Bulletin No. 1998–31

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August 3, 1998

Internal Revenue

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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

EMPLOYMENT TAX

Rev. Rul. 98–34, page 12.

T.D. 8772, page 8.

Below-market loans; exempted loans; second mortgage loans under the MAHRA Act. A below-market second mortgage loan made under the Multifamily Assisted

Housing Reform and Aff o rdability Act of 1997, by the

Department of Housing and Urban Development (HUD) to the

owner of a multifamily low-income rental property in connection with restructuring the existing first mortgage on the

property, is exempted from section 7872 of the Code.

Final and temporary regulations under section 6011 of the

Code relate to the requirements for filing information returns

on magnetic media or in other machine-readable form.

Rev. Rul. 98–36, page 6.

Federal rates; adjusted federal rates; adjusted federal

long-term rate, and the long-term exempt rate. For

purposes of sections 1274, 1288, 382, and other sections

of the Code, tables set forth the rates for August 1998.

T.D. 8775, page 4.

Final and temporary regulations under section 460 of the

Code explain how a taxpayer elects not to apply the lookback method to long-term contracts in de minimis cases.

EXEMPT ORGANIZATIONS

Announcement 98–75, page 15.

A list is given of organizations now classified as private foundations.

Finding Lists begin on page 18.

Index for January–July begins on page 20.

Department of the Tr e a s u r y

Internal Revenue Service

Page 7.

Railroad retirement; rate determination; quarterly. The

Railroad Retirement Board has determined that the rate of

tax imposed by section 3221 of the Code shall be 35 cents

for the quarter beginning April 1, 1998, and 35 cents for the

quarter beginning July 1, 1998.

ADMINISTRATIVE

Announcement 98–72, page 14.

Rev. Proc. 98–35, 1998–21 I.R.B. 6, relating to specifications for the magnetic or electronic filing of 1998 Forms

1098, 1099, 5498, and W–2G, is corrected.

Announcement 98–73, page 14.

The Service will not assess penalties for missing or incorrect taxpayer identification numbers (TINs) on Form 1099–R

for 1996 and 1997. Listings of missing and incorrect TINs

will be sent to filers of this form in early August of this year.

Announcement 98–74, page 15.

REG–106031–98, 1998–26 I.R.B. 38, relating to the treatment of foreign taxpayers trading in derivative financial instruments for their own account, is corrected.

Mission of the Service

ucts and services; and perform in a manner warranting

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

The purpose of the Internal Revenue Service is to collect

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

the public by continually improving the quality of our prod-

Statement of Principles

of Internal Revenue

Tax Administration

The Service also has the responsibility of applying and

administering the law in a reasonable, practical manner.

Issues should only be raised by examining officers when

they have merit, never arbitrarily or for trading purposes.

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

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

adopt a position inconsistent with an established Service

position.

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

is determined by Congress.

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

policy by correctly applying the laws enacted by Congress;

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

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

neither a government nor a taxpayer point of view.

Administration should be both reasonable and vigorous. It

should be conducted with as little delay as possible and

with great courtesy and considerateness. It should never

try to overreach, and should be reasonable within the

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

should be relentless in its attack on unreal tax devices and

fraud.

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

is the responsibility of each person in the Service, charged

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

meaning of the statutory provision and not to adopt a

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

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

Introduction

The Internal Revenue Bulletin is the authoritative instrument

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

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly and may be obtained

from the Superintendent of Documents on a subscription

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

on a single-copy basis.

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

are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

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

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

modify, or amend any of those previously published in the

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

of internal practices and procedures that affect the rights

and duties of taxpayers are published.

Part II.—Treaties and Tax Legislation.

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

Tax Conventions, and Subpart B, Legislation and Related

Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to

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

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

Assistant Secretary (Enforcement).

Revenue rulings represent the conclusions of the Service on

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

revenue ruling. In those based on positions taken in rulings

to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature

are deleted to prevent unwarranted invasions of privacy and

to comply with statutory requirements.

Part IV.—Items of General Interest.

With the exception of the Notice of Proposed Rulemaking

and the disbarment and suspension list included in this part,

none of these announcements are consolidated in the Cumulative Bulletins.

Rulings and procedures reported in the Bulletin do not have

the force and effect of Treasury Department Regulations,

but they may be used as precedents. Unpublished rulings

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

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

The first Bulletin for each month includes a cumulative index

for the matters published during the preceding months.

These monthly indexes are cumulated on a 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.Acitation of the Internal Revenue Bulletin as the source would be appropriate.

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

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

Section 42.—Low-Income

Housing Credit

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

of August 1998. See Rev. Rul. 98–36, page 6.

Section 280G.—Golden

Parachute Payments

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

rates are set forth for the month of August 1998. See

Rev. Rul. 98–36, page 6.

Section 382.—Limitation on Net

Operating Loss Carryforwards

and Certain Built-In Losses

Following Ownership Change

The adjusted federal long-term rate is set forth

for the month of August 1998. See Rev. Rul. 98–36,

page 6.

Section 412.—Minimum Funding

Standards

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

of August 1998. See Rev. Rul. 98–36, page 6.

Section 460.—Special Rules for

Long-Term Contracts

26 CFR 1.460–6: Look-back method.

T.D. 8775

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

Election Not to Apply Look-Back

Method in De Minimis Cases

A G E N C Y: Internal Revenue Service

(IRS), Treasury.

ACTION: Final and temporary regulations.

S U M M A RY: This document contains

regulations explaining how a taxpayer

elects under section 460(b)(6) not to

apply the look-back method to long-term

contracts in de minimis cases. The regulations reflect changes to the law made by

August 3, 1998

the Taxpayer Relief Act of 1997 and affect manufacturers and construction contractors whose long-term contracts otherwise are subject to the look-back method.

D ATES: Effective date: These regulations are effective July 2, 1998.

Applicability date: These regulations

apply to long-term contracts completed in

taxable years ending after August 5, 1997.

FOR FURTHER INFORMATION CONTA C T: Leo F. Nolan II or John M.

Aramburu at (202) 622-4960 (not a tollfree number).

SUPPLEMENTARYINFORMATION:

Paperwork Reduction Act

The collection of information contained in these final regulations has been

reviewed and approved by the Office of

Management and Budget in accordance

with the Paperwork Reduction Act (44

U.S.C. 3507) under control number

1545–1572. Responses to this collection

of information are required for a taxpayer

to elect not to apply the look-back method

to long-term contracts in de minimis

cases. An agency may not conduct or

s p o n s o r, and a person is not required to

respond to, a collection of information

unless the collection of information displays a valid OMB control number. The

estimated average burden per respondent

is 0.2 hours.

Comments concerning the accuracy of

this burden estimate should be sent to the

Internal Revenue Service, Attn: IRS Reports Clearance Officer, OP:FS:FP, Washington, DC 20224, and to the O ffice of

Management and Budget, Attn: Desk

O fficer for the Department of the Tr e as u r y, Office of Information and Regulatory Affairs, Washington, DC 20503.

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

long as their contents may become material in the administration of any internal

revenue law. Generally, tax returns and

tax return information are confidential, as

required by 26 U.S.C. 6103.

Background

This document contains amendments to

the Income Tax Regulations (26 CFR Part

1). Section 460(b)(6) of the Internal Revenue Code was added by section 1211 of

the Taxpayer Relief Act of 1997, Public

Law 105–34, 111 Stat. 788, 998, to provide an election not to apply the lookback method of section 460(b)(2) to longterm contracts in de minimis cases. These

regulations provide guidance concerning

this new election.

A notice of proposed rulemaking was

published in REG–120200–97, 1998–12

I.R.B. 32 for January 13, 1998 (63 F. R .

1932). No written comments were received, and no public hearing was requested or held. The proposed regulations

under section 460 are adopted by this

Treasury decision with one revision. T h e

final regulations provide that for longterm contracts completed in taxable years

ending after August 5, 1997, an election

not to apply the look-back method under

section 460(b)(6) automatically revokes

an election under §1.460–6(e) to use the

delayed reapplication method.

Special Analyses

It has been determined that this final

regulation is not a significant regulatory

action as defined in EO 12866. T h e r efore, a regulatory assessment is not required. It also has been determined that

section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not

apply to these regulations. Moreover, it is

hereby certified that the collection of information in 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

time required to prepare and file an election statement is minimal and will not

have a significant impact on those small

entities that choose to make the election.

In addition, the election need only be

made once by a taxpayer. 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, the notice of proposed

rulemaking preceding these regulations

was submitted to the Chief Counsel for

Advocacy of the Small Business Administration for comment on the impact of the

proposed regulations on small business.

1998–31 I.R.B.

Drafting Information

The principal author of these regulations is Leo F. Nolan II, Office of Assistant Chief Counsel (Income Tax and Accounting). However, other personnel

from the IRS and Treasury Department

participated in their development.

* * * * *

Adoption of Amendments to the

Regulations

A c c o r d i n g l y, 26 CFR parts 1 and 602

are amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for

part 1 is amended by removing the entry

for “§1.460–6T” to read in part as follows:

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

P a r. 2. In §1.460–0, the entry for

§1.460–6 is amended by adding entries

for paragraphs (i) and (j) and the entry for

§1.460–6T is removed to read as follows:

§1.460–0 Outline of regulations under

section 460.

tive or to an amended return for that year,

provided the amended return is filed on or

before March 31, 1998. This statement

must have the legend “NOTIFICAT I O N

OF ELECTION UNDER SECTION

460(b)(6)”; provide the taxpayer’s name

and identifying number and the effective

date of the election; and identify the

trades or businesses that involve longterm contracts. An election applies to all

long-term contracts completed during and

after the taxable year for which the election is effective. An election may not be

revoked without the Commissioner’s consent. For taxpayers who elected to use the

delayed reapplication method under paragraph (e) of this section, an election under

this paragraph (j) automatically revokes

the election to use the delayed reapplication method for contracts subject to section 460(b)(6). A consolidated group of

corporations, as defined in §1.1502–1(h),

is subject to consistency rules analogous

to those in paragraph (e)(2) of this section

and in paragraph (d)(4)(ii)(C) of this section (concerning election to use simplified

marginal impact method).

