# Bulletin No. 1998–40 > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3A835874612f761bba ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text IRB 1998-40 9/30/98 12:00 PM Page 1 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 IRB 1998-40 9/30/98 12:00 PM Page 2 Mission of the Service ucts and services; and perform in a manner warranting the highest degree of public confidence in our integrity, efficiency, and fairness. The purpose of the Internal Revenue Service is to collect the proper amount of tax revenue at the least cost; serve the public by continually improving the quality of our prod- Statement of Principles of Internal Revenue Tax Administration The Service also has the responsibility of applying and administering the law in a reasonable, practical manner. Issues should only be raised by examining officers when they have merit, never arbitrarily or for trading purposes. At the same time, the examining officer should never hesitate to raise a meritorious issue. It is also important that care be exercised not to raise an issue or to ask a court to adopt a position inconsistent with an established Service position. The function of the Internal Revenue Service is to administer the Internal Revenue Code. Tax policy for raising revenue is determined by Congress. With this in mind, it is the duty of the Service to carry out that policy by correctly applying the laws enacted by Congress; to determine the reasonable meaning of various Code provisions in light of the Congressional purpose in enacting them; and to perform this work in a fair and impartial manner, with neither a government nor a taxpayer point of view. Administration should be both reasonable and vigorous. It should be conducted with as little delay as possible and with great courtesy and considerateness. It should never try to overreach, and should be reasonable within the bounds of law and sound administration. It should, however, be vigorous in requiring compliance with law and it should be relentless in its attack on unreal tax devices and fraud. At the heart of administration is interpretation of the Code. It is the responsibility of each person in the Service, charged with the duty of interpreting the law, to try to find the true meaning of the statutory provision and not to adopt a strained construction in the belief that he or she is “protecting the revenue.” The revenue is properly protected only when we ascertain and apply the true meaning of the statute. 2 IRB 1998-40 9/30/98 12:00 PM Page 3 Introduction The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly and may be obtained from the Superintendent of Documents on a subscription basis. Bulletin contents of a permanent nature are consolidated semiannually into Cumulative Bulletins, which are sold on a single-copy basis. dures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same. The Bulletin is divided into four parts as follows: Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986. It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions, and Subpart B, Legislation and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secretary (Enforcement). Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Part IV.—Items of General Interest. With the exception of the Notice of Proposed Rulemaking and the disbarment and suspension list included in this part, none of these announcements are consolidated in the Cumulative Bulletins. Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and proce- The first Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis and are published in the first Bulletin of the succeeding semiannual period, respectively. The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate. For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. 3 IRB 1998-40 9/30/98 12:00 PM Page 4 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- 4 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 1998–40 I.R.B. IRB 1998-40 9/30/98 12:00 PM Page 5 (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 5 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 IRB 1998-40 9/30/98 12:00 PM Page 6 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 6 (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. 1998–40 I.R.B. IRB 1998-40 9/30/98 12:00 PM 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% 1998–40 I.R.B. 7 October 5, 1998 IRB 1998-40 9/30/98 12:00 PM 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. 8 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 9 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 9/30/98 12:01 PM 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) 10 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 9/30/98 12:01 PM 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- 11 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 9/30/98 12:01 PM 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, IL 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, IL Freed Hurwitz Memorial Fund, Inc., Hollywood, FL Fritz & Alice Anton Scholarship Fund, San Marcos, TX God Rules Ministry, Inc., Baton Rouge, LA Goddard Historical & Genealogical Society Inc., Stow, OH Good Stewards, Woodbury, MN Gulf Coast Research and Development Laboratory Inc., Tampa, FL Haviland Heartland Housing, Haviland KS 