Internal Revenue Bulletin 2011-48 (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.

Bulletin No. 201
1-48
November 28, 201
1
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. 2011–26, page 803.
Geographical areas included in North American area.
This ruling contains an updated list of all geographical areas
included in the North American area for purposes of section
274 of the Code. Rev. Rul. 2007–28 superseded.
Rev. Rul. 2011–27, page 805.
Section 1274A – inflation adjusted numbers for 2012.
This ruling provides the dollar amounts, increased by the 2012
inflation adjustment, for section 1274A of the Code. Rev. Rul.
2010–30 supplemented and superseded.
REG–146537–06, page 813.
Proposed regulations under section 892 of the Code relate to
the taxation of certain investment income earned by foreign
governments in the United States.
REG–114749–09, page 819.
Proposed regulations under section 964 of the Code clarify and
add examples illustrating the application of final regulations re-
lating to the procedures for U.S. shareholders of foreign cor-
porations to make tax accounting elections on behalf of the
foreign corporations for purposes of computing the foreign cor-
poration’s earnings and profits for U.S. tax purposes. The reg-
ulations also update the rules relating to required book-to-tax
adjustments in respect of depreciation and amortization and
contain a rule related to mandated changes in methods of ac-
counting in connection with an audit or audits of a foreign cor-
poration’s controlling domestic shareholders.
Announcement 2011–73, page 822.
This announcement notifies taxpayers that the Service has with-
drawn Weld Rite, Inc.’s right to certify its hydronic outdoor
wood-burning furnaces. Therefore, this announcement also no-
tifies taxpayers that they may no longer rely on Weld Rite, Inc.’s
certification statement to claim a section 25C credit for the fur-
naces.
Announcement 2011–75, page 823.
This document contains a withdrawal of proposed regulations
(REG–158677–05, 2007–1 C.B. 975) clarifying that if a bank
is an S corporation within the meaning of section 1361(a)(1)
of the Code, its status as an S corporation does not affect the
applicability of the special rules for banks under the Internal
Revenue Code.
EMPLOYEE PLANS
Notice 2011–93, page 810.
Weighted average interest rate update; corporate bond
indices; 30-year Treasury securities; segment rates.
This notice contains updates for the corporate bond weighted
average interest rate for plan years beginning in November
2011; the 24-month average segment rates; the funding
transitional segment rates applicable for November 2011;
and the minimum present value transitional rates for October
2011. In addition, the Service requests comments on whether
these monthly interest rate notices should continue to provide
theCompositeCorporateBondRateandtheCorporateBond
Weighted Average in 2012.
(Continued on the next page)
Fi
nding Lists begin on page ii.
Index for July through November begins on page v.

EMPLOYMENT TAX
T.D. 9553, page 806.
Final regulations under section 7701 of the Code clarify that a
single-owner eligible entity that is generally disregarded as an
entity separate from its owner for any purpose, but regarded
as a separate entity for certain excise tax purposes, is treated
as a corporation for those excise tax purposes. The regula-
tions also make conforming changes to the tax liability rule for
disregarded entities and the treatment of entity rule for disre-
garded entities with respect to employment taxes. The regu-
lations affect disregarded entities in general and, in particular,
disregarded entities that pay or pay over certain federal excise
taxes or that are required to be registered by the IRS.
EXCISE TAX
T.D. 9553, page 806.
Final regulations under section 7701 of the Code clarify that a
single-owner eligible entity that is generally disregarded as an
entity separate from its owner for any purpose, but regarded
as a separate entity for certain excise tax purposes, is treated
as a corporation for those excise tax purposes. The regula-
tions also make conforming changes to the tax liability rule for
disregarded entities and the treatment of entity rule for disre-
garded entities with respect to employment taxes. The regu-
lations affect disregarded entities in general and, in particular,
disregarded entities that pay or pay over certain federal excise
taxes or that are required to be registered by the IRS.
Notice 2011–92, page 809.
This notice provides guidance on the branded prescription drug
fee for the 2012 fee year related to (1) the submission of Form
8947,“Report of Branded Prescription Drug Information”,(2)
the time and manner for notifying covered entities of the pre-
liminary fee calculation, (3) the time and manner for submitting
error reports for the dispute resolution process, and (4) the
time for notifying covered entities of their final fee calculation.
Rev. Proc. 2011–24 obsoleted.
TAX CONVENTIONS
Rev. Rul. 2011–26, page 803.
Geographical areas included in North American area.
This ruling contains an updated list of all geographical areas
included in the North American area for purposes of section
274 of the Code. Rev. Rul. 2007–28 superseded.
ADMINISTRATIVE
T.D. 9553, page 806.
Final regulations under section 7701 of the Code clarify that a
single-owner eligible entity that is generally disregarded as an
entity separate from its owner for any purpose, but regarded
as a separate entity for certain excise tax purposes, is treated
as a corporation for those excise tax purposes. The regula-
tions also make conforming changes to the tax liability rule for
disregarded entities and the treatment of entity rule for disre-
garded entities with respect to employment taxes. The regu-
lations affect disregarded entities in general and, in particular,
disregarded entities that pay or pay over certain federal excise
taxes or that are required to be registered by the IRS.
Announcement 2011–75, page 823.
This document contains a withdrawal of proposed regulations
(REG–158677–05, 2007–1 C.B. 975) clarifying that if a bank
is an S corporation within the meaning of section 1361(a)(1)
of the Code, its status as an S corporation does not affect the
applicability of the special rules for banks under the Internal
Revenue Code.
November 28, 20112011–48 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top-quality service by helping
them understa
nd and meet their tax responsibilities and en-
force the law wi
th 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 compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying 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.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al 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, Leg-
islation 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 par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last 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 last Bulletin of each semiannual period.
The c
ontents 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.
2011–48 I.R.B.November 28, 2011

November 28, 20112011–48 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 274.—
Disallowance
of Certain Ent
ertainment,
Etc., Expenses
26 CFR 1.274–1: Disallowance of certain entertain-
ment, etc., expenses.
Geographical areas included in
North American area.This ruling con-
tains an updated list of all geographical
areas included in the North American area
for purposes of section 274 of the Code.
Rev. Rul. 2007–28 superseded.
Rev. Rul. 2011–26
ISSUE
Section 274(h) of the Internal Revenue
Code (the “Code”) limits deductions for
expenses incurred in connection with a
convention, seminar, or similar meeting
(collectively, a “convention”) held outside
the “North American area.” This revenue
ruling contains an updated list of all ge-
ographical areas currently included in the
North American area for purposes of sec-
tion 274(h).
LAW AND ANALYSIS
Section 274(h) disallows deductions
under section 162 for expenses allocable
to attendance of an individual at a con-
vention held outside the North American
area unless the taxpayer demonstrates that
the location of the convention satisfies
specified standards of reasonableness.
A geographical area may be included
in the North American area for purposes
of section 274(h) under one of the four
provisions described below.
Section 274(h)(3)(A)
Sect
ion 274(h)(3)(A) defines the term
“Nor
th American area” as the United
Stat
es, its possessions, the Trust Territory
of th
e Pacific Islands, Canada, and Mex-
ico
. Under section 7701(a)(9), the United
Sta
tesconsistsofthefiftystatesandthe
Dis
trict of Columbia. The Internal Rev-
enu
e Service treats the following as the
pos
sessions of the United States for this
pu
rpose: American Samoa, Baker Island,
the Commonwea
lthofPuertoRico,the
Commonwealth
of the Northern Mariana
Islands, Guam
, Howland Island, Jarvis
Island, John
ston Island, Kingman Reef,
the Midway Is
lands, Palmyra Atoll, the
United State
s Virgin Islands, Wake Island,
and other Uni
ted States islands, cays, and
reefs not pa
rt of the fifty states or the Dis-
trict of Col
umbia. The jurisdictions that
formerly co
nstituted the Trust Territory of
the Pacific
Islands — the Republic of the
Marshall Is
lands, the Federated States of
Micronesi
a, and the Republic of Palau —
are now cov
ered by the compacts with the
United Sta
tes described below.
The Compact of Free Association Act of
1985
The Compact of Free Association
Act of 1985, Pub. L. No. 99–239,
99 Stat. 1770 (1986), went into effect
on October 21, 1986, with respect to
the Republic of the Marshall Islands,
and on November 3, 1986, with respect
to the Federated States of Micronesia.
Section 405 of Title IV of the Compact
provides that, for purposes of section
274(h)(3)(A) of the Code, the Republic
of the Marshall Islands and the Federated
States of Micronesia are included in the
North American area.
The Com
pact of Free Association Between
the Uni
ted States and the Republic of
Palau
The Compact of Free Association be-
tween the United States and the Repub-
lic of Palau, Pub. L. No. 99–658, 100
Stat. 3672 (1986), went into effect on
October 1, 1994. Section 225(d) of Title II
of the Compact with Palau provides that,
forpurposesofsection274(h)(3)(A)of
the Code, Palau is included in the North
American area.
Section 274(h)(6)
Sect
ion 274(h)(6)(A) provides that the
term
“North American area” includes any
“ben
eficiary country” if, as of the time
acon
vention begins: (i) there is in ef-
fec
t an agreement described in section
274(h)(6)(C)
providing for the exchange
of informatio
n between the United States
and the benefi
ciary country; and (ii) there
is not in effe
ct a finding by the Secretary
of the Treasu
ry that the tax laws of the
beneficiary
country discriminate against
conventions
held in the United States.
Section 274(
h)(6)(B) defines the term
“beneficiar
y country” as a beneficiary
country as d
efined in section 212(a)(1)(A)
of the Carib
bean Basin Economic Re-
covery Act,
Pub. L. No. 98–67, 97 Stat.
384 (1983),
and Bermuda. Under section
274(h)(6)
(C)(i), to constitute an agree-
ment that p
rovides for the exchange of
informati
on between the United States
and a benef
iciary country, an agreement
generally
must provide for the exchange
of such in
formation (not limited to infor-
mation co
ncerning nationals or residents
of the Uni
ted States or the beneficiary
country)
as may be necessary or appropri-
ate to car
ry out and enforce the tax laws
of the Un
ited States and the beneficiary
country
(whether criminal or civil pro-
ceeding
s), including information which
may othe
rwise be subject to nondisclo-
sure pr
ovisions of the local law of the
benefi
ciary country such as provisions
respec
ting bank secrecy and bearer shares.
Where a
n exchange of information
agreem
ent between a beneficiary country
and the
United States does not qualify
as an ag
reement described in section
274(h
)(6)(C)(i) or is not in effect within
the me
aning of section 274(h)(6)(A)(i),
the be
neficiary country is not included as
part o
f the North American area under
secti
on 274(h)(6) for purposes of deter-
mini
ng whether deductions are allowed
for e
xpenses incurred in connection with
acon
vention.
Rev.
Rul. 2007–28, 2007–1 C.B. 1039,
iden
tified each of the following jurisdic-
tion
s as a beneficiary country for which
ther
e was in effect an agreement with
the U
nited States as described in section
274
(h)(6)(C)(i) and for which there was
not
in effect a finding by the Secretary
of t
he Treasury that the tax laws of the
ben
eficiary country discriminate against
con
ventions held in the United States:
An
tigua and Barbuda, Aruba, Bahamas,
2011–48 I.R.B.803November 28, 2011

Barbados, Bermuda, Costa Rica, Do-
minica, Dominican Republic, Grenada,
Guyana, Honduras, Jamaica, Netherlands
Antilles, and Trinidad and Tobago.
Since publication of Rev.Rul.
2007–28, the “Agreement Between the
Government of the United States of
America and the Republic of Panama
for Tax Cooperation and the Ex-
change of Information with Respect to
Taxes” entered into force on April 18,
2011.SeeTreas. News Release at
http://www.treasury.gov/press-center/
press-releases/Pages/tg1144.aspx
(April 18, 2011). This new agreement
qualifies as an agreement described in
section 274(h)(6)(C)(i). Panama is a
beneficiary country, and no finding is in
effect by the Secretary of the Treasury
that the tax laws of Panama discriminate
against conventions held in the United
States. Therefore, Panama is included
within the North American area under
section 274(h)(6) as of April 18, 2011.
Three other beneficiary countries — the
Cayman Islands, the British Virgin Islands,
and Saint Lucia — have entered into tax
information exchange agreements with the
United States that are not of the type de-
scribed in section 274(h)(6)(C)(i) because
of certain limitations in the scope or imple-
mentation of those agreements. Accord-
ingly, these three beneficiary countries are
not included as part of the North American
area under section 274(h)(6). In the case
of Saint Lucia, certain transition relief has
been provided, as reflected in the Holding
below.
HOLDING
For purposes of determining whether
deductions are allowed for expenses in-
curred in connection with a convention, the
following areas are included in the North
American area as of the effective date of
section 274(h) except as otherwise indi-
cated:
1. The fifty states of the United States and the District of Columbia;
2. The possessions of the United States, which for this purpose are American Samoa, Baker Island, the Commonwealth of
Puerto Rico, the Commonwealth of the Northern Mariana Islands, Guam, Howland Island, Jarvis Island, Johnston Island,
Kingman Reef, the Midway Islands, Palmyra Atoll, the UnitedStates Virgin Islands, Wake Island, and other United States
islands, cays, and reefs not part of the fifty states or the District of Columbia;
3. Canada;
4. Mexico;
5.
The Republic of the Marshall Islands;
6. The Federated States of Micronesia;
7. The Republic of Palau;
Forexpensesincurredinattendingaconventionthatbegan
after:
8. Antigua and BarbudaFebruary 9, 2003
9. ArubaSeptember 12, 2004
10. Bahamas
December 31, 2005
11. BarbadosNovember 2, 1984
12. BermudaDecember 1, 1988
13. Costa RicaFebruary 11, 1991
14. DominicaMay 8, 1988
15.
Dominican RepublicOctober 11, 1989
16. GrenadaJuly 12, 1987
17. GuyanaAugust 26, 1992
18. HondurasOctober 9, 1991
19. JamaicaDecember 17, 1986
20. Netherlands AntillesMarch 21, 2007
21. PanamaApril 18, 2011
22. Trinidad and TobagoFebruary 8, 1990
The Internal Revenue Service will con-
tinue to treat Saint Lucia as not included
in the North American area under section
274(h)(6) with respect to conventions that
begin after April 4, 2007, except with re-
spect to expenses for which the taxpayer
demonstrates a nonrefundable contractual
obligation existing as of April 4, 2007.
November 28, 20118042011–48 I.R.B.

This revenue ruling will be updated as
future developments result in the inclusion
of other areas in, or the exclusion of areas
from, the North American area.
EFFECT ON OTHER DOCUMENTS
Rev. Rul. 2007–28 is superseded.
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Terra-Lynn Zentara of the Office of
Associate Chief Counsel (International),
Branch 7. For furtherinformation regard-
ing this revenue ruling, contact the princi-
pal author at (202) 435–5262 (not a toll-
free call).
Section 483.—Interest on
Certain Deferred Payments
This ruling provides the dollar amounts, increased
by the 2012 inflation adjustment, for section 1274A
of the Code. Rev. Rul. 2010-30 supplemented and
superseded. See Rev. Rul. 2011-27, page 805.
Section 1274.—Determi-
nation of Issue Price in the
Case of Certain Debt Instru-
ments Issued for Property
This ruling provides the dollar amounts, increased
by the 2012 inflation adjustment, for section 1274A
of the Code. Rev. Rul. 2010-30 supplemented and
superseded. See Rev. Rul. 2011-27, page 805.
Section 1274A.—Special
Rules for Certain
Transactions Where Stated
Principal Amount Does Not
Exceed $2,800,000
26 CFR 1.1274A–1: Special rules for certain trans-
actions where stated principal amount does not ex-
ceed $2,800,000.
(Also§§483,1274.)
Section 1274A – inflation adjusted
numbers for 2012.This ruling provides
the dollar amounts, increased by the 2012
inflation adjustment, for section 1274A
of the Code. Rev. Rul. 2010–30 supple-
mented and superseded.
Rev. Rul. 2011–27
This revenue ruling provides the dollar
amounts, increased by the 2012 inflation
adjustment, for § 1274A of the Internal
Revenue Code.
BACKGROUND
In general, §§ 483 and 1274 determine
the principal amount of a debt instrument
given in consideration for the sale or ex-
change of nonpublicly traded property. In
addition, any interest on a debt instrument
subject to § 1274 is taken into account un-
der the original issue discount provisions
of the Code. Section 1274A, however,
modifies the rules under §§ 483 and 1274
for certain types of debt instruments.
In the case of a “qualified debt instru-
ment,” the discount rate used for purposes
of §§ 483 and 1274 may not exceed nine
percent, compounded semiannually. Sec-
tion 1274A(b) defines a qualified debt in-
strument as any debt instrument given in
consideration for the sale or exchange of
property (other than new § 38 property
within the meaning of § 48(b), as in effect
on the day before the date of enactment of
the Revenue Reconciliation Act of 1990)
if the stated principal amount of the instru-
ment does not exceed the amount specified
in § 1274A(b). For debt instruments aris-
ing out of sales or exchanges before Jan-
uary 1, 1990, this amount is $2,800,000.
In the case of a “cash method debt in-
strument,” as defined in § 1274A(c), the
borrower and lender may elect to use the
cash receipts and disbursements method
of accounting. In particular, for any cash
method debt instrument, § 1274 does not
apply, and interest on the instrument is ac-
counted for by both the borrower and the
lender under the cash method of account-
ing. A cash method debt instrument is
a qualified debt instrument that meets the
following additional requirements: (A) In
the case of instruments arising out of sales
or exchanges before January 1, 1990, the
stated principal amount does not exceed
$2,000,000; (B) the lender does not use an
accrual method of accounting and is not a
dealer with respect tothe property sold or
exchanged; (C) § 1274 would have applied
to the debt instrument but for an election
under § 1274A(c); and (D) an election un-
der § 1274A(c) is jointly made with respect
to the debt instrument by the borrower and
the lender. Section 1.1274A–1(c)(1) of
the Income Tax Regulations provides rules
concerning the time for, and manner of,
making this election.
Section 1274A(d)(2) provides that, for
any debt instrument arising out of a sale
or exchange during any calendar year
after 1989, the dollar amounts stated in
§ 1274A(b) and § 1274A(c)(2)(A) are
increased by the inflation adjustment for
the calendar year. Any increase due to
the inflation adjustment is rounded to the
nearest multiple of $100 (or, if the increase
is a multiple of $50 and not of $100, the
increase is increased to the nearest mul-
tiple of $100). The inflation adjustment
for any calendar year is the percentage (if
any) by which the CPI for the preceding
calendar year exceeds the CPI for calendar
year 1988. Section 1274A(d)(2)(B) de-
fines the CPI for any calendar year as the
average of the Consumer Price Index as of
the close of the 12-month period ending
on September 30 of that calendar year.
INFLATION-ADJUSTED AMOUNTS
UNDER § 1274A
For debt instruments arising out of sales
or exchanges after December 31, 1989, the
inflation-adjusted amounts under § 1274A
areshowninTable1.
2011–48 I.R.B.805November 28, 2011