§602.101 OMB Control numbers.

§1.460–6T [Removed]

Section 467.—Certain Payments

for the Use of Property or

Services

* * * * *

Par. 4. Section 1.460–6T is removed.

§1.460–6 Look-back method.

* * * * *

(i) [Reserved].

(j) Election not to apply look-back

method in de minimis cases.

PART 602—OMB CONTROL

NUMBERS UNDER THE

PAPERWORK REDUCTION ACT

P a r. 3. In §1.460–6, paragraph (i) is

added and reserved and paragraph (j) is

added to read as follows:

P a r. 5. The authority citation for part

602 continues to read as follows:

Authority: 26 U.S.C. 7805.

P a r. 6. In §602.101, paragraph (c) is

amended by:

1. Removing the following entry from

the table:

§1.460–6 Look-back method.

§602.101 OMB Control numbers.

* * * * *

(i) [Reserved].

(j) Election not to apply look-back

method in de minimis cases. S e c t i o n

460(b)(6) provides taxpayers with an

election not to apply the look-back

method to long-term contracts in de min imis cases, effective for contracts completed in taxable years ending after A ugust 5, 1997. To make an election, a

taxpayer must attach a statement to its

timely filed original federal income tax

return (including extensions) for the taxable year the election is to become effec-

1998–31 I.R.B.

* * * * *

CFR part or section

where identified and

described

Current OMB

control No.

* * * * *

1.460–6T . . . . . . . . . . . . . . . 1545–1572

* * * * *

2. Revising the entry for §1.460–6 to

read as follows:

* * * * *

CFR part or section

where identified and

described

Current OMB

control No.

* * * * *

1.460–6 . . . . . . . . . . . . . . . . . 1545–1031

1545–1572

* * * * *

Michael P. Dolan,

Deputy Commissioner of

Internal Revenue.

Approved June 12, 1998.

Donald C. Lubick,

Assistant Secretary of

the Treasury.

(Filed by the Office of the Federal Register on July

1, 1998, 8:45 a.m., and published in the issue of the

Federal Register for July 2, 1998, 63 F.R. 36180)

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

of August 1998. See Rev. Rul. 98–36, page 6.

Section 468.—Special Rules for

Mining and Solid Waste

Reclamation and Closing Costs

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

of August 1998. See Rev. Rul. 98–36, page 6.

Section 482.—Allocation of

Income and Deductions Among

Taxpayers

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

rates are set forth for the month of August 1998. See

Rev. Rul. 98–36, page 6.

Section 483.—Interest on

Certain Deferred Payments

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

of August 1998. See Rev. Rul. 98–36, page 6.

August 3, 1998

Section 642.—Special Rules for

Credits and Deductions

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

rates are set forth for the month of August 1998. See

Rev. Rul. 98–36, page 6.

Section 1274.—Determination

of Issue Price in the Case of

Certain Debt Instruments Issued

for Property

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

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

Section 807.—Rules for Certain

Reserves

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

of August 1998. See Rev. Rul. 98–36, page 6.

Federal rates; adjusted federal rates;

adjusted federal long-term rate, and

the long-term exempt rate. For purposes

of sections 1274, 1288, 382, and other

sections of the Code, tables set forth the

rates for August 1998.

Rev. Rul. 98–36

Section 846.—Discounted

Unpaid Losses Defined

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

of August 1998. See Rev. Rul. 98–36, page 6.

This revenue ruling provides various

prescribed rates for federal income tax

purposes for August 1998 (the current

month.) Table 1 contains the short-term,

mid-term, and long-term applicable fed-

eral rates (AFR) for the current month for

purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the

short-term, mid-term, and long-term adjusted applicable federal rates (adjusted

AFR) for the current month for purposes

of section 1288(b). Table 3 sets forth the

adjusted federal long-term rate and the

long-term tax-exempt rate described in

section 382(f). Table 4 contains the appropriate percentages for determining the

low-income housing credit described in

section 42(b)(2) for buildings placed in

service during the current month. Finally,

Table 5 contains the federal rate for determining the present value of an annuity, an

interest for life or for a term of years, or a

remainder or a reversionary interest for

purposes of section 7520.

REV. RUL. 98–36 TABLE 1

Applicable Federal Rates (AFR) for August 1998

Period for Compounding

Annual

Semiannual

Quarterly

Monthly

Short-Term

AFR

110% AFR

120% AFR

130% AFR

5.48%

6.04%

6.60%

7.15%

5.41%

5.95%

6.49%

7.03%

5.37%

5.91%

6.44%

6.97%

5.35%

5.88%

6.40%

6.93%

Mid-Term

AFR

110% AFR

120% AFR

130% AFR

150% AFR

175% AFR

5.57%

6.13%

6.70%

7.27%

8.41%

9.84%

5.49%

6.04%

6.59%

7.14%

8.24%

9.61%

5.45%

6.00%

6.54%

7.08%

8.16%

9.50%

5.43%

5.97%

6.50%

7.04%

8.10%

9.42%

Long-Term

AFR

110% AFR

120% AFR

130% AFR

5.72%

6.30%

6.88%

7.46%

5.64%

6.20%

6.77%

7.33%

5.60%

6.15%

6.71%

7.26%

5.57%

6.12%

6.68%

7.22%

August 3, 1998

1998–31 I.R.B.

REV. RUL. 98–36 TABLE 2

Adjusted AFR for August 1998

Period for Compounding

Annual

Semiannual

Quarterly

Monthly

Short-term

adjusted AFR

3.66%

3.63%

3.61%

3.60%

Mid-term

adjusted AFR

4.25%

4.21%

4.19%

4.17%

Long-term

adjusted AFR

5.01%

4.95%

4.92%

4.90%

REV. RUL. 98–36 TABLE 3

Rates Under Section 382 for August 1998

Adjusted federal long-term rate for the current month

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

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

5.01%

5.15%

REV. RUL. 98–36 TABLE 4

Appropriate Percentages Under Section 42(b)(2) for August 1998

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

8.32%

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

3.57%

REV. RUL. 98-36 TABLE 5

Rate Under Section 7520 for August 1998

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

term of years, or a remainder or reversionary interest

Section 1288.—Treatment of

Original Issue Discount on

Tax-Exempt Obligations

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

of August 1998. See Rev. Rul. 98–36, page 6.

Section 3221.—Rate of Tax

Determination of Quarterly Rate

of Excise Tax for Railroad

Retirement Supplemental

Annuity Program

In accordance with directions in Sec-

1998–31 I.R.B.

6.8%

tion 3221(c) of the Railroad Retirement

Tax Act (26 U.S.C., Section 3221(c)), the

Railroad Retirement Board has determined that the excise tax imposed by such

Section 3221(c) on every employer, with

respect to having individuals in his employ, for each work-hour for which compensation is paid by such employer for

August 3, 1998

services rendered to him during the quarter beginning April 1, 1998, shall be at the

rate of 35 cents.

In accordance with directions in Section 15(a) of the Railroad Retirement Act

of 1974, the Railroad Retirement Board

has determined that for the quarter beginning April 1, 1998, 30.3 percent of the

taxes collected under Sections 3211 ( b )

and 3221(c) of the Railroad Retirement

Tax Act shall be credited to the Railroad

Retirement Account and 69.7 percent of

the taxes collected under such Sections

3211(b) and 3221(c) plus 100 percent of

the taxes collected under Section 3221(d)

of the Railroad Retirement Tax Act shall

be credited to the Railroad Retirement

Supplemental Account.

Dated: February 19, 1998.

By Authority of the Board.

Beatrice Ezerski,

Secretary to the Board.

(Filed by the Office of the Federal Register on

February 25, 1998, at 8:45 a.m., and published in the

issue of the Federal Register for February 26, 1998,

63 F.R. 9876)

Beatrice Ezerski,

Secretary to the Board.

(Filed by the Office of the Federal Register on June

11, 1998, at 8:45 a.m., and published in the issue of

the Federal Register for June 12, 1998, 63 F.R.

32259)

Section 6011.—General

Requirement of Return,

Statement or List

26 CFR 301.6011–2: Required use of magnetic

media.

T.D. 8772

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 301

Magnetic Media Filing

Requirements for Information

Returns

A G E N C Y: Internal Revenue Service

(IRS), Treasury.

ACTION: Final and temporary regulations.

In accordance with directions in Section 3221(c) of the Railroad Retirement

Tax Act (26 U.S.C., Section 3221(c)), the

Railroad Retirement Board has determined that the excise tax imposed by such

Section 3221(c) on every employer, with

respect to having individuals in his employ, for each work-hour for which compensation is paid by such employer for

services rendered to him during the quarter beginning July 1, 1998, shall be at the

rate of 35 cents.

In accordance with directions in Section 15(a) of the Railroad Retirement Act

of 1974, the Railroad Retirement Board

has determined that for the quarter beginning July 1, 1998, 29.7 percent of the

taxes collected under Sections 3211 ( b )

and 3221(c) of the Railroad Retirement

Tax Act shall be credited to the Railroad

Retirement Account and 70.3 percent of

the taxes collected under such Sections

3211(b) and 3221(c) plus 100 percent of

the taxes collected under Section 3221(d)

of the Railroad Retirement Tax Act shall

be credited to the Railroad Retirement

Supplemental Account.

Dated: June 2, 1998.

By Authority of the Board.

August 3, 1998

S U M M A RY: This document contains

final and temporary regulations relating to

the requirements for filing information returns on magnetic media or in other machine-readable form under section

6 0 11(e) of the Internal Revenue Code

(Code). These regulations affect persons

filing information returns. These regulations prescribe magnetic media filing requirements for employers filing wage and

tax statements for employees in Puerto

Rico, U.S. Vi rgin Islands, Guam, and

American Samoa. In addition, these regulations provide taxpayers with the guidance to comply with the changes made to

the Code and to the administrative practices with respect to filing on magnetic

media or in other machine-readable form.

D ATES: Effective date: These regulations are effective June 30, 1998.

