Bulletin No. 1996–33

Agency decision

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Text

August 12, 1996

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.

SPECIAL ANNOUNCEMENT

Announcement 96–71, page 16.

The Ninth Annual Institute on Current Issues in International Taxation, co-sponsored with The George Washington University, will be held December 12 and 13, 1996,

at the J.W. Marriott Hotel in Washington, DC.

INCOME TAX

Rev. Rul. 96–38, page 4.

Pooled income fund; community trust; maintenance

requirement. This ruling provides guidance on when a

fund maintained by a community trust satisfies the

maintenance requirement for a pooled income fund

under section 642(c)(5)(E) of the Code.

T.D. 8680, page 5.

IA–29–96, page 14.

Temporary and proposed regulations relate to extensions of time for making certain elections under the

Code. A public hearing on the proposed regulations will

be held on October 30, 1996. Rev. Procs. 87–32 and

92–20 modified.

PS–22–96, page 15.

Proposed regulations relate to the final generationskipping transfer (GST) tax regulations under chapter 13

of the Code.

Finding Lists begin on page 21.

GL–7–96, page 13.

Proposed regulations under section 6335 of the Code

relate to the sale of seized property.

EXEMPT ORGANIZATIONS

Announcement 96–73, page 18.

A list is given of organizations now classified as private

foundations.

Announcement 96–74, page 19.

A list is provided of organizations that no longer qualify

as organizations to which contributions are deductible

under section 170 of the Code.

ADMINISTRATIVE

Notice 96–40, page 11.

Accounting methods. Comments are invited on possible changes to Rev. Proc. 92–20, 1992–1 C.B. 685,

which provides the general procedures for a taxpayer to

change a method of accounting.

Rev. Proc. 96–39, page 11.

Section 355 No Rule. This procedure amplifies the ‘‘No

Rule’’ Rev. Proc. 96–3, 1996–1 I.R.B. 82, to include

certain transactions under section 355 of the Code.

Announcement 96–72, page 16.

T.D. 8644, 1996–7 I.R.B. 16, relating to generationskipping transfer tax, is corrected.

Mission of the Service

The purpose of the Internal Revenue Service is to

collect the proper amount of tax revenue at the least

cost; serve the public by continually improving the

quality of our products and services; and perform in a

manner warranting the highest degree of public

confidence in our integrity, efficiency and fairness.

Statement of Principles

of Internal Revenue

Tax Administration

The Service also has the responsibility of applying

and administering the law in a reasonable,

practical manner. Issues should only be raised by

examining of ficers when they have merit, never

arbitrarily or for trading purposes. At the same

time, the examining officer should never hesitate

to raise a meritorious issue. It is also important

that care be exercised not to raise an issue or to

ask a court to adopt a position inconsistent with

an established Service position.

The function of the Internal Revenue Service is to

administer the Internal Revenue Code. Tax policy

for raising revenue is determined by Congress.

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

carry out that policy by correctly applying the laws

enacted by Congress; to determine the reasonable

meaning of various Code provisions in light of the

Congressional purpose in enacting them; and to

perform this work in a fair and impartial manner,

with neither a government nor a taxpayer point of view.

Administration should be both reasonable and

vigorous. It should be conducted with as little

delay as possible and with great cour tesy and

considerateness. It should never try to overreach,

and should be reasonable within the bounds of law

and sound administration. It should, however, be

vigorous in requiring compliance with law and it

should be relentless in its attack on unreal tax

devices and fraud.

At the heart of administration is interpretation of the

Code. It is the responsibility of each person in the

Service, charged with the duty of interpreting the

law, to try to find the true meaning of the statutory

provision and not to adopt a strained construction in

the belief that he or she is ‘‘protecting the revenue.’’

The revenue is properly protected only when we ascertain and apply the true meaning of the statute.

Introduction

The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for

announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation,

court decisions, and other items of general interest. It is

published weekly and may be obtained from the Superintendent of Documents on a subscription basis. Bulletin

contents of a permanent nature are consolidated semiannually into Cumulative Bulletins, which are sold on a

single-copy basis.

court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are

cautioned against reaching the same conclusions in

other cases unless the facts and circumstances are

substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on

provisions of the Internal Revenue Code of 1986.

It is the policy of the Service to publish in the Bulletin all

substantive rulings necessary to promote a uniform

application of the tax laws, including all rulings that

supersede, revoke, modify, or amend any of those

previously published in the Bulletin. All published rulings

apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management

are not published; however, statements of internal

practices and procedures that affect the rights and

duties of taxpayers are published.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows:

Subpart A, Tax Conventions, and Subpart B, Legislation

and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to

these subjects are contained in the other Parts and

Subparts. Also included in this part are Bank Secrecy

Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the

Treasury’s Office of the Assistant Secretary (Enforcement).

Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts

stated in the revenue ruling. In those based on positions

taken in rulings to taxpayers or technical advice to

Service field offices, identifying details and information

of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory

requirements.

Part IV.—Items of General Interest.

With the exception of the Notice of Proposed Rulemaking and the disbarment and suspension list included in

this part, none of these announcements are consolidated in the Cumulative Bulletins.

Rulings and procedures reported in the Bulletin do not

have the force and effect of Treasury Department

Regulations, but they may be used as precedents.

Unpublished rulings will not be relied on, used, or cited

as precedents by Service personnel in the disposition of

other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations,

The first Bulletin for each month includes an index for

the matters published during the preceding month.

These monthly indexes are cumulated on a quarterly and

semiannual basis, and are published in the first Bulletin

of the succeeding quarterly and semi-annual period,

respectively.

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

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

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

Section 170.—Charitable

Contributions

26 CFR 1.170A–9: Definition

170(b)(1)(A) organization.

section

Does a fund satisfy the pooled income fund

requirements of § 642(c)(5)(E) of the Internal

Revenue Code if the fund is maintained by a

community trust and in the instrument of transfer

either (1) the donor gives the community trust

complete discretion to determine how the remainder interest will be used to further charitable

purposes, or (2) the donor requests or requires that

the community trust place the proceeds from the

remainder interest in one of its component funds

that is designated to benefit a specific charitable

organization? See Rev. Rul. 96–38, on this page.

Section 355.—Distribution of Stock

and Securities of a Controlled

Corporation

26 CFR 1.355–2: Limitations.

The revenue procedure amplifies the ‘‘No Rule’’

revenue procedure, Rev. Proc. 96–3, 1996–1 I.R.B.

82, to include certain transactions under § 355 of

the Code. See Rev. Proc. 96–39, page 11.

Section 642.—Special Rules for

Credits and Deductions

26 CFR 1.642(c)–5: Definition of pooled income

fund.

(Also § 170; 1.170A–9.)

Pooled income fund; community

trust; maintenance requirement. This

ruling provides guidance on when a

fund maintained by a community trust

satisfies the maintenance requirement

for a pooled income fund under section

642(c)(5)(E) of the Code.

Rev. Rul. 96–38

ISSUE

Does a fund satisfy the pooled income fund requirements of § 642(c)(5)(E) of the Internal Revenue Code if the

fund is maintained by a community trust

and in the instrument of transfer either

(1) the donor gives the community trust

complete discretion to determine how

the remainder interest will be used to

further charitable purposes, or (2) the

donor requests or requires that the community trust place the proceeds from the

remainder interest in one of its component funds that is designated to benefit a

specific charitable organization?

FACTS

Both A and B are organizations

described in § 170(b)(1)(A)(vi) and

are community trusts described in

§ 1.170A–9(e)(10) of the Income Tax

Regulations. Each pooled income fund’s

declaration of trust and instruments of

transfer (collectively referred to as the

‘‘governing instrument’’) satisfy the requirements of § 642(c)(5)(A)–(D) and

(F); therefore, each proposed fund will

qualify as a pooled income fund if the

provisions of § 642(c)(5)(E) are satisfied.

Situation 1. A proposes to establish a

pooled income fund that A will maintain. Under the terms of the governing

instrument, a donor contributes to A an

irrevocable remainder interest in the

property that the donor transfers to the

pooled income fund, and A has full

discretion to determine how to use the

remainder interest to further A’s charitable purposes.

Situation 2. B proposes to establish a

pooled income fund that B will maintain. Under the terms of the governing

instrument, a donor contributes to B an

irrevocable remainder interest in the

property that the donor has transferred

to the pooled income fund. In the instrument of transfer, however, the donor

may either request or require that after

the death of the donor’s designated

income beneficiaries, B place the proceeds of the remainder interest in one of

B’s component funds that satisfies the

requirements of § 1.170A–9(e)(11)(ii)

and is designated to benefit a specific

charitable organization. Under the terms

of B’s donor-designated component

funds, B makes current distributions of

the income of the component fund to

the designated charitable organization. B

may also distribute principal to the

designated charitable organization to finance special projects or in extraordinary circumstances. As required in

§ 1.170A–9(e)(11)(v)(B)(1), B’s governing body has the power to modify any

restriction on the distributions from its

component funds if, in the sole judgment of the governing body, the restriction becomes unnecessary, incapable of

fulfillment, or inconsistent with the

charitable needs of the community or

area served.

LAW AND ANALYSIS

A pooled income fund is a trust that

satisfies the requirements listed in

§ 642(c)(5). Section 642(c)(5)(A) and

§ 1.642(c)–5(b)(1) provide that each donor who transfers property to the trust

must contribute an irrevocable remainder interest in the property to or for the

use of an organization described in

§ 170(b)(1)(A), except certain private

foundations described in clauses (vii)

and (viii) of § 170(b)(1)(A).

Section 642(c)(5)(E) provides that the

trust must be maintained by the organization to which the remainder interest is

contributed and of which no donor or

beneficiary of an income interest is a

trustee. Section 1.642(c)–5(b)(5) provides that the maintenance requirement

of § 642(c)(5)(E) is satisfied only if the

public charity exercises control directly

or indirectly over the fund.

The maintenance requirement is designed to ensure that the fund’s assets

will not be manipulated for the benefit

of noncharitable interests and that the

amount received by the charitable organization will reflect the amount of any

charitable contribution deduction the donor may have taken for contributing the

remainder interest. H.R. Rep. No. 413

(Part 1), 91st Cong., 1st Sess. 58 (1969),

1969–3 C.B. 200, 237; and S. Rep. No.

552, 91st Cong., 1st Sess. 87 (1969),

1969–3 C.B. 423, 479. For an organization to satisfy the maintenance requirement of § 642(c)(5)(E), it may not be

serving merely as a conduit for a gift to

another beneficiary, but instead must be

receiving a contribution itself that it will

use to achieve its charitable purposes.

Under § 1.170A–9(e)(11), a group of

funds is treated as a single community

trust if the funds operate under a common name, have a common governing

instrument, prepare common reports,

and are under the direction of a common governing board that has the power

to modify any restriction on distributions from any of the funds, if in the

sole judgment of the governing body,

the restriction becomes unnecessary, incapable of fulfillment, or inconsistent

with the charitable needs of the community or area served. Under § 1.170A–

9(e)(11)(ii), a fund created by gift, bequest, or other transfer that is not

subject to any material restriction or

condition (within the meaning of

§ 1.507–2(a)(8)) can be treated as a

component part of the single entity. A

fund held by a community trust and

designated by the donor to pay its

income annually to a specific public

charity is not subject to a material

restriction and therefore may qualify as

a component part of the community

trust (component fund). § 1.507–

2(a)(8)(v), Example (3).