Rev. Rul. 2011–27 Table 1
Inflation-Adjusted Amounts Under Section 1274A
Calendar Year
of Sale
or Exchange
1274A(b) Amount
(qualified debt
instrument)
1274A(c)(2)(A) Amount
(cash method debt
instrument)
1990
$2,933,200$2,095,100
1991
$3,079,600$2,199,700
1992
$3,234,900$2,310,600
1993
$3,332,400$2,380,300
1994
$3,433,500$2,452,500
1995
$3,523,600$2,516,900
1996
$3,622,500$2,587,500
1997
$3,723,800$2,659,900
1998
$3,823,100$2,730,800
1999
$3,885,500$2,775,400
2000
$3,960,100$2,828,700
2001
$4,085,900$2,918,500
2002
$4,217,500$3,012,500
2003
$4,280,800$3,057,700
2004
$4,381,300$3,129,500
2005
$4,483,000$3,202,100
2006
$4,630,300$3,307,400
2007
$4,800,800$3,429,100
2008
$4,913,400$3,509,600
2009
$5,131,700$3,665,500
2010
$5,115,100$3,653,600
2011
$5,201,300$3,715,200
2012
$5,339,300$3,813,800
Note: These inflation adjustments were computed using the All-Urban, Consumer Price Index, 1982–1984 base, published
by the Bureau of Labor Statistics.
EFFECT ON OTHER DOCUMENTS
Rev. Rul. 2010–30, 2010–50 I.R.B.
820, is supplemented and superseded.
DRAFTING INFORMATION
The author of this revenue ruling is
Andrea M. Hoffenson of the Office of
the Associate Chief Counsel (Financial
Institutions and Products). For further
information regarding this revenue ruling,
please contact Ms. Hoffenson at (202)
622–3920 (not a toll-free call).
Section 7701.—Definitions
26 CFR 301.7701–2: Business entities; definitions.
T.D. 9553
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 301
Disregarded Entities; Excise
Taxes and Employment Taxes
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains fi-
nal regulations relating to disregarded en-
tities and excise taxes. These regulations
also make conforming changes to the tax
liability rule for disregarded entities and
the treatment of entity rule for disregarded
entities with respect to employment taxes.
These regulations affect disregarded en-
tities in general and, in particular, disre-
garded entities that pay or pay over certain
federal excise taxes or that are required to
be registered by the IRS.
DATES:Effective Date:These regulations
are effective on October 26, 2011.
Applicability Date:For dates of
applicability, see §§301.7701–2(e)(2),
301.7701–2(e)(5), and 301.7701–2(e)(6).
FOR FURTHER INFORMATION
CONTACT: Michael H. Beker, (202)
622–3070 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to
the Procedure and Administration Regula-
tions (26 CFR part 301) under section 7701
of the Internal Revenue Code (Code).
Temporary regulations (T.D. 9462,
2009–42 I.R.B. 504 [74 FR 46903])
and a cross-reference notice of proposed
November 28, 20118062011–48 I.R.B.

rulemaking (REG–116614–08, 2009–42
I.R.B. 536 [74 FR 46957]) were published
in theFederal Registeron September 14,
2009 (the 2009 proposed regulations).
On October 14, 2009, corrections to the
temporary regulations (74 FR 52677) and
to the cross-reference notice of proposed
rulemaking (74 FR 52708) were published
in theFederal Register.
The 2009 proposed regulations clar-
ify that a single-owner eligible entity
that is disregarded as an entity separate
from its owner for any purpose under
§301.7701–2, but regarded as an entity
for certain excise tax purposes under
§301.7701–2(c)(2)(v), is treated as a cor-
poration with respect to those excise
taxes. In addition, the 2009 proposed
regulations make conforming changes to
the tax liability rule for disregarded en-
tities in §301.7701–2(c)(2)(iii) and the
treatment of entity rule for disregarded
entities with respect to employment taxes
in §301.7701–2(c)(2)(iv)(B).
No public hearing was requested or
held. One written comment was received.
After consideration of the comment, the
proposed regulations are adopted by this
Treasury decision and the temporary reg-
ulations are removed.
Summary of the Comment and
Explanation of Provisions
A.Air transportation excise tax
The commenter asked whether an
amount paid to a single-member limited
liability company (SMLLC) by its owner
for air transportation provided to its owner
will be deemed to be paid to a separate cor-
poration and therefore subject to federal
transportation excise taxes under section
4261.
On August 16, 2007, final regulations
under §301.7701–2(c)(2)(v)(A) were pub-
lished in theFederal Register(T.D. 9356,
2007–2 C.B. 675 [72 FR 45891]) (the 2007
final regulations). The 2007 final regula-
tions provide that a single-owner eligible
entity that is disregarded as an entity sep-
arate from its owner for Federal tax pur-
poses is treated as a separate entity for cer-
tain excise tax purposes, including Federal
tax liabilities imposed by Chapter 33 of the
Code. Under this rule, amounts paid af-
ter December 31, 2007, to an SMLLC by
its owner for air transportation are subject
to the tax imposed by section 4261. The
commenter suggested that the rule in the
2007 final regulationscreated a tax liabil-
ity where one did not exist before.
Prior to the adoption of the
§301.7701–2 regulations in 1997, amounts
paid from one state law entity to another
for air transportation were potentially
subject to the section 4261 tax, regardless
of the relationship between the entities.
See for example, Rev. Ruls. 76–394,
1976–2 C.B. 355, and 70–325, 1970–1
C.B. 231, which involve transportation
between related corporations and between
corporations and their shareholders.
Because there are separate and distinct
entities in each case, these rulings hold
that payments made from one entity to
another for taxable air transportation
are “amounts paid” for purposes of the
section 4261 tax. While section 4282
provides a limited exception in the case of
air transportation excise taxes for certain
affiliated groups that do not offer air
transportation services to non-affiliated
members, no exception had been provided
prior to 1997 for other situations.
The adoption of the §301.7701–2 reg-
ulations in 1997 departed from this long-
standing precedent by making those previ-
ously taxable transactions no longer sub-
ject to excise tax when the owner of an
eligible entity elected to be a disregarded
entity. The 2007 regulations merely re-
stored the long-standing and reasonable
pre–1997 rule. Accordingly, the final reg-
ulations retain the rule that excise taxes
imposed on amounts paid for covered ser-
vices (such as air transportation) apply to
amounts paid between state law entities for
such services (unless astatutory exception
applies).
B.Indoor tanning services excise tax
After the 2009 proposed regulations
were published, section 10907 of the
Patient Protection and Affordable Care
Act, Public Law 111–148 (124 Stat. 119
(2010)) added new Chapter 49 to the Code,
which contains an excise tax on amounts
paid for indoor tanning services under
new section 5000B. The IRS and Treasury
Department are aware of issues relating
to the treatment of qualified subchapter
S subsidiaries and single-owner eligible
entities that are disregarded as entities
separate from their owners with respect
to tax liabilities imposed by Chapter 49
of the Code. The issues are similar to
those addressed in §301.7701–2(c)(2)(v).
Accordingly, the IRS and the Treasury
Department plan to issue regulations ad-
dressing the treatment of those entities
with respect to tax liabilities imposed by
Chapter 49 of the Code.
C.Firearms excise tax and harbor
maintenance tax
The rules in the final regulations do not
apply to the firearms excise tax adminis-
tered by the Alcohol and Tobacco Tax and
Trade Bureau (TTB) and the harbor main-
tenance tax administered by U.S. Customs
and Border Protection (Customs). Rules
in 26 CFR part 301 generally do not ap-
ply for purposes of these taxes and taxpay-
ers should not assume that a single owner
entity will be disregarded under applicable
TTB or Customs rules.
Availability of IRS documents
The IRS revenue rulings cited in this
preamble are published in the Internal
Revenue Cumulative Bulletin and are
available from the Superintendent of Doc-
uments, P.O. Box 371954, Pittsburgh PA,
15250–7954.
Special Analyses
It has been determined that this Trea-
sury decision is not asignificant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It has also been deter-
mined that section 553(b) of the Admin-
istrative Procedure Act (5 U.S.C. chapter
5) does not apply to these regulations, and,
because the regulations do not impose a
collection of information on small entities,
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to sec-
tion 7805(f) of the Code, the proposed reg-
ulations preceding these regulations were
submitted to the Chief Counsel for Advo-
cacy of the Small Business Administration
for comment on its impact on small busi-
ness.
Drafting Information
The principal author of these regula-
tions is Michael H. Beker, Office of the
Associate Chief Counsel (Passthroughs
2011–48 I.R.B.807November 28, 2011

and Special Industries). However, other
personnel from the IRS and the Treasury
Department participated in their develop-
ment.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 301 is
amended as follows:
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation for
part 301 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805. * * *
Par. 2. Section 301.7701–2 is amended
by:
1. Revising paragraphs (c)(2)(iii),
(c)(2)(iv)(B), (c)(2)(v)(B), (c)(2)(v)(C)
Example(iv), (e)(2), and (e)(6).
2. Adding two sentences at the end of
paragraph (e)(5).
The additions and revisions read as fol-
lows:
§301.7701–2 Business entities;
definitions.
*****
(c) * * *
(2) * * *
(iii)Tax liabilities of certain disre-
garded entities—(A)In general.Anentity
that is disregarded as separate from its
owner for any purpose under this section
is treated as an entity separate from its
owner for purposes of—
(1) Federal tax liabilities of the entity
with respect to any taxable period for
which the entity was not disregarded;
(2) Federal tax liabilities of any other
entity for which the entity is liable; and
(3) Refunds or credits of Federal tax.
(B)Examples. The following exam-
ples illustrate the application of paragraph
(c)(2)(iii)(A) of this section:
Example 1. In 2006, X, a domestic corporation
that reports its taxes on a calendar year basis, merges
into Z, a domestic LLC wholly owned by Y that is
disregarded as an entity separate from Y, in a state
law merger. X was not a member of a consolidated
group at any time during its taxable year ending in
December 2005. Under the applicable state law, Z is
the successor to X and is liable for all of X’s debts.
In 2009, the Internal Revenue Service (IRS) seeks to
extend the period of limitations on assessment for X’s
2005 taxable year. Because Z is the successor to X
and is liable for X’s 2005 taxes that remain unpaid, Z
is the proper party to sign the consent to extend the
period of limitations.
Example 2. The facts are the same as inExample
1, except that in 2007, the IRS determines that X mis-
calculated and underreported its income tax liability
for 2005. Because Z is the successor to X and is liable
for X’s 2005 taxes that remain unpaid, the deficiency
may be assessed against Z and, in the event that Z fails
to pay the liability after notice and demand, a general
tax lien will arise against all of Z’s property and rights
to property.
(iv) * * *
(B)Treatment of entity.Anentitythat
is disregarded as an entity separate from its
owner for any purpose under this section
is treated as a corporation with respect to
taxes imposed under Subtitle C—Employ-
ment Taxes and Collection of Income Tax
(Chapters 21, 22, 23, 23A, 24, and 25 of
the Internal Revenue Code).
*****
(v) * * *
(B)Treatment of entity.Anentitythat
is disregarded as an entity separate from its
owner for any purpose under this section
is treated as a corporation with respect to
items described in paragraph (c)(2)(v)(A)
of this section.
(C)***
Example.***
(iv) Assume the same facts as in paragraph
(c)(2)(v)(C)Example(i) and (ii) of this section. If
LLCB does not pay the tax on its sale of coal under
chapter 32 of the Internal Revenue Code, any notice
of lien the Internal Revenue Service files will be filed
as if LLCB were a corporation.
*****
(e) * * *
(2) Paragraph (c)(2)(iii) of this section
applies on and after September 14, 2009.
For rules that apply before September 14,
2009, see 26 CFR part 301, revised as of
April 1, 2009.
*****
(5) * * * However, paragraph
(c)(2)(iv)(B) of this section applies with
respect to wages paid on or after Septem-
ber 14, 2009. For rules that apply before
September 14, 2009, see 26 CFR part 301
revised as of April 1, 2009.
(6)(i) Except as provided in this para-
graph (e)(6), paragraph (c)(2)(v) of this
section applies to liabilities imposed and
actions first required or permitted in peri-
ods beginning on or after January 1, 2008.
(ii) Paragraphs (c)(2)(v)(B) and
(c)(2)(v)(C)Example(iv) of this section
apply on and after September 14, 2009.
*****
§301.7701–2T [Removed]
Par. 5. Section 301.7701–2T is re-
moved.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved October 18, 2011.
Emily S. McMahon,
Acting Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on October 25,
2011, 8:45 a.m., and published in the issue of the Federal
Register for October 26, 2011, 76 F.R. 66181)
November 28, 20118082011–48 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Branded Prescription Drug
Fee; Guidance for the 2012
Fee Year
Notice 2011–92
Purpose
This notice provides guidance on the
branded prescription drug fee for the 2012
fee year related to (1) the submission of
Form 8947, “Report of Branded Prescrip-
tion Drug Information,”(2) the time and
manner for notifying covered entities of
their preliminary fee calculation, (3) the
time and manner for submitting error re-
ports for the dispute resolution process,
and (4) the time for notifying covered en-
tities of their final fee calculation.
Background
An annual fee on covered entities en-
gaged in the business of manufacturing
or importing branded prescription drugs
is imposed by section 9008 of the Patient
Protection and Affordable Care Act, Pub-
lic Law 111–148 (124 Stat. 119 (2010)),
as amended by section 1404 of the Health
Care and Education Reconciliation Act of
2010, Public Law 111–152 (124 Stat. 1029
(2010)).
The Branded Prescription Drug Fee
Regulations in 26 C.F.R. Part 51, which
were published on August 18, 2011 (76 FR
51245), provide the method by which each
covered entity’s annual fee is calculated.
These regulations also define terms for
the administration of the fee. As relevant
for this notice, § 51.2T(g) defines fee year
as the calendar year in which the fee for
a particular sales year must be paid and
§ 51.2T(m) definessales yearas the sec-
ond calendar year preceding the fee year.
Section 51.3T provides that annually,
each covered entity may submit a com-
pleted Form 8947,“ReportofBranded
Prescription Drug Information,”in accor-
dance with the instructions for the form.
Generally, the form solicits information
from covered entities on National Drug
Codes, orphan drugs, designated entities,
rebates, and other information specified by
the form or its instructions. The form is to
be filed by the date prescribed in guidance
published in the Internal Revenue Bulletin.
Section 51.6T provides that for each
sales year the IRS will make a prelimi-
nary fee calculation for each covered en-
tity and will notify each covered entity of
this calculation by the date prescribed in
guidance published in the Internal Rev-
enue Bulletin. This notification will also
include additional prescribed information.
As used in this notice, “notice of prelim-
inary fee calculation” includes the addi-
tional prescribed information.
Section 51.7T provides that upon re-
ceipt of its preliminary fee calculation,
each covered entity will have an op-
portunity to dispute this calculation by
submitting to the IRS an error report with
prescribed information. Sections 51.7T(b)
and (c) set out the information that a cov-
ered entity must submit to support each
asserted error. Section 51.7T(d) provides
that each covered entity must submit its
error report(s) in the form and manner that
is prescribed in guidance published in the
Internal Revenue Bulletin. This guidance
will also prescribe the date by which each
covered entity must submit its report(s).
Section 51.8T provides that the IRS will
send each covered entity its final fee cal-
culation no later than August 31st of each
fee year and also provides that covered en-
tities must pay their fee by September 30th
of the fee year.
Submission of Form 8947
For the 2012 fee year, a covered entity
that chooses to submit Form 8947 must file
the form by December 15, 2011.
Time and manner for notifying covered
entities of their preliminary fee calculation
For the 2012 fee year, the IRS will
mail each covered entity a paper notice of
its preliminary fee calculation by April 2,
2012. This mailing will include a National
Drug Code (NDC) attachment (NDC at-
tachment) that lists the covered entity’s
NDCs and the sales data reported to the
IRS by each government program pursuant
to § 51.4T.
A covered entity may request that the
IRS send a CD-ROM with the NDC at-
tachment in Microsoft Excel format. The
covered entity must make this request
by March 1, 2012. This request must be
made either by telephone to Lou Milano
at (908) 301–2118 or Mi Lim at (312)
566–3775 (not toll-free calls) or by email
tomits.bpd.fee@irs.gov.Ifacovered
entity makes this request timely, the IRS
will mail the covered entity its notice
of preliminary fee calculation on paper
and the NDC attachment on paper and
CD-ROM by April 2, 2012.
Time and manner for submitting error
reports for the dispute resolution process
For the 2012 fee year, a covered en-
tity that chooses to submit an error re-
port regarding its preliminary fee calcula-
tion must mail the error report by May 16,
2012.
When the IRS mails each covered en-
tity a notice of its preliminary fee calcu-
lation by April 2, 2012, the IRS will also
send each covered entity a template on a
CD-ROM that the covered entity must use
to prepare its error report. All completed
templates and the supporting documenta-
tion must be submitted on a CD-ROM and
sent by mail to:
Department of the Treasury
Internal Revenue Service
1973 N. Rulon White Boulevard,
Mail Stop 4916
Ogden, UT 84404
Notification of Final Fee Calculation
In accordance with § 51.8T(a), the IRS
will notify each covered entity of its final
fee calculation for 2012 by August 31,
2012. In accordancewith §51.8T(c),
each covered entity must pay this fee by
September 30, 2012.
Effect on Other Documents
Rev. Proc 2011–24 is obsoleted.
Drafting Information
The principal author of this notice is
Celia Gabrysh of the Office of Associate
Chief Counsel (Passthroughs & Special In-
dustries). For furtherinformation regard-
ing this notice, contact Celia Gabrysh at
(202) 622–3130 (not a toll-free call).
2011–48 I.R.B.809November 28, 2011