Applicability date: These regulations

apply to information returns required to

be filed on or after January 1, 1997.

FOR FURTHER INFORMATION CONTA C T: Donna Joy Welch, (202) 6224910 (not a toll-free call), if the inquiry

relates to provisions of these regulations.

For further information, see the telephone

numbers listed at the beginning of SUPPLEMENTARYINFORMATION.

S U P P L E M E N TA RY I N F O R M AT I O N :

If the inquiry relates to magnetic media

filing and magnetic media specifications

for Form W–2, Form 499R–2/W–2PR,

Form W–2VI, Form W–2GU, and Form

W–2AS, persons residing in the following

locations should contact the corresponding Social Security Administration office

(not a toll-free call):

Alabama (404) 562-1314 (Atlanta),

Alaska (206) 615-2125 (Seattle),

American Samoa (415) 744-4559 (San

Francisco),

Arizona (415) 744-4559 (San

Francisco),

Arkansas (501) 324-5466 (Little

Rock),

California (415) 744-4559 (San

Francisco),

Colorado (303) 844-2364 (Denver),

Connecticut (617) 565-2895 (Boston),

Delaware (215) 597-4632

(Philadelphia),

District of Columbia (215) 597-4632

(Philadelphia),

Florida (404) 562-1314 (Atlanta),

Georgia (404) 562-1314 (Atlanta),

Guam (415) 744-4559 (San Francisco),

Hawaii (415) 744-4559 (San

Francisco),

Idaho (206) 615-2125 (Seattle),

Illinois (312) 575-4244 (Chicago),

Indiana (312) 575-4244 (Chicago),

Iowa (816) 936-5649 (Kansas City),

Kansas (816) 936-5649 (Kansas City),

Kentucky (404) 562-1314 (Atlanta),

Louisiana (504) 389-0426 (Baton

Rouge),

Maine (617) 565-2895 (Boston),

Maryland (215) 597-4632

(Philadelphia),

Massachusetts (617) 565-2895

(Boston),

Michigan (312) 575-4244 (Chicago),

Minnesota (312) 575-4244 (Chicago),

Mississippi (404) 562-1314 (Atlanta),

Missouri (816) 936-5649 (Kansas

City),

Montana (303) 844-2364 (Denver),

Nebraska (816) 936-5649 (Kansas

City),

Nevada (415) 744-4559 (San

Francisco),

1998–31 I.R.B.

New Hampshire (617) 565-2895

(Boston),

New Jersey (212) 264-5643 (New

York),

New Mexico (505) 262-6048

(Albuquerque),

New York (212) 264-5643 (New York),

North Carolina (404) 562-1314

(Atlanta),

North Dakota (303) 844-2364

(Denver),

Ohio (312) 575-4244 (Chicago),

Oklahoma (405) 951-3007 (Oklahoma

City),

Oregon (206) 615-2125 (Seattle),

Pennsylvania (215) 597-4632

(Philadelphia),

Puerto Rico (787) 766-5574 (San

Juan),

Rhode Island (617) 565-2895

(Boston),

South Carolina (404) 562-1314

(Atlanta),

South Dakota (303) 844-2364

(Denver),

Tennessee (404) 562-1314 (Atlanta),

Texas-Central/South (210) 229-6433

(San Antonio),

Texas-Dallas County (214) 767-6777

(Dallas),

Texas-North (817) 978-3123 (Forth

Worth),

Texas-Southeast (713) 718-3015

(Houston),

Texas-West (505) 262-6048

(Albuquerque),

Utah (303) 844-2364 (Denver),

Vermont (617) 565-2895 (Boston),

Virgin Islands (787) 766-5574 (San

Juan),

Virginia (215) 597-4632

(Philadelphia),

Washington (206) 615-2125 (Seattle),

West Virginia (215) 597-4632

(Philadelphia),

Wisconsin (312) 575-4244 (Chicago),

and

Wyoming (303) 844-2364 (Denver).

If the inquiry relates to either the

waiver procedure for all forms described

in these regulations or the magnetic media

specifications for Forms 1042–S, 1098,

1099 series, 5498, 8027, or W–2G, persons should contact the Internal Revenue

Service, Martinsburg Computing Center,

P.O. Box 1359, Martinsburg, West Vi rginia 25402-1359; telephone (304) 2638700 (not a toll-free call).

1998–31 I.R.B.

Background

Section 6011(e) authorizes the Secretary to prescribe regulations providing the

standards for determining which returns

must be filed on magnetic media or in

other machine-readable form. Section

6 0 11(e) was added to the Internal Revenue Code (Code) by section 319 of the

Tax Equity and Fiscal Responsibility Act

of 1982, Public Law 97–248, 96 Stat.

610; and was amended by section 109 of

the Interest and Dividend Tax Compliance Act of 1983, Public Law 98–67, 97

Stat. 383; and section 7713 of the Revenue Reconciliation Act of 1989 (1989

Act), Public Law 101–239, 103 Stat.

2394. As amended by the 1989 Act, section 6011(e)(2)(A) provides that the Secretary shall not require any person to file

returns on magnetic media unless the person is required to file at least 250 returns

during the calendar year.

On October 10, 1996, final and temporary regulations (T.D. 8683) amending the

existing regulations relating to the requirements for filing information returns

on magnetic media or in other machinereadable form under section 6011(e) were

published in the Federal Register (61

F.R. 53058 [T.D. 8683, 1996–2 C.B.

169]). A notice of proposed rulemaking

(REG–209803–95) cross-referencing the

temporary regulations was published in

the Federal Register for the same day

(61 F.R. 53161 [REG–209803–95,

1996–2 C.B. 497]). These regulations

were issued at the request of the Social

Security Administration (the SSA) that

regulations be issued to require employers

required to file 250 or more Forms

499R–2/W–2PR (Withholding Statement

(Puerto Rico)), Forms W–2VI (U.S. Virgin Islands Wage and Tax Statement),

Forms W–2GU (Guam Wage and Ta x

Statement), and Forms W–2AS (American Samoa Wage and Tax Statement) to

file these forms with the SSAon magnetic

media. Filing these forms on magnetic

media will reduce administrative burdens

and will increase accurate processing of

information. These regulations also reflect the changes made to the Code and to

the administrative practices with respect

to filing on magnetic media or in other

machine-readable form.

One written comment responding to

this notice was received. No public hear-

ing was requested or held. After consideration of the comment, the proposed regulations are adopted as modified and the

corresponding temporary regulations are

removed. The comment is discussed

below.

Summary of Comment

The commentator suggests that the definition of magnetic media is too restrictive and that it does not encompass the

use of additional technology that would

facilitate the underlying reporting requirements. The commentator suggests that

the definition is not broad enough to include the use of digital filing, specifically

2D barcode. Neither the IRS nor the SSA

utilize digital filing technology at this

time. However, the IRS and the SSA are

committed to utilizing available technology that would facilitate the purpose of

information reporting. Therefore, the regulations make clear that the use of other

media may be permitted in the future as

provided in applicable regulations, revenue procedures, or publications.

Relationship to Treasury Decision 8734

Treasury Decision 8734 was published

in the Federal Register on October 14,

1997 (62 F.R. 53387 [T.D. 8734, 1997–44

I.R.B. 5]) and removed §§1.6045–1T and

1 . 6 0 4 5 – 2 T e ffective January 1, 1999.

This document removes §§1.6045–1T

amd 1.6045–2T e ffective June 30, 1998.

Because this document removes these

sections at an earlier date, a document

will be published later to amend T. D .

8734 to take this into account.

Special Analyses

It is hereby certified that the regulations in this document will not have a significant economic impact on a substantial

number of small entities. This certification is based on a determination that these

regulations impose no additional reporting or recordkeeping requirement and

prescribe only the method of filing information returns that are already required to

be filed. Further, these regulations are

consistent with the requirements imposed

by statute. Section 6011(e)(2)(A) provides that, in prescribing regulations providing standards for determining which

returns must be filed on magnetic media

or in other machine-readable form, the

August 3, 1998

Secretary shall not require any person to

file returns on magnetic media unless the

person is required to file at least 250 returns during the calendar year. Consistent

with the statutory provision, these regulations do not require information returns to

be filed on magnetic media unless 250 or

more returns are required to be filed. Furt h e r, the economic impact caused by filing on magnetic media should be minimal. If a taxpayer’s operations are

computerized, reporting in accordance

with the regulations should be less costly

than filing on paper. If the taxpayer’s operations are not computerized, the incremental cost of magnetic media reporting

should be minimal in most cases because

of the availability of computer service bureaus. In addition, the regulations provide

that the IRS may waive the magnetic

media filing requirements upon a showing

of hardship. It is anticipated that the

waiver authority will be exercised so as

not to unduly burden taxpayers lacking

both the necessary data processing facilities and access at a reasonable cost to

computer service bureaus. Accordingly, a

Regulatory Flexibility Analysis under the

Regulatory Flexibility Act (5 U.S.C.

chapter 6) is not required.

It has been determined that this Tr e asury decision is not a significant regulatory action as defined in EO 12866.

Therefore, a regulatory assessment is not

required.

Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed

rulemaking preceding these regulations

was submitted to the Chief Counsel for

Advocacy of the Small Business Administration for comment on its impact on

small business.

Drafting Information

The principal author of these regulations is Donna Joy Welch, Office of Assistant Chief Counsel (Income Tax and

Accounting). However, other personnel

from the IRS and the Treasury Department participated in the development of

the regulations.

* * * * *

Adoption of Amendments to the

Regulations

A c c o r d i n g l y, 26 CFR parts 1 and 301

are amended as follows:

August 3, 1998

PART 1—INCOME TAXES

Paragraph 1. The authority citation for

part 1 continues to read in part as follows:

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

required, may be subject to a penalty

under section 6721 for each such failure.

See paragraph (g)(4) of this section.

* * * * *

§§1.6045–1T and 1.6045–2T

[Removed]

PART301—PROCEDURE AND

ADMINISTRATION

P a r. 2. Sections 1.6045–1T a n d

1 . 6 0 4 5 – 2 T, currently in effect, are removed.

