Internal Revenue Bulletin 1997-17 (PDF rendition): IRS Announcements

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.

SPECIAL ANNOUNCEMENT
Announcement 97–44, page 19.
The date and location of the public hearing on proposed
regulation, REG–208172–91, 1997–10 I.R.B. 59, relat-
ing to basis reduction due to discharge of indebtedness,
are changed.
EMPLOYEE PLANS
Notice 97–27, page 7.
Weighted average interest rate update.Guidelines are
set forth for determining for April 1997, the weighted
average interest rate and the resulting permissible range
of interest rates used to calculate current liability for
purposes of the full funding limitation of section
412(c)(7) of the Code as amended by the Omnibus
Budget Reconciliation Act of 1987 and the Uruguay
Round Agreements Act (GATT).
Announcement 97–45, page 20.
The Service is reexamining the plan qualification and
other tax issues raised by a contribution of stock
options to a plan and subsequent exercise of those
options.
TAX CONVENTIONS
Page 5.
The bilateral agreements between the United States and
Malta, providing for the reciprocal tax exemption of
income from international operation of ships and/or
aircraft, are set forth.
ADMINISTRATIVE
Rev. Proc. 97–23, page 7.
This procedure provides that the Service will not rule on
whether trusts that hold certain assets qualify as
charitable remainder unitrusts under section 664. Rev.
Proc. 97–3 is amplified.
Rev. Proc. 97–25, page 8.
Electronic and magnetic media filing specifications.
Specifications are set forth for the magnetic or elec-
tronic filing of 1997 Form 8851, Summary of Medical
Savings Accounts, Magnetically/Electronically. The form
may be filed with the Internal Revenue Service using ½
inch magnetic tape; IBM 3480/3490 or AS400 compat-
ible tape cartridge; asynchronous electronic filing (IRP–
BBS); or 5¼-, 3½-inch diskettes.
Rev. Proc. 97–26, page 17.
Qualified mortgage bonds; mortgage credit certifi-
cates; national median gross income.Guidance is
provided concerning the use of the national and area
median gross income figures by issuers of qualified
mortgage bonds and mortgage credit certificates in
determining the housing cost/income ratio described in
section 143(f)(5) of the Code. Except as provided in
section 5.02 of this procedure, Rev. Proc. 96–37 is
obsolete.
Notice 97–26, page 6.
Timely filing or payment; private delivery services.A
list of designated private delivery services is provided
for purposes of the ‘‘timely filing/paying’’ rules of
section 7502 of the Code.
Announcement 97–42, page 19.
Examination guidelines for Simplified Employee Plans
(SEPs) have been developed for use during examina-
tions. The guidelines are being released to the public for
comments.
Announcement 97–43, page 19.
T.D. 8697, 1997–2 I.R.B. 11, relating to the classifica-
tion of business organizations, is corrected.
Finding Lists begin on page 23.
Announcement of Disbarments and Suspensions begins on page 21.
Bulletin No. 1997–17
April 28, 1997
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.

Mission of the Service
The purpose of the Internal Revenue Service is to
collect the proper amount of tax revenue at the least
cost; serve the public by continually improving the
quality of our products and services; and perform in a
manner warranting the highest degree of public
confidence in our integrity, efficiency and fairness.
Statement of Principles
of Internal Revenue
Tax Administration
The function of the Internal Revenue Service is to
administer the Internal Revenue Code. Tax policy
for raising revenue is determined by Congress.
With this in mind, it is the duty of the Service to
carry out that policy by correctly applying the laws
enacted by Congress; to determine the reasonable
meaning of various Code provisions in light of the
Congressional purpose in enacting them; and to
perform this work in a fair and impartial manner,
with neither a government nor a taxpayer point of view.
At the heart of administration is interpretation of the
Code. It is the responsibility of each person in the
Service, charged with the duty of interpreting the
law, to try to find the true meaning of the statutory
provision and not to adopt a strained construction in
the belief that he or she is ‘‘protecting the revenue.’’
The revenue is properly protected only when we as-
certain and apply the true meaning of the statute.
The Service also has the responsibility of applying
and administering the law in a reasonable,
practical manner. Issues should only be raised by
examining officers when they have merit, never
arbitrarily or for trading purposes. At the same
time, the examining officer should never hesitate
to raise a meritorious issue. It is also important
that care be exercised not to raise an issue or to
ask a court to adopt a position inconsistent with
an established Service position.
Administration should be both reasonable and
vigorous. It should be conducted with as little
delay as possible and with great courtesy and
considerateness. It should never try to overreach,
and should be reasonable within the bounds of law
and sound administration. It should, however, be
vigorous in requiring compliance with law and it
should be relentless in its attack on unreal tax
devices and fraud.
2

Introduction
The Internal Revenue Bulletin is the authoritative instru-
ment of the Commissioner of Internal Revenue for
announcing official rulings and procedures of the Inter-
nal Revenue Service and for publishing Treasury Deci-
sions, Executive Orders, Tax Conventions, legislation,
court decisions, and other items of general interest. It is
published weekly and may be obtained from the Superin-
tendent of Documents on a subscription basis. Bulletin
contents of a permanent nature are consolidated semi-
annually into Cumulative Bulletins, which are sold on a
single-copy basis.
It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform
application of the tax laws, including all rulings that
supersede, revoke, modify, or amend any of those
previously published in the Bulletin. All published rulings
apply retroactively unless otherwise indicated. Proce-
dures relating solely to matters of internal management
are not published; however, statements of internal
practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Ser-
vice 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 unwar-
ranted 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 proce-
dures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be consid-
ered, and Service personnel and others concerned are
cautioned against reaching the same conclusions in
other cases unless the facts and circumstances are
substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on
provisions of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows:
Subpart A, Tax Conventions, and Subpart B, Legislation
and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to
these subjects are contained in the other Parts and
Subparts. Also included in this part are Bank Secrecy
Act Administrative Rulings. Bank Secrecy Act Administra-
tive Rulings are issued by the Department of the
Treasury’s Office of the Assistant Secretary (Enforce-
ment).
Part IV.—Items of General Interest.
With the exception of the Notice of Proposed Rulemak-
ing and the disbarment and suspension list included in
this part, none of these announcements are consoli-
dated in the Cumulative Bulletins.
The first Bulletin for each month includes an index for
the matters published during the preceding month.
These monthly indexes are cumulated on a quarterly and
semiannual basis, and are published in the first Bulletin
of the succeeding quarterly and semi-annual period,
respectively.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents U.S. Government Printing Office, Washington, D.C. 20402.
3

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 25.—Interest on Certain
Home Mortgages
26 CFR 1.25–4T: Qualified mortgage credit cer-
tificate program (temporary).
Guidance is provided for the use of the national
and area median gross income figures by issuers
of qualified mortgage bonds and mortgage credit
certificates in determining the housing cost/income
ratio described in section 143(f)(5) of the Code.
See Rev. Proc. 97–26, page 17.
Section 103.—State and Local
Bonds
26 CFR 1.103–1: Interest upon obligations of a
state, territory, etc.
Guidance is provided for the use of the national
and area median gross income figures by issuers
of qualified mortgage bonds and mortgage credit
certificates in determining the housing cost/income
ratio described in section 143(f)(5) of the Code.
See Rev. Proc. 97–26, page 17.
Section 143.—Mortgage Revenue
Bonds: Qualified Mortgage Bond
and Qualified Veterans’ Mortgage
Bond
26 CFR 6a.103A–2: Qualified mortgage bond.
Guidance is provided for the use of the national
and area median gross income figures by issuers
of qualified mortgage bonds and mortgage credit
certificates in determining the housing cost/income
ratio described in section 143(f)(5) of the Code.
See Rev. Proc. 97–26, page 17.
4

Part II. Treaties and Tax Legislation
Subpart A.—Tax Conventions
MALTA
Embassy of Malta
Washington, D.C.
December 26, 1996
The Embassy of Malta presents its
compliments to the Department of State
of the United States of America and has
the honour to propose that the two
governments conclude an agreement to
exempt from income tax, on a reciprocal
basis, income derived by residents of the
other country from the international op-
eration of ships and aircraft. The follow-
ing proposed terms of agreement have
been drafted on the basis of similar
agreements the United States has with
other governments:
The Government of Malta agrees to
exempt from tax gross income derived
from the international operations of
ships or aircraft by individuals who are
residents of the United States (other
than citizens of Malta) and corporations
which are incorporated in the United
States.
In case of a U.S. corporation, the
exemption shall apply only if the corpo-
ration meets one of the following condi-
tions:
(1) the corporation’s stock is primarily
and regularly traded on an established
securities market in the U.S., another
country which grants a reciprocal ex-
emption to Maltese corporations or
Malta, or
(2)
more than fifty (50) percent of the
value of the corporation’s stock is owned
directly or indirectly by individuals who
are residents of the United States or of
another foreign country which grants an
equivalent exemption to Maltese corpo-
rations or by a corporation organized in
a country which grants an equivalent
exemption to Maltese corporations and
whose stock is primarily and regularly
traded on an established securities mar-
ket in that country, another country
which grants an equivalent exemption to
Maltese corporations, or Malta.
The Government of the United States
of America, in accordance with sections
872(b) and 883(A) of the Internal Rev-
enue Code, agrees to exempt from tax
gross income derived from the interna-
tional operation of ships or aircraft by
individuals who are residents of Malta
(other than United States citizens) and
corporations which are incorporated in
Malta.
In case of a Maltese corporation, the
exemption shall apply only if the corpo-
ration meets one of the following condi-
tions:
(1) the corporation’s stock is primarily
and regularly traded on an established
securities market in Malta, another
country which grants a reciprocal ex-
emption to U.S. corporations or the
United States, or
(2) more than fifty (50) percent of the
value of the corporation’s stock is
owned directly or indirectly by individu-
als who are residents of Malta or of
another foreign country which grants an
equivalent exemption to U.S. corpora-
tions or by a corporation organized in a
country which grants an equivalent ex-
emption to U.S. corporations and whose
stock is primarily and regularly traded
on an established securities market in
that country, another country which
grants an equivalent exemption to U.S.
corporations, or the United States.
For the purposes of exemption from
the U.S. tax, the Government of Malta
will be treated as an individual resident
of Malta, and subparagraph (2) shall be
considered to be satisfied if the corpora-
tion is a ‘‘controlled foreign corpora-
tion’’ under the Internal Revenue Code,
so however, that U.S. shareholders of
such corporations shall be treated as
residents of Malta.
In this agreement:
(a) the terms ‘‘contracting state’’, and
‘‘other contracting state’’ mean Malta or
the United States of America, the gov-
ernments of which have concluded this
agreement.
(b) gross income includes all income
derived from the international operation
of ships or aircraft, including:
(1) Income from the rental on full
(time or voyage) basis of ships or
aircraft used in international
transport;
(2) income from the rental on a
bareboat basis of ships or aircraft
used in international transport;
(3) income from the rental of con-
tainers and related equipment
used in international transport that
is incidental to income from the
international operation of ships
and aircraft; and
(4) gains from the sale or other alien-
ation of ships or aircraft used in
international transport derived by
a person primarily engaged in the
international operation of ships or
aircraft.
In the application of this agreement
by a contracting state, any term not
defined in this agreement shall, unless
the context otherwise requires, have the
meaning which it has under the laws of
that state relating to the taxes to which
the agreement applies.
The Government of Malta proposes
that, if the foregoing is acceptable to the
Government of the United States, this
note and the Department’s note in reply
shall constitute an agreement. The
agreement shall enter into force on the
date of the Department’s note in reply
and shall have effect in respect of
income derived on or after 1 January,
1997.
This agreement shall continue in force
until the Government of either contract-
ing state gives written notice of termina-
tion of the agreement to the other
contracting state through the diplomatic
channel.
The Embassy of Malta takes this
opportunity to renew to the Department
of State of the United States of America
the assurances of it’s highest consider-
ation.
Department of State
Washington, D.C.
March 11, 1997
The Department of State refers the
Embassy of Malta to the Embassy’s note
1065 of December 26, 1996, regarding
the reciprocal exemption from income
tax of income derived from the interna-
tional operation of ships and aircraft.
The Department of State confirms
that the proposals contained in the Em-
bassy’s note are acceptable to the Gov-
ernment of the United States of
America. Therefore, this note and the
Embassy’s note of December 26, 1996,
constitute an agreement which shall en-
ter into force on the date of this note in
reply and shall be effective in respect of
income derived on or after January 1,
1997. This agreement shall continue in
force until the Government of either
contracting state gives written notice of
termination of the agreement to the
other contracting state through the diplo-
matic channel.
5

