Bulletin No. 1998–35

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Internal Revenue

bulletin

Bulletin No. 1998–35

August 31, 1998

HIGHLIGHTS

OF THIS ISSUE

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

INCOME TAX

Rev. Rul. 98–41, page 6.

Employees’ trust’s unrelated business taxable income. An employees’ trust’s proportionate share of the income of a common trust fund is unrelated business taxable

income (UBTI) to the extent that it would have been if the investment producing the income had been made directly by

the employees’ trust. Rev. Rul. 67–301 modified.

Rev. Rul. 98–42, page 5.

LIFO; price indexes; department stores. The June

1998 Bureau of Labor Statistics price indexes are accepted for use by department stores employing the retail

inventory and last-in, first-out inventory methods for valuing

inventories for tax years ended on, or with reference to,

June 30, 1998.

ADMINISTRATIVE

REG–209813–96, page 9.

Proposed regulations under section 671 of the Code define

widely held fixed investment trusts, clarify the reporting obligations of the trustees of these trusts and the middlemen connected with these trusts, and provide for he communication of

Finding Lists begin on page 19.

Announcements Relating to Court Decisions begin on page 4.

Department of the Treasury

Internal Revenue Service

necessary tax information to beneficial owners of trust interests. A public hearing on the proposed regulations will be held

on November 5, 1998.

Notice 98–40, page 7.

Consolidated income tax returns. Treasury and the Service intend to issue regulations under section 1502 of the

Code permitting taxpayers to elect not to apply the overall

foreign loss provisions under section 1.1502–9T of the Income Tax Regulations to consolidated return years beginning before January 1, 1998. The notice also provides guidance on how taxpayers can make the election.

Notice 98–45, page 7.

Definition of former Indian reservation in Oklahoma.

This notice provides the definition of “former Indian reservations in Oklahoma” for purposes of section 168(j)(6) of the

Code, as amended by the Taxpayer Relief Act of 1997.

Announcement 98–82, page 17.

This document provides notice of a public hearing on proposed regulations, REG–251698–96, 1998–20 I.R.B. 14,

under section 1308 of the Code relating to the treatment of

corporate subsidiaries of S corporations. The hearing will be

held on September 9, 1998.

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Mission of the Service

ucts and services; and perform in a manner warranting

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

The purpose of the Internal Revenue Service is to collect

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

the public by continually improving the quality of our prod-

Statement of Principles

of Internal Revenue

Tax Administration

The Service also has the responsibility of applying and

administering the law in a reasonable, practical manner.

Issues should only be raised by examining officers when

they have merit, never arbitrarily or for trading purposes.

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

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

adopt a position inconsistent with an established Service

position.

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

is determined by Congress.

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

policy by correctly applying the laws enacted by Congress;

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

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

neither a government nor a taxpayer point of view.

Administration should be both reasonable and vigorous. It

should be conducted with as little delay as possible and

with great courtesy and considerateness. It should never

try to overreach, and should be reasonable within the

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

should be relentless in its attack on unreal tax devices and

fraud.

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

is the responsibility of each person in the Service, charged

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

meaning of the statutory provision and not to adopt a

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

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

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Introduction

The Internal Revenue Bulletin is the authoritative instrument

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

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly and may be obtained

from the Superintendent of Documents on a subscription

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

on a single-copy basis.

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

are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

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

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

modify, or amend any of those previously published in the

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

of internal practices and procedures that affect the rights

and duties of taxpayers are published.

Part II.—Treaties and Tax Legislation.

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

Tax Conventions, and Subpart B, Legislation and Related

Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to

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

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

Assistant Secretary (Enforcement).

Revenue rulings represent the conclusions of the Service on

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

revenue ruling. In those based on positions taken in rulings

to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature

are deleted to prevent unwarranted invasions of privacy and

to comply with statutory requirements.

Part IV.—Items of General Interest.

With the exception of the Notice of Proposed Rulemaking

and the disbarment and suspension list included in this part,

none of these announcements are consolidated in the Cumulative Bulletins.

Rulings and procedures reported in the Bulletin do not have

the force and effect of Treasury Department Regulations,

but they may be used as precedents. Unpublished rulings

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

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

The first Bulletin for each month includes a cumulative index

for the matters published during the preceding months.

These monthly indexes are cumulated on a semiannual basis

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

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

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

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Announcement Relating to Court Decisions

It is the policy of the Internal Revenue

Service to announce at an early date

whether it will follow the holdings in certain cases. An Action on Decision is the

document making such an announcement.

An Action on Decision will be issued at

the discretion of the Service only on unappealed issues decided adverse to the

government. Generally, an Action on Decision is issued where its guidance would

be helpful to Service personnel working

with the same or similar issues. Unlike a

Treasury Regulation or a Revenue Ruling,

an Action on Decision is not an affirmative statement of Service position. It is not

intended to serve as public guidance and

may not be cited as precedent.

Actions on Decisions shall be relied

upon within the Service only as conclusions applying the law to the facts in the

particular case at the time the Action on

Decision was issued. Caution should be

exercised in extending the recommendation of the Action on Decision to similar

cases where the facts are different. Moreover, the recommendation in the Action

on Decision may be superseded by new

legislation, regulations, rulings, cases, or

Actions on Decisions.

Prior to 1991, the Service published acquiescence or nonacquiescence only in

certain regular Tax Court opinions. The

Service has expanded its acquiescence

program to include other civil tax cases

where guidance is determined to be helpful. Accordingly, the Service now may acquiesce or nonacquiesce in the holdings

of memorandum Tax Court opinions, as

well as those of the United States District

Courts, Claims Court, and Circuit Courts

of Appeal. Regardless of the court deciding the case, the recommendation of any

Action on Decision will be published in

the Internal Revenue Bulletin.

The recommendation in every Action

on Decision will be summarized as acquiescence, acquiescence in result only,

or nonacquiescence. Both “acquiescence” and “acquiescence in result only”

mean that the Service accepts the holding

of the court in a case and that the Service

will follow it in disposing of cases with

the same controlling facts. However, “acquiescence” indicates neither approval

nor disapproval of the reasons assigned

by the court for its conclusions; whereas,

“acquiescence in result only” indicates

disagreement or concern with some or all

of those reasons. Nonacquiescence signifies that, although no further review was

sought, the Service does not agree with

the holding of the court and, generally,

will not follow the decision in disposing

of cases involving other taxpayers. In reference to an opinion of a circuit court of

appeals, a nonacquiescence indicates that

the Service will not follow the holding on

a nationwide basis. However, the Service

will recognize the precedential impact of

the opinion on cases arising within the

venue of the deciding circuit.

The announcements published in the

weekly Internal Revenue Bulletins are

consolidated semiannually and annually.

The semiannual consolidation appears in

the first Bulletin for July and in the Cumulative Bulletin for the first half of the

year, and the annual consolidation appears in the first Bulletin for the following January and in the Cumulative Bulletin for the last half of the year.

The Commissioner ACQUIESCES in

the following decision:

McCormick v. Peterson,1

CV93–2157 (E.D.N.Y. 1993),

Estate of Clara K. Hoover, Deceased,

Yetta Hoover Bidegain, Personal

Representative v. Commissioner,2

69 F.3d 1044 (10th Cir. 1995)

Barry I. Fredericks v. Commissioner,3

No. 96–7748 (3rd Cir. 1997)

1Acquiescence relating to whether the taxpayer was subject to the frivolous return penalty under section 6702.

2Acquiescence relating to whether the election of special use valuation under I.R.C. section 2032A precludes a valuation that takes into account a minority interest

discount under section 2031.

3Acquiescence relating to whether the Court of Appeals erred in determining that the Service is equitably estopped from relying on a Form 872–A to indefinitely

extend the period of limitations when the Service’s actions misled the taxpayer into believing that the form was not in effect.

August 31, 1998

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

Section 472.—Last-in, First-out

Inventories

26 CFR 1.472–1: Last-in, first-out inventories.

LIFO; price indexes; department

stores. The June 1998 Bureau of Labor

Statistics price indexes are accepted for

use by department stores employing the

retail inventory and last-in, first-out inventory methods for valuing inventories

for tax years ended on, or with reference

to, June 30, 1998.

Rev. Rul. 98–42

reference to, June 30, 1998.

The following Department Store Inventory Price Indexes for June 1998 were issued by the Bureau of Labor Statistics.

The indexes are accepted by the Internal

Revenue Service, under § 1.472–1(k) of

the Income Tax Regulations and Rev.

Proc. 86–46, 1986–2 C.B. 739, for appropriate application to inventories of department stores employing the retail inventory and last-in, first-out inventory

methods for tax years ended on, or with

The Department Store Inventory Price

Indexes are prepared on a national basis

and include (a) 23 major groups of departments, (b) three special combinations of

the major groups - soft goods, durable

goods, and miscellaneous goods, and (c) a

store total, which covers all departments,

including some not listed separately, except for the following: candy, food,

liquor, tobacco, and contract departments.