In Situation 1, the governing instrument provides that the donor contributes

an irrevocable remainder interest in the

contributed property to A, and A has

discretion over how to use the remainder interest to further charitable purposes. Although A may elect to use

some or all of the remainder interest for

the benefit of other charitable organizations, A is given full dominion and

control over the remainder interest.

Therefore, for § 642(c)(5), a donor in

Situation 1 will be treated as contributing the remainder interest to A. Because

A will maintain the fund, the fund will

satisfy the requirements of § 642(c)(5)(E) and will qualify as a pooled income

fund under § 642(c)(5).

In Situation 2, the governing instrument allows a donor in the instrument

of transfer either to request or to require

that B place the proceeds from the

remainder interest in one of its designated funds that is a component part of

B under § 1.170A–9(e)(11)(ii). Under

§ 1.170A–9(e)(11), B’s component

funds, including its donor-designated

funds, are treated as a single entity,

rather than separate entities. Thus, even

though the donor in Situation 2 will

either request or require that B place the

proceeds of the remainder interest into

one of its donor-designated funds, the

donor will be treated under § 642(c)(5)

as contributing the remainder interest to

B. Because B will maintain the fund, the

fund will satisfy the requirements of

§ 642(c)(5)(E) and will qualify as a

pooled income fund under § 642(c)(5).

HOLDINGS

(1) A fund maintained by a community trust satisfies the maintenance requirement of § 642(c)(5)(E) if, in the

instrument of transfer, the donor gives

the remainder interest to the community

trust with full discretion to choose how

the remainder interest will be used to

further charitable purposes.

(2) A fund maintained by a community trust satisfies the maintenance requirement of § 642(c)(5)(E) if, in the

instrument of transfer, the donor either

requests or requires that the community

trust place the proceeds of the remainder

interest in a fund that has been designated to be used for the benefit of

specific charitable organizations provided the fund is a component part that

satisfies the requirements of § 1.170A–

9(e)(11)(ii).

DRAFTING INFORMATION

The principal author of this revenue

ruling is Jeffrey A. Erickson of the

Office of Assistant Chief Counsel

(Passthroughs and Special Industries).

For further information regarding this

revenue ruling, contact Mr. Erickson at

(202) 622–3070 (not a toll-free call).

Section 7805.—Rules and

Regulations

26 CFR 301.9100–1T: Extensions of time to make

elections (temporary).

T.D. 8680

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 301 and 602

Extensions of Time to Make

Elections

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Temporary regulations.

SUMMARY: This document contains

temporary regulations concerning extensions of time for making certain elections under the Internal Revenue Code

(Code). The regulations provide the

standards that the Commissioner will

use to grant taxpayers extensions of

time for making these elections. The

text of these temporary regulations also

serves as the text of the proposed regulations set forth in IA–29–96 on page 14

in this issue of the Bulletin.

DATES: These regulations are effective

June 27, 1996.

For dates of applicability, see

§ 301.9100–1T(h) of these regulations.

FOR FURTHER INFORMATION

CONTACT: Robert A. Testoff at (202)

622– 4960 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

These regulations are being issued

without prior notice and public procedure pursuant to the Administrative Procedure Act (5 U.S.C. 553). For this

reason, the collection of information

contained in these regulations has been

reviewed and, pending receipt and

evaluation of public comments, approved by the Office of Management

and Budget under control number 1545–

1488. Responses to this collection of

information are required to obtain an

extension of time for making an election.

An agency may not conduct or sponsor, and a person is not required to

respond to, a collection of information

unless the collection of information displays a valid control number.

For further information concerning

this collection of information, where to

submit comments on the collection of

information and the accuracy of the

estimated burden, and suggestions for

reducing this burden, please refer to the

preamble to IA–29–96 on page 14 in

this issue of the Bulletin.

Books or records relating to a collection of information must be retained as

long as their contents may become material in the administration of any internal revenue law. Generally, tax returns

and tax return information are confidential, as required by 26 U.S.C. 6103.

Background

This document contains temporary

regulations amending the Regulations on

Procedure and Administration (26 CFR

part 301) concerning extensions of time

for making certain elections. The regulations provide the standards that the

Commissioner will use to grant taxpayers extensions of time for making these

elections. These standards provide relief

to taxpayers who reasonably and in

good faith fail to make a timely election

when granting relief will not prejudice

the interests of the government. The

regulations provide a means by which

taxpayers can be in the same position

they would have been in had they made

their elections in a timely fashion.

Explanation of Provisions

These temporary regulations provide

the standards the Commissioner will use

to determine whether to grant an extension of time to make an election when

the deadline for making the election is

prescribed by regulation, revenue ruling,

revenue procedure, notice, or announcement published in the Federal Register

or the Internal Revenue Bulletin (regulatory election). Under section 6081(a),

these regulations also provide an automatic extension of time to make an

election when the deadline for making

the election is prescribed by statute

(statutory election) and the deadline for

making the election is the due date of

the return or the due date of the return

including extensions. These regulations

adopt and revise the standards for relief

provided in Rev. Proc. 92–85, 1992–2

C.B. 490.

Automatic Extensions

Rev. Proc. 92–85 provides an automatic 12-month extension for certain

regulatory elections listed in Appendix A

of that revenue procedure. The temporary regulations continue the automatic

12-month extension and update the list

of eligible regulatory elections.

Rev. Proc. 92–85 also provides an

automatic 6-month extension for statutory elections when the deadline for

making the election is prescribed as the

due date of the return or the due date of

the return including extensions. The

temporary regulations expand the automatic 6-month extension to include

regulatory elections.

under section 6662; (2) the taxpayer was

fully informed of the required election

and related tax consequences and chose

not to file the election; or (3) the

taxpayer uses hindsight in requesting

relief.

The temporary regulations adopt the

standards for prejudice to the interests

of the government in Rev. Proc. 92–85.

The regulations provide that the interests

of the government are deemed to be

prejudiced if granting relief would result

in a taxpayer having a lower tax liability

than the taxpayer would have had if the

regulatory election had been timely

made. In addition, the interests of the

government are ordinarily deemed to be

prejudiced if the tax year in which the

election should have been made or any

affected tax years are closed by the

statute of limitations.

Other Extensions

Accounting Method and Period Elections

Rev. Proc. 92–85 provides relief for

certain regulatory elections that do not

qualify for relief under the automatic

extensions. Rev. Proc. 92–85 requires a

taxpayer to demonstrate that (1) it acted

reasonably and in good faith and (2)

granting relief will not prejudice the

interests of the government. The temporary regulations continue to provide extensions for such regulatory elections

upon a showing of reasonable action

and good faith and no prejudice to the

interests of the government.

The temporary regulations adopt the

standards for reasonable action and good

faith in Rev. Proc. 92–85. The regulations provide that a taxpayer is deemed

to have acted reasonably and in good

faith if: (1) the taxpayer applies for

relief before the failure to make the

regulatory election is discovered by the

IRS; (2) the taxpayer inadvertently

failed to make the election because of

intervening events beyond its control;

(3) the taxpayer failed to make the

election because after exercising reasonable diligence the taxpayer was unaware

of the necessity for the election; (4) the

taxpayer reasonably relied on written

advice of the IRS; or (5) the taxpayer

relied on a qualified tax professional,

including a professional employed by

the taxpayer, and the professional failed

to make or advise the taxpayer to make

the election. However, a taxpayer is

deemed to have not acted reasonably

and in good faith if: (1) the taxpayer is

requesting relief for an election to alter

a return position for which an accuracyrelated penalty could have been imposed

Rev. Proc. 92–85 provides limited

relief (ordinarily not to exceed 90 days

from the deadline for filing Form 3115,

Application for Change in Accounting

Method) for requests to change an accounting method subject to the procedure described in § 1.446–1(e)(3)(i) (requiring the advance written consent of

the Commissioner). The temporary regulations continue this limited relief. Rev.

Proc. 92–85 provides an automatic 12month extension for the election to use

the last-in, first-out (LIFO) inventory

method under section 472 and also

provides relief for the section 472 election beyond the automatic 12-month

extension. Rev. Proc. 92–85 is otherwise

inapplicable to accounting method regulatory elections, except for three specific

elections listed in Appendix B of that

revenue procedure.

The temporary regulations provide relief for all accounting method regulatory

elections. For example, relief will now

be available for elections under sections

197 (amortization of goodwill and certain other intangibles) and 468A (special

rules for nuclear decommissioning

costs).

The temporary regulations provide additional rules regarding what constitutes

prejudice to the interests of the government for accounting method regulatory

elections. The temporary regulations

provide that the interests of the government are deemed to be prejudiced except in unusual and compelling circumstances if: (1) the election requires an

adjustment under section 481(a); (2) the

taxpayer is under examination, requests

relief to change from an impermissible

method of accounting, and granting relief will provide the taxpayer a more

favorable method of accounting or more

favorable terms and conditions than the

taxpayer would receive if the change is

made as part of the examination; or (3)

the election provides a more favorable

method of accounting or more favorable

terms and conditions if the election is

made by a certain date or taxable year.

Rev. Proc. 92–85 provides an automatic 12-month extension for elections

to use other than the required taxable

year under section 444. Rev. Proc.

92–85 also provides limited relief (ordinarily not to exceed 90 days from the

deadline for filing Form 1128, Application to Adopt, Change, or Retain a Tax

Year) for accounting period regulatory

elections subject to Rev. Proc. 87–32,

1987–2 C.B. 396. Rev. Proc. 92–85 is

otherwise inapplicable to accounting period regulatory elections. The temporary

regulations extend the limited relief for

elections subject to Rev. Proc. 87–32 to

all other accounting period regulatory

elections except for the section 444

election, and provide relief for the section 444 election beyond the automatic

12-month extension.

Effect on other documents

Rev. Proc. 92–85, 1992–2 C.B. 490,

as modified and clarified by Rev. Proc.

93–28, 1993–2 C.B. 344, is obsolete as

of June 27, 1996.

Rev. Proc. 92–20, 1992–1 C.B. 685,

is modified as of June 27, 1996, to the

extent that the provisions of this regulation apply to applications for relief with

respect to requests to change an accounting method subject to the procedures of Rev. Proc. 92–20.

Rev. Proc. 87–32, 1987–2 C.B. 396,

is modified as of June 27, 1996, to the

extent that the provisions of this regulation apply to applications for relief with

respect to requests to change an accounting period subject to the procedures of Rev. Proc. 87–32.

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 has also been determined

that section 553(b) of the Administrative

Procedure Act (5 U.S.C. chapter 5) and

the Regulatory Flexibility Act (5 U.S.C.

chapter 6) do not apply to these regula-

tions, and, therefore, a Regulatory Flexibility Analysis is not required. Pursuant

to section 7805(f) of the Internal Revenue Code, these temporary regulations

will be submitted to the Chief Counsel

for Advocacy of the Small Business

Administration for comment on their

impact on small businesses.

