Internal Revenue Bulletin 1997-6 (PDF rendition): IRS Revenue Procedures

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.

INCOME TAX
T.D. 8694, page 11.
Final regulations amend section 6103 of the Code,
which authorizes the disclosure of certain information to
the U.S. Customs Service.
T.D. 8696, page 4.
Final regulations for S corporations and their sharehold-
ers relate to the definitions and the special rule pro-
vided in section 1377 of the Code.
REG–209828–96, page 15.
Proposed regulations under section 468A of the Code
relate to requests for revised schedules of ruling
amounts for nuclear decommissioning reserve funds. A
public hearing will be held on May 13, 1997.
EXEMPT ORGANIZATIONS
Announcement 97–11, page 19.
A list is given of organizations now classified as private
foundations.
EMPLOYMENT TAX
T.D. 8699, page 4.
Temporary regulations under section 45B of the Code,
pertaining to the credit for employer FICA taxes paid with
respect to certain tips received by employees of food or
beverage establishments, are removed.
REG–209672–93, page 15.
Proposed regulations under section 45B of the Code,
relating to the credit for employer FICA taxes paid with
respect to certain tips received by employees of food or
beverage establishments, are withdrawn.
EXCISE TAX
T.D. 8693, page 9.
REG–247678–96, page 17.
Temporary and proposed regulations under section 4082
of the Code relate to the application of the diesel fuel
excise tax to fuel used in Alaska.
ADMINISTRATIVE
Rev. Proc. 97–11, page 13.
Photocopy fee increase.Effective May 1, 1997, the
fee for a copy of a tax return or other related document
will increase from $14 to $23. The next revision of Form
4506 will reflect the $23 charge. Rev. Procs. 66–3 and
87–21 modified. Rev. Proc. 94–52 revoked.
Notice 97–13, page 13.
Change in accounting method; alternative minimum
tax.Taxpayers are informed that the Service intends to
provide approval for farmers to change their method of
accounting for income from certain deferred payment
sales contracts for purposes of computing their alterna-
tive minimum tax.
Finding Lists begin on page 23.
Announcement of Disbarments and Suspensions begins on page 21.
Bulletin No. 1997–6
February 10, 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 45B.—Credit for Portion of
Employer Social Security Taxes
Paid With Respect To Employee
Cash Tips
26 CFR 1.45B–1T: Credit for certain employer
social security taxes paid with respect to employee
tips (Temporary).
T.D. 8699
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
Credit for Employer Social Security
Taxes Paid on Employee Tips
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Removal of temporary regula-
tions.
SUMMARY: This document removes
the temporary regulations pertaining to
the credit for employer FICA taxes paid
with respect to certain tips received by
employees of food or beverage estab-
lishments. The temporary regulations
were published in theFederal Register
on December 23, 1993. Statutory
changes made by the Small Business
Job Protection Act of 1996 have made
these temporary regulations obsolete.
EFFECTIVE DATE: The removal of the
temporary regulations is effective Janu-
ary 1, 1994.
FOR FURTHER INFORMATION CON-
TACT: Jean M. Casey at (202) 622–
6060 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On December 23, 1993, the IRS pub-
lished temporary regulations (T.D. 8503
[1994–1 C.B. 17])(58 FR 68033) under
section 45B of the Internal Revenue
Code of 1986 (Code). Amendments
made by section 1112(a) of the Small
Business Job Protection Act of 1996
(Public Law 104–188) render the tempo-
rary regulations obsolete. Therefore,
temporary regulation § 1.45B–1T is be-
ing removed.
On December 23, 1993, the IRS also
issued a notice of proposed rulemaking
(EE–71–93 [1994–1 C.B. 784])(58 FR
68091) under section 45B of the Code.
This notice of proposed rulemaking is
being withdrawn in a separate docu-
ment.
Explanation of Provisions
Section 45B of the Code describes a
business tax credit allowable under sec-
tion 38 for food and beverage establish-
ments. The credit is equal to the em-
ployer’s Federal Insurance Contributions
Act (FICA) obligation attributable to
certain employee tips. The credit is
reduced, however, if the nontip wages
paid to an employee during a month are
less than the amount that would have
been payable to the employee at the
federal minimum wage rate. The tempo-
rary regulations provide that this credit
is available only for employer FICA
taxes paid after December 31, 1993,
with respect to tips received for services
performed after December 31, 1993.
The temporary regulations also provide
that the credit applies only to taxes paid
on tips that are reported to the employer
by its employees.
Section 1112(a) of the Small Business
Job Protection Act of 1996 amended
Code section 45B to provide that the
credit is available for employer FICA
taxes paid after December 31, 1993,
regardless of when the services with
respect to which the tips are received
were performed. Section 1112(a) also
provides that the credit is available
whether or not the tips on which the
employer FICA taxes were paid were
reported to the employer by the em-
ployee. These provisions are effective as
if included in the legislation under
which section 45B was originally en-
acted, and thus render the temporary
regulations obsolete.
Drafting Information
The principal author of these regula-
tions is Jean M. Casey of the Office of
the Associate Chief Counsel (Employee
Benefits and Exempt Organizations),
IRS. However, other personnel from the
IRS and Treasury Department partici-
pated in their development.
* * * * *
Removal of Temporary Regulations
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
§ 1.45B–1T [Removed]
Par. 2. Section 1.45B–1T is removed.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved December 11, 1996.
Donald C. Lubick,
Acting Assistant Secretary
of the Treasury.
(Filed by the Office of the Federal Register on
December 19, 1996, 8:45 a.m., and published in
the issue of the Federal Register for December 20,
1996, 61 F.R. 67212)
Section 56.—Adjustments in
Computing Alternative Minimum
Taxable Income
26 CFR 1.55–1: Alternative minimum taxable
income.
Will the Internal Revenue Service provide ap-
proval for taxpayers engaged in the business of
farming to change their method of accounting for
the income from certain deferred payment sales
contracts for purposes of computing their alterna-
tive minimum tax. See Notice 97–13, page 13.
Section 1377.—Definitions and
Special Rules
26 CFR 1.1377: Pro rata share.
T.D. 8696
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 18, and 602
Definitions under Subchapter S of
the Internal Revenue Code
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regula-
tions.
