Bulletin No. 1997–45

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Internal Revenue

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Bulletin No. 1997–45

November 10, 1997

HIGHLIGHTS

OF THIS ISSUE

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

INCOME TAX

Rev. Rul. 97–44, page 5.

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 November 1997.

Rev. Proc. 97–51, page 9.

Section 911(d)(4) waiver. Guidance is provided to individuals who fail to meet the eligibility requirements of section

911(d)(1) of the Code because adverse conditions in a foreign

country preclude the individual from meeting those requirements. A current list of countries and the dates those countries are subject to the section 911(d)(4) waiver is provided.

EMPLOYEE PLANS

Notice 97–58, page 7.

Retirement plans; 1998 cost-of-living adjustments.

Cost-of-living adjustments, effective January 1, 1998, applicable to the dollar limits on benefits under qualified defined

benefit pension plans and to other provisions affecting certain plans of deferred compensation, are set forth.

EXEMPT ORGANIZATIONS

Announcement 97–110, page 14.

A list is provided of organizations that no longer qualify as

organizations to which contributions are deductible under

section 170 of the Code.

ADMINISTRATIVE

Rev. Proc. 97–50, page 8.

Year 2000 costs; computer software. Guidelines are provided for the examination of federal income tax returns involving the costs paid or incurred by a taxpayer in its trade

or business to convert or replace computer software to recognize dates beginning in the year 2000.

Notice 97–59, page 7.

Capital gains and losses; rates. Taxpayers are informed

of rules for netting capital gains and losses under recently

amended section 1(h) of the Code (which provides new capital gains tax rates) and how Code section 1(h) coordinates

with other provisions of the Code.

Announcement 97–106, page 11.

As a result of the Taxpayer Relief Act of 1997, changes to

reporting requirements for 1997 Forms 1099–S and

1099–LTC are provided.

Announcement 97–109, page 12.

As a result of the Taxpayer Relief Act of 1997, changes for

certain 1996 and 1997 forms are provided to reflect

changes in the capital gains tax rates.

Finding Lists begin on page 19.

Announcement of Disbarments and Suspensions begins on page 15.

Announcement of Declaratory Judgement Proceedings Under Section 7428 begins on page 14.

Department of the Treasury

Internal Revenue Service

Mission of the Service

ucts and services; and perform in a manner warranting

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

The purpose of the Internal Revenue Service is to collect

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

the public by continually improving the quality of our prod-

Statement of Principles

of Internal Revenue

Tax Administration

The Service also has the responsibility of applying and

administering the law in a reasonable, practical manner.

Issues should only be raised by examining officers when

they have merit, never arbitrarily or for trading purposes.

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

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

adopt a position inconsistent with an established Service

position.

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

is determined by Congress.

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

policy by correctly applying the laws enacted by Congress;

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

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

neither a government nor a taxpayer point of view.

Administration should be both reasonable and vigorous. It

should be conducted with as little delay as possible and

with great courtesy and considerateness. It should never

try to overreach, and should be reasonable within the

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

should be relentless in its attack on unreal tax devices and

fraud.

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

is the responsibility of each person in the Service, charged

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

meaning of the statutory provision and not to adopt a

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

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

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.

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 November 1997. See Rev. Rul. 97–44, page 5.

Section 55.—Alternative

Minimum Tax Imposed

How does § 1(h), as amended by the Taxpayer

Relief Act of 1997, coordinate with the alternative

minimum tax provisions. See Notice 97–59,

page 7.

Section 280G.—Golden

Parachute Payments

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

rates are set forth for the month of November 1997.

See Rev. Rul. 97–44, page 5.

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 November 1997. See Rev. Rul.

97–44, page 5.

Section 412.—Minimum

Funding Standards

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

of November 1997. See Rev. Rul. 97–44, page 5.

Section 446.—General Rule for

Methods of Accounting

26 CFR 1.446–1: General rule for methods of

accounting.

What procedures should taxpayers follow to obtain automatic consent to change their method of accounting for costs paid or incurred to convert or replace computer software to recognize dates

beginning in the year 2000. See Rev. Proc. 97–50,

page 8.

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 November 1997. See Rev. Rul. 97–44, page 5.

Section 481.—Adjustments

Required by Changes in Method

of Accounting

26 CFR 1.481–1: Adjustments in general.

26 CFR 1.481–4: Adjustments taken into account

with consent.

What procedures should taxpayers follow to obtain automatic consent to change their method of accounting for costs paid or incurred to convert or replace computer software to recognize dates

beginning in the year 2000. See Rev. Proc. 97–50,

page 8.

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 November 1997.

See Rev. Rul. 97–44, page 5.

Section 483.—Interest on

Certain Deferred Payments

26 CFR 1.911–1: Partial exclusion for earned

income from sources within a foreign country

and foreign housing costs.

Guidance is provided to individuals who fail to

meet the eligibility requirements of section 911(d)(1) of the Internal Revenue Code because adverse

conditions in a foreign country preclude the individual from meeting those requirements. A current list

of countries and the dates those countries are subject

to the section 911(d)(4) waiver is provided. See Rev.

Proc. 97–51, page 9.

Section 1222.—Other Terms

Relating to Capital Gains and

Losses

What are the rules for netting gains and losses

under § 1(h), as amended by the Taxpayer Relief Act

of 1997. See Notice 97–59, page 7.

Section 1223.—Holding Period

of Property

How does § 1(h), as amended by the Taxpayer

Relief Act of 1997, coordinate with the rules for determining the holding period of property under

§ 1223. See Notice 97–59, page 7.

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

of November 1997. See Rev. Rul. 97–44, page 5.

Section 1231.—Property Used

in the Trade or Business and

Involuntary Conversions

Section 642.—Special Rules for

Credits and Deductions

What are the rules for netting gains and losses

under § 1(h), as amended by the Taxpayer Relief Act

of 1997. See Notice 97–59, page 7.

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

rates are set forth for the month of November 1997.

See Rev. Rul. 97–44, page 5.

Section 807.—Rules for Certain

Reserves

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

of November 1997. See Rev. Rul. 97–44, page 5.

Section 467.—Certain

Payments for the Use of

Property or Services

Section 846.—Discounted

Unpaid Losses Defined

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

of November 1997. See Rev. Rul. 97–44, page 5.

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

of November 1997. See Rev. Rul. 97–44, page 5.

November 10, 1997

Section 911.—Citizens or

Residents of the United States

Living Abroad

Section 1235.—Sale or

Exchange of Patents

How does § 1(h), as amended by the Taxpayer

Relief Act of 1997, coordinate with the rules for the

sale or exchange of patents under § 1235. See Notice

97–59, page 7.

Section 1250.—Gains From

Dispositions of Certain

Depreciable Realty

What are the rules for netting gains and losses

under § 1(h), as amended by the Taxpayer Relief Act

of 1997. See Notice 97–59, page 7.

1997–45 I.R.B.

Section 1256.—Section 1256

Contracts Marked to Market

How does § 1(h), as amended by the Taxpayer

Relief Act of 1997, coordinate with the rules for gain

or loss from section 1256 contracts. See Notice

97–59, page 7.

Section 1274.—Determination

of Issue Price in the Case of

Certain Debt Instruments Issued

for Property

(Also Sections 42, 280G, 382, 412, 467, 468, 482,

483, 642, 807, 846, 1288, 7520, 7872.)

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 November 1997.

