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Bulletin No. 1999–6
February 8, 1999
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
EMPLOYEE PLANS
Rev. Rul. 99–5, page 8.
T.D. 8806, page 4.
Disregarded entity to partnership. This ruling describes
the federal income tax consequences when a single member
limited liability company that is disregarded as an entity separate from its owner under section 301.7701–3 of the Procedure and Administration Regulations becomes an entity
with more than one owner that is classified as a partnership
for federal tax purposes.
EXEMPT ORGANIZATIONS
Rev. Rul. 99–6, page 6.
Partnership to disregarded entity. This ruling describes
the federal income tax consequences if one person purchases all of the ownership interests in a domestic limited liability company (LLC) that is classified as a partnership
under section 301.7701–3 of the Procedure and Administration Regulations, causing the LLC’s status as a partnership
to terminate under section 708(b)(1)(A) of the Code.
Rev. Rul. 99–8, page 10.
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 February 1999.
T.D. 8799, page 12.
Final regulations relate to the treatment of certain investment income under the qualifying income provisions of section 7704 of the Code and the application of the passive activity loss rules to publicly traded partnerships.
Finding Lists begin on page 24.
Department of the Treasury
Internal Revenue Service
Final and temporary regulations provide changes to the rules
under section 411 of the Code regarding qualified retirement plan benefits that are protected from reduction by plan
amendment. The changes were made necessary by the Taxpayer Relief Act of 1997.
Announcement 99–13, page 20.
A list is given of organizations now classified as private foundations.
ESTATE TAX
REG–114663–97, page 17.
Proposed regulations under section 2056 of the Code relate
to the effect of certain administration expenses on the valuation of property which qualifies for the estate tax marital or
charitable deduction. A public hearing will be held on April
21, 1999.
ADMINISTRATIVE
Notice 99–10, page 16.
Low-income housing tax credit. Resident population figures for the various states for determining the 1999 calendar year (1) state housing credit ceiling under section 42(h)
of the Code, and (2) private activity bond volume cap under
section 146 of the Code are reproduced.
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Mission of the Service
and by applying the tax law with integrity and fairness to
all.
Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities
Statement of Principles
of Internal Revenue
Tax Administration
The Service also has the responsibility of applying and
administering the law in a reasonable, practical manner.
Issues should only be raised by examining officers when
they have merit, never arbitrarily or for trading purposes.
At the same time, the examining officer should never hesitate to raise a meritorious issue. It is also important that
care be exercised not to raise an issue or to ask a court to
adopt a position inconsistent with an established Service
position.
The function of the Internal Revenue Service is to administer the Internal Revenue Code. Tax policy for raising revenue
is determined by Congress.
With this in mind, it is the duty of the Service to carry out that
policy by correctly applying the laws enacted by Congress;
to determine the reasonable meaning of various Code provisions in light of the Congressional purpose in enacting them;
and to perform this work in a fair and impartial manner, with
neither a government nor a taxpayer point of view.
Administration should be both reasonable and vigorous. It
should be conducted with as little delay as possible and
with great courtesy and considerateness. It should never
try to overreach, and should be reasonable within the
bounds of law and sound administration. It should, however, be vigorous in requiring compliance with law and it
should be relentless in its attack on unreal tax devices and
fraud.
At the heart of administration is interpretation of the Code. It
is the responsibility of each person in the Service, charged
with the duty of interpreting the law, to try to find the true
meaning of the statutory provision and not to adopt a
strained construction in the belief that he or she is “protecting the revenue.” The revenue is properly protected only
when we ascertain and apply the true meaning of the statute.
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Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly and may be obtained
from the Superintendent of Documents on a subscription
basis. Bulletin contents of a permanent nature are consolidated semiannually into Cumulative Bulletins, which are sold
on a single-copy basis.
dures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances
are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements
of internal practices and procedures that affect the rights
and duties of taxpayers are published.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions, and Subpart B, Legislation and Related
Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to
these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings
are issued by the Department of the Treasury’s Office of the
Assistant Secretary (Enforcement).
Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
revenue ruling. In those based on positions taken in rulings
to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature
are deleted to prevent unwarranted invasions of privacy and
to comply with statutory requirements.
Part IV.—Items of General Interest.
With the exception of the Notice of Proposed Rulemaking
and the disbarment and suspension list included in this part,
none of these announcements are consolidated in the Cumulative Bulletins.
Rulings and procedures reported in the Bulletin do not have
the force and effect of Treasury Department Regulations,
but they may be used as precedents. Unpublished rulings
will not be relied on, used, or cited as precedents by Service
personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and proce-
The first Bulletin for each month includes a cumulative index
for the matters published during the preceding months.
These monthly indexes are cumulated on a quarterly and
semiannual basis, and are published in the first Bulletin of the
succeeding quarterly and semiannual period, respectively.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.
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Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 42.—Low-Income
Housing Credit
The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month
of February 1999. See Rev. Rul. 99–8, page 10.
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term
rates are set forth for the month of February 1999.
See Rev. Rul. 99–8, page 10.
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 February 1999. See Rev. Rul. 99–8,
page 10.
isting final 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 final regulations affect sponsors of
qualified retirement plans, employers that
maintain qualified retirement plans, and
qualified retirement plan participants.
The amendments to the temporary regulations remove previously issued temporary
regulations on the same subject.
DATES: These regulations are effective
January 8, 1999.
FOR FURTHER INFORMATION CONTACT: Linda S. F. Marshall, (202) 6226030 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Section 411.—Minimum Vesting
Standards
26 CFR 1.411(d)–4: Section 411(d)(6) protected
benefits.
T.D. 8806
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
Employee Stock Ownership
Plans; 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 final regulations change the ex-
February 8, 1999
Background
This document contains amendments to
the Income Tax Regulations (26 CFR part
1) under section 411(d)(6). These 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). On
September 4, 1998, temporary regulations
(T.D. 8781, 1998–40 I.R.B. 4) under section 411(d)(6) were published in the Federal Register (63 F.R. 47172). A notice
of proposed rulemaking (REG–101363–
98, 1998–40 I.R.B. 10), cross-referencing
the temporary regulations, was published
in the Federal Register (63 F.R. 47214)
on the same day. The temporary regulations conform the regulations 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, the 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).
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One written comment responding to the
notice of proposed rulemaking was received. No public hearing was requested
or held. The proposed regulations under
section 411(d)(6) are adopted by this
Treasury decision, and the corresponding
temporary regulations are removed.
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 (e.g., cash or inkind) 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 se-
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curities 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 ownership 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 regulations retain the provision in the temporary regulations to expand the exception of
§1.411(d)–4, Q&A-2(d)(2)(ii) from the
requirements of section 411(d)(6) to
1999–6 I.R.B
apply to S corporations as well, to reflect
the TRA ’97 changes to section 409(h).
Rules for Plan Amendments Pursuant to
TRA ’97
Section 1541 of TRA ’97 contains provisions relating to plan amendments that
are adopted as a result of TRA ’97. If section 1541 applies to a plan amendment,
section 1541(a) provides that the plan will
be treated as operated in accordance with
its terms and will not fail to satisfy the requirements of section 411(d)(6) by reason
of the amendment. Section 1541 applies
to a plan amendment that is made pursuant to a legislative change in the pension and employee benefit provisions of
TRA ’97, provided the following conditions are satisfied. First, the plan amendment must be adopted before the first day
of the first plan year beginning on or after
January 1, 1999 (2001, in the case of a
governmental plan, as defined in section
414(d)). Second, the plan must be operated in accordance with the terms of the
plan amendment, beginning on the date
the legislative change takes effect, or, if
the amendment is not required by the legislative change, the effective date of the
amendment specified by the plan. Third,
the plan amendment must be made
retroactively effective.
The remedial amendment period for
adopting plan amendments to which section 1541 of TRA ’97 applies was extended pursuant to the rules of section
401(b) in Rev. Proc. 98–14 (1998–4
I.R.B. 22). To provide a uniform time for
plan amendment, these regulations add a
new §1.411(d)–4, Q&A-11 to retain the
rule of §1.411(d)–4T, Q&A-11 of the
temporary regulations extending 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.
The sole commentator raised a concern
regarding whether this extension of the
time period for section 411(d)(6) relief
originally provided under section 1541 of
TRA ’97 restricts the time during which
any plan amendment can be made to eliminate in-kind distributions of employer securities from employee stock ownership
plans of S corporations. The extension of
the time period for this section 1541 statutory relief pursuant to §1.411(d)–4, Q&A11 does not restrict the time period during
5
which a plan amendment can be made to
eliminate these in-kind distributions as
permitted under §1.411(d)–4, Q&A2(d)(2)(ii); to the contrary, the §1.411(d)4, Q&A-11 extension of this statutory relief period provides an additional time
period for the adoption of certain plan
amendments to eliminate these in-kind
distributions after these in-kind distributions have been eliminated in operation.
Under the ongoing rule of §1.411(d)–4,
Q&A-2(d)(2)(ii), a plan amendment to
eliminate these in-kind distributions that
is effective with respect to distributions
payable after the date the amendment is
adopted can be made at any time during
taxable years of the employer beginning
after December 31, 1997.
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, the notice of proposed rulemaking
preceding these regulations was submitted to the Small Business Administration
for comment on its impact on small businesses.
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.
* * * * *
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
February 8, 1999
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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. Revising Q&A-2(d)(2)(ii).
2. Removing the last sentence of
Q&A-2(d)(3).
3. Adding Q&A-11.
The additions and revisions read as follows:
§1.411(d)–4 Section 411(d)(6) protected
benefits.
* * * * *
Q-2: * * *
A-2: * * *
(d) * * *
(2) * * *
(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.
* * * * *
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
February 8, 1999
(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.
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 February 1999. See Rev. Rul. 99–8, page 10.
§1.411(d)–4T [Removed]
Par. 3. Section 1.411(d)–4T is removed.
Section 642.—Special Rules for
Credits and Deductions
Robert E. Wenzel,
Deputy Commissioner of
Internal Revenue.
Federal short-term, mid-term, and long-term
rates are set forth for the month of February 1999.
See Rev. Rul. 99–8, page 10.
Approved January 7, 1999.
Donald C. Lubick,
Assistant Secretary of
the Treasury.
(Filed by the Office of the Federal Register on January 7, 1999, 8:45 a.m., and published in the issue of
the Federal Register for January 8, 1999, 64 F.R.
1125)
Section 412.—Minimum
Funding Standards
The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month
of February 1999. See Rev. Rul. 99–8, page 10.
Section 708.—Continuation of
Partnership
26 CFR 1.708–1: Continuation of partnership.
(Also sections 731, 732, 735, 741, 751, 1012;
1.741–1; 301.7701–2, 301.7701–3.)
Partnership to disregarded entity.
