Internal Revenue Bulletin 2002-24 (PDF rendition): IRS Revenue Rulings

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 2002–36, page 1148.
Federal rates; adjusted federal rates; adjusted federal
long-term rate and the long-term exempt rate. For pur-
poses of sections 382, 1274, 1288, and other sections of the
Code, tables set forth the rates for June 2002.
Rev. Rul. 2002–37, page 1147.
LIFO; price indexes; department stores. The April 2002
Bureau of Labor Statistics price indexes are accepted for use
by department stores employing the retail inventory and last-in,
first-out inventory methods for valuing inventories for tax years
ended on, or with reference to, April 30, 2002.
T.D. 8996, page 1127.
Final regulations under sections 441 and 442 of the Code
relate to certain adoptions, changes, and retentions of annual
accounting periods. The final regulations primarily affect tax-
payers that want to adopt an annual accounting period or that
must receive approval from the Commissioner to adopt,
change, or retain an annual accounting period. In addition, the
regulations provide guidance relating to the taxable years of
partnerships and S corporations. Rev. Ruls. 57–589, 65–316,
68–125, 69–563, 74–326, and 78–179 obsolete.
Notice 2002–41, page 1153.
This notice contains guidance for entering into a withholding
foreign partnership or withholding foreign trust agreement with
the service.
EMPLOYEE PLANS
Rev. Proc. 2002–29, page 1176.
Minimum distributions; regulations; model amendments.
This procedure describes the final and temporary regulations
under section 401(a)(9) of the Code and provides model
amendments for qualified defined contribution plans and for
qualified defined benefit plans. Rev. Procs. 2000–20 and
2002–6 modified.
Rev. Proc. 2002–35, page 1187.
Retroactive plan amendments; GUST late amenders. This
document establishes streamlined procedures to avoid the dis-
qualification of plans intended to satisfy sections 401(a) or
403(a) of the Code on account of the plans’ failure to be timely
amended for GUST. Rev. Proc. 2001–17 modified.
EXCISE TAX
Rev. Rul. 2002–34, page 1150.
Segment Tax. This ruling provides guidance on how to calcu-
late the tax under section 4261(b) of the Code on domestic
segments if an aircraft is chartered and one or more persons
are transported on that aircraft.
ADMINISTRATIVE
Notice 2002–40, page 1152.
This notice supplements the relief granted in Notice 2001–61,
2001–40 I.R.B. 305, and Notice 2001–68, 2001–47 I.R.B.
504, for taxpayers affected by the September 11, 2001, ter-
rorist attack by expanding relief from interest and penalties.
The notice implements changes that were made to section
7508A of the Code by the Victims of Terrorism Tax Relief Act of
2001.
(Continued on the next page)
Finding Lists begin on page ii.
Bulletin No. 2002–24
June 17, 2002

Rev. Proc. 2002–30, page 1184.
This procedure provides for a pilot program that will test
whether the process for issuing Technical Advice Memoranda
(TAM) can be streamlined. The new advice will be known as a
Technical Expedited Advice Memorandum (TEAM). Rev. Proc.
2002–2 modified.
Rev. Proc. 2002–42, page 1188.
This procedure sets forth a process whereby taxpayers who
purchase motor vehicles propelled by both a gasoline internal
combustion engine and an electric motor that is recharged as
the motor vehicles operate (hybrid vehicles) may rely on the
original equipment manufacturer’s (or, in the case of a foreign
original equipment manufacturer, its domestic distributor’s)
certification of the incremental cost of the motor vehicles’
clean-fuel vehicle property for purposes of section 179A of the
Code.
Announcement 2002–54, page 1190.
This announcement contains the annual report concerning the
Pre-Filing Agreement Program of the Large and Mid-Size Divi-
sion of the Service for calendar year 2001.
June 17, 20022002–24 I.R.B.

The IRS Mission
Provide America’s taxpayers top quality service by helping
them understand and meet their tax responsibilities and by
applying the tax law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, 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 are consolidated semiannually into Cumulative Bulle-
tins, 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 Bul-
letin. All published rulings apply retroactively unless otherwise
indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal 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 rev-
enue ruling. In those based on positions taken in rulings to tax-
payers 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 published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion and Related Committee Reports.
Part III.—Administrative, Procedural, and
Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The first Bulletin for each month includes a cumulative index for
the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the first Bulletin of the succeeding semiannual
period, respectively.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.
2002–24 I.R.B.June 17, 2002

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 30.—Credit for
Qualified Electric Vehicles
If a hybrid motor vehicle is a “qualified electric
vehicle”, does the motor vehicle constitute “clean-
fuel vehicle property” for purposes of section
179A(c) of the Internal Revenue Code? See Rev.
Proc. 2002–42, page 1188.
Section 42.—Low-Income
Housing Credit
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of June 2002. See Rev. Rul. 2002–36, page 1148.
Section 50.—Other Special
Rules
If a hybrid motor vehicle is used predominantly
outside the United States, is a clean-fuel vehicle
property deduction allowed with respect to the
motor vehicle under section 179A(a) of the Internal
Revenue Code? See Rev. Proc. 2002–42, page 1188.
Section 179.—Election to
Expense Certain Depreciable
Business Assets
If a taxpayer elects to treat the cost of the clean-
fuel vehicle property in a hybrid motor vehicle as an
expense which is not chargeable to capital account,
is a clean-fuel vehicle property deduction allowed
with respect to the motor vehicle under section
179A(a) of the Internal Revenue Code? See Rev.
Proc. 2002–42, page 1188.
Section 179A.—Deduction for
Clean-Fuel Vehicles and
Certain Refueling Property
If a motor vehicle is propelled by both a gaso-
line internal combustion engine and an electric
motor that is recharged as the motor vehicle oper-
ates and the motor vehicle otherwise meets the
requirements of section 179A of the Internal Rev-
enue Code, may taxpayers rely on the manufactur-
er’s certification of the incremental cost of the
motor vehicle’s clean-fuel vehicle property for pur-
poses of the clean-fuel vehicle property deduction
under section 179A of the Internal Revenue Code?
See Rev. Proc. 2002–42, page 1188.
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term
rates are set forth for the month of June 2002. See
Rev. Rul. 2002–36, page 1148.
Section 382.—Limitation on
Net Operating Loss
Carryforwards and Certain
Built-In Losses Following
Ownership Change
The adjusted applicable federal long-term rate is
set forth for the month of June 2002. See Rev. Rul.
2002–36, page 1148.
Section 401.—Qualified
Pension, Profit-Sharing and
Stock Bonus Plans
26 CFR 1.401(a)(9)–1: Required distributions from
trusts and plans.
A revenue procedure provides model amend-
ments that may be used in conjunction with the final
and temporary Income Tax Regulations published
under § 401(a)(9) of the Code which are effective
for years beginning on or after January 1, 2003. See
Rev. Proc. 2002–29, page 1176.
26 CFR 1.401(b)–1: Certain retroactive changes in
plan.
A revenue procedure describes how retroactive
remedial plan amendments may be made after the
end of the GUST remedial amendment period if cer-
tain criteria are met. See Rev. Proc. 2002–35, page
1187.
Section 412.—Minimum
Funding Standards
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of June 2002. See Rev. Rul. 2002–36, page 1148.
Section 441.—Period for
Computation of Taxable
Income
26 CFR 1.441–1: Period for computation of taxable
income.
T.D. 8996
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1, 5c, 5f, 18,
and 602
Changes in Accounting
Periods
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains
final regulations relating to certain adop-
tions, changes, and retentions of annual
accounting periods. The final regulations
are necessary to update, clarify, and reor-
ganize the rules and procedures for adopt-
ing, changing, and retaining a taxpayer’s
annual accounting period. The final regu-
lations primarily affect taxpayers that
want to adopt an annual accounting
period under section 441 or that must
receive approval from the Commissioner
to adopt, change, or retain their annual
accounting periods under section 442.
DATES:Effective Date: These regula-
tions are effective May 17, 2002.
Applicability Date: These regulations
are applicable for taxable years ending on
or after May 17, 2002.
FOR FURTHER INFORMATION CON-
TACT: Michael Schmit or Roy Hir-
schhorn at (202) 622-4960 (not a toll-free
number).
2002–24 I.R.B.1127June 17, 2002

SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collections of information con-
tained in these final regulations have been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)) under control
number 1545-1748. Responses to these
collections of information are required for
certain taxpayers to adopt, change, or
retain an annual accounting period.
An agency may not conduct or spon-
sor, and a person is not required to
respond to, a collection of information
unless the collection of information dis-
plays a valid control number assigned by
the Office of Management and Budget.
The estimated annual burden per
respondent varies from 20 minutes to one
hour, depending on individual circum-
stances, with an estimated average of 30
minutes.
Comments concerning the accuracy of
this burden estimate and suggestions for
reducing this burden should be sent to the
Internal Revenue Service, Attn: IRS
ReportsClearanceOfficer,W:CAR:
MP:FP:S, Washington, DC 20224, and to
theOffice of Management and Budget,
Attn: Desk Officer for the Department of
the Treasury, Office of Information and
Regulatory Affairs, Washington, DC
20503.
Books or records relating to this col-
lection of information must be retained as
long as their contents may become mate-
rial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.
Background
On June 12, 2001, the IRS and Trea-
sury Department published in theFederal
Registerproposed amendments to regula-
tions under section 441 (period for com-
puting taxable income), and sections 442,
706, 898, and 1378 (regarding the
requirement to obtain the approval of the
Commissioner to adopt, change, or retain
an annual accounting period) (REG–
106917–99, 2001–27 I.R.B. 4 [66 FR
31850]). Written and electronic comments
were solicited, and a public hearing was
scheduled for October 2, 2001. Several
comments were received, and are dis-
cussed below. Because no requests to
speak were received, the public hearing
was cancelled. After consideration of all
comments, the proposed regulations
under sections 441, 442, 706, and 1378
are adopted as revised by this Treasury
decision.
Summary of Comments and
Explanation of Revisions
1.Comments and Changes Relating to
§1.441 of the Proposed Regulations
A.Definition of 52–53-week taxable
year
The proposed regulations both define
the termtaxable year consisting of
52–53-weeksand provide anExample
illustrating a 52–53-week taxable year
that ends on a particular day of the week
that last occurs in a calendar month or
that is nearest to the last day of that cal-
endar month. A commentator observed
that many taxpayers have difficulty cor-
rectly applying the rules for 52–53-week
taxable years, and suggested that certain
explanatory text contained in theExample
be moved to the regulations text itself
where it would be more apparent and
helpful. This suggestion has been adopted
in the final regulations.
B.Changes to or from a 52–53-week
taxable year
The proposed regulations generally
provide that changes to or from a 52–53-
week taxable year are treated as changes
in annual accounting periods that require
the approval of the Commissioner, and
describe some specific instances in which
such approval may be obtained automati-
cally under administrative procedures to
be published by the Commissioner. Con-
sistent with the general framework of the
regulations, the descriptions of these spe-
cific changes have been removed from
the final regulations. Taxpayers should
see Rev. Proc. 2002–37, 2002–22 I.R.B.
1030 and Rev. Proc. 2002–38, 2002–22
I.R.B. 1037, for situations in which auto-
matic approval for changes to or from a
52–53-week taxable year will be granted.
The final regulations clarify that a tax-
payer will not be granted automatic
approval for a change from one 52–53-
week taxable year to another 52–53-week
taxable year, even if both years reference
the same calendar month.
C.Short periods of 6 days or less
The proposed regulations provide spe-
cial rules for certain short periods
required to effect a change in annual
accounting period to (or from) a 52–53-
week taxable year. The proposed regula-
tions provide that if the short period is 6
days or less, such short period is not a
separate taxable year but is instead added
to and deemed a part of the following tax-
able year.
One commentator suggested that tax-
payers be permitted the option of adding
such a short period to either: (1) the fol-
lowing taxable year (as the proposed
regulations would require); or (2) the
prior taxable year, whichever convention
is used by the taxpayer for financial
accounting purposes.
The IRS and Treasury Department
believe that adopting the commentator’s
suggestion in this case would present cer-
tain administrative difficulties, complicate
tax administration, and possibly encour-
age the use of hindsight in tax reporting.
After careful consideration, the IRS and
Treasury have concluded that it is in the
best interests of sound tax administration
to have a uniform and certain rule appli-
cable in all such situations. Thus, the final
regulations do not adopt this suggestion.
D.Application of effective date rules to
52–53 week-taxable years
The proposed regulations provide a
general rule concerning the application of
certain effective dates as they apply to
taxpayers employing 52–53-week taxable
years. In response to comments, the final
regulations clarify that this rule also
applies to administrative guidance pub-
lished by the Commissioner.
A comment was received suggesting
that additionalExamplesbe provided
illustrating how particular terms other
than those“expressed in terms of taxable
years beginning, including, or ending
with reference to the first or last day of a
specified calendar month,”apply to
52–53-week fiscal-year taxpayers. In
response to this comment, clarifying lan-
guage and an additionalExamplehave
been provided in the final regulations.
June 17, 200211282002–24 I.R.B.

E.Definitions of“pass-through entity”
and“owner of a pass-through entity”
The proposed regulations provide rules
for certain pass-through entities and own-
ers of pass-through entities relating to the
treatment of certain taxable years ending
with reference to the same calendar
month. These rules are designed to pre-
vent substantial deferral and distortion of
income reporting.
The IRS and Treasury have become
aware of a potentially abusive situation
involving the deferral of income reporting
in the case of closely-held Real Estate
Investment Trusts (REITs) (within the
meaning of section 6655(e)(5)(B)) and
certain owners of interests in closely-held
REITs (within the meaning of section
6655(e)(5)(A)).
For estimated tax purposes, certain
owners of interests in closely-held REITs
are required to recognize income from the
REIT in a manner similar to partners in a
partnership. Unlike a partnership, how-
ever, REITs are not required to use a tax-
able year that conforms to the taxable
year of their owners but rather are
required to use a taxable year ending
December 31 pursuant to section 859.
Thus, the potential for deferral of esti-
mated taxes exists with respect to certain
owners of interests in closely-held REITs,
including owners with 52–53-week tax-
able years that reference December 31, as
well as fiscal-year owners.
In an attempt to reduce the potential
for deferral of estimated taxes in the case
of certain owners of interests in closely-
held REITs, the final regulations have
been modified to add: (1) a closely-held
REIT (within the meaning of section
6655(e)(5)(B)) to the definition of apass-
through entity; and (2) an owner of an
interest (within the meaning of section
6655(e)(5)(A)) in a closely-held REIT to
the definition of anowner of a pass-
through entity. Thus, these owners of
interests in a closely-held REIT with
52–53-week taxable years that reference
December 31 will be required under the
final regulations to recognize income
from the closely-held REIT as if their tax-
able year ends on December 31.
F.Accrual of foreign taxes
The IRS recognizes that changes to the
taxable year of a taxpayer may shift the
taxable year in which foreign taxes are
treated as accruing for U.S. purposes. The
IRS also recognizes that similar results
may occur in the case of taxpayers that
usea52–53-week taxable year, which
will not always include the last day of the
taxpayer’s taxable year in a foreign juris-
diction. The IRS is working on guidance
that it expects will be issued this year to
ensure that changes in U.S. taxable years,
or the use of a 52–53-week taxable year,
do not result in unintended and inappro-
priate consequences for foreign tax credit
purposes. Comments are requested on the
changes necessary and appropriate to
address the accrual of foreign taxes in
these situations.
2.Comments and Changes Relating to
§1.442 of the Proposed Regulations
A.Time and manner for filing an
application
The proposed regulations provide spe-
cific rules for the time and manner of fil-
ing an application to adopt, change, or
retain an annual accounting period. Con-
sistent with the general framework of the
regulations, the IRS and Treasury have
concluded that it is more appropriate to
remove the specific time and manner
requirements for filing applications for
adoptions, changes, and retentions in
annual accounting period from the final
regulations, and provide them instead in
administrative procedures published by
the Commissioner. See Rev. Proc. 2002–
37, Rev. Proc. 2002–38, and Rev. Proc.
2002–39, 2002–22 I.R.B. 1046. The IRS
and Treasury believe that providing these
rules in administrative guidance, rather
than in regulations, allows the IRS more
flexibility to respond in the future to the
changing needs of taxpayers and the IRS.
The proposed regulations provide that
an application for non-automatic approval
of an annual accounting period change
may be filed no earlier than the day fol-
lowing the close of the first effective year
and no later than the 15th day of the third
calendar month following the close of the
first effective year. One commentator
suggested that such applications be per-
mitted to be filed no earlier than the later
of: (1) the first day of the short period
resulting from the proposed tax year
change; or (2) 60 days prior to the end of
the short period.
The IRS currently allows taxpayers to
file applications with the national office
within the referenced 60-day period and
believes that many taxpayers take advan-
tage of early filing, even knowing that
their applications lack adequate informa-
tion, in an effort to obtain priority over
other applications processed by the
national office. However, the lack of
adequate financial and other required
information common to such early appli-
cations requires that the IRS devote addi-
tional resources to properly develop and
process the applications. Ultimately, this
causes a delay in processing both the
early applications, and other applications
as well. For this reason, the administra-
tive guidance issued concurrently with
these final regulations do not adopt this
suggestion. However, the IRS and Trea-
sury Department intend to study filing
patterns under the new rules, and will
consider expanding or modifying the time
frame for filing applications with the
national office if circumstances warrant.
One commentator recommended that
instead of requiring all taxpayers to file
the application by the 15th day of the
third calendar month following the close
of the first taxable year in which the tax-
payer wants the adoption, change, or
retention to be effective (the first effec-
tive year), as the proposed regulations
provide, the due date for the application
should be the due date of the taxpayer’s
return for the short period, without exten-
sions. The IRS and Treasury believe that
such a rule will be simpler for taxpayers
(such as individuals and partnerships) and
the IRS. Accordingly, this change is
adopted in the administrative guidance
issued concurrently with these final regu-
lations.
B.Changes to required taxable years by
pass-through entities
One commentator suggested that the
proposed regulations be modified to
waive the Form 1128,Application to
Adopt, Change, or Retain a Tax Year, fil-
ing requirement in the case of partner-
ships, S corporations, and personal ser-
vice corporations (PSCs) changing to a
“required taxable year”for the first tax-
able year for which such change is
required. Alternatively, the commentator
recommended use of an“automatic con-
sent”procedure similar to the procedure
2002–24 I.R.B.1129June 17, 2002

outlined in the proposed regulations for
subsidiaries changing tax years to con-
form to the periods of their affiliated
groups. The commentator reasoned that
changes to statutorily required taxable
years should not require the Commission-
er’s prior approval through any filing or
application process.
Except in very limited circumstances
(e.g., adoptions of required years, certain
section 444 terminations, and certain sec-
tion 859 changes) applications histori-
cally have been required for changes to a
required taxable year by a pass-through
entity. The IRS and Treasury Department
believe that the statutes that require such
entities to use or change to a particular
taxable year must be read in conjunction
with the general requirement under sec-
tion 442 to obtain the prior approval of
the Commissioner to change an existing
taxable year. Moreover, the applications
serve to provide the IRS with necessary
information about the entity’s annual
accounting period. Accordingly, this com-
ment was not adopted in the final regula-
tions or the administrative guidance
issued concurrently with these regula-
tions.
C.Book conformity requirements
The proposed regulations conform the
recordkeeping requirement for taxpayers
using a fiscal year to that of§1.446–
1(a)(4), which allows for a reconciliation
between the taxpayer’s books and return.
However, the preamble to the proposed
regulations noted that, as a term and con-
dition of obtaining approval to adopt,
change to, or retain an annual accounting
period under section 442, certain taxpay-
ers nevertheless may be required, under
administrative procedures published by
the Commissioner, to compute income
and keep their books (including financial
statements and reports to creditors) on the
basis of the requested annual accounting
period. In fact, strict book conformity is a
general requirement in the administrative
procedures for approval to make many
changes. See,e.g., Rev. Proc. 2002–37.
One commentator objected to the pro-
posed elimination of procedures con-
tained in the existing regulations under
section 442 under which certain corpora-
tions are granted automatic approval to
change their taxable year without a strict
book conformity requirement (i.e., by sat-
isfying the general book conformity rules
of section 446). The commentator recom-
mended that either the final regulations
retain these automatic consent rules or,
alternatively, that the administrative pro-
cedures eliminate the strict book confor-
mity requirement.
The IRS and Treasury Department
believe it is appropriate to apply the more
lenient book conformity rule of section
446 in the case of a taxpayer adopting,
changing to, or retaining a required or
ownership taxable year and in the case of
a foreign corporation that is required by
foreign law to use a particular year for
financial accounting purposes. See,e.g.,
Rev. Proc. 2002–39. However, for all
other changes under the administrative
procedures, the IRS and Treasury Depart-
ment continue to believe that strict book
conformity is an appropriate term and
condition of a voluntary change in annual
accounting period, as it provides assur-
ance that the change is motivated by busi-
ness, as opposed to tax, considerations. In
addition, the IRS and Treasury believe,
for reasons stated in the preamble to the
proposed regulations, that tax administra-
tion and taxpayers are better served by
providing the specific rules for adoptions,
changes, and retentions of annual
accounting periods in administrative pro-
nouncements, rather than regulations.
Accordingly, the comment has not been
adopted.
3.Comments and Changes Relating to
Partnerships, S Corporations, and
Personal Service Corporations (PSCs)
A comment was received recommend-
ing that the limitation on additional
required taxable year changes in the pro-
posed regulations for partnerships using a
majority-interest taxable years, be
extended to partnerships using other
required taxable years (e.g., to principal
partners’taxable years and to least-
aggregate-deferral taxable years). The
limitation for changes to a majority inter-
est taxable year is specifically provided in
section 706(b)(4)(B). No such statutory
authority exists for providing similar
limitations in the case of other required
taxable year changes by partnerships.
Accordingly, this comment was not
adopted in the final regulations. However,
the Treasury Department is considering
this comment in connection with a legis-
lative simplification study.
The proposed regulations (consistent
with the existing temporary regulations)
generally provide for a 1-year testing
period for determining whether a tax-
payer is a PSC. In the preamble to the
proposed regulations, the IRS and Trea-
sury Department responded to a comment
received in connection with the original
notice of proposed rulemaking cross-
referenced by the temporary regulations.
The original commentator suggested that
the testing period be expanded to the
three preceding taxable years in order to
minimize instances in which taxpayers
become PSCs due to temporary or aberra-
tional conditions. In response, the IRS
and Treasury Department indicated that
they would consider alternatives to the
current 1-year period if similar requests
were received in comments to the pro-
posed regulations now that taxpayers
have significantly more experience with
the 1-year rule.
Although some comments were
received recommending a general 3-year
testing period for both PSCs and S corpo-
rations, the suggestions were not directed
to particular taxpayer burdens stemming
from the 1-year testing period for a PSC
or the original concern about taxpayers
becoming a PSC because of temporary or
aberrational conditions. Rather, commen-
tators suggested that a general 3-year test-
ing period rule would reduce repetitive
“required tax year”changes, and promote
tax-year certainty.
The IRS and Treasury Department
believe that these reasons do not warrant
extending the 1-year testing period for
PSCs and S corporations because the cur-
rent required taxable year framework for
PSCs and S corporations should not result
in repetitive required taxable year
changes. Once a PSC or S corporation
has changed to its required taxable year
(i.e., a calendar year), any further changes
would be voluntary rather than required.
Accordingly, this suggestion has not been
adopted in the final regulations.
Effect on Other Documents
Rev. Rul. 57–589 is obsolete.
Rev. Rul. 65–316 (1965–2 C.B. 149) is
obsolete.
Rev. Rul. 68–125 (1968–1 C.B. 189) is
obsolete.
June 17, 200211302002–24 I.R.B.

Rev. Rul. 69–563 is obsolete.
Rev. Rul. 74–326 (1974–2 C.B. 142) is
obsolete.
Rev. Rul. 78–179 (1978–1 C.B. 132) is
obsolete.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assess-
ment is not required. It also has been
determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regula-
tions. It is hereby certified that the collec-
tions of information in these regulations
will not have a significant economic
impact on a substantial number of small
entities. This certification is based upon
the fact that few small entities are
expected to adopt a 52–53-week taxable
year, triggering the collection of informa-
tion, and that for those who do, the bur-
den imposed under§1.441–2(b)(1)(ii)
will be minimal. Therefore, a Regulatory
Flexibility Analysis under the Regulatory
Flexibility Act (5 U.S.C. chapter 6) is not
required. Pursuant to section 7805(f) of
the Internal Revenue Code, the notice of
proposed rulemaking preceding these
regulations was submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small business.
Drafting Information
The principal authors of these regula-
tions are Roy A. Hirschhorn and Michael
F. Schmit of the Office of Associate Chief
Counsel (Income Tax and Accounting).
However, other personnel from the IRS
and Treasury Department participated in
their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1, 5c, 5f,
18, and 602 are amended as follows:
PA RT 1—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. In the list below, for each sec-
tion indicated in the left column, remove
the old language in the middle column
and add the new language in the right col-
umn.
Affected SectionRemoveAdd
1.46–1(p)(2)(iv)paragraph (b)(1) of§1.441–2§1.441–2
1.48–3(d)(1)(iii)paragraph (b)(1) of§1.441–2§1.441–2
1.280H–1T(a), last sentence§1.441–4T(d)§1.441–3(c)
1.443–1(b)(1)(ii)and paragraph (c)(5) of§1.441–2
and§1.441–
2(b)(2)(ii).
1.444–1T(a)(1), first sentence§1.441–4T(d)§1.441–3(c)
1.444–2T(a), last sentence§1.441–4T(d)§1.441–3(c)
1.448–1(h)(2)(ii)(B)(1)§1.441–2T(b)(1)§1.441–2(c)
1.469–1(h)(4)(ii)(D)§1.441–4T(f)§1.441–3(e)
1.469–1T(g)(2)(i)§1.441–4T(d)§1.441–3(c)
1.1561–1(c)(2)See paragraph (b)(1) of§1.441–2See§1.441–2
1.6654–2(a), concluding textparagraph (b) of§1.441–2§1.441–2(c)
1.6655–2(a)(4), first sentenceparagraph (b) of§1.441–2§1.441-2(c)
301.7701(b)–6(a), third sentence§1.441–1(e)§1.441–1(b)
Par. 3. Sections 1.441–0, 1.441–1,
1.441–2, 1.441–3, and 1.441–4 are added
to read as follows:
§1.441–0 Table of contents.
This section lists the captions con-
tained in§§1.441–1 through 1.441–4as
follows:
§1.441–1 Period for computation of
taxable income.
(a) Computation of taxable income.
(1) In general.
(2) Length of taxable year.
(b) General rules and definitions.
(1) Taxable year.
(2) Required taxable year.
(i) In general.
(ii) Exceptions.
(A) 52–53-week taxable years.
(B) Partnerships, S corporations, and
PSCs.
(C) Specified foreign corporations.
(3) Annual accounting period.
(4) Calendar year.
(5) Fiscal year.
(i) Definition.
(ii) Recognition.
(6) Grandfathered fiscal year.
(7) Books.
(8) Taxpayer.
(c) Adoption of taxable year.
(1) In general.
(2) Approval required.
(i) Taxpayers with required taxable
years.
(ii) Taxpayers without books.
(d) Retention of taxable year.
(e) Change of taxable year.
(f) Obtaining approval of the Commis-
sioner or making a section 444 election.
2002–24 I.R.B.1131June 17, 2002

§1.441–2 Election of taxable year
consisting of 52–53 weeks.
(a) In general.
(1) Election.
(2) Effect.
(3) Eligible taxpayer.
(4) Example.
(b) Procedures to elect a 52–53-week
taxable year.
(1) Adoption of a 52–53-week taxable
year.
(i) In general.
(ii) Filing requirement.
(2) Change to (or from) a 52–53-week
taxable year.
(i) In general.
(ii) Special rules for short period
required to effect the change.
(3) Examples.
(c) Application of effective dates.
(1) In general.
(2) Examples.
(3) Changes in tax rates.
(4) Examples.
(d) Computation of taxable income.
(e) Treatment of taxable years ending
with reference to the same calendar
month.
(1) Pass-through entities.
(2) Personal service corporations and
employee-owners.
(3) Definitions.
(i) Pass-through entity.
(ii) Owner of a pass-through entity.
(4) Examples.
(5) Transition rule.
§1.441–3 Taxable year of a personal
service corporation.
(a) Taxable year.
(1) Required taxable year.
(2) Exceptions.
(b) Adoption, change, or retention of
taxable year.
(1) Adoption of taxable year.
(2) Change in taxable year.
(3) Retention of taxable year.
(4) Procedures for obtaining approval
or making a section 444 election.
(5) Examples.
(c) Personal service corporation
defined.
(1) In general.
(2) Testing period.
(i) In general.
(ii) New corporations.
(3) Examples.
(d) Performance of personal services.
(1) Activities described in section
448(d)(2)(A).
(2) Activities not described in section
448(d)(2)(A).
(e) Principal activity.
(1) General rule.
(2) Compensation cost.
(i) Amounts included.
(ii) Amounts excluded.
(3) Attribution of compensation cost to
personal service activity.
(i) Employees involved only in the
performance of personal services.
(ii) Employees involved only in activi-
ties that are not treated as the perfor-
mance of personal services.
(iii) Other employees.
(A) Compensation cost attributable to
personal service activity.
(B) Compensation cost not attributable
to personal service activity.
(f) Services substantially performed by
employee-owners.
(1) General rule.
(2) Compensation cost attributable to
personal services.
(3) Examples.
(g) Employee-owner defined.
(1) General rule.
(2) Special rule for independent con-
tractors who are owners.
(h) Special rules for affiliated groups
filing consolidated returns.
(1) In general.
(2) Examples.
§1.441–4 Effective date.
§1.441–1 Period for computation of
taxable income.
(a)Computation of taxable income—
(1)In general. Taxable income must be
computed and a return must be made for
a period known as the taxable year. For
rules relating to methods of accounting,
the taxable year for which items of gross
income are included and deductions are
taken, inventories, and adjustments, see
parts II and III (section 446 and follow-
ing), subchapter E, chapter 1 of the Inter-
nal Revenue Code, and the regulations
thereunder.
(2)Length of taxable year. Except as
otherwise provided in the Internal Rev-
enue Code and the regulations thereunder
(e.g.,§1.441–2 regarding 52–53-week
taxable years), a taxable year may not
cover a period of more than 12 calendar
months.
(b)General rules and definitions. The
general rules and definitions in this para-
graph (b) apply for purposes of sections
441 and 442 and the regulations thereun-
der.
(1)Taxable year.Taxable year
means—
(i) The period for which a return is
made, if a return is made for a period of
less than 12 months (short period). See
section 443 and the regulations thereun-
der;
(ii) Except as provided in paragraph
(b)(1)(i) of this section, the taxpayer’s
required taxable year (as defined in para-
graph (b)(2) of this section), if applicable;
(iii) Except as provided in paragraphs
(b)(1)(i) and (ii) of this section, the tax-
payer’s annual accounting period (as
defined in paragraph (b)(3) of this sec-
tion), if it is a calendar year or a fiscal
year; or
(iv) Except as provided in paragraphs
(b)(1)(i) and (ii) of this section, the calen-
dar year, if the taxpayer keeps no books,
does not have an annual accounting
period, or has an annual accounting
period that does not qualify as a fiscal
year.
(2)Required taxable year—(i)In gen-
eral. Certain taxpayers must use the par-
ticular taxable year that is required under
the Internal Revenue Code and the regu-
lations thereunder (the required taxable
year). For example, the required taxable
year is—
(A) In the case of a foreign sales cor-
poration or domestic international sales
corporation, the taxable year determined
under section 441(h) and§1.921–
1T(a)(11), (b)(4), and (b)(6);
(B) In the case of a personal service
corporation (PSC), the taxable year deter-
minedundersection441(i)and
§1.441–3;
(C) In the case of a nuclear decommis-
sioning fund, the taxable year determined
under§1.468A–4(c)(1);
(D) In the case of a designated settle-
ment fund or a qualified settlement fund,
thetaxableyeardeterminedunder
§1.468B–2(j);
(E) In the case of a common trust
fund, the taxable year determined under
section 584(i);
June 17, 200211322002–24 I.R.B.

(F) In the case of certain trusts, the
taxable year determined under section
644;
(G) In the case of a partnership, the
taxable year determined under section
706 and§1.706–1;
(H) In the case of an insurance com-
pany, the taxable year determined under
section 843 and§1.1502–76(a)(2);
(I) In the case of a real estate invest-
ment trust, the taxable year determined
under section 859;
(J) In the case of a real estate mortgage
investment conduit, the taxable year
determined under section 860D(a)(5) and
§1.860D–1(b)(6);
(K) In the case of a specified foreign
corporation, the taxable year determined
under section 898(c)(1)(A);
(L) In the case of an S corporation, the
taxable year determined under section
1378 and§1.1378–1; or
(M) In the case of a member of an
affiliated group that makes a consolidated
return, the taxable year determined under
§1.1502–76.
(ii)Exceptions. Notwithstanding para-
graph (b)(2)(i) of this section, the follow-
ing taxpayers may have a taxable year
other than their required taxable year:
(A)52–53-week taxable years. Certain
taxpayers may elect to use a 52–53-week
taxable year that ends with reference to
their required taxable year. See, for
example,§§1.441–3 (PSCs), 1.706–1
(partnerships), 1.1378–1 (S corporations),
and 1.1502–76(a)(1) (members of a con-
solidated group).
(B)Partnerships, S corporations, and
PSCs.A partnership, S corporation, or
PSC may use a taxable year other than its
required taxable year if the taxpayer
elects to use a taxable year other than its
required taxable year under section 444,
elects a 52–53-week taxable year that
ends with reference to its required taxable
year as provided in paragraph
(b)(2)(ii)(A) of this section or to a taxable
year elected under section 444, or estab-
lishes a business purpose to the satisfac-
tion of the Commissioner under section
442 (such as a grandfathered fiscal year).
(C)Specified foreign corporations.A
specified foreign corporation (as defined
in section 898(b)) may use a taxable year
other than its required taxable year if it
elects a 52–53-week taxable year that
ends with reference to its required taxable
year as provided in paragraph
(b)(2)(ii)(A) of this section or makes a
one-month deferral election under section
898(c)(1)(B).
(3)Annual accounting period.Annual
accounting periodmeans the annual
period (calendar year or fiscal year) on
the basis of which the taxpayer regularly
computes its income in keeping its books.
(4)Calendar year.Calendar year
means a period of 12 consecutive months
ending on December 31. A taxpayer who
has not established a fiscal year must
make its return on the basis of a calendar
year.
(5)Fiscal year—(i)Definition.Fiscal
yearmeans—
(A) A period of 12 consecutive months
ending on the last day of any month other
than December; or
(B)A52–53-week taxable year, if such
period has been elected by the taxpayer.
See§1.441–2.
(ii)Recognition. A fiscal year will be
recognized only if the books of the tax-
payer are kept in accordance with such
fiscal year.
(6)Grandfathered fiscal year.Grand-
fathered fiscal yearmeans a fiscal year
(other than a year that resulted in a three
month or less deferral of income) that a
partnership or an S corporation received
permission to use on or after July 1, 1974,
by a letter ruling (i.e., not by automatic
approval).
(7)Books.Booksinclude the taxpay-
er’s regular books of account and such
other records and data as may be neces-
sary to support the entries on the taxpay-
er’s books and on the taxpayer’s return,
as for example, a reconciliation of any
difference between such books and the
taxpayer’s return. Records that are suffi-
cient to reflect income adequately and
clearly on the basis of an annual account-
ing period will be regarded as the keeping
of books. See section 6001 and the regu-
lations thereunder for rules relating to the
keeping of books and records.
(8)Taxpayer. Taxpayerhas the same
meaning as the termpersonas defined in
section 7701(a)(1) (e.g., an individual,
trust, estate, partnership, association, or
corporation) rather than the meaning of
the term taxpayer as defined in section
7701(a)(14) (any person subject to tax).
(c)Adoption of taxable year—(1)In
general. Except as provided in paragraph
(c)(2) of this section, a new taxpayer may
adopt any taxable year that satisfies the
requirements of section 441 and the regu-
lations thereunder without the approval of
the Commissioner. A taxable year of a
new taxpayer is adopted by filing its first
Federal income tax return using that tax-
able year. The filing of an application for
automatic extension of time to file a Fed-
eral income tax return (e.g., Form 7004,
“Application for Automatic Extension of
Time To File Corporation Income Tax
Return”), the filing of an application for
an employer identification number (i.e.,
Form SS-4,“Application for Employer
Identification Number”), or the payment
of estimated taxes, for a particular taxable
year do not constitute an adoption of that
taxable year.
(2)Approval required—(i)Taxpayers
with required taxable years. A newly-
formed partnership, S corporation, or
PSC that wants to adopt a taxable year
other than its required taxable year, a tax-
able year elected under section 444, or a
52–53-week taxable year that ends with
reference to its required taxable year or a
taxable year elected under section 444
must establish a business purpose and
obtain the approval of the Commissioner
under section 442.
(ii)Taxpayers without books. A tax-
payer that must use a calendar year under
section 441(g) and paragraph (f) of this
section may not adopt a fiscal year with-
out obtaining the approval of the Com-
missioner.
(d)Retention of taxable year. In cer-
tain cases, a partnership, S corporation,
electing S corporation, or PSC will be
required to change its taxable year unless
it obtains the approval of the Commis-
sioner under section 442, or makes an
election under section 444, to retain its
current taxable year. For example, a cor-
poration using a June 30 fiscal year that
either becomes a PSC or elects to be an S
corporation and, as a result, is required to
use the calendar year under section 441(i)
or 1378, respectively, must obtain the
approval of the Commissioner to retain its
current fiscal year. Similarly, a partner-
ship using a taxable year that corresponds
to its required taxable year must obtain
the approval of the Commissioner to
retain such taxable year if its required
taxable year changes as a result of a
2002–24 I.R.B.1133June 17, 2002

change in ownership. However, a partner-
ship that previously established a busi-
ness purpose to the satisfaction of the
Commissioner to use a taxable year is not
required to obtain the approval of the
Commissioner if its required taxable year
changes as a result of a change in owner-
ship.
(e)Change of taxable year. Once a
taxpayer has adopted a taxable year, such
taxable year must be used in computing
taxable income and making returns for all
subsequent years unless the taxpayer
obtains approval from the Commissioner
to make a change or the taxpayer is oth-
erwise authorized to change without the
approval of the Commissioner under the
Internal Revenue Code (e.g., section 444
or 859) or the regulations thereunder.
(f)Obtaining approval of the Commis-
sioner or making a section 444 election.
See§1.442–1(b) for procedures for
obtaining approval of the Commissioner
(automatically or otherwise) to adopt,
change, or retain an annual accounting
period. See§§1.444–1T and 1.444–2T
for qualifications, and 1.444–3T for pro-
cedures, for making an election under
section 444.
§1.441–2 Election of taxable year
consisting of 52–53 weeks.
(a)In general—(1)Election. An eli-
gible taxpayer may elect to compute its
taxable income on the basis of a fiscal
year that—
(i) Varies from 52 to 53 weeks;
(ii) Ends always on the same day of
the week; and
(iii) Ends always on—
(A) Whatever date this same day of the
week last occurs in a calendar month; or
(B) Whatever date this same day of the
week falls that is the nearest to the last
day of the calendar month.
(2)Effect. In the case of a taxable year
described in paragraph (a)(1)(iii)(A) of
this section, the year will always end
within the month and may end on the last
day of the month, or as many as six days
before the end of the month. In the case
of a taxable year described in paragraph
(a)(1)(iii)(B) of this section, the year may
end on the last day of the month, or as
many as three days before or three days
after the last day of the month.
(3)Eligible taxpayer. A taxpayer is eli-
gible to elect a 52–53-week taxable year
if such fiscal year would otherwise satisfy
the requirements of section 441 and the
regulations thereunder. For example, a
taxpayer that is required to use a calendar
year under§1.441–1(b)(2)(i)(D) is not an
eligible taxpayer.
(4)Example. The provisions of this
paragraph (a) are illustrated by the fol-
lowing example:
Example. If the taxpayer elects a taxable year
ending always on the last Saturday in November,
then for the year 2001, the taxable year would end
on November 24, 2001. On the other hand, if the
taxpayer had elected a taxable year ending always
on the Saturday nearest to the end of November,
then for the year 2001, the taxable year would end
on December 1, 2001.
(b)Procedures to elect a 52–53-week
taxable year—(1)Adoption of a 52–53-
week taxable year—(i)In general. A new
eligible taxpayer elects a 52–53-week
taxable year by adopting such year in
accordance with§1.441–1(c). A newly-
formed partnership, S corporation or per-
sonal service corporation (PSC) may
adopt a 52–53-week taxable year without
the approval of the Commissioner if such
year ends with reference to either the tax-
payer’s required taxable year (as defined
in§1.441-1(b)(2)) or the taxable year
electedundersection444.See
§§1.441–3, 1.706–1, and 1.1378–1.
Similarly, a newly-formed specified for-
eign corporation (as defined in section
898(b)) may adopt a 52–53-week taxable
year if such year ends with reference to
the taxpayer’s required taxable year, or, if
the one-month deferral election under
section 898(c)(1)(B) is made, with refer-
ence to the month immediately preceding
the required taxable year. See§1.1502–
76(a)(1) for special rules regarding sub-
sidiaries adopting 52–53-week taxable
years.
(ii)Filing requirement. A taxpayer
adopting a 52–53-week taxable year must
file with its Federal income tax return for
its first taxable year a statement contain-
ing the following information—
(A) The calendar month with reference
to which the 52–53-week taxable year
ends;
(B) The day of the week on which the
52–53-week taxable year always will end;
and
(C) Whether the 52–53-week taxable
year will always end on the date on which
that day of the week last occurs in the
calendar month, or on the date on which
that day of the week falls that is nearest
to the last day of that calendar month.
(2)Change to (or from) a 52–53-week
taxable year—(i)In general. An election
ofa52–53-week taxable year by an exist-
ing eligible taxpayer with an established
taxable year is treated as a change in
annual accounting period that requires the
approval of the Commissioner in accor-
dance with§1.442–1. Thus, a taxpayer
must obtain approval to change from its
current taxable year to a 52–53-week tax-
able year, even if such 52–53-week tax-
able year ends with reference to the same
calendar month. Similarly, a taxpayer
must obtain approval to change from a
52–53-week taxable year, or to change
from one 52–53-week taxable year to
another 52–53-week taxable year. How-
ever, a taxpayer may obtain approval for
52–53-week taxable year changes auto-
matically to the extent provided in admin-
istrative procedures published by the
Commissioner. See§1.442–1(b) for pro-
cedures for obtaining such approval.
(ii)Special rules for the short period
required to effect the change. If a change
to or from a 52–53-week taxable year
results in a short period (within the mean-
ing of§1.443–1(a)) of 359 days or more,
or six days or less, the tax computation
under§1.443–1(b) does not apply. If the
short period is 359 days or more, it is
treated as a full taxable year. If the short
period is six days or less, such short
period is not a separate taxable year but
instead is added to and deemed a part of
the following taxable year. (In the case of
a change to or from a 52–53-week taxable
year not involving a change of the month
with reference to which the taxable year
ends, the tax computation under§1.443–
1(b) does not apply because the short
period will always be 359 days or more,
or six days or less.) In the case of a short
period which is more than six days and
less than 359 days, taxable income for the
short period is placed on an annual basis
for purposes of§1.443–1(b) by multiply-
ing such income by 365 and dividing the
result by the number of days in the short
period. In such case, the tax for the short
period is the same part of the tax com-
puted on such income placed on an
annual basis as the number of days in the
short period is of 365 days (unless
§1.443–1(b)(2), relating to the alternative
June 17, 200211342002–24 I.R.B.

