Bulletin No. 1998–40

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Bulletin No. 1998–40

October 5, 1998

Internal Revenue

bulletin

HIGHLIGHTS

OF THIS ISSUE

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

INCOME TAX

Rev. Rul. 98–49, page 4.

Low-income housing tax credit. This ruling advises taxpayers that payments made to a building owner on behalf or

in respect of a tenant under the Section 8 Assistance For Single-Room Occupancy Dwellings Program or under the Shelter

Plus Care Program are not grants made with respect to a

building or its operation under section 42(d)(5) of the Code.

Rev. Rul. 98–50, page 7.

Federal rates; adjusted federal rates; adjusted federal

long-term rate, and the long-term exempt rate. For

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

of the Code, tables set forth the rates for October 1998.

EMPLOYEE PLANS

T.D. 8781, page 4.

REG–101363–98, page 10.

Final, temporary, and proposed regulations under section

411 of the Code provide for changes to the rules regarding

qualified retirement plan benefits that are protected from reduction by plan amendment, that have been made necessary by the Taxpayer Relief Act of 1997.

Rev. Proc. 98–53, page 9.

Determination letter requests; plan amendments. This

procedure allows for determination letter requests with

caveats for statutory changes. Rev. Proc. 98–14 modified.

EXEMPT ORGANIZATIONS

Announcement 98–91, page 12.

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

ADMINISTRATIVE

Announcement 98–87, page 11.

This announcement states that taxpayers may rely on the

proposed Income Tax Regulations under sections 411(a)(11)

and 417 of the Code pertaining to notice and consent (Section 1.411(a)–11(c)(2) and (8) and section 1.417(e)–1(b)(3)

and (4)).

Announcement 98–89, page 11.

The Service has undertaken a new initiative to improve its

procedures for handling bankruptcy cases.

Finding Lists begin on page 17.

Announcement of Disbarments and Suspensions begins on page 13.

Index for January-September begins on page 19.

Department of the Treasury

Internal Revenue Service

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Mission of the Service

ucts and services; and perform in a manner warranting

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

The purpose of the Internal Revenue Service is to collect

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

the public by continually improving the quality of our prod-

Statement of Principles

of Internal Revenue

Tax Administration

The Service also has the responsibility of applying and

administering the law in a reasonable, practical manner.

Issues should only be raised by examining officers when

they have merit, never arbitrarily or for trading purposes.

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

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

adopt a position inconsistent with an established Service

position.

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

is determined by Congress.

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

policy by correctly applying the laws enacted by Congress;

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

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

neither a government nor a taxpayer point of view.

Administration should be both reasonable and vigorous. It

should be conducted with as little delay as possible and

with great courtesy and considerateness. It should never

try to overreach, and should be reasonable within the

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

should be relentless in its attack on unreal tax devices and

fraud.

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

is the responsibility of each person in the Service, charged

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

meaning of the statutory provision and not to adopt a

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

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

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Introduction

The Internal Revenue Bulletin is the authoritative instrument

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

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly and may be obtained

from the Superintendent of Documents on a subscription

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

on a single-copy basis.

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

are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

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

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

modify, or amend any of those previously published in the

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

of internal practices and procedures that affect the rights

and duties of taxpayers are published.

Part II.—Treaties and Tax Legislation.

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

Tax Conventions, and Subpart B, Legislation and Related

Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to

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

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

Assistant Secretary (Enforcement).

Revenue rulings represent the conclusions of the Service on

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

revenue ruling. In those based on positions taken in rulings

to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature

are deleted to prevent unwarranted invasions of privacy and

to comply with statutory requirements.

Part IV.—Items of General Interest.

With the exception of the Notice of Proposed Rulemaking

and the disbarment and suspension list included in this part,

none of these announcements are consolidated in the Cumulative Bulletins.

Rulings and procedures reported in the Bulletin do not have

the force and effect of Treasury Department Regulations,

but they may be used as precedents. Unpublished rulings

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

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

The first Bulletin for each month includes a cumulative index

for the matters published during the preceding months.

These monthly indexes are cumulated on a semiannual basis

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

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

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

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

Section 42.—Low-Income

Housing Credit

26 CFR 1.42–16: Eligible basis reduced by federal

grants.

Low-income housing tax credit. This

revenue ruling advises taxpayers that payments made to a building owner on behalf

or in respect of a tenant under the Section

8 Assistance For Single-Room Occupancy Dwellings Program or under the

Shelter Plus Care Program are not grants

made with respect to a building or its operation under section 42(d)(5) of the

Code.

Rev. Rul. 98–49

Pursuant to § 1.42–16(b)(3) of the Income Tax Regulations, the Internal Revenue Service has determined that payments made to a building owner on behalf

or in respect of a tenant under the Section

8 Assistance For Single-Room Occupancy

Dwellings Program (42 U.S.C. 11301,

11401–11402) or under the Shelter Plus

Care Program (42 U.S.C. 11301, 11403–

11407b) are not grants made with respect

to a building or its operation under

§ 42(d)(5) of the Internal Revenue Code.

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).

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

of October 1998. See Rev. Rul. 98–50, page 7.

Section 280G.—Golden

Parachute Payments

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

rates are set forth for the month of October 1998.

See Rev. Rul. 98–50, page 7.

October 5, 1998

Section 382.—Limitation on Net

Operating Loss Carryforwards

and Certain Built-In Losses

Following Ownership Change

The adjusted federal long-term rate is set forth

for the month of October 1998. See Rev. Rul. 98–50,

page 7.

Section 411.—Minimum Vesting

Standards

ence the temporary regulations. The text

of the temporary regulations also serves

as the text of REG–101363–98, page 10.

DATES: These regulations are effective

September 4, 1998.

FOR FURTHER INFORMATION CONTACT: Linda S. F. Marshall, (202) 6226030 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

26 CFR 1.411(d)–4: Section 411(d)(6) protected

benefits.

T.D. 8781

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

Section 411(d)(6) Protected

Benefits (Taxpayer Relief Act of

1997); Qualified Retirement

Plan Benefits

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Final and temporary regulations.

SUMMARY: This document contains

final and temporary regulations providing

for changes to the rules regarding qualified retirement plan benefits that are protected from reduction by plan amendment, that have been made necessary by

the Taxpayer Relief Act of 1997 (TRA

’97). The temporary regulations change

the existing regulations to conform with

the TRA ’97 rules regarding in-kind distribution requirements for certain employee stock ownership plans, and specify

the time period during which certain plan

amendments for which relief has been

granted by TRA ’97 may be made without

violating the prohibition against plan

amendments that reduce accrued benefits.

These temporary regulations affect sponsors of qualified retirement plans, employers that maintain qualified retirement

plans, and qualified retirement plan participants. The final regulations amend the

existing final regulations to cross-refer-

This document contains amendments to

the Income Tax Regulations (26 CFR part

1) under section 411(d)(6). These temporary regulations change the rules under

section 411(d)(6) regarding qualified retirement plan benefits that are protected

from reduction by plan amendment, to

take into account amendments made by

the Taxpayer Relief Act of 1997 (TRA

’97), Public Law 105–34 (111 Stat. 788

(1997)). Specifically, these temporary

regulations change the existing regulations to conform to the TRA ’97 amendments to section 409 regarding the general requirement that employee stock

ownership plans offer distributions in the

form of employer securities. In addition,

these temporary regulations specify the

time period during which certain plan

amendments for which relief has been

granted by TRA ’97 may be made without

violating section 411(d)(6).

Explanation of Provisions

Section 411(d)(6) provides that a plan

is not treated as satisfying the requirements of section 411 if the accrued benefit of a participant is decreased by a plan

amendment. Under section 411(d)(6)(B),

a plan amendment that eliminates an

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

the amendment applies to benefits accrued as of the later of the adoption date

or the effective date of the amendment.

Sections 1.411(d)–4, Q&A–1(b)(1) and

1.401(a)(4)–4(e) specify that different optional forms of benefit within the meaning

of section 411(d)(6)(B) result from differences in the medium of a distribution

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(e.g., cash or in-kind) from a plan. Section 411(d)(6)(C) provides that any tax

credit employee stock ownership plan or

any employee stock ownership plan is not

treated as failing to meet the requirements

of section 411(d)(6) merely because it

modifies distribution options in a nondiscriminatory manner.

Special Rules Regarding Medium of

Distribution from ESOPs

Section 409(h) contains requirements

relating to distributions from tax credit

employee stock ownership plans. Section

4975(e)(7) extends the requirements of

section 409(h) to other employee stock

ownership plans as well, and section

401(a)(23) extends the requirements of

section 409(h) to qualified plans that are

stock bonus plans. Under section

409(h)(1)(A), an employee stock ownership plan or other stock bonus plan generally is required to make distributions

available in the form of employer securities. Prior to its amendment by TRA ’97,

section 409(h)(2) provided an exception

to this rule in the case of an employer

whose charter or bylaws restrict the ownership of substantially all outstanding employer securities to employees or to a trust

described in section 401(a).

Under section 1361, certain small business corporations that do not have more

than 75 shareholders are eligible to elect

treatment as S corporations whose tax attributes generally flow through to shareholders in accordance with the rules of

subchapter S of chapter 1 of subtitle A of

the Internal Revenue Code. Prior to the

Small Business Job Protection Act of

1996 (SBJPA), Public Law 104–188 (110

Stat. 1755 (1996)), an S corporation could

not maintain an employee stock ownership plan because an S corporation could

not have a qualified trust described in section 401(a) as a shareholder. SBJPA

amended the requirements for S corporations, effective for tax years beginning

after December 31, 1996, to permit certain tax-exempt organizations, including

qualified trusts described in section

401(a), to be S corporation shareholders.

TRA ’97 made an additional change to

the rules governing qualified plans holding securities of an S corporation employer, to make it easier for S corporation

employers to facilitate employee owner-

1998–40 I.R.B.

ship of employer securities through qualified plans. Section 1506 of TRA ’97 extends the exception of section 409(h)(2)

to cover S corporations, effective for taxable years beginning after December 31,

1997. Pursuant to this change, tax credit

employee stock ownership plans, employee stock ownership plans, and other

stock bonus plans established and maintained by S corporation employers are not

required to offer distributions in the form

of employer securities.