This ruling describes the federal income
tax consequences if one person purchases
all of the ownership interests in a domestic limited liability company (LLC) that is
classified as a partnership under section
301.7701–3 of the Procedure and Administration Regulations, causing the LLC’s
status as a partnership to terminate under
section 708(b)(1)(A) of the Code.
Rev. Rul. 99–6
Section 467.—Certains
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 February 1999. See Rev. Rul. 99–8, page 10.
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 February 1999. See Rev. Rul. 99–8, page 10.
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 February 1999.
See Rev. Rul. 99–8, page 10.
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ISSUE
What are the federal income tax consequences if one person purchases all of the
ownership interests in a domestic limited
liability company (LLC) that is classified
as a partnership under § 301.7701–3 of
the Procedure and Administration Regulations, causing the LLC’s status as a partnership to terminate under § 708(b)(1)(A)
of the Internal Revenue Code?
FACTS
In each of the following situations, an
LLC is formed and operates in a state
which permits an LLC to have a single
owner. Each LLC is classified as a partnership under § 301.7701–3. Neither of
the LLCs holds any unrealized receivables or substantially appreciated inventory for purposes of § 751(b). For the
sake of simplicity, it is assumed that neither LLC is liable for any indebtedness,
nor are the assets of the LLCs subject to
any indebtedness.
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Situation 1. A and B are equal partners
in AB, an LLC. A sells A’s entire interest
in AB to B for $10,000. After the sale, the
business is continued by the LLC, which
is owned solely by B.
Situation 2. C and D are equal partners
in CD, an LLC. C and D sell their entire
interests in CD to E, an unrelated person,
in exchange for $10,000 each. After the
sale, the business is continued by the
LLC, which is owned solely by E.
After the sale, in both situations, no entity classification election is made under §
301.7701–3(c) to treat the LLC as an association for federal tax purposes.
LAW
Section 708(b)(1)(A) and § 1.708–
1(b)(1) of the Income Tax Regulations
provide that a partnership shall terminate
when the operations of the partnership are
discontinued and no part of any business,
financial operation, or venture of the partnership continues to be carried on by any
of its partners in a partnership.
Section 731(a)(1) provides that, in the
case of a distribution by a partnership to a
partner, gain is not recognized to the partner except to the extent that any money
distributed exceeds the adjusted basis of
the partner’s interest in the partnership
immediately before the distribution.
Section 731(a)(2) provides that, in the
case of a distribution by a partnership in
liquidation of a partner’s interest in a partnership where no property other than
money, unrealized receivables (as defined
in § 751(c)), and inventory (as defined in
§ 751(d)(2)) is distributed to the partner,
loss is recognized to the extent of the excess of the adjusted basis of the partner’s
interest in the partnership over the sum of
(A) any money distributed, and (B) the
basis to the distributee, as determined
under § 732, of any unrealized receivables and inventory.
Section 732(b) provides that the basis
of property (other than money) distributed
by a partnership to a partner in liquidation
of the partner ’s interest shall be an
amount equal to the adjusted basis of the
partner’s interest in the partnership, reduced by any money distributed in the
same transaction.
Section 735(b) provides that, in determining the period for which a partner has
1999–6 I.R.B
held property received in a distribution
from a partnership (other than for purposes of § 735(a)(2)), there shall be included the holding period of the partnership, as determined under § 1223, with
respect to the property.
Section 741 provides that gain or loss
resulting from the sale or exchange of an
interest in a partnership shall be recognized by the transferor partner, and that
the gain or loss shall be considered as
gain or loss from a capital asset, except as
provided in § 751 (relating to unrealized
receivables and inventory items).
Section 1.741–1(b) provides that § 741
applies to the transferor partner in a twoperson partnership when one partner sells
a partnership interest to the other partner,
and to all the members of a partnership
when they sell their interests to one or
more persons outside the partnership.
Section 301.7701–2(c)(1) provides
that, for federal tax purposes, the term
“partnership” means a business entity (as
the term is defined in § 301.7701–2(a))
that is not a corporation and that has at
least two members.
In Edwin E. McCauslen v. Commissioner, 45 T.C. 588 (1966), one partner in
an equal, two-person partnership died, and
his partnership interest was purchased
from his estate by the remaining partner.
The purchase caused a termination of the
partnership under § 708(b)(1)(A). The
Tax Court held that the surviving partner
did not purchase the deceased partner’s interest in the partnership, but that the surviving partner purchased the partnership
assets attributable to the interest. As a result, the surviving partner was not permitted to succeed to the partnership’s holding
period with respect to these assets.
Rev. Rul. 67–65, 1967–1 C.B. 168, also
considered the purchase of a deceased
partner’s interest by the other partner in a
two-person partnership. The Service
ruled that, for the purpose of determining
the purchaser’s holding period in the assets attributable to the deceased partner’s
interest, the purchaser should treat the
transaction as a purchase of the assets attributable to the interest. Accordingly, the
purchaser was not permitted to succeed to
the partnership’s holding period with respect to these assets. See also Rev. Rul.
55–68, 1955–1 C.B. 372.
7
ANALYSIS AND HOLDINGS
Situation 1. The AB partnership terminates under § 708(b)(1)(A) when B purchases A’s entire interest in AB. Accordingly, A must treat the transaction as the
sale of a partnership interest. Reg.
§ 1.741–1(b). A must report gain or loss,
if any, resulting from the sale of A’s partnership interest in accordance with § 741.
Under the analysis of McCauslen and
Rev. Rul. 67–65, for purposes of determining the tax treatment of B, the AB
partnership is deemed to make a liquidating distribution of all of its assets to A and
B, and following this distribution, B is
treated as acquiring the assets deemed to
have been distributed to A in liquidation
of A’s partnership interest.
B’s basis in the assets attributable to A’s
one-half interest in the partnership is
$10,000, the purchase price for A’s partnership interest. Section 1012. Section
735(b) does not apply with respect to the
assets B is deemed to have purchased
from A. Therefore, B’s holding period for
these assets begins on the day immediately following the date of the sale. See
Rev. Rul. 66–7, 1966–1 C.B. 188, which
provides that the holding period of an
asset is computed by excluding the date
on which the asset is acquired.
Upon the termination of AB, B is considered to receive a distribution of those
assets attributable to B’s former interest in
AB. B must recognize gain or loss, if any,
on the deemed distribution of the assets to
the extent required by § 731(a). B’s basis
in the assets received in the deemed liquidation of B’s partnership interest is determined under § 732(b). Under § 735(b),
B’s holding period for the assets attributable to B’s one-half interest in AB includes the partnership’s holding period
for such assets (except for purposes of
§ 735(a)(2)).
Situation 2. The CD partnership terminates under § 708(b)(1)(A) when E purchases the entire interests of C and D in
CD. C and D must report gain or loss, if
any, resulting from the sale of their partnership interests in accordance with
§ 741.
For purposes of classifying the acquisition by E, the CD partnership is deemed
to make a liquidating distribution of its
assets to C and D. Immediately following
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this distribution, E is deemed to acquire,
by purchase, all of the former partnership’s assets. Compare Rev. Rul. 84–111,
1984–2 C.B. 88 (Situation 3), which determines the tax consequences to a corporate transferee of all interests in a partnership in a manner consistent with
McCauslen, and holds that the transferee’s basis in the assets received equals
the basis of the partnership interests, allocated among the assets in accordance with
§ 732(c).
E’s basis in the assets is $20,000 under
§ 1012. E’s holding period for the assets
begins on the day immediately following
the date of sale.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Matthew Lay of the Office of Assistant Chief Counsel (Passthroughs and
Special Industries). For further information regarding this revenue ruling contact
Mr. Lay at (202) 622-3050 (not a toll-free
call).
Section 721.—Nonrecognition
of Gain or Loss on Contribution
26 CFR 1.721–1: Nonrecognition of gain or loss on
contribution.
(Also sections 722, 723, 1001, 1012, 1223, 7701;
1.1223–1, 301.7701–3.)
Disregarded entity to partnership.
This ruling describes the federal income
tax consequences when a single member
limited liability company that is disregarded as an entity separate from its
owner under section 301.7701–3 of the
Procedure and Administration Regulations becomes an entity with more than
one owner that is classified as a partnership for federal tax purposes.
Rev. Rul. 99–5
ISSUE
What are the federal income tax consequences when a single member domestic
limited liability company (LLC) that is
disregarded for federal tax purposes as an
entity separate from its owner under
§ 301.7701–3 of the Procedure and Administration Regulations becomes an entity with more than one owner that is classified as a partnership for federal tax
purposes?
February 8, 1999
FACTS
In each of the following two situations,
an LLC is formed and operates in a state
which permits an LLC to have a single
owner. Each LLC has a single owner, A,
and is disregarded as an entity separate
from its owner for federal tax purposes
under § 301.7701–3. In both situations,
the LLC would not be treated as an investment company (within the meaning of
§ 351) if it were incorporated. All of the
assets held by each LLC are capital assets
or property described in § 1231. For the
sake of simplicity, it is assumed that neither LLC is liable for any indebtedness,
nor are the assets of the LLCs subject to
any indebtedness.
Situation 1. B, who is not related to A,
purchases 50% of A’s ownership interest
in the LLC for $5,000. A does not contribute any portion of the $5,000 to the
LLC. A and B continue to operate the
business of the LLC as co-owners of the
LLC.
Situation 2. B, who is not related to A,
contributes $10,000 to the LLC in exchange for a 50% ownership interest in
the LLC. The LLC uses all of the contributed cash in its business. A and B continue to operate the business of the LLC
as co-owners of the LLC.
After the sale, in both situations, no entity classification election is made under
§ 301.7701–3(c) to treat the LLC as an association for federal tax purposes.
LAW AND ANALYSIS
Section 721(a) generally provides that
no gain or less shall be recognized to a
partnership or to any of its partners in the
case of a contribution of property to the
partnership in exchange for an interest in
the partnership.
Section 722 provides that the basis of
an interest in a partnership acquired by a
contribution of property, including
money, to the partnership shall be the
amount of the money and the adjusted
basis of the property to the contributing
partner at the time of the contribution increased by the amount (if any) of gain
recognized under § 721(b) to the contributing partner at such time.
Section 723 provides that the basis of
property contributed to a partnership by a
partner shall be the adjusted basis of the
property to the contributing partner at the
8
time of the contribution increased by the
amount (if any) of gain recognized under
§ 721(b) to the contributing partner at
such time.
Section 1001(a) provides that the gain
or loss from the sale or other disposition
of property shall be the difference between the amount realized therefrom and
the adjusted basis provided in § 1011.
Section 1223(1) provides that, in determining the holding period of a taxpayer
who receives property in an exchange,
there shall be included the period for
which the taxpayer held the property exchanged if the property has the same basis
in whole or in part in the taxpayer’s hands
as the property exchanged, and the property exchanged at the time of the exchange was a capital asset or property described in § 1231.