Rev. Rul. 97–44

This revenue ruling provides various

prescribed rates for federal income tax

purposes for November 1997 (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. 97–44 TABLE 1

Applicable Federal Rates (AFR) for November 1997

Period for Compounding

Annual

Semiannual

Quarterly

Monthly

Short-Term

AFR

110% AFR

120% AFR

130% AFR

5.69%

6.27%

6.84%

7.42%

5.61%

6.17%

6.73%

7.29%

5.57%

6.12%

6.67%

7.22%

5.55%

6.09%

6.64%

7.18%

Mid-Term

AFR

110% AFR

120% AFR

130% AFR

150% AFR

175% AFR

6.10%

6.72%

7.34%

7.96%

9.22%

10.80%

6.01%

6.61%

7.21%

7.81%

9.02%

10.52%

5.97%

6.56%

7.15%

7.74%

8.92%

10.39%

5.94%

6.52%

7.10%

7.69%

8.86%

10.30%

Long-Term

AFR

110% AFR

120% AFR

130% AFR

6.42%

7.07%

7.72%

8.39%

6.32%

6.95%

7.58%

8.22%

6.27%

6.89%

7.51%

8.14%

6.24%

6.85%

7.46%

8.08%

1997–45 I.R.B.

November 10, 1997

REV. RUL. 97–44 TABLE 2

Adjusted AFR for November 1997

Period for Compounding

Annual

Semiannual

Quarterly

Monthly

Short-term

adjusted AFR

3.92%

3.88%

3.86%

3.85%

Mid-term

adjusted AFR

4.35%

4.30%

4.28%

4.26%

Long-term

adjusted AFR

5.15%

5.09%

5.06%

5.04%

REV. RUL. 97–44 TABLE 3

Rates Under Section 382 for November 1997

Adjusted federal long-term rate for the current month

5.15%

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

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

5.27%

REV. RUL. 97–44 TABLE 4

Appropriate Percentages Under Section 42(b)(2) for November 1997

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

8.47%

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

3.63%

REV. RUL. 97–44 TABLE 5

Rate Under Section 7520 for November 1997

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

term of years, or a remainder or reversionary interest

Section 1288.—Treatment of

Original Issue Discount on

Tax-Exempt Obligations

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

of November 1997. See Rev. Rul. 97–44, page 5.

November 10, 1997

Section 7520.—Valuation

Tables

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

of November 1997. See Rev. Rul. 97–44, page 5

7.4%

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 November 1997. See Rev. Rul. 97–44, page 5.

1997–45 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous

1998 Pension Plan Limitations,

Etc.1

Notice 97–58

Section 415 of the Internal Revenue

Code (the Code) provides for dollar limitations on benefits and contributions

under qualified plans. Section 415 also

requires that the Commissioner annually

adjust these limits for cost-of-living increases. Other limitations applicable to

deferred compensation plans are also affected by these adjustments.

Effective January 1, 1998, the limitation for the annual benefit under § 415(b)(1)(A) for defined benefit plans is increased from $125,000 to $130,000. For

participants who separated from service

before January 1, 1998, the limitation for

defined benefit plans under § 415(b)(1)(B) is computed by multiplying the

participant’s compensation limitation, as

adjusted through 1997 by 1.0220. The

limitation for defined contribution plans

under § 415(c)(1)(A) remains unchanged

at $30,000.

The Code provides that various other

dollar amounts are to be adjusted at the

same time and in the same manner as the

dollar limitation of § 415(b)(1)(A) is adjusted. These dollar amounts and the adjusted amounts are as follows:

The dollar limitation on early retirement benefits for qualified police or firefighters in a defined benefit plan was

amended by § 1527 of the Taxpayer Relief Act of 1997 (TRA ‘97), effective for

years beginning after December 31, 1996.

This section amended § 415(b)(2)(G) of

the Code so that the dollar limitation for

qualified police or firefighters is not reduced where the benefit begins before the

social security retirement age.

The limitation on the exclusion for

elective deferrals under § 402(g)(1) is increased from $9,500 to $10,000.

The dollar amount under § 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5-year distribution

period is increased from $710,000 to

$725,000, while the dollar amount used to

determine the lengthening of the 5-year

1Based on News Release IR-97-41, dated October 22, 1997.

1997–45 I.R.B.

distribution period is increased from

$140,000 to $145,000.

The excess distribution and excess retirement accumulation tax was repealed by

§ 1073 of TRA ‘97, effective for excess

distributions received after, and to estates

of decedents dying after, December 31,

1996. This section of TRA ‘97 repealed

§ 4980A of the Code, thereby removing

the threshold amount under § 4980A(c)(1)(B) regarding excess distributions.

The limitation used in the definition of

highly compensated employee under

§ 414(q)(1)(B) remains unchanged at

$80,000.

The annual compensation limit under

§§ 401(a)(17) and 404(l) remains unchanged at $160,000. The annual compensation limit under § 401(a)(17) for eligible participants in certain governmental

plans that, under the plan as in effect on

July 1, 1993, allowed cost-of-living adjustments to the compensation limitation

under the plan under § 401(a)(17) to be

taken into account, is $265,000.

The compensation amount under

§ 408(k)(2)(C) regarding simplified employee pension plans (SEPs) remains unchanged at $400. The compensation

amount under § 408(k)(3)(C) for SEPs remains unchanged at $160,000.

The limitation under § 408(p)(2)(A) regarding simple retirement accounts remains unchanged at $6,000.

The limitation on deferrals under

§ 457(b)(2) and (c)(1) concerning eligible

deferred compensation plans of state and

local governments and of tax-exempt organizations is increased from $7,500 to

$8,000.

Administrators of defined benefit or defined contribution plans that have received

favorable determination letters should not

request new determination letters solely

because of yearly amendments to adjust

maximum limitations in the plans.

Capital Gains Rates

Notice 97–59

PURPOSE

The Taxpayer Relief Act of 1997 (the

“1997 Act”) amended § 1(h) of the Inter-

nal Revenue Code (“new § 1(h)”) to provide for new capital gains rates for noncorporate taxpayers (individuals, estates,

and trusts), effective for tax years ending

after May 6, 1997. Pub. L. No. 105–34,

§ 311, 111 Stat. 788 (Aug. 5, 1997). The

chairmen and ranking members of both

the House Ways and Means Committee

and the Senate Finance Committee have

advised the Department of the Treasury of

their intent to pursue technical corrections

legislation which would correct and clarify the rules for netting capital gains and

losses under new § 1(h) and coordinate

new § 1(h) with certain other provisions

of the Code. Such legislation has already

been approved by the House Ways and

Means Committee. See H.R. 2645, 105th

Cong. § 4(d) (1997). When enacted, the

legislation will be effective retroactively

for tax years ending after May 6, 1997.

This notice summarizes new § 1(h) and

describes how the Internal Revenue Service is taking into account the pending

retroactive legislative corrections in administering the provision.

BACKGROUND

Under prior law, capital gains were

taxed at the same rate as ordinary income,

except that a noncorporate taxpayer was

subject to a maximum marginal rate of 28

percent on net capital gain. Under

§ 1222, net capital gain is the excess of

net long- term capital gain (from assets

held for more than one year) over net

short-term capital loss (from assets held

for one year or less).

The definitions of net capital gain, net

long-term capital gain or loss, and net

short-term capital gain or loss were not

changed by the 1997 Act. However,

under new § 1(h), if a noncorporate taxpayer has a net capital gain, the taxpayer’s

long-term capital gains and losses are separated into three tax rate groups.

(1) The 28-percent group. The 28-percent group consists of the following:

(a) capital gains and losses properly

taken into account before May 7, 1997,

from assets held for more than one year;

(b) capital gains and losses properly

taken into account after July 28, 1997,

from assets held for more than one year

but not more than 18 months; and

November 10, 1997

alcoholic beverages) held for more than

one year, regardless of the date taken into

account.

This group also includes long-term capital

loss carryovers. For sales of certain small

business stock after August 10, 1998, an

amount equal to the gain excluded under

§ 1202(a) will be included in the 28-percent group.

(2) The 25-percent group. The 25-percent group consists of unrecaptured section 1250 gain (there are no losses in this

group). Unrecaptured section 1250 gain

is long-term capital gain, not otherwise

recaptured as ordinary income, attributable to prior depreciation of real property

and which is from property held for more

than one year (if taken into account after

May 6, 1997, but before July 29, 1997), or

for more than 18 months (if taken into account after July 28, 1997).