Drafting Information

The principal author of these regulations is Robert A. Testoff of the Office

of Assistant Chief Counsel (Income Tax

and Accounting). However, other personnel from the IRS and Treasury Department participated in their development.

Adoption of Amendments to the Regulations

Accordingly, 26 CFR parts 301 and

602 are amended as follows:

PART 301—PROCEDURE AND

ADMINISTRATION

Paragraph 1. The authority citation for

part 301 is amended by adding entries

in numerical order to read as follows:

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

Section 301.9100–1T also issued under

26 U.S.C. 6081;

Section 301.9100–2T also issued under

26 U.S.C. 6081;

Section 301.9100–3T also issued under

26 U.S.C. 6081; * * *

Par. 2. Sections 301.9100–1T through

301.9100–3T are added to read as follows:

§ 301.9100–1T Extensions of time to

make elections (temporary).

(a) - (c) [Reserved].

(d) Introduction. The regulations under this section and §§ 301.9100–2T

through 301.9100–3T provide the standards the Commissioner will use to

determine whether to grant an extension

of time to make a regulatory election.

The regulations under this section and

§§ 301.9100–2T through 301.9100–3T

also provide an automatic extension of

time to make certain statutory elections.

An extension of time is available for

elections that a taxpayer is otherwise

eligible to make and the granting of an

extension of time is not a determination

that the taxpayer is otherwise eligible to

make the election. Section 301.9100–2T

provides automatic extensions of time

for making regulatory and statutory

elections when the deadline for making

the election is the due date of the return

or the due date of the return including

extensions. Section 301.9100–3T provides extensions of time for making

regulatory elections that do not meet the

requirements of § 301.9100–2T.

(e) Terms. The following terms have

the meanings provided below:

Election includes an application for

relief in respect of tax; a request to

adopt, change, or retain an accounting

method or accounting period; but does

not include an application for an extension of time for filing a return under

section 6081.

Regulatory election means an election

whose deadline is prescribed by a regulation published in the Federal Register,

or a revenue ruling, revenue procedure,

notice, or announcement published in

the Internal Revenue Bulletin.

Statutory election means an election

whose deadline is prescribed by statute.

Taxpayer means any person within the

meaning of section 7701(a)(1).

(f) General standards for relief. The

Commissioner in the Commissioner’s

discretion may grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more

than 6 months except in the case of a

taxpayer who is abroad), under all subtitles of the Internal Revenue Code

except subtitles E, G, H, and I, provided

the taxpayer demonstrates to the satisfaction of the Commissioner that—

(1) The taxpayer acted reasonably

and in good faith; and

(2) Granting relief will not prejudice

the interests of the government.

(g) Exceptions. Notwithstanding the

provisions of paragraph (f) of this section, an extension of time will not be

granted—

(1) For elections under section

4980A(f)(5);

(2) For elections required to be made

prior to November 20, 1970, in the case

of an election—

(i) Required to be made in or with

the taxpayer’s original income tax return;

(ii) Required to be exercised by filing

a claim for credit or refund, unless the

election is required to be exercised on

or before a date that precedes the date

of expiration of the period of limitations

provided in section 6511;

(iii) Required to be filed in a petition

to the Tax Court;

(iv) To change a previous election;

(v) To change an accounting method

as described in §§ 1.77–1 of this chapter and 1.446–1 of this chapter;

(vi) To change an accounting period

as described in § 1.442–1 of this chapter; or

(vii) To change the method of treating bad debts as described in § 1.166–1

of this chapter; or

(3) For elections that are expressly

excepted from relief or where alternative

relief is provided by a statute, a regulation published in the Federal Register,

or a revenue ruling, revenue procedure,

notice, or announcement published in

the Internal Revenue Bulletin.

(h) Effective dates. In general, this

section and §§ 301.9100–2T through

301.9100–3T are effective for all requests for relief being considered by the

IRS on June 27, 1996, and for all

requests for relief submitted on or after

June 27, 1996. However, the automatic

12-month extension and the automatic

6-month extension provided in

§ 301.9100–2T are effective for elections whose due dates are on or after

June 27, 1996.

§ 301.9100–2T Automatic extensions

(temporary).

(a) Automatic 12-month extension—

(1) In general. An automatic extension

of 12 months from the original deadline

for making a regulatory election is

granted to make elections described in

paragraph (a)(2) of this section provided

the taxpayer takes corrective action as

defined in paragraph (c) of this section

within that 12-month extension period.

(2) Elections eligible for automatic

12-month extension. The following regulatory elections are eligible for the automatic 12-month extension described in

paragraph (a)(1) of this section—

(i) The election to use other than the

required taxable year under section 444;

(ii) The election to use the last-in,

first-out (LIFO) inventory method under

section 472;

(iii) The 15-month rule for filing an

exemption application for a section

501(c)(9), 501(c)(17), or 501(c)(20) organization under section 505;

(iv) The 15-month rule for filing an

exemption application for a section

501(c)(3) organization under section

508;

(v) The election to be treated as a

homeowners association under section

528;

(vi) The election to adjust basis on

partnership transfers and distributions

under section 754;

(vii) The estate tax election to specially value qualified real property

(where the IRS has not yet begun an

examination of the filed return) under

section 2032A(d)(1);

(viii) The chapter 14 gift tax election

to treat a qualified payment right as

other than a qualified payment under

section 2701(c)(3)(C)(i); and

(ix) The chapter 14 gift tax election

to treat any distribution right as a qualified payment under section 2701(c)(3)(C)(ii).

(b) Automatic 6-month extension. An

automatic extension of 6 months from

the due date of a return excluding

extensions is granted to make regulatory

or statutory elections whose deadlines

are prescribed as the due date of the

return or the due date of the return

including extensions in the case of a

taxpayer that timely filed its return for

the year the election should have been

made, provided the taxpayer takes corrective action as defined in paragraph

extension period. This extension does

not apply, however, to regulatory or

statutory elections that must be made by

the due date of the return excluding

extensions.

this section, corrective action means

filing an original or an amended return

for the year the regulatory or statutory

election should have been made and

attaching the appropriate form or statement for making the election. For those

elections not required to be filed with a

return, corrective action means taking

the steps required to file the election in

accordance with the statute, the regulation published in the Federal Register,

or the revenue ruling, revenue procedure, notice, or announcement published

in the Internal Revenue Bulletin. Taxpayers who make an election under an

automatic extension (and all taxpayers

whose tax liability would be affected by

the election) must report their income in

a manner that is consistent with the

election and comply with all other requirements for making the election for

the year the election should have been

made and for all affected years; otherwise, the Service may invalidate the

election.

(d) Procedural requirements. Any return, statement of election, or other form

of filing that must be made to obtain an

automatic extension must provide the

following statement at the top of the

document: ‘‘FILED PURSUANT TO

§ 301.9100–2T’’. Any filing made to

obtain an automatic extension must be

sent to the same address that the filing

to make the election would have been

sent had the filing been timely made.

No request for a letter ruling is required

to obtain an automatic extension. Accordingly, user fees do not apply to

taxpayers taking corrective action to

obtain an automatic extension.

(e) The following example illustrates

the rules of this section:

Example. Taxpayer A fails to make a certain

election when filing A’s 1996 income tax return on

March 17, 1997, the due date of the return. This

election does not affect the tax liability of any

other taxpayer. The applicable regulation requires

that the election be made by attaching the appropriate form to a timely filed return including

extensions. In accordance with paragraphs (b) and

election by filing an amended return with the

appropriate form by September 15, 1997 (6

months from the March 17, 1997, due date).

§ 301.9100–3T Other extensions (temporary).

(a) In general. Requests for extensions of time for regulatory elections

that do not meet the requirements of

§ 301.9100–2T must be made under the

rules of this section. Requests for relief

subject to this section will be granted

when the taxpayer provides the evidence

(including affidavits described in paragraph (e) of this section) to establish

that the taxpayer acted reasonably and

in good faith, and granting relief will

not prejudice the interests of the government.

(b) Reasonable action and good

faith—(1) In general. Except as provided in paragraphs (b)(3)(i) through

(iii) of this section, a taxpayer is

deemed to have acted reasonably and in

good faith if the taxpayer—

(i) Requests relief under this section

before the failure to make the regulatory

election is discovered by the IRS;

(ii) Inadvertently failed to make the

election because of intervening events

beyond the taxpayer’s control;

(iii) Failed to make the election because, after exercising reasonable diligence (taking into account the taxpayer’s experience and the complexity of

the return or issue), the taxpayer was

unaware of the necessity for the election;

(iv) Reasonably relied on the written

advice of the IRS; or

(v) Reasonably relied on a qualified

tax professional, including a tax professional employed by the taxpayer, and

the tax professional failed to make, or

advise the taxpayer to make, the election.

(2) Reasonable reliance on a qualified tax professional. For purposes of

this paragraph (b), a taxpayer will not

be considered to have reasonably relied

on a qualified tax professional if the

taxpayer knew or should have known

that the professional was not—

(i) Competent to render advice on the

regulatory election; or

(ii) Aware of all relevant facts.

(3) Taxpayer deemed to have not

acted reasonably or in good faith. For

purposes of this paragraph (b), a taxpayer is deemed to have not acted

reasonably and in good faith if the

taxpayer—

(i) Seeks to alter a return position for

which an accuracy-related penalty has

been or could be imposed under section

6662 at the time the taxpayer requests

relief (taking into account any qualified

amended return filed within the meaning

of § 1.6664–2(c)(3)) of this chapter and

the new position requires or permits a

regulatory election for which relief is

requested;

(ii) Was fully informed of the required election and related tax consequences, but chose not to file the election; or

(iii) Uses hindsight in requesting relief. If specific facts have changed since

the original deadline for making the

election that make the election advantageous to a taxpayer, the IRS will not

ordinarily grant relief. In such a case,

the IRS will grant relief only when the

taxpayer provides strong proof that the

taxpayer’s decision to seek relief did not

involve hindsight.

government—(1) In general—(i) Lower

tax liability. The interests of the government are prejudiced if granting relief

would result in a taxpayer having a

lower tax liability in the aggregate for

all years to which the regulatory election applies than the taxpayer would

have had if the election had been timely

made (taking into account the time

value of money). Similarly, if the tax

consequences of more than one taxpayer

are affected by the election, the government’s interests are prejudiced if extending the time for making the election

may result in the affected taxpayers, in

the aggregate, having a lower tax liability than if the election had been timely

made.

(ii) Closed years. The interests of the

government are ordinarily prejudiced if

the tax year in which the regulatory

election should have been made or any

tax years that would have been affected

by the election had it been timely made

are closed by the period of limitations

on assessment under section 6501(a)

before the taxpayer’s receipt of a ruling

granting relief under this section. The

IRS may condition a grant of relief on

the taxpayer providing the IRS with a

statement from an independent auditor

(other than an auditor providing an

affidavit pursuant to paragraph (e)(3) of

this section) certifying that the requirements of paragraph (c)(1)(i) of this

section are satisfied.