Section 1.411(d)–4, Q&A-2(d)(2)(ii)

provides an exception from the requirements of section 411(d)(6) for plan

amendments that eliminate optional forms

of benefit from a tax credit employee

stock ownership plan, an employee stock

ownership plan, or a stock bonus plan, for

certain employers. Section 1.411(d)–4,

Q&A-2(d)(2)(ii) applies to employers that

become substantially employee-owned, if

the employer otherwise meets the requirements of section 409(h)(2) with respect to

restrictions on the ownership of outstanding employer stock. These temporary

regulations expand this exception from

the requirements of section 411(d)(6) to

apply to S corporations as well, to reflect

the TRA ’97 changes to section 409(h).

Rules for Plan Amendments Pursuant to

TRA ’97

Section 1541 of TRA ’97 contains provisions relating to plan amendments that

are adopted as a result of TRA ’97. If section 1541 applies to a plan amendment,

section 1541(a) provides that the plan will

be treated as operated in accordance with

its terms and will not fail to satisfy the requirements of section 411(d)(6) by reason

of the amendment. Section 1541 applies

to a plan amendment that is made pursuant to a legislative change in the pension and employee benefit provisions of

TRA ’97, provided the following conditions are satisfied. First, the plan amendment must be adopted before the first day

of the first plan year beginning on or after

January 1, 1999 (2001, in the case of a

governmental plan, as defined in section

414(d)). Second, the plan must be operated in accordance with the terms of the

plan amendment, beginning on the date

the legislative change takes effect, or, if

the amendment is not required by the legislative change, the effective date of the

amendment specified by the plan. Third,

the plan amendment must be made

retroactively effective.

The remedial amendment period for

adopting plan amendments to which section 1541 of TRA ’97 applies was extended pursuant to the rules of section

401(b) in Rev. Proc. 98–14 (1998–4 I.R.B.

22). To provide a uniform time for plan

amendment, these temporary regulations

extend the time for the section 411(d)(6)

relief provided by section 1541 of TRA

’97 to the end of the remedial amendment

period for these plan amendments.

Other Section 411(d)(6) Issues

In Notice 98–29 (1998–22 I.R.B. 8),

the IRS requested public comment regarding a number of possible methods of

providing section 411(d)(6) relief, particularly for defined contribution plans. The

IRS will also consider comments submitted pursuant to Notice 98–29 that propose

other methods of providing section

411(d)(6) relief to address special concerns of employee stock ownership plans.

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) does not

apply to these regulations, and because

the regulation does 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, these temporary regulations will be

submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small

business.

Drafting Information

The principal author of these regulations is Linda S. F. Marshall, Office of the

Associate Chief Counsel (Employee Benefits and Exempt Organizations). However, other personnel from the IRS and

Treasury Department participated in their

development.

* * * * *

October 5, 1998

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Adoption of Amendments to the

Regulations

Accordingly, 26 CFR part 1 is amended

as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for

part 1 is amended by adding an entry in

numerical order to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

§1.411(d)–4T also issued under 26 U.S.C.

411(d)(6). * * *

Par. 2. Section 1.411(d)–4 is amended

by:

1. Removing the reference “Q&A-5”

and adding Q&A-2” in its place in the

first sentence of Q&A-2(d)(1) introductory text.

2. Adding a sentence at the end of

Q&A-2(d)(3) to read as follows:

§1.411(d)–4 Section 411(d)(6) protected

benefits.

* * * * *

Q-2: * * *

A-2: * * *

(d) * * *

(3) * * * (For taxable years after December 31, 1997, see §1.411(d)–4T

Q&A-2(d).)

* * * * *

Par. 3. Section 1.411(d)–4T is added to

read as follows:

§1.411(d)–4T Section 411(d)(6)

protected benefits (temporary).

Q&A-1: [Reserved]. For further information, see §1.411(d)–4 Q&A-1.

Q-2: To what extent may section

411(d)(6) protected benefits under a plan

be reduced or eliminated?

(a) through (c) [Reserved]. For further

information, see §1.411(d)–4 Q&A-2(a)

through (c).

(d) ESOP and stock bonus plan exception—(1) In general. Subject to the limitations in paragraph (d)(2) of this Q&A-2,

a tax credit employee stock ownership

plan (as defined in section 409(a)), an employee stock ownership plan (as defined

in section 4975(e)(7)), or a stock bonus

plan that is not an employee stock ownership plan will not be treated as violating

October 5, 1998

the requirements of section 411(d)(6)

merely because of the circumstances described in paragraph (d)(1)(ii) of this

Q&A-2.

(i) [Reserved]. For further information,

see §1.411(d)–4 Q&A-2(d)(1)(i).

(ii) Employer becomes substantially

employee-owned or is an S corporation.

The employer eliminates, or retains the

discretion to eliminate, with respect to all

participants, optional forms of benefit by

substituting cash distributions for distributions in the form of employer stock with

respect to benefits subject to section

409(h) in the circumstances described in

paragraph (d)(1)(ii)(A) or (B) of this

Q&A-2, but only if the employer otherwise meets the requirements of section

409(h)(2)—

(A) The employer becomes substantially employee-owned; or

(B) For taxable years of the employer

beginning after December 31, 1997, the

employer is an S corporation as defined in

section 1361.

(iii) and (iv) [Reserved]. For further

information, see §1.411(d)–4 Q&A2(d)(1)(iii) and (iv).

(2) Limitations on ESOP and stock

bonus plan exceptions. [Reserved]. For

further information, see §1.411(d)–4

Q&A-2(d)(2).

(3) Effective date. Paragraph (d) of

this Q&A-2 applies for taxable years beginning after December 31, 1997. For

taxable years beginning prior to January

1, 1998, see §1.411(d)–4 Q&A-2(d).

(4) [Reserved]. For further information, see §1.411(d)–4 Q&A-2(d)(4).

Q&A-3 through Q&A-10 [Reserved].

For further information, see §1.411(d)–4

Q&A-3 through Q&A-10.

Q-11: To what extent may a plan

amendment that is made pursuant to the

Taxpayer Relief Act of 1997 (TRA ’97)

(Public Law 105–34, 111 Stat. 788), reduce or eliminate section 411(d)(6) protected benefits?

A-11: A plan amendment does not violate the requirements of section 411(d)(6)

merely because the plan amendment reduces or eliminates section 411(d)(6) protected benefits as of the effective date of

the plan amendment, provided that—

(a) The plan amendment is made pursuant to an amendment made by title XV,

or subtitle H of title X, of TRA ’97; and

(b) The plan amendment is adopted no

later than the last day of any remedial

amendment period that applies to the plan

pursuant to §§1.401(b)–1 and 1.401(b)–

1T for changes under TRA ’97.

Michael P. Dolan,

Deputy Commissioner of

Internal Revenue.

Approved July 24, 1998.

Donald C. Lubick,

Assistant Secretary of

the Treasury.

(Filed by the Office of the Federal Register on

September 8, 1998, 8:45 a.m., and published in the

issue of the Federal Register for September 9, 1998,

63 F.R. 47172)

Section 412.—Minimum Funding

Standards

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

of October 1998. See Rev. Rul. 98–50, page 7.

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 October 1998. See Rev. Rul. 98–50, page 7.

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 October 1998. See Rev. Rul. 98–50, page 7.

Section 482.—Allocation of

Income and Deductions Among

Taxpayers

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

rates are set forth for the month of October 1998.

See Rev. Rul. 98–50, page 7.

Section 483.—Interest on

Certain Deferred Payments

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

of October 1998. See Rev. Rul. 98–50, page 7.

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Page 7

Section 642.—Special Rules for

Credits and Deductions

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

rates are set forth for the month of October 1998.

See Rev. Rul. 98–50, page 7.

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.)

Section 807.—Rules for Certain

Reserves

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

of October 1998. See Rev. Rul. 98–50, page 7.

Federal rates; adjusted federal rates;

adjusted federal long-term rate, and

the long-term exempt rate. For purposes

of sections 1274, 1288, 382, and other

sections of the Code, tables set forth the

rates for October 1998.

Rev. Rul. 98–50

Section 846.—Discounted

Unpaid Losses Defined

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

of October 1998. See Rev. Rul. 98–50, page 7.

This revenue ruling provides various

prescribed rates for federal income tax

purposes for October 1998 (the current

month.) Table 1 contains the short-term,

mid-term, and long-term applicable fed-

eral 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.

REV. RUL. 98–50 TABLE 1

Applicable Federal Rates (AFR) for October 1998

Period for Compounding

Annual

Semiannual

Quarterly

Monthly

Short-Term

AFR

110% AFR

120% AFR

130% AFR

5.06%

5.58%

6.09%

6.61%

5.00%

5.50%

6.00%

6.50%

4.97%

5.46%

5.96%

6.45%

4.95%

5.44%

5.93%

6.41%

Mid-Term

AFR

110% AFR

120% AFR

130% AFR

150% AFR

175% AFR

5.12%

5.65%

6.16%

6.69%

7.73%

9.06%

5.06%

5.57%

6.07%

6.58%

7.59%

8.86%

5.03%

5.53%

6.02%

6.53%

7.52%

8.76%

5.01%

5.51%

5.99%

6.49%

7.47%

8.70%

Long-Term

AFR

110% AFR

120% AFR

130% AFR

5.46%

6.02%

6.57%

7.13%

5.39%

5.93%

6.47%

7.01%

5.35%

5.89%

6.42%

6.95%

5.33%

5.86%

6.38%

6.91%

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Page 8

REV. RUL. 98–50 TABLE 2

Adjusted AFR for October 1998

Period for Compounding

Annual

Semiannual

Quarterly

Monthly

Short-term

adjusted AFR

3.52%

3.49%

3.47%

3.46%

Mid-term

adjusted AFR

4.05%

4.01%

3.99%

3.98%

Long-term

adjusted AFR

4.80%

4.74%

4.71%

4.69%

REV. RUL. 98–50 TABLE 3

Rates Under Section 382 for October 1998

Adjusted federal long-term rate for the current month

4.80%

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

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

5.02%

REV. RUL. 98–50 TABLE 4

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

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

8.23%

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

3.53%

REV. RUL. 98–50 TABLE 5

Rate Under Section 7520 for October 1998

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

term of years, or a remainder or reversionary interest

Section 1288.—Treatment of

Original Issue Discount on

Tax-Exempt Obligations

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

of October 1998. See Rev. Rul. 98–50, page 7.