tax computation, applies). For an adjust-
ment in deduction for personal exemp-
tion, see§1.443–1(b)(1)(v).
(3)Examples. The following examples
illustrate paragraph (b)(2)(ii) of this sec-
tion:
Example 1. A taxpayer having a fiscal year end-
ing April 30, obtains approval to change to a 52–53-
week taxable year ending the last Saturday in April
for taxable years beginning after April 30, 2001.
This change involves a short period of 362 days,
from May 1, 2001, to April 27, 2002, inclusive.
Because the change results in a short period of 359
days or more, it is not placed on an annual basis and
is treated as a full taxable year.
Example 2. Assume the same conditions as
Example 1, except that the taxpayer changes for tax-
able years beginning after April 30, 2002, to a tax-
able year ending on the Thursday nearest to April
30. This change results in a short period of two
days, May 1 to May 2, 2002. Because the short
period is less than seven days, tax is not separately
computed. This short period is added to and deemed
part of the following 52–53-week taxable year,
which would otherwise begin on May 3, 2002, and
end on May 1, 2003.
(c)Application of effective dates—(1)
In general. Except as provided in para-
graph (c)(3) of this section, for purposes
of determining the effective date (e.g.,of
legislative, regulatory, or administrative
changes) or the applicability of any provi-
sion of the internal revenue laws that is
expressed in terms of taxable years begin-
ning, including, or ending with reference
to the first or last day of a specified cal-
endar month, a 52–53-week taxable year
is deemed to begin on the first day of the
calendar month nearest to the first day of
the 52–53-week taxable year, and is
deemed to end or close on the last day of
the calendar month nearest to the last day
of the 52–53-week taxable year, as the
case may be. Examples of provisions of
this title, the applicability of which is
expressed in terms referred to in the pre-
ceding sentence, include the provisions
relating to the time for filing returns and
other documents, paying tax, or perform-
ing other acts, and the provisions of part
II, subchapter B, chapter 6 (section 1561
and following) relating to surtax exemp-
tions of certain controlled corporations.
(2)Examples. The provisions of para-
graph (c)(1) of this section may be illus-
trated by the following examples:
Example 1. Assume that an income tax provision
is applicable to taxable years beginning on or after
January 1, 2001. For that purpose, a 52–53-week
taxable year beginning on any day within the period
December 26, 2000, to January 4, 2001, inclusive, is
treated as beginning on January 1, 2001.
Example 2. Assume that an income tax provision
requires that a return must be filed on or before the
15th day of the third month following the close of
the taxable year. For that purpose, a 52–53-week
taxable year ending on any day during the period
May 25 to June 3, inclusive, is treated as ending on
May 31, the last day of the month ending nearest to
the last day of the taxable year, and the return, there-
fore, must be made on or before August 15.
Example 3. Assume that a revenue procedure
requires the performance of an act by the taxpayer
within“the first 90 days of the taxable year,”by
“the 75th day of the taxable year,”or, alternately, by
“the last day of the taxable year.”The taxpayer
employs a 52–53-week taxable year that ends
always on the Saturday closest to the last day of
December. These requirements are not expressed in
terms of taxable years beginning, including, or end-
ing with reference to the first or last day of a speci-
fied calendar month, and are accordingly outside the
scope of the rule stated in§1.441–2(c)(1). Accord-
ingly, the taxpayer must perform the required act by
the 90th, 75th, or last day, respectively, of its taxable
year.
Example 4. X, a corporation created on January
1, 2001, elects a 52–53-week taxable year ending on
the Friday nearest the end of December. Thus, X’s
first taxable year begins on Monday, January 1,
2001, and ends on Friday, December 28, 2001; its
next taxable year begins on Saturday, December 29,
2001, and ends on Friday, January 3, 2003; and its
next taxable year begins on Saturday, January 4,
2003, and ends on Friday, January 2, 2004. For pur-
poses of applying the provisions of Part II, subchap-
ter B, chapter 6 of the Internal Revenue Code, X’s
first taxable year is deemed to end on December 31,
2001; its next taxable year is deemed to begin on
January 1, 2002, and end on December 31, 2002,
and its next taxable year is deemed to begin on
January 1, 2003, and end on December 31, 2003.
Accordingly, each such taxable year is treated as
including one and only one December 31st.
(3)Changes in tax rates. If a change in
the rate of tax is effective during a 52–53-
week taxable year (other than on the first
day of such year as determined under
paragraph (c)(1) of this section), the tax
for the 52–53-week taxable year must be
computed in accordance with section 15,
relating to effect of changes, and the
regulations thereunder. For the purpose of
the computation under section 15, the
determination of the number of days in
the period before the change, and in the
period on and after the change, is to be
made without regard to the provisions of
paragraph (b)(1) of this paragraph.
(4)Examples. The provisions of para-
graph (c)(3) of this section may be illus-
trated by the following examples:
Example 1. Assume a change in the rate of tax
is effective for taxable years beginning after June
30, 2002. For a 52–53-week taxable year beginning
on Friday, November 2, 2001, the tax must be com-
puted on the basis of the old rates for the actual
number of days from November 2, 2001, to June 30,
2002, inclusive, and on the basis of the new rates for
the actual number of days from July 1, 2002, to
Thursday, October 31, 2002, inclusive.
Example 2. Assume a change in the rate of tax
is effective for taxable years beginning after June
30, 2001. For this purpose, a 52–53-week taxable
year beginning on any of the days from June 25 to
July 4, inclusive, is treated as beginning on July 1.
Therefore, no computation under section 15 will be
required for such year because of the change in rate.
(d)Computation of taxable income.
The principles of section 451, relating to
the taxable year for inclusion of items of
gross income, and section 461, relating to
the taxable year for taking deductions,
generally are applicable to 52–53-week
taxable years. Thus, except as otherwise
provided, all items of income and deduc-
tion must be determined on the basis of a
52–53-week taxable year. However, a tax-
payer may determine particular items as
though the 52–53-week taxable year were
a taxable year consisting of 12 calendar
months, provided that practice is consis-
tently followed by the taxpayer and
clearly reflects income. For example, an
allowance for depreciation or amortiza-
tion may be determined on the basis of a
52–53-week taxable year, or as though
the 52–53-week taxable year is a taxable
year consisting of 12 calendar months,
provided the taxpayer consistently fol-
lows that practice with respect to all
depreciable or amortizable items.
(e)Treatment of taxable years ending
with reference to the same calendar
month—(1)Pass-through entities.Ifa
pass-through entity (as defined in para-
graph (e)(3)(i) of this section) or an
owner of a pass-through entity (as defined
in paragraph (e)(3)(ii) of this section), or
both, use a 52–53-week taxable year and
the taxable year of the pass-through entity
and the owner end with reference to the
same calendar month, then, for purposes
of determining the taxable year in which
items of income, gain, loss, deductions, or
credits from the pass-through entity are
taken into account by the owner of the
pass-through, the owner’s taxable year
will be deemed to end on the last day of
the pass-through’s taxable year. Thus, if
the taxable year of a partnership and a
partner end with reference to the same
calendar month, then for purposes of
determining the taxable year in which that
partner takes into account items described
in section 702 and items that are deduct-
ible by the partnership (including items
2002–24 I.R.B.1135June 17, 2002

described in section 707(c)) and includ-
ible in the income of that partner, that
partner’s taxable year will be deemed to
end on the last day of the partnership’s
taxable year. Similarly, if the taxable year
of an S corporation and a shareholder end
with reference to the same calendar
month, then for purposes of determining
the taxable year in which that shareholder
takes into account items described in sec-
tion 1366(a) and items that are deductible
by the S corporation and includible in the
income of that shareholder, that share-
holder’s taxable year will be deemed to
end on the last day of the S corporation’s
taxable year.
(2)Personal service corporations and
employee-owners. If the taxable year of a
PSC (within the meaning of§1.441–3(c))
and an employee-owner (within the
meaning of§1.441–3(g)) end with refer-
ence to the same calendar month, then for
purposes of determining the taxable year
in which an employee-owner takes into
account items that are deductible by the
PSC and includible in the income of the
employee-owner, the employee-owner’s
taxable year will be deemed to end on the
last day of the PSC’s taxable year.
(3)Definitions—(i)Pass-through en-
tity. For purposes of this section, a pass-
through entity means a partnership, S cor-
poration, trust, estate, closely-held real
estate investment trust (within the mean-
ing of section 6655(e)(5)(B)), common
trust fund (within the meaning of section
584(i)), controlled foreign corporation
(within the meaning of section 957), for-
eign personal holding company (within
the meaning of section 552), or passive
foreign investment company that is a
qualified electing fund (within the mean-
ing of section 1295).
(ii)Owner of a pass-through entity.
For purposes of this section, an owner of
a pass-through entity generally means a
taxpayer that owns an interest in, or stock
of, a pass-through entity. For example, an
owner of a pass-through entity includes a
partner in a partnership, a shareholder of
an S corporation, a beneficiary of a trust
or an estate, an owner of a closely-held
real estate investment trust (within the
meaning of section 6655(e)(5)(A)), a par-
ticipant in a common trust fund, a U.S.
shareholder (as defined in section 951(b))
of a controlled foreign corporation, a U.S.
shareholder (as defined in section 551(a))
of a foreign personal holding company, or
a U.S. person that holds stock in a passive
foreign investment company that is a
qualified electing fund with respect to
that shareholder.
(4)Examples. The provisions of para-
graph (e)(2) of this section may be illus-
trated by the following examples:
Example 1. ABC Partnership uses a 52–53-week
taxable year that ends on the Wednesday nearest to
December 31, and its partners, A, B, and C, are
individual calendar year taxpayers. Assume that, for
ABC’s taxable year ending January 3, 2001, each
partner’s distributive share of ABC’s taxable income
is $10,000. Under section 706(a) and paragraph
(e)(1) of this section, for the taxable year ending
December 31, 2000, A, B, and C each must include
$10,000 in income with respect to the ABC year
ending January 3, 2001. Similarly, if ABC makes a
guaranteed payment to A on January 2, 2001, A
must include the payment in income for A’s taxable
year ending December 31, 2000.
Example 2. X, a PSC, uses a 52–53-week tax-
able year that ends on the Wednesday nearest to
December 31, and all of the employee-owners of X
are individual calendar year taxpayers. Assume that,
for its taxable year ending January 3, 2001, X pays
a bonus of $10,000 to each employee-owner on
January 2, 2001. Under paragraph (e)(2) of this sec-
tion, each employee-owner must include its bonus in
income for the taxable year ending December 31,
2000.
(5)Transition rule. In the case of an
owner of a pass-through entity (other than
the owner of a partnership or S corpora-
tion) that is required by this paragraph (e)
to include in income for its first taxable
year ending on or after May 17, 2002,
amounts attributable to two taxable years
of a pass-through entity, the amount that
otherwise would be required to be
included in income for such first taxable
year by reason of this paragraph (e)
should be included in income ratably over
the four-taxable-year period beginning
with such first taxable year under prin-
ciples similar to§1.702–3T, unless the
owner of the pass-through entity elects to
include all such income in its first taxable
year ending on or after May 17, 2002.
§1.441–3 Taxable year of a personal
service corporation.
(a)Taxable year—(1)Required tax-
able year. Except as provided in para-
graph (a)(2) of this section, the taxable
year of a personal service corporation
(PSC) (as defined in paragraph (c) of this
section) must be the calendar year.
(2)Exceptions. A PSC may have a tax-
able year other than its required taxable
year (i.e., a fiscal year) if it makes an
election under section 444, elects to use a
52–53-week taxable year that ends with
reference to the calendar year or a taxable
year elected under section 444, or estab-
lishes a business purpose for such fiscal
year and obtains the approval of the Com-
missioner under section 442.
(b)Adoption, change, or retention of
taxable year—(1)Adoption of taxable
year. A PSC may adopt, in accordance
with§1.441–1(c), the calendar year, a
taxable year elected under section 444, or
a52–53-week taxable year ending with
reference to the calendar year or a taxable
year elected under section 444 without
the approval of the Commissioner. See
§1.441–1. A PSC that wants to adopt any
other taxable year must establish a busi-
ness purpose and obtain the approval of
the Commissioner under section 442.
(2)Change in taxable year. A PSC that
wants to change its taxable year must
obtain the approval of the Commissioner
under section 442 or make an election
under section 444. However, a PSC may
obtain automatic approval for certain
changes, including a change to the calen-
dar year or to a 52–53-week taxable year
ending with reference to the calendar
year, pursuant to administrative proce-
dures published by the Commissioner.
(3)Retention of taxable year. In cer-
tain cases, a PSC will be required to
change its taxable year unless it obtains
the approval of the Commissioner under
section 442, or makes an election under
section 444, to retain its current taxable
year. For example, a corporation using a
June 30 fiscal year that becomes a PSC
and, as a result, is required to use the cal-
endar year must obtain the approval of
the Commissioner to retain its current fis-
cal year.
(4)Procedures for obtaining approval
or making a section 444 election. See
§1.442–1(b) for procedures to obtain the
approval of the Commissioner (automati-
cally or otherwise) to adopt, change, or
retain a taxable year. See§§1.444–1T
and 1.444–2T for qualifications, and
1.444–3T for procedures, for making an
election under section 444.
(5)Examples. The provisions of para-
graph (b)(4) of this section may be illus-
trated by the following examples:
Example 1. X, whose taxable year ends on Janu-
ary 31, 2001, becomes a PSC for its taxable year
beginning February 1, 2001, and does not obtain the
approval of the Commissioner for using a fiscal
June 17, 200211362002–24 I.R.B.

year. Thus, for taxable years ending before February
1, 2001, this section does not apply with respect to
X. For its taxable year beginning on February 1,
2001, however, X will be required to comply with
paragraph (a) of this section. Thus, unless X obtains
approval of the Commissioner to use a January 31
taxable year, or makes a section 444 election, X will
be required to change its taxable year to the calen-
dar year under paragraph (b) of this section by using
a short taxable year that begins on February 1, 2001,
and ends on December 31, 2001. Under paragraph
(b)(1) of this section, X may obtain automatic
approval to change its taxable year to a calendar
year. See§1.442–1(b).
Example 2. Assume the same facts as in
Example 1, except that X desires to change to a
52–53-week taxable year ending with reference to
the month of December. Under paragraph (b)(1) of
this section X may obtain automatic approval to
make the change. See§1.442–1(b).
(c)Personalservicecorporation
defined—(1)In general. For purposes of
this section and section 442, a taxpayer is
a PSC for a taxable year only if—
(i) The taxpayer is a C corporation (as
defined in section 1361(a)(2)) for the tax-
able year;
(ii) The principal activity of the tax-
payer during the testing period is the per-
formance of personal services;
(iii) During the testing period, those
services are substantially performed by
employee-owners (as defined in para-
graph (g) of this section); and
(iv) Employee-owners own (as deter-
mined under the attribution rules of sec-
tion 318, except that the language“any”
applies instead of“50 percent”in section
318(a)(2)(C)) more than 10 percent of the
fair market value of the outstanding stock
in the taxpayer on the last day of the test-
ing period.
(2)Testing period—(i)In general.
Except as otherwise provided in para-
graph (c)(2)(ii) of this section, the testing
period for any taxable year is the imme-
diately preceding taxable year.
(ii)New corporations. The testing
period for a taxpayer’s first taxable year
is the period beginning on the first day of
that taxable year and ending on the earlier
of—
(A) The last day of that taxable year;
or
(B) The last day of the calendar year in
which that taxable year begins.
(3)Examples. The provisions of para-
graph (c)(2)(ii) of this section may be
illustrated by the following examples:
Example 1. Corporation A’s first taxable year
begins on June 1, 2001, and A desires to use a Sep-
tember 30 taxable year. However, if A is a personal
service corporation, it must obtain the Commission-
er’s approval to use a September 30 taxable year.
Pursuant to paragraph (c)(2)(ii) of this section, A’s
testing period for its first taxable year beginning
June 1, 2001, is the period June 1, 2001, through
September 30, 2001. Thus, if, based upon such test-
ing period, A is a personal service corporation, A
must obtain the Commissioner’s permission to use a
September 30 taxable year.
Example 2. The facts are the same as inExample
1, except that A desires to use a March 31 taxable
year. Pursuant to paragraph (c)(2)(ii) of this section,
A’s testing period for its first taxable year beginning
June 1, 2001, is the period June 1, 2001, through
December 31, 2001. Thus, if, based upon such test-
ing period, A is a personal service corporation, A
must obtain the Commissioner’s permission to use a
March 31 taxable year.
(d)Performance of personal ser-
vices—(1)Activities described in section
448(d)(2)(A). For purposes of this sec-
tion, any activity of the taxpayer
described in section 448(d)(2)(A) or the
regulations thereunder will be treated as
the performance of personal services.
Therefore, any activity of the taxpayer
that involves the performance of services
in the fields of health, law, engineering,
architecture, accounting, actuarial sci-
ence, performing arts, or consulting (as
such fields are defined in§1.448–1T)
will be treated as the performance of per-
sonal services for purposes of this sec-
tion.
(2)Activities not described in section
448(d)(2)(A). For purposes of this sec-
tion, any activity of the taxpayer not
described in section 448(d)(2)(A) or the
regulations thereunder will not be treated
as the performance of personal services.
(e)Principal activity—(1)General
rule. For purposes of this section, the
principal activity of a corporation for any
testing period will be the performance of
personal services if the cost of the corpo-
ration’s compensation (the compensation
cost) for such testing period that is attrib-
utable to its activities that are treated as
the performance of personal services
within the meaning of paragraph (d) of
this section (i.e., the total compensation
for personal service activities) exceeds 50
percent of the corporation’s total compen-
sation cost for such testing period.
(2)Compensation cost—(i)Amounts
included. For purposes of this section, the
compensation cost of a corporation for a
taxable year is equal to the sum of the
following amounts allowable as a deduc-
tion, allocated to a long-term contract, or
otherwise chargeable to a capital account
by the corporation during such taxable
year—
(A) Wages and salaries; and
(B) Any other amounts, attributable to
services performed for or on behalf of the
corporation by a person who is an
employee of the corporation (including an
owner of the corporation who is treated as
an employee under paragraph (g)(2) of
this section) during the testing period.
Such amounts include, but are not limited
to, amounts attributable to deferred com-
pensation, commissions, bonuses, com-
pensation includible in income under sec-
tion 83, compensation for services based
on a percentage of profits, and the cost of
providing fringe benefits that are includ-
ible in income.
(ii)Amounts excluded. Notwithstand-
ing paragraph (e)(2)(i) of this section,
compensation cost does not include
amounts attributable to a plan qualified
under section 401(a) or 403(a), or to a
simplified employee pension plan defined
in section 408(k).
(3)Attribution of compensation cost to
personal service activity—(i)Employees
involved only in the performance of per-
sonal services. The compensation cost for
employees involved only in the perfor-
mance of activities that are treated as per-
sonal services under paragraph (d) of this
section, or employees involved only in
supporting the work of such employees,
are considered to be attributable to the
corporation’s personal service activity.
(ii)Employees involved only in activi-
ties that are not treated as the perfor-
mance of personal services. The compen-
sation cost for employees involved only
in the performance of activities that are
not treated as personal services under
paragraph (d) of this section, or for
employees involved only in supporting
the work of such employees, are not con-
sidered to be attributable to the corpora-
tion’s personal service activity.
(iii)Other employees. The compensa-
tion cost for any employee who is not
described in either paragraph (e)(3)(i) or
(ii) of this section (a mixed-activity
employee) is allocated as follows—
(A)Compensation cost attributable to
personal service activity. That portion of
the compensation cost for a mixed activ-
ity employee that is attributable to the
corporation’s personal service activity
2002–24 I.R.B.1137June 17, 2002

equals the compensation cost for that
employee multiplied by the percentage of
the total time worked for the corporation
by that employee during the year that is
attributable to activities of the corporation
that are treated as the performance of per-
sonal services under paragraph (d) of this
section. That percentage is to be deter-
mined by the taxpayer in any reasonable
and consistent manner. Time logs are not
required unless maintained for other pur-
poses;
(B)Compensation cost not attribut-
able to personal service activity. That
portion of the compensation cost for a
mixed activity employee that is not con-
sidered to be attributable to the corpora-
tion’s personal service activity is the
compensation cost for that employee less
the amount determined in paragraph
(e)(3)(iii)(A) of this section.
(f)Services substantially performed by
employee-owners—(1)General rule. Per-
sonal services are substantially performed
during the testing period by employee-
owners of the corporation if more than 20
percent of the corporation’s compensation
cost for that period attributable to its
activities that are treated as the perfor-
mance of personal services within the
meaning of paragraph (d) of this section
(i.e., the total compensation for personal
service activities) is attributable to per-
sonal services performed by employee-
owners.
(2)Compensation cost attributable to
personal services. For purposes of para-
graph (f)(1) of this section—
(i) The corporation’s compensation
cost attributable to its activities that are
treated as the performance of personal
services is determined under paragraph
(e)(3) of this section; and
(ii) The portion of the amount deter-
mined under paragraph (f)(2)(i) of this
section that is attributable to personal ser-
vices performed by employee-owners is
to be determined by the taxpayer in any
reasonable and consistent manner.
(3)Examples. The provisions of this
paragraph (f) may be illustrated by the
following examples:
Example 1. For its taxable year beginning Feb-
ruary 1, 2001, Corp A’s testing period is the taxable
year ending January 31, 2000. During that testing
period, A’s only activity was the performance of
personal services. The total compensation cost of A
(including compensation cost attributable to
employee-owners) for the testing period was
$1,000,000. The total compensation cost attributable
to employee-owners of A for the testing period was
$210,000. Pursuant to paragraph (f)(1) of this sec-
tion, the employee-owners of A substantially per-
formed the personal services of A during the testing
period because the compensation cost of A’s
employee-owners was more than 20 percent of the
total compensation cost for all of A’s employees
(including employee-owners).
Example 2. Corp B has the same facts as corpo-
ration A inExample 1, except that during the taxable
year ending January 31, 2001, B also participated in
an activity that would not be characterized as the
performance of personal services under this section.
The total compensation cost of B (including com-
pensation cost attributable to employee-owners) for
the testing period was $1,500,000 ($1,000,000
attributable to B’s personal service activity and
$500,000 attributable to B’s other activity). The
total compensation cost attributable to employee-
owners of B for the testing period was $250,000
($210,000 attributable to B’s personal service activ-
ity and $40,000 attributable to B’s other activity).
Pursuant to paragraph (f)(1) of this section, the
employee-owners of B substantially performed the
personal services of B during the testing period
because more than 20 percent of B’s compensation
cost during the testing period attributable to its per-
sonal service activities was attributable to personal
services performed by employee-owners
($210,000).
(g)Employee-owner defined—(1)Ge-
neral rule. For purposes of this section, a
person is an employee-owner of a corpo-
ration for a testing period if—
(i) The person is an employee of the
corporation on any day of the testing
period; and
(ii) The person owns any outstanding
stock of the corporation on any day of the
testing period.
(2)Special rule for independent con-
tractors who are owners. Any person who
is an owner of the corporation within the
meaning of paragraph (g)(1)(ii) of this
section and who performs personal ser-
vices for, or on behalf of, the corporation
is treated as an employee for purposes of
this section, even if the legal form of that
person’s relationship to the corporation is
such that the person would be considered
an independent contractor for other pur-
poses.
(h)Special rules for affiliated groups
filing consolidated returns—(1)In gen-
eral. For purposes of applying this sec-
tion to the members of an affiliated group
of corporations filing a consolidated
return for the taxable year—
(i) The members of the affiliated group
are treated as a single corporation;
(ii) The employees of the members of
the affiliated group are treated as employ-
ees of such single corporation; and
(iii) All of the stock of the members of
the affiliated group that is not owned by
any other member of the affiliated group
is treated as the outstanding stock of that
corporation.
(2)Examples. The provisions of this
paragraph (h) may be illustrated by the
following examples:
Example 1. The affiliated group AB, consisting
of corporation A and its wholly owned subsidiary B,
filed a consolidated Federal income tax return for
the taxable year ending January 31, 2001, and AB is
attempting to determine whether it is affected by
this section for its taxable year beginning February
1, 2001. During the testing period (i.e., the taxable
year ending January 31, 2001), A did not perform
personal services. However, B’s only activity was
the performance of personal services. On the last
day of the testing period, employees of A did not
own any stock in A. However, some of B’s employ-
ees own stock in A. In the aggregate, B’s employees
own 9 percent of A’s stock on the last day of the
testing period. Pursuant to paragraph (h)(1) of this
section, this section is effectively applied on a con-
solidated basis to members of an affiliated group
filing a consolidated Federal income tax return.
Because the only employee-owners of AB are the
employees of B, and because B’s employees do not
own more than 10 percent of AB on the last day of
the testing period, AB is not a PSC subject to the
provisions of this section. Thus, AB is not required
to determine on a consolidated basis whether, during
the testing period, its principal activity is the provid-
ing of personal services, or the personal services are
substantially performed by employee-owners.
Example 2. The facts are the same as inExample
1, except that on the last day of the testing period A
owns only 80 percent of B. The remaining 20 per-
cent of B is owned by employees of B. The fair
market value of A, including its 80 percent interest
in B, as of the last day of the testing period, is
$1,000,000. In addition, the fair market value of the
20 percent interest in B owned by B’s employees is
$50,000 as of the last day of the testing period. Pur-
suant to paragraphs (c)(1)(iv) and (h)(1) of this sec-
tion, AB must determine whether the employee-
owners of A and B (i.e.,B’s employees) own more
than 10 percent of the fair market value of A and B
as of the last day of the testing period. Because the
$140,000 [($1,000,000 x .09) + $50,000] fair market
value of the stock held by B’s employees is greater
than 10 percent of the aggregate fair market value of
A and B as of the last day of the testing period, or
$105,000 [$1,000,000 + $50,000 x .10], AB may be
subject to this section if, on a consolidated basis
during the testing period, the principal activity of
AB is the performance of personal services and the
personal services are substantially performed by
employee-owners.
§1.441–4 Effective date.
Sections 1.441–0 through 1.441–3 are
applicable for taxable years ending on or
after May 17, 2002.
June 17, 200211382002–24 I.R.B.

§§ 1.441–1T, 1.441–2T, 1.441–3T and
1.441–4T [Removed]
Par. 4. Sections 1.441–1T, 1.441–2T,
1.441–3T and 1.441–4T are removed.
Par 5. Section 1.442–1 is revised to
read as follows:
§1.442–1 Change of annual accounting
period.
(a)Approval of the Commissioner.A
taxpayer that has adopted an annual
accounting period (as defined in§1.441–
1(b)(3)) as its taxable year generally must
continue to use that annual accounting
period in computing its taxable income
and for making its Federal income tax
returns. If the taxpayer wants to change
its annual accounting period and use a
new taxable year, it must obtain the
approval of the Commissioner, unless it is
otherwise authorized to change without
the approval of the Commissioner under
either the Internal Revenue Code (e.g.,
section 444 and section 859) or the regu-
lations thereunder (e.g., paragraph (c) of
this section). In addition, as described in
§1.441–1(c) and (d), a partnership, S cor-
poration, electing S corporation, or per-
sonal service corporation (PSC) generally
is required to secure the approval of the
Commissioner to adopt or retain an
annual accounting period other than its
required taxable year. The manner of
obtaining approval from the Commis-
sioner to adopt, change, or retain an
annual accounting period is provided in
paragraph (b) of this Section. However,
special rules for obtaining approval may
be provided in other sections.
(b)Obtaining approval—(1)Time and
manner for requesting approval. In order
to secure the approval of the Commis-
sioner to adopt, change, or retain an
annual accounting period, a taxpayer
must file an application, generally on
Form 1128,“Application To Adopt,
Change, or Retain a Tax Year”, with the
Commissioner within such time and in
such manner as is provided in administra-
tive procedures published by the Com-
missioner.
(2)General requirements for approval.
An adoption, change, or retention in
annual accounting period will be
approved where the taxpayer establishes a
business purpose for the requested annual
accounting period and agrees to the Com-
missioner’s prescribed terms, conditions,
and adjustments for effecting the adop-
tion, change, or retention. In determining
whether a taxpayer has established a busi-
ness purpose and which terms, condi-
tions, and adjustments will be required,
consideration will be given to all the facts
and circumstances relating to the adop-
tion, change, or retention, including the
tax consequences resulting therefrom.
Generally, the requirement of a business
purpose will be satisfied, and adjustments
to neutralize any tax consequences will
not be required, if the requested annual
accounting period coincides with the tax-
payer’s required taxable year (as defined
in§1.441–1(b)(2)), ownership taxable
year, or natural business year. In the case
of a partnership, S corporation, electing S
corporation, or PSC, deferral of income to
partners, shareholders, or employee-
owners will not be treated as a business
purpose.
(3)Administrative procedures. The
Commissioner will prescribe administra-
tive procedures under which a taxpayer
may be permitted to adopt, change, or
retain an annual accounting period. These
administrative procedures will describe
the business purpose requirements
(including an ownership taxable year and
a natural business year) and the terms,
conditions, and adjustments necessary to
obtain approval. Such terms, conditions,
and adjustments may include adjustments
necessary to neutralize the tax effects of a
substantial distortion of income that
would otherwise result from the requested
annual accounting period including: a
deferral of a substantial portion of the
taxpayer’s income, or shifting of a sub-
stantial portion of deductions, from one
taxable year to another; a similar deferral
or shifting in the case of any other person,
such as a beneficiary in an estate; the cre-
ation of a short period in which there is a
substantial net operating loss, capital loss,
or credit (including a general business
credit); or the creation of a short period in
which there is a substantial amount of
income to offset an expiring net operating
loss, capital loss, or credit. See, for
example, Rev. Proc. 2002–39, 2002–22
I.R.B. 1046, procedures for obtaining the
Commissioner’s prior approval of an
adoption, change, or retention in annual
accounting period through application to
the national office; Rev. Proc. 2002–37,
2002–22 I.R.B. 1030, automatic approval
procedures for certain corporations; Rev.
Proc. 2002–38, 2002–22 I.R.B. 1037,
automatic approval procedures for part-
nerships, S corporations, electing S cor-
porations, and PSCs; and Rev. Proc.
66–50, 1966–2 C.B. 1260, automatic
approval procedures for individuals. For
availability of Revenue Procedures and
Notices, see§601.601(d)(2) of this chap-
ter.
(4)Taxpayers to whom Section 441(g)
applies. If section 441(g) and§1.441–
1(b)(1)(iv) apply to a taxpayer, the adop-
tion of a fiscal year is treated as a change
in the taxpayer’s annual accounting
period under Section 442. Therefore, that
fiscal year can become the taxpayer’s tax-
able year only with the approval of the
Commissioner. In addition to any other
terms and conditions that may apply to
such a change, the taxpayer must estab-
lish and maintain books that adequately
and clearly reflect income for the short
period involved in the change and for the
fiscal year proposed.
(c)Special rule for change of annual
accounting period by subsidiary corpora-
tion. A subsidiary corporation that is
required to change its annual accounting
period under§1.1502–76, relating to the
taxable year of members of an affiliated
group that file a consolidated return, does
not need to obtain the approval of the
Commissioner or file an application on
Form 1128 with respect to that change.
(d)Special rule for newly married
couples. (1) A newly married husband or
wife may obtain automatic approval
under this paragraph (d) to change his or
her annual accounting period in order to
use the annual accounting period of the
other spouse so that a joint return may be
filed for the first or second taxable year
of that spouse ending after the date of
marriage. Such automatic approval will
be granted only if the newly married hus-
band or wife adopting the annual account-
ing period of the other spouse files a Fed-
eral income tax return for the short period
required by that change on or before the
15th day of the 4th month following the
close of the short period. See Section 443
and the regulations thereunder. If the due
date for any such short-period return
occurs before the date of marriage, the
first taxable year of the other spouse end-
ing after the date of marriage cannot be
2002–24 I.R.B.1139June 17, 2002

adopted under this paragraph (d). The
short-period return must contain a state-
ment at the top of page one of the return
that it is filed under the authority of this
paragraph (d). The newly married hus-
band or wife need not file Form 1128
with respect to a change described in this
paragraph (d). For a change of annual
accounting period by a husband or wife
that does not qualify under this paragraph
(d), see paragraph (b) of this section.
(2) The provisions of this paragraph
(d) may be illustrated by the following
example:
Example. H & W marry on September 25, 2001.
H is on a fiscal year ending June 30, and W is on a
calendar year. H wishes to change to a calendar year
in order to file joint returns with W. W’s first tax-
able year after marriage ends on December 31,
2001. H may not change to a calendar year for 2001
since, under this paragraph (d), he would have had
to file a return for the short period from July 1 to
December 31, 2000, by April 16, 2001. Since the
date of marriage occurred subsequent to this due
date, the return could not be filed under this para-
graph (d). Therefore, H cannot change to a calendar
year for 2001. However, H may change to a calen-
dar year for 2002 by filing a return under this para-
graph (d) by April 15, 2002, for the short period
from July 1 to December 31, 2001. If H files such a
return, H and W may file a joint return for calendar
year 2002 (which is W’s second taxable year ending
after the date of marriage).
(e)Effective date. The rules of this
Section are applicable for taxable years
ending on or after May 17, 2002.
§§1.442–2T and 1.442–3T [Removed]
Par. 6. Sections 1.442–2T and
1.442–3T are removed.
Par. 7. Section 1.706–1 is amended by
revising paragraphs (a) and (b) and add-
ing paragraph (d) to read as follows:
§1.706–1 Taxable years of partner and
partnership.
(a)Year in which partnership income
is includible. (1) In computing taxable
income for a taxable year, a partner is
required to include the Partner’s distribu-
tive share of partnership items set forth in
section 702 and the regulations thereun-
der for any partnership taxable year end-
ing within or with the partner’s taxable
year. A partner must also include in tax-
able income for a taxable year guaranteed
payments under Section 707(c) that are
deductible by the partnership under its
method of accounting in the partnership
taxable year ending within or with the
Partner’s taxable year.
(2) The rules of this paragraph (a)(1)
may beillustrated by the following
example:
Example. Partner A reports income using a cal-
endar year, while the partnership of which A is a
member reports its income using a fiscal year end-
ing May 31. The partnership reports its income and
deductions under the cash method of accounting.
During the partnership taxable year ending May 31,
2002, the Partnership makes guaranteed payments
of $120,000 to A for services and for the use of
capital. Of this amount, $70,000 was paid to A
between June 1 and December 31, 2001, and the
remaining $50,000 was paid to A between January 1
and May 31, 2002. The entire $120,000 paid to A is
includible in A’s taxable income for the calendar
year 2002 (together with A’s distributive share of
partnership items set forth in section 702 for the
partnership taxable year ending May 31, 2002).
(3) If a Partner receives distributions
under section 731 or sells or exchanges
all or part of a partnership interest, any
gain or loss arising therefrom does not
constitute partnership income.
(b)Taxable year—(1)Partnership
treated as a taxpayer. The taxable year of
a partnership must be determined as
though the partnership were a taxpayer.
(2)Partnership’s taxable year—(i)
Required taxable year. Except as pro-
vided in paragraph (b)(2)(ii) of this sec-
tion, the taxable year of a partnership
must be—
(A) The majority interest taxable year,
as defined in section 706(b)(4);
(B) If there is no majority interest tax-
able year, the taxable year of all of the
principal partners of the partnership, as
defined in 706(b)(3) (the principal part-
ners’taxable year); or
(C) If there is no majority interest tax-
able year or principal partners’taxable
year, the taxable year that produces the
least aggregate deferral of income as
determined under paragraph (b)(3) of this
section.
(ii)Exceptions. A partnership may
have a taxable year other than its required
taxable year if it makes an election under
section 444, elects to use a 52–53-week
taxable year that ends with reference to
its required taxable year or a taxable year
elected under section 444, or establishes a
business purpose for such taxable year
and obtains approval of the Commis-
sioner under section 442.
(3)Least aggregate deferral—(i)Tax-
able year that results in the least aggre-
gate deferral of income. The taxable year
that results in the least aggregate deferral
of income will be the taxable year of one
or more of the partners in the partnership
which will result in the least aggregate
deferral of income to the partners. The
aggregate deferral for a particular year is
equal to the sum of the products deter-
mined by multiplying the month(s) of
deferral for each partner that would be
generated by that year and each partner’s
interest in partnership profits for that
year. The partner’s taxable year that pro-
duces the lowest sum when compared to
the other partner’s taxable years is the
taxable year that results in the least aggre-
gate deferral of income to the partners. If
the calculation results in more than one
taxable year qualifying as the taxable year
with the least aggregate deferral, the part-
nership may select any one of those tax-
able years as its taxable year. However, if
one of the qualifying taxable years is also
the partnership’s existing taxable year, the
partnership must maintain its existing tax-
able year. The determination of the tax-
able year that results in the least aggre-
gate deferral of income generally must be
made as of the beginning of the partner-
ship’s current taxable year. The director,
however, may determine that the first day
of the current taxable year is not the
appropriate testing day and require the
use of some other day or period that will
more accurately reflect the ownership of
the partnership and thereby the actual
aggregate deferral to the partners where
the partners engage in a transaction that
has as its principal purpose the avoidance
of the principles of this section. Thus, for
example the preceding sentence would
apply where there is a transfer of an inter-
est in the partnership that results in a tem-
porary transfer of that interest principally
for purposes of qualifying for a specific
taxable year under the principles of this
section. For purposes of this section,
deferral to each partner is measured in
terms of months from the end of the part-
nership’s taxable year forward to the end
of the partner’s taxable year.
(ii)Determination of the taxable year
of a partner or partnership that uses a
52–53-week taxable year. For purposes of
the calculation described in paragraph
(b)(3)(i) of this section, the taxable year
of a partner or partnership that uses a
52–53-week taxable year must be the
same year determined under the rules of
June 17, 200211402002–24 I.R.B.

section 441(f) and the regulations there-
under with respect to the inclusion of
income by the partner or partnership.
(iii)Special de minimis rule. If the tax-
able year that results in the least aggre-
gate deferral produces an aggregate defer-
ral that is less than .5 when compared to
the aggregate deferral of the current tax-
able year, the Partnership’s current tax-
able year will be treated as the taxable
year with the least aggregate deferral.
Thus, the partnership will not be permit-
ted to change its taxable year.
(iv)Examples. The principles of this
section may be illustrated by the follow-
ing examples:
Example 1. Partnership P is on a fiscal year end-
ing June 30. Partner A reports income on the fiscal
year ending June 30 and Partner B reports income
on the fiscal year ending July 31. A and B each have
a 50 percent interest in partnership profits. For its
taxable year beginning July 1, 1987, the partnership
will be required to retain its taxable year since the
fiscal year ending June 30 results in the least aggre-
gate deferral of income to the partners. This deter-
mination is made as follows:
Test 6/30Year EndInterest in
Partnership
Profits
Months of
Deferral for
6/30 Year End
Interest
x Deferral
Partner A6/30.500
Partner B7/31.51.5
Aggregate deferral.5
Test 7/31Year EndInterest in
Partnership
Profits
Months of
Deferral for
7/31 Year End
Interest
x Deferral
Partner A6/30.5115.5
Partner B7/31.500
Aggregate deferral5.5
Example 2. The facts are the same as inExample 1except that A reports income on the calendar year and B reports on the fiscal year ending November 30.
For the partnership’s taxable year beginning July 1, 1987, the partnership is required to change its taxable year to a fiscal year ending November 30 because such
year results in the least aggregate deferral of income to the partners. This determination is made as follows:
Test 12/31Year EndInterest in
Partnership
Profits
Months of
Deferral for
12/31 Year End
Interest
x Deferral
Partner A12/31.500
Partner B11/30.5115.5
Aggregate deferral5.5
Test 11/30Year EndInterest in
Partnership
Profits
Months of
Deferral for
11/30 Year End
Interest
x Deferral
Partner A12/31.51.5
Partner B11/30.500
Aggregate deferral.5
Example 3. The facts are the same as inExample 2except that B reports income on the fiscal year ending June 30. For the partnership’s taxable year beginning
July 1, 1987, each partner’s taxable year will result in identical aggregate deferral of income. If the partnership’s current taxable year was neither a fiscal year end-
ing June 30 nor the calendar year, the partnership would select either the fiscal year ending June 30 or the calendar year as its taxable year. However, since the
partnership’s current taxable year ends June 30, it must retain its current taxable year. The determination is made as follows:
2002–24 I.R.B.1141June 17, 2002

Test 12/31Year EndInterest in
Partnership
Profits
Months of
Deferral for
12/31 Year End
Interest
x Deferral
Partner A12/31.500
Partner B6/30.563.0
Aggregate deferral3.0
Test 6/30Year EndInterest in
Partnership
Profits
Months of
Deferral for
6/30 Year End
Interest
x Deferral
Partner A12/31.563.0
Partner B6/30.500
Aggregate deferral3.0
Example 4. The facts are the same as inExample 1except that on December 31, 1987, partner A sells a 4 percent interest in the Partnership to Partner C, who
reports income on the fiscal year ending June 30, and a 40 percent interest in the partnership to Partner D, who also reports income on the fiscal year ending June
30. The taxable year beginning July 1, 1987, is unaffected by the sale. However, for the taxable year beginning July 31, 1988, the partnership must determine the
taxable year resulting in the least aggregate deferral as of July 1, 1988. In this case, the partnership will be required to retain its taxable year since the fiscal year
ending June 30 continues to be the taxable year that results in the least aggregate deferral of income to the partners.
Example 5. The facts are the same as inExample 4except that Partner D reports income on the fiscal year ending April 30. As inExample 4, the taxable year
during which the sale took place is unaffected by the shifts in interests. However, for its taxable year beginning July 1, 1988, the partnership will berequired to
change its taxable year to the fiscal year ending April 30. This determination is made as follows:
Test 7/31Year EndInterest in
Partnership
Profits
Months of
Deferral for
7/31 Year End
Interest
x Deferral
Partner A6/30.0611.66
Partner B7/31.500
Partner C6/30.0411.44
Partner D4/30.493.60
Aggregate deferral4.70
Test 6/30Year EndInterest in
Partnership
Profits
Months of
Deferral for
6/30 Year End
Interest
x Deferral
Partner A6/30.0600
Partner B7/31.51.5
Partner C6/30.0400
Partner D4/30.4104.0
Aggregate deferral
4.5
June 17, 200211422002–24 I.R.B.

