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Bulletin No. 1997–3
January 21, 1997

HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be relied
upon as authoritative interpretations.

INCOME TAX
Rev. Rul. 97–4, page 6.
Low-income housing tax credit. This ruling clarifies
that section 502(e)(3) of the Tax Reform Act of 1986
does not prevent a taxpayer from claiming a low-income
housing tax credit under section 42 of the Code for a
building’s credit period beginning after 1995.
T.D. 8688, page 7.
Final regulations under section 108 of the Code relate to
the time and manner of making certain elections under
the Omnibus Budget Reconciliation Act of 1993.
T.D. 8689, page 9.
Final and temporary regulations under section 6695 of
the Code relate to the methods of signing returns,
statements, or other documents.
T.D. 8692, page 4.
Final and temporary regulations under section 25 of the
Code relate to the reissuance of mortgage credit certificates.

Finding Lists begin on page 17.

REG–209762–95, page 12.
Proposed regulations under section 1245 of the Code
relate to the allocation of depreciation recapture among
partners in a partnership. A public hearing will be held
on March 27, 1997.
Notice 97–12, page 11.
Electing Small Business Trust (ESBT) election. This
notice provides the time and manner for the trustee to
elect to be treated as an ESBT. This notice also provides
that only the trustee need consent to the S corporation
election on Form 2553.
Announcement 97–4, page 14.
Invalid and late S corporation elections. In order to
obtain relief for invalid and late S corporation elections,
taxpayers must generally request a private letter ruling.
However, if an S corporation election is untimely made
for the 1996 taxable year, there is a special transition
rule for seeking late election relief.

ADMINISTRATIVE
Announcement 97–5, page 15.
New Form 8832, Entity Classification Election, is now
available.

Mission of the Service
The purpose of the Internal Revenue Service is to
collect the proper amount of tax revenue at the least
cost; serve the public by continually improving the

quality of our products and services; and perform in a
manner warranting the highest degree of public
confidence in our integrity, efficiency and fairness.

Statement of Principles
of Internal Revenue
Tax Administration
The Service also has the responsibility of applying
and administering the law in a reasonable,
practical manner. Issues should only be raised by
examining of ficers when they have merit, never
arbitrarily or for trading purposes. At the same
time, the examining officer should never hesitate
to raise a meritorious issue. It is also important
that care be exercised not to raise an issue or to
ask a court to adopt a position inconsistent with
an established Service position.

The function of the Internal Revenue Service is to
administer the Internal Revenue Code. Tax policy
for raising revenue is determined by Congress.
With this in mind, it is the duty of the Service to
carry out that policy by correctly applying the laws
enacted by Congress; to determine the reasonable
meaning of various Code provisions in light of the
Congressional purpose in enacting them; and to
perform this work in a fair and impartial manner,
with neither a government nor a taxpayer point of view.

Administration should be both reasonable and
vigorous. It should be conducted with as little
delay as possible and with great cour tesy and
considerateness. It should never try to overreach,
and should be reasonable within the bounds of law
and sound administration. It should, however, be
vigorous in requiring compliance with law and it
should be relentless in its attack on unreal tax
devices and fraud.

At the heart of administration is interpretation of the
Code. It is the responsibility of each person in the
Service, charged with the duty of interpreting the
law, to try to find the true meaning of the statutory
provision and not to adopt a strained construction in
the belief that he or she is ‘‘protecting the revenue.’’
The revenue is properly protected only when we ascertain and apply the true meaning of the statute.

2

Introduction
The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for
announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation,
court decisions, and other items of general interest. It is
published weekly and may be obtained from the Superintendent of Documents on a subscription basis. Bulletin
contents of a permanent nature are consolidated semiannually into Cumulative Bulletins, which are sold on a
single-copy basis.

court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are
cautioned against reaching the same conclusions in
other cases unless the facts and circumstances are
substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on
provisions of the Internal Revenue Code of 1986.

It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform
application of the tax laws, including all rulings that
supersede, revoke, modify, or amend any of those
previously published in the Bulletin. All published rulings
apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management
are not published; however, statements of internal
practices and procedures that affect the rights and
duties of taxpayers are published.

Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows:
Subpart A, Tax Conventions, and Subpart B, Legislation
and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to
these subjects are contained in the other Parts and
Subparts. Also included in this part are Bank Secrecy
Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the
Treasury’s Office of the Assistant Secretary (Enforcement).

Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts
stated in the revenue ruling. In those based on positions
taken in rulings to taxpayers or technical advice to
Service field offices, identifying details and information
of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory
requirements.

Part IV.—Items of General Interest.
With the exception of the Notice of Proposed Rulemaking and the disbarment and suspension list included in
this part, none of these announcements are consolidated in the Cumulative Bulletins.

Rulings and procedures reported in the Bulletin do not
have the force and effect of Treasury Department
Regulations, but they may be used as precedents.
Unpublished rulings will not be relied on, used, or cited
as precedents by Service personnel in the disposition of
other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations,

The first Bulletin for each month includes an index for
the matters published during the preceding month.
These monthly indexes are cumulated on a quarterly and
semiannual basis, and are published in the first Bulletin
of the succeeding quarterly and semi-annual period,
respectively.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents U.S. Government Printing Office, Washington, D.C. 20402.

3

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 25.—Interest on Certain
Home Mortgages
26 CFR 1.25–3: Qualified mortgage credit certificate.

T.D. 8692
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
Reissuance of Mortgage Credit
Certificates
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regulations.
SUMMARY: This document contains final regulations relating to the reissuance
of mortgage credit certificates. Changes
to the applicable law were made by the
Tax Reform Act of 1984. The regulations provide guidance to issuers and
holders of mortgage credit certificates.
EFFECTIVE DATE: These regulations
are effective December 17, 1996.
FOR FURTHER INFORMATION CONTACT: L. Michael Wachtel, (202) 622–
3980 (not a toll-free number).
SUPPLEMENTARY
INFORMATION:
Background
This document adds final regulations
to the Income Tax Regulations (26 CFR
part 1) to provide guidance under section 25(e)(4) of the Internal Revenue
Code (Code) with respect to the reissuance of mortgage credit certificates. Section 25(e)(4) was added to the Code by
section 612 of the Tax Reform Act of
1984, 98 Stat. 494, 905.
On December 22, 1993, temporary
regulations (TD 8502) relating to refinancing under section 25(e)(4) were
published in the Federal Register (58
FR 67689). A notice of proposed
rulemaking (REG–209574–92, previously FI–47–92) cross-referencing the
temporary regulations was published in
the Federal Register for the same day
(58 FR 67744).
Written comments responding to these
notices were received. There were no
requests to appear in response to publication of a notice of a hearing in the
Federal Register (61 FR 15204). Therefore, no public hearing was held. After
consideration of all the comments, the

proposed regulations under section
25(e)(4) are adopted as revised by this
Treasury decision, and the corresponding temporary regulations are removed.
The comments and revisions are discussed below.
Explanation of provisions and summary
of comments
The temporary regulations permit the
reissuance of a mortgage credit certificate on or after December 22, 1992, but
no later than 1 year after the date of the
refinancing. Commentators thought this
unnecessarily limited eligibility for the
reissuance of a certificate and limited
the flexibility of State and local governments. The final regulations, reflecting
the goal of giving State and local governments maximum flexibility to administer mortgage credit certificate programs, remove these limits. A State or
local government may reissue a certificate to any person who refinanced a
mortgage for which a mortgage credit
certificate was issued and who meets the
other requirements for a reissued certificate. The credit for prior years is available to the extent that the certificate
holder may file a claim for refund.
The temporary regulations provide
that the certified mortgage indebtedness
amount on the reissued certificate cannot exceed the remaining balance of the
certified mortgage indebtedness amount
on the existing certificate. Commentators suggested that the final regulations
permit the indebtedness amount on the
reissued certificate to include costs such
as closing costs of the refinancing loan.
This recommendation was not implemented in the final regulations because
section 25(e)(4) of the Code limits the
amount of the reissued certificate to the
outstanding balance of the existing certificate.
The temporary regulations provide
that the reissued certificate may not
result in an increase in the credit that
would otherwise have been allowable to
the holder under the existing certificate
for any taxable year. In the case of a
series of refinancings, the amount allowable on the refinanced loan would be
the amount allowable on the original
loan, rather than the immediately preceding refinanced loan.
A holder of a mortgage credit certificate who refinances a fixed rate loan
can determine the amount of interest
that would have been paid for any
taxable year on the refinanced loan from

4

an amortization schedule that projects
interest and principal payments over the
life of the loan. By applying the mortgage credit rate to the amount of interest, the holder can calculate the amount
of tax credit that would have been
allowable for the taxable year.
The amount of tax credit that would
have been allowable for a taxable year
is not as easily calculated by a holder of
a mortgage credit certificate who refinances a variable rate loan because the
holder cannot project an amortization
schedule for the refinanced loan. Instead, each year the holder must calculate the amount of interest that would
have been paid on the refinanced loan
under the interest rate in effect for that
year and then calculate the tax credit
that would have been allowable. This
procedure was described as burdensome
by various commentators.
The final regulations continue to reflect the statutory requirement that the
reissued certificate not result in an increase in the credit that would otherwise
have been allowable to the certificate
holder under the existing certificate for
any taxable year. The final regulations,
however, permit a certificate holder who
refinances a variable rate loan with
either a variable rate loan or a fixed rate
loan to determine the amount of credit
that would have been allowable by
using an alternative method instead of
calculating the amount based on the
actual interest that would have been
paid on the refinanced loan. Under the
alternative method, the credit that would
have been allowable is computed using
an amortization schedule of a hypothetical self-amortizing loan with level payments projected to the final maturity
date of the refinanced loan. The interest
rate of the hypothetical loan is the
annual percentage rate (APR) of the
refinancing loan determined for purposes of the Federal Truth in Lending
Act. The principal of the hypothetical
loan is the remaining outstanding balance of the certified mortgage indebtedness specified on the existing certificate.
A certificate holder who refinances a
variable rate loan may use the alternative method or may compute the actual
amount of credit that would have been
allowable. However, the method chosen
must be consistently applied by the
holder beginning with the first taxable
year for which the tax credit based upon
the reissued certificate is claimed.