October 5, 1998

Section 7520.—Valuation

Tables

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

of October 1998. See Rev. Rul. 98–50, page 7.

6.2%

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 October 1998. See Rev. Rul. 98–50, page 7.

1998–40 I.R.B.

IRB 1998-40

9/30/98 12:00 PM

Page 9

Part III. Administrative, Procedural, and Miscellaneous

26 CFR 601.201: Rulings and determination letters.

Rev. Proc. 98–53

SECTION 1. PURPOSE

This revenue procedure modifies Rev.

Proc. 98–14, 1998–4 I.R.B. 22, to give

sponsors of individually-designed pension, profit-sharing and stock bonus plans,

including volume submitter plans, the option of requesting that applications for determination letters involving § 401(a) or

§ 403(a) of the Code be reviewed without

taking into account changes in the plan

qualification requirements made by the

Uruguay Round Agreements Act, Pub. L.

103–465 (GATT), the Small Business Job

Protection Act of 1996, Pub. L. 104–188

(SBJPA) (including § 414(u) and the Uniformed Services Employment and Reemployment Rights Act of 1994, Pub. L.

103–353 (USERRA)), and the Taxpayer

Relief Act of 1997, Pub. L. 105–34 (TRA

’97). This option is being provided in response to employer and practitioner comments and will continue until further notice. This option will allow employers to

take advantage of the full remedial

amendment period for changes in the plan

qualification requirements under these

acts.

SECTION 2. BACKGROUND

.01 Rev. Proc. 98–14 provides that determination letter applications that are

filed on or after April 27, 1998, will be reviewed taking into account GATT, TRA

’97, and those provisions of SBJPA that

are effective before 1999 (“new law”).

The only exception is for determination

letter applications for adopters of master

or prototype (M&P) and regional prototype plans (other than terminating plans)

that have not yet been amended for the

new law; these will continue to be reviewed and approved on the basis of

“pre-GATT” law. In addition, under Rev.

Proc. 98–14, applications for opinion letters for M&P plans, notification letters for

regional prototype plans, and advisory

letters for volume submitter specimen

plans that are filed on or after April 27,

1998, will be reviewed on the basis of the

new law.

.02 Rev. Proc. 97–41, 1997–33 I.R.B.

1998–40 I.R.B.

51, as modified by Rev. Proc. 98–14, provides that the remedial amendment period

under § 401(b) for amending plans for the

new law generally does not expire until

the end of the first plan year beginning on

or after January 1, 1999. Rev. Proc. 97–

41 also provides that this remedial

amendment period applies with respect to

all disqualifying provisions of new plans

adopted or effective after December 7,

1994, and all disqualifying provisions of

existing plans arising from a plan amendment adopted after December 7, 1994.

Nevertheless, employers and practitioners

have asked that plan sponsors be allowed

to request determination letters without

being required to amend their plans for

the new law at this time.

SECTION 3. MODIFICATION OF

REV. PROC. 98–14

.01 Rev. Proc. 98–14 is modified to

provide that sponsors of individually-designed plans, including volume submitter

plans, may request that an application for

a determination letter on a plan’s qualified

status (other than a determination on plan

termination) be reviewed without taking

into account the requirements of the new

law, except for § 1432 and § 1454 of

SBJPA, which amended § 401(a)(26) and

§ 414(n), respectively. The fact that a

plan sponsor requests that its application

be reviewed without taking into account

the requirements of the new law does not

preclude the sponsor from incorporating

in the plan any provisions that reflect the

new law, such as the GATT changes to §

417(e). However, the determination letter

that is issued for the plan may not be relied upon with respect to whether such

provisions satisfy the qualification requirements as amended by the new law,

except for § 1432 and, if the applicant has

requested a determination of leased employee status, § 1454 of SBJPA. This option of requesting a pre-GATT letter will

apply with respect to applications filed on

or after April 27, 1998, and will continue

until further notice.

.02 A determination letter applicant

who wishes to request a pre-GATT letter

should so indicate in a cover letter submitted with the application or on the face

of the application form. If the application

has already been filed, the applicant

should notify the Service by calling the

phone number shown on the Service’s acknowledgment-of-receipt letter or by contacting the specialist who has been assigned to review the application. A

favorable determination letter that is issued in response to an application for a

pre-GATT letter will contain a statement

to the effect that the letter does not reflect

consideration of new law changes in the

qualification requirements, except for §

1432 and, if the applicant has requested a

determination of leased employee status,

§ 1454 of SBJPA.

.03 The procedures described in section 6.03 of Rev. Proc. 98–14, regarding

applications filed for plans that contain

the family aggregation rules of § 414(q)(6) and § 401(a)(17)(A), will not apply if

the applicant requests a pre-GATT letter.

.04 This modification does not affect

the provisions of Rev. Proc. 98–14 that

apply to determination letter applications

filed by adopters of M&P and regional

prototype plans or to applications for

opinion, notification, or advisory letters.

Thus, for example, applications for opinion, notification, and advisory letters that

are filed on or after April 27, 1998, will in

all cases be reviewed taking into account

the requirements of the new law.

SECTION 4. EFFECT ON OTHER

DOCUMENTS

Rev. Proc. 98–14 is modified.

SECTION 5. EFFECTIVE DATE

This revenue procedure is effective

with respect to determination letter applications that are filed on or after April 27,

1998.

DRAFTING INFORMATION

The principal author of this revenue

procedure is James Flannery of the Employee Plans Division. For further information regarding this revenue procedure,

contact the Employee Plans Division’s

telephone assistance service between the

hours of 1:30 and 3:30 p.m. Eastern time,

Monday through Thursday, on (202) 6226074/75. (These telephone numbers are

not toll-free.)

October 5, 1998

IRB 1998-40

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Page 10

Part IV. Items of General Interest

Notice of Proposed Rulemaking

and Notice of Public Hearing

SUPPLEMENTARY INFORMATION:

Section 411(d)(6) Protected

Benefits (Taxpayer Relief Act of

1997); Qualified Retirement

Plan Benefits

Temporary regulations in T.D. 8781

amend the Income Tax Regulations (26

CFR part 1) relating to section 411(d)(6),

to provide for changes that have been

made necessary by the Taxpayer Relief

Act of 1997 (TRA ’97), Public Law

105–34, 111 Stat. 788 (1997). The temporary regulations change the existing

regulations to conform with the TRA ’97

rules regarding in-kind distribution requirements for certain employee stock

ownership plans, and specify the time period during which certain plan amendments for which relief has been granted

by TRA ’97 may be made without violating the prohibition against plan amendments that reduce accrued benefits.

The text of those temporary regulations

also serves as the text of these proposed

regulations. The preamble to the temporary regulations explains the temporary

regulations.

REG–101363–98

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary regulations.

SUMMARY: In T.D. 8781, page 4, the

IRS is issuing temporary regulations providing for changes to the rules regarding

qualified retirement plan benefits that are

protected from reduction by plan amendment, that have been made necessary by

the Taxpayer Relief Act of 1997. The text

of those temporary regulations also serves

as the text of these proposed regulations.

DATES: Written comments and requests

for a public hearing must be received by

December 3, 1998.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (REG–101363–98),

room 5228, 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–101363–98), 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.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Linda

S. F. Marshall, (202) 622-6030 (not a tollfree call); concerning submissions,

Michael Slaughter, (202) 622-7190 (not a

toll-free call).

October 5, 1998

Background

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 regulation does 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 Requests for a 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 submitted timely to the

IRS. All comments will be available for

public inspection and copying. A public

hearing may be scheduled if requested in

writing by any person that timely submits

written comments. If a public hearing is

scheduled, notice of the date, time, and

place for the hearing will be published in

the Federal Register.

Drafting Information

The principal author of these regulations is Linda S. F. Marshall, Office of the

Associate Chief Counsel (Employee Benefits and Exempt Organizations. However, other personnel from the IRS and

Treasury Department participated in their

development.

* * * * *

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is proposed to be 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 1.411(d)–4 is amended

by:

1. Revising paragraph (d)(1)(ii) of

Q&A-2.

2. Adding Q&A-11.

The addition and revisions read as follows:

§1.411(d)–4 Section 411(d)(6) protected

benefits.

* * * * *

Q&A-2 * * *

(d)(1)(ii) [The text of proposed paragraph (d)(1)(ii) of Q&A-2 is the same as

the text of §1.411(d)–4T Q&A-2(d)(1)(ii)

published in T.D. 8781.]

* * * * *

Q&A-11 [The text of proposed Q&A11 is the same as the text of §1.411(d)–4T

Q&A-11 published in T.D. 8781.]

Michael P. Dolan,

Deputy Commissioner of

Internal Revenue.

1998–40 I.R.B.

IRB 1998-40

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Page 11

(Filed by the Office of the Federal Register on

September 8, 1998, 8:45 a.m., and published in the

issue of the Federal Register for September 9, 1998,

63 F.R. 47214)

Pending Finalization of

Proposed Regulations Regarding

Timing Requirements for

Satisfying Notice and Consent

Requirements Under Sections

411 and 417 of the Code

Announcement 98–87

The Internal Revenue Service and the

Department of the Treasury intend to take

into account public comments that are

currently being received regarding the use

of new technologies (sometimes referred

to as “paperless” technologies) in the administration of qualified plans when

amending and finalizing proposed regulations relating to notice and consent requirements under sections 411(a)(11) and

417 of the Internal Revenue Code (the

“Code”). The Service and Treasury intend to finalize these regulations in the

near future. In the meanwhile, plan sponsors may continue to rely on these regulations as proposed.

Background

A notice of proposed rulemaking (EE–

24–93) containing proposed amendments

to the Income Tax Regulations under sections 411(a)(11) and 417 of the Code

(that would amend section 1.411(a)–

11(c)(2) and (8) and section 1.417(e)–

1(b)(3) and (4)) was published in the Federal Register (60 F.R. 49236) on September 22, 1995. Temporary Income Tax

Regulations (T.D. 8620) under sections

411(a)(11) and 417 (section 1.411(a)–

11T(c)(2) and (8) and section 1.417(e)–

1T(b)(3) and (4)) were published on the

same day (60 F.R. 49218). The text of

the proposed regulations and temporary

regulations is the same. Under section

7805(e), temporary regulations expire

within three years after issuance.