Update for Weighted Average
Interest Rates, Yield Curves,
and Segment Rates
Notice 2011-93
This notice provides guidance as to the
corporate bond weighted average interest
rate and the permissible range of interest
rates specified under § 412(b)(5)(B)(ii)(II)
of the Internal Revenue Code as in ef-
fect for plan years beginning before 2008.
It also provides guidance on the cor-
porate bond monthly yield curve (and
the corresponding spot segment rates),
and the 24-month average segment rates
under § 430(h)(2). In addition, this no-
tice provides guidance as to the interest
rate on 30-year Treasury securities un-
der § 417(e)(3)(A)(ii)(II) as in effect for
plan years beginning before 2008, the
30-year Treasury weighted average rate
under § 431(c)(6)(E)(ii)(I), and the min-
imum present value segment rates under
§ 417(e)(3)(D) as in effect for plan years
beginning after 2007.
CORPORATE BOND WEIGHTED
AVERAGE INTEREST RATE
Sections412(b)(5)(B)(ii)and
412(l)(7)(C)(i), as amended by the Pen-
sion Funding Equity Act of 2004 and by
the Pension Protection Act of 2006 (PPA),
provide that the interest rates used to cal-
culate current liability and to determine
the required contribution under § 412(l)
for plan years beginning in 2004 through
2007 must be within a permissible range
based on the weighted average of the rates
of interest on amounts invested conser-
vatively in long term investment grade
corporate bonds during the 4-year period
ending on the last day before the beginning
of the plan year.
Notice 2004-34, 2004-1 C.B. 848, pro-
vides guidelines for determining the cor-
porate bond weighted average interest rate
and the resulting permissible range of in-
terest rates used to calculate current liabil-
ity. That notice establishes that the corpo-
rate bond weighted average is based on the
monthly composite corporate bond rate de-
rived from designated corporate bond in-
dices. The methodology for determining
the monthly composite corporate bond rate
as set forth in Notice 2004-34 continues to
apply in determining that rate. See Notice
2006-75, 2006-2 C.B. 366.
The composite corporate bond rate for
October 2011 is 4.79 percent. Pursuant
to Notice 2004-34, the Service has de-
termined this rate as the average of the
monthly yields for the included corporate
bond indices for that month.
The following corporate bond weighted
average interest rate was determined for
plan years beginning in the month shown
below.
For Plan Years
Beginning inPermissible Range
MonthYear
Corporate
Bond Weighted
Average90%to100%
November2011
5.825.235.82
YIELD CURVE AND SEGMENT
RATES
Generally for plan years beginning
after 2007 (except for delayed effective
dates for certain plans under sections 104,
105, and 106 of PPA), § 430 of the Code
specifies the minimum funding require-
ments that apply to single employer plans
pursuant to § 412. Section 430(h)(2) spec-
ifies the interest rates that must be used
to determine a plan’s target normal cost
and funding target. Under this provision,
present value is generally determined us-
ing three 24-month average interest rates
(“segment rates”), each of which applies
to cash flows during specified periods.
However, an election may be made under
§ 430(h)(2)(D)(ii) to use the monthly yield
curve in place of the segment rates. Sec-
tion 430(h)(2)G) set forth a transitional
rule applicable to plan years beginning in
2008 and 2009 under which the segment
rates were blended with the corporate bond
weighted average described above, includ-
ing an election under § 430(h)(2)(G)(iv)
foranemployertousethesegmentrates
without the transitional rule.
Notice 2007-81, 2007-2 C.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, and
the 24-month average corporate bond
segment rates used to compute the tar-
get normal cost and the funding target.
Pursuant to Notice 2007-81, the monthly
corporate bond yield curve derived from
October 2011 data is in Table I at the end
of this notice. The spot first, second, and
third segment rates for the month of Oc-
tober 2011 are, respectively, 2.09, 4.56,
and 5.50. The three 24-month average
corporate bond segment rates applicable
forNovember2011areasfollows:
First
Segment
Second
Segment
Third
Segment
2.01
5.16
6.28
The transitional rule of § 430(h)(2)(G)
does not apply to plan years beginning af-
ter December 31, 2009. Therefore, for a
plan year beginning after 2009 with a look-
back month to November 2011, the fund-
ing segment rates are the three 24-month
average corporate bond segment rates ap-
plicable for November 2011, listed above
without blending for any transitional pe-
riod.
30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 417(e)(3)(A)(ii)(II) (prior to
amendment by PPA) defines the appli-
November 28, 20118102011–48 I.R.B.

cable interest rate, which must be used
for purposes of determining the minimum
present value of a participant’s benefit
under § 417(e)(1) and (2), as the annual
rate of interest on 30-year Treasury se-
curities for the month before the date
of distribution or such other time as the
Secretary may by regulations prescribe.
Section 1.417(e)-1(d)(3) of the Income
Tax Regulations provides that the applica-
ble interest rate for a month is the annual
rate of interest on 30-year Treasury secu-
rities as specified by the Commissioner
for that month in revenue rulings, notices
or other guidance published in the Internal
Revenue Bulletin.
The rate of interest on 30-year Treasury
securities for October 2011 is 3.13 percent.
The Service has determined this rate as
the average of the daily determinations of
yield on the 30-year Treasury bond matur-
ing in August 2041.
Generally for plan years beginning
after 2007, § 431 specifies the mini-
mum funding requirements that apply to
multiemployer plans pursuant to § 412.
Section 431(c)(6)(B)specifies a minimum
amount for the full-funding limitation
described in section 431(c)(6)(A), based
on the plan’s current liability. Section
431(c)(6)(E)(ii)(I) provides that the inter-
est rate used to calculate current liability
for this purpose must be no more than 5
percent above and no more than 10 percent
below the weighted average of the rates of
interest on 30-year Treasury securities dur-
ing the four-year period ending on the last
day before the beginning of the plan year.
Notice 88-73, 1988-2 C.B. 383, provides
guidelines for determining the weighted
average interest rate. The following rates
were determined for plan years beginning
in the month shown below.
For Plan Yea
rs
Beginning i
n
Permissibl
e Range
MonthYear
30-Year
Treasury
Weighted
Average90%to105%
November20114.163.744.37
MINIMUM PRE
SENT VALUE
SEGMENT RAT
ES
Generally
for plan years beginning af-
ter Decemb
er 31, 2007, the applicable in-
terest rat
es under § 417(e)(3)(D) are seg-
ment rates
computed without regard to a
24-month av
erage. For plan years begin-
ning in 2008
through 2011, the applica-
ble interes
t rates are the monthly spot seg-
ment rates
blended with the applicable rate
under § 417
(e)(3)(A)(ii)(II) as in effect
for plan ye
ars beginning in 2007. Notice
2007-81 pr
ovides guidelines for determin-
ing the mini
mum present value segment
rates. Purs
uant to that notice, the min-
imum presen
t value transitional segment
rates dete
rmined for October 2011, tak-
ingintoac
count the October 2011 30-year
Treasury r
ate of 3.13 stated above, are as
follows:
For Plan Years
Beginning in
First
Segment
Second
Segment
Third
Segment
2010
2.51
3.99
4.55
20112.304.27
5.03
20122.09
4.565.50
REQUEST F
OR COMMENTS
The IRS re
quests comments on whether
these mo
nthly interest rate notices should
continu
e to provide the Composite Cor-
porate B
ond Rate and the Corporate Bond
Weighte
d Average in 2012. Comments
should b
e submitted by December 15,
2011, t
o CC:PA:LPD:PR (Notice
2011-9
3), Room 5203, Internal Revenue
Servic
e, POB 7604 Ben Franklin Station,
Washingt
on, D.C. 20044. Comments
may be han
d delivered Monday through
Friday be
tween the hours of 8 a.m. and 4
p.m. to C
C:PA:LPD:PR (Notice 2011-93),
Courier
’s Desk, Internal Revenue
Service
, 1111 Constitution Ave., N.W.,
Washing
ton D.C. Alternatively, comments
may be su
bmitted via the Internet at
Notice
.comments@irscounsel.treas.gov.
Please
include “Notice 2011-93” in
the sub
ject line of any electronic
communic
ation. All materials submitted
will be av
ailable for public inspection and
copying.
DRAFTIN
G INFORMATION
The prin
cipal author of this notice is
Tony Mon
tanaro of the Employee Plans,
Tax Exe
mpt and Government Entities Di-
vision
. Mr. Montanaro may be e-mailed at
Retire
mentPlanQuestions@irs.gov.
2011–48 I.R.B.811November 28, 2011

Table I
Monthly Yield Curve for October 2011
Derived from October 2011 Data
Maturity YieldMaturity YieldMaturity YieldMaturity YieldMaturity Yield
0.50.5420.5
5.19
40.55.5360.55.6580.55.71
1.01.0121.0
5.21
41.0
5.54
61.0
5.65
81.0
5.71
1.51.4521.55.2341.55.5461.55.6681.55.71
2.01.8222.0
5.24
42.0
5.55
62.0
5.66
82.0
5.71
2.5
2.13
22.55.2542.55.5562.55.6682.55.72
3.0
2.39
23.0
5.27
43.0
5.56
63.0
5.66
83.0
5.72
3.5
2.61
23.55.2843.55.5663.55.6683.55.72
4.02.8024.05.2944.0
5.56
64.0
5.67
84.0
5.72
4.5
2.98
24.55.3044.55.5764.55.6784.55.72
5.03.1525.05.3245.05.5765.05.6785.05.72
5.5
3.30
25.55.3345.55.5765.55.6785.55.72
6.0
3.45
26.0
5.34
46.0
5.58
66.0
5.67
86.0
5.72
6.5
3.59
26.55.3546.55.5866.55.6786.55.72
7.03.7227.0
5.36
47.0
5.58
67.0
5.68
87.0
5.73
7.53.8527.55.3747.55.5967.55.6887.55.73
8.03.9628.0
5.38
48.05.5968.0
5.68
88.0
5.73
8.5
4.07
28.55.3848.5
5.59
68.55.6888.55.73
9.0
4.18
29.0
5.39
49.0
5.60
69.0
5.68
89.0
5.73
9.54.2729.5
5.40
49.5
5.60
69.5
5.68
89.5
5.73
10.04.3630.0
5.4150.05.60
70.0
5.68
90.0
5.73
10.54.4430.55.4250.55.6170.55.6990.55.73
11.0
4.51
31.0
5.4351.05.61
71.05.6991.0
5.73
11.54.5831.55.4351.55.6171.5
5.6991.5
5.73
12.0
4.65
32.0
5.4452.05.61
72.05.69
92.0
5.73
12.5
4.71
32.55.4552.55.6272.5
5.6992.5
5.73
13.04.7633.0
5.4553.05.62
73.05.69
93.0
5.74
13.54.8133.55.4653.55.6273.55.6993.55.74
14.0
4.85
34.0
5.4754.05.62
74.0
5.70
94.0
5.74
14.5
4.89
34.55.4754.55.6374.55.70
94.5
5.74
15.0
4.93
35.05.4855.05.6375.05.70
95.0
5.74
15.5
4.96
35.55.4855.55.6375.55.70
95.5
5.74
16.0
5.00
36.05.49
56.05.63
76.0
5.70
96.0
5.74
16.55.0236.55.5056.55.6476.55.7096.55.74
17.0
5.05
37.0
5.5057.05.64
77.0
5.70
97.0
5.74
17.55.0837.55.5157.55.6477.55.70
97.5
5.74
18.0
5.10
38.0
5.5158.05.64
78.0
5.71
98.0
5.74
18.55.1238.55.5258.55.6478.55.71
98.5
5.74
19.0
5.14
39.0
5.52
59.0
5.65
79.0
5.71
99.0
5.75
19.55.1639.55.5359.55.6579.55.7199.55.75
20.0
5.18
40.0
5.53
60.0
5.65
80.0
5.71
100.0
5.75
November 28, 20118122011–48 I.R.B.

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking
Income of Fore
ign
Governments a
nd
Internation
al Organizations
REG–146537–
06
AGENCY: Inte
rnal Revenue Service
(IRS), Treas
ury.
ACTION: Noti
ce of proposed rulemaking.
SUMMARY: Thi
s document contains pro-
posed Incom
e Tax Regulations that pro-
vide guidan
ce relating to the taxation of the
income of fo
reign governments from in-
vestments i
n the United States under sec-
tion 892 of t
he Internal Revenue Code of
1986 (Code
). The regulations will affect
foreign go
vernments that derive income
from sourc
es within the United States.
DATES: Wri
tten or electronic comments
and reques
ts for a public hearing must be
received
by February 1, 2012.
ADDRESSE
S: Send submissions to:
CC:PA:LP
D:PR(REG–146537–06),
Room 5205
, Internal Revenue Service,
PO Box 760
4,BenFranklinStation,
Washingt
on, DC 20044. Submissions may
be hand-
delivered Monday through Friday
between
the hours of 8 a.m. and 4 p.m.
to CC:PA
:LPD:PR (REG–146537–06),
Courier
’s Desk, Internal Revenue
Service
, 1111 Constitution Avenue, NW,
Washin
gton, DC, or sent electronically,
viathe
FederaleRulemaking
Portal
atwww.regulations.gov(IRS
REG–14
6537–06).
FOR FUR
THER INFORMATION
CONTAC
T: Concerning the pro-
posed
regulations, David A. Juster,
(202)
622–3850 (not a toll-free num-
ber);
concerning submission of com-
ments
, contact Richard A. Hurst at
Richa
rd.A.Hurst@irscounsel.treas.gov.
SUPPL
EMENTARY INFORMATION:
Paper
work Reduction Act
The co
llections of information con-
taine
d in this notice of proposed rulemak-
ing have been s
ubmittedtotheOffice
of Management
and Budget (OMB) for
review and app
roval under OMB ap-
proval number
1545–1053 in accordance
with the Paper
work Reduction Act of
1995 (44 U.S.
C. 3507(d)). Comments
on the collec
tions of information should
be sent to the
Office of Management
and Budget,A
ttn: Desk Officer for
the Departm
ent of the Treasury, Office
of Informat
ion and Regulatory Affairs,
Washington
, DC 20503, with copies
to theInter
nal Revenue Service,
Attn: IRS R
eports Clearance Officer,
SE:CAR:MP
:T:T:SP, Washington, DC
20224. Com
ments on the collections
of informa
tion should be received
by January
3, 2012. Comments are
specific
ally requested concerning:
Whether th
e proposed collections of in-
formatio
n are necessary for the proper per-
formance
of the functions of the Internal
Revenue S
ervice, including whether the
informat
ion will have practical utility;
The accur
acy of the estimated burden
associat
ed with the proposed collections of
informa
tion;
How the q
uality, utility, and clarity of
the info
rmation to be collected may be en-
hanced;
How the b
urden of complying with the
propose
d collections of information may
be minim
ized, including through the appli-
cation o
f automated collection techniques
or othe
r forms of information technology;
and
Estima
tes of capital or start-up costs
and cos
ts of operation, maintenance, and
purcha
se of services to provide informa-
tion.
The col
lections of informa-
tion in
this proposed regulation
are in §
§1.892–5(a)(2)(ii)(B) and
1.892
–5(a)(2)(iv). This information is
requi
red to determine if taxpayers qualify
for ex
emption from tax under section
892. T
he collections of information are
volun
tary to obtain a benefit. The likely
resp
ondents are foreign governments.
Estim
ated total annual reporting bur-
den:
975 hours.
Estim
ated average annual burden hours
per r
espondent: 5 hours.
Estim
ated number of respondents: 195.
Estimated ann
ual frequency of re-
sponses: 1.
An agency may n
ot conduct or sponsor,
and a person is
not required to respond to, a
collection of
information unless it displays
a valid contro
l number assigned by the Of-
fice of Manage
ment and Budget.
Books or reco
rds relating to a collection
of informati
on must be retained as long
as their cont
ents may become material in
the administ
ration of any internal revenue
law. General
ly, tax returns and tax return
information
are confidential, as required
by 26 U.S.C.
6103.
Background
This docume
nt contains proposed
amendments
to 26 CFR part 1 and to
26 CFR part 6
02. On June 27, 1988,
temporary
regulations under section 892
(T.D. 8211
, 53 FR 24060) (1988 temporary
regulatio
ns) with a cross-reference notice
of propose
d rulemaking (53 FR 24100)
were publi
shed in theFederal Register
to provid
e guidance concerning the
taxation
of income of foreign governments
and inter
national organizations from
investme
nts in the United States. The
proposed
regulations contained herein
supplem
ent the cross-reference notice of
propose
d rulemaking to provide additional
guidanc
e for determining when a foreign
governm
ent’s investment income is
exempt f
rom U.S. taxation.
Explana
tion of Provisions
The Trea
sury Department and the IRS
have re
cently received numerous written
commen
ts on the 1988 temporary regula-
tions.
The proposed regulations are issued
in resp
onse to those comments.
Treatm
ent of Controlled Entities
Sectio
n 892 exempts from U.S. income
taxati
on certain qualified investment in-
come d
erived by a foreign government.
Secti
on 1.892–2T defines the term for-
eign g
overnment to mean only the integral
parts
or controlled entities of a foreign
sover
eign. The exemption from U.S. in-
come
tax under section 892 does not apply
to in
come (1) derived from the conduct of
any c
ommercial activity, (2) received by a
cont
rolled commercial entity or received
2011–48 I.R.B.813November 28, 2011