(3) The 20-percent group. The 20-percent group (10 percent in the case of gain

that would otherwise be taxed at 15 percent) consists of long-term capital gains

and losses that are not in the 28-percent or

25-percent group. Thus, for 1997 a rate

of 20 or 10 percent applies to net capital

gain (other than collectibles gain or unrecaptured section 1250 gain) from capital

assets held for more than one year (if

taken into account after May 6 but before

July 29), or for more than 18 months (if

taken into account after July 28).

New § 1(h) also applies to gains and

losses that are characterized as capital

under § 1231, which covers certain transactions including sales of depreciable

property or real property used in a trade or

business. These gains and losses are included in the appropriate rate group, depending on the holding period and disposition date of the particular asset.

NETTING GAINS AND LOSSES

Within each group, gains and losses are

netted to arrive at a net gain or loss. Taking into account the pending legislation,

the following additional netting and ordering rules apply:

(1) Short-term capital gains and losses.

As under prior law, short-term capital

losses (including short-term capital loss

carryovers) are applied first to reduce

short-term capital gains, if any, otherwise

November 10, 1997

taxable at ordinary income rates. A net

short-term capital loss is then applied to

reduce any net long-term gain from the

28-percent group, then to reduce gain

from the 25-percent group, and finally to

reduce net gain from the 20-percent

group.

(2) Long-term capital gains and losses.

A net loss from the 28-percent group (including long-term capital loss carryovers)

is used first to reduce gain from the 25percent group, then to reduce net gain

from the 20-percent group. A net loss

from the 20-percent group is used first to

reduce net gain from the 28-percent

group, then to reduce gain from the 25percent group.

Any resulting net capital gain that is attributable to a particular rate group is

taxed at that group’s marginal tax rate.

COORDINATION WITH OTHER

PROVISIONS

The pending legislation coordinates the

multiple rates of new § 1(h) with certain

other provisions of the Code. Accordingly, the following rules apply:

(1) Holding periods. Under prior law,

certain inherited property, if disposed of

within one year after the decedent’s death,

was deemed to have been held for more

than one year under § 1223(11) or (12).

Such property, if disposed of within 18

months after the decedent’s death, is now

deemed to have been held for more than

18 months. A similar rule applies for certain patents described in § 1235(a). Gain

or loss from a section 1256 contract, to

the extent that it is treated as long-term

capital gain or loss under § 1256(a)(3), is

now treated as attributable to property

held for more than 18 months. Rules similar to those of § 1233(b) and (d) (involving short sales of substantially identical

property) and § 1092(f) (involving certain

stock options) apply with respect to property held for more than one year but not

more than 18 months.

(2) Recharacterized section 1231

gains. If a portion of the taxpayer’s net

section 1231 gain for the year is recharacterized as ordinary income under section

1231(c), the gain so recharacterized consists first of any net section 1231 gain in

the 28-percent group, then any section

1231 gain in the 25-percent group, and finally any net section 1231 gain in the 20percent group.

(3) Alternative minimum tax. Newlyenacted § 55(b)(3) provides favorable alternative minimum tax (“AMT”) rates for

certain categories of capital gain. The

amounts of these gains are determined according to the principles used for regular

tax purposes, although the AMT amounts

can vary from the regular tax amounts because of AMT adjustments and preferences.

FORMS AND PUBLICATIONS

The Service is amending relevant

forms, instructions, and publications (including Schedule D) to reflect the rules

set forth above.

DRAFTING INFORMATION

The principal author of this notice is

Susan J. Kassell of the Office of the Assistant Chief Counsel (Income Tax & Accounting). For further information regarding this notice contact Ms. Kassell at

(202) 622-4930 (not a toll-free call).

26 CFR 601.105: Examination of returns and

claims for refund, credit, or abatement;

determination of correct tax liability.

(Also Part I, §§ 41, 446, 481; 1.446–1, 1.481–1,

1.481–4)

Rev. Proc. 97–50

SECTION 1. PURPOSE

.01 This revenue procedure provides

guidelines to be used in connection with the

examination of federal income tax returns

involving the costs paid or incurred by a

taxpayer in its trade or business to convert

or replace computer software to recognize

dates beginning in the year 2000.

.02 This revenue procedure also provides procedures for a taxpayer to obtain

automatic consent to change to a method

of accounting described in this revenue

procedure.

SECTION 2. BACKGROUND

Many computer systems use two digits

rather than four digits to represent the

year in a date field (for example, “97” to

represent 1997). A two-digit year field,

however, may be inadequate to represent

years after 1999. For data involving the

year 2000, for example, computer systems may not recognize “00” as a year, or

may treat that year as 1900 instead of

1997–45 I.R.B.

2000. Thus, many computer systems may

fail to operate, or may operate improperly,

if the software is not converted or replaced to recognize four-digit years (i.e.,

made “year 2000 compliant”). In order to

ensure that their computer systems are

year 2000 compliant, taxpayers may pay

or incur costs to manually convert their

existing software, to develop new software to replace their existing software, to

purchase or lease new software to replace

their existing software, or to develop or

purchase software tools to assist them in

converting their existing software to be

year 2000 compliant (“year 2000 costs”).

SECTION 3. TREATMENT OF YEAR

2000 COSTS

Rev. Proc. 69–21, 1969–2 C.B. 303,

provides guidelines to be used in connection with the examination of federal income tax returns involving the costs paid

or incurred to develop, purchase, or lease

computer software. Year 2000 costs fall

within the purview of Rev. Proc. 69–21.

Accordingly, the Internal Revenue Service will not disturb a taxpayer’s treatment of its year 2000 costs if the taxpayer

treats these costs in accordance with section 3 of Rev. Proc. 69–21 (in the case of

developed software, including converted

software), section 4 of Rev. Proc. 69–21

(in the case of purchased software), or

section 5 of Rev. Proc. 69–21 (in the case

of leased software).

SECTION 4. RESEARCH CREDIT

Section 41 of the Internal Revenue

Code provides a credit against tax for increasing research activities. To be eligible for the research credit, expenditures

must be for activities satisfying the requirements of § 41 including the definition of “qualified research” in § 41(d).

Except in extraordinary circumstances,

year 2000 costs will not satisfy the definition of “qualified research” in § 41(d).

For example, year 2000 costs generally

do not involve research undertaken for the

purpose of discovering information that is

technological in nature where substantially all of the research activities constitute elements of a process of experimentation. Thus, a taxpayer that pays or incurs

year 2000 costs may not claim the research credit except in those extraordinary circumstances in which those costs

satisfy the definition of “qualified re-

1997–45 I.R.B.

search” in § 41(d) and otherwise meet all

the requirements of § 41.

SECTION 5. APPLICATION

Any change in a taxpayer’s treatment

of year 2000 costs to conform with section 3 of this revenue procedure is a

change in method of accounting to which

the provisions of §§ 446 and 481 and the

regulations thereunder apply. A taxpayer

wanting to change its method of accounting for year 2000 costs to conform with

section 3 of this revenue procedure must

follow the automatic change in accounting method provisions of Rev. Proc.

97–37, 1997–33 I.R.B. 18.

SECTION 6. EFFECT ON OTHER

DOCUMENTS

Rev. Proc. 69–21 is amplified. Rev.

Proc. 97–37 is amplified to include this

change in the Appendix.

DRAFTING INFORMATION

The principal author of this revenue

procedure is Kimberly L. Koch of the Office of Assistant Chief Counsel (Income

Tax and Accounting). For further information regarding this revenue procedure,

contact Ms. Koch on (202) 622-4950 (not

a toll-free call).

26 CFR 601.105: Examination of returns

and claims for refund, credit, or abatement;

determination of correct tax liability.

(Also Part I, § 911, 1.911–1)

Rev. Proc. 97–51

SECTION 1. PURPOSE

01. This revenue procedure provides

information to any individual who failed

to meet the eligibility requirements of

§ 911(d)(1) of the Internal Revenue Code

because adverse conditions in a foreign

country precluded the individual from

meeting those requirements for taxable

year 1996.