The proposed and temporary regulations set forth rules concerning the timing

requirements for satisfying the notice and

consent requirements under sections

411(a)(11) and 417 of the Code in connection with distributions from qualified

plans. The regulations did not provide

guidance on the use of paperless tech-

1998–40 I.R.B.

nologies, although the preamble to the

regulations invited comments on possible

modifications to the notice and consent

requirements to accommodate paperless

technologies, if adequate safeguards are

provided.

Section 1510 of the Taxpayer Relief

Act of 1997, Pub. L. 105–34, provides

that the Secretary of the Treasury and the

Secretary of Labor each shall issue guidance designed to interpret the notice, election, consent, disclosure, and time requirements (and related recordkeeping

requirements) under the Code and the

Employee Retirement Income Security

Act of 1974 relating to retirement plans as

applied to the use of new technologies by

plan sponsors and administrators. Section

1510 requires the guidance to maintain

the protection of the rights of participants

and beneficiaries. Announcement 98–62,

1998–29 I.R.B. 13, requested public comments, by October 5, 1998, on the use of

paperless technologies and, among other

issues, the application of these technologies to the notice and consent requirements under sections 411(a)(11) and 417.

Reliance on Proposed Regulations

The Service and Treasury plan to issue

amended and final regulations relating to

the timing requirements for satisfying the

notice and consent requirements under

sections 411(a)(11) and 417 of the Code

only after careful consideration of the

public comments on paperless technologies received by October 5, 1998. Accordingly, it is intended that the temporary regulations under sections 411(a)(11)

and 417 (section 1.411(a)–11T(c)(2) and

(8) and section 1.417(e)–1T(b)(3) and

(4)) will not be finalized prior to their automatic expiration under section 7805(e).

Pursuant to this announcement, plan

sponsors may rely on the proposed regulations under sections 411(a)(11) and 417

(that would amend section 1.411(a)–

11(c)(2) and (8) and section 1.417(e)–

1(b)(3) and (4)) until the proposed regulations are amended or finalized.

IRS Announces New

Procedures For Handling

Matters In Bankruptcy

Announcement 98–89

The Internal Revenue Service has un-

dertaken a new initiative to improve its

procedures for handling bankruptcy

cases. The new procedures are intended

to minimize the likelihood that IRS collection actions will inadvertently violate

the bankruptcy laws, to facilitate prompt

correction of any violations that do occur,

and to provide an administrative process

for handling any claims for damages

against the IRS that arise from such violations.

The initiative includes new administrative measures to speed the processing of

bankruptcy matters. The IRS has designated specific points of contact who will

coordinate the handling of violations of

the automatic stay and the discharge injunction of the bankruptcy laws. These

contact points will be part of the Special

Procedures Function (SPF) in the local

IRS Collection Division. SPF will expeditiously handle these cases according to

specific time guidelines in order to ensure

compliance with the bankruptcy laws.

These procedures will be reflected in the

next version of IRM Part V Bankruptcy

Handbook 5.9. In addition, the IRS is notifying bankruptcy practitioners throughout the country of the address in each district to which bankruptcy petitions and all

other bankruptcy correspondence should

be sent.

The initiative also provides for a pilot

program to test new administrative procedures for handling any claims for damages debtors may have in cases where the

IRS fails to properly comply with the

bankruptcy laws. Under Section 7433 of

the Internal Revenue Code, as amended

by the Internal Revenue Service Reform

and Restructuring Act of 1998, debtors

may be entitled to recover damages for

actual economic losses they sustain as a

result of willful violations of the bankruptcy laws by the IRS. Attorney’s fees in

these cases may also be available pursuant to Internal Revenue Code Section

7430.

While the new procedures for processing bankruptcy cases are intended to minimize any such violations, the IRS believes it is appropriate to test a simplified

administrative process for handling cases

in which debtors believe they have suffered damages because of improper IRS

actions. Under this process, debtors may

elect to file claims for damages with the

local SPF office rather than with the

October 5, 1998

IRB 1998-40

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Page 12

bankruptcy court. Claims for damages

must be made in writing and must include

supporting documentation requested by

the SPF office. SPF will evaluate and respond to these claims within sixty days.

The IRS will be undertaking outreach

efforts to explain its new procedures to

bankruptcy practitioners and other interested parties across the country. For additional information about these new procedures, contact the local Special

Procedures Function office.

Foundations Status of Certain

Organizations

Announcement 98–91

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:

Abundant Waters Inc., New York, NY

Akron Coalition for Education

Foundation, Akron, OH

American Computer Scientists

Association, Inc., Cranford, NJ

Belize Foundation, Detroit, MI

Berdan Support Fund, Mendenhall, PA

Bonsall Village Inc., Yeadon, PA

Center for Health and Long Term Care

Research, Inc., Waltham, MA

Chicago Community Outreach, Chicago,

Christ Crusade Community Center,

Fayetteville, NC

October 5, 1998

Christion Legal Services Inc., Bangor, MI

Coastnet, Beaufort, SC

Corestates Community Development

Corporation, Philadelphia, PA

Cross Keys Retirement, Inc., Sewell, NJ

Earl Kouba Memorial Foundation,

Kasson, MN

Earth Preservation Funds, Inc.,

Milwaukee, WI

Families United By Adoption, Berlin, NJ

Film Foundation Inc., New York, NY

For A Better Life Foundation, Chicago,

Freed Hurwitz Memorial Fund, Inc.,

Hollywood, FL

Fritz & Alice Anton Scholarship Fund,

San Marcos, TX

God Rules Ministry, Inc., Baton Rouge,

Goddard Historical & Genealogical

Society Inc., Stow, OH

Good Stewards, Woodbury, MN

Gulf Coast Research and Development

Laboratory Inc., Tampa, FL

Haviland Heartland Housing, Haviland

Hollyfield Foundation, Houston, TX

Indiana Civic and Cultural Association,

Incorporated, Indiana, PA

Jewish Radical Education Project, Inc.,

New York, NY

Johns Gospel Mission, Troy, MI

Joseph Ministries Inc., Nixa, MO

Juanita Maldon Foundation, Richmond,

Kate Sidran Family Foundation, Dallas,

King City Police Activities League, Inc.,

King City, CA

Largess, South Euclid, OH

Living God Ministries, Inc., Bastrop,

Lutheran Housing Service Number 8

Incorporated, Toledo, OH

Lutheran Radio Incorporated, Nevada, IA

Mesoamerican Research Foundation, Salt

Lake City, UT

Na Vision Ministries Inc., Sunrise, FL

Network 2000, Kansas City, KS

Ontohealth, Inc., Xenia, OH

Ozark Mountain Adventure, Fort Smith,

Paula Martin Jones Charities, Inc.,

Longview, TX

People Against Racism &

Discrimination, Calumet, IL

Raptor Education Group Inc., Antigo,

Somerville Community Schools Council

Inc., Somerville, MA

Special Program for Adolescents,

Evanston, IL

Sports Pride of America Foundation, Inc.,

Raleigh, NC

Sterling Foundation Inc., Pittsburgh, PA

Sthle Wildlife Foundation, Brewer, ME

Tanzania Children Development

Association, Hazel Crest, IL

Think First of New York, Inc.,

Schenectady, NY

The Silver Spring Historical Trust, Cape

Girardeau, MO

The Sumter Foundation Inc., Americus,

Trades Awareness Program Inc., Franklin,

Union Missionary Baptist Neighborhood

Redevelopment Corp., Lansing, MI

United Students Association, Inc.,

Chestnut Hill, MA

Urban Ministries Development

Corporation, Columbus, OH

Versin House Inc. Community/Living

Facility, Dolton, IL

Victory Home Health Hospice, Las

Vegas, NM

Wisconsin Rural Leadership Program,

Inc., Madison, WI

World Farmers Hall of Fame, Pawnee

City, NE

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 contributors may thereafter rely upon

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

Tax Regulations. It is not the practice of

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

1998–40 I.R.B.

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Announcement of the Disbarment and Suspension of Attorneys, Certified

Public Accountants, Enrolled Agents, and Enrolled Actuaries From

Practice Before the Internal Revenue Service

Under 330, Title 31 of the United

States Code, the Secretary of the Treasury, after due notice and opportunity for

hearing, is authorized to suspend or disbar from practice before the Internal Revenue Service any person who has violated the rules and regulations governing

the recognition of attorneys, certified

public accountants, enrolled agents, or

enrolled actuaries to practice before the

Internal Revenue Service.

Attorneys, certified public accountants,

enrolled agents, and enrolled actuaries are

prohibited in any Internal Revenue Service

matter from directly or indirectly employ-

ing, accepting assistance from, being employed by, or sharing fees with, any practitioner disbarred or suspended from practice before the Internal Revenue Service.

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

actuaries to identify such disbarred or suspended practitioners, the Director

of Practice will announce in the Internal

Revenue Bulletin the names and addresses of practitioners who have been

suspended from such practice, their designation as attorney, certified public accountant, enrolled agent, or enrolled actuary, and date or period of suspension. This

announcement will appear in the weekly

Bulletin at the earliest practicable date

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

practicable for each attorney, certified

public accountant, enrolled agent, or enrolled actuary so suspended or disbarred

and will be consolidated and published in

the Cumulative Bulletin.

After due notice and opportunity for

hearing before an administrative law

judge, the following individuals have

been disbarred from further practice before the Internal Revenue Service:

Name

Address

Designation

Effective Date

Galt, Edward G.

Lopez, Andrew L.

Branch, Jimmie L.

Harrison, Rebecca A.

Mayer, Robert J.

Monterey, CA

Albuquerque, NM

Jacksonville, FL

Carmichael, CA

Wexford, PA

CPA

Enrolled Agent

CPA

October 25, 1997

December 11, 1997

January 15, 1998

March 4, 1998

June 4, 1998

1998–40 I.R.B.

October 5, 1998

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Page 14

Announcement of the Expedited Suspension of Attorneys, Certified Public

Accountants, Enrolled Agents, and Enrolled Actuaries From Practice

Before the Internal Revenue Service

Under title 31 of the Code of Federal

Regulations, section 10.76, the Director

of Practice is authorized to immediately

suspend from practice before the Internal

Revenue Service any practitioner who,

within five years from the date the expedited proceeding is instituted, (1) has had

a license to practice as an attorney, certified public accountant, or actuary suspended or revoked for cause; or (2) has

been convicted of any crime under title 26

of the United States Code or, of a felony

under title 18 of the United States Code

involving dishonesty or breach of trust.