BUREAU OF LABOR STATISTICS, DEPARTMENT STORE

INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS

(January 1941 = 100, unless otherwise noted)

June

1997

June

1998

Percent Change

from June 1997

to June 19981

1. Piece Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541.0

2. Domestics and Draperies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 644.1

3. Women’s and Children’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651.0

4. Men’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 904.0

5. Infants’ Wear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 642.5

6. Women’s Underwear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539.3

7. Women’s Hosiery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295.7

8. Women’s and Girls’ Accessories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569.4

9. Women’s Outerwear and Girls’ Wear . . . . . . . . . . . . . . . . . . . . . . . . 415.3

10. Men’s Clothing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625.0

11. Men’s Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589.8

12. Boys’ Clothing and Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494.5

13. Jewelry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1002.1

14. Notions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 752.1

15. Toilet Articles and Drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 913.5

16. Furniture and Bedding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673.2

17. Floor Coverings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 592.4

18. Housewares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 808.1

19. Major Appliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243.5

20. Radio and Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

76.2

21. Recreation and Education2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109.5

22. Home Improvements2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132.8

23. Auto Accessories2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108.0

513.9

618.6

659.3

906.7

623.1

567.7

308.3

536.2

410.0

616.6

599.1

494.6

970.3

776.0

948.5

689.3

604.0

818.6

236.7

71.9

104.8

133.1

107.2

–5.0

–4.0

1.3

0.3

–3.0

5.3

4.3

–5.8

–1.3

1.6

0.0

–3.2

3.2

3.8

2.4

2.0

1.3

–2.8

–5.6

–4.3

0.2

–0.7

Groups 1 – 15: Soft Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

602.5

600.1

–0.4

Groups 16 – 20: Durable Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

465.9

463.6

–0.5

Groups 21 – 23: Misc. Goods2

................................

112.2

108.9

–2.9

Store Total3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

554.8

550.7

–0.7

Groups

1Absence of a minus sign before percentage change in this column signifies price increase.

2Indexes on a January 1986=100 base.

3The store total index covers all departments, including some not listed separately, except for the following: candy, food, liquor, to-

bacco, and contract departments.

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DRAFTING INFORMATION

Rev. Rul. 98–41

The principal author of this revenue ruling is Stan Michaels of the Office of

Assistant Chief Counsel (Income Tax and

Accounting). For further information

regarding this revenue ruling, contact Mr.

Michaels on (202) 622-4970 (not a tollfree call).

In Rev. Rul. 67–301, 1967–2 C.B. 146,

an employees’ trust, formed under

§ 401(a) of the Internal Revenue Code

and exempt under § 501(a), invested in a

common trust fund that is exempt under

§ 584. Rev. Rul. 67–301 concludes, in

part, that the income of the common trust

fund is not unrelated business taxable income (UBTI) in the hands of the employees’ trust.

Section 1.584–2(c)(3) of the Income

Tax Regulations provides that for taxable

years beginning on or after September 22,

1980, any amount of income or loss of the

common trust fund that is included in the

computation of a participant’s taxable income for the taxable year shall be treated

as income or loss from an unrelated trade

or business to the extent that the amount

would have been income or loss from an

unrelated trade or business if the investments of the common trust fund had been

made directly by the participant.

Section 584.—Common Trust

Funds

26 CFR 1.584–2: Income of participants in

common trust fund.

Employees’ trust’s unrelated business taxable income. An employees’

trust’s proportionate share of the income

of a common trust fund is unrelated business taxable income (UBTI) to the extent

that it would have been if the investment

producing the income had been made directly by the employees’ trust. Rev. Rul.

67–301 modified.

August 31, 1998

The discussion of UBTI in Rev. Rul.

67–301 is inconsistent with § 1.584–

2(c)(3). Therefore, Rev. Rul. 67–301 is

modified to provide that the employees’

trust’s proportionate share of the income

of the common trust fund is UBTI to the

extent that it would have been if the investment producing the income had been

made directly by the employees’ trust.

EFFECT ON OTHER REVENUE

RULINGS

Rev. Rul. 67-301 is modified, effective

for taxable years beginning on or after

September 22, 1980.

DRAFTING INFORMATION

The principal author of this revenue

ruling is John Kramer of the Office of the

Assistant Chief Counsel (Passthroughs

and Special Industries). For further information regarding this revenue ruling contact John Kramer on (202) 622-3060 (not

a toll-free call).

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Part III. Administrative, Procedural, and Miscellaneous

Effective Date of Consolidated

Overall Foreign Loss Provisions

Notice 98–40

This notice announces that Treasury

and the Service intend to issue regulations

permitting taxpayers to elect to delay the

effective date of Treas. Reg. § 1.1502–9T,

published in the Federal Register on January 12, 1998 (63 F.R. 1740), and modified on March 16, 1998 (63 F.R. 12641).

On January 12, 1998, Treasury and the

Service published in the Federal Register final, temporary and proposed regulations (the “January 1998 regulations”) relating to limitations on the use of certain

tax credits and related attributes by corporations filing consolidated income tax returns. In general, the January 1998 regulations relate to the separate return

limitation year (“SRLY”) provisions for

general business credits, alternative minimum tax credits, foreign tax credits and

overall foreign loss accounts. The January 1998 regulations were generally applicable to consolidated return years beginning on or after January 1, 1997.

On March 16, 1998, Treasury and the

Service published in the Federal Register final, temporary, and proposed regulations (the “March 1998 regulations”)

modifying the effective date of the January 1998 regulations. The March 1998

regulations provide that the provisions of

the January 1998 regulations will apply

for consolidated return years for which

the due date (without extensions) of the

income tax return is after March 13,

1998. In lieu of applying this effective

date, however, the March 1998 regulations permit a consolidated group to

choose to apply the effective date provisions under the January 1998 regulations.

The March 1998 regulations provide that

taxpayers making this choice must apply

all those effective date provisions for all

relevant years. Thus, under the March

1998 regulations, such taxpayers are not

permitted to apply one provision of the

January 1998 regulations (e.g., the general business credit effective date) and

not another (e.g., the foreign tax credit effective date).

On May 7, 1998, a public hearing was

held regarding the proposed January and

1998–35 I.R.B.

March regulations. At the hearing and in

written submissions, commentators expressed concern regarding the effective

dates contained in the January 1998 and

March 1998 regulations with respect to

the overall foreign loss account provisions of Treas. Reg. § 1.1502–9T. The

commentators’ principal concern was that

these effective dates resulted in adverse

tax consequences not anticipated by taxpayers with respect to business transactions that occurred prior to the issuance of

the January 1998 regulations. Treasury

and the Service now believe that certain

of these consequences are inappropriate.

Accordingly, this notice announces that

Treasury and the Service intend to issue

regulations permitting taxpayers to elect

not to apply Treas. Reg. § 1.1502–9T (the

overall foreign loss account provisions) to

consolidated return years beginning before

January 1, 1998. A taxpayer that chooses

under the March 1998 regulations to apply

the effective date provisions under the

January 1998 regulations may also make

the election under this notice.

To make the election under this notice,

a taxpayer must write “Election Pursuant

to Notice 98–40” across the top of page 1

of an original or amended tax return for

each consolidated return year subject to

the election. For the first consolidated return year to which the overall foreign loss

provisions of Treas. Reg. § 1.1502–9T

apply (i.e., the first year beginning on or

after January 1, 1998), such taxpayer

must write “Notice 98–40 Election in Effect in Prior Years” across the top of page

1 of the consolidated tax return for that

year. For purposes of applying Treas.

Reg. § 1.1502–9T with respect to such

year, any member with a balance in an

overall foreign loss account from a separate return limitation year on the first day

of such year shall be treated as joining the

group on such first day.

Treasury and the Service intend to

amend the regulations under section 1502

to incorporate the guidance set forth in

this notice. Until the regulations are

amended, taxpayers may rely on the guidance set forth in this notice.

For further information regarding this

notice, contact Trina Dang of the Office

of Associate Chief Counsel (Interna-

tional) at (202) 622-3880 (not a toll-free

call).

Former Indian Reservations in

Oklahoma

Notice 98–45

This notice defines “former Indian

reservations in Oklahoma” for purposes

of § 168(j)(6) of the Internal Revenue

Code, as amended by the Taxpayer Relief

Act of 1997 (the Act), Pub. L. No. 105–

34, 111 Stat. 788.

BACKGROUND

Sections 13321 and 13322 of the Omnibus Budget Reconciliation Act of 1993,

Pub. L. No. 103–66, 1993-3 C.B. 1, 146–

151, amended the Internal Revenue Code

by adding two provisions to the Code to

establish two Indian reservation-based

federal tax incentives. Section 45A generally provides an Indian employment

credit for certain wages and health insurance costs paid or incurred by an employer whose employees are enrolled

members of an Indian tribe or the spouses

of enrolled members of an Indian tribe

who perform substantially all their services for the taxpayer within an Indian

reservation and have a principal place of

abode on or near such reservation. Section 168(j) generally provides more favorable depreciation for qualified Indian

reservation property (that is, certain depreciable property used predominantly in

the active conduct of a trade or business

within an Indian reservation and not regularly used or located outside the reservation). Section 45A applies to wages and

health insurance costs paid or incurred

after December 31, 1993, in a taxable

year that begins on or before December

31, 2003. Section 168(j) applies to property placed in service after December 31,

1993, and on or before December 31,

2003.

Section 45A(c)(7) states that the term

“Indian reservation” has the meaning

given the term by § 168(j)(6). Section

168(j)(6) (prior to its amendment by the

Act) provided that, for purposes of

§ 168(j), the term “Indian reservation”

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Page 8

means a reservation, as defined in either

section 3(d) of the Indian Financing Act

of 1974, 25 U.S.C. § 1452(d), or section

4(10) of the Indian Child Welfare Act of

1978, 25 U.S.C. § 1903(10). Section 3(d)

of the Indian Financing Act of 1974 defines reservation to include “former Indian reservations in Oklahoma.”