Section 1223(2) provides that, regardless of how a property is acquired, in determining the holding period of a taxpayer
who holds the property, there shall be included the period for which such property
was held by any other person if the property has the same basis in whole or in part
in the taxpayer’s hands as it would have
in the hands of such other person.
HOLDING(S)
Situation 1. In this situation, the LLC,
which, for federal tax purposes, in disregarded as an entity separate from its
owner, is converted to a partnership when
the new member, B, purchases an interest
in the disregarded entity from the owner,
A. B’s purchase of 50% of A’s ownership
interest in the LLC is treated as the purchase of a 50% interest in each of the
LLC’s assets, which are treated as held directly by A for federal tax purposes. Immediately thereafter, A and B are treated
as contributing their respective interests
in those assets to a partnership in exchange for ownership interests in the partnership.
Under § 1001, A recognizes gain or
loss from the deemed sale of the 50% interest in each asset of the LLC to B.
Under § 721(a), no gain or loss is recognized by A or B as a result of the conversion of the disregarded entity to a partnership.
Under § 722, B’s basis in the partnership interest is equal to $5,000, the
amount paid by B to A for the assets
1999–6 I.R.B.
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which B is deemed to contribute to the
newly-created partnership. A’s basis in
the partnership interest is equal to A’s
basis in A’s 50% share of the assets of the
LLC.
Under § 723, the basis of the property
treated as contributed to the partnership
by A and B is the adjusted basis of that
property in A’s and B’s hands immediately after the deemed sale.
Under § 1223(1), A’s holding period
for the partnership interest received includes A’s holding period in the capital
assets and property described in § 1231
held by the LLC when it converted from
an entity that was disregarded as an entity
separate from A to a partnership. B’s holding period for the partnership interest begins on the day following the date of B’s
purchase of the LLC interest from A. See
Rev. Rul. 66–7, 1966–1 C.B. 188, which
provides that the holding period of a purchased asset is computed by excluding the
date on which the asset is acquired. Under
§ 1223(2), the partnership’s holding period for the assets deemed transferred to it
includes A’s and B’s holding periods for
such assets.
Situation 2. In this situation, the LLC is
converted from an entity that is disregarded as an entity separate from its
owner to a partnership when a new member, B, contributes cash to the LLC. B’s
contribution is treated as a contribution to
a partnership in exchange for an ownership interest in the partnership. A is
treated as contributing all of the assets of
the LLC to the partnership in exchange
for a partnership interest.
Under § 721(a), no gain or loss is recognized by A or B as a result of the conversion of the disregarded entity to a partnership.
Under § 722, B’s basis in the partnership interest is equal to $10,000, the
amount of cash contributed to the partnership. A’s basis in the partnership interest
is equal to A’s basis in the assets of the
LLC which A was treated as contributing
to the newly-created partnership.
Under § 723, the basis of the property
contributed to the partnership by A is the
adjusted basis of that property in A’s
hands. The basis of the property contributed to the partnership by B is
$10,000, the amount of cash contributed
to the partnership.
1999–6 I.R.B
Under § 1223(1), A’s holding period for
the partnership interest received includes
A’s holding period in the capital and
§ 1231 assets deemed contributed when
the disregarded entity converted to a partnership. B’s holding period for the partnership interest begins on the day following
the date of B’s contribution of money to
the LLC. Under § 1223(2), the partnership’s holding period for the assets transferred to it includes A’s holding period.
Section 732.—Basis of
Distributed Property Other Than
Money
DRAFTING INFORMATION
Section 735.—Character of
Gain or Loss on Disposition of
Distributed Property
The principal authors of this revenue
ruling are Matthew Lay of the Office of
Assistant Chief Counsel (Passthroughs
and Special Industries) and Mark D. Harris of the Office of Associate Chief Counsel (International). For further information regarding this revenue ruling contact
Mr. Lay at 202-622-3050 (not a toll-free
call).
Section 722.—Basis of
Contributing Partner’s Interest
26 CFR 1.722–1: Basis of contributing partner’s
interest.
26 CFR 1.732–1: Basis of distributed property
other than money.
Tax consequences if one person purchases all of
the ownership interests in a domestic limited liability company that is classified as a partnership. See
Rev. Rul. 99–6, page 6.
26 CFR 1.735–1: Character of gain or loss on
disposition of distributed property.
Tax consequences if one person purchases all of
the ownership interests in a domestic limited liability company that is classified as a partnership. See
Rev. Rul. 99–6, page 6.
Section 741.—Recognition and
Character of Gain or Loss on
Sale or Exchange
26 CFR 1.741–1: Recognition and character of gain
or loss on sale or exchange.
Tax consequences when a single member domestic limited liability company that is disregarded as
an entity separate from its owner becomes an entity
with more than one owner that is classified as a partnership. See Rev. Rul. 99–5, page 8.
Tax consequences if one person purchases all of
the ownership interests in a domestic limited liability company that is classified as a partnership. See
Rev. Rul. 99–6, page 6.
Section 723.—Basis of Property
Contributed to Partnership
Section 751.—Unrealized
Receivables and Inventory Items
26 CFR 1.723–1: Basis of property contributed to
partnership.
26 CFR 1.751–1: Unrealized receivables and
inventory items.
Tax consequences when a single member domestic limited liability company that is disregarded as
an entity separate from its owner becomes an entity
with more than one owner that is classified as a partnership. See Rev. Rul. 99–5, page 8.
Tax consequences if one person purchases all of
the ownership interests in a domestic limited liability company that is classified as a partnership. See
Rev. Rul. 99–6, page 6.
Section 731.—Extent of
Recognition of Gain or Loss on
Distribution
26 CFR 1.731–1: Extent of recognition of gain or
loss on distribution.
Tax consequences if one person purchases all of
the ownership interests in a domestic limited liability company that is classified as a partnership. See
Rev. Rul. 99–6, page 6.
Section 807.—Rules for Certain
Reserves
The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month
of February 1999. See Rev. Rul. 99–8, page 10.
Section 846.—Discounted
Unpaid Losses Defined
The adjusted applicable federal short-term, mid-
9
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Page 10
term, and long-term rates are set forth for the month
of February 1999. See Rev. Rul. 99–8, page 10.
ity company that is classified as a partnership. See
Rev. Rul. 99–6, page 6.
Section 1001.—Determination
of Amount of and Recognition of
Gain or Loss
Section 1223.—Basis Period of
Property
Rev. Rul. 99–8
26 CFR 1.1223–1: Determination of period for
which capital assets are held.
26 CFR 1.1001–1: Computation of gain or loss.
Tax consequences when a single member domestic limited liability company that is disregarded as
an entity separate from its owner becomes an entity
with more than one owner that is classified as a partnership. See Rev. Rul. 99–5, page 8.
Tax consequences when a single member domestic limited liability company that is disregarded as
an entity separate from its owner becomes an entity
with more than one owner that is classified as a partnership. See Rev. Rul. 99–5, page 8.
Section 1012.—Basis of
Property—Cost
Section 1274.—Determination
of Issue Price in the Case of
Certain Debt Instruments Issued
for Property
26 CFR 1.1012–1: Basis of property.
Tax consequences when a single member domestic limited liability company that is disregarded as
an entity separate from its owner becomes an entity
with more than one owner that is classified as a partnership. See Rev. Rul. 99–5, page 8.
Tax consequences if one person purchases all of
the ownership interests in a domestic limited liabil-
sections of the Code, tables set forth the
rates for February 1999.
(Also sections 42, 280G, 382, 412, 467, 468, 482,
483, 642, 807, 846, 1288, 7520, 7872.)
Federal rates; adjusted federal rates;
adjusted federal long-term rate, and
the long-term exempt rate. For purposes
of sections 1274, 1288, 382, and other
This revenue ruling provides various
prescribed rates for federal income tax
purposes for February 1999 (the current
month.) Table 1 contains the short-term,
mid-term, and long-term applicable federal rates (AFR) for the current month for
purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the
short-term, mid-term, and long-term adjusted applicable federal rates (adjusted
AFR) for the current month for purposes
of section 1288(b). Table 3 sets forth the
adjusted federal long-term rate and the
long-term tax-exempt rate described in
section 382(f). Table 4 contains the appropriate percentages for determining the
low-income housing credit described in
section 42(b)(2) for buildings placed in
service during the current month. Finally,
Table 5 contains the federal rate for determining the present value of an annuity, an
interest for life or for a term of years, or a
remainder or a reversionary interest for
purposes of section 7520.
REV. RUL. 99–8 TABLE 1
Applicable Federal Rates (AFR) for February 1999
Period for Compounding
Annual
Semiannual
Quarterly
Monthly
Short-Term
AFR
110% AFR
120% AFR
4.62%
5.09%
5.56%
4.57%
5.03%
5.48%
4.54%
5.00%
5.44%
4.53%
4.98%
5.42%
130% AFR
6.03%
5.94%
5.90%
5.87%
Mid-Term
AFR
110% AFR
120% AFR
130% AFR
150% AFR
175% AFR
4.71%
5.20%
5.67%
6.15%
7.11%
8.33%
4.66%
5.13%
5.59%
6.06%
6.99%
8.16%
4.63%
5.10%
5.55%
6.01%
6.93%
8.08%
4.62%
5.08%
5.53%
5.98%
6.89%
8.02%
Long-Term
AFR
110% AFR
120% AFR
130% AFR
5.24%
5.77%
6.30%
6.83%
5.17%
5.69%
6.20%
6.72%
5.14%
5.65%
6.15%
6.66%
5.12%
5.62%
6.12%
6.63%
February 8, 1999
10
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REV. RUL. 99–8 TABLE 2
Adjusted AFR for February 1999
Period for Compounding
Annual
Semiannual
Quarterly
Monthly
Short-term
adjusted AFR
3.13%
3.11%
3.10%
3.09%
Mid-term
adjusted AFR
3.87%
3.83%
3.81%
3.80%
Long-term
adjusted AFR
4.71%
4.66%
4.63%
4.62%
REV. RUL. 99–8 TABLE 3
Rates Under Section 382 for February 1999
Adjusted federal long-term rate for the current month
4.71%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the
adjusted federal long-term rates for the current month and the prior two months.)
4.71%
REV. RUL. 99–8 TABLE 4
Appropriate Percentages Under Section 42(b)(2) for February 1999
Appropriate percentage for the 70% present value low-income housing credit
8.16%
Appropriate percentage for the 30% present value low-income housing credit
3.50%
REV. RUL. 99–8 TABLE 5
Rate Under Section 7520 for February 1999
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
1999–6 I.R.B
11
5.6%
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Section 1288.—Treatment of
Original Issue Discount on TaxExempt Obligations
The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month
of February 1999. See Rev. Rul. 99–8, page 10.
Section 7520.—Valuation Tables
The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month
of February 1999. See Rev. Rul. 99–8, page 10.
