us-irs-revenue-rulings-irb-1998-40-pdf•Internal Revenue Bulletin 1998-40 (PDF rendition): IRS Revenue Rulings
Internal Revenue Bulletin 1998-40 (PDF rendition): IRS Revenue Rulings
us-irs-revenue-rulings-irb-1998-40-pdfInternal Revenue Bulletin 1998-40 (PDF rendition): IRS Revenue RulingsGuidance
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INCOME TAX Rev. Rul. 98–49, page 4. Low-income housing tax credit.This ruling advises tax- payers that payments made to a building owner on behalf or in respect of a tenant under the Section 8 Assistance For Sin- gle-Room Occupancy Dwellings Program or under the Shelter Plus Care Program are not grants made with respect to a building or its operation under section 42(d)(5) of the Code. Rev. Rul. 98–50, page 7. 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 October 1998. EMPLOYEE PLANS T.D. 8781, page 4. REG–101363–98, page 10. Final, temporary, and proposed regulations under section 411 of the Code provide for changes to the rules regarding qualified retirement plan benefits that are protected from re- duction by plan amendment, that have been made neces- sary by the Taxpayer Relief Act of 1997. Rev. Proc. 98–53, page 9. Determination letter requests; plan amendments.This procedure allows for determination letter requests with caveats for statutory changes. Rev. Proc. 98–14 modified. EXEMPT ORGANIZATIONS Announcement 98–91, page 12. A list is given of organizations now classified as private foun- dations. ADMINISTRATIVE Announcement 98–87, page 11. This announcement states that taxpayers may rely on the proposed Income Tax Regulations under sections 411(a)(11) and 417 of the Code pertaining to notice and consent (Sec- tion 1.411(a)–11(c)(2) and (8) and section 1.417(e)–1(b)(3) and (4)). Announcement 98–89, page 11. The Service has undertaken a new initiative to improve its procedures for handling bankruptcy cases. Internal Revenue bbuulllleettiinn Bulletin No. 1998–40 October 5, 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. Department of the Treasury Internal Revenue Service Finding Lists begin on page 17. Announcement of Disbarments and Suspensions begins on page 13. Index for January-September begins on page 19. IRB 1998-40 9/30/98 12:00 PM Page 1 Mission of the Service The purpose of the Internal Revenue Service is to collect the proper amount of tax revenue at the least cost; serve the public by continually improving the quality of our prod- ucts and services; and perform in a manner warranting the highest degree of public confidence in our integrity, effi- ciency, and fairness. 2 Statement of Principles of Internal Revenue Tax Administration The function of the Internal Revenue Service is to adminis- ter 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 provi- sions 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. 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 “protect- ing the revenue.” The revenue is properly protected only when we ascertain and apply the true meaning of the statute. 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 hesi- tate 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. 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, howev- er, be vigorous in requiring compliance with law and it should be relentless in its attack on unreal tax devices and fraud. IRB 1998-40 9/30/98 12:00 PM Page 2 The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing offi- cial 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 consoli- dated semiannually into Cumulative Bulletins, which are sold on a single-copy basis. It is the policy of the Service to publish in the Bulletin all sub- stantive 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 other- wise indicated. Procedures relating solely to matters of in- ternal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. 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. 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 pub- lished rulings and procedures, the effect of subsequent leg- islation, regulations, court decisions, rulings, and proce- dures must be considered, and Service personnel and oth- ers concerned are cautioned against reaching the same con- clusions 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. 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 Sub- parts. Also included in this part are Bank Secrecy Act Admin- istrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secretary (Enforcement). 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 Cumu- lative Bulletins. 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 semi- annual period, respectively. 3 Introduction 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. IRB 1998-40 9/30/98 12:00 PM Page 3 Section 42.—Low-Income Housing Credit 26 CFR 1.42–16: Eligible basis reduced by federal grants. Low-income housing tax credit.This revenue ruling advises taxpayers that pay- ments made to a building owner on behalf or in respect of a tenant under the Section 8 Assistance For Single-Room Occu- pancy Dwellings Program or under the Shelter Plus Care Program are not grants made with respect to a building or its op- eration under section 42(d)(5) of the Code. Rev. Rul. 98–49 Pursuant to § 1.42–16(b)(3) of the In- come Tax Regulations, the Internal Rev- enue Service has determined that pay- ments made to a building owner on behalf or in respect of a tenant under the Section 8 Assistance For Single-Room Occupancy Dwellings Program(42 U.S.C. 11301, 11401–11402) or under the Shelter Plus Care Program(42 U.S.C. 11301, 11403– 11407b) are not grants made with respect to a building or its operation under § 42(d)(5) of the Internal Revenue Code. DRAFTING INFORMATION The principal author of this revenue ruling is Christopher J. Wilson of the Of- fice of Assistant Chief Counsel (Passthroughs and Special Industries). For further information regarding this revenue ruling contact Mr. Wilson on (202) 622-3040 (not a toll-free call). The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1998. See Rev. Rul. 98–50, page 7. Section 280G.—Golden Parachute Payments Federal short-term, mid-term, and long-term rates are set forth for the month of October 1998. See Rev. Rul. 98–50, page 7. 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 October 1998. See Rev. Rul. 98–50, page 7. Section 411.—Minimum Vesting Standards 26 CFR 1.411(d)–4: Section 411(d)(6) protected benefits. T.D. 8781 DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 Section 411(d)(6) Protected Benefits (Taxpayer Relief Act of 1997); Qualified Retirement Plan Benefits AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final and temporary regula- tions. SUMMARY: This document contains final and temporary regulations providing for changes to the rules regarding quali- fied retirement plan benefits that are pro- tected from reduction by plan amend- ment, that have been made necessary by the Taxpayer Relief Act of 1997 (TRA ’97). The temporary regulations change the existing regulations to conform with the TRA’97 rules regarding in-kind dis- tribution requirements for certain em- ployee stock ownership plans, and specify the time period during which certain plan amendments for which relief has been granted by TRA’97 may be made without violating the prohibition against plan amendments that reduce accrued benefits. These temporary regulations affect spon- sors of qualified retirement plans, em- ployers that maintain qualified retirement plans, and qualified retirement plan par- ticipants. The final regulations amend the existing final regulations to cross-refer- ence the temporary regulations. The text of the temporary regulations also serves as the text of REG–101363–98, page 10. DATES: These regulations are effective September 4, 1998. FOR FURTHER INFORMATION CON- TACT: Linda S. F. Marshall, (202) 622- 6030 (not a toll-free number). SUPPLEMENTARYINFORMATION: Background This document contains amendments to the Income Tax Regulations (26 CFR part 1) under section 411(d)(6). These tempo- rary regulations change the rules under section 411(d)(6) regarding qualified re- tirement plan benefits that are protected from reduction by plan amendment, to take into account amendments made by the Taxpayer Relief Act of 1997 (TRA ’97), Public Law 105–34 (111 Stat. 788 (1997)). Specifically, these temporary regulations change the existing regula- tions to conform to the TRA’97 amend- ments to section 409 regarding the gen- eral requirement that employee stock ownership plans offer distributions in the form of employer securities. In addition, these temporary regulations specify the time period during which certain plan amendments for which relief has been granted by TRA’97 may be made without violating section 411(d)(6). Explanation of Provisions Section 411(d)(6) provides that a plan is not treated as satisfying the require- ments of section 411 if the accrued bene- fit of a participant is decreased by a plan amendment. Under section 411(d)(6)(B), a plan amendment that eliminates an optional form of benefit is treated as re- ducing accrued benefits to the extent that the amendment applies to benefits ac- crued as of the later of the adoption date or the effective date of the amendment. Sections 1.411(d)–4, Q&A–1(b)(1) and 1.401(a)(4)–4(e) specify that different op- tional forms of benefit within the meaning of section 411(d)(6)(B) result from differ- ences in the medium of a distribution October 5, 199841998–40 I.R.B. Part I. Rulings and Decisions Under the Internal Revenue Code of 1986 IRB 1998-40 9/30/98 12:00 PM Page 