Part III. Administrative, Procedural, and Miscellaneous
List of Designated Private Delivery
Services
Notice 97–26
SUMMARY: This notice provides the
first list of private delivery services
(‘‘PDSs’’) that are designated private
delivery services (‘‘designated PDSs’’)
during the interim period described in
Rev. Proc. 97–19, 1997–10 I.R.B. 55.
The interim period ends on the date on
which the Service issues guidance su-
perseding Rev. Proc. 97–19. Designation
is for purposes of the ‘‘timely mailing
as timely filing/paying’’ rule of § 7502
of the Internal Revenue Code. This
notice also provides special rules for
determining the date that will be treated
as the postmark date for purposes of
§ 7502.
BACKGROUND: Section 7502 pro-
vides rules that apply when a document
is required to be filed (or a payment is
required to be made) within a prescribed
period or on or before a prescribed date
under the authority of any provision of
the internal revenue laws. Section 7502
provides what is commonly called the
‘‘timely mailing as timely filing/paying’’
rule. For example, an individual income
tax return is considered timely filed
even though it is received by the Ser-
vice after the April 15 due date if the
return was delivered to the Service by
United States mail in a postage prepaid,
properly addressed envelope that had a
post office postmark dated on or before
the April 15 due date.
Prior to the amendment made by the
Taxpayer Bill of Rights 2 (TBOR 2), the
‘‘timely mailing as timely filing/paying’’
rule applied only to documents and
payments sent by United States mail.
TBOR 2 amended § 7502 by adding
subsection (f), which authorizes the Sec-
retary to designate certain PDSs for the
‘‘timely mailing as timely filing/paying’’
rule.
Rev. Proc. 97–19 provides the criteria
that are being used during the interim
period described in Rev. Proc. 97–19 to
determine whether a PDS qualifies as a
designated PDS under § 7502(f). This
notice provides the first list of the
designated PDSs for the interim period.
LIST OF DESIGNATED PDSs AND
TYPES OF SERVICES: The following
PDSs and the following specific types
of delivery services are designated for
purposes of § 7502(f):
1. Airborne Express (Airborne):
Overnight Air Express Service, Next
Afternoon Service, and Second Day
Service
2. DHL Worldwide Express
(DHL): DHL ‘‘Same Day’’ Service
and DHL USA Overnight
3. Federal Express (FedEx): FedEx
Priority Overnight, FedEx Standard
Overnight, and FedEx 2Day
4. United Parcel Service (UPS):
UPS Next Day Air, UPS Next Day
Air Saver, UPS 2nd Day Air, and
UPS 2nd Day Air A.M.
Airborne, DHL, FedEx, and UPS are
not designated with respect to any type
of delivery service not identified above.
Consequently, the ‘‘timely mailing as
timely filing/paying’’ rule of § 7502
does not apply to any other type of
delivery service offered by the desig-
nated PDSs.
Designation under this notice is effec-
tive until the Service issues a revised
list of designated PDSs. On or before
September 1st and March 1st of each
year of the interim period, the Service
will issue other notices that provide a
revised list of designated PDSs. In un-
usual circumstances, the Service may
issue additional notices at other times.
If taxpayers use a business that pro-
vides mailing services of a designated
PDS, but the business itself is not a
designated PDS, taxpayers should be
aware that the ‘‘timely mailing as timely
filing/paying’’ rule will not apply unless
an item is actually given to, or picked
up by, a designated PDS on or before
the due date. Taxpayers should take
appropriate precautions to ensure that
the item will be given to, or picked up
by, a designated PDS on or before the
due date.
SPECIAL RULES FOR DETERMIN-
ING POSTMARK DATE: Section
7502(f)(2)(C) requires a PDS to either
(1) record electronically to its data base
(kept in the regular course of its busi-
ness) the date on which an item was
given to the PDS for delivery or (2)
mark on the cover of the item the date
on which an item was given to the PDS
for delivery. Under § 7502(f)(1), the
date recorded or the date marked under
§ 7502(f)(2)(C) is treated as the post-
mark date for purposes of § 7502.
This notice provides rules for deter-
mining the date that is treated as the
postmark date for purposes of § 7502.
There is one set of rules for the desig-
nated PDSs that qualified for designa-
tion because their ‘‘postmark date’’ is
recorded electronically to their data
bases. There is another set of rules for
the designated PDS that qualified for
designation because its ‘‘postmark date’’
is marked on the cover of an item.
Airborne, DHL, and UPS
The date on which an item is given to
Airborne, DHL, or UPS is recorded
electronically to the data base of these
designated PDSs. Accordingly, the date
recorded in the electronic data base of
these designated PDSs is treated as the
postmark date for purposes of § 7502.
For items that are delivered after their
due dates, there is a presumption that
the postmark date is the day that pre-
cedes the delivery date by an amount of
time that equals the amount of time it
would normally take for an item to be
delivered under the terms of the specific
type of delivery service used (e.g., two
days before the actual delivery date for
a two day delivery service). This pre-
sumption applies to items sent by tax-
payers and, in appropriate cases, items
sent by the Government.
Taxpayers who wish to overcome this
presumption will need to provide infor-
mation that shows that the date recorded
in the electronic data base is on or
before the due date. For example, a
taxpayer could obtain such information
in the form of a written confirmation
produced and issued by the designated
PDS before the expiration of the period
for storing the date recorded in its
electronic data base. If taxpayers wish to
maintain this type of proof for their
records, they should make a timely
request to receive this information from
the designated PDS before the expira-
tion of that designated PDS’s data stor-
age period.
Airborne, DHL, and UPS entered into
agreements pursuant to Rev. Proc.
97–19 that require these designated
PDSs to store (electronically or by mi-
crofiche) the dates recorded in their
electronic data bases for at least 6
months. Although Airborne, DHL, and
UPS may choose to store the dates for
more than 6 months, the agreements do
not require them to do so. Prior to the
expiration of the data storage period,
senders or recipients can obtain informa-
tion concerning the date recorded to the
electronic data base by contacting Air-
borne, DHL, or UPS. The toll-free tele-
6

phone numbers for these designated
PDSs are as follows: Airborne, 1–800–
247–2676; DHL ‘‘Same Day’’ Service,
1–800–345–2727; DHL USA Overnight,
1–800–225–5345; and UPS, 1–800–
742–5877.
FedEx
An electronically generated label is
applied to the cover of all items deliv-
ered by FedEx, including those items
that already have an airbill attached. The
date on which an item is given to FedEx
for delivery is marked on the label.
There are two types of labels (which are
distinguishable from each other). One
type of label is generated and applied to
an item by a FedEx employee. The
other type of label is generated (using
computer software and/or hardware pro-
vided by FedEx) and applied to an item
by a customer.
The date that will be treated as the
postmark date for purposes of § 7502 is
determined under the following rules:
(1) If an item has a label generated
and applied by a FedEx employee, the
date marked on that label is treated as
the postmark date for purposes of
§ 7502, regardless of whether the
item also has a label generated and
applied by the customer.
(2) If an item has a label generated
and applied by a customer, the date
marked on that label is treated as the
postmark date for purposes of § 7502
if the item is received within the
normal delivery time. (Normal deliv-
ery time is one day for FedEx Priority
Overnight and FedEx Standard Over-
night, or two days for FedEx 2 Day.)
If an item is not delivered within the
normal delivery time, the person re-
quired to file the document or to
make the payment must establish (a)
that the item was actually either given
to, or picked up by, a FedEx em-
ployee on or before the due date and
(b) the cause of the delay in delivery
of the document or payment. These
rules are similar to the rules for
United States mail that has a post-
mark made other than by the United
States Postal Service. (SeeTreas. Reg.
§ 301.7502–1(c)(1)(iii)(b).)
(3) The information recorded elec-
tronically to the data base of FedEx
(in the regular course of its business)
can be used to show that the item was
actually either given to, or picked up
by, a FedEx employee on or before
the due date when (a) an item has a
label generated and applied by a
customer or (b) an item has a label
generated and applied by a FedEx
employee, but the date is illegible or
otherwise unavailable.
EFFECTIVE DATE: Designation under
this notice is effective for documents
and payments that are given by taxpay-
ers to a designated PDS on or after
April 11, 1997. Designation is not effec-
tive for documents and payments that
are given by taxpayers to a designated
PDS before April 11, 1997, even if such
documents and payments are delivered
by the designated PDS on or after April
11, 1997.
FOR FURTHER INFORMATION: The
principal author of this notice is Robert
J. Basso of the Office of Assistant Chief
Counsel (Income Tax and Accounting).
For further information regarding this
notice, contact Mr. Basso at (202) 622–
4940 (not a toll-free call).
Weighted Average Interest Rate
Update
Notice 97–27
Notice 88–73 provides guidelines for
determining the weighted average inter-
est rate and the resulting permissible
range of interest rates used to calculate
current liability for the purpose of the
full funding limitation of § 412(c)(7) of
the Internal Revenue Code as amended
by the Omnibus Budget Reconciliation
Act of 1987 and as further amended by
the Uruguay Round Agreements Act,
Pub. L. 103–465 (GATT).
The average yield on the 30-year
Treasury Constant Maturities for March
1997 is 6.93 percent.
The following rates were determined
for the plan years beginning in the
month shown below.
MonthYear
Weighted
Average
90% to 107%
Permissible Range
90% to 110%
Permissible Range
April19976.876.18 to 7.356.18 to 7.56
Drafting Information
The principal author of this notice is
Donna Prestia of the Employee Plans
Division. For further information regard-
ing this notice, call (202) 622–6076
between 2:30 and 4:00 p.m. Eastern
time (not a toll-free number). Ms.
Prestia’s number is (202) 622–7377
(also not a toll-free number).
26 CFR 601.201: Rulings and determination
letters.
(Also Part I, sections 664, 1.664–1(a)(4).)
Rev. Proc. 97–23
SECTION 1. PURPOSE
This revenue procedure amplifies Rev.
Proc. 97–3, 1997–1 I.R.B. 85, which
sets forth areas of the Internal Revenue
Code under the jurisdiction of the Asso-
ciate Chief Counsel (Domestic) in which
the Internal Revenue Service will not
issue advance rulings or determination
letters.
SECTION 2. BACKGROUND
Rev. Proc. 97–3, section 5, lists spe-
cific areas in which rulings or determi-
nation letters will not be issued because
the areas are under extensive study. This
revenue procedure adds a subparagraph
for certain income exception charitable
remainder unitrusts under § 664(d)(3) of
the Internal Revenue Code. The Service
and Treasury will study whether creating
or using income exception charitable
remainder unitrusts to control the timing
of the trust’s receipt of trust income for
the benefit of the unitrust recipient
causes the trust to fail to function
exclusively as a charitable remainder
trust under § 1.664–1(a)(4) of the In-
come Tax Regulations. For a trust to
qualify as a charitable remainder trust, it
must function exclusively as a charitable
remainder trust from its creation.See
§ 1.664–1(a)(4).
SECTION 3. PROCEDURE
Rev. Proc. 97–3 is amplified by add-
ing to section 5 the following: Section
664.—Charitable Remainder Trusts.—
Whether a trust that will calculate the
unitrust amount under § 664(d)(3) quali-
fies as a § 664 charitable remainder
trust when a grantor, a trustee, a benefi-
7