Section 1604(c) of the Act (generally

effective as of January 1, 1994) amended

the definition of “Indian reservation”

under section 168(j)(6). Under the

amendment, only lands within the jurisdictional area of an Oklahoma Indian

tribe (as determined by the Secretary of

the Interior) that are recognized by such

Secretary as an area eligible for trust land

status under 25 CFR Part 151 as in effect

on August 5, 1997 (the date of enactment), are “former Indian reservations in

Oklahoma.”

DETERMINATION OF SECRETARY

OF THE INTERIOR AS TO THE

MEANING OF FORMER INDIAN

RESERVATIONS

The Secretary of the Interior has determined that, for purposes of section

168(j)(6), lands that are within the jurisdictional area of an Oklahoma Indian

tribe are those lands within the boundaries

of the last treaties, Executive Orders, fed-

August 31, 1998

eral agreements, federal statutes, and Secretarial Orders with the Oklahoma tribes.

The Secretary of the Interior also has determined that any lands within the boundaries of the last treaties, Executive Orders,

federal agreements, federal statutes, and

Secretarial Orders with the Oklahoma

tribes are lands eligible for trust land status under 25 CFR Part 151.

The areas of Oklahoma located outside

the boundaries of the last treaties, Executive Orders, federal agreements, federal

statutes, and Secretarial Orders with the

Oklahoma tribes are (1) the Cherokee

Outlet, (2) No Man’s Land (also known as

the Panhandle), (3) the historic Greer

County, and (4) those former Seminole

and Creek domain lands in central Indian

Territory that were deemed to be “unassigned lands.” The location of those areas

in Oklahoma that are outside the boundaries of the last treaties, Executive Orders,

federal agreements, federal statutes, and

Secretarial Orders with the Oklahoma Indian tribes can best be described in terms

of entire present-day counties that are ineligible (Alfalfa, Beaver, Cimarron,

Garfield, Grant, Greer, Harmon, Harper,

Jackson, Major, Texas, Woods, and

Woodward) and present-day counties that

are split by the boundaries, that is, part of

the county is eligible and part of the

county is not eligible (Beckham, Canadian, Cleveland, Ellis, Kay, Kingfisher,

Logan, Noble, Oklahoma, Pawnee and

Payne).

ADDITIONAL INFORMATION

The Arkansas-Oklahoma District of the

Internal Revenue Service will make available a plain language description of the

boundary for each split county. Written

requests should include the name of the

applicable split county and be sent to the

following address: Internal Revenue Service, 55 North Robinson Street, Mail Stop

4030-OKC, Attention: RSC, Oklahoma

City, OK 73102. The plain language description is also available on the Internet

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

atn/oklahoma.html.

DRAFTING INFORMATION

CONTACT

The principal author of this notice is

Winston H. Douglas of the Office of the

Assistant Chief Counsel (Passthroughs

and Special Industries). For further information regarding this notice contact Mr.

Douglas on (202) 622-3110 (not a tollfree call). For information concerning the

boundaries, contact the Arkansas-Oklahoma District office on (405) 297-4690

(not a toll-free call).

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Part IV. Items of General Interest

Notice of Proposed Rulemaking

and Notice of Public Hearing

Reporting Requirements for

Widely Held Fixed Investment

Trusts

REG–209813–96

AGENCY: Internal Revenue Service

(IRS), Treasury

ACTION: Notice of proposed rulemaking and notice of public hearing.

SUMMARY: This document contains

proposed regulations that define widely

held fixed investment trusts, clarify the

reporting obligations of the trustees of

these trusts and the middlemen connected

with these trusts, and provide for the communication of necessary tax information

to beneficial owners of trust interests.

This document also provides notice of a

public hearing on these proposed regulations.

DATES: Written comments must be received by, November 12, 1998. Requests

to speak (with outlines of oral comments)

at a public hearing scheduled for Thursday, November 5, 1998 at 10 a.m. must be

submitted by October 15, 1998.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (REG–209813–96),

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 (REG–209813–96),

Courier’s Desk, Internal Revenue Building, 1111 Constitution Avenue, NW,

Washington, DC. Alternatively, taxpayers

may submit comments electronically via

the Internet by selecting the “Tax Regs”

option on the IRS Home Page, or by submitting comments directly to the IRS Internet site at http://www.irs.ustreas.gov/

prod/tax_regs/comments.html. The public hearing will be held in room 2615, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Faith

1998–35 I.R.B.

Colson, (202) 622-3060; concerning submissions and the hearing, LaNita Van

Dyke, (202) 622-7180 (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 for review in accordance with the Paperwork Reduction Act

of 1995 (44 U.S.C. 3507(d)). Comments

on the collection of information should be

sent to the Office of Management and

Budget, Attn: Desk Officer for the Department of Treasury, Office of Information and Regulatory Affairs, Washington,

DC 20503, with copies to the Internal

Revenue Service, Attn: IRS Reports

Clearance Officer, OP:FS:FP, Washington, DC 20224. Comments on the collection of information should be received by,

October 13, 1998. Comments are specifically requested concerning:

Whether the proposed collection of information is necessary for the proper performance of the functions of the Internal

Revenue Service, including whether the

information will have practical utility;

The accuracy of the estimated burden

associated with the proposed collection of

information (see below);

How the quality, utility, and clarity of

the information to be collected may be enhanced;

How the burden of complying with the

proposed collection of information may

be minimized, including through the application of automated collection techniques or other forms of information technology; and

Estimates of capital or start-up costs

and costs of operation, maintenance, and

purchase of service to provide information.

The collection of information in these

proposed regulations is in §1.671–4 of the

Income Tax Regulations. This information is required to enable holders of trust

interests to report items of income, deduction, and credit of a widely held fixed investment trust under section 671. This information will be used by the IRS to

ensure that those items are reported accu-

rately by beneficial owners of trust interests. The collection of information is

mandatory. The likely respondents are

businesses and other for-profit institutions.

Estimated total annual reporting burden: 2,400 hours.

Estimated average annual burden hours

per respondent: 2 hours.

Estimated number of respondents:

1,200.

Estimated annual frequency of responses: Annually (but more often for a

trust providing information to certain persons on request).

An agency may not conduct or sponsor,

and a person is not required to respond to,

a collection of information unless it displays a valid control number assigned by

the Office of Management and Budget.

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.

Background

This document contains proposed

amendments to the Income Tax Regulations (26 CFR part 1) under section 671.

The proposed amendments are to be issued under the authority of sections 671,

6034A, 6049(d)(7), and 7805.

A fixed investment trust is an arrangement classified as a trust under

§301.7701–4(c). Beneficial interests in

these trusts are divided into units. The

Service treats these trusts as grantor trusts

under section 671 and the owners of the

beneficial interests, or units, as the

grantors. See Rev. Rul. 84–10 (1984–1

C.B. 155); Rev. Rul. 70–545 (1970–2

C.B. 7); Rev. Rul. 70–544 (1970–2 C.B.

6); Rev. Rul. 61–175 (1961–2 C.B. 128).

Under the proposed regulations, a widely

held fixed investment trust is a fixed investment trust in which any interest is

held by a middleman. For this purpose,

the term middleman includes, but is not

limited to, a custodian of a person’s account, a nominee, and a broker holding an

interest for a customer in street name.

The IRS and Treasury request comments

on the application and scope of these defi-

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nitions, including the appropriateness of a

de minimis rule as to the number of middlemen.

Interests in widely held fixed investment trusts are often held in the street

name of a middleman, who holds such interests on behalf of the beneficial owners.

Thus, trustees frequently do not know the

identity of the beneficial owners and are

not in a position to communicate necessary tax information directly to such owners. Currently, there are no tax information reporting rules specifically providing

for the sharing of tax information among

trustees, middlemen, and beneficial owners of these trusts.

On December 21, 1995, final regulations (T.D. 8633) under section 671, relating to the information reporting requirements of grantor trusts, were published in

1996–1 C.B. 119. See §1.671–4. While

drafting the final regulations, the IRS and

Treasury concluded that special reporting

requirements were needed for widely held

fixed investment trusts but that such guidance fell outside the scope of the final regulations. The preamble to the final regulations stated that the IRS and Treasury

anticipated providing guidance for these

trusts in a separate project and invited

comments from interested taxpayers and

practitioners regarding such guidance.

In developing these proposed regulations, the IRS and Treasury have continued to solicit comments from the public.

Comments were received from various industry members and practitioners, and

these proposed regulations take such

comments into account. The proposed

regulations are intended to clarify the reporting requirements of trustees and middlemen and to ensure that beneficial owners of trust interests receive accurate and

timely tax reporting information. The

IRS and Treasury welcome comments on

specific instances of industry practice that

differ significantly from the framework of

these proposed regulations and on suggestions to tailor the reporting requirements

to account for those differences.

Explanation of Provisions

A. General Framework of Reporting

Rules

The information reporting framework

in the proposed regulations is similar to

that for regular interests in a real estate

August 31, 1998

mortgage investment conduit. See

§1.6049–7.

Under the proposed regulations, the responsibility for information reporting lies

primarily with the person in the ownership chain who holds a unit interest for a

beneficial owner and is, therefore, in the

best position to communicate with, and

provide tax information to, the beneficial

owner. Thus, a brokerage firm that holds

a unit interest directly for an individual as

a middleman will have the primary obligation to report to the IRS and to provide

tax information to the individual. Similarly, if a unit interest is held directly by

an individual and not through a middleman, the trustee is to report to the IRS and

to provide tax information to the individual. Information reporting generally is

not required for interests held by exempt

recipients. Middlemen and trustees, however, are to make trust tax information

available upon request to exempt recipients.

Appropriate adjustments may be necessary to other information reporting rules

to make them compatible with these proposed regulations.