02. The Internal Revenue Service previously has listed countries for which the eligibility requirements of § 911(d)(1) of the

Code are waived under § 911(d)(4) because

of adverse conditions in those countries

during the time periods stated. See Rev.

Proc. 96–33, 1996–1 C.B. 720, Rev. Proc.

95–45, 1995–2 C.B. 421, Rev. Proc. 94–31,

1994–1 C.B. 625, and Rev. Proc. 94–15,

1994–1 C.B. 575. This revenue procedure

relists countries where the adverse conditions are still in effect. The Central African

Republic is added to the list for 1996. Rev.

Proc. 96–33, Rev. Proc. 95–45, Rev. Proc.

94–31, and Rev. Proc. 94–15 remain in full

force and effect; the older periods listed

therein are omitted from this revenue procedure solely for brevity.

SEC. 2. BACKGROUND

01. Section 911(a) of the Code allows a

“qualified individual,” as defined in

§ 911(d)(1), to exclude foreign earned income and housing cost amounts from

gross income. Section 911(c)(3) allows a

qualified individual to deduct housing

cost amounts from gross income.

02. Section 911(d)(1) of the Code defines the term “qualified individual” as an

individual whose tax home is in a foreign

country and who is (A) a citizen of the

United States and establishes to the satisfaction of the Secretary of the Treasury

that the individual has been a bona fide

resident of a foreign country or countries

for an uninterrupted period that includes

an entire taxable year, or (B) a citizen or

resident of the United States who, during

any period of 12 consecutive months, is

present in a foreign country or countries

during at least 330 full days.

03. Section 911(d)(4) of the Code provides an exception to the eligibility requirements of § 911(d)(1). An individual

will be treated as a qualified individual

with respect to a period in which the individual was a bona fide resident of, or was

present in, a foreign country if the individual left the country during a period for

which the Secretary of the Treasury, after

consultation with the Secretary of State,

determines that individuals were required

to leave because of war, civil unrest, or

similar adverse conditions that precluded

the normal conduct of business. An individual must establish that but for those

conditions the individual could reasonably have been expected to meet the eligibility requirements.

04. For purposes of § 911(d)(4) of the

Code, the Secretary of the Treasury in

consultation with the Secretary of State,

has determined that war, civil unrest, or

similar adverse conditions that precluded

the normal conduct of business existed in

the following countries during the specified periods:

November 10, 1997

Date of Departure

Country

On or After

On or Before

Afghanistan

Bosnia and Herzegovina

Central African Republic

Croatia

Iran

Lebanon

The Former Yugoslav Republic

of Macedonia

Montenegro1

Serbia1

Somalia

April 23, 1979

April 7, 1992

May 21, 1996

April 7, 1992

September 1, 1978

August 31, 1979

(still in effect)

September 12, 1996

(still in effect)

June 13, 1992

December 21, 1990

(still in effect)

1Montenegro and Serbia, formerly part of the Socialist Federal Republic of Yugoslavia, have asserted the formation of a joint independent state, but this entity has not

been formally recognized as a state by the United States.

.05 Accordingly, for purposes of § 911

of the Code, an individual who left one of

the foregoing countries during the specified period shall be treated as a qualified

individual with respect to the period during which that individual was a bona fide

resident of, or present in, that foreign

country if the individual establishes a

reasonable expectation of meeting the requirements of § 911(d) but for those conditions.

.06 To qualify for relief under § 911(d)(4), an individual must have established

residency or have been physically present

in the foreign country on or prior to the

date that the Secretary of the Treasury determines that individuals were required to

leave the foreign country. Individuals

who establish residency or are first physi-

November 10, 1997

cally present in the foreign country after

the date that the Secretary prescribes, but

during the period for which the Secretary

determines that individuals were required

to leave the foreign country, shall not be

treated as qualified individuals under

§ 911(d)(4) pursuant to § 911(d)(4)(C).

For example, individuals who establish

residency or are first physically present in

Iran after September 1, 1978, are not eligible to qualify for the exemption prescribed in § 911(d)(4). The same holds

true with respect to individuals who move

to Afghanistan after April 23, 1979, or

Lebanon after August 31, 1979.

SEC. 3. INQUIRIES

A taxpayer who needs assistance on

how to claim this exclusion, or on how to

file an amended return, should contact a

local IRS Office or, for a taxpayer residing or traveling outside the United States,

the nearest overseas IRS office.

SEC. 4. EFFECT ON OTHER

DOCUMENTS

Rev. Proc. 92-63, 1992-2 C.B. 421 is

obsoleted.

DRAFTING INFORMATION

The principal author of this revenue

procedure is Leslie B. van der Wal of the

Office of Associate Chief Counsel (International). For further information regarding this revenue procedure contact Ms.

van der Wal on (202) 622-3840 (not a

toll-free call).

1997–45 I.R.B.

Part IV. Items of General Interest

Changes to Reporting Requirements for 1997 Forms 1099–S and 1099–LTC

Announcement 97–106

Background

Forms 1099 are released early in the year so that payers, brokers, etc., can collect necessary information

during the year to report to the IRS, recipients, sellers, etc. Because the Taxpayer Relief Act of 1997

(Public Law 105–34) was enacted August 5, 1997, changes in the 1997 reporting requirements of the following Forms 1099 are required:

• Form 1099–S, Proceeds From Real Estate Transactions

• Form 1099–LTC, Long-Term Care and Accelerated Death Benefits (also, the 1998 instructions for Form

1099–LTC will include changes suggested by industry)

Reporting changes are described in the following sections.

Form 1099–S:

Reporting the Sale of

a Principal Residence

After May 6, 1997

Filers who receive an acceptable written assurance from the seller are not required to file Form 1099–S

with the IRS nor furnish the seller Form 1099–S for any sale or exchange after May 6, 1997, of a principal residence for $250,000 or less ($500,000 or less if the written assurance includes an assurance

that the seller is married). The written assurance must state that the:

• Property sold is the seller’s principal residence, and

• Full gain on the sale or exchange is excludable from gross income under section 121 of the Code.

As soon as possible, the IRS will issue guidance on what will be considered an acceptable written assurance. Although filers are not required to obtain the written assurance, if the written assurance is not obtained, Form 1099–S must be filed with the IRS and a Form 1099–S statement must be furnished to the

seller.

Form 1099–LTC:

Telephone Number

Required

The Act requires payers to provide a telephone number of a person to contact on statements to recipients

(Copies B and C) for Form 1099–LTC. This new requirement applies to the 1997 statements due to

recipients by February 2, 1998. The number must be in any conspicuous place on the statements and

must provide direct access to a person who can answer questions about the statements.

Because this requirement was enacted after the 1997 forms were printed, a failure to include a telephone

number on the 1997 statements will be considered to have arisen from an event beyond the control of the

filer. As a result, the penalty under section 6722 of the Code will be waived for reasonable cause if the

next statement required to be provided (generally for 1998) includes the number. Although the penalty

will be waived for 1997 statements, payers are encouraged to enter the number anywhere they choose on

the statements.

Payers are not required to report the telephone number to the IRS.

Form 1099–LTC:

Instructions Changes

At the request of industry, the IRS plans to revise the 1998 instructions for box 3 of Form 1099–LTC to

require payers of accelerated death benefits to check a box to indicate whether payments were made on a

per diem or reimbursed basis. If the payments were made on behalf of a terminally ill person, payers are

not required to check either box in box 3. In addition, the instructions will make it clear that, in the case

of a group contract, the term “policyholder” means the certificate holder, and the “policyholder” statement must be furnished to the certificate holder.

Payers are encouraged to follow these new instructions in filing their 1997 forms and in providing 1997

statements to recipients.

1997–45 I.R.B.