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, CA Kate Sidran Family Foundation, Dallas, TX King City Police Activities League, Inc., King City, CA Largess, South Euclid, OH Living God Ministries, Inc., Bastrop, TX 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, AR 12 Paula Martin Jones Charities, Inc., Longview, TX People Against Racism & Discrimination, Calumet, IL Raptor Education Group Inc., Antigo, WI 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, GA Trades Awareness Program Inc., Franklin, WI 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. IRB 1998-40 9/30/98 12:01 PM Page 13 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 CPA CPA Enrolled Agent CPA October 25, 1997 December 11, 1997 January 15, 1998 March 4, 1998 June 4, 1998 1998–40 I.R.B. 13 October 5, 1998 IRB 1998-40 9/30/98 12:01 PM 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 14 1998–40 I.R.B. IRB 1998-40 9/30/98 12:01 PM 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. Register, Billy 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 CPA CPA CPA CPA CPA CPA CPA CPA CPA CPA CPA 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 November 1, 1998 to April 30, 2000 1998–40 I.R.B. 15 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 16 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. 17 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 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 18 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: RR Revenue Ruling RP Revenue Procedure TD Treasury Decision CD Court Decision PL Public Law EO Executive Order DO Delegation Order TDO Treasury Department Order TC Tax Convention SPR Statement of Procedural Rules PTE Prohibited Transaction Exemption EMPLOYMENT TAX 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, 11 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, 6 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 19 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, 21 Regulations: 26 CFR 40.0–1(a), amended; 40.6011(a) –1(a)(2)(iii), 40.5302(c)– 1, amended, 40.6302(c)–2(b)(2)(iii), added; deposits of excise taxes (TD 8740) 3, 4 26 CFR 40.6011(a)–1(b)(2)(vi), amended; 48.4082–5T, removed; 48.4082–5, added; 48.4081–1, amended; 48.4082–5T, redesignated; 48.6416(b)(4)–1, removed; 48.6421– 3(d)(2), amended; 48.6427–3(d)(2), amended; 48.6715–1(a)(3), revised; 48.6715–2T, removed; gasoline and diesel fuel excise tax; special rules for Alaska, definitions (TD 8748) 8, 24 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, 4 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, 11 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, 42 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, 30 Tax consequences of physicians recruitment incentives provided by hospitals (RR 15) 12, 6 Technical advice (RP 5) 1, 155 User fees (RP 8) 1, 225 Failure to deposit federal tax; penalty abatement (Notice 14) 8, 27 Foreign partnerships, reporting transfer of property by U.S. persons (Notice 17) 11, 6 Foreign tax credit abuse (Notice 5) 3, 49 Form 1040: e-file program (RP 50) 38, 8 On-line filing program (RP 51) 38, 20 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. IRB 1998-40 9/30/98 12:01 PM Page 21 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, 6 Form 1040NR (RP 36) 23, 10 Marginal production rates (Notice 42) 33, 12 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, 12 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, 42 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; 21 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- October 5, 1998 IRB 1998-40 9/30/98 12:01 PM Page 22 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, 23 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 22 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, 16 26 CFR 1.1290–0, amended; 1.1294–0, added; a. 1291–0T, amended; 1.1291–1T, added; 1.1291–9, amended; 1.1293–0, –1T, added; 1.1295–0, –1T, –3T, 1.1297–3T(c), added; passive foreign investment company preferred shares, special income exclusion (TD 8750) 8, 4 26 CFR 1.1396–1; empowerment zone employment credit, qualified zone employees (TD 8747) 7, 18 26 CFR 1.1397E–1T, added; qualified zone academy bonds (TD 8755) 10, 21 26 CFR 1.1502–3, –4, –9(a), –21T(c)(1)(iii), amended; 1.1502– 3T, –4T, –9T, –55T, added; 1.1502– 23T(b), 1998–40 I.R.B. IRB 1998-40 9/30/98 12:01 PM Page 23 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, 14 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 23 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, 12 October 5, 1998 IRB 1998-40 9/30/98 12:01 PM Page 24 Notes October 5, 1998 24 1998–40 I.R.B. IRB 1998-40 9/30/98 12:01 PM Page 25 Notes 1998–40 I.R.B. 25 October 5, 1998 IRB 1998-40 9/30/98 12:01 PM Page 26 Notes October 5, 1998 26 1998–40 I.R.B. IRB 1998-40 9/30/98 12:01 PM Page 27 IRB 1998-40 9/30/98 12:01 PM Page 28 INTERNAL REVENUE BULLETIN The Introduction on page 3 describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superintendent of Documents when their subscriptions must be renewed. CUMULATIVE BULLETINS The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the weekly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print and are not available. 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