ciary, or a person related or subordinate
to a grantor, a trustee, or a beneficiary
can control the timing of the trust’s
receipt of trust income from a partner-
ship or a deferred annuity contract to
take advantage of the difference between
trust income under § 643(b) and income
for federal income tax purposes for the
benefit of the unitrust recipient.
SECTION 4. EFFECTIVE DATE
The revenue procedure applies to all
ruling requests, including any pending in
the National Office on April 17, 1997,
and ruling requests received after April
17, 1997.
SECTION 5. EFFECT ON OTHER
REVENUE PROCEDURES
Rev. Proc. 97–3 is amplified.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Mary Beth Collins of the
Office of the Assistant Chief Counsel
(Passthroughs and Special Industries).
For further information regarding this
revenue procedure, contact Mary Beth
Collins at (202) 622–3070 (not a toll-
free number).
26 CFR 601.602: Tax forms and instructions.
Rev. Proc. 97–25
NOTE:This revenue procedure may
be used to prepare Form 8851, Sum-
mary of Medical Savings Accounts, for
submission to Internal Revenue Service
(IRS) using any of the following:
Magnetic Tape
Tape Cartridge
5 1/4-inch Diskette
3 1/2-inch Diskette
Asynchronous Electronic Filing
Contents
Part A. General
Section 1. Purpose
Section 2. Where to File and How to
Contact the IRS Martinsburg Com-
puting Center (IRS/MCC)
Section 3. Filing Requirements
Section 4. Filing of Form(s) 8851
Magnetically/ Electronically and
Retention Requirements
Section 5. Preparation Instructions for
Media Label
Section 6. Due Dates
Section 7. Processing of Information
Returns Magnetically/Electronically
Section 8 Effect on Paper Documents
Section 9. Definition of Terms
Part B. Magnetic Media
Specifications
Section 1. General
Section 2. Tape Specifications
Section 3. Tape Cartridge Specifica-
tions
Section 4. 5 1/4- and 3 1/2-Inch
Diskette Specifications
Section 5. Data Sequence Specifica-
tions
Section 6. The Trustee ‘‘A’’ Record -
General Field Descriptions and
Record Layout
Section 7. The Account Holder ‘‘B’’
Record - General Field Descrip-
tions and Record Layout
Section 8. The Control Total ‘‘C’’
Record - General Field Descrip-
tions and Record Layout
Part C. Asynchronous (IRP-BBS)
Electronic Filing Specifications
Section 1. General
Section 2. Electronic Filing Approval
Procedure
Section 3. Electronic Submissions
Section 4. Transmittal Requirements
Section 5. Information Reporting Pro-
gram Bulletin Board System (IRP-
BBS) Specifications
Section 6. IRP-BBS First Time Logon
Procedures
Part A. General
Sec. 1. Purpose
.01 The purpose of this revenue pro-
cedure is to provide the specifications
under which trustees may file Form
8851, Summary of Medical Savings Ac-
counts, magnetically or electronically.
.02 Comments concerning this rev-
enue procedure, or suggestions for mak-
ing it more helpful and user friendly,
can be addressed to:
Internal Revenue Service
Martinsburg Computing Center
P. O. Box 1359
Martinsburg, WV 25402
.03 It is unlawful to intentionally
transmit a computer virus to the Internal
Revenue Service. Violators may be sub-
ject to a fine and/or imprisonment.
Sec. 2. Where To File and How To
Contact the IRS Martinsburg
Computing Center (IRS/MCC)
.01 All Forms 8851 filed magneti-
cally or electronically are processed at
IRS/MCC. Inquiries concerning filing
procedures specified in this revenue pro-
cedure should be directed to IRS/MCC
by telephone at (304) 263–8700 (not a
toll-free number). The hours of opera-
tion are 8:30 a.m. to 4:30 p.m., Eastern
Time.
.02 Send magnetic media files and
any correspondence to MCC at the fol-
lowing addresses:
If by Postal Service:
IRS, Martinsburg Computing Center
P.O. Box 879, MS360
Kearneysville, WV 25430
If by truck or air freight:
IRS, Martinsburg Computing Center
Information Reporting Program
Route 9 and Needy Road, MS360
Martinsburg, WV 25401
.03 This revenue procedure and other
IRS publications concerning magnetic
and electronic filing of information re-
turns are available through the IRP-BBS
as ‘‘downloadable’’ files. Using IRP-
BBS as a means of obtaining publica-
tions will provide faster access to this
information. Additionally, publications
will be available from the IRP-BBS
much earlier than the printed version.
The IRP-BBS is operational 24 hours a
day, 7 days a week. The telephone
number is (304) 264–7070.
.04 The IRP-BBS software provides a
menu-driven environment which allows
filers to access different parts of the
bulletin board. Whenever possible, IRS/
MCC personnel will provide assistance
in resolving communication problems
with the IRP-BBS.
.05 The telephone number for the
IRS/MCC fax machine is (304) 264–
5602.
.06 IRS/MCC has installed a Tele-
communications Device for the Deaf
(TDD). The number is (304) 267–3367.
.07 The Information Reporting Pro-
gram Centralized Call Site is located at
IRS/MCC and operates in conjunction
with the Information Reporting Program.
The Call Site provides service to the
payer community (financial institutions,
employers, and other transmitters of in-
formation returns). Recipients of infor-
mation returns (payees) should continue
to contact 1–800–829–1040 with any
questions on how to report this informa-
tion on their Form 1040.
.08 The Call Site accepts calls from
all areas of the country. The number to
call is (304) 263–8700 or Telecommuni-
cations Device for the Deaf (TDD)
(304) 267–3367. These are toll calls.
Hours of operation for the Call Site are
Monday through Friday, 8:30 a.m. to
4:30 p.m., Eastern Time. The Call Site
is open throughout the year to handle
8

payers’, transmitters’, and employers’
questions. Due to the high demand for
assistance at the end of January and
February, it is advisable to call as soon
as possible to avoid these peak filing
seasons.
.09 For assistance with regard to the
reporting of Form(s) 8851, magnetic
media filing, and processing require-
ments, contact:
Martinsburg Computing Center
Information Reporting Program
TEL: 304–263–8700
FAX: 304–264–5602
.10 Requests for the Form 8851 may
be directed to the IRS toll free forms
number 1–800–829–3676 or downloaded
from the Internet http://WWW.IRS.-
USTREAS.GOV. Requests for paper re-
turns, publications, and forms not re-
lated to magnetic media processing may
also be requested by calling 1–800–829–
3676.
Sec. 3. Filing Requirements
.01 If you are required to report 250
or more medical savings accounts
(MSAs), you must file magnetically or
electronically. Even though a trustee
may not meet the required filing thresh-
old of 250 documents, IRS encourages
the filing of the Form 8851
magnetically/electronically.
.02 Filers who are required to submit
their Forms 8851 on magnetic media
may choose to submit their documents
electronically instead. Filers who trans-
mit their information electronically are
considered to have satisfied the mag-
netic media filing requirements.
.03 The filing requirement applies in-
dividually to each reporting entity as
defined by its separate Taxpayer Identi-
fication Number (TIN) (Social Security
Number [SSN] or Employer Identifica-
tion Number [EIN]). For example, if
filing for a corporation with several
branches or locations and each uses the
same name and EIN, the filer must
aggregate the total volume to be filed
for that EIN and apply the filing re-
quirement accordingly.
.04 For additional information on fil-
ing requirements, please refer to the
instructions on Form 8851.
Sec. 4. Filing of Form 8851
Magnetically/Electronically and
Retention Requirements
.01 Form 8851, Summary of Medical
Saving Accounts, MUST accompany
ALLmagnetic media shipments. If you
wish to file electronically, complete
Form 8851 above line ‘‘a’’ (trustee’s
information only) and send it to:
Internal Revenue Service
P.O. Box 879, MS360
Kearneysville, WV 25430
Upon receipt, you will be contacted with
instructions on how to transmit your file
electronically.
In both instances, only the trustee
information requested on Form 8851
must be completed. The form may be
computer-generated; however, all of the
trustee information requested on the
original form must be on the computer-
generated form.
.02 Do not report duplicate informa-
tion.Ifafilersubmitsreturnsmagnetically/
electronically, identical paper documents
must not be filed.
.03 An external label must be affixed
to each piece of media (tape, tape
cartridge, or diskette). For an example,
see Part A, Section 5. If diskettes are
used, and the operating system is not
MS/DOS compatible, the operating sys-
tem and hardware informationmustbe
provided. Failure to provide this infor-
mation may result in the media being
returned to the filer.
.04 On the outside of the shipping
container, affix or attach a label which
reads ‘‘IRB—BOX
of.’’ If there
is only one container, mark the outside
as Box 1 of 1. For multiple containers,
be sure to include the sequence (for
example, Box 1 of 3, 2 of 3, 3 of 3).
.05 When submitting files, include
the following:
(a) A Form 8851;
(b) A media label affixed to the
magnetic media;
(c) A label affixed to the outside of
the shipping container.
.06 IRS/MCC will not pay for or
accept ‘‘Cash-on-Delivery’’ or ‘‘Charge
to IRS’’ shipments of tax information
that an individual or organization is
legally required to submit.
Sec. 5. Preparation Instructions for
Media Label
Please create your own pressure sen-
sitive label containing the following in-
formation:
Type of filing:Indicate whether data is
Original orReplace-
ment.
Tax Year:Tax period for which media
is submitted as defined on
the Form 8851.
IRS TCC:(Transmitter Control Code):
MSA01
Trustee’s name
Operating system/Hardware:Recommended label format:
For 5 1/4- and 3 1/2- inch diskette files, indicate the type of
personal computer operating system and software package used
to create the media (for example: IBM.PC/AT-MSD/DOS, Apple
MacIntosh/MacWrite V2.2).
Type of filing
Tax YearIRS TCC MSA01
Trustee name
Operating system/Hardware
Number of account holders
Trustee number for media
Media sequenceof
For tape, indicate either EBCDIC or
ASCII.
For tape cartridge, indicate operating
system, either EBCDIC or ASCII, and
either 18- or 36-track.
Number of account holders:Indicate
the total number of Account Holder ‘‘B’’
Records reported on the media.
Trustee number for media:If avail-
able, provide the in-house number as-
signed by your organization to the tapes,
tape cartridges, or diskettes.
Media sequence:Indicate sequence
number of media and total number of
media in file (for example: Media se-
quence 1 of 3, 2 of 3, 3 of 3).
Please affix external label to appro-
priate area on magnetic media, so it
will not hinder the ability to process
media.
Sec. 6. Due Dates
.01 The due dates for filing paper
returns with IRS also apply to magnetic
media or electronic filing. File Form
8851, postmarked no later thanJune 2,
9