4 (e.g., cash or in-kind) from a plan. Sec- tion 411(d)(6)(C) provides that any tax credit employee stock ownership plan or any employee stock ownership plan is not treated as failing to meet the requirements of section 411(d)(6) merely because it modifies distribution options in a nondis- criminatory manner. Special Rules Regarding Medium of Distribution from ESOPs Section 409(h) contains requirements relating to distributions from tax credit employee stock ownership plans. Section 4975(e)(7) extends the requirements of section 409(h) to other employee stock ownership plans as well, and section 401(a)(23) extends the requirements of section 409(h) to qualified plans that are stock bonus plans. Under section 409(h)(1)(A), an employee stock owner- ship plan or other stock bonus plan gener- ally is required to make distributions available in the form of employer securi- ties. Prior to its amendment by TRA’97, section 409(h)(2) provided an exception to this rule in the case of an employer whose charter or bylaws restrict the own- ership of substantially all outstanding em- ployer securities to employees or to a trust described in section 401(a). Under section 1361, certain small busi- ness corporations that do not have more than 75 shareholders are eligible to elect treatment as S corporations whose tax at- tributes generally flow through to share- holders in accordance with the rules of subchapter S of chapter 1 of subtitle Aof the Internal Revenue Code. Prior to the Small Business Job Protection Act of 1996 (SBJPA), Public Law 104–188 (110 Stat. 1755 (1996)), an S corporation could not maintain an employee stock owner- ship plan because an S corporation could not have a qualified trust described in sec- tion 401(a) as a shareholder. SBJPA amended the requirements for S corpora- tions, effective for tax years beginning after December 31, 1996, to permit cer- tain tax-exempt organizations, including qualified trusts described in section 401(a), to be S corporation shareholders. TRA’97 made an additional change to the rules governing qualified plans hold- ing securities of an S corporation em- ployer, to make it easier for S corporation employers to facilitate employee owner- ship of employer securities through quali- fied plans. Section 1506 of TRA’97 ex- tends the exception of section 409(h)(2) to cover S corporations, effective for tax- able years beginning after December 31, 1997. Pursuant to this change, tax credit employee stock ownership plans, em- ployee stock ownership plans, and other stock bonus plans established and main- tained by S corporation employers are not required to offer distributions in the form of employer securities. Section 1.411(d)–4, Q&A-2(d)(2)(ii) provides an exception from the require- ments of section 411(d)(6) for plan amendments that eliminate optional forms of benefit from a tax credit employee stock ownership plan, an employee stock ownership plan, or a stock bonus plan, for certain employers. Section 1.411(d)–4, Q&A-2(d)(2)(ii) applies to employers that become substantially employee-owned, if the employer otherwise meets the require- ments of section 409(h)(2) with respect to restrictions on the ownership of outstand- ing employer stock. These temporary regulations expand this exception from the requirements of section 411(d)(6) to apply to S corporations as well, to reflect the TRA’97 changes to section 409(h). Rules for Plan Amendments Pursuant to TRA’97 Section 1541 of TRA’97 contains pro- visions relating to plan amendments that are adopted as a result of TRA’97. If sec- tion 1541 applies to a plan amendment, section 1541(a) provides that the plan will be treated as operated in accordance with its terms and will not fail to satisfy the re- quirements of section 411(d)(6) by reason of the amendment. Section 1541 applies to a plan amendment that is made pur- suant to a legislative change in the pen- sion and employee benefit provisions of TRA’97, provided the following condi- tions are satisfied. First, the plan amend- ment must be adopted before the first day of the first plan year beginning on or after January 1, 1999 (2001, in the case of a governmental plan, as defined in section 414(d)). Second, the plan must be oper- ated in accordance with the terms of the plan amendment, beginning on the date the legislative change takes effect, or, if the amendment is not required by the leg- islative change, the effective date of the amendment specified by the plan. Third, the plan amendment must be made retroactively effective. The remedial amendment period for adopting plan amendments to which sec- tion 1541 of TRA’97 applies was ex- tended pursuant to the rules of section 401(b) in Rev. Proc. 98–14 (1998–4 I.R.B. 22). To provide a uniform time for plan amendment, these temporary regulations extend the time for the section 411(d)(6) relief provided by section 1541 of TRA ’97 to the end of the remedial amendment period for these plan amendments. Other Section 411(d)(6) Issues In Notice 98–29 (1998–22 I.R.B. 8), the IRS requested public comment re- garding a number of possible methods of providing section 411(d)(6) relief, partic- ularly for defined contribution plans. The IRS will also consider comments submit- ted pursuant to Notice 98–29 that propose other methods of providing section 411(d)(6) relief to address special con- cerns of employee stock ownership plans. Special Analyses It has been determined that this Trea- sury decision is not a significant regula- tory action as defined in EO 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Pro- cedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the regulation does not impose a collec- tion of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, these temporary regulations will be submitted to the Chief Counsel for Advo- cacy of the Small Business Administra- tion for comment on their impact on small business. Drafting Information The principal author of these regula- tions is Linda S. F. Marshall, Office of the Associate Chief Counsel (Employee Ben- efits and Exempt Organizations). How- ever, other personnel from the IRS and Treasury Department participated in their development. ***** 1998–40 I.R.B.5October 5, 1998 IRB 1998-40 9/30/98 12:00 PM Page 5 Adoption of Amendments to the Regulations Accordingly, 26 CFR part 1 is amended as follows: PART1—INCOME TAXES Paragraph 1. The authority citation for part 1 is amended by adding an entry in numerical order to read in part as follows: Authority: 26 U.S.C. 7805 * * * §1.411(d)–4Talso issued under 26 U.S.C. 411(d)(6). * * * Par. 2. Section 1.411(d)–4 is amended by: 1. Removing the reference “Q&A-5” and adding Q&A-2” in its place in the first sentence of Q&A-2(d)(1) introduc- tory text. 2. Adding a sentence at the end of Q&A-2(d)(3) to read as follows: §1.411(d)–4 Section 411(d)(6) protected benefits. * * * * * Q-2: * * * A-2: * * * (d) * * * (3) * * * (For taxable years after De- cember 31, 1997, see §1.411(d)–4T Q&A-2(d).) * * * * * Par. 3. Section 1.411(d)–4Tis added to read as follows: §1.411(d)–4TSection 411(d)(6) protected benefits (temporary). Q&A-1: [Reserved]. For further infor- mation, see §1.411(d)–4 Q&A-1. Q-2: To what extent may section 411(d)(6) protected benefits under a plan be reduced or eliminated? (a) through (c) [Reserved]. For further information, see §1.411(d)–4 Q&A-2(a) through (c). (d) ESOPand stock bonus plan excep- tion—(1) In general.Subject to the limi- tations in paragraph (d)(2) of this Q&A-2, a tax credit employee stock ownership plan (as defined in section 409(a)), an em- ployee stock ownership plan (as defined in section 4975(e)(7)), or a stock bonus plan that is not an employee stock owner- ship plan will not be treated as violating the requirements of section 411(d)(6) merely because of the circumstances de- scribed in paragraph (d)(1)(ii) of this Q&A-2. (i) [Reserved]. For further information, see §1.411(d)–4 Q&A-2(d)(1)(i). (ii) Employer becomes substantially employee-owned or is an S corporation. The employer eliminates, or retains the discretion to eliminate, with respect to all participants, optional forms of benefit by substituting cash distributions for distrib- utions in the form of employer stock with respect to benefits subject to section 409(h) in the circumstances described in paragraph (d)(1)(ii)(A) or (B) of this Q&A-2, but only if the employer other- wise meets the requirements of section 409(h)(2)— (A) The employer becomes substan- tially employee-owned; or (B) For taxable years of the employer beginning after December 31, 1997, the employer is an S corporation as defined in section 1361. (iii) and (iv) [Reserved]. For further information, see §1.411(d)–4 Q&A- 2(d)(1)(iii) and (iv). (2) Limitations on ESOPand stock bonus plan exceptions.[Reserved]. For further information, see §1.411(d)–4 Q&A-2(d)(2). (3) Effective date.Paragraph (d) of this Q&A-2 applies for taxable years be- ginning after December 31, 1997. For taxable years beginning prior to January 1, 1998, see §1.411(d)–4 Q&A-2(d). (4) [Reserved]. For further informa- tion, see §1.411(d)–4 Q&A-2(d)(4). Q&A-3 through Q&A-10 [Reserved]. For further information, see §1.411(d)–4 Q&A-3 through Q&A-10. Q-11: To what extent may a plan amendment that is made pursuant to the Taxpayer Relief Act of 1997 (TRA’97) (Public Law 105–34, 111 Stat. 788), re- duce or eliminate section 411(d)(6) pro- tected benefits? A-11: Aplan amendment does not vio- late the requirements of section 411(d)(6) merely because the plan amendment re- duces or eliminates section 411(d)(6) pro- tected benefits as of the effective date of the plan amendment, provided that— (a) The plan amendment is made pur- suant to an amendment made by title XV, or subtitle H of title X, of TRA’97; and (b) The plan amendment is adopted no later than the last day of any remedial amendment period that applies to the plan pursuant to §§1.401(b)–1 and 1.401(b)– 1Tfor changes under TRA’97. Michael P. Dolan, Deputy Commissioner of Internal Revenue. Approved July 24, 1998. Donald C. Lubick, Assistant Secretary of the Treasury. (Filed by the Office of the Federal Register on September 8, 1998, 8:45 a.m., and published in the issue of the Federal Register for September 9, 1998, 63 F.R. 47172) Section 412.