B. Trustee or Middleman to Report to the

IRS on Form 1099

Under proposed §1.671–4(j)(2)(i)(A), a

trustee must report to the IRS, on the appropriate Forms 1099, the gross amount

of trust income (determined in accordance

with proposed §1.671–4(j)(6)(i)) attributable to a unit interest holder who holds an

interest in the trust directly and not

through a middleman. Similarly, under

proposed §1.671–4(j)(2)(i)(B), a middleman must report for any unit interest

holder on whose behalf or account the

middleman holds an interest. (To comply

with this requirement, middlemen may request the necessary tax information from

the trustee. See the discussion below.) In

addition, the trustee or middleman is to

report on the appropriate Form 1099 the

gross proceeds from the sale or other disposition of a trust asset that is attributable

to the unit interest holder. Forms 1099

are not required for any unit interest

holder who is an exempt recipient, as defined in proposed §1.671–4(j)(1).

C. Statements to be Furnished to the

Beneficial Owners of Unit Interests

Every middleman or trustee required to

file with the IRS a Form 1099 under these

proposed regulations for a unit interest

holder must furnish to the unit interest

holder a written statement providing the

holder with necessary tax reporting information including: (1) the items of income

(determined in accordance with proposed

§1.671–4(j)(6)(i)), deduction, and credit

of the trust attributable to the unit interest

holder; (2) if any trust asset has been sold

or otherwise disposed of during the calendar year, the portion of the gross proceeds

relating to the trust asset which is attributable to the unit interest holder, the date of

sale or disposition of the trust asset, and

the percentage of that trust asset that has

been sold or disposed of; and (3) any

other information necessary for the unit

interest holder to accurately report the income, deductions, and credits of the trust

attributable to the unit interest as required

under section 671.

In addition, to enable unit interest holders to calculate gain or loss on the disposition of a trust asset, if a trust sells or disposes of a trust asset during a particular

calendar year, the proposed regulations

require the trustee or middleman to include, with the statement to the holder, a

schedule showing the portion (expressed

as a percentage) of the total fair market

value of all the assets held by the trust that

the trust asset sold or disposed of represented as of the last day of each quarter

that the asset was held by the trust. It is

contemplated that, in the absence of more

accurate information, this information

may be used by the unit interest holder to

determine the percentage of the holder’s

basis in its unit interest that the disposed

asset represents, so that the holder may

calculate its gain or loss on the disposition

of the asset.

The IRS and Treasury welcome comments on whether the approach taken in

the proposed regulations to communicate

information to enable the holder of a unit

interest to calculate its basis in a trust

asset is effective, or whether a different

approach, which continues to be consistent with the taxation of grantor trusts,

would be more effective. In addition, the

IRS and Treasury invite comments on

whether, for trusts consisting of fungible

assets, an approach other than the proposed asset-by-asset approach for reporting sales and determining basis is administratively feasible or whether an

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Page 11

aggregate approach would be more appropriate and on the manner in which such an

aggregate approach would be applied.

D. Information to be Furnished to

Middlemen by Trusts

In general, information reporting is not

required for unit interests held by exempt

recipients. To enable such persons to receive necessary trust information, however, §1.671–4(j)(3)(iii) of the proposed

regulations provides that middlemen, exempt recipients, and certain other persons

may request from the trust tax information for a calendar quarter, computed as of

the last day of the quarter specified, or for

a calendar year, computed as of December 31 of the year specified. The tax reporting information the trust is to make

available includes: (1) all items of income (determined in accordance with

proposed §1.671–4(j)(6)(i)), deduction,

and credit of the trust for the period specified; (2) if any trust asset has been sold or

otherwise disposed of during the period

specified, the gross proceeds received by

the trust for the trust asset, the date of sale

or disposition, and the percentage of that

trust asset that has been sold or disposed

of; (3) the number of units outstanding on

the last business day of the period specified; and (4) any other information necessary for the unit interest holder to accurately report the income, deductions, and

credits attributable to the portion of the

trust treated as owned by the holder, as required under section 671. In addition, if a

trust asset is sold or otherwise disposed of

during the period specified, the trust must

provide a schedule showing the portion

(expressed in terms of a percentage) of

the total fair market value of all the assets

held by the trust that the asset sold or disposed of represented as of the last day of

each calendar quarter that the trust held

the asset.

E. Special Rules

A beneficial owner of a unit interest

must report trust items consistent with the

owner’s method of accounting. See, e.g.,

Rev. Rul. 84–10. For administrative convenience, and with the intent of being

consistent with industry practice, however, the proposed regulations require a

trust to provide tax information as if the

trust were a taxpayer using the cash re-

1998–35 I.R.B.

ceipts and disbursements method of tax

accounting (cash method). Although a

trust must provide tax information to unit

holders as if the trust were a cash method

taxpayer, the trust must provide information necessary for such holders to comply

with the original issue discount rules and

other provisions requiring the inclusion of

accrued amounts regardless of the

holder’s method of accounting. The IRS

and Treasury are continuing to study, and

welcome comments on, whether to require trusts to provide tax reporting information to accommodate the different

methods of accounting used by the beneficial owners of a trust.

In the case of a widely held fixed investment trust that holds a pool of debt instruments subject to section 1272(a)(6)(C)(iii), the proposed regulations

require that middlemen, unit interest

holders, exempt recipients, and noncalendar-year taxpayers be provided with certain additional information that is necessary for compliance with the market

discount rules and, where applicable, section 1272(a)(6) (as amended by section

1004 of the Taxpayer Relief Act of 1997,

Public Law 105–34, 111 Stat. 788, 911

(1997)). This additional information includes information necessary to compute

(1) the accrual of market discount, including the type of information required under

§1.6049–7(f)(2)(i)(G) in the case of a

REMIC regular interest or a collateralized

debt obligation not issued with original

issue discount; and (2) the accrual of original issue discount and market discount,

including the type of information required

under §1.6049–7(f)(2)(ii)(E), (F), (I), and

(K) in the case of a REMIC regular interest or a collateralized debt obligation that

is issued with original issue discount.

The IRS and Treasury request comments

on whether similar information reporting

requirements, for example, reporting of

information necessary to compute the accrual of market discount, should be extended to widely held fixed investment

trusts that hold instruments (or pools of

instruments) not subject to section

1272(a)(6)(C).

To enable a beneficial owner to comply

fully with section 671 and section 67

(where applicable), §1.671–4(j)(6)(i) of

the proposed regulations requires the

amount of trust income to be reported by

the trustee to be the gross amount of in-

come generated by the trust assets (other

than from the sale or other disposition of

trust assets). Thus, in the case of a trust

that receives a payment net of an expense,

the payment must be grossed up to reflect

the deducted expense. Trustees must also

have, and make available, information regarding the trust’s affected expenses (as

defined in §1.67–2T(i)(1)) for the calendar year. In addition, in the case of a unit

interest holder that is an affected investor

(as defined in §1.67–2T(h)(1)), the trustee

or middleman must provide such unit interest holder with information regarding

the holder’s proportionate share of the

trust’s affected expenses for the calendar

year.

The proposed regulations also require

the trust to separately state any other item

that, if taken into account separately by

any unit interest holder, could result in an

income tax liability for that unit interest

holder different from that which would

result if the unit interest holder did not

take the item into account separately. The

IRS and Treasury request comments on

whether this requirement is administratively feasible in the context of a widely

held fixed investment trust or whether a

different approach, also consistent with

the taxation of grantor trusts, would be

more appropriate.

F. Coordination with Backup

Withholding Rules

Section 1.671–4(j)(7) of the proposed

regulations contains provisions to coordinate these regulations with the backup

withholding rules.

Proposed Effective Date

These regulations are proposed to

apply to calendar years beginning on or

after the date that final regulations are

published in the Federal Register.

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 is hereby certified

that these regulations will not have a significant economic impact on a substantial

number of small entities. This certification is based on the fact that the regulations generally clarify existing reporting

August 31, 1998

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Page 12

obligations and are expected, for the most

part, to have a minimal impact on industry practice. Thus, the regulations will

not result in a significant economic impact on any entity subject to the regulations. Further, the reporting burdens in

these regulations will fall primarily on

large brokerage firms, large banks, and

other large entities acting as trustees or

middlemen, most of which are not small

entities within the meaning of the Regulatory Flexibility Act (5 U.S.C. chapter 6).

Thus, a substantial number of small entities will not be affected. Therefore, a

Regulatory Flexibility Analysis under the

Regulatory Flexibility Act (5 U.S.C.

chapter 6) 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 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 (in the

manner described in the ADDRESSES

caption) to the IRS. All comments will be

available for public inspection and copying.

A public hearing has been scheduled

for Thursday, November 5, 1998 at 10

a.m., in room 2615, Internal Revenue

Building, 1111 Constitution Avenue, NW,

Washington, DC. Because of access restrictions, visitors will not be admitted beyond the Internal Revenue Building lobby

more than 15 minutes before the hearing

starts.

The rules of 26 CFR 601.601(a)(3)

apply to the hearing.

Persons that wish to present oral comments at the hearing must submit written

comments by, November 12, 1998, and

submit an outline of the topics to be discussed and the time to be devoted to each

topic (signed original and eight (8)

copies) by October 15, 1998.

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

August 31, 1998

passed. Copies of the agenda will be

available free of charge at the hearing.

Drafting Information

The principal author of these regulations is Faith Colson, Office of Assistant

Chief Counsel (Passthroughs and Special

Industries). However, other personnel

from the IRS and Treasury Department

participated in their development.