Test 4/30Year EndInterest in
Partnership
Profits
Months of
Deferral for
4/30 Year End
Interest
x Deferral
Partner A6/30.062.12
Partner B7/31.531.50
Partner C6/30.042.08
Partner D4/30.400
Aggregate deferral1.70
§1.706–1(b)(3) Test:
Current taxable year (June 30)4.5
Less: Taxable year producing the least
aggregate deferral (April 30)1.7
Additional aggregate deferral (greater than .5)2.8
Example 6. (i) Partnership P has two partners, A who reports income on the fiscal year ending March 31, and B who reports income on the fiscal year ending
July 31. A and B share profits equally. P has determined its taxable year under paragraph (b)(3) of this section to be the fiscal year ending March 31 as follows:
Test 3/31Year EndInterest in
Partnership
Profits
Months of
Deferral for
3/31 Year End
Interest
x Deferral
Partner A3/31.500
Partner B7/31.542
Aggregate deferral2
Test 7/31Year EndInterest in
Partnership
Profits
Deferral for
7/31 Year End
Interest
x Deferral
Partner A3/31.584
Partner B7/31.500
Aggregate deferral4
(ii) In May 1988, Partner A sells a 45 percent interest in the partnership to C, who reports income on the fiscal year ending April 30. For the taxable period
beginning April 1, 1989, the fiscal year ending April 30 is the taxable year that produces the least aggregate deferral of income to the partners. However, under
paragraph (b)(3)(iii) of this section the partnership is required to retain its fiscal year ending March 31. This determination is made as follows:
Test 3/31Year EndInterest in
Partnership
Profits
Deferral for
3/31 Year End
Interest
x Deferral
Partner A3/31.0500
Partner B7/31.542.0
Partner C4/30.451.45
Aggregate deferral2.45
2002–24 I.R.B.1143June 17, 2002

Test 7/31Year EndInterest in
Partnership
Profits
Deferral for
7/31 Year End
Interest
Deferral
Partner A3/31.058.40
Partner B7/31.500
Partner C4/30.4594.05
Aggregate deferral4.45
Test 4/30Year EndInterest in
Partnership
Profits
Deferral for
4/30 Year End
Interest
Deferral
Partner A3/31.0511.55
Partner B7/31.531.50
Partner C4/30.4500
Aggregate deferral2.05
§1.706–1(b)(3) Test:
Current taxable year (3/31)2.45
Less: Taxable year producing the leastaggregate deferral (4/30).2.05
.40
Additional aggregate deferral (greater than .5)
(4)Measurement of partner’s profits
and capital interest—(i)In general. The
rules of this paragraph (b)(4) apply in
determining the majority interest taxable
year, the principal partners’taxable year,
and the least aggregate deferral taxable
year.
(ii)Profits interest—(A)In general.
For purposes of section 706(b), a part-
ner’s interest in partnership profits is gen-
erally the partner’s percentage share of
partnership profits for the current partner-
ship taxable year. If the partnership does
not expect to have net income for the cur-
rent partnership taxable year, then a part-
ner’s interest in partnership profits
instead must be the partner’s percentage
share of partnership net income for the
first taxable year in which the partnership
expects to have net income.
(B)Percentage share of partnership
net income. The partner’s percentage
share of partnership net income for a part-
nership taxable year is the ratio of: the
partner’s distributive share of partnership
net income for the taxable year, to the
partnership’s net income for the year. If a
partner’s percentage share of partnership
net income for the taxable year depends
on the amount or nature of partnership
income for that year (due to, for example,
preferred returns or special allocations of
specific partnership items), then the part-
nership must make a reasonable estimate
of the amount and nature of its income
for the taxable year. This estimate must
be based on all facts and circumstances
known to the partnership as of the first
day of the current partnership taxable
year. The partnership must then use this
estimate in determining the partners’
interests in partnership profits for the tax-
able year.
(C)Distributive share. For purposes of
this paragraph (b)(4)(ii), a partner’s dis-
tributive share of partnership net income
is determined by taking into account all
rules and regulations affecting that deter-
mination, including, without limitation,
sections 704(b), (c), and (e), 736, and
743.
(iii)Capital interest. Generally, a part-
ner’s interest in partnership capital is
determined by reference to the assets of
the partnership that the partner would be
entitled to upon withdrawal from the part-
nership or upon liquidation of the partner-
ship. If the partnership maintains capital
accounts in accordance with§1.704–
1(b)(2)(iv), then for purposes of section
706(b), the partnership may assume that a
partner’s interest in partnership capital is
the ratio of the partner’s capital account
to all partners’capital accounts as of the
first day of the partnership taxable year.
(5)Certain tax-exempt partners disre-
garded. [Reserved]
(6)Foreign Partners. [Reserved]
(7)Adoption of taxable year. A newly-
formed partnership may adopt, in accor-
dance with§1.441–1(c), its required tax-
able year, a taxable year elected under
section 444, or a 52–53-week taxable
year ending with reference to its required
taxable year or a taxable year elected
under section 444 without securing the
approval of the Commissioner. If a
newly-formed partnership wants to adopt
any other taxable year, it must establish a
business purpose and secure the approval
of the Commissioner under section 442.
(8)Changeintaxableyear—(i)
Partnerships—(A) Approval required.An
existing partnership may change its tax-
able year only by securing the approval of
the Commissioner under section 442 or
making an election under Section 444.
However, a partnership may obtain auto-
matic approval for certain changes,
including a change to its required taxable
June 17, 200211442002–24 I.R.B.

year, pursuant to administrative proce-
dures published by the Commissioner.
(B)Short period tax return. A partner-
ship that changes its taxable year must
make its return for a short period in
accordance with section 443, but must not
annualize the partnership taxable income.
(C)Change in required taxable year.
If a partnership is required to change to
its majority interest taxable year, then no
further change in the partnership’s
required taxable year is required for either
of the two years following the year of the
change. This limitation against a second
change within a three-year period applies
only if the first change was to the major-
ity interest taxable year and does not
apply following a change in the partner-
ship’s taxable year to the principal part-
ners’taxable year or the least aggregate
deferral taxable year.
(ii)Partners. Except as otherwise pro-
vided in the Internal Revenue Code or the
regulations thereunder (e.g., section 859
regarding real estate investment trusts or
§1.442–2(c) regarding a subsidiary
changing to its consolidated parent’s tax-
able year), a partner may not change its
taxable year without securing the
approval of the Commissioner under sec-
tion 442. However, certain partners may
be eligible to obtain automatic approval
to change their taxable years pursuant to
the regulations or administrative proce-
dures published by the Commissioner. A
partner that changes its taxable year must
make its return for a short period in
accordance with section 443.
(9)Retention of taxable year. In cer-
tain cases, a partnership will be required
to change its taxable year unless it obtains
the approval of the Commissioner under
section 442, or makes an election under
section 444, to retain its current taxable
year. For example, a partnership using a
taxable year that corresponds to its
required taxable year must obtain the
approval of the Commissioner to retain
such taxable year if its required taxable
year changes as a result of a change in
ownership, unless the partnership previ-
ously obtained approval for its current
taxable year or, if appropriate, makes an
election under section 444.
(10)Procedures for obtaining
approval or making a section 444 elec-
tion. See§1.442–1(b) for procedures to
obtain the approval of the Commissioner
(automatically or otherwise) to adopt,
change, or retain a taxable year. See
§§1.444–1T and 1.444–2T for qualifica-
tions, and§1.444–3T for procedures, for
making an election under section 444.
*****
(d)Effective date. The rules of this
section are applicable for taxable years
ending on or after May 17, 2002, except
for paragraph (c), which applies for tax-
able years beginning after December 31,
1953.
§1.706–1T [Removed]
Par. 8. Section 1.706–1T is removed.
Par. 9. Section 1.1378–1 is added
under the undesignated centerheading
“Small Business Corporations and Their
Shareholders”to read as follows:
§1.1378–1 Taxable year of S
corporation.
(a)In general. The taxable year of an
S corporation must be a permitted year. A
permitted year is the required taxable year
(i.e., a taxable year ending on December
31), a taxable year elected under section
444, a 52–53-week taxable year ending
with reference to the required taxable
year or a taxable year elected under sec-
tion 444, or any other taxable year for
which the corporation establishes a busi-
ness purpose to the satisfaction of the
Commissioner under section 442.
(b)Adoption of taxable year. An elect-
ing S corporation may adopt, in accor-
dance with§1.441–1(c), its required tax-
able year, a taxable year elected under
section 444, or a 52–53-week taxable
year ending with reference to its required
taxable year or a taxable year elected
under section 444 without the approval of
the Commissioner. See§1.441–1. An
electing S corporation that wants to adopt
any other taxable year, must establish a
business purpose and obtain the approval
of the Commissioner under section 442.
(c)Change in taxable year—(1)
Approval required. An S corporation or
electing S corporation that wants to
change its taxable year must obtain the
approval of the Commissioner under sec-
tion 442 or make an election under sec-
tion 444. However, an S corporation or
electing S corporation may obtain auto-
matic approval for certain changes,
including a change to its required taxable
year, pursuant to administrative proce-
dures published by the Commissioner.
(2)Short period tax return. An S cor-
poration or electing S corporation that
changes its taxable year must make its
return for a short period in accordance
with section 443, but must not annualize
the corporation’s taxable income.
(d)Retention of taxable year. In cer-
tain cases, an S corporation or electing S
corporation will be required to change its
taxable year unless it obtains the approval
of the Commissioner under section 442,
or makes an election under Section 444,
to retain its current taxable year. For
example, a corporation using a June 30
fiscal year that elects to be an S corpora-
tion and, as a result, is required to use the
calendar year must obtain the approval of
the Commissioner to retain its current fis-
cal year.
(e)Procedures for obtaining approval
or making a section 444 election—(1)In
general. See§1.442–1(b) for procedures
to obtain the approval of the Commis-
sioner (automatically or otherwise) to
adopt, change, or retain a taxable year.
See§§1.444–1T and 1.444–2T for quali-
fications, and 1.444–3T for procedures,
for making an election under section 444.
(2)Special rules for electing S corpo-
rations. An electing S corporation that
wants to adopt, change to, or retain a tax-
able year other than its required taxable
year must request approval of the Com-
missioner on Form 2553,Election by a
Small Business Corporation, when the
election to be an S corporation is filed
pursuanttosection1362(b)and
§1.1362–6. See§1.1362–6(a)(2)(i) for
the manner of making an election to be an
S corporation. If such corporation
receives permission to adopt, change to,
or retain a taxable year other than its
required taxable year, the election to be
an S corporation will be effective. Denial
of the request renders the election ineffec-
tive unless the corporation agrees that, in
the event the request to adopt, change to,
or retain a taxable year other than its
required taxable year is denied, it will
adopt, change to, or retain its required
taxable year or, if applicable, make an
election under section 444.
(f)Effective date. The rules of this
Section are applicable for taxable years
ending on or after May 17, 2002.
2002–24 I.R.B.1145June 17, 2002

PA RT 5 c—TEMPORARY INCOME
TAX REGULATIONS UNDER THE
ECONOMIC RECOVERY TAX ACT
OF 1981
Par. 10. The authority citation for part
5c continues to read as follows:
Authority 26 U.S.C. 168(f)(8)(G) and
7805.
§5c.442–1 [Removed]
Par. 11. Section 5c.442–1 is removed.
PA RT 5 f—TEMPORARY INCOME
TAX REGULATIONS UNDER THE
TAX EQUITY AND FISCAL
RESPONSIBILITY ACT OF 1982
Par. 12. The authority citation for part
5f continues to read in part as follows:
Authority: 26 U.S.C. 7805***
§5f.442–1 [Removed]
Par. 13. Section 5f.442–1 is removed.
PA RT 1 8—TEMPORARY INCOME
TAX REGULATIONS UNDER THE
SUBCHAPTER S REVISION ACT OF
1982
Par. 14. The authority citation for part
18 continues to read as follows:
Authority 26 U.S.C. 7805.
§18.1378–1T [Removed]
Par. 15. Section 18.1378–1 is removed.
PART 602—OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION ACT
Par. 16. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 17. In§602.101, paragraph (b) is
amended by adding an entry for“1.441–
2”, removing the entries for“1.441–3T”,
“1.442–2T”, and“1.442–3T”, revising the
entry for“1.442–1”, and adding an entry
for“1.1378–1”in numerical order to read
as follows:
§602.101 OMB Control numbers.
*****
(b)***
CFR part or section where
identified and described
Current OMB
control No.
*****
1.441–2 ..................................................................................................................................................................... 1545–1748
*****
1.442–1 ..................................................................................................................................................................... 1545–0074
1545–0123
1545–0134
1545–0152
1545–1748
*****
1.1378–1 ................................................................................................................................................................... 1545–1748
*****
Robert E. Wenzel,
Deputy Commissioner of
Internal Revenue.
Approved May 3, 2002.
Pamela F. Olson,
Acting Assistant Secretary
of the Treasury.
(Filed by the Office of the Federal Register on May
16, 2002, 8:45 a.m., and published in the issue of
the Federal Register for May 17, 2002, 67 F.R.
35009)
Section 442.—Change of
Annual Accounting Period
26 CFR 1.442–1: Change of annual accounting
period.
Final regulations relate to obtaining approval of
the Commissioner to adopt, change, or retain an
annual accounting period under section 442 of the
Code. See T.D. 8996, page 1127.
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 June 2002. See Rev. Rul. 2002–36, page 1148.
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 June 2002. See Rev. Rul. 2002–36, page 1148.
June 17, 200211462002–24 I.R.B.

Section 472.—Last-in, First-
out Inventories
26 CFR 1.472–1: Last-in, first-out inventories.
LIFO; price indexes; department
stores. The April 2002 Bureau of Labor
Statistics price indexes are accepted for
use by department stores employing the
retail inventory and last-in, first-out
inventory methods for valuing inventories
for tax years ended on, or with reference
to, April 30, 2002.
Rev. Rul. 2002–37
The following Department Store
Inventory Price Indexes for April 2002
were issued by the Bureau of Labor Sta-
tistics. The indexes are accepted by the
Internal Revenue Service, under§1.472–
1(k) of the Income Tax Regulations and
Rev. Proc. 86–46, 1986–2 C.B. 739, for
appropriate application to inventories of
department stores employing the retail
inventory and last-in, first-out inventory
methods for tax years ended on, or with
reference to, April 30, 2002.
The Department Store Inventory Price
Indexes are prepared on a national basis
and include (a) 23 major groups of
departments, (b) three special combina-
tions of the major groups—soft goods,
durable goods, and miscellaneous goods,
and (c) a store total, which covers all
departments, including some not listed
separately, except for the following:
candy, food, liquor, tobacco, and contract
departments.
BUREAU OF LABOR STATISTICS, DEPARTMENT STORE
INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS
(January 1941 = 100, unless otherwise noted)
GroupsApr.
2001
Apr.
2002
Percent Change
from Apr. 2001
to Apr. 2002
1
1.Piece Goods ------------------------------------------------------------497.9488.7-1.8
2.Domestics and Draperies --------------------------------------------606.5597.7-1.5
3.Women’s and Children’s Shoes ------------------------------------657.4652.6-0.7
4.Men’s Shoes -----------------------------------------------------------895.3902.70.8
5.Infants’Wear -----------------------------------------------------------626.8622.2-0.7
6.Women’s Underwear -------------------------------------------------565.5554.0-2.0
7.Women’s Hosiery -----------------------------------------------------344.8356.03.2
8.Women’s and Girls’Accessories -----------------------------------557.3565.61.5
9.Women’s Outerwear and Girls’Wear -----------------------------414.5395.0-4.7
10.Men’s Clothing --------------------------------------------------------591.8600.21.4
11.Men’s Furnishings ----------------------------------------------------618.7604.4-2.3
12.Boys’Clothing and Furnishings ------------------------------------485.0504.24.0
13.Jewelry ------------------------------------------------------------------938.6905.6-3.5
14.Notions ------------------------------------------------------------------793.4794.80.2
15.Toilet Articles and Drugs --------------------------------------------991.0974.7-1.6
16.Furniture and Bedding -----------------------------------------------650.3627.7-3.5
17.Floor Coverings -------------------------------------------------------626.8618.7-1.3
18.Housewares ------------------------------------------------------------773.8756.6-2.2
19.Major Appliances -----------------------------------------------------224.8222.6-1.0
20.Radio and Television -------------------------------------------------55.250.8-8.0
21.Recreation and Education
2
------------------------------------------90.387.2-3.4
22.Home Improvements
2
------------------------------------------------127.0125.8-0.9
23.Auto Accessories
2
-----------------------------------------------------109.0110.81.7
Groups 1—15: Soft Goods -----------------------------------------------603.2591.9-1.9
Groups 16—20: Durable Goods -----------------------------------------426.5413.9-3.0
Groups 21—23: Misc. Goods
2
-------------------------------------------98.997.1-1.8
Store Total
3
-------------------------------------------------------------537.5526.3-2.1
1
Absence of a minus sign before the percentage change in this column signifies a price increase.
2
Indexes on a January 1986=100 base.
3
The store total index covers all departments, including some not listed separately, except for the following: candy, food,
liquor, tobacco, and contract departments.
2002–24 I.R.B.1147June 17, 2002

DRAFTING INFORMATION
The principal author of this revenue
ruling is Michael Burkom of the Office of
Associate Chief Counsel (Income Tax and
Accounting). For further information
regarding this revenue ruling, contact Mr.
Burkom at (202) 622–7718 (not a toll-
free call).
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 June 2002. See
Rev. Rul. 2002–36, page 1148.
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 June 2002. See Rev. Rul. 2002–36, page 1148.
Section 642.—Special Rules
for Credits and Deductions
Federal short-term, mid-term, and long-term
rates are set forth for the month of June 2002. See
Rev. Rul. 2002–36, page 1148.
Section 706.—Taxable Years
of Partner and Partnership
26 CFR 1.706–1: Taxable years of partner and part-
nership.
Final regulations relate to taxable years of part-
nerships under section 706 of the Code. See T.D.
8996, page 1127.
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 June 2002. See Rev. Rul. 2002–36, page 1148.
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 June 2002. See Rev. Rul. 2002–36, page 1148.
Section 1274.—Determi-
nation 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 pur-
poses of sections 382, 1274, 1288, and
other sections of the Code, tables set forth
the rates for June 2002.
Rev. Rul. 2002–36
This revenue ruling provides various
prescribed rates for federal income tax
purposes for June 2002 (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
adjusted applicable federal rates (adjusted
AFR) for the current month for purposes
of section 1288(b). Table 3 sets forth the
adjusted federal long-term rate and the
long-term tax-exempt rate described in
section 382(f). Table 4 contains the
appropriate percentages for determining
the low-income housing credit described
in section 42(b)(2) for buildings placed in
service during the current month. Finally,
Table 5 contains the federal rate for 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.
REV. RUL. 2002–36 TABLE 1
Applicable Federal Rates (AFR) for June 2002
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-Term
AFR2.91%2.89%2.88%2.87%
110% AFR3.21%3.18%3.17%3.16%
120% AFR3.50%3.47%3.46%3.45%
130% AFR3.80%3.76%3.74%3.73%
Mid-Term
AFR4.74%4.69%4.66%4.64%
110% AFR5.23%5.16%5.13%5.11%
120% AFR5.71%5.63%5.59%5.57%
130% AFR6.19%6.10%6.05%6.02%
150% AFR7.16%7.04%6.98%6.94%
175% AFR8.38%8.21%8.13%8.07%
June 17, 200211482002–24 I.R.B.

REV. RUL. 2002–36 TABLE 1—CONTINUED
Applicable Federal Rates (AFR) for June 2002
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Long-Term
AFR5.70%5.62%5.58%5.56%
110% AFR6.28%6.18%6.13%6.10%
120% AFR6.85%6.74%6.68%6.65%
130% AFR7.44%7.31%7.24%7.20%
REV. RUL. 2002–36 TABLE 2
Adjusted AFR for June 2002
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
adjusted AFR2.45%2.44%2.43%2.43%
Mid-term
adjusted AFR3.67%3.64%3.62%3.61%
Long-term
adjusted AFR4.89%4.83%4.80%4.78%
REV. RUL. 2002–36 TABLE 3
Rates Under Section 382 for June 2002
Adjusted federal long-term rate for the current month4.89%
Long-term tax-exempt rate for ownership changes during the current month (the highest
of the adjusted federal long-term rates for the current month and the prior two months.)5.01%
REV. RUL. 2002–36 TABLE 4
Appropriate Percentages Under Section 42(b)(2) for June 2002
Appropriate percentage for the 70% present value low-income housing credit8.22%
Appropriate percentage for the 30% present value low-income housing credit3.52%
2002–24 I.R.B.1149June 17, 2002

REV. RUL. 2002–36 TABLE 5
Rate Under Section 7520 for June 2002
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 interest5.8%
Section 1288.—Treatment of
Original Issue Discounts on
Tax-Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of June 2002. See Rev. Rul. 2002–36, page 1148.
Section 1378.—Taxable Year
of S Corporation
26 CFR 1.1378–1: Taxable year of S corporation.
Final regulations relate to taxable years of S cor-
porations under section 1378 of the Code. See T.D.
8996, page 1127.
Section 4261.—Imposition of
Ta x
26 CFR 49.4261–1: Imposition of tax; in general.
(Also§§4281.)
Segment Tax. This ruling provides
guidance on how to calculate the tax on
domestic segments under section 4261(b)
of the Code if an aircraft is chartered and
one or more persons are transported on
that aircraft.
Rev. Rul. 2002–34
ISSUE
How is the tax on domestic segments
under§4261(b) of the Internal Revenue
Code calculated if an aircraft is chartered
and one or more persons are transported
on that aircraft?
FACTS
Xoperates an air charter service that
provides taxable air transportation. Each
ofX’s aircraft has a certificated takeoff
weight in excess of 6,000 pounds. The
amountXcharges for the charter of an
aircraft is not affected by the number of
passengers transported on the aircraft.
Passengers transported on the aircraft do
not pay for the transportation.
LAW AND ANALYSIS
Section 4261(a) imposes a tax on the
amount paid for taxable transportation (as
defined in§4262) of any person by air
(the percentage tax) equal to 7.5 percent
of the amount paid.
Section 4262(a)(1) provides that the
term“taxable transportation”includes
transportation by air which begins in the
United States and ends in the United
States.
Section4261(b)(1),enactedby
§1031(c)(1) of the Taxpayer Relief Act
of 1997, 1997–4 (Vol. 1) C.B. 1, 143,
imposes a tax on the amount paid for
each domestic segment of taxable trans-
portation (the segment tax) equal to a
fixed amount determined in accordance
with the table contained in that section.
For segments beginning in 2002, that
amount is $3.00 per segment. The term
“domesticsegment”isdefinedin
§4261(b)(2) as any segment consisting of
one takeoff and one landing that is tax-
abletransportationdescribedin
§4262(a)(1).
Section 4261(c) imposes a tax on any
amount paid for any transportation of any
person by air if the transportation begins
or ends in the United States (the interna-
tional facilities tax). Generally, the
amount of the tax was set at $12.00 for
amounts paid in 1997. Section 4261(e)(4)
provides that the amount of the tax
imposed by§4261(c) is to be adjusted
for inflation; generally, the amount of the
tax for amounts paid in 2002 is $13.20.
Section 4281 provides an exemption
from the tax imposed by§4261 for air-
craft having a certificated takeoff weight
of 6,000 pounds or less, except when that
aircraft is operated on an established line.
Rev. Rul. 72–309, 1972–1 C.B. 348,
addresses the calculation of the interna-
tional facilities tax imposed by§4261(c)
in the context of a single payment for a
charter. The revenue ruling concludes
that, if a single amount is paid for a char-
ter, the§4261(c) international facilities
tax applies with respect to each passenger
because implicit in the charter fee is an
amount paid for the transportation of each
passenger actually on the flight.
The§4261(b) segment tax is similar
to the§4261(c) international facilities tax
inasmuch as it is not calculated as a per-
centage of the amount paid, but is a fixed
amount imposed on the amount paid for
the transportation. Rev. Rul. 72–309
establishes that implicit in a charter pay-
ment is an amount paid for each passen-
ger actually on the flight. Thus, as in the
case of the§4261(c) international facili-
ties tax, the§4261(b) segment tax is to
be calculated on a per-passenger basis.
Accordingly, for each segment,Xmust
calculate the§4261(b) segment tax by
multiplying the amount of tax set forth in
§4261(b)(1) by the number of passengers
transported on the chartered aircraft. (The
segment tax so determined is not an
amount paid for taxable transportation for
purposes of calculating the§4261(a) per-
centage tax.)
HOLDING
If an aircraft is chartered and one or
more persons are transported on that air-
craft, for each segment the tax under
§4261(b) is calculated by multiplying the
amount of tax set forth in§4261(b)(1) by
the number of passengers transported on
the aircraft.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Patrick S. Kirwan of the Office
of Associate Chief Counsel (Passthroughs
June 17, 200211502002–24 I.R.B.

and Special Industries). For further infor-
mation regarding this revenue ruling, con-
tact Mr. Kirwan at (202) 622–3130 (not a
toll-free call).
Section 7520.—Valuation
Tables
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of June 2002. See Rev. Rul. 2002–36, page 1148.
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 June 2002. See Rev. Rul. 2002–36, page 1148.
2002–24 I.R.B.1151June 17, 2002

Part III. Administrative, Procedural, and Miscellaneous
Additional Relief for Certain
Taxpayers Affected by the
September 11, 2001 Terrorist
Attack
Notice 2002–40
PURPOSE
This notice supplements and expands
the relief granted under section 7508A of
the Internal Revenue Code (Code) in
Notice 2001–61, 2001–40 I.R.B. 305, and
Notice 2001–68, 2001–47 I.R.B. 504, for
taxpayers affected by the September 11,
2001, Terrorist Attack. In Notice 2001–61
and Notice 2001–68, the Department of
the Treasury and the IRS extended and
postponed filing and payment due dates
for affected taxpayers. At the time those
notices were issued, the Code limited the
amount of interest relief the IRS could
provide to an affected taxpayer. Under
section 6404(h), interest was abated only
for income taxes due from an affected
taxpayer located in the Presidentially
declared disaster area and only if both an
extension of time to file under section
6081 and an extension of time to pay
under section 6161 were granted to the
taxpayer. The Secretary’s authority to
provide relief under section 7508A was
specifically limited to items other than
interest. In addition, section 7508A per-
mitted the Secretary to disregard no more
than 120 days in the calculation of penal-
ties.
On January 23, 2002, the President
signed into law the Victims of Terrorism
Tax Relief Act of 2001 (the Act). Section
112 of the Act repealed section 6404(h)
and amended section 7508A (effective
September 11, 2001), by providing, in
part, that the Secretary may disregard up
to one year in determining the amount of
any interest or penalty. Under this
increased authority, the Department of the
Treasury and the IRS are providing relief
from interest and expanded relief from
the failure to pay penalty for certain
affected taxpayers.
GRANT OF RELIEF
(1) For affected taxpayers with an
original income tax return due date on or
after September 11, 2001, and on or
before November 30, 2001, that were pre-
viously granted a six-month extension of
time to file and pay and a 120 day post-
ponement of time to file and pay by para-
graphs (1) and (2) of the Grant of Relief
Section of Notice 2001–61, and for cer-
tain taxpayers who had difficulty in filing
their federal income tax returns due on or
after September 11, 2001, and on or
before October 31, 2001, because of dis-
ruptions in the transportation and delivery
of documents by mail or private delivery
services resulting from the terrorist
attack, that were previously granted a
postponement of time to file and pay until
November 15, 2001, by paragraph (5) of
the Grant of Relief Section of Notice
2001–61, interest will not be due for the
period of time that the payment is
extended and postponed. For example, an
affected fiscal year taxpayer with an
original due date of September 17, 2001,
has until July 15, 2002, to file and pay as
a result of the relief granted by Notice
2001–61. Under this notice, no interest
will accrue from September 17, 2001,
through July 15, 2002. Additionally, no
failure to file or pay penalty will accrue
from September 17, 2001, through July
15, 2002. This relief applies to all
affected taxpayers (as defined in Notice
2001–61 and Announcement 2001–124
2001–52 I.R.B. 630) no matter where
they are located.
(2) For affected taxpayers with an
extended income tax return due date on or
after September 11, 2001, and on or
before November 30, 2001, that were pre-
viously granted a 120 day postponement
of time to file by Notice 2001–61, and for
taxpayers with an extended due date on or
after December 1, 2001, and on or before
January 31, 2002, that were previously
granted a postponement of time to file
until February 15, 2002, by paragraph (1)
of the Additional Grant of Relief section
of Notice 2001–68, interest will not be
due for the period beginning September
11, 2001, and ending with the postponed
due date of the return. In addition, the
relief from the failure to pay penalty pro-
vided by Notice 2001–61 for the period
September 11, 2001, through January 9,
2002 (120 days) is expanded to cover the
period beginning September 11, 2001,
and ending with the postponed due date
of the return. For example, an individual
income taxpayer with an extended due
date of October 15, 2001, has a postponed
filing due date of February 12, 2002, as a
result of the relief granted by Notice
2001–61. Under this notice, no interest or
failure to pay penalty will accrue from
September 11, 2001, through February
12, 2002, on any balance originally due
on April 16, 2001. Interest and the failure
to pay penalty will be owed on any bal-
ance due for the period April 16, 2001,
through September 10, 2001, and on any
balance remaining due after February 12,
2002.
(3) Under paragraph (6) of the Grant
of Relief section of Notice 2001–61, cer-
tain taxpayers were granted a reasonable
cause waiver from the failure to deposit
penalty if third quarter tax deposits due
from September 11, 2001, through Sep-
tember 30, 2001, were deposited by
November 15, 2001. For these taxpayers,
the third quarter return and payment were
generally due on October 31, 2001. In the
absence of relief under section 7508A (as
amended), interest would be imposed for
the period from November 1, 2001,
through November 15, 2001, on any bal-
ance due on October 31, 2001. Under this
notice, taxpayers will not owe interest for
this period on any employment and excise
tax liability for which the failure to
deposit penalty has been waived.
(4) The IRS may have already
assessed interest and penalties relieved
under this notice and taxpayers may have
already paid these amounts. The IRS has
identified taxpayers located in the cov-
ered disaster area specified in Notice
2001–61 who are eligible for the addi-
tional relief and have adjusted those
accounts accordingly. If you were located
in the covered disaster area and are
entitled to receive a refund, you should
receive a notice by May 28, 2002. Tax-
payers not located in the covered disaster
area who are entitled to this additional
relief (or anyone else with any questions
regarding the status of an adjustment or
June 17, 200211522002–24 I.R.B.

refund because of this notice), should
contact the IRS at (866) 562–5227 (a toll-
free call).
DRAFTING INFORMATION
This notice was authored by the Office
of Associate Chief Counsel, Procedure
and Administration (Administrative Pro-
visions and Judicial Practice Division).
For further information regarding this
notice, you may call (202) 622–4940 (not
a toll-free call).
Application Procedures for
Withholding Foreign
Partnership or Withholding
Foreign Trust Status Under
Section 1441; Proposed
Withholding Foreign
Partnership and Withholding
Foreign Trust Agreements
Notice 2002–41
SECTION 1. PURPOSE
.01Proposed Guidance to Simplify
Partnership and Trust Withholding and
Reporting Obligations. This notice con-
tains proposed guidance for entering into
a withholding foreign partnership (WP)
or withholding foreign trust (WT) agree-
ment with the Internal Revenue Service
(IRS). Similar to the qualified intermedi-
ary (QI) withholding agreement,
1
the pro-
posed WP and WT agreements are
designed to simplify withholding and
reporting obligations for payments of
income made to partners of a WP and
beneficiaries or owners of a WT. The IRS
recognizes that foreign partnerships and
trusts differ significantly from each other,
as well as from foreign financial institu-
tions that receive amounts subject to
withholding as intermediaries for account
holders. These proposed agreements
attempt to address the unique features of
partnerships and trusts by adopting tai-
lored procedures for documentation,
reporting and audit that facilitate compli-
ance and reduce administrative and audit
cost for the WP or WT. As discussed fur-
ther in Section 7 of this notice, Treasury
and the IRS request comments on these
proposed agreements. Treasury and the
IRS will review any comments received
and intend thereafter to publish a revenue
procedure containing the final text of the
WP and WT agreements.
Under applicable Treasury regulations,
a foreign partnership or foreign simple or
grantor trust that is not a WP or WT is
required to provide each withholding
agent from whom it receives an amount
subject to withholding under sections
1441 and 1442 of the Internal Revenue
Code (Code) and the regulations thereun-
der with a Form W-8IMY, along with
documentation from each of its partners,
beneficiaries, or owners, and a withhold-
ing statement allocating the amount
attributable to each partner, beneficiary,
or owner. The withholding agent is
required to withhold tax from payments
to the partnership or trust and to report on
Forms 1042-S and 1099 payments to, and
tax withheld from, each partner, benefi-
ciary, or owner.
Under the provisions of the WP and
WT agreements, a WP or WT is permitted
to provide the withholding agent with a
Form W-8IMY as a WP or WT without
attached documentation from partners,
beneficiaries, or owners. The WP or WT
receives payments from the withholding
agent in gross and withholds and deposits
tax, if any, based on the Forms W-8 or
W-9 that it receives from its partners,
beneficiaries, or owners. The WP or WT
reports payments to, and tax withheld
from, its direct foreign partners, benefi-
ciaries or owners on Form 1042-S on an
individual basis or, by election, on a
pooled basis. Thus, a WP or WT is
relieved of the requirement to disclose to
a withholding agent any documentation
and payment information for partners,
beneficiaries or owners. A withholding
agent is relieved of the responsibility for
collecting documentation, withholding
and reporting payment information for
partners, beneficiaries and owners of a
WP or WT.
.02Key Provisions. The following key
provisions, explained in greater detail in
Section 4.02, are intended to work
together to produce a simple and admin-
istrable agreement for withholding for-
eign partnerships and trusts.
Direct partners, beneficiaries or own-
ers. A foreign partnership or simple or
grantor trust that has entered into a WP or
WT agreement may act as a WP or WT
only with respect to amounts subject to
NRA withholding that are distributed to,
or included in the distributive share of,
direct partners, beneficiaries, or owners.
WP or WT must act as a nonwithholding
foreign partnership or trust with respect to
partners, beneficiaries, or owners that
hold through intermediaries or
passthrough entities. The foreign partner-
ship or foreign simple or grantor trust
may, however, act as a WP or WT with
respect to amounts distributed to, or
included in the distributive share of,
another WP or WT.
Forms W-8 and W-9.WPorWTis
required to document each direct partner,
beneficiary or owner with Form W-8 or
W-9.
Withholding and reporting—direct for-
eign partners, beneficiaries or owners.
WP or WT is required to withhold and
deposit tax, to file a tax return on Form
1042, and, absent a pooled reporting elec-
tion, to report on Form 1042-S for each
direct foreign partner, beneficiary or
owner.
Reporting—pooled reporting election.
WP or WT may elect to report on Form
1042-S on a pooled basis (using the
recipient codes for QI pooling until such
time that there are recipient codes for
WPs and WTs that make an election to
report on a pooled basis). Whether WP or
WT elects pooled reporting will affect
both the timing of audits and the term of
the agreement.
Reporting—direct U.S. partners, ben-
eficiaries or owners.WPorWTisnot
required to report on Form 1099 for U.S.
partners, beneficiaries, or owners. How-
ever, if WP has U.S. partners, WP gener-
ally is required to file Form 1065 with
Schedules K-1 for each U.S. partner. If
WT is a grantor trust with U.S. owners,
WT is required to file Form 3520-A and
1
See Rev. Proc. 2000–12, 2000–1 C.B. 387.
2002–24 I.R.B.1153June 17, 2002

to provide statements to each U.S. benefi-
ciary or owner. If WT makes a distribu-
tion to a U.S. person, WT must provide
an information statement to that U.S. per-
son pursuant to section 6048(c) of the
Code.
Audit. Unless WP or WT has elected to
report on Form 1042-S on a pooled basis,
it will be subject to audit only if selected
for audit by the IRS. In that case, WP or
WT will be subject to audit by an exter-
nal auditor unless WP or WT requests an
IRS audit. If WP or WT elects pooled
reporting it must agree to have the exter-
nal auditor conduct an audit after the
close of every other calendar year, which
will examine the two previous calendar
years.
Term of the agreement. The WP or WT
agreement will continue in force indefi-
nitely unless WP or WT has elected to
report on Form 1042-S on a pooled basis.
In that case, the agreement will expire
after a term of six years.
Automatic termination.IfWPorWT
fails to document any partner, beneficiary
or owner with Form W-8 or W-9 by the
time withholding is required under the
agreement, then, unless WP or WT cures
its failure, the agreement will automati-
cally terminate effective December 31st
of the year in which the failure is discov-
ered.
SECTION 2. SCOPE
.01Foreign Partnerships and Foreign
Simple and Grantor Trusts. This Notice
applies to a foreign partnership seeking to
qualify as a withholding foreign partner-
ship under Treas. Reg.§1.1441–
5(c)(2)(ii).
2
The proposed withholding
foreign partnership agreement applies to
amounts subject to NRA withholding that
the partnership distributes to, or includes
in the distributive shares of, its direct
partners.
This Notice also applies to a foreign
trust seeking to qualify as a withholding
foreign trust under Treas. Reg.§1.1441–
5(e)(5)(v). The proposed withholding for-
eign trust agreement applies to amounts
subject to NRA withholding that are
required to be distributed to the beneficia-
ries of a simple trust or that are includ-
able in the income of the owners of a
grantor trust (“distributive shares”of ben-
eficiaries or owners).
The IRS intends that the WP and WT
agreements will be available in all cir-
cumstances in which a foreign entity act-
ing on behalf of its partners, beneficiaries
or owners provides Form W-8IMY as
proper documentation. For example, a
WP or WT agreement would be available
for an entity that is properly claiming
treaty benefits for its owners under sec-
tion 894 of the Code (notwithstanding
that the entity may be treated as a corpo-
ration for U.S. tax purposes).
This Notice does not apply to interme-
diaries seeking to become QIs. Instead,
see Rev. Proc. 2000–12, 2000–1 C.B.
387. The QI agreement applies to
amounts subject to NRA withholding that
are collected by an intermediary and paid
to its account holders.
The QI agreement is not available to
foreign partnerships or foreign trusts. As
outlined below, the relationship of an
intermediary and its account holders
addressed in the QI agreement differs
fundamentally from the relationship of a
partnership and its partners and the rela-
tionship of a trust and its beneficiaries or
owners.
.02Notice 2001–4. Pending the devel-
opment of these agreements, Notice
2001–4, 2001–1 C.B. 267, provided a
transition rule for foreign partnerships for
calendar year 2001. Under the transition
rule, for calendar year 2001, partnerships
were permitted to provide to withholding
agents Form W-8IMY with partner docu-
mentation attached together with a with-
holding statement that furnished payment
information on the basis of withholding
rate pools. Because that relief is unavail-
able for payments after December 31,
2001, the IRS intends that subscribing
partnerships will apply the WP agreement
for calendar years after 2001.
Notice 2001–4 also permitted a QI to
treat the beneficiaries of a foreign simple
trust or the owners of a foreign grantor
trust as direct account holders for pur-
poses of the QI agreement if certain crite-
ria were met. This rule will continue in
effect after the WT agreement becomes
available. Alternatively, foreign simple
and grantor trusts, including those that
meet the criteria set forth in Notice
2001–4, may choose to enter a WT agree-
ment when the WT agreement is final-
ized.
SECTION 3. BACKGROUND
.01Withholding and Reporting on
Payments to Foreign Persons. Under sec-
tions 1441 and 1442 of the Internal Rev-
enue Code (Code), a person that makes a
payment of U.S. source interest, divi-
dends, royalties, and certain other types
of income to a foreign person generally
must deduct and withhold 30 percent
from the payment. A lower rate of with-
holding may apply under the Code (e.g.,
section 1443), the regulations, or an
income tax treaty. Generally, a payor of
these types of income also must report the
payments on Forms 1042-S. See Treas.
Reg.§1.1461–1(c).
Under sections 6041, 6042, 6045,
6049, and 6050N of the Code (the Form
1099 reporting provisions), payors of
interest, dividends, royalties, gross pro-
ceeds from the sale of securities, and
other fixed or determinable income must
report payments on Form 1099 unless an
exception applies. If a payment is report-
able on Form 1099, a payor must gener-
ally obtain a Form W-9 from the payee. If
the payor does not receive the Form W-9,
it generally must backup withhold under
section 3406 of the Code and report the
payment on Form 1099.
An exception to the Form 1099 report-
ing provisions applies if the payee is a
foreign person. A payor can treat a person
as foreign if the payor can reliably asso-
ciate the payment with a Form W-8 or
other documentation that establishes that
the person is the foreign beneficial owner
of the income or a foreign payee. See
Treas. Reg.§§1.1441–1, 1.6041–
4(a),1.6042–3(b)(1)(iii), 1.6045–
1(g)(1)(i), 1.6049–5(b)(12), and
1.6050N–1(c)(1)(i). Moreover, a payor
does not backup withhold on payments to
foreign beneficial owners or foreign pay-
ees because backup withholding applies
only to amounts that the payor must
report on Form 1099.
2
All citations to income tax regulations in this revenue procedure are to the regulations as amended by T.D. 8734, 1997–2 C.B. 109 [62 FR 53387], T.D. 8804, 1999–1 C.B. 793 [63 FR
72183], and T.D. 8856, 2000–1 C.B. 298 [64 FR 73408].
June 17, 200211542002–24 I.R.B.

In general, the beneficial owners or
payees of a payment to a person that is
treated as a nonwithholding foreign part-
nership are the partners (looking through
partners that are foreign intermediaries or
flow-through entities). However, a pay-
ment to a withholding foreign partnership
is treated as a payment to the partnership
and not to the partners. See Treas. Reg.
§1.1441–5(c). Similarly, the beneficial
owners of a payment to a nonwithholding
foreign simple or grantor trust are the
beneficiaries or owners of the trust (look-
ing through beneficiaries or owners that
are foreign intermediaries or flow-
through entities). However, a payment to
a withholding foreign trust is treated as a
payment to the trust and not to its benefi-
ciaries or owners. See Treas. Reg.
§1.1441–5(e).
A nonwithholding foreign partnership
or nonwithholding foreign simple or
grantor trust must forward documentation
for each of its partners, beneficiaries or
owners to each withholding agent making
a payment to the partnership or trust so
that the withholding agent can correctly
withhold and report on Forms 1042-S and
1099, as appropriate. If a withholding
agent does not receive that documenta-
tion, the withholding agent generally will
withhold and report based on presump-
tions provided in the regulations. See
Treas. Reg.§§1.1441–1, 1.1441–5 and
1.6049–5.
A foreign partnership or foreign trust
is a withholding agent under sections
1441 and 1442 of the Code for amounts
subject to withholding that it pays to for-
eign persons, including partners, benefi-
ciaries and owners, and therefore must
file Forms 1042 and 1042-S in the same
manner as a U.S. withholding agent.
However, a foreign partnership or foreign
trust is not required to file Forms 1042
and 1042-S if another withholding agent
has reported the same amount to the same
recipient for which the foreign partner-
ship or foreign trust would be required to
file a return and the proper amount has
been withheld. See Treas. Reg.§1.1461–
1(b) and (c)(4).
Under section 6031 of the Code, a for-
eign partnership that has gross income
that is effectively connected with the con-
duct of a trade or business within the
United States (ECI) is required to file a
partnership return on Form 1065 with
Schedules K-1 (Statement of Partner’s
Share of Income, Credit, Deduction, Etc.)
for each partner. Also, a foreign partner-
ship that has U.S. source gross income
that is not ECI and that has U.S. partners
is generally required to file Form 1065
and Schedules K-1 for each of its direct
U.S. partners and for its passthrough part-
ners through which U.S. partners hold an
interest in the foreign partnership. See
Treas. Reg.§1.6031(a)–1(b). A foreign
trust generally is not engaged in any trade
or business. However, if it has gross
income that is treated as effectively con-
nected with the conduct of a U.S. trade or
business, it must file a return on Form
1040NR. Under section 6048(b), a for-
eign trust that has a U.S. owner must file
Form 3520-A,Annual Information Return
of a Foreign Trust with a U.S. Owner.
Under section 6048(c), a U.S. person that
receives a distribution from a foreign trust
must file Form 3520. The trust must pro-
vide an information statement to the U.S.
distributee. See Form 3520,Annual
Return to Report Transactions With For-
eign Trusts and Receipt of Certain For-
eign Gifts.
SECTION 4. OVERVIEW OF
PROPOSED AGREEMENTS
.01Comparison with QI Agreement.
The IRS recognizes that foreign partner-
ships and foreign simple and grantor
trusts differ significantly from each other
as well as from foreign financial institu-
tions that act as intermediaries for their
account holders. For instance, foreign
partnerships and trusts generally (1) have
unique governing provisions and alloca-
tions, (2) are not subject to any extensive
government regulation and oversight
(including know-your-customer laws),
and (3) do not have staffing and systems
comparable to financial institutions that
are intermediaries. Thus, certain provi-
sions in the QI agreement become prob-
lematic in the context of foreign partner-
ships and trusts, such as: the treatment of
indirect account holders, collection and
examination of documentary evidence,
application of the presumption rules, and
Form 1099 reporting. In addition, such
entities often have special allocations that
generally are not an issue with account
holders of financial institutions.
.02Simplified Requirements and Pro-
cedures. The proposed agreements
attempt to minimize the difficulties
unique to partnerships and trusts by
adopting procedures that reduce the
administrative and audit cost for the WP
and WT, as well as the risk of error in
performing under the agreements.
(i)Limitation to direct partners, ben-
eficiaries, or owners. The WP and WT
agreements apply only to payments from
a WP or WT to its direct partners, benefi-
ciaries, or owners. This limitation elimi-
nates the need (1) for the WP or WT to
apply the presumption rules on payments
it makes to indirect partners, beneficia-
ries, or owners who failed to provide
adequate documentation; (2) for the WP
or WT to gather and review documenta-
tion and withholding information for indi-
rect partners, beneficiaries, and owners;
and (3) for the WP or WT to bear the
expense of having an auditor review such
documentation and withholding informa-
tion for indirect partners. The presump-
tion rules generally require a withholding
agent to withhold at the highest rate,
which often requires subsequent reim-
bursements or refunds, and also results in
duplicative reporting. A WP or WT, nev-
ertheless, may act as a WP or WT for
payments it makes to a partner, benefi-
ciary, or owner that is, itself, a WP or WT
because, for payments to such entities, it
is never necessary to apply the presump-
tion rules, or review documentation for
the partners, beneficiaries, or owners of
such entities. Because the IRS and Trea-
sury expect that many foreign partner-
ships and trusts will enter into WP and
WT agreements with the IRS, it is
expected that the number of WPs and
WTs that have partners, beneficiaries, or
owners that are nonwithholding foreign
partnerships and nonwithholding foreign
trusts will be relatively small.
(ii)Documentation. The agreements
require a WT and WP to obtain Forms
W-8 and W-9 from its direct partners,
beneficiaries, or owners. Obtaining docu-
mentary evidence in lieu of Forms W-8
and W-9 is not permitted. Although this
requirement is imposed primarily for sim-
plicity, it is also necessary because a WP
or WT generally is not subject to the
know-your-customer (KYC) rules in its
jurisdiction. Therefore, the IRS is unable
2002–24 I.R.B.1155June 17, 2002

to rely on the regulators in that jurisdic-
tion to ensure that a WP or WT is prop-
erly documenting its partners, beneficia-
ries, or owners. The IRS believes that this
requirement should not unduly burden a
WP or WT because, unlike a QI, which
may have had large percentages of its
account base already documented with
KYC-type documentation for other regu-
latory purposes, a WP or WT generally
will not.
(iii)Automatic termination. The agree-
ments provide that, if on audit the IRS or
external auditor discovers that the WP or
WT was not in possession of a valid
Form W-8 or W-9, as applicable, for any
direct partner, beneficiary, or owner, the
agreement will automatically terminate
unless cured. This provision operates in
conjunction with the documentation pro-
visions described above to eliminate com-
pletely the application of the presumption
rules by WP or WT. The extended date
for withholding on undistributed income
under the WP or WT agreements, as
noted below, provides the WP or WT with
more time to obtain documentation. Thus,
it is expected that WP or WT will have
ample time to comply with the documen-
tation requirements to avoid automatic
termination.
(iv)Withholding. Because information
regarding special allocations among part-
ners, beneficiaries, or owners often is
unavailable at the time withholding is
required, a WP or WT may find it diffi-
cult to determine the correct amount of
withholding at the time a payment is
received by WP or WT. To address this
concern, the agreements provide that,
where an actual distribution has not been
made, a WP or WT is not required to
withhold until the earlier of the date that
the statements required under section
6031 (for partnerships) or section 6048
(for simple and grantor trusts) are mailed
or otherwise provided to the partner, ben-
eficiary or owner, or the due date for fur-
nishing such statements (whether or not
WP or WT is required to prepare and fur-
nish such statements). With this delay in
the time for withholding on undistributed
income, the foreign partnership or trust
who enters into the WP or WT agreement
should be able to withhold accurately,
thereby avoiding the need to correct with-
holding errors. This provision also will
ease the audit burden by eliminating the
need for the auditor to review numerous
setoffs or reimbursements.
(v)Pooled reporting. Under the regu-
lations, a foreign partnership or trust is
required to provide the U.S. withholding
agent with sufficient information so that it
can properly report on Form 1042-S for
each foreign partner, beneficiary, or
owner. Under the agreements, the WP or
WT assumes the Form 1042-S reporting
requirement for each direct foreign part-
ner, beneficiary, or owner. The IRS under-
stands, however, that reporting on a ben-
eficial owner basis is a concern for some
foreign partnerships and trusts. To accom-
modate this concern, the agreements
allow a WP or WT to elect pooled-basis
reporting for those amounts distributed to,
or includible in the income of, its direct
foreign partners, beneficiaries, or owners.
If a WP or WT makes the pooled report-
ing election, the term of the agreement
will be limited and the WP or WT will be
subject to external audit every other year.
(vi)Elimination of Form 1099 report-
ing. To avoid duplication of reporting to a
WP’sorWT’s direct U.S. partners, ben-
eficiaries, or owners, (e.g., a Form 1099
and K-1 issued to the same U.S. partner
of a foreign partnership for the same
income), the agreements eliminate the
requirement that a WP or WT file Form(s)
1099 for its direct U.S. partners, benefi-
ciaries, or owners. The WP or WT must
file the necessary forms, schedules, and
statements required by sections 6031 and
6048, as applicable.
(vii)Amendment and Termination of
Agreement. The agreements may be
amended by the IRS if the IRS deter-
mines that such amendment is needed for
the sound administration of the applicable
laws or regulations. For example, the IRS
may amend the agreement as needed to
address changes in law or administrative
practice. The agreement also may be
modified by mutual agreement of the par-
ties. Either party can terminate the agree-
ment prior to the end of its term by deliv-
ering a notice of termination. However,
the IRS will terminate the agreement only
in certain specified circumstances involv-
ing a“significant change in circum-
stances”or an“event of default”(as
defined in the agreement).
SECTION 5. APPLICATION FOR WP
or WT STATUS
.01Where to Apply. To apply for WP
or WT status, a foreign partnership or
trust must submit the information
required by this Section 5 to:
Internal Revenue Service
LMSB:FS:QI
290 Broadway
New York, NY 10007–1867
USA
.02Contents of the Application. A pro-
spective WP or WT must submit an appli-
cation to become a WP or WT. An appli-
cation must include the information
specified in this section 5.02, and any
additional information and documentation
requested by the IRS:
(1) A statement identifying what type
of entity the applicant is (i.e., a foreign
partnership or a foreign simple or grantor
trust) and that it requests to enter into a
WP or WT agreement with the IRS.
(2) The applicant’s name, address, and
employer identification number(s) (EIN),
if any.
(3) The country in which the applicant
was created or organized and a descrip-
tion of the applicant’s business.
(4) A list of the titles of those persons
who will be the responsible parties for
performance under the Agreement and the
names, addresses, and telephone numbers
of those persons as of the date the appli-
cation is submitted.
(5) A list describing, as of the date the
application is submitted, the type of part-
ners, beneficiaries or owners (e.g., U.S.,
foreign, treaty benefit claimant, or inter-
mediary or flow-through), the number
(and percentage interest in partnership
capital, partnership profits, and partner-
ship losses (noting any special allocations
or similar provisions)) of partners, benefi-
ciaries or owners within each type, and
the estimated value of U.S. investments
that the WP or WT agreement will cover.
(6) A general description, as of the
date the application is submitted, of U.S.
assets by type (e.g., U.S. securities, U.S.
real estate), including assets held by U.S.
custodians, and their approximate aggre-
gate value by type.
(7) A completed Form SS-4 (Applica-
tion for Employer Identification Number)
June 17, 200211562002–24 I.R.B.