P a r. 3. Section 1.6045-1, currently in

effect, is amended by:

1. Revising paragraph (l).

2. Removing the language “§1.6045–

1T(l)” and adding “paragraph (l) of this

section” in its place in paragraph (q).

The revision reads as follows:

P a r. 5. The authority citation for part

301 continues to read in part as follows:

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

Par. 6. Section 301.6011-2 is amended

by:

1. Revising paragraphs (a)(1), (b)(1),

(b)(2), (c)(1) heading, (c)(1)(i), (c)(1)(iii),

(c)(2), (d), (f), (g) heading, and (g)(2).

2. Adding paragraph (c)(1)(iv).

3. Removing paragraphs (c)(3) and

(c)(4) and the last sentence of paragraph

(e).

The revisions and addition read as follows:

§1.6045–1 Returns of information of

brokers and barter exchanges.

* * * * *

(l) Use of magnetic media. For information returns filed after December 31,

1996, see §301.6011–2 of this chapter for

rules relating to filing information returns

on magnetic media and for rules relating

to waivers granted for undue hardship. A

broker or barter exchange that fails to file

a Form 1099 on magnetic media, when

required, may be subject to a penalty

under section 6721 for each such failure.

See paragraph (j) of this section.

* * * * *

Par. 4. Section 1.6045–2, currently in

effect, is amended by:

1. Revising paragraph (g)(2).

2. Removing the language “§1.6045–

2T(g)(2)” and adding “paragraph (g)(2) of

this section” in its place in paragraph (i).

The revision reads as follows:

§1.6045–2 Furnishing statement required

with respect to certain substitute

payments.

* * * * *

(g) * * *

(2) Use of magnetic media. For information returns filed after December 31,

1996, see §301.6011–2 of this chapter for

rules relating to filing information returns

on magnetic media and for rules relating

to waivers granted for undue hardship. A

broker or barter exchange that fails to file

a Form 1099 on magnetic media, when

§301.6011–2 Required use of magnetic

media.

(a) * * *

(1) Magnetic media. The term mag netic media means any media permitted

under applicable regulations, revenue

procedures or publications, or, in the case

of returns filed with the Social Security

Administration, Social Security Administration publications. These generally include magnetic tape, tape cartridge, and

diskette, as well as other media (such as

electronic filing) specifically permitted

under the applicable regulations, procedures, or publications.

* * * * *

(b) Returns re q u i red on magnetic

media. (1) If the use of Form 1042-S,

1098, 1099 series, 5498, 8027, W-2G, or

other form treated as a form specified in

this paragraph (b)(1) is required by the

applicable regulations or revenue procedures for the purpose of making an information return, the information required

by the form must be submitted on magnetic media, except as otherwise provided

in paragraph (c) of this section. Returns

on magnetic media must be made in accordance with applicable revenue procedures or publications (see §601.601(d)(2)(ii)(b) of this chapter). Pursuant to

these procedures, the consent of the Commissioner of Internal Revenue (or other

authorized officer or employee of the In-

1998–31 I.R.B.

ternal Revenue Service) to a magnetic

medium must be obtained by submitting

Form 4419 (Application for Filing Information Returns Magnetically/Electronically) prior to submitting a return described in this paragraph (b)(1) on the

magnetic medium.

(2) If the use of Form W–2 (Wage and

Tax Statement), Form 499R–2/W–2PR

( Withholding Statement (Puerto Rico)),

Form W–2VI (U.S. Vi rgin Islands Wa g e

and Tax Statement), Form W – 2 G U

(Guam Wage and Tax Statement), Form

W–2AS (American Samoa Wage and Tax

Statement), or other form treated as a

form specified in this paragraph (b)(2) is

required for the purpose of making an information return, the information required

by the form must be submitted on magnetic media, except as otherwise provided

in paragraph (c) of this section. Returns

described in this paragraph (b)(2) must be

made in accordance with applicable Social Security Administration procedures

or publications (which may be obtained

from the local office of the Social Security Administration).

Example 2. During the calendar year ending December 31, 1998, Company Yhas 275 employees in

Puerto Rico and 50 employees in American Samoa.

Company Y is required to file Forms 499R–2/

W–2PR on magnetic media but is not required to file

Forms W–2AS on magnetic media.

Example 3. For the calendar year ending December 31, 1998, Company Z files 300 original returns

on Form 1099–DIV and later files 70 corrected returns on Form 1099–DIV. Company Z is required to

file the original returns on magnetic media. However, Company Z is not required to file the corrected

returns on magnetic media because the corrected returns fall under the 250-threshold. See §301.6721–

1(a)(2)(ii).

(2) Waiver. (i) The Commissioner may

waive the requirements of this section if

hardship is shown in a request for waiver

filed in accordance with this paragraph

(c)(2)(i). The principal factor in determining hardship will be the amount, if

any, by which the cost of filing the information returns in accordance with this

section exceeds the cost of filing the returns on other media. Notwithstanding

the foregoing, if an employer is required

to make a final return on Form 941, or a

variation thereof, and expedited filing of

Forms W–2, Forms 499R–2/W–2PR,

Forms W–2VI, Forms W–2GU, or Form

* * * * *

W–2AS is required, the unavailability of

(c) E x c e p t i o n s—(1) Low-volume fil - the specifications for magnetic media file r s / 2 5 0 - t h re s h o l d—(i) In general. No ing will be treated as creating a hardship

person is required to file information re- (see §31.6071(a)–1(a)(3)(ii) of this chapturns on magnetic media unless the per- ter). A request for waiver must be made

son is required to file 250 or more returns in accordance with applicable revenue

during the calendar year. Persons filing procedures or publications (see

fewer than 250 returns during the calen- § 6 0 1 . 6 0 1 ( d ) ( 2 ) ( i i ) (b) of this chapter).

dar year may make the returns on the pre- Pursuant to these procedures, a request

scribed paper form, or, alternatively, such for waiver should be filed at least 45 days

persons may make returns on magnetic before the due date of the information remedia in accordance with paragraph (b) turn in order for the Service to have adeof this section.

quate time to respond to the request for

waiver. The waiver will specify the type

* * * * *

of information return and the period to

(iii) No aggregation. Each type of in- which it applies and will be subject to

formation return described in paragraphs such terms and conditions regarding the

(b)(1) and (2) of this section is considered method of reporting as may be prescribed

a separate return for purposes of this para- by the Commissioner.

graph (c)(1). Therefore, the 250-thresh(ii) The Commissioner may prescribe

old applies separately to each type of rules that supplement the provisions of

form required to be filed.

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

(iv) Examples. The provisions of para(d) Paper form re t u r n s . Returns subgraph (c)(1)(iii) of this section are illus- mitted on paper forms (whether or not

trated by the following examples:

machine-readable) permitted under paragraph (c) of this section shall be in accorExample 1. For the calendar year ending December 31, 1998, Company X is required to file 200 re- dance with applicable Internal Revenue

turns on Form 1099–INT and 350 returns on Form Service or Social Security Administration

1099–MISC. Company X is not required to file procedures.

Forms 1099–INT on magnetic media but is required

to file Forms 1099–MISC on magnetic media.

1998–31 I.R.B.

(f) Failure to file. If a person fails to

file an information return on magnetic

media when required to do so by this section, the person is deemed to have failed

to file the return. In addition, if a person

making returns on a paper form under

paragraph (c) of this section fails to file a

return on machine-readable paper form

when required to do so by this section, the

person is deemed to have failed to file the

return. See sections 6652, 6693, and

6721 for penalties for failure to file certain returns. See also section 6724 and

the regulations under section 6721 for the

specific rules and limitations regarding

the penalty imposed under section 6721

for failure to file on magnetic media.

(g) Effective dates. * * *

(2) Paragraphs (a)(1), (b)(1), (b)(2),

(c)(1)(i), (c)(1)(iii), (c)(1)(iv), (c)(2), (d),

(e), and (f) of this section are effective for

information returns required to be filed

after December 31, 1996. For information returns required to be filed after December 31, 1989, and before January 1,

1997, see section 6011(e).

§301.6011–2T [Removed].

P a r. 7. Section 301.6011 – 2 T is removed.

Michael P. Dolan,

Deputy Commissioner of

Internal Revenue.

Approved May 22, 1998.

Donald C. Lubick,

Assistant Secretary of

the Treasury.

(Filed by the Office of the Federal Register on June

29, 1998, 8:45 a.m., and published in the issue of the

Federal Register for June 30, 1998, 63 F.R. 35517)

Section 7520.—Valuation Tables

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

of August 1998. See Rev. Rul. 98–36, page 6.

Section 7872.—Treatment of

Loans With Below-Market

Interest Rates

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

of August 1998. See Rev. Rul. 98–36, page 6.

* * * * *

August 3, 1998

26 CFR 1.7872–5T: Exempted Loans (temporary).

Below-market loans; exempted

loans; second mortgage loans under the

M A H R A A c t . A below-market second

mortgage loan made under the Multifamily Assisted Housing Reform and Affordability Act of 1997, by the Department of

Housing and Urban Development (HUD)

to the owner of a multifamily low-income

rental property in connection with restructuring the existing first mortgage on the

p r o p e r t y, is exempted from section 7872

of the Code.

Rev. Rul. 98–34

ISSUE

If the Department of Housing and

Urban Development (“HUD”) makes a

below-market second mortgage loan in

accordance with the Multifamily Assisted

Housing Reform and Affordability Act of

1997, 111 Stat. 1384 (“MAHRAAct”), is

that loan exempt from § 7872 of the Internal Revenue Code?

FACTS

Limited partnership PRS owns a multifamily low-income rental property subject

to a first mortgage that secures a nonrecourse first mortgage note with an outstanding principal balance of $100x (the

“Existing Mortgage loan”). The Existing

Mortgage loan is insured by the Federal

Housing Administration (“FHA”). PRS,

as owner of the property, receives both

rental payments from the property’s tenants and, under a project-based assistance

contract, certain additional payments

from HUD. (Collectively, the payments

are referred to as “Contract Rents.”) The

Contract Rents exceed the rents that

would be received with respect to comparable unassisted rental properties in the

same housing market (“Street Rents”). If

the project-based assistance from HUD

were reduced so that Contract Rents reflected Street Rents, PRS would not be

able to satisfy its debt service obligation

on the Existing Mortgage loan.