November 10, 1997

Changes to Reporting Requirements for Certain 1996 and 1997 Forms Because of Changes in the

Capital Gains Tax Rates

Announcement 97–109

Background

The Taxpayer Relief Act of 1997 (Public Law 105–34) amended section 1(h) of the Internal Revenue

Code to change the capital gains tax rates. As a result, changes in the reporting requirements are required

for the following forms:

• 1997 Form 1099–DIV, Dividends and Distributions

• 1997 Form 1099–B, Broker and Barter Exchange Transactions

• 1996 Form 2439 for 1996–1997 fiscal years ending after May 6, 1997

• 1996 Schedules K & K–1 for partnerships, S corporations, and estates with 1996–1997 fiscal years ending after May 6, 1997

The instructions for the forms listed above do not reflect these changes.

Also, the tax computation using maximum capital gains rates affects 1996–1997 fiscal year individuals

and estates if the taxpayer’s fiscal year ended after May 6, 1997.

The necessary changes are described in the following sections. Further guidance will be issued shortly

regarding the computation of capital gain distributions by regulated investment companies and real estate

investment trusts.

The following rules relate only to forms for the years listed above. For subsequent years, the reporting

requirements will be included on the forms and/or stated in the instructions.

Form 1099–DIV:

Reporting Capital

Gain Distributions

for 1997

Regulated investment companies, real estate investment trusts, brokers, and others reporting capital gain

distributions on the 1997 Form 1099–DIV must provide additional information with their statements to

recipients. Payers must continue to report the total capital gain distributions in box 1c. Payers should

also advise recipients that they cannot report capital gain distributions on Form 1040, line 13, as stated in

the official 1997 Form 1099–DIV. Rather, they must report the distributions on Schedule D (Form 1040),

line 13, column (f).

In addition, payers must provide to recipients information sufficient to determine the following:

• The amount of 28% rate gain distributions. Payers should advise recipients to report this amount on

Schedule D (Form 1040), line 13, column (g).

• The amount of unrecaptured section 1250 gain distributions. Payers should advise recipients to report

this amount on Schedule D (Form 1040), line 25.

Payers may provide this additional information to recipients on a substitute statement or on a separate

statement. Payers are not required to report the additional information to the IRS.

Form 2439:

Reporting

Undistributed

Long-Term Capital

Gains for 1996–1997

Regulated investment companies (RICs) and other filers completing the 1996 Form 2439 for fiscal years

ending after May 6, 1997, must provide additional information with their notices to shareholders. Filers

must continue to report the total undistributed long-term capital gains for the year on line 1 of Form

2439. Filers should also advise individual shareholders that they cannot report the amount on line 1 on

Schedule D (Form 1040), Part II, line 12, as stated in the official 1996 Form 2439 instructions. Rather,

they must report the amount on line 1 on the 1997 Schedule D (Form 1040), line 11, column (f).

In addition, filers must provide to shareholders information sufficient to determine the following:

• The amount of 28% rate gain included on line 1 of Form 2439. Filers should advise recipients to report

this amount on Schedule D (Form 1040), line 11, column (g).

• The amount of unrecaptured section 1250 gain included on line 1 of Form 2439. Filers should advise

recipients to report this amount on Schedule D (Form 1040), line 25.

Filers may provide this additional information to shareholders on a substitute statement or on a separate

statement. Filers are not required to report this additional information on Forms 2439 filed with the IRS.

November 10, 1997

1997–45 I.R.B.

Form 1099–B:

Reporting Aggregate

Profit or Loss From

Regulated Futures

or Foreign Currency

Contracts

Brokers and others reporting the aggregate gain or loss on regulated futures or foreign currency contracts

in box 9 of Form 1099-B must provide additional information with their statements to recipients. They

must continue to report the total aggregate amount in box 9 and also report to the recipient the amount

included in box 9 attributable to the profit or loss before May 7, 1997.

Fiscal Year

Estates and

Individuals: Reporting

Capital Gains and

Losses for 1996–1997

Estates and individuals affected by the new capital gains rates who complete the 1996 Forms 1040 and

1041 for fiscal years ending after May 6, 1997, must attach a computation similar to that shown in Part IV

of the 1997 Schedule D (Form 1040) or Part V of the 1997 Schedule D (Form 1041). These estates and

individuals may use their 1997 Schedule D to figure their 1996 tax provided they use the applicable 1996

tax rate schedules or table in the computation. Also, when figuring the amount to enter on line 29 of the

1997 Schedule D, these filers must not use the dollar amounts shown on that line. Instead, they must substitute the dollar amounts shown on line 6 of the Capital Gain Tax Worksheet in the 1996 Form 1040 instructions (or line 39 of the 1996 Schedule D (Form 1041)) .

Payers may provide this additional information to recipients on a substitute statement or on a separate

statement. Payers are not required to report the additional information to the IRS.

Note: The new capital gains rates also affect the computation of the alternative minimum tax. The

above-mentioned filers should attach a computation similar to that shown in Part IV of the 1997 Form

6251 (or Part IV, Schedule I of the 1997 Form 1041).

Estates also must continue to report each beneficiary’s share of the net long-term capital gain on line 3b

of Schedule K–1. In addition, the estate must provide the following information to its beneficiaries:

• 28% rate gain—the amount on line 3b attributable (after taking into account the netting rules described

in Notice 97–59) to “collectibles gains and losses” AND to net gain from sales, exchanges, or conversions (including installment payments received) either:

(a) before May 7, 1997, or

(b) after July 28, 1997, for assets held more than 1 year but not more than 18 months.

Estates should advise individual beneficiaries to report this amount on the 1997 Schedule D (Form 1040),

line 12, column (g).

• Unrecaptured section 1250 gain—the amount on line 3b attributable to unrecaptured section 1250 gain.

Estates should advise individual beneficiaries to report this amount on the 1997 Schedule D (Form

1040), line 25.

Each beneficiary’s share of the above amounts should be reported on line 13 of Schedule K–1.

Forms 1065 and

1120S (Schedules K

and K–1): Reporting

Capital and Section

1231 Gains and Losses

for 1996–1997

Partnerships and S corporations completing the 1996 Forms 1065 and 1120S for fiscal years ending after

May 6, 1997, must provide additional information on Schedules K and K–1. The partnership or S corporation must continue to report the net long-term capital gain or loss on line 4e of Schedules K and K–1 of

Form 1065 or 1120S, the net gain or loss under section 1231 (other than due to casualty or theft) on line

6 of Schedules K and K–1 of Form 1065 (line 5 of Schedules K and K–1 of Form 1120S), and other income on line 7 of Schedules K and K–1 of Form 1065 (line 6 of Schedules K and K–1 of Form 1120S).

In addition, the partnership or S corporation must provide the following information:

• 28% rate gain or loss—the amount that would be entered on each of the above lines if they included

only “collectibles gains and losses” AND gains and losses from sales, exchanges, or conversions (including installment payments received) either:

(a) before May 7, 1997, or

(b) after July 28, 1997, for assets held more than 1 year but not more than 18 months.

The total 28% rate gain or loss of the partnership or S corporation should be reported as an item of information on line 24 of Schedule K, Form 1065, or on line 21 of Schedule K, Form 1120S. Each partner’s or

shareholder’s share should be reported in the “Supplemental Information” space on Schedule K–1.

Partnerships and S corporations should advise partners and shareholders to report this amount on the line

of the form to which it relates in the separate column, if any, provided on that form for 28% rate gain or

loss. For example, a long-term capital gain that is also a 28% rate gain should be reported on the 1997

Schedule D (Form 1040), line 12, column (g); a section 1231 gain that is also a 28% rate gain should be

reported on the 1997 Form 4797, line 2, column (h).

1997–45 I.R.B.

November 10, 1997

• Unrecaptured section 1250 gain—the amount that would be entered on each of the above lines if they included only unrecaptured section 1250 gain. The total unrecaptured section 1250 gain of the partnership or S corporation should be reported as an item of information on line 24 of Schedule K, Form 1065, or on line 21 of Schedule K, Form 1120S. Each

partner’s or shareholder’s share should be reported in the “Supplemental Information” space on Schedule K–1.