to apply for a withholding foreign part-
nership or trust Employer Identification
Number (WP-EIN, WT-EIN) to be used
solely for WP or WT reporting and filing
purposes. An applicant must apply for a
WP-EIN or WT-EIN even if it already has
another EIN. The WP-EIN or WT-EIN
will be in addition to any EIN the WP or
WT already has, which should be
retained.
(8) A completed WP or WT agreement,
as set forth in Appendix 1 or 2, executed
as provided in section 6.
SECTION 6. EXECUTING THE WP
OR WT AGREEMENT
The text of the WP agreement is set
forth in Appendix 1. The text of the WT
agreement is set forth in Appendix 2.
Upon receipt and review of an application
to become a WP or WT, the IRS will
complete the agreement based on the
information provided by WP or WT (e.g.,
insertion of the WP’s name, etc.). There-
fore, a prospective WP or WT should
ensure that it has provided to the IRS all
of the information that is required to com-
plete the agreement. It may be necessary
for the IRS to contact the potential WP or
WT, or its authorized representative, to
obtain additional information. Once the
IRS has obtained all the information
required to complete the agreement, the
IRS will send two unsigned copies of the
agreement to the prospective WP or WT
for signature. Both copies of the agree-
ment should be signed by a person with
the authority to sign the agreement and
should be returned to the IRS at the
address specified in section 5.01. The IRS
will sign the agreement and return one of
the originals to the WP or WT.
SECTION 7. REQUEST FOR
COMMENTS
Treasury and the IRS request com-
ments on the proposed withholding for-
eign partnership and withholding foreign
trust agreements attached as appendices
to this notice. After consideration of any
comments received, Treasury and the IRS
intend to publish a revenue procedure
containing the final text of these agree-
ments. In addition, the IRS may consider
adapting the proposed withholding for-
eign partnership and withholding foreign
trust agreements to the unique circum-
stances of certain classes of foreign part-
nerships and trusts. For instance, the IRS
may consider incorporating documenta-
tion provisions similar to the provisions
in the QI agreement in the case of certain
foreign partnerships and trusts that are
required by law in the jurisdiction of
organization to comply with know-your-
customer rules for obtaining documenta-
tion confirming the identity of partners,
beneficiaries, or owners (or the interests
in which are generally held through insti-
tutions that are subject to know-your-
customer rules); and
(i) the offer and sale of interests in
which are subject to securities regulation
in that jurisdiction; or
(ii) the interests in which are publicly
traded on an established securities
exchange or continuously offered and
sold to the general public (and the part-
nership is not classified as a corporation
pursuant to section 7704).
In addition, the IRS understands that cer-
tain small partnerships or small family
trusts may find the WP or WT agreement
to be a desirable alternative to acting as a
nonwithholding partnership or trust but
may nevertheless require adaptations to
the agreements as drafted.
The IRS specifically requests com-
ments identifying such classes of foreign
partnerships or trusts, suggesting possible
adaptations of the agreements for such
cases and analyzing the feasibility of any
such suggestions.
Written comments must be received by
July 22, 2002. Send comments to
CC:DOM:CORP:R (NOT–151112–01),
Room 5228, Internal Revenue Service,
Ben Franklin Station, Washington, DC
20224. Alternatively, comments may be
hand delivered between the hours of 8:00
AM and 5:00 PM to: CC:DOM:CORP:R
(NOT–151112–01), Courier’s Desk, Inter-
nal Revenue Service,1111Constititution
Ave. NW, Washington, DC.
SECTION 8. CONTACT
INFORMATION
For further information regarding this
Notice, contact Carl Cooper or Laurie
Hatten-Boyd of the Office of the Associ-
ate Chief Counsel (International), Internal
Revenue Service,1111Constitution
Avenue, N.W., Washington, D.C. 20224.
Mr. Cooper and Ms. Hatten-Boyd may be
contacted by telephone at 202–622–3840
(not a toll-free call).
APPENDIX 1
Withholding Foreign Partnership
Agreement
SECTION 1. PURPOSE AND SCOPE
Sec. 1.01. General Obligations
Sec. 1.02. Parties to the Agreement
SECTION 2. DEFINITIONS
Sec. 2.01. Agreement
Sec. 2.02. Amounts Subject to NRA
Withholding
Sec. 2.03. Chapter 3 of the Code
Sec. 2.04. Chapter 61 of the Code
Sec. 2.05. External Auditor
Sec. 2.06. Flow -Through Entity
Sec. 2.07. Foreign Person
Sec. 2.08. Form W-8
Sec. 2.09. Form W-9
Sec. 2.10. Form 1042
Sec. 2.11. Form 1042-S
Sec. 2.12. Form 1065
Sec. 2.13. Intermediary
Sec. 2.14. Nonwithholding Foreign
Partnership
Sec. 2.15. NRA Withholding
Sec. 2.16. Overwithholding
Sec. 2.17. Partnership and Partner
Sec. 2.18. Payment
Sec. 2.19. Reduced Rate of Withhold-
ing
Sec. 2.20. Reportable Amount
Sec. 2.21. Reporting Pool
Sec. 2.22. Schedule K-1
Sec. 2.23. TIN
Sec. 2.24. Underwithholding
Sec. 2.25. U.S. Person
Sec. 2.26. Withholding Agent
Sec 2.27. Withholding Foreign Part-
nership (or WP)
Sec. 2.28. Withholding Foreign Part-
nership (or WP) EIN
Sec. 2.29. Withholding Statement
Sec. 2.30. Other Terms
SECTION 3. WITHHOLDING RE-
SPONSIBILITY
Sec. 3.01. NRA Withholding Respon-
sibility
Sec. 3.02. Timing of Withholding
Sec. 3.03. Deposit Requirements
2002–24 I.R.B.1157June 17, 2002

SECTION4.DOCUMENTATION
REQUIREMENTS
Sec. 4.01. Documentation Require-
ments
Sec. 4.02. Documentation For Foreign
Partners
Sec. 4.03. Treaty Claims
Sec. 4.04. Documentation for Interna-
tional Organizations
Sec. 4.05. Documentation for Foreign
Governments and Foreign Central
Banks of Issue
Sec. 4.06. Documentation for Foreign
Tax-Exempt Organizations
Sec. 4.07. Documentation from
Passthrough Partners
Sec. 4.08. Documentation for U.S.
Exempt Recipients
Sec. 4.09. Documentation for U.S.
Non-Exempt Recipients
Sec. 4.10. Documentation Validity
Sec. 4.11. Documentation Validity
Period
Sec. 4.12. Maintenance and Retention
of Documentation
SECTION 5. WITHHOLDING FOR-
EIGN PARTNERSHIP WITHHOLD-
ING CERTIFICATE
Sec. 5.01. WP Withholding Certificate
Sec. 5.02. Withholding Statement
Sec. 5.03. Withholding Rate Pools
SECTION 6. TAX RETURN OBLIGA-
TIONS
Sec. 6.01. Form 1042 Filing Require-
ment
Sec. 6.02. Form 1042-S Reporting:
General Rule
Sec. 6.03. Form 1042-S Reporting:
Special Rule for PR Election
Sec. 6.04. Form 1065 Filing Require-
ment
Sec. 6.05. Retention of Returns
SECTION 7. ADJUSTMENTS FOR
OVER- AND UNDER- WITHHOLD-
ING; REFUNDS
Sec. 7.01. Adjustments for NRA Over-
withholding by WP
Sec. 7.02. Collective Credit or Refund
Procedures for NRA Overwithhold-
ing
Sec. 7.03. Adjustments for NRA
Underwithholding
Sec. 7.04. NRA Underwithholding
after Form 1042 Filed
Sec. 7.05. Special Rule Regarding
Failure to Deposit Penalties
SECTION8.EXTERNAL AUDIT
PROCEDURES
Sec. 8.01. In General
Sec. 8.02. Designation of External
Auditor
Sec. 8.03. Timing External Audits:
General Rule
Sec. 8.04. Timing External Audits:
Special Rule for PR Election
Sec. 8.05. Scope of External Audit
Sec. 8.06. External Auditor’s Report
Sec. 8.07. Expanding Scope and Tim-
ing of External Audit
SECTION 9. EXPIRATION, TERMI-
NATION AND DEFAULT
Sec. 9.01. Term of Agreement: General
Rule
Sec. 9.02. Term of Agreement: Special
Rule for PR Election
Sec. 9.03. Termination of Agreement
Sec. 9.04. Automatic Termination of
Agreement
Sec. 9.05. Significant Change in Cir-
cumstances
Sec. 9.06. Events of Default
Sec. 9.07. Notice and Cure
Sec. 9.08. Renewal
SECTION10.MISCELLANEOUS
PROVISIONS
THIS AGREEMENT is made in dupli-
cate under and in pursuance of section
1441 of the Internal Revenue Code of
1986, as amended, (the“Code”) and Trea-
sury Regulation§1.1441–5(c)(2) by and
between
, (referred to as
“WP”), and the INTERNAL REVENUE
SERVICE (the“IRS”):
WHEREAS, WP has submitted an
application in accordance withRevenue
Procedure 2002–xxto be a withholding
foreign partnership for purposes of Treas.
Reg.§1.1445–5(c)(2);
WHEREAS, WP and the IRS desire
to enter into an agreement to establish
WP’s rights and obligations regarding
documentation, withholding, information
reporting, tax return filing, deposits, and
adjustment procedures under sections
1441, 1442, 1443, 1461, 6031, 6302,
6402, and 6414 of the Code with respect
to certain types of payments;
NOW, THEREFORE, in consider-
ation of the following terms, representa-
tions, and conditions, the parties agree as
follows:
SECTION 1. PURPOSE AND SCOPE
Sec. 1.01. General Obligations.
Except as otherwise provided in this
Agreement, WP’s obligations with respect
to income distributed to, or included in
the distributive shares of, its partners are
governed by the Code and the regulations
thereunder. WP may act in its capacity as
a withholding foreign partnership pursu-
ant to this Agreement only for payments
of amounts subject to NRA withholding
that are distributed to, or included in the
distributive shares of, its direct partners.
WP is required to act as a withholding
foreign partnership for all such amounts
paid to WP, or included in WP’s distribu-
tive share, by any withholding agent to
which WP has provided a Form W-8IMY
that represents that WP is acting as a
withholding foreign partnership with
respect to such amounts. WP must act as
a withholding foreign partnership for any
such amounts paid with respect to such a
Form W-8IMY that are distributed to, or
included in the distributive shares of, its
direct foreign partners. WP may also act
as a withholding foreign partnership for
such amounts that are distributed to, or
included in the distributive shares of, its
direct partners that are U.S. persons. In
no event may WP act as a withholding
foreign partnership for amounts subject to
NRA withholding that are distributed to,
or included in the distributive shares of,
passthrough partners or indirect partners.
For passthrough partners and indirect
partners, WP must act as a nonwithhold-
ing foreign partnership.
Sec. 1.02. Parties to the Agreement.
This Agreement applies to WP and the
IRS.
SECTION 2. DEFINITIONS
For purposes of this Agreement, the
terms listed below are defined as follows:
Sec. 2.01. Agreement.“Agreement”
means this Agreement between WP and
the IRS. All appendices to this Agreement
and WP’s application to become a with-
holding foreign partnership are incorpo-
rated into this Agreement by reference.
Sec. 2.02. Amounts Subject to NRA
Withholding.An“amount subject to
NRA withholding”is an amount
described in Treas. Reg.§1.1441–2(a).
An amount subject to NRA withholding
shall not include interest paid as part of
June 17, 200211582002–24 I.R.B.

the purchase price of an obligation sold
between interest payment dates or origi-
nal issue discount paid as part of the pur-
chase price of an obligation sold in a
transaction other than the redemption of
such obligation, unless the sale is part of
a plan the principal purpose of which is to
avoid tax and WP has actual knowledge
or reason to know of such plan.
Sec. 2.03. Chapter 3 of the Code.
Any reference to“chapter 3 of the Code”
means sections 1441, 1442, 1443, 1461,
1463, and 1464 of the Code.
Sec. 2.04. Chapter 61 of the Code.
Any reference to“chapter 61 of the
Code”means sections 6031, 6041, 6042,
6045, 6049, and 6050N of the Code.
Sec. 2.05. External Auditor.An
“external auditor”is any approved auditor
listed in Appendix A of this Agreement
that WP engages to perform the audits
required by section 8 of this Agreement.
Sec. 2.06. Flow-Through Entity.A
flow-through entity is a foreign partner-
shipdescribedinTreas.Reg.
§301.7701–2 or 3 (other than a withhold-
ing foreign partnership), a foreign trust
that is described in section 651(a) of the
Code, or a foreign trust all or a portion of
which is treated as owned by the grantor
or other person under sections 671
through 679 of the Code (other than a
withholding foreign trust). For an item of
income for which a treaty benefit is
claimed, an entity is also a flow-through
entity to the extent it is treated as fiscally
transparent under section 894 and the
regulations thereunder.
Sec. 2.07. Foreign Person.A“foreign
person”is any person that is not a
“United States person”and includes a
“nonresident alien individual,”a“foreign
corporation,”a“foreign partnership,”a
“foreign trust,”and a“foreign estate,”as
those terms are defined in section 7701 of
the Code.
Sec. 2.08. Form W-8.“Form W-8”
means a valid IRS Form W-8BEN,Cer-
tificate of Foreign Status of Beneficial
Owner for United States Tax Withholding;
IRS Form W-8ECI,Certificate of Foreign
Person’s Claim for Exemption From
Withholding on Income Effectively Con-
nected With the Conduct of a Trade or
Business in the United States; IRS Form
W-8EXP,Certificate of Foreign Govern-
ments and Other Foreign Organizations
for United States Tax Withholding; and
IRS Form W-8IMY,Certificate of For-
eign Intermediary, Foreign Partnership,
and Certain U.S. Branches for United
States Tax Withholding, as appropriate. It
also includes any acceptable substitute
form.
Sec. 2.09. Form W-9.“Form W-9”
means a valid IRS Form W-9,Request for
Taxpayer Identification Number and Cer-
tification, or any acceptable substitute.
Sec. 2.10. Form 1042.“Form 1042”
means an IRS Form 1042,Annual With-
holding Tax Return for U.S. Source
Income of Foreign Persons.
Sec. 2.11. Form 1042-S.“Form
1042-S”means an IRS Form 1042-S,
Foreign Person’s U.S. Source Income
Subject to Withholding.
Sec. 2.12. Form 1065.“Form 1065”
means an IRS Form 1065,U.S. Return of
Partnership Income, and the Schedules
K-1 associated with that form.
Sec. 2.13. Intermediary.An“interme-
diary”means any person that acts on
behalf of another person, such as a custo-
dian, broker, nominee, or other agent.
Sec. 2.14. Nonwithholding Foreign
Partnership.A“nonwithholding foreign
partnership”is any foreign partnership
that is not acting as a withholding foreign
partnership.
Sec. 2.15. NRA Withholding. For pur-
poses of this agreement,“nonresident
alien (NRA) withholding”is any with-
holding required under chapter 3 of the
Code (other than sections 1445 or 1446),
whether the payment subject to withhold-
ing is made to an individual or to an
entity.
Sec. 2.16. Overwithholding. The term
“overwithholding”means the excess of
the amount actually withheld over the
amount required to be withheld under
chapter 3 of the Code.
Sec. 2.17. Partnership and Partner.
The terms“partnership”and“partner”are
defined in section 7701(a)(2) of the Code
and the regulations thereunder. A direct
partner is a partner, other than an interme-
diary or flow-through entity, that is not
itself a withholding foreign partnership or
withholding foreign trust, for which WP
acts as a withholding foreign partnership.
An indirect partner is a person that owns
a partnership interest in WP though one
or more passthrough partners. A
passthrough partner is a direct or indirect
partner in WP that is an intermediary or
flow-through entity. As provided in Sec-
tion 2.06 of this Agreement, a withhold-
ing foreign partnership or withholding
foreign trust is not a flow-through entity
and thus is not a passthrough partner.
Sec. 2.18. Payment.A“payment”is
considered made to a person if that per-
son realizes income whether or not such
income results from an actual transfer of
cash or other property. See Treas. Reg.
§1.1441–2(e).
Sec. 2.19. Reduced Rate of With-
holding.A“reduced rate of withholding”
means a rate of withholding that is less
than 30 percent, either as a result of a
reduction in withholding under the Code
or as a result of a reduction in withhold-
ing under an income tax treaty.
Sec. 2.20. Reportable Amount.A
“reportable amount”means an amount
subject to NRA withholding (as defined
in section 2.02 of this Agreement); U.S.
source deposit interest; and U.S. source
interest or original issue discount paid on
the redemption of short-term obligations.
The term does not include payments on
deposits with banks and other financial
institutions that remain on deposit for two
weeks or less. It also does not include
amounts of original issue discount arising
from a sale and repurchase transaction
completed within a period of two weeks
or less, or amounts described in Treas.
Reg.§1.6049–5(b)(7), (10), or (11)
(relating to certain foreign targeted regis-
tered obligations and certain obligations
issued in bearer form).
Sec. 2.21. Reporting Pool. A reporting
pool is defined in section 5.03 of this
Agreement.
Sec. 2.22. Schedule K-1.“Schedule
K-1”or“K-1”is the schedule associated
with the Form 1065 that itemizes an indi-
vidual Partner’s Share of Income, Credits,
Deductions, etc.
Sec. 2.23. TIN.A“TIN”is a U.S. tax-
payer identification number.
Sec. 2.24. Underwithholding.
“Underwithholding”means the excess of
the amount required to be withheld under
chapter 3 of the Code over the amount
actually withheld.
Sec. 2.25. U.S. Person.A“United
States (or U.S.) person”is a person
described in section 7701(a)(30) of the
Code, the U.S. government (including an
agency or instrumentality thereof), a State
of the United States (including an agency
2002–24 I.R.B.1159June 17, 2002

or instrumentality thereof), or the District
of Columbia (including an agency or
instrumentality thereof).
Sec. 2.26. Withholding Agent.A
“withholding agent”has the same mean-
ing as set forth in Treas. Reg.§1.1441–
7(a) and includes a payor. As used in this
Agreement, the term generally refers to
the person making a payment to a with-
holding foreign partnership.
Sec. 2.27. Withholding Foreign Part-
nership (or WP).A“withholding foreign
partnership”is a person, described in
Treas. Reg.§1.1441–5(c)(2), that has
entered into a withholding agreement
with the IRS to be treated as a withhold-
ing foreign partnership and is acting in its
capacity as a withholding foreign partner-
ship.
Sec. 2.28. Withholding Foreign Part-
nership (or WP) EIN.A“withholding
foreign partnership EIN”or“WP-EIN”
means the employer identification num-
ber assigned by the IRS to a withholding
foreign partnership. WP’s WP-EIN is
only to be used when WP is acting as a
withholding foreign partnership. For
example, WP must give a withholding
agent its non-WP EIN, if any, rather than
its WP-EIN, if it is not acting as a with-
holding foreign partnership and a tax-
payer identification number is required.
Sec. 2.29. Withholding Statement.
The term“withholding statement”is
defined in section 5.02 of this Agreement.
Sec. 2.30. Other Terms. Any term not
defined in this section has the same
meaning that it has under the Code, the
income tax regulations under the Code, or
any applicable income tax treaty.
SECTION 3. WITHHOLDING
RESPONSIBILITY
Sec. 3.01. NRA Withholding Respon-
sibility. WP is subject to the withholding
and reporting provisions applicable to
withholding agents under chapter 3 of the
Code. Under chapter 3, a withholding
agent must withhold 30 percent of any
payment of an amount subject to NRA
withholding made to a partner that is a
foreign person unless the withholding
agent can reliably associate the payment
with documentation upon which it can
rely to treat the payment as made to a
payee that is a U.S. person or as made to
a beneficial owner that is a foreign person
entitled to a reduced rate of withholding.
When it is acting as a withholding foreign
partnership, WP must assume NRA with-
holding responsibility for amounts subject
to NRA withholding that are distributed
to, or included in the distributive share of,
any direct partner, and WP must withhold
the amount required to be withheld under
chapter 3 of the Code. WP must provide
a Form W-8IMY that certifies to a with-
holding agent that makes a payment of
such amounts that WP is acting as a with-
holding foreign partnership, and WP must
identify such amounts on the withholding
statement associated with that Form
W-8IMY. WP is not required to withhold
when it pays such amounts to another
withholding foreign partnership or with-
holding foreign trust that has certified to
WP on Form W-8IMY that it is acting as
a withholding foreign partnership or with-
holding foreign trust with respect to such
identified amounts. WP is not required to
act as a withholding foreign partnership
for all amounts that it receives from a
withholding agent. WP may not act as a
withholding foreign partnership for
amounts distributed to, or included in the
distributive share of, passthrough partners
or indirect partners. WP must act as a
nonwithholding foreign partnership for
such amounts. When WP is not acting as
a withholding foreign partnership, WP
must: 1) provide to the withholding agent
a Form W-8IMY with Part VI completed;
2) identify such amounts on the withhold-
ing statement associated with that Form
W-8IMY; and 3) provide the documenta-
tion and information required by Treas.
Reg.§1.1441–5(c)(3)(iii) and (iv).
Sec. 3.02. Timing of Withholding.
WP must withhold on the date it makes a
distribution to a direct foreign partner that
includes an amount subject to NRA with-
holding. To the extent a direct foreign
partner’s distributive share of income
subject to withholding has not actually
been distributed to the direct foreign part-
ner, WP must withhold on the direct for-
eign partner’s distributive share on the
earlier of the date that the statement
required under section 6031(b) (schedule
K-1) is mailed or otherwise provided to
the partner or the due date for furnishing
the statement (whether or not WP is
required to prepare and furnish the state-
ment).
Sec. 3.03. Deposit Requirements.WP
must deposit amounts withheld under
chapter 3 of the Code with a Federal
Reserve bank or authorized financial
institution at the time and in the manner
provided under section 6302 of the Code
(see Treas. Reg.§1.6302–2(a) or
§31.6302–1(h)).
SECTION 4. DOCUMENTATION
REQUIREMENTS
Sec. 4.01. Documentation Require-
ments. WP agrees to obtain, review, and
maintain Forms W-8 and W-9 in accor-
dance with this section 4. WP must obtain
a Form W-8 or W-9 from every direct
partner prior to the time that withholding
is required. WP agrees to make documen-
tation (together with any associated with-
holding statements and other documents
or information) available upon request for
inspection by WP’s external auditor. WP
represents that none of the laws to which
it is subject prohibits disclosure of the
identity of any partner or corresponding
partner information to WP’s external
auditor. WP may rely on the Forms W-8
and W-9 it obtains under this section 4 as
the basis for determining its withholding
and reporting obligations.
Sec. 4.02. Documentation for For-
eign Partners. WP may treat a direct
partner as a foreign beneficial owner if
the direct partner provides a Form W-8
that supports such status. WP may treat a
direct partner that has provided a Form
W-8 as entitled to a reduced rate of NRA
withholding if all the requirements for a
reduced rate are met and the Form W-8
provided by the direct partner supports
entitlement to a reduced rate. Sections
4.03 through 4.06 of this Agreement
describe the specific documentation
requirements necessary for obtaining a
reduced rate of withholding in certain cir-
cumstances.
Sec. 4.03. Treaty Claims. WP may not
reduce the rate of withholding based on a
direct partner’s claim of treaty benefits
unless WP obtains from the partner a
Form W-8BEN with Part II of the form
properly completed, including the appro-
priate limitation on benefits and section
894 certifications.
Sec. 4.04. Documentation for Inter-
national Organizations. WP may not
treat a direct partner as an international
organization entitled to an exemption
from withholding under section 892 of
the Code unless WP obtains a Form
June 17, 200211602002–24 I.R.B.

W-8EXP from the international organiza-
tion and the name provided on the Form
W-8EXP is the name of an entity desig-
nated as an international organization by
executive order pursuant to 22 United
States Code 288 through 288(f). If an
international organization is not claiming
benefits under section 892 of the Code
but under another Code exception, the
provisions of sections 4.02 of this Agree-
ment apply rather than the provisions of
this section 4.04.
Sec. 4.05. Documentation for For-
eign Governments and Foreign Central
Banks of Issue.
(A)Documentation For a Foreign
Government or Foreign Central Bank
of Issue Claiming an Exemption From
Withholding Under Section 892 or Sec-
tion 895. WP may not treat a direct part-
ner as a foreign government or foreign
central bank of issue exempt from with-
holding under section 892 or 895 of the
Code unless—
(1) WP receives from the direct partner
a Form W-8EXP establishing that the
direct partner is a foreign government or
foreign central bank of issue;
(2) The income distributed to, or
included in the distributive share of, the
direct partner is the type of income that
qualifies for an exemption from withhold-
ing under section 892 or 895; and
(3) WP does not know, or have reason
to know, that the direct partner is a con-
trolled commercial entity, that the income
owned by the foreign government or for-
eign central bank of issue is being
received from a controlled commercial
entity, or that the income is from the dis-
position of an interest in a controlled
commercial entity.
(B)Treaty Exemption. WP may not
treat a direct partner as a foreign govern-
ment or foreign central bank of issue
entitled to a reduced rate of withholding
under an income tax treaty unless it
obtains a Form W-8BEN that, under sec-
tion 4.03 of this Agreement, is sufficient
to obtain a reduced rate of withholding
under a treaty.
(C)Other Code Exception.Ifafor-
eign government or foreign central bank
of issue is not claiming benefits under
section 892 or section 895 of the Code
but under another Code exception (e.g.,
the portfolio interest exception under sec-
tions 871(h) or 881(c) of the Code), the
provisions of section 4.02 of this Agree-
ment apply rather than the provisions of
this section 4.05.
Sec. 4.06. Documentation for For-
eign Tax-Exempt Organizations.
(A)Reduced Rate of Withholding
Under Section 501. WP may not treat a
direct partner as a foreign organization
described under section 501(c) of the
Code, and therefore exempt from with-
holding (or, if the direct partner is a for-
eign private foundation, subject to with-
holding at a 4-percent rate under section
1443(b) of the Code) unless WP obtains a
valid Form W-8EXP on which Part III of
the form is completed.
(B)Treaty Exemption. WP may not
treat a direct partner as a foreign organi-
zation that is tax exempt or entitled to a
reduced rate of withholding under an
income tax treaty unless WP obtains a
Form W-8BEN that, under section 4.03 of
this Agreement, is sufficient to obtain a
reduced rate of withholding under a
treaty.
(C)Other Exceptions. If a tax-exempt
entity is not claiming a reduced rate of
withholding because it is an organization
described under section 501(c) of the
Code or under an income tax treaty, but is
claiming a reduced rate of withholding
under another Code exception, the provi-
sions of section 4.02 of this Agreement
apply rather than the provisions of this
section 4.06.
Sec. 4.07. Documentation for
Passthrough Partners. WP shall not act
as a withholding foreign partnership with
respect to an amount subject to withhold-
ing distributed to, or included in the dis-
tributive share of, a passthrough partner.
WP must forward that passthrough part-
ner’s documentation (and associated
withholding statement and documentation
of indirect partners) to the withholding
agent from whom WP receives the
amount subject to withholding. WP may
act as a withholding foreign partnership
for payments made to partners that are
themselves withholding foreign partner-
ships or withholding foreign trusts.
Sec. 4.08. Documentation for U.S.
Exempt Recipients. WP shall not treat a
partner as a U.S. exempt recipient unless
WP obtains a Form W-9 from the partner
on which the partner writes“Exempt”in
Part II of the Form.
Sec. 4.09. Documentation for U.S.
Non-Exempt Recipients. WP shall not
treat a partner as a U.S. non-exempt
recipient unless WP obtains a Form W-9
from the partner.
Sec. 4.10. Documentation Validity.
WP may not rely on Forms W-8 or W-9 if
WP has actual knowledge or reason to
know that the information or statements
contained in the forms are unreliable or
incorrect. Once WP knows, or has reason
to know, that a Form W-8 or W-9 pro-
vided by a direct partner is unreliable or
incorrect, WP must obtain a new Form
W-8 or W-9 prior to the time withholding
is required.
Sec. 4.11. Documentation Validity
Period.
(A)Form W-8. WP may rely on a
properly completed Form W-8 until its
validityexpiresunderTreas.Reg.
§1.1441–1(e)(4)(ii).
(B)Form W-9. WP may rely on a
properly completed Form W-9 as long as
it has not been informed by the IRS or
another withholding agent that the form is
unreliable.
Sec. 4.12. Maintenance and Reten-
tion of Documentation.
(A)Maintaining Documentation.WP
shall maintain Forms W-8 and W-9 by
retaining the original documentation, a
certified copy, a photocopy, a microfiche,
or by electronic storage or similar means
of record retention.
(B)Retention Period. WP shall retain
a direct partner’s Form W-8 or W-9
obtained under this section 4 for as long
as it may be relevant to the determination
of WP’s tax liability under this agree-
ment.
SECTION 5. WITHHOLDING
FOREIGN PARTNERSHIP
WITHHOLDING CERTIFICATE
Sec. 5.01. WP Withholding Certifi-
cate. WP agrees to furnish a withholding
foreign partnership withholding certifi-
cate to each withholding agent from
which it receives amounts subject to NRA
withholding as a withholding foreign
partnership. The withholding foreign part-
nership withholding certificate is a Form
W-8IMY (or acceptable substitute form)
that certifies that WP is acting as a with-
holding foreign partnership, contains
WP’s WP-EIN, and provides all other
information required by the form. WP is
2002–24 I.R.B.1161June 17, 2002

not required to disclose, as part of that
Form W-8IMY or its withholding state-
ment, any information regarding the iden-
tity of a direct partner.
Sec. 5.02. Withholding Statement.
WP agrees to provide to each withholding
agent from which WP receives amounts
subject to NRA withholding as a with-
holding foreign partnership a written
statement (the“withholding statement”)
identifying the amounts for which WP
acts as a withholding foreign partnership.
The statement forms an integral part of
the Form W-8IMY. The withholding
statement may be provided in any man-
ner, and in any form, to which WP and
the withholding agent mutually agree.
Sec. 5.03. Withholding Rate Pools.
When it is acting as a withholding foreign
partnership, WP must assume withholding
responsibility for amounts subject to
withholding that are distributed to, or
included in the distributive shares of, its
direct partners. Accordingly, withholding
rate pool information is not required as
part of WP’s withholding statement.
SECTION 6. TAX RETURN
OBLIGATIONS
Sec. 6.01. Form 1042 Filing Require-
ment.
(A)In General. WP shall file a return
on Form 1042, whether or not WP with-
held any amounts under chapter 3 of the
Code, on or before March 15 of the year
following any calendar year in which WP
acts as a withholding foreign partnership.
In addition to the information specifically
requested on Form 1042 and the accom-
panying instructions, WP shall attach a
statement setting forth the amounts of any
overwithholding or underwithholding
adjustments made under Treas. Reg.
§1.1461–2 and sections 7.01 and 7.03 of
this Agreement, and an explanation of the
circumstances that resulted in the over- or
under- withholding.
(B)Extensions for Filing Returns.
WP may request an extension of the time
for filing Form 1042, or any of the infor-
mation required to be attached to the
form, by submitting Form 2758,Applica-
tion for Extension of Time to File Certain
Excise, Income, Information, and Other
Returns, on or before the due date of the
return. The application must be in writ-
ing, properly signed by a duly authorized
agent of WP, and shall clearly set forth
the following:
(1) The calendar year for which the
extension is requested; and
(2) A full explanation of the reason(s)
for requesting the extension to assist the
IRS in determining the period of exten-
sion, if any, that will be granted.
Sec. 6.02. Form 1042-S Reporting:
General Rule. Unless WP has made a
pooled reporting (PR) election pursuant
to section 6.03 of this Agreement, WP is
required to file separate Forms 1042-S for
each direct partner to whom WP distrib-
utes, or in whose distributive share is
included, an amount subject to NRA with-
holding. WP must file separate Forms
1042-S by income code, exemption code,
recipient code, and withholding rate. WP
must file its Forms 1042-S in the manner
required by the regulations under chapter
3 of the Code and the instructions to the
form, including any requirement to file
the forms magnetically or electronically.
Any Form 1042-S required by this section
6 shall be filed on or before March 15
following the calendar year in which
withholding, if any, was required under
section 3.02 of this agreement. WP may
request an extension of time to file Forms
1042-SbysubmittingForm8809,
Request for Extension of Time to File
Information Returns, by the due date of
Forms 1042-S in the manner required by
Form 8809.
Sec. 6.03. Form 1042-S Reporting:
Special Rule for PR Election. If WP has
made the PR election pursuant to this sec-
tion 6.03, WP is not required to file
Forms 1042-S for amounts distributed to,
or included in the distributive share of,
each separate direct partner for whom
such reporting would otherwise be
required. Instead, WP shall file a separate
Form 1042-S for each reporting pool. A
reporting pool consists of income that
falls within a particular withholding rate
and within a particular income code,
exemption code, and recipient code as
determined on Form 1042-S. WP may use
a single recipient code for all reporting
pools except for amounts paid to foreign
tax-exempt recipients, for which a sepa-
rate recipient code must be used. For this
purpose, a foreign tax-exempt recipient
includes any organization that is not sub-
ject to NRA withholding and is not liable
to tax in its country of residence because
it is a charitable organization, a pension
fund, or a foreign government. WP must
make the PR election at the time this
agreement is executed by signing the
election statement on the signature page
of this agreement. Once made, the PR
election remains in effect for the entire
term of this agreement beginning on the
date the agreement becomes effective and
ending on the date of its expiration or ter-
mination under section 9 of the Agree-
ment. WP must make a new election for
each renewal term of this agreement. If
WP makes the PR election, WP cannot
revoke it prior to the end of the term for
which WP has made the PR election. If
WP did not make the PR election at the
time this agreement was executed, then
WP may make a PR election only by ter-
minating this agreement pursuant to sec-
tion 9.03 and requesting to enter into a
new agreement.
Sec. 6.04. Form 1065 Filing Require-
ment. If WP is required to file Form 1065
and Schedules K-1 under Treas. Reg.
§1.6031(a)–1, then WP shall file Form
1065 and Schedules K-1 in accordance
with the regulations and the instructions
for the form.
Sec. 6.05. Retention of Returns.WP
shall retain Forms 1065 and 1042 for the
period of the applicable statute of limita-
tions on assessments and collection under
the Code.
SECTION 7. ADJUSTMENTS FOR
OVER- AND UNDER-
WITHHOLDING; REFUNDS
Sec. 7.01. Adjustments for NRA
Overwithholding by WP. WP may make
an adjustment for amounts paid to its
direct partners that it has overwithheld
under chapter 3 of the Code by applying
either the reimbursement or set-off proce-
dures described in this section within the
time period prescribed for those proce-
dures.
(A)Reimbursement Procedure.WP
may repay its partners for an amount
overwithheld and reimburse itself by
reducing, by the amount of tax actually
repaid to the partners, the amount of any
subsequent deposit of tax required to be
made by WP under section 3.03 of this
Agreement. For purposes of this section
7.01(A), an amount that is overwithheld
shall be applied in order of time to each
June 17, 200211622002–24 I.R.B.

of WP’s subsequent deposit periods in the
same calendar year to the extent that the
withholding taxes required to be depos-
ited for a subsequent deposit period
exceed the amount actually deposited. An
amount overwithheld in a calendar year
may be applied to deposit periods in the
calendar year following the calendar year
of overwithholding only if:
(1) WP states on a Form 1042-S filed
by March 15 of the calendar year follow-
ing the calendar year of overwithholding,
the amount of tax withheld and the
amount of any actual repayments; and
(2) WP states on a Form 1042, filed by
March 15 of the calendar year following
the calendar year of overwithholding, that
the filing of the Form 1042 constitutes a
claim for credit in accordance with Treas.
Reg.§1.6414–1.
(B)Set-Off Procedure. WP may
repay its partners by applying the amount
overwithheld against any amount which
otherwise would be required under chap-
ter 3 of the Code to be withheld by WP
before the earlier of March 15 of the cal-
endar year following the calendar year of
overwithholding or the date that the Form
1042-S is actually filed with the IRS. For
purposes of making a return on Form
1042 or 1042-S for the calendar year of
overwithholding, and for purposes of
making a deposit of the amount withheld,
the reduced amount shall be considered
the amount required to be withheld from
such income under chapter 3 of the Code.
Sec. 7.02. Collective Credit or
Refund Procedures for NRA Overwith-
holding. If WP has made a PR election
and it has overwithheld under chapter 3
of the Code on amounts subject to NRA
withholding paid to WP’s direct partners
during a calendar year and the amount
has not been recovered under the reim-
bursement or set-off procedures under
sections 7.01 of this Agreement, WP may
request a credit or refund of the total
amount overwithheld by following the
procedures of this section 7.02. WP shall
follow the procedures set forth under sec-
tions 6402 and 6414 of the Code, and the
regulations thereunder, to claim the credit
or refund. No credit or refund will be
allowed after the expiration of the statu-
tory period of limitation for refunds under
section 6511 of the Code. WP may use
the collective refund procedures under
this section 7.02 only if the following
conditions are met:
(A) WP must not have issued Forms
1042-S to the direct partners who were
subjected to overwithholding;
(B) WP must submit together with its
amended return on which it claims a
credit or refund a statement of the reason
for the overwithholding;
(C) WP must submit together with its
amended return on which it claims a
credit or refund a statement that it has
repaid the amount of overwithholding to
the appropriate direct partners prior to fil-
ing the claim for credit or refund; and
(D) WP must retain a record showing
that it repaid the direct partners the
amount of the overwithholding.
Sec. 7.03. Adjustments for NRA
Underwithholding. If WP knows that an
amount should have been withheld under
chapter 3 of the Code from a previous
payment to a direct partner but was not
withheld, WP may either withhold from
future payments made to the same direct
partner or satisfy the tax from the direct
partner’s proportionate share of assets
over which it has control. The additional
withholding or satisfaction of the tax
owed may only be made before the due
date of the Form 1042 (not including
extensions) for the calendar year in which
the underwithholding occurred.
Sec. 7.04. NRA Underwithholding
after Form 1042 Filed. If, after a Form
1042 has been filed for a calendar year,
WP, WP’s external auditor, or the IRS
determines that, due to WP’s failure to
carry out its obligations under this Agree-
ment, WP has underwithheld tax for such
year, WP shall file an amended Form
1042 to report and pay the underwithheld
tax. WP shall pay the underwithheld tax,
the interest due on the underwithheld tax,
and any applicable penalties, at the time
of filing the amended Form 1042. If WP
fails to file an amended return, the IRS
shall make such return under section 6020
of the Code.
Sec. 7.05. Special Rule Regarding
Failure to Deposit Penalties. Solely for
purposes of applying section 6656 of the
Code (failure to make deposit of taxes),
WP will not be considered to have made
an underpayment of a deposit of NRA
withholding taxes if the conditions of this
paragraph are met. The conditions of this
paragraph are that—
(A) WP makes its deposits within the
time (deposit period) required by section
6302 of the Code;
(B) The deposit is not less than 90 per-
cent of the aggregate amount of the tax
required to be withheld under chapter 3 of
the Code during the deposit period appli-
cable to WP; and
(C) WP determines the difference
between the total amount required to be
deposited and the amount actually depos-
ited as of the end of the 3rd, 6th, 9th, and
12th months of the calendar year and the
difference is deposited no later than the
15th day of the second following month
(i.e., May 15, August 15, November 15
and February 15, respectively). In deter-
mining whether there has been an under-
payment, reimbursements and set-offs
shall be taken into account.
SECTION 8. EXTERNAL AUDIT
PROCEDURES
Sec. 8.01. In General. Unless WP
requests an IRS audit in lieu of an exter-
nal audit, the IRS agrees not to conduct
an on-site audit of WP with respect to
withholding and reporting obligations
covered by this Agreement provided that
an external auditor designated in Appen-
dix A of this Agreement conducts an audit
of WP in accordance with this section 8.
WP shall permit the external auditor to
have access to all relevant records of WP
for purposes of performing the external
audit, including information regarding
specific partners. WP shall permit the IRS
to communicate directly with the external
auditor and to review the audit procedures
followed by the external auditor. WP rep-
resents that there are no legal prohibitions
that prevent the external auditor from
examining any information relevant to the
external audit to be performed under this
section 8 and that there are no legal pro-
hibitions that prevent the IRS from com-
municating directly with the auditor. WP
shall permit the IRS to examine the exter-
nal auditor’s work papers and reports.
Sec. 8.02. Designation of External
Auditor.WP’s external auditor must be
one of the auditors listed in Appendix A
of this Agreement, unless WP and the IRS
agree, prior to the audit, to substitute
another auditor. WP shall not propose an
external auditor unless it has a reasonable
belief that the auditor is subject to laws,
regulations, or rules that impose sanctions
2002–24 I.R.B.1163June 17, 2002

for failure to exercise its independence
and to perform the audit competently. The
IRS has the right to reject a proposed
external auditor, or to revoke its accep-
tance of an external auditor, if the IRS, in
its sole discretion, reasonably believes
that the auditor is not independent or can-
not perform an effective audit under this
Agreement.
Sec. 8.03. Timing External Audits:
General Rule. Unless WP has made a PR
election, WP shall have the external audi-
tor conduct an external audit only at such
time and only for such calendar years as
the IRS directs.
Sec. 8.04. Timing External Audits:
Special Rule for PR Election. If WP has
made a PR election, WP shall have the
external auditor conduct an audit after the
close of every other calendar year that
this Agreement is in effect. The auditor
shall examine the two previous calendar
years. For example, the first audit will
occur in the third calendar year that the
agreement is in effect and the external
auditor will examine calendar years one
and two.
Sec. 8.05. Scope of External Audit.
The external auditor shall verify whether
WP is in compliance with this Agreement
by conducting an audit that meets the
requirements of this section 8.05. The
report, described in section 8.06 of this
Agreement, must disclose that the exter-
nal auditor has, at a minimum, performed
the following checks listed in this section
8.05, and set forth how each of those
checks was performed and the results of
the checks. WP’s external auditor is
encouraged to contact the IRS at the
address set forth in section 10.06 of this
Agreement and submit an audit plan
(which includes, if relevant, the extent to
which the external auditor proposes to
rely on WP’s internal audit procedures)
prior to performing the audit so that the
audit may be conducted in the most effi-
cient and least costly manner possible.
(A)Documentation. The external
auditor must review information con-
tained in partner files to determine
whether the documentation requirements
of section 4 of this Agreement are being
met.
(B)Withholding Responsibilities.
The external auditor must—
(1) Perform test checks of direct part-
ners, to verify that WP is withholding the
proper amounts.
(2) Verify that amounts withheld were
timely deposited in accordance with sec-
tion 3.03 of this Agreement.
(C)Return Filing and Information
Reporting. The external auditor must—
(1) Obtain copies of original and
amended Forms 1042, and any schedules,
statements, or attachments required to be
filed with those forms, and determine
whether the amounts of income, taxes,
and other information reported on those
forms are accurate by—
(i) Reviewing work papers;
(ii) Reviewing Forms W-8IMY,
together with the associated withholding
statements, that WP has provided to with-
holding agents;
(iii) Reviewing copies of Forms
1042-S that withholding agents have pro-
vided WP;
(iv) Reviewing account statements
from withholding agents;
(v) Reviewing correspondence
between WP and withholding agents; and
(vi) Interviewing personnel respon-
sible for preparing the Form 1042 and the
work papers used to prepare those forms.
(2) Obtain copies of original and cor-
rected Forms 1042-S and Schedules K-1
together with the work papers used to
prepare those forms and determine
whether the amounts reported on those
forms are accurate by—
(i) Reviewing the Forms 1042-S
received from withholding agents;
(ii) Reviewing the Form 1065, if
required;
(iii) Reviewing a valid sample of earn-
ings statements issued by WP to direct
partners, if any.
(3) Thoroughly review the statements
attached to amended Forms 1042 filed to
claim a refund, ascertain their veracity,
and determine the causes of any over-
withholding reported and ensure WP did
not issue Forms 1042-S to persons whom
it included as part of its collective credit
or refund.
(4) Determine, in the case of collective
credits or refunds, that WP repaid the
appropriate partners prior to requesting a
collective refund or credit.
(E)Change in Circumstances. The
external auditor must verify that in the
course of the audit it has not discovered
any significant change in circumstances,
as described in section 9.05 (A) or (D) of
this Agreement.
Sec. 8.06. External Auditor’s Report.
Upon completion of the audit of WP, the
external auditor shall issue a report, or
reports, of audit findings directly to the
IRS by sending the original report to the
IRS at the address set forth in section
10.06 of this Agreement. This report is
due by December 31 following the calen-
dar year being audited, or if that date falls
on a Saturday or Sunday, the next U.S.
business day. The IRS may, however,
upon request by the external auditor,
extend the due date of the audit report
upon good cause. The report must be in
writing, in English, and currency amounts
must be stated in U.S. dollars. The report
must fully describe the scope of the audit,
the methodologies (including sampling
techniques) used to determine whether
WP is in compliance with the provisions
of this Agreement, and the result of each
such determination. The report must also
specifically address each of the items in
section 8.05 of this Agreement.
Sec. 8.07. Expanding Scope and
Timing of External Audit. Upon review
of the external auditor’s report, the IRS
may request, and WP must permit, the
external auditor to perform additional
audit procedures.
SECTION 9. EXPIRATION,
TERMINATION AND DEFAULT
Sec. 9.01. Term of Agreement: Gen-
eral Rule. If WP has not made a PR elec-
tion, this Agreement shall be in effect on
and shall continue in
force until terminated under 9.03 or 9.04
of this Agreement.
Sec. 9.02. Term of Agreement: Spe-
cial Rule for PR Election. If WP has
made a PR election, this Agreement shall
be in effect on
and
shall expire on December 31 of the fifth
full calendar year after the year in which
this Agreement first takes effect. This
Agreement may be renewed for addi-
tional terms as provided in section 9.08 of
this Agreement.
Sec. 9.03. Termination of Agreement.
This Agreement may be terminated by
either the IRS or WP prior to the end of
June 17, 200211642002–24 I.R.B.