Congress enacted the MAHRA Act to

reduce the federal government’s cost of

rental subsidies, to minimize FHA m o r tgage insurance risks, and to ensure the

continued viability of multifamily rental

housing projects. S e e § 511(b) of the

MAHRA Act; H.R. Conf. Rep. No. 297,

August 3, 1998

105th Cong., 1st Sess. 137–39 (1997).

To achieve these goals, the MAHRA Act

permits owners of eligible multifamily

housing projects with expiring projectbased assistance contracts to enter into

mortgage restructuring and rental assistance sufficiency plans with HUD or a

participating administrative entity acting

on behalf of HUD.

In accordance with the MAHRA Act,

the following actions occur:

(1) Project-based assistance payments

to PRS are reduced so that the Contract

Rents received by P R S reflect Street

Rents.

(2) HUD makes a $35x cash payment

to the holder of the Existing Mortgage

loan on behalf of PRS to reduce the outstanding principal balance of the Existing

Mortgage loan to $65x.

(3) The terms of the Existing Mortgage

loan are modified, resulting in a new first

mortgage loan with an outstanding principal balance of $65x (“New First Mortgage

loan”). The New First Mortgage loan

provides for interest above the applicable

Federal rate under § 1274(d) (“AFR”).

Debt service on the New First Mortgage

loan is supportable by the reduced Contract Rents.

(4) In consideration for the payment in

step (2), PRS executes a nonrecourse note

to HUD (the “Second Mortgage loan”) secured by a second mortgage. The Second

Mortgage loan has a principal balance of

$ 3 5x, provides for interest below the

AFR, and qualifies as indebtedness under

general principles of federal income tax

law. The Second Mortgage loan is made

in accordance with § 517(a)(1)(B) of the

MAHRAAct.

LAWAND ANALYSIS

In general, § 7872 defines a belowmarket loan as any loan on which the interest rate charged is less than the A F R .

Section 7872(b) provides that the borrower of a below-market term loan is

treated as having received from the

lender, on the date the loan is made, cash

in an amount equal to the excess of the

amount loaned over the present value of

all payments required under the loan (the

“imputed transfer”). Section 7872(b) further provides that a below-market term

loan is treated as having original issue

discount (“OID”) in an amount equal to

the imputed transfer, which is in addition

to any other OID on the loan determined

without regard to § 7872(b).

Section 1.7872–5T(a)(1) of the temporary Income Tax Regulations provides

that, notwithstanding any other provision

of § 7872 and the regulations thereunder,

§ 7872 does not apply to the loans listed

in § 1.7872–5T(b) because the interest

arrangements of those loans do not have a

significant effect on the federal tax liability of the borrower or the lender. Section

1.7872–5T(a)(2) provides, however, that

if a taxpayer structures a transaction as a

loan exempt under § 1.7872–5T(b) and

one of the principal purposes of so structuring the transaction is the avoidance of

federal tax, then the transaction will be

recharacterized as a tax avoidance loan

under § 7872(c)(1)(D).

Section 1.7872–5T(b)(5) provides an

exemption for loans that are subsidized by

a federal, state, or municipal government

(or any agency or instrumentality

thereof), and that are made available

under a program of general application to

the public.

Under § 1.7872–5T(b)(15), other loans

described in revenue rulings or revenue

procedures may be exempted from § 7872

if the Commissioner finds that the factors

justifying the exemption for those loans

are sufficiently similar to the factors justifying the other exemptions listed in

§ 1.7872–5T.

The legislative history of § 7872 indicates that most government-subsidized

loans, such as government-insured residential mortgage loans, were intended to

be exempt from § 7872. See 1 Senate

Comm. on Finance, 98th Cong., 2d Sess.,

Deficit Reduction Act of 1984: Explanation of Provisions Approved by the Committee on March 21, 1984, at 482 (S. Prt.

169).

The factors justifying exemption of the

Second Mortgage loan from § 7872 are

similar to the factors justifying the exemption for government subsidized loans

made available under a program of general application to the public, which are

exempt from § 7872 under § 1.7872–

5T(b)(5).

The MAHRAAct was enacted as a reform measure to reduce HUD’s cost of renewing project-based assistance contracts

on multifamily low-income rental properties while ensuring the continued viability

of these multifamily rental housing pro-

1998–31 I.R.B.

jects. The interest arrangements of the

Second Mortgage loan to PRS are, therefore, not structured with a principal purpose of avoiding federal tax.

HOLDING

The Second Mortgage loan is exempt

from § 7872.

1998–31 I.R.B.

DRAFTING INFORMATION

The principal authors of this revenue

ruling are David B. Silber and Tina Jannotta of the Office of Assistant Chief

Counsel (Financial Institutions and Products). However, other personnel from the

IRS and Treasury Department partici-

pated in its development. For further information regarding this notice, contact

Tina Jannotta on (202) 622–3940 (not a

toll-free call).

August 3, 1998

Part IV. Items of General Interest

1998 Form Specifications; Correction

Announcement 98–72

This announcement corrects Rev. Proc. 98–35, 1998–21 I.R.B. 6, relating to specifications for the magnetic or electronic filing of

1998 Forms 1098, 1099, 5498, and W–2G.

On page 6 of the Bulletin, the bullet relating to Form 8809 is incorrectly stated as follows:

Form 8809, 8027, – Request for Extension of Time to File Information Returns (For Forms W–2, W–2G, 1042–S, 1099,

1098, and 5498)

The correct wording is as follows:

Form 8809 – Request for Extension of Time to File Information Returns (For Forms W–2, W–2G, 1042–S, 1099, 1098,

5498, and 8027)

On page 16, under Section 10, Due Dates, the date for Forms 5498 and 5498–MSAis incorrectly stated as follows:

Forms 5498 and 5498–MSA

Participant Copy – June 1, 1999

IRS Copy – June 1, 1999

The correct date to use is:

Forms 5498 and 5498–MSA

Participant Copy – May 31, 1999

IRS Copy – May 31, 1999

Penalty Relief for TIN Errors on

1996 & 1997 Forms 1099–R

Announcement 98–73

In early August, the Internal Revenue

Service (IRS) will send certain filers of

Form 1099–R (payers of distributions

from pensions, annuities, retirement or

profit-sharing plans, individual retirement

accounts, insurance contracts, etc.) lists of

payees whose taxpayer identification

numbers (TINs) on 1996 Forms 1099–R

filed with the IRS have been identified as

missing or incorrect based on the IRS

matching process. Most of these listings

will be included with the Notice 972CG,

but some will be sent separately. The law

provides a penalty of $50 per return for

filing an information return with a missing or incorrect TIN. For 1996 and 1997,

for the Forms 1099–R only, the IRS will

not assess this TIN penalty, merely because the TIN has been identified as missing or incorrect based on the IRS matching process. In certain cases this penalty

may be assessed after an examination of a

payer’s returns. Payers should use these

listings to correct their records and perform necessary solicitations to obtain correct payee information to establish reasonable cause for any TIN penalties in

future years.

August 3, 1998

The IRS will still send out proposed

penalty notices for the 1996 Form 1099R, as well as for other information returns, in early August to those who filed

late or failed to file on magnetic media

when required to do so.

Questions & Answers on the Form

1099–R TIN Listing

Q1. Why is the IRS sending this listing?

A1. The IRS is sending this listing so that

the payer can compare the data on it

to the information in its records and

then take steps to secure correct

payee information so that future information returns may be filed accurately.

Q2. What is contained in this listing?

A2. This listing consists of the Forms

1099–R filed for Tax Year 1996 that

have been identified as having missing or incorrect TINs based on the

records of the IRS and the Social Security Administration (SSA).

Q3. When does the IRS consider a TIN to

be missing or incorrect?

A3. A TIN is identified as missing if

there is no entry in the TIN block of

a Form 1099 or if the number is obviously incorrect. A number is obviously incorrect if, for example, it

does not have nine characters or it

includes alpha characters. A TIN is

identified as incorrect if the name/

TIN combination on a Form 1099

does not match the name/TIN combination found in IRS and SSAfiles.

Q4. What should be done with the information in the listing?

A4. The payer should compare the information in the listing with its records

to identify accounts or records with

the same name/TIN combination and

account or other number (if provided). The IRS recommends that

the payer contact these payees and

ask them for the correct name/TIN

combination that can be used on future information returns. Although a

certified TIN is not required from

these payees, the payer may use

Form W–9, “Request for Ta x p a y e r

Identification Number and Certification,” for this purpose. The payer

should also check its records for errors (such as transposition of digits)

so that the correct name/TIN combination can be used on any future information returns.

Q5. What should be done if the payer

does not have a payee’s TIN?

A5. The payer should comply with the

TIN solicitation requirements in

Regulations section 301.6724–1(e).

In addition, Federal income taxes

1998–31 I.R.B.

should be withheld from any payments made to the payee that are

designated distributions under Code

section 3405. In the case of nonperiodic payments, a flat rate of 10%

should be withheld on non-eligible

rollover distributions. On eligible

rollover distributions, the withholding rate of 20% should continue to

be used. In the case of periodic payments, the payer should withhold

using the wage withholding rates for

a single taxpayer claiming zero (0)

allowances .

Q6. What should be done if a payee refuses or neglects to provide a TIN?

A6. The payer should withhold under the

provisions of Code section 3405. See

Q&A5.

Q7. What should be done if a payee provides the same name and TIN that

was on the listing?

A7. The payer should continue to use the

name and TIN provided and keep a

copy on file of the documentation received from the payee.

Q8. What should be done if a TIN was

actually on file but was left off the

Form 1099 or reported incorrectly?

A8. The payer should make the change to

its records and use the correct information on future filings.

Q9. Will the IRS impose a penalty under

Code section 6721 with respect to

the information returns merely because a TIN is identified as missing

or incorrect on this listing?