—Minimum Funding Standards The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1998. See Rev. Rul. 98–50, page 7. Section 467.—Certain Payments for the Use of Property or Services The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1998. See Rev. Rul. 98–50, page 7. Section 468.—Special Rules for Mining and Solid Waste Reclamation and Closing Costs The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1998. See Rev. Rul. 98–50, page 7. 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 October 1998. See Rev. Rul. 98–50, page 7. Section 483.—Interest on Certain Deferred Payments The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1998. See Rev. Rul. 98–50, page 7. October 5, 199861998–40 I.R.B. IRB 1998-40 9/30/98 12:00 PM Page 6 Section 642.—Special Rules for Credits and Deductions Federal short-term, mid-term, and long-term rates are set forth for the month of October 1998. See Rev. Rul. 98–50, page 7. Section 807.—Rules for Certain Reserves The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1998. See Rev. Rul. 98–50, page 7. Section 846.—Discounted Unpaid Losses Defined The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1998. See Rev. Rul. 98–50, page 7. Section 1274.—Determination of Issue Price in the Case of Certain Debt Instruments Issued for Property (Also sections 42, 280G, 382, 412, 467, 468, 482, 483, 642, 807, 846, 1288, 7520, 7872.) Federal rates; adjusted federal rates; adjusted federal long-term rate, and the long-term exempt rate.For purposes of sections 1274, 1288, 382, and other sections of the Code, tables set forth the rates for October 1998. Rev. Rul. 98–50 This revenue ruling provides various prescribed rates for federal income tax purposes for October 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 Inter- nal Revenue Code. Table 2 contains the short-term, mid-term, and long-term ad- justed 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 ap- propriate 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 deter- mining 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. 1998–40 I.R.B.7October 5, 1998 REV. RUL. 98–50 TABLE 1 Applicable Federal Rates (AFR) for October 1998 Period for Compounding AnnualSemiannualQuarterlyMonthly Short-Term AFR5.06%5.00%4.97%4.95% 110% AFR5.58%5.50%5.46%5.44% 120% AFR6.09%6.00%5.96%5.93% 130% AFR6.61%6.50%6.45%6.41% Mid-Term AFR5.12%5.06%5.03%5.01% 110% AFR5.65%5.57%5.53%5.51% 120% AFR6.16%6.07%6.02%5.99% 130% AFR6.69%6.58%6.53%6.49% 150% AFR7.73%7.59%7.52%7.47% 175% AFR9.06%8.86%8.76%8.70% Long-Term AFR5.46%5.39%5.35%5.33% 110% AFR6.02%5.93%5.89%5.86% 120% AFR6.57%6.47%6.42%6.38% 130% AFR7.13%7.01%6.95%6.91% IRB 1998-40 9/30/98 12:00 PM Page 7 REV. RUL. 98–50 TABLE 2 Adjusted AFR for October 1998 Period for Compounding AnnualSemiannualQuarterlyMonthly Short-term adjusted AFR3.52%3.49%3.47%3.46% Mid-term adjusted AFR4.05%4.01%3.99%3.98% Long-term adjusted AFR4.80%4.74%4.71%4.69% October 5, 199881998–40 I.R.B. REV. RUL. 98–50 TABLE 3 Rates Under Section 382 for October 1998 Adjusted federal long-term rate for the current month4.80% Long-term tax-exempt rate for ownership changes uring the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months)5.02% REV. RUL. 98–50 TABLE 4 Appropriate Percentages Under Section 42(b)(2) for October 1998 Appropriate percentage for the 70% present value low-income housing credit8.23% Appropriate percentage for the 30% present value low-income housing credit 3.53% REV. RUL. 98–50 TABLE 5 Rate Under Section 7520 for October 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 interest6.2% Section 1288.—Treatment of Original Issue Discount on Tax-Exempt Obligations The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1998. See Rev. Rul. 98–50, page 7. Section 7520.—Valuation Tables The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1998. See Rev. Rul. 98–50, page 7. Section 7872.—Treatment of Loans With Below-Market Interest Rates The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1998. See Rev. Rul. 98–50, page 7. IRB 1998-40 9/30/98 12:00 PM Page 8 1998–40 I.R.B.9October 5, 1998 26 CFR 601.201: Rulings and determination letters. Rev. Proc. 98–53 SECTION 1. PURPOSE This revenue procedure modifies Rev. Proc. 98–14, 1998–4 I.R.B. 22, to give sponsors of individually-designed pen- sion, profit-sharing and stock bonus plans, including volume submitter plans, the op- tion of requesting that applications for de- termination letters involving § 401(a) or § 403(a) of the Code be reviewed without taking into account changes in the plan qualification requirements made by the Uruguay Round Agreements Act, Pub. L. 103–465 (GATT), the Small Business Job Protection Act of 1996, Pub. L. 104–188 (SBJPA) (including § 414(u) and the Uni- formed Services Employment and Reem- ployment Rights Act of 1994, Pub. L. 103–353 (USERRA)), and the Taxpayer Relief Act of 1997, Pub. L. 105–34 (TRA ’97). This option is being provided in re- sponse to employer and practitioner com- ments and will continue until further no- tice. This option will allow employers to take advantage of the full remedial amendment period for changes in the plan qualification requirements under these acts. SECTION 2. BACKGROUND .01 Rev. Proc. 98–14 provides that de- termination letter applications that are filed on or after April 27, 1998, will be re- viewed taking into account GATT, TRA ’97, and those provisions of SBJPAthat are effective before 1999 (“new law”). The only exception is for determination letter applications for adopters of master or prototype (M&P) and regional proto- type plans (other than terminating plans) that have not yet been amended for the new law; these will continue to be re- viewed and approved on the basis of “pre-GATT” law. In addition, under Rev. Proc. 98–14, applications for opinion let- ters for M&Pplans, notification letters for regional prototype plans, and advisory letters for volume submitter specimen plans that are filed on or after April 27, 1998, will be reviewed on the basis of the new law. .02 Rev. Proc. 97–41, 1997–33 I.R.B. 51, as modified by Rev. Proc. 98–14, pro- vides that the remedial amendment period under § 401(b) for amending plans for the new law generally does not expire until the end of the first plan year beginning on or after January 1, 1999. Rev. Proc. 97– 41 also provides that this remedial amendment period applies with respect to all disqualifying provisions of new plans adopted or effective after December 7, 1994, and all disqualifying provisions of existing plans arising from a plan amend- ment adopted after December 7, 1994. Nevertheless, employers and practitioners have asked that plan sponsors be allowed to request determination letters without being required to amend their plans for the new law at this time. SECTION 3. MODIFICATION OF REV. PROC. 98–14 .01 Rev. Proc. 98–14 is modified to provide that sponsors of individually-de- signed plans, including volume submitter plans, may request that an application for a determination letter on a plan’s qualified status (other than a determination on plan termination) be reviewed without taking into account the requirements of the new law, except for § 1432 and § 1454 of SBJPA, which amended § 401(a)(26) and § 414(n), respectively. The fact that a plan sponsor requests that its application be reviewed without taking into account the requirements of the new law does not preclude the sponsor from incorporating in the plan any provisions that reflect the new law, such as the GATTchanges to § 417(e). However, the determination letter that is issued for the plan may not be re- lied upon with respect to whether such provisions satisfy the qualification re- quirements as amended by the new law, except for § 1432 and, if the applicant has requested a determination of leased em- ployee status, § 1454 of SBJPA. This op- tion of requesting a pre-GATTletter will apply with respect to applications filed on or after April 27, 1998, and will continue until further notice. .02 Adetermination letter applicant who wishes to request a pre-GATTletter should so indicate in a cover letter sub- mitted with the application or on the face of the application form. If the application has already been filed, the applicant should notify the Service by calling the phone number shown on the Service’s ac- knowledgment-of-receipt letter or by con- tacting the specialist who has been as- signed to review the application. A favorable determination letter that is is- sued in response to an application for a pre-GATTletter will contain a statement to the effect that the letter does not reflect consideration of new law changes in the qualification requirements, except for § 1432 and, if the applicant has requested a determination of leased employee status, § 1454 of SBJPA. .03 The procedures described in sec- tion 6.03 of Rev. Proc. 98–14, regarding applications