The temporary regulations do not address whether a refinancing loan is a
financing that is subject to the recapture
provisions of section 143(m) if the refinanced loan was not subject to recapture. The final regulations provide that
the refinancing loan underlying a reissued mortgage credit certificate that replaces a mortgage credit certificate issued on or before December 31, 1990,
is not a federally subsidized indebtedness that is subject to the recapture
provisions of section 143(m) of the
Code.
Commentators asked for clarification
of whether additional volume cap was
required in order to reissue a mortgage
credit certificate and whether additional
reporting was required by the issuer of a
reissued mortgage certificate. Reissuance
of a mortgage credit certificate relates to
refinancing by a mortgage credit certificate holder of a mortgage loan on the
holder’s principal residence. Volume cap
was required to be obtained in connection with the program under which the
original certificate had been issued. Because the reissued certificate is replacing
the existing certificate, it is treated as
issued in connection with the original
program, and additional volume cap is
unnecessary for the reissuance. For similar reasons, no additional reporting is
required by an issuer of a reissued
mortgage credit certificate.

Adoption of Amendments to the
Regulations

Special Analyses

(a) through (g)(1)(ii) [Reserved] For
further guidance, see § 1.25–3T(a)
through (g)(1)(ii).
(g)(1)(iii) Reissued certificate exception. See paragraph (p) of this section
for rules regarding the exception in the
case of refinancing existing mortgages.
(g)(2) through (o) [Reserved] For further guidance, see § 1.25–3T(g)(2)
through (o).
(p) Reissued certificates for certain
refinancings—(1) In general. If the issuer of a qualified mortgage credit certificate reissues a certificate in place of
an existing mortgage credit certificate to
the holder of that existing certificate, the
reissued certificate is treated as satisfying the requirements of this section. The
period for which the reissued certificate
is in effect begins with the date of the
refinancing (that is, the date on which
interest begins accruing on the refinancing loan).
(2) Meaning of existing certificate.
For purposes of this paragraph (p), a
mortgage credit certificate is an existing
certificate only if it satisfies the requirements of this section. An existing certifi-

It has been determined that this Treasury decision is not a significant regulatory action as defined in EO 12866. It
also has been determined that section
553(b) of the Administrative Procedures
Act (5 U.S.C. chapter 5) does not apply
to these regulations, and because the
notice of proposed rulemaking preceding
the regulations was issued prior to
March 29, 1996, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the
Internal Revenue Code, the notice of
proposed rule making preceding these
regulations was submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Drafting Information
The principal author of these regulations is L. Michael Wachtel, Office of
the Assistant Chief Counsel (Financial
Institutions and Products), IRS. However, other personnel from the IRS and
Treasury Department participated in
their development.

Accordingly, 26 CFR part 1 is
amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by removing the entry
‘‘1.25–1T–1.25–8T’’ and adding entries
in numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.25–1T also issued under 26
U.S.C. 25.
Section 1.25–2T also issued under 26
U.S.C. 25.
Section 1.25–3 also issued under 26
U.S.C. 25.
Section 1.25–3T also issued under 26
U.S.C. 25.
Section 1.25–4T also issued under 26
U.S.C. 25.
Section 1.25–5T also issued under 26
U.S.C. 25.
Section 1.25–6T also issued under 26
U.S.C. 25.
Section 1.25–7T also issued under 26
U.S.C. 25.
Section 1.25–8T also issued under 26
U.S.C. 25. * * *
Par. 2. Section 1.25–3 is added to
read as follows:
§ 1.25–3 Qualified mortgage credit certificate.

5

cate may be the original certificate, a
certificate issued to a transferee under
§ 1.25–3T(h)(2)(ii), or a certificate previously reissued under this paragraph
(p).
(3) Limitations on reissued certificate. An issuer may reissue a mortgage
credit certificate only if all of the following requirements are satisfied:
(i) The reissued certificate is issued
to the holder of an existing certificate
with respect to the same property to
which the existing certificate relates.
(ii) The reissued certificate entirely
replaces the existing certificate (that is,
the holder cannot retain the existing
certificate with respect to any portion of
the outstanding balance of the certified
mortgage indebtedness specified on the
existing certificate).
(iii) The certified mortgage indebtedness specified on the reissued certificate
does not exceed the remaining outstanding balance of the certified mortgage
indebtedness specified on the existing
certificate.
(iv) The reissued certificate does not
increase the certificate credit rate specified in the existing certificate.
(v) The reissued certificate does not
result in an increase in the tax credit
that would otherwise have been allowable to the holder under the existing
certificate for any taxable year. The
holder of a reissued certificate determines the amount of tax credit that
would otherwise have been allowable by
multiplying the interest that was scheduled to have been paid on the refinanced
loan by the certificate rate of the existing certificate. In the case of a series of
refinancings, the tax credit that would
otherwise have been allowable is determined from the amount of interest that
was scheduled to have been paid on the
original loan and the certificate rate of
the original certificate.
(A) In the case of a refinanced loan
that is a fixed interest rate loan, the
interest that was scheduled to be paid on
the refinanced loan is determined using
the scheduled interest method described
in paragraph (p)(3)(v)(C) of this section.
(B) In the case of a refinanced loan
that is not a fixed interest rate loan, the
interest that was scheduled to be paid on
the refinanced loan is determined using
either the scheduled interest method described in paragraph (p)(3)(v)(C) of this
section or the hypothetical interest
method described in paragraph
(p)(3)(v)(D) of this section.
(C) The scheduled interest method
determines the amount of interest for

each taxable year that was scheduled to
have been paid in the taxable year based
on the terms of the refinanced loan
including any changes in the interest
rate that would have been required by
the terms of the refinanced loan and any
payments of principal that would have
been required by the terms of the refinanced loan (other than repayments required as a result of any refinancing of
the loan).
(D) The hypothetical interest method
(which is available only for refinanced
loans that are not fixed interest rate
loans) determines the amount of interest
treated as having been scheduled to be
paid for a taxable year by constructing
an amortization schedule for a hypothetical self-amortizing loan with level
payments. The hypothetical loan must
have a principal amount equal to the
remaining outstanding balance of the
certified mortgage indebtedness specified on the existing certificate, a maturity equal to that of the refinanced loan,
and interest equal to the annual percentage rate (APR) of the refinancing loan
that is required to be calculated for the
Federal Truth in Lending Act.
(E) A holder must consistently apply
the scheduled interest method or the
hypothetical interest method for all taxable years beginning with the first taxable year the tax credit is claimed by
the holder based upon the reissued certificate.
(4) Examples. The following examples illustrate the application of paragraph (p)(3)(v) of this section:
Example 1. A holder of an existing certificate
that meets the requirements of this section seeks to
refinance the mortgage on the property to which
the existing certificate relates. The final payment
on the holder’s existing mortgage is due on
December 31, 2000; the final payment on the new
mortgage would not be due until January 31,
2004. The holder requests that the issuer provide
to the holder a reissued mortgage credit certificate
in place of the existing certificate. The requested
certificate would have the same certificate credit
rate as the existing certificate. For each calendar
year through the year 2000, the credit that would
be allowable to the holder with respect to the new
mortgage under the requested certificate would not
exceed the credit allowable for that year under the
existing certificate. The requested certificate, however, would allow the holder credits for the years
2001 through 2004, years for which, due to the
earlier scheduled retirement of the existing mortgage, no credit would be allowable under the
existing certificate. Under paragraph (p)(3)(v) of
this section, the issuer may not reissue the certificate as requested because, under the existing
certificate, no credit would be allowable for the
years 2001 through 2004. The issuer may, however, provide a reissued certificate that limits the
amount of the credit allowable in each year to the

amount allowable under the existing certificate.
Because the existing certificate would allow no
credit after December 31, 2000, the reissued
certificate could expire on December 31, 2000.
Example 2. (a) The facts are the same as
Example 1 except that the existing mortgage loan
has a variable rate of interest and the refinancing
loan will have a fixed rate of interest. To determine whether the limit under paragraph (p)(3)(v)
of this section is met for any taxable year, the
holder must calculate the amount of credit that
otherwise would have been allowable absent the
refinancing. This requires a determination of the
amount of interest that would have been payable
on the refinanced loan for the taxable year. The
holder may determine this amount by—
(1) Applying the terms of the refinanced loan,
including the variable interest rate or rates, for the
taxable year as though the refinanced loan continued to exist; or
(2) Obtaining the amount of interest, and calculating the amount of credit that would have been
available, from the schedule of equal payments
that fully amortize a hypothetical loan with the
principal amount equal to the remaining outstanding balance of the certified mortgage indebtedness
specified on the existing certificate, the interest
equal to the annual percentage rate (APR) of the
refinancing loan, and the maturity equal to that of
the refinanced loan.
(b) The holder must apply the same method for
each taxable year the tax credit is claimed based
upon the reissued mortgage credit certificate.