A9. No. In August 1998 (for Tax Ye a r

1996), the IRS is providing this listing so that payers can obtain correct

name/TIN information for use on

any future Forms 1099–R filed. Incorrect name/TIN combinations and

missing TINs on future Forms 1099–

R filed may result in a penalty.

Q10. Is this listing a notification, under

Code section 3405(e)(12)(B), that

the TIN furnished by the payee is

incorrect?

A10. No. The informational listing provided in August 1998 will not be

treated as a notice under Code section 3405(e)(12)(B) that the T I N

furnished by the payee is incorrect.

In 1998 (for Tax Year 1996), the

IRS is only providing this informational listing so that payers can con-

1998–31 I.R.B.

tact these payees and obtain correct

name/TIN information for use on

future Forms 1099–R filed.

Q11. Where can I find additional information about the reasonable cause

regulations and requirements for

missing and incorrect name/TIN

combinations?

A11. See Publication 1586, “Reasonable

Cause Regulations and Requirements for Missing and Incorrect

Name/TINs.”

Q12. Since it is likely that Forms 1099–R

for Tax Year 1997 have already

been filed with the missing or incorrect information found on this

listing, will penalty relief for 1997

also be granted?

A12. Yes. For Tax Year 1997, this relief

will be granted for the TIN penalty

for Forms 1099–R only.

Q13. Who should be called with any

questions?

A13. The Information Reporting Program Centralized Call Site may be

called at (304) 263-8700 (not a tollfree number) between 8:30 a.m.

and 4:30 p.m. (EST). Payers may

also access the Information Returns

Program Bulletin Board using standard personal computing equipment

at (304) 264-7070 (not a toll-free

number).

Trading Safe Harbors;

Correction

Announcement 98–74

A G E N C Y: Internal Revenue Service

(IRS), Treasury.

ACTION: Correction to notice of proposed rulemaking and notice of public

hearing.

S U M M A RY: This document contains

corrections to REG–106031–98, which

was published in the Federal Register on

F r i d a y, June 12, 1998 (63 F.R. 32164

[1998–26 I.R.B. 38]), relating to the treatment of foreign taxpayers trading in derivative financial instruments for their

own account.

FOR FURTHER INFORMATION CONTA C T: Milton Cahn, (202) 622-3870

(not a toll-free number).

SUPPLEMENTARYINFORMATION:

Background

The notice of proposed rulemaking that

is the subject of this correction is under

section 864(b) of the Internal Revenue

Code.

Need for Correction

As published, REG–106031–98 contains errors which may prove to be misleading and are in need of clarification.

Correction of Publication

Accordingly, the publication of the notice of proposed rulemaking (REG106031-98), which is the subject of FR

Doc. 98-15452, is corrected as follows:

1. On page 32164, column 3, in the

preamble under the paragraph heading

“Background”, the second paragraph, line

3, the language “promulgated in 1972.

Since the” is corrected to read “promulgated in 1968. Since the”.

2. On page 32165, column 2, in the preamble under the paragraph heading “2. Eli gible Nondealer”, the third paragraph, line

9, the language “securities in 475(c)(1)(B),

including” is corrected to read “securities

in section 475(c)(1)(B), including”.

§1.864(b)–1 [Corrected]

3. On page 32166, columns 2 and 3,

§1.864(b)–1(b) (1) introductory text, the

last line in column 2 and the first line in

column 3, the language “nondealer is a

person that is not a resident of the United

States and is not,” is corrected to read

“nondealer is a foreign corporation or a

person that is not a resident of the United

States, and either of which is not,”.

Cynthia E. Grigsby,

Chief, Regulations Unit,

Assistant Chief Counsel (Corporate).

(Filed by the Office of the Federal Register on July

14, 1998, 8:45 a.m., and published in the issue of the

Federal Register for July 15, 1998, 63 F.R. 38139)

Foundations Status of Certain

Organizations

Announcement 98–75

The following organizations have

failed to establish or have been unable to

August 3, 1998

maintain their status as public charities or

as operating foundations. A c c o r d i n g l y,

grantors and contributors may not, after

this date, rely on previous rulings or designations in the Cumulative List of Organizations (Publication 78), or on the presumption arising from the filing of notices

under section 508(b) of the Code. T h i s

listing does not indicate that the organizations have lost their status as org a n i z ations described in section 501(c)(3), eligible to receive deductible contributions.

Former Public Charities. The following

o rganizations (which have been treated as

o rganizations that are not private foundations described in section 509(a) of the

Code) are now classified as private foundations:

A Better Option Dwelling Enterprise,

Inc., Laurel, MD

African Family Services Center, New

York, NY

American Aid for Polands Environment

Foundation Inc., Chicago, IL

Angela Barber Foundation, Ashland, OR

Aradia Inc. Aradia Theatre, Buskirk, NY

Bread of Life Outreach Deliverance, East

Orange, NJ

Cleveland Haddassah House, Inc.,

Beachwood, OH

August 3, 1998

Delaware Crime Prevention Association,

Dover, DE

Dixie Hollins Band Boosters, Inc.,

St. Petersburg, FL

Doniphan Education Foundation,

Doniphan, NE

Environmental Technology Synthests,

Beltsville, MD

For a Better Life Foundation, Chicago, IL

Glen Shumate Ministries, Inc., Corbin,

Good Stewards, Woodbury, MN

Gospel Music Museum & Archives Inc.,

Huntsville, AK

Hans Lehfeldt Charitable Trust, New

York, NY

Help or Motivate Everybody, Inc., Dallas,

Henrietta J. Gersoni Educational

Foundation, Stockton, CA

Hine-2 Corporation, Portland, ME

Hintz Research Foundation, Rock Island,

Hope & Charity Incorporated, Pittsburg,

Impoverished, Inc., Chicago, IL

International Center for Addiction and

AIDS Training, Inc., Rochester, NY

Itis H. Chidester Scout Museum of

Southern Arizona, Tucson, AR

Lochearn Child Care & Development

Center, Baltimore, MD

Living History Society of Delaware, Inc.,

Dover, DE

Sayre Charitable Union, Sayre, OK

Shelter Plus Inc., North Miami, FL

Sphere, Inc., Dixmont, ME

Steve Nelson Ministries, Gallatin, TN

TASCA, Raleigh, NC

Team Jesus Inc., Amory, MS

Vanguard Communications, St. Louis,

Visions & Associates, Bath, OH

Westwood Education Foundation,

Mapleton, IA

If an organization listed above submits

information that warrants the renewal of

its classification as a public charity or as a

private operating foundation, the Internal

Revenue Service will issue a ruling or determination letter with the revised classification as to foundation status. Grantors

and contributors may thereafter rely upon

such ruling or determination letter as provided in section 1.509(a)–7 of the Income

Tax Regulations. It is not the practice of

the Service to announce such revised classification of foundation status in the Internal Revenue Bulletin.

1998–31 I.R.B.

Definition of Terms

Revenue rulings and revenue pro c e d u re s

( h e reinafter re f e rred 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. T h u s ,

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.

D i s t i n g u i s h e d 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 for merly 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.

1998–31 I.R.B.

August 3, 1998

Numerical Finding List 1

Bulletins 1998–29 and 30

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

Notices:

98–36, 1998–29 I.R.B. 8

98–37, 1998–30 I.R.B. 13

Proposed Regulations:

REG–104641–97, 1998–29 I.R.B. 9

REG–110403–98, 1998–29 I.R.B. 11

REG–116608–97, 1998–29 I.R.B. 12

REG–119227–97, 1998–30 I.R.B. 13

Revenue Procedures:

98–43, 1998–29 I.R.B. 8

Revenue Rulings:

98–35, 1998–30 I.R.B. 4

Treasury Decisions:

8771, 1998–29 I.R.B. 6

8773, 1998–29 I.R.B. 4

8774, 1998–30 I.R.B. 5

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.

August 3, 1998

1998–31 I.R.B.

Finding List of Current Action on

Previously Published Items 1

Bulletins 1998–29 and 30

*Denotes entry since last publication

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.

1998–31 I.R.B.

August 3, 1998

Index

ESTATE TAX—Continued

EXCISE TAX—Continued

Internal Revenue Bulletins

1998–1 Through 1998–30

26 CFR 25.2702–5, –7, amended; qualified prsonal residence trust, sale of

residence (TD 8743) 7, 26

26 CFR 25.2511–1, 25.2514–3,

25.2518–1, –2, amended; property

interests and disclaimers (TD 8744)

7, 20

Revocable trust; election (RP13) 4, 21

Special use value; farms; interest rates

(RR 22) 19, 5

Underpayment interest, interest expense

deduction, estates (RP15) 4, 25

Valuation of compensatory stock options

(RP 34) 18, 15

Regulations:

26 CFR 48.4081–1T, 48.4082–6T

through –10T and intermediary sections, 48.4091–3T, 48.4101–2T, –3T,

4 8 . 6 4 2 7 – 1 0 T, –11 T, added; 145.4052–

1, amended; kerosene, aviation fuel,

heavy trucks and trailers tax (TD

8774) 30, 5

The abbreviation and number in parenthesis following the index entry refer to

the specific item; numbers in roman and

italic type following the parenthesis refer

to the Internal Revenue Bulletin in which

the item may be found and the page

number on which it appears.