Attorneys, certified public accountants,

enrolled agents, and enrolled actuaries are

prohibited in any Internal Revenue Service

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

before the Internal Revenue Service.

To enable attorneys, certified public accountants, enrolled agents, and enrolled actuaries to identify practitioners under expedited suspension from practice before the

Internal Revenue Service, the Director of

Practice will announce in the Internal Revenue Bulletin the names and addresses of

practitioners who have been suspended

from such practice, their designation as attorney, certified public accountant, en-

rolled agent, or enrolled actuary, and date

or period of suspension. This announcement will appear in the weekly Bulletin at

the earliest practicable date after such action and will continue to appear in the

weekly Bulletins for five successive weeks

or for as many weeks as is practicable for

each attorney, certified public accountant,

enrolled agent, or enrolled actuary so suspended and will be consolidated and published in the Cumulative Bulletin.

The following individuals have been

placed under suspension from practice before the Internal Revenue Service by virtue

of the expedited proceeding provisions of

the applicable regulations:

Name

Address

Designation

Date of Suspension

Clark, Sheila

Houston, TX

CPA

Indefinite from April 21, 1998

Kimes, Larry W.

Austin, TX

Attorney

Indefinite from May 5, 1998

Braiteman, Sheldon

Baltimore, MD

Attorney

Indefinite from June 5, 1998

Pollack, Michael

Guttenberg, NJ

Attorney

Indefinite from June 11, 1998

Eichenbaum, Irving

Huntingdon Valley, PA

CPA

Indefinite from August 4, 1998

Corley, Francis R.

Irmo, SC

CPA

Indefinite from August 4, 1998

Scott, Richard

Lincoln, NE

Attorney

Indefinite from August 4, 1998

Wilson, Douglas D.

Roanoke, VA

Attorney

Indefinite from August 4, 1998

Watkins, Brian R.

Lincoln, NE

Attorney

Indefinite

Congdon Jr., Byron E.

San Bernadino, CA

Attorney

Indefinite from August 4, 1998

Abrams, Robert

Elmsford, NY

CPA

Indefinite from August 4, 1998

Robinson, Doane

Rapid City, SD

CPA

Indefinite from August 4, 1998

Szarwark, Ernest

Nashville, TN

Attorney

Indefinite from August 4, 1998

Roberts, Mark

Norman, OK

CPA

Indefinite from August 4, 1998

Wood, Randall K.

Springfield, MO

Attorney

Indefinite from August 5, 1998

Chappell, Ronald L.

Antelope, CA

CPA

Indefinite from August 12, 1998

October 5, 1998

1998–40 I.R.B.

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Page 15

Announcement of the Consent Voluntary Suspension of Attorneys,

Certified Public Accountants, Enrolled Agents, and Enrolled Actuaries

From Practice Before the Internal Revenue Service

Under 31 Code of Federal Regulations,

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

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

the Internal Revenue Service, may offer

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

enrolled actuary in accordance with the

consent offered.

Attorneys, certified public accountants,

enrolled agents, and enrolled actuaries are

prohibited in any Internal Revenue Ser-

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

employed by, or sharing fees with any

practitioner disbarred or suspended from

practice before the Internal Revenue Service.

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

actuaries to identify practitioners under

consent suspension from practice before the

Internal Revenue Service, the Director

of Practice will announce in the Internal

Revenue Bulletin the names and addresses of practitioners who have been

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

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

announcement will appear in the weekly

Bulletin at the earliest practicable date

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

practicable for each attorney, certified

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

consolidated and published in the Cumulative Bulletin.

The following individuals have been

placed under consent suspension from

practice before the Internal Revenue Service:

Name

Address

Designation

Date of Suspension

Makula, John G.

Slomski, Michael

Bozeman Jr., T. Alvin

Parness, Richard A.

Cooper, Michael E.

Minello, Michael J.

Holden, William W.

Freeman, Samuel

Anders, Kevin

Breed, Robert M.

Sandirk, Paula Brooks

Neuhaus Jr., George

Park Ridge, IL

Gross Pointe Woods, MI

Sylvester, GA

Westfield, NJ

Havana, FL

Edina, MN

Clarks Summit, PA

Fairfield, CT

Bedford, NH

Williamport, MD

Concord, MA

Chehalis, WA

Brewster, NY

CPA

April 1, 1998 to March 31, 2003

April 1, 1998 to March 31, 2001

May 22, 1998 to November 21, 1999

June 1, 1998 to December 31, 1998

Indefinite from July 10, 1998

August 19, 1998 to February 18, 1999

August 28, 1998 to April 27, 2001

September 1, 1998 to March 31, 1999

September 1, 1998 to August 31, 1999

September 1, 1998 to August 31, 2001

September 1, 1998 to February 28, 2001

November 1, 1998 to April 30, 2000

1998–40 I.R.B.

October 5, 1998

IRB 1998-40

9/30/98 12:01 PM

Page 16

Definition of Terms

Revenue rulings and revenue procedures

(hereinafter referred to as “rulings”) that

have an effect on previous rulings use the

following defined terms to describe the

effect:

Amplified describes a situation where

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

being extended to apply to a variation of

the fact situation set forth therein. Thus,

if an earlier ruling held that a principle

applied to A, and the new ruling holds

that the same principle also applies to B,

the earlier ruling is amplified. (Compare

with modified, below).

Clarified is used in those instances

where the language in a prior ruling is

being made clear because the language

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

prior ruling is being changed.

Distinguished describes a situation

where a ruling mentions a previously

published ruling and points out an essential difference between them.

Modified is used where the substance

of a previously published position is

being changed. Thus, if a prior ruling

held that a principle applied to A but not

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

plies to both A and B, the prior ruling is

modified because it corrects a published

position. (Compare with amplified and

clarified, above).

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

in a ruling that lists previously published

rulings that are obsoleted because of

changes in law or regulations. A ruling

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

subsequently adopted.

Revoked describes situations where the

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

is being stated in the new ruling.

Superseded describes a situation where

the new ruling does nothing more than

restate the substance and situation of a

previously published ruling (or rulings).

Thus, the term is used to republish under

the 1986 Code and regulations the same

position published under the 1939 Code

and regulations. The term is also used

when it is desired to republish in a single

ruling a series of situations, names, etc.,

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

new ruling does more than restate the

substance of a prior ruling, a combination

of terms is used. For example, modified

and superseded describes a situation

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

is continued without change in part and it

is desired to restate the valid portion of

the previously published ruling in a new

ruling that is self contained. In this case

the previously published ruling is first

modified and then, as modified, is superseded.

Supplemented is used in situations in

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

countries, is published in a ruling and

that list is expanded by adding further

names in subsequent rulings. After the

original ruling has been supplemented

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

ruling and the additions, and supersedes

all prior rulings in the series.

Suspended is used in rare situations to

show that the previous published rulings

will not be applied pending some future

action such as the issuance of new or

amended regulations, the outcome of

cases in litigation, or the outcome of a

Service study.

Abbreviations

E.O.—Executive Order.

ER—Employer.

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contribution Act.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign Corporation.

G.C.M.—Chief Counsel’s Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Internal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

M—Minor.

Nonacq.—Nonacquiescence.

O—Organization.

P—Parent Corporation.

PHC—Personal Holding Company.

PO—Possession of the U.S.

PR—Partner.

PRS—Partnership.

PTE—Prohibited Transaction Exemption.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statements of Procedral Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

U.S.C.—United States Code.

X—Corporation.

Y—Corporation.

Z—Corporation.

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

Bulletin.

A—Individual.

Acq.—Acquiescence.

B—Individual.

BE—Beneficiary.

BK—Bank.

B.T.A.—Board of Tax Appeals.

C.—Individual.

C.B.—Cumulative Bulletin.

CFR—Code of Federal Regulations.

CI—City.

COOP—Cooperative.

Ct.D.—Court Decision.

CY—County.

D—Decedent.

DC—Dummy Corporation.

DE—Donee.

Del. Order—Delegation Order.

DISC—Domestic International Sales Corporation.

DR—Donor.

E—Estate.

EE—Employee.

October 5, 1998

1998–40 I.R.B.

IRB 1998-40

9/30/98 12:01 PM

Page 17

Numerical Finding List1

Revenue Procedures:

Bulletins 1998–29 through 39

98–40, 1998–32 I.R.B. 6

98–41, 1998–32 I.R.B. 7

98–42, 1998–28 I.R.B. 9

98–43, 1998–29 I.R.B. 8

98–44, 1998–32 I.R.B. 11

98–45, 1998–34 I.R.B. 8

98–46, 1998–36 I.R.B. 21

98–47, 1998–37 I.R.B. 8

98–48, 1998–38 I.R.B. 7

98–49, 1998–37 I.R.B. 9

98–50, 1998–38 I.R.B. 8

98–51, 1998–38 I.R.B. 20

98–52, 1998–37 I.R.B. 12

Announcements:

98–62, 1998–29 I.R.B. 13

98–68, 1998–29 I.R.B. 14

98–69, 1998–30 I.R.B. 16

98–70, 1998–30 I.R.B. 17

98–71, 1998–30 I.R.B. 17

98–72, 1998–31 I.R.B. 14

98–73, 1998–31 I.R.B. 14

98–74, 1998–31 I.R.B. 15

98–75, 1998–31 I.R.B. 15

98–76, 1998–32 I.R.B. 64

98–77, 1998–34 I.R.B. 30

98–78, 1998–34 I.R.B. 30

98–79, 1998–34 I.R.B. 31

98–80, 1998–34 I.R.B. 32

98–81, 1998–36 I.R.B. 35

98–82, 1998–35 I.R.B. 17

98–83, 1998–36 I.R.B. 36

98–84, 1998–38 I.R.B. 30

98–85, 1998–38 I.R.B. 30

98–86, 1998–38 I.R.B. 31

Court Decisions:

2063, 1998–36 I.R.B. 13

2064, 1998–37 I.R.B. 4

2065, 1998–39 I.R.B. 7

Notices:

98–36, 1998–29 I.R.B. 8

98–37, 1998–30 I.R.B. 13

98–38, 1998–34 I.R.B. 7

98–39, 1998–33 I.R.B. 11

98–40, 1998–35 I.R.B. 7

98–41, 1998–33 I.R.B. 12

98–42, 1998–33 I.R.B. 12

98–43, 1998–33 I.R.B. 13

98–44, 1998–34 I.R.B. 7

98–45, 1998–35 I.R.B. 7

98–46, 1998–36 I.R.B. 21

98–47, 1998–37 I.R.B. 8

98–48, 1998–39 I.R.B. 17

98–49, 1998–38 I.R.B. 5

Revenue Rulings:

98–34, 1998–31 I.R.B. 12

98–35, 1998–30 I.R.B. 4

98–36, 1998–31 I.R.B. 6

98–37, 1998–32 I.R.B. 5

98–38, 1998–32 I.R.B. 4

98–39, 1998–33 I.R.B. 4

98–40, 1998–33 I.R.B. 4

98–41, 1998–35 I.R.B. 6

98–42, 1998–35 I.R.B. 5

98–43, 1998–36 I.R.B. 9

98–44, 1998–37 I.R.B. 4

98–45, 1998–38 I.R.B. 4

98–46, 1998–39 I.R.B. 10

98–47, 1998–39 I.R.B. 4

98–48, 1998–39 I.R.B. 6

Treasury Decisions:

8771, 1998–29 I.R.B. 6

8772, 1998–31 I.R.B. 8

8773, 1998–29 I.R.B. 4

8774, 1998–30 I.R.B. 5

8775, 1998–31 I.R.B. 4

8776, 1998–33 I.R.B. 6

8777, 1998–34 I.R.B. 4

8778, 1998–36 I.R.B. 4

8779, 1998–36 I.R.B. 11

8780, 1998–39 I.R.B. 14

Railroad Retirement Quarterly Rate:

1998–31 I.R.B. 7

Proposed Regulations:

REG–209446–82, 1998–36 I.R.B. 24

REG–209060–86, 1998–39 I.R.B. 18

REG–209813–96, 1998–35 I.R.B. 9

REG–246256–96, 1998–34 I.R.B. 9

REG–104641–97, 1998–29 I.R.B. 9

REG–104565–97, 1998–39 I.R.B. 21

REG–106177–97, 1998–37 I.R.B. 33

REG–115446–97, 1998–36 I.R.B. 23

REG–116608–97, 1998–29 I.R.B. 12

REG–118926–97, 1998–39 I.R.B. 23

REG–118966–97, 1998–39 I.R.B. 29

REG–119227–97, 1998–30 I.R.B. 13

REG–110332–98, 1998–33 I.R.B. 18

REG–110403–98, 1998–29 I.R.B. 11

REG–115393–98, 1998–39 I.R.B. 34

1 A cumulative list of all revenue rulings, revenue

procedures, Treasury decisions, etc., published in

Internal Revenue Bulletins 1998–1 through 1998–28

will be found in Internal Revenue Bulletin 1998–29,

dated July 20, 1998.

1998–40 I.R.B.

October 5, 1998

IRB 1998-40

9/30/98 12:01 PM

Page 18

Finding List of Current Action on

Previously Published Items1

Bulletins 1998–29 through 39

*Denotes entry since last publication

Notices:

87–13

Modified by

98–49, 1998–38 I.R.B. 5

87–16

Modified by

98–49, 1998–38 I.R.B. 5

Revenue Procedures:

83–58

Obsoleted by

98–37, 1998–32 I.R.B. 5

97–60

Superseded by

98–50, 1998–38 I.R.B. 8

97–61

Superseded by

98–51, 1998–38 I.R.B. 20

Revenue Rulings:

57–271

Obsoleted by

98–37, 1998–32 I.R.B. 5

67–301

Modified by

98–41, 1998–35 I.R.B. 6

70–225

Obsoleted by

98–44, 1998–37 I.R.B. 4

71–277

Obsoleted by

98–37, 1998–32 I.R.B. 5

71–434

Obsoleted by

98–37, 1998–32 I.R.B. 5

71–574

Obsoleted by

98–37, 1998–32 I.R.B. 5

72–75

Obsoleted by

98–37, 1998–32 I.R.B. 5

72–120

Obsoleted by

98–37, 1998–32 I.R.B. 5

72–121

Obsoleted by

98–37, 1998–32 I.R.B. 5

72–122

Obsoleted by

98–37, 1998–32 I.R.B. 5

74–77

Obsoleted by

98–37, 1998–32 I.R.B. 5

75–19

Obsoleted by

98–37, 1998–32 I.R.B. 5

76–562

Obsoleted by

98–37, 1998–32 I.R.B. 5

Revenue Rulings—Continued

77–214

Obsoleted by

98–37, 1998–32 I.R.B. 5

94–6

Obsoleted by

98–37, 1998–32 I.R.B. 5

79–106

Obsoleted by

98–37, 1998–32 I.R.B. 5

94–30

Obsoleted by

98–37, 1998–32 I.R.B. 5

83–113

Obsoleted by

98–37, 1998–32 I.R.B. 5

94–51

Obsoleted by

98–37, 1998–32 I.R.B. 5

85–143

Obsoleted by

98–37, 1998–32 I.R.B. 5

94–79

Obsoleted by

98–37, 1998–32 I.R.B. 5

95–2

Obsoleted by

98–37, 1998–32 I.R.B. 5

88–8

Obsoleted by

98–37, 1998–32 I.R.B. 5

88–76

Obsoleted by

98–37, 1998–32 I.R.B. 5

88–79

Obsoleted by

98–37, 1998–32 I.R.B. 5

95–9

Obsoleted by

98–37, 1998–32 I.R.B. 5

97–37

Obsoleted by

98–39, 1998–33 I.R.B. 4

93–4

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–5

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–6

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–30

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–38

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–49

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–50

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–53

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–81

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–91

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–92

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–93

Obsoleted by

98–37, 1998–32 I.R.B. 5

94–5

Obsoleted by

98–37, 1998–32 I.R.B. 5

1 A cumulative finding list for previously published

items mentioned in Internal Revenue Bulletins

1998–1 through 1998–28 will be found in Internal

Revenue Bulletin 1998–29, dated July 20, 1998.

October 5, 1998

1998–40 I.R.B.

IRB 1998-40

9/30/98 12:01 PM

Page 19

Index

Internal Revenue Bulletins

1998–1 Through 1998–39

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

the specific item; numbers in roman and

italic type following the parenthesis refer

to the Internal Revenue Bulletin in which

the item may be found and the page

number on which it appears.

Key to Abbreviations:

Revenue Ruling

Revenue Procedure

Treasury Decision

Court Decision

Public Law

Executive Order

Delegation Order

TDO

Treasury Department Order

Tax Convention

SPR

Statement of Procedural

Rules

PTE

Prohibited Transaction

Exemption

EMPLOYMENT TAX

Magnetic media; electronic filing:

1998 Form W–4 specifications (RP 26)

13, 26

1998 Form 8027 (RP 52) 37, 12

Proposed regulations:

26 CFR 31.3121(v)(2)–1, revised;

FICA and FUTA taxation of amounts

under employee benefit plans (REG–

209484–87; REG–209807–95) 8, 40

26 CFR 31.6053–1, –4; electronic tip

reports (REG–104691–97) 11, 13

Student FICA exception (RP 16) 5, 19

26 CFR 31.6302–1(f)(4), revised; federal employment tax deposits de

minimis rule (REG–110403–98) 29,

Railroad retirement; rate determination;

quarterly beginning April 1, 1998 and

July 1, 1998 31, 7

Regulations:

26 CFR 1.6045–1T, –2T, removed;

1.6045–1, –2, amended; 301.6011–2,

amended; 301.6011–2T, removed;

magnetic filing requirements for information returns (TD 8772) 31, 8

26 CFR 31.6302–1(f)(4), 31.6302–1T,

added; federal employment tax deposits de minimis rule (TD 8771) 29,

1998–40 I.R.B.

EMPLOYMENT TAX—

Continued

Worker classification; section 530; Tax

Court review (Notice 43) 33, 13

ESTATE TAX

Regulations:

26 CFR 20.2041–3, 20.2056(d)–2,

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

8744) 7, 20

26 CFR 20.2044–1(e), added; 20.2044–

1T, removed; 20.2056(b)–7, revised;

20.2056(b)–7T, removed; 20.2056(b)–

10, revised; 20.2056(b)–10T, removed; certain property for which

marital deduction was previously allowed (TD 8779) 36, 11

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

residence (TD 8743) 7, 26

26 CFR 25.2511–1, 25.2514–3,

25.2518–1, –2, amended; property

interests and disclaimers (TD 8744)

7, 20

Revocable trust; election (RP 13) 4, 21

Special use value; farms; interest rates

(RR 22) 19, 5

Underpayment interest, interest expense

deduction, estates (RP 15) 4, 25

Valuation of compensatory stock options

(RP 34) 18, 15

EXCISE TAX

Ad valorem tax, export clause (Ct.D.

2064) 37, 4

Bows and arrows; taxable and nontaxable

articles (RR 5) 2, 20

Deposit of excise taxes, amendment (Notice 36) 29, 8

Federal excise taxes for consular officers

and employees, exemption (RR 24) 19, 6

Proposed regulations:

26 CFR 40.0–1T, added; 40.6011(a)–

1T, added; 40.6302(c)–2T, added;

deposits of excise taxes (REG–

102894–97) 3, 59

26 CFR 48.4052–1, added; 48.4081–1,

amended; 48.4082–6 through –10

and intermediary sections, 48.4091–

3, added; 48.4101–2, amended;

48.4101–3, 48.6427–10, –11, added;

kerosene tax, aviation fuel tax, tax

on heavy trucks and trailers (REG–

119227–97) 30, 13

EXCISE TAX—Continued

26 CFR 53.4958; 301.6213–1,

301.6501(e)–1, 301.6501(n)–1,

301.7422–1, amended; 53.4958–0

through –7 and intermediary sections,

added; failure by certain charitable organizations to meet certain qualification requirements, taxes on excess

benefit transactions (REG–246256–

96) 34, 9

26 CFR 54.4980B–1, added; group

health plans continuation coverage

requirements (REG–209485–86) 11,

Regulations:

26 CFR 40.0–1(a), amended; 40.6011(a)

–1(a)(2)(iii), 40.5302(c)– 1, amended,

40.6302(c)–2(b)(2)(iii), added; deposits of excise taxes (TD 8740) 3, 4

26 CFR 40.6011(a)–1(b)(2)(vi),

amended; 48.4082–5T, removed;