* * * * *

Proposed Amendments to the Regulations

Accordingly, 26 CFR parts 1 and 301

are proposed to be amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for

part 1 is amended by adding an entry in

numerical order to read as follows:

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

Section 1.671–4 also issued under 26

U.S.C. 671, 26 U.S.C. 6034A, and 26

U.S.C. 6049(d)(7).

Par. 2. Section 1.671–4 is amended by

revising paragraph (a) and adding paragraph (j) to read as follows:

§1.671–4 Method of reporting.

(a) Portion of trust treated as owned by

the grantor or another person. Except as

otherwise provided in paragraphs (b) and

(j) of this section, items of income, deduction, and credit attributable to any portion

of a trust which, under the provisions of

subpart E (section 671 and following),

part I, subchapter J, chapter 1 of the Internal Revenue Code, is treated as owned by

the grantor or another person are not reported by the trust on Form 1041, but are

shown on a separate statement to be attached to that form. Paragraph (j) of this

section provides special reporting rules

for widely held fixed investment trusts.

Section 301.7701–4(e)(2) of this chapter

provides guidance on how the reporting

rules in this paragraph (a) apply to an environmental remediation trust.

* * * * *

(j) Special rules applicable to widely

held fixed investment trusts. The reporting rules contained in this paragraph (j)

apply to any widely held fixed investment

trust.

(1) Definitions. For purposes of this

paragraph (j):

Affected expenses. The term affected

expenses has the meaning given that term

by §1.67–2T(i)(1).

Affected investor. The term affected investor has the meaning given that term by

§1.67–2T(h)(1).

Exempt recipient. An exempt recipient

is any person described in paragraphs

(j)(2)(iv)(A) through (R) of this section.

Middleman. A middleman is any person who holds an interest in an arrangement classified as a trust under

§301.7701–4(c) of this chapter, and subject to subpart E, part I, subchapter J,

chapter 1 of the Internal Revenue Code,

on behalf of, or for the account of, another

person, or who otherwise acts in a capacity as an intermediary for the account of

another person, at any time during the calendar year. A middleman includes, but is

not limited to—

(i) A custodian of a person’s account,

such as a bank, financial institution, or

brokerage firm acting as custodian of an

account;

(ii) A nominee, including the joint

owner of an account or instrument except

if the joint owners are husband and wife;

and

(iii) A broker (as defined in section

6045(c)(1) and §1.6045-1(a)(1)) holding

an interest for a customer in street name.

Requesting person. A requesting person is a person specified in paragraph

(j)(3)(iii)(A) of this section who is entitled to request from the trustee the information specified in paragraph (j)(3)(ii) of

this section.

Trustee. Trustee means the trustee of a

widely held fixed investment trust.

Unit interest holder. A unit interest

holder is any person who holds a direct or

indirect interest, including a beneficial interest, in a widely held fixed investment

trust at any time during the calendar year.

Widely held fixed investment trust. A

widely held fixed investment trust is an

arrangement classified as a trust under

§301.7701–4(c) of this chapter, and subject to subpart E, part I, subchapter J,

chapter 1 of the Internal Revenue Code,

in which any interest is held by a middleman.

(2) Form 1099 requirement for trustees

and middlemen—(i) Obligation to file

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Form 1099 with the Internal Revenue Service. Except as provided in paragraph

(j)(2)(iv) of this section—

(A) Every trustee must file with the Internal Revenue Service the appropriate

Forms 1099 reporting the information

specified in paragraph (j)(2)(ii) of this

section with respect to any unit interest

holder who holds an interest in the trust

directly and not through a middleman;

and

(B) Every middleman must file with

the Internal Revenue Service the appropriate Forms 1099, reporting the information specified in paragraph (j)(2)(ii) of

this section with respect to any unit interest holder on whose behalf or account the

middleman holds an interest in the trust or

acts in a capacity as an intermediary.

(ii) Information to be reported. The following information must be reported to

the Internal Revenue Service on the appropriate Forms 1099—

(A) The name, address, and taxpayer

identification number of the unit interest

holder;

(B) The name, address, and taxpayer

identification number of the person required to file the form;

(j)(6)(i) of this section) attributable to the

unit interest holder for the calendar year

for which the return is made;

(D) In the case of the sale or other disposition of a trust asset during the calendar year, the portion of the gross proceeds

relating to the trust asset that is attributable to the unit interest holder; and

(E) Any other information required by

the Forms 1099.

(iii) Time and place for filing Forms

1099. The Forms 1099 required to be

filed with the Internal Revenue Service by

trustees or middlemen pursuant to paragraph (j)(2)(i) of this section must be filed

on or before February 28 of the year following the year for which the Forms 1099

are being filed. The returns must be filed

with the appropriate Internal Revenue

Service Center, at the address listed in the

instructions for the Forms 1099. For extensions of time for filing returns under

this section, see §1.6081–1. For magnetic

media filing requirements, see

§301.6011-2 of this chapter.

(iv) Forms 1099 not required. A Form

1099 is not required for a unit interest

1998–35 I.R.B.

holder that is an exempt recipient. However, if the trustee or middleman backup

withholds under section 3406 on payments made to a unit interest holder (because, for example, the unit interest

holder has failed to furnish a Form W-9

on request), then the trustee or middleman

is required to make a return under this

section, unless the trustee or middleman

refunds the amount withheld in accordance with §31.6413(a)–3 of this chapter.

An exempt recipient is generally exempt

from information reporting without filing

a certificate claiming exempt status unless

the provisions of this paragraph (j)(2)(iv)

require the unit interest holder to file a

certificate. A trustee or middleman may

in any case require a unit interest holder

not otherwise required to file a certificate

under this paragraph (j)(2)(iv) to file a

certificate in order to qualify as an exempt

recipient. See §31.3406(h)–3(a)(1)(iii)

and (c)(2) of this chapter for the certificate that a unit interest holder must provide if a trustee or middleman requires the

certificate in order to treat the unit interest

holder as an exempt recipient under this

paragraph (j)(2)(iv). A trustee or middleman may treat a unit interest holder as an

exempt recipient based upon a properly

completed form as described in

§31.3406(h)–3(e)(2) of this chapter, its

actual knowledge that the unit interest

holder is a person described in this paragraph (j)(2)(iv), or the indicators described in this paragraph (j)(2)(iv). Any

unit interest holder who ceases to be an

exempt recipient shall, no later than 10

days after such cessation, notify the

trustee or middleman in writing when it

ceases to be an exempt recipient. For purposes of this paragraph (j)—

(A) Corporation. A corporation, as defined in section 7701(a)(3), whether domestic or foreign, is an exempt recipient.

In addition, for purposes of this paragraph

(j)(2)(iv), the term corporation includes a

partnership all of whose members are corporations described in this paragraph

(j)(2)(iv), but only if the partnership files

with the trustee or middleman a properly

completed form as described in

§31.3406(h)–3(e)(2) of this chapter. Absent actual knowledge otherwise, a trustee

or middleman may treat a unit interest

holder as a corporation (and, therefore, as

an exempt recipient) if one of the requirements of paragraph (j)(2)(iv)(A)(1), (2),

(3), or (4), is met at the time a unit interest

holder acquires an interest in the trust.

(1) The name of the unit interest holder

contains an unambiguous expression of

corporate status (that is, Incorporated,

Inc., Corporation, Corp., P.C., (but not

Company or Co.)) or contains the term insurance company, indemnity company,

reinsurance company, or assurance company, or its name indicates that it is an entity listed as a per se corporation under

§301.7701–2(b)(8)(i) of this chapter.

(2) The trustee or middleman has on

file a corporate resolution or similar document clearly indicating corporate status.

For this purpose, a similar document includes a copy of Form 8832, filed by the

unit interest holder to elect classification

as an association under §301.7701–3(c)

of this chapter.

(3) The trustee or middleman receives a

Form W-9 which includes an EIN and a

statement from the unit interest holder

that it is a domestic corporation.

(4) The trustee or middleman receives a

withholding certificate described in

§1.1441–1(e)(2)(i), that includes a certification that the person whose name is on

the certificate is a foreign corporation.

(B) Tax exempt organization. Any organization that is exempt from taxation

under section 501(a) is an exempt recipient. A custodial account under section

403(b)(7) shall be considered an exempt

recipient under this paragraph. A trustee

or middleman may treat an organization as

an exempt recipient under this paragraph

(j)(2)(iv)(B) without requiring a certificate

if the organization’s name is listed in the

compilation by the Commissioner of organizations for which a deduction for charitable contributions is allowed, if the name

of the organization contains an unambiguous indication that it is a tax-exempt organization, or if the organization is known to

the trustee or middleman to be a tax-exempt organization.

A trustee or middleman may treat any

such plan of which it is the trustee or custodian as an exempt recipient under this

paragraph (j)(2)(iv)(C) without requiring

a certificate.

(D) United States. The United States

Government and any wholly-owned

agency or instrumentality thereof are ex-

August 31, 1998

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Page 14

empt recipients. A trustee or middleman

may treat a person as an exempt recipient

under this paragraph (j)(2)(iv)(D) without

requiring a certificate if the name of such

person reasonably indicates it is described

in this paragraph (j)(2)(iv)(D).

(E) State. A State, the District of Columbia, a possession of the United States,

a political subdivision of any of the foregoing, a wholly-owned agency or instrumentality of any one or more of the foregoing, and a pool or partnership composed

exclusively of any of the foregoing are exempt recipients. A trustee or middleman

may treat a person as an exempt recipient

under this paragraph (j)(2)(iv)(E) without

requiring a certificate if the name of such

person reasonably indicates it is described

in this paragraph (j)(2)(iv)(E) or if such

person is known generally in the community to be a State, the District of Columbia,

a possession of the United States or a political subdivision or a wholly-owned

agency or instrumentality or any one or

more of the foregoing (for example, an account held in the name of “Town of S” or

“County of T” may be treated as held by

an exempt recipient under this paragraph

(j)(2)(iv)(E)).