(2) Special rules for accounting

method regulatory elections. The interests of the government are deemed to be

prejudiced except in unusual and compelling circumstances if the accounting

method regulatory election is—

(i) Subject to the procedure described

in § 1.446–1(e)(3)(i) of this chapter (requiring the advance written consent of

the Commissioner), and the request for

relief under this section is filed more

than 90 days after the deadline for filing

the Form 3115, Application for Change

in Accounting Method;

(ii) Not an election described in paragraph (c)(2)(i) of this section and requires an adjustment under section

481(a) (or would require an adjustment

under section 481(a) if the taxpayer

changed to the method of accounting for

which relief is requested in a taxable

year subsequent to the taxable year the

election should have been made);

(iii) Not an election described in

paragraph (c)(2)(i) of this section, the

taxpayer is under examination and requests relief under this section to change

from an impermissible method of accounting, and granting relief will provide the taxpayer a more favorable

method of accounting or more favorable

terms and conditions than the taxpayer

would receive if the change from the

impermissible method is made as part of

the examination; or

(iv) Not an election described in

paragraph (c)(2)(i) of this section and

the election provides a more favorable

method of accounting or more favorable

terms and conditions if the election is

made by a certain date or taxable year.

(3) Special rules for accounting period regulatory elections. The interests

of the government are deemed to be

prejudiced except in unusual and compelling circumstances if an election is an

accounting period regulatory election

(other than the election to use other than

the required taxable year under section

444) and the request for relief is filed

more than 90 days after the deadline for

filing the Form 1128, Application to

Adopt, Change, or Retain a Tax Year (or

other required statement).

(d) Effect of amended returns—(1)

Second examination under section

7605(b). Taxpayers requesting and receiving an extension of time under this

section waive any objections to a second

examination under section 7605(b) for

the issue(s) that is the subject of the

relief request and any correlative adjustments.

(2) Suspension of the period of limitations under section 6501(a). A request

for relief under this section does not

suspend the period of limitations on

assessment under section 6501(a). Thus,

for relief to be granted, the IRS may

require the taxpayer to consent under

section 6501(c)(4) to an extension of the

period of limitations on assessment for

the tax year in which the regulatory

election should have been made and any

tax years that would have been affected

by the election had it been timely made.

(e) Procedural requirements—(1) In

general. Requests for relief under this

section must provide evidence that satisfies the requirements in paragraphs (b)

and (c) of this section, and must provide

additional information as required by

this paragraph (e).

(2) Affidavit and declaration from

taxpayer. The taxpayer, or the individual

who acts on behalf of the taxpayer with

respect to tax matters, must submit a

detailed affidavit describing the events

that led to the failure to make a valid

regulatory election and to the discovery

of the failure. When the taxpayer relied

on a qualified tax professional for advice, the taxpayer’s affidavit must describe the engagement and responsibilities of the professional as well as the

extent to which the taxpayer relied on

the professional. The affidavit must be

accompanied by a dated declaration,

signed by the taxpayer, which states:

‘‘Under penalties of perjury, I declare

that, to the best of my knowledge and

belief, the facts presented herein are

true, correct, and complete.’’ The individual who signs for an entity must

have personal knowledge of the facts

and circumstances at issue.

(3) Affidavits and declarations from

other parties. The taxpayer must submit

detailed affidavits from the individuals

having knowledge or information about

the events that led to the failure to make

a valid regulatory election and to the

discovery of the failure. These individuals must include the taxpayer’s income

tax return preparer, any individual (including an employee of the taxpayer)

who made a substantial contribution to

the preparation of the return, and any

accountant or attorney, knowledgeable in

tax matters, who advised the taxpayer

with regard to the election. An affidavit

must describe the engagement and responsibilities of the individual as well as

the advice that the individual provided

to the taxpayer. Each affidavit must

include the name, current address, and

taxpayer identification number of the

individual, and be accompanied by a

dated declaration, signed by the individual, which states: ‘‘Under penalties

of perjury, I declare that, to the best of

my knowledge and belief, the facts

presented herein are true, correct, and

complete.’’

(4) Other Information. The request

for relief filed under this section must

also contain the following information—

(i) The taxpayer must state whether

the taxpayer’s return(s) for the tax year

in which the regulatory election should

have been made or any tax years that

would have been affected by the election had it been timely made is being

examined by a district director, or is

being considered by an appeals office or

a federal court. The taxpayer must notify the IRS office considering the request for relief if the IRS starts an

examination of any such return while

the taxpayer’s request for relief is pending;

(ii) The taxpayer must state when the

applicable return, form, or statement

used to make the election was required

to be filed and when it was actually

filed;

(iii) The taxpayer must submit a copy

of any documents that refer to the

election;

(iv) When requested, the taxpayer

must submit a copy of the taxpayer’s

income tax return for any taxable year

for which the taxpayer requests an extension and any return affected by the

election; and

(v) When applicable, the taxpayer

must submit a copy of the income tax

returns of other taxpayers affected by

the election.

(5) Filing instructions. A request for

relief under this section is a request for

a letter ruling. Requests for relief should

be submitted in accordance with the

applicable procedures for requests for a

letter ruling and must be accompanied

by the applicable user fee.

(f) Examples. The following examples illustrate the provisions of this

section:

Example 1. Taxpayer discovers own error. Taxpayer A prepares A’s 1996 income tax return. A is

unaware that a particular regulatory election is

available to report a transaction in a particular

manner. A files the 1996 return without making

the election and reporting the transaction in a

different manner. In 1998, A hires a qualified tax

professional to prepare A’s 1998 return. The

professional discovers that A did not make the

election. A promptly files for relief in accordance

with this section. Assuming paragraphs (b)(3)(i)

through (iii) of this section do not apply, A is

deemed to have acted reasonably and in good

faith.

Example 2. Reliance on qualified tax professional. Taxpayer B hires a qualified tax professional to advise B on preparing B’s 1996 income

tax return and provides the professional with all

the information requested. The professional fails to

advise B that a regulatory election is necessary in

order for B to report income on B’s 1996 return in

a particular manner. Nevertheless, B reports this

income in a manner that is consistent with having

made the election. In 1999, during the examination

of the 1996 return by the IRS, the examining

agent discovers that the election has not been

filed. B promptly files for relief in accordance

with this section, including attaching an affidavit

from B’s professional stating that the professional

failed to advise B that the election was necessary.

Assuming paragraphs (b)(3)(i) through (iii) of this

section do not apply, B is deemed to have acted

reasonably and in good faith.

Example 3. Accuracy-related penalty. Taxpayer

C reports income on its 1996 income tax return in

a manner that contravenes a statutory provision. C

was aware of the statutory provision that prohibited the manner in which C reported this income,

but did not provide adequate disclosure of the

return position within the meaning of § 1.6662–

3(c) of this chapter. In 1999, during the examination of the 1996 return, the IRS raises an issue

regarding the reporting of this income on C’s

return. C requests relief under this section to elect

an alternative method of reporting the income.

Under paragraph (b)(3)(i) of this section, C is

deemed to have not acted reasonably and in good

faith because C seeks to alter a return position for

which an accuracy-related penalty could be imposed under section 6662.

Example 4. Election not requiring adjustment

under section 481(a). Taxpayer D prepares D’s

1996 income tax return. D is unaware that a

particular accounting method regulatory election is

available. D files the 1996 return using another

method of accounting. In 1998, D hires a qualified

tax professional to prepare D’s 1998 return. The

professional discovers that D did not make the

election. D promptly files for relief in accordance

with this section. Assume the applicable regulation

provides that the election does not require an

adjustment under section 481(a) and the election is

not subject to the procedure described in § 1.446–

1(e)(3)(i) of this chapter. Further assume that if D

were granted an extension of time to make the

election, D would pay no less tax than if the

election had been timely made. Under paragraph

are not deemed to be prejudiced.

Example 5. Election requiring adjustment under

section 481(a). The facts are the same as in

Example 4 of this paragraph (f) except that the

applicable regulation provides that the election

requires an adjustment under section 481(a). Under paragraph (c)(2)(ii) of this section, the interests of the government are deemed to be prejudiced except in unusual or compelling

circumstances.

Example 6. Under examination. A regulation

permits an automatic change from an impermissible method of accounting on a cut-off basis. Any

change to this method made as part of an

examination is made with a section 481(a) adjustment. Taxpayer E reports income on E’s 1996

income tax return using the impermissible method

of accounting. In 1999, during the examination of

the 1996 return by the IRS, the examining agent

questions the propriety of E’s method of accounting. E requests relief under this section to make

the change pursuant to the regulation for 1996. E

will receive less favorable terms and conditions if

the change in method of accounting is made with

a section 481(a) adjustment by the examining

agent than if the change is made on a cut-off basis

pursuant to the regulation. Under paragraph

(c)(2)(iii) of this section, the interests of the

government are deemed to be prejudiced except in

unusual and compelling circumstances.

PART 602—OMB CONTROL

NUMBERS UNDER THE

PAPERWORK REDUCTION ACT

Par. 3. The authority citation for part

602 continues to read as follows:

Authority: 26 U.S.C. 7805

Par. 4. Section 602.101(c) is amended

by adding the following entries in numerical order to the table:

§ 602.101 OMB Control numbers

CFR part or section where

identified and described

Current OMB

control No.

§ 301.9100–2T . . . . . . . . . . . . . 1545–1488

§ 301.9100–3T . . . . . . . . . . . . . 1545–1488

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Donald C. Lubick,

Assistant Secretary of the Treasury.

(Filed by the Office of the Federal Register on

June 26, 1996, 8:45 a.m., and published in the

issue of the Federal Register for June 27, 1996, 61

F.R. 33365)

Part III. Administrative, Procedural, and Miscellaneous

Request for Comments on

Procedures Relating to Voluntary

and Involuntary Changes in Method

of Accounting

Notice 96–40

This notice invites public comment on

possible changes to Rev. Proc. 92–20,

1992–1 C.B. 685, which provides the

general procedures for a taxpayer to

change a method of accounting. These

changes may include (1) adding procedures for changes in method of accounting made by the district director as part

of an examination and by an appeals

officer as part of a settlement, and (2)

revising some of the existing procedures

to better achieve prompt voluntary compliance with proper tax accounting principles.

BACKGROUND

Section 446(e) of the Internal Revenue Code and § 1.446–1(e) of the

Income Tax Regulations state that, except as otherwise provided, a taxpayer

must secure the consent of the Commissioner before changing a method of

accounting for federal income tax purposes.

Section 1.446–1(e)(3)(ii) authorizes

the Commissioner to prescribe administrative procedures setting forth the terms

and conditions under which taxpayers

will be permitted to change a method of

accounting. The terms and conditions

the Commissioner may prescribe include

the taxable year for which the change in

method of accounting is effective and

the taxable year or years in which a

§ 481(a) adjustment is taken into account.