its term by delivery of a notice of termi-
nation to the other party in accordance
with section 10.06 of this Agreement. The
IRS, however, shall not terminate the
Agreement unless there has been a sig-
nificant change in circumstances, as
defined in section 9.05 of this Agreement,
or an event of default has occurred, as
defined in section 9.06 of this Agreement,
and the IRS determines, in its sole discre-
tion, that the significant change in cir-
cumstances or the event of default war-
rants termination of this Agreement. In
addition, the IRS shall not terminate this
Agreement in the event of default if WP
can establish to the satisfaction of the IRS
that all events of default for which it has
received notice have been cured within
the time period agreed upon. The IRS
shall notify WP, in accordance with sec-
tion 9.07 of this Agreement, that an event
of default has occurred and that the IRS
intends to terminate the Agreement unless
WP cures the default. A notice of termina-
tion sent by either party shall take effect
on the date specified in the notice.
Sec 9.04. Automatic Termination of
Agreement. Notwithstanding Section
9.03 of this Agreement, this Agreement
will terminate automatically in the event
that the external auditor or the IRS on
audit discovers that WP was not in pos-
session of Forms W-8 or W-9, as appli-
cable, for any direct partner at any time
that withholding or reporting was
required under section 3.02 of this Agree-
ment. The automatic termination will be
effective as of December 31 of the year in
which the external auditor or the IRS
makes that discovery. This Agreement
will be reinstated, effective the same date
it was automatically terminated, if WP
obtains appropriate Forms W-8 or W-9
(that relate to the time withholding or
reporting was required) for each such
partner before January 31 of the year fol-
lowing the year in which the agreement
automatically terminated. In the event of
automatic termination of this agreement,
WP must pay any underwithholding of
tax, interest, and penalties that the IRS
determines is attributable to each undocu-
mented direct partner for the period dur-
ing which the partner was undocumented,
and, if WP has made a PR election, WP
must file partner specific Forms 1042-S
for every foreign direct partner from the
earliest time the Forms W-8 or W-9 were
required for any undocumented direct
partner through the date of termination.
After the date of automatic termination of
this agreement, WP may not act as a with-
holding foreign partnership, and must so
notify any persons to which WP has fur-
nished a withholding foreign partnership
certificate. After the date of automatic ter-
mination of this agreement, the IRS may
reinstate this agreement (or the IRS may
require WP to enter into a new withhold-
ing foreign partnership agreement) on
such terms and conditions and with such
modifications as the IRS may determine.
Sec. 9.05. Significant Change in Cir-
cumstances. For purposes of this Agree-
ment, a significant change in circum-
stances includes, but is not limited to—
(A) any merger, consolidation or divi-
sion of WP or any change in circum-
stances that would result in a termination
of WP under section 708 of the Code;
(B) A change in U.S. federal law or
policy, or applicable foreign law or
policy, that affects the validity of any pro-
vision of this Agreement, materially
affects the procedures contained in this
Agreement, or affects WP’s ability to per-
form its obligations under this Agree-
ment;
(C) A ruling of any court that affects
the validity of any provision of this
Agreement; or
(D) A significant change in WP’s busi-
ness practices that affects WP’s ability to
meet its obligations under this Agree-
ment.
Sec. 9.06. Events of Default. For pur-
poses of this Agreement, an event of
default occurs if WP fails to perform any
material duty or obligation required under
this Agreement, and includes, but is not
limited to, the occurrence of any of the
following:
(A) WP fails to implement adequate
procedures, accounting systems, and
internal controls to ensure compliance
with this Agreement;
(B) WP underwithholds an amount that
WP is required to withhold under chapter
3 of the Code and fails to correct the
underwithholding or to file an amended
Form 1042 reporting, and paying, the
appropriate tax;
(C) WP makes excessive refund
claims;
(D) WP fails to file Forms 1042,
1042-S, 1065 (if required), or Schedules
K-1 (if required) by the due date specified
on such forms or files forms that are
materially incorrect or fraudulent;
(E) WP fails to have an external audit
performed when required, WP’s external
auditor fails to provide its report directly
to the IRS on a timely basis, WP fails to
cooperate with the external auditor, or
WP or its external auditor fails to cooper-
ate with the IRS;
(F) WP fails to inform the IRS within
90 days of any significant change in its
business practices to the extent that
change affects WP’s obligations under
this Agreement;
(G) WP fails to cure a default identi-
fied by the IRS or by an external auditor;
(H) WP makes any fraudulent state-
ment or a misrepresentation of material
fact with regard to this Agreement to the
IRS, a withholding agent, or WP’s exter-
nal auditor;
(I)The IRS determines that WP’s
external auditor is not sufficiently inde-
pendent to adequately perform its audit
function or the external auditor fails to
provide an audit report that complies with
section 8 of this Agreement;
(J) WP is prohibited by any law from
disclosing the identity of a partner or
partner information to WP’s external
auditor;
(K) WP fails to make deposits in the
time and manner required by section 3.03
of this Agreement or fails to make
adequate deposits, taking into account the
procedures of 7.05 of this Agreement; or
(L) WP fails to permit the external
auditor to perform additional audit proce-
dures under the provisions of section 8.07
of this Agreement.
Sec. 9.07. Notice and Cure. Upon the
occurrence of an event of default, the IRS
may deliver to WP a notice of default
specifying the event of default that has
occurred. WP shall respond to the notice
of default within 60 days (60-day
response) from the date of the notice of
default. The 60-day response shall con-
tain an offer to cure the event of default
and the time period in which the cure will
be accomplished or shall state the reasons
why WP does not agree that an event of
default has occurred. If WP does not pro-
vide a 60-day response, the IRS may
deliver a notice of termination as pro-
vided in section 9.03 of this Agreement.
If WP provides a 60-day response, the
2002–24 I.R.B.1165June 17, 2002

IRS shall either accept or reject WP’s
statement that no default has occurred or
accept or reject WP’s proposal to cure an
event of default. If the IRS rejects WP’s
contention that no default has occurred or
rejects WP’s proposal to cure a default,
the IRS will offer a counter-proposal to
cure the event of default. Within 30 days
of receiving the IRS’s counter-proposal,
WP shall notify the IRS (30-day
response) whether it continues to main-
tain that no default has occurred or
whether it rejects the IRS’s counter-
proposal to cure an event of default. If
WP’s 30-day response states that no
default has occurred or it rejects the IRS’s
counter-proposal to cure, the parties shall
seek to resolve their disagreement within
30 days of the IRS’s receipt of WP’s
30-day response. If a satisfactory resolu-
tion has not been achieved at the end of
this latter 30-day period, or if WP fails to
provide a 30-day response, the IRS may
terminate this Agreement by providing a
notice of termination in accordance with
section 9.03 of this Agreement. If WP
receives a notice of termination from the
IRS, it may appeal the determination
within 30 days of the date of the notice of
termination by sending a written notice to
the address specified in section 10.06 of
this Agreement. If WP appeals the notice
of termination, this Agreement shall not
terminate until the appeal has been
decided. If an event of default is discov-
ered in the course of an external audit, the
WP may cure the default, without follow-
ing the procedures of this section 9.07, if
the external auditor’s report describes the
default and the actions that WP took to
cure the default and the IRS determines
that the cure procedures followed by WP
were sufficient. If the IRS determines that
WP’s actions to cure the default were not
sufficient, the IRS shall issue a notice of
default and the procedures described in
this section 9.07 shall be followed.
Sec. 9.08. Renewal. If WP has made
the PR election under section 6.03 of this
agreement and intends to renew this
Agreement for an additional term, it shall
submit an application for renewal to the
IRS no earlier than one year and no later
than six months prior to the expiration of
this Agreement. Any such application for
renewal must contain an update of the
information provided by WP to the IRS in
connection with the application to enter
into this Agreement, and any other infor-
mation the IRS may request in connection
with the renewal process. This Agreement
shall be renewed only upon the signatures
of both WP and the IRS. Either the IRS or
WP may seek to negotiate a new with-
holding foreign partnership agreement
rather than renew this Agreement.
SECTION 10. MISCELLANEOUS
PROVISIONS
Sec. 10.01.WP’s application to
become a withholding foreign partnership
and the Appendix to this Agreement are
hereby incorporated into and made an
integral part of this Agreement. This
Agreement, WP’s application, and the
Appendix to this Agreement constitute
the complete agreement between the par-
ties.
Sec. 10.02. This Agreement may be
amended by the IRS if the IRS deter-
mines that such amendment is needed for
the sound administration of the internal
revenue laws or internal revenue regula-
tions. The agreement may also be modi-
fied by either WP or the IRS upon mutual
agreement. Such amendments or modifi-
cations shall be in writing.
Sec. 10.03. Any waiver of a provision
of this Agreement by the IRS is a waiver
solely of that provision. The waiver does
not obligate the IRS to waive other provi-
sions of this Agreement or the same pro-
vision at a later date.
Sec. 10.04. This Agreement shall be
governed by the laws of the United
States. Any legal action brought under
this Agreement shall be brought only in a
U.S. court with jurisdiction to hear and
resolve matters under the internal revenue
laws of the United States. For this pur-
pose, WP agrees to submit to the jurisdic-
tion of such U.S. court.
Sec. 10.05.WP’s rights and responsi-
bilities under this Agreement cannot be
assigned to another person.
Sec. 10.06. Notices provided under
this Agreement shall be mailed registered,
first class airmail. Notice shall be directed
as follows:
To the IRS:
Internal Revenue Service
LMSB:FS:QI
290 Broadway
New York, NY 10007–1867
USA
All notices sent to the IRS must
include the WP’s WP-EIN.
To WP:
Sec. 10.07. WP, acting in its capacity
as a withholding foreign partnership or in
any other capacity, does not act as an
agent of the IRS, nor does it have the
authority to hold itself out as an agent of
the IRS.
IN WITNESS WHEREOF, the
above parties have subscribed their
names to these presents, in duplicate.
Signed thisday of,
(name and title of person signing for
WP)
(name and title of person signing for
IRS)
PR Election Statement
By signing hereunder, WP makes the
PR election under section 6.03 of this
Agreement.
(name and title of
person signing for WP)
Appendix A
WP and the IRS agree that any of the
following auditors may be used by WP to
perform the external audits required by
section 8 of this Agreement.
[Names, addresses, telephone and fax
numbers of external auditors.]
APPENDIX 2
Withholding Foreign Trust Agreement
SECTION 1. PURPOSE AND SCOPE
Sec. 1.01. General Obligations
Sec. 1.02. Parties to the Agreement
SECTION 2. DEFINITIONS
Sec. 2.01. Agreement
Sec. 2.02. Amounts Subject to NRA
Withholding
June 17, 200211662002–24 I.R.B.

Sec. 2.03. Chapter 3 of the Code
Sec. 2.04. Chapter 61 of the Code
Sec. 2.05. Distributive Share
Sec. 2.06. External Auditor
Sec. 2.07. Flow-Through Entity
Sec. 2.08. Foreign Person
Sec. 2.09. Form W-8
Sec. 2.10. Form W-9
Sec. 2.11. Form 1042
Sec. 2.12. Form 1042-S
Sec. 2.13. Form 3520
Sec. 2.14. Form 3520–A
Sec. 2.15. Intermediary
Sec. 2.16. Nonwithholding Foreign
Trust
Sec. 2.17. NRA Withholding
Sec. 2.18. Overwithholding
Sec. 2.19. Trust and Beneficiary or
Owner
Sec. 2.20. Payment
Sec. 2.21. Reduced Rate of Withhold-
ing
Sec. 2.22. Reportable Amount
Sec. 2.23. Reporting Pool
Sec. 2.24. TIN
Sec. 2.25. Underwithholding
Sec. 2.26. U.S. Person
Sec. 2.27. Withholding Agent
Sec. 2.28. Withholding Foreign Trust
(or WT)
Sec. 2.29. Withholding Foreign Trust
(or WT) EIN
Sec. 2.30. Withholding Statement
Sec. 2.31. Other Terms
SECTION 3. WITHHOLDING RE-
SPONSIBILITY
Sec. 3.01. NRA Withholding Respon-
sibility
Sec. 3.02. Timing of Withholding
Sec. 3.03. Deposit Requirements
SECTION 4. DOCUMENTATION RE-
QUIREMENTS
Sec. 4.01. Documentation Require-
ments
Sec. 4.02. Documentation for Foreign
Beneficiaries or Owners
Sec. 4.03. Treaty Claims
Sec. 4.04. Documentation for Interna-
tional Organizations
Sec. 4.05. Documentation for Foreign
Governments and Foreign Central
Banks of Issue
Sec. 4.06. Documentation for Foreign
Tax-Exempt Organizations
Sec. 4.07. Documentation From
Passthrough Beneficiaries or Owners
Sec. 4.08. Documentation for U.S.
Exempt Recipients
Sec. 4.09. Documentation for U.S.
Non-Exempt Recipients
Sec. 4.10. Documentation Validity
Sec. 4.11. Documentation Validity
Period
Sec. 4.12. Maintenance and Retention
of Documentation
SECTION 5. WITHHOLDING FOR-
EIGN TRUST WITHHOLDING CER-
TIFICATE
Sec. 5.01. WT Withholding Certificate
Sec. 5.02. Withholding Statement
Sec. 5.03. Withholding Rate Pools
SECTION 6. TAX RETURN OBLIGA-
TIONS
Sec. 6.01. Form 1042 Filing Require-
ment
Sec. 6.02. Form 1042-S Reporting:
General Rule
Sec. 6.03. Form 1042-S Reporting:
Special Rule for PR Election
Sec. 6.04. Form 3520–A Filing
Requirement
Sec. 6.05. Retention of Returns
SECTION 7. ADJUSTMENTS FOR
OVER- AND UNDER- WITHHOLD-
ING; REFUNDS
Sec. 7.01. Adjustments for NRA Over-
withholding by WT
Sec. 7.02. Collective Credit or Refund
Procedures for NRA Overwithhold-
ing
Sec. 7.03. Adjustments for NRA
Underwithholding
Sec. 7.04. NRA Underwithholding
after Form 1042 Filed
Sec. 7.05. Special Rule Regarding
Failure to Deposit Penalties
SECTION8.EXTERNAL AUDIT
PROCEDURES
Sec. 8.01. In General
Sec. 8.02. Designation of External
Auditor
Sec. 8.03. Timing External Audits:
General Rule
Sec. 8.04. Timing External Audits:
Special Rule for PR Election
Sec. 8.05. Scope of External Audit
Sec. 8.06. External Auditor’s Report
Sec. 8.07. Expanding Scope and Tim-
ing of External Audit
SECTION 9. EXPIRATION, TERMI-
NATION AND DEFAULT
Sec. 9.01. Term of Agreement: General
Rule
Sec. 9.02. Term of Agreement: Special
Rule for PR Election
Sec. 9.03. Termination of Agreement
Sec. 9.04. Automatic Termination of
Agreement
Sec. 9.05. Significant Change in Cir-
cumstances
Sec. 9.06. Events of Default
Sec. 9.07. Notice and Cure
Sec. 9.08. Renewal
SECTION10.MISCELLANEOUS
PROVISIONS
THIS AGREEMENT is made in dupli-
cate under and in pursuance of section
1441 of the Internal Revenue Code of
1986, as amended, (the“Code”) and Trea-
sury Regulation§1.1441–5(e)(5)(v) by
and between
, (referred
to as“WT”), and the INTERNAL REV-
ENUE SERVICE (the“IRS”):
WHEREAS, WT has submitted an
application in accordance withRevenue
Procedure 2002–xxto be a withholding
foreign trust for purposes of Treas. Reg.
§1.1445–5(e)(5)(v);
WHEREAS, WT and the IRS desire
to enter into an agreement to establish
WT’s rights and obligations regarding
documentation, withholding, information
reporting, tax return filing, deposits, and
adjustment procedures under sections
1441, 1442, 1443, 1461, 6048, 6302,
6402, and 6414 of the Code with respect
to certain types of payments;
NOW, THEREFORE, in consider-
ation of the following terms, representa-
tions, and conditions, the parties agree as
follows:
SECTION 1. PURPOSE AND SCOPE
Sec. 1.01. General Obligations.
Except as otherwise provided in this
Agreement, WT’s obligations with
respect to income distributed to, or
included in the distributive shares of, its
beneficiaries or owners are governed by
the Code and the regulations thereunder.
WT may act in its capacity as a withhold-
ing foreign trust pursuant to this Agree-
ment only for payments of amounts sub-
ject to NRA withholding that are
distributed to, or included in the distribu-
tive shares of, its direct beneficiaries or
2002–24 I.R.B.1167June 17, 2002

owners. WT is required to act as a with-
holding foreign trust for all such amounts
paid to WT, or included in WT’s distribu-
tive share, by any withholding agent to
which WT has provided a Form W-8IMY
that represents that WT is acting as a
withholding foreign trust with respect to
such amounts. WT must act as a with-
holding foreign trust for any such
amounts paid with respect to such a Form
W-8IMY that are distributed to, or
included in the distributive shares of, its
direct foreign beneficiaries or owners.
WT may act as a withholding foreign
trust for such amounts that are distributed
to, or included in the distributive shares
of, its direct beneficiaries or owners that
are U.S. persons. WT may also act as a
withholding foreign trust and may treat
itself as a direct foreign beneficiary if (i)
WT is a trust the terms of which
described in section 651(a)(1) and (2) of
the Code and (ii) in any taxable year, WT
distributes amounts other than amounts of
income described in section 651(a)(1). In
no event may WT act as a withholding
foreign trust for amounts subject to NRA
withholding that are distributed to, or
included in the distributive shares of,
passthrough beneficiaries or owners or
indirect beneficiaries or owners. For
passthrough beneficiaries or owners and
indirect beneficiaries or owners, WT must
act as a nonwithholding foreign trust.
Sec. 1.02. Parties to the Agreement.
This Agreement applies to WT and the
IRS.
SECTION 2. DEFINITIONS
For purposes of this Agreement, the
terms listed below are defined as follows:
Sec. 2.01. Agreement.“Agreement”
means this Agreement between WT and
the IRS. All appendices to this Agreement
and WT’s application to become a with-
holding foreign trust are incorporated into
this Agreement by reference.
Sec. 2.02. Amounts Subject to NRA
Withholding.An“amount subject to
NRA withholding”is an amount
described in Treas. Reg.§1.1441–2(a).
An amount subject to NRA withholding
shall not include interest paid as part of
the purchase price of an obligation sold
between interest payment dates or origi-
nal issue discount paid as part of the pur-
chase price of an obligation sold in a
transaction other than the redemption of
such obligation, unless the sale is part of
a plan the principal purpose of which is to
avoid tax and WT has actual knowledge
or reason to know of such plan.
Sec. 2.03. Chapter 3 of the Code.
Any reference to“chapter 3 of the Code”
means sections 1441, 1442, 1443, 1461,
1463, and 1464 of the Code.
Sec. 2.04. Chapter 61 of the Code.
Any reference to“chapter 61 of the
Code”means sections 6041, 6042, 6045,
6048, 6049, and 6050N of the Code.
Sec. 2.05. Distributive share.“Dis-
tributive share”means an amount subject
to withholding that is required to be dis-
tributed to the beneficiaries of a simple
trust and an amount subject to withhold-
ing that is includable in the income of the
owners of a grantor trust.
Sec. 2.06. External Auditor.An
“external auditor”is any approved auditor
listed in Appendix A of this Agreement
that WT engages to perform the audits
required by section 8 of this Agreement.
Sec. 2.07. Flow-Through Entity.A
flow-through entity is a foreign partner-
shipdescribedinTreas.Reg.
§301.7701–2 or 3 (other than a withhold-
ing foreign partnership), a foreign trust
that is described in section 651(a) of the
Code, or a foreign trust all or a portion of
which is treated as owned by the grantor
or other person under sections 671
through 679 of the Code (other than a
withholding foreign trust). For an item of
income for which a treaty benefit is
claimed, an entity is also a flow-through
entity to the extent it is treated as fiscally
transparent under section 894 and the
regulations thereunder.
Sec. 2.08. Foreign Person.A“foreign
person”is any person that is not a
“United States person”and includes a
“nonresident alien individual,”a“foreign
corporation,”a“foreign partnership,”a
“foreign trust,”and a“foreign estate,”as
those terms are defined in section 7701 of
the Code.
Sec. 2.09. Form W-8.“Form W-8”
means a valid IRS Form W-8BEN,Cer-
tificate of Foreign Status of Beneficial
Owner for United States Tax Withholding;
IRS Form W-8ECI,Certificate of Foreign
Person’s Claim for Exemption From
Withholding on Income Effectively Con-
nected With the Conduct of a Trade or
Business in the United States; IRS Form
W-8EXP,Certificate of Foreign Govern-
ments and Other Foreign Organizations
for United States Tax Withholding; and
IRS Form W-8IMY,Certificate of For-
eign Intermediary, Foreign Partnership,
and Certain U.S. Branches for United
States Tax Withholding, as appropriate. It
also includes any acceptable substitute
form.
Sec. 2.10. Form W-9.“Form W-9”
means a valid IRS Form W-9,Request for
Taxpayer Identification Number and Cer-
tification, or any acceptable substitute.
Sec. 2.11. Form 1042.“Form 1042”
means an IRS Form 1042,Annual With-
holding Tax Return for U.S. Source
Income of Foreign Persons.
Sec. 2.12. Form 1042-S.“Form
1042-S”means an IRS Form 1042-S,
Foreign Person’s U.S. Source Income
Subject to Withholding.
Sec. 2.13. Form 3520.“Form 3520”
means an IRS Form 3520,Annual Return
to Report Transaction With Foreign Trust
and Receipt of Certain Foreign Gifts.
Sec. 2.14. Form 3520-A.“Form
3520-A”means an IRS Form 3520-A,
Annual Information Return of Foreign
Trust With a U.S. Owner.
Sec. 2.15. Intermediary.An“interme-
diary”means any person that acts on
behalf of another person, such as a custo-
dian, broker, nominee, or other agent.
Sec. 2.16. Nonwithholding Foreign
Trust.A“nonwithholding foreign trust”
is any foreign trust that is not acting as a
withholding foreign trust.
Sec. 2.17. NRA Withholding. For pur-
poses of this agreement“nonresident
alien (NRA) withholding”is any with-
holding required under chapter 3 of the
Code (other than sections 1445 or 1446),
whether the payment subject to withhold-
ing is made to an individual or to an
entity.
Sec. 2.18. Overwithholding. The term
“overwithholding”means the excess of
the amount actually withheld over the
amount required to be withheld under
chapter 3 of the Code.
Sec. 2.19. Trust, Beneficiary and
Owner. The term“trust”is defined in
Treas. Reg.§301.7701–4. The term“ben-
eficiary”is defined in section 643(c) of
the Code and the regulations thereunder.
An“owner”is a person treated as a
grantor or owner under Subpart C of Sub-
chapter J of the Code. A direct benefi-
ciary or owner is a beneficiary or owner,
June 17, 200211682002–24 I.R.B.

other than an intermediary or flow-
through entity that is not itself a with-
holding foreign trust or withholding for-
eign partnership, for which WT acts as a
withholding foreign trust. An indirect
beneficiary or owner is a person that
owns a trust interest in WT though one or
more passthrough beneficiaries or own-
ers. A passthrough beneficiary or owner is
a direct or indirect beneficiary or owner
in WT that is an intermediary or flow-
through entity. As provided in Section
2.07 of this Agreement, a withholding
foreign partnership or withholding for-
eign trust is not a flow-through entity and
thus is not a passthrough beneficiary or
owner.
Sec. 2.20. Payment.A“payment”is
considered made to a person if that per-
son realizes income whether or not such
income results from an actual transfer of
cash or other property. See Treas. Reg.
§1.1441–2(e).
Sec. 2.21. Reduced Rate of With-
holding.A“reduced rate of withholding”
means a rate of withholding that is less
than 30 percent, either as a result of a
reduction in withholding under the Code
or as a result of a reduction in withhold-
ing under an income tax treaty.
Sec. 2.22. Reportable Amount.A
“reportable amount”means an amount
subject to NRA withholding (as defined
in section 2.02 of this Agreement); U.S.
source deposit interest; and U.S. source
interest or original issue discount paid on
the redemption of short-term obligations.
The term does not include payments on
deposits with banks and other financial
institutions that remain on deposit for two
weeks or less. It also does not include
amounts of original issue discount arising
from a sale and repurchase transaction
completed within a period of two weeks
or less, or amounts described in Treas.
Reg.§1.6049–5(b)(7), (10), or (11)
(relating to certain foreign targeted regis-
tered obligations and certain obligations
issued in bearer form).
Sec. 2.23. Reporting Pool.A“report-
ing pool”is defined in section 5.03 of this
Agreement.
Sec. 2.24. TIN.A“TIN”is a U.S. tax-
payer identification number.
Sec. 2.25. Underwithholding.
“Underwithholding”means the excess of
the amount required to be withheld under
chapter 3 of the Code over the amount
actually withheld.
Sec. 2.26. U.S. Person.A“United
States (or U.S.) person”is a person
described in section 7701(a)(30) of the
Code, the U.S. government (including an
agency or instrumentality thereof), a State
of the United States (including an agency
or instrumentality thereof), or the District
of Columbia (including an agency or
instrumentality thereof).
Sec. 2.27. Withholding Agent.A
“withholding agent”has the same mean-
ing as set forth in Treas. Reg.§1.1441–
7(a) and includes a payor. As used in this
Agreement, the term generally refers to
the person making a payment to a with-
holding foreign trust.
Sec. 2.28. Withholding Foreign Trust
(or WT).A“withholding foreign trust”is
a person, described in Treas. Reg.
§1.1441–5(e)(5)(v), that has entered into
a withholding agreement with the IRS to
be treated as a withholding foreign trust
and is acting in its capacity as a withhold-
ing foreign trust.
Sec. 2.29. Withholding Foreign Trust
(or WT) EIN.A“withholding foreign
trust EIN”or“WT-EIN”means the
employer identification number assigned
by the IRS to a withholding foreign trust.
WT’s WT-EIN is only to be used when
WT is acting as a withholding foreign
trust. For example, WT must give a with-
holding agent its non-WT EIN, if any,
rather than its WT-EIN, if it is not acting
as a withholding foreign trust and a tax-
payer identification number is required.
Sec. 2.30. Withholding Statement.
The term“withholding statement”is
defined in section 5.02 of this Agreement.
Sec. 2.31. Other Terms. Any term not
defined in this section has the same
meaning that it has under the Code, the
income tax regulations under the Code, or
any applicable income tax treaty.
SECTION 3. WITHHOLDING
RESPONSIBILITY
Sec. 3.01. NRA Withholding Respon-
sibility. WT is subject to the withholding
and reporting provisions applicable to
withholding agents under chapter 3 of the
Code. Under chapter 3, a withholding
agent must withhold 30 percent of any
payment of an amount subject to NRA
withholding made to a beneficiary or
owner that is a foreign person unless the
withholding agent can reliably associate
the payment with documentation upon
which it can rely to treat the payment as
made to a payee that is a U.S. person or
as made to a beneficial owner that is a
foreign person entitled to a reduced rate
of withholding. When it is acting as a
withholding foreign trust, WT must
assume NRA withholding responsibility
for amounts subject to NRA withholding
that are distributed to, or included in the
distributive share of, any direct benefi-
ciary or owner, and WT must withhold
the amount required to be withheld under
chapter 3 of the Code. WT must provide
a Form W-8IMY that certifies to a with-
holding agent that makes a payment of
such amounts that WT is acting as a with-
holding foreign trust, and WT must iden-
tify such amounts on the withholding
statement associated with that Form
W-8IMY. WT is not required to withhold
when it pays such amounts to another
withholding foreign trust or withholding
foreign partnership that has certified to
WT on Form W-8IMY that it is acting as
a withholding foreign trust or withholding
foreign partnership with respect to such
identified amounts. WT is not required to
act as a withholding foreign trust for all
amounts that it receives from a withhold-
ing agent. WT may not act as a withhold-
ing foreign trust for amounts distributed
to, or included in the distributive share of,
passthrough beneficiaries or owners or
indirect beneficiaries or owners. WT must
act as a nonwithholding foreign trust for
such amounts. When WT is not acting as
a withholding foreign trust, WT must: 1)
provide to the withholding agent a Form
W-8IMY with Part VI completed; 2) iden-
tify such amounts on the withholding
statement associated with that Form
W-8IMY; and 3) provide the documenta-
tion and information required by Treas.
Reg.§1.1441–5(e)(5)(iii) and (iv).
2002–24 I.R.B.1169June 17, 2002

Sec. 3.02. Timing of Withholding.
WT must withhold on the date it makes a
distribution to a direct foreign beneficiary
or owner that includes an amount subject
to NRA withholding. To the extent a
direct foreign beneficiary’s or owner’s
distributive share of income subject to
withholding has not actually been distrib-
uted to the direct foreign beneficiary or
owner, WT must withhold on the direct
beneficiary’s or owner’s distributive share
on the earlier of the date the statement
required under section 6048 is mailed or
otherwise provided to the beneficiary or
owner or the due date for furnishing the
statement (whether or not WT is required
to prepare and furnish the statement).
Sec. 3.03. Deposit Requirements.WT
must deposit amounts withheld under
chapter 3 of the Code with a Federal
Reserve bank or authorized financial
institution at the time and in the manner
provided under section 6302 of the Code
(see Treas. Reg.§§1.6302–2(a) or
31.6302–1(h)).
SECTION 4. DOCUMENTATION
REQUIREMENTS
Sec. 4.01. Documentation Require-
ments. WT agrees to obtain, review, and
maintain Forms W-8 and W-9 in accor-
dance with this section 4. WT must obtain
a Form W-8 or W-9 from every direct
beneficiary or owner prior to the time that
withholding is required. WT agrees to
make documentation (together with any
associated withholding statements and
other documents or information) available
upon request for inspection by WT’s
external auditor. WT represents that none
of the laws to which it is subject prohib-
its disclosure of the identity of any ben-
eficiary or owner or corresponding ben-
eficiary or owner information to WT’s
external auditor. WT may rely on the
Forms W-8 and W-9 it obtains under this
section 4 as the basis for determining its
withholding and reporting obligations.
Sec. 4.02. Documentation for For-
eign Beneficiaries or Owners.WTmay
treat a direct beneficiary or owner as a
foreign beneficial owner if the direct ben-
eficiary or owner provides a Form W-8
that supports such status. WT may treat a
direct beneficiary or owner that has pro-
vided a Form W-8 as entitled to a reduced
rate of NRA withholding if all the
requirements for a reduced rate are met
and the Form W-8 provided by the direct
beneficiary or owner supports entitlement
to a reduced rate. Sections 4.03 through
4.06 of this Agreement describe the spe-
cific documentation requirements neces-
sary for obtaining a reduced rate of with-
holding in certain circumstances.
Sec. 4.03. Treaty Claims.WTmay
not reduce the rate of withholding based
on a direct beneficiary’s or owner’s claim
of treaty benefits unless WT obtains from
the beneficiary or owner a Form W-8BEN
with Part II of the form properly com-
pleted, including the appropriate limita-
tion on benefits and section 894 certifica-
tions.
Sec. 4.04. Documentation for Inter-
national Organizations. WT may not
treat a direct beneficiary or owner as an
international organization entitled to an
exemption from withholding under sec-
tion 892 of the Code unless WT obtains a
Form W-8EXP from the international
organization and the name provided on
the Form W-8EXP is the name of an
entity designated as an international orga-
nization by executive order pursuant to 22
United States Code 288 through 288(f). If
an international organization is not claim-
ing benefits under section 892 of the
Code but under another Code exception,
the provisions of sections 4.02 of this
Agreement apply rather than the provi-
sions of this section 4.04.
Sec. 4.05. Documentation for For-
eign Governments and Foreign Central
Banks of Issue.
(A)Documentation For a Foreign
Government or Foreign Central Bank
of Issue Claiming an Exemption From
Withholding Under Section 892 or Sec-
tion 895. WT may not treat a direct ben-
eficiary or owner as a foreign government
or foreign central bank of issue exempt
from withholding under section 892 or
895 of the Code unless—
(1) WT receives from the direct ben-
eficiary or owner a Form W-8EXP estab-
lishing that the direct beneficiary or
owner is a foreign government or foreign
central bank of issue;
(2) The income distributed to, or
included in the distributive share of, the
direct beneficiary or owner is the type of
income that qualifies for an exemption
from withholding under section 892 or
895; and
(3) WT does not know, or have reason
to know, that the direct beneficiary or
owner is a controlled commercial entity,
that the income owned by the foreign
government or foreign central bank of
issue is being received from a controlled
commercial entity, or that the income is
from the disposition of an interest in a
controlled commercial entity.
(B)Treaty Exemption. WT may not
treat a direct beneficiary or owner as a
foreign government or foreign central
bank of issue entitled to a reduced rate of
withholding under an income tax treaty
unless it obtains a Form W-8BEN that,
under section 4.03 of this Agreement, is
sufficient to obtain a reduced rate of with-
holding under a treaty.
(C)Other Code Exception.Ifafor-
eign government or foreign central bank
of issue is not claiming benefits under
section 892 or 895 of the Code but under
another Code exception (e.g., the portfo-
lio interest exception under sections
871(h) or 881(c) of the Code), the provi-
sions of section 4.02 of this Agreement
apply rather than the provisions of this
section 4.05.
Sec. 4.06. Documentation for For-
eign Tax-Exempt Organizations.
(A)Reduced Rate of Withholding
Under Section 501. WT may not treat a
direct beneficiary or owner as a foreign
organization described under section
501(c) of the Code, and therefore exempt
from withholding (or, if the direct benefi-
ciary or owner is a foreign private foun-
dation, subject to withholding at a
4-percent rate under section 1443(b) of
the Code) unless WT obtains a valid
Form W-8EXP on which Part III of the
form is completed.
(B)Treaty Exemption. WT may not
treat a direct beneficiary or owner as a
foreign organization that is tax exempt, or
entitled to a reduced rate of withholding
under an income tax treaty unless it
obtains a Form W-8BEN from the benefi-
ciary or owner that, under section 4.03 of
this Agreement, is sufficient to obtain a
reduced rate of withholding under a
treaty.
(C)Other Exceptions. If a tax-exempt
entity is not claiming a reduced rate of
withholding because it is an organization
described under section 501(c) of the
Code or under an income tax treaty, but is
June 17, 200211702002–24 I.R.B.

claiming a reduced rate of withholding
under another Code exception, the provi-
sions of section 4.02 of this Agreement
apply rather than the provisions of this
section 4.06.
Sec. 4.07. Documentation For
Passthrough Beneficiaries or Owners.
WT shall not act as a withholding foreign
trust with respect to an amount subject to
withholding distributed to, or included in
the distributive share of, a passthrough
beneficiary or owner. WT must forward
that passthrough beneficiary’s or owner’s
documentation (and associated withhold-
ing statement and documentation of indi-
rect beneficiaries or owners) to the with-
holding agent from whom WT receives
the amount subject to withholding. WT
may act as a withholding foreign trust for
payments made to beneficiaries or owners
that are themselves withholding foreign
trusts or withholding foreign partnerships.
Sec. 4.08. Documentation For U.S.
Exempt Recipients. WT shall not treat a
beneficiary or owner as a U.S. exempt
recipient unless WT obtains from the ben-
eficiary or owner a Form W-9 on which
the beneficiary or owner writes“Exempt”
in Part II of the Form.
Sec. 4.09. Documentation for U.S.
Non-Exempt Recipients. WT shall not
treat a beneficiary or owner as a U.S.
non-exempt recipient unless WT obtains a
Form W-9 from the beneficiary or owner.
Sec. 4.10. Documentation Validity.
WT may not rely on Forms W-8 or W-9
if WT has actual knowledge or reason to
know that the information or statements
contained in the forms are unreliable or
incorrect. Once WT knows, or has reason
to know, that a Form W-8 or W-9 pro-
vided by a direct beneficiary or owner is
unreliable or incorrect, WT must obtain a
new Form W-8 or W-9 prior to the time
withholding is required.
Sec.4.11.DocumentationValidity
Period.
(A)Form W-8. WT may rely on a
properly completed Form W-8 until its
validityexpiresunderTreas.Reg.
§1.1441–1(e)(4)(ii).
(B)Form W-9. WT may rely on a
properly completed Form W-9 as long as
it has not been informed by the IRS or
another withholding agent that the form is
unreliable.
Sec. 4.12. Maintenance and Reten-
tion of Documentation.
(A)Maintaining Documentation.
WT shall maintain Forms W-8 and W-9
by retaining the original documentation, a
certified copy, a photocopy, a microfiche,
or by electronic storage or similar means
of record retention.
(B)Retention Period. WT shall retain
a direct beneficiary’s or owner’s Form
W-8 or W-9 obtained under this section 4
for as long as it may be relevant to the
determination of WT’s tax liability under
this agreement.
SECTION 5. WITHHOLDING
FOREIGN TRUST WITHHOLDING
CERTIFICATE
Sec. 5.01. WT Withholding Certifi-
cate. WT agrees to furnish a withholding
foreign trust withholding certificate to
each withholding agent from which it
receives amounts subject to NRA with-
holding as a withholding foreign trust.
The withholding foreign trust withholding
certificate is a Form W-8IMY (or accept-
able substitute form) that certifies that
WT is acting as a withholding foreign
trust, contains WT’s WT-EIN, and pro-
vides all other information required by
the form. WT is not required to disclose,
as part of that Form W-8IMY or its with-
holding statement, any information
regarding the identity of a direct benefi-
ciary or owner.
Sec. 5.02. Withholding Statement.
WT agrees to provide to each withholding
agent from which WT receives amounts
subject to NRA withholding as a with-
holding foreign trust a written statement
(the“withholding statement”) identifying
the amounts for which WT acts as a with-
holding foreign trust. The statement
forms an integral part of the Form
W-8IMY. The withholding statement may
be provided in any manner, and in any
form, to which WT and the withholding
agent mutually agree.
Sec. 5.03. Withholding Rate Pools.
When it is acting as a withholding foreign
trust, WT must assume withholding
responsibility for amounts subject to
withholding that are distributed to, or
included in the distributive shares of, its
direct beneficiaries or owners. Accord-
ingly, withholding rate pool information
is not required as part of WT’s withhold-
ing statement.
SECTION 6. TAX RETURN
OBLIGATIONS
Sec. 6.01. Form 1042 Filing Require-
ment.
(A)In general. WT shall file a return
on Form 1042, whether or not WT with-
held any amounts under chapter 3 of the
Code, on or before March 15 of the year
following any calendar year in which WT
acts as a withholding foreign trust. In
addition to the information specifically
requested on Form 1042 and the accom-
panying instructions, WT shall attach a
statement setting forth the amounts of any
overwithholding or underwithholding
adjustments made under Treas. Reg.
§1.1461–2 and sections 7.01 and 7.03 of
this Agreement, and an explanation of the
circumstances that resulted in the over- or
under- withholding.
(B)Extensions for Filing Returns.
WT may request an extension of the time
for filing Form 1042, or any of the infor-
mation required to be attached to the
form, by submitting Form 2758,Applica-
tion for Extension of Time to File Certain
Excise, Income, Information, and Other
Returns, on or before the due date of the
return. The application must be in writ-
ing, properly signed by a duly authorized
agent of WT, and shall clearly set forth
the following:
(1) The calendar year for which the
extension is requested; and
(2) A full explanation of the reason(s)
for requesting the extension to assist the
IRS in determining the period of exten-
sion, if any, that will be granted.
Sec. 6.02. Form 1042-S Reporting:
General Rule. Unless WT has made a
pooled reporting (PR) election pursuant
to section 6.03 of this Agreement, WT is
required to file separate Forms 1042-S for
each direct beneficiary or owner to whom
WT distributes, or in whose distributive
share is included, an amount subject to
NRA withholding. WT must file separate
Forms 1042-S by income code, exemp-
tion code, recipient code, and withholding
rate. WT must file its Forms 1042-S in
the manner required by the regulations
under chapter 3 of the Code and the
instructions to the form, including any
requirement to file the forms magneti-
cally or electronically. Any Form 1042-S
required by this section 6 shall be filed on
2002–24 I.R.B.1171June 17, 2002

or before March 15 following the calen-
dar year in which withholding, if any, was
required under section 3.02 of this agree-
ment. WT may request an extension of
time to file Forms 1042-S by submitting
Form 8809,Request for Extension of
Time to File Information Returns,bythe
due date of Forms 1042-S in the manner
required by Form 8809.
Sec. 6.03. Form 1042-S Reporting:
Special Rule for PR Election.IfWThas
made the PR election pursuant to this sec-
tion 6.03, WT is not required to file
Forms 1042-S for amounts distributed to,
or included in the distributive share of,
each separate direct beneficiary or owner
for whom such reporting would otherwise
be required. Instead, WT shall file a sepa-
rate Form 1042-S for each reporting pool.
A reporting pool consists of income that
falls within a particular withholding rate
and within a particular income code,
exemption code, and recipient code as
determined on Form 1042-S. WT may use
a single recipient code for all reporting
pools except for amounts paid to foreign
tax-exempt recipients, for which a sepa-
rate recipient code must be used. For this
purpose, a foreign tax-exempt recipient
includes any organization that is not sub-
ject to NRA withholding and is not liable
to tax in its country of residence because
it is a charitable organization, a pension
fund, or a foreign government. WT must
make the PR election at the time this
agreement is executed by signing the
election statement on the signature page
of this agreement. Once made, the PR
election remains in effect for the entire
term of this agreement beginning on the
date the agreement becomes effective and
ending on the date of its expiration or ter-
mination under section 9 of this Agree-
ment. WT must make a new election for
each renewal term of this agreement. If
WT makes the PR election, WT cannot
revoke it prior to the end of the term for
which WT has made the PR election. If
WT did not make the PR election at the
time this agreement was executed, then
WT may make a PR election only by ter-
minating this agreement pursuant to sec-
tion 9.03 and requesting to enter into a
new agreement.
Sec.6.04.Form3520–A Filing
Requirement. If WT is required to file
Form 3520-A under section 6048 of the
Code, then WT shall file Form 3520-A
and furnish any required statements to
U.S. beneficiaries or owners in accor-
dance with the instructions for the form.
Sec. 6.05. Retention of Returns.WT
shall retain 1042 and Form 3520-A, if
required, for the period of the applicable
statute of limitations on assessments and
collection under the Code.
SECTION 7. ADJUSTMENTS FOR
OVER- AND UNDER-
WITHHOLDING; REFUNDS
Sec. 7.01. Adjustments for NRA
Overwithholding by WT. WT may make
an adjustment for amounts paid to its
direct beneficiaries or owners that it has
overwithheld under chapter 3 of the Code
by applying either the reimbursement or
set-off procedures described in this sec-
tion within the time period prescribed for
those procedures.
(A)Reimbursement Procedure.WT
may repay its beneficiaries or owners for
an amount overwithheld and reimburse
itself by reducing, by the amount of tax
actually repaid to the beneficiaries or
owners, the amount of any subsequent
deposit of tax required to be made by WT
under section 3.03 of this Agreement. For
purposes of this section 7.01(A), an
amount that is overwithheld shall be
applied in order of time to each of WT’s
subsequent deposit periods in the same
calendar year to the extent that the with-
holding taxes required to be deposited for
a subsequent deposit period exceed the
amount actually deposited. An amount
overwithheld in a calendar year may be
applied to deposit periods in the calendar
year following the calendar year of over-
withholding only if:
(1) WT states on a Form 1042-S, filed
by March 15 of the calendar year follow-
ing the calendar year of overwithholding,
the amount of tax withheld and the
amount of any actual repayments; and
(2) WT states on a Form 1042, filed by
March 15 of the calendar year following
the calendar year of overwithholding, that
the filing of the Form 1042 constitutes a
claim for credit in accordance with Treas.
Reg.§1.6414–1.
(B)Set-Off Procedure.WTmay
repay its beneficiaries or owners by
applying the amount overwithheld against
any amount which otherwise would be
required under chapter 3 of the Code to
be withheld by WT before the earlier of
March 15 of the calendar year following
the calendar year of overwithholding or
the date that the Form 1042-S is actually
filed with the IRS. For purposes of mak-
ing a return on Form 1042 or 1042-S for
the calendar year of overwithholding, and
for purposes of making a deposit of the
amount withheld, the reduced amount
shall be considered the amount required
to be withheld from such income under
chapter 3 of the Code.
Sec. 7.02. Collective Credit or
Refund Procedures for NRA Overwith-
holding. If WT has made a PR election
and it has overwithheld under chapter 3
of the Code on amounts subject to NRA
withholding paid to WT’s direct benefi-
ciaries or owners during a calendar year
and the amount has not been recovered
under the reimbursement or set-off proce-
dures under sections 7.01 of this Agree-
ment, WT may request a credit or refund
of the total amount overwithheld by fol-
lowing the procedures of this section
7.02. WT shall follow the procedures set
forth under sections 6402 and 6414 of the
Code, and the regulations thereunder, to
claim the credit or refund. No credit or
refund will be allowed after the expiration
of the statutory period of limitation for
refunds under section 6511 of the Code.
WT may use the collective refund proce-
dures under this section 7.02 only if the
following conditions are met:
(A) WT must not have issued Forms
1042-S to the direct beneficiaries or own-
ers who were subjected to overwithhold-
ing;
(B) WT must submit together with its
amended return on which it claims a
credit or refund a statement of the reason
for the overwithholding;
(C) WT must submit together with its
amended return on which it claims a
credit or refund a statement that it has
repaid the amount of overwithholding to
the appropriate direct beneficiaries or
owners prior to filing the claim for credit
or refund; and
(D) WT must retain a record showing
that it repaid the direct beneficiaries or
owners the amount of the overwithhold-
ing.
Sec. 7.03. Adjustments for NRA
Underwithholding. If WT knows that an
amount should have been withheld under
chapter 3 of the Code from a previous
payment to a direct beneficiary or owner
June 17, 200211722002–24 I.R.B.