(directly or indirectly) from a controlled
commercial entity, or (3) derived from the
disposition of any interest in a controlled
commercial entity. Section 892(a)(2)(B)
defines a controlled commercial entity
as an entity owned by the foreign gov-
ernment that meets certain ownership or
control thresholds and that is engaged
in commercial activities anywhere in the
world. Accordingly, an integral part of
a foreign sovereign that derives income
from both qualified investments and from
the conduct of commercial activity is eli-
gible to claim the section 892 exemption
with respect to the income from qualified
investments, but not with respect to the
income derived from the conduct of com-
mercial activity. In contrast, if a controlled
entity (as defined in §1.892–2T(a)(3)) en-
gages in commercial activities anywhere
in the world, it is treated as a controlled
commercial entity, and none of its income
(including income from otherwise quali-
fied investments) qualifies for exemption
from tax under section 892. In addition,
none of the income derived from the con-
trolled entity (e.g.,dividends), including
the portion attributable to qualified in-
vestments of the controlled entity, will be
eligible for the section 892 exemption.
Several comments raised concerns that this
so-called “all or nothing” rule represents
an unnecessary administrative and opera-
tional burden for foreign governments and
a trap for unwary foreign governments
that inadvertently conduct a small level
of commercial activity. These comments
have requested that the Treasury Depart-
ment and the IRS revise §1.892–5T(a) to
provide for ade minimisexception under
which an entity would not be treated as a
controlled commercial entity as a result of
certain inadvertent commercial activity.
In response to these comments, the
proposed regulations at §1.892–5(a)(2)
provide that an entity will not be consid-
ered to engage in commercial activities
if it conducts only inadvertent commer-
cial activity. Commercial activity will be
treated as inadvertent commercial activity
only if: (1) the failure to avoid conduct-
ing the commercial activity is reasonable;
(2) the commercial activity is promptly
cured; and (3) certain record maintenance
requirements are met. However, none of
the income derived from such inadvertent
commercial activity will qualify for ex-
emption from tax under section 892.
In determining whether an entity’s
failure to avoid conducting a particular
commercial activity is reasonable, due
regard will be given to the number of
commercial activities conducted during
the taxable year, as well as the amount
of income earned from, and assets used
in, the conduct of the commercial ac-
tivity in relationship to the entity’s total
income and assets. However, a failure
to avoid conducting commercial activity
will not be considered reasonable unless
adequate written policies and operational
procedures are in place to monitor the
entity’s worldwide activities. The pro-
posed regulations include a safe harbor
at §1.892–5(a)(2)(ii)(C) under which,
provided that there are adequate written
policies and operational procedures in
place to monitor the entity’s worldwide
activities, the controlled entity’s failure to
avoid the conduct of commercial activity
during a taxable year will be considered
reasonable if: (1) the value of the assets
used in, or held for use in, the activity does
not exceed five percent of the total value
of the assets reflected on the entity’s bal-
ance sheet for the taxable year as prepared
for financial accounting purposes; and
(2) the income earned by the entity from
the commercial activity does not exceed
five percent of the entity’s gross income
as reflected on its income statement for
the taxable year as prepared for financial
accounting purposes.
Comments also requested further guid-
ance on the duration of a determination
that an entity is a controlled commercial
entity. In response to these comments,
the proposed regulations at §1.892–5(a)(3)
provide that the determination of whether
an entity is a controlled commercial entity
within the meaning of section 892(a)(2)(B)
will be made on an annual basis. Ac-
cordingly, an entity will not be considered
a controlled commercial entity for a tax-
able year solely because the entity engaged
in commercial activities in a prior taxable
year.
Definition of Commercial Activity
Section 1.892–4T of the 1988 tempo-
rary regulations provides rules for deter-
mining whether income is derived from
the conduct of a commercial activity, and
specifically identifies certain activities
that are not commercial, including certain
investments, trading activities, cultural
events, non-profit activities, and govern-
mental functions. Several comments have
expressed uncertainty about the applicable
U.S. standard for determining when an
activity will be considered a commercial
activity, a non-profit activity, or govern-
mental function for purposes of section
892 and §1.892–4T.
Section 1.892–4(d) of the proposed reg-
ulations restates the general rule adopted
in the 1988 temporary regulations that,
subject to certain enumerated exceptions,
all activities ordinarily conducted for the
current or future production of income or
gain are commercial activities. Section
1.892–4(d) of the proposed regulations
further provides that only the nature of an
activity, not the purpose or motivation for
conducting the activity, is determinative
of whether the activity is a commercial
activity. This standard also applies for
purposes of determining whether an ac-
tivity is characterized as a non-profit
activity or governmental function under
§1.892–4T(c)(3) and (c)(4). In addition,
§1.892–4(d) of the proposed regulations
clarifies the rule in the 1988 temporary
regulations by providing that an activity
may be considered a commercial activity
even if the activity does not constitute
a trade or business for purposes of sec-
tion 162 or does not constitute (or would
not constitute if undertaken in the United
States) the conduct of a trade or business
in the United States for purposes of section
864(b).
Section 1.892–4T(c) lists certain activi-
ties that will not be considered commercial
activities. One such activity is invest-
ments in financial instruments, as defined
in §1.892–3T(a)(4), which, if held in the
execution of governmental financial or
monetary policy, are not commercial activ-
ities for purposes of section 892. Several
comments have requested that the condi-
tion that financial instruments be “held in
the execution of governmental financial or
monetary policy” be eliminated to more
closely conform the treatment of invest-
ments in financial instruments, including
derivatives, with investments in physical
stocks and securities, which under the
1988 temporary regulations generally are
not commercial activities regardless of
whether they are held in the execution
of governmental financial or monetary
policy. Section 1.892–4(e)(1)(i) of the
November 28, 20118142011–48 I.R.B.

proposed regulations modifies the rules
in §1.892–4T(c)(1)(i) by providing that
investments in financial instruments will
not be treated as commercial activities
for purposes of section 892, irrespective
of whether such financial instruments are
held in the execution of governmental fi-
nancial or monetary policy. In addition,
§1.892–4(e)(1)(ii) of the proposed reg-
ulations expands the existing exception
in §1.892–4T(c)(1)(ii) from commercial
activity for trading of stocks, securities,
and commodities to include financial
instruments, without regard to whether
such financial instruments are held in the
execution of governmental financial or
monetary policy. These revisions address
only the definition of commercial activity
for purposes of determining whether a
government will be considered to derive
income from the conduct of a commercial
activity, or whether an entity will be con-
sidered to be engaged in commercial activ-
ities. They do not address whether income
from activities that are not commercial
activities will be exempt from tax under
section 892. Pursuant to §1.892–3T(a),
only income derived from investments in
financial instruments held in the execution
of governmental financial or monetary
policy will qualify for exemption from tax
under section 892.
Comments have requested clarifica-
tion as to whether an entity that disposes
of a United States real property interest
(USRPI) as defined in section 897(c) will
be deemed to be engaged in commercial
activities solely by reason of this dispo-
sition. Section 897(a)(1) requires that a
nonresident alien or foreign corporation
take into account gain or loss from the
disposition of a USRPI as if the taxpayer
were engaged in a trade or business within
the United States during the taxable year
and as if such gain or loss were effectively
connected with that trade or business.
The Treasury Department and the IRS
believe that an entity that only holds pas-
sive investments and is not otherwise
engaged in commercial activities should
not be deemed to be engaged in com-
mercial activities solely by reason of the
operation of section 897(a)(1). Accord-
ingly, §1.892–4(e)(1)(iv) of the proposed
regulations provides that a disposition,
including a deemed disposition under sec-
tion 897(h)(1), of a USRPI, by itself, does
not constitute the conduct of a commer-
cial activity. However, as provided in
§1.892–3T(a), the income derived from
the disposition of the USRPI described in
section 897(c)(1)(A)(i) shall in no event
qualify for the exemption from tax under
section 892.
After the 1988 temporary regulations
were published, section 892(a)(2)(A) was
amended by the Technical and Miscella-
neous Revenue Act of 1988 (TAMRA),
Public Law No. 100–647, 102 Stat. 3342
to provide that income derived from the
disposition of any interest in a controlled
commercial entity does not qualify for the
exemption under section 892. The pro-
posed regulations revise §1.892–5(a) to re-
flect the amendment of section 892 by
TAMRA.
Treatment of Partnerships
Section 1.892–5T(d)(3) provides a gen-
eral rule that commercial activities of a
partnership are attributable to its general
and limited partners (“partnership attribu-
tion rule”) and provides a limited excep-
tion to this rule for partners of publicly
traded partnerships (PTPs). Several com-
ments have requested that the Treasury De-
partment and the IRS modify the partner-
ship attribution rule to provide that the
activities of a partnership will not be at-
tributed to a foreign government partner if
that government: (i) holds a minority inter-
est, as a limited partner, in the partnership;
and (ii) has no greater rights to partici-
pate in the management and conduct of the
partnership’s business than would a minor-
ity shareholder in a corporation conduct-
ing the same activities as the partnership.
The comments assert that the partnership
attribution rule causes many controlled en-
tities of foreign sovereigns to forego mak-
ing investments in foreign partnerships or
other foreign entities that do not invest in
the United States out of concern that such
investments might cause those controlled
entities to be treated as controlled commer-
cial entities.
In response to these comments,
§1.892–5(d)(5)(iii) of the proposed reg-
ulations modifies the existing exception
to the partnership attribution rule for PTP
interests by providing a more general ex-
ception for limited partnership interests.
Under this revised exception, an entity that
is not otherwise engaged in commercial
activities will not be treated as engaged
in commercial activities solely because it
holds an interest as a limited partner in a
limited partnership, including a publicly
traded partnership that qualifies as a lim-
ited partnership.
For this purpose, an interest as a lim-
ited partner in a limited partnership is de-
fined as an interest in an entity classified as
a partnership for federal tax purposes if the
holder of the interest does not have rights
to participate in the management and con-
duct of the partnership’s business at any
time during the partnership’s taxable year
under the law of the jurisdiction in which
the partnership is organized or under the
governing agreement. This definition of
an interest as a limited partner in a limited
partnership applies solely for purposes of
this exception, and no inference is intended
that the same definition would apply for
any other provision of the Code making or
requiring a distinction between a general
partner and a limited partner.
Although the commercial activity of a
limited partnership will not cause a con-
trolled entity of a foreign sovereign lim-
ited partner meeting the requirements of
the exception for limited partnerships to be
engaged in commercial activities, the con-
trolled entity partner’s distributive share
of partnership income attributable to such
commercial activity will be considered to
be derived from the conduct of commercial
activity, and therefore will not be exempt
from taxation under section 892. Addi-
tionally, in the case of a partnership that is
a controlled commercial entity, no part of
the foreign government partner’s distribu-
tive share of partnership income will qual-
ify for exemption from tax under section
892.
Comments also assert that disparity
in tax treatment exists under the tem-
porary regulations regarding foreign
government tradingactivity described
in §1.892–4T(c)(1)(ii) because trading
for a foreign government’s own account
does not constitute a commercial ac-
tivity but no similar rule applies in the
case of trading done by a partnership of
which a foreign government is a partner.
The comments note that this disparity
is not generally present in determining
whether an activity is a trade or busi-
ness within the United States under sec-
tion 864(b). See §1.864–2(c)(2)(i) and
(d)(2)(i). In response to these comments,
§1.892–5(d)(5)(ii) of the proposed regu-
2011–48 I.R.B.815November 28, 2011

lations provides that an entity that is not
otherwise engaged in commercial activi-
ties will not be considered to be engaged
in commercial activities solely because it
is a member of a partnership that effects
transactions in stocks, bonds, other securi-
ties, commodities, or financial instruments
for the partnership’s own account. How-
ever, this exception does not apply in
the case of a partnership that is a dealer
in stocks, bonds, other securities, com-
modities, or financial instruments. For
this purpose, whether a partnership is a
dealer is determined under the principles
of §1.864–2(c)(2)(iv)(a).
Proposed Effective/Applicability Date
These regulations are proposed to apply
on the date of publication of the Treasury
decision adopting these rules as final regu-
lations in theFederal Register.Forrules
applicable to periods prior to the publica-
tion date, see the corresponding provisions
in §§1.892–4T and 1.892–5T in the 1988
temporary regulations and in §1.892–5(a)
as issued under T.D. 9012, 2002–2 C.B.
389 (August 1, 2002).
Reliance on Proposed Regulations
Taxpayers may rely on the proposed
regulations until final regulations are is-
sued.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in Exec-
utive Order 12866. Therefore, a regula-
tory assessment is not required. It has also
been determined thatsection 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regula-
tions and because the proposed regulations
do not impose a collection of information
on small entities, the Regulatory Flexibil-
ity Act (5 U.S.C. chapter 6) does not ap-
ply. Pursuant to section 7805(f) of the
Code, this notice of proposed rulemaking
has been submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on its impact on
small business.
Comments and Requests for Public
Hearing
Before the proposed regulations are
adopted as final regulations, considera-
tion will be given to any written (a signed
original and eight (8) copies) or electronic
comments, that are submitted timely to
the IRS. The Treasury Department and the
IRS request comments on the clarity of the
proposed regulations and how they can be
made easier to understand. All comments
will be available for public inspection and
copying. A public hearing will be sched-
uled if requested in writing by any person
that timely submits written comments. If a
public hearing is scheduled, notice of the
date, time, and place for the public hearing
will be published in theFederal Register.
Drafting Information
The principal author of these regula-
tions is David A. Juster of the Office of
Associate Chief Counsel (International),
within the Office of Chief Counsel, IRS.
Other personnel from the Treasury Depart-
ment and the IRS participated in develop-
ing the regulations.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and 602
are proposed to be amended as follows:
PART 1—INCOME TAX
REGULATIONS
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.892–4 also issued under
26 U.S.C. 892(c). * * *
Par. 2. Section 1.892–4 is added to read
as follows:
§1.892–4 Commercial activities.
(a) through (c) [Reserved]. For further
guidance, see §1.892–4T(a) through (c).
(d)In general. Except as provided in
paragraph (e) of this section, all activities
(whether conducted within or outside the
United States) which are ordinarily con-
ducted for the current or future production
of income or gain are commercial activi-
ties. Only the nature of the activity, not
the purpose or motivation for conducting
the activity, is determinative of whether the
activity is commercial in character. An ac-
tivity may be considered a commercial ac-
tivity even if such activity does not consti-
tute a trade or business for purposes of sec-
tion 162 or does not constitute (or would
not constitute if undertaken in the United
States) the conduct of a trade or business
in the United States for purposes of section
864(b).
(e)Activities that are not commer-
cial—(1)Investments—(i)In general.
Subject to the provisions of paragraphs
(e)(1)(ii) and (e)(1)(iii) of this section, the
following are not commercial activities:
investments in stocks, bonds, and other
securities (as defined in §1.892–3T(a)(3));
loans; investments in financial instru-
ments (as defined in §1.892–3T(a)(4));
the holding of net leases on real property;
the holding of real property which is not
producing income (other than on its sale
or from an investment in net leases on real
property); and the holding of bank deposits
in banks. Transferring securities under a
loan agreement which meets the require-
ments of section 1058 is an investment for
purposes of this paragraph (e)(1)(i). An
activity will not cease to be an investment
solely because of the volume of transac-
tions of that activity or because of other
unrelated activities.
(ii)Trading. Effecting transactions
in stocks, bonds, other securities (as de-
fined in §1.892–3T(a)(3)), commodities,
or financial instruments (as defined in
§1.892–3T(a)(4)) for a foreign govern-
ment’s own account does not constitute a
commercial activity regardless of whether
such activity constitutes a trade or business
for purposes of section 162 or constitutes
(or would constitute if undertaken within
the United States) the conduct of a trade
or business in the United States for pur-
poses of section 864(b). Such transactions
are not commercial activities regardless
of whether they are effected by the for-
eign government through its employees
or through a broker, commission agent,
custodian, or other independent agent and
regardless of whether or not any such
employee or agent has discretionary au-
thority to make decisions in effecting the
transactions. Such transactions under-
taken as a dealer (as determined under
the principles of §1.864–2(c)(2)(iv)(a)),
however, constitute commercial activity.
For purposes of this paragraph (e)(1)(ii),
November 28, 20118162011–48 I.R.B.

the termcommoditiesmeans commodi-
ties of a kind customarily dealt in on an
organized commodity exchange but only
if the transaction is of a kind customarily
consummated at such place.
(iii)Banking, financing, etc.Invest-
ments (including loans) made by a bank-
ing, financing, or similar business con-
stitute commercial activities, even if the
income derived from such investments is
not considered to be income effectively
connected with the active conduct of a
banking, financing, or similar business in
the U.S. by reason of the application of
§1.864–4(c)(5).
(iv)Disposition of a U.S. real prop-
erty interest.A disposition (includ-
ing a deemed disposition under section
897(h)(1)) of a U.S. real property in-
terest (as defined in section 897(c)), by
itself, does not constitute the conduct of
a commercial activity. As described in
§1.892–3T(a), however, gain derived from
a disposition of a U.S. real property inter-
est defined in section 897(c)(1)(A)(i) will
not qualify for exemption from tax under
section 892.
(2) through (5) [Reserved]. For further
guidance, see §1.892–4T(c)(2) through
(c)(5).
(f)Effective/applicability date.This
section applies on the date the regulations
are published as final regulations in the
Federal Register. See §1.892–4T for the
rules that apply before the date the regula-
tions are published as final regulations in
theFederal Register.
Par. 3. Section 1.892–5 is revised to
read as follows:
§1.892–5 Controlled commercial entity.
(a)In general—(1)General rule
and definition of the term “controlled
commercial entity”.Under section
892(a)(2)(A)(ii) and (a)(2)(A)(iii), the ex-
emption generally applicable to a foreign
government (as defined in §1.892–2T) for
income described in §1.892–3T does not
apply to income received by a controlled
commercial entity or received (directly
or indirectly) from a controlled commer-
cial entity, or to income derived from the
disposition of any interest in a controlled
commercial entity. For purposes of sec-
tion 892 and the regulations thereunder,
the termentitymeans and includes a cor-
poration, a partnership, a trust (including a
pension trust described in §1.892–2T(c)),
and an estate, and the termcontrolled
commercial entitymeans any entity (in-
cluding a controlled entity as defined in
§1.892–2T(a)(3)) engaged in commercial
activities (as defined in §§1.892–4 and
1.892–4T) (whether conducted within or
outside the United States) if the govern-
ment—
(i) Holds (directly or indirectly) any in-
terest in such entity which (by value or vot-
ing power) is 50 percent or more of the to-
tal of such interests in such entity, or
(ii) Holds (directly or indirectly) any
other interest in such entity which pro-
vides the foreign government with effec-
tive practical control of such entity.
(2)Inadvertent commercial activ-
ity—(i)General rule. For purposes of
determining whether an entity is a con-
trolled commercial entity for purposes of
section 892(a)(2)(B)and paragraph (a)(1)
of this section, an entity that conducts only
inadvertent commercial activity will not be
considered to be engaged in commercial
activities. However, any income derived
from such inadvertent commercial activity
will not qualify for exemption from tax
under section 892. Commercial activity
of an entity will be treated as inadvertent
commercial activity only if:
(A) Failure to avoid conducting the
commercial activity is reasonable as de-
scribed in paragraph (a)(2)(ii) of this
section;
(B) The commercial activity is
promptly cured as described in paragraph
(a)(2)(iii) of this section; and
(C) The record maintenance require-
ments described in paragraph (a)(2)(iv) of
this section are met.
(ii)Reasonable failure to avoid com-
mercial activity—(A)In general.Sub-
ject to paragraphs (a)(2)(ii)(B) and
(a)(2)(ii)(C) of this section, whether an
entity’s failure to prevent its worldwide
activities from resulting in commercial
activity is reasonable will be determined
in light of all the facts and circumstances.
Due regard will be given to the number
of commercial activities conducted during
the taxable year and in prior taxable years,
as well as the amount of income earned
from, and assets used in, the conduct of
the commercial activities in relationship
to the entity’s total income and assets, re-
spectively. For purposes of this paragraph
(a)(2)(ii)(A) and paragraph (a)(2)(ii)(C) of
this section, where a commercial activity
conducted by a partnership is attributed
under paragraph (d)(5)(i) of this section to
an entity owning an interest in the partner-
ship—
(1) Assets used in the conduct of the
commercial activity by the partnership are
treated as assets used in the conduct of
commercial activity by the entity in pro-
portion to the entity’s interest in the part-
nership; and
(2) The entity’s distributive share of the
partnership’s income from the conduct of
the commercial activity shall be treated as
income earned by the entity from the con-
duct of commercial activities.
(B)Continuing due diligence require-
ment. A failure to avoid commercial
activity will not be considered reasonable
unless there is continuing due diligence
to prevent the entity from engaging in
commercial activities within or outside
the United States as evidenced by having
adequate written policies and operational
procedures in place tomonitor the entity’s
worldwide activities. A failure to avoid
commercial activity will not be considered
reasonable if the management-level em-
ployees of the entity have not undertaken
reasonable efforts to establish, follow, and
enforce such written policies and opera-
tional procedures.
(C)Safe Harbor. Provided that ade-
quate written policies and operational pro-
cedures are in place to monitor the entity’s
worldwide activities as required in para-
graph (a)(2)(ii)(B) of this section, the en-
tity’s failure to avoid commercial activity
during the taxable year will be considered
reasonable if:
(1) The value of the assets used in, or
held for use in, all commercial activity
does not exceed five percent of the total
value of the assets reflected on the entity’s
balance sheet for the taxable year as pre-
pared for financial accounting purposes,
and
(2) The income earned by the entity
from commercial activity does not exceed
five percent of the entity’s gross income as
reflected on its income statement for the
taxable year as prepared for financial ac-
counting purposes.
(iii)Cure requirement.Atimelycure
shall be considered to have been made if
the entity discontinues the conduct of the
commercial activity within 120 days of
discovering the commercial activity. For
2011–48 I.R.B.817November 28, 2011