1997,to report the number of medical
savings accounts you established from
January 1 through April 30, 1997. File
another Form 8851 postmarked no later
thanAugust 1, 1997,to report medical
savings accounts you established from
May 1, 1997, through June 30, 1997.
.02 In 1998, file Form 8851 post-
marked no later than August 3, 1998, to
report MSAs that were established Janu-
ary 1 through June 30, 1998. In 1999,
file Form 8851 postmarked no later than
August 2, 1999, to report MSAs that
were established January 1, 1999
through June 30, 1999.
.03 In all instances, identify which
accounts are for individuals that were
previously uninsured or excludable ac-
count holders, if applicable.
.04 When using a delivery service
other than the U.S. Postal Service, if no
date of shipment appears on the package
or container, the date of receipt will be
the date received at IRS/MCC.
Sec. 7. Processing of Information
Returns Magnetically/Electronically
.01 All data received at IRS/MCC for
processing will be given the same pro-
tection as individual income tax returns
(Form 1040). IRS/MCC will process the
data and determine if the records are
formatted and coded according to this
revenue procedure.
.02 If you are filing information for
more than one trustee, each trustee must
be reported on separate media and/or
transmitted separately, if filing electroni-
cally.
.03 When the magnetic media is re-
turned for replacement, a listing identi-
fying the type of errors and frequency
of such errors will be provided. It is the
responsibility of the transmitter to check
the entire file for similar errors. The
transmitter must correct the problem(s)
and submit a replacement file to IRS/
MCC.
.04 The following definition has been
provided to help identify a replacement:
A replacementis media that IRS/
MCC has returned due to format or
coding errors encountered during
processing. Media returned should
receive the most prompt attention.
After necessary changes have been
made, these files are to be returned
to IRS/MCC.
.05 IRS/MCC will not return media
after successful processing. Therefore, if
the transmitter wants proof that IRS/
MCC received a shipment, the transmit-
ter should select a service with tracing
capabilities or one that will provide
proof of delivery.
.06 IRS/MCC will work with the fil-
ers to identify and resolve processing
problems. If contacted by IRS/MCC,
please respond promptly. IRS/MCC may
have information the filers need to cor-
rect their files.
.07 Do not use special shipping con-
tainers for transmitting data to IRS/
MCC. Shipping containers will not be
returned.
Sec. 8. Effect on Paper Documents
.01 Magnetic or electronic reporting
eliminates the need to submit paper
Forms 8851 to IRS except as described
in Section 4.01.
.02 Even though the threshold for
filing magnetically or electronically is
250 or more MSAs, IRS encourages
transmitters to submit all returns mag-
netically or electronically.
.03 The address for filing paper
Forms 8851 is:
Internal Revenue Service Center
Philadelphia, PA 19255
Do NOT send paper Forms 8851 to
IRS/MCC except as described in Sec-
tion 4.01.
.04 Do not send paper Forms 8851 to
Philadelphia if the Forms 8851 were
filed magnetically or electronically with
IRS/MCC.
Sec. 09. Definition of Terms
ElementDescription
Account HolderThe owner of the MSA.
Asynchronous ProtocolsThis type of data transmission is most often used by micro-computers, PCs and some
mini-transmissions transfer data at arbitrary time intervals using the start-stop method.
Each character transmitted has its own start bit and stop bit.
Denotes a blank position. Enter blank(s) when this symbol is used (do not enter the letter
‘‘b’’). This appears in numerous areas throughout the record descriptions.
Blocked recordsTwo or more records grouped together between interrecord gaps.
Employer Identification Number
(EIN)
A nine-digit number assigned by IRS to a person for Federal tax reporting purposes.
Electronic FilingSubmission of information returns using switched telecommunications network circuits.
These transmissions use modems, dial-up phone lines, and asynchronous protocols (see
Part C of this publication for specific information on electronic filing).
FileFor the purpose of this revenue procedure, a file consists of all records submitted by a
transmitter either magnetically or electronically.
FilerPerson or organization who prepares and submits files. May be the trustee and/or
transmitter.
Information Reporting Program
Bulletin Board System (IRP-BBS)
An electronic bulletin board which provides the ability to transmit information returns
via a personal computer (PC) using dial-up modems; provides immediate access to the
latest changes, updates, and publications.
IRS/MCCInternal Revenue Service/ Martinsburg Computing Center
10

ElementDescription
Magnetic MediaRefers to 1/2-inch magnetic tape, tape cartridge, 5 1/4- or 3 1/2-inch diskettes.
Multi-reel/diskette fileA group of tapes or diskettes submitted under one TCC where all media ends with an
account holder ‘‘B’’ Record,exceptfor the last media of the file, which ends with a
Control Total ‘‘C’’ Record.
ReplacementMedia that IRS/MCC has returned due to format errors encountered during processing.
Social Security Number (SSN)A nine-digit number assigned by the Social Security Administration (SSA) to an
individual for tax and wage reporting purposes.
Special CharacterAny character that is not a numeral, an alpha, or a blank.
Taxpayer Identification Number
(TIN)
May be either a Social Security Number (SSN) or an Employer Identification Number
(EIN).
Transmitter Control Code (TCC)The five-digit code ‘‘MSA01’’ assigned to all filers prior to submitting Forms 8851
magnetically/electronically. This number is inserted in the ‘‘A’’ Record and must be
present in the file.
TrusteePerson or organization that is the custodian of the MSA and is required to file Form
8851.
Part B. Magnetic Media
Specifications
Sec. 1. General
.01 These specifications prescribe the
required format and content of the
Trustee ‘‘A,’’ Account Holder ‘‘B,’’ and
Control Total ‘‘C’’ records to be in-
cluded in the magnetic media file. Usu-
ally, IRS/MCC will be able to process
any compatible file. Deviations cannot
and will not be permitted in any of the
data fields.
.02 If you are filing for more than
one trustee, each trustee must be re-
ported on a separate tape, tape cartridge,
diskette, or in a separate electronic
transmission. A separate Form 8851 is
required for each.
.03 An external label must appear on
each tape, diskette, or cartridge submit-
ted. The following information is needed
on the label:
(a) Type of filing (i.e., Original).
(b) The tax year of the data (i.e.,
1997).
(c) The trustee’s name.
(d) The five digit Transmitter Con-
trol Code ‘‘MSA01’’
(e) Operating system software and
hardware used to create the file
(i.e., IBM.PC/AT-MSD/DOS,
Apple MacIntosh/MacWrite
V2.2).
(f) The total number of account
holders in the file.
(g) Trustee’s media number. The
number assigned to the media
by the trustee.
(h) The sequence of each tape or
diskette (i.e., 001 of 008, 002
of 008,..., 008 of 008).
Information provided on the label will
assist IRS/MCC in identifying informa-
tion that is reported and in locating a
specific file if it is necessary to return
the file to the trustee.
.04 Regardless of the type of media
used or if returns are filed electronically,
the record length must be 150 positions.
Sec. 2. Tape Specifications
.01 In most instances, IRS/MCC can
process any compatible magnetic tape
file if the following specifications are
met:
(a) 9-track EBCDIC (Extended Bi-
nary Coded Decimal Inter-
change Code) with a recording
density of 1600 or 6250 BPI.
(b) 9-track ASCII (American Stan-
dard Coded Information Inter-
change) with recording density
of 1600 or 6250 BPI.
.02 All compatible tape files must
have the following characteristics: 1/2-
inch (12.7 mm) wide, computer-grade
magnetic tape on reels of up to 2,400
feet (731.52 m) within the following
specifications:
(a) Tape thickness: 1.0 or 1.5 mils,
and
(b) Reel diameter: 10 1/2-inch
(26.67 cm), 8 1/2-inch (21.59
cm), 7-inch (17.78 cm), or
6-inch.
.03 The tape records may be blocked
subject to the following:
(a) A block may not exceed 30,000
tape positions.
(b) If the use of blocked records
would result in a short block,
all remaining positions of the
block must be filled with 9’s;
however, the last block of the
file may be filled with 9’s or
truncated. Do not pad a block
with blanks.
(c) All records, except the header
and trailer labels, may be
blocked or unblocked. A record
may not contain any control
fields or block descriptor fields
which describe the length of
the block or the logical records
within the block. The number
of logical records within a
block (the blocking factor)
must be constant in every block
with the exception of the last
block which may be shorter
(see item b above). The block
length must be evenly divisible
by 150.
(d) Records may not span blocks.
.04 Labeled or unlabeled tapes may
be submitted.
.05 Tape header and trailer labels,
record marks, and tape marks are all
optional. If used, they must conform to
the following standards:
(a) Header labels must begin with
VOL1, VOL2, HDR1, HDR2,
or 1HDR. They must be the
first record(s) on the reel im-
mediately before the Trustee
‘‘A’’ Record. Header labels may
not exceed 80 characters in
length.
(b) Trailer labels must begin
1EOR, 1EOF, EOF1, or EOR1.
11

They must be the last record(s)
on the reel, after the ‘‘C’’
record and tape mark (if a tape
mark is used). Trailer labels
may not exceed 80 characters
in length.
(c) Tape marks must always appear
immediately after the ‘‘C’’
Record. If both header and
trailer labels are used, the tape
mark must follow the header
label and must precede and/or
follow the trailer label(s).
Sec. 3. Tape Cartridge
Specifications
.01 In most instances, IRS/MCC can
process tape cartridges that meet the
following specifications:
(a) Must be IBM 3480, 3490, or
AS400 compatible.
(b) Must meet American National
Standard Institute (ANSI) stan-
dards, and have the following
characteristics:
(1) Tape cartridges will be 1/2-
inch tape contained in plastic
cartridges which are approxi-
mately 4-inches by 5-inches
by 1-inch in dimension.
(2) Magnetic tape will be chro-
mium dioxide particle based
1/2-inch tape.
(3) Cartridges must be 18-track
or 36-track parallel. (See
Note.)
(4) Cartridges will contain
37,871 CPI or 75,742 CPI
(characters per inch).
(5) Mode will be full function.
(6) The data may be compressed
using EDRC (Memorex) or
IDRC (IBM) compression.
(7) Either EBCDIC (Extended
Binary Coded Decimal Inter-
change Code) or ASCII
(American Standard Coded
Information Interchange)
may be used.
.02 The tape cartridge records defined
in this revenue procedure may be
blocked subject to the following:
(a) A block must not exceed
30,000 tape positions.
(b) If the use of blocked records
would result in a short block,
all remaining positions of the
block must be filled with 9’s;
however, the last block of the
file may be filled with 9’s or
truncated. Do not pad a block
with blanks.
(c) All records, except the header
and trailer labels, may be
blocked or unblocked. A record
may not contain any control
fields or block descriptor fields
which describe the length of
the block or the logical records
within the block. The number
of logical records within a
block (the blocking factor)
must be constant in every block
with the exception of the last
block which may be shorter
(see item b above). The block
length must be evenly divisible
by 150.
(d) Records may not span blocks.
.03 Tape cartridges may be labeled or
unlabeled.
.04 For the purposes of this revenue
procedure, the following must be used:
Tape Mark:
(a) Used to signify the physical
end of the recording on tape.
(b) For even parity, use BCD con-
figuration 001111 (8421).
(c) May follow the header label
and precede and/or follow the
trailer label.
Note: Filers should indicate on the
external tape label whether the car-
tridge is 36- or 18-track.
Sec. 4. 5 1/4-inch And 3 1/2-inch
Diskette Specifications
.01 To be compatible, a diskette file
must meet the following specifications:
(a) 5 1/4- or 3 1/2-inches in diam-
eter.
(b) Data must be recorded in stan-
dard ASCII code. For 5 1/4-
inch diskettes, data may be re-
corded using EBCDIC if the
file is created on an IBM Sys-
tem 36.
(c) Records must be a fixed length
of 150 bytes per record.
(d) Delimiter character commas (,)
must not be used.
(e) Positions 149 and 150 of each
record must contain carriage
return/line feed (cr/lf) charac-
ters, if applicable.
(f) Filename of 8851MSA must be
used. Do not enter any other
data in this field. If a file will
consist of more than one dis-
kette, the file name 8851MSA
will contain a 3-digit extension.
This extension will indicate the
sequence of the diskettes within
the file. For example, the first
diskette will be named
8851MSA.001, the second dis-
kette will be 8851MSA.002,
etc.
(g) A diskette file may consist of
multiple diskettes as long as
the filenaming conventions are
followed.
(h) Diskettes must meet one of the
following specifications:
CapacityTracksSides/DensitySector Size
1.44 mb96tpihd512
1.44 mb135tpihd512
1.2 mb96tpihd512
720 kb48tpids/dd512
360 kb48tpids/dd512
320 kb48tpids/dd512
180 kb48tpiss/dd512
160 kb48tpiss/dd512
.02 IRS/MCC encourages trustees to
use blank or currently formatted dis-
kettes when preparing files. If extrane-
ous data follows the ‘‘C’’ Record, the
file must be returned for replacement.
.03 IRS/MCC prefers that 5 1/4- and
3 1/2-inch diskettes be created using MS/
DOS; however, diskettes created using
other operating systemsmay beaccept-
able. 3 1/2-inch diskettes created on a
System 36 or AS400are not accept-
able.IRS/MCC has equipment that can
12