SUMMARY: This document contains
final regulations for S corporations and
their shareholders relating to the defini-
tions and the special rule provided in
section 1377 of the Internal Revenue
Code. The final regulations reflect
changes to the law made by the
Subchapter S Revision Act of 1982 and
the Small Business Job Protection Act
of 1996. These final regulations are
necessary to provide guidance for tax-
payers to comply with the law.
EFFECTIVE DATE: These regulations
are effective January 1, 1997.
4

FOR FURTHER INFORMATION CON-
TACT: Laura Howell, (202) 622–3060
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in these final regulations has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act (44
U.S.C. 3507) under control number
1545–1462. Responses to this collection
of information are required to verify the
event giving rise to the making of an
election under section 1377(a)(2) by an
S corporation.
An agency may not conduct or spon-
sor, and a person is not required to
respond to, a collection of information
unless the collection of information dis-
plays a valid control number.
The estimated annual burden per re-
spondent varies from .2 hour to .5 hour,
depending on individual circumstances,
with an estimated average of .25 hour.
Comments concerning the accuracy of
this burden estimate and suggestions for
reducing this burden should be sent to
theInternal Revenue Service, Attn:
IRS Reports Clearance Officer, T:FP,
Washington, DC 20224, and to theOf-
fice of Management and Budget, Attn:
Desk Officer for the Department of the
Treasury, Office of Information and
Regulatory Affairs, Washington, DC
20503.
Books or records relating to this col-
lection of information must be retained
as long as their contents may become
material in the administration of any
internal revenue law. Generally, tax re-
turns and tax return information are
confidential, as required by 26 U.S.C.
6103.
Background
On July 12, 1995, the IRS published
in theFederal Registera notice of
proposed rulemaking (PS–268–82,
1995–2 C.B. 491) containing proposed
amendments to the Income Tax Regula-
tions (26 CFR part 1) under section
1377 of the Internal Revenue Code
(Code). These amendments were pro-
posed to conform the regulations to the
addition of section 1377 to the Code by
section 2 of the Subchapter S Revision
Act of 1982, Public Law 97–354
(1982–2 C.B. 702, 710). Written com-
ments responding to this notice were
received. No public hearing was held
because no hearing was requested. On
August 20, 1996, the Small Business
Job Protection Act of 1996, Public Law
104–188, 110 Stat. 1755, was enacted.
Sections 1306 and 1307 of the Small
Business Job Protection Act of 1996
amended section 1377 of the Code.
After consideration of all comments re-
ceived, and the changes to section 1377
by the Small Business Job Protection
Act of 1996, the proposed amendments
are adopted as revised by this Treasury
decision.
Explanation of Provisions
Days on which stock has not been
issued
Section 1366(a)(1) requires a share-
holder of an S corporation to take into
account the shareholder’s pro rata share
of the corporation’s items of income,
loss, deduction, and credit. Section
1377(a) provides that, except in the case
of an election under section 1377(a)(2),
each shareholders’s pro rata share of any
item for any taxable year shall be the
sum of the amounts determined with
respect to the shareholder by assigning
an equal portion of such item to each
day of the taxable year, and then by
dividing that portion pro rata among the
shares outstanding on such day. The
proposed regulations provide that solely
for purposes of determining a sharehold-
er’s pro rata share of an item, an S
corporation’s taxable year does not in-
clude any day on which the corporation
has no shareholders.
One commentator suggested that a
person who beneficially owns the corpo-
ration should be treated as a shareholder
of an S corporation for any day on
which the corporation has assets and
conducts business, but has not issued
any stock. The final regulations revise
the rule concerning no shareholder days
and provide that, solely for purposes of
determining a shareholder’s pro rata
share of an item for a taxable year
under section 1377(a), the beneficial
owners of the corporation are treated as
the shareholders of the corporation for
any day on which the corporation has
not issued any stock.
When a Post-Termination Transition Pe-
riod Arises
The proposed regulations provide that
a post-termination transition period
(PTTP) arises following the termination
under section 1362(d) of a corporation’s
S election. By example, the proposed
regulations state that a PTTP arises
when a C corporation acquires the assets
of an S corporation in a transaction to
which section 381(a)(2) applies. Several
commentators requested clarification
concerning whether the example results
in a termination under section 1362(d)
of the corporation’s election to be an S
corporation or merely the cessation of
the S corporation’s taxable year. The
final regulations clarify that, pursuant to
the rule in section 1377(b)(1), a PTTP
arises the day after the last day that an
S corporation was in existence if a C
corporation acquires the assets of an S
corporation in a transaction to which
section 381(a)(2) applies. Changes to
section 1377 made by the Small Busi-
ness Job Protection Act of 1996.
Agreement to Terminate Year
Section 1306 of the Small Business
Job Protection Act of 1996 amended
section 1377(a)(2) to provide that only
the affected shareholders and the corpo-
ration must consent to an election to
treat the corporation’s taxable year as
two taxable years in the event of a
complete termination of a shareholder’s
interest in the corporation. In addition,
the terminating election under section
1377(a)(2) applies only to the affected
shareholders. H.R. Conf. Rep. No. 104–
737, 104th Cong. 2d Sess. 222 (1986).
The termaffected shareholdersis de-
fined as the shareholder whose interest
is terminated and all shareholders to
whom the shareholder has transferred
shares during the taxable year. If the
shareholder has transferred shares to the
corporation,affected shareholdersin-
clude all persons who are shareholders
during the taxable year. The final regu-
lations reflect these changes made to
section 1377(a)(2) by the Small Busi-
ness Job Protection Act of 1996.
Expansion of Post-Termination Transi-
tion Period
Section 1307(a) of the Small Business
Job Protection Act of 1996 expands the
definition of PTTP under section
1377(b)(1) to include the 120-day period
beginning on the date of any determina-
tion pursuant to an audit of the taxpayer
that follows the termination of the S
corporation’s election and that adjusts a
subchapter S item of income, loss, or
deduction of the S corporation during
the S period. In addition, the definition
ofdeterminationis expanded to include
any determination under section 1313(a).
The effect of this change is to expand
the definition ofdeterminationto in-
clude a final disposition by the Secre-
5

tary of a claim for refund and certain
agreements between the Secretary and
any person relating to the tax liability of
the person. The final regulations reflect
these changes made to section 1377(b)
by section 1307 of the Small Business
Job Protection Act of 1996.