48.4082–5, added; 48.4081–1,

amended; 48.4082–5T, redesignated;

48.6416(b)(4)–1, removed; 48.6421–

3(d)(2), amended; 48.6427–3(d)(2),

amended; 48.6715–1(a)(3), revised;

48.6715–2T, removed; gasoline and

diesel fuel excise tax; special rules for

Alaska, definitions (TD 8748) 8, 24

Regulations:

26 CFR 48.4081–1T, 48.4082–6T

through –10T and intermediary sections, 48.4091–3T, 48.4101–2T, –3T,

48.6427–10T, –11T, added; 145.4052–

1, amended; kerosene, aviation fuel,

heavy trucks and trailers tax (TD

8774) 30, 5

GIFT TAX

Nonstatutory stock option, transfer (RR

21) 18, 7

Qualifying income interest, disposition

(RR 8) 7, 24

Valuation of compensatory stock options

(RP 34) 18, 15

INCOME TAX

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

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

Automobile owners and lessees (RP 24)

10, 31; (RP 30) 17, 6

October 5, 1998

IRB 1998-40

9/30/98 12:01 PM

Page 20

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

Below-market loans; exempted loans;

second mortgage loans under the

MAHRA Act (RR 34) 31, 12

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

Business expenses:

Environmental remediation expenditures (RP 47) 37, 8

Underground waste storage tank (RR

25) 19, 4

Capital gains and charitable remainder

trusts (Notice 20) 13, 25

Classification settlement program:

Extended until further notice (Notice

21) 15, 14

Common Trust Funds, unrelated business

taxable income (RR 41) 35, 6

Deductions:

When taken:

All events test; accrued cooperative

advertising expenses (RR 39) 33,

Definition of former Indian reservations

in Oklahoma (Notice 45) 35, 7

Disclosure authorization list (RP 43) 29, 8

Distribution of stock and securities of a

newly formed controlled corporation;

limitations (RR 44) 37, 4

Domestic assets/liability and investment

yield percentages (RP 31) 23, 9

Education loans (Notice 7) 3, 54

Effective date of consolidated overall foreign loss provisions (Notice 40) 35, 7

Elections under section 7704(g) (Notice

3) 3, 48

Electronic Federal Tax Payment System:

Batch filers and bulk filers (RP 32) 17,

Electronic funds transfer; failure to deposit penalty (Notice 30) 22, 9

Employee plans:

Administrative programs; closing

agreements (RP 22) 12, 11

Determination letters (RP 6) 1, 183;

(RP 14) 4, 22

Discrimination; CODAs (Notice 1) 3,

Eligible deferred compensation plans

(Notice 8) 4, 6

Funding:

Full funding limitations, weighted

average interest rate for January 1998 (Notice 9) 4, 8; February 1998 (Notice 15) 9, 8;

March 1998 (Notice 18) 12, 11;

April 1998 (Notice 26) 18, 14;

October 5, 1998

May 1998 (Notice 32) 22, 23;

June 1998 (Notice 33) 25, 10;

July 1998 (Notice 37) 30, 13;

August 1998 (Notice 44) 34, 7;

September 1998 (Notice 48)

39, 17

Group health plans; COBRA continuation coverage; HIPAA portability

(Notice 12) 5, 12

Individual retirement arrangements,

Roth IRAs (Notice 49) 38, 5

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

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

Minimum Funding Standards (RP 10)

2, 35

Minimum:

Remedial amendments (RP 42) 28, 9

Net unrealized appreciation; capital

gains (Notice 24) 17, 5

Qualification (Notice 29) 22, 8;

CODAs (RR 30) 25, 8

Qualification:

Church plans (Notice 39) 33, 11

Recovery of basis; retirees (Notice 2)

2, 22

Section 457 model amendments (RP

41) 32, 7

Section 457 ruling program (RP 40)

32, 6

SIMPLE-IRAs (Notice 4) 2, 25

Technical advice (RP 5) 1, 155

User fees (RP 8) 1, 225

Enhanced oil recovery credit (Notice 41)

33, 12

Environmental cleanup costs; letter

rulings (RP 17) 5, 21

Exempt Organizations:

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

Organizations excepted from reporting

lobbying expenditures (RP 19) 7,

Tax consequences of physicians recruitment incentives provided by

hospitals (RR 15) 12, 6

Technical advice (RP 5) 1, 155

User fees (RP 8) 1, 225

Failure to deposit federal tax; penalty

abatement (Notice 14) 8, 27

Foreign partnerships, reporting transfer of

property by U.S. persons (Notice 17)

11, 6

Foreign tax credit abuse (Notice 5) 3, 49

Form 1040:

e-file program (RP 50) 38, 8

On-line filing program (RP 51) 38, 20

Fringe benefits aircraft valuation formula,

first half of 1998 (RR 14) 11, 4;

second half of 1998 (RR 40) 33, 4

Fuel from a nonconventional source,

credit; section 29 inflation adjustment;

reference price for 1997 (Notice 28)

19, 7

Hybrid arrangements, treatment under

subpart F (Notice 35) 27, 35

Information reporting:

Hope Scholarship and Lifetime Learning credits (Notice 46) 36, 21

Insurance companies:

Differential earnings rate and recomputed differential earnings rate for

mutual life insurance companies (RR

38) 32, 4

Discounting estimated salvage recoverable (RP 12) 4, 18

Interest rate tables (RR 2) 2, 15

Loss reserves; discounting unpaid

losses (RP 11) 4, 9

“Reserve strengthening,” reasonable

interpretation (Ct.D. 2065) 39, 7

Interest:

Investment:

Federal short-term, mid-term, and

long-term rates for January 1998

(RR4) 2, 18; February 1998 (RR

7) 6, 6; March 1998 (RR 11) 10,

13; April 1998 (RR 18) 14, 22;

May (RR 23) 18, 5; June 1998

(RR 28) 22, 5; July 1998 (RR 33)

27, 26; August 1998 (RR 36) 31,

6; September 1998 (RR 43) 36, 9

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

quarter beginning July 1, 1998

(RR 32) 25, 4; calendar quarter

beginning October 1, 1998 (RR

46) 39, 10

Inventory:

LIFO:

Automobile and truck dealers (RP

46) 36, 21

Price indexes; department stores for

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

1998 (RR 16) 13, 18; February

1998 (RR 20) 15, 8; March 1998

(RR 26) 21, 4; April 1998 (RR

29) 24, 4; May 1998 (RR 35) 30,

4; June 1998 (RR 42) 35, 5; July

1998 (RR 48) 39, 6

Price indexes; inventory price computation method (RP 49) 37, 9

1998–40 I.R.B.

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

Shrinkage estimates:

Changing method of accounting for

estimating inventory shrinkage

(RP 29) 15, 22

Letter rulings, determination letters, and

information letters issued by Associate

Chief Counsel (Domestic), Associate

Chief Counsel (EBEO), Associate

Chief Counsel (Enforcement Litigation), and Associate Chief Counsel

(International) (RP 1) 1, 7

Lien for taxes; validity and priority against

third parties; judgment creditor (Ct.D.

2063) 36, 13

Losses attributable to a disaster during

1997 (RR 12) 10, 5

Low-income housing tax credit (Notice

13) 6, 19; (RP 45) 34, 8

Satisfactory bond; “bond factor”

amounts for the period October

through December 1997 (RR 3) 2, 4;

January–March 1998 (RR 13) 11, 4;

April-June 1998 (RR 31) 25, 4; JulySeptember 1998 (RR 45) 38, 4

Magnetic media/electronic filing:

1998 Forms 1098, 1099, 5498, and

W–2G specifications (RP 35) 19,

Form 1040NR (RP 36) 23, 10

Marginal production rates (Notice 42) 33,

Methods of accounting; involuntary

changes (Notice 31) 22, 10

Package design; amortization; capitalization; amortizable section 197 intangible

(RP 39) 26, 36

Passive foreign investment companies:

Shareholders may use rules of sec.

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

1, 1998 (Notice 22) 17, 5

Private letter rulings under sections 877,

2107, and 2501(a)(3)(Notice 34) 27, 30

Proposed regulations:

26 CFR 1.32–3, added; EIC eligibility

requirements (REG–116608–97) 29,

26 CFR 1.72(p)–1, amended; loans to

plan participants (REG–209476–82)

8, 36

26 CFR 1.141–7, 1.142(f)(4)–1, 1.150–

5, added; 1.141–8, –15, amended;

obligations of states and political

subdivisions (REG–110965–97) 13,

1998–40 I.R.B.

26 CFR 1.195–1, added; election to

amortize start-up expenditures

(REG–209373–81) 14, 26

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

(REG–121755–97) 9, 13

26 CFR 1.368–1, amended; corporate

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

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

plans, required distributions (REG–

209463–82) 4, 27

26 CFR 1.408A–0 through –9 and intermediary sections, added; Roth

IRAs, questions and answers

(REG–115393–98) 39, 34

26 CFR 1.417(e)–1 and paragraph (d),

revised; 1.417(e)–1T and paragraph

(d), revised; valuation of plan distributrions (TD 8768) 20, 4

26 CFR 1.460–6, amended; election

not to apply look-back method in de

minimis cases (REG–120200–97)

12, 32

26 CFR 1.469–10, revised; 1.7704–1,

added; investment income, passive

activity income and loss rules for

publicly traded partnerships

(REG–105163–97) 8, 31

26 CFR 1.475(g)–2, new; 1.482–8,

added; 1.482–0, –1, –2, 1.863,

1.863–7(a)(1), 1.864–4, –6, 1.894–1,

amended; 1.482–9, redesignated;

global dealing operation allocation

and sourcing of income and deductions among taxpayers (REG–

208299–90) 16, 26

26 CFR 1.513–7, added; travel and tour

activities of tax exempt organizations (REG–121268–97) 20, 12

26 CFR 1.529–0 through –6 and intermediary sections, added; Qualified

State Tuition Programs (REG–

106177–97) 37, 33

26 CFR 1.671–4, 1.6049–7, 301.6109–

1, amended; reporting requirements

for widely held fixed investment

trusts (REG–209813–96) 35, 9

26 CFR 1.702–1, 1.954–1, 301.7701–3,

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

4(b)(2)(iii), 1.954–9, 1.956–2(a)(3),

added (REG–104537–97) 16, 21

26 CFR 1.732–1, amended; 1.732–2,

amended; 1.734–1(e), added; 1.743–

1, revised; 1.751–1, amended;