example, if an entity that holds an interest
as a general partner in a partnership dis-
covers that the partnership is conducting
commercial activity, the entity will satisfy
the cure requirement if, within 120 days
of discovering the commercial activity, the
entity discontinues the conduct of the ac-
tivity by divesting itself of its interest in
the partnership (including by transferring
its interest in the partnership to a related
entity), or the partnership discontinues its
conduct of commercial activity.
(iv)Record maintenance.Adequate
records of each discovered commercial
activity and the remedial action taken to
cure that activity must be maintained. The
records shall be retained so long as the
contents thereof may become material in
the administration of section 892.
(3)Annual determination of controlled
commercial entity status. If an entity de-
scribed in paragraph (a)(1)(i) or paragraph
(a)(1)(ii) of this section engages in com-
mercial activities at any time during a tax-
able year, the entity will be considered a
controlled commercial entity for the en-
tire taxable year. An entity not otherwise
engaged in commercial activities during a
taxable year will not be considered a con-
trolled commercial entity for a taxable year
even if the entity engaged in commercial
activities in a prior taxable year.
(b) through (d)(4) [Reserved]. For fur-
ther guidance, see §1.892–5T(b) through
(d)(4).
(5)Partnerships—(i)General rule.Ex-
cept as provided in paragraph (d)(5)(ii) or
(d)(5)(iii) of this section, the commercial
activities of an entity classified as a part-
nership for federal tax purposes will be at-
tributable to its partners for purposes of
section 892. For example, if an entity de-
scribed in paragraph (a)(1)(i) or paragraph
(a)(1)(ii) of this section holds an interest
as a general partner in a partnership that is
engaged in commercial activities, the part-
nership’s commercial activities will be at-
tributed to that entity for purposes of de-
termining if the entity is a controlled com-
mercial entity within the meaning of sec-
tion 892(a)(2)(B) and paragraph (a) of this
section.
(ii)Trading activity exception.An
entity not otherwise engaged in com-
mercial activities will not be considered
to be engaged in commercial activi-
ties solely because the entity is a mem-
ber of a partnership (whether domestic
or foreign) that effects transactions in
stocks, bonds, other securities (as de-
fined in §1.892–3T(a)(3)), commodi-
ties (as defined in §1.892–4(e)(1)(ii)),
or financial instruments (as defined in
§1.892–3T(a)(4)) for the partnership’s
own account or solely because an em-
ployee of such partnership, or a broker,
commission agent, custodian, or other
agent, pursuant to discretionary authority
granted by such partnership, effects such
transactions for the account of the partner-
ship. This exception shall not apply to any
member in the case of a partnership that is
a dealer in stocks, bonds, other securities,
commodities, or financial instruments,
as determined under the principles of
§1.864–2(c)(2)(iv)(a).
(iii)Limited partner exception—(A)
General rule. An entity that is not oth-
erwise engaged in commercial activities
(including, for example, performing ser-
vices for a partnership as described in
section 707(a) or section 707(c)) will not
be deemed to be engaged in commercial
activities solely because it holds an interest
as a limited partner in a limited partner-
ship. Nevertheless, pursuant to sections
875, 882, and 892(a)(2)(A)(i), a foreign
government member’s distributive share
of partnership income will not be exempt
from taxation under section 892 to the
extent that the partnership derived such
income from the conduct of a commercial
activity. For example, where a controlled
entity described in §1.892–2T(a)(3) that
is not otherwise engaged in commercial
activities holds an interest as a limited
partner in a limited partnership that is a
dealer in stocks, bonds, other securities,
commodities, or financial instruments
in the United States, although the con-
trolled entity partner will not be deemed
to be engaged in commercial activities
solely because of its interest in the lim-
ited partnership, its distributive share of
partnership income derived from the part-
nership’s activity as a dealer will not be
exempt from tax under section 892 be-
cause it was derived from the conduct of a
commercial activity.
(B)Interest as a limited partner in a
limited partnership. Solely for purposes
of paragraph (d)(5)(iii) of this section, an
interest in an entity classified as a part-
nership for federal tax purposes shall be
treated as an interest as a limited partner in
a limited partnership if the holder of such
interest does not have rights to participate
in the management andconduct of the part-
nership’s business at any time during the
partnership’s taxable year under the law of
the jurisdiction in which the partnership is
organized or under the governing agree-
ment. Rights to participate in the manage-
ment and conduct of a partnership’s busi-
ness do not include consent rights in the
case of extraordinary events such as ad-
mission or expulsion of a general or lim-
ited partner, amendment of the partnership
agreement, dissolution of the partnership,
disposition of all or substantially all of the
partnership’s property outside of the ordi-
nary course of the partnership’s activities,
merger, or conversion.
(iv)Illustration. The following exam-
ple illustrates the application of this para-
graph (d)(5):
Example 1. K, a controlled entity of a foreign
sovereign, has investments in various stocks and
bonds of United States corporations and in a 20%
interest in Opco, a limited liability company that is
classified as a partnership for federal tax purposes.
Under the governing agreement of Opco, K has the
authority to participate in the management and con-
duct of Opco’s business. Opco has investments in
various stocks and bonds of United States corpora-
tions and also owns and manages an office building
in New York. Because K has authority to participate
in the management and conduct of Opco’s business,
its interest in Opco is not a limited partner interest.
Therefore, K will be deemed to be engaged in com-
mercial activities because of attribution of Opco’s
commercial activity, even if K does not actually make
management decisions with regard to Opco’s com-
mercial activity, the operation of the office building.
Accordingly, K is a controlled commercial entity,
and all of its income, including its distributive share
of partnership income from its interest in Opco and
its income from the stocks and bonds it owns directly,
will not be exempt from tax under section 892.
Example 2. ThefactsarethesameasinExam-
ple 1, except that Opco has hired a real estate man-
agement firm to lease offices and manage the office
building. Notwithstanding the fact that an indepen-
dent contractor is performing the activities, Opco will
still be deemed to be engaged in commercial activi-
ties. Accordingly, K is a controlled commercial en-
tity, and all of its income, including its distributive
share of partnership income from its interest in Opco
and its income from the stocks and bonds it owns di-
rectly, will not be exempt from tax under section 892.
Example 3. ThefactsarethesameasinExam-
ple 1, except that K is a member that has no right to
participate in the management and conduct of Opco’s
business. Assume further that K is not otherwise
engaged in commercial activities. Under paragraph
(d)(5)(iii) of this section, Opco’s commercial activi-
ties will not be attributed to K. Accordingly, K will
not be a controlled commercial entity, and its income
derived from the stocks and bonds it owns directly
and the portion of its distributive share of partner-
ship income from its interest in Opco that is derived
November 28, 20118182011–48 I.R.B.

from stocks and bonds will be exempt from tax un-
der section 892. The portion of K’s distributive share
of partnership income from its interest in Opco that
is derived from the operation of the office building
will not be exempt from tax under section 892 and
§1.892–3T(a)(1).
(e)Effective/applicability date.This
section applies on the date these regula-
tions are published as final regulations in
theFederal Register. See §1.892–5(a) as
issued under T.D. 9012 (August 1, 2002)
for rules that apply on or after January 14,
2002, and before the date these regulations
are published as final regulations in the
Federal Register. See §1.892–5T(a) for
rules that apply before January 14, 2002,
and §1.892–5T(b) through (d) for rules that
apply before the date these regulations are
published as final regulations in theFed-
eral Register.
PART 602—OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION
ACT
Par. 4. The authority for part 602 con-
tinues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 5. In §602.101, paragraph (b) is
amended by adding an entry to the table 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.
*****
1.892–5
...........................................................
1545–1053
*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on November 2,
2011, 8:45 a.m., and published in the issue of the Federal
Register for November 3, 2011, 76 F.R. 68110)
Withdrawal of Notice of
Proposed Rulemaking
andNoticeofProposed
Rulemaking
Tax Accounting Elections on
Behalf of Foreign Corporations
REG–114749–09
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Withdrawal of notice of pro-
posed rulemaking and notice of proposed
rulemaking.
SUMMARY: These proposed regulations
would clarify the rules for controlling do-
mestic shareholders to adopt or change a
method of accounting or taxable year on
behalf of a foreign corporation. The reg-
ulations affect United States persons that
own stock in certain foreign corporations.
DATES: Written or electronic comments
and requests for a public hearing must be
received by February 2, 2012.
ADDRESSES: Send submissions to
CC:PA:LPD:PR(REG–114749–09),
Room 5203, Internal Revenue Service, PO
Box 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may
be hand-delivered between the hours of
8a.m. and4p.m. toCC:PA:LPD:PR
(REG–114749–09), Courier’s Desk, Inter-
nal Revenue Service, 1111 Constitution
Avenue NW; Washington DC, 20224 or
sent electronically via the Federal Rule-
making Portal atwww.regulations.gov
(IRS REG–114749–09).
FOR FURTHER INFORMATION
CONTACT:Concerning
submissionofcomments,
Oluwafunmilayo (Funmi) Taylor (202)
622–7180; concerning the regulations,
Joseph W. Vetting (202) 622–3402 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
On April 17, 1991, a notice of pro-
posed rulemaking (INTL–939–86) under
sections 953, 954, 964, 1248, and 6046
of the Internal Revenue Code (Code) was
published in theFederal Register(56 FR
15540) (the 1991 proposed regulations).
No comments were received with respect
to the proposed amendments under section
964, which would provide a special defini-
tion of controlling domestic shareholders
for certain controlled foreign corporations
with insurance income. Comments were
received on other provisions of the 1991
proposed regulations, but no public hear-
ing was requested and none was held.
On July 1, 1992, a notice of pro-
posed rulemaking (INTL–0018–92) un-
der sections 952 and 964 of the Code
was published in theFederal Register
(57 FR 29246). A correction to the notice
of proposed rulemaking was published on
October 8, 1992, in theFederal Register
(57 FR 46355). The proposed regulations
would modify the regulations relating
to required book-to-tax adjustments in
respect of depreciation and inventory
accounting. Comments were received. A
public hearing was not requested and none
was held.
Final regulations published on June 10,
2009 (T.D. 9452, 2009–27 I.R.B. 1) pro-
vided guidance for shareholders of certain
foreign corporations to elect or change a
method of accounting or a taxable year
on behalf of the foreign corporation under
section 964 of the Code.
Explanation of Provisions
These proposed regulations provide
clarification of the required book-to-tax
adjustments, including those in respect of
depreciation and amortization, and addi-
tional examples illustrating the application
of §1.964–1(a) and (c). The proposed reg-
ulations also would delete §1.964–1(b)(3),
Example 2. The example refers to section
963, which was repealed for taxable years
beginning after December 31, 1975. Ad-
ditionally, the proposed regulations pro-
2011–48 I.R.B.819November 28, 2011

vide rules regarding IRS-initiated method
changes.
The Treasury Department and the IRS
again request comments on whether the
special control group definition contained
in the 1991 proposed regulations should be
adopted.
Special Analyses
It has been determined that this no-
tice of proposed rulemaking is not a
significant regulatory action as defined
in Executive Order12866. Therefore,
a regulatory assessment is not required.
It also has been determined that section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply
to these regulations, and because the reg-
ulations do not impose a collection of
information on small entities, the Regu-
latory Flexibility Act (5 U.S.C. chapter
6) does not apply. Pursuant to section
7805(f) of the Internal Revenue Code,
these regulations will be submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
their impact on small businesses.
Comments and Request for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, considera-
tion will be given to any written (a signed
original and eight (8) copies) or electronic
comments that are submitted timely to the
IRS. The IRS and Treasury Department
request comments on the clarity of the
proposed regulations and how they can be
made easier to understand. All comments
will be available for public inspection and
copying atwww.regulations.govor upon
request. A public hearing may be sched-
uled if requested in writing by a person
who timely submits comments. If a public
hearing is scheduled, notice of the date,
time, and place for the hearing will be
published in theFederal Register.
Drafting Information
The principal author of these regula-
tionsisJosephW.Vetting,OfficeofAsso-
ciate Chief Counsel (International). How-
ever, other personnel from the IRS and
Treasury Department participated in their
development.
*****
Withdrawal of Proposed Regulations
Accordingly, under the authority of
26 U.S.C. 7805, the notice of proposed
rulemaking published in theFederal
Registeron July 1, 1992 (57 FR 29246) is
withdrawn.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1-INCOME TAXES
Paragraph. 1. The authority for part 1
continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.964–1 is amended as
follows:
1. Adding a new paragraph (a)(4).
2. In paragraph (b)(3), revising the in-
troductory text, redesignatingExample(1)
asExample, and removingExample (2).
3. Revising the first sentence of para-
graph (c)(1).
4.Revising paragraph (c)(1)(iii)
and removing paragraphs (c)(1)(iii)(a),
(c)(1)(iii)(b), and (c)(1)(iii)(c).
5. Revising paragraph (c)(1)(v).
6. Inserting a sentence after the fourth
sentence of paragraph (c)(2), revising the
fifth sentence of paragraph (c)(2), and
adding a sentence at the end of paragraph
(c)(2).
7. Revising paragraph (c)(8).
8. Adding a new paragraph (c)(9).
9. Revising paragraph (d).
The additions and revisions read as fol-
lows:
§1.964–1 Determination of the earnings
and profits of a foreign corporation.
*****
(a)(4)Example.Therulesofthispara-
graph (a) are illustrated by the following
example.
Example.(i)Facts. P, a domestic corporation,
owns all of the outstanding stock of FX, a controlled
foreign corporation. In preparing its books for pur-
poses of accounting to its shareholders, FX uses an
accounting method (Local Books Method) to deter-
mine the amount of its depreciation expense that does
not conform to accounting principles generally ac-
cepted in the United States (U.S. GAAP) or to U.S.
income tax accounting standards as described in para-
graph (c). The amount of the adjustment necessary
to conform the depreciation expense determined un-
der the Local Books Method with the amount that
would be determined under U.S. GAAP for purposes
of paragraph (a)(1)(ii) of this section if FX were a do-
mestic corporation is not material. However, the ad-
justment necessary to conform the amount of the de-
preciation expense under the Local Books Method to
U.S. income tax accounting standards for purposes of
paragraph (a)(1)(iii) of this section is material.
(ii)Result. Although FX is not required to make
the adjustment necessary to conform the amount of its
tax expense reserve deduction determined under the
Local Books Method to the amount that would be de-
termined under U.S. GAAP, FX is required to make
the adjustment necessary to conform the amount of
the depreciation expense determined under the Local
Books Method to the amount of depreciation expense
for the current year that would be allowed under U.S.
income tax accounting standards as described in para-
graph (c).
(b) * * *
(3)Example. The rules of this para-
graph (b) are illustrated by the following
example.
*****
(c) * * *(1)In general. Except as other-
wise provided in the Code and regulations
(for example, section952(c)(3) (earnings
and profits determined without regard to
section 312(n)(4)-(6) for purposes of sec-
tion 952(c)), the tax accounting standards
to be applied in making the adjustments re-
quired by paragraph (a)(1)(iii) of this sec-
tion shall be those applied to domestic cor-
porations, including but not limited to the
following:
*****
(iii)Depreciation and amortization.
Depreciation and amortization shall be
computed in accordance with the provi-
sions of section 312(k) and the regulations
under that section. In the case of a for-
eign corporation described in section
312(k)(4) (one with less than 20 percent
U.S.-source gross income), depreciation
and amortization of items that are not
described in section 312(k)(2) or (k)(3)
shall be determined under the rules for
determining taxable income. For example,
amortization for amortizable section 197
intangibles (as defined in section 197(c))
is calculated in accordance with section
197, and depreciation for real property
is calculated in accordance with section
168(g)(2)(C)(iii). For any taxable year be-
ginning before July 1, 1972, depreciation
shall be computed in accordance with
section 167 and the regulations under that
section.
*****
(v)Taxable years. The period for com-
putation of taxable income and earnings
November 28, 20118202011–48 I.R.B.