Rev. Proc. 92–20 sets forth the general procedures under § 1.446–1(e) for

obtaining the consent of the Commissioner to change a method of accounting. Rev. Proc. 92–20 uses a gradation

of incentives to encourage prompt voluntary compliance. Under this approach,

taxpayers that voluntarily file a request

to change prior to being contacted for

an examination of their income tax

returns receive the most favorable terms

and conditions. Once contacted for an

examination, taxpayers are generally

precluded from requesting a change

without the consent of the district director. However, some taxpayers that have

been contacted for examination may

request a change during certain ‘‘window periods.’’ For example, certain tax-

payers may request a change during the

first 90 days after contact for examination, but will then receive terms and

conditions less favorable than those

available if they had requested a change

prior to such contact. Other taxpayers

requesting a change during certain other

available window periods receive terms

and conditions no less favorable than

those available if they had requested the

change prior to contact for examination.

Taxpayers that are required by the district director to change their method of

accounting as part of an examination

receive the least favorable terms and

conditions.

In addition, Rev. Proc. 92–20 generally provides less favorable terms and

conditions for changes from a ‘‘Category A method’’ of accounting than

from a ‘‘Category B method.’’ A Category A method is any method that is

specifically not permitted by the Code,

regulations, or a decision of the Supreme Court or any method that differs

from a method that is specifically required by any of these authorities. A

Category B method is any method that

is not a Category A method.

The Service also has provided a number of procedures for taxpayers to obtain

automatic consent to change certain

methods of accounting. Taxpayers complying with these procedures are deemed

to have obtained the consent of the

Commissioner to change their method of

accounting.

REQUEST FOR PUBLIC COMMENT

Rev. Proc. 92–20 provides no guidance on changes in method of accounting made by the district director on

examination or by an appeals officer in

a settlement. In addition, the Service

and Treasury are evaluating whether

using window periods and characterizing

a method of accounting as a Category A

or B method are effective in encouraging prompt voluntary compliance. Accordingly, the Service and Treasury request comments on possible changes to

Rev. Proc. 92–20 including, but not

limited to, the following:

(1) What are the consequences to the

Service and the taxpayer when the district director, as part of an examination,

or an appeals officer, as part of a

settlement, makes an adjustment that

involves a method of accounting? For

example, under what circumstances does

such an adjustment constitute a change

in method of accounting imposed by the

Service (e.g., only if the adjustment

includes a § 481(a) adjustment)? When

does such a change become final (e.g.,

when the taxpayer agrees to assessment

of the tax, when the period of limitations for filing a claim for refund expires, or at some other point)? What are

the effects of such a change on taxable

years for which a return has been filed

and taxable years for which a return has

not yet been filed?

(2) Are the various window periods of

Rev. Proc. 92–20 effective in encouraging prompt voluntary compliance with

proper tax accounting principles? If not,

what alternatives should the Service

consider?

(3) Should the distinction between

Category A and Category B methods of

accounting be modified or eliminated? If

so, what alternatives should the Service

consider?

(4) Should the Service provide automatic consent procedures for more accounting method changes? If so, for

what changes?

Taxpayers may submit comments in

writing to:

Internal Revenue Service

Attn: CC:DOM:CORP:R (IA-Branch

7, Room 5228).

P.O. Box 7604

Ben Franklin Station

Washington, D.C. 20044.

Alternatively, taxpayers may submit

comments electronically via the IRS

Internet site at:

http://www.irs.ustreas.gov/prod/

tax_regs/comments.html.

All comments should be received by

September 30, 1996. The comments

submitted will be available for public

inspection and copying.

DRAFTING INFORMATION

The principal author of this notice is

Robert Testoff of the Office of Assistant

Chief Counsel (Income Tax & Accounting). For further information regarding

this notice, contact Mr. Testoff on (202)

622–4960 (not a toll-free call).

26 CFR 601.201: Rulings and determination letters.

(Also §§ 355; 1.355–2.)

Rev. Proc. 96–39

SECTION 1. PURPOSE

This revenue procedure amplifies Rev.

Proc. 96–3, 1996–1 I.R.B. 82,

which sets forth the areas of the Internal

Revenue Code under the jurisdiction of

the Associate Chief Counsel (Domestic)

and the Associate Chief Counsel (Employee Benefits and Exempt Organizations) relating to issues on which the

Internal Revenue Service will not issue

advance rulings or determination letters.

SECTION 2. BACKGROUND

Section 5 of Rev. Proc. 96–3 sets

forth those areas under extensive study

in which rulings or determination letters

will not be issued until the Service

resolves the issue through publication of

a revenue ruling, revenue procedure,

regulations or otherwise. Section 355(a)

of the Internal Revenue Code applies to

distributions to a shareholder with respect to stock, or to a security holder in

exchange for securities, of stock or

securities of a corporation controlled by

the distributing corporation immediately

before the distribution. In cases in which

there have been negotiations, agreements

or arrangements with respect to transactions or events which, if consummated

before the distribution, would result in

the distribution of stock or securities of

a corporation which is not controlled by

the distributing corporation, the Service

intends to study further the proper

evaluation of the facts and circumstances to determine whether the requirements of § 355 are satisfied.

SECTION 3. PROCEDURE

Rev. Proc. 96–3 is amplified by adding to Section 5 the following:

Section 355.—Distribution of Stock

or Securities of a Controlled Corporation.—Whether a distribution of stock or

securities is described in § 355(a)(1) if

there have been negotiations, agreements

or arrangements with respect to transactions or events which, if treated as

consummated before the distribution,

would result in the distribution of stock

or securities of a corporation which is

not controlled by the distributing corporation (or, if stock is retained by the

distributing corporation, in a distribution

of an amount of stock not constituting

control).

SECTION 4. EFFECTIVE DATE

This revenue procedure will apply to

all ruling requests postmarked or, if not

mailed, received on or after July 23,

1996.

FURTHER INFORMATION

For further information regarding this

Revenue Procedure contact Bonnie

O’Brien of the Office of Assistant Chief

Counsel (Corporate) at (202) 622–7790

(not a toll-free call).

Part IV. Items of General Interest

Notice of Proposed Rulemaking

Sale of Seized Property

GL-7-96

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains

proposed regulations relating to the sale

of seized property. The proposed regulations reflect changes concerning the setting of a minimum price for seized

property by the Tax Reform Act of

1986. The proposed regulations affect

all sales of seized property.

DATES: Written comments and requests

for a public hearing must be received by

September 11, 1996.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (GL-007-96), room

5228, Internal Revenue Service, POB

7604, Ben Franklin Station, Washington,

DC 20044. In the alternative, submissions may be hand delivered to:

CC:DOM:CORP:R (GL-007-96), room

5228, Internal Revenue Service, 1111

Constitution Avenue NW., Washington,

DC.

FOR FURTHER INFORMATION

CONTACT: Concerning the regulations,

Kevin B. Connelly, (202) 622-3640 (not

a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains proposed

amendments to the Procedure and Administration Regulations (26 CFR part

301) relating to the sale of seized property under section 6335 of the Internal

Revenue Code (Code). The Tax Reform

Act of 1986 amended section 6335(e),

relating to the manner and conditions of

sale, to authorize the Secretary to determine whether it would be in the best

interest of the United States to buy

seized property at the minimum price

set by the Secretary. These proposed

regulations reflect this change.

Explanation of provisions

Section 1570 of the Tax Reform Act

of 1986 amended section 6335(e) of the

Code to require the Secretary to determine before the sale of seized property

whether it would be in the best interest

of the United States to purchase such

property at the minimum price set by

the Secretary. The best interest determination is to be based on criteria prescribed by the Secretary. If, at the sale,

one or more persons offer at least the

minimum price, the property shall be

sold to the highest bidder. If no one

offers at least the minimum price and

the Secretary has determined that it

would be in the best interest of the

United States to purchase the property

for the minimum price, the property will

be declared sold to the United States for

the minimum price. If no one offers the

minimum price and the Secretary has

not determined that it would be in the

best interest of the United States to

purchase the property for the minimum

price, the property shall be released to

the owner of the property and the

expense of the levy and sale shall be

added to the amount of tax for the

collection of which the United States

made the levy. Any property released

shall remain subject to any lien imposed

by subchapter C of chapter 64 of subtitle F of the Code.

The proposed regulations reflect the

changes made by the Tax Reform Act of

1986. The regulations propose to authorize district directors to make the required determination whether it would

be in the best interest of the United

States to purchase seized property for

the minimum price. In addition, the

regulations propose to set forth factors

the district director may consider when

determining the best interest of the

United States. The district director may

consider all relevant facts and circumstances including for example: (1) marketability of the property; (2) cost of

maintaining the property; (3) cost of

repairing or restoring the property; (4)

cost of transporting the property; (5)

cost of safeguarding the property; (6)

cost of potential toxic waste cleanup;

and (7) other factors pertinent to the

type of property.

Special Analyses

It has been determined that this notice

of proposed rulemaking is not a significant regulatory action as defined in EO

12866. Therefore, a regulatory assessment is not required. It also has been

determined that section 553(b) of the

Administrative Procedure Act (5 U.S.C.

chapter 5) and the Regulatory Flexibility

Act (5 U.S.C. chapter 6) do not apply to

these regulations, and, therefore, a

Regulatory Flexibility Analysis is not

required. Pursuant to section 7805(f) of

the Internal Revenue Code, this notice

of proposed rulemaking will be submitted to the Chief Counsel for Advocacy

of the Small Business Administration for

comment on its impact on small business.

Comments and Requests for a Public

Hearing

Before these proposed regulations are

adopted as final regulations, consideration will be given to any written comments that are submitted timely (preferably a signed original and eight (8)

copies) to the IRS. All comments will

be available for public inspection and

copying. A public hearing may be

scheduled if requested in writing by a

person that timely submits written comments. If a public hearing is scheduled,

notice of the date, time, and place for

the hearing will be published in the

Federal Register.

Drafting Information

The principal author of these regulations is Kevin B. Connelly, Office of

Assistant Chief Counsel (General Litigation) CC:EL:GL, IRS. However, other

personnel from the IRS and Treasury

Department participated in their development.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 301 is

proposed to be amended as follows:

PART 301—PROCEDURE AND

ADMINISTRATION

Paragraph 1. The authority citation for

part 301 continues to read in part as

follows:

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

Par. 2. Section 301.6335-1 is amended

as follows:

1. Paragraph (c)(3) is revised.

2. Paragraphs (c)(4) through (c)(9)

are redesignated as paragraphs (c)(5)

through (c)(10).

3. New paragraph (c)(4) is added.

The additions and revision read as

follows:

301.6335-1 Sale of seized property.

(3) Determinations relating to minimum price—(i) Minimum price. Before

the sale of property seized by levy, the

district director shall determine a minimum price, taking into account the

expenses of levy and sale, for which the

property shall be sold. The internal

revenue officer conducting the sale may

either announce the minimum price before the sale begins, or defer announcement of the minimum price until after

the receipt of the highest bid, in which

case, if the highest bid is greater than

the minimum price, no announcement of

the minimum price shall be made.

(ii) Purchase by the United States.