Section 7701.—Definitions
26 CFR 7701–3: Classification of certain business
entities.
Tax consequences when a single member domestic limited liability company that is disregarded as
an entity separate from its owner becomes an entity
with more than one owner that is classified as a partnership. See Rev. Rul. 99–5, page 8.
Tax consequences if one person purchases all of
the ownership interests in a domestic limited liability company that is classified as a partnership. See
Rev. Rul. 99–6, page 6.
Section 7704.—Certain Publicly
Traded Partnerships Treated as
Corporations
26 CFR 1.7704–3: Qualifying income.
T.D. 8799
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
Certain Investment Income
Under the Qualifying Income
Provisions of Section 7704 and
the Application of the Passive
Activity Loss Rules to Publicly
Traded Partnerships
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations relating to the treatment
of certain investment income under the
qualifying income provisions of section
February 8, 1999
7704 and the application of the passive
activity loss rules to publicly traded partnerships. These regulations provide guidance on calculating a publicly traded partnership’s qualifying income under section
7704. The regulations will affect the classification of certain partnerships for federal tax purposes and also will affect the
passive activity loss limitations with respect to items attributable to publicly
traded partnerships.
DATES: Effective Date: These regulations are effective, December 17, 1998.
Applicability Dates: See Effective
Dates under SUPPLEMENTARY INFORMATION of the preamble.
FOR FURTHER INFORMATION CONTACT: Christopher Kelley or Terri Belanger at (202) 622-3080 (not a toll-free
number).
SUPPLEMENTARY INFORMATION:
Background
The final regulations add §1.7704–3 to
the Income Tax Regulations (26 CFR part
1) relating to the definition of qualifying
income for publicly traded partnerships
under section 7704(d) of the Internal Revenue Code (Code). The final regulations
also amend §1.469-10 of the Income Tax
Regulations relating to the application of
section 469 to publicly traded partnerships.
On December 19, 1997, proposed regulations (REG–105163–97, 1998–8 I.R.B.
31) were published in the Federal Register
(62 F.R. 66575). A number of written
comments were received on the proposed
regulations under section 7704(d). Two
speakers provided testimony at a public
hearing held on April 28, 1998. After consideration of all the comments, the proposed regulations under section 7704 are
adopted, as revised by this Treasury decision.
No comments were received on the
proposed regulations under section 469.
The proposed regulations under section
469 are adopted without revision by this
Treasury decision.
Explanation of Revisions and Summary
of Comments
1. Determination of Gross Income for
Purposes of Section 7704(c)(2)
12
a. Capital Losses
Section 7704(d)(1)(F) provides that,
except as otherwise provided, the term
qualifying income includes any gain from
the sale or disposition of a capital asset
(or property described in section
1231(b)) held for the production of income described in section 7704(d). Several commentators requested clarification
as to how capital losses incurred by the
partnership are treated in determining
gross income of the partnership for purposes of section 7704(c)(2). The final
regulations clarify that, in general, all
losses are ignored in the computation of
gross income.
b. Straddles
The proposed regulations requested
comments on the appropriate way to compute the gross income for a partnership
that makes a mixed straddle account election under §1.1092(b)–4T. The final regulations provide that, for purposes of applying the general rule that a capital gain
on an investment is taken into account but
a capital loss is not, certain rules shall
apply that generally net capital gains and
losses recognized in a taxable year with
respect to a straddle. This treatment applies to all straddles, not just mixed straddle accounts, and to other interests in
property that produce a substantial
diminution of the partnership’s risk of
loss similar to that of straddles. In addition, the final regulations contain a wash
sale rule for gains in certain straddle and
straddle-like transactions. This rule provides that, for purposes of section
7704(c)(2), if a partnership recognizes
gain with respect to the disposition of one
or more positions of a straddle or similar
arrangement, and the partnership acquires
a substantially similar position or positions within a period beginning 30 days
before and ending 30 days after the date
of the disposition, then the gain shall not
be taken into account to the extent of the
amount of unrecognized loss (as of the
close of the taxable year) in one or more
offsetting positions of the straddle or similar arrangement.
c. Mark-to-Market
The proposed regulations provide that
qualifying income includes capital gain
from the sale of stock. The final regulations clarify that gain recognized with re-
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spect to a position that is marked to market (for example, under section 475(f),
section 1256, section 1259, or section
1296) will not fail to be qualifying income solely because there is no sale or
disposition.
d. Certain Ordinary Income
Under certain provisions of the Code,
capital gain or loss with respect to certain
transactions is recharacterized as ordinary
income or loss. However, such gain or
loss may be recognized with respect to a
capital asset in a manner that is consistent
with section 7704(d)(1)(F). Accordingly,
the final regulations provide that gain will
not fail to be qualifying income solely because it is characterized as ordinary income under section 475(f), section 988,
section 1258, or section 1296.
2. Income Derived from Securities
Lending Activities
Several commentators requested that
the final regulations clarify that income
from securities lending activities of a
trader is qualifying income. Section
7704(d)(4) provides that qualifying income includes income that qualifies under
section 851(b)(2). Section 851(b)(2),
which includes income from security
loans, does not specifically state that it applies to the business of trading, as opposed
to the business of investing. Thus, commentators have suggested that there is uncertainty under section 7704 as to whether
income from security loans from the business of trading is qualifying income.
The IRS and Treasury Department believe that section 851(b)(2) generally encompasses income from the business of
trading as well as investing. Thus, income from the securities lending activities of a trader will be qualifying income
under section 7704. A special provision
in these final regulations for this income
is not necessary and could create a negative implication as to the qualification of
trading income under section 851(b)(2)
generally. Accordingly, the final regulations do not adopt this comment.
3. Income Derived from Investments in
Foreign Corporations
One commentator requested that the
final regulations clarify that income from
investments in foreign corporations is
qualifying income. Because taxable in-
1999–6 I.R.B
come may arise with respect to an investment in a foreign corporation that may not
literally constitute a dividend, the commentator suggested that it is unclear
whether these investments generate qualifying income under section 7704(d).
Specifically, the commentator requested
clarification regarding whether a U.S.
shareholder would have qualifying income from an inclusion under (1) section
551 (foreign personal holding company
income); (2) section 951(a)(1)(A) or
(B)(subpart F income or a section 956
amount); (3) section 1291 (excess distributions of a passive foreign investment
company (PFIC)); and (4) section 1293
(earnings of a PFIC that is a qualified
electing fund). The commentator requested that the final regulations clarify
that income realized under these tax
regimes with respect to stock ownership
in a foreign corporation is included in the
definition of qualifying income under section 7704(d).
Section 551(b) characterizes amounts
included in gross income under section
551(a) as dividends for federal tax purposes. Thus, an inclusion under section
551 is qualifying income under section
7704(d)(1)(B). No clarification is necessary in the final regulations.
Section 851(b)(2), which is cross-referenced in section 7704(d), provides rules
on the extent to which certain inclusions
of subpart F income under section
951(a)(1)(A)(i) and certain inclusions
under section 1293(a) are treated as dividends and, thus, qualifying income for
purposes of section 851(b)(2). Any expansion of qualifying income with respect
to investments in foreign corporations
should be addressed under section
851(b)(2) and the regulations thereunder.
Accordingly, the final regulations do not
adopt this comment.
4. Limitation on the Definition of
Qualifying Income
The proposed regulations provide that
qualifying income includes capital gain
from the sale of stock, income from holding annuities, income from notional principal contracts, and other substantially
similar income from ordinary and routine
investments to the extent determined by
the Commissioner. Several commentators stated that partnerships must know
that an investment generates qualifying
13
income before entering into the transaction. Because passive-type investments
evolve constantly and rapidly, the commentators suggested that a requirement
that a type of investment generates qualifying income only to the extent determined by the Commissioner creates uncertainty for partnerships considering new
investments. Thus, these commentators
requested that the final regulations not include this restriction in the definition of
qualifying income.
The IRS and Treasury Department do
not believe that the language in the proposed regulations creates significant uncertainty in the definition of qualifying income. Instead, the standard in the
proposed regulations provides necessary
flexibility to consider the effect of new
types of financial investments as such investments evolve. The IRS and Treasury
Department do not believe that it would
be appropriate to create a broader and
more generic rule that would allow taxpayers to determine for themselves
whether new types of investments generate qualifying income. Thus, the final
regulations do not adopt this comment.
5. List of Specific Items Generating
Qualifying Income
Several commentators requested that
the final regulations expand the list of
specific investments that generate qualifying income. The IRS and Treasury Department do not believe that it is appropriate to expand the list of specific
investments enumerated in the proposed
regulations. Therefore, the final regulations do not adopt this comment.
6. Partnership Reporting Requirements
Several commentators indicated that the
current reporting requirements for partnerships do not specifically compel a lowertier partnership to provide the data necessary for an upper-tier partnership to
determine whether it meets the gross income requirement of section 7704(c)(2).
These commentators requested that the
final regulations specifically require a
lower-tier partnership to report in a level of
detail that would permit an upper-tier partnership to make the necessary calculations.
The final regulations do not adopt this
comment. The current reporting requirements for a partnership in §1.6031(b)–
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1T(a)(3)(ii) require a partnership to furnish its partners with statements that include, to the extent provided by form or
the accompanying instructions, any additional information that a partner may need
to apply particular provisions of the Code
with respect to items related to the partnership. The instructions to Form 1065,
“U.S. Partnership Return of Income,”
specifically require a partnership to include on a Schedule K-1 any information
a partner may need to file its return that is
not shown anywhere else on the schedule.
The information that an upper-tier partnership needs to make its gross income
calculations must be provided by the
lower-tier partnership under the current
reporting requirements. An additional reporting requirement in these final regulations is not necessary.
7. Private Placement Safe Harbor under
§1.7704–1(h)(1)(ii)
Several commentators requested that
the final regulations amend the requirements of the private placement safe harbor under §1.7704–1(h)(1) to reflect the
adoption of new rules by the Securities
and Exchange Commission regarding
knowledgeable employees. Specifically,
the commentators requested that the private placement safe harbor be amended to
provide that knowledgeable employees
are not counted for purposes of the 100
partner limitation. This issue is beyond
the scope of these final regulations.
Therefore, the final regulations do not
adopt this comment.
The final regulations provide that these
regulations apply to taxable years of a
partnership beginning on or after, December 17, 1998. However, in response to the
comments, the final regulations also include a provision that allows a partnership
to apply the regulations retroactively.
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 regulations do not impose a collection
of information on small entities, a Regulatory Flexibility Analysis is not required.
Pursuant to section 7805(f) of the Internal
Revenue Code, the notice of proposed
rulemaking preceding these regulations
was submitted to the Chief Counsel for
Advocacy of the Small Business Administration for comment on its impact on
small business.
Drafting Information
The principal authors of these regulations are Christopher Kelley and Terri Belanger, Office of Chief Counsel
(Passthroughs and Special Industries).