but was not withheld, WT may either
withhold from future payments made to
the same direct beneficiary or owner or
satisfy the tax from the direct beneficia-
ry’s or owner’s proportionate share of
assets over which it has control. The addi-
tional withholding or satisfaction of the
tax owed may only be made before the
due date of the Form 1042 (not including
extensions) for the calendar year in which
the underwithholding occurred.
Sec. 7.04. NRA Underwithholding
after Form 1042 Filed. If, after a Form
1042 has been filed for a calendar year,
WT, WT’s external auditor, or the IRS
determines that, due to WT’s failure to
carry out its obligations under this Agree-
ment, WT has underwithheld tax for such
year, WT shall file an amended Form
1042 to report and pay the underwithheld
tax. WT shall pay the underwithheld tax,
the interest due on the underwithheld tax,
and any applicable penalties, at the time
of filing the amended Form 1042. If WT
fails to file an amended return, the IRS
shall make such return under section 6020
of the Code.
Sec. 7.05. Special Rule Regarding
Failure to Deposit Penalties. Solely for
purposes of applying section 6656 of the
Code (failure to make deposit of taxes),
WT will not be considered to have made
an underpayment of a deposit of NRA
withholding taxes if the conditions of this
paragraph are met. The conditions of this
paragraph are that—
(A) WT makes its deposits within the
time (deposit period) required by section
6302 of the Code;
(B) The deposit is not less than 90 per-
cent of the aggregate amount of the tax
required to be withheld under chapter 3 of
the Code during the deposit period appli-
cable to WT; and
(C) WT determines the difference
between the total amount required to be
deposited and the amount actually depos-
ited as of the end of the 3rd, 6th, 9th, and
12th months of the calendar year and the
difference is deposited no later than the
15th day of the second following month
(i.e., May 15, August 15, November 15
and February 15, respectively). In deter-
mining whether there has been an under-
payment, reimbursements and set-offs
shall be taken into account.
SECTION 8. EXTERNAL AUDIT
PROCEDURES
Sec. 8.01. In General. Unless WT
requests an IRS audit in lieu of an exter-
nal audit, the IRS agrees not to conduct
an on-site audit of WT with respect to
withholding and reporting obligations
covered by this Agreement provided that
an external auditor designated in Appen-
dix A of this Agreement conducts an audit
of WT in accordance with this section 8.
WT shall permit the external auditor to
have access to all relevant records of WT
for purposes of performing the external
audit, including information regarding
specific beneficiaries or owners. WT shall
permit the IRS to communicate directly
with the external auditor and to review
the audit procedures followed by the
external auditor. WT represents that there
are no legal prohibitions that prevent the
external auditor from examining any
information relevant to the external audit
to be performed under this section 8 and
that there are no legal prohibitions that
prevent the IRS from communicating
directly with the auditor. WT shall permit
the IRS to examine the external auditor’s
work papers and reports.
Sec. 8.02. Designation of External
Auditor.WT’s external auditor must be
one of the auditors listed in Appendix A
of this Agreement, unless WT and the
IRS agree, prior to the audit, to substitute
another auditor. WT shall not propose an
external auditor unless it has a reasonable
belief that the auditor is subject to laws,
regulations, or rules that impose sanctions
for failure to exercise its independence
and to perform the audit competently. The
IRS has the right to reject a proposed
external auditor, or to revoke its accep-
tance of an external auditor, if the IRS, in
its sole discretion, reasonably believes
that the auditor is not independent or can-
not perform an effective audit under this
Agreement.
Sec. 8.03. Timing External Audits:
General Rule. Unless WT has made a PR
election, WT shall have the external audi-
tor conduct an external audit only at such
time and only for such calendar years as
the IRS directs.
Sec. 8.04. Timing External Audits:
Special Rule for PR Election.IfWThas
made a PR election, WT shall have the
external auditor conduct an audit after the
close of every other calendar year that
this Agreement is in effect. The auditor
shall examine the two previous calendar
years. For example, the first audit will
occur in the third calendar year that the
agreement is in effect and the external
auditor will examine calendar years one
and two.
Sec. 8.05. Scope of External Audit.
The external auditor shall verify whether
WT is in compliance with this Agreement
by conducting an audit that meets the
requirements of this section 8.05. The
report, described in section 8.06 of this
Agreement, must disclose that the exter-
nal auditor has, at a minimum, performed
the following checks listed in this section
8.05, and set forth how each of those
checks was performed and the results of
the checks. WT’s external auditor is
encouraged to contact the IRS at the
address set forth in section 10.06 of this
Agreement and submit an audit plan
(which includes, if relevant, the extent to
which the external auditor proposes to
rely on WT’s internal audit procedures)
prior to performing the audit so that the
audit may be conducted in the most effi-
cient and least costly manner possible.
(A)Documentation. The external
auditor must review information con-
tained in beneficiary or owner files to
determine whether the documentation
requirements of section 4 of this Agree-
ment are being met.
(B)Withholding Responsibilities.
The external auditor must—
(1) Perform test checks of direct ben-
eficiaries or owners, to verify that WT is
withholding the proper amounts.
(2) Verify that amounts withheld were
timely deposited in accordance with sec-
tion 3.03 of this Agreement.
(C)Return Filing and Information
Reporting. The external auditor must-
(1) Obtain copies of original and
amended Forms 1042, and any schedules,
statements, or attachments required to be
filed with those forms, and determine
whether the amounts of income, taxes,
and other information reported on those
forms are accurate by—
(i) Reviewing work papers;
(ii) Reviewing Forms W-8IMY,
together with the associated withholding
statements, that WT has provided to with-
holding agents;
2002–24 I.R.B.1173June 17, 2002

(iii) Reviewing copies of Forms
1042-S that withholding agents have pro-
vided WT;
(iv) Reviewing account statements
from withholding agents;
(v) Reviewing correspondence
between WT and withholding agents; and
(vi) Interviewing personnel respon-
sible for preparing the Form 1042 and the
work papers used to prepare those forms.
(2) Obtain copies of original and cor-
rected Forms 1042-S and Forms 3520-A
together with the work papers used to
prepare those forms and determine
whether the amounts reported on those
forms are accurate by—
(i) Reviewing the Forms 1042-S
received from withholding agents;
(ii) Reviewing a valid sample of earn-
ings statements issued by WT to direct
beneficiaries or owners, if any.
(3) Thoroughly review the statements
attached to amended Forms 1042 filed to
claim a refund, ascertain their veracity,
and determine the causes of any over-
withholding reported and ensure WT did
not issue Forms 1042-S to persons whom
it included as part of its collective credit
or refund.
(4) Determine, in the case of collective
credits or refunds, that WT repaid the
appropriate beneficiaries or owners prior
to requesting a collective refund or credit.
(E)Change in Circumstances. The
external auditor must verify that in the
course of the audit it has not discovered
any significant change in circumstances,
as described in section 9.05 (A) or (D) of
this Agreement.
Sec. 8.06. External Auditor’s Report.
Upon completion of the audit of WT, the
external auditor shall issue a report, or
reports, of audit findings directly to the
IRS by sending the original report to the
IRS at the address set forth in section
10.06 of this Agreement. This report is
due by December 31 following the calen-
dar year being audited, or if that date falls
on a Saturday or Sunday, the next U.S.
business day. The IRS may, however,
upon request by the external auditor,
extend the due date of the audit report
upon good cause. The report must be in
writing, in English, and currency amounts
must be stated in U.S. dollars. The report
must fully describe the scope of the audit,
the methodologies (including sampling
techniques) used to determine whether
WT is in compliance with the provisions
of this Agreement, and the result of each
such determination. The report must also
specifically address each of the items in
section 8.05 of this Agreement.
Sec. 8.07. Expanding Scope and
Timing of External Audit. Upon review
of the external auditor’s report, the IRS
may request, and WT must permit, the
external auditor to perform additional
audit procedures.
SECTION 9. EXPIRATION,
TERMINATION AND DEFAULT
Sec. 9.01. Term of Agreement: Gen-
eral Rule. If WT has not made a PR elec-
tion, this Agreement shall be in effect on
and shall continue
in force until terminated under 9.03 or
9.04 of this Agreement.
Sec. 9.02. Term of Agreement: Spe-
cial Rule for PR Election.IfWThas
made a PR election, this Agreement shall
be in effect on
and
shall expire on December 31 of the fifth
full calendar year after the year in which
this Agreement first takes effect. This
Agreement may be renewed for addi-
tional terms as provided in section 9.08 of
this Agreement.
Sec. 9.03. Termination of Agreement.
This Agreement may be terminated by
either the IRS or WT prior to the end of
its term by delivery of a notice of termi-
nation to the other party in accordance
with section 10.06 of this Agreement. The
IRS, however, shall not terminate the
Agreement unless there has been a sig-
nificant change in circumstances, as
defined in section 9.05 of this Agreement,
or an event of default has occurred, as
defined in section 9.06 of this Agreement,
and the IRS determines, in its sole discre-
tion, that the significant change in cir-
cumstances or the event of default war-
rants termination of this Agreement. In
addition, the IRS shall not terminate this
Agreement in the event of default if WT
can establish to the satisfaction of the IRS
that all events of default for which it has
received notice have been cured within
the time period agreed upon. The IRS
shall notify WT, in accordance with sec-
tion 9.07 of this Agreement, that an event
of default has occurred and that the IRS
intends to terminate the Agreement unless
WT cures the default. A notice of termi-
nation sent by either party shall take
effect on the date specified in the notice.
Sec 9.04. Automatic Termination of
Agreement. Notwithstanding Section
9.03 of this Agreement, this Agreement
will terminate automatically in the event
that the external auditor or the IRS dis-
covers that WT was not in possession of
Forms W-8 or W-9, as applicable, for any
direct beneficiary or owner at any time
that withholding or reporting was
required under section 3.02 of this agree-
ment. The automatic termination will be
effective as of December 31 of the year in
which the external auditor or the IRS
makes such discovery. This Agreement
will be reinstated, effective the same date
it was automatically terminated, if WT
obtains appropriate Forms W-8 or W-9
(that relate to the time withholding or
reporting was required) for each such
partner before January 31 of the year fol-
lowing the year in which the agreement
automatically terminated. In the event of
automatic termination of this agreement,
WT must pay any underwithholding of
tax, interest, and penalties that the IRS
determines is attributable to each undocu-
mented direct beneficiary or owner for
the period during which the beneficiary or
owner was undocumented, and, if WT has
made a PR election, WT must file benefi-
ciary or owner specific Forms 1042-S for
every foreign direct beneficiary or owner
from the earliest time the Forms W-8 or
W-9 were required for any undocumented
direct beneficiary or owner through the
date of termination. After the date of
automatic termination of this agreement,
WT may not act as a withholding foreign
trust, and must so notify any persons to
which WT has furnished a withholding
foreign trust certificate. After the date of
automatic termination of this agreement,
the IRS may reinstate this agreement (or
the IRS may require WT to enter into a
new withholding foreign trust agreement)
on such terms and conditions and with
such modifications as the IRS may deter-
mine.
Sec. 9.05. Significant Change in Cir-
cumstances. For purposes of this Agree-
ment, a significant change in circum-
stances includes, but is not limited to—
(A) A change in U.S. federal law or
policy, or applicable foreign law or
policy, that affects the validity of any pro-
vision of this Agreement, materially
June 17, 200211742002–24 I.R.B.

affects the procedures contained in this
Agreement, or affects WT’s ability to per-
form its obligations under this Agree-
ment;
(B) A ruling of any court that affects
the validity of any provision of this
Agreement; or
(C) A significant change in WT’s busi-
ness practices that affects WT’s ability to
meet its obligations under this Agree-
ment.
Sec. 9.06. Events of Default. For pur-
poses of this Agreement, an event of
default occurs if WT fails to perform any
material duty or obligation required under
this Agreement, and includes, but is not
limited to, the occurrence of any of the
following:
(A) WT fails to implement adequate
procedures, accounting systems, and
internal controls to ensure compliance
with this Agreement;
(B) WT underwithholds an amount
that WT is required to withhold under
chapter 3 of the Code and fails to correct
the underwithholding or to file an
amended Form 1042 reporting, and pay-
ing, the appropriate tax;
(C) WT makes excessive refund
claims;
(D) WT fails to file Forms 1042,
1042-S, 3520-A (if required), 1041 (if
required), and Schedules K-1 (if required)
by the due date specified on such forms
or files forms or schedules that are mate-
rially incorrect or fraudulent;
(E) WT fails to have an external audit
performed when required, WT’s external
auditor fails to provide its report directly
to the IRS on a timely basis, WT fails to
cooperate with the external auditor, or
WT or its external auditor fails to cooper-
ate with the IRS;
(F) WT fails to inform the IRS within
90 days of any significant change in its
business practices to the extent that
change affects WT’s obligations under
this Agreement;
(G) WT fails to cure a default identi-
fied by the IRS or by an external auditor;
(H) WT makes any fraudulent state-
ment or a misrepresentation of material
fact with regard to this Agreement to the
IRS, a withholding agent, or WT’s exter-
nal auditor;
(I) The IRS determines that WT’s
external auditor is not sufficiently inde-
pendent to adequately perform its audit
function or the external auditor fails to
provide an audit report that complies with
section 8 of this Agreement;
(J) WT is prohibited by any law from
disclosing the identity of a beneficiary or
owner or beneficiary or owner informa-
tion to WT’s external auditor;
(K) WT fails to make deposits in the
time and manner required by section 3.03
of this Agreement or fails to make
adequate deposits, taking into account the
procedures of 7.05 of this Agreement; or
(L) WT fails to permit the external
auditor to perform additional audit proce-
dures under the provisions of section 8.07
of this Agreement.
Sec. 9.07. Notice and Cure. Upon the
occurrence of an event of default, the IRS
may deliver to WT a notice of default
specifying the event of default that has
occurred. WT shall respond to the notice
of default within 60 days (60-day
response) from the date of the notice of
default. The 60-day response shall con-
tain an offer to cure the event of default
and the time period in which the cure will
be accomplished or shall state the reasons
why WT does not agree that an event of
default has occurred. If WT does not pro-
vide a 60-day response, the IRS may
deliver a notice of termination as pro-
vided in section 9.03 of this Agreement.
If WT provides a 60-day response, the
IRS shall either accept or reject WT’s
statement that no default has occurred or
accept or reject WT’s proposal to cure an
event of default. If the IRS rejects WT’s
contention that no default has occurred or
rejects WT’s proposal to cure a default,
the IRS will offer a counter-proposal to
cure the event of default. Within 30 days
of receiving the IRS’s counter-proposal,
WT shall notify the IRS (30-day
response) whether it continues to main-
tain that no default has occurred or
whether it rejects the IRS’s counter-
proposal to cure an event of default. If
WT’s 30-day response states that no
default has occurred or it rejects the IRS’s
counter-proposal to cure, the parties shall
seek to resolve their disagreement within
30 days of the IRS’s receipt of WT’s
30-day response. If a satisfactory resolu-
tion has not been achieved at the end of
this latter 30-day period, or if WT fails to
provide a 30-day response, the IRS may
terminate this Agreement by providing a
notice of termination in accordance with
section 9.03 of this Agreement. If WT
receives a notice of termination from the
IRS, it may appeal the determination
within 30 days of the date of the notice of
termination by sending a written notice to
the address specified in section 10.06 of
this Agreement. If WT appeals the notice
of termination, this Agreement shall not
terminate until the appeal has been
decided. If an event of default is discov-
ered in the course of an external audit, the
WT may cure the default, without follow-
ing the procedures of this section 9.07, if
the external auditor’s report describes the
default and the actions that WT took to
cure the default and the IRS determines
that the cure procedures followed by WT
were sufficient. If the IRS determines that
WT’s actions to cure the default were not
sufficient, the IRS shall issue a notice of
default and the procedures described in
this section 9.07 shall be followed.
Sec. 9.08. Renewal. If WT has made
the PR election under section 6.03 of this
agreement and intends to renew this
Agreement for an additional term, it shall
submit an application for renewal to the
IRS no earlier than one year and no later
than six months prior to the expiration of
this Agreement. Any such application for
renewal must contain an update of the
information provided by WT to the IRS
in connection with the application to enter
into this Agreement, and any other infor-
mation the IRS may request in connection
with the renewal process. This Agreement
shall be renewed only upon the signatures
of both WT and the IRS. Either the IRS
or WT may seek to negotiate a new with-
holding foreign trust agreement rather
than renew this Agreement.
SECTION 10. MISCELLANEOUS
PROVISIONS
Sec. 10.01.WT’s application to
become a withholding foreign trust and
the Appendix to this Agreement are
hereby incorporated into and made an
integral part of this Agreement. This
Agreement, WT’s application, and the
Appendix to this Agreement constitute
the complete agreement between the par-
ties.
Sec. 10.02. This Agreement may be
amended by the IRS if the IRS deter-
mines that such amendment is needed for
the sound administration of the internal
2002–24 I.R.B.1175June 17, 2002

revenue laws or internal revenue regula-
tions. The agreement may also be modi-
fied by either WT or the IRS upon mutual
agreement. Such amendments or modifi-
cations shall be in writing.
Sec. 10.03. Any waiver of a provision
of this Agreement is a waiver solely of
that provision. The waiver does not obli-
gate the IRS to waive other provisions of
this Agreement or the same provision at a
later date.
Sec. 10.04. This Agreement shall be
governed by the laws of the United
States. Any legal action brought under
this Agreement shall be brought only in a
U.S. court with jurisdiction to hear and
resolve matters under the internal revenue
laws of the United States. For this pur-
pose, WT agrees to submit to the jurisdic-
tion of such U.S. court.
Sec. 10.05.WT’s rights and responsi-
bilities under this Agreement cannot be
assigned to another person.
Sec. 10.06. Notices provided under
this Agreement shall be mailed registered,
first class airmail. Notice shall be directed
as follows:
To the IRS:
Internal Revenue Service
LMSB:FS:QI
290 Broadway
New York, NY 10007–1867
USA
All notices sent to the IRS must
include the WT’s WT-EIN.
To WT:
Sec. 10.07. WT, acting in its capacity
as a withholding foreign trust or in any
other capacity, does not act as an agent of
the IRS, nor does it have the authority to
hold itself out as an agent of the IRS.
IN WITNESS WHEREOF, the
above parties have subscribed their
names to these presents, in duplicate.
Signed thisday of,
(name and title of
person signing for WT)
(name and title of
person signing for IRS)
PR Election Statement
By signing hereunder, WT makes
the PR election under section 6.03 of
this Agreement.
(name and title of
person signing for WT)
Appendix A
WT and the IRS agree that any of the
following auditors may be used by WT to
perform the external audits required by
section 8 of this Agreement.
[Names, addresses, telephone and fax
numbers of external auditors.]
26 CFR 601.201: Rulings and determination letters.
(Also, Part I,§§401; 1.401(a)(9)–1.)
Rev. Proc. 2002–29
SECTION 1. PURPOSE
This revenue procedure provides that
qualified retirement plans generally must
be amended by the end of the first plan
year beginning on or after January 1,
2003, to the extent necessary to comply
with final and temporary regulations
under§401(a)(9) of the Internal Revenue
Code, relating to required minimum dis-
tributions. The revenue procedure con-
tains model plan amendments that spon-
sors of master and prototype (M&P),
volume submitter and individually
designed plans may adopt to satisfy this
requirement. The revenue procedure also
provides that determination letter applica-
tions filed on or after the first day of the
2003 plan year will be reviewed with
respect to whether the form of the plan
satisfies the requirements of the final and
temporary regulations under§401(a)(9).
SECTION 2. BACKGROUND
.01 Section 401(a)(9) provides rules
for required minimum distributions from
plans qualified under§401(a). The rules
also apply to§403(b) annuity contracts,
§408 IRAs,§408A Roth IRAs, and
§457 eligible deferred compensation
plans.
.02 Proposed regulations (EE–113–82,
1987–2 C.B. 881) under§401(a)(9) were
published in theFederal Registeron July
27, 1987, 52 FR 28070, and January 17,
2001, 66 FR 3928. The proposed regula-
tions published in 2001 (the§401(a)(9)
2001 Proposed Regulations) substantially
simplified many of the rules in regula-
tions that had been proposed in 1987 (the
§401(a)(9) 1987 Proposed Regulations)
and also incorporated other guidance pub-
lished after 1987, including guidance
relating to the changes to§401(a)(9)
made by the Small Business Job Protec-
tion Act of 1996, Pub. L. 104–188
(SBJPA).
.03 The preamble to the§401(a)(9)
2001 Proposed Regulations stated that
taxpayers could rely on the§401(a)(9)
1987ProposedRegulationsorthe
§401(a)(9) 2001 Proposed Regulations
for determining required minimum distri-
butions for calendar year 2001 and subse-
quent calendar years prior to the effective
date of the final regulations. The pre-
amble also contained a model amendment
that sponsors of qualified plans could
adopt if they wished to apply the
§401(a)(9) 2001 Proposed Regulations in
making all required minimum distribu-
tions for 2001 and subsequent calendar
years prior to the effective date of the
final regulations. After publication in the
Federal Register, the model amendment
was republished in Announcement 2001–
18, 2001–1 C.B. 791, with minor correc-
tions, and appeared (as corrected in the
I.R.B.) in the preamble to the§401(a)(9)
2001 Proposed Regulations (REG–
130477–00; REG–130481–00, 2001–1
C.B. 865).
.04 An alternative model amendment
was published in Announcement 2001–
82, 2001–32 I.R.B. 123. This additional
model amendment was provided in
response to the concerns of qualified plan
sponsorsthatintendedtousethe
§401(a)(9) 2001 Proposed Regulations
for distributions for 2001 but made
required minimum distributions for 2001
under the§401(a)(9) 1987 Proposed
Regulations prior to the date in 2001 on
which the plan began operating under the
§401(a)(9) 2001 Proposed Regulations.
The alternative model amendment in
Announcement 2001–82 allowed required
minimum distributions made for 2001
prior to the date in 2001 on which the
June 17, 200211762002–24 I.R.B.

planbeganoperatingunderthe
§401(a)(9) 2001 Proposed Regulations to
be made under the§401(a)(9) 1987 Pro-
posed Regulations.
.05 The alternative model amendment
in Announcement 2001–82 provided the
following rules with respect to distribu-
tees who received 2001 required distribu-
tions prior to the date in 2001 on which
the plan began operating under the
§401(a)(9) 2001 Proposed Regulations.
If the total amount of 2001 required mini-
mum distributions made to a participant
prior to the date on which the plan began
operatinginaccordancewiththe
§401(a)(9) 2001 Proposed Regulations
equaled or exceeded the required mini-
mum distributions determined under the
§401(a)(9) 2001 Proposed Regulations,
then no additional distributions were
required for that participant for 2001 on
or after such date. If the total amount of
2001 required minimum distributions
made to a participant prior to the date on
which the plan began operating in accor-
dance with the§401(a)(9) 2001 Proposed
Regulations was less than the amount
determined under the§401(a)(9) 2001
Proposed Regulations, then required
minimum distributions for 2001 on and
after such date would be determined so
that the total amount of required mini-
mum distributions for 2001 for that par-
ticipant would be the amount determined
under the§401(a)(9) 2001 Proposed
Regulations.
.06 In order for a qualified plan spon-
sor to use either the original model
amendment in Announcement 2001–18 or
the alternative model amendment in
Announcement 2001–82, the plan sponsor
was required to adopt the amendment by
the deadline for amending its plan for
GUST. See Rev. Proc. 2001–55, 2001–49
I.R.B. 552.
.07 Final and temporary regulations
(T.D. 8987, 2002–19 I.R.B. 852) under
§401(a)(9) were published in the Federal
Register on April 17, 2002, 74 FR 18987
(the§401(a)(9) Final and Temporary
Regulations). The§401(a)(9) Final and
Temporary Regulations generally adopt
the simplifications proposed in 2001 and
provide additional simplifications. The
§401(a)(9) Final and Temporary regula-
tions apply for determining required
minimum distributions for calendar years
beginning on or after January 1, 2003.
For determining required minimum distri-
butions for calendar year 2002, taxpayers
may rely on the§401(a)(9) Final and
Temporary Regulations, the§401(a)(9)
2001ProposedRegulations,orthe
§401(a)(9) 1987 Proposed Regulations.
.08 Section 401(b) and the regulations
thereunder provide a remedial amend-
ment period during which an amendment
to a disqualifying provision may be made
retroactively effective, under certain cir-
cumstances, to comply with the require-
ments of§401(a). Section 1.401(b)–1(b)
provides that a disqualifying provision
includes an amendment to an existing
plan that causes the plan to fail to satisfy
the requirements of§401(a). Notice
2001–42, 2001–30 I.R.B. 70, provides a
remedialamendmentperiodunder
§401(b) ending not prior to the last day
of the first plan year beginning on or after
January 1, 2005, in which any needed ret-
roactive amendment with regard to the
Economic Growth and Tax Relief Recon-
ciliation Act of 2001, Pub. L. 107–16,
(EGTRRA), may be adopted. The avail-
ability of this remedial amendment period
is conditioned on the adoption of a good
faith EGTRRA plan amendment no later
than the later of: (i) the end of the plan
year in which the EGTRRA change in the
qualification requirement is required to
be, or is optionally, put into effect under
the plan; or (ii) the end of the GUST
remedial amendment period for the plan.
.09 Rev. Proc. 2000–20, 2000–1 C.B.
553, as modified by Rev. Proc. 2000–27,
2000–1 C.B. 1272, Notice 2001–42,
2001–30 I.R.B. 70, and Rev. Proc. 2001–
55, contains the Service’s procedures for
issuing opinion letters regarding the
acceptability of the form of M&P plans.
.10 Rev. Proc. 2002–6, 2002–1 I.R.B.
203, contains the Service’s procedures for
issuing determination letters on the quali-
fied status of employee plans under
§§401(a), 403(a), 409 and 4975(e)(7) of
the Code and the exempt status of related
trustsorcustodialaccountsunder
§501(a).
.11 Section 1.401(a)(9)–1, Q&A–3,
describes the provisions that a plan must
contain in order to satisfy§401(a)(9).
The plan must generally set forth the
statutory rules of§401(a)(9), including
the incidental death benefit requirement
in§401(a)(9)(G), and must provide that
distributions must be made in accordance
with the§401(a)(9) Final and Temporary
Regulations. The plan must provide that
its provisions reflecting§401(a)(9) over-
ride any inconsistent distribution options
in the plan and must include such other
provisions as the Commissioner may pre-
scribe in guidance published in the Inter-
nal Revenue Bulletin.
SECTION 3. REQUIRED PLAN
AMENDMENTS
.01 In general, qualified plans must be
amended by the last day of the first plan
year beginning on or after January 1,
2003, to the extent necessary to comply
with the requirements of the§401(a)(9)
Final and Temporary Regulations.
Whether and the extent to which a par-
ticular plan must be amended depends on
the plan’s current terms. Any plan amend-
ments for the§401(a)(9) Final and Tem-
porary Regulations must apply in deter-
mining required minimum distributions
under the plan for calendar years begin-
ning on or after January 1, 2003. If a plan
sponsor begins operating its plan under
the§401(a)(9) Final and Temporary
Regulations on a date in 2002, then the
amendments must also apply in determin-
ing required minimum distributions under
the plan for 2002 that are made on or
after such date, although the amendments
are not required to be adopted before the
last day of the first plan year beginning
on or after January 1, 2003.
.02 If a plan sponsor begins operating
its plan under the§401(a)(9) Final and
Temporary Regulations on a date in 2002
and prior to such date the plan sponsor
has made required minimum distributions
for 2002 under the§401(a)(9) 1987 Pro-
posed Regulations or the§401(a)(9)
2001 Proposed Regulations, then the plan
must also be amended to provide the tran-
sitional rule for 2002 required minimum
distributions that is set forth in section 1.2
of the model amendments in the Appen-
dix to this revenue procedure.
.03 Every M&P plan must allow the
M&P plan sponsor to amend the plan on
behalf of all adopting employers so that
changes in the Code, regulations, revenue
rulings, other statements published by the
Internal Revenue Service, or corrections
of prior approved plans may be applied to
all employers who have adopted the plan.
Therefore, by December 31, 2003, every
sponsor of an M&P plan must amend its
2002–24 I.R.B.1177June 17, 2002

plan to the extent necessary to comply
with the requirements of the§401(a)(9)
Final and Temporary Regulations and
must furnish copies of the amendments to
all employers who have adopted the plan.
A favorable opinion letter may not be
relied upon after December 31, 2003,
unless the M&P plan sponsor satisfies
this requirement.
.04 Practitioners that sponsor volume
submitter plans generally are not autho-
rized to amend the plan on behalf of
adopting employers. In this case, employ-
ers that have adopted the plan must indi-
vidually amend their plans by the last day
of the first plan year beginning on or after
January 1, 2003, to the extent necessary
to comply with the requirements of the
§401(a)(9) Final and Temporary Regula-
tions. Nevertheless, volume submitter
practitioners must amend their specimen
plans for the§401(a)(9) Final and Tem-
porary Regulations by December 31,
2003, so that the amendments will apply
to future adopters of the plan. A favorable
advisory letter may not be relied upon
after December 31, 2003, unless the vol-
ume submitter practitioner satisfies this
requirement.
.05 Until further notice, sponsors of
pre-approved plans are not required to
request opinion or advisory letters that
consider whether their plans satisfy the
requirements of the§401(a)(9) Final and
Temporary Regulations. However, opin-
ion and advisory letter applications filed
on or after January 1, 2003, will be
reviewed with respect to whether the
form of the plan satisfies these require-
ments. Opinion and advisory letter appli-
cations filed before January 1, 2003, will
be reviewed with respect to whether the
form of the plan satisfies the requirements
of the§401(a)(9) Final and Temporary
Regulations if a plan amendment to com-
ply with the§401(a)(9) Final and Tem-
porary Regulations is submitted in con-
junction with and at the same time as the
request for the opinion or advisory letter.
.06 Determination letter applications
for individually designed plans filed on or
after the first day of the first plan year
beginning on or after January 1, 2003,
will be reviewed with respect to whether
the form of the plan satisfies the require-
ments of the§401(a)(9) Final and Tem-
porary Regulations. Determination letter
applications for individually designed
plans filed before the first day of the first
plan year beginning on or after January 1,
2003, will be reviewed with respect to
whether the form of the plan satisfies the
requirements of the§401(a)(9) Final and
Temporary Regulations if a plan amend-
ment to comply with the§401(a)(9) Final
and Temporary Regulations is submitted
in conjunction with and at the same time
as the request for the determination letter.
In both cases, determination letters issued
for such applications may be relied on
with respect to the requirements of the
§401(a)(9) Final and Temporary Regula-
tions. Determination letters issued for
pre-approved plans may be relied on with
respect to the requirements of the
§401(a)(9) Final and Temporary Regula-
tions if those requirements were consid-
ered in issuing the opinion or advisory
letter.
.07 If a plan is timely amended to
comply with the§401(a)(9) Final and
Temporary Regulations and, as a result of
the amendment, there is a disqualifying
provision under§401(b), the remedial
amendment period with respect to the dis-
qualifying provision will end at the end of
the EGTRRA remedial amendment
period. Therefore, an application for a
determination letter regarding the effect
of the plan amendment need not be filed
earlier than the last day of the EGTRRA
remedial amendment period. The timely
adoption of the appropriate model amend-
ment in the Appendix will provide reli-
ance, without the need to request a letter,
that the plan has been amended to comply
with the§401(a)(9) Final and Temporary
Regulations and will not result in a dis-
qualifying provision.
.08 The Appendix provides two model
plan amendments to facilitate the amend-
ment of qualified plans to comply with
the requirements of the§401(a)(9) Final
and Temporary Regulations. The model
amendments may be adopted by M&P
plans sponsors and volume submitter
practitioners and also by sponsors of indi-
vidually designed plans. The model
amendments are“snap-on”amendments
designed to work with a plan’s existing
minimum distribution provisions by
superseding those that are inconsistent
with the provisions of the model amend-
ment and retaining those (such as the
plan’s definition of required beginning
date) that are not inconsistent. Plans that
are amended to adopt the model amend-
ments must retain their existing required
minimum distribution provisions in order
to have reliance that the form of the plan
has been properly amended to comply
with the§401(a)(9) Final and Temporary
Regulations. Adoption of one of the
model amendments will not amend a plan
for the changes to§401(a)(9) made by
§1404 of SBJPA or to provide that 2001
or 2002 required minimum distributions
will be determined in accordance with the
§401(a)(9) 2001 Proposed Regulations.
The first model amendment is for
defined contribution plans. The second
model amendment is for defined benefit
plans. A plan sponsor or a sponsor of a
pre-approved plan that timely adopts the
appropriate model amendment verbatim
(or with only minor changes) will have
reliance that the form of its plan satisfies
the requirements of the§401(a)(9) Final
and Temporary Regulations, and the
adoption of the model amendment will
not adversely affect the plan sponsor’s
reliance on a favorable determination,
opinion or advisory letter, or cause a pre-
approved plan to be treated as an indi-
vidually designed plan. For this purpose,
changes to either of the model amend-
ments to incorporate the adoption agree-
ment elective provisions into the body of
the amendment or to remove the elective
provisions in favor of the default rules in
the body of the amendment are minor
changes.
SECTION 4. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2000–20 and Rev. Proc.
2002–6 are modified.
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective
June 17, 2002.
DRAFTING INFORMATION
The principal authors of this revenue
procedure are James Flannery and Steven
Linder of Employee Plans, Tax Exempt
and Government Entities Division. For
further information regarding this revenue
procedure, please contact the Employee
Plans’taxpayer assistance telephone ser-
vice at 1–877–829–5500 between the
hours of 8:00 a.m. and 6:30 p.m. Eastern
June 17, 200211782002–24 I.R.B.

time, Monday through Friday (a toll-free
number). Mr. Flannery and Mr. Linder
may be reached at 1–202–283–9888 (not
a toll-free call).
APPENDIX—MODEL
AMENDMENTS
The following are model plan amend-
ments that sponsors of pre-approved
plans and sponsors of individually
designed plans may adopt to comply with
the§401(a)(9) Final and Temporary
Regulations. Except as provided below, a
plan that is amended to adopt one of the
model amendments will satisfy, in form,
the requirements of§401(a)(9) and the
§401(a)(9) Final and Temporary Regula-
tions in determining required minimum
distributions for calendar years beginning
on or after January 1, 2003 (as well as
required minimum distributions for calen-
dar year 2002 made on or after the date
the plan sponsor begins to operate its plan
in accordance with the§401(a)(9) Final
and Temporary Regulations). Adoption of
the model amendments will not amend a
plan to reflect the change to the definition
ofrequiredbeginningdatein
§401(a)(9)(C) that was made by§1404
of SBJPA or to provide the actuarial
adjustment that may be required in a
defined benefit plan that is so amended. A
plan sponsor that wishes to amend its
plan to reflect the provisions of§1404 of
SBJPA must do so through a separate
amendment. Consequently, the model
amendments may not be relied upon with
respect to whether a plan’s definition of
required beginning date is correct or
whether a defined benefit plan makes the
correct actuarial adjustment required by
§401(a)(9)(C)(iii). Adoption of the model
amendments also will not amend a plan to
provide that 2001 or 2002 required mini-
mum distributions will be determined in
accordance with the§401(a)(9) 2001
Proposed Regulations. A plan sponsor
that has operated its plan in accordance
with the§401(a)(9) 2001 Proposed
Regulations must adopt the model
amendment in Announcement 2001–18 or
the alternative model amendment in
Announcement 2001–82 within the plan’s
GUST remedial amendment period. Plans
that are amended to adopt the model
amendments must retain their existing
required minimum distribution provisions
in order to have reliance that the form of
the plan has been properly amended to
comply with the§401(a)(9) Final and
Temporary Regulations.
MODEL PLAN AMENDMENT 1—
DEFINED CONTRIBUTION PLANS
Article
. MINIMUM DISTRI-
BUTION REQUIREMENTS.
Section 1. General Rules
1.1. Effective Date. Unless an earlier
effective date is specified in the adoption
agreement, the provisions of this article
will apply for purposes of determining
required minimum distributions for calen-
dar years beginning with the 2003 calen-
dar year.
1.2. Coordination with Minimum Dis-
tribution Requirements Previously in
Effect. If the adoption agreement speci-
fies an effective date of this article that is
earlier than calendar years beginning with
the 2003 calendar year, required mini-
mum distributions for 2002 under this
article will be determined as follows. If
the total amount of 2002 required mini-
mum distributions under the plan made to
the distributee prior to the effective date
of this article equals or exceeds the
required minimum distributions deter-
mined under this article, then no addi-
tional distributions will be required to be
made for 2002 on or after such date to the
distributee. If the total amount of 2002
required minimum distributions under the
plan made to the distributee prior to the
effective date of this article is less than
the amount determined under this article,
then required minimum distributions for
2002 on and after such date will be deter-
mined so that the total amount of required
minimum distributions for 2002 made to
the distributee will be the amount deter-
mined under this article.
1.3. Precedence. The requirements of
this article will take precedence over any
inconsistent provisions of the plan.
1.4. Requirements of Treasury Regula-
tions Incorporated. All distributions
required under this article will be deter-
mined and made in accordance with the
Treasury regulations under section
401(a)(9) of the Internal Revenue Code.
1.5. TEFRA Section 242(b)(2) Elec-
tions. Notwithstanding the other provi-
sions of this article, distributions may be
made under a designation made before
January 1, 1984, in accordance with sec-
tion 242(b)(2) of the Tax Equity and Fis-
cal Responsibility Act (TEFRA) and the
provisions of the plan that relate to sec-
tion 242(b)(2) of TEFRA.
Section 2. Time and Manner of
Distribution.
2.1. Required Beginning Date. The
participant’s entire interest will be distrib-
uted, or begin to be distributed, to the
participant no later than the participant’s
required beginning date.
2.2. Death of Participant Before Distri-
butions Begin. If the participant dies
before distributions begin, the partici-
pant’s entire interest will be distributed,
or begin to be distributed, no later than as
follows:
(a) If the participant’s surviving
spouse is the participant’s sole designated
beneficiary, then, except as provided in
the adoption agreement, distributions to
the surviving spouse will begin by
December 31 of the calendar year imme-
diately following the calendar year in
which the participant died, or by Decem-
ber 31 of the calendar year in which the
participant would have attained age 70½,
if later.
(b) If the participant’s surviving
spouse is not the participant’s sole desig-
nated beneficiary, then, except as pro-
vided in the adoption agreement, distribu-
tions to the designated beneficiary will
begin by December 31 of the calendar
year immediately following the calendar
year in which the participant died.
(c) If there is no designated benefi-
ciary as of September 30 of the year fol-
lowing the year of the participant’s death,
the participant’s entire interest will be
distributed by December 31 of the calen-
dar year containing the fifth anniversary
of the participant’s death.
(d) If the participant’s surviving
spouse is the participant’s sole designated
beneficiary and the surviving spouse dies
after the participant but before distribu-
tions to the surviving spouse begin, this
section 2.2, other than section 2.2(a), will
apply as if the surviving spouse were the
participant.
For purposes of this section 2.2 and
section 4, unless section 2.2(d) applies,
distributions are considered to begin on
the participant’s required beginning date.
If section 2.2(d) applies, distributions are
2002–24 I.R.B.1179June 17, 2002

considered to begin on the date distribu-
tions are required to begin to the surviv-
ing spouse under section 2.2(a). If distri-
butions under an annuity purchased from
an insurance company irrevocably com-
mence to the participant before the par-
ticipant’s required beginning date (or to
the participant’s surviving spouse before
the date distributions are required to
begin to the surviving spouse under sec-
tion 2.2(a)), the date distributions are con-
sidered to begin is the date distributions
actually commence.
2.3. Forms of Distribution. Unless the
participant’s interest is distributed in the
form of an annuity purchased from an
insurance company or in a single sum on
or before the required beginning date, as
of the first distribution calendar year dis-
tributions will be made in accordance
with sections 3 and 4 of this article. If the
participant’s interest is distributed in the
form of an annuity purchased from an
insurance company, distributions thereun-
der will be made in accordance with the
requirements of section 401(a)(9) of the
Code and the Treasury regulations.
Section 3. Required Minimum
Distributions During Participant’s
Lifetime.
3.1. Amount of Required Minimum
Distribution For Each Distribution Calen-
dar Year. During the participant’s life-
time, the minimum amount that will be
distributed for each distribution calendar
year is the lesser of:
(a) the quotient obtained by dividing
the participant’s account balance by the
distribution period in the Uniform Life-
time Table set forth in section
1.401(a)(9)–9 of the Treasury regulations,
using the participant’s age as of the par-
ticipant’s birthday in the distribution cal-
endar year; or
(b) if the participant’s sole designated
beneficiary for the distribution calendar
year is the participant’s spouse, the quo-
tient obtained by dividing the partici-
pant’s account balance by the number in
the Joint and Last Survivor Table set forth
in section 1.401(a)(9)–9 of the Treasury
regulations, using the participant’s and
spouse’s attained ages as of the partici-
pant’s and spouse’s birthdays in the dis-
tribution calendar year.
3.2. Lifetime Required Minimum Dis-
tributions Continue Through Year of Par-
ticipant’s Death. Required minimum dis-
tributions will be determined under this
section 3 beginning with the first distribu-
tion calendar year and up to and including
the distribution calendar year that
includes the participant’s date of death
Section 4. Required Minimum
Distributions After Participant’s Death.
4.1. Death On or After Date Distribu-
tions Begin.
(a) Participant Survived by Designated
Beneficiary. If the participant dies on or
after the date distributions begin and there
is a designated beneficiary, the minimum
amount that will be distributed for each
distribution calendar year after the year of
the participant’s death is the quotient
obtained by dividing the participant’s
account balance by the longer of the
remaining life expectancy of the partici-
pant or the remaining life expectancy of
the participant’s designated beneficiary,
determined as follows:
(1) The participant’s remaining life
expectancy is calculated using the age of
the participant in the year of death,
reduced by one for each subsequent year.
(2) If the participant’s surviving
spouse is the participant’s sole designated
beneficiary, the remaining life expectancy
of the surviving spouse is calculated for
each distribution calendar year after the
year of the participant’s death using the
surviving spouse’s age as of the spouse’s
birthday in that year. For distribution cal-
endar years after the year of the surviving
spouse’s death, the remaining life expect-
ancy of the surviving spouse is calculated
using the age of the surviving spouse as
of the spouse’s birthday in the calendar
year of the spouse’s death, reduced by
one for each subsequent calendar year.
(3) If the participant’s surviving
spouse is not the participant’s sole desig-
nated beneficiary, the designated benefi-
ciary’s remaining life expectancy is cal-
culated using the age of the beneficiary in
the year following the year of the partici-
pant’s death, reduced by one for each
subsequent year.
(b) No Designated Beneficiary. If the
participant dies on or after the date distri-
butions begin and there is no designated
beneficiary as of September 30 of the
year after the year of the participant’s
death, the minimum amount that will be
distributed for each distribution calendar
year after the year of the participant’s
death is the quotient obtained by dividing
the participant’s account balance by the
participant’s remaining life expectancy
calculated using the age of the participant
in the year of death, reduced by one for
each subsequent year.
4.2. Death Before Date Distributions
Begin.
(a) Participant Survived by Designated
Beneficiary. Except as provided in the
adoption agreement, if the participant dies
before the date distributions begin and
there is a designated beneficiary, the
minimum amount that will be distributed
for each distribution calendar year after
the year of the participant’s death is the
quotient obtained by dividing the partici-
pant’s account balance by the remaining
life expectancy of the participant’s desig-
nated beneficiary, determined as provided
in section 4.1.
(b) No Designated Beneficiary. If the
participant dies before the date distribu-
tions begin and there is no designated
beneficiary as of September 30 of the
year following the year of the partici-
pant’s death, distribution of the partici-
pant’s entire interest will be completed by
December 31 of the calendar year con-
taining the fifth anniversary of the partici-
pant’s death.
(c) Death of Surviving Spouse Before
Distributions to Surviving Spouse Are
Required to Begin. If the participant dies
before the date distributions begin, the
participant’s surviving spouse is the par-
ticipant’s sole designated beneficiary, and
the surviving spouse dies before distribu-
tions are required to begin to the surviv-
ing spouse under section 2.2(a), this sec-
tion 4.2 will apply as if the surviving
spouse were the participant.
Section 5. Definitions.
5.1. Designated beneficiary. The indi-
vidual who is designated as the benefi-
ciary under section
of the plan
and is the designated beneficiary under
section 401(a)(9) of the Internal Revenue
Code and section 1.401(a)(9)–1, Q&A-4,
of the Treasury regulations.
5.2. Distribution calendar year. A cal-
endar year for which a minimum distribu-
tion is required. For distributions begin-
ning before the participant’s death, the
June 17, 200211802002–24 I.R.B.