filed for plans that contain the family aggregation rules of § 414(q)- (6) and § 401(a)(17)(A), will not apply if the applicant requests a pre-GATTletter. .04 This modification does not affect the provisions of Rev. Proc. 98–14 that apply to determination letter applications filed by adopters of M&Pand regional prototype plans or to applications for opinion, notification, or advisory letters. Thus, for example, applications for opin- ion, notification, and advisory letters that are filed on or after April 27, 1998, will in all cases be reviewed taking into account the requirements of the new law. SECTION 4. EFFECTON OTHER DOCUMENTS Rev. Proc. 98–14 is modified. SECTION 5. EFFECTIVE DATE This revenue procedure is effective with respect to determination letter appli- cations that are filed on or after April 27, 1998. DRAFTING INFORMATION The principal author of this revenue procedure is James Flannery of the Em- ployee Plans Division. For further infor- mation regarding this revenue procedure, contact the Employee Plans Division’s telephone assistance service between the hours of 1:30 and 3:30 p.m. Eastern time, Monday through Thursday, on (202) 622- 6074/75. (These telephone numbers are not toll-free.) Part III. Administrative, Procedural, and Miscellaneous IRB 1998-40 9/30/98 12:00 PM Page 9 October 5, 1998101998–40 I.R.B. Notice of Proposed Rulemaking and Notice of Public Hearing Section 411(d)(6) Protected Benefits (Taxpayer Relief Act of 1997); Qualified Retirement Plan Benefits REG–101363–98 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemak- ing by cross-reference to temporary regu- lations. SUMMARY: In T.D. 8781, page 4, the IRS is issuing temporary regulations pro- viding for changes to the rules regarding qualified retirement plan benefits that are protected from reduction by plan amend- ment, that have been made necessary by the Taxpayer Relief Act of 1997. The text of those temporary regulations also serves as the text of these proposed regulations. DATES: Written comments and requests for a public hearing must be received by December 3, 1998. ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG–101363–98), room 5228, Internal Revenue Service, POB 7604, Ben Franklin Station, Wash- ington, DC 20044. Submissions may be hand delivered between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG–101363–98), Courier’s Desk, In- ternal Revenue Service, 1111 Constitution Avenue NW., Washington, DC. Alterna- tively, 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. FOR FURTHER INFORMATION CON- TACT: Concerning the regulations, Linda S. F. Marshall, (202) 622-6030 (not a toll- free call); concerning submissions, Michael Slaughter, (202) 622-7190 (not a toll-free call). SUPPLEMENTARYINFORMATION: Background Temporary regulations in T.D. 8781 amend the Income Tax Regulations (26 CFR part 1) relating to section 411(d)(6), to provide for changes that have been made necessary by the Taxpayer Relief Act of 1997 (TRA’97), Public Law 105–34, 111 Stat. 788 (1997). The tem- porary regulations change the existing regulations to conform with the TRA’97 rules regarding in-kind distribution re- quirements for certain employee stock ownership plans, and specify the time pe- riod during which certain plan amend- ments for which relief has been granted by TRA’97 may be made without violat- ing the prohibition against plan amend- ments that reduce accrued benefits. The text of those temporary regulations also serves as the text of these proposed regulations. The preamble to the tempo- rary regulations explains the temporary regulations. Special Analyses It has been determined that this notice of proposed rulemaking is not a signifi- cant regulatory action as defined in EO 12866. Therefore, a regulatory assess- ment is not required. It also has been de- termined that section 553(b) of the Ad- ministrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regula- tions, and because the regulation does not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Busi- ness Administration for comment on its impact on small business. Comments and Requests for a Public Hearing Before these proposed regulations are adopted as final regulations, considera- tion will be given to any written com- ments (a signed original and eight (8) copies) that are submitted timely to the IRS. All comments will be available for public inspection and copying. Apublic hearing may be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the hearing will be published in the Federal Register. Drafting Information The principal author of these regula- tions is Linda S. F. Marshall, Office of the Associate Chief Counsel (Employee Ben- efits and Exempt Organizations. How- ever, other personnel from the IRS and Treasury Department participated in their development. ***** Proposed Amendments to the Regulations Accordingly, 26 CFR part 1 is pro- posed to be amended as follows: PART1—INCOME TAXES Paragraph 1. The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * Par. 2. Section 1.411(d)–4 is amended by: 1. Revising paragraph (d)(1)(ii) of Q&A-2. 2. Adding Q&A-11. The addition and revisions read as fol- lows: §1.411(d)–4 Section 411(d)(6) protected benefits. * * * * * Q&A-2 * * * (d)(1)(ii) [The text of proposed para- graph (d)(1)(ii) of Q&A-2 is the same as the text of §1.411(d)–4TQ&A-2(d)(1)(ii) published in T.D. 8781.] * * * * * Q&A-11 [The text of proposed Q&A- 11 is the same as the text of §1.411(d)–4T Q&A-11 published in T.D. 8781.] Michael P. Dolan, Deputy Commissioner of Internal Revenue. Part IV. Items of General Interest IRB 1998-40 9/30/98 12:01 PM Page 10 1998–40 I.R.B.11October 5, 1998 (Filed by the Office of the Federal Register on September 8, 1998, 8:45 a.m., and published in the issue of the Federal Register for September 9, 1998, 63 F.R. 47214) Pending Finalization of Proposed Regulations Regarding Timing Requirements for Satisfying Notice and Consent Requirements Under Sections 411 and 417 of the Code Announcement 98–87 The Internal Revenue Service and the Department of the Treasury intend to take into account public comments that are currently being received regarding the use of new technologies (sometimes referred to as “paperless” technologies) in the ad- ministration of qualified plans when amending and finalizing proposed regula- tions relating to notice and consent re- quirements under sections 411(a)(11) and 417 of the Internal Revenue Code (the “Code”). The Service and Treasury in- tend to finalize these regulations in the near future. In the meanwhile, plan spon- sors may continue to rely on these regula- tions as proposed. Background Anotice of proposed rulemaking (EE– 24–93) containing proposed amendments to the Income Tax Regulations under sec- tions 411(a)(11) and 417 of the Code (that would amend section 1.411(a)– 11(c)(2) and (8) and section 1.417(e)– 1(b)(3) and (4)) was published in the Fed- eral Register(60 F.R. 49236) on Septem- ber 22, 1995. Temporary Income Tax Regulations (T.D. 8620) under sections 411(a)(11) and 417 (section 1.411(a)– 11T(c)(2) and (8) and section 1.417(e)– 1T(b)(3) and (4)) were published on the same day (60 F.R. 49218). The text of the proposed regulations and temporary regulations is the same. Under section 7805(e), temporary regulations expire within three years after issuance. The proposed and temporary regula- tions set forth rules concerning the timing requirements for satisfying the notice and consent requirements under sections 411(a)(11) and 417 of the Code in con- nection with distributions from qualified plans. The regulations did not provide guidance on the use of paperless tech- nologies, although the preamble to the regulations invited comments on possible modifications to the notice and consent requirements to accommodate paperless technologies, if adequate safeguards are provided. Section 1510 of the Taxpayer Relief Act of 1997, Pub. L. 105–34, provides that the Secretary of the Treasury and the Secretary of Labor each shall issue guid- ance designed to interpret the notice, elec- tion, consent, disclosure, and time re- quirements (and related recordkeeping requirements) under the Code and the Employee Retirement Income Security Act of 1974 relating to retirement plans as applied to the use of new technologies by plan sponsors and administrators. Section 1510 requires the guidance to maintain the protection of the rights of participants and beneficiaries. Announcement 98–62, 1998–29 I.R.B. 13, requested public com- ments, by October 5, 1998, on the use of paperless technologies and, among other issues, the application of these technolo- gies to the notice and consent require- ments under sections 411(a)(11) and 417. Reliance on Proposed Regulations The Service and Treasury plan to issue amended and final regulations relating to the timing requirements for satisfying the notice and consent requirements under sections 411(a)(11) and 417 of the Code only after careful consideration of the public comments on paperless technolo- gies received by October 5, 1998. Ac- cordingly, it is intended that the tempo- rary regulations under sections 411(a)(11) and 417 (section 1.411(a)–11T(c)(2) and (8) and section 1.417(e)–1T(b)(3) and (4)) will not be finalized prior to their au- tomatic expiration under section 7805(e). Pursuant to this announcement, plan sponsors may rely on the proposed regu- lations under sections 411(a)(11) and 417 (that would amend section 1.411(a)– 11(c)(2) and (8) and section 1.417(e)– 1(b)(3) and (4)) until the proposed regula- tions are amended or