Before the sale of property seized by

levy, the district director shall determine

whether the purchase of property by the

United States at the minimum price

would be in the best interest of the

United States. In determining whether

the purchase of property would be in the

best interest of the United States, the

district director may consider all relevant facts and circumstances including

for example—

(a) Marketability of the property;

(b) Cost of maintaining the property;

property;

(d) Cost of transporting the property;

(e) Cost of safeguarding the property;

(f) Cost of potential toxic waste

cleanup; and

(g) Other factors pertinent to the type

of property.

(iii) Effective date. This paragraph

(c)(3) applies to determinations relating

to minimum price made on or after

[date final regualtions are published in

the Federal Register].

(4) Disposition of property at sale—

(i) Sale to highest bidder at or above

minimum price. If one or more persons

offer to buy the property for at least the

amount of the minimum price, the property shall be sold to the highest bidder.

(ii) Property deemed sold to United

States at minimum price. If no one

offers at least the amount of the minimum price for the property and the

Secretary has determined that it would

be in the best interest of the United

States to purchase the property for the

minimum price, the property shall be

declared to be sold to the United States

for the minimum price.

(iii) Release to owner. If the property

is not declared to be sold under para-

graph (c)(4)(i) or (ii) of this section, the

property shall be released to the owner

of the property and the expense of the

levy and sale shall be added to the

amount of tax for the collection of

which the United States made the levy.

Any property released under this paragraph (c)(4)(iii) shall remain subject to

any lien imposed by subchapter C of

chapter 64 of subtitle F of the Internal

Revenue Code.

(iv) Effective date. This paragraph

(c)(4) applies to dispositions of property

at sale made on or after [date final

regulations are published in the Federal

Margaret Milner Richardson,

Commissioner of Internal Revenue.

(Filed by the Office of the Federal Register on

June 12, 1996, 8:45 a.m., and published in the

issue of the Federal Register for June 13, 1996, 61

F.R. 30012)

Notice of Proposed Rulemaking

and Notice of Public Hearing

Extensions of Time to Make

Elections

IA–29–96

AGENCY: Internal Revenue Service

(IRS), Treasury.

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

regulations and notice of public hearing.

SUMMARY: In TD 8680, on page 5 of

this issue of the Bulletin, the IRS is

issuing temporary regulations relating to

extensions of time for making certain

elections under the Internal Revenue

Code (Code). The regulations provide

the standards that the Commissioner will

use to grant taxpayers extensions of

time for making these elections. The

text of those temporary regulations also

serves as the text of these proposed

regulations. This document also provides

notice of a public hearing on these

proposed regulations.

DATES: Written comments must be received by September 25, 1996. Outlines

of oral comments to be presented at the

public hearing scheduled for Wednesday,

October 30, 1996, at 10 a.m. must be

received by October 9, 1996.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (IA–29–96), room

5226, Internal Revenue Service, POB

7604, Ben Franklin Station, Washington,

DC 20044. In the alternative, submissions may be delivered between the

hours of 8 a.m. and 5 p.m. to:

CC:DOM:CORP:R (IA–29–96), Courier’s Desk, Internal Revenue Service,

1111 Constitution Avenue NW, Washington, DC. The public hearing will be held

in the IRS Classroom (room 2617),

Internal Revenue Building, 1111 Constitution Avenue NW, Washington, DC.

FOR FURTHER INFORMATION

CONTACT: Concerning the regulations,

Robert A. Testoff of the Office of

Assistant Chief Counsel (Income Tax &

Accounting) at (202) 622–4960; concerning submissions and the hearing,

Christina Vasquez of the Regulations

Unit, (202) 622–7190 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information contained in this notice of proposed

rulemaking has been submitted to the

Office of Management and Budget

(OMB) for review in accordance with

the Paperwork Reduction Act of 1995

(44 U.S.C. 3507).

Comments on the collection of information should be sent to the Office of

Management and Budget, Attn: Desk

Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503,

with copies to the Internal Revenue

Service, Attn: IRS Reports Clearance

Officer, T:FP, Washington, DC 20224.

Comments on the collection of information should be received by August 26,

1996.

An agency may not conduct or sponsor, and a person is not required to

respond to, a collection of information

unless the collection of information displays a valid control number.

The collection of information is in

§§ 301.9100–2T and 301.9100–3T. This

information is required for a taxpayer to

obtain an extension of time to make an

election. This information will be used

by the IRS to determine whether to

grant an extension of time to make an

election. The likely respondents are

businesses or other for-profit institutions, small businesses or organizations,

nonprofit institutions, individuals or

households, and farms.

Books or records relating to the collection of information must be retained

as long as their contents may become

material in the administration of any

internal revenue law. Generally, tax returns and tax return information are

confidential, as required by 26 U.S.C.

6103.

Estimated total annual reporting

burden:

5,000 hours

Estimated annual burden per

respondent:

10 hours.

Estimated number of respondents: 500

Estimated annual frequency

of responses:

Occasional

Background

Temporary regulations in TD 8680,

on page 5 of this issue of the Bulletin

amend 26 CFR part 301. The temporary

regulations contain rules relating to extensions of time for making certain

elections.

The text of those temporary regulations also serves as the text of these

proposed regulations. The preamble to

the temporary regulations explains the

temporary regulations.

Special Analyses

It has been determined that this notice

of proposed rulemaking is not a significant regulatory action as defined in EO

12866. Therefore, a regulatory assessment is not required. It has also been

determined that section 553(b) of the

Administrative Procedure Act (5 U.S.C.

chapter 5) and the Regulatory Flexibility

Act (5 U.S.C. chapter 6) do not apply to

these regulations, and, therefore, a

Regulatory Flexibility Analysis is not

required. Pursuant to section 7805(f) of

the Internal Revenue Code, 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 businesses.

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 Wednesday, October 30, 1996, at 10

a.m. in the IRS Classroom (room 2617),

Internal Revenue Building, 1111 Constitution Avenue NW, Washington, DC.

Because of access restrictions, visitors

will not be admitted beyond the building

lobby more than 15 minutes before the

hearing starts.

The rules of § 601.601(a)(3) apply to

the hearing.

Persons that have submitted written

comments by September 25, 1996, and

want to present oral comments at the

hearing must submit, by October 9,

1996, an outline of the topics to be

discussed and the time to be devoted to

each topic (signed original and eight (8)

copies). 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 the temporary

regulations is Robert A. Testoff of the

Office of Assistant Chief Counsel (Income Tax and Accounting). However,

other personnel from the IRS and Treasury Department participated in their

development.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 301 is

proposed to be amended as follows:

PART 301—PROCEDURE AND

ADMINISTRATION

Paragraph 1. The authority citation

for part 301 is amended by removing

the entries for §§ 301.9100–1T through

301.9100–3T and adding entries in numerical order to read as follows:

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

Section 301.9100–1 also issued under 26

U.S.C. 6081;

Section 301.9100–2 also issued under 26

U.S.C. 6081;

Section 301.9100–3 also issued under 26

U.S.C. 6081; * * *

Par. 2. Sections 301.9100–1 and

301.9100–1T through 301.9100–3T are

removed.

Par. 3. Sections 301.9100–1 through

301.9100–3 are added to read as follows:

§ 301.9100–1 Extensions of time to

make elections.

§ 301.9100–2 Automatic extensions.

§ 301.9100–3 Other extensions.

[The text of these above proposed

sections are the same as the text of

§§ 301.9100-1T through 301.9100–3T

published in TD 8680, on page 5 in this

issue of the Bulletin.]

Margaret Milner Richardson,

Commissioner of Internal Revenue.

(Filed by the Office of the Federal Register on

June 26, 1996, 8:45 a.m., and published in the

issue of the Federal Register for June 27, 1996, 61

F.R. 33408)

Notice of Proposed Rulemaking

Generation-Skipping Transfer Tax

PS–22–96

AGENCY: Internal Revenue Service

(IRS), Treasury

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains

proposed regulations relating to the final

generation-skipping transfer (GST) tax

regulations under chapter 13 of the

Internal Revenue Code (Code). This

document proposes a change to the final

regulations and is necessary to provide

guidance to taxpayers so that they may

comply with chapter 13 of the Code.

DATES: Written comments and requests

for a public hearing must be received by

September 10, 1996.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (PS–22–96), room

5228, Internal Revenue Service, POB

7604, Ben Franklin Station, Washington,

DC 20044. In the alternative, submissions may be hand delivered between

the hours of 8 a.m. and 5 p.m. to:

CC:DOM:CORP:R (PS–22–96), Courier’s Desk, Internal Revenue Service,

1111 Constitution NW., Washington,

DC. 20224.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulation, James F. Hogan, (202) 622–3090

(not a toll-free number); concerning submissions, Christina Vasquez, (202) 622–

7180, (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

On December 24, 1992, the IRS published a notice of proposed rulemaking

in the Federal Register (57 FR 61356)

containing proposed regulations under

sections 2611, 2612, 2613, 2632, 2641,

2642, 2652, 2653, 2654, and 2663. On

December 27, 1995, the IRS published

final regulations in the Federal Register

(60 FR 66898) under sections 2611,

2612, 2613, 2632, 2641, 2642, 2652,

2653, 2654, and 2663. This proposed

regulation will delete § 26.2652–

1(a)(4) and two related examples.

Explanation of Provision

Section 2652(a)(1) provides generally,

that the term transferor means—(A) in

the case of any property subject to the

tax imposed by chapter 11, the decedent,

and (B) in the case of any property

subject to the tax imposed by chapter

12, the donor. An individual is treated as

transferring any property with respect to

which the individual is the transferor.

Under § 26.2652–1(a)(2), a transfer is

subject to Federal gift tax if a gift tax is

imposed under section 2501(a) and is

subject to Federal estate tax if the value

of the property is includible in the

decedent’s gross estate determined under

section 2031 or section 2103. Under

§ 26.2652–1(a)(4), the exercise of a

power of appointment that is not a

general power of appointment is also

treated as a transfer subject to Federal

estate or gift tax by the holder of the

power if the power is exercised in a

manner that may postpone or suspend

the vesting, absolute ownership, or

power of alienation of an interest in

property for a period, measured from the

date of the creation of the trust, extending beyond any specified life in being at

the date of creation of the trust plus a

period of 21 years plus, if necessary, a

reasonable period of gestation.

The purpose of the rule in

§ 26.2652–1(a)(4) was to apply the

GST tax when it may not otherwise

have applied. It was never intended to

(nor could it) prevent the application of

the tax pursuant to the statutory provisions that apply based on the original

taxable transfer. To eliminate any uncertainty concerning the proper application

of the GST tax, the regulations under

section 2652(a) will be clarified by

eliminating § 26.2652– 1(a)(4) and Example 9 and Example 10 in § 26.2652–

1(a)(6) from the final regulations.

Proposed Effective Date

These amendments apply to transfers

to trusts on or after June 12, 1996.

Special Analysis

It has been determined that this notice

of proposed rulemaking is not a significant regulatory action as defined in EO

12866. Therefore, a regulatory assessment is not required. It has also been

determined that section 553(b) of the

Administrative Procedure Act (5 U.S.C.

chapter 5) and the Regulatory Flexibility

Act (5 U.S.C. chapter 6) do not apply to

these regulations, and therefore, a Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of

the Internal Revenue Code, the notice of

proposed rulemaking preceding these

regulations was submitted to the Small

Business Administration for comment on

its impact on small business.