1.755–1, revised; 1.1017–1, revised;

adjustments to basis of partnership

property and partnership interest

(REG–209682–94) 17, 20

26 CFR 1.864(b)–1; trading safe harbors (REG–106031–98) 26, 38

26 CFR 1.925(a)–1, (b)–1, added;

1.927(e)–1, amended; foreign sales

corporation transfer pricing source

and grouping rules (REG–102144–

98) 15, 25

26 CFR 1.936–1T, added; termination

of Puerto Rico and possession tax

credit, new lines of business prohibited (REG–115446–97) 36, 23

26 CFR 1.985–8, 1.1001–5, added;

conversion to the euro (REG–

110332–98) 33, 18

26 CFR 1.1092(c)–1, added; equity options without standard terms, special

rules and definitions (REG–104641–

97) 29, xx

26 CFR 1.1291–1, 1.1293–1, 1.1295–1,

–3, 1.1297–3(c), added; 1.1296–4,

amended; passive foreign investment

company preferred shares, special

income exclusion (REG–115795–

97) 8, 33

26 CFR 1.1361–0, amended; 1.1361–1,

amended; 1.1361–1(d)(3), removed;

1.1361–2 through –6 and intermediary sections, added; 1.1362–0,

amended; 1.1362–2, amended;

1.1362–8, added; 1.1368–0,

amended; 1.1368–2(d)(2), amended;

1.1374–8(b), amended; S corporation subsidiaries (REG–251698–96)

20, 14

26 CFR 1.1366–1, –2, removed;

1.1366–0 through –5 and intermediary sections, added; 1.1367–0, –1,

amended; 1.1367–3, removed;

1.1368–0, –1, –2, –3, amended;

1.1368–4, revised; pass through of

items of an S corporation to its shareholders (REG–209446– 82) 36, 24

26 CFR 1.1397E–1, added; qualified

zone academy bonds (REG–

119449–97) 10, 35

26 CFR 1.1502–3(c), revised; 1.1502–

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

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

and credits (REG–104062–97) 10, 34

26 CFR 1.6031–1, removed; 1.6031(a)–

1, added; 1.6063–1, amended; part-

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

nership returns (REG–209322–82)

15, 26

26 CFR 1.6038B–1, amended; 1.6038B–

2, added; reporting of certain transfers

to foreign corporations and foreign

partnerships (REG– 118926–97) 39,

26 CFR 1.6038–3, added; information

returns for certain foreign partnerships (REG–118966–97) 39, 29

26 CFR 1.6046A–1, added; return requirement for U.S. persons owning

interests in foreign partnerships

(REG–209060–86) 39, 18

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

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

payments (REG–100841–97) 8, 30

26 CFR 301.6402–5(h), added; –6(n),

revised; tax refund offset program

(REG–104565–97) 39, 21

26 CFR 301.6404–2, added; abatement

of interest (REG–209276–87) 11, 18

26 CFR 301.7433–1(a), (d), (e), and

(f), revised; civil cause of action for

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

26 CFR 54.9812–1, added; mental

health parity; HIPAA (REG–

109704–97) 3, 60

Qualified Funeral Trust; guidance (Notice

6) 3, 52

Qualified intermediary agreements:

Guidance provided to foreign financial

institutions (RP 27) 15, 15

Qualified mortgage bonds, mortgage

credit certificates:

Guidance provided regarding use of national and area median gross income

figures by issuers (RP 28) 15, 14

Qualified Subchapter S Trust (QSST)

conversion to Electing Small Business

Trust (ESBT) 10, 30

Qualified Zone Academy Zone Bonds

(RP) 3, 100

Real estate transactions (RP 20) 7, 32

Regulations:

26 CFR 1.32–3T, added; EIC eligibility

requirements (TD 8773) 29, 4

26 CFR 1.61–12, 1.249–1, 1.1016–5,

1.1275–1, amended; 1.163–13,

1.171–5, added; 1.171–1, –2, –3, –4,

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

October 5, 1998

26 CFR 1.141–0, –2, amended;

1.141–7, –8, removed; 1.141–7T,

–8T, –15T, 1.142(f)(4)–1T, 1.150–

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

26 CFR 1.166–3(a)(3), 1.1001–4,

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

and dealer assignments of notional

principal contracts (TD 8763) 15, 5

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

8745) 7, 15

26 CFR 1.338–2, 1.368–1, –2,

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

14, 13

26 CFR 1.354–1, 1.355–1, 1.356–3,

amended; reorganizations, treatment

of warrants as securities (TD 8752)

9, 4

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

(TD 8753) 9, 6

26 CFR 1.367(a)–1T, –3, amended;

1.367(a)–3T, removed; 1.367(a)–8,

1.367(b)–1, –4, added; 1.367(d)–1T,

amended; 1.6038B–1, added;

1.6038B–1T; 7.367(b)–1, –4, –7,

amended; certain transfers of stock

or securities by U.S. persons to foreign corporations (TD 8770) 27, 4

26 CFR 1.411(d)–4, amended; permitted elimination of preretirement optional forms of benefit (TD 8769)

28, 4

26 CFR 1.446–1, amended; 1.446–1T,

removed; 301.9100–0, added;

301.9100–1, revised; 301.9100–2,

–3, added; 301.9100–1T, –2T, –3T;

removed extensions of time to make

elections (TD 8742) 5, 4

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

26 CFR 1.460–0, amended; 1.460–6T,

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

(TD 8756) 12, 4

26 CFR 1.460–6T, removed;

1.460–6(i), (j), added; election not to

apply look-back method in de minimis cases (TD 8775) 31, 4

26 CFR 1.465–27, added; qualified

nonrecourse financing under section

465(b)(6) (TD 8777) 34, 4

26 CFR 1.468A–2, –3, –8, amended;

nuclear decommissioning funds; revised schedules of ruling amounts

(TD 8758) 13, 15

26 CFR 1.904–5(o), 1.904–5T, 1.954–

0(b), 1.954–1, amended; 1.954–1T,

–2T, –9T, added; 301.7701–3(f)(1),

amended; controlled foreign corporation relating to partnerships and

branches (TD 8767) 16, 4

26 CFR 1.905–2, amended; foreign tax

credit filing requirements (TD 8759)

13, 19

26 CFR 1.925(a)–1T, 1.925(b)–

1T(b)(3)(i), amended; 1.927(e)–1T,

revised; foreign sales corporation

transfer pricing source and grouping

rules (TD 8764) 15, 9

26 CFR 1.936–11T, added; termination

of Puerto Rico and possession tax

credit; new lines of business prohibited (TD 8778) 36, 4

26 CFR 1.985–1, –5(a), amended;

1.985–7, added; dollar approximate

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

method of accounting, change from

P&L method to DASTM (TD 8765)

16, 11

26 CFR 1.1271–1, 1.1275–1, amended;

debt instruments with original issue

discount, annuity contracts (TD

8754) 10, 15

26 CFR 1.1202–0, –2, added; qualified

small business stock (TD 8749) 7,

26 CFR 1.1290–0, amended; 1.1294–0,

added; a. 1291–0T, amended;

1.1291–1T, added; 1.1291–9,

amended; 1.1293–0, –1T, added;

1.1295–0, –1T, –3T, 1.1297–3T(c),

added; passive foreign investment

company preferred shares, special

income exclusion (TD 8750) 8, 4

26 CFR 1.1396–1; empowerment zone

employment credit, qualified zone

employees (TD 8747) 7, 18

26 CFR 1.1397E–1T, added; qualified

zone academy bonds (TD 8755) 10,

26 CFR 1.1502–3, –4, –9(a), –21T(c)(1)(iii), amended; 1.1502– 3T, –4T,

–9T, –55T, added; 1.1502– 23T(b),

1998–40 I.R.B.

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

(c), redesignated; consolidated returns, limitations on the use of certain losses and credits, overall foreign loss accounts (TD 8751) 10, 23

26 CFR 54.9801–2T, amended;

54.9801–4T, –5T, revised; 54.9804–

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

health parity, interim rules (TD

8741) 3, 6

26 CFR 301.7623–1, revised;

301.7623–1T, removed; rewards for

information relating to violations of

internal revenue laws (TD 8780) 39,

Relocation payments:

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

Act, not includible in gross income

(RR 19) 15, 5

Renewable electricity production credit;

calendar year 1998 inflation adjustment

factor and reference prices. (Notice 27)

18, 14

1998–40 I.R.B.

Reorganizations; exchange of securities

(RR 10) 10, 11

Reproduction of Forms 1096, 1098, 1099,

5498, and W–2G (RP 37) 26, 6

Residential rental property, exempt facility bond (RR 47) 39, 4

Rulings:

Areas in which advance rulings will not

be issued:

Associate Chief Counsel (Domestic), Associate Chief Counsel

(EBEO) (RP 3) 1, 100

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

Obsolete (RR 37) 32, 5

Rural airports (RP 18) 6, 20

Sales or exchanges:

Qualified small business stock (RP 48)

38, 7

Social security benefits under U.S.Canada treaty, recent changes (Notice

23) 18, 9

Specifications for filing Form 1042–S

(RP 44) 32, 11

Spin-off of subsidiary (RR 27) 22, 4

SRLY notice (Notice 38) 34, 7

Technical advice to district directors and

chiefs, appeals offices, Associate Chief

Counsel (Domestic), Associate Chief

Counsel (EBEO), Associate Chief

Counsel (Enforcement Litigation), and

Associate Chief Counsel (International)

(RP 2) 1, 74

Tentative differential earnings rate for

1997 (Notice 19) 13, 24

Timely filing or payment; private delivery

services (Notice 47) 37, 8

Treatment of hybrid arrangements under

subpart F (Notice 11) 6, 18

Trust, election to treat U.S. person;

domestic trust (Notice 25) 18, 11

Waiver of period of stay in foreign country (RP 38) 27, 29

Withholding regulations:

Effective date of sec. 1441 withholding

regulations amended (Notice 16) 15,

October 5, 1998

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Notes

October 5, 1998

1998–40 I.R.B.

IRB 1998-40

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Page 25

Notes

1998–40 I.R.B.

October 5, 1998

IRB 1998-40

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Page 26

Notes

October 5, 1998

1998–40 I.R.B.

IRB 1998-40

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Page 28

INTERNAL REVENUE BULLETIN

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