first distribution calendar year is the cal-
endar year immediately preceding the cal-
endar year which contains the partici-
pant’s required beginning date. For
distributions beginning after the partici-
pant’s death, the first distribution calen-
dar year is the calendar year in which dis-
tributions are required to begin under
section 2.2. The required minimum distri-
bution for the participant’s first distribu-
tion calendar year will be made on or
before the participant’s required begin-
ning date. The required minimum distri-
bution for other distribution calendar
years, including the required minimum
distribution for the distribution calendar
year in which the participant’s required
beginning date occurs, will be made on or
before December 31 of that distribution
calendar year.
5.3. Life expectancy. Life expectancy
as computed by use of the Single Life
Table in section 1.401(a)(9)–9ofthe
Treasury regulations.
5.4. Participant’s account balance. The
account balance as of the last valuation
date in the calendar year immediately pre-
ceding the distribution calendar year
(valuation calendar year) increased by the
amount of any contributions made and
allocated or forfeitures allocated to the
account balance as of dates in the valua-
tion calendar year after the valuation date
and decreased by distributions made in
the valuation calendar year after the valu-
ation date. The account balance for the
valuation calendar year includes any
amounts rolled over or transferred to the
plan either in the valuation calendar year
or in the distribution calendar year if dis-
tributed or transferred in the valuation
calendar year.
5.5 Required beginning date. The date
specified in section
of the plan.
Adoption Agreement
(Check and complete section 1 below if
any required minimum distributions for
the 2002 distribution calendar year were
made in accordance with the§401(a)(9)
Final and Temporary Regulations.)
Section 1. Effective Date of Plan Amend-
ment for Section 401(a)(9) Final and
Temporary Treasury Regulations.
. Article, Minimum
Distribution Requirements, applies for
purposes of determining required mini-
mum distributions for distribution calen-
dar years beginning with the 2003 calen-
dar year, as well as required minimum
distributions for the 2002 distribution cal-
endar year that are made on or after
.
(Check and complete any of the remain-
ing sections if you wish to modify the
rules in sections 2.2 and 4.2 of Article
of the plan.)
Section 2. Election to Apply 5-Year Rule
to Distributions to Designated Beneficia-
ries.
If the participant dies before
distributions begin and there is a desig-
nated beneficiary, distribution to the des-
ignated beneficiary is not required to
begin by the date specified in section 2.2
of Article _____ of the plan, but the par-
ticipant’s entire interest will be distrib-
uted to the designated beneficiary by
December 31 of the calendar year con-
taining the fifth anniversary of the partici-
pant’s death. If the participant’s surviving
spouse is the participant’s sole designated
beneficiary and the surviving spouse dies
after the participant but before distribu-
tions to either the participant or the sur-
viving spouse begin, this election will
apply as if the surviving spouse were the
participant.
This election will apply to:
All distributions.
The following distributions:
.
Section 3. Election to Allow Participants
or Beneficiaries to Elect 5-Year Rule.
Participants or beneficiaries
may elect on an individual basis whether
the 5-year rule or the life expectancy rule
in sections 2.2 and 4.2 of Article
of the plan applies to distribu-
tions after the death of a participant who
has a designated beneficiary. The election
must be made no later than the earlier of
September 30 of the calendar year in
which distribution would be required to
begin under section 2.2 of Article
of the plan, or by September 30
of the calendar year which contains the
fifth anniversary of the participant’s (or,
if applicable, surviving spouse’s) death. If
neither the participant nor beneficiary
makes an election under this paragraph,
distributions will be made in accordance
with sections 2.2 and 4.2 of Article of the
plan and, if applicable, the elections in
section 2 above.
Section 4. Election to Allow Designated
Beneficiary Receiving Distributions
Under 5-Year Rule to Elect Life
Expectancy Distributions.
A designated beneficiary who
is receiving payments under the 5-year
rule may make a new election to receive
payments under the life expectancy rule
until December 31, 2003, provided that
all amounts that would have been
required to be distributed under the life
expectancy rule for all distribution calen-
dar years before 2004 are distributed by
the earlier of December 31, 2003, or the
end of the 5-year period.
MODEL PLAN AMENDMENT 2—
DEFINED BENEFIT PLANS
Article
. MINIMUM DISTRI-
BUTION REQUIREMENTS.
Section 1. General Rules
1.1. Effective Date. Unless an earlier
effective date is specified in the adoption
agreement, the provisions of this article
will apply for purposes of determining
required minimum distributions for calen-
dar years beginning with the 2003 calen-
dar year.
1.2. Coordination with Minimum Dis-
tribution Requirements Previously in
Effect. If the adoption agreement speci-
fies an effective date of this article that is
earlier than calendar years beginning with
the 2003 calendar year, required mini-
mum distributions for 2002 under this
article will be determined as follows. If
the total amount of 2002 required mini-
mum distributions under the plan made to
the distributee prior to the effective date
of this article equals or exceeds the
required minimum distributions deter-
mined under this article, then no addi-
tional distributions will be required to be
made for 2002 on or after such date to the
distributee. If the total amount of 2002
required minimum distributions under the
2002–24 I.R.B.1181June 17, 2002

plan made to the distributee prior to the
effective date of this article is less than
the amount determined under this article,
then required minimum distributions for
2002 on and after such date will be deter-
mined so that the total amount of required
minimum distributions for 2002 made to
the distributee will be the amount deter-
mined under this article.
1.3. Precedence. The requirements of
this article will take precedence over any
inconsistent provisions of the plan.
1.4. Requirements of Treasury Regula-
tions Incorporated. All distributions
required under this article will be deter-
mined and made in accordance with the
Treasury regulations under section
401(a)(9) of the Internal Revenue Code.
1.5. TEFRA Section 242(b)(2) Elec-
tions. Notwithstanding the other provi-
sions of this article, other than section
1.4, distributions may be made under a
designation made before January 1, 1984,
in accordance with section 242(b)(2) of
the Tax Equity and Fiscal Responsibility
Act (TEFRA) and the provisions of the
plan that relate to section 242(b)(2) of
TEFRA.
Section 2. Time and Manner of
Distribution.
2.1. Required Beginning Date. The
participant’s entire interest will be distrib-
uted, or begin to be distributed, to the
participant no later than the participant’s
required beginning date.
2.2. Death of Participant Before Distri-
butions Begin. If the participant dies
before distributions begin, the partici-
pant’s entire interest will be distributed,
or begin to be distributed, no later than as
follows:
(a) If the participant’s surviving
spouse is the participant’s sole designated
beneficiary, then, except as provided in
the adoption agreement, distributions to
the surviving spouse will begin by
December 31 of the calendar year imme-
diately following the calendar year in
which the participant died, or by Decem-
ber 31 of the calendar year in which the
participant would have attained age 70½,
if later.
(b) If the participant’s surviving
spouse is not the participant’s sole desig-
nated beneficiary, then, except as pro-
vided in the adoption agreement, distribu-
tions to the designated beneficiary will
begin by December 31 of the calendar
year immediately following the calendar
year in which the participant died.
(c) If there is no designated benefi-
ciary as of September 30 of the year fol-
lowing the year of the participant’s death,
the participant’s entire interest will be
distributed by December 31 of the calen-
dar year containing the fifth anniversary
of the participant’s death.
(d) If the participant’s surviving
spouse is the participant’s sole designated
beneficiary and the surviving spouse dies
after the participant but before distribu-
tions to the surviving spouse begin, this
section 2.2, other than section 2.2(a), will
apply as if the surviving spouse were the
participant.
For purposes of this section 2.2 and
section 5, distributions are considered to
begin on the participant’s required begin-
ning date (or, if section 2.2(d) applies, the
date distributions are required to begin to
the surviving spouse under section
2.2(a)). If annuity payments irrevocably
commence to the participant before the
participant’s required beginning date (or
to the participant’s surviving spouse
before the date distributions are required
to begin to the surviving spouse under
section 2.2(a)), the date distributions are
considered to begin is the date distribu-
tions actually commence.
2.3. Form of Distribution. Unless the
participant’s interest is distributed in the
form of an annuity purchased from an
insurance company or in a single sum on
or before the required beginning date, as
of the first distribution calendar year dis-
tributions will be made in accordance
with sections 3, 4 and 5 of this article. If
the participant’s interest is distributed in
the form of an annuity purchased from an
insurance company, distributions thereun-
der will be made in accordance with the
requirements of section 401(a)(9) of the
Code and the Treasury regulations. Any
part of the participant’s interest which is
in the form of an individual account
described in section 414(k) of the Code
will be distributed in a manner satisfying
the requirements of section 401(a)(9) of
the Code and the Treasury regulations
that apply to individual accounts.
Section 3. Determination of Amount to
be Distributed Each Year.
3.1. General Annuity Requirements. If
the participant’s interest is paid in the
form of annuity distributions under the
plan, payments under the annuity will sat-
isfy the following requirements:
(a) the annuity distributions will be
paid in periodic payments made at inter-
vals not longer than one year;
(b) the distribution period will be
over a life (or lives) or over a period cer-
tain not longer than the period described
in section 4 or 5;
(c) once payments have begun over
a period certain, the period certain will
not be changed even if the period certain
is shorter than the maximum permitted;
(d) payments will either be nonin-
creasing or increase only as follows:
(1) by an annual percentage
increase that does not exceed the annual
percentage increase in a cost-of-living
index that is based on prices of all items
and issued by the Bureau of Labor Statis-
tics;
(2) to the extent of the reduction
in the amount of the participant’s pay-
ments to provide for a survivor benefit
upon death, but only if the beneficiary
whose life was being used to determine
the distribution period described in sec-
tion 4 dies or is no longer the partici-
pant’s beneficiary pursuant to a qualified
domestic relations order within the mean-
ing of section 414(p);
(3) to provide cash refunds of
employee contributions upon the partici-
pant’s death; or
(4) to pay increased benefits that
result from a plan amendment.
3.2. Amount Required to be Distrib-
uted by Required Beginning Date. The
amount that must be distributed on or
before the participant’s required begin-
ning date (or, if the participant dies before
distributions begin, the date distributions
are required to begin under section 2.2(a)
or (b)) is the payment that is required for
one payment interval. The second pay-
ment need not be made until the end of
the next payment interval even if that
payment interval ends in the next calen-
dar year. Payment intervals are the peri-
ods for which payments are received,e.g.,
bi-monthly, monthly, semi-annually, or
annually. All of the participant’s benefit
June 17, 200211822002–24 I.R.B.

accruals as of the last day of the first dis-
tribution calendar year will be included in
the calculation of the amount of the annu-
ity payments for payment intervals end-
ing on or after the participant’s required
beginning date.
3.3. Additional Accruals After First
Distribution Calendar Year. Any addi-
tional benefits accruing to the participant
in a calendar year after the first distribu-
tion calendar year will be distributed
beginning with the first payment interval
ending in the calendar year immediately
following the calendar year in which such
amount accrues.
Section 4. Requirements For Annuity
Distributions That Commence During
Participant’s Lifetime.
4.1. Joint Life Annuities Where the
Beneficiary Is Not the Participant’s
Spouse. If the participant’s interest is
being distributed in the form of a joint
and survivor annuity for the joint lives of
the participant and a nonspouse benefi-
ciary, annuity payments to be made on or
after the participant’s required beginning
date to the designated beneficiary after
the participant’s death must not at any
time exceed the applicable percentage of
the annuity payment for such period that
would have been payable to the partici-
pant using the table set forth in Q&A-2 of
section 1.401(a)(9)–6T of the Treasury
regulations. If the form of distribution
combines a joint and survivor annuity for
the joint lives of the participant and a
nonspouse beneficiary and a period cer-
tain annuity, the requirement in the pre-
ceding sentence will apply to annuity
payments to be made to the designated
beneficiary after the expiration of the
period certain.
4.2. Period Certain Annuities. Unless
the participant’s spouse is the sole desig-
nated beneficiary and the form of distri-
bution is a period certain and no life
annuity, the period certain for an annuity
distribution commencing during the par-
ticipant’s lifetime may not exceed the
applicable distribution period for the par-
ticipant under the Uniform Lifetime Table
set forth in section 1.401(a)(9)–9ofthe
Treasury regulations for the calendar year
that contains the annuity starting date. If
the annuity starting date precedes the year
in which the participant reaches age 70,
the applicable distribution period for the
participant is the distribution period for
age 70 under the Uniform Lifetime Table
set forth in section 1.401(a)(9)–9ofthe
Treasury regulations plus the excess of 70
over the age of the participant as of the
participant’s birthday in the year that con-
tains the annuity starting date. If the par-
ticipant’s spouse is the participant’s sole
designated beneficiary and the form of
distribution is a period certain and no life
annuity, the period certain may not
exceed the longer of the participant’s
applicable distribution period, as deter-
mined under this section 4.2, or the joint
life and last survivor expectancy of the
participant and the participant’s spouse as
determined under the Joint and Last Sur-
vivor Table set forth in section
1.401(a)(9)–9 of the Treasury regulations,
using the participant’s and spouse’s
attained ages as of the participant’s and
spouse’s birthdays in the calendar year
that contains the annuity starting date.
Section 5. Requirements For Minimum
Distributions Where Participant Dies
Before Date Distributions Begin.
5.1. Participant Survived by Desig-
nated Beneficiary. Except as provided in
the adoption agreement, if the participant
dies before the date distribution of his or
her interest begins and there is a desig-
nated beneficiary, the participant’s entire
interest will be distributed, beginning no
later than the time described in section
2.2(a) or (b), over the life of the desig-
nated beneficiary or over a period certain
not exceeding:
(a) unless the annuity starting date
is before the first distribution calendar
year, the life expectancy of the designated
beneficiary determined using the benefi-
ciary’s age as of the beneficiary’s birth-
day in the calendar year immediately fol-
lowing the calendar year of the
participant’s death; or
(b) if the annuity starting date is
before the first distribution calendar year,
the life expectancy of the designated ben-
eficiary determined using the beneficia-
ry’s age as of the beneficiary’s birthday
in the calendar year that contains the
annuity starting date.
5.2. No Designated Beneficiary. If the
participant dies before the date distribu-
tions begin and there is no designated
beneficiary as of September 30 of the
year following the year of the partici-
pant’s death, distribution of the partici-
pant’s entire interest will be completed by
December 31 of the calendar year con-
taining the fifth anniversary of the partici-
pant’s death.
5.3. Death of Surviving Spouse Before
Distributions to Surviving Spouse Begin.
If the participant dies before the date dis-
tribution of his or her interest begins, the
participant’s surviving spouse is the par-
ticipant’s sole designated beneficiary, and
the surviving spouse dies before distribu-
tions to the surviving spouse begin, this
section 5 will apply as if the surviving
spouse were the participant, except that
the time by which distributions must
begin will be determined without regard
to section 2.2(a).
Section 6. Definitions.
6.1. Designated beneficiary. The indi-
vidual who is designated as the benefi-
ciary under section
of the plan
and is the designated beneficiary under
section 401(a)(9) of the Internal Revenue
Code and section 1.401(a)(9)–1, Q&A-4,
of the Treasury regulations.
6.2. Distribution calendar year. A cal-
endar year for which a minimum distribu-
tion is required. For distributions begin-
ning before the participant’s death, the
first distribution calendar year is the cal-
endar year immediately preceding the cal-
endar year which contains the partici-
pant’s required beginning date. For
distributions beginning after the partici-
pant’s death, the first distribution calen-
dar year is the calendar year in which dis-
tributions are required to begin pursuant
to section 2.2.
6.3 Life expectancy. Life expectancy
as computed by use of the Single Life
Table in section 1.401(a)(9)–9ofthe
Treasury regulations.
6.4. Required beginning date. The date
specified in section
of the plan.
Adoption Agreement
(Check and complete section 1 below if
any required minimum distributions for
the 2002 distribution calendar year were
made in accordance with the§401(a)(9)
Final and Temporary Regulations.)
Section 1. Effective Date of Plan Amend-
ment for Section 401(a)(9) Final and
Temporary Treasury Regulations.
2002–24 I.R.B.1183June 17, 2002

Article, Minimum
Distribution Requirements, applies for
purposes of determining required mini-
mum distributions for distribution calen-
dar years beginning with the 2003 calen-
dar year, as well as required minimum
distributions for the 2002 distribution cal-
endar year that are made on or after .
(Check and complete any of the remain-
ing sections if you wish to modify the
rules in sections 2.2 and 5 of Article
of the plan.)
Section 2. Election to Apply 5-Year Rule
to Distributions to Designated Beneficia-
ries.
If the participant dies before
distributions begin and there is a desig-
nated beneficiary, distribution to the des-
ignated beneficiary is not required to
begin by the date specified in section 2.2
of Article
of the plan, but the
participant’s entire interest will be distrib-
uted to the designated beneficiary by
December 31 of the calendar year con-
taining the fifth anniversary of the partici-
pant’s death. If the participant’s surviving
spouse is the participant’s sole designated
beneficiary and the surviving spouse dies
after the participant but before distribu-
tions to either the participant or the sur-
viving spouse begin, this election will
apply as if the surviving spouse were the
participant.
This election will apply to:
All distributions.
The following distributions:
.
Section 3. Election to Allow Participants
or Beneficiaries to Elect 5-Year Rule.
Participants or beneficiaries
may elect on an individual basis whether
the 5-year rule or the life expectancy rule
in sections 2.2 and 5 of Article
of the plan applies to distribu-
tions after the death of a participant who
has a designated beneficiary. The election
must be made no later than the earlier of
September 30 of the calendar year in
which distribution would be required to
begin under section 2.2 of Article of the
plan, or by September 30 of the calendar
year which contains the fifth anniversary
of the participant’s (or, if applicable, sur-
viving spouse’s) death. If neither the par-
ticipant nor beneficiary makes an election
under this paragraph, distributions will be
made in accordance with sections 2.2 and
5 of Article
of the plan and, if
applicable, the elections in section 2
above.
Section 4. Election to Allow Designated
Beneficiary Receiving Distributions
Under 5-Year Rule to Elect Life
Expectancy Distributions.
A designated beneficiary who
is receiving payments under the 5-year
rule may make a new election to receive
payments under the life expectancy rule
until December 31, 2003, provided that
all amounts that would have been
required to be distributed under the life
expectancy rule for all distribution calen-
dar years before 2004 are distributed by
the earlier of December 31, 2003, or the
end of the 5-year period.
26 CFR 601.105: Examination of returns and claims
for refund, credit or abatement; determination of
correct tax liability.
Rev. Proc. 2002–30
SECTION 1. PURPOSE
This revenue procedure provides for a
pilot program that will test whether the
process for issuing Technical Advice
Memoranda (TAMs) can be streamlined.
The new advice will be known as a Tech-
nical Expedited Advice Memorandum
(TEAM). During the TEAM pilot pro-
gram, only issues under the jurisdiction of
the Associate Chief Counsel (Income Tax
& Accounting) will be eligible for a
TEAM.
The purpose of the new TEAM pilot
program is to expedite certain aspects of
the TAM process and to eliminate certain
requirements (taxpayer and field agree-
ment on facts) that may delay or frustrate
the process. Accordingly, the Office of
Chief Counsel will provide an answer
even if the taxpayer and the field disagree
on the facts. The Office of Chief Counsel,
in appropriate circumstances, may issue
two separate answers: one based on the
field’s factual submission and the other
based on the taxpayer’s.
If the TEAM pilot program is success-
ful, the Office of Chief Counsel expects
to expand it to cover other types of issues
and all Associate offices. The program
also may be made permanent in Rev.
Proc. 2003–2 or a subsequent annual rev-
enue procedure. To that end, comments
from taxpayers and practitioners regard-
ing the TEAM pilot program are solicited
and may be mailed to:
Internal Revenue Service
CC:ITA:RU (RP–124153–02)
Room 5226
POB 7604
Ben Franklin Station
Washington, DC 20044
Attn: A. Lawan Jackson
Submissions may also be delivered
Monday through Friday between the
hours of 8 a.m. and 5 p.m to CC:ITA:RU
(RP–124153–02), Courier’s Desk, Inter-
nal Revenue Service,1111Constitution
Avenue, NW, Washington, DC. Alterna-
tively, taxpayers may submit comments
electronically by submitting comments
directly to the following IRS e-mail
address:Notice.Comments@irscounsel.
treas.gov.
SECTION 2. EFFECT OF A TEAM
A TEAM issued under this revenue
procedure will have the same force and
legal effect as a TAM requested under
Rev. Proc. 2002–2, 2002–1 I.R.B. 82,
except as described in sections 8, 10, and
11 of this revenue procedure. Therefore,
the field must process the taxpayer’s case
on the basis of the conclusions in the
TEAM, subject to the conditions and
limitations described in Rev. Proc.
2002–2, and sections 8, 10, and 11 of this
revenue procedure.
SECTION 3. DEFINITIONS
For purposes of this revenue
procedure—
(1)The term“taxpayer”includes all
persons subject to any provision of the
Internal Revenue Code (including issuers
of section 103 obligations) and, when
appropriate, their representatives;
(2)The term“Associate”means the
Associate Chief Counsel (Income Tax &
Accounting);
(3)The term“field”refers to field
counsel and exam and appeals personnel;
June 17, 200211842002–24 I.R.B.

(4)The term“field counsel”refers to
any attorney with the Office of Chief
Counsel who is not part of the national
office or Division Counsel Headquarters;
(5)The term“director”refers to the
Director, Field Operations, LMSB; the
Territory Manager, Field Compliance,
SB/SE; or the Director, Compliance,
W&I, as appropriate, and their respective
offices; and
(6)The term“area director, appeals”
refers to the Area Director, Appeals
LBSP, or the Area Director, General
Appeals Programs, as appropriate.
SECTION 4. SCOPE
The TEAM pilot program is limited to
TAM requests originating during the
examination or appeals process that are
submitted to the Associate Chief Counsel
(Income Tax & Accounting). All TAM
requests with issues under the jurisdiction
of the Associate will be eligible for the
TEAM procedures, except for requests
that require coordination outside of the
Associate’s office. If the request requires
coordination outside of the Associate’s
office, the TAM procedures set forth in
Rev. Proc. 2002–2 will apply. During the
pendency of the TEAM pilot program, all
TAM requests to the Associate (whether
or not eligible for the pilot program) must
be submitted through the presubmission
procedures set forth in section 6 of this
revenue procedure. TEAM treatment will
be available only after the taxpayer, the
field and the Associate agree that such
treatment is appropriate following the
presubmisson conference described in
section 6.
SECTION 5. WHO IS RESPONSIBLE
FOR REQUESTING A TEAM?
Requests for a TEAM. A request for
a TEAM can originate with the taxpayer,
exam or appeals personnel, or field coun-
sel. All requests for a TEAM must be
submitted through the supervisory chain
for exam or appeals and must be
approved by the director or equivalent
official in the respective operating divi-
sions or by the area director, appeals (or
by an official authorized to act on their
behalf) before submission to the Associ-
ate. If the director or equivalent official
declines to approve the request, then the
denial can be appealed to the Division
Commissioner for that Operating Divi-
sion or to the Deputy Director, General
Appeals Programs or Director, Appeals,
LBSP.
Taxpayer initiated request. While a
case is under the jurisdiction of a director
or area director, appeals, a taxpayer may
make a written or oral request to the
examining agent or appeals officer that an
issue be referred to the Associate for a
TEAM.
Field counsel initiated request. Exam
or appeals personnel can request advice
from field counsel on issues involved in
cases under their jurisdiction. If, during
the discussion of an issue with an exam-
ining agent or appeals officer, field coun-
sel believes an issue warrants consider-
ation as a TEAM, then field counsel may
make a written or oral request to the
examining agent or appeals officer that
the issue be referred to the Associate for
a TEAM.
Resolution of conflicts over requests
for a TEAM. If, after considering a
request by the taxpayer or field counsel
that an issue be submitted for a TEAM,
the examining agent or appeals officer
disagrees with the request, the taxpayer or
the field counsel may raise the request
through the examining agent’sorthe
appeals officer’s supervisory chain.
SECTION 6. HOW ARE
PRESUBMISSION CONFERENCES
SCHEDULED?
Field counsel will work closely with
the examining agents or appeals officers
and the taxpayer in developing the case
for a TEAM and in preparing for the pre-
submission conference. The request for a
presubmission conference must be made
by FAX to the Associate’s office at202–
622–6316, and must be confirmed in
writing by the director or area director,
appeals. The receipt of the FAX will be
confirmed by the Associate office within
one business day. Because the presubmis-
sion conference shall involve the tax-
payer, as set forth in Rev. Proc. 2002–2,
coordination of the request with the tax-
payer must begin as soon as reasonably
possible after the oral request. Addition-
ally, the field personnel and the taxpayer
should agree on what materials to forward
to the Associate’s office to assist in decid-
ing whether TEAM procedures are appro-
priate.
Within 5 calendar days of receiving
the request, the assigned branch within
the Associate’s office will contact the
field office to schedule the conference.
The conference will be held within 15
calendar days of the assigned branch’s
call to the field office and will be held by
telephone, unless the parties specifically
request a meeting in person. In no event
will a request for an in-person presubmis-
sion conference be allowed to delay the
conference beyond the 15-day period.
The presubmission materials must be
received by the assigned branch in the
Associate’s office no later than 5 calendar
days prior to the conference. In order to
obtain the protection of taxpayer informa-
tion offered by the Chief Counsel Intranet
“firewall,”the presubmission materials
shall be electronically transmitted by field
counsel to theCRU-TEAMe-mail
address. To the extent that supporting
materials cannot reasonably be submitted,
such materials should be sent by FAX,
express mail, or private delivery service
to avoid any delays in regular mail to the
Associate’s office.
During the presubmission conference,
the parties should determine whether the
issue is appropriate for a TEAM, and how
the issue should be framed. The partici-
pants from the Associate’s office will
explain the TEAM procedures and the
expedited time frames involved. If all
parties agree that the TEAM process is
desirable, then the request will be pro-
cessed subject to the TEAM pilot proce-
dures. The parties also should agree on
the background documents necessary for
the TEAM, and when and how the parties
will submit those documents to the Asso-
ciate.
If the parties do not agree that the
TEAM process is appropriate for the
issue, the standard TAM procedures of
Rev. Proc. 2002–2 may be used.
SECTION 7. WHAT MUST BE
INCLUDED IN THE REQUEST FOR A
TEAM?
In general, the same procedures should
be used for preparing a TEAM request
that are used for preparing a TAM
request, with the following modifications
to Rev. Proc. 2002–2 to expedite the pro-
cess and to articulate procedures for the
TEAM pilot program:
2002–24 I.R.B.1185June 17, 2002

Factual statements. The field, with
the assistance of field counsel, will pre-
pare a factual statement. The taxpayer
will have 10 calendar days to respond to
the field office’s facts. If the taxpayer and
the field disagree, the parties will have 10
calendar days to attempt to resolve the
disagreements. Within 5 calendar days of
the expiration of the 10-day period or the
day that factual agreement is reached,
whichever is earliest, the TEAM request
will be forwarded to the Associate. If
there is no agreement on the facts, both
sets of facts will be forwarded to the
Associate. The field, with the assistance
of field counsel, will prepare a memoran-
dum highlighting the material factual dif-
ferences, which memorandum will be
provided to the taxpayer.
Submission of documents. All docu-
ments will be electronically transmitted
by field counsel (followed by hard copy
upon the request of the Associate) to the
CRU:TEAMe-mail address. Additional
or supporting documents will be sent by
FAX, express mail or private delivery ser-
vice. The field and the taxpayer are
encouraged to provide electronic versions
of a proposed TEAM containing the tax-
payer’s deletions and legends for the
Associate’s use.
SECTION 8. HOW ARE REQUESTS
HANDLED?
If, at the outset, the reviewing branch
chief in the Associate’s office determines
that general guidance should be published
regarding the issue presented, the branch
chief will immediately notify the Associ-
ate. The reviewing branch chief will
attempt to make this determination and
recommendation as soon as possible,
which may occur during the presubmis-
sion conference. The criteria for this
determination should include whether the
issue has a broad application to similarly
situated taxpayers or an industry, or reso-
lution of the issue is important to a clear
understanding of the tax laws. If the
Associate, in consultation with Division
Counsel and the Operating Division,
agrees that general guidance is desirable,
an expedited guidance project will be ini-
tiated. The Associate, in consultation with
Division Counsel and the Operating Divi-
sion, also will determine the appropriate
resolution of the TEAM request,i.e.,
whether it may be issued in advance of
the general guidance project or must
await the publication of guidance. In gen-
eral, except where policy issues and con-
cerns regarding proper administration of
the tax laws require otherwise, the TEAM
will be issued in advance of the published
guidance.
Within 5 calendar days of the receipt
of the TEAM request, the assigned attor-
ney in the Associate’s office will contact
the field office and the field counsel to
confirm the receipt of the request for
advice. The assigned Associate attorney
and reviewer should also evaluate the
issue(s) presented in the TEAM request.
If, notwithstanding the presubmission dis-
cussion, the Associate concludes that the
issue is too complex or otherwise imprac-
tical to resolve in the time frames pro-
vided below, the Associate may submit a
memorandum to the Chief Counsel
requesting that the case be excluded from
the TEAM process and be treated as a
TAM under Rev. Proc. 2002–2. The Asso-
ciate must discuss this request with both
the field and the taxpayer and reflect their
views in the memorandum to the Chief
Counsel.
Within 20 calendar days of receipt of
the TEAM request, the assigned branch in
the Associate’s office will analyze the
facts and offer the taxpayer and the field
a conference of right, which will be
scheduled for a date within 10 calendar
days of the date of the offer for the con-
ference. The conference will be con-
ducted by telephone, unless the taxpayer
or the field requests that the conference
be held in-person. In no event will the
conference be delayed to provide an in
person conference rather than a telephone
conference.
Following the conference, the taxpayer
and the field will have 15 calendar days
to provide any supplemental materials.
No further conferences will be held. The
TEAM will be issued no later than 15
calendar days after the expiration of the
15-day period for supplemental materials.
If two sets of facts are provided to the
Associate (i.e., the parties were unable to
reach agreement on the facts), the follow-
ing procedure will be used: If the Associ-
ate would rule the same way on either set
of facts, a TEAM will be issued, which
will note that the factual disagreement is
immaterial. If the Associate would rule
differently based on which specific set of
facts is considered, then a TEAM will be
issued describing the resolution of the
issue based on each set of facts.
If the TEAM provides alternate
responses based on separate sets of facts,
the field will not be required to process
the case on the basis of the conclusions in
the TEAM, as required by section 17.01
of Rev. Proc. 2002–2 in the case of a
TAM.
SECTION 9. ISSUANCE OF A TEAM
The Associate will attempt to issue all
TEAMs to the field within 60 calendar
days of receipt. The Associate will pro-
vide the field with the TEAM at the ear-
liest possible date (whether the proposed
TEAM is favorable or adverse, in whole
or in part, to the taxpayer). The Associate
will not provide the taxpayer with the
TEAM or advise the taxpayer of a pro-
posed or final conclusion until the Asso-
ciate has considered a request for recon-
sideration under section 10 of this
revenue procedure or, if no reconsidera-
tion is requested, after the expiration of
the 30-day period to request reconsidera-
tion, whichever occurs later.
SECTION 10. RECONSIDERATION
OF A TEAM
The field will have 30 calendar days
from issuance to request reconsideration
or the TEAM becomes final and will be
released to the taxpayer, as is provided in
section 17 of Rev. Proc. 2002–2. The
request for reconsideration from the field
must come from the director or area
director, appeals. The request for recon-
sideration must describe with specificity
the errors in the TEAM analysis and con-
clusions. Requests for reconsideration
should not reargue points raised in the
initial request, but should instead focus
on points that the TEAM overlooked or
misconstrued in the field’s arguments in
support of their request.
The Associate will consider the field’s
request for reconsideration and rule on
that request within 30 calendar days of
receipt. The Associate may request fur-
ther submissions from the field or the tax-
payer, but no additional submissions shall
be made in the absence of such a request.
If the field does not request reconsidera-
tion, the TEAM will take effect at the end
June 17, 200211862002–24 I.R.B.

of the 30-day period following the issu-
ance of the TEAM to the field. If recon-
sideration is requested, the TEAM will
take effect 5 calendar days after the
reconsideration is ruled on.
In the event of a TEAM adverse to the
taxpayer, in whole or in part, the taxpayer
may request section 7805(b) relief. Such
a request will be treated as a separate
request subject to the user fee require-
ments in Rev. Proc. 2002–1. (Similar to
section 301.9100 relief.)
SECTION 11. EFFECT ON OTHER
REVENUE PROCEDURES
Rev. Proc. 2002–2, 2002–1 I.R.B. 82,
is modified by the supplemental proce-
dures in this revenue procedure. If the
TEAM provides alternate responses based
on separate sets of facts, the field will not
be required to process the case on the
basis of the conclusions in the TEAM, as
required by section 17.01 of Rev. Proc.
2002–2 in the case of a TAM.
SECTION 12. EFFECTIVE DATE
This revenue procedure is effective on
the date of publication in the Internal
Revenue Bulletin, and the TEAM pilot
procedures will remain in effect until the
issuance of Rev. Proc. 2003–2.
SECTION 13. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Susan L. Hartford of the
Office of Associate Chief Counsel (Proce-
dure and Administration). For further
information regarding this revenue proce-
dure, contact Ms. Hartford at 202–622–
4940 (not a toll-free call).
26 CFR 601.201: Rulings and determination letters.
(Also, Part I,§§401; 1.401(b)–1.)
Rev. Proc. 2002–35
SECTION 1. PURPOSE
This revenue procedure establishes
streamlined procedures to avoid the dis-
qualification of plans intended to satisfy
§401(a) or§403(a) of the Internal Rev-
enue Code on account of failure to be
timely amended for GUST.
1
These
streamlined procedures are available only
if the plan sponsor applies for a determi-
nation letter by September 3, 2002.
SECTION 2. BACKGROUND
.01 Plans intended to satisfy§401(a)
or§403(a) (“Qualified Plans”) are
required to be amended for GUST within
the GUST remedial amendment period. A
plan’s GUST remedial amendment period
generally ends on the later of February
28, 2002, or the last day of the first plan
year beginning on or after January 1,
2001. See Rev. Proc. 2001–55, 2001–49
I.R.B. 552. Special rules apply to govern-
mental plans, plans directly affected by
the terrorist attack of September 11, 2001,
and plans that are eligible for the
extended GUST remedial amendment
period that applies to master and proto-
type and volume submitter plans under
section 19 of Rev. Proc. 2000–20, 2000–1
C.B. 553, as modified by Rev. Proc.
2000–27, 2000–1 C.B. 1272, Notice
2001–42, 2001–30 I.R.B. 70, and Rev.
Proc. 2001–55.
.02 Rev. Proc. 2001–17, 2001–1 C.B.
589, describes the Employee Plans Com-
pliance Resolution System (“EPCRS”), a
comprehensive system of correction pro-
grams that, with respect to Qualified
Plans, permits plan sponsors to correct
qualification failures and thereby preserve
the plans’tax-favored status.
SECTION 3. STREAMLINED
PROCEDURES
.01 The streamlined procedures in this
section apply to Eligible Qualified Plans.
The term“Eligible Qualified Plan”means
a Qualified Plan that has not been
amended for GUST within its GUST
remedial amendment period and for
which an application for a determination
letter that considers all of the require-
ments of GUST is filed by September 3,
2002. However, a plan is not an Eligible
Qualified Plan if the plan is a late
amender without regard to GUST (for
example, in the case of a plan other than
a governmental or nonelecting church
plan, if the plan was not timely amended
for the Tax Reform Act of 1986, the
Unemployment Compensation Act of
1992 or the Omnibus Budget and Recon-
ciliation Act of 1993.) For purposes of
this revenue procedure, the failure to
amend any disqualifying provision for
which the GUST remedial amendment
period is available will be treated as a
failure to amend the plan for GUST.
.02 The procedures in this section
apply to Eligible Qualified Plans in lieu
of the procedures in Rev. Proc. 2001–17.
Rev. Proc. 2001–17 will continue to apply
to late amended plans that are not eligible
under this revenue procedure, including
late amended plans for which determina-
tion letter applications are not filed by
September 3, 2002.
.03 The Service will, upon resolution
of the determination letter application,
treat an Eligible Qualified Plan as having
been amended for GUST within the
GUST remedial amendment period and
issue a favorable determination letter if
the plan sponsor has submitted payment
of the fee described in section 3.04. This
fee is in addition to the determination let-
ter user fee, if applicable.
1
“GUST”refers to the following:
•the Uruguay Round Agreements Act, Pub. L. 103–465;
•the Uniformed Services Employment and Reemployment Rights Act of 1994, Pub. L. 103–353;
•the Small Business Job Protection Act of 1996, Pub. L. 104–188;
•the Taxpayer Relief Act of 1997, Pub L. 105–34;
•the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105–206; and
•the Community Renewal Tax Relief Act of 2000, Pub. L. 106–554.
2002–24 I.R.B.1187June 17, 2002

.04 The amount of the fee is as fol-
lows:
Number of Participants
(per Form 5300 or Form
5307)Fee
1–100$1,000
101–1000$3,000
1001 or more$10,000
.05 If the plan sponsor of a late
amended Qualified Plan does not resolve
the failure to timely amend the plan under
this revenue procedure or under Rev.
Proc. 2001–17, the plan will be subject to
disqualification.
SECTION 4. APPLICATION
PROCEDURES
.01 A plan sponsor of an Eligible
Qualified Plan may apply to have the fail-
ure to timely amend the plan resolved
under this revenue procedure by filing a
complete GUST determination letter
application by September 3, 2002. If the
application is filed on or after July 17,
2002, the application should include a
check or money order, made payable to
the U.S. Treasury, in the amount of the
fee determined under section 3.04. This
fee and the appropriate determination let-
ter user fee, if applicable, should be paid
using separate checks or money orders,
each appropriately annotated. The phrase
“Rev. Proc. 2002–35”should be written
in bold at the top of the Form 5300 or
Form 5307. The application should be
sent to the appropriate address in section
6.18 of Rev. Proc. 2002–6, 2002–1 I.R.B.
203.
.02 If the Service determines that a
plan for which a GUST determination let-
ter application has been filed by Septem-
ber 3, 2002, is a GUST late amender, and
the plan sponsor has not submitted pay-
ment of the fee under section 3.04, the
Service will contact the plan sponsor to
offer the sponsor the opportunity to
request consideration under this proce-
dure, or, if the plan is not an Eligible
Qualified Plan, under Rev. Proc. 2001–
17. Therefore, plan sponsors of late
amended plans that have filed GUST
determination letter applications before
July 17, 2002, need take no further action
until contacted by the Service.
SECTION 5. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2001–17 is modified.
SECTION 6. EFFECTIVE DATE
This revenue procedure is effective on
June 17, 2002.
DRAFTING INFORMATION
The principal author of this revenue
procedure is James Flannery of Employee
Plans, Tax Exempt and Government Enti-
ties Division. For further information
regarding this revenue procedure, please
contact the Employee Plans’taxpayer
assistance telephone service at 1–877–
829–5500 between the hours of 8:00 a.m.
and 6:30 p.m. Eastern time, Monday
through Friday (a toll-free number). Mr.
Flannery may be reached at 1–202–283–
9888 (not a toll-free call).
26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also Part I,§§30, 50, 179, 179A.)
Rev. Proc. 2002–42
SECTION 1. PURPOSE
This revenue procedure sets forth a
process that allows taxpayers who pur-
chase certain clean-fuel vehicle property
to rely on a manufacturer’s certification
of the incremental cost of the property for
purposes of the clean-fuel vehicle prop-
erty deduction provided in§179A of the
Internal Revenue Code. This revenue pro-
cedure applies to motor vehicles (other
than buses, and trucks and vans with a
gross vehicle weight rating greater than
10,000 pounds) that are propelled by both
a gasoline internal combustion engine and
an electric motor that is recharged as the
motor vehicles operate (hybrid vehicles)
and that otherwise meet the requirements
of§179A.
SECTION 2. BACKGROUND
.01In general. Section 179A allows a
deduction for certain costs of“qualified
clean-fuel vehicle property”for the tax
year in which the property is placed in
service. In the case of hybrid vehicles,
only the incremental cost of permitting
the use of the clean-burning fuel (electric-
ity) can be taken into account when deter-
mining the allowable deduction under
§179A.
The Internal Revenue Service has
received numerous inquiries from taxpay-
ers concerning the determination of the
incremental cost for specific hybrid
vehicles for purposes of§179A. This
revenue procedure sets forth a process
allowing a taxpayer who purchases a
hybrid vehicle to rely on the original
equipment manufacturer’s (or, in the case
of a foreign original equipment manufac-
turer, its domestic distributor’s) certifica-
tion of the incremental cost of the prop-
erty for purposes of§179A.
.02Qualifying Motor Vehicles. This
revenue procedure applies only to motor
vehicles that meet the requirements of
§179A. In order to be eligible for the
deduction under§179A, a motor vehicle
must: (1) be acquired for use by the tax-
payer and not for resale and have its
original use commence with the taxpayer;
(2) meet the applicable federal and state
emissions standards with respect to each
fuel by which the vehicle is propelled; (3)
be manufactured primarily for use on
public streets, roads, and highways; (4)
have at least four wheels; and (5) not
operate exclusively on a rail or rails. Sec-
tion 179A and this revenue procedure do
not apply to motor vehicles that are pri-
marily powered by electricity and qualify
for the credit provided in§30 or to motor
vehicles that are used predominantly out-
side the United States.
.03Deduction Amount Limitations.
Under§179A, except in the case of any
truck or van with a gross vehicle weight
rating greater than 10,000 pounds or any
bus with a seating capacity of at least 20
adults (not including the driver), the
maximum cost that may be taken into
account when determining the deduction
is $2,000 for motor vehicles placed in ser-
vice on or before December 31, 2003.
The $2,000 maximum is reduced by 25
percent for motor vehicles placed in ser-
vice in calendar year 2004, 50 percent for
motor vehicles placed in service in calen-
dar year 2005, and 75 percent for motor
vehicles placed in service in calendar year
2006. No deduction is allowed for motor
vehicles placed in service after December
31, 2006. No deduction is allowed with
June 17, 200211882002–24 I.R.B.

respect to the portion of the cost of any
property taken into account under§179.
SECTION 3. PROCEDURE
.01Original Equipment Manufactur-
er’s Certification. An original equipment
manufacturer (or in the case of a foreign
original equipment manufacturer, its
domestic distributor) may prepare a certi-
fication concerning the incremental cost
of permitting the use of electricity to pro-
pel its vehicles. The certification should
contain the following information:
(1) the name and address of the certi-
fying entity;
(2) the make, model, year, and any
other appropriate identifiers of the motor
vehicle; and
(3) a statement disclosing the total per-
vehicle cost to acquire and install the
motor vehicle’s electric motor and related
generating, storage, and delivery equip-
ment. If the total cost exceeds $2,000, the
statement may so indicate without dis-
closing the specific amount of the cost.
The certification should be signed by
an officer of the original equipment
manufacturer (or, in the case of a foreign
original equipment manufacturer, an
officer of its domestic distributor). This
original signed certification must be sent
to the Internal Revenue Service, Industry
Director, Large and Mid-Size Business,
Heavy Manufacturing and Transportation,
Metro Park Office Complex—LMSB,
111 Wood Avenue, South, Iselin, New
Jersey 08830.
.02InternalRevenueService’s
Acknowledgment. The Internal Revenue
Service will review the original signed
certification and issue an acknowledg-
ment letter to the original equipment
manufacturer (or, in the case of a foreign
original equipment manufacturer, its
domestic distributor). This acknowledg-
ment letter will state whether purchasers
may rely on the certification.
.03Purchaser’s Reliance. Copies of
the certification and acknowledgment
may be made available to purchasers.
Except as otherwise provided in the
acknowledgment, a purchaser of a hybrid
vehicle may rely on the certification con-
cerning the incremental cost of permitting
the use of electricity to propel the vehicle.
SECTION 4. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Jolene J. Shiraishi of the
Office of the Associate Chief Counsel
(Passthroughs & Special Industries). For
further information regarding this revenue
procedure, contact Ms. Shiraishi at (202)
622–3120 (not a toll free call).
2002–24 I.R.B.1189June 17, 2002

Part IV. Items of General Interest
Announcement and Report
Concerning Pre-Filing
Agreements
Announcement 2002–54
Introduction
This Announcement is issued pursuant
to the Conference Report to H.R. 4577
(Pub. L. 106–554),The Community
Renewal Tax Relief Act of 2000, which
requires that the Secretary of the Treasury
make publicly available an annual report
relating to the Pre-Filing Agreement
(“PFA”) program operations for the pre-
ceding calendar year. The Conference
Report states that the report is to include:
(1) the number of pre-filing agreements
completed, (2) the number of applications
received, (3) the number of applications
withdrawn, (4) the types of issues which
are resolved by completed agreements,
(5) whether the program is being utilized
by taxpayers who were previously subject
to audit, (6) the average length of time
required to complete an agreement, (7)
the number, if any, and subject of techni-
cal advice and Chief Counsel advice
memoranda issued to address issues aris-
ing in connection with any pre-filing
agreement, (8) any model agreements,
and (9) any other information the Secre-
tary deems appropriate. This is the second
annual report and provides information
on the four remaining PFA pilot program
cases that closed in calendar year 2001.
This report also provides similar informa-
tion concerning case activity that started
with the permanent program (Rev. Proc.
2001–22, 2001–1 C.B. 745).
Background
The Large and Mid-Size Business
Division (“LMSB”) within the Internal
Revenue Service serves corporations and
partnerships with assets greater than $10
million. In 2001, approximately 170,000
corporations and partnerships filed
returns reporting assets in this range. The
returns filed by these taxpayers present a
wide variety of complex issues. Taxpay-
ers served by LMSB reported a total tax
liability of $350 billion during 2001. The
largest of the taxpayers deal with the IRS
on a continuous basis.
One of LMSB’s strategic initiatives is
issue management. Through effective
issue management, LMSB seeks to
resolve issues of tax controversy on a
more current basis. This includes, but is
not limited to, increasing the efficiency of
the examination process and seeking
alternative issue resolution tools. The Pre-
Filing Agreement program was designed
to support LMSB’s issue management
strategy. LMSB believes the Pre-Filing
Agreement program reduces taxpayer
burden and make more effective use of
IRS resources by resolving or eliminating
tax controversy before the tax return is
filed.
Pre-Filing Agreement Program
The PFA program is designed to per-
mit a taxpayer to resolve, before the filing
of a return, the treatment of an issue that
otherwise would likely be disputed in a
post-filing examination. The PFA pro-
gram is intended to produce agreement on
factual issues and apply settled legal prin-
ciples to those facts. A PFA is a specific
matter closing agreement under§7121 of
the Internal Revenue Code and resolves
the subject of the PFA for a taxable
period. Execution of a PFA that resolves
issues prior to filing permits taxpayers to
avoid a portion of the costs, burdens and
delays that are frequently incident to post-
filing examination disputes between tax-
payers and the IRS.
In calendar year 2000, the pilot pro-
gram was implemented which resulted in
the execution of seven PFAs. Four cases
remained in process at the end of calendar
year 2000 and all four cases were closed
during calendar year 2001. A PFA was
executed in three of the four cases. Based
upon input from internal and external par-
ticipants in the pilot program, the IRS
expanded the PFA program and made it
permanent.
Pilot Pre-Filing Agreement Program
Completion
PFA Pilot Program
The PFA pilot program was open to
Coordinated Examination Program
(“CEP”) taxpayers that had a CEP exami-
nation team currently on site (CEP cases
have been renamed Coordinated Industry
Cases (CIC)). Notice 2000–12, 2000–1
C.B. 727, dated February 11, 2000, pro-
vided a description of a PFA, the proce-
dures for requesting a PFA, and the pro-
cedures for LMSB to select taxpayers for
the PFA pilot program. The IRS believed
that this PFA pilot program offered sig-
nificant benefits for taxpayers, as well as
for the IRS, and invited large business
taxpayers to participate. Notice 2000–12
requested interested taxpayers to submit
applications for the PFA pilot program by
March 15, 2000, through the on site
LMSB team manager. During the PFA
pilot, eleven cases were accepted into the
pilot program. Of the eleven, seven were
closed during calendar year 2000 and
reflected in the first report (Announce-
ment 2001–38, 2001–1 C.B. 1138, dated
April 23, 2001). The remaining four cases
were closed during calendar year 2001.
This report reflects the activity of the four
pilot cases closed in calendar year 2001.
The taxpayers and the respective
Industry Directors, in accordance with the
provisions of Notice 2000–12, agreed to
continue discussions relating to the four
PFAs that were in process at December
31, 2000.
June 17, 200211902002–24 I.R.B.