However, other personnel from the IRS
and Treasury Department participated in
their development.
* * * * *
8. Effective Dates
Amendments to the Regulations
The proposed regulations provide that
the regulations will be effective for taxable years of a partnership beginning on
or after the date final regulations are published in the Federal Register. Commentators stated that this effective date would
preclude taxpayers from relying upon the
revised definition of qualifying income in
the proposed regulations until the regulations are final. These commentators requested that the effective date of the regulations be changed so that a partnership
may rely upon the revised definition of
qualifying income for taxable years beginning on or after the date the regulations were published as proposed regulations in the Federal Register.
Accordingly, 26 CFR part 1 is amended
as follows:
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *.
Par. 2. Section 1.469–10 is revised to
read as follows:
February 8, 1999
§1.469–10 Application of section 469 to
publicly traded partnerships.
(a) [Reserved].
(b) Publicly traded partnership—(1) In
general. For purposes of section 469(k), a
partnership is a publicly traded partnership
only if the partnership is a publicly traded
partnership as defined in §1.7704–1.
(2) Effective date. This section applies
14
for taxable years of a partnership beginning on or after, December 17, 1998.
Par. 3. Section 1.7704–3 is added to
read as follows:
§1.7704–3 Qualifying income.
(a) Certain investment income—(1) In
general. For purposes of section
7704(d)(1), qualifying income includes
capital gain from the sale of stock, income from holding annuities, income
from notional principal contracts (as defined in §1.446–3), and other substantially similar income from ordinary and
routine investments to the extent determined by the Commissioner. Income
from a notional principal contract is included in qualifying income only if the
property, income, or cash flow that measures the amounts to which the partnership is entitled under the contract would
give rise to qualifying income if held or
received directly by the partnership.
(2) Limitations. Qualifying income described in paragraph (a)(1) of this section
does not include income derived in the ordinary course of a trade or business. For
purposes of the preceding sentence, income derived from an asset with respect
to which the partnership is a broker, market maker, or dealer is income derived in
the ordinary course of a trade or business;
income derived from an asset with respect
to which the taxpayer is a trader or investor is not income derived in the ordinary course of a trade or business.
(b) Calculation of gross income and
qualifying income—(1) Treatment of
losses. Except as otherwise provided in
this section, in computing the gross income and qualifying income of a partnership for purposes of section 7704(c)(2)
and this section, losses do not enter into
the computation.
(2) Certain positions that are marked
to market. Gain recognized with respect
to a position that is marked to market (for
example, under section 475(f), 1256,
1259, or 1296) shall not fail to be qualifying income solely because there is no sale
or disposition of the position.
(3) Certain items of ordinary income.
Gain recognized with respect to a capital
asset shall not fail to be qualifying income
solely because it is characterized as ordinary income under section 475(f), 988,
1258, or 1296.
1999–6 I.R.B.
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Page 15
(4) Straddles. In computing the gross
income and qualifying income of a partnership for purposes of section 7704(c)(2)
and this section, a straddle (as defined in
section 1092(c)) shall be treated as set
forth in this paragraph (b)(4). For purposes of the preceding sentence, two or
more straddles that are part of a larger
straddle shall be treated as a single straddle. The amount of the gain from any
straddle to be taken into account shall be
computed as follows:
(i) Straddles other than mixed straddle
accounts. With respect to each straddle
(whether or not a straddle during the taxable year) other than a mixed straddle account, the amount of gain taken into account shall be the excess, if any, of gain
recognized during the taxable year with
respect to property that was at any time a
position in that straddle over any loss recognized during the taxable year with respect to property that was at any time a
position in that straddle (including loss realized in an earlier taxable year).
(ii) Mixed straddle accounts. With respect to each mixed straddle account (as
defined in §1.1092(b)–4T(b)), the
amount of gain taken into account shall
be the annual account gain for that mixed
straddle account, computed pursuant to
§1.1092(b)–4T(c)(2).
(5) Certain transactions similar to
straddles. In computing the gross income
and qualifying income of a partnership for
purposes of section 7704(c)(2) and this
1999–6 I.R.B
section, related interests in property
(whether or not personal property as defined in section 1092(d)(1)) that produce
a substantial diminution of the partnership’s risk of loss similar to that of a
straddle (as defined in section 1092(c))
shall be combined so that the amount of
gain taken into account by the partnership
in computing its gross income shall be the
excess, if any, of gain recognized during
the taxable year with respect to such interests over any loss recognized during the
taxable year with respect to such interests.
(6) Wash sale rule—(i) Gain not taken
into account. Solely for purposes of section 7704(c)(2) and this section, if a partnership recognizes gain in a section 7704
wash sale transaction with respect to one
or more positions in either a straddle (as
defined in section 1092(c)) or an arrangement described in paragraph (b)(5) of this
section, then the gain shall not be taken
into account to the extent of the amount of
unrecognized loss (as of the close of the
taxable year) in one or more offsetting positions of the straddle or arrangement described in paragraph (b)(5) of this section.
(ii) Section 7704 wash sale transaction.
For purposes of this paragraph (b)(6), a
section 7704 wash sale transaction is a
transaction in which—
(A) A partnership disposes of one or
more positions of a straddle (as defined in
section 1092(c)) or one or more related
positions described in paragraph (b)(5) of
this section; and
15
(B) The partnership acquires a substantially similar position or positions within
a period beginning 30 days before the
date of the disposition and ending 30 days
after such date.
(c) Effective date. This section applies
to taxable years of a partnership beginning on or after, December 17, 1998.
However, a partnership may apply this
section in its entirety for all of the partnership’s open taxable years beginning after
any earlier date selected by the partnership.
Robert E. Wenzel,
Deputy Commissioner of
Internal Revenue.
Approved December 7, 1998.
Donald C. Lubick,
Assistant Secretary of
the Treasury,
(Tax Policy).
(Filed by the Office of the Federal Register on December 16, 1998, 8:45 a.m., and published in the
issue of the Federal Register for December 17, 1998,
63 F.R. 69551)
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 February 1999. See Rev. Rul. 99–8, page 10.
February 8, 1999
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Page 16
Part III. Administrative, Procedural, and Miscellaneous
Low-Income Housing Tax
Credit—1999 Calendar Year
Resident Population Estimates
Bureau of the Census on December 31,
1998, in press release CB98–242. For
convenience, these estimates are reprinted
below.
Notice 99–10
This notice informs (1) state and local
housing credit agencies that allocate lowincome housing tax credits under § 42 of
the Internal Revenue Code and (2) states
and other issuers of tax-exempt private
activity bonds under § 141, of the proper
population figures to be used for calculating the 1999 calendar year populationbased component of the state housing
credit ceiling (Credit Ceiling) under
§ 42(h)(3)(C)(i) and the 1999 calendar
year volume cap (Volume Cap) under
§ 146.
The population figures both for the
population-based component of the Credit
Ceiling and for the Volume Cap are determined by reference to § 146(j). That section provides generally that determinations of population for any calendar year
are made on the basis of the most recent
census estimate of the resident population
of a state (or issuing authority) released
by the Bureau of the Census before the
beginning of such calendar year.
The proper population figures for calculating the Credit Ceiling and the Volume Cap for the 1999 calendar year are
the estimates of the resident population of
states for July 1, 1998, released by the
February 8, 1999
Resident Population Estimates for
July 1, 1998
State
Population
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
D.C.
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
4,351,999
614,010
4,668,631
2,538,303
32,666,550
3,970,971
3,274,069
743,603
523,124
14,915,980
7,642,207
1,193,001
1,228,684
12,045,326
5,899,195
2,862,447
2,629,067
3,936,499
4,368,967
1,244,250
5,134,808
6,147,132
9,817,242
4,725,419
2,752,092
5,438,559
16
Montana
880,453
Nebraska
1,662,719
Nevada
1,746,898
New Hampshire
1,185,048
New Jersey
8,115,011
New Mexico
1,736,931
New York
18,175,301
North Carolina
7,546,493
North Dakota
638,244
Ohio
11,209,493
Oklahoma
3,346,713
Oregon
3,281,974
Pennsylvania
12,001,451
Rhode Island
988,480
South Carolina
3,835,962
South Dakota
738,171
Tennessee
5,430,621
Texas
19,759,614
Utah
2,099,758
Vermont
590,883
Virginia
6,791,345
Washington
5,689,263
West Virginia
1,811,156
Wisconsin
5,223,500
Wyoming
480,907
The principal authors of this notice are
Christopher J. Wilson of the Office of Assistant Chief Counsel (Passthroughs and
Special Industries) and Timothy L. Jones
of the Office of Assistant Chief Counsel
(Financial Institutions and Products). For
further information regarding this notice
contact Mr. Wilson on (202) 622-3040
(not a toll-free call).
1999–6 I.R.B.
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Page 17
Part IV. Items of General Interest
Notice of Proposed Rulemaking
and Notice of Public Hearing
Marital Deduction; Valuation of
Interest Passing to Surviving
Spouse
REG–114663–97
AGENCY: Internal Revenue Service
(IRS), Treasury.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Deborah Ryan (202) 622-3090;
concerning submissions of comments, the
hearing, and/or to be placed on the building access list to attend the hearing,
LaNita Van Dyke (202) 622-7190 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
ACTION: Notice of proposed rulemaking and notice of public hearing.
SUMMARY: This document contains
proposed regulations relating to the effect
of certain administration expenses on the
valuation of property which qualifies for
the estate tax marital or charitable deduction. The proposed regulations define estate transmission expenses and estate
management expenses and provide that
estate transmission expenses, but not estate management expenses, reduce the
value of property for marital and charitable deduction purposes. This document
also provides notice of a public hearing
on these proposed regulations.
DATES: Written comments must be received by February 16, 1999. Outlines of
topics to be discussed at the public hearing scheduled for April 21, 1999, at 10
a.m., must be received by March 31,
1999.
ADDRESSES: Send submissions to
CC:DOM:CORP:R (REG–114663–97),
room 5226, Internal Revenue Service,
POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be
hand delivered Monday through Friday
between the hours of 8 a.m. and 5 p.m. to:
CC:DOM:CORP:R (REG–114663–97),
Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW,
Washington, DC. Alternatively, taxpayers may submit comments electronically
via the Internet by selecting the “Tax
Regs” option on the IRS Home Page, or
by submitting comments directly to the
IRS Internet site at http://www.irs.ustreas.
gov/prod/tax_regs/comments.html. The
public hearing will be held in Room 2615,
Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC.
1999–6 I.R.B
On March 18, 1997, the Supreme Court
of the United States issued its decision in
Commissioner v. Estate of Hubert, 520
U.S. 93 (1997) (1997–32 I.R.B. 8), in
which it considered the proper interpretation of §20.2056(b)–4(a) of the Estate Tax
Regulations. On November 24, 1997, the
IRS issued Notice 97–63 (1997–47 I.R.B.