Coordination With Other Provisions and
Other Clarifying Changes
In response to comments, the final
regulations add cross-references and
make certain clarifying revisions. The
proposed regulations coordinate the ap-
plication of the terminating election un-
der section 1377(a)(2) with the election
that may be made under § 1.1368–
1(g)(2) when there is a qualifying dispo-
sition by: (i) removing the section 1377
reference in § 1.1368–1(g)(1) because
all of the rules for a section 1377(a)(2)
terminating election are now entirely
stated in these final regulations; and (ii)
amending § 1.1368–1(g)(2) to provide
that a qualifying disposition election
cannot be made if a transfer results in a
termination of the shareholder’s entire
interest as a shareholder.
The proposed regulations provide that
a section 1377(a)(2) terminating election
must contain the written consent of each
shareholder. The final regulations revise
the shareholder consent rules by remov-
ing the written consent requirement for
each shareholder. The final regulations
merely require an S corporation to in-
clude a statement by the corporation that
each affected shareholder and the corpo-
ration consent to the election.
In response to comments, the final
regulations clarify that a shareholder’s
entire interest in an S corporation is not
terminated if the shareholder retains
ownership of any stock, including an
interest treated as stock under § 1.1361–
1(l), that would result in the shareholder
continuing to be considered a share-
holder of the corporation for purposes of
section 1362(a)(2). In addition, the final
regulations clarify that a shareholder
whose entire interest in an S corporation
is terminated in an event for which a
terminating election was made is not
required to consent to an election under
section 1377(a)(2) for a subsequent ter-
mination of another shareholder within
the taxable year unless the shareholder
is an affected shareholder with respect
to the subsequent termination.
Effective Date
These regulations apply to taxable
years of an S corporation beginning
after December 31, 1996.
Special Analysis
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in EO 12866.
Therefore, a regulatory assessment is not
required. It has also been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations, and be-
cause the notice of proposed rulemaking
preceding the regulations was issued
prior to March 29, 1996, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does
not apply. Pursuant to section 7805(f) of
the Internal Revenue Code, the notice of
proposed rulemaking preceding these
regulations was submitted to the Small
Business Administration for comment on
its impact on small business.
Drafting Information
The principal author of these regula-
tions is Laura Howell, Office of Assis-
tant Chief Counsel (Passthroughs and
Special Industries). However, other per-
sonnel from the IRS and Treasury De-
partment participated in their develop-
ment.
* * * * *
Adoption of Amendments to the Regula-
tions
Accordingly, 26 CFR parts 1, 18, and
602 are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding an entry in
numerical order to read as follows:
Authority: 26 U.S.C. 7805. * * *
Section 1.1377–1 also issued under 26
U.S.C. 1377(a)(2) and (c). * * *
Par. 2. Section 1.1368–0 is amended
by:
1. Revising the entry for paragraphs
(g) and (g)(1) of § 1.1368–1.
2. Adding an entry for paragraph
(g)(2)(iv) of § 1.1368–1.
The revisions and addition read as
follows:
§ 1.1368–0 Table of contents.
* * * * *
§ 1.1368–1 Distributions by S corpora-
tions.
* * * * *
(g) Special rule.
(1) Election to terminate year under
§ 1.1368–1(g)(2).
(2) * * *
(iv) Coordination with election under
section 1377(a)(2).
* * * * *
Par. 3. Section 1.1368–1 is amended
by:
1. Revising the heading for paragraph
(g).
2. Revising paragraph (g)(1).
3. Adding paragraph (g)(2)(iv).
The revisions and addition read as
follows:
§ 1.1368–1 Distributions by S corpora-
tions.
* * * * *
(g)Special rule—(1)Election to ter-
minate year under § 1.1368–1(g)(2).If
an election is made under paragraph
(g)(2) of this section to terminate the
year when there is a qualifying disposi-
tion, this section applies as if the taxable
year consisted of separate taxable years,
the first of which ends at the close of
the day on which there is a qualifying
disposition of stock.
(2) * * *
(iv)Coordination with election under
section 1377(a)(2).If the event resulting
in a qualifying disposition also results in
a termination of a shareholder’s entire
interest as described in § 1.1377–
1(b)(4), the election under this para-
graph (g)(2) cannot be made. Rather, the
election under section 1377(a)(2) and
§ 1.1377–1(b) may be made. See
§ 1.1377–1(b) (concerning the election
under section 1377(a)(2)). Par. 4. Sec-
tions 1.1377–0, 1.1377–1, 1.1377–2, and
1.1377–3 are added under the
undesignated center heading ‘‘Small
Business Corporations and Their Share-
holders’’ to read as follows:
§ 1.1377–0 Table of contents.
The following table of contents is
provided to facilitate the use of
§§ 1.1377–1 through 1.1377–3:
§ 1.1377–1 Pro rata share.
(a) Computation of pro rata shares.
(1) In general.
(2) Special rules.
(i) Days on which stock has not been
issued.
(ii) Determining shareholder for day
of stock disposition.
(b) Election to terminate year.
(1) In general.
(2) Affected shareholders.
(3) Effect of the terminating election.
(i) In general.
(ii) Due date of S corporation return.
6

(iii) Taxable year of inclusion by
shareholder.
(iv) S Corporation that is a partner in
a partnership.
(4) Determination of whether an S
shareholder’s entire interest has termi-
nated.
(5) Time and manner of making a
terminating election.
(i) In general.
(ii) Affected shareholders required to
consent.
(iii) More than one terminating elec-
tion.
(c) Examples.
§ 1.1377–2 Post-termination transition
period.
(a) In general.
(b) Special rules for post-termination
transition period.
(c) Determination defined.
(d) Date a determination becomes ef-
fective.
(1) Determination under section
1313(a).
(2) Written agreement.
(3) Implied agreement.
§ 1.1377–3 Effective date.
§ 1.1377–1 Pro rata share.