finalized. IRS Announces New Procedures For Handling Matters In Bankruptcy Announcement 98–89 The Internal Revenue Service has un- dertaken a new initiative to improve its procedures for handling bankruptcy cases. The new procedures are intended to minimize the likelihood that IRS col- lection actions will inadvertently violate the bankruptcy laws, to facilitate prompt correction of any violations that do occur, and to provide an administrative process for handling any claims for damages against the IRS that arise from such viola- tions. The initiative includes new administra- tive measures to speed the processing of bankruptcy matters. The IRS has desig- nated specific points of contact who will coordinate the handling of violations of the automatic stay and the discharge in- junction of the bankruptcy laws. These contact points will be part of the Special Procedures Function (SPF) in the local IRS Collection Division. SPF will expe- ditiously handle these cases according to specific time guidelines in order to ensure compliance with the bankruptcy laws. These procedures will be reflected in the next version of IRM Part VBankruptcy Handbook 5.9. In addition, the IRS is no- tifying bankruptcy practitioners through- out the country of the address in each dis- trict to which bankruptcy petitions and all other bankruptcy correspondence should be sent. The initiative also provides for a pilot program to test new administrative proce- dures for handling any claims for dam- ages debtors may have in cases where the IRS fails to properly comply with the bankruptcy laws. Under Section 7433 of the Internal Revenue Code, as amended by the Internal Revenue Service Reform and Restructuring Act of 1998, debtors may be entitled to recover damages for actual economic losses they sustain as a result of willful violations of the bank- ruptcy laws by the IRS. Attorney’s fees in these cases may also be available pur- suant to Internal Revenue Code Section 7430. While the new procedures for process- ing bankruptcy cases are intended to min- imize any such violations, the IRS be- lieves it is appropriate to test a simplified administrative process for handling cases in which debtors believe they have suf- fered damages because of improper IRS actions. Under this process, debtors may elect to file claims for damages with the local SPF office rather than with the IRB 1998-40 9/30/98 12:01 PM Page 11 October 5, 1998121998–40 I.R.B. bankruptcy court. Claims for damages must be made in writing and must include supporting documentation requested by the SPF office. SPF will evaluate and re- spond to these claims within sixty days. The IRS will be undertaking outreach efforts to explain its new procedures to bankruptcy practitioners and other inter- ested parties across the country. For addi- tional information about these new proce- dures, contact the local Special Procedures Function office. Foundations Status of Certain Organizations Announcement 98–91 The following organizations have failed to establish or have been unable to maintain their status as public charities or as operating foundations. Accordingly, grantors and contributors may not, after this date, rely on previous rulings or des- ignations in the Cumulative List of Orga- nizations (Publication 78), or on the pre- sumption arising from the filing of notices under section 508(b) of the Code. This listing does notindicate that the organiza- tions have lost their status as organiza- tions described in section 501(c)(3), eligi- ble to receive deductible contributions. Former Public Charities.The following organizations (which have been treated as organizations that are not private founda- tions described in section 509(a) of the Code) are now classified as private foun- dations: Abundant Waters Inc., New York, NY Akron Coalition for Education Foundation, Akron, OH American Computer Scientists Association, Inc., Cranford, NJ Belize Foundation, Detroit, MI Berdan Support Fund, Mendenhall, PA Bonsall Village Inc., Yeadon, PA Center for Health and Long Term Care Research, Inc., Waltham, MA Chicago Community Outreach, Chicago, IL Christ Crusade Community Center, Fayetteville, NC Christion Legal Services Inc., Bangor, MI Coastnet, Beaufort, SC Corestates Community Development Corporation, Philadelphia, PA Cross Keys Retirement, Inc., Sewell, NJ Earl Kouba Memorial Foundation, Kasson, MN Earth Preservation Funds, Inc., Milwaukee, WI Families United By Adoption, Berlin, NJ Film Foundation Inc., New York, NY For ABetter Life Foundation, Chicago, IL Freed Hurwitz Memorial Fund, Inc., Hollywood, FL Fritz & Alice Anton Scholarship Fund, San Marcos, TX God Rules Ministry, Inc., Baton Rouge, LA Goddard Historical & Genealogical Society Inc., Stow, OH Good Stewards, Woodbury, MN Gulf Coast Research and Development Laboratory Inc., Tampa, FL Haviland Heartland Housing, Haviland KS Hollyfield Foundation, Houston, TX Indiana Civic and Cultural Association, Incorporated, Indiana, PA Jewish Radical Education Project, Inc., New York, NY Johns Gospel Mission, Troy, MI Joseph Ministries Inc., Nixa, MO Juanita Maldon Foundation, Richmond, CA Kate Sidran Family Foundation, Dallas, TX King City Police Activities League, Inc., King City, CA Largess, South Euclid, OH Living God Ministries, Inc., Bastrop, TX Lutheran Housing Service Number 8 Incorporated, Toledo, OH Lutheran Radio Incorporated, Nevada, IA Mesoamerican Research Foundation, Salt Lake City, UT Na Vision Ministries Inc., Sunrise, FL Network 2000, Kansas City, KS Ontohealth, Inc., Xenia, OH Ozark Mountain Adventure, Fort Smith, AR Paula Martin Jones Charities, Inc., Longview, TX People Against Racism & Discrimination, Calumet, IL Raptor Education Group Inc., Antigo, WI Somerville Community Schools Council Inc., Somerville, MA Special Program for Adolescents, Evanston, IL Sports Pride of America Foundation, Inc., Raleigh, NC Sterling Foundation Inc., Pittsburgh, PA Sthle Wildlife Foundation, Brewer, ME Tanzania Children Development Association, Hazel Crest, IL Think First of New York, Inc., Schenectady, NY The Silver Spring Historical Trust, Cape Girardeau, MO The Sumter Foundation Inc., Americus, GA Trades Awareness Program Inc., Franklin, WI Union Missionary Baptist Neighborhood Redevelopment Corp., Lansing, MI United Students Association, Inc., Chestnut Hill, MA Urban Ministries Development Corporation, Columbus, OH Versin House Inc. Community/Living Facility, Dolton, IL Victory Home Health Hospice, Las Vegas, NM Wisconsin Rural Leadership Program, Inc., Madison, WI World Farmers Hall of Fame, Pawnee City, NE 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 de- termination letter with the revised classi- fication as to foundation status. Grantors and contributors may thereafter rely upon such ruling or determination letter as pro- vided in section 1.509(a)–7 of the Income Tax Regulations. It is not the practice of the Service to announce such revised clas- sification of foundation status in the Inter- nal Revenue Bulletin. IRB 1998-40 9/30/98 12:01 PM Page 12 1998–40 I.R.B.13October 5, 1998 NameAddressDesignationEffective Date Galt, Edward G.Monterey, CACPAOctober 25, 1997 Lopez, Andrew L.Albuquerque, NMCPADecember 11, 1997 Branch, Jimmie L.Jacksonville, FLCPAJanuary 15, 1998 Harrison, Rebecca A.Carmichael, CAEnrolled AgentMarch 4, 1998 Mayer, Robert J.Wexford, PACPAJune 4, 1998 Announcement of the Disbarment and Suspension of Attorneys, Certified Public Accountants, Enrolled Agents, and Enrolled Actuaries From Practice Before the Internal Revenue Service Under 330, Title 31 of the United States Code, the Secretary of the Trea- sury, after due notice and opportunity for hearing, is authorized to suspend or dis- bar from practice before the Internal Rev- enue Service any person who has vio- lated the rules and regulations governing the recognition of attorneys, certified public accountants, enrolled agents, or enrolled actuaries to practice before the Internal Revenue Service. Attorneys, certified public accountants, enrolled agents, and enrolled actuaries are prohibited in any Internal Revenue Service matter from directly or indirectly employ- ing, accepting assistance from, being em- ployed by, or sharing fees with, any practi- tioner disbarred or suspended from prac- tice before the Internal Revenue Service. To enable attorneys, certified public ac- countants, enrolled agents, and enrolled actuaries to identify such disbarred or sus- pended practitioners, the Director of Practice will announce in the Internal Revenue Bulletin the names and ad- dresses of practitioners who have been suspended from such practice, their desig- nation as attorney, certified public ac- countant, enrolled agent, or enrolled actu- ary, and date or period of suspension. This announcement will appear in the weekly Bulletin at the earliest practicable date after such action and will continue to ap- pear in the weekly Bulletins for five suc- cessive weeks or for as many weeks as is practicable for each attorney, certified public accountant, enrolled agent, or en- rolled actuary so suspended or disbarred and will be consolidated and published in the Cumulative Bulletin. After due notice and opportunity for hearing before an administrative law judge, the following individuals have been disbarred from further practice be- fore the Internal Revenue Service: IRB 1998-40 9/30/98 12:01 PM Page 13 October 5, 1998141998–40 I.R.B. Under title 31 of the Code of Federal Regulations, section 10.76, the Director of Practice is authorized to immediately suspend