6), requesting comments on alternatives
for amending §20.2056(b)–4(a) in light of
the Supreme Court’s Estate of Hubert
decision.
Section 2056(b)(4) provides that, in determining the value of an interest in property which passes from the decedent to
the surviving spouse for purposes of the
marital deduction, account must be taken
of any encumbrance on the property or
any obligation imposed on the surviving
spouse by the decedent with respect to the
property. Section 20.2056(b)–4(a) of the
Estate Tax Regulations amplifies this rule
by providing that account must be taken
of the effect of any material limitations on
the surviving spouse’s right to the income
from the property. The regulation provides, for example, that there may be a
material limitation on the surviving
spouse’s right to the income from marital
trust property where the income is used to
pay administration expenses during the
period between the date of the decedent’s
death and the date of distribution of the
assets to the trustee.
The facts in Estate of Hubert are similar to a common fact pattern wherein the
decedent’s will provides for a residuary
bequest to a marital trust which qualifies
for the marital deduction and also provides that estate administration expenses
are to be paid from the residuary estate.
Further, the will (or state law) permits the
executor to use the income generated by
the residuary estate (otherwise payable to
17
the marital trust) to pay administration expenses, and the executor does so. The
issue before the Supreme Court in Estate
of Hubert was whether the executor’s use
of the income to pay estate administration
expenses was a material limitation on the
surviving spouse’s right to the income
which would reduce the marital deduction
under §20.2056(b)–4(a).
The issue in Estate of Hubert also involved the estate tax charitable deduction,
and the proposed regulations relate to the
valuation of property for both marital and
charitable deduction purposes. However,
for simplicity and clarity, this discussion
focuses on the provisions of the estate tax
marital deduction.
In Estate of Hubert, the Commissioner
argued that the payment of administration
expenses from income is, per se, a material limitation on the surviving spouse’s
right to income for purposes of
§20.2056(b)–4(a), and, therefore, the
value of the marital bequest should be reduced dollar for dollar by the amount of
income used to pay administration expenses. The Court agreed that the value
of the marital bequest should be reduced
if the use of income to pay administration
expenses is a material limitation on the
spouse’s right to income. The Court
found, however, that the regulation does
not define material limitation and that the
Commissioner had not argued that the use
of income in this case was a material limitation. Thus, the Court held for the taxpayer.
In Notice 97–63 (November 24, 1997),
the IRS requested comments on possible
approaches for proposed regulations in
light of the Estate of Hubert decision.
Notice 97–63 suggested three alternative
approaches for determining when the use
of income to pay administration expenses
constitutes a material limitation on the
surviving spouse’s right to income. One
approach distinguished between administration expenses that are properly charged
to principal and those that are properly
charged to income and provided that there
is a material limitation on the surviving
spouse’s right to income if income is used
to pay an estate administration expense
that is properly charged to principal. A
second approach provided a de minimis
safe harbor amount of income that may be
February 8, 1999
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Page 18
used to pay administration expenses without constituting a material limitation on
the surviving’s spouse’s right to income.
A third approach provided that any charge
to income for the payment of administration expenses constitutes a material limitation on the spouse’s right to income.
Notice 97–63 also asked for comments
on whether the test for materiality should
be based on a comparison of the relative
amounts of the income and the expenses
charged to the income; whether materiality should be based on projections as of
the date of death rather than on the facts
that develop afterwards; and whether present value principles should be applied.
In response to Notice 97–63, several
commentators suggested that local law
should be determinative of whether an expense is a proper charge to income or
principal. If the testamentary document
directs the executor to charge expenses to
income, and the charge is allowed under
applicable local law, then the charge to income should not be treated as a material
limitation on the spouse’s right to income.
This approach was not adopted because
statutory provisions relating to income
and principal may vary from state to state,
and this would result in disparate treatment of estates that are similarly situated
but governed by different state law.
Moreover, in states that have adopted
some form of the Uniform Principal and
Income Act, the definitions of principal
and income, and the allocation of expenses thereto, can be specified in the will
or trust instrument and given the effect of
state law. Thus, simply following state
law was thought to be too malleable to
protect the policies underlying the marital
and charitable deductions.
Several commentators agreed with the
de minimis safe harbor approach whereby
a certain amount of income could be used
to pay administration expenses without
materially limiting the surviving spouse’s
right to the income. Under this approach,
the safe harbor amount is determined in
two steps: first, the present value of the
surviving spouse’s income interest for life
is determined using actuarial principles
and, second, the resulting amount is multiplied by a percentage, for example, 5
percent.
The proposed regulations do not adopt
this approach. Although a de minimis
safe harbor approach would provide a
February 8, 1999
bright line test for determining materiality
in the context of the marital deduction, it
is unclear how this approach would apply
for charitable deduction purposes because
there is no measuring life for valuing the
income interest.
One commentator suggested that, consistent with the plurality opinion in Estate
of Hubert, the test for materiality should be
quantitative, based upon a comparison between the amount of income charged with
administration expenses and the total income earned during administration. The
commentator, however, considered the requirement that projected income and expenses be presently valued to be impractical, complex, and uncertain. Another
commentator considered a quantitative test
to be impractical. A third commentator
suggested that a quantitative test would require a factual determination in each case
and, as a result, the period of estate administration would be greatly prolonged.
Because these tests for materiality appear to be complex and difficult to administer, the proposed regulations adopt neither a quantitative test nor a test based on
present values of projected income and
expenses.
Many commentators opposed an approach in which every charge to income is
a material limitation on the spouse’s right
to income. Two commentators contended
that adoption of this approach would effectively overrule the result in Estate of
Hubert.
One commentator suggested the approach adopted in the proposed regulations, a description of which follows, and
two commentators suggested similar approaches.
Explanation of Provisions
After carefully considering the comments, the Treasury and the Internal Revenue Service have determined that a test
based on what constitutes a material limitation would prove too complex and
would be administratively burdensome.
For this reason, the proposed regulations
eliminate the concept of materiality and,
instead, establish rules providing that
only administration expenses of a certain
character which are charged to the marital
property will reduce the value of the property for marital deduction purposes. It is
anticipated that these rules will have uni-
18
form application to all estates, will be
simple to administer, and will reflect the
economic realities of estate administration. These same rules will also apply for
purposes of the estate tax charitable deduction.
Under the proposed regulations, a reduction is made to the date of death value
of the property interest which passes from
the decedent to the surviving spouse (or to
a charitable organization described in section 2055) for the dollar amount of any
estate transmission expenses incurred
during the administration of the decedent’s estate and charged to the property
interest. Such a reduction is proper because these expenses would not have been
incurred but for the decedent’s death. No
reduction is made for estate management
expenses incurred with respect to the
property and charged to the property because these expenses would have been incurred even if the death had not occurred.
However, a reduction is made for estate
management expenses charged to the
marital property interest passing to the
surviving spouse if the expenses were incurred in connection with property passing to someone other than the surviving
spouse and a person other than the surviving spouse is entitled to the income from
that property. Estate transmission expenses are all estate administration expenses that are not estate management expenses and include expenses incurred in
collecting estate assets, paying debts, estate and inheritance taxes, and distributing the decedent’s property. Estate management expenses are expenses incurred
in connection with the investment of the
estate assets and with their preservation
and maintenance during the period of administration.
Proposed Effective Date
These regulations are proposed to be
effective for estates of decedents dying on
or after the date the regulations are published in the Federal Register as final
regulations.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also
1999–6 I.R.B.
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Page 19
has been determined that section 553(b)
of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these
regulations, and, because the regulations
do not impose a collection of information
on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the
Internal Revenue Code, this notice of proposed rulemaking will be submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration will be given to any written comments (a signed original and eight (8)
copies) that are submitted timely to the
IRS. All comments will be available for
public inspection and copying.
A public hearing has been scheduled for
April 21, 1999, beginning at 10 a.m. in
Room 2615 of the Internal Revenue
Building, 1111 Constitution Avenue, NW,
Washington, DC. Due to building security
procedures, visitors must enter at the 10th
Street entrance, located between Constitution and Pennsylvania Avenues, NW. In
addition, all visitors must present photo
identification to enter the building. Because of access restrictions, visitors will
not be admitted beyond the immediate entrance area more than 15 minutes before
the hearing starts. For information about
having your name placed on the building
access list to attend the hearing, see the
“FOR FURTHER INFORMATION CONTACT” section of this preamble.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing. Persons who wish to
present oral comments at the hearing must
submit written comments and an outline
of the topics to be discussed and the time
to be devoted to each topic (signed original and eight (8) copies) by March 31,
1999. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after
the deadline for receiving outlines has
passed. Copies of the agenda will be
available free of charge at the hearing.
Drafting Information
The principal author of these proposed
regulations is Deborah Ryan, Office of
1999–6 I.R.B
the Assistant Chief Counsel (Passthroughs and Special Industries). However, other personnel from the IRS and
Treasury Department participated in their
development.
* * * * *
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 20 is proposed to be amended as follows:
PART 20—ESTATE TAX; ESTATES OF
DECEDENTS DYING AFTER
AUGUST 16, 1954
Paragraph 1. The authority citation for
part 20 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. In §20.2055–1, paragraph (d)(6)
is added to read as follows:
§20.2055–1 Deduction for transfers for
public, charitable, and religious uses; in
general.
* * * * *
(d) * * *
(6) For the effect of certain administration expenses on the valuation of transfers
for charitable deduction purposes, see
§20.2056(b)–4(e). The rules provided in
that section apply for purposes of both the
marital and charitable deductions. This
paragraph (d)(6) is effective for estates of
decedents dying on or after the date these
regulations are published in the Federal
Register as final regulations.
Par. 3. Section 20.2056(b)-4 is
amended by:
1. Removing the last two sentences of
paragraph (a).
2. Adding paragraph (e).
The addition reads as follows:
§20.2056(b)–4 Marital deduction;
valuation of interest passing to surviving
spouse.
* * * * *
(e) Effect of certain administration expenses—(1) Estate transmission expenses. For purposes of determining the
marital deduction, the value of any deductible property interest which passed
from the decedent to the surviving spouse
shall be reduced by the amount of estate
transmission expenses incurred during the
19
administration of the decedent’s estate
and paid from the principal of the property interest or the income produced by
the property interest. For purposes of this
subsection, the term estate transmission
expenses means all estate administration
expenses that are not estate management
expenses (as defined in paragraph (e)(2)
of this section). Estate transmission expenses include expenses incurred in the
collection of the decedent’s assets, the
payment of the decedent’s debts and death
taxes, and the distribution of the decedent’s property to those who are entitled
to receive it. Examples of these expenses
include executor commissions and attorney fees (except to the extent specifically
related to investment, preservation, and
maintenance of the assets), probate fees,
expenses incurred in construction proceedings and defending against will contests, and appraisal fees.