Industry SegmentIssueIn-Process @12/31/00
Heavy Manufacturing & TransportationResearch Credit1
Heavy Manufacturing & TransportationValuation of Assets1
Communications, Technology & MediaResearch Credit1
Retailers, Food, Pharmaceuticals & HealthcareExpense vs. Capitalization1
During calendar year 2001, the four pilot cases were closed in the following manner:
Status of PFAsIssue
Executed PFAResearch Credit
Executed PFAValuation of Assets
Executed PFAResearch Credit
PFA WithdrawnExpense vs. Capitalization
Executed PFAs—Research Credit
Two applicants sought PFAs regarding
the amount of research credit each could
claim as a result of various activities
undertaken to improve products. In both
instances, IRS specialists and other non-
Service outside experts were involved in
the process of ascertaining what activities
qualified for the credit. In one case, the
analysis involved consideration of the
activities of over 1,500 different depart-
ments. Closing agreements were executed
in both cases.
Executed PFA—Valuation of Assets
This case involved a determination of
value related to the sale of assets and
stock of a subsidiary to an unrelated
party. An allocation of the net selling
price among the assets and stock sold, the
basis of the assets sold, and the taxable
gain or loss were at issue. A closing
agreement was executed regarding all of
these issues.
PFA Withdrawn—Expense vs.
Capitalization
The issue in this case related to
whether certain repairs and maintenance
expenditures were deductible or should
be capitalized and depreciated over their
useful life. A closing agreement with
multi-year application which was sought
by the taxpayer could not be provided
under the terms of the Delegation Order
for the PFA program. Consequently, both
the Service and the taxpayer mutually
agreed to withdraw from the PFA process.
Closing Agreements
The above three PFAs were executed
during 2001. A pro forma or model agree-
ment does not exist for a PFA. A PFA
represents a specific matter closing agree-
ment under§7121. The closing agree-
ments entered into under this program
were prepared with assistance from the
Office of Chief Counsel and conform to
the guidance provided in Rev. Proc.
68–16, 1968–1 C.B. 770.
Processing Statistics
The average elapsed time to resolve
the four cases described above that were
closed in calendar year 2001 was 482.75
days.
Average Processing Time for Four Cases Closed in 2001Range
(Elapsed Days)
Average
(Elapsed Days)
Phase I—Application Screening Process21–8644.5
Phase II—PFA Evaluation Process292–533438.25
Total Time to Close a PFA Case322–574482.75
Phase I—Application Screening
Process
The initial phase was the screening
process to determine if an application was
appropriate for inclusion in the PFA pilot
program. This screening process included
obtaining comments from various LMSB
functions and Chief Counsel, the review
of these comments, and the decision mak-
ing process on the acceptance/rejection of
an application by the Industry Director.
The average elapsed time from the date
an application was received by the IRS
until the Industry Director rendered a
decision to accept or reject an application
was 44.5 days.
Phase II—PFA Evaluation Process
The second (and final) phase in the
PFA pilot program process was the evalu-
ation phase. This phase began when the
Industry Director accepted an application
into the PFA program and ended when a
PFA was executed or the case was other-
wise closed. The average elapsed time for
the four cases was 438.25 days.
2002–24 I.R.B.1191June 17, 2002

Program Evaluation
The PFA Program Manager ensures
that an evaluation of all of the PFA pro-
gram cases, based on feedback from
LMSB employees and taxpayer partici-
pants, is conducted. As a part of this pro-
gram evaluation, participants were asked
to provide the actual direct examination
time expended to complete the PFA and
an estimate of the direct examination time
it would have taken to resolve the issue in
a post-filing context.
Cumulative Hours
(Executed PFAs)
Taxpayer
(Hours)
(2 executed PFAs)
LMSB
(Hours)
(3 executed PFAs)
Actual—PFA Process25,92017,192
Estimated—Post-Filing Process59,50031,860
Estimated Savings33,58014,668
Estimated Savings Percentage (Average)56.4%46%
Estimated Savings Percentage (Range)(28%)–59%(12.4%)–61%
One taxpayer who executed a PFA did
not participate in the program evaluation
phase of the PFA process.
Pre-Filing Agreement Pilot Program
Summary
After evaluating the PFA pilot program
and receiving input from internal and
external participants, the IRS concluded
that the PFA program supports the LMSB
issue management strategy by assisting
taxpayers to resolve issues in a cost effi-
cient and cooperative environment.
Accordingly, the IRS issued Rev. Proc.
2001–22, which expanded the PFA pro-
gram and made it permanent.
Permanent Pre-Filing Agreement
Program
PFA Program
As a result of the success of the pilot
program, the Service established a perma-
nent PFA Program with the issuance of
Rev. Proc. 2001–22. Although many of
the procedures remained the same, there
were some significant changes, including:
1. All taxpayers within the jurisdic-
tion of LMSB are eligible to par-
ticipate;
2. More issues are considered
appropriate;
3. There are fewer excludible cir-
cumstances;
4. Certain international issues are
now considered appropriate; and
5. A user fee was implemented for
those taxpayers accepted into the
program.
PFA Process
The PFA process is managed and con-
ducted by LMSB Industry Directors and
field staff, with support from the Office
of Pre-Filing and Technical Guidance in
LMSB Headquarters. The PFA Program
Manager receives all applications and,
with the assistance of the Technical Advi-
sors and the Office of Chief Counsel,
ensures that the issues presented are
appropriate for inclusion in the PFA pro-
gram.
The Industry Director with jurisdiction
over the taxpayer makes the final decision
whether to accept a taxpayer’s request for
participation in the PFA program. The cri-
teria for selecting a request include:
a. The suitability of the issue pre-
sented by the taxpayer;
b. The direct or indirect impact of a
PFA upon other years, issues,
taxpayers, or related cases;
c. The availability of Service
resources;
d. The ability and willingness of the
taxpayer to dedicate sufficient
resources to the process;
e. The likelihood that the PFA may
result in contrary positions with
respect to an item or transaction
(“whipsaw”); and
f. The probability of completing the
examination of the issue and
entering into a PFA by the target
date.
For the cases selected, a mandatory
orientation session for the examination
team and the taxpayer is conducted. Sub-
sequently, the taxpayer and examination
team convene a joint planning meeting to
reach agreement on a proposed time-
frame, to identify and arrange for IRS
access to relevant records and testimony,
and to define the potential scope and
nature of the PFA.
The examination team conducts the
factual determination and issue develop-
ment consistent with IRS auditing stan-
dards. Based upon an examination of the
issue, the Team Manager prepares a PFA
recommendation for the Industry Direc-
tor. The Industry Director’s decision to
enter into a PFA is based on the Team
Manager’s recommendation and discus-
sions with the PFA Program Manager,
Chief Counsel attorneys, appropriate
Technical Advisors and the taxpayer. Fol-
lowing Chief Counsel review to ensure
that the proposed PFA conforms with
guidance provided in Rev. Proc. 68–16
(regarding closing agreements), the
Industry Director could execute a PFA if
he or she determines that:
a. Entering into the PFA is consis-
tent with the goals of the PFA
program as stated in Rev. Proc.
2001–22;
b. The resolution in the PFA reflects
settled legal principles and cor-
rectly applies those principles (or
positions authorized under Del-
egation Order Nos. 236 or 247)
to facts found by the Examina-
tion Team; and
c. There appears to be an advantage
in having the issue(s) perma-
nently and conclusively closed
for the taxable period covered by
the PFA, or that the taxpayer
shows good and sufficient rea-
sons for desiring a closing agree-
ment and that the United States
would sustain no disadvantage
June 17, 200211922002–24 I.R.B.

through consummation of such
an agreement (see§301.7121–
1(a) of the Procedure and Admin-
istration Regulations).
Program Oversight
A designated PFA Program Manager
and an analyst assigned to the Office of
Pre-Filing and Technical Guidance in
LMSB Headquarters provide oversight
for the PFA program. The PFA Program
Manager provides assistance to taxpayers,
Industry Directors and Team Managers
throughout the process.
Pre-Filing Agreement Program
Accomplishments
Applications Received
Twenty-six applications were received
for the permanent PFA program in calen-
dar year 2001. Applications were received
from each LMSB industry segment and
involved a variety of issues.
Number of Requests Received by Industry
Industry SegmentReceived
Financial Services10
Retailers, Food, Pharmaceuticals & Healthcare3
Natural Resources & Construction4
Communications, Technology & Media3
Heavy Manufacturing, Construction & Transportation6
Total26
Types of Issues Received
IssueReceived
Deductibility of interest1
Fair Market Value of Assets3
Expense vs. Capitalization1
Tax Basis & Holding Period1
Excise Tax Allocation2
Reorganization & Stock Basis1
Research & Experiment Credit3
Bad Debts & Worthless Securities1
Gain on Sale1
Amortization of Intangibles1
Class Life Determination2
Deductibility of Indemnification Payments1
Acquiring parent—method of accounting1
NOL Determination1
Demutualization & IPO2
Foreign Business Cessation1
Acquisition & Liquidation1
Cost Basis Determination1
Complete Liquidation & Bankruptcy1
Total26
Applications Not Accepted
Eight applications were not considered appropriate for the PFA program.
2002–24 I.R.B.1193June 17, 2002

Reasons for Non-acceptanceApplications
Issue Not Suitable or Ineligible4
International Issue Not Listed in Rev. Proc. 2001–221
Not Well-Settled Law1
Change of Accounting Method (Form 3115)1
Not Under Jurisdiction of LMSB1
Total8
Applications Accepted
Eighteen applications from the twenty-six taxpayer submissions were accepted into the permanent PFA program. The status of
these applications on December 31, 2001, was as follows:
Status of PFAs @ 12/31/01Applications
PFA Request Withdrawn by Taxpayer1
PFA Request Withdrawn by IRS1
PFAs In-process11
PFAs Executed5
Total18
Taxpayer Withdrawal (1)
One taxpayer, in accordance with the
procedures set forth in Section 8 of Rev.
Proc. 2001–22, withdrew from the PFA
program after its request had been
accepted. This withdrawal was necessi-
tated, in the view of the taxpayer, due to
adverse economic conditions within the
company causing a reduction in staffing
required to successfully continue the PFA
process.
IRS Withdrawal (1)
The Service withdrew from the PFA
process in another instance where all
issue and factual development had been
completed and, after considerable discus-
sions with the taxpayer, it was determined
that a closing agreement could not be
reached on the issue of the amount of
allowable research credit.
PFAs In Process (11)
The taxpayers and the respective
Industry Directors, in accordance with the
provisions of Rev. Proc. 2001–22, have
agreed to continue the PFA process in an
effort to reach a closing agreement con-
cerning the 11 in-process cases.
PFAs Executed (5)
Five PFAs were completed in calendar
year 2001 under the permanent program.
The Office of Chief Counsel provided
advice to the examination teams and
assisted in the drafting and review of the
PFA closing agreements. No Technical
Advice or Chief Counsel Advice Memo-
randa were issued for issues addressed in
the PFA process. The executed PFAs cov-
ered the following issues:
PFAs Executed by Issue
Deductibility of Interest1
Class Life Determination1
Expense vs. Capitalization1
Amortization of Intangibles1
Deductibility of Indemnification Payments1
Total5
June 17, 200211942002–24 I.R.B.

Deductibility of Interest (1)
An agreement was reached between a
taxpayer and the Service that, on the basis
of the facts presented, the taxpayer was
not subject to disallowance of its interest
deductions under§265(a)(2) because its
investment in tax-exempt securities was
less than 2 percent of its average total
assets and therefore it satisfied the 2 per-
cent safe harbor under§3.05 of Rev.
Proc. 72–18.
Class Life Determination (1)
Taxpayer requested a determination
whether they had properly assigned class
lives and recovery periods for assets capi-
talized and placed into service during the
taxable year (the PFA year). Additionally,
the taxpayer requested a determination as
to whether certain assets placed in service
in prior periods were properly classified.
A closing agreement was executed con-
cerning the assets placed in service during
the PFA year. Separately, the taxpayer
submitted a request for a change of
accounting method to the Office of Chief
Counsel concerning the reclassification of
assets placed in service in prior tax peri-
ods which was consistent with the deter-
mination in the PFA year.
Expense vs. Capitalization (1)
Taxpayer requested consideration
whether certain expenditures for repairs
made during the PFA year were properly
deductible or should be capitalized and
depreciated over the appropriate recovery
period. A closing agreement was executed
establishing which portion of the total
expenditures was properly expensed and
which portion was properly capitalized
and subject to depreciation.
Amortization of Intangibles (1)
During the PFA year, the taxpayer
entered into a taxable transaction in
which it acquired certain amortizable
intangible assets. The taxpayer requested
a determination as to the value of the
intangibles acquired. A closing agreement
was executed as to such value.
Deductibility of Indemnification
Payments (1)
A majority shareholder made certain
payments in settlement of litigation on his
own behalf and on behalf of a corporate
taxpayer. The corporate taxpayer agreed
to indemnify the shareholder a negotiated
amount. The corporate taxpayer requested
a determination concerning the deduct-
ibility of the indemnification payments
made to the shareholder during the PFA
year. A closing agreement was executed
regarding the amounts of deductible and
non-deductible payments.
Closing Agreements
Five PFAs were executed in the per-
manent PFA program during calendar
year 2001. A pro forma or model agree-
ment does not exist for a PFA. A PFA
represents a specific matter closing agree-
ment under§7121. The closing agree-
ments entered into under this program
were prepared with assistance from the
Office of Chief Counsel and conform to
the guidance provided in Rev. Proc.
68–16.
Processing Statistics
The average elapsed time to resolve
the seven cases (five executed PFAs and
two withdrawals) described above that
were closed in calendar year 2001 was
172.7 days.
Average Processing Time for Seven Cases Closed in 2001Range
(Elapsed Days)
Average
(Elapsed Days)
Phase I—Application Screening Process16–6546.6
Phase II—PFA Evaluation Process54–188126.1
Total Time to Close a PFA Case105–253172.7
Phase I—Application Screening
Process
Twenty-six applications were received
for the PFA program during calendar year
2001. The initial phase was the screening
process to determine if an application was
appropriate for inclusion in the PFA pro-
gram. This screening process included
obtaining comments from various LMSB
functions and Chief Counsel, the review
of these comments, and the decision mak-
ing process on the acceptance/rejection of
an application by the Industry Director.
The average time from the date an appli-
cation was received by the IRS until the
Industry Director rendered a decision to
accept or reject an application was 63.96
days for all twenty-six applications
received in the calendar year 2001 and
46.6 days for the seven cases closed in
that year.
Phase II—PFA Evaluation Process
The second (and final) phase in the
PFA program process was the evaluation
phase. This phase began when the Indus-
try Director accepted an application into
the PFA program and ended when a PFA
was executed or the case was otherwise
closed. The average elapsed time for the
seven cases closed in calendar year 2001
was 126.1 days.
Program Evaluation
The PFA Program Manager ensures
that an evaluation of all of the PFA pro-
gram cases, based on feedback from
LMSB employees and taxpayer partici-
pants, is conducted. As a part of this pro-
gram evaluation, participants were asked
to provide the direct examination time
expended to complete the PFA and an
estimate of the direct examination time it
would have taken to resolve the issue in a
post-filing context.
2002–24 I.R.B.1195June 17, 2002

Cumulative Hours
(5 Executed PFAs)
Taxpayer
(Hours)
LMSB
(Hours)
Actual—PFA Process4,5836,252
Estimated—Post-Filing Process13,70811,873
Estimated Savings9,1255,621
Estimated Savings Percentage (Average)66.6%47.3%
Estimated Savings Percentage (Range)50%–98.4%(8.9)%–92.5%
Comparative Analysis—Processing
Statistics
Illustrated below are the average
elapsed time (in days) processing statis-
tics for the seven pilot cases that closed in
calendar year 2000, the remaining four
pilot cases closed in calendar year 2001,
and the seven permanent program cases
closed in calendar year 2001. In the pilot
program, the average total time to con-
clude the first seven cases, as indicated
below, was 164.8 days. The range was
from a low of 91 days to a high of 186
days. The four pilot cases that started in
calendar year 2000 and closed in calendar
year 2001 were concluded in an average
total time of 482.75 days. Those cases
had a range of 322 to 574 days. The aver-
age total time to conclude the seven per-
manent program cases that started and
closed in calendar year 2001 was 172.7
days. The range was from 105 to 253
days.
With regard to the four pilot cases
completed in calendar year 2001, the
increased time can be attributed to the
degree of complexity of the issue and the
time necessary to develop the factual
aspects of the issue. Generally, the more
complex and examination intensive the
issue is, the greater the time necessary to
complete the process.
Regarding the Phase I—Application
Screening Process, we have noted the
slight increase in average processing
time. With respect to the Phase II and
Total Time, the results meet our expecta-
tions and may be a positive consequence
of the slightly increased Phase I time.
Other than the contributing factors stated
above, our analysis thus far has not
revealed any systemic issues giving rise
to this phenomenon.
Average Processing Time for PFAs
(Days)
Pilot
CY 2000
(7 cases)
Pilot
CY 2001
(4 cases)
Overall
Pilot
(11 cases)
Program
CY 2001
(7 cases)
Phase I—Application Screening Process34.744.538.346.6
Phase II—PFA Evaluation Process130.1438.25242.2126.1
Total Time to Complete a PFA164.8482.75280.5172.7
Pre-Filing Agreement Program
Summary
The PFA program is now available to
all LMSB taxpayers, including taxpayers
that are not currently under examination.
While the PFA program will continue to
be limited to issues that involve settled
legal principles, the list of recommended
issues has been expanded, and now
includes certain international issues. Gen-
erally, the operational procedures used
during the PFA pilot program were
adopted and enhanced in the permanent
PFA program.
Overall, the PFA program is meeting
the LMSB strategic program objectives as
contained in its issue management strate-
gic initiative. Issues of potential contro-
versy are being resolved more efficiently
and on a more current basis yielding ben-
efits to taxpayers and the IRS.
The principal author of this announce-
ment is J. Michael Mann, in the Office of
Pre-Filing and Technical Guidance, Large
and Mid-Size Business Division. For fur-
ther information regarding this announce-
ment, contact Mr. Mann at (202) 283–
8424 (not a toll-free call).
June 17, 200211962002–24 I.R.B.

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as“rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplifieddescribes 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
withmodified, below).
Clarifiedis 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.
Modifiedis used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but not
to B, and the new ruling holds that it
applies to both A and B, the prior ruling
is modified because it corrects a pub-
lished position. (Compare withamplified
andclarified, above).
Obsoleteddescribes 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. A ruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revokeddescribes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.
Supersededdescribes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example,modified
andsupersededdescribes 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.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspendedis 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 formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions 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.—Intemal 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 Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
2002–24 I.R.B.iJune 17, 2002

Numerical Finding List
1
Bulletins 2002–1 through 2002–23
Announcements:
2002–1, 2002–2 I.R.B.304
2002–2, 2002–2 I.R.B.304
2002–3, 2002–2 I.R.B.305
2002–4, 2002–2 I.R.B.306
2002–5, 2002–4 I.R.B.420
2002–6, 2002–5 I.R.B.458
2002–7, 2002–5 I.R.B.459
2002–8, 2002–6 I.R.B.494
2002–9, 2002–7 I.R.B.536
2002–10, 2002–7 I.R.B.539
2002–11, 2002–6 I.R.B.494
2002–12, 2002–8 I.R.B.553
2002–13, 2002–7 I.R.B.540
2002–14, 2002–7 I.R.B.540
2002–15, 2002–7 I.R.B.540
2002–16, 2002–7 I.R.B.541
2002–17, 2002–8 I.R.B.561
2002–18, 2002–10 I.R.B.621
2002–19, 2002–8 I.R.B.561
2002–20, 2002–8 I.R.B.561
2002–21, 2002–8 I.R.B.562
2002–22, 2002–8 I.R.B.562
2002–23, 2002–8 I.R.B.563
2002–24, 2002–9 I.R.B.606
2002–25, 2002–10 I.R.B.621
2002–26, 2002–11 I.R.B.629
2002–27, 2002–11 I.R.B.629
2002–28, 2002–11 I.R.B.630
2002–29, 2002–11 I.R.B.631
2002–30, 2002–11 I.R.B.632
2002–31, 2002–15 I.R.B.747
2002–32, 2002–12 I.R.B.664
2002–33, 2002–12 I.R.B.666
2002–34, 2002–13 I.R.B.702
2002–35, 2002–12 I.R.B.667
2002–36, 2002–13 I.R.B.703
2002–37, 2002–13 I.R.B.703
2002–38, 2002–14 I.R.B.738
2002–39, 2002–14 I.R.B.738
2002–40, 2002–15 I.R.B.747
2002–41, 2002–14 I.R.B.739
2002–42, 2002–14 I.R.B.739
2002–43, 2002–16 I.R.B.792
2002–44, 2002–17 I.R.B.809
2002–45, 2002–18 I.R.B.833
2002–46, 2002–18 I.R.B.834
2002–47, 2002–18 I.R.B.844
2002–48, 2002–17 I.R.B.809
2002–49, 2002–19 I.R.B.919
2002–50, 2002–18 I.R.B.845
2002–51, 2002–22 I.R.B.1063
2002–52, 2002–19 I.R.B.919
2002–53, 2002–22 I.R.B.1063
2002–55, 2002–23 I.R.B.1125
2002–56, 2002–23 I.R.B.1126
2002–57, 2002–23 I.R.B1126
Court Decisions:
2073, 2002–14 I.R.B.718
2074, 2002–20 I.R.B.954
Notices:
2002–1, 2002–2 I.R.B.283
2002–2, 2002–2 I.R.B.285
2002–3, 2002–2 I.R.B.289
2002–4, 2002–2 I.R.B.298
2002–5, 2002–3 I.R.B.320
2002–6, 2002–3 I.R.B.326
2002–7, 2002–6 I.R.B.489
2002–8, 2002–4 I.R.B.398
2002–9, 2002–5 I.R.B.450
2002–10, 2002–6 I.R.B.490
2002–11, 2002–7 I.R.B.526
2002–12, 2002–7 I.R.B.526
2002–13, 2002–8 I.R.B.547
2002–14, 2002–8 I.R.B.548
2002–15, 2002–8 I.R.B.548
2002–16, 2002–9 I.R.B.567
2002–17, 2002–9 I.R.B.567
2002–18, 2002–12 I.R.B.644
2002–19, 2002–10 I.R.B.619
2002–20, 2002–17 I.R.B.796
2002–21, 2002–14 I.R.B.730
2002–22, 2002–14 I.R.B.731
2002–23, 2002–15 I.R.B.742
2002–24, 2002–16 I.R.B.785
2002–25, 2002–15 I.R.B.743
2002–26, 2002–15 I.R.B.743
2002–27, 2002–18 I.R.B.814
2002–28, 2002–16 I.R.B.785
2002–29, 2002–17 I.R.B.797
2002–30, 2002–17 I.R.B.797
2002–31, 2002–19 I.R.B.908
2002–32, 2002–21 I.R.B.989
2002–33, 2002–21 I.R.B.989
2002–34, 2002–21 I.R.B.990
2002–35, 2002–21 I.R.B.992
2002–36, 2002–22 I.R.B.1029
2002–37, 2002–23 I.R.B.1095
Proposed Regulations:
REG–209135–88, 2002–4 I.R.B.418
REG–209114–90, 2002–9 I.R.B.576
REG–105885–99, 2002–23 I.R.B.1103
REG–104762–00, 2002–18 I.R.B.825
REG–105369–00, 2002–18 I.R.B.828
REG–107100–00, 2002–7 I.R.B.529
REG–107184–00, 2002–20 I.R.B.967
REG–107366–00, 2002–12 I.R.B.645
REG–118861–00, 2002–12 I.R.B.651
REG–105344–01, 2002–2 I.R.B.302
REG–112991–01, 2002–4 I.R.B.404
REG–115054–01, 2002–7 I.R.B.530
REG–119436–01, 2002–3 I.R.B.377
REG–120135–01, 2002–8 I.R.B.552
REG–125450–01, 2002–5 I.R.B.457
REG–125626–01, 2002–9 I.R.B.604
Proposed Regulations:—Continued:
REG–136193–01, 2002–21 I.R.B.995
REG–142299–01, 2002–4 I.R.B.418
REG–154920–01, 2002–22 I.R.B.1060
REG–159079–01, 2002–6 I.R.B.493
REG–161424–01, 2002–21 I.R.B.1010
REG–163892–01, 2002–20 I.R.B.968
REG–165706–01, 2002–16 I.R.B.787
REG–167648–01, 2002–16 I.R.B.790
REG–102740–02, 2002–13 I.R.B.701
REG–108697–02, 2002–19 I.R.B.918
Revenue Procedures:
2002–1, 2002–1 I.R.B.1
2002–2, 2002–1 I.R.B.82
2002–3, 2002–1 I.R.B.117
2002–4, 2002–1 I.R.B.127
2002–5, 2002–1 I.R.B.173
2002–6, 2002–1 I.R.B.203
2002–7, 2002–1 I.R.B.249
2002–8, 2002–1 I.R.B.252
2002–9, 2002–3 I.R.B.327
2002–10, 2002–4 I.R.B.401
2002–11, 2002–7 I.R.B.526
2002–12, 2002–3 I.R.B.374
2002–13, 2002–8 I.R.B.549
2002–14, 2002–5 I.R.B.450
2002–15, 2002–6 I.R.B.490
2002–16, 2002–9 I.R.B.572
2002–17, 2002–13 I.R.B.676
2002–18, 2002–13 I.R.B.678
2002–19, 2002–13 I.R.B.696
2002–20, 2002–14 I.R.B.732
2002–21, 2002–19 I.R.B.911
2002–22, 2002–14 I.R.B.733
2002–23, 2002–15 I.R.B.744
2002–24, 2002–17 I.R.B.798
2002–25, 2002–17 I.R.B.800
2002–26, 2002–15 I.R.B.746
2002–27, 2002–17 I.R.B.802
2002–28, 2002–18 I.R.B.815
2002–31, 2002–19 I.R.B.916
2002–32, 2002–20 I.R.B.959
2002–33, 2002–20 I.R.B.963
2002–36, 2002–21 I.R.B.993
2002–37, 2002–22 I.R.B.1030
2002–38, 2002–22 I.R.B.1037
2002–39, 2002–22 I.R.B.1046
2002–40, 2002–23 I.R.B.1096
2002–41, 2002–23 I.R.B.1098
Revenue Rulings:
2002–1, 2002–2 I.R.B.268
2002–2, 2002–2 I.R.B.271
2002–3, 2002–3 I.R.B.316
2002–4, 2002–4 I.R.B.389
2002–5, 2002–6 I.R.B.461
2002–6, 2002–6 I.R.B.460
2002–7, 2002–8 I.R.B.543
2002–8, 2002–9 I.R.B.564
1
A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 2001–27 through 2001–53 is
in Internal Revenue Bulletin 2002–1, dated January 7, 2002.
June 17, 2002ii2002–24 I.R.B.

Revenue Rulings:—Continued:
2002–9, 2002–10 I.R.B.614
2002–10, 2002–10 I.R.B.616
2002–11, 2002–10 I.R.B.608
2002–12, 2002–11 I.R.B.624
2002–13, 2002–12 I.R.B.637
2002–14, 2002–12 I.R.B.636
2002–15, 2002–13 I.R.B.668
2002–16, 2002–15 I.R.B.740
2002–17, 2002–14 I.R.B.716
2002–18, 2002–16 I.R.B.779
2002–19, 2002–16 I.R.B.778
2002–20, 2002–17 I.R.B.794
2002–21, 2002–17 I.R.B.793
2002–22, 2002–19 I.R.B.849
2002–23, 2002–18 I.R.B.811
2002–24, 2002–19 I.R.B.848
2002–25, 2002–19 I.R.B.904
2002–26, 2002–19 I.R.B.906
2002–27, 2002–20 I.R.B.925
2002–28, 2002–20 I.R.B.941
2002–29, 2002–20 I.R.B.940
2002–30, 2002–21 I.R.B.971
2002–31, 2002–22 I.R.B.1023
2002–32, 2002–23 I.R.B.1069
2002–35, 2002–23 I.R.B.1067
Tax Conventions:
2002–14 I.R.B.725
Treasury Decisions:
8968, 2002–2 I.R.B.274
8969, 2002–2 I.R.B.276
8970, 2002–2 I.R.B.281
8971, 2002–3 I.R.B.308
8972, 2002–5 I.R.B.443
8973, 2002–4 I.R.B.391
8974, 2002–3 I.R.B.318
8975, 2002–4 I.R.B.379
8976, 2002–5 I.R.B.421
8977, 2002–6 I.R.B.463
8978, 2002–7 I.R.B.500
8979, 2002–6 I.R.B.466
8980, 2002–6 I.R.B.477
8981, 2002–7 I.R.B.496
8982, 2002–8 I.R.B.544
8983, 2002–9 I.R.B.565
8984, 2002–13 I.R.B.668
8985, 2002–14 I.R.B.707
8986, 2002–16 I.R.B.780
8987, 2002–19 I.R.B.852
8988, 2002–20 I.R.B.929
8989, 2002–20 I.R.B.920
8990, 2002–20 I.R.B.947
8991, 2002–21 I.R.B.972
8992, 2002–21 I.R.B.981
8993, 2002–22 I.R.B.1026
8994, 2002–23 I.R.B.1078
8995, 2002–23 I.R.B.1070
2002–24 I.R.B.iiiJune 17, 2002

Finding List of Current Actions
on Previously Published Items
2
Bulletins 2002–1 through 2002–23
Announcements:
2001–83
Modified by
Ann. 2002–36, 2002–13 I.R.B.703
2002–9
Corrected by
Ann. 2002–30, 2002–11 I.R.B.632
Ann. 2002–35, 2002–12 I.R.B.667
Notices:
90–24
Modified and superseded by
Notice 2002–24, 2002–16 I.R.B.785
97–12
Superseded by
T.D. 8994, 2002–23 I.R.B.1078
97–49
Superseded by
T.D. 8994, 2002–23 I.R.B.1078
98–31
Supplemented by
Ann. 2002–37, 2002–13 I.R.B.703
98–43
Modified and superseded by
Notice 2002–5, 2002–3 I.R.B.320
2000–11
Obsoleted by
Notice 2002–3, 2002–2 I.R.B.289
2001–10
Revoked by
Notice 2002–8, 2002–4 I.R.B.398
2001–61
Supplemented by
Notice 2002–15, 2002–8 I.R.B.548
2001–68
Supplemented by
Notice 2002–15, 2002–8 I.R.B.548
2002–14
Modified and superseded by
Rev. Proc. 2002–28, 2002–18 I.R.B.815
Proposed Regulations:
REG–209135–88
Corrected by
Ann. 2002–15, 2002–7 I.R.B.540
Ann. 2002–30, 2002–11 I.R.B.632
REG–251502–96
Withdrawn by
Ann. 2002–33, 2002–12 I.R.B.666
Proposed Regulations:—Continued
REG–105316–98
Withdrawn by
REG–161424–01, 2002–21 I.R.B.1010
REG–113526–98
Withdrawn by
REG–105369–00, 2002–18 I.R.B.828
REG–107100–00
Corrected by
Ann. 2002–30, 2002–11 I.R.B.632
REG–107566–00
Withdrawn by
REG–163892–01, 2002–20 I.R.B.968
REG–105344–01
Corrected by
Ann. 2002–7, 2002–5 I.R.B.459
REG–112991–01
Corrected by
Ann. 2002–30, 2002–11 I.R.B.632
Ann. 2002–38, 2002–14 I.R.B.738
REG–115054–01
Corrected by
Ann. 2002–30, 2002–11 I.R.B.632
REG–119436–01
Corrected by
Ann. 2002–30, 2002–11 I.R.B.632
REG–120135–01
Corrected by
Ann. 2002–30, 2002–11 I.R.B.632
REG–125450–01
Corrected by
Ann. 2002–30, 2002–11 I.R.B.632
REG–125626–01
Corrected by
Ann. 2002–30, 2002–11 I.R.B.632
REG–126485–01
Corrected by
Ann. 2002–30, 2002–11 I.R.B.632
REG–137519–01
Corrected by
Ann. 2002–30, 2002–11 I.R.B.632
REG–142299–01
Corrected by
Ann. 2002–15, 2002–7 I.R.B.540
Ann. 2002–30, 2002–11 I.R.B.632
REG–142686–01
Corrected by
Ann. 2002–30, 2002–11 I.R.B.632
REG–159079–01
Corrected by
Ann. 2002–30, 2002–11 I.R.B.632
Revenue Procedures:
74–33
Superseded by
Rev. Proc. 2002–39, 2002–22 I.R.B.1046
84–37
Modified by
Rev. Proc. 2002–1, 2002–1 I.R.B.1
84–57
Obsoleted by
T.D. 8976, 2002–5 I.R.B.421
85–16
Superseded by
Rev. Proc. 2002–39, 2002–22 I.R.B.1046
87–32
Clarified, modified, amplified, and superseded by
Rev. Proc. 2002–38, 2002–22 I.R.B.1037
87–50
Modified by
Rev. Proc. 2002–10, 2002–4 I.R.B.401
89–45
Superseded by
Rev. Proc. 2002–23, 2002–15 I.R.B.744
91–71
Clarified and superseded by
Rev. Proc. 2002–32, 2002–20 I.R.B.959
96–13
Modified by
Rev. Proc. 2002–1, 2002–1 I.R.B.1
97–27
Modified and amplified by
Rev. Proc. 2002–19, 2002–13 I.R.B.696
98–23
Superseded by
T.D. 8994, 2002–23 I.R.B.1078
98–49
Obsoleted by
T.D. 8976, 2002–5 I.R.B.421
99–49
Modified and superseded by
Rev. Proc. 2002–9, 2002–3 I.R.B.327
2000–11
Modified, amplified, and superseded by
Rev. Proc. 2002–37, 2002–22 I.R.B.1030
2000–20
Modified by
Rev. Proc. 2002–6, 2002–1 I.R.B.203
2000–46
Superseded by
Rev. Proc. 2002–22, 2002–14 I.R.B.733
2
A cumulative list of current actions on previously published
items in Internal Revenue Bulletins 2001–27 through 2001–53 is
in Internal Revenue Bulletin 2002–1, dated January 7, 2002.
June 17, 2002iv2002–24 I.R.B.

Revenue Procedures:—Continued
2001–1
Superseded by
Rev. Proc. 2002–1, 2002–1 I.R.B.1
2001–2
Superseded by
Rev. Proc. 2002–2, 2002–1 I.R.B.82
2001–3
Superseded by
Rev. Proc. 2002–3, 2002–1 I.R.B.117
2001–4
Superseded by
Rev. Proc. 2002–4, 2002–1 I.R.B.127
2001–5
Superseded by
Rev. Proc. 2002–5, 2002–1 I.R.B.173
2001–6
Superseded by
Rev. Proc. 2002–6, 2002–1 I.R.B.203
2001–7
Superseded by
Rev. Proc. 2002–7, 2002–1 I.R.B.249
2001–8
Superseded by
Rev. Proc. 2002–8, 2002–1 I.R.B.252
2001–13
Corrected by
Ann. 2002–5, 2002–4 I.R.B.420
2001–16
Modified by
Ann. 2002–26, 2002–11 I.R.B.629
2001–27
Supplemented by
Rev. Proc. 2002–20, 2002–14 I.R.B.732
2001–35
Obsoleted, except as provided in section 5.02 by
Rev. Proc. 2002–24, 2002–17 I.R.B.798
2001–36
Superseded by
Rev. Proc. 2002–3, 2002–1 I.R.B.117
2001–41
Superseded by
Rev. Proc. 2002–2, 2002–1 I.R.B.82
2001–51
Superseded by
Rev. Proc. 2002–3, 2002–1 I.R.B.117
2002–3
Modified by
Rev. Proc. 2002–22, 2002–14 I.R.B.733
2002–6
Modified by
Notice 2002–1, 2002–2 I.R.B.283
Rev. Proc. 2002–21, 2002–19 I.R.B.911
2002–8
Modified by
Notice 2002–1, 2002–2 I.R.B.283
Revenue Procedures:—Continued
2002–9
Modified and clarified by
Ann. 2002–17, 2002–8 I.R.B.561
Modified and amplified by
Rev. Rul. 2002–9, 2002–10 I.R.B.614
Rev. Proc. 2002–17, 2002–13 I.R.B.676
Rev. Proc. 2002–19, 2002–13 I.R.B.696
Rev. Proc. 2002–27, 2002–17 I.R.B.802
Rev. Proc. 2002–28, 2002–18 I.R.B.815
Rev. Proc. 2002–33, 2002–20 I.R.B.963
Rev. Proc. 2002–36, 2002–21 I.R.B.993
2002–10
Modified by
Ann. 2002–49, 2002–19 I.R.B.919
Revenue Rulings:
55–261
Distinguished by
Rev. Rul. 2002–19, 2002–16 I.R.B.778
55–747
Revoked by
Notice 2002–8, 2002–4 I.R.B.398
61–146
Distinguished by
Rev. Rul. 2002–3, 2002–3 I.R.B.316
64–328
Modified by
Notice 2002–8, 2002–4 I.R.B.398
66–110
Modified by
Notice 2002–8, 2002–4 I.R.B.398
68–624
Revoked by
Rev. Rul. 2002–35, 2002–23 I.R.B.1067
73–304
Superseded by
Rev. Proc. 2002–26, 2002–15 I.R.B.746
73–305
Superseded by
Rev. Proc. 2002–26, 2002–15 I.R.B.746
76–270
Amplified and superseded by
Rev. Rul. 2002–20, 2002–17 I.R.B.794
79–151
Distinguished by
Rev. Rul. 2002–19, 2002–16 I.R.B.778
79–284
Superseded by
Rev. Proc. 2002–26, 2002–15 I.R.B.746
80–218
Superseded by
Rev. Rul. 2002–23, 2002–18 I.R.B.811
87–112
Clarified by
Rev. Rul. 2002–22, 2002–19 I.R.B.849
Revenue Rulings:—Continued
89–29
Obsoleted by
T.D. 8976, 2002–5 I.R.B.421
92–19
Supplemented in part by
Rev. Rul. 2002–12, 2002–11 I.R.B.624
2002–7
Corrected by
Ann. 2002–13, 2002–7 I.R.B.540
Treasury Decisions:
8971
Corrected by
Ann. 2002–20, 2002–8 I.R.B.561
8972
Corrected by
Ann. 2002–23, 2002–8 I.R.B.563
8973
Corrected by
Ann. 2002–14, 2002–7 I.R.B.540
8975
Corrected by
Ann. 2002–21, 2002–8 I.R.B.562
8976
Corrected by
Ann. 2002–21, 2002–8 I.R.B.562
8978
Corrected by
Ann. 2002–39, 2002–14 I.R.B.738
8985
Corrected by
Ann. 2002–55, 2002–23 I.R.B.1125
2002–24 I.R.B.vJune 17, 2002