Key to Abbreviations:

Revenue Ruling

Revenue Procedure

Treasury Decision

Court Decision

Public Law

Executive Order

Delegation Order

TDO

Treasury Department Order

Tax Convention

SPR

Statement of Procedural

Rules

PTE

Prohibited Transaction

Exemption

EMPLOYMENT TAX

Magnetic media; electronic filing; 1998

Form W–4 specifications (RP 26) 13,

Proposed regulations:

26 CFR 31.3121(v)(2)–1, revised;

FICAand FUTAtaxation of amounts

under employee benefit plans (REG–

209484–87; REG–209807–95) 8, 40

26 CFR 31.6053–1, –4; electronic tip

reports (REG–104691–97) 11, 13

Student FICAexception (RP16) 5, 19

26 CFR 31.6302–1(f)(4), revised; federal employment tax deposits d e

minimis rule (REG–110403–98) 29,

Regulations:

26 CFR 31.6302–1(f)(4), 31.6302–1T,

added; federal employment tax deposits de minimis rule (TD 8771) 29,

ESTATE TAX

Regulations:

26 CFR 20.2041–3, 20.2056(d)–2,

amended; 20.2046–1, revised; property interests and disclaimer (TD

8744) 7, 20

August 3, 1998

EXCISE TAX

Bows and arrows; taxable and nontaxable

articles (RR 5) 2, 20

Deposit of excise taxes, amendment (Notice 36) 29, 8

Federal excise taxes for consular officers

and employees, exemption (RR 24) 19,

Proposed regulations:

26 CFR 40.0–1T, added; 40.6011 ( a ) –

1 T, added; 40.6302(c)–2T, added;

deposits of excise taxes (REG–

102894–97) 3, 59

26 CFR 48.4052–1, added; 48.4081–1,

amended; 48.4082–6 through –10

and intermediary sections, 48.4091–

3, added; 48.4101–2, amended;

48.4101–3, 48.6427–10, –11, added;

kerosene tax, aviation fuel tax, tax

on heavy trucks and trailers (REG–

119227–97) 30, 13

26 CFR 54.4980B–1, added; group

health plans continuation coverage

requirements (REG–209485–86) 11,

Regulations:

26 CFR 40.0–1(a), amended;

4 0 . 6 0 11 ( a ) –1(a)(2)(iii), 40.5302(c)–

1, amended, 40.6302(c)–2(b)(2)(iii),

added; deposits of excise taxes (TD

8740) 3, 4

26 CFR 40.6011 ( a ) – 1 ( b ) ( 2 ) ( v i ) ,

amended; 48.4082–5T, removed;

48.4082–5, added; 48.4081–1,

amended; 48.4082–5T, redesignated;

48.6416(b)(4)–1, removed; 48.6421–

3(d)(2), amended; 48.6427–3(d)(2),

amended; 48.6715–1(a)(3), revised;

4 8 . 6 7 1 5 – 2 T, removed; gasoline and

diesel fuel excise tax; special rules for

Alaska, definitions (TD 8748) 8, 24

GIFT TAX

Nonstatutory stock option, transfer (RR

21) 18, 7

Qualifying income interest, disposition

(RR 8) 7, 24

Valuation of compensatory stock options

(RP 34) 18, 15

INCOME TAX

Advance pricing agreements, small business taxpayers (Notice 10) 6, 9

Article XIII (8) Rev. Proc. (RP 21) 8, 27

Automobile owners and lessees (RP 24)

10, 31; (RP 30) 17, 6

Books and records; automatic data processing system (RP 25) 11, 7

Business expenses:

U n d e rground waste storage tank (RR

25) 19, 4

Capital gains and charitable remainder

trusts (Notice 20) 13, 25

Classification settlement program:

Extended until further notice (Notice

21) 15, 14

Disclosure authorization list (RP 43) 29, 8

Domestic assets/liability and investment

yield percentages (RP31) 23, 9

Education loans (Notice 7) 3, 54

Elections under section 7704(g) (Notice

3) 3, 48

Electronic Federal Tax Payment System:

Batch filers and bulk filers (RP 32) 17,

Electronic funds transfer; failure to deposit penalty (Notice 30) 22, 9

Employee plans:

Administrative programs; closing

agreements (RP 22) 12, 11

Determination letters (RP 6) 1, 183;

(RP14) 4, 22

Discrimination; CODAs (Notice 1) 3,

Eligible deferred compensation plans

(Notice 8) 4, 6

1998–31 I.R.B.

INCOME TAX—Continued INCOME TAX—Continued INCOME TAX—Continued

Group health plans; COBRA continuation coverage; HIPA A p o r t a b i l i t y

(Notice 12) 5, 12

Net unrealized appreciation; capital

gains (Notice 24) 17, 5

Funding:

Full funding limitations, weighted

average interest rate for January 1998 (Notice 9) 4, 8; February 1998 (Notice 15) 9, 8 ;

March 1998 (Notice 18) 12, 11;

April 1998 (Notice 26) 18, 14;

May 1998 (Notice 32) 22, 23;

June 1998 (Notice 33) 25, 10;

July 1998 (Notice 37) 30, 13

Letter rulings, etc. (RP4) 1, 113

Limitations on benefits and contributions (RR 1) 2, 5

Minimum Funding Standards (RP 10)

2, 35

Minimum:

Remedial amendments (RP 42) 28,

Qualification (Notice 29) 22, 8;

CODAs (RR 30) 25, 8

Recovery of basis; retirees (Notice 2)

2, 22

SIMPLE-IRAs (Notice 4) 2, 25

Technical advice (RP5) 1, 155

User fees (RP 8) 1, 225

Environmental cleanup costs; letter

rulings (RP 17) 5, 21

Exempt Organizations:

Letter rulings, etc. (RP 4) 1, 113

Organizations excepted from reporting

lobbying expenditures (RP 19) 7,

Tax consequences of physicians recruitment incentives provided by

hospitals (RR 15) 12, 6

Technical advice (RP5) 1, 155

User fees (RP8) 1, 225

Failure to deposit federal tax; penalty

abatement (Notice 14) 8, 27

Foreign partnerships, reporting transfer of

property by U.S. persons (Notice 17)

11, 6

Foreign tax credit abuse (Notice 5) 3, 49

Fringe benefits aircraft valuation formula,

first half of 1998 (RR 14) 11, 4

Fuel from a nonconventional source,

credit; section 29 inflation adjustment;

reference price for 1997 (Notice 28)

19, 7

Hybrid arrangements, treatment under

subpart F (Notice 35) 27, 35

1998–31 I.R.B.

Insurance companies:

Discounting estimated salvage recoverable (RP12) 4, 18

Interest rate tables (RR 2) 2, 15

Loss reserves; discounting unpaid

losses (RP 11) 4, 9

Interest:

Investment:

Federal short-term, mid-term, and

long-term rates for January 1998

(RR4) 2, 1 8; February 1998

(RR7) 6, 6; March 1998 (RR11 )

10, 13; April 1998 (RR 18) 14,

2 2; May (RR 23) 18, 5; J u n e

1998 (RR 28) 22, 5; July 1998

(RR 33) 27, 26

Rates, underpayments and overpayments (RR 17) 13, 21; calendar

quarter beginning July 1, 1998

(RR 32) 25, 4

Inventory:

LIFO:

Price indexes; department stores for

November 1997 (RR 6) 4, 4; December 1997 (RR 9) 6, 5; January

1998 (RR 16) 13, 18; February

1998 (RR 20) 15, 8; March 1998

(RR 26) 21, 4; April 1998 (RR

29) 24, 4; May 1998 (RR 35) 30,

Shrinkage estimates:

Changing method of accounting for

estimating inventory shrinkage

(RP 29) 15, 22

Letter rulings, determination letters, and

information letters issued by Associate

Chief Counsel (Domestic), Associate

Chief Counsel (EBEO), Associate

Chief Counsel (Enforcement Litigation), and Associate Chief Counsel

(International) (RP 1) 1, 7

Losses attributable to a disaster during

1997 (RR 12) 10, 5

Low-income housing tax credit (Notice

13) 6, 19

Satisfactory bond; “bond factor”

amounts for the period October

through December 1997 (RR 3) 2, 4;

January–March 1998 (RR 13) 11, 4;

April-June 1998 (RR 31) 25, 4

Magnetic media/electronic filing:

Specifications for 1998 Forms 1098,

1099, 5498, and W–2G (RP 35) 19,

Form 1040NR (RP 36) 23, 10

Methods of accounting; involuntary

changes (Notice 31) 22, 10

Package design; amortization; capitalization; amortizable section 197 intangible

(RP 39) 26, 36

Passive foreign investment companies:

Shareholders may use rules of sec.

1.1295–1T(b)(4), (f), and (g) to taxable years beginning before January

1, 1998 (Notice 22) 17, 5

Private letter rulings under sections 877,

2107, and 2501(a)(3)(Notice 34) 27, 30

Proposed regulations:

26 CFR 1.32–3, added; EIC eligibility

requirements (REG–116608–97) 29,

26 CFR 1.72(p)–1, amended; loans to

plan participants (REG–209476–82)

8, 36

26 CFR 1.141–7, 1.142(f)(4)–1, 1.150–

5, added; 1.141–8, –15, amended;

obligations of states and political

subdivisions (REG–110965–97) 13,

26 CFR 1.195–1, added; election to

amortize start-up expenditures

(REG–209373–81) 14, 26

26 CFR 1.356–6, added; reorg a n i z ations, nonqualified preferred stock

(REG–121755–97) 9, 13

26 CFR 1.368–1, amended; corporate

r e o rganizations, continuity of interest (REG–120882–97) 14, 25

26 CFR 1.401(a)(9)–1, amended; qualified plans and individual retirement

plans, required distributions (REG–

209463–82) 4, 27

26 CFR 1.417(e)–1 and paragraph (d),

revised; 1.417(e)–1T and paragraph

(d), revised; valuation of plan distributrions (TD 8768) 20, 4

26 CFR 1.460–6, amended; election

not to apply look-back method in de

m i n i m i s cases (REG–120200–97)

12, 32

26 CFR 1.469–10, revised; 1.7704–1,

added; investment income, passive

activity income and loss rules for

publicly traded partnerships

(REG–105163–97) 8, 31

26 CFR 1.475(g)–2, new; 1.482–8,

added; 1.482–0, –1, –2, 1.863,

1.863–7(a)(1), 1.864–4, –6, 1.894–1,

amended; 1.482–9, redesignated;

global dealing operation allocation

and sourcing of income and deductions among taxpayers (REG–

208299–90) 16, 26

August 3, 1998

INCOME TAX—Continued INCOME TAX—Continued INCOME TAX—Continued

26 CFR 1.513–7, added; travel and tour

activities of tax exempt org a n i z ations (REG–121268–97) 20, 12

26 CFR 1.702–1, 1.954–1, 301.7701–3,

amended; 1.952–1(b), (c), redesignated 1.954–2(a)(5), (6), 1.954–

4(b)(2)(iii), 1.954–9, 1.956–2(a)(3),

added (REG–104537–97) 16, 21

26 CFR 1.732–1, amended; 1.732–2,

amended; 1.734–1(e), added; 1.743–

1, revised; 1.751–1, amended;