(2) Estate management expenses—(i)
In general. For purposes of determining
the marital deduction, the value of any deductible property interest which passed
from the decedent to the surviving spouse
shall not be reduced by the amount of estate management expenses incurred in
connection with the property interest during the administration of the decedent’s
estate and paid from the principal of the
property interest or the income produced
by the property interest. For marital deduction purposes, the value of any deductible property interest which passed
from the decedent to the surviving spouse
shall be reduced by the amount of any estate management expenses incurred in
connection with property that passed to a
beneficiary other than the surviving
spouse if a beneficiary other than the surviving spouse is entitled to the income
from the property and the expenses are
charged to the deductible property interest
which passed to the surviving spouse.
For purposes of this subsection, the term
estate management expenses means expenses incurred in connection with the investment of the estate assets and with
their preservation and maintenance during
the period of administration. Examples of
these expenses include investment advisory fees, stock brokerage commissions,
custodial fees, and interest.
(ii) Special rule where estate management expenses are deducted on the federal estate tax return. For purposes of de-
February 8, 1999
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Page 20
termining the marital deduction, the value
of the deductible property interest which
passed from the decedent to the surviving
spouse is not increased as a result of the
decrease in the federal estate tax liability
attributable to any estate management expenses that are deducted as expenses of
administration under section 2053 on the
federal estate tax return.
(3) Examples. The following examples
illustrate the application of this paragraph
(e). In each example, the decedent, who
dies after 2006, makes a bequest of shares
of ABC Corporation stock to the decedent’s child. The bequest provides that
the child is to receive the income from the
shares from the date of the decedent’s
death. The value of the bequeathed
shares, on the decedent’s date of death, is
$3,000,000. The residue of the estate is
bequeathed to a trust which satisfies the
requirements of section 2056(b)(7) as
qualified terminable interest property.
The value of the residue, on the decedent’s date of death, before the payment
of administration expenses and estate
taxes, is $6,000,000. Under applicable
local law, the executor has the discretion
to pay administration expenses from the
income or principal of the residuary estate. All estate taxes are to be paid from
the residue. The state estate tax equals
the state tax credit available under section
2011. The examples are as follows:
Example 1. During the period of administration,
the estate incurs estate transmission expenses of
$400,000, which the executor charges to the residue.
For purposes of determining the marital deduction,
the value of the residue is reduced by the federal and
state estate taxes and by the estate transmission expenses. If the transmission expenses are deducted
on the federal estate tax return, the marital deduction
is $3,500,000 ($6,000,000 minus $400,000 transmission expenses and minus $2,100,000 federal and
state estate taxes). If the transmission expenses are
deducted on the estate’s income tax return rather
than on the estate tax return, the marital deduction is
$3,011,111 ($6,000,000 minus $400,000 transmission expenses and minus $2,588,889 federal and
state estate taxes).
Example 2. During the period of administration,
the estate incurs estate management expenses of
$400,000 in connection with the residue property
passing for the benefit of the spouse. The executor
charges these management expenses to the residue.
For purposes of determining the marital deduction,
the value of the residue is reduced by the federal and
state estate taxes but is not reduced by the estate
management expenses. If the management expenses
are deducted on the estate’s income tax return, the
marital deduction is $3,900,000 ($6,000,000 minus
$2,100,000 federal and state estate taxes). If the
February 8, 1999
management expenses are deducted on the estate tax
return rather than on the estate’s income tax return,
the marital deduction remains $3,900,000, even
though the federal and state estate taxes now total
only $1,880,000. The marital deduction is not increased by the reduction in estate taxes attributable
to deducting the management expenses on the federal estate tax return.
Example 3. During the period of administration,
the estate incurs estate management expenses of
$400,000 in connection with the bequest of ABC
Corporation stock to the decedent’s child. The executor charges these management expenses to the
residue. For purposes of determining the marital deduction, the value of the residue is reduced by the
federal and state estate taxes and by the management
expenses. The management expenses reduce the
value of the residue because they are charged to the
property passing to the spouse even though they were
incurred with respect to stock passing to the child
and the spouse is not entitled to the income from the
stock during the period of estate administration. If
the management expenses are deducted on the estate’s income tax return, the marital deduction is
$3,011,111 ($6,000,000 minus $400,000 management expenses and minus $2,588,889 federal and
state estate taxes). If the management expenses are
deducted on the estate tax return rather than on the
estate’s income tax return, the marital deduction remains $3,011,111, even though the federal and state
estate taxes now total only $2,368,889. The marital
deduction is not increased by the reduction in estate
taxes attributable to deducting the management expenses on the federal estate tax return.
(4) Effective date. This paragraph (e) is
effective on the date these regulations are
published in the Federal Register as final
regulations.
Robert E. Wenzel,
Deputy Commissioner of
Internal Revenue.
(Filed by the Office of the Federal Register on December 15, 1998, 8:45 a.m., and published in the
issue of the Federal Register for December 16, 1998
63 F.R. 69248)
Foundations Status of Certain
Organizations
Announcement 99–13
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 organiza-
20
tions 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:
Community Housing Corporation of
Arkansas Inc., Little Rock, AR
Community Learning Information
Network of Arizona Inc., Phoenix,
AZ
Community Learning Services Inc.,
East Point, GA
Community Legal Service Corporation,
Ponchatoula, LA
Community Partnership of Santa Clara
County, San Jose, CA
Community Peace, Las Vegas, NV
Community Services Institute of Virginia,
Richmond, VA
Community Shares of Idaho Inc., Boise,
ID
Community Works Inc., Atlanta, GA
Compass Players Inc., Valrico, FL
Compassion Community Living Home
Inc., New Orleans, LA
Comprehensive AIDS Resource and
Educational Services Inc., Delray
Beach, FL
Compulsive Gambling Therapy Center
Inc., Worcester, MA
Computer and Multimedia Education
Corporation, Williamsburg, VA
Computer Education Management
Association, American Fork, UT
Concerned About You Committee Inc.,
Denver, CO
Concerned African American Men
Women, Chicago, IL
Concerned Black Men of New York City
Incorporated, New York, NY
Concerned Christians for America,
Catharpin, VA
Concerned Citizens for Public Education,
Gastonia, NC
Concord Village Resident Management
Corporation, Indianapolis, IN
Concordia Neighborhood Association,
Portland, OR
Congregations United for Community
Action Inc., St. Petersburg, FL
Connecticut Sober Sports League Inc.,
Waterbury, CT
Conservatory of Performing Arts Inc.,
Boynton Beach, FL
1999–6 I.R.B.
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Page 21
Consumer Council a Non-Profit Social
Service Corporation, Scottsdale, AZ
Consumer Credit Counseling Service of
Mid Missouri, Colombia, MO
Consumer Financial Education
Foundation, Buffalo Grove, IL
Contemporary Home Health Services a
New Jersey Nonprofit Corporation,
Woodbury, NJ
Conway P C User Group Inc., Conway,
AR
Coon Rapids Lions Foundation, Coon
Rapids, MN
Cooperative Planning Coalition,
Kalispell, MT
Coordinating Committee in Support of
the All Amhara Peoples, Boston, MA
Cops Cons and Kids Inc., Newark, NJ
Cops for Christ Mohoning Valley Ohio,
Youngstown, OH
Corey Lewis Foundation Inc., Boca
Raton, FL
Cornerstone Childrens Home Inc.,
Nederland, TX
Cornerstone Development Center Inc.,
Birmingham, AL
Cornerstone Prison Ministries Inc.,
Garland, TX
Cornerstone Steppington Inc., Columbia,
MD
Cornerstone Windridge Inc., Columbia,
MD
Corporation for Public Education in
American Popular Music, Bethesda,
MD
Corpus Christi Wheelchair Tennis Club,
Corpus Christi, TX
Cotter-Lane Active Parent Support Group
Inc., Louisville, KY
Cottondale Dixie Youth Baseball
Incorporated, Cottondale, AL
Counsel for Property Rights Foundation
Inc., Washington, DC
Council for Rural Health Clinic
Resources and Education, Cuero, TX
Council of Baptist Pastors Community
Development Corporation, Detroit, MI
Council of United Jewish Orthodox
Organization of Rockland County NY,
Monsey, NY
Court Appointed Special Advocates of
Hill County Inc., Hillsboro, TX
Courthouse Restoration 3-28-93 Inc.,
Hillsboro, TX
Courtland Historical Foundation,
Courtland, AL
CPAA Concerned Parents for AcademicsAthletics, Waddell, AZ
1999–6 I.R.B
Crater AIDS Action Program, Petersburg,
VA
Created Families Inc., Denver, CO
Creative Educational Concepts, Denver,
CO
Creative Maintenance Emergency Shelter
& Affordable Housing, Long Beach,
CA
Creative Outreach Inc., Conroe, TX
Creative Youth Incorporated, Atlanta, GA
Creek County Civil Emergency
Management Volunteers, Sapulpa, OK
Creekside Community Development
Corporation, Detroit, MI
Crestwood Education Foundation,
Mantua, OH
Creswell Athletic Association Inc.,
Creswell, NC
Crime Control Education Foundation,
Palm Springs, CA