convert diskettes created under virtually
any operating system to the appropriate
MS/DOS format.
.04 Trustees are encouraged to use
high density diskettes. Low density dis-
kettes are acceptable but must be for-
matted in low density.
Sec. 5. Data Sequence
Specifications
.01 In order to be acceptable, records
within the file must be in the following
sequence:
(a) A Trustee ‘‘A’’ Record
(b) Account Holder ‘‘B’’ Records
(c) Control Total ‘‘C’’ Record
.02 If you are filing for more than
one trustee, each trustee must be re-
ported on a separate tape, tape cartridge,
or diskette.
Sec. 6. The Trustee ‘‘A’’ Record-General Field Descriptions and Record Layout
.01 This record identifies the entity preparing and transmitting the file. The first record of a file MUST be a Trustee ‘‘A’’
Record, (preceded only by header labels, if any), and must appear on each tape and cartridge. Otherwise, the file will be
returned for replacement. The ‘‘A’’ Record is a fixed length of 150 positions.
Record Name: Trustee ‘‘A’’ Record
PositionsField TitleLengthDescription and Remarks
1Record Type1Required.Enter ‘‘A’’
2–10Trustee TIN9Required.Enter the Taxpayer Identification Number (TIN), either
the Employer Identification Number (EIN) or the Social Security
Number (SSN) of the Trustee.
11–50Trustee Name40Required.Enter the trustee’s name. Abbreviate if necessary to fit
40-character limit. Omit punctuation if possible. Left-justify and
blank fill.
51–90Trustee Address40Required.Enter mailing address of the trustee. Street address
should include number, street, apartment or suite number (or P.O.
Box if mail is not delivered to street address). Abbreviate as
needed to fit 40-character limit. Omit punctuation if possible. Left-
justify and blank fill.
91–119Trustee City29Required.Enter the city or town of trustee. If applicable, enter
APO or FPO only. Left-justify and blank fill.
120–121Trustee State2Required.Enter two- letter Post Office Code as shown in the list
below ONLY. Do NOT spell out the state name.
StateCodeStateCodeStateCode
AlabamaALMarylandMDSouth DakotaSD
AlaskaAKMassachusettsMATennesseeTN
ArizonaAZMichiganMITexasTX
ArkansasARMinnesotaMNUtahUT
CaliforniaCAMississippiMSVermontVT
ColoradoCOMissouriMOVirginiaVA
ConnecticutCTMontanaMTWashingtonWA
DelawareDENebraskaNEWest VirginiaWV
District ofNevadaNVWisconsinWI
ColumbiaDCNew HampshireNHWyomingWY
FloridaFLNew JerseyNJAmerican SamoaAS
GeorgiaGANew MexicoNMFederated States
HawaiiHINew YorkNYof MicronesiaFM
IdahoIDNorth CarolinaNCGuamGU
IllinoisILNorth DakotaNDNorthern Mariana
IndianaINOhioOHIslandsMP
IowaIAOklahomaOKMarshall IslandsMH
KansasKSOregonORPalauPW
KentuckyKYPennsylvaniaPAPuerto RicoPR
LouisianaLARhode IslandRIVirgin IslandsVI
MaineMESouth CarolinaSC
13

NOTE: When reporting APO/FPO addresses use the following format:
Example:
NamePVT Willard J. Doe
Street AddressCompany F, PSC Box 100
CityAPO (or FPO)
*StateAE, AA, or AP
ZIP Code098010100
*AE is the designation for ZIPs beginning with 090–098, AA for ZIP 340, and AP for ZIPs 962–966.
Record Name: Trustee ‘‘A’’ Record-continued
PositionsField TitleLengthDescription and Remarks
122–130Trustee ZIP Code9Required.Enter the ZIP code of the trustee for all U.S. addresses,
U.S. territories or possessions, APO/FPO addresses. For trustees
using a five-digit ZIP code, enter the ZIP code in the left-most five
positions and zero fill the remaining four positions. For trustees
outside the U.S., enter nine zeros only. Do NOT blank fill.
131–135Transmitter Control Code 5Required.Enter your five-digit Transmitter (TCC) Control Code,
‘‘MSA01.’’ This is the TCC assigned to all filers who report
Form(s) 8851 magnetically/electronically.
136Report Period1Required.Identify the tax period for which the Form 8851 is be-
ing filed by entering the appropriate indicator from the list below:
Tax periodIndicator
April 30, 19971
June 30, 19972
June 30, 19983
June 30, 19994
137–148Blanks12Enter Blanks.
149–150Blanks or Carriage
Return/Line Feed (cr/lf)
2Enter blanks or Carriage Return/ Line Feed(cr/lf).
Trustee ‘‘A’’ Record Layout
Record Type ‘‘A’’Trustee TINTrustee NameTrustee AddressTrustee City
12–1011–5051–9091–119
Trustee StateTrustee ZIP Code
Transmitter Control
Code (TCC)
‘‘MSA01’’Report PeriodBlanks
Blanks or Carriage
Return/
Line Feed
120–121122–130131–135136137–148149–150
Sec. 7. Account Holder ‘‘B’’ Record-General Field Descriptions and Record Layout
.01 The ‘‘B’’ record contains the account holder information. The format of the ‘‘B’’ record will remain constant and is a
fixed length of 150 positions.
Record Name: Account Holder ‘‘B’’ Record
PositionsField TitleLengthDescription and Remarks
1Record Type1Required.Enter ‘‘B.’’
2–10Account Holder’s Identi-
fication Number (TIN)
9Required.Enter the nine-digit Taxpayer Identification Number
(TIN) (EIN or SSN) of the Account Holder. Do NOT enter blanks,
hyphens, or alpha characters. A TIN consisting of all the same digit
(e.g., 111111111) is not acceptable.
11–50Account Holder Name40Required.Enter the name of the account holder. Abbreviate as
needed. Left justify and blank fill.
14

Record Name: Account Holder ‘‘B’’ Record
PositionsField TitleLengthDescription and Remarks
51Previously Uninsured
Indicator
1Required.Enter a code from the list below to indicate whether or
not the account holder was previously uninsured. For a definition
of ‘‘Previously Uninsured’’, please see Form 8851.
ConditionCode
Previously uninsured1
Previously insured0
52Excludable Indicator1Required.Enter a code from the list below to indicate whether the
account holder is excludable. For a definition see Form 8851.
ConditionCode
Excludable1
Not excludable0
53–148Blanks96Enter blanks.
149–150Blank or Carriage Return/
Line Feed
2Enter blanks or carriage return/ line feed (CR/LF).
Account Holder ‘‘B’’ Record Layout
Record Type ‘‘B’’Account Holder TINAccount Holder Name
Previously Uninsured
Indicator
12–1011–5051
Excludable IndicatorBlanksBlanks or Carriage Return/ Line Feed
5253–148149–150
Sec. 8. The Control Total ‘‘C’’ Record-General Field Descriptions and Record Layout
.01 Enter a ‘‘C’’ Record after the last ‘‘B’’ Record submitted for a particular Trustee ‘‘A’’ Record. The ‘‘C’’ Record serves as
a summary of the preceding ‘‘B’’ Records’ data, and enables IRS to cross check the correctness of information received.
.02 A ‘‘C’’ Record may only be followed by ‘‘B’’ Records reported for a trustee, or by a tape mark and/or trailer label when
more reels follow this reel. The ‘‘C’’ Record can be the last record on the file.
.03 Each ‘‘C’’ Record has a fixed length of 150 positions.
.04 If the field is not applicable, allow for the field by entering blanks or zeros as instructed.
Record Name: Control Total ‘‘C’’ Record
PositionsField TitleLengthDescription and Remarks
1Record Type1Required.Enter ‘‘C.’’
2–7Number of Account
Holders
6Required.Enter the total number of account holders being re-
ported. Right justify and zero fill.
8–13Previously Uninsured6Enter the total number of account holders that were previously un-
insured. Right justify and zero fill.
14–19Excludable6Enter the total number of excludable account holders being re-
ported. Right justify and zero fill.
20–148Blanks129Enter blanks.
149–150Blank or Carriage Return/
Line Feed
2Enter blanks or carriage return/line feed (CR/LF).
‘‘C’’ Record Layout
Record Type ‘‘C’’Number of Account HoldersPreviously UninsuredExcludable
12–78–1314–19
BlanksBlanks or Carriage Return/Line Feed (CR/LF)
20–148149–150
15