Partnerships and S corporations should advise partners and shareholders to report this amount on the 1997 Schedule D

(Form 1040), line 25.

Deletions from Cumulative List

of Organizations Contributions

to Which Are Deductible Under

Section 170 of the Code

Announcement 97–110

The names of organizations that no

longer qualify as organizations described

in section 170(c)(2) of the Internal Revenue Code of 1986 are listed below.

Generally, the Service will not disallow

deductions for contributions made to a

listed organization on or before the date

of announcement in the Internal Revenue

Bulletin that an organization no longer

qualifies. However, the Service is not

precluded from disallowing a deduction

for any contributions made after an organization ceases to qualify under section

170(c)(2) if the organization has not

timely filed a suit for declaratory judgment under section 7428 and if the contributor (1) had knowledge of the revocation of the ruling or determination letter,

(2) was aware that such revocation was

imminent, or (3) was in part responsible

for or was aware of the activities or omissions of the organization that brought

about this revocation.

If on the other hand a suit for declaratory judgment has been timely filed, con-

November 10, 1997

tributions from individuals and organizations described in section 170(c)(2) that

are otherwise allowable will continue to

be deductible. Protection under section

7428(c) would begin on November 10,

1997, and would end on the date the court

first determines that the organization is

not described in section 170(c)(2) as more

particularly set forth in section

7428(c)(1).

For individual contributors, the maximum deduction protected is $1,000, with

a husband and wife treated as one contributor. This benefit is not extended to any

individual who was responsible, in whole

or in part, for the acts or omissions of the

organization that were the basis for revocation.

Learning Center Association

Kettering, OH

Self Awareness Center, Inc.

Evansville, IN

Section 7428(c) Validation of

Certain Contributions Made

During Pendency of Declaratory

Judgment Proceedings

This announcement serves notice to potential donors that the organization listed

below has recently filed a timely declara-

tory judgment suit under section 7428 of

the Code, challenging revocation of its

status as an eligible donee under section

170(c)(2).

Protection under section 7428(c) of the

Code begins on the date that the notice of

revocation is published in the Internal

Revenue Bulletin and ends on the date on

which a court first determines that an organization is not described in section

170(c)(2), as more particularly set forth in

section 7428(c)(1). In the case of individual contributors, the maximum amount of

contributions protected during this period

is limited to $1,000.00, with a husband

and wife being treated as one contributor.

This protection is not extended to any individual who was responsible, in whole or

in part, for the acts or omissions of the organization that were the basis for the revocation. This protection also applies

(but without limitation as to amount) to

organizations described in section

170(c)(2) which are exempt from tax

under section 501(a). If the organization

ultimately prevails in its declaratory judgment suit, deductibility of contributions

would be subject to the normal limitations

set forth under section 170.

Student Ministries, Inc.

Milwaukie, OR

1997–45 I.R.B.

Announcement of the Expedited Suspension of Attorneys, Certified Public

Accountants, Enrolled Agents, and Enrolled Actuaries From Practice

Before the Internal Revenue Service

Under title 31 of the Code of Federal

Regulations, section 10.76, the Director

of Practice is authorized to immediately

suspend from practice before the Internal

Revenue Service any practitioner who,

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

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

been convicted of any crime under title 26

of the United States Code or, of a felony

under title 18 of the United States Code

involving dishonesty or breach of trust.

Attorneys, certified public accountants,

enrolled agents, and enrolled actuaries are

prohibited in any Internal Revenue Service

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

before the Internal Revenue Service.

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

Internal Revenue Service, the Director of

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

practitioners who have been suspended

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

rolled agent, or enrolled actuary, and date

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

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

weekly Bulletins for five successive weeks

or for as many weeks as is practicable for

each attorney, certified public accountant,

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

The following individuals have been

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

of the expedited proceeding provisions of

the applicable regulations:

Name

Address

Designation

Date of Suspension

Booker, William G.

Acevado, Gustavo

Piotti, Wayne H.

Burley, Franklin R.

Kent, William F.

Levine, Jack

Kapral, Stephen M.

Bell, Abraham E.

Jackson, Paul

Clay, Henry

Cooley, Donald

Duke, Charla R.

Devins, George

Williams, Ronald A.

Winston-Salem, NC

Laredo, TX

Homer, NY

Monroe, LA

Winston-Salem, NC

Phoenix, AZ

Richmond, VA

St. Louis, MO

Burley, ID

New York, NY

Springfield, MO

Oakland, CA

Munsey Park, NY

Doylestown, PA

CPA

Attorney

CPA

Attorney

CPA

Attorney

CPA

Enrolled Agent

Indefinite from June 12, 1997

Indefinite from July 23, 1997

Indefinite from July 30, 1997

Indefinite from September 11, 1997

Announcement of the Consent Voluntary Suspension of Attorneys,

Certified Public Accountants, Enrolled Agents, and Enrolled Actuaries

From Practice Before the Internal Revenue Service

Under 31 Code of Federal Regulations,

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

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

the Internal Revenue Service, may offer

his consent to suspension from such practice. The Director of Practice, in his discretion, may suspend an attorney, certi-

1997–45 I.R.B.

fied public accountant, enrolled agent, or

enrolled actuary in accordance with the

consent offered.

Attorneys, certified public accountants,

enrolled agents, and enrolled actuaries are

prohibited in any Internal Revenue Service matter from directly or indirectly employing, accepting assistance from, being

employed by, or sharing fees with, any

practitioner disbarred or suspended from

practice before the Internal Revenue Service.

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

actuaries to identify practitioners under

consent suspension from practice before the

Internal Revenue Service, the Director

of Practice will announce in the Internal

Revenue Bulletin the names and addresses of practitioners who have been

November 10, 1997

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

announcement will appear in the weekly

Bulletin at the earliest practicable date

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

practicable for each attorney, certified

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

consolidated and published in the Cumulative Bulletin.

The following individuals have been

placed under consent suspension from

practice before the Internal Revenue Service:

Name

Address

Designation

Date of Suspension

Weksler, Mark R.

Womble, Bill R.

Robinson II, Vaughn

Kim, Kwang W.

Tymas, George M.

Rattet, Robert L.

Noles, R. Leon

Harbin, Glenn E.

Harms, John G.

Lewis, Craig S.

Terranova, Michael P.

Frantz, Barbara A.

Smith, Glen L.

Bayus Sr., Gerald A.

Winton, D. Michael

McNabb, Gerald

Ness, Stanley L.

Culmer, Thomas A.

Ziskind, Sherman

Huston, James L.

Fulthorpe, Douglas R.

Suszko, Richard J.

Bromagen, Kent E.

Shawhan, David W.

Kennedy Jr., Joseph

Brummet, Richard E.

Pollard, E. Dwain

Tamminga, Roland R.

Ayala, Simon

Balmer, Alan J.

Fox, Eugene

Sanford, Paul L.

Glemann, Richard P.

Rubey, Patrick J.