(F) Foreign government. A foreign

government, a political subdivision of a

foreign government, and any whollyowned agency or instrumentality of either

of the foregoing are exempt recipients. A

trustee or middleman may treat a foreign

government or a political subdivision

thereof as an exempt recipient under this

paragraph (j)(2)(iv)(F) without requiring a

certificate provided that its name reasonably indicates that it is a foreign government or provided that it is known to the

trustee or middleman to be a foreign government or a political subdivision thereof

(for example, an account held in the name

of the “Government of V” may be treated

as held by a foreign government).

(G) International organization. An international organization and any whollyowned agency or instrumentality thereof

are exempt recipients. The term international organization shall have the meaning ascribed to it in section 7701(a)(18).

A trustee or middleman may treat a unit

interest holder as an international organization without requiring a certificate if the

unit interest holder is designated as an international organization by executive

August 31, 1998

order (pursuant to 22 U.S.C. 288 through

288f).

(H) Foreign central bank of issue. A

foreign central bank of issue is an exempt

recipient. A foreign central bank of issue

is a bank which is by law or government

sanction the principal authority, other

than the government itself, issuing instruments intended to circulate as currency.

See §1.895-1(b)(1). A trustee or middleman may treat a person as a foreign central bank of issue (and, therefore, as an

exempt recipient) without requiring a certificate provided that such person is

known generally in the financial community as a foreign central bank of issue or if

its name reasonably indicates that it is a

foreign central bank of issue.

(I) Securities and commodities dealer.

A dealer in securities, commodities, or

notional principal contracts that is registered as such under the laws of the United

States or a State or under the laws of a

foreign country is an exempt recipient. A

trustee or middleman may treat a dealer as

an exempt recipient under this paragraph

(j)(2)(iv)(I) without requiring a certificate

if the person is known generally in the investment community to be a dealer meeting the requirements set forth in this paragraph (j)(2)(iv)(I) (for example, a

registered broker-dealer or a person listed

as a member firm in the most recent publication of members of the National Association of Securities Dealers, Inc.).

(J) Real Estate Investment Trust. A real

estate investment trust, as defined in section 856 and §1.856-1, is an exempt recipient. A trustee or middleman may treat a

person as a real estate investment trust

(and, therefore, as an exempt recipient)

without requiring a certificate if the person

is known generally in the investment community as a real estate investment trust.

(K) Entity registered under the Investment Company Act of 1940. An entity

registered at all times during the taxable

year under the Investment Company Act

of 1940, as amended (15 U.S.C. 80a–1),

(or during such portion of the taxable year

that it is in existence), is an exempt recipient. An entity that is created during the

taxable year will be treated as meeting the

registration requirement of the preceding

sentence provided that such entity is so

registered at all times during the taxable

year for which such entity is in existence.

A trustee or middleman may treat such an

entity as an exempt recipient under this

paragraph (j)(2)(iv)(K) without requiring

a certificate if the entity is known generally in the investment community to meet

the requirements of the preceding sentence.

(L) Common trust fund. A common

trust fund, as defined in section 584(a), is

an exempt recipient. A trustee or middleman may treat the fund as an exempt recipient without requiring a certificate provided that its name reasonably indicates

that it is a common trust fund or provided

that it is known to the trustee or middleman to be a common trust fund.

(M) Financial institution. A financial

institution such as a bank, mutual savings

bank, savings and loan association, building and loan association, cooperative

bank, homestead association, credit

union, industrial loan association or bank,

or other similar organization, whether organized in the United States or under the

laws of a foreign country is an exempt recipient. A financial institution also includes a clearing organization defined in

§1.163–5(c)(2)(i)(D)(8) and the Bank for

International Settlements. A trustee or

middleman may treat any person described in the preceding sentence as an

exempt recipient without requiring a certificate if the person’s name (including a

foreign name, such as “Banco” or

“Banque”) reasonably indicates the unit

interest holder is a financial institution described in the preceding sentence.

(N) Trust. A trust which is exempt

from tax under section 664(c) (i.e., a charitable remainder annuity trust or a charitable remainder unitrust) or is described in

section 4947(a)(1) (relating to certain

charitable trusts) is an exempt recipient.

A trustee or middleman which is a trustee

of the trust may treat the trust as an exempt recipient without requiring a certificate.

(O) Middlemen. A middleman, as defined in paragraph (j)(1) of this section, is

an exempt recipient.

(P) Brokers. A broker, as defined in

section 6045(c) and §1.6045-1(a)(1), is an

exempt recipient.

(Q) Real estate mortgage investment

conduit. A real estate mortgage investment conduit, as defined in section

860D(a), is an exempt recipient.

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(R) A widely held fixed investment

trust. A widely held fixed investment

trust, as defined in paragraph (j)(1) of this

section, is an exempt recipient.

(3) Trustee’s requirement to furnish information to middlemen, exempt recipients, and noncalendar-year taxpayers—

(i) In general. The trustee must cause to

be printed in a publication generally read

by and available to requesting persons,

the name, address, and telephone number

of a representative or official of the trust

who will provide the information specified in paragraph (j)(3)(ii) of this section

to such persons. The trustee must provide

the information in the time and manner

prescribed in paragraph (j)(3)(iii)(C) of

this section to requesting persons who request the information in the manner prescribed in paragraph (j)(3)(iii)(B) of this

section.

(ii) Information required to be reported. For each calendar quarter or calendar year specified, the trustee must

have available and provide, upon request,

the following information computed as of

the last day of the quarter, or computed as

of December 31 of the year specified—

(A) The name of the trust, the name

and address of the trustee of the trust, and

the employer identification number of the

trust;

(B) The Committee on Uniform Security Identification Procedure (CUSIP)

number, account number, serial number

or other identifying number of the trust;

accordance with paragraph (j)(6)(i) of this

section), deduction, and credit of the trust,

expressed both as a total dollar amount

for the trust and as a dollar amount per

unit outstanding on the last day of the period requested;

(D) If any trust asset has been sold or

otherwise disposed of during the period

requested, the gross proceeds received by

the trust for the trust asset, the date of sale

or disposition of the trust asset, and the

percentage of that trust asset that has been

sold or disposed of. The trust must also

provide a schedule showing the portion

(expressed in terms of a percentage) of

the total fair market value of all the assets

held by the trust that the asset sold or disposed of represented as of the last day of

the quarter for each quarter that the asset

was held by the trust;

1998–35 I.R.B.

(E) The amount of affected expenses of

the trust expressed both as a total dollar

amount and as a dollar amount per unit

outstanding on the last day of the period

requested;

(F) In the case of a widely held fixed

investment trust that holds a pool of debt

instruments subject to section 1272(a)(6)(C)(iii), the information required by

paragraph (j)(6)(ii) of this section;

(G) The number of units outstanding on

the last business day of the period requested; and

(H) Any other information necessary

for a unit interest holder that is the beneficial owner of a trust interest to properly

report the income, deductions, and credits

attributable to the portion of the trust

treated as owned by the unit interest

holder under section 671. For this purpose, the trustee shall separately state any

trust item that, if taken into account separately by a unit interest holder, could result in an income tax liability for that unit

interest holder different from that which

would result if the unit interest holder did

not take the item into account separately.

(iii) Providing and requesting trust information—(A) Requesting persons. The

following persons that hold an interest in

a trust may request the information specified in paragraph (j)(3)(ii) of this section

from that trust—

(1) Any middleman;

(2) Any broker who holds a unit interest on its own behalf;

(3) Any other exempt recipient who

holds an interest directly and not through

a middleman;

(4) Any noncalendar-year unit interest

holder who holds a trust interest directly

and not through a middleman; and

(5) A representative or agent for a person specified in paragraphs (j)(3)(iii)(A)(1) through (4) of this section.

(B) Manner of requesting information

from the trust. A requesting person may

request the information specified in paragraph (j)(3)(ii) of this section in writing or

by telephone. The request must specify

the calendar quarters or years for which

the information is needed.

paragraph (j)(3)(ii) of this section may be

furnished as follows—

(i) By telephone;

(ii) By written statement sent by first

class mail to the address provided by the

requesting person;

(iii) By causing it to be printed in a

publication generally read by and available to requesting persons and by notifying the requesting person in writing or by

telephone of the publication in which it

will appear, the date on which it will appear, and, if possible, the page on which it

will appear; or

(iv) By any other method agreed to by

the parties.

(2) Time for furnishing the information.

The trustee must furnish, or cause to be

furnished, the information specified in

paragraph (j)(3)(ii) of this section on or

before the later of—

(i) The 30th day after the close of the

period for which the information was requested; or

(ii) The day that is 2 weeks after the receipt of the request.

(4) Requirement of furnishing statement to unit interest holder—(i) In general. Every trustee or middleman required to file appropriate Forms 1099

under paragraph (j)(2)(i) of this section

with respect to a particular unit interest

holder must furnish to that unit interest

holder (the person whose identifying

number is required to be shown on the

form) a written statement showing the information required by paragraph (j)(4)(ii)

of this section.