(a)Computation of pro rata shares—
(1)In general.For purposes of
subchapter S of chapter 1 of the Internal
Revenue Code and this section, each
shareholder’s pro rata share of any S
corporation item described in section
1366(a) for any taxable year is the sum
of the amounts determined with respect
to the shareholder by assigning an equal
portion of the item to each day of the S
corporation’s taxable year, and then di-
viding that portion pro rata among the
shares outstanding on that day. See
paragraph (b) of this section for rules
pertaining to the computation of each
shareholder’s pro rata share when an
election is made under section
1377(a)(2) to treat the taxable year of an
S corporation as if it consisted of two
taxable years in the case of a termina-
tion of a shareholder’s entire interest in
the corporation.
(2)Special rules—(i)Days on which
stock has not been issued.Solely for
purposes of determining a shareholder’s
pro rata share of an item for a taxable
year under section 1377(a) and this
section, the beneficial owners of the
corporation are treated as the sharehold-
ers of the corporation for any day on
which the corporation has not issued
any stock.
(ii)Determining shareholder for day
of stock disposition.A shareholder who
disposes of stock in an S corporation is
treated as the shareholder for the day of
the disposition. A shareholder who dies
is treated as the shareholder for the day
of the shareholder’s death.
(b)Election to terminate year—(1)In
general.If a shareholder’s entire interest
in an S corporation is terminated during
the S corporation’s taxable year and the
corporation and all affected shareholders
agree, the S corporation may elect under
section 1377(a)(2) and this paragraph
(b) (terminating election) to apply para-
graph (a) of this section to the affected
shareholders as if the corporation’s tax-
able year consisted of two separate
taxable years, the first of which ends at
the close of the day on which the
shareholder’s entire interest in the S
corporation is terminated. If the event
resulting in the termination of the share-
holder’s entire interest also constitutes a
qualifying disposition as described in
§ 1.1368–1(g)(2)(i), the election under
§ 1.1368–1(g)(2) cannot be made. An S
corporation may not make a terminating
election if the cessation of a sharehold-
er’s interest occurs in a transaction that
results in a termination under section
1362(d)(2) of the corporation’s election
to be an S corporation. (See section
1362(e)(3) for an election to have items
assigned to each short taxable year
under normal tax accounting rules in the
case of a termination of a corporation’s
election to be an S corporation.) A
terminating election is irrevocable and is
effective only for the terminating event
for which it is made.
(2)Affected shareholders.For pur-
poses of the terminating election under
section 1377(a)(2) and paragraph (b) of
this section, the termaffected sharehold-
ersmeans the shareholder whose inter-
est is terminated and all shareholders to
whom such shareholder has transferred
shares during the taxable year. If such
shareholder has transferred shares to the
corporation, the termaffected sharehold-
ersincludes all persons who are share-
holders during the taxable year.
(3)Effect of the terminating elec-
tion—(i)In general.An S corporation
that makes a terminating election for a
taxable year must treat the taxable year
as separate taxable years for all affected
shareholders for purposes of allocating
items of income (including tax-exempt
income), loss, deduction, and credit;
making adjustments to the accumulated
adjustments account, earnings and prof-
its, and basis; and determining the tax
effect of a distribution. An S corporation
that makes a terminating election must
assign items of income (including tax-
exempt income), loss, deduction, and
credit to each deemed separate taxable
year using its normal method of ac-
counting as determined under section
446(a).
(ii)Due date of S corporation return.
A terminating election does not affect
the due date of the S corporation’s
return required to be filed under section
6037(a) for a taxable year (determined
without regard to a terminating elec-
tion).
(iii)Taxable year of inclusion by
shareholder.A terminating election does
not affect the taxable year in which an
affected shareholder must take into ac-
count the affected shareholder’s pro rata
share of the S corporation’s items of
income, loss, deduction, and credit.
(iv)S corporation that is a partner in
a partnership.A terminating election by
an S corporation that is a partner in a
partnership is treated as a sale or ex-
change of the corporation’s entire inter-
est in the partnership for purposes of
section 706(c) (relating to closing the
partnership taxable year), if the taxable
year of the partnership ends after the
shareholder’s interest is terminated and
within the taxable year of the S corpora-
tion (determined without regard to any
terminating election) for which the ter-
minating election is made.
(4)Determination of whether an S
shareholder’s entire interest has termi-
nated.For purposes of the terminating
election under section 1377(a)(2) and
paragraph (b) of this section, a share-
holder’s entire interest in an S corpora-
tion is terminated on the occurrence of
any event through which a shareholder’s
entire stock ownership in the S corpora-
tion ceases, including a sale, exchange,
or other disposition of all of the stock
held by the shareholder; a gift under
section 102(a) of all the shareholder’s
stock; a spousal transfer under section
1041(a) of all the shareholder’s stock; a
redemption, as defined in section
317(b), of all the shareholder’s stock,
regardless of the tax treatment of the
redemption under section 302; and the
death of the shareholder. A shareholder’s
entire interest in an S corporation is not
terminated if the shareholder retains
ownership of any stock (including an
interest treated as stock under § 1.1361–
1(l)) that would result in the shareholder
continuing to be considered a share-
holder of the corporation for purposes of
section 1362(a)(2). Thus, in determining
7

whether a shareholder’s entire interest in
an S corporation has been terminated,
any interest held by the shareholder as a
creditor, employee, director, or in any
other non-shareholder capacity is disre-
garded.
(5)Time and manner of making a
terminating election—(i)In general.An
S corporation makes a terminating elec-
tion by attaching a statement to its
timely filed original or amended return
required to be filed under section
6037(a) (that is, a Form 1120S) for the
taxable year during which a sharehold-
er’s entire interest is terminated. A
single election statement may be filed
by the S corporation for all terminating
elections for the taxable year. The elec-
tion statement must include—
(A) A declaration by the S corpora-
tion that it is electing under section
1377(a)(2) and this paragraph (b) to
treat the taxable year as if it consisted
of two separate taxable years;
(B) Information setting forth when
and how the shareholder’s entire interest
was terminated (for example, a sale or
gift);
(C) The signature on behalf of the S
corporation of an authorized officer of
the corporation under penalties of per-
jury; and
(D) A statement by the corporation
that the corporation and each affected
shareholder consent to the S corporation
making the terminating election.
(ii)Affected shareholders required to
consent.For purposes of paragraph
(b)(5)(i)(D) of this section, a shareholder
of the S corporation for the taxable year
is a shareholder as described in section
1362(a)(2). For example, the person
who under § 1.1362–6(b)(2) must con-
sent to a corporation’s S election in
certain special cases is the person who
must consent to the terminating election.