and profits known as the taxable year shall
reflect the provisions of sections 441 and
898 and the regulations under those sec-
tions.
*****
(2)Adoption or change of method
or taxable year. ***Onceadopted,
a method of accounting or taxable year
maybechangedbyoronbehalfofthe
foreign corporation only in accordance
with the applicable provisions of the Code
and regulations. Adjustments to the ap-
propriate separate category (as defined in
§1.904–5(a)(1)) of earnings and profits
and income of the foreign corporation (in-
cluding a category of subpart F income de-
scribed in section 952(a) or, in the case of
foreign base company income, described
in §1.954–1(c)(1)(iii)) shall be required
under section 481 to prevent any duplica-
tion or omission of amounts attributable to
previous years that would otherwise result
from any change in a method of account-
ing. * * * See paragraph (c)(9) of this
section for rules if the change in method of
accounting is required in connection with
an audit of the foreign corporation’s con-
trolling domestic shareholders (as defined
in paragraph (c)(5) of this section).
*****
(8)Examples. The following examples
illustrate the application of paragraph (c)
of this section:
Example 1. P, a domestic corporation, owns all of
the outstanding stock of FX, a controlled foreign cor-
poration organized in 2012. In maintaining its books
for the purpose of accounting to its shareholders, FX
deducts additions to a reserve for bad debts. Assume
that if FX were a domestic corporation, it would be
required to use the specific charge-off method under
section 166 with respect to allowable bad debt losses.
In accordance with paragraph (c)(1)(i) of this section,
FX’s reserve deductions must be adjusted (if the ad-
justments are material) in order to compute its earn-
ings and profits in accordance with U.S. income tax
accounting standards as described in paragraph (c).
Accordingly, P must compute FX’s earnings and prof-
its using the specific charge-off method of accounting
for bad debts in accordance with section 166.
Example 2. FX, a controlled foreign corporation,
maintains its books for the purpose of accounting to
its shareholders by capitalizing research and exper-
imental expenses. A, B, and C, the United States
shareholders (as definedin section 951(b)) of FX,
own 45 percent, 30 percent, and 25 percent, respec-
tively, of its only class of outstanding stock. For the
first taxable year of FX, pursuant to paragraph (c)(3)
of this section, B and C adopt on its behalf the sec-
tion 174 method of currently deducting research and
experimental expenses. Regardless of whether A ob-
jects to this action or receives the notice required by
paragraph (c)(3)(iii) of this section, adjustments must
be made to reflect the use of the section 174 method
in computing the earnings and profits of FX with re-
spect to A as well as with respect to B and C.
Example 3. (i) P, a calendar year domestic corpo-
ration that uses the fair market value method of appor-
tioning interest expense, owns all of the outstanding
stock of FX, a controlled foreign corporation orga-
nized in 2002 that uses the calendar year as its tax-
able year for foreign tax purposes. On June 1, 2012,
FX makes a distribution to P. Prior to that distribu-
tion, none of the significant events specified in para-
graph (c)(6) of this section had occurred. In addition,
neither P nor FX had ever made or adopted, or been
required to make or adopt, an election or method of
accounting or taxable year for United States tax pur-
poses with respect to FX. FX does not act to make
any election or adopt any method of accounting or a
taxable year for United States tax purposes.
(ii) P must compute FX’s earnings and profits for
FX’s 2002 through 2012 taxable years in order to de-
termine if any portion of the 2012 distribution is tax-
able as a dividend and to determine P’s deemed paid
foreign tax credit on such portion under section 902.
Under paragraph (c)(2) of this section, P may make
an election or adopt a method or methods of account-
ing and a taxable year on behalf of FX by satisfying
the requirements of paragraph (c)(3) of this section by
the due date (with extensions) of P’s Federal income
tax return for 2012, its taxable year with which ends
FX’s 2012 taxable year. Under paragraph (c)(4) of
this section, any such election or adoption will gov-
ern the computation of FX’s earnings and profits for
its taxable years beginning in 2002 and subsequent
taxable years for purposes of determining the Federal
income tax liability of P and any subsequent share-
holders of FX in 2012 and subsequent taxable years,
unless the Commissioner consents to a change.
(iii) If P fails to satisfy the requirements under
paragraph (c)(3) of this section and such failure is not
shown to the satisfaction of the Commissioner to be
due to reasonable cause, the earnings and profits of
FX will be computed on the basis of a calendar tax-
able year as if no elections were made and any per-
missible methods of accounting not requiring an elec-
tion and reflected in FX’s books were adopted. Any
subsequent attempt by FX or P to change an account-
ing method or taxable year of FX shall be effective
only if the Commissioner consents to the change.
Example 4. (i) The facts are the same as inExam-
ple 3, except that P owns 80 percent, rather than all,
of the outstanding stock of FX. M, a calendar year
domestic corporation, owns the remaining 20 percent
of the stock of FX beginning in 2002. M uses the tax
book value method to allocate its interest expense un-
der section 864(e)(4).
(ii) M, but not P, must compute FX’s earnings and
profits beginning in 2002 in order to determine the ad-
justment under §1.861–12(c) and §1.861–12T(c) to
M’s basis in the stock of FX for M’s 2002 through
2011 taxable years. Because P, the controlling do-
mestic shareholder of FX, has not made or adopted,
or been required to make or adopt, an election or a
method of accounting or taxable year with respect to
FX, the earnings and profits of FX for 2002 through
2011 will be computed on the basis of a calendar tax-
able year as if no elections were made and any per-
missible methods of accounting not requiring an elec-
tion and reflected in FX’s books were adopted. How-
ever, a properly filed, timely election or adoption of a
method of accounting or taxable year by, or on behalf
of, FX with respect to FX’s taxable year ending in
2012, when FX’s earnings and profits are first signif-
icant for United States tax purposes for P, FX’s con-
trolling domestic shareholder, shall not be treated as
a change in accounting method or a change in tax-
able year for any pre–2012 taxable year of FX. M will
not be required to recompute its basis adjustments
for 2002 through 2011 by reason of P’s adoption of
a method or methods of accounting or taxable year
with respect to FX for 2012. See paragraph (c)(4)(iii)
of this section. However, any method of accounting
or taxable year adopted on behalf of FX by P pursuant
to this paragraph (c) with respect to FX is binding on
P, FX, and M for purposes of computing FX’s earn-
ings and profits in 2002 and subsequent taxable years
for purposes of determining the Federal income tax
liability of P, M, and any subsequent shareholders of
FX in 2012 and subsequent taxable years, unless the
Commissioner consents to a change.
Example 5. (i) In 1987, P, a calendar year domes-
tic corporation that uses the tax book value method to
allocate its interest expense under section 864(e)(4),
acquired 50 percent of the outstanding stock of 10/50
Corp, a noncontrolled section 902 corporation orga-
nized in 1980. For taxable years beginning on or be-
fore April 25, 2006, the provisions of this paragraph
(c) did not provide a mechanism for shareholders of
noncontrolled section 902 corporations to make elec-
tions or adopt methods of accounting or a taxable year
on behalf of noncontrolled section 902 corporations.
However, P had to compute 10/50 Corp’s earnings
and profits in order to determine the adjustment un-
der §1.861–12(c) and §1.861–12T(c) to P’s basis in
the stock of 10/50 Corp beginning with P’s 1987 tax-
able year.
(ii) For taxable years beginning on or before
April 25, 2006, P was required to compute 10/50
Corp’s earnings and profits as if any permissible
method of accounting not requiring an election and
reflected in 10/50 Corp’s books had been adopted.
See paragraph (c)(4)(ii) of this section. In taxable
years beginning after April 25, 2006, in accordance
with paragraph (c)(3) of this section P may request
the consent of the Commissioner to change any
method of accounting or the taxable year on behalf
of 10/50 Corp.
(9)Change of method on audit.If,
in connection with an audit (or audits)
of one or more shareholders of the for-
eign corporation who collectively would
constitute the foreign corporation’s con-
trolling domestic shareholder(s) if they
undertook to act on the corporation’s be-
half, the Commissioner determines that
a method of accounting of the foreign
corporation does not clearly reflect in-
come, the computation of earnings and
profits shall be made in a manner which,
in the opinion of the Commissioner, does
clearly reflect income. See section 446
and the related regulations. The Commis-
sioner shall provide written notice of the
change in method of accounting to each
such shareholder and to all other persons
2011–48 I.R.B.821November 28, 2011

known by the Commissioner to be do-
mestic shareholders who own (within the
meaningofsection958(a))stockofthe
foreign corporation. However, the fail-
ure of the Commissioner to provide such
notice to any such other person shall not
invalidate the change of method, which
shall bind both the foreign corporation and
all of its domestic shareholders as to the
computation of the foreign corporation’s
earnings and profits for the taxable year
of the foreign corporation for which the
method of accounting is changed and in
subsequent taxable years unless the Com-
missioner consents to a change.
(d)Effective/applicability date.This
section applies in computing earnings and
profits of foreign corporations in taxable
years of foreign corporations beginning on
or after the date of publication of these
regulations as final regulations in theFed-
eral Register, and taxable years of share-
holders with or within which such taxable
years of the foreign corporations end. See
26 CFR §1.964–1 (revised as of April 1,
2011) for rules applicable to taxable years
beginning before such date.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on November 3,
2011, 8:45 a.m., and published in the issue of the Federal
Register for November 4, 2011, 76 F.R. 68370)
Withdrawal of a
Manufacturer’s Right to
Provide Certifications Under
the Qualifying Nonbusiness
Energy Property Credit of
Section 25C
Announcement 2011–73
This announcement withdraws the right
of a manufacturer, Weld Rite, Inc., to cer-
tify that its hydronic outdoor wood-burn-
ing furnaces qualify for the nonbusiness
energy property credit under § 25C of the
Internal Revenue Code.
SECTION 1. BACKGROUND
Section 25C provides a tax credit to in-
dividuals for nonbusiness energy property.
Section 25C(a) allows a credit for the tax-
able year in an amount equal to: (1) 10
percent of the amount paid or incurred for
qualified energy efficiency improvements
installed during such taxable year; and (2)
the amount of the residential energy prop-
erty expenditures paid or incurred during
such taxable year.
Under § 25C(d)(1), the residential en-
ergy property expenditures are expendi-
tures made by the taxpayer for qualified
energy property which the taxpayer installs
on or in connection with a dwelling unit lo-
cated in the United States that the taxpayer
owns and uses as the taxpayer’s principal
residence (within the meaning of § 121),
and that the taxpayer originally placed in
service.
Section 25C(d)(2)(A)(i) provides that
qualified energy property includes energy-
efficient building property.
Under § 25C(d)(3)(E), energy-efficient
building property includes, among others,
a stove which uses the burning of biomass
fuel to heat a dwelling unit located in the
United States and used as a residence by
the taxpayer, or to heat water for use in
such a dwelling unit, and which has a ther-
mal efficiency rating of at least 75 percent.
For property placed in service after De-
cember 31, 2008, and prior to January 1,
2011, the law also required that the ther-
mal efficiency rating of at least 75 percent
be measured using a lower heating value.
On June 22, 2009, the Internal Rev-
enue Service (“Service”) issued Notice
2009–53, 2009–25 I.R.B. 1095, to provide
procedures that manufacturers may fol-
low to certify property as qualified energy
property, as well as guidance regarding the
conditions under which taxpayers seeking
a credit may rely on a manufacturer’s cer-
tification.
Section 6.01 of the notice allows a
manufacturer to provide the certification
by including a written copy of the state-
ment with the packaging of the property,
in printable form on the manufacturer’s
website, or in any other manner that will
permit the taxpayer to retain the certifi-
cation statement for tax recordkeeping
purposes.
Section 6.02 of the notice provides that
a taxpayer may rely on a manufacturer’s
certification that energy property is quali-
fied energy property except as provided in
sections 6.03 and 6.08 of the notice.
Section 6.03 of the notice does not
apply to qualified energy property. Pur-
suant to section 6.08 of the notice, the
Servicemay,uponexamination(andaf-
ter any appropriate consultation with the
Department of Energy or Environmental
Protection Agency), determine that prop-
erty that has been certified under section 6
of the notice is not qualified energy prop-
erty. In that event, or if the manufacturer
of the property fails to satisfy the require-
ments relating to documentation in section
6.07 of the notice, the manufacturer’s right
to provide a certification on which future
purchasers of the property can rely will
be withdrawn, and taxpayers purchasing
the property after the date on which the
Service publishes an announcement of the
withdrawal may not rely on the manufac-
turer’s certification.
SECTION 2. WITHDRAWAL OF THE
MANUFACTURER’S RIGHT
Weld Rite, Inc. (“Weld”) manufactures
certain hydronic outdoor wood-burning
furnaces, sold under the name of “Shaver
Wood Burning Furnace” (“Furnace”).
Pursuant to Notice 2009–53, Weld pro-
vided certification to its consumers that
the Furnace uses the burning of biomass
fuel to heat a dwelling unit or to heat hot
water for use in such a dwelling unit and
has efficiency ratings of at least 75% as
measured using a lower heating value.
The manufacturer certified that the Fur-
nace constitutes qualified energy property
under § 25C.
The Service, upon examination, deter-
mined that the Furnace is not qualified en-
ergy property. Specifically, the Service
found that the Furnace failed to meet the
efficiency ratings of at least 75% as mea-
sured using a lower heating value. Accord-
ingly, as of August 17, 2011, the Service
withdraws the manufacturer’s right to pro-
vide a certification on which future pur-
chasers of the Furnace can rely. This with-
drawal applies to the following Furnace
models: Shaver Pro Series 165, 250, 290
and 340. Taxpayers purchasing the Fur-
nace after the date of the publication of this
announcement of the withdrawal may not
rely on Weld’s certification.
The Service may impose penalties un-
der § 7206 or § 6701 on Weld if Weld con-
tinues to provide the erroneous certifica-
tion to purchasers of the Furnace after Au-
gust 17, 2011.
November 28, 20118222011–48 I.R.B.

SECTION 3. DRAFTING
INFORMATION
The principal author of this announce-
ment is Martha McRee of the Office of
Associate Chief Counsel (Passthroughs
& Special Industries).For further
information regarding this announcement,
contact Ms. McRee at (202) 622–3110
(not a toll-free call).
Effect of Election on
Corporation
Announcement 2011–75
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Withdrawal of notice of pro-
posed rulemaking.
SUMMARY: This document withdraws
theproposedregulationseekingtoclarify
thatifabankisanScorporationwithinthe
meaning of section 1361(a)(1), its status
as an S corporation does not affect the
applicability of the special rules for banks
under the Internal Revenue Code.
FOR FURTHER INFORMATION
CONTACT: Laura Fields at (202)
622–3050 (not a toll-free number).
SUPPLEMENTAL INFORMATION:
Background
On August 24, 2006, the Treasury De-
partment and the IRS published in the
Federal Register(71 FR 50007) a no-
tice of proposed rulemaking under section
1363 (REG–158677–05, 2007–1 C.B.
975), relating to the applicability of the
special banking rules to banks that are
S corporations within the meaning of
section 1361(a)(1) of the Internal Revenue
Code.
The Treasury Department and the IRS
received written comments on the pro-
posed regulation from various interested
parties. The Treasury Department and the
IRS have decided to withdraw the pro-
posed regulation.
*****
Withdrawal of Notice of Proposed
Rulemaking
Accordingly, under the authority of
26 U.S. C. 7805, the notice of proposed
rulemaking (REG–158677–05) that was
published in theFederal Registeron
August 24, 2006 (71 FR 50007) is
withdrawn.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on October 25,
2011, 8:45 a.m., and published in the issue of the Federal
Register for October 26, 2011, 76 F.R. 66239)
2011–48 I.R.B.823November 28, 2011

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 ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
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 published position. (Compare
withamplifiedandclarified, 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 rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
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 rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings 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 fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
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—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
November 28, 2011i2011–48 I.R.B.

Numerical Finding List
1
Bulletins 2011–27 through 2011–48
Announcements:
2011-37, 2011-27 I.R.B.37
2011-38, 2011-28 I.R.B.45
2011-39, 2011-28 I.R.B.46
2011-40, 2011-29 I.R.B.56
2011-41, 2011-28 I.R.B.47
2011-42, 2011-32 I.R.B.138
2011-43, 2011-35 I.R.B.198
2011-44, 2011-33 I.R.B.164
2011-45, 2011-34 I.R.B.178
2011-46, 2011-34 I.R.B.178
2011-47, 2011-34 I.R.B.178
2011-48, 2011-36 I.R.B.227
2011-49, 2011-36 I.R.B.228
2011-50, 2011-38 I.R.B.409
2011-51, 2011-38 I.R.B.409
2011-52, 2011-38 I.R.B.409
2011-53, 2011-38 I.R.B.409
2011-54, 2011-38 I.R.B.409
2011-55, 2011-38 I.R.B.409
2011-56, 2011-38 I.R.B.409
2011-57, 2011-38 I.R.B.409
2011-58, 2011-38 I.R.B.410
2011-59, 2011-37 I.R.B.335
2011-61, 2011-39 I.R.B.453
2011-62, 2011-40 I.R.B.483
2011-63, 2011-41 I.R.B.503
2011-64, 2011-41 I.R.B.503
2011-65, 2011-44 I.R.B.691
2011-66, 2011-44 I.R.B.691
2011-67, 2011-44 I.R.B.691
2011-68, 2011-44 I.R.B.691
2011-69, 2011-44 I.R.B.691
2011-70, 2011-45 I.R.B.715
2011-71, 2011-46 I.R.B.770
2011-72, 2011-47 I.R.B.796
2011-73, 2011-48 I.R.B.822
2011-74, 2011-47 I.R.B.796
2011-75, 2011-48 I.R.B.823
Notices:
2011-47, 2011-27 I.R.B.34
2011-50, 2011-27 I.R.B.35
2011-51, 2011-27 I.R.B.36
2011-52, 2011-30 I.R.B.60
2011-53, 2011-32 I.R.B.124
2011-54, 2011-29 I.R.B.53
2011-55, 2011-29 I.R.B.53
2011-56, 2011-29 I.R.B.54
2011-57, 2011-31 I.R.B.84
2011-58, 2011-31 I.R.B.85
2011-59, 2011-31 I.R.B.86
Notices— Continued:
2011-60, 2011-31 I.R.B.90
2011-61, 2011-31 I.R.B.91
2011-62, 2011-32 I.R.B.126
2011-63, 2011-34 I.R.B.172
2011-64, 2011-37 I.R.B.231
2011-65, 2011-34 I.R.B.173
2011-66, 2011-35 I.R.B.184
2011-67, 2011-34 I.R.B.174
2011-68, 2011-36 I.R.B.205
2011-69, 2011-39 I.R.B.445
2011-70, 2011-32 I.R.B.135
2011-71, 2011-37 I.R.B.233
2011-72, 2011-38 I.R.B.407
2011-73, 2011-40 I.R.B.474
2011-74, 2011-41 I.R.B.496
2011-75, 2011-40 I.R.B.475
2011-76, 2011-40 I.R.B.479
2011-78, 2011-41 I.R.B.497
2011-79, 2011-41 I.R.B.498
2011-80, 2011-43 I.R.B.591
2011-81, 2011-42 I.R.B.513
2011-82, 2011-42 I.R.B.516
2011-83, 2011-43 I.R.B.593
2011-84, 2011-43 I.R.B.595
2011-85, 2011-44 I.R.B.605
2011-86, 2011-45 I.R.B.698
2011-87, 2011-45 I.R.B.699
2011-88, 2011-46 I.R.B.748
2011-89, 2011-46 I.R.B.748
2011-90, 2011-47 I.R.B.791
2011-91, 2011-47 I.R.B.792
2011-92, 2011-48 I.R.B.809
2011-93, 2011-48 I.R.B.810
Proposed Regulations:
REG-128224-06, 2011-42 I.R.B.533
REG-146537-06, 2011-48 I.R.B.813
REG-137128-08, 2011-28 I.R.B.43
REG-140280-09, 2011-45 I.R.B.709
REG-114749-09, 2011-48 I.R.B.819
REG-146297-09, 2011-47 I.R.B.795
REG-112805-10, 2011-40 I.R.B.482
REG-120391-10, 2011-39 I.R.B.451
REG-125592-10, 2011-32 I.R.B.137
REG-125949-10, 2011-45 I.R.B.712
REG-131491-10, 2011-36 I.R.B.208
REG-133002-10, 2011-46 I.R.B.766
REG-140038-10, 2011-42 I.R.B.537
REG-109006-11, 2011-37 I.R.B.334
REG-101352-11, 2011-30 I.R.B.75
REG-111283-11, 2011-42 I.R.B.573
REG-116284-11, 2011-43 I.R.B.598
REG-118809-11, 2011-33 I.R.B.162
REG-122813-11, 2011-35 I.R.B.197
REG-126519-11, 2011-39 I.R.B.452
Revenue Procedures:
2011-38, 2011-30 I.R.B.66
2011-39, 2011-30 I.R.B.68
2011-40, 2011-37 I.R.B.235
2011-41, 2011-35 I.R.B.188
2011-42, 2011-37 I.R.B.318
2011-43, 2011-37 I.R.B.326
2011-44, 2011-39 I.R.B.446
2011-45, 2011-39 I.R.B.449
2011-46, 2011-42 I.R.B.518
2011-47, 2011-42 I.R.B.520
2011-48, 2011-42 I.R.B.527
2011-49, 2011-44 I.R.B.608
2011-50, 2011-44 I.R.B.628
2011-51, 2011-44 I.R.B.669
2011-52, 2011-45 I.R.B.701
2011-53, 2011-46 I.R.B.749
2011-54, 2011-46 I.R.B.759
2011-55, 2011-47 I.R.B.793
Revenue Rulings:
2011-14, 2011-27 I.R.B.31
2011-15, 2011-30 I.R.B.57
2011-16, 2011-32 I.R.B.93
2011-17, 2011-33 I.R.B.160
2011-18, 2011-39 I.R.B.428
2011-19, 2011-36 I.R.B.199
2011-20, 2011-36 I.R.B.202
2011-21, 2011-40 I.R.B.458
2011-22, 2011-41 I.R.B.489
2011-23, 2011-43 I.R.B.585
2011-24, 2011-41 I.R.B.485
2011-25, 2011-45 I.R.B.695
2011-26, 2011-48 I.R.B.803
2011-27, 2011-48 I.R.B.805
Treasury Decisions:
9527, 2011-27 I.R.B.1
9528, 2011-28 I.R.B.38
9529, 2011-30 I.R.B.57
9530, 2011-31 I.R.B.77
9531, 2011-31 I.R.B.79
9532, 2011-32 I.R.B.95
9533, 2011-33 I.R.B.139
9534, 2011-33 I.R.B.144
9535, 2011-39 I.R.B.415
9536, 2011-39 I.R.B.426
9537, 2011-35 I.R.B.181
9538, 2011-37 I.R.B.229
9539, 2011-35 I.R.B.179
9540, 2011-38 I.R.B.341
9541, 2011-39 I.R.B.438
9542, 2011-39 I.R.B.411
9543, 2011-40 I.R.B.470
9544, 2011-40 I.R.B.458
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2011–1 through 2011–26 is in Internal Revenue Bulletin
2011–26, dated June 27, 2011.
2011–48 I.R.B.iiNovember 28, 2011