(ii) Information required to be provided

on written statement. The written statement must specify for the calendar year

for which the return is made the following

information—

(A) The name of the trust and the

CUSIP number, account number, serial

number, or other identifying number for

the trust or unit interest;

(B) The name, address, and taxpayer

identification number of the person required to send the statement;

accordance with paragraph (j)(6)(i) of this

section), deduction, and credit of the trust

attributable to the unit interest holder;

(D) If any trust asset is sold, or otherwise disposed of during the calendar year,

the portion of the gross proceeds relating

to the trust asset that is attributable to the

unit interest holder, the date of sale or dis-

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Page 16

position of the trust asset, and the percentage of that trust asset that has been sold or

otherwise disposed of. A schedule showing the portion (expressed in terms of a

percentage) of the total fair market value

of all the assets held by the trust that the

asset sold or disposed of represented as of

the last day of the quarter for each quarter

that the asset was held by the trust must

be included with the statement;

(E) In the case of a unit interest holder

that is an affected investor, the affected

expenses that are attributable to the unit

interest holder;

(F) In the case of a widely held fixed

investment trust that holds a pool of debt

instruments subject to section 1272(a)(6)(C)(iii), the information required by paragraph (j)(6)(ii) of this section;

(G) Any other information necessary

for a unit interest holder to properly report

the income, deductions, and credit attributable to the unit interest holder under

section 671. For this purpose, the trustee

or middleman, as the case may be, shall

separately state any trust item that, if

taken into account separately by any unit

interest holder, could result in an income

tax liability for that unit interest holder

different from that which would result if

the unit interest holder did not take the

item into account separately; and

(H) A statement that the items of income, deduction, and credit and other information shown on the statement must

be taken into account in computing the

taxable income and credits of the unit interest holder on the income tax return of

the unit interest holder.

(iii) Due date and other requirements

with respect to statement required to be

furnished to the unit interest holder. The

statement required to be furnished to the

unit interest holder under this paragraph

(j)(4) for a calendar year must be furnished to the holder after April 30 of that

year and on or before March 15 of the

year following the year for which the

statement is being furnished. The person

sending the statement must maintain in its

records a copy of the statement furnished

to the unit interest holder for a period of 3

years from the due date for furnishing

such statement specified in this paragraph

(j)(4).

(5) Requirement that middlemen furnish information to exempt recipients and

noncalendar-year taxpayers. For each

August 31, 1998

calendar quarter or calendar year specified, any exempt recipient listed in paragraph (j)(2)(iv) of this section and any

noncalendar-year unit interest holder may

request from the middleman who holds

the unit interest on behalf of, or for the account of, the unit interest holder, the information listed in paragraph (j)(4)(ii)(A)

through (G) of this section computed as of

the last day of the calendar quarter specified, or computed as of December 31 of

the year specified. The middleman must

provide in writing or by telephone the information listed in paragraph (j)(4)(ii)(A)

through (G) of this section to any such requester on or before the later of the 45th

day after the close of the period for which

the information was requested, or that day

that is 4 weeks after the receipt of the request.

(6) Special rules. For purposes of this

paragraph (j):

(i) Determination of trust income.

Trust income is to be determined in the

following manner—

(A) The trust is to be treated as a calendar year taxpayer using the cash receipts

and disbursements method of accounting;

and

(B) The amount of trust income for the

calendar year is the gross amount of income generated by the trust assets (other

than from the sale or other disposition of

trust assets). Thus, in the case of a trust

that receives a payment net of an expense,

the payment must be grossed up to reflect

the deducted expense.

(ii) Widely held fixed investment trust

holding pool of debt instruments subject

to section 1272(a)(6)(C)(iii). In the case

of a widely held fixed investment trust

that holds a pool of debt instruments subject to section 1272(a)(6)(C)(iii), requesting persons, unit interest holders, exempt

recipients, and noncalendar-year taxpayers must be provided, as required under

paragraphs (j)(3)(ii)(F), (j)(4)(ii)(F), and

(j)(5), respectively, of this section, information necessary to compute—

(A) The accrual of market discount, including the type of information required

under paragraphs §1.6049-7(f)(2)(i)(G) in

the case of a REMIC regular interest or a

collateralized debt obligation not issued

with original issue discount; and

(B) The accrual of original issue discount and market discount, including the

type of information required under

§1.6049–7(f)(2)(ii)(E), (F), (I), and (K) in

the case of a REMIC regular interest or a

collateralized debt obligation that is issued with original issue discount.

(7) Backup withholding requirements.

Every trustee and middleman filing a

Form 1099 under this section shall be

considered a payor within the meaning of

§31.3406(a)–2 of this chapter. The obligation of a trustee or middleman as payor

to backup withhold shall be determined

pursuant to section 3406 and the regulations promulgated thereunder.

(8) Penalties for failure to comply.

Every trustee and middleman who has a

reporting obligation under this paragraph

(j) and who fails to comply is subject to

the penalties provided by sections 6721,

6722, and any other applicable penalty

provisions.

(9) Effective date. Trustees and middlemen must report in accordance with

this paragraph (j) for calendar years beginning on or after the date that the final

regulations are published in the Federal

Par. 3. Section 1.6049-7 is amended by

adding a sentence to the end of paragraph

(f)(4) to read as follows:

§1.6049–7 Returns of information with

respect to REMIC regular interests and

collateralized debt obligations.

* * * * *

(f) * * *

(4) * * * For rules regarding a widely

held fixed investment trust that holds a

pool of debt instruments subject to section

1272(a)(6)(C)(iii), see §1.671-4(j).

* * * * *

PART 301—PROCEDURE AND

ADMINISTRATION

Par. 4. The authority citation for part

301 continues to read in part as follows:

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

Par. 5. Section 301.6109-1 is amended

by revising the last sentence of paragraph

(a)(2)(i) to read as follows:

§301.6109–1 Identifying numbers.

(a) * * *

(2) * * * (i) * * * If the trustee has not

already obtained a taxpayer identification

number for the trust, the trustee must obtain a taxpayer identification number for

1998–35 I.R.B.

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the trust as provided in paragraph (d)(2)

of this section in order to report pursuant

to §1.671–4(a), (b)(2)(i)(B), (b)(3)(i), or

(j) of this chapter.

Building, 1111 Constitution Avenue, NW,

Washington, DC. The addresses of the remote teleconference sites are listed below

under Supplementary Information.

Michael P. Dolan,

Deputy Commissioner of

Internal Revenue.

FOR FURTHER INFORMATION CONTACT: Mike Slaughter of the Regulations

Unit, Assistant Chief Counsel (Corporate), (202) 622-7180 (not a toll-free

number).

(Filed by the Office of the Federal Register on

August 12, 1998, 8:45 a.m., and published in the

issue of the Federal Register for August 13, 1998, 63

F.R. 43354.)

S Corporation Subsidiaries;

Hearing

Announcement 98–82

AGENCY: Internal Revenue Service,

Treasury.

ACTION: Notice of public hearing on

proposed regulations.

SUMMARY: This document provides

notice of a public hearing on proposed

regulations relating to the treatment of

corporate subsidiaries of S corporations.

In addition, this document announces that

persons wishing to testify who are outside

the Washington, DC area, will be able to

make their presentations from one of two

Internal Revenue Service remote teleconference sites.

DATES: The public hearing will be held

September 9, 1998, beginning at 1:00

p.m. (EDT). Requests to speak and outlines of oral comments must be received

by Wednesday, August 20, 1998.

ADDRESSES: The public hearing will

be held in room 3411, Internal Revenue

1998–35 I.R.B.

SUPPLEMENTARY INFORMATION:

The subject of the public hearing is proposed regulations under section 1308 of

the Internal Revenue Code. These proposed regulations (REG–251698–96) appeared in the Federal Register (63 F.R.

19864 [1998–20 I.R.B. 14]) on Wednesday, April 22, 1998.

The hearing will be held in room 3411

of the Internal Revenue Building, 1111

Constitution Avenue, NW. Washington,

DC, and in two teleconference sites listed

below:

Federal Building, 5th Floor

Room 5003

300 N. Los Angeles Street

Los Angeles, California

Robert A. Young Building

2nd Floor, Conference Room

1222 Spruce Street

St. Louis, MO 63103

The rules of §601.601 (a)(3) of the

“Statement of Procedural Rules” (26 CFR

part 601) shall apply with respect to the

public hearing. Persons who have submitted written comments within the time

prescribed in the notice of proposed rulemaking and who also desire to present

oral comments at the hearing on the proposed regulations should submit not later

than Wednesday, August 20, 1998, an out-

line of the oral comments/testimony to be

presented at the hearing and the time they

wish to devote to each subject.

Each speaker (or group of speakers representing a single entity) will be limited to

10 minutes for an oral presentation exclusive of the time consumed by the question

from the panel for the government and answers to these question.

Because of controlled access restriction, attendees cannot be admitted beyon

d the lobby of the Internal Revenue building until 12:30 p.m. Hearing times at the

remote teleconference sites will be concurrent with the hearing in Washington,

DC. (i.e., 10 a.m. PDT and 12 noon CDT)

Due to limited seating capacity at the

remote teleconference sites, no more than

12 people may be accommodated at any

one time in each teleconference room.

Seating in the teleconference rooms will

be made available based on the order of

presentations. IRS personnel will be

available at the remote teleconference

sites to assist speakers in using the teleconference equipment.

The Service will prepare an agenda

showing the scheduling of speakers and

will make copies of the agenda available

free of charge at the hearing. Testimony

will begin with the speakers at the remote

teleconference sites in the following

order: Los Angeles, St. Louis, and will

conclude with presentations by the speakers in Washington, DC.

Cynthia E. Grigsby,

Chief, Regulations Unit,

Assistant Chief Counsel (Corporate).