In addition, an executor or administrator
of the estate of a deceased affected
shareholder may consent to the terminat-
ing election on behalf of the deceased
affected shareholder.
(iii)More than one terminating elec-
tion.A shareholder whose entire interest
in an S corporation is terminated in an
event for which a terminating election
was made is not required to consent to a
terminating election made with respect
to a subsequent termination within the
same taxable year unless the shareholder
is an affected shareholder with respect
to the subsequent termination.
(c)Examples.The following ex-
amples illustrate the provisions of this
section:
Example 1. Shareholder’s pro rata share in the
case of a partial disposition of stock.(i) On
January 6, 1997, X incorporates as a calendar year
corporation, issues 100 shares of common stock to
each of A and B, and files an election to be an S
corporation for its 1997 taxable year. On July 24,
1997, B sells 50 shares of X stock to C. Thus, in
1997, A owned 50 percent of the outstanding
shares of X on each day of X’s 1997 taxable year,
B owned 50 percent on each day from January 6,
1997, to July 24, 1997 (200 days), and 25 percent
from July 25, 1997, to December 31, 1997 (160
days), and C owned 25 percent from July 25,
1997, to December 31, 1997 (160 days).
(ii) Because B’s entire interest in X is not
terminated when B sells 50 shares to C on July
24, 1997, X cannot make a terminating election
under section 1377(a)(2) and paragraph (b) of this
section for B’s sale of 50 shares to C. Although
B’s sale of 50 shares to C is a qualifying
disposition under § 1.1368–1(g)(2)(i), X does not
make an election to terminate its taxable year
under § 1.1368–1(g)(2). During its 1997 taxable
year, X has nonseparately computed income of
$720,000.
(iii) For each day in X’s 1997 taxable year, A’s
daily pro rata share of X’s nonseparately computed
income is $1,000 ($720,000/360 days x 50%).
Thus, A’s pro rata share of X’s nonseparately
computed income for 1997 is $360,000 ($1,000 x
360 days). B’s daily pro rata share of X’s
nonseparately computed income is $1,000
($720,000/360 x 50%) for the first 200 days of
X’s 1997 taxable year, and $500 ($720,000/360 x
25%) for the following 160 days in 1997. Thus,
B’s pro rata share of X’s nonseparately computed
income for 1997 is $280,000 (($1,000 x 200 days)
+ ($500 x 160 days)). C’s daily pro rata share of
X’s nonseparately computed income is $500
($720,000/360 x 25%) for 160 days in 1997. Thus,
C’s pro rata share of X’s nonseparately computed
income for 1997 is $80,000 ($500 x 160 days).
Example 2. Shareholder’s pro rata share when
an S corporation makes a terminating election
under section 1377(a)(2).(i) On January 6, 1997,
X incorporates as a calendar year corporation,
issues 100 shares of common stock to each of A
and B, and files an election to be an S corporation
for its 1997 taxable year. On July 24, 1997, B
sells B’s entire 100 shares of X stock to C. With
the consent of B and C, X makes an election
under section 1377(a)(2) and paragraph (b) of this
section for the termination of B’s entire interest
arising from B’s sale of 100 shares to C. As a
result of the election, the pro rata shares of B and
C are determined as if X’s taxable year consisted
of two separate taxable years, the first of which
ends on July 24, 1997, the date B’s entire interest
in X terminates. Because A is not an affected
shareholder as defined by section 1377(a)(2)(B)
and paragraph (b)(2) of this section, the treatment
as separate taxable years does not apply to A.
(ii) During its 1997 taxable year, X has
nonseparately computed income of $720,000. Un-
der X’s normal method of accounting, $200,000 of
the $720,000 of nonseparately computed income is
allocable to the period of January 6, 1997, through
July 24, 1997 (the first deemed taxable year), and
the remaining $520,000 is allocable to the period
of July 25, 1997, through December 31, 1997 (the
second deemed taxable year).
(iii) B’s pro rata share of the $200,000 of
nonseparately computed income for the first
deemed taxable year is determined by assigning
the $200,000 of nonseparately computed income
to each day of the first deemed taxable year
($200,000/200 days = $1,000 per day). Because B
held 50% of X’s authorized and issued shares on
each day of the first deemed taxable year, B’s
daily pro rata share for each day of the first
deemed taxable year is $500 ($1,000 per day x
50%). Thus, B’s pro rata share of the $200,000 of
nonseparately computed income for the first
deemed taxable year is $100,000 ($500 per day x
200 days). B must report this amount for B’s
taxable year with or within which X’s full taxable
year ends (December 31, 1997).
(iv) C’s pro rata share of the $520,000 of
nonseparately computed income for the second
deemed taxable year is determined by assigning
the $520,000 of nonseparately computed income
to each day of the second deemed taxable year
($520,000/160 days = $3,250 per day). Because C
held 50% of X’s authorized and issued shares on
each day of the second deemed taxable year, C’s
daily pro rata shares for each day of the second
deemed taxable year is $1,625 ($3,250 per day x
50%). Therefore, C’s pro rata share of the
$520,000 of nonseparately computed income is
$260,000 ($1,625 per day x 160 days). C must
report this amount for C’s taxable year with or
within which X’s full taxable year ends (December
31, 1997).
§ 1.1377–2 Post-termination transition
period.
(a)In general.For purposes of
subchapter S of chapter 1 of the Internal
Revenue Code (Code) and this section,
the termpost-termination transition pe-
riodmeans—
(1) The period beginning on the day
after the last day of the corporation’s
last taxable year as an S corporation and
ending on the later of—
(i) The day which is 1 year after such
last day; or
(ii) The due date for filing the return
for the last taxable year as an S corpora-
tion (including extensions);
(2) The 120-day period beginning on
the date of any determination pursuant
to an audit of the taxpayer which fol-
lows the termination of the corporation’s
election and which adjusts a subchapter
S item of income, loss, or deduction of
the corporation arising during the S
period (as defined in section
1368(e)(2)); and
(3) The 120-day period beginning on
the date of a determination that the
corporation’s election under section
1362(a) had terminated for a previous
taxable year.