(5) Coordination
with
section
143(m)(3). A refinancing loan underlying a reissued mortgage credit certificate
that replaces a mortgage credit certificate issued on or before December 31,
1990, is not a federally subsidized indebtedness for the purposes of section
143(m)(3) of the Internal Revenue Code.
§ 1.25–3T [Amended}
Par. 3. Section 1.25–3T is amended
by removing paragraphs (g)(1)(iii) and
(p).
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved November 27, 1996.
Donald C. Lubick,
Acting Assistant Secretary
of the Treasury.
(Filed by the Office of the Federal Register on
December 16, 1996, 8:45 a.m., and published in
the issue of the Federal Register for December 17,
1996, 61 F.R. 66212)

Section 42.—Low-Income Housing
Credit
Low-income housing tax credit. This
revenue ruling clarifies that section
502(e)(3) of the Tax Reform Act of
1986 does not prevent a taxpayer from
claiming a low-income housing tax
credit under section 42 of the Code for

6

a building’s credit period beginning after
1995.
Rev. Rul. 97–4
ISSUE
Does § 502(e)(3) of the Tax Reform
Act of 1986 (Act) prevent a taxpayer
from claiming a low-income housing tax
credit under § 42 of the Internal Revenue Code for a building whose credit
period begins after 1995?
FACTS
On January 1, 1995, taxpayer, T,
purchased a residential rental building
(Building) from seller, S. S was allowed
the transition-rule benefits under Act
§ 502(a). T intends to substantially rehabilitate the Building and qualify the
Building for a low-income housing tax
credit under § 42. The credit period for
the Building will begin in 1996.
LAW AND ANALYSIS
Act § 502 contains a transition rule
for taxpayers investing in certain lowincome housing properties that exempts
them from the passive-loss rules under
§ 469. The rule applies for investments
made after 1983 in housing property
constructed or acquired pursuant to a
binding written contract entered into by
August 16, 1986. If a binding contract
existed by that date, taxpayers who
purchased an interest in the property by
the close of 1986 (1988 if the interest
was held through certain partnerships),
and who had not contributed more than
50 percent of their capital obligation,
could qualify for the transition rule.
These taxpayers could claim passive
losses on new low-income housing investments for a limited period of time if
the properties were placed in service
prior to January 1, 1989. After 1995, the
transition-rule benefits of Act § 502 are
no longer available to any taxpayer.
Section 42 provides a tax credit for
investment in qualified low-income
buildings placed in service after December 31, 1986.
A taxpayer may not claim a § 42
credit before the start of a building’s
10-year credit period. Section 42(f) provides that the 10-year credit period for a
building begins with the taxable year the
building is placed in service, or, at the
election of the taxpayer, the succeeding
taxable year.
Act § 502 and § 42 can apply to the
same type of property. To prevent a

taxpayer from obtaining a simultaneous
tax benefit under both sections, Act
§ 502(e)(3) provides that no lowincome housing credit under § 42 is
available ‘‘with respect to any project
with respect to which any person has
been allowed any benefit under [Act
§ 502].’’
The transition-rule benefits under Act
§ 502 are not available to S in 1996 and
future years. Thus, no simultaneous tax
benefit under Act § 502 and § 42 is
available after that date. Therefore, Act
§ 502(e)(3) does not prohibit T from
claiming a § 42 low-income housing
credit for the Building whose credit
period begins after 1995.
HOLDING
Act § 502(e)(3) does not prevent a
taxpayer from claiming a low-income
housing tax credit under § 42 for a
building whose credit period begins after 1995.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Christopher J. Wilson of the
Office of Assistant Chief Counsel
(Passthroughs and Special Industries).
For further information regarding this
revenue ruling contact Mr. Wilson on
(202) 622–3040 (not a toll-free call).
Section 108.—Income From
Discharge of Indebtedness
26 CFR 1.108(c)–1: Time and manner for making
election under the Omnibus Budget Reconciliation
Act of 1993.

T.D. 8688
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Certain Elections Under the
Omnibus Budget Reconciliation Act
of 1993
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains final regulations relating to the time and
manner of making certain elections under the Omnibus Budget Reconciliation
Act of 1993. These regulations provide
guidance to persons making the elections.
EFFECTIVE DATE: December 12,
1996.

FOR FURTHER INFORMATION CONTACT: George Bradley, 202–622–4920
(not a toll-free number).
SUPPLEMENTARY
INFORMATION:
Paperwork Reduction Act
The collections of information contained in these final regulations 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 1545–1421. Responses to these
collections of information are required
to obtain the benefits of the particular
election that is the subject of the collection.
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 control number.
The estimated annual burden per respondent varies from 15 minutes to 45
minutes, depending on individual circumstances, with an estimated average
of 30 minutes.
Comments concerning the accuracy of
this burden estimate and suggestions for
reducing this burden should be sent to
the Internal Revenue Service, Attn:
IRS Reports Clearance Officer, T:FP,
Washington, DC 20224, and to the Office of Management and Budget, Attn:
Desk Officer for the Department of the
Treasury, Office of Information and
Regulatory Affairs, Washington, DC
20503.
Books or records relating to this collection of information must be retained
as long as their contents may become
material in the administration of any
internal revenue law. Generally, tax returns and tax return information are
confidential, as required by 26 U.S.C.
6103.
Background
This document contains final regulations relating to elections under the
following sections of the Internal Revenue Code of 1986 (Code) and the
Omnibus Budget Reconciliation Act of
1993 (Pub. L. 103–66, 107 Stat. 312)
(Act):
Act
Code
Section
Section
13114
1044(a)
13150
108(c)(3)(C)
13206(d)
163(d)(4)(B)(iii)
13225
6655(e)(2)(C)

7

On December 27, 1993, the Federal
Register published temporary regulations (T.D. 8509 [1994–1 C.B. 24]) and
a cross-reference notice of proposed
rulemaking (IA–62–93 [1994–1 C.B.
803]), 58 FR 68300 and 58 FR 68336,
respectively, relating to these elections.
Three written comments responding to
the regulations were submitted. Since
none of the commentators requested a
public hearing, one was not held. After
consideration of the comments, the proposed regulations are adopted as final
regulations subject to modifications to
proposed § 1.108(c)–1, and the corresponding temporary regulations are removed. The comments and a description
of the modifications to proposed
§ 1.108(c)–1 are discussed below.
Summary of Comments and
Modifications
All three comments related to the
election under section 163(d)(4)(B)(iii),
which allows a taxpayer to take all or a
portion of certain net capital gains,
attributable to dispositions of property
held for investment, into account as
investment income. As a consequence,
the capital gains affected by this election are not eligible for the maximum
capital gain rate of 28 percent. The
election must be made on Form 4952,
Investment Interest Expense Deduction,
on or before the due date (including
extensions) of the income tax return for
the taxable year in which the net capital
gain is recognized.
The commentators questioned the authority of the IRS to require a formal
election, stated that a formal election
will add to the complexity of filing
individual income tax returns, and suggested that taxpayers be allowed to
freely change the manner in which they
treat long-term capital gains, as long as
the taxable year is open. These comments were given careful consideration.
However, they have not been incorporated into these final regulations. The
IRS and the Treasury Department believe that the requirement of a formal
election is supported by the language of
section 163(d)(4)(B)(iii), is not unduly
burdensome, and provides taxpayers
with flexibility, since the election is
revocable.
The final regulations modify the requirements for making the election for
discharge of qualified real property business indebtedness under section 108(c).
Under the previous temporary regulations a taxpayer was required to make

the election with the taxpayer’s income
tax return for the taxable year in which
the discharge occurred, but was permitted to file an election with an amended
return or claim for credit or refund if
the taxpayer established reasonable
cause for failure to file the election with
the original return. The final regulations
require the taxpayer to make the election on the timely-filed (including extensions) Federal income tax return for the
taxable year in which the taxpayer has
discharge of indebtedness income that is
excludible under section 108(a). Therefore, a taxpayer that fails to make the
election on that return must request the
Commissioner’s consent to file a late
election under § 301.9100–3T or any
regulations that supersede § 301.9100–
3T.
Special Analyses
It has been determined that these
regulations are not significant rules as
defined in Executive Order 12866. It
also has been determined that section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply
to these regulations, and because the
notice of proposed rulemaking preceding
the regulations was issued prior to
March 29, 1996, a Regulatory Flexibility Analysis is not required. Pursuant to
section 7805(f) of the Internal Revenue
Code, the notice of proposed rulemaking
preceding these regulations was submitted to the Small Business Administration
for comment on its impact on small
business.
Drafting Information
The principal author of these regulations is George Bradley, Office of Assistant Chief Counsel (Income Tax and
Accounting), Internal Revenue Service.
However, personnel from other offices
of the Internal Revenue Service and the
Treasury Department participated in
their development.
*