from practice before the Internal Revenue Service any practitioner who, within five years from the date the expe- dited proceeding is instituted, (1) has had a license to practice as an attorney, certi- fied public accountant, or actuary sus- pended or revoked for cause; or (2) has been convicted of any crime under title 26 of the United States Code or, of a felony under title 18 of the United States Code involving dishonesty or breach of trust. Attorneys, certified public accountants, enrolled agents, and enrolled actuaries are prohibited in any Internal Revenue Service matter from directly or indirectly employ- ing, accepting assistance from, being em- ployed by, or sharing fees with, any practi- tioner disbarred or suspended from practice before the Internal Revenue Service. To enable attorneys, certified public ac- countants, enrolled agents, and enrolled ac- tuaries to identify practitioners under expe- dited suspension from practice before the Internal Revenue Service, the Director of Practice will announce in the Internal Rev- enue Bulletin the names and addresses of practitioners who have been suspended from such practice, their designation as at- torney, certified public accountant, en- rolled agent, or enrolled actuary, and date or period of suspension. This announce- ment will appear in the weekly Bulletin at the earliest practicable date after such ac- tion and will continue to appear in the weekly Bulletins for five successive weeks or for as many weeks as is practicable for each attorney, certified public accountant, enrolled agent, or enrolled actuary so sus- pended and will be consolidated and pub- lished in the Cumulative Bulletin. The following individuals have been placed under suspension from practice be- fore the Internal Revenue Service by virtue of the expedited proceeding provisions of the applicable regulations: Announcement of the Expedited Suspension of Attorneys, Certified Public Accountants, Enrolled Agents, and Enrolled Actuaries From Practice Beforethe Internal Revenue Service NameAddressDesignationDate of Suspension Clark, SheilaHouston, TXCPAIndefinite from April 21, 1998 Kimes, Larry W.Austin, TXAttorneyIndefinite from May 5, 1998 Braiteman, SheldonBaltimore, MDAttorneyIndefinite from June 5, 1998 Pollack, MichaelGuttenberg, NJAttorneyIndefinite from June 11, 1998 Eichenbaum, IrvingHuntingdon Valley, PACPAIndefinite from August 4, 1998 Corley, Francis R.Irmo, SCCPAIndefinite from August 4, 1998 Scott, RichardLincoln, NEAttorneyIndefinite from August 4, 1998 Wilson, Douglas D.Roanoke, VAAttorneyIndefinite from August 4, 1998 Watkins, Brian R.Lincoln, NEAttorneyIndefinite Congdon Jr., Byron E.San Bernadino, CAAttorneyIndefinite from August 4, 1998 Abrams, RobertElmsford, NYCPAIndefinite from August 4, 1998 Robinson, DoaneRapid City, SDCPAIndefinite from August 4, 1998 Szarwark, ErnestNashville, TNAttorneyIndefinite from August 4, 1998 Roberts, MarkNorman, OKCPAIndefinite from August 4, 1998 Wood, Randall K.Springfield, MOAttorneyIndefinite from August 5, 1998 Chappell, Ronald L.Antelope, CACPAIndefinite from August 12, 1998 IRB 1998-40 9/30/98 12:01 PM Page 14 1998–40 I.R.B.15October 5, 1998 NameAddressDesignationDate of Suspension Makula, John G.Park Ridge, ILCPAApril 1, 1998 to March 31, 2003 Slomski, MichaelGross Pointe Woods, MICPAApril 1, 1998 to March 31, 2001 Bozeman Jr., T. AlvinSylvester, GACPAMay 22, 1998 to November 21, 1999 Parness, Richard A.Westfield, NJCPAJune 1, 1998 to December 31, 1998 Register, BillyHavana, FLCPAIndefinite from July 10, 1998 Cooper, Michael E.Edina, MNCPAAugust 19, 1998 to February 18, 1999 Minello, Michael J.Clarks Summit, PACPAAugust 28, 1998 to April 27, 2001 Holden, William W.Fairfield, CTCPASeptember 1, 1998 to March 31, 1999 Freeman, SamuelBedford, NHCPASeptember 1, 1998 to August 31, 1999 Anders, KevinWilliamport, MDCPASeptember 1, 1998 to August 31, 2001 Breed, Robert M.Concord, MACPASeptember 1, 1998 to February 28, 2001 Sandirk, Paula BrooksChehalis, WACPANovember 1, 1998 to April 30, 2000 Neuhaus Jr., GeorgeBrewster, NYCPANovember 1, 1998 to April 30, 2000 Announcement of the Consent Voluntary Suspension of Attorneys, Certified Public Accountants, Enrolled Agents, and Enrolled Actuaries From Practice Beforethe Internal Revenue Service Under 31 Code of Federal Regulations, Part 10, an attorney, certified public ac- countant, enrolled agent, or enrolled ac- tuary, in order to avoid the institution or conclusion of a proceeding for his disbar- ment or suspension from practice before the Internal Revenue Service, may offer his consent to suspension from such prac- tice. The Director of Practice, in his dis- cretion, may suspend an attorney, certi- fied public accountant, enrolled agent, or enrolled actuary in accordance with the consent offered. Attorneys, certified public accountants, enrolled agents, and enrolled actuaries are prohibited in any Internal Revenue Ser- vice matter from directly or indirectly em- ploying, accepting assistance from, being employed by, or sharing fees with any practitioner disbarred or suspended from practice before the Internal Revenue Ser- vice. To enable attorneys, certified public ac- countants, enrolled agents, and enrolled actuaries to identify practitioners under consent suspension from practice before the Internal Revenue Service, the Director of Practice will announce in the Internal Revenue Bulletin the names and ad- dresses of practitioners who have been suspended from such practice, their desig- nation as attorney, certified public ac- countant, enrolled agent, or enrolled actu- ary, and date or period of suspension. This announcement will appear in the weekly Bulletin at the earliest practicable date after such action and will continue to ap- pear in the weekly Bulletins for five suc- cessive weeks or for as many weeks as is practicable for each attorney, certified public accountant, enrolled agent, or en- rolled actuary so suspended and will be consolidated and published in the Cumu- lative Bulletin. The following individuals have been placed under consent suspension from practice before the Internal Revenue Ser- vice: IRB 1998-40 9/30/98 12:01 PM Page 15 October 5, 1998161998–40 I.R.B. 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 pub- lished 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 confu- sion. It is not used where a position in a prior ruling is being changed. Distinguisheddescribes a situation where a ruling mentions a previously published ruling and points out an essen- tial 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 Abut not to B, and the new ruling holds that it ap- plies to both Aand B, the prior ruling is modified because it corrects a published position. (Compare with amplified and clarified, above). Obsoleted describes a previously pub- lished ruling that is not considered deter- minative with respect to future transac- tions. This term is most commonly used in a ruling that lists previously published rulings that are obsoleted because of changes in law or regulations. Aruling may also be obsoleted because the sub- stance has been included in regulations subsequently adopted. Revoked describes situations where the position in the previously published rul- ing 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 pe- riod 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 pub- lished 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 super- seded. 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 pub- lished 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 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. 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. Definition of Terms IRB 1998-40 9/30/98 12:01 PM Page 16 1998–40 I.R.B.17October 5, 1998 Numerical Finding List 1 Bulletins 1998–29 through 39 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 98–81, 1998–36 I.R.B.35 98–82, 1998–35 I.R.B. 17 98–83, 1998–36 I.R.B. 36 98–84, 1998–38 I.R.B.30 98–85, 1998–38 I.R.B.30 98–86, 1998–38 I.R.B.31 Court Decisions: 2063, 1998–36 I.R.B. 13 2064, 1998–37 I.R.B. 4 2065, 1998–39 I.R.B.7 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 98–40, 1998–35 I.R.B. 7 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 98–45, 1998–35 I.R.B.7 98–46, 1998–36 I.R.B. 21 98–47, 1998–37 I.R.B. 8 98–48, 1998–39 I.R.B.17 98–49, 1998–38 I.R.B.5 Railroad Retirement Quarterly Rate: 1998–31 I.R.B. 7 Proposed Regulations: REG–209446–82, 1998–36 I.R.B. 24 REG–209060–86, 1998–39 I.R.B. 18 REG–209813–96, 1998–35 I.R.B. 9 REG–246256–96, 1998–34 I.R.B.9 REG–104641–97, 1998–29 I.R.B. 9 REG–104565–97, 1998–39 I.R.B.21 REG–106177–97, 1998–37 I.R.B.33 REG–115446–97, 1998–36 I.R.B. 23 REG–116608–97, 1998–29 I.R.B. 12 REG–118926–97, 1998–39 I.R.B.23 REG–118966–97, 1998–39 I.R.B.29 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 REG–115393–98, 1998–39 I.R.B.34 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 98–46, 1998–36 I.R.B. 21 98–47, 1998–37 I.R.B. 8 98–48, 1998–38 I.R.B.7 98–49, 1998–37 I.R.B. 9 98–50, 1998–38 I.R.B.8 98–51, 1998–38 I.R.B.20 98–52, 1998–37 I.R.B. 12 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 98–41, 1998–35 I.R.B.6 98–42, 1998–35 I.R.B. 5 98–43, 1998–36 I.R.B. 9 98–44, 1998–37 I.R.B.4 98–45, 1998–38 I.R.B.4 98–46, 1998–39 I.R.B. 10 98–47, 1998–39 I.R.B. 4 98–48, 1998–39 I.R.B. 6 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 8778, 1998–36 I.R.B. 4 8779, 1998–36 I.R.B. 11 8780, 1998–39 I.R.B.14 1 Acumulative 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. IRB 1998-40 9/30/98 12:01 PM Page 17 