(b)Special rules for post-termination
transition period.Pursuant to section
1377(b)(1) and paragraph (a)(1) of this
section, a post-termination transition pe-
riod arises the day after the last day that
an S corporation was in existence if a C
corporation acquires the assets of the S
corporation in a transaction to which
section 381(a)(2) applies. However, if an
S corporation acquires the assets of
another S corporation in a transaction to
which section 381(a)(2) applies, a post-
8

termination transition period does not
arise. (See § 1.1368–2(d)(2) for the
treatment of the acquisition of the assets
of an S corporation by another S corpo-
ration in a transaction to which section
381(a)(2) applies.) The special treatment
under section 1371(e)(1) of distributions
of money by a corporation with respect
to its stock during the post-termination
transition period is available only to
those shareholders who were sharehold-
ers in the S corporation at the time of
the termination.
(c)Determination defined.For pur-
poses of section 1377(b)(1) and para-
graph (a) of this section, the termdeter-
minationmeans—
(1) A determination as defined in
section 1313(a);
(2) A written agreement between the
corporation and the Commissioner (in-
cluding a statement acknowledging that
the corporation’s election to be an S
corporation terminated under section
1362(d)) that the corporation failed to
qualify as an S corporation;
(3) For a corporation subject to the
audit and assessment provisions of
subchapter C of chapter 63 of subtitle A
of the Code, the expiration of the period
specified in section 6226 for filing a
petition for readjustment of a final S
corporation administrative adjustment
finding that the corporation failed to
qualify as an S corporation, provided
that no petition was timely filed before
the expiration of the period; and
(4) For a corporation not subject to
the audit and assessment provisions of
subchapter C of chapter 63 of subtitle A
of the Code, the expiration of the period
for filing a petition under section 6213
for the shareholder’s taxable year for
which the Commissioner has made a
finding that the corporation failed to
qualify as an S corporation, provided
that no petition was timely filed before
the expiration of the period.
(d)Date a determination becomes ef-
fective—(1)Determination under section
1313(a).A determination under para-
graph (c)(1) of this section becomes
effective on the date prescribed in sec-
tion 1313 and the regulations thereunder.
(2)Written agreement.A determina-
tion under paragraph (c)(2) of this sec-
tion becomes effective when it is signed
by the district director having jurisdic-
tion over the corporation (or by another
Service official to whom authority to
sign the agreement is delegated) and by
an officer of the corporation authorized
to sign on its behalf. Neither the request
for a written agreement nor the terms of
the written agreement suspend the run-
ning of any statute of limitations.
(3)Implied agreement.A determina-
tion under paragraph (c)(3) or (4) of this
section becomes effective on the day
after the date of expiration of the period
specified under section 6226 or 6213,
respectively.
§ 1.1377–3 Effective date.
Sections 1.1377–1 and 1.1377–2 ap-
ply to taxable years of an S corporation
beginning after December 31, 1996.
PART 18—TEMPORARY INCOME
TAX REGULATIONS UNDER THE
SUBCHAPTER S REVISION ACT OF
1982
Par. 5. The authority citation for part
18 continues to read as follows:
Authority: 26 U.S.C. 7805.
Section 18.1377–1 [Removed]
Par. 6. Section 18.1377–1 is removed.
PART 602—OMB CONTROL NUM-
BERS UNDER THE PAPERWORK
REDUCTION ACT
Par. 7. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 8. In § 602.101, paragraph (c) is
amended as follows:
1. Removing the following entry
from the table:
§ 602.101 OMB Control numbers.
* * * * *
(c) * * *
CFR part or section
where identified and
described
Current
OMB
control No.
* * * * *
18.1377–1 . . . . . . . . . . . 1545–0130
* * * * *
2. Adding an entry in numerical order
to the table to read as follows:
§ 602.101 OMB Control numbers.
* * * * *
(c) * * *
CFR part or section
where identified and
described
Current
OMB control
No.
* * * * *
1.1377–1 . . . . . . . . . . . . 1545–1462
* * * * *
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved November 1, 1996.
Donald C. Lubick,
Acting Assistant Secretary
of the Treasury.
(Filed by the Office of the Federal Register on
December 20, 1996, 8:45 a.m., and published in
the issue of the Federal Register for December 23,
1996, 61 F.R. 67454)
Section 4082.—Exemptions for
Diesel Fuel
26 CFR 48.4082–5T: Diesel fuel; Alaska (tempo-
rary).
T.D. 8693
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 48
Diesel Fuel Excise Tax; Special
Rules for Alaska
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Temporary regulations.
SUMMARY: This document contains
temporary regulations relating to the
application of the diesel fuel excise tax
to fuel used in Alaska. The regulations
implement certain changes made by the
Small Business Job Protection Act of
1996. They affect certain enterers, refin-
ers, retailers, terminal operators,
throughputters, wholesale distributors,
and users. The text of these regulations
also serves as the text of REG–247678–
96, page 17, this Bulletin.
DATES: These regulations are effective
December 17, 1996. For dates of appli-
cability of these regulations, see
§§ 48.4082–5T(g) and 48.6715–2T(b).
FOR FURTHER INFORMATION
CONTACT: Frank Boland (202) 622–
3130 (not a toll-free call).
SUPPLEMENTARY INFORMATION:
Background
Section 4081 imposes a tax on certain
removals, entries, and sales of diesel
fuel. However, under section 4082, tax
is not imposed if, among other condi-
tions, the diesel fuel is indelibly dyed in
accordance with Treasury regulations.
Dyed diesel fuel can be used legally in
nontaxable uses such as for heating oil,
as fuel in stationary engines, or as fuel
in nonhighway vehicles. A substantial
penalty under section 6715 applies if
9

dyed diesel fuel is used for a taxable
purpose such as in a registered highway
vehicle.
A similar dyeing regime for diesel
fuel is required by regulations issued
under the Clean Air Act. That Act
prohibits the use on highways of diesel
fuel with a sulfur content exceeding
prescribed levels. The Environmental
Protection Agency (EPA) requires this
‘‘high sulfur’’ diesel fuel to be dyed.
Section 1801 of the Small Business
Job Protection Act of 1996 amends
section 4082 to create an exception to
the IRS dyeing requirement. Under this
amendment, which is effective October
1, 1996, the IRS dyeing requirement
does not apply to diesel fuel that is
removed, entered, or sold in a state for
ultimate sale or use in an area of such
state during the period such area is
exempted from EPA’s sulfur content and
fuel dyeing requirements if the use of
the fuel is certified pursuant to Treasury
regulations.