Crises Press Inc., Gainesville, FL
Crisis Pregnancy Center Inc., Springfield,
MA
Cross Management Properties,
Columbus, OH
Crosscreek Apartments Inc., Whitfield,
MS
Crosslinks Ministries, Strongsville, OH
Crossroads Pregnancy Resource Center
of Gunnison Valley a Nonpro,
Gunnison, CO
Crosswalk Ministries Inc., Ocala, FL
Cubbs Citizens United for a Better Balch
Springs, Balch Springs, TX
Culinary Arts Plus, Plano, TX
Cultural Alliance Through Art Inc.,
Montvale, NJ
Cultural Diversity Educational
Association, Detroit, MI
Cultural Initiatives Inc., Eagan, MN
Culture Awareness Inc., Philadelphia, PA
Culture Kids Project Inc., Adelphi, MD
Culture Without Borders Inc., New York,
NY
Cumberland Plateau Services Inc.,
Sewanee, TN
Cuney Homes Management Corporation,
Houston, TX
Cy-Fair Preservation Society
Incorporated, Houston, TX
Czech American Summer Music Institute
Inc., Tallahassee, FL
M & M Community Development Inc.,
Columbus, OH
M C Escher Museum Foundation, Santa
Cruz, CA
M C H Inc., Naperville, IL
M O S A I C, Roseville, MI
21
M Power Inc., Minneapolis, MN
Maaleh Adumim Foundation Inc., New
York, NY
MacArthur Blue Guard Alumni
Association, San Antonio, TX
Macon County Education Support
System Inc., Tuskegee, AL
Madison Community Free Clinic Inc.,
Marshall, NC
Madison Avenue Development
Corporation, Baltimore, MD
M & M Ministries, Presque Isle, ME
Madison Lions Foundation Inc.,
Madison, CT
Magdalena School Parent Group,
Magdalena, NM
Magellan Theatre, Chicago, IL
Magellan University, Tucson, AZ
Magnolia Heritage Charities Inc., Green
Cove Springs, FL
Mahogany House for Young Women Inc.,
Phoenix, AZ
Main Street Business Resource &
Development Inc., Hartford, CT
Main Street Gym Inc., Salisbury, MD
Main Street Kids Inc., Canton, KS
Maine Studies Foundation Inc., Standish,
ME
Mainstreet Seymour Indiana Inc.,
Seymour, IN
Makah Resident Initiatives Program,
Neah Bay, WA
Make a Dent Foundation Inc., Chicago,
IL
Make It Home, Houston, TX
Making a Better Tomorrow Inc., Wichita,
KS
Making a Difference Ministries, Temple,
TX
Making Good Foundation Inc., Marietta,
GA
Making Life Easier Inc., Tigard, OR
Malemte Football Booster Club,
Fairbanks, AK
Maloney-Wilding Foundation for
Children & Teens, Escondido, CA
Management Research Foundation Inc.,
Boca Raton, FL
Manahata Pan American Indian Arts
Council Inc., New York, NY
Manatee Catholic School Foundation,
Bradenton, FL
Manchester High School Alumni
Association, Manchester, CT
Manchester Summerstage Incorporated,
Manchester, MA
Manitowoc County Ice Center Inc.,
Manitowoc, WI
February 8, 1999
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Page 22
Manjiro Society for International
Exchange Inc., McLean, VA
Many Are Called-Few Are Chosen
Ministries Inc MAC-FAC
MINISTRIES, Houston, TX
Maple Valley Child Care Center,
Vermontville, MI
Marguerite Rawalt Legal Defense Fund,
Washington, DC
Maricopa Foundation for Affordable
Housing, Phoenix, AZ
Mark Evans Production Group Inc.,
Winooski, VT
Mark Fuqua Ministries Inc., Fort Worth,
TX
Marketplace Ministry, Grand Rapids, MI
Marmet Soccer Association Inc.,
Charleston, WV
Marrero Community Development
Corporation, Marrero, LA
Mars Hill Ministries Inc., Miami Beach,
FL
Martin de Porres Foundation, Aurora, IL
Martin Luther King Drive Resident
Organization, Chicago, IL
Martin Luther Memorial Homes
Foundation, Holt, MI
Martin Youth Foundation, Joliet, IL
Martinsville-Henry County Music
Association Inc., Martinsville, VA
Mary I Minor Scholarship Fund,
Washington, DC
Maryiann Sitton Ministries Inc.,
Hamilton, MT
Marys Love Kingdom Inc., Philadelphia,
PA
Mason County Little League Football
Inc., Maysville, KY
Massachusetts Guongdong Committee
Inc., Boston, MA
Massachusetts Save James Bay
Foundation Inc., Boston, MA
Masters Review Inc., New York, NY
Masters Touch, Vacaville, CA
Mattoon Youth Sports League Inc.,
Mattoon, IL
Maude Ellen Coats Armstrong MECA
Foundation, Norfolk, VA
Mayors Youth Center Inc., Granite City,
IL
Maysville Better Community Action Org
Inc., Maysville, NC
MB Educational Programs Inc.,
Chippewa Falls, WI
February 8, 1999
McBride Volunteer Fire Department
Ladies Auxiliary, Kingston, OK
McConnells Mill Preservation
Association, Portersville, PA
McCook Legion Baseball Boosters Inc.,
McCook, NE
McCoy Center for the Arts Inc.,
Birmingham, AL
McDonalds Avail, Poway, CA
McDowell County Animal Aid Inc.,
Marion, NC
McHenry County Gang Drug Task Force,
Woodstock, IL
McMillan Ministries, Homerville, GA
NcNair Group Home Inc., Modesto, CA
McRae Berry Youth Camp Inc.,
Hampton, AR
Meacham Park Resident Council,
St. Louis, MO
Medassist International, Buffalo, NY
Media Partnership for Jobs, Detroit, MI
Medica International Inc., McKinney, TX
Medical Airlift Volunteers Inc., Clayton,
MO
Medjugorje Appeal Inc., Cranston, RI
Melissa Segars Foundation, Fayetteville,
GA
Melody Music Education Listening and
Outreach for District Youth,
Washington, DC
Men Against Creating Hostilities and
Appression Macho, Denver, CO
Men of Action Inc., Washington, DC
Mens Council of Austin, Austin, TX
Mens Grief Support Group, Salt Lake
City, UT
Mental Health Association in Putnam
County II Inc., Brewster, NY
Mental Health Association of Clayton
County, Morrow, GA
Mercy & Truth Prison Ministry Inc.,
Carbon Hill, AL
Mercy International America Inc., New
York, NY
Meridzo Center, Franklin, OH
Merriday Center for Inclusion in the
Classroom Inc., Orlando, FL
Merry Thought Foundation Inc.,
Annapolis, MD
Messengers of Mary Inc., Lexington, KY
Metro Atlanta Stroke Council, Atlanta,
GA
Metro Magazine on WNYE-TV Inc.,
Long Island City, NY
22
Metropolitan Contributions for Life Inc.,
Houston, TX
Mexican American Community
Development Organization, Dallas, TX
Mexican Cultural Center of Northern
California, Rancho Cordova, CA
Meyir America Inc., Wall, NJ
Miami Valley Housing Association I Inc.,
Dayton, OH
Miami Valley Tree Source Inc.,
Miamisburg, OH
Micheaux Foundation, Washington, DC
Michigan Hemingway Society, Petoskey,
MI
Mid-America Cancer Rehabilitation
Organization Inc., Evansville, IN
Mid-Atlantic Youth Sports and
Educational Expo Inc., East Orange,
NJ
Mid-Coast Compeer Inc., Rockland, ME
Mid-County Teachers Credit Union
Scholarship Foundation Inc., Port
Neches, TX
Mid-Houston Valley Chapter of the Spina
Bifida Assoc. of America Inc.,
Newburgh, NY
Mid-Ohio Resource Center Inc., Grove
City, OH
Mid-South Mens Council Inc., Memphis,
TN
Middle Path Foundation Inc., New York,
NY
Middle Tennessee Grand Championship
Inc., Nashville, TN
Midnight Basketball of Northeast Ohio,
Canton, OH
Midway Club of Kansas, Great Bend, KS
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.
1999–6 I.R.B.
IRB 1999-6
2/3/99 1:40 PM
Page 23
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. Proc..—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.
1999–6 I.R.B
23
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Page 24
Numerical Finding List1
Bulletins 1999–1 through 1999–5
Announcements:
99–1, 1999–2 I.R.B. 41
99–2, 1999–2 I.R.B. 44
99–3, 1999–3 I.R.B. 15
99–4, 1999–3 I.R.B. 15
99–5, 1999–3 I.R.B. 16
99–6, 1999–4 I.R.B. 24
99–7, 1999–2 I.R.B. 45
99–8, 1999–4 I.R.B. 24
99–9, 1999–4 I.R.B. 24
99–10, 1999–5 I.R.B. 63
99–11, 1999–5 I.R.B. 64
99–12, 1999–5 I.R.B. 65
Notices:
99–1, 1999–2 I.R.B. 8
99–2, 1999–2 I.R.B. 8
99–3, 1999–2 I.R.B. 10
99–4, 1999–3 I.R.B. 9
99–5, 1999–3 I.R.B. 10
99–6, 1999–3 I.R.B. 12
99–7, 1999–4 I.R.B. 23
99–8, 1999–5 I.R.B. 26
99–9, 1999–4 I.R.B. 23
Revenue Procedures:
99–1, 1999–1 I.R.B. 6
99–2, 1999–1 I.R.B. 73
99–3, 1999–1 I.R.B. 103
99–4, 1999–1 I.R.B. 115
99–5, 1999–1 I.R.B. 158
99–6, 1999–1 I.R.B. 187
99–7, 1999–1 I.R.B. 226
99–8, 1999–1 I.R.B. 229
99–9, 1999–2 I.R.B. 17
99–10, 1999–2 I.R.B. 11
99–11, 1999–2 I.R.B. 14
99–12, 1999–3 I.R.B. 13
99–13, 1999–5 I.R.B. 52
99–14, 1999–5 I.R.B. 56
Revenue Rulings:
99–1, 1999–2 I.R.B. 4
99–2, 1999–2 I.R.B. 5
99–3, 1999–3 I.R.B. 4
99–4, 1999–4 I.R.B. 19
99–7, 1999–5 I.R.B. 4
Treasury Decisions:
8789, 1999–3 I.R.B. 5
8791, 1999–5 I.R.B. 7
8796, 1999–4 I.R.B. 16
8797, 1999–5 I.R.B. 5
8800, 1999–4 I.R.B. 20
8801, 1999–4 I.R.B. 5
8802, 1999–4 I.R.B. 10
8805, 1999–5 I.R.B. 14
1 A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 1998–1 through 1998–52
will be found in Internal Revenue Bulletin 1999–1,
dated January 4, 1999.
February 8, 1999
24
1999–6 I.R.B.
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Page 25
Finding List of Current Action on
Previously Published Items1
Bulletins 1999–1 through 1999–5
Revenue Procedures:
78–10
Obsoleted by
99–12, 1999–3 I.R.B. 13
94–56
Superseded by
99–9, 1999–2 I.R.B. 17
97–23
Superseded by
99–3, 1999–1 I.R.B. 103
98–1
Superseded by
99–1, 1999–1 I.R.B. 6
98–2
Superseded by
99–2, 1999–1 I.R.B. 73
98–3
Superseded by
99–3, 1999–1 I.R.B. 103
98–4
Superseded by
99–4, 1999–1 I.R.B. 115
98–5
Superseded by
99–5, 1999–1 I.R.B. 158
98–6
Superseded by
99–6, 1999–1 I.R.B. 187
98–7
Superseded by
99–7, 1999–1 I.R.B. 226
98–8
Superseded by
99–8, 1999–1 I.R.B. 229
98–22
Modified and amplified by
99–13, 1999–5 I.R.B. 52
98–56
Superseded by
99–3, 1999–1 I.R.B. 103
98–63
Modified by announcement
99–7, 1999–2 I.R.B. 45
1 A cumulative finding list for previously published
items mentioned in Internal Revenue Bulletins
1998–1 through 1998–52 will be found in Internal
Revenue Bulletin 1999–1, dated January 4, 1999.
1999–6 I.R.B
25
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Page 26
NOTES
February 8, 1999
26
1999–6 I.R.B.
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Page 27
IRB 1999-6
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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.
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The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are
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and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the
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detach entire page, and mail to the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. Please
allow two to six weeks, plus mailing time, for delivery.
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