October 5, 1998181998–40 I.R.B. Finding List of Current Action on Previously Published Items 1 Bulletins 1998–29 through 39 *Denotes entry since last publication Notices: 87–13 Modified by 98–49, 1998–38 I.R.B. 5 87–16 Modified by 98–49, 1998–38 I.R.B. 5 Revenue Procedures: 83–58 Obsoleted by 98–37, 1998–32 I.R.B. 5 97–60 Superseded by 98–50, 1998–38 I.R.B. 8 97–61 Superseded by 98–51, 1998–38 I.R.B. 20 Revenue Rulings: 57–271 Obsoleted by 98–37, 1998–32 I.R.B. 5 67–301 Modified by 98–41, 1998–35 I.R.B. 6 70–225 Obsoleted by 98–44, 1998–37 I.R.B. 4 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 Revenue Rulings—Continued 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 88–79 Obsoleted by 98–37, 1998–32 I.R.B. 5 93–4 Obsoleted by 98–37, 1998–32 I.R.B. 5 93–5 Obsoleted by 98–37, 1998–32 I.R.B. 5 93–6 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 Revenue Rulings—Continued 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 97–37 Obsoleted by 98–39, 1998–33 I.R.B. 4 1 Acumulative 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. IRB 1998-40 9/30/98 12:01 PM Page 18 1998–40 I.R.B.19October 5, 1998 Index Internal Revenue Bulletins 1998–1 Through 1998–39 The abbreviation and number in paren- thesis 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: RRRevenue Ruling RPRevenue Procedure TDTreasury Decision CDCourt Decision PLPublic Law EOExecutive Order DODelegation Order TDOTreasury Department Order TCTax Convention SPRStatement of Procedural Rules PTEProhibited Transaction Exemption EMPLOYMENT TAX Magnetic media; electronic filing: 1998 Form W–4 specifications (RP26) 13, 26 1998 Form 8027 (RP52) 37, 12 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; fed- eral employment tax deposits de minimisrule (REG–110403–98) 29, 11 Railroad retirement; rate determination; quarterly beginning April 1, 1998 and July 1, 1998 31, 7 Regulations: 26 CFR 1.6045–1T, –2T, removed; 1.6045–1, –2, amended; 301.6011–2, amended; 301.6011–2T, removed; magnetic filing requirements for in- formation returns (TD 8772) 31, 8 26 CFR 31.6302–1(f)(4), 31.6302–1T, added; federal employment tax de- posits de minimisrule (TD 8771) 29, 6 EMPLOYMENT TAX— Continued Worker classification; section 530; Tax Court review (Notice 43) 33, 13 ESTATE TAX Regulations: 26 CFR 20.2041–3, 20.2056(d)–2, amended; 20.2046–1, revised; prop- erty interests and disclaimer (TD 8744) 7, 20 26 CFR 20.2044–1(e), added; 20.2044– 1T, removed; 20.2056(b)–7, revised; 20.2056(b)–7T, removed; 20.2056(b)– 10, revised; 20.2056(b)–10T, re- moved; certain property for which marital deduction was previously al- lowed (TD 8779) 36, 11 26 CFR 25.2702–5, –7, amended; qual- ified 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 (RP34) 18, 15 EXCISE TAX Ad valoremtax, export clause (Ct.D. 2064) 37, 4 Bows and arrows; taxable and nontaxable articles (RR 5) 2, 20 Deposit of excise taxes, amendment (No- tice 36) 29, 8 Federal excise taxes for consular officers and employees, exemption (RR 24) 19, 6 Proposed regulations: 26 CFR 40.0–1T, added; 40.6011(a)– 1T, 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 53.4958; 301.6213–1, 301.6501(e)–1, 301.6501(n)–1, 301.7422–1, amended; 53.4958–0 through –7 and intermediary sections, added; failure by certain charitable or- ganizations to meet certain qualifica- tion requirements, taxes on excess benefit transactions (REG–246256– 96) 34, 9 26 CFR 54.4980B–1, added; group health plans continuation coverage requirements (REG–209485–86) 11, 21 Regulations: 26 CFR 40.0–1(a), amended; 40.6011(a) –1(a)(2)(iii), 40.5302(c)– 1, amended, 40.6302(c)–2(b)(2)(iii), added; de- posits of excise taxes (TD 8740) 3, 4 26 CFR 40.6011(a)–1(b)(2)(vi), 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; 48.6715–2T, removed; gasoline and diesel fuel excise tax; special rules for Alaska, definitions (TD 8748) 8, 24 Regulations: 26 CFR 48.4081–1T, 48.4082–6T through –10Tand intermediary sec- tions, 48.4091–3T, 48.4101–2T, –3T, 48.6427–10T, –11T, added; 145.4052– 1, amended; kerosene, aviation fuel, heavy trucks and trailers tax (TD 8774) 30, 5 GIFT TAX Nonstatutory stock option, transfer (RR 21) 18, 7 Qualifying income interest, disposition (RR 8) 7, 24 Valuation of compensatory stock options (RP34) 18, 15 INCOME TAX Advance pricing agreements, small busi- ness taxpayers (Notice 10) 6, 9 Article XIII (8) Rev. Proc. (RP21) 8, 27 Automobile owners and lessees (RP24) 10, 31;(RP30) 17,6 EXCISE TAX—Continued IRB 1998-40 9/30/98 12:01 PM Page 19 INCOME TAX—Continued Below-market loans; exempted loans; second mortgage loans under the MAHRAAct (RR 34) 31, 12 Books and records; automatic data pro- cessing system (RP25) 11, 7 Business expenses: Environmental remediation expendi- tures (RP47) 37, 8 Underground 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 Common Trust Funds, unrelated business taxable income (RR 41) 35, 6 Deductions: When taken: All events test; accrued cooperative advertising expenses (RR39) 33, 4 Definition of former Indian reservations in Oklahoma (Notice 45) 35, 7 Disclosure authorization list (RP43) 29, 8 Distribution of stock and securities of a newly formed controlled corporation; limitations (RR 44) 37, 4 Domestic assets/liability and investment yield percentages (RP31) 23, 9 Education loans (Notice 7) 3, 54 Effective date of consolidated overall for- eign loss provisions (Notice 40) 35, 7 Elections under section 7704(g) (Notice 3) 3, 48 Electronic Federal Tax Payment System: Batch filers and bulk filers (RP32) 17, 11 Electronic funds transfer; failure to de- posit penalty (Notice 30) 22, 9 Employee plans: Administrative programs; closing agreements (RP22) 12, 11 Determination letters (RP6) 1, 183; (RP14) 4,22 Discrimination; CODAs (Notice 1) 3, 42 Eligible deferred compensation plans (Notice 8) 4, 6 Funding: Full funding limitations, weighted average interest rate for Janu- ary 1998 (Notice 9) 4, 8; Feb- ruary 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; August 1998 (Notice 44) 34,7; September 1998 (Notice 48) 39,17 Group health plans; COBRAcontinua- tion coverage; HIPAAportability (Notice 12) 5, 12 Individual retirement arrangements, Roth IRAs (Notice 49) 38, 5 Letter rulings, etc. (RP4) 1, 113 Limitations on benefits and contribu- tions (RR 1) 2, 5 Minimum Funding Standards (RP10) 2, 35 Minimum: Remedial amendments (RP42) 28, 9 Net unrealized appreciation; capital gains (Notice 24) 17, 5 Qualification (Notice 29) 22, 8; CODAs (RR 30) 25, 8 Qualification: Church plans (Notice 39) 33, 11 Recovery of basis; retirees (Notice 2) 2, 22 Section 457 model amendments (RP 41) 32, 7 Section 457 ruling program (RP40) 32, 6 SIMPLE-IRAs (Notice 4) 2,25 Technical advice (RP5) 1, 155 User fees (RP8) 1, 225 Enhanced oil recovery credit (Notice 41) 33, 12 Environmental cleanup costs; letter rulings (RP17) 5, 21 Exempt Organizations: Letter rulings, etc. (RP4) 1, 113 Organizations excepted from reporting lobbying expenditures (RP19) 7, 30 Tax consequences of physicians re- cruitment 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 Form 1040: e-fileprogram (RP50) 38, 8 On-line filing program (RP51) 38, 20 Fringe benefits aircraft valuation formula, first half of 1998 (RR 14) 11, 4; second half of 1998 (RR 40) 33,4 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 Information reporting: Hope Scholarship and Lifetime Learn- ing credits (Notice 46) 36, 21 Insurance companies: Differential earnings rate and recom- puted differential earnings rate for mutual life insurance companies (RR 38) 32, 4 Discounting estimated salvage recover- able (RP12) 4, 18 Interest rate tables (RR 2) 2,15 Loss reserves; discounting unpaid losses (RP11) 4, 9 “Reserve strengthening,” reasonable interpretation (Ct.D. 2065) 39,7 Interest: Investment: Federal short-term, mid-term, and long-term rates for January 1998 (RR4) 2, 18; February 1998 (RR 7) 6, 6; March 1998 (RR 11) 10, 13; April 1998 (RR 18) 14,22; May (RR 23) 18,5; June 1998 (RR 28) 22,5; July 1998 (RR 33) 27, 26; August 1998 (RR 36) 31, 6; September 1998 (RR 43) 36,9 Rates, underpayments and overpay- ments (RR 17) 13, 21; calendar quarter beginning July 1, 1998 (RR 32) 25,4; calendar quarter beginning October 1, 1998 (RR 46) 39,10 Inventory: LIFO: Automobile and truck dealers (RP 46) 36, 21 Price indexes; department stores for November 1997 (RR 6) 4, 4; De- cember 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, 4; June 1998 (RR 42) 35, 5; July 1998 (RR 48) 39,6 Price indexes; inventory price com- putation method (RP49) 37, 9 October 5, 1998201998–40 I.R.B. INCOME TAX—ContinuedINCOME TAX—Continued IRB 1998-40 9/30/98 12:01 PM Page 20 Shrinkage estimates: Changing method of accounting for estimating inventory shrinkage (RP29) 15, 22 Letter rulings, determination letters, and information letters issued by Associate Chief Counsel (Domestic), Associate Chief Counsel (EBEO), Associate Chief Counsel (Enforcement Litiga- tion), and Associate Chief Counsel (International) (RP1) 1, 7 Lien for taxes; validity and priority against third parties; judgment creditor (Ct.D. 2063) 36, 13 Losses attributable to a disaster during 1997 (RR 12) 10, 5 Low-income housing tax credit (Notice 13) 6, 19; (RP45) 34,8 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; July- September 1998 (RR 45) 38, 4 Magnetic media/electronic filing: 1998 Forms 1098, 1099, 5498, and W–2G specifications (RP35) 19, 6 Form 1040NR (RP36) 23,10 Marginal production rates (Notice 42) 33, 12 Methods of accounting; involuntary changes (Notice 31) 22, 10 Package design; amortization; capitaliza- tion; amortizable