(Filed by the Office of the Federal Register on

August 12, 1998, 8:45 a.m., and published in the

issue of the Federal Register for August 13, 1998, 63

F.R. 43353.)

August 31, 1998

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Definition of Terms

Revenue rulings and revenue procedures

(hereinafter referred to as “rulings”) that

have an effect on previous rulings use the

following defined terms to describe the

effect:

Amplified describes a situation where

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

being extended to apply to a variation of

the fact situation set forth therein. Thus,

if an earlier ruling held that a principle

applied to A, and the new ruling holds

that the same principle also applies to B,

the earlier ruling is amplified. (Compare

with modified, below).

Clarified is used in those instances

where the language in a prior ruling is

being made clear because the language

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

prior ruling is being changed.

Distinguished describes a situation

where a ruling mentions a previously

published ruling and points out an essential difference between them.

Modified is used where the substance

of a previously published position is

being changed. Thus, if a prior ruling

held that a principle applied to A but not

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

plies to both A and B, the prior ruling is

modified because it corrects a published

position. (Compare with amplified and

clarified, above).

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

in a ruling that lists previously published

rulings that are obsoleted because of

changes in law or regulations. A ruling

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

subsequently adopted.

Revoked describes situations where the

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

is being stated in the new ruling.

Superseded describes a situation where

the new ruling does nothing more than

restate the substance and situation of a

previously published ruling (or rulings).

Thus, the term is used to republish under

the 1986 Code and regulations the same

position published under the 1939 Code

and regulations. The term is also used

when it is desired to republish in a single

ruling a series of situations, names, etc.,

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

new ruling does more than restate the

substance of a prior ruling, a combination

of terms is used. For example, modified

and superseded describes a situation

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

is continued without change in part and it

is desired to restate the valid portion of

the previously published ruling in a new

ruling that is self contained. In this case

the previously published ruling is first

modified and then, as modified, is superseded.

Supplemented is used in situations in

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

countries, is published in a ruling and

that list is expanded by adding further

names in subsequent rulings. After the

original ruling has been supplemented

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

ruling and the additions, and supersedes

all prior rulings in the series.

Suspended is used in rare situations to

show that the previous published rulings

will not be applied pending some future

action such as the issuance of new or

amended regulations, the outcome of

cases in litigation, or the outcome of a

Service study.

Abbreviations

E.O.—Executive Order.

ER—Employer.

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contribution Act.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign Corporation.

G.C.M.—Chief Counsel’s Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Internal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

M—Minor.

Nonacq.—Nonacquiescence.

O—Organization.

P—Parent Corporation.

PHC—Personal Holding Company.

PO—Possession of the U.S.

PR—Partner.

PRS—Partnership.

PTE—Prohibited Transaction Exemption.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statements of Procedral Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

U.S.C.—United States Code.

X—Corporation.

Y—Corporation.

Z—Corporation.

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

Bulletin.

A—Individual.

Acq.—Acquiescence.

B—Individual.

BE—Beneficiary.

BK—Bank.

B.T.A.—Board of Tax Appeals.

C.—Individual.

C.B.—Cumulative Bulletin.

CFR—Code of Federal Regulations.

CI—City.

COOP—Cooperative.

Ct.D.—Court Decision.

CY—County.

D—Decedent.

DC—Dummy Corporation.

DE—Donee.

Del. Order—Delegation Order.

DISC—Domestic International Sales Corporation.

DR—Donor.

E—Estate.

EE—Employee.

August 31, 1998

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Numerical Finding List1

Bulletins 1998–29 through 34

Announcements:

98–62, 1998–29 I.R.B. 13

98–68, 1998–29 I.R.B. 14

98–69, 1998–30 I.R.B. 16

98–70, 1998–30 I.R.B. 17

98–71, 1998–30 I.R.B. 17

98–72, 1998–31 I.R.B. 14

98–73, 1998–31 I.R.B. 14

98–74, 1998–31 I.R.B. 15

98–75, 1998–31 I.R.B. 15

98–76, 1998–32 I.R.B. 64

98–77, 1998–34 I.R.B. 30

98–78, 1998–34 I.R.B. 30

98–79, 1998–34 I.R.B. 31

98–80, 1998–34 I.R.B. 32

Notices:

98–36, 1998–29 I.R.B. 8

98–37, 1998–30 I.R.B. 13

98–38, 1998–34 I.R.B. 7

98–39, 1998–33 I.R.B. 11

98–41, 1998–33 I.R.B. 12

98–42, 1998–33 I.R.B. 12

98–43, 1998–33 I.R.B. 13

98–44, 1998–34 I.R.B. 7

Railroad Retirement Quarterly Rate:

1998–31 I.R.B. 7

Proposed Regulations:

REG–246256–96, 1998–34 I.R.B. 9

REG–104641–97, 1998–29 I.R.B. 9

REG–116608–97, 1998–29 I.R.B. 12

REG–119227–97, 1998–30 I.R.B. 13

REG–110332–98, 1998–33 I.R.B. 18

REG–110403–98, 1998–29 I.R.B. 11

Revenue Procedures:

98–40, 1998–32 I.R.B. 6

98–41, 1998–32 I.R.B. 7

98–42, 1998–28 I.R.B. 9

98–43, 1998–29 I.R.B. 8

98–44, 1998–32 I.R.B. 11

98–45, 1998–34 I.R.B. 8

Revenue Rulings:

98–34, 1998–31 I.R.B. 12

98–35, 1998–30 I.R.B. 4

98–36, 1998–31 I.R.B. 6

98–37, 1998–32 I.R.B. 5

98–38, 1998–32 I.R.B. 4

98–39, 1998–33 I.R.B. 4

98–40, 1998–33 I.R.B. 4

Treasury Decisions:

8771, 1998–29 I.R.B. 6

8772, 1998–31 I.R.B. 8

8773, 1998–29 I.R.B. 4

8774, 1998–30 I.R.B. 5

8775, 1998–31 I.R.B. 4

8776, 1998–33 I.R.B. 6

8777, 1998–34 I.R.B. 4

1 A cumulative list of all revenue rulings, revenue

procedures, Treasury decisions, etc., published in

Internal Revenue Bulletins 1998–1 through 1998–28

will be found in Internal Revenue Bulletin 1998–29,

dated July 20, 1998.

1998–35 I.R.B.

August 31, 1998

IRB 1998-35

8/26/98 12:31 PM

Page 20

Finding List of Current Action on

Previously Published Items1

Bulletins 1998–29 through 34

*Denotes entry since last publication

Revenue Rulings—Continued

88–79

Obsoleted by

98–37, 1998–32 I.R.B. 5

97–37

Obsoleted by

98–39, 1998–33 I.R.B. 4

Revenue Procedures:

93–4

Obsoleted by

98–37, 1998–32 I.R.B. 5

83–58

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–5

Obsoleted by

98–37, 1998–32 I.R.B. 5

Revenue Rulings:

93–6

Obsoleted by

98–37, 1998–32 I.R.B. 5

57–271

Obsoleted by

98–37, 1998–32 I.R.B. 5

71–277

Obsoleted by

98–37, 1998–32 I.R.B. 5

71–434

Obsoleted by

98–37, 1998–32 I.R.B. 5

71–574

Obsoleted by

98–37, 1998–32 I.R.B. 5

72–75

Obsoleted by

98–37, 1998–32 I.R.B. 5

72–120

Obsoleted by

98–37, 1998–32 I.R.B. 5

72–121

Obsoleted by

98–37, 1998–32 I.R.B. 5

72–122

Obsoleted by

98–37, 1998–32 I.R.B. 5

74–77

Obsoleted by

98–37, 1998–32 I.R.B. 5

75–19

Obsoleted by

98–37, 1998–32 I.R.B. 5

76–562

Obsoleted by

98–37, 1998–32 I.R.B. 5

77–214

Obsoleted by

98–37, 1998–32 I.R.B. 5

79–106

Obsoleted by

98–37, 1998–32 I.R.B. 5

83–113

Obsoleted by

98–37, 1998–32 I.R.B. 5

85–143

Obsoleted by

98–37, 1998–32 I.R.B. 5

88–8

Obsoleted by

98–37, 1998–32 I.R.B. 5

88–76

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–30

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–38

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–49

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–50

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–53

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–81

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–91

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–92

Obsoleted by

98–37, 1998–32 I.R.B. 5

93–93

Obsoleted by

98–37, 1998–32 I.R.B. 5

94–5

Obsoleted by

98–37, 1998–32 I.R.B. 5

94–6

Obsoleted by

98–37, 1998–32 I.R.B. 5

94–30

Obsoleted by

98–37, 1998–32 I.R.B. 5

94–51

Obsoleted by

98–37, 1998–32 I.R.B. 5

94–79

Obsoleted by

98–37, 1998–32 I.R.B. 5

95–2

Obsoleted by

98–37, 1998–32 I.R.B. 5

95–9

Obsoleted by

98–37, 1998–32 I.R.B. 5

1 A cumulative finding list for previously published

items mentioned in Internal Revenue Bulletins

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

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

August 31, 1998

1998–35 I.R.B.

IRB 1998-35

8/26/98 12:31 PM

Page 21

Notes

1998–35 I.R.B.

August 31, 1998

IRB 1998-35

8/26/98 12:31 PM

Page 22

Notes

August 31, 1998

1998–35 I.R.B.

IRB 1998-35

8/26/98 12:31 PM

Page 23

IRB 1998-35

8/26/98 12:31 PM

Page 24

INTERNAL REVENUE BULLETIN

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