Section 211(i)(4) of the Clean Air Act
allows EPA to exempt the states of
Alaska and Hawaii from the Clean Air
Act’s sulfur content requirements. In
response to a petition from Alaska, the
EPA granted a permanent exemption for
remote areas of Alaska (that is, areas
that are not served by the Federal Aid
Highway System). In addition, a tempo-
rary exemption was granted for urban
areas. This temporary exemption, which
was originally scheduled to expire after
September 30, 1996, has been extended
by the EPA (61 FR 42812 (August 19,
1996)) for 24 months, or until a decision
is made on Alaska’s petition for a
permanent exemption, whichever period
is shorter.
Thus, under current EPA rules, the
entire state of Alaska is exempt from the
Clean Air Act’s sulfur content require-
ments and, consequently, from the EPA’s
dyeing requirements. No part of Hawaii
or any other state is similarly exempt.
Explanation of Provisions
These temporary regulations generally
establish a system for collecting the
federal diesel fuel tax at the wholesale
level in Alaska. This system is similar to
the pre-1994 federal system under sec-
tion 4091 and the present system used
by the state of Alaska for state fuel tax.
The person liable for tax under the
temporary regulations generally will be
a person who is licensed by Alaska as a
qualified dealer.
Under the temporary regulations, a
qualified dealer may buy undyed diesel
fuel tax free at a terminal rack and sell
the fuel tax free to another qualified
dealer or to a buyer for the buyer’s own
nontaxable use. However, a qualified
dealer is liable for tax when it sells to a
buyer for the buyer’s taxable use or to a
reseller that is not a qualified dealer.
A qualified dealer must keep adequate
records to document the exempt nature
of its nontaxable sales. Although the
temporary regulations do not prescribe
any specific documentation, taxpayers
may consider using a format similar to
the notification certificate in
§ 48.4081–5 as proof of tax-free sales
between qualified dealers. As proof of
tax-free sales for nontaxable uses, tax-
payers may consider using Alaska’s ex-
emption certificate, when appropriate, or
an adaptation of the certificate presently
used to support tax-free sales of aviation
fuel that is found in Notice 88–132,
1988–2 C.B. 552, 555. The IRS will
consider whether the final regulations
should specify model certificates to be
used for documenting nontaxable trans-
actions in the future.
Taxpayers are cautioned that the uses
that are exempt from Alaska’s state tax
are not identical to the uses that are
exempt from the federal tax. For ex-
ample, Alaska exempts sales to all non-
profit organizations described in section
501(c)(3); the comparable federal rule
exempts only sales to nonprofit educa-
tional organizations.
Taxpayers should also note that diesel
fuel that is dyed in accordance with
existing IRS regulations will continue to
be exempt from the section 4081 tax in
Alaska.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in EO 12866.
Therefore, a regulatory assessment is not
required. It also has been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations and, be-
cause these regulations do not impose
on small entities a collection of informa-
tion requirement, the Regulatory Flex-
ibility Act (5 U.S.C. chapter 6) does not
apply. Therefore, a Regulatory Flexibil-
ity Analysis is not required. Pursuant to
section 7805(f) of the Internal Revenue
Code, this temporary regulation will be
submitted to the Chief Counsel for Ad-
vocacy of the Small Business Adminis-
tration for comment on its impact on
small business.
Drafting Information
The principal author of these regula-
tions is Frank Boland, Office of Assis-
tant Chief Counsel (Passthroughs and
Special Industries). However, other per-
sonnel from the IRS and Treasury De-
partment participated in their develop-
ment.
* * * * *
Adoption of Amendments to the Regula-
tions
Accordingly, 26 CFR part 48 is
amended as follows:
PART 48—MANUFACTURERS AND
RETAILERS EXCISE TAXES
Paragraph 1. The authority citation
for part 48 is amended by adding an
entry in numerical order to read in part
as follows:
Authority: 26 U.S.C. 7805 * * *
Section 48.4082–5T also issued under
26 U.S.C. 4082. * * *
Par. 2. Section 48.4082–5T is added
to read as follows:
§ 48.4082–5T Diesel fuel; Alaska (tem-
porary).
(a)Application. This section applies
to diesel fuel removed, entered, or sold
in Alaska for ultimate sale or use in an
exempt area of Alaska.
(b)Definitions.
Exempt area of Alaskameans the area
of Alaska in which the sulfur content
requirements for diesel fuel (see section
211(i) of the Clear Air Act (42 U.S.C.
7545(i))) do not apply because the Ad-
ministrator of the Environmental Protec-
tion Agency has granted an exemption
under section 211(i)(4) of that Act.
Nontaxable usemeans a use described
in section 4082(b). Qualified dealer
means any person that holds a qualified
dealer license from the state of Alaska.
(c)Tax-free removals and entries.
Notwithstanding § 48.4082–1, tax is not
imposed by section 4081 on the removal
or entry of any diesel fuel in an exempt
area of Alaska if—
(1) The person that would be liable
for tax under § 48.4081–2 or 48.4081–3
is a taxable fuel registrant and satisfies
the requirements of paragraph (e) of this
section;
10

(2) In the case of a removal from a
terminal, the terminal is an approved
terminal; and
(3) The owner of the diesel fuel
immediately after the removal or entry
holds the fuel for its own use in a
nontaxable use or is a qualified dealer.
(d)Sales after removals and en-
tries—(1)In general. Paragraph (c) of
this section does not apply with respect
to diesel fuel that is subsequently sold
by a qualified dealer unless—
(i) The fuel is sold in an exempt area
of Alaska;
(ii) The buyer purchases the fuel for
its own use in a nontaxable use or is a
qualified dealer; and
(iii) The seller satisfies the require-
ments of paragraph (e) of this section.
(2)Tax imposed at time of sale;
liability for tax.Notwithstanding
§§ 48.4081–2 and 48.4081–3, in any
case in which paragraph (c) of this
section does not apply with respect to
diesel fuel because of a subsequent sale
by a qualified dealer, the tax with
respect to that fuel is imposed at the
time of the subsequent sale and the
qualified dealer is liable for the tax.