Comments and Requests for a Public

Hearing

Before this proposed regulation is

adopted as a final regulation, consideration will be given to any written comments (a signed original and eight (8)

copies) that are submitted timely to the

IRS. All comments will be available for

public inspection and copying. A public

hearing may be scheduled if requested

in writing by a person that timely

submits written comments. If a public

hearing is scheduled, notice of the date,

time, and place for the hearing will be

published in the Federal Register.

Drafting Information

The principal author of this proposed

regulation is James F. Hogan, Office of

the Chief Counsel, IRS. Other personnel

from the IRS and Treasury Department

participated in its development.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

(Filed by the Office of the Federal Register on

June 11, 1996, 8:45 a.m., and published in the

issue of the Federal Register for June 12, 1996, 61

F.R. 29714)

Announcement 96–71

Assistant Commissioner (International) John T. Lyons has announced the

Ninth Annual Institute on Current Issues

in International Taxation, co-sponsored

with The George Washington University,

to be held December 12 and 13 at the

J.W. Marriott Hotel in Washington, DC.

Designed for professionals in international tax law, the Institute will cover on

the first day sessions with the U.S.,

Mexican, and Canadian Competent Authorities, treaty issues, collateral consequences of check-the-box, and a U.S.

multinational update. The second day

will include an ‘‘Ask the IRS’’ session,

and sessions on regulatory guidance,

intellectual property, and withholding

regulations. IRS Commissioner Margaret

Milner Richardson will be a featured

luncheon speaker.

Those interested in attending may

obtain more information from The

George Washington University, Office of

Conferences and Institutes, by calling

(202) 973–1110.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 26 is proposed to be amended as follows:

PART 26—GENERATION-SKIPPING

TRANSFER TAX REGULATIONS UNDER THE TAX REFORM ACT OF

1986

Paragraph 1. The authority citation for

part 26 continues to read, in part, as

follows:

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

Par. 2 Section 26.2652–1 is amended

as follows:

1. Paragraph (a)(4) is removed and

paragraphs (a)(5) and (a)(6) are redesignated as paragraphs (a)(4) and (a)(5),

respectively.

2. In newly designated paragraph

(a)(5), Examples 9 and 10 are removed

and Example 11 is redesignated as Example 9.

Generation-Skipping Transfer Tax;

Correction

Announcement 96–72

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION:

tions.

Correction to final regula-

SUMMARY: This document contains

corrections to final regulations (TD

8644 [1996–7 I.R.B. 16]) which were

published in the Federal Register for

Wednesday, December 27, 1995 (60 FR

66898). The final regulations relate to

generation-skipping transfer tax.

EFFECTIVE DATE: December 27,

1995.

FOR FURTHER INFORMATION

CONTACT: Jim Hogan (202) 622–3090

(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The final regulations that are subject

to these corrections are under chapter 13

of the Internal Revenue Code.

Need for Correction

6. On page 66909, column 2,

§ 26.2601–1, newly designated paragraph (b)(3)(iii)(A)(3) is corrected and

paragraph (b)(3)(iii)(B) is added to read

as follows:

§ 26.2601–1 Effective dates.

Accordingly, the publication of final

regulations which are the subject of FR

Doc. 95–30873 is corrected as follows:

1. On page 66899, column 1, in the

preamble under the paragraph heading

‘‘Uniform Statutory Rule Against Perpetuities’’, line 13, the language ‘‘alienation of a interest in property for a’’ is

corrected to read ‘‘alienation of an interest in property for a’’.

2. On page 66902, column 1, in the

preamble under the paragraph heading

‘‘Division of a Single Trust Into Separate Trusts’’, paragraph 3, line 3 from

the bottom, the language ‘‘for under the

original trusts. Thus, a’’ is corrected to

read ‘‘for under the original trust. Thus,

a’’.

(b) * * *

(3) * * *

(iii) * * *

(A) * * *

(3) Any judgement or decree relating

to the decedent’s incompetency that was

made after October 22, 1986.

(B) Such items in paragraphs

(b)(3)(iii)(A), (B), and (C) of this section will be considered relevant, but not

determinative, in establishing the decedent’s state of competency.

7. On page 66909, column 3,

§ 26.2601–1, paragraph (b)(4)(i), line 5,

the language ‘‘rules in paragraph (b)(2)

or (3) of this’’ is corrected to read

‘‘rules in paragraph (b)(1), (2) or (3) of

this’’.

8. On page 66910, column 2,

§ 26.2601–1, paragraph (c), line 5 from

the top of the column, the language ‘‘on

or after [December 27, 1995].’’ is corrected to read ‘‘on or after December

27, 1995.’’.

§ 26.2601–1 [Corrected]

§ 26.2612–1 [Corrected]

2a. On page 66907, column 2,

§ 26.2601–1, paragraph (b)(1)(v)(D),

Example 2, eighth line from the bottom

of the paragraph, the language, ‘‘of the

first addition), $200,000 (.2÷’’ is corrected to read ‘‘of the first addition),

$200,000 (.2x’’.

3. On page 66907, column 2,

§ 26.2601–1, paragraph (b)(1)(v)(D),

Example 4, eighth line from the bottom

of the column, the language ‘‘GGC, for

life. Upon GGC’s death the’’ is corrected to read ‘‘GGC, for life. Upon

GGC’s death, the’’.

4. On page 66907, column 3,

§ 26.2601–1, paragraph (b)(1)(v)(D),

Example 5, line 3, the language ‘‘Assume the same facts as in Example 3,’’

is corrected to read ‘‘Assume the same

facts as in Example 4,’’.

5. On page 66909, column 2,

§ 26.2601–1, paragraphs (b)(3)(iii) introductory text, (b)(3)(iii)(A), (b)(3)(iii)(A)(1), (b)(3)(iii)(A)(2), (b)(3)(iii)(B),

(b)(3)(iii)(C) are correctly designated

(b)(3)(iii)(A) introductory text, (b)(3)(iii)(A)(1), (b)(3)(iii)(A)(1)(i), (b)(3)(iii)(A)(1)(ii), (b)(3)(iii)(A)(2), and (b)(3)(iii)(A)(3), respectively.

9. On page 66910, column 3,

§ 26.2612–1, paragraph (a)(2)(ii), lines

5 and 6, the language ‘‘the transferor

would be assigned to a lower generation

by reason of that’’ is corrected to read

‘‘the lineal descendant would be assigned to a higher generation by reason

of that’’.

10. On page 66910, column 3,

§ 26.2612–1, paragraph (b)(1)(i), last 3

lines are corrected by removing the

language ‘‘(i.e., a new transferor is

determined with respect to the property)’’.

As published, the final regulations

[TD 8644] contain errors that are in

need of clarification.

Correction of Publication

§ 26.2632–1 [Corrected]

11. On page 66914, column 3,

§ 26.2632–1, paragraph (d)(1), line 3

from the top of the column, the language ‘‘706 or Form 706NA and is

effective as’’ is corrected to read ‘‘706,

Form 706NA or Form 709 (filed on or

before the due date of the transferor’s

estate tax return) and is effective as’’.

§ 26.2642–2 [Corrected]

12. On page 66916, column 2,

§ 26.2642–2, paragraph (b)(3)(ii)(B),

line 6, the language ‘‘date of death and

the date of’’ is corrected to read ‘‘valuation date and the date of’’.

§ 26.2642–4 [Corrected]

13. On page 66917, column 3,

§ 26.2642–4, paragraph (a)(3), lines 5

through 9 from the top of the column,

the language ‘‘not allocated to the trust,

the applicable fraction immediately before death is not changed, if the trust

was not subject to an ETIP at the time

GST exemption was allocated to the

trust. The denominator’’ is corrected to

read ‘‘not allocated to the trust, then,

except as provided in this paragraph

(a)(3), the applicable fraction immediately before death is not changed, if the

trust was not subject to an ETIP at the

time GST exemption was allocated to

the trust. In any event, the denominator’’.

14. On page 66918, column 2,

§ 26.2642–4, paragraph (b), paragraph

(i) of Example 5, the last line,

the language ‘‘is .50 (1 2 ($100,000/

$200,000 = .50)’’ is corrected to read

‘‘is .50 (1 2 ($100,000/$200,000))’’.

§ 26.2652–1 [Corrected]

15. On page 66918, column 3,

§ 26.2652–1, paragraph (a)(2), line 2,

the language ‘‘or gift tax. For purposes

of this section,’’ is corrected to read ‘‘or

gift tax. For purposes of this chapter,’’.

16. On page 66919, column 1,

§ 26.2652–1, paragraph (a)(2), line 3

from the top of the column, the language ‘‘2501(a). A transfer is subject to

Federal’’ is corrected to read ‘‘2501(a)

(without regard to exemptions, exclusions, deductions, and credits). A transfer is subject to Federal’’.

17. On page 66919, columns 1 and 2,

§ 26.2652–1, paragraph (a)(6) Example

1, last two lines in column 1 and first

line in column 2, the language ‘‘benefit

of T’s grandchild. The transfer is a

completed gift under § 25.2511–2 of

this chapter. Thus, for purposes of chapter 13, T’’ is corrected to read ‘‘benefit

of T’s grandchild. The transfer is subject

to Federal gift tax because a gift tax is

imposed under section 2501(a) (without

regard to exemptions, exclusions, deductions, and credits). Thus, for purposes of

chapter 13, T’’.

18. On page 66919, column 2,

§ 26.2652–1, paragraph (a)(6), Example

5, lines 13 and 14, the language ‘‘transfer by T is a completed transfer within

the meaning of § 25.2511–2 of this

chapter’’ is corrected to read ‘‘transfer

by T is subject to Federal gift tax

because a gift tax is imposed under

section 2501(a) (without regard to exemptions, exclusions, deductions, and

credits)’’.

§ 26.2654–1 [Corrected]

19. On page 66921, column 2,

§ 26.2654–1, paragraph (a)(1)(ii)(A),

last line, the language ‘‘person; or’’ is

corrected to read ‘‘person; and’’.

20. On page 66922, column 2,

§ 26.2654–1, paragraph (a)(5), Example

6, line 10 from the top of the column,

the language ‘‘contribution is 3/4 ((2/3 x

$180,000) +’’ is corrected to read ‘‘contribution is 3/4 (((2/3 x $180,000) +’’.

21. On page 66922, column 2,

§ 26.2654–1, paragraph (a)(5), Example

8, line 4 from the bottom of the paragraph, the language ‘‘same if, the trust

instrument provided that’’ is corrected to

read ‘‘same if the trust instrument provided that’’.

22. On page 66922, column 2,

§ 26.2654–1, paragraph (b)(1)(ii)(A),

lines 1 and 2, the language ‘‘(A) The

terms of each of the new trusts provide

for the same succession of’’ is corrected

to read ‘‘(A) The terms of the new trusts

provide in the aggregate for the same

succession of’’.

23. On page 66922, column 3,

§ 26.2654–1, paragraph (b)(1)(ii)(C)(1),

line 2 from the bottom of the paragraph,

the language ‘‘measured from the date

of death to the’’ is corrected to read

‘‘measured from the valuation date to

the’’.