Treasury Decisions— Continued:
9545, 2011-41 I.R.B.490
9546, 2011-42 I.R.B.505
9547, 2011-43 I.R.B.580
9548, 2011-46 I.R.B.716
9549, 2011-46 I.R.B.718
9550, 2011-47 I.R.B.785
9551, 2011-47 I.R.B.774
9552, 2011-47 I.R.B.783
9553, 2011-48 I.R.B.806
November 28, 2011iii2011–48 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2011–27 through 2011–48
Announcements:
2007-47
Updated and superseded by
Ann. 2011-59, 2011-37 I.R.B.335
Notices:
2002-1
Amplified by
Notice 2011-86, 2011-45 I.R.B.698
2006-101
Amplified and superseded by
Notice 2011-64, 2011-37 I.R.B.231
2007-93
Obsoleted by
T.D. 9545, 2011-41 I.R.B.490
2010-23
Modified and supplemented by
Notice 2011-54, 2011-29 I.R.B.53
2010-77
Modified by
Notice 2011-85, 2011-44 I.R.B.605
2010-81
Amended and supplemented by
Notice 2011-63, 2011-34 I.R.B.172
2010-88
Modified by
Ann. 2011-40, 2011-29 I.R.B.56
2010-90
Modified by
Notice 2011-85, 2011-44 I.R.B.605
Proposed Regulations:
REG-118761-09
Hearing scheduled by
Ann. 2011-38, 2011-28 I.R.B.45
REG-151687-10
Hearing scheduled by
Ann. 2011-48, 2011-36 I.R.B.227
REG-158677-05
Withdrawn by
Ann. 2011-75, 2011-48 I.R.B.823
Revenue Procedures:
72-36
Amplified and modified by
Rev. Proc. 2011-42, 2011-37 I.R.B.318
2004-29
Amplified and modified by
Rev. Proc. 2011-42, 2011-37 I.R.B.318
Revenue Procedures— Continued:
2005-16
Modified and superseded by
Rev. Proc. 2011-49, 2011-44 I.R.B.608
2006-56
Modified and amplified by
Rev. Proc. 2011-46, 2011-42 I.R.B.518
2007-35
Amplified and modified by
Rev. Proc. 2011-42, 2011-37 I.R.B.318
2008-24
Modified and superseded by
Rev. Proc. 2011-38, 2011-30 I.R.B.66
2008-32
Superseded by
Rev. Proc. 2011-39, 2011-30 I.R.B.68
2010-33
Superseded by
Rev. Proc. 2011-50, 2011-44 I.R.B.628
2010-37
Superseded by
Rev. Proc. 2011-51, 2011-44 I.R.B.669
2010-39
Amplified, modified, and superseded by
Rev. Proc. 2011-47, 2011-42 I.R.B.520
2011-4
Modified by
Rev. Proc. 2011-44, 2011-39 I.R.B.446
2011-6
Modified by
Rev. Proc. 2011-49, 2011-44 I.R.B.608
2011-8
Modified by
Rev. Proc. 2011-49, 2011-44 I.R.B.608
2011-14
Modified by
Rev. Proc. 2011-43, 2011-37 I.R.B.326
2011-24
Obsoleted by
Notice 2011-92, 2011-48 I.R.B.809
2011-35
Amplified and modified by
Rev. Proc. 2011-42, 2011-37 I.R.B.318
Revenue Rulings:
58-225
Obsoleted by
Rev. Rul. 2011-15, 2011-30 I.R.B.57
92-19
Supplemented in part by
Rev. Rul. 2011-23, 2011-43 I.R.B.585
Revenue Rulings— Continued:
2007-28
Superseded by
Rev. Rul. 2011-26, 2011-48 I.R.B.803
2010-30
Supplemented and superseded by
Rev. Rul. 2011-27, 2011-48 I.R.B.805
Treasury Decisions:
9527
Corrected by
Ann. 2011-49, 2011-36 I.R.B.228
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2011–1 through 2011–26 is in Internal Revenue Bulletin 2011–26, dated June 27, 2011.
2011–48 I.R.B.ivNovember 28, 2011

INDEX
Internal Revenue Bulletins 2011–27 through
2011–48
The abbreviation and number in parenthesis following the index entry
refer to the specific item; numbers in roman and italic type following
the parentheses refer to the Internal Revenue Bulletin in which the item
may be found and the page number on which it appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Amendment to rules relating to internal claims and ap-
peals and external review processes (TD 9532) 32,95;
(REG–125592–10) 32,137
Determination letters, user fees (Notice 86) 45,698
Full funding limitations, weighted average interest rates, seg-
ment rates for:
July 2011 (Notice 59) 31,86
August 2011 (Notice 67) 34,174
September 2011 (Notice 75) 40,475
October 2011 (Notice 84) 43,595
November 2011 (Notice 93) 48,810
Group health plans and health insurance issuers relating
to coverage of preventive services (TD 9541) 39,438;
(REG–120391–10) 39,451
Letter rulings, church plans (RP 44) 39,446
Limitations on benefits and contributions, cost-of-living adjust-
ments (Notice 90) 47,791
Nonbank trustees and custodians (Ann 59) 37,335
Pre-approved plans, opinion and advisory letters (RP 49) 44,608
Proposed Regulations:
26 CFR 54.9815–2713T, amended; group health plans and
health insurance issuers relating to coverage of preventive
services (REG–120391–10) 39,451
26 CFR 54.9815–2715, added; 602.101(b), amended; sum-
mary of benefits and coverage and uniform glossary
for group health plans and health insurance coverage
(REG–140038–10) 42,537
26 CFR 54.9815–2719, amended; rules relating to inter-
nal claims and appeals and external review processes
(REG–125592–10) 32,137
EMPLOYEE PLANS—Cont.
Regulations:
26 CFR 54.9815–2713, amended; group health plans and
health insurance issuers relating to coverage of preventive
services (TD 9541) 39,438
26 CFR 54.9815–2719T, amended; rules relating to inter-
nal claims and appeals and external review processes (TD
9532) 32,95
26 CFR 301.7502–1, amended; timely mailing treated as
timely filing (TD 9543) 40,470
Statutory hybrid plans, interest crediting rates (Notice 85) 44,
605
Summary of benefits and coverage and uniform glossary
for group health plans and health insurance coverage
(REG–140038–10) 42,537
Timely mailing treated as timely filing (TD 9543) 40,470
EMPLOYMENT TAX
Proposed Regulations:
26 CFR 301.6402–2 thru –4, amended; claims for credit or
refund (REG–137128–08) 28,43
Publication:
4436, General Rules and Specifications for Substitute Form
941, Schedule B (Form 941) and Schedule R (Form 941),
revised (RP 39) 30,68
Regulations:
26 CFR 301.7502–1, amended; timely mailing treated as
timely filing (TD 9543) 40,470
Section 6402 claims for credit or refund (REG–137128–08) 28,
43
Substitute Form 941, Schedule B (Form 941), and Schedule R
(Form 941) general rules and specifications (RP 39) 30,68
Timely mailing treated as timely filing (TD 9543) 40,470
Voluntary classification settlement program (VCSP) (Ann 64)
41,503
Withholding on payments by government entities to persons pro-
viding property or services, hearing for REG–151687–10 (Ann
48) 36,227
ESTATE TAX
Automatic five-month extensions for certain pass-through enti-
ties (TD 9531) 31,79
Cost-of-living adjustments for inflation for 2012 (RP 52) 45,701
Due dates for filing Forms 706, 706-NA, or 8939, extension of
time to pay estate tax, and penalty relief for recipients of prop-
erty acquired from decedents who died in 2010 (Notice 76) 40,
479
Electing portability of a deceased spousal unused exclusion
amount (Notice 82) 42,516
Election to apply the rules under section 1022 of the Code (Notice
66) 35,184
Procedures for section 2053 protective claims for refund (RP 48)
42,527
November 28, 2011v2011–48 I.R.B.

ESTATE TAX—Cont.
Regulations:
26 CFR 1.170A–12, amended; 1.170A–12T, removed;
1.642(c)–6, amended; 1.642(c)–6T, removed; 1.664–1,
–2, –4, –4A, amended; 1.664–4T, removed; 1.7520–1,
amended; 1.7520–1T, removed; 20.2031–7, –7A, amended;
20.2031–7T, removed; 20.2055–2, amended; 20.2055–2T,
removed; 20.2056A–4, amended; 20.2056A–4T, removed;
20.7520–1, amended; 20.7520–1T, removed; 25.2512–5,
–5A, amended; 25.2512–5T, removed; 25.2522(c)–3,
amended; 25.2522(c)–3T, removed; 25.7520–1, –3,
amended; 25.7520–1T, –3T, removed; use of actuarial
tables in valuing annuities, interests for life or terms of
years, and remainder or reversionary interest (TD 9540)
38,341
26 CFR 1.6081–2, –6, added; 1.6081–2T, –6T, added;
54.6081–1, removed; automatic five-month extensions for
certain pass-through entities (TD 9531) 31,79
26 CFR 301.7502–1, amended; timely mailing treated as
timely filing (TD 9543) 40,470
Safe harbor guidance with respect to section 1022 of the Code
(RP 41) 35,188
Timely mailing treated as timely filing (TD 9543) 40,470
Use of actuarial tables in valuing annuities, interests for life terms
of years, and remainder or reversionary interests (TD 9540) 38,
341
Valuation of certain farm, etc.,real property under section 2032A
(RR 17) 33,160
EXCISE TAX
Air transportation, aviation fuels (Notice 69) 39,445
Amendment to rules relating to internal claims and ap-
peals and external review processes (TD 9532) 32,95;
(REG–125592–10) 32,137
Branded prescription drug fee (TD 9544) 40,458;
(REG–112805–10) 40,482
Cost-of-living adjustments for inflation for 2012 (RP 52) 45,701
Disregarded entities, excisetaxes and employment taxes (TD
9553) 48,806
Group health plans and health insurance issuers relating
to coverage of preventive services (TD 9541) 39,438;
(REG–120391–10) 39,451
Guidance for the 2012 fee year, branded prescription drug fee
(Notice 92) 48,809
Highway use tax, filing and payment (TD 9537) 35,181;
(REG–122813–11) 35,197
Proposed Regulations:
26 CFR 1.150–1, amended; 1.171–1, amended; 1.197–2,
amended; 1.249–1, amended; 1.475(a)–4, amended;
1.860G–2, amended; 1.1001–3, amended; 48.4101–1,
amended; removal of regulatory references to credit rat-
ings pursuant to section 939A of the Dodd-Frank Act
(REG–118809–11) 33,162
26 CFR 41.6001–2, amended; 41.6071(a)–1, amended;
41.6151(a)–1, amended; highway use tax, filing and pay-
ment (REG–122813–11) 35,197
EXCISE TAX—Cont.
26 CFR 51, added; branded prescription drug fee
(REG–112805–10) 40,482
26 CFR 54.9815–2713T, amended; group health plans and
health insurance issuers relating to coverage of preventive
services (REG–120391–10) 39,451
26 CFR 54.9815–2715, added; 602.101(b), amended; sum-
mary of benefits and coverage and uniform glossary
for group health plans and health insurance coverage
(REG–140038–10) 42,537
26 CFR 54.9815–2719T, amended; rules relating to inter-
nal claims and appeals and external review processes
(REG–125592–10) 32,137
Regulations:
26 CFR 1.150–1, amended; 1.150–1T, added; 1.171–1,
amended; 1.171–1T, added; 1.197–2, amended; 1.197–2T,
added; 1.249–1, amended; 1.249–1T, added; 1.475(a)–4,
amended; 1.475(a)–4T, added; 1.860G–2, amended;
1.860G–2T, added; 1.1001–3, amended; 1.1001–3T, added;
48.4101–1, –1T, amended; removal of regulatory refer-
ences to credit ratings pursuant to section 939A of the
Dodd-Frank Act (TD 9533) 33,139
26 CFR 41.6001–2, amended; 41.6001–2T, added;
41.6071(a)–1, amended;41.6071(a)–1T, added;
41.6151(a)–1, amended; 41.6151(a)–1T, added; highway
use tax, filing and payment (TD 9537) 35,181
26 CFR 51, added; 602.101, amended; branded prescription
drug fee (TD 9544) 40,458
26 CFR 54.9815–2713T, amended; group health plans and
health insurance issuers relating to coverage of preventive
services (TD 9541) 39,438
26 CFR 54.9815–2719T, amended; rules relating to inter-
nal claims and appeals and external review processes (TD
9532) 32,95
26 CFR 301.7502–1, amended; timely mailing treated as
timely filing (TD 9543) 40,470
26 CFR 301.7701–2, amended; 301.7701–2T, removed; dis-
regarded entities, excise taxes and employment taxes (TD
9553) 48,806
Removal of regulatory references to credit ratings pursuant to
section 939A of the Dodd-Frank Act (TD 9533) 33,139;
(REG–118809–11) 33,162
Rules relating to internal claims and appeals and external review
processes (REG–125592–10) 32,137
Shared responsibility for employers regarding health coverage,
request for comments (Notice 73) 40,474
Summary of benefits and coverage and uniform glossary
for group health plans and health insurance coverage
(REG–140038–10) 42,537
Timely mailing treated as timely filing (TD 9543) 40,470
EXEMPT ORGANIZATIONS
Community health needs assessment requirements for tax-ex-
empt hospitals, request for comments (Notice 52) 30,60
2011–48 I.R.B.viNovember 28, 2011

EXEMPT ORGANIZATIONS—Cont.
Elimination of the advance ruling process for new organizations
and change in public support computation period (TD 9549)
46,718
Form 990, Schedule H, Part V, Section B, optional for 2010 tax
year (Ann 37) 27,37
Regulations:
26 CFR 1.170A–9, amended; 1.170A–9T, removed; 1.507–2,
amended; 1.507–2T, removed; 1.509(a)–3, amended;
1.509(a)–3T, removed; 1.6033–2, amended; 1.6033–2T,
removed; 1.6043–3, amended; 1.6043–3T, removed;
602.101, amended; implementation of Form 990 (TD
9549) 46,718
26 CFR 301.7502–1, amended; timely mailing treated as
timely filing (TD 9543) 40,470
Revocations (Ann 39) 28,46; (Ann 45) 34,178; (Ann 63) 41,
503; (Ann 70) 45,715; (Ann 72) 47,796
Timely mailing treated as timely filing (TD 9543) 40,470
GIFT TAX
Cost-of-living adjustments for inflation for 2012 (RP 52) 45,701
Regulations:
26 CFR 1.170A–12, amended; 1.170A–12T, removed;
1.642(c)–6, amended; 1.642(c)–6T, removed; 1.664–1,
–2, –4, –4A, amended; 1.664–4T, removed; 1.7520–1,
amended; 1.7520–1T, removed; 20.2031–7, –7A, amended;
20.2031–7T, removed; 20.2055–2, amended; 20.2055–2T,
removed; 20.2056A–4, amended; 20.2056A–4T, removed;
20.7520–1, amended; 20.7520–1T, removed; 25.2512–5,
–5A, amended; 25.2512–5T, removed; 25.2522(c)–3,
amended; 25.2522(c)–3T, removed; 25.7520–1, –3,
amended; 25.7520–1T, –3T, removed; use of actuarial
tables in valuing annuities, interests for life or terms of
years, and remainder or reversionary interest (TD 9540)
38,341
26 CFR 301.7502–1, amended; timely mailing treated as
timely filing (TD 9543) 40,470
Timely mailing treated as timely filing (TD 9543) 40,470
Use of actuarial tables in valuing annuities, interests for life terms
of years, and remainder or reversionary interests (TD 9540) 38,
341
INCOME TAX
Adopting a method of accounting or taxable year on behalf of a
foreign corporation (REG–114749–09) 48,819
Automatic five-month extensions for certain pass-through enti-
ties (TD 9531) 31,79
Basis of stock (Notice 56) 29,54
Bonds, tribal economic development bonds (Ann 71) 46,770
Capitalization of electric utility transmission and distribution
property, safe-harbor method (RP 43) 37,326
Certain enrolled retirement plan agents not required to obtain a
PTIN (Notice 91) 47,792
Chapter 4 implementation (Notice 53) 32,124
INCOME TAX—Cont.
Consumer Price Index (CPI) adjustments, certain loans under
section 1274A, 2012 (RR 27) 48,805
Continuing education providers, request for comments (Notice
61) 31,91
Corporate reorganizations, distributions under sections
368(a)(1)(D) and 354(b)(1)(B), correction to TD 9475 (Ann
43) 35,198
Cost-of-living adjustments for inflation for 2012 (RP 52) 45,701
Creditability of foreign levy (RR 19) 36,199
Credits:
Carbon dioxide sequestration, 2011 inflation adjustment (No-
tice 50) 27,35
Credit for increasing research activities: (TD 9528) 28,38
Election to claim the reduced research credit (TD 9539) 35,
179
Enhanced oil recovery credit, 2011 inflation adjustment (No-
tice 57) 31,84
Health insurance premium tax credit (REG–131491–10) 36,
208
Low-income housing credit:
Relief for Alabama (Notice 65) 34,173
Relief for Missouri disasters (Notice 47) 27,34
Relief for New York (Notice 87) 45,699
Relief for North Dakota (Notice 60) 31,90
Relief for Pennsylvania (Notice 83) 43,593
Relief for Vermont (Notice 74) 41,496
Declaratory judgement suits (Ann 46) 34,178; (Ann 47) 34,178;
(Ann 50) 38,409; (Ann 51) 38,409; (Ann 52) 38,409;(Ann
53) 38,409; (Ann 54) 38,409; (Ann 55) 38,409; (Ann 56) 38,
409;(Ann57)38,409; (Ann 58) 38,410; (Ann 65) 44,691;
(Ann 66) 44,691;(Ann67)44,691; (Ann 68) 44,691
Deductions:
Qualified film and television production costs:
Changes made by the American Jobs Creation Act of 2004
and the Gulf Opportunity Zone Act of 2005 (TD 9551)
47,774
Changes made by the Tax Extenders and Alternative
Minimum Tax Relief Act of 2008 (TD 9552) 47,783;
(REG–146297–09) 47,795
Deferred losses on property between members of a controlled
group, hearing (Ann 38) 28,45
Determination of basis in specified U.S. property acquired by a
controlled foreign corporation in certain nonrecognition trans-
actions (TD 9530) 31,77
Determining the amount of taxes paid for purposes of section 901
(TD 9536) 39,426; (REG–126519–11) 39,452
Disallowance of convention expenses, North American geo-
graphical area (RR 26) 48,
803
Disciplinary actionsinvolving attorneys,certified public accoun-
tants, enrolled agents, and enrolled actuaries (Ann 41) 28,47;
(Ann 44) 33,164;(Ann61)39,453; (Ann 74) 47,796
Disregarded entities, excisetaxes and employment taxes (TD
9553) 48,806
Documentation requirements under section 6050W for U.S. pay-
ors making payment outside the U.S. to an offshore account
(Notice 71) 37,233
November 28, 2011vii2011–48 I.R.B.