1.755–1, revised; 1.1017–1, revised;

adjustments to basis of partnership

property and partnership interest

(REG–209682–94) 17, 20

26 CFR 1.864(b)–1; trading safe harbors (REG–106031–98) 26, 38

26 CFR 1.925(a)–1, (b)–1, added;

1.927(e)–1, amended; foreign sales

corporation transfer pricing source

and grouping rules (REG–102144–

98) 15, 25

26 CFR 1.1092(c)–1, added; equity options without standard terms, special

rules and definitions (REG–104641–

97) 29, 9

26 CFR 1.1291–1, 1.1293–1, 1.1295–1,

–3, 1.1297–3(c), added; 1.1296–4,

amended; passive foreign investment

company preferred shares, special

income exclusion (REG–11 5 7 9 5 –

97) 8, 33

26 CFR 1.1361–0, amended; 1.1361–1,

amended; 1.1361–1(d)(3), removed;

1.1361–2 through –6 and intermediary sections, added; 1.1362–0,

amended; 1.1362–2, amended;

1.1362–8, added; 1.1368–0,

amended; 1.1368–2(d)(2), amended;

1.1374–8(b), amended; S corporation subsidiaries (REG–251698–96)

20, 14

26 CFR 1.1397E–1, added; qualified

zone academy bonds (REG–

119449–97) 10, 35

26 CFR 1.1502–3(c), revised; 1.1502–

4(f)(3), (g)(3), added; 1.1502–9(b)(1)(v), added; 1.1502–21(c)(1)(iii),

amended; consolidated returns, limitations on the use of certain losses

and credits (REG–104062–97) 10, 34

26 CFR 1.6031–1, removed;

1.6031(a)–1, added; 1.6063–1,

amended; partnership returns

(REG–209322–82) 15, 26

26 CFR 1.7702B–1, –2, added; qualified long-term care insurance contracts (REG–109333–97) 9, 9

August 3, 1998

26 CFR 301.6159–1, amended; agreements for tax liability installment

payments (REG–100841–97) 8, 30

26 CFR 301.6404–2, added; abatement

of interest (REG–209276–87) 11, 18

26 CFR 301.7433–1(a), (d), (e), and

(f), revised; civil cause of action for

certain unauthorized collection actions (REG–251502–96) 9, 14

26 CFR 54.9812–1, added; mental

health parity; HIPA A ( R E G –

109704–97) 3, 60

Qualified Funeral Trust; guidance (Notice

6) 3, 52

Qualified intermediary agreements:

Guidance provided to foreign financial

institutions (RP 27) 15, 15

Qualified mortgage bonds, mortgage

credit certificates:

Guidance provided regarding use of national and area median gross income

figures by issuers (RP28) 15, 14

Qualified Subchapter S Trust (QSST)

conversion to Electing Small Business

Trust (ESBT) 10, 30

Qualified Zone Academy Zone Bonds

(RP) 3, 100

Real estate transactions (RP 20) 7, 32

Regulations:

26 CFR 1.32–3T, added; EIC eligibility

requirements (TD 8773) 29, 4

26 CFR 1.61–12, 1.249–1, 1.1016–5,

1.1275–1, amended; 1.163–13,

1.171–5, added; 1.171–1, –2, –3, –4,

revised; 1.1016–9, removed; amortizable bond premium (TD 8746) 7, 4

26 CFR 1.141–0, –2, amended;

1.141–7, –8, removed; 1.141–7T,

– 8 T, –15T, 1.142(f)(4)–1T, 1.150–

5T, added; 1.141–15, revised; obligations of states and political subdivisions (TD 8757) 13, 4

26 CFR 1.166–3(a)(3), 1.1001–4,

added; 1.166–3T, 1.1001–4T, removed; modifications of bad debts

and dealer assignments of notional

principal contracts (TD 8763) 15, 5

26 CFR 1.280B–1, added; building demolition, definition of structure (TD

8745) 7, 15

26 CFR 1.338–2, 1.368–1, –2,

amended; 1.368–1T, added; corporate reorganizations, continuity of interest, and continuity of business enterprise (TD 8760) 14, 4; (TD 8761)

14, 13

26 CFR 1.354–1, 1.355–1, 1.356–3,

amended; reorganizations, treatment

of warrants as securities (TD 8752)

9, 4

26 CFR 1.356–6T, added; reorg a n i z ations, nonqualified preferred stock

(TD 8753) 9, 6

26 CFR 1.367(a)–1T, –3, amended;

1 . 3 6 7 ( a ) – 3 T, removed; 1.367(a)–8,

1.367(b)–1, –4, added; 1.367(d)–1T,

amended; 1.6038B–1, added;

1 . 6 0 3 8 B – 1 T; 7.367(b)–1, –4, –7,

amended; certain transfers of stock

or securities by U.S. persons to foreign corporations (TD 8770) 27, 4

26 CFR 1.411(d)–4, amended; permitted elimination of preretirement optional forms of benefit (TD 8769)

28, 4

26 CFR 1.446–1, amended; 1.446–1T,

removed; 301.9100–0, added;

301.9100–1, revised; 301.9100–2,

–3, added; 301.9100–1T, –2T, –3T;

removed extensions of time to make

elections (TD 8742) 5, 4

26 CFR 1.453.11; installment obligations received from liquidating corporations (TD 8762) 14, 15

26 CFR 1.460–0, amended; 1.460–6T,

added; election not to apply lookback method in de minimis c a s e s

(TD 8756) 12, 4

26 CFR 1.468A–2, –3, –8, amended;

nuclear decommissioning funds; revised schedules of ruling amounts

(TD 8758) 13, 15

26 CFR 1.904–5(o), 1.904–5T, 1.954–

0(b), 1.954–1, amended; 1.954–1T,

– 2 T, –9T, added; 301.7701–3(f)(1),

amended; controlled foreign corporation relating to partnerships and

branches (TD 8767) 16, 4

26 CFR 1.905–2, amended; foreign tax

credit filing requirements (TD 8759)

13, 19

26 CFR 1.925(a)–1T, 1.925(b)–

1T(b)(3)(i), amended; 1.927(e)–1T,

revised; foreign sales corporation

transfer pricing source and grouping

rules (TD 8764) 15, 9

26 CFR 1.985–1, –5(a), amended;

1.985–7, added; dollar approximate

separate transactions method of accounting (DASTM) to profit and loss

method of accounting, change from

P&L method to DASTM (TD 8765)

16, 11

1998–31 I.R.B.

INCOME TAX—Continued INCOME TAX—Continued INCOME TAX—Continued

26 CFR 1.1271–1, 1.1275–1, amended;

debt instruments with original issue

discount, annuity contracts (TD

8754) 10, 15

26 CFR 1.1202–0, –2, added; qualified

small business stock (TD 8749) 7,

26 CFR 1.1290–0, amended; 1.1294–0,

added; a. 1291–0T, amended;

1 . 1 2 9 1 – 1 T, added; 1.1291–9,

amended; 1.1293–0, –1T, added;

1.1295–0, –1T, –3T, 1.1297–3T(c),

added; passive foreign investment

company preferred shares, special

income exclusion (TD 8750) 8, 4

26 CFR 1.1396–1; empowerment zone

employment credit, qualified zone

employees (TD 8747) 7, 18

26 CFR 1.1397E–1T, added; qualified

zone academy bonds (TD 8755) 10,

26 CFR 1.1502–3, –4, –9(a), –21T(c)(1)(iii), amended; 1.1502–3T, –4T,

– 9 T, –55T, added; 1.1502–23T(b),

(c), redesignated; consolidated returns, limitations on the use of certain losses and credits, overall foreign loss accounts (TD 8751) 10, 23

1998–31 I.R.B.

26 CFR 54.9801–2T, amended;

54.9801–4T, –5T, revised; 54.9804–

1T, redesignated; 54.9806–1T, redesignated; 54.9812–1T, added; mental

health parity, interim rules (TD

8741) 3, 6

Relocation payments:

Authorized by sec. 105(a)(11) of Housing and Community Development

Act, not includible in gross income

(RR 19) 15, 5

Renewable electricity production credit;

calendar year 1998 inflation adjustment

factor and reference prices. (Notice 27)

18, 14

Reorganizations; exchange of securities

(RR 10) 10, 11

Reproduction of Forms 1096, 1098, 1099,

5498, and W–2G (RP 37) 26, 6

Rulings:

Areas in which advance rulings will not

be issued:

Associate Chief Counsel (Domestic), Associate Chief Counsel

(EBEO) (RP 3) 1, 100

Associate Chief Counsel (International) (RP7) 1, 222

Rural airports (RP 18) 6, 20

Social security benefits under U.S.Canada treaty, recent changes (Notice

23) 18, 9

Spin-off of subsidiary (RR 27) 22, 4

Technical advice to district directors and

chiefs, appeals offices, Associate Chief

Counsel (Domestic), Associate Chief

Counsel (EBEO), Associate Chief

Counsel (Enforcement Litigation), and

Associate Chief Counsel (International)

(RP 2) 1, 74

Tentative differential earnings rate for

1997 (Notice 19) 13, 24

Treatment of hybrid arrangements under

subpart F (Notice 11) 6, 18

Trust, election to treat U.S. person;

domestic trust (Notice 25) 18, 11

Waiver of period of stay in foreign country (RP 38) 27, 29

Withholding regulations:

Effective date of sec. 1441 withholding

regulations amended (Notice 16) 15,

August 3, 1998

Notes

August 3, 1998

1998–31 I.R.B.

Notes

1998–31 I.R.B.

August 3, 1998

Notes

August 3, 1998

1998–31 I.R.B.

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