Part C. Asynchronous (IRP-BBS)
Electronic Filing Specifications
Sec. 1. General
.01
Asynchronous electronic filing of
Form(s) 8851 is offered as an alternative
to magnetic media (tape, tape cartridge,
or diskette) or paper filing, but is not a
requirement. Electronic filing using the
Information Reporting Program Bulletin
Board System (IRP-BBS) will fulfill the
magnetic media requirements for those
filers who are required to file magneti-
cally. It may also be used by those payers
who are under the filing threshold re-
quirement, but would prefer to file their
information returns this way. If the origi-
nal file was sent magnetically, but was
returned for replacement, the replacement
may be transmitted electronically.
.02 The electronic filing of informa-
tion returns is not affiliated with the
Form 1040 electronic filing program.
These two programs are totally indepen-
dent, and filers must obtain separate
approval to participate in each of them.
All inquiries concerning the electronic
filing of information returns should be
directed to IRS/MCC. IRS/MCC person-
nel cannot answer questions or assist
taxpayers in the filing of Form 1040 tax
returns. Filers with questions of this
nature will be directed to the Taxpayer
Service toll-free number (1–800–829–
1040) for assistance.
.03 Filers participating in the elec-
tronic filing program for Form(s) 8851
will submit their returns to IRS/MCC by
way of modems and not through mag-
netic media or paper filing.
.04 The formats of the ‘‘A,’’ ‘‘B,’’
and ‘‘C’’ Records are the same for
electronically filed records as they are
for 5 1/4- and 3 1/2-inch diskettes,
tapes, and tape cartridges. For electroni-
cally filed documents, each transmission
is considered a separate file.
Sec. 2. Electronic Filing Approval
Procedure
.01 Filers must send a Form 8851 to
IRS/MCCpriorto filing their Form(s)
8851 electronically. Only trustee infor-
mation should be provided on the Form
8851 when filing electronically. Please
annotate the Form 8851 with ‘‘Elec-
tronic Filing’’ to indicate the method of
filing. The Form 8851 may also be
faxed to IRS/MCC in order to expedite
electronic processing. The fax number is
(304) 264–5602.
.02 With all passwords, it is the us-
er’s responsibility to remember the pass-
word and not allow the password to be
compromised. However, if filers do for-
get their password, call (304) 263–8700
for assistance.Note: Passwords on the
IRP-BBS are case sensitive.
Sec. 3. Electronic Submissions
.01
Electronically filed information
may be submitted to IRS/MCC 24 hours
a day, 7 days a week. Technical assis-
tance will be available Monday through
Friday between 8:30 a.m. and 4:30 p.m.,
Eastern Time by calling (304) 263–8700.
.02 Filers may submit as many docu-
ments as they choose electronically. Fil-
ers are allowed 240 minutes a day;
however, more time may be requested if
needed.
.03 Data compression is encouraged
when submitting information returns by
way of the IRP-BBS. MCC has the
ability to decompress files created using
several popular software compression
programs such as ARC, LHARC, and
PKZIP. Software data compression can
be done alone or in conjunction with
V.42bis hardware compression.Trans-
mission time can be reduced by as
much as 85 percent when data com-
pression is used; therefore, it is highly
recommended.
The time required to transmit infor-
mation returns electronically will vary
depending on the modem speed and the
type of data compression used, if any.
.04 Files submitted to IRP-BBS must
have a unique filename. The trustee will
be contacted after receipt of the Form
8851 indicating the desire to file elec-
tronically. It is necessary for the trustee
to record the upload date, time, and
filename. This information will be
needed by MCC in order to identify the
file if assistance is required.
Sec. 4. Transmittal Requirements
.01 If you wish to file electronically,
complete Form 8851 above line ‘‘a’’
(trustee’s information only) and send it
to:
If by Postal Service:
Internal Revenue Service
P.O. Box 879, MS360
Kearneysville, WV 25430
or
If by truck or air freight:
IRS-Martinsburg Computing Center
ATTN: Electronic Filing Coordinator
Route 9 and Needy Road, MS366
Martinsburg, WV 25401
When the form is received, you will
be contacted by the Electronic Filing
Coordinator with instructions on how to
transmit your file. No return is consid-
ered filed until a Form 8851 is received
by IRS/MCC.
.02 Form 8851 can be ordered by
calling the IRS toll free forms and
publication order number 1–800–TAX–
FORM, (1–800–829–3676). The form
may also be obtained from the Internet
Http://WWW.IRS.USTREAS.GOVT.
The form may be computer-generated;
however, all of the trustee information
requested on the original form must be
on the computer-generated form.
.03 If you are submitting files for
more than one trustee, you must send a
separate Form 8851 for each trustee.
Each trustees’ information must be sub-
mitted in a separate transmission.
Sec. 5. Information Reporting
Program Bulletin Board System
(IRP-BBS) Specifications
.01 The IRP-BBS is an electronic
bulletin board system available to filers
of information returns. In addition to
filing information returns electronically,
the IRP-BBS provides other capabilities.
Some of the advantages of IRP-BBS are
as follows:
(1) Immediate access to the latest
changes and updates that affect
the Information Reporting Pro-
gram at IRS/MCC (program,
legislative, etc.).
(2) Access to publications, such as
the Publication 1220, as soon
as they are available.
(3) Capability to communicate with
IRS/MCC personnel.
(4) Ability to retrieve information
and files applicable to the IRP-
BBS.
.02 The IRP-BBS is available for
public use and accessible using various
personal computer communications
equipment. A TCC is not needed to
access those portions of the IRP-BBS
that contain forms and publications or to
leave questions or messages for IRS/
MCC personnel.
.03 Contact the IRP-BBS by dialing
(304) 264–7070. The communication
software settings for IRP-BBS are:
- No parity
- Eight data bits
- One stop bit
- Full duplex
The communication software should be
set up to use the fastest speed allowed
by the filer’s modem.
16

.04 Due to the large number of com-
munication products available, it is im-
possible to provide specific information
on a particular software package or
hardware configuration. Filers should
contact their software or hardware sup-
plier for assistance.
.05 IRP-BBS software provides a
menu-driven environment allowing ac-
cess to different parts of IRP-BBS.
Whenever possible, IRS/MCC personnel
will provide assistance in resolving any
communication problems with IRP-BBS.
.06 IRP-BBS can be accessed at
speeds from 1200 to 28,800 bps. The
speed is automatically negotiated for
connection at the speed of the calling
modem. The communication standards
supported include Industry Standard
212A, V.22bis, V.32, V.32bis, V.34, and
V.FC. Point-to-point error control is sup-
ported using the V.42 ITU-T standard or
MNP 2–4. Data compression is sup-
ported using V.42bis ITU-T standard or
MNP5.
Sec. 6. IRP-BBS First Time Logon
Procedures
.01 The following information will be
requested to set up the filer’s user
profile when logging onto the IRP-BBS
for the first time.
(A) Enter the letter, that corre-
sponds to the filer’s terminal,
from the following:
<A> IBM PC
<B> IBM w/ANSI
<C> Atari
<D> ADM–3
<E> H19/Z19/H89
<F> Televid 925
<G> TRS–80
<H> Vidtex
<I> VT–52
<j> VT–100
<CR> if none of the above
Most PCs, clones, etc., will
select the IBM PC emulation.
Machines with color, CGA,
EGA, or VGA should select
IBM w/ANSI.
(B) Upper/lower case, line feed
needed, O (zero) nulls after
each <CR>, do you wish to
modify this? (Most users an-
swer no.)
This is the end of the Revenue Proce-
dure for reporting Forms 8851,
magnetically/electronically.
26 CFR 601.201: Rulings and determination let-
ters.
(Also Part I, sections 25, 103, 143; 1.25–4T,
1.103–1, 6a.103A–2.)
Rev. Proc. 97–26
SECTION 1. PURPOSE
This revenue procedure provides
guidance concerning the United States
and area median gross income figures
that are to be used by issuers of quali-
fied mortgage bonds, as defined in
§ 143(a) of the Internal Revenue Code,
and issuers of mortgage credit certifi-
cates, as defined in § 25(c), in comput-
ing the housing cost/income ratio de-
scribed in § 143(f)(5).
SECTION 2. BACKGROUND
.01 Section 103(a) provides that, ex-
cept as provided in § 103(b), gross
income does not include interest on any
state or local bond. Section 103(b)(1)
provides that § 103(a) shall not apply to
any private activity bond that is not a
‘‘qualified bond’’ within the meaning of
§ 141. Section 141(e) provides that the
term ‘‘qualified bond’’ includes any pri-
vate activity bond that (1) is a qualified
mortgage bond, (2) meets the volume
cap requirements under § 146, and (3)
meets the applicable requirements under
§ 147.
.02 Section 143(a)(1) provides that
the term ‘‘qualified mortgage bond’’
means a bond that is issued as part of a
‘‘qualified mortgage issue’’. Section
143(a)(2)(A) provides that the term
‘‘qualified mortgage issue’’ means an
issue of one or more bonds by a state or
political subdivision thereof, but only if
(i) all proceeds of the issue (exclusive
of issuance costs and a reasonably re-
quired reserve) are to be used to finance
owner-occupied residences; (ii) the issue
meets the requirements of subsections
(c), (d), (e), (f), (g), (h), (i), and (m)(7)
of § 143; (iii) the issue does not meet
the private business tests of paragraphs
(1) and (2) of § 141(b); and (iv) with
respect to amounts received more than
10 years after the date of issuance,
repayments of $250,000 or more of
principal on financing provided by the
issue are used not later than the close of
the first semi-annual period beginning
after the date the prepayment (or com-
plete repayment) is received to redeem
bonds that are part of the issue.
.03 Section 143(f) imposes eligibility
requirements concerning the maximum
income of mortgagors for whom financ-
ing may be provided by qualified mort-
gage bonds. Section 25(c)(2)(A)(iii)(IV)
provides that recipients of mortgage
credit certificates must meet the income
requirements of § 143(f). Generally, un-
der §§ 143(f)(1) and 25(c)(2)(A)(iii)-
(IV), these income requirements are met
only if all owner-financing under a
qualified mortgage bond and all certified
indebtedness amounts under a mortgage
credit certificate program are provided
to mortgagors whose family income is
115 percent or less of the applicable
median family income. Under
§ 143(f)(6), the income limitation is
reduced to 100 percent of the applicable
median family income if there are fewer
than three individuals in the family of
the mortgagor.
.04 Section 143(f)(4) provides that
the term ‘‘applicable median family in-
come’’ means the greater of (A) the area
median gross income for the area in
which the residence is located or (B) the
statewide median gross income for the
state in which the residence is located.
.05 Section 143(f)(5) provides for an
upward adjustment of the income limita-
tions in certain high housing cost areas.
Under § 143(f)(5)(C), a high housing
cost area is a statistical area for which
the housing cost/income ratio is greater
than 1.2. The housing cost/income ratio
is determined under § 143(f)(5)(D) by
dividing (a) the applicable housing price
ratio by (b) the ratio that the area
median gross income bears to the me-
dian gross income for the United States.
The applicable housing price ratio is the
new housing price ratio (new housing
average purchase price for the area
divided by the new housing average
purchase price for the United States) or
the existing housing price ratio (existing
housing average area purchase price
divided by the existing housing average
purchase price for the United States),
whichever results in the housing cost/
income ratio being closer to 1. This
income adjustment applies only to bonds
issued and nonissued bond amounts
elected after December 31, 1988.
.06 The Department of Housing and
Urban Development (HUD) has com-
puted the median gross income for the
United States, the states, and statistical
areas within the states. The income
information was released to the HUD
regional offices on December 27, 1996,
and may be obtained by calling the
HUD reference service at 1–800–245–
2691, or, in the Washington, D.C., area,
at 301–251–5154. The Internal Revenue
Service annually publishes only the me-
dian gross income for the United States.
17