section 197 intangible (RP39) 26, 36 Passive foreign investment companies: Shareholders may use rules of sec. 1.1295–1T(b)(4), (f), and (g) to tax- able 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, 12 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, 42 26 CFR 1.195–1, added; election to amortize start-up expenditures (REG–209373–81) 14,26 26 CFR 1.356–6, added; reorganiza- tions, nonqualified preferred stock (REG–121755–97) 9, 13 26 CFR 1.368–1, amended; corporate reorganizations, continuity of inter- est (REG–120882–97) 14, 25 26 CFR 1.401(a)(9)–1, amended; quali- fied plans and individual retirement plans, required distributions (REG– 209463–82) 4, 27 26 CFR 1.408A–0 through –9 and in- termediary sections, added; Roth IRAs, questions and answers (REG–115393–98) 39, 34 26 CFR 1.417(e)–1 and paragraph (d), revised; 1.417(e)–1Tand paragraph (d), revised; valuation of plan dis- tributrions (TD 8768) 20, 4 26 CFR 1.460–6, amended; election not to apply look-back method in de minimiscases (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 deduc- tions among taxpayers (REG– 208299–90) 16, 26 26 CFR 1.513–7, added; travel and tour activities of tax exempt organiza- tions (REG–121268–97) 20, 12 26 CFR 1.529–0 through –6 and inter- mediary sections, added; Qualified State Tuition Programs (REG– 106177–97) 37, 33 26 CFR 1.671–4, 1.6049–7, 301.6109– 1, amended; reporting requirements for widely held fixed investment trusts (REG–209813–96) 35, 9 26 CFR 1.702–1, 1.954–1, 301.7701–3, amended; 1.952–1(b), (c), redesig- nated 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 har- bors (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 1.936–1T, added; termination of Puerto Rico and possession tax credit, new lines of business prohib- ited (REG–115446–97) 36, 23 26 CFR 1.985–8, 1.1001–5, added; conversion to the euro (REG– 110332–98) 33, 18 26 CFR 1.1092(c)–1, added; equity op- tions without standard terms, special rules and definitions (REG–104641– 97) 29, xx 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–115795– 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 intermedi- ary 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 corpora- tion subsidiaries (REG–251698–96) 20, 14 26 CFR 1.1366–1, –2, removed; 1.1366–0 through –5 and intermedi- ary sections, added; 1.1367–0, –1, amended; 1.1367–3, removed; 1.1368–0, –1, –2, –3, amended; 1.1368–4, revised; pass through of items of an S corporation to its share- holders (REG–209446– 82) 36, 24 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, limi- tations 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; part- 1998–40 I.R.B.21October 5, 1998 INCOME TAX—ContinuedINCOME TAX—ContinuedINCOME TAX—Continued IRB 1998-40 9/30/98 12:01 PM Page 21 nership returns (REG–209322–82) 15, 26 26 CFR 1.6038B–1, amended; 1.6038B– 2, added; reporting of certain transfers to foreign corporations and foreign partnerships (REG– 118926–97) 39, 23 26 CFR 1.6038–3, added; information returns for certain foreign partner- ships (REG–118966–97) 39, 29 26 CFR 1.6046A–1, added; return re- quirement for U.S. persons owning interests in foreign partnerships (REG–209060–86) 39, 18 26 CFR 1.7702B–1, –2, added; quali- fied long-term care insurance con- tracts (REG–109333–97) 9, 9 26 CFR 301.6159–1, amended; agree- ments for tax liability installment payments (REG–100841–97) 8, 30 26 CFR 301.6402–5(h), added; –6(n), revised; tax refund offset program (REG–104565–97) 39, 21 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 ac- tions (REG–251502–96) 9, 14 26 CFR 54.9812–1, added; mental health parity; HIPAA(REG– 109704–97) 3, 60 Qualified Funeral Trust; guidance (Notice 6) 3, 52 Qualified intermediary agreements: Guidance provided to foreign financial institutions (RP27) 15, 15 Qualified mortgage bonds, mortgage credit certificates: Guidance provided regarding use of na- tional 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 (RP20) 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; amorti- zable bond premium (TD 8746) 7, 4 26 CFR 1.141–0, –2, amended; 1.141–7, –8, removed; 1.141–7T, –8T, –15T, 1.142(f)(4)–1T, 1.150– 5T, added; 1.141–15, revised; oblig- ations of states and political subdivi- sions (TD 8757) 13, 4 26 CFR 1.166–3(a)(3), 1.1001–4, added; 1.166–3T, 1.1001–4T, re- moved; modifications of bad debts and dealer assignments of notional principal contracts (TD 8763) 15, 5 26 CFR 1.280B–1, added; building de- molition, definition of structure (TD 8745) 7, 15 26 CFR 1.338–2, 1.368–1, –2, amended; 1.368–1T, added; corpo- rate reorganizations, continuity of in- terest, and continuity of business en- terprise (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; reorganiza- tions, nonqualified preferred stock (TD 8753) 9, 6 26 CFR 1.367(a)–1T, –3, amended; 1.367(a)–3T, removed; 1.367(a)–8, 1.367(b)–1, –4, added; 1.367(d)–1T, amended; 1.6038B–1, added; 1.6038B–1T; 7.367(b)–1, –4, –7, amended; certain transfers of stock or securities by U.S. persons to for- eign corporations (TD 8770) 27, 4 26 CFR 1.411(d)–4, amended; permit- ted elimination of preretirement op- tional 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 obliga- tions received from liquidating cor- porations (TD 8762) 14, 15 26 CFR 1.460–0, amended; 1.460–6T, added; election not to apply look- back method in de minimiscases (TD 8756) 12, 4 26 CFR 1.460–6T, removed; 1.460–6(i), (j), added; election not to apply look-back method in de min- imiscases (TD 8775) 31, 4 26 CFR 1.465–27, added; qualified nonrecourse financing under section 465(b)(6) (TD 8777) 34, 4 26 CFR 1.468A–2, –3, –8, amended; nuclear decommissioning funds; re- vised 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, –2T, –9T, added; 301.7701–3(f)(1), amended; controlled foreign corpo- ration 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 1.936–11T, added; termination of Puerto Rico and possession tax credit; new lines of business prohib- ited (TD 8778) 36, 4 26 CFR 1.985–1, –5(a), amended; 1.985–7, added; dollar approximate separate transactions method of ac- counting (DASTM) to profit and loss method of accounting, change from P&Lmethod to DASTM (TD 8765) 16, 11 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, 16 26 CFR 1.1290–0, amended; 1.1294–0, added; a. 1291–0T, amended; 1.1291–1T, 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, 21 26 CFR 1.1502–3, –4, –9(a), –21T(c)- (1)(iii), amended; 1.1502– 3T, –4T, –9T, –55T, added; 1.1502– 23T(b), October 5, 1998221998–40 I.R.B. INCOME TAX—ContinuedINCOME TAX—ContinuedINCOME TAX—Continued IRB 1998-40 9/30/98 12:01 PM Page 22 (c), redesignated; consolidated re- turns, limitations on the use of cer- tain losses and credits, overall for- eign loss accounts (TD 8751) 10, 23 26 CFR 54.9801–2T, amended; 54.9801–4T, –5T, revised; 54.9804– 1T, redesignated; 54.9806–1T, redes- ignated; 54.9812–1T, added; mental health parity, interim rules (TD 8741) 3, 6 26 CFR 301.7623–1, revised; 301.7623–1T, removed; rewards for information relating to violations of internal revenue laws (TD 8780) 39, 14 Relocation payments: Authorized by sec. 105(a)(11) of Hous- ing 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 (RP37) 26, 6 Residential rental property, exempt facili- ty bond (RR 47) 39, 4 Rulings: Areas in which advance rulings will not be issued: Associate Chief Counsel (Domes- tic), Associate Chief Counsel (EBEO)(RP3) 1, 100 Associate Chief Counsel (Interna- tional) (RP7) 1, 222 Obsolete (RR 37) 32, 5 Rural airports (RP18) 6, 20 Sales or exchanges: Qualified small business stock (RP48) 38, 7 Social security benefits under U.S.- Canada treaty, recent changes (Notice 23) 18, 9 Specifications for filing Form 1042–S (RP44) 32, 11 Spin-off of subsidiary (RR 27) 22, 4 SRLYnotice (Notice 38) 34, 7 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) (RP2) 1, 74 Tentative differential earnings rate for 1997 (Notice 19) 13, 24 Timely filing or payment; private delivery services (Notice 47) 37, 8 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 coun- try (RP38) 27, 29 Withholding regulations: Effective date of sec. 1441 withholding regulations amended (Notice 16) 15, 12 1998–40 I.R.B.23October 5, 1998 INCOME TAX—ContinuedINCOME TAX—ContinuedINCOME TAX—Continued IRB 1998-40 9/30/98 12:01 PM Page 23 Notes October 5, 1998241998–40 I.R.B. IRB 1998-40 9/30/98 12:01 PM Page 24 Notes 1998–40 I.R.B.25October 5, 1998 IRB 1998-40 9/30/98 12:01 PM Page 25 Notes October 5, 1998261998–40 I.R.B. IRB 1998-40 9/30/98 12:01 PM Page 26 IRB 1998-40 9/30/98 12:01 PM Page 27 INTERNAL REVENUE BULLETIN The Introduction on page 3 describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superintendent of Documents when their subscriptions must be renewed. CUMULATIVE BULLETINS The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the week- ly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the Superintendent of Documents. HOW TO ORDER Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance, detach entire page, and mail to the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. Please allow two to six weeks, plus mailing time, for delivery. WE WELCOME COMMENTS ABOUT THE INTERNAL REVENUE BULLETIN If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page (www.irs.ustreas.gov) or write to the IRS Bulletin Unit, T:FP:F:CD, Room 5560, 1111 Constitution Avenue NW, Washington, DC 20224. You can also leave a recorded message 24 hours a day, 7 days a week at 1–800–829–9043. IRB 1998-40 9/30/98 12:01 PM Page 28
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