Coverdale Jr., Alphonso

Arlington Heights, IL

Dallas, TX

Midland, TX

Schaumburg, IL

Russellton, PA

New Rochelle, NY

N. Little Rock, AR

Bakersfield, CA

Lemont, PA

Savannah, GA

Lake Charles, LA

Pontiac, IL

Edina, MN

Hubbard, OH

Clovis, NM

White Bear, MN

Minneapolis, MN

Devils Lake, ND

Dunlevy, PA

Kingman, AZ

St. Petersburg, FL

La Mesa, CA

Dayton, OH

Xenia, OH

Santa Barbara, CA

Hinsdale, IL

Idabell, OK

Belmont, NH

Oxnard, CA

Fairfield, IA

Rockville Centre, NY

Avon, CT

Jacksonville Beach, FL

Chicago, IL

Philadelphia, PA

CPA

Attorney

CPA

Attorney

CPA

Attorney

CPA

Enrolled Agent

Attorney

CPA

Enrolled Agent

CPA

Enrolled Agent

CPA

Attorney

Enrolled Agent

CPA

Enrolled Agent

June 16, 1997 to June 15, 2000

Indefinite from June 19, 1997

June 30, 1997 to December 29, 1997

July 1, 1997 to February 28, 1999

July 26, 1997 to June 25, 1998

July 30, 1997 to October 29, 1997

July 31, 1997 to December 30, 1998

August 1, 1997 to November 30, 1997

August 1, 1997 to July 31, 1998

August 7, 1997 to May 6, 1998

August 8, 1997 to July 31, 1999

August 9, 1997 to November 8, 1997

August 11, 1997 to July 10, 1998

August 15, 1997 to November 14, 1997

August 22, 1997 to January 21, 2000

August 25, 1997 to February 24, 1998

September 1, 1997 to November 30, 1997

September 1, 1997 to February 28, 1999

September 1, 1997 to December 31, 1997

September 1, 1997 to August 30, 1998

September 1, 1997 to August 31, 1999

September 1, 1997 to February 28, 2000

September 1, 1997 to August 31, 1999

September 1, 1997 to May 31, 1998

September 3, 1997 to January 2, 1998

September 4, 1997 to August 3, 1999

September 5, 1997 to December 4, 1997

Indefinite from September 19, 1997

September 30, 1997 to August 29, 1999

October 1, 1997 to March 31, 1998

November 1, 1997 to July 31, 1997

November 1, 1997 to October 31, 1999

November 1, 1997 to January 31, 1999

December 1, 1997 to November 30, 2000

November 10, 1997

1997–45 I.R.B.

Announcement of the Suspension of Attorneys, Certified Public

Accountants, Enrolled Agents, and Enrolled Actuaries From Practice

Before the Internal Revenue Service

Under Section 330, Title 31 of the United

States Code, the Secretary of the Treasury,

after due notice and opportunity for hearing,

is authorized to suspend or disbar from practice before the Internal Revenue Service any

person who has violated the rules and regulations governing the recognition of attorneys, certified public accountants, enrolled

agents, or enrolled actuaries to practice before the Internal Revenue Service.

Attorneys, certified public accountants,

enrolled agents, and enrolled actuaries are

prohibited in any Internal Revenue Service

matter from directly or indirectly employ-

ing, accepting assistance from, being employed by, or sharing fees with, any practitioner disbarred or under suspension from

practice before the Internal Revenue Service.

To enable attorneys, certified public accountants, enrolled agents, and enrolled actuaries to identify such disbarred or suspended practitioners, the Director of

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

practitioners who have been disbarred or

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

tant, enrolled agent, or enrolled actuary, and

date of disbarment or period of suspension.

This announcement will appear in the

weekly Bulletin for five successive weeks

or for as many weeks as is practicable for

each attorney, certified public accountant,

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

After due notice and opportunity for

hearing before an administrative law judge,

the following individuals have been suspended from further practice before the Internal Revenue Service:

Name

Address

Designation

Date of Suspension

Makos, Deborah

Friberg, John P.

Green Bay, WI

Milwaukee, WI

Enrolled Agent

CPA

June 20, 1997 to May 19, 2000

July 20, 1997 to June 19, 2001

Announcement of the Disbarment of Attorneys, Certified Public

Accountants, Enrolled Agents, and Enrolled Actuaries From Practice

Before the Internal Revenue Service

Under Section 330, Title 31 of the United

States Code, the Secretary of the Treasury,

after due notice and opportunity for hearing,

is authorized to suspend or disbar from practice before the Internal Revenue Service any

person who has violated the rules and regulations governing the recognition of attorneys, certified public accountants, enrolled

agents, or enrolled actuaries to practice before the Internal Revenue Service.

Attorneys, certified public accountants,

enrolled agents, and enrolled actuaries are

prohibited in any Internal Revenue Service

matter from directly or indirectly employ-

ing, accepting assistance from, being employed by, or sharing fees with, any practitioner disbarred or under suspension from

practice before the Internal Revenue Service.

To enable attorneys, certified public accountants, enrolled agents, and enrolled actuaries to identify such disbarred or suspended practitioners, the Director of

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

practitioners who have been disbarred or

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

tant, enrolled agent, or enrolled actuary, and

the date of disbarment or period of suspension. This announcement will appear in the

weekly Bulletin for five successive weeks

or for as many weeks as is practicable for

each attorney, certified public accountant,

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

After due notice and opportunity for

hearing before an administrative law judge,

the following individuals have been disbarred from further practice before the Internal Revenue Service:

Name

Address

Designation

Effective Date

Hoyt III, Walter J.

Lu, John S.

McCue, William T.

Foster, Dennis S.

Burns, OR

New York, NY

Glen Rock, NJ

Pittsburgh, PA

Enrolled Agent

Attorney

CPA

July 13, 1997

July 21, 1997

September 8, 1997

1997–45 I.R.B.

November 10, 1997

Definition of Terms

Revenue rulings and revenue procedures

(hereinafter referred to as “rulings”) that

have an effect on previous rulings use the

following defined terms to describe the

effect:

Amplified describes a situation where

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

being extended to apply to a variation of

the fact situation set forth therein. Thus,

if an earlier ruling held that a principle

applied to A, and the new ruling holds

that the same principle also applies to B,

the earlier ruling is amplified. (Compare

with modified, below).

Clarified is used in those instances

where the language in a prior ruling is

being made clear because the language

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

prior ruling is being changed.

Distinguished describes a situation

where a ruling mentions a previously

published ruling and points out an essential difference between them.

Modified is used where the substance

of a previously published position is

being changed. Thus, if a prior ruling

held that a principle applied to A but not

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

plies to both A and B, the prior ruling is

modified because it corrects a published

position. (Compare with amplified and

clarified, above).

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

in a ruling that lists previously published

rulings that are obsoleted because of

changes in law or regulations. A ruling

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

subsequently adopted.

Revoked describes situations where the

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

is being stated in the new ruling.

Superseded describes a situation where

the new ruling does nothing more than

restate the substance and situation of a

previously published ruling (or rulings).

Thus, the term is used to republish under

the 1986 Code and regulations the same

position published under the 1939 Code

and regulations. The term is also used

when it is desired to republish in a single

ruling a series of situations, names, etc.,

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

new ruling does more than restate the

substance of a prior ruling, a combination

of terms is used. For example, modified

and superseded describes a situation

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

is continued without change in part and it

is desired to restate the valid portion of

the previously published ruling in a new

ruling that is self contained. In this case

the previously published ruling is first

modified and then, as modified, is superseded.

Supplemented is used in situations in

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

countries, is published in a ruling and

that list is expanded by adding further

names in subsequent rulings. After the

original ruling has been supplemented

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

ruling and the additions, and supersedes

all prior rulings in the series.

Suspended is used in rare situations to

show that the previous published rulings

will not be applied pending some future

action such as the issuance of new or

amended regulations, the outcome of

cases in litigation, or the outcome of a

Service study.

Abbreviations

E.O.—Executive Order.

ER—Employer.

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contribution Act.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign Corporation.

G.C.M.—Chief Counsel’s Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Internal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

M—Minor.

Nonacq.—Nonacquiescence.

O—Organization.

P—Parent Corporation.

PHC—Personal Holding Company.

PO—Possession of the U.S.

PR—Partner.

PRS—Partnership.

PTE—Prohibited Transaction Exemption.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statements of Procedral Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

U.S.C.—United States Code.

X—Corporation.

Y—Corporation.

Z—Corporation.

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

Bulletin.

A—Individual.

Acq.—Acquiescence.

B—Individual.

BE—Beneficiary.

BK—Bank.

B.T.A.—Board of Tax Appeals.

C.—Individual.

C.B.—Cumulative Bulletin.

CFR—Code of Federal Regulations.

CI—City.

COOP—Cooperative.

Ct.D.—Court Decision.

CY—County.

D—Decedent.

DC—Dummy Corporation.

DE—Donee.

Del. Order—Delegation Order.

DISC—Domestic International Sales Corporation.

DR—Donor.

E—Estate.