§ 26.2662–1 [Corrected]

24. On page 66923, column 3,

§ 26.2662–1, paragraph (c)(2)(vi), Example 1, line 6, the language ‘‘T’s

grandchild GC, was named the sole’’ is

corrected to read ‘‘T’s grandchild, GC,

was named the sole’’.

§ 26.2663–2 [Corrected]

25. On page 66925, column 1,

§ 26.2663–2, paragraph (c)(2), the last

line, the language ‘‘the trust).’’ is corrected to read ‘‘the trust)).’’.

26. On page 66925, column 2,

§ 26.2663–2, paragraph (d), Example 3,

line 8 from the bottom of the paragraph,

the language ‘‘Generation-Skipping

Transfer) Tax return’’ is corrected to

read ‘‘Generation-Skipping Transfer)

Tax Return’’.

27. On page 66925, column 3,

§ 26.2663–2, paragraph (e), line 11, the

language ‘‘prescribed in section 2632(c).

Thus, an’’ is corrected to read ‘‘prescribed in section 2632(c). Thus, a’’.

Cynthia E. Grigsby

Chief, Regulations Unit

Assistant Chief Counsel (Corporate)

(Filed by the Office of the Federal Register on

June 11, 1996, 8:45 a.m., and published in the

issue of the Federal Register for June 12, 1996, 61

F.R. 29653)

Foundations Status of Certain

Organizations

Announcement 96–73

The following organizations have

failed to establish or have been unable

to maintain their status as public charities or as operating foundations. Accordingly, grantors and contributors may not,

after this date, rely on previous rulings

or designations in the Cumulative List

of Organizations (Publication 78), or on

the presumption arising from the filing

of notices under section 508(b) of the

Code. This listing does not indicate that

the organizations have lost their status

as organizations described in section

501(c)(3), eligible to receive deductible

contributions.

Former Public Charities. The following organizations (which have been

treated as organizations that are not

private foundations described in section

509(a) of the Code) are now classified

as private foundations:

American Research Center Inc.,

Aberdeen, MD

Arundel Singers Inc., Baltimore, MD

Assisting Dads & Moms Inc., West

Long Branch, NJ

Association for a Better Environment,

McMurray, PA

Association for Innovative Education

Inc., Philadelphia, PA

Association for Puerto Ricans in Science

and Engineering, Washington, DC

Association of Pharmaceutical

Technologists Incorporated, Union, NJ

Atlantic City Urban Beautification

Committee Inc., Atlantic City, NJ

Autumn Place Inc., Frederick, MD

Aware Safety Group Inc., Richmond,

Bangladesh Society of NJ Inc.,

Lawrenceville, NJ

Bergmans Butterflies Parents

Association, Mays Landing, NJ

Bernardino Coutinho Foundation Inc.,

Newark, NJ

Bill Gold Drive for Life Inc.,

Ridgewood, NJ

Biosphere Resources Group Inc.,

Takoma Park, MD

Birmingham Football Foundation, Inc.,

Birmingham, AL

Black College AIDS Awareness

Foundation, Washington, DC

Blacks Networking for Progress Inc.,

Philadelphia, PA

Black Teenage World Educational Fund

Inc., Washington, DC

Blue Mountain Community Library Inc.,

Pen Argyl, PA

Bon Aqua Volunteer Fire Dept, Bon

Aqua Volunteer, TN

Bulgarian-American Charitable &

Educational Center, Potomac, MD

Caesar Rodney High School Cheerleader

Booster Club, Dover, DE

Cambodia Development International,

Washington, DC

Capella Productions Inc., Merion, PA

Capital Hill Tollgate Association,

Washington, DC

Captain Thomas Clifford Bland Jr

Memorial & Scholarship Fund,

Gaithersburg, MD

Care Group Inc., Calhoun, GA

Cecil Soccer League Inc., Elkton, MD

Central and Southern Africa Legal

Assistance Foundation, Harrisburg,

Christians United in Business—CUBE,

Detroit, MI

C Incorporated Support for Visions in

Action, Hopewell, NJ

Ellis Swim Team, Philadelphia, PA

Goldstone-Trust Press and Educational

Division, Great Barrington, MA

Harold E. Byrd Educational Foundation,

Inc., East Bradenton, FL

Isadora Duncan International, New York,

KOP Art, Inc., Brooklyn, NY

Lebanon Opera House Improvement

Corporation, Lebanon, NY

Manhattan International Cultural

Studios, Inc., New York, NY

Massachusetts Association of Women

Lawyers Scholarship Trust, Boston,

Massachusetts Vigil Society

Corporation, Ipswich, MA

Mayors Youth Leadership Corps, Inc.,

Boston, MA

Medius Corporation, New York, NY

Melrose Launch, Inc., Melrose, MA

Merrimack County Mental Health

Consumers Association, Concord, NH

Minnesota Decoy Foundation, St. Paul,

Monadnock Area Foster Parent Support

Group, Keene, NH

Music Mobile International, Inc., New

York, NY

Nash County Foundation to Reduce the

Use of Drugs, Nashville, TN

National Cancer Research Center, Inc.,

Aberdeen, MD

Northwest Community and Business

Council, Inc., Lake Wales, FL

Paralysis Research Organization,

Littleton, MA

Parents Teachers Advisory Group,

Fitchburg, MA

Pasos Bailandos Therapeutic Riding

Center, Bridgeton, ME

Planet Well Incorporated, Tallahassee,

Precious Jewels Day Care Center, Inc.,

Buffalo, NY

P.S. 234 Parents and Teachers

Association, Inc., New York, NY

Quidditas, Inc., Salem, NY

Recreational Association for Deaf Youth,

Inc., Avon, MA

Relapse Preventions Therapy and

Preventive Measure, Inc., Providence,

Serving Our Selves, Inc., Bronx, NY

Shaw Memorial Ame Zion Church

Gathering, Providence, RI

Shelter Works, Inc., Bloomfield, CT

Spiritual Vision, Inc., Tallahassee, FL

Sugarloaf Foundation, Gray, ME

Take-One Theatre Arts, Inc., St. James,

Tilton-Northfield Baseball Organization,

Tilton, NH

Turnpike Camerata, Inc., New York, NY

Valley Grove School District

Scholarship Fund, Franklin, PA

Whitfield Education Foundation, Inc.,

Dalton, GA

Youth Hi Tech ZK Inc., Silver Spring,

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.

Deletions from Cumulative List of

Organizations Contributions to

Which Are Deductible Under

Section 170 of the Code

Announcement 96–74

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, contributions 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 August 12, 1996, 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.

Fellowship Outreach Ministries, Inc.

Jacksonville, FL

Fund for the Duluth Clinic

Duluth, MN

Numerical Finding List1

Bulletins 1996–27 through 1996–32

Announcements:

96–61, 1996–27 I.R.B. 72

96–62, 1996–28 I.R.B. 55

96–63, 1996–29 I.R.B. 18

96–64, 1996–29 I.R.B. 18

96–65, 1996–29 I.R.B. 18

96–66, 1996–29 I.R.B. 19

96–67, 1996–30 I.R.B. 27

96–68, 1996–31 I.R.B. 45

96–69, 1996–32 I.R.B. 38

96–70, 1996–32 I.R.B. 40

Notices:

96–36, 1996–27 I.R.B. 11

96–37, 1996–31 I.R.B. 29

96–38, 1996–31 I.R.B. 29

96–39, 1996–32 I.R.B. 8

Proposed Regulations:

CO–24–96, 1996–30 I.R.B. 22

CO–25–96, 1996–31 I.R.B. 30

CO–26–96, 1996–31 I.R.B. 31

FI–28–96, 1996–31, I.R.B. 33

FI–48–95, 1996–31 I.R.B. 36

FI–59–94, 1996–30 I.R.B. 23

IA–26–94, 1996–30 I.R.B. 24

IA-292-84, 1996–28 I.R.B. 38

Railroad Retirement Quarterly Rate

1996–29 I.R.B. 14

Revenue Procedures:

96–36, 1996–27 I.R.B. 11

96–37, 1996–29 I.R.B. 16

96–40, 1996–32 I.R.B. 8

96–41, 1996–32 I.R.B. 9

96–42, 1996–32 I.R.B. 14

Revenue Rulings:

96–33, 1996–27 I.R.B. 4

96–34, 1996–28 I.R.B. 4

96–35, 1996–31 I.R.B. 4

96–36, 1996–30 I.R.B. 6

96–37, 1996–32 I.R.B. 4

Tax Conventions:

1996–28 I.R.B. 36

Treasury Decisions:

8673, 1996–27 I.R.B. 4

8674, 1996–28 I.R.B. 7

8675, 1996–29 I.R.B. 5

8676, 1996–30 I.R.B. 4

8677, 1996–30 I.R.B. 7

8678, 1996–31 I.R.B. 11

8679, 1996–31 I.R.B. 4

A cumulative list of all Revenue Rulings, Revenue Procedures, Treasury Decisions, etc., published in Internal Revenue Bulletins 1996–1

through 1996–26 will be found in Internal Revenue Bulletin 1996–27, dated July 1, 1996.

Finding List of Current Action on

Previously Published Items1

Bulletins 1996–27 through 1996–32

*Denotes entry since last publication

Revenue Procedures:

80–27

Modified by

96–40, 1996–32 I.R.B. 8

95–29

Superseded by

96–36, 1996–27 I.R.B. 11

95–29A

Superseded by

96–36, 1996–27 I.R.B. 11

95–30

Superseded by

96–42, 1996–32 I.R.B. 4

A cumulative finding list for previously published

items mentioned in Internal Revenue Bulletins

1996–1 through 1996–26 will be found in Internal

Revenue Bulletin 1996–27, dated July 1, 1996.

Definition of Terms

Revenue rulings and revenue procedures

(hereinafter referred to as ‘‘rulings’’)

that have an effect on previous rulings

use the following defined terms to describe the effect:

Amplified describes a situation where

no change is being made in a prior

published position, but the prior position

is being extended to apply to a variation

of the fact situation set forth therein.

Thus, if an earlier ruling held that a

principle applied to A, and the new

ruling holds that the same principle also

applies to B, the earlier ruling is amplified. (Compare with modified, below).

Clarified is used in those instances

where the language in a prior ruling is

being made clear because the language

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

prior ruling is being changed.

Distinguished describes a situation

where a ruling mentions a previously

published ruling and points out an essential difference between them.

Modified is used where the substance

of a previously published position is

being changed. Thus, if a prior ruling

held that a principle applied to A but not

to B, and the new ruling holds that it

applies to both A and B, the prior ruling

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.

PHC—Personal Holding Company.

PO—Possession of the U.S.

FC—Foreign Country.

FICA—Federal Insurance Contribution Act.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

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.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statements of Procedural Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

M—Minor.

U.S.C.—United States Code.

Nonacq.—Nonacquiescence.

X—Corporation.

O—Organization.

Y—Corporation.

P—Parent 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.

PR—Partner.

PRS—Partnership.

PTE—Prohibited Transaction Exemption.

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.