INCOME TAX—Cont.
Domestic production activities deduction (RR 24) 41,485
Due dates for filing Forms 706, 706-NA, or 8939, extension of
time to pay estate tax, and penalty relief for recipients of prop-
erty acquired from decedents who died in 2010 (Notice 76) 40,
479
Effect of election on corporation, REG–158677–05, withdrawn
(Ann 75) 48,823
Election to apply the rules under section 1022 of the Code (Notice
66) 35,184
Election to expense certain refineries (TD 9547) 43,580
Elections regarding start-up expenditures, corporation organiza-
tional expenditures, and partnership organizational expenses
(TD 9542) 39,411
Equitable relief under section 6015(f), time limits (Notice 70) 32,
135
Examination of returns and claims for refund, credit and abate-
ment, determination of correct tax liability (RP 42) 37,318
Ex parte communication between appeals and other Internal Rev-
enue Service employees (Notice 62) 32,126
FBAR, additional administrative relief for individuals whose fil-
ing deadline was extended under Notice 2010–23 (Notice 54)
29,53
Forms:
1042-S, Foreign Person’s U.S. Source Income Subject to
Withholding, specifications for filing electronically (RP
50) 44,628
1097, 1098, 3921, 3922, 5498, 8935, and W-2G, requirements
for filing electronically (RP 40) 37,235
5472, filing requirements (TD 9529) 30,57;
(REG–101352–11) 30,75
8027, Employer’s Annual Information Return of Tips Income
and Allocated Tips, specified for filing electronically (RP
51) 44,669
Guidance regarding obtainingand renewing PTINs and continu-
ing education requirements for registered tax return preparers
(Notice 80) 43,591
Guidance regarding the treatment of stock of a controlled corpo-
ration under section 355(a)(3)(B) (TD 9548) 46,716
Income of foreign governments and international organizations
(REG–146537–06) 48,813
Information reporting, mortgage assistance programs (MAP)
(RP 55) 47,793
Institute on Current Issues in International Taxation (Ann 69) 44,
691
Insurance companies:
Annunity and life insurance contracts with a long–term care
insurancefeature(Notice68)36,205
Effectively connected income (RP 45) 39,449
Interest rate tables (RR 23) 43,585
Life insurance gross income, prepaid interest on policyholder
loans (RR 15) 30,57
Loss payment patterns and discount factors for the 2011 acci-
dent year (RP 53) 46,749
Nonapplication of section 6050W to insurance companies that
administer certain insurance arrangements (Notice 78) 41,
497
INCOME TAX—Cont.
Partial exchange or partial annuitization (RP 38) 30,66
Salvage discount factors for the 2011 accident year (RP 54)
46,759
Treatment of Blue Cross/Blue Shield organizations and cer-
tain other health organizations (Notice 51) 27,36
Interest:
Investment:
Federal short-term, mid-term, and long-term rates for:
July 2011 (RR 14) 27,31
August 2011 (RR 16) 32,93
September 2011 (RR 20) 36,202
October 2011 (RR 22) 41,489
November 2011 (RR 25) 45,695
Rates:
Underpayment and overpayments, quarter beginning Oc-
tober 2011 (RR 18) 39,428
Interest and penalty suspension provisions under section 6404(g)
of the Code (TD 9545) 41,490
Involuntary conversions, livestock sold on account of drought,
extension of replacement period, list of affected counties (No-
tice 79) 41,498
Marginal production rates for 2011 (Notice 58) 31,85
Modifications of certain derivative contracts (TD 9538) 37,229;
(REG–109006–11) 37,334
Nonaccrual-experience (NAE) method of accounting (RP 46) 42,
518
Optional standard mileage rates (Ann 40) 29,56
Per diem allowances, 2011–2012 (RP 47) 42,520
Per diem substantiationmethod(Ann42)32,138
Postponement of backup withholding requirement for payment
card and third part network payments made under section
6050W (Notice 88) 46,748
Proposed Regulations:
26 CFR 1.36B–0 thru –5, added; 1.6011–8, added; 1.6012–1,
revised; health insurance premium revised tax credit
(REG–131491–10) 36,208
26 CFR 1.67–4, added; section 67 limitations on estates or
trusts (REG–128224–06) 42,533
26 CFR 1.150–1, amended; 1.171–1, amended; 1.197–2,
amended; 1.249–1, amended; 1.475(a)–4, amended;
1.860G–2, amended; 1.1001–3, amended; 48.4101–1,
amended; removal of regulatory references to credit rat-
ings pursuant to section 939A of the Dodd-Frank Act
(REG–118809–11) 33,162
26 CFR 1.181–0, added; 1.181–1, amended; deduc-
tion for qualified film and television production costs
(REG-146297–09) 47,795
26 CFR 1.363–1, amended; effect of election on corporation,
REG–158677–05, withdrawn (Ann 75) 48,823
26 CFR 1.446–3, amended; 1.512(b)–1, amended; 1.863–7,
amended; 1.954–2, amended; 1.988–1, amended;
1.1256(b)–1, added; 1.1256(g)–1, added; swap exclusion
for section 1256 contracts (REG–111283–11) 42,573
26 CFR 1.471–8, amended; retail inventory method
(REG–125949–10) 45,712
2011–48 I.R.B.viiiNovember 28, 2011

INCOME TAX—Cont.
26 CFR 1.892–4, added; 1.892–5, revised; 602.101, amended;
income of foreign governments and international organiza-
tions (REG–146537–06) 48,813
26 CFR 1.901–2, amended; determining the amount of taxes
paid for purposes of section 901 (REG–126519–11) 39,452
26 CFR 1.964–1, amended; taxaccounting elections on behalf
of foreign corporations (REG–114749–09) 48,819
26 CFR 1.1001–4, revised; modifications of certain derivative
contracts (REG–109006–11) 37,334
26 CFR 1.1502–91, amended; redetermination of the
consolidated net unrealized built-in gain and loss
(REG–133002–10) 46,766
26 CFR 1.6038A–1, –2, amended; requirements for taxpayers
filing Form 5472 (REG–101352–11) 30,75
26 CFR 1.6695–2, revised; tax return preparer penalties under
section 6695 (REG–140280–09) 45,709
26 CFR 300.0, amended; 300.12 thru .14, added; user
fees relating to the registered tax return preparer compe-
tency examination and fingerprinting participants in the
PTIN, acceptance agent, and authorized e-file programs
(REG–116284–11) 43,598
26 CFR 301.6402–2 thru –4, amended; claims for credit or
refund (REG–137128–08) 28,43
Publications:
1187, Specifications for Filing Form 1042-S, Foreign Per-
son’s U.S. Source Income Subject to Withholding, Elec-
tronically, revised (RP 50) 44,628
1220, Specifications for Filing Forms 1097, 1098, 3921, 3922,
5498, 8935, and W-2G Electronically, 2011 revision (RP
40) 37,235
1239, Specifications for Filing Form 1027, Employer’s An-
nual Information Return of Tip Income and Allocated Tips,
Electronically, revised (RP 51) 44,669
4436, General Rules and Specifications for Substitute Form
941, Schedule B (Form 941) and Schedule R (Form 941),
revised (RP 39) 30,68
Qualifying advanced coalproject program (Ann 62) 40,483
Redetermination of the consolidated net unrealized built-in gain
and loss (REG-133002–10) 46,766
Regulations:
26 CFR 1.41–0, –6, –8, amended; 1.41–0T, –6T, –8T, –9T, re-
moved; alternative simplified credit under section 41(c)(5)
(TD 9528) 28,38
26 CFR 1.150–1, amended; 1.150–1T, added; 1.171–1,
amended; 1.171–1T, added; 1.197–2, amended; 1.197–2T,
added; 1.249–1, amended; 1.249–1T, added; 1.475(a)–4,
amended; 1.475(a)–4T, added; 1.860G–2, amended;
1.860G–2T, added; 1.1001–3, amended; 1.1001–3T, added;
48.4101–1, –1T, amended; removal of regulatory refer-
ences to credit ratings pursuant to section 939A of the
Dodd-Frank Act (TD 9533) 33,139
26 CFR 1.103–8, amended; 1.142(a)(6)–1, added; Part 17,
removed; solid waste disposal facility, tax-exempt bonds
(TD 9546) 42,505
26 CFR 1.170A–12, amended; 1.170A–12T, removed;
1.642(c)–6, amended; 1.642(c)–6T, removed; 1.664–1,
INCOME TAX—Cont.
–2, –4, –4A, amended; 1.664–4T, removed; 1.7520–1,
amended; 1.7520–1T, removed; 20.2031–7, –7A, amended;
20.2031–7T, removed; 20.2055–2, amended; 20.2055–2T,
removed; 20.2056A–4, amended; 20.2056A–4T, removed;
20.7520–1, amended; 20.7520–1T, removed; 25.2512–5,
–5A, amended; 25.2512–5T, removed; 25.2522(c)–3,
amended; 25.2522(c)–3T, removed; 25.7520–1, –3,
amended; 25.7520–1T, –3T, removed; use of actuarial
tables in valuing annuities, interests for life or terms of
years, and remainder or reversionary interest (TD 9540)
38,341
26 CFR 1.179C–1, added 1.179C–1T, removed; 602.101,
amended; election to expensecertain refineries (TD 9547)
43,580
26 CFR 1.181–0 thru –6, added; 1.181–0T thru –6T, removed;
deduction for qualified film and television production costs
(TD 9551) 47,774
26 CFR 1.181–1, amended; 1.181–0T, –1T, –6T, added; de-
duction for qualified film and television production costs
(TD 9552) 47,783
26 CFR 1.195–1, revised; 1.195–1T, removed; 1.248–1,
amended; 1.248–1T, removed; 1.709–1, amended;
1.709–1, removed; elections regarding start-up expen-
ditures, corporation organizational expenditures, and
partnership organizational expenses (TD 9542) 39,411
26 CFR 1.280C–4, revised; election of reduced research credit
(TD 9539) 35,179
26 CFR 1.355–0, –1, –2, amended; 1.355–0T, –2T, removed;
guidance regarding the treatment of stock of a controlled
corporation under section 355(a)(3)(B) (TD 9548) 46,716
26 CFR 1.901–1, –2, amended; 1.901–1T, –2T, removed; de-
termining the amount of taxes paid for purposes of section
901 (TD 9535) 39,415
26 CFR 1.901–2, amended; 1.901–2T, revised; determining
the amount of taxes paid for purposes of section 901 (TD
9536) 39,426
26 CFR 1.956–1, amended; 1.956–1T, amended; determina-
tion of basis in specified U.S. property acquired by a con-
trolled foreign corporation in certain nonrecognition trans-
actions (TD 9530) 31,77
26 CFR 1.1001–4, revised; 1.1001–4T, added; modification
of certain derivative contracts (TD 9538) 37,229
26 CFR 1.1502–13, amended; corporate reorganizations; dis-
tributions under sections 368(a)(1)(D) and 354(b)(1)(B);
correctiontoTD9475(Ann43)35,198
26 CFR 1.6038A–1, –2, amended; 1.6038A–1T, –2T, added;
requirements for taxpayers filing Form 5472 (TD 9529) 30,
57
26 CFR 1.6081–2, –6, added; 1.6081–2T, –6T, removed;
54.6081–1, added; automatic five-month extensions for
certain pass-through entities (TD 9531) 31,79
26 CFR 301.6404–0, –4, amended; 301.6404–0T, removed;
interest and penalty suspension provisions under section
6404(g) of the Code (TD 9545) 41,490
26 CFR 301.6707A–1, added; 301.6707–1T, removed; sec-
tion 6707A and the failure to include on any return or state-
November 28, 2011ix2011–48 I.R.B.

INCOME TAX—Cont.
ment any information required to be disclosed with respect
to a reportable transaction (TD 9550) 47,785
26 CFR 301.7502–1, amended; timely mailing treated as
timely filing (TD 9543) 40,470
26 CFR 301.7701–2, amended; 301.7701–2T, removed; dis-
regarded entities, excise taxes and employment taxes (TD
9553) 48,806
26 CFR 301.6707A–1, added; 301.6707–1T, removed; sec-
tion 6707A and the failure to include on any return or state-
ment any information required to be disclosed with respect
to a reportable transaction (TD 9550) 47,785
31 CFR 10.0 thru 10.8, 10.9, added; 10.20, 10.25, 10.30,
10.34, 10.36, 10.38, 10.50, 10.51, 10.53, revised; 10.60 thru
10.66, revised; 10.69, 10.72, revised; 10.76 thru 10.82, re-
vised; 10.90, revised; regulations governing practice before
the Internal Revenue Service (TD 9527) 27,1; corrections
(Ann 49) 36,228
Regulations governing practice before the Internal Revenue Ser-
vice (TD 9527) 27,1; corrections (Ann 49) 36,228
Removal of regulatory references to credit ratings pursuant to
section 939A of the Dodd-Frank Act (TD 9533) 33,139;
(REG–118809–11) 33,162
Retail inventory method (REG–125949–10) 45,712
Revocations, exempt organizations (Ann 39) 28,46;(Ann45)
34,178;(Ann63)41,503; (Ann 70) 45,715;(Ann72)47,
796
Safe harbor guidance with respect to section 1022 of the Code
(RP 41) 35,188
Section 67 limitations on estates or trusts (REG–128224–06) 42,
533
Section 6402 claims for credit or refund (REG–137128–08) 28,
43
Section 6707A and the failure toinclude on any return or state-
ment any information required to be disclosed with respect to
a reportable transaction (TD 9550) 47,785
Solid waste disposal facility, tax-exempt bonds (TD 9546) 42,
505
Special per diem rates for 2011–2012 (Notice 81) 42,513
Standard Industry Fare Level (SIFL) formula (RR 21) 40,458
State and local bonds; volume cap and timing of issuing bonds
(Notice 63) 34,172
Substitute Form 941, Schedule B (Form 941) and Schedule R
(Form 941) general rules and specifications (RP 39) 30,68
Suspension of information reporting with respect to foreign fi-
nancial assets and certain interests in a PFIC (Notice 55) 29,
53
Swap exclusion for section 1256 contracts (REG–111283–11)
42,573
Tax return preparer penalties under section 6695
(REG–140280–09) 45,709
Tax treatment of employer-provided cell phones (Notice 72) 38,
407
Timely mailing treated as timely filing (TD 9543) 40,470
Transitional penalty relief for information reporting relating to
payment card and third party network transaction (Notice 89)
46,748
INCOME TAX—Cont.
U.S. income tax treaties that meet the requirements of section
1(h)(11)(C)(i)(II) (Notice 64) 37,231
Use of actuarial tables in valuing annuities, interests for life terms
of years, and remainder or reversionary interests (TD 9540) 38,
341
User fees relating to the registered tax return preparer com-
petency examination and fingerprinting participants in the
PTIN, acceptance agent, and authorized e-file programs
(REG–116284–11) 43,598
Withdrawal of a manufacturer’sright to provide certifications
under the qualifying nonbusiness energy property credit of 25C
(Ann 73) 48,822
2011–48 I.R.B.xNovember 28, 2011

November 28, 20112011–48 I.R.B.

2011–48 I.R.B.November 28, 2011

November 28, 20112011–48 I.R.B.

INTERNAL REVENUE BULLETIN
The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superin-
tendent of Documents when their subscriptions must be renewed.
CUMULATIVE BULLETINS
The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are
sold on a single copy basis andare notincluded as part of the subscription to the Internal Revenue Bulletin. Subscribers to the weekly
Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print
and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the
Superintendent of Documents.
ACCESS THE INTERNAL REVENUE BULLETIN ON THE INTERNET
You may view the Internal Revenue Bulletin on the Internet at www.irs.gov. Select Businesses. Under Businesses Topics, select
More Topics. Then select Internal Revenue Bulletins.
INTERNAL REVENUE BULLETINS ON CD-ROM
Internal Revenue Bulletins are available annually as part ofPublication 1796 (Tax Products CD-ROM). The CD-ROM can be
purchased from National Technical Information Service (NTIS) on the Internet at www.irs.gov/cdorders (discount for online orders)
or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January.
HOW TO ORDER
Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance,
detach entire page, and mail to the Superintendent of Documents, P.O. Box 979050, St. Louis, MO 63197–9000. Please allow two to
six weeks, plus mailing time, for delivery.
WE WELCOME COMMENTS ABOUT THE INTERNAL
REVENUE BULLETIN
If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page (www.irs.gov)
or write to the IRS Bulletin Unit, SE:W:CAR:MP:T:T:SP, Washington, DC 20224.
Internal Revenue Service
W
ashington,DC20224
Official Business
Penalty for Private Use, $300