*

*

*

*

Adoption of Amendments to the
Regulations
Accordingly, parts 1 and 602 of title
26 of the Code of Federal Regulations
are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by removing the entry
for section 1.108(c)–1T and by adding

an entry in numerical order to read as
follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.108(c)–1 also issued under
the authority of 26 U.S.C. 108(d)(9);
***
§ 1.108(c)–1T [Removed]
Par. 2. Section 1.108(c)–1T is removed.
§ 1.163(d)–1T [Removed]
Par. 3. Section 1.163(d)–1T is removed.
§ 1.1044(a)–1T [Removed]
Par. 4. Section 1.1044(a)–1T is removed.
§ 1.6655(e)–1T [Removed]
Par. 5. Section 1.6655(e)–1T is removed.
Par. 6. Section 1.108(c)–1 is added to
read as follows:
§ 1.108(c)–1 Time and manner for
making election under the Omnibus
Budget Reconciliation Act of 1993.
(a) Description. Section 108(c)(3)(C),
as added by section 13150 of the Omnibus Budget Reconciliation Act of 1993
(Public Law 103–66, 107 Stat. 446),
allows certain noncorporate taxpayers to
elect to treat certain indebtedness described in section 108(c)(3) that is discharged after December 31, 1992, as
qualified real property business indebtedness. This discharged indebtedness is
excluded from gross income to the extent allowed by section 108.
(b) Time and manner for making
election. The election described in this
section must be made on the timelyfiled (including extensions) Federal income tax return for the taxable year in
which the taxpayer has discharge of
indebtedness income that is excludible
from gross income under section 108(a).
The election is to be made on a completed Form 982, in accordance with
that Form and its instructions.
(c) Revocability of election. The election described in this section is revocable with the consent of the Commissioner.
(d) Effective date. The rules set forth
in this section are effective December
27, 1993.
Par. 7. Section 1.163(d)–1 is added to
read as follows:
§ 1.163(d)–1 Time and manner for
making election under the Omnibus
Budget Reconciliation Act of 1993.
(a) Description. Section 163(d)(4)(B)(iii), as added by section 13206(d) of

8

the Omnibus Budget Reconciliation Act
of 1993 (Public Law 103–66, 107 Stat.
467), allows an electing taxpayer to take
all or a portion of certain net capital
gains, attributable to dispositions of
property held for investment, into account as investment income. As a consequence, the capital gains affected by this
election are not eligible for the maximum capital gain rate of 28 percent.
The election may be made for net
capital gains recognized by noncorporate
taxpayers during any taxable year beginning after December 31, 1992.
(b) Time and manner for making the
election. The election under section
163(d)(4)(B)(iii) must be made on or
before the due date (including extensions) of the income tax return for the
taxable year in which the net capital
gain is recognized. The election is to be
made on Form 4952, Investment Interest
Expense Deduction, in accordance with
the Form and its instructions.
(c) Revocability of election. The election described in this section is revocable with the consent of the Commissioner.
(d) Effective date. The rules set forth
in this section are effective December
12, 1996.
Par. 8. Section 1.1044(a)–1 is added
to read as follows:
§ 1.1044(a)–1 Time and manner for
making election under the Omnibus
Budget Reconciliation Act of 1993.
(a) Description. Section 1044(a), as
added by section 13114 of the Omnibus
Budget Reconciliation Act of 1993
(Public Law 103–66, 107 Stat. 430),
generally allows individuals and C corporations that sell publicly traded securities after August 9, 1993, to elect not to
recognize certain gain from the sale if
the taxpayer purchases common stock or
a partnership interest in a specialized
small business investment company
(SSBIC) within the 60-day period beginning on the date the publicly traded
securities are sold.
(b) Time and manner for making the
election. The election under section
1044(a) must be made on or before the
due date (including extensions) for the
income tax return for the year in which
the publicly traded securities are sold.
The election is to be made by reporting
the entire gain from the sale of publicly
traded securities on Schedule D of the

income tax return in accordance with
instructions for Schedule D, and by
attaching a statement to Schedule D
showing —
(1) How the nonrecognized gain
was calculated;
(2) The SSBIC in which common
stock or a partnership interest was purchased;
(3) The date the SSBIC stock or
partnership interest was purchased; and
(4) The basis of the SSBIC stock
or partnership interest.
(c) Revocability of election. The election described in this section is revocable with the consent of the Commissioner.
(d) Effective date. The rules set forth
in this section are effective December
12, 1996.
Par. 9. Section 1.6655(e)–1 is added
to read as follows.
§ 1.6655(e)–1 Time and manner for
making election under the Omnibus
Budget Reconciliation Act of 1993.
(a) Description. Section 6655(e)(2)(C), as added by section 13225 of the
Omnibus Budget Reconciliation Act of
1993 (Public Law 103–66, 107 Stat.
486), allows a corporate taxpayer to
make an annual election to use a different annualization period to determine
annualized income for purposes of paying any required installment of estimated income tax for a taxable year
beginning after December 31, 1993.
(b) Time and manner for making the
election. An election under section
6655(e)(2)(C) must be made on or before the date required for the payment
of the first required installment for the
taxable year. For a calendar or fiscal
year corporation, Form 8842, Election to
Use Different Annualization Periods for
Corporate Estimated Tax, must be filed
by the 15th day of the 4th month of the
taxable year for which the election is to
apply. Form 8842 must be filed with the
Internal Revenue Service Center where
the corporation files its income tax
return.
(c) Revocability of election. The election described in this section is irrevocable.
(d) Effective date. The rules set forth
in this section are effective December
12, 1996.
PART 602—OMB CONTROL NUMBERS UNDER THE PAPERWORK
REDUCTION ACT

Authority: 26 U.S.C. 7805.
Par. 11. In § 602.101, paragraph (c)
is amended as follows:
1. The following entries are removed
from the table:
§ 602.101 OMB Control numbers.
*

*

*

*

*

Section 6695.—Other Assessable
Penalties With Respect To the
Preparation of Income Tax Returns
for Other Persons
26 CFR 1.6695–1: Other assessable penalties with
respect to the preparation of income tax returns
for other persons.
(Also Sec. 6061; 301.6061–1)

T.D. 8689
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 301

(c) * * *
CFR part or section
where identified and
described

Current OMB
control no.

*
*
*
1.108(c)–1T. . . . . . . . .
*
*
*
1.163(d)–1T . . . . . . . .
*
*
*
1.1044(a)–1T. . . . . . . .
*
*
*
1.6655(e)–1T. . . . . . . .
*
*
*

*
*
1545–1421
*
*
1545–1421
*
*
1545–1421
*
*
1545–1421
*
*

Methods of Signing
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.

2. The following entries are added in
numerical order to the table:

SUMMARY: This document contains final regulations relating to the methods
of signing returns, statements, or other
documents. The final regulations clarify
that the IRS may prescribe a method
other than pen and ink for signing any
return, statement, or other document.
This clarification will facilitate the IRS’
implementation of paperless filings.

§ 602.101 OMB Control numbers.

EFFECTIVE DATE: These regulations
are effective on December 12, 1996.

*

*

*

*

*

(c) * * *
CFR part or section
where identified and
described

Current OMB
control no.