EE—Employee.

November 10, 1997

1997–45 I.R.B.

Numerical Finding List1

Bulletins 1997–27 through 1997–44

Announcements:

97–61, 1997–29 I.R.B. 13

97–67, 1997–27 I.R.B. 37

97–68, 1997–28 I.R.B. 13

97–69, 1997–28 I.R.B. 13

97–70, 1997–29 I.R.B. 14

97–71, 1997–29 I.R.B. 15

97–72, 1997–29 I.R.B. 15

97–73, 1997–30 I.R.B. 86

97–74, 1997–31 I.R.B. 16

97–75, 1997–32 I.R.B. 28

97–76, 1997–32 I.R.B. 28

97–77, 1997–33 I.R.B. 58

97–78, 1997–34 I.R.B. 11

97–79, 1997–35 I.R.B. 8

97–80, 1997–34 I.R.B. 12

97–81, 1997–34 I.R.B. 12

97–82, 1997–34 I.R.B. 12

97–83, 1997–34 I.R.B. 13

97–84, 1997–34 I.R.B. 13

97–85, 1997–35 I.R.B. 8

97–86, 1997–35 I.R.B. 9

97–87, 1997–35 I.R.B. 9

97–88, 1997–35 I.R.B. 9

97–89, 1997–36 I.R.B. 10

97–90, 1997–36 I.R.B. 10

97–91, 1997–37 I.R.B. 25

97–92, 1997–37 I.R.B. 26

97–93, 1997–36 I.R.B. 11

97–94, 1997–36 I.R.B. 12

97–95, 1997–36 I.R.B. 12

97–96, 1997–39 I.R.B. 15

97–97, 1997–38 I.R.B. 22

97–98, 1997–39 I.R.B. 15

97–99, 1997–40 I.R.B. 7

97–100, 1997–40 I.R.B. 8

97–101, 1997–41 I.R.B. 13

97–102, 1997–41 I.R.B. 15

97–103, 1997–41 I.R.B. 16

97–104, 1997–42 I.R.B. 39

97–105, 1997–42 I.R.B. 40

97–107, 1997–43 I.R.B. 25

97–108, 1997–43 I.R.B. 25

Notices–Continued

Treasury Decisions:

97–47, 1997–35 I.R.B. 5

97–48, 1997–35 I.R.B. 5

97–49, 1997–36 I.R.B. 8

97–50, 1997–37 I.R.B. 21

97–51, 1997–38 I.R.B. 20

97–52, 1997–38 I.R.B. 20

97–53, 1997–40 I.R.B. 6

97–54, 1997–41 I.R.B. 7

97–55, 1997–40 I.R.B. 6

97–56, 1997–43 I.R.B. 19

97–57, 1997–43 I.R.B. 19

8722, 1997–29 I.R.B. 4

8723, 1997–30 I.R.B. 4

8724, 1997–36 I.R.B. 4

8725, 1997–37 I.R.B. 16

8726, 1997–34 I.R.B. 7

8727, 1997–34 I.R.B. 5

8728, 1997–37 I.R.B. 4

8729, 1997–38 I.R.B. 4

8730, 1997–38 I.R.B. 16

8731, 1997–42 I.R.B. 6

8732, 1997–42 I.R.B. 4

8733, 1997–43 I.R.B. 8

8734, 1997–44 I.R.B. 5

8735, 1997–43 I.R.B. 4

Railroad Retirement Quarterly Rate:

1997–28 I.R.B. 5

Public Laws

105–35, 1997–43 I.R.B. 13

Proposed Regulations:

REG–104893–97, 1997–29 I.R.B. 13

REG–105160–97, 1997–37 I.R.B. 22

REG–106043–97, 1997–37 I.R.B. 24

REG–107644–97, 1997–32 I.R.B. 24

REG–208151–91, 1997–38 I.R.B. 21

REG–246250–96, 1997–42 I.R.B. 30

Revenue Procedures:

97–32, 1997–27 I.R.B. 9

97–32A, 1997–34 I.R.B. 10

97–33, 1997–30 I.R.B. 10

97–34, 1997–30 I.R.B. 14

97–35, 1997–33 I.R.B. 11

97–36, 1997–33 I.R.B. 14

97–37, 1997–33 I.R.B. 18

97–38, 1997–33 I.R.B. 43

97–39, 1997–33 I.R.B. 48

97–40, 1997–33 I.R.B. 50

97–41, 1997–33 I.R.B. 5

97–42, 1997–33 I.R.B. 57

97–43, 1997–39 I.R.B. 12

97–44, 1997–41 I.R.B. 8

97–45, 1997–41 I.R.B. 10

97–46, 1997–42 I.R.B. 10

97–47, 1997–42 I.R.B. 19

97–48, 1997–43 I.R.B. 19

97–49, 1997–43 I.R.B. 22

Court Decisions:

Revenue Rulings:

2061, 1997–31 I.R.B. 5

2062, 1997–32 I.R.B. 8

97–27, 1997–27 I.R.B. 4

97–28, 1997–28 I.R.B. 4

97–29, 1997–28 I.R.B. 4

97–30, 1997–31 I.R.B. 12

97–31, 1997–32 I.R.B. 4

97–32, 1997–33 I.R.B. 4

97–33, 1997–34 I.R.B. 4

97–34, 1997–34 I.R.B. 14

97–35, 1997–35 I.R.B. 4

97–36, 1997–36 I.R.B. 5

97–37, 1997–37 I.R.B. 15

97–38, 1997–38 I.R.B. 14

97–39, 1997–39 I.R.B. 4

97–40, 1997–39 I.R.B. 8

97–41, 1997–40 I.R.B. 4

97–42, 1997–41 I.R.B. 4

97–43, 1997–42 I.R.B. 8

Delegation Orders:

97 (Rev. 34), 1997–41 I.R.B. 14

172 (Rev. 5), 1997–28 I.R.B. 6

Notices:

97–37, 1997–27 I.R.B. 4

97–38, 1997–27 I.R.B. 8

97–39, 1997–27 I.R.B. 8

97–40, 1997–28 I.R.B. 6

97–41, 1997–28 I.R.B. 6

97–42, 1997–29 I.R.B. 12

97–43, 1997–30 I.R.B. 9

97–44, 1997–31 I.R.B. 15

97–45, 1997–33 I.R.B. 7

97–46, 1997–34 I.R.B. 10

1 A cumulative list of all revenue rulings, revenue

procedures, Treasury decisions, etc., published in

Internal Revenue Bulletins 1997–1 through 1997–26

will be found in Internal Revenue Bulletin 1997–27,

dated July 7, 1997.

1997–45 I.R.B.

November 10, 1997

Finding List of Current Action on

Previously Published Items1

Bulletins 1997–27 through 1997–44

*Denotes entry since last publication

Revenue Procedures:

82–36

Modified and superseded by

97–49, 1997–43 I.R.B. 22

96–36

Superseded by

97–34, 1997–30 I.R.B. 14

96–42

Superseded by

97–27, 1997–27 I.R.B. 9

97–32

Modified and amplified by

97–32A, 1997–34 I.R.B. 10

Revenue Rulings:

89–42

Supplemented by

97–31, 1997–32 I.R.B. 4

93–76

Clarified, modified, partially

obsoleted, and superceded by

97–39, 1997–39 I.R.B 4

94–7

Clarified, modified, partially

obsoleted, and superceded by

97–39, 1997–39 I.R.B 4

1 A cumulative finding list for previously published

items mentioned in Internal Revenue Bulletins

1997–1 through 1997–26 will be found in Internal

Revenue Bulletin 1997–27, dated July 7, 1997.

November 10, 1997

1997–45 I.R.B.

Notes

1997–45 I.R.B.

November 10, 1997

Notes

November 10, 1997

1997–45 I.R.B.

INTERNAL REVENUE BULLETIN

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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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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.

WE WELCOME COMMENTS ABOUT THE

INTERNAL REVENUE BULLETIN

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would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page

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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.