(3)Rate of tax.For the rate of tax,
see section 4081.
(e)Evidence of tax-free transactions.
The requirements of section 4082(c)(2)
(relating to certification) and this para-
graph (e) are satisfied if the person
otherwise liable for tax is able to show
the district director satisfactory evidence
of the exempt nature of the transaction
and has no reason to believe that the
evidence is false. Satisfactory evidence
may include copies of qualified dealer
licenses or exemption certificates ob-
tained for state tax purposes.
(f)Cross reference. For the tax on
previously untaxed diesel fuel that is
used for a taxable purpose, see
§ 48.4082–4.
(g)Effective date. This section is ap-
plicable with respect to diesel fuel re-
moved or entered after December 31,
1996.
Par. 3. Section 48.6715–2T is added
to read as follows:
§ 48.6715–2T Application of section
6715(a)(3) to Alaska (temporary).
(a)In general. The penalty provided
by section 6715(a)(3) for willful alter-
ation of dyed fuel will not be assessed if
the alteration occurs in an exempt area
of Alaska.
(b)Effective date. This section is ap-
plicable October 1, 1996.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved November 27, 1996.
Donald C. Lubick,
Acting Assistant Secretary
of the Treasury.
(Filed by the Office of the Federal Register on
December 16, 1996, 8:45 a.m., and published in
the issue of the Federal Register for December 17,
1996, 61 F.R. 66215)
Section 6103.—Confidentiality and
Disclosure of Returns and Return
Information
26 CFR 301.6103(l)(14)–1: Disclosure of return
information to United States Customs Service.
T.D. 8694
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
Disclosure of Return Information to
the U.S. Customs Service
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: These amendments to the
regulations under 26 CFR part 301
implement section 6103(l)(14) of the
Internal Revenue Code, which autho-
rizes the disclosure of certain return
information to the U.S. Customs Ser-
vice. The regulations specify the proce-
dure by which return information may
be disclosed and describe the conditions
and restrictions on the use of the infor-
mation by the U.S. Customs Service.
EFFECTIVE DATE: These regulations
are effective December 17, 1996.
FOR FURTHER INFORMATION CON-
TACT: Donald Squires, 202–622–4570
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The North American Free Trade
Agreement Implementation Act (Act),
Public Law 103–182, 107 Stat. 2057,
was signed into law on December 8,
1993. Section 522 of the Act added
section 6103(l)(14) to the Internal Rev-
enue Code (Code), authorizing the IRS
to disclose certain tax data to the U.S.
Customs Service. The Act directed the
Treasury Department to adopt temporary
regulations to implement the new sec-
tion.
On March 11, 1994, temporary regu-
lations were published in theFederal
Register(59 FR 11547) specifying the
procedure by which return information
may be disclosed to officers and em-
ployees of the United States Customs
Service, and describing the conditions
and restrictions on the use and
redisclosure of that information. A no-
tice of proposed rulemaking (DL–21–
94) cross-referencing the temporary
regulations was published in theFed-
eral Registerfor the same day (59 FR
11566).
The IRS received two comments on
the proposed regulations but did not
hold a public hearing. After consider-
ation of the comments, this Treasury
decision adopts the proposed regulations
without revision. The comments are dis-
cussed below.
Explanation of Provisions
The regulations authorize disclosure
of return information only to the extent
necessary to the purposes authorized by
the statute, i.e., ascertaining the correct-
ness of entries in audits under the Tariff
Act of 1930 and other actions to recover
any loss of revenue or collect amounts
determined to be due and owing as a
result of these audits. The regulations
permit redisclosure to the Department of
Justice for civil enforcement actions
related to these collection efforts. Con-
sistent with the statute’s legislative his-
tory, the regulations prohibit disclosure
of information (i) relating to Advance
Pricing Agreements (as described in
Rev. Proc. 91–22 (1991–1 C.B. 526)), or
(ii) covered by tax treaties and executive
agreements with respect to which the
United States is a party. The regulations
also specifically prohibit any use or
redisclosure of the information by the
Customs Service in a manner inconsis-
tent with section 6103 and the regula-
tions.
Notice to Taxpayers/Importers
One commentator suggested that the
regulations should provide taxpayers
with advance notice of a Customs Ser-
vice request for tax data and an opportu-
nity to comment upon or object to the
request. The legislation authorizing these
disclosures did not, however, make any
provision for such advance notice and
pre-disclosure challenges to Customs
11

Service requests for disclosure of tax
data. Such procedures would, moreover,
run counter to the existing statutory
scheme of section 6103. Disclosures
under section 6103 are governed by the
requirements of that statute and appli-
cable regulations, none of which offers a
procedural opportunity for a taxpayer to
challenge, in advance, a proposed dis-
closure of tax information by the IRS.
The same commentator suggested
that, in the alternative, a taxpayer should
be notified in the event of a disclosure
so the taxpayer can prepare its response
to inquiries from the Customs Service
that might be based on such tax data.
Otherwise, the commentator argued, the
taxpayer would be forced to defend
itself against an ‘‘unexpressed suspi-
cion’’ based on information the taxpayer
does not know the Customs Service has
obtained and possibly has misinter-
preted.
Nothing in the statute’s legislative
history suggests that Congress intended
the Service to notify taxpayers upon
disclosure of their tax data to the Cus-
toms Service. As noted above, such a
requirement would be at odds with
general practice under section 6103.
Moreover, the IRS understands that the
usual practice of the Customs Service is
not to request information from the IRS
unless the data has been first directly
requested from, but not provided by,
importers. When importers receive such
a request, therefore, they will effectively
be on notice, whether or not they choose
to comply with the request, that the
Customs Service is likely to consider
tax information in the course of its
audit.
Misinterpretation of Tax Data by Cus-
toms
Both commentators expressed a con-
cern that due to the different reporting
requirements of the IRS and the Cus-
toms Service, tax data is susceptible to
misinterpretation by Customs Service
auditors. For example, it was noted that
the cost of goods reported for tax pur-
poses includes certain amounts (e.g.,
duty, transportation, insurance, storage,
design costs) not relevant to, or included
in, the value of goods for customs
purposes.
Congress was aware when it enacted
the legislation, however, that IRS tax
information may not correlate exactly
with the information required