.07 The most recent nationwide aver-
age purchase prices and average area
purchase price safe harbor limitations
were published on September 6, 1994,
in Rev. Proc. 94–55, 1994–2 C.B. 716.
SECTION 3. APPLICATION
.01 When computing the housing
cost/income ratio under § 143(f)(5), is-
suers of qualified mortgage bonds and
mortgage credit certificates must use
$43,500 as the median gross income for
the United States. See section 2.06 of
this revenue procedure.
.02 When computing the housing
cost/income ratio under § 143(f)(5), is-
suers of qualified mortgage bonds and
mortgage credit certificates must use the
area median gross income figures re-
leased by HUD on December 27, 1996.
See section 2.06 of this revenue proce-
dure.
SECTION 4. EFFECT ON OTHER
REVENUE PROCEDURES
.01 Rev. Proc. 96–37, 1996–29 I.R.B.
16, is obsolete except as provided in
section 5.02 of this revenue procedure.
.02 This revenue procedure does not
affect the effective date provisions of
Rev. Rul. 86–124, 1986–2 C.B. 27.
Those effective date provisions will re-
main operative at least until the Service
publishes a new revenue ruling that
conforms the approach to effective dates
set forth in Rev. Rul. 86–124 to the
general approach taken in this revenue
procedure.
SECTION 5. EFFECTIVE DATES
.01 Issuers must use the United States
and area median gross income figures
specified in section 3 of this revenue
procedure for commitments to provide
financing that are made, or (if the
purchase precedes the financing commit-
ment) for residences that are purchased,
in the period that begins on December
27, 1996, the date HUD released the
income figures, and ends on the date
when these United States and area me-
dian gross income figures are rendered
obsolete by a new revenue procedure.
.02 Notwithstanding section 5.01 of
this revenue procedure, issuers may con-
tinue to rely on the United States and
area median gross income figures speci-
fied in Rev. Proc. 96–37 with respect to
bonds originally sold and nonissued
bond amounts elected not later than
May 28, 1997, if the commitments or
purchases described in section 5.01 are
made not later than July 28, 1997.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Patricia M. Monahan of the
Office of Assistant Chief Counsel (Fi-
nancial Institutions and Products). For
further information regarding this rev-
enue procedure contact Ms. Monahan on
(202) 622–4122 (not a toll-free call).
18

Part IV. Items of General Interest
Employee Plans; Examination
Guidelines
Announcement 97–42
The Internal Revenue Service has
developed proposed examination guide-
lines for employee plans examiners to
use when examining Simplified Em-
ployee Plans (SEPs). The guidelines
provide technical background and guid-
ance as to issues that should be consid-
ered during an examination. The guide-
lines are not intended to be all inclusive,
and may be modified based on specific
issues encountered by the examiners
during the examination.
As with earlier examination guide-
lines, the Service is seeking public com-
ments with respect to the proposed
examination guidelines pertaining to
Simplified Employee Plans before the
guidelines are finalized in the Internal
Revenue Manual.
A copy of the proposed examination
guidelines for Simplified Employee
Plans may be obtained by submitting a
written request to the Internal Revenue
Service: Assistant Commissioner (Em-
ployee Plans and Exempt Organiza-
tions), CP:E:EP:FC, 1111 Constitution
Avenue NW, Washington, DC 20224.
Written comments on the guidelines per-
taining to Simplified Employee Plans
may be submitted on or before July 28,
1997, to the Internal Revenue Service,
Attention: Assistant Commissioner (Em-
ployee Plans and Exempt Organiza-
tions), CP:E:EP:FC, 1111 Constitution
Avenue, NW, Washington, DC 20224.
Simplification of Entity
Classification Rules; Correction
Announcement 97–43
AGENCY: Internal Revenue Service,
Treasury.
ACTION: Correction to the final regula-
tions.
SUMMARY: This document contains
corrections to the final regulations (T.D.
8697 [1997–2 I.R.B. 11]) which were
published in theFederal Registeron
Wednesday, December 18, 1996 (61 FR
66584). The final regulations relate to
the classification of business organiza-
tions.
EFFECTIVE DATE: January 1, 1997.
FOR FURTHER INFORMATION CON-
TACT: Mark D. Harris, (202) 622–3050
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The final regulations that are subject
to these corrections are under section
7701 of the Internal Revenue Code.
Need for Correction
As published, the final regulations
(T.D. 8697) contain errors which may
prove to be misleading and are in need
of clarification.
Correction of Publication
Accordingly, the publication of the
final regulations (T.D. 8697) which are
the subject of FR Doc. 96–31997 is
corrected as follows:
§ 301.7701–3 [Corrected]
1. On page 66592, column 1,
§ 301.7701–3, paragraph (c)(1)(vi),Ex-
ample 1, line 11 from the bottom of the
paragraph, the language ‘‘by September
13, 1998. See paragraph’’ is corrected to
read ‘‘by September 14, 1998. See para-
graph’’.
2. On page 66592, column 1,
§ 301.7701–3, paragraph (c)(1)(vi),Ex-
ample 1, line 7 from the bottom of the
paragraph, the language ‘‘Form 8832
after September 13, 1998, it will’’ is
corrected to read ‘‘Form 8832 after
September 14, 1998, it will’’.
Cynthia E. Grigsby,
Chief, Regulations Unit,
Assistant Chief Counsel (Corporate).
(Filed by the Office of the Federal Register on
March 12, 1997, 8:45 a.m., and published in the
issue of the Federal Register for March 13, 1997,
62 F.R. 11769)
Basis Reduction Due To Discharge
of Indebtedness; Hearing
Announcement 97–44
AGENCY: Internal Revenue Service,
Treasury.
ACTION: Proposed rule; change of date
and location of public hearing.
SUMMARY: This document changes
the date and location of the public
hearing on the notice of proposed
rulemaking relating to basis reduction
due to discharge of indebtedness under
sections 108 and 1017 of the Internal
Revenue Code of 1986.
DATES: The public hearing is being
held on Thursday, May 29, 1997, begin-
ning at 10 a.m. Requests to speak and
outlines of oral comments must be re-
ceived by April 3, 1997.
ADDRESSES: The public hearing origi-
nally scheduled in the IRS Auditorium,
Internal Revenue Building, 1111 Consti-
tution Avenue, NW, Washington, DC is
changed to the Commissioner’s Confer-
ence Room, room 3313, Internal Rev-
enue Building, 1111 Constitution Av-
enue, NW, Washington, DC.
FOR FURTHER INFORMATION
CONTACT: Evangelista Lee of the
Regulations Unit, Assistant Chief Coun-
sel (Corporate), (202) 622–7180 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
A notice of proposed rulemaking and
notice of public hearing appearing in the
Federal Registeron Tuesday, January
7, 1997, (62 FR 955 [REG–208172–91,
1997–10 I.R.B. 59]) announced that a
public hearing on proposed regulations
relating to the basis reduction due to
discharge of indebtedness under sections
108 and 1017 would be held on Thurs-
day, April 24, 1997, beginning at 10
a.m. in the IRS Auditorium, Internal
Revenue Building, 1111 Constitution
Avenue, NW, Washington, DC and that
requests to speak and outlines of oral
comments should be received by Thurs-
day, April 3, 1997.
The date and location of the public
hearing has changed. The hearing is
scheduled for Thursday, May 29, 1997,
beginning at 10 a.m. in the Commis-
sioner’s Conference Room, room 3313,
Internal Revenue Building, 1111 Consti-
tution Avenue, NW, Washington, DC.
We must receive requests to speak and
outlines of oral comments by Thursday,
April 3, 1997. Because of the controlled
access restrictions, attenders are not ad-
mitted beyond the lobby of the Internal
Revenue Building until 9:45 a.m.
The Service will prepare an agenda
showing the scheduling of the speakers
after the outlines are received from the
191997–17 I.R.B.

persons testifying and make copies
available free of charge at the hearing.
Cynthia E. Grigsby,
Chief, Regulations Unit,
Assistant Chief Counsel (Corporate).
(Filed by the Office of the Federal Register on
March 14, 1997, 8:45 a.m., and published in the
issue of the Federal Register for March 17, 1997,
62 F.R. 12582)
Stock Options Contributed to a Plan
Announcement 97–45
On December 24, 1996, the Internal
Revenue Service issued P.L.R. 9712033
which concerned the federal income tax
(including unrelated business income
tax) and federal excise tax consequences
of the contribution of certain stock op-
tions to a qualified plan and the subse-
quent exercise of those stock options to
be used in the purchase of the common
stock of the employer maintaining the
plan.
The Service is reexamining the plan
qualification and other tax issues under
the Internal Revenue Code of 1986, as
amended, raised by a contribution of
stock options to a plan and subsequent
exercise of those options.
201997–17 I.R.B.

Announcement of the Expedited Suspension of Attorneys, Certified Public
Accountants, Enrolled Agents, and Enrolled Actuaries From Practice Before the
Internal Revenue Service
Under title 31 of the Code of Federal
Regulations, section 10.76, the Director
of Practice is authorized to immediately
suspend from practice before the Inter-
nal Revenue Service any practitioner
who, within five years, from the date
the expedited proceeding is instituted,
(1) has had a license to practice as an
attorney, certified public accountant, or
actuary suspended or revoked for cause;
or (2) has been convicted of any crime
under title 26 of the United States Code
or, of a felony under title 18 of the
United States Code involving dishonesty
or breach of trust.
Attorneys, certified public accoun-
tants, enrolled agents and enrolled actu-
aries are prohibited in any Internal Rev-
enue Service matter from directly or
indirectly employing, accepting assis-
tance from, being employed by, or shar-
ing fees with, any practitioner disbarred
or suspended from practice before the
Internal Revenue Service.
To enable attorneys, certified public
accountants, enrolled agents, and en-
rolled actuaries to identify practitioners
under expedited suspension from prac-
tice before the Internal Revenue Service,
the Director of Practice will announce in
the Internal Revenue Bulletin the names
and addresses of practitioners who have
been suspended from such practice, their
designation as attorney, certified public
accountant, enrolled agent, or enrolled
actuary, and date or period of suspen-
sion. This announcement will appear in
the weekly Bulletin at the earliest practi-
cable date after such action and will
continue to appear in the weekly Bulle-
tins for five successive weeks or for as
many weeks as is practicable for each
attorney, certified public accountant, en-
rolled agent, or enrolled actuary so
suspended and will be consolidated and
published in the Cumulative Bulletin.
The following individuals have been
placed under suspension from practice
before the Internal Revenue Service by
virtue of the expedited proceeding pro-
visions of the applicable regulations:
NameAddressDesignationDate of Suspension
Loberg, ThomasSt. Paul, MNCPAIndefinite from November 13, 1996
Rose Ann GalatiThousand Oaks, CACPAIndefinite from November 25, 1996
Labendeira, AnthonyFresno, CACPAIndefinite from November 25, 1996
Nation, D. MarkAlbuquerque, NMCPAIndefinite from November 25, 1996
Behren, Daryl D.Visalia, CACPAIndefinite from November 25, 1996
Murphy, Virginia T.Laurinburg, NCCPAIndefinite from November 25, 1996
Best III, James M.Monroe, NCCPAIndefinite from November 25, 1996
Rehm, AyshaTulsa, OKCPAIndefinite from November 25, 1996
Dineen, Lee M.Castle Hayne, NCCPAIndefinite from December 12, 1996
Miele, Ralph J.North Babylon, NYCPAIndefinite from February 14, 1997
21