*
*
*
1.108(c)–1 . . . . . . . . . .
*
*
*
1.163(d)–1. . . . . . . . . .
*
*
*
1.1044(a)–1 . . . . . . . . .
*
*
*
1.6655(e)–1 . . . . . . . . .
*
*
*

*
*
1545–1421
*
*
1545–1421
*
*
1545–1421
*
*
1545–1421
*
*

Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved November 1, 1996.
Donald C. Lubick,
Acting, Assistant Secretary
of the Treasury.
(Filed by the Office of the Federal Register on
December 11, 1996, 8:45 a.m., and published in
the issue of the Federal Register for December 12,
1996, 61 F.R. 65321)

Par. 10. The authority citation for
part 602 continues to read as follows:

9

FOR FURTHER INFORMATION CONTACT: Celia Gabrysh (202) 622–4940
(not a toll-free number).
SUPPLEMENTARY
INFORMATION:
Background
This document contains amendments
to the Income Tax Regulations (26 CFR
part 1) and the Procedure and Administration Regulations (26 CFR part 301)
that relate to signing returns, statements,
and other documents. Section 6061 provides in part that ‘‘. . . any return, statement, or other document required to be
made under any provision of the internal
revenue laws or regulations shall be
signed in accordance with forms or
regulations prescribed by the Secretary.’’
Traditionally, the IRS has accepted pento-paper signatures. The IRS will prescribe additional methods of signing to
be used for electronically filed returns
and other documents.
The final regulations clarify that the
IRS may prescribe the specific method
of signing any return, statement, or
other document. The final regulations
also provide that the IRS may require a
return preparer to use a method of
signing other than a pen-to-paper signa-

ture or a facsimile signature stamp when
signing a return, statement, or other
document.
On July 21, 1995, temporary regulations (T.D. 8603 [1995–2 C.B. 281])
relating to the signing of returns, statements, and other documents were published in the Federal Register (60 FR
37589). A notice of proposed rulemaking (IA–10–95 [1995–2 C.B. 478])
cross-referencing the temporary regulations was published in the Federal
Register for the same day (60 FR
37621).
One comment responding to this notice was received. A public hearing was
held on November 2, 1995. After consideration of the comment, the proposed
regulations under sections 6061 and
6695 are adopted without change by this
Treasury decision, and the corresponding temporary regulations are removed.
The comment is discussed below.
Summary of Comments
The commentator suggested that the
IRS prescribe by regulation any new
method of signing any return, statement,
or other document to allow the public to
comment on the method’s feasibility.
Also, the commentator suggested that a
regulation would constitute substantial
authority and would provide broader
public exposure.
The final regulations did not adopt
the commentator’s suggestion. The final
regulations retain the full range of options for prescribing new methods of
signing: forms, instructions, or other
appropriate guidance. The final regulations provide the IRS with the flexibility
to address the particular circumstances
of any method of signing. The IRS will
continue to inform the public about
methods of signing.
Special Analyses
It has been determined that this Treasury decision is not a significant regulatory action as defined in EO 12866.
Therefore, a regulatory assessment is not
required. It also has been determined
that section 553(b) of the Administrative

Procedure Act (5 U.S.C. chapter 5) and
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) do not apply to these regulations, and therefore, a Regulatory Flexibility Analysis is not required. Pursuant
to section 7805(f) of the Internal Revenue Code, the notice of proposed
rulemaking preceding these regulations
was submitted to the Chief Counsel for
Advocacy of the Small Business Administration for comment on its impact on
small business.
Drafting Information
The principal author of these regulations is Celia Gabrysh, Office of Assistant Chief Counsel (Income Tax & Accounting). However, other personnel
from the IRS and Treasury Department
participated in their development.
*

*

*

*

*

Adoption of Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 301
are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.6695–1 is amended
by revising the first sentence of paragraph (b)(1) to read as follows:
§ 1.6695–1 Other assessable penalties
with respect to the preparation of income tax returns for other persons.
*

*

*

*

*

(b) * * * (1) Unless the Secretary has
prescribed another method of signing
pursuant to § 301.6061–1(b) on or after
July 21, 1995, an individual who is an
income tax return preparer with respect
to a return of tax under subtitle A of the
Internal Revenue Code (Code) or claim
for refund of tax under subtitle A of the
Code shall manually sign the return or
claim for refund (which may be a
photocopy) in the appropriate space provided on the return or claim for refund
after it is completed and before it is

10

presented to the taxpayer (or nontaxable
entity) for signature. * * *
*

*

*

*

*

§ 1.6695–1T [Removed]
Par. 3. Section 1.6695–1T is removed.
PART 301—PROCEDURE AND ADMINISTRATION
Par. 4. The authority citation for part
301 is amended by removing the entry
for § 301.6061–1T and adding an entry
in numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.6061–1 also issued under
26 U.S.C. 6061; * * *
Par. 5. Section 301.6061–1 is revised
to read as follows:
§ 301.6061–1 Signing of returns and
other documents.
(a) In general. For provisions concerning the signing of returns and other
documents, see the regulations relating
to the particular tax.
(b) Method of signing. The Secretary
may prescribe in forms, instructions, or
other appropriate guidance the method
of signing any return, statement, or
other document required to be made
under any provision of the internal revenue laws or regulations.
(c) Effective dates. The rule in paragraph (a) is effective December 12,
1996. The rule in paragraph (b) is
effective on July 21, 1995.
§ 301.6061–1T [Removed]
Par. 6. Section 301.6061–1T is removed.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved November 1, 1996.
Donald C. Lubick,
Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on
December 11, 1996, 8:45 a.m., and published in
the issue of the Federal Register for December 12,
1996, 61 F.R. 65319)

Part III. Administrative, Procedural, and Miscellaneous
Electing Small Business Trusts
Notice 97–12
PURPOSE
Section 1302 of the Small Business
Job Protection Act of 1996, Pub. L. No.
104–188, 110 Stat. 1755 (1996) (the
Act) amended § 1361 of the Internal
Revenue Code to permit an Electing
Small Business Trust (ESBT) to be a
shareholder of an S corporation. The
Department of Treasury and the Internal
Revenue Service intend to issue regulations to provide guidance on the application of § 1302 of the Act. This notice
provides guidance in advance of the
issuance of regulations regarding the
ESBT election and the ESBT’s consent
to the S corporation election.
ESBT ELECTION
The trustee of the ESBT must make
the ESBT election pursuant to
§ 1361(e)(3) by signing and filing with
the service center with which the corporation files its income tax return a
statement that—
(1) Contains the name, address, and
taxpayer identification number of all
potential current beneficiaries, the trust,
and the corporation;
(2) Identifies the election as an election made under section 1361(e)(3);
(3) Specifies the date on which the
election is to become effective (not
earlier than 15 days and two months
before the date on which the election is
filed);
(4) Specifies the date (or dates) on
which the stock of the corporation was
transferred to the trust; and

(5) Provides all information and representations necessary to show that:
(A) All potential current beneficiaries meet the shareholder requirements
of section 1361(b)(1); and
(B) The trust meets the definitional
requirements of an ESBT under section
1361(e).
The trustee of the ESBT must file the
ESBT election within the time requirements prescribed in regulation section
1.1361–1(j)(6)(iii) for filing Qualified
Subchapter S Trust (QSST) elections
(generally within the 16-day-and-2month period beginning on the day that
the stock is transferred to the trust). The
trustee may attach the ESBT election to
the Form 2553 in the case of newly
electing S corporations.
ESBT CONSENT TO S
CORPORATION ELECTION
Section 1362(a) provides that all
shareholders must consent to the S corporation election. Section 1361(c)(2)(B)
generally provides that all potential current beneficiaries of the ESBT are
treated as shareholders for purposes of
determining whether the corporation has
eligible shareholders and whether the
number of shareholders does not exceed
75, as provided by § 1361(b)(1). For
purposes of the ESBT’s consent to the S
corporation election under § 1362(a),
however, because the ESBT is taxed on
the S corporation’s income and the
trustee makes the ESBT election, only
the trustee need consent to the S corporation election.
PAPERWORK REDUCTION ACT
The collection of information con-

11

tained in this notice has 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 1545–1523.
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 control number.
The collections of information in this
notice are in the section headed ESBT
Election. This information is required by
the IRS to assure compliance with the
new provisions of the Small Business
Job Protection Act of 1996. The likely
respondents are business or other forprofit institutions.
The estimated total reporting burden
is 5,000 hours.
The estimated average burden per
respondent is one hour. The estimated
number of respondents is 5,000.
The estimated frequency of responses
is once.
Books or records relating to a collection of information must be retained as
long as their contents may become material in the administration of any internal revenue law. Generally tax returns
and tax return information are confidential, as required by 26 U.S.C. 6103.
DRAFTING INFORMATION
The principal author of this notice is
Steven R. Schneider of the Office of
Assistant Chief Counsel (Passthroughs
and Special Industries). For further information regarding this notice contact
Steven R. Schneider at (202) 622–3060
(not a toll-free call).

Part IV. Items of General Interest
Notice of Proposed Rulemaking
and Notice of Public Hearing

and the hearing, Evangelista Lee, (202)
622–7190 (not a toll-free number).

Allocations of Depreciation
Recapture Among Partners in a
Partnership

SUPPLEMENTARY
INFORMATION:

REG–209762–95

This document proposes to change the
current Income Tax Regulations (26
CFR part 1) relating to the characterization and allocation of depreciation recapture among partners in a partnership.
Section 1245 of the Internal Revenue
Code requires taxpayers to recharacterize as ordinary income some or all of
the gain on the disposition of certain
types of business properties. The amount
recharacterized as ordinary income (recapture gain) is the lesser of: (a) the
gain realized on disposition, or (b) the
total deductions allowed or allowable
for depreciation or amortization from
the property. Section 1.1245–1(e)(2) of
the Income Tax Regulations currently
provides that each partner’s share of
recapture gain will generally be determined in accordance with the provisions
of section 704. The regulations also
provide that, if the partnership agreement provides for the allocation of total
gain from the property but does not
provide for the allocation of recapture
gain, recapture gain is allocated in the
same manner as total gain.
The current regulations create some
uncertainty because it is unclear how
recapture gain is allocated under section
704. The allocation of recapture gain
cannot have substantial economic effect
because classifying a portion of the gain
as recapture gain merely changes the tax
character of the gain. In addition, by
allowing the partnership to allocate recapture gain in the same manner as total
gain, the current regulations increase the
possibility that a partner may receive an
allocation of recapture gain in excess of
the partner’s share of depreciation from
the property. For example, if a partner
acquires an interest in a partnership that
has fully depreciated the property and
the property is subsequently sold at a
gain, the partner may be allocated a
portion of the total gain and a portion of
the recapture gain, even though the
partner did not receive any depreciation
deductions from the property. This mismatch between depreciation allocations
and recapture allocations should be
minimized because recapture gain is
intended to offset the earlier depreciation deductions taken from the property

AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking and notice of public hearing.
SUMMARY: This document contains
proposed regulations relating to the allocation of depreciation recapture among
partners in a partnership. The proposed
regulations amend existing regulations
to require that any gain characterized as
depreciation recapture must be allocated
to each partner in an amount equal to
the lesser of the partner’s share of total
gain from the sale of the property or the
partner’s share of depreciation from the
property. The proposed regulations affect partnerships and their partners. This
document also contains a notice of public hearing on the proposed regulations.
DATES: Written comments must be received by March 6, 1997. Outlines of
oral comments and requests to speak at
the public hearing scheduled for March
27, 1997, at 10 a.m., must be received
by March 6, 1997.
ADDRESSES: Send submissions to
CC:DOM:CORP:R [REG–209762–95],
room 5226, Internal Revenue Service,
POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be
hand delivered between the hours of 8
a.m. and 5 p.m. to: CC:DOM:CORP:R
[REG–209762–95], Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC.
Alternatively, taxpayers may submit
comments electronically via the Internet
by selecting the ‘‘Tax Regs’’ option on
the IRS Home Page, or by submitting
comments directly to the IRS Internet
site at http://www.irs.ustreas.gov/prod/
tax_regs/comments.html. The public
hearing will be held in room 3313,
Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC.
FOR FURTHER INFORMATION
CONTACT: Concerning the regulations, Daniel J. Coburn or Deborah
Harrington, (202) 622–3050 (not a tollfree number); concerning submissions

1997–3

I.R.B.

Background

12

and should therefore be allocated to the
extent possible to the partner that received those depreciation deductions. Finally, the current regulations do not
provide guidance on the allocation of
recapture gain from contributed property
subject to section 704(c). In the legislative history of the 1984 amendment to
section 704(c), Congress suggested that
Treasury and the Service issue regulations governing the allocation of recapture gain inherent in property contributed to a partnership. See H.R. Rep. No.
861, 98th Cong., 2d Sess. 857 (1984);
see also Staff of the Joint Comm. on
Taxation, 98th Cong., 2d Sess., General
Explanation of the Revenue Provisions
of the Deficit Reduction Act of 1984 214
(Comm. Print 1984). In the 1994 preamble to the section 704(c) final regulations, Treasury and the Service indicated
that this issue would be considered in a
separate regulations project. 59 Fed.
Reg. 66,726 (1994).
Explanation of Provisions
The proposed regulations provide
guidance on allocating recapture gain
among partners, including recapture gain
attributable to contributed property. The
proposed regulations provide that a partner’s share of recapture gain is equal to
the lesser of (1) the partner’s share of
total gain arising from the disposition of
the property, or (2) the partner’s share
of depreciation or amortization from the
property. This rule seeks to insure, to
the extent possible, that a partner recognizes recapture on the disposition of
property in an amount equal to the
depreciation or amortization deductions
previously taken by the partner on the
property. If recapture gain remains unallocated under the general rule, the remaining unallocated gain is allocated
among those partners whose shares of
total gain on the disposition of the
property exceed their shares of depreciation or amortization with respect to the
property. Recapture gain may be unallocated under the general rule if, for
example, the total gain allocated to a
partner on the sale of the property is
less than the amount of depreciation
previously allocated to that partner.
The proposed regulations provide special rules for determining a partner’s
share of depreciation or amortization
from contributed property subject to
section 704(c). The proposed regulations
provide that a contributing partner’s
share of depreciation or amortization

includes depreciation or amortization allowed or allowable prior to contribution.
In addition, the proposed regulations
provide that curative and remedial allocations generally reduce the contributing
partner’s share of depreciation or amortization and increase the noncontributing
partners’ shares of depreciation or amortization.
Treasury and the Service request comments on whether these special rules can
be incorporated into accounting systems
that track section 704(c) allocations for
partnerships with multiple section 704(c)
properties.

Persons that wish to present oral
comments at the hearing must submit
written comments by March 6, 1997,
and submit an outline of the topics to be
discussed and the time to be devoted to
each topic (signed original and eight (8)
copies) by March 6, 1997.
A period of 10 minutes will be allotted to each person for making comments.
An agenda showing the scheduling of
the speakers will be prepared after the
deadline for receiving outlines has
passed. Copies of the agenda will be
available free of charge at the hearing.

Proposed Effective Date

Drafting Information

These amendments are proposed to
apply to properties acquired by a partnership on or after the date the regulations are published as final regulations
in the Federal Register.

The principal authors of these regulations are Daniel J. Coburn and Deborah
Harrington, Office of Assistant Chief
Counsel (Passthroughs and Special Industries), IRS. However, other personnel
from the IRS and Treasury Department
participated in their development.

Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant regulatory action as defined in EO
12866. Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these
regulations, and, because the regulations
do not impose a collection of information on small entities, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does
not apply. Pursuant to section 7805(f) of
the Internal Revenue Code, this notice
of proposed rulemaking will be submitted to the Chief Counsel for Advocacy
of the Small Business Administration for
comment on its impact on small business.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration will be given to any written comments (a signed original and eight (8)
copies) that are timely submitted to the
IRS. All comments will be available for
public inspection and copying.
A public hearing has been scheduled
for March 27, 1997, at 10:00 a.m. in
room 3313 of the Internal Revenue
Building, 1111 Constitution Avenue,
NW., Washington, DC. Because of access restrictions, visitors will not be
admitted beyond the Internal Revenue
Building lobby more than 15 minutes
before the hearing starts.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing.

*

*

*

*

*

PART 1 — INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read, in part, as
follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.704–3 is amended as
follows:
1. Paragraphs (a)(9) and (a)(10) are
redesignated as paragraphs (a)(10) and
(a)(11), respectively.
2. New paragraph (a)(9) is added.
The addition reads as follows:
§ 1.704–3 Contributed property.
(a) * * *
(9) Contributing and noncontributing
partners’ recapture shares. For special
rules applicable to the allocation of
recapture gain with respect to property
contributed by a partner to a partnership,
see § § 1.1245–1(e)(2) and 1.1250–1(f).
*

*

*

*

*

Par. 3. Section 1.1245–1 is amended
by revising paragraph (e)(2) to read as
follows:
§ 1.1245–1 General rule for treatment
of gain from dispositions of certain
depreciable property.
*

*

*

*

*

(e) * * *
(2)(i) Unless paragraph (e)(3) of this
section applies, a partner’s distributive
share of gain recognized under section
1245(a)(1) by the partnership is equal to
the lesser of the partner’s share of the

13

total gain from the disposition of the
property or the partner’s share of the
depreciation or amortization with respect
to the property. Any gain recognized
under section 1245(a)(1) by the partnership that is not allocated under the first
sentence of this paragraph is allocated
among the partners whose shares of
total gain exceed their shares of depreciation or amortization with respect to
the property and is allocated to those
partners in proportion to (but not in
excess of) their shares of the total gain
(including gain recognized under section
1245(a)(1)) from the disposition of the
property.
(ii) A partner’s share of depreciation
or amortization with respect to property
equals the total amount of allowed or
allowable depreciation or amortization
previously allocated to that partner with
respect to the property. If a partner
transfers a partnership interest, a share
of depreciation or amortization must be
allocated to the transferee partner as it
would have been allocated to the
transferor partner. If the partner transfers
a portion of the partnership interest, a
share of depreciation or amortization
proportionate to the interest transferred
must be allocated to the transferee partner.
(iii)(A) A partner’s share of depreciation or amortization with respect to
property contributed by the partner includes the amount of depreciation or
amortization allowed or allowable to the
partner for the period prior to the property’s contribution.
(B) The partners’ shares of depreciation or amortization with respect to
property contributed by a partner must
be adjusted to account for any curative
allocations. (See § 1.704–3(c) for a description of the curative allocation
method). The contributing partner’s
share of depreciation or amortization
with respect to the contributed property
is decreased (but not below zero) by the
amount of any curative allocation of
ordinary income to the contributing partner with respect to the contributed property and by the amount of any curative
allocation of deduction or loss (other
than capital loss) allocated to the noncontributing partners with respect to the
contributed property. A noncontributing
partner’s share of depreciation or amortization with respect to the contributed
property is increased by the noncontributing partner’s share of any curative
allocation of ordinary income to the
contributing partner with respect to the
contributed property and by the amount

1997–3

I.R.B.

of any curative allocation of deduction
or loss (other than capital loss) allocated
to the noncontributing partner with respect to the contributed property. The
partners’ shares of depreciation or amortization with respect to property from
which curative allocations of depreciation or amortization are taken is determined without regard to those curative
allocations.
(C) The partners’ shares of depreciation or amortization with respect to
property contributed by a partner must
be adjusted to account for any remedial
allocations. (See § 1.704–3(d) for a description of the remedial allocation
method). The contributing partner’s
share of depreciation or amortization
with respect to the contributed property
is decreased (but not below zero) by the
amount of any remedial allocation of
ordinary income to the contributing partner with respect to the contributed property. A noncontributing partner’s share
of depreciation or amortization with respect to the contributed property is
increased by the amount of any remedial
allocation of depreciation or amortization to the noncontributing partner with
respect to the contributed property.
(D) The principles of this paragraph
(e)(2)(iii) apply in determining the effect
of remedial or curative allocations on a
partner’s share of depreciation or amortization with respect to property for
which differences between book value
and adjusted tax basis are created when
a partnership revalues partnership property pursuant to § 1.704–1(b)(2)(iv)(f).
(iv) Examples. The application of this
paragraph (e)(2) may be illustrated by
the following examples:
Example 1. Recapture allocations. (i) Facts. A
and B each contribute $5,000 cash to form AB, a
general partnership. The partnership agreement
provides that depreciation deductions will be allocated 90 percent to A and 10 percent to B, and, on
the sale of depreciable property, A will first be
allocated gain to the extent necessary to equalize
A’s and B’s capital accounts. Any remaining gain
will be allocated 50 percent to A and 50 percent to
B. In its first year of operations, AB purchases
depreciable equipment for $5,000. AB depreciates
the equipment over its 5-year recovery period and
elects to use the straight-line method. In its first
year of operations, AB’s operating income equals
its expenses (other than depreciation).
(ii) Year 1. In its first year of operations, AB
has $1,000 of depreciation from the partnership
equipment. (To simplify this example, the partnership’s depreciation deductions are determined
without regard to any first-year depreciation conventions.) In accordance with the partnership
agreement, AB allocates 90 percent ($900) of the
depreciation to A and 10 percent ($100) of the
depreciation to B. At the end of the year, AB sells
the equipment for $5,200, recognizing $1,200 of
gain ($5,200 amount realized less $4,000 adjusted

1997–3

I.R.B.

tax basis). In accordance with the partnership
agreement, the first $800 of gain is allocated to A
to equalize the partners’ capital accounts, and the
remaining $400 of gain is allocated $200 to A and
$200 to B.
(iii) Recapture allocations. $1,000 of the gain
from the sale of the equipment is treated as gain
recognized under section 1245(a)(1). Under paragraph (e)(2)(i) of this section, each partner’s share
of this section 1245 gain is the lesser of the
partner’s share of total gain recognized on the sale
of the equipment or the partner’s share of total
depreciation with respect to the equipment. Thus,
A’s share of the section 1245 gain is $900 (the
lesser of A’s share of total gain ($1,000) and A’s
share of depreciation ($900)) and B’s share of the
section 1245 gain is $100 (the lesser of B’s share
of total gain ($200) and B’s share of depreciation
($100)). Accordingly, $900 of the $1,000 of total
gain allocated to A will be treated as ordinary
income and $100 of the $200 of total gain
allocated to B will be treated as ordinary income.
Example 2. Recapture allocation limited by
gain share. Assume the same facts as in Example
1, except that the partnership agreement provides
that gains and losses from the sale of depreciable
property will be allocated equally between the
partners. On the sale of the equipment, the
partnership’s total gain of $1,200 is allocated $600
to A and $600 to B. Under paragraph (e)(2)(i) of
this section, A’s share of the section 1245 gain is
limited to $600 (the amount of total gain allocated
to A) even though A’s share of the total depreciation from the equipment was $900. The remaining
$400 of section 1245 gain must be allocated to B.
Accordingly, all $600 of total gain allocated to A
is treated as ordinary income and $400 of the
$600 of total gain allocated to B is treated as
ordinary income.
Example 3. Determination of partners’ shares of
depreciation with respect to contributed property.
(i) Facts. C and D form partnership CD as equal
partners. C contributes depreciable personal property C1 with an adjusted tax basis of $800 and a
fair market value of $2,800. D contributes $2,800
cash. Prior to contributing C1, C claimed $200 of
depreciation from C1. At the time of contribution,
C1 has four years remaining on its 5-year recovery
period and is depreciable under the straight-line
method. At the time CD is formed, it purchases
depreciable personal property D1 for $2,800,
which is depreciable over seven years under the
straight-line method. (To simplify the example, all
depreciation is determined without regard to any
first-year depreciation conventions).
(ii) Traditional method. C and D will each be
allocated $350 of the total of $700 of book
depreciation from C1 in year 1. Under the traditional method of making section 704(c) allocations, C will not be allocated any tax depreciation
from C1 and D will be allocated the entire $200
of tax depreciation from C1. C and D will each be
allocated $200 of book and tax depreciation from
D1. As a result, after the first year of partnership
operations, C’s share of depreciation with respect
to C1 is $200 (the depreciation taken by C prior to
contribution) and D’s share of depreciation with
respect to C1 is $200 (the amount of tax depreciation allocated to D). C and D each have a $200
share of depreciation with respect to D1.
(iii) Effect of curative allocations. If the partnership elects to make curative allocations under
§ 1.704–3(c) using depreciation from D1, the
results in year 1 will be the same as under the
traditional method, except that $150 of the $200
of tax depreciation from D1 that would have been
allocated to C under the traditional method will be
allocated to D as additional depreciation with

14

respect to C1. As a result, after the first year of
partnership operations, C’s share of depreciation
with respect to C1 will be reduced to $50 (the
total depreciation taken by C prior to contribution
($200) decreased by the amount of the curative
allocation to D ($150)). C’s share of depreciation
with respect to D1 will still be $200 and D’s share
of depreciation with respect to C1 will be $350
(the depreciation allocated to D under the traditional method ($200) increased by the amount of
the curative allocation to D ($150)). D’s share of
depreciation with respect to D1 will still be $200.
(iv) Effect of remedial allocations. If the partnership elects the remedial allocation method for
making section 704(c) allocations under § 1.704–
3(d), there will be $600 of total book depreciation
from C1 in year 1. (Under the remedial allocation
method, the amount by which C1’s book basis
($2,800) exceeds its tax basis ($800) is depreciated over a 5-year life, rather than a 4-year life). C
and D will each be allocated one-half ($300) of
the total book depreciation. As under the traditional method, C will be allocated $0 of tax
depreciation from C1 and D will be allocated $200
of tax depreciation from C1. Because the ceiling
rule would cause a disparity of $100 between D’s
book and tax allocations of depreciation, D will
also receive a $100 remedial allocation of depreciation with respect to C1, and C will receive a
$100 remedial allocation of income with respect to
C1. As a result, after the first year of partnership
operations, D’s share of depreciation with respect
to C1 is $300 (the depreciation allocated to D
under the traditional method ($200) increased by
the amount of the remedial allocation ($100)). C’s
share of depreciation with respect to C1 is $100
(the total depreciation taken by C prior to contribution ($200) decreased by the amount of the
remedial allocation of income ($100)). As under
the traditional method, C and D each have a $200
share of depreciation with respect to D1.