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 de-
scribe the effect:
Amplifieddescribes a situation where
no change is being made in a prior
published position, but the prior position
is being extended to apply to a variation
of the fact situation set forth therein.
Thus, if an earlier ruling held that a
principle applied to A, and the new
ruling holds that the same principle also
applies to B, the earlier ruling is ampli-
fied. (Compare withmodified, below).
Clarifiedis used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously
published ruling and points out an es-
sential difference between them.
Modifiedis used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but not
to B, and the new ruling holds that it
applies to both A and B, the prior ruling
is modified because it corrects a pub-
lished position. (Compare withamplified
andclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered de-
terminative with respect to future trans-
actions. This term is most commonly
used in a ruling that lists previously
published rulings that are obsoleted be-
cause of changes in law or regulations.
A ruling may also be obsoleted because
the substance has been included in regu-
lations subsequently adopted.
Revokeddescribes situations where
the position in the previously published
ruling is not correct and the correct
position is being stated in the new
ruling.
Supersededdescribes a situation
where the new ruling does nothing more
than restate the substance and situation
of a previously published ruling (or
rulings). Thus, the term is used to
republish under the 1986 Code and
regulations the same position published
under the 1939 Code and regulations.
The term is also used when it is desired
to republish in a single ruling a series of
situations, names, etc., that were previ-
ously published over a period of time in
separate rulings. If the new ruling does
more than restate the substance of a
prior ruling, a combination of terms is
used. For example,modifiedandsuper-
sededdescribes a situation where the
substance of a previously published rul-
ing is being changed in part and is
continued without change in part and it
is desired to restate the valid portion of
the previously published ruling in a new
ruling that is self contained. In this case
the previously published ruling is first
modified and then, as modified, is su-
perseded.
Supplementedis used in situations in
which a list, such as a list of the names
of countries, is published in a ruling and
that list is expanded by adding further
names in subsequent rulings. After the
original ruling has been supplemented
several times, a new ruling may be
published that includes the list in the
original ruling and the additions, and
supersedes all prior 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 following abbreviations in current use and
formerly used will appear in material published in
the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C.—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contribution Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
22

Numerical Finding List
1
Bulletin 1997–1 through 1997–16
Announcements:
97–1, 1997–2 I.R.B.63
97–2, 1997–2 I.R.B.63
97–3, 1997–2 I.R.B.63
97–4, 1997–3 I.R.B.14
97–5, 1997–3 I.R.B.15
97–6, 1997–4 I.R.B.11
97–7, 1997–4 I.R.B.12
97–8, 1997–4 I.R.B.12
97–9, 1997–5 I.R.B.27
97–10, 1997–10 I.R.B.64
97–11, 1997–6 I.R.B.19
97–12, 1997–7 I.R.B.55
97–13, 1997–8 I.R.B.38
97–14, 1997–8 I.R.B.38
97–15, 1997–9 I.R.B.23
97–16, 1997–9 I.R.B.23
97–17, 1997–9 I.R.B.23
97–18, 1997–10 I.R.B.67
97–19, 1997–10 I.R.B.68
97–20, 1997–11 I.R.B.22
97–21, 1997–11 I.R.B.23
97–22, 1997–12 I.R.B.47
97–23, 1997–11 I.R.B.23
97–24, 1997–11 I.R.B.24
97–25, 1997–12 I.R.B.47
97–26, 1997–12 I.R.B.48
97–27, 1997–13 I.R.B.30
97–28, 1997–14 I.R.B.15
97–29, 1997–14 I.R.B.16
97–30, 1997–14 I.R.B.16
97–31, 1997–14 I.R.B.16
97–32, 1997–14 I.R.B.17
97–33, 1997–15 I.R.B.8
97–34, 1997–15 I.R.B.8
97–35, 1997–15 I.R.B.9
97–36, 1997–15 I.R.B.10
97–37, 1997–15 I.R.B.10
97–38, 1997–15 I.R.B.10
97–39, 1997–16 I.R.B.27
97–40, 1997–16 I.R.B.28
97–41, 1997–16 I.R.B.28
Notices:
97–1, 1997–2 I.R.B.22
97–2, 1997–2 I.R.B.22
97–3, 1997–1 I.R.B.8
97–4, 1997–2 I.R.B.24
97–5, 1997–2 I.R.B.25
97–6, 1997–2 I.R.B.26
97–7, 1997–1 I.R.B.8
97–8, 1997–4 I.R.B.7
97–9, 1997–2 I.R.B.35
97–10, 1997–2 I.R.B.41
97–11, 1997–2 I.R.B.50
97–12, 1997–3 I.R.B.11
97–13, 1997–6 I.R.B.13
97–14, 1997–8 I.R.B.23
97–15, 1997–8 I.R.B.23
97–16, 1997–9 I.R.B.15
97–17, 1997–10 I.R.B.34
97–18, 1997–10 I.R.B.35
97–19, 1997–10 I.R.B.40
97–20, 1997–10 I.R.B.52
97–21, 1997–11 I.R.B.9
97–22, 1997–13 I.R.B.9
97–23, 1997–14 I.R.B.8
Notices—Continued
97–24, 1997–16 I.R.B.6
97–25, 1997–16 I.R.B.8
Proposed Regulations:
REG–209332–80, 1997–14 I.R.B.9
REG–209040–88, 1997–7 I.R.B.34
REG–209121–89, 1997–11 I.R.B.15
REG–208288–90, 1997–11 I.R.B.14
REG–209494–90, 1997–8 I.R.B.24
REG–208172–91, 1997–10 I.R.B.59
REG–209672–93, 1997–6 I.R.B.15
REG–209709–94 1997–13 I.R.B.12
REG–209729–94, 1997–11 I.R.B.19
REG–209762–95, 1997–3 I.R.B.12
REG–209817–96, 1997–7 I.R.B.41
REG–209824–96, 1997–11 I.R.B.19
REG–254394–96, 1997–14 I.R.B.14
REG–209828–96, 1997–6 I.R.B.15
REG–209830–96, 1997–15 I.R.B.7
REG–209834–96, 1997–4 I.R.B.9
REG–209839–96, 1997–8 I.R.B.26
REG–242996–96, 1997–9 I.R.B.18
REG–246018–96, 1997–8 I.R.B.30
REG–247678–96, 1997–6 I.R.B.17
REG–247862–96, 1997–8 I.R.B.32
REG–248770–96, 1997–8 I.R.B.33
REG–249819–96, 1997–7 I.R.B.50
REG–252231–96, 1997–7 I.R.B.52
REG–252233–96, 1997–9 I.R.B.19
REG–252665–96, 1997–12 I.R.B.46
Revenue Procedures:
97–1, 1997–1 I.R.B.11
97–2, 1997–1 I.R.B.64
97–3, 1997–1 I.R.B.84
97–4, 1997–1 I.R.B.96
97–5, 1997–1 I.R.B.132
97–6, 1997–1 I.R.B.153
97–7, 1997–1 I.R.B.185
97–8, 1997–1 I.R.B.187
97–9, 1997–2 I.R.B.56
97–10, 1997–2 I.R.B.59
97–11, 1997–6 I.R.B.13
97–12, 1997–4 I.R.B.7
97–13, 1997–5 I.R.B.18
97–14, 1997–5 I.R.B.20
97–15, 1997–5 I.R.B.21
97–16, 1997–5 I.R.B.25
97–17, 1997–9 I.R.B.15
97–18, 1997–10 I.R.B.53
97–19, 1997–10 I.R.B.55
97–20, 1997–11 I.R.B.10
97–21, 1997–12 I.R.B.44
97–22, 1997–13 I.R.B.9
97–24, 1997–16 I.R.B.10
Revenue Rulings:
97–1, 1997–2 I.R.B.10
97–2, 1997–2 I.R.B.7
97–3, 1997–2 I.R.B.5
97–4, 1997–3 I.R.B.6
97–5, 1997–4 I.R.B.5
97–6, 1997–4 I.R.B.4
97–7, 1997–5 I.R.B.14
97–8, 1997–7 I.R.B.4
97–9, 1997–9 I.R.B.4
97–10, 1997–10 I.R.B.31
97–11, 1997–10 I.R.B.5
97–12, 1997–11 I.R.B.5
97–13, 1997–16 I.R.B.4
Revenue Rulings—Continued
97–14, 1997–11 I.R.B.5
97–15, 1997–12 I.R.B.42
97–16, 1997–13 I.R.B.4
97–17, 1997–14 I.R.B.5
97–18, 1997–15 I.R.B.4
Social Security Domestic Coverage Threshold
1997–9, I.R.B.17
Treasury Decisions:
8688, 1997–3 I.R.B.7
8689, 1997–3 I.R.B.9
8690, 1997–5 I.R.B.5
8691, 1997–5 I.R.B.16
8692, 1997–3 I.R.B.4
8693, 1997–6 I.R.B.9
8694, 1997–6 I.R.B.11
8695, 1997–4 I.R.B.5
8696, 1997–6 I.R.B.4
8697, 1997–2 I.R.B.11
8698, 1997–7 I.R.B.29
8699, 1997–6 I.R.B.4
8700, 1997–7 I.R.B.5
8701, 1997–7 I.R.B.23
8702, 1997–8 I.R.B.4
8703, 1997–8 I.R.B.18
8704, 1997–8 I.R.B.12
8705, 1997–8 I.R.B.16
8706, 1997–9 I.R.B.11
8707, 1997–7 I.R.B.17
8708, 1997–10 I.R.B.14
8709, 1997–9 I.R.B.5
8710, 1997–13 I.R.B.4
8711, 1997–12 I.R.B.35
8712, 1997–12 I.R.B.4
8713, 1997–14 I.R.B.4
8714, 1997–15 I.R.B.5
1
A cumulative list of all Revenue Rulings,
Revenue Procedures, Treasury Decisions, etc.,
published in Internal Revenue Bulletins 1996–27
through 1996–53 will be found in Internal
Revenue Bulletin 1997–1, dated January 6, 1997.
23

Finding List of Current Action on
Previously Published Items
1
Bulletin 1997–1 through 1997–16
*Denotes entry since last publication
Revenue Procedures:
66–3
Modified by
97–11, 1997–6 I.R.B.13
87–21
Modified by
97–11, 1997–6 I.R.B.13
92–20
Modified by
97–1, 1997–1 I.R.B.11
92–20
Modified by
97–10, 1997–2 I.R.B.59
92–90
Superseded by
97–1, 1997–1 I.R.B.11
94–52
Revoked by
97–11, 1997–6 I.R.B.13
96–1
Superseded by
97–1, 1997–1 I.R.B.11
96–2
Superseded by
97–2, 1997–1 I.R.B.64
96–3
Superseded by
97–3, 1997–1 I.R.B.84
96–4
Superseded by
97–4, 1997–1 I.R.B.96
96–5
Superseded by
97–5, 1997–1 I.R.B.132
96–6
Superseded by
97–6, 1997–1 I.R.B.153
96–7
Superseded by
97–7, 1997–1 I.R.B.185
96–8
Superseded by
97–8, 1997–1 I.R.B.187
96–24
96–24A
Superseded by
97–24, 1997–16 I.R.B.10
97–2
Amplified by
97–21, 1997–12 I.R.B.44
Revenue Rulings:
70–480
Revoked by
97–6, 1997–4 I.R.B.4
Revenue Rulings—Continued
72–527
Obsoleted by
8704, 1997–8 I.R.B.12
74–59
Revoked by
8708, 1997–10 I.R.B.14
92–19
Supplemented in part by
97–2, 1997–2 I.R.B.7
96–12
Superseded by
97–3, 1997–1 I.R.B.84
96–13
Modified by
97–1, 1997–1 I.R.B.11
96–22
Superseded by
97–3, 1997–1 I.R.B.84
96–34
Superseded by
97–3, 1997–1 I.R.B.84
96–39
Superseded by
97–3, 1997–1 I.R.B.84
96–43
Superseded by
97–3, 1997–1 I.R.B.84
96–56
Superseded by
97–3, 1997–1 I.R.B.84
1
A cumulative finding list for previously published
items mentioned in Internal Revenue Bulletins
1996–27 through 1996–53 will be found in Inter-
nal Revenue Bulletin 1997–1, dated January 6,
1997.
24