(v) Effective date. This paragraph
(e)(2) is effective for properties acquired
by the partnership on or after the date
the regulations are published as final
regulations in the Federal Register.
*

*

*

*

*

Margaret Milner Richardson,
Commissioner of Internal Revenue.
(Filed by the Office of the Federal Register on
December 11, 1996, 8:45 a.m., and published in
the issue of the Federal Register for December 12,
1996, 61 F.R. 65371)

Inadvertent Invalid S Elections and
Late S Elections
Announcement 97–4
This announcement informs taxpayers
of a recently enacted Internal Revenue
Code provision that allows the Internal
Revenue Service (IRS) to treat a late
subchapter S election as timely made
and to waive the defects in an inadvertent invalid S election.
Section 1305 of the Small Business
Job Protection Act, Pub. L. No. 104–
188, 110 Stat. 1755, enacted August 20,
1996, amends §§ 1362(b) and (f) of the

Internal Revenue Code, effective for
taxable years beginning after December
31, 1982.
I. LATE SUBCHAPTER S
ELECTIONS
A small business corporation must
elect to be an S corporation no later
than the 15th day of the third month of
the taxable year for which the election
is effective. Under prior law, the IRS
did not have the authority to validate a
late election.
New § 1362(b)(5) of the Code allows
the Secretary to treat an election to be
an S corporation as timely filed if either
the election is made after the date
prescribed or no such election was
made, provided the Secretary determines
there was reasonable cause for the failure to timely file the S election.
Generally, in order to obtain relief
under § 1362(b)(5) of the Code, a taxpayer must receive a private letter ruling
from the IRS. The procedural requirements for requesting a ruling are described in Revenue Procedure 97–1,
1997–1 I.R.B.
However, a special transition rule for
seeking relief under § 1362(b)(5) is provided for untimely S corporation elections made for a taxable year beginning
in 1996. Under this rule, taxpayers who
did not file an S corporation election in
a timely fashion for the 1996 taxable
year may seek relief under § 1362(b)(5)
of the Code by submitting on or before
February 15, 1997, an S corporation
election to the applicable service center
as well as a letter explaining the reasonable cause for the untimely S corporation election.
Any taxpayer who is not eligible for
the relief under the special transition
rule described above may request relief
by applying for a private letter ruling.
II. INADVERTENT INVALID S
CORPORATION ELECTIONS
Under prior law, if the IRS determined that a corporation’s subchapter S
election was inadvertently terminated,
the IRS could waive the effect of the
terminating event for any period if the
corporation timely corrected the event
and if the shareholders agreed to be
treated as if the election had been in
effect for that period. Such waivers
generally are obtained through the issuance of a private letter ruling. Prior law
did not grant the IRS the ability to
waive the effect of an inadvertent invalid subchapter S election.

New § 1362(f) of the Code applies
the inadvertent termination relief rules
in situations where an election by a
corporation to be treated as a small
business corporation was invalid due to
a failure to meet the requirements of an
S corporation found in § 1361(b) or to
obtain all of the shareholder consents.
Generally, in order to obtain relief for
inadvertent invalid elections, the corporation must request a private letter ruling from the IRS. Sections 1.1362–4(c)
through (f) of the Income Tax Regulations provide rules for corporations requesting inadvertent termination relief
under § 1362(f). These rules will also
apply to corporations requesting inadvertent invalid election relief.
In situations where taxpayers fail to
obtain all of the necessary shareholder
consents on Form 2553, section 1.1362–
6(b)(3)(iii) provides rules for obtaining
§ 1362(f) relief from the district director or director of the service center with
which the corporation files its income
tax return.
III. PAPERWORK REDUCTION ACT
The collection of information contained in this announcement has 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
1545–1524.
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 control number.
The collection of information in this
announcement is in part I. LATE
SUBCHAPTER S ELECTIONS. This
information is required to be submitted
to the applicable service center in order
to obtain late S corporation election
relief. This information will be used to
determine if the reasonable cause requirement in § 1362(b)(5) has been met.
The collection of information is required
to obtain a benefit. The likely respondents are business or other for-profit
institutions.
The estimated total annual reporting
burden is 800 hours.
The estimated annual burden per respondent is 1 hour. The estimated number of respondents is 800.
This announcement provides for a

15

single response that must be completed
by February 15, 1997.
Books or records relating to a collection of information must be retained as
long as their contents may become material in the administration of any internal revenue law. Generally tax returns
and tax return information are confidential, as required by 26 U.S.C. 6103.
The principal author of this announcement is Mark D. Harris of the Office of
Assistant Chief Counsel (Passthroughs
and Special Industries). For further information regarding this announcement
contact Mr. Harris at (202) 622–3050
(not a toll-free call).

New Form 8832, Entity
Classification Election, Now
Available
Announcement 97–5
Final regulations under section 7701
of the Internal Revenue Code became
effective on January 1, 1997. The new
regulations allow certain business entities to choose their classification for
Federal tax purposes under an elective
regime. Under the regulations, any business entity that is not required to be
treated as a corporation is an ‘‘eligible
entity’’ that may choose its classification. In order to provide most eligible
entities with the classification they
would choose without requiring them to
file an election, the regulations provide
default classification rules. For example,
under the default rules, a domestic eligible entity will be treated as a partnership if it has two or more members, and
disregarded as an entity separate from
its owner if it has a single owner.
Form 8832 was developed for eligible
entities that choose not to be classified
under the default rules or that wish to
change their previous classification. The
IRS will use the information entered on
Form 8832 to establish the entity’s filing
and reporting requirements for Federal
tax purposes.
Form 8832 is available electronically
through the IRS Home Page on the
World Wide Web (http://www.irs.
ustreas.gov) or by modem directly to
703–321–8020 (not a toll-free number).
You may also order Form 8832 by
calling 1–800–TAX–FORM (1–800–
829–3676).

1997–3

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
applies to both A and B, the prior ruling

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

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.

ER—Employer.

PR—Partner.

ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.

PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.

A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C.—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.

FC—Foreign Country.
FICA—Federal Insurance Contribution Act.

Del. Order—Delegation Order.

M—Minor.

DISC—Domestic International Sales Corporation.

Nonacq.—Nonacquiescence.

DR—Donor.

O—Organization.

E—Estate.

P—Parent Corporation.

X—Corporation.

EE—Employee.

PHC—Personal Holding Company.

Y—Corporation.

E.O.—Executive Order.

PO—Possession of the U.S.

Z—Corporation.

FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.

REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.

I.R.B.—Internal Revenue Bulletin.

TFR—Transferor.

LE—Lessee.

T.I.R.—Technical Information Release.

LP—Limited Partner.

TP—Taxpayer.

LR—Lessor.

TR—Trust.
TT—Trustee.
U.S.C.—United States Code.

16

Numerical Finding List1
Bulletin 1997–1 through 1997–2
Announcements:
97–1, 1997–2 I.R.B. 63
97–2, 1997–2 I.R.B. 63
97–3, 1997–2 I.R.B. 63
Notices:
97–1, 1997–2 I.R.B. 22
97–2, 1997–2 I.R.B. 22
97–3, 1997–1 I.R.B. 8
97–4, 1997–2 I.R.B. 24
97–5, 1997–2 I.R.B. 25
97–6, 1997–2 I.R.B. 26
97–7, 1997–1 I.R.B. 8
97–9, 1997–2 I.R.B. 35
97–10, 1997–2 I.R.B. 41
97–11, 1997–2 I.R.B. 50
Revenue Procedures:
97–1, 1997–1 I.R.B. 11
97–2, 1997–1 I.R.B. 64
97–3, 1997–1 I.R.B. 84
97–4, 1997–1 I.R.B. 96
97–5, 1997–1 I.R.B. 132
97–6, 1997–1 I.R.B. 153
97–7, 1997–1 I.R.B. 185
97–8, 1997–1 I.R.B. 187
97–9, 1997–2 I.R.B. 56
97–10, 1997–2 I.R.B. 59
Revenue Rulings:
97–1, 1997–2 I.R.B. 10
97–2, 1997–2 I.R.B. 7
97–3, 1997–2 I.R.B. 5
Tresury Decisions:
8697, 1997–2 I.R.B. 11

1

A cumulative list of all Revenue Rulings, Revenue Procedures, Treasury Decisions, etc., published in Internal Revenue Bulletins 1996–27
through 1996–53 will be found in Internal Revenue Bulletin 1997–1, dated January 6, 1997.

17

Finding List of Current Action on
Previously Published Items1
Bulletin 1997–1 through 1997–2
*Denotes entry since last publication
Revenue Procedures:
92–20
Modified by
97–1, 1997–1 I.R.B. 11

Revenue Rulings—Continued
96–43
Superseded by
97–3, 1997–1 I.R.B. 84
96–56
Superseded by
97–3, 1997–1 I.R.B. 84

92–20
Modified by
97–10, 1997–2 I.R.B. 59
92–90
Superseded by
97–1, 1997–1 I.R.B. 11
96–1
Superseded by
97–1, 1997–1 I.R.B. 11
96–2
Superseded by
97–2, 1997–1 I.R.B. 64
96–3
Superseded by
97–3, 1997–1 I.R.B. 84
96–4
Superseded by
97–4, 1997–1 I.R.B. 96
96–5
Superseded by
97–5, 1997–1 I.R.B. 132
96–6
Superseded by
97–6, 1997–1 I.R.B. 153
96–7
Superseded by
97–7, 1997–1 I.R.B. 185
96–8
Superseded by
97–8, 1997–1 I.R.B. 187
Revenue Rulings:
92–19
Supplemented in part by
97–2, 1997–2 I.R.B. 7
96–12
Superseded by
97–3, 1997–1 I.R.B. 84
96–13
Modified by
97–1, 1997–1 I.R.B. 11
96–22
Superseded by
97–3, 1997–1 I.R.B. 84
96–34
Superseded by
97–3, 1997–1 I.R.B. 84
96–39
Superseded by
97–3, 1997–1 I.R.B. 84
1

A cumulative finding list for previously published
items mentioned in Internal Revenue Bulletins
1996–27 through 1996–53 will be found in Internal Revenue Bulletin 1997–1, dated January 6,
1997.

18

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A78925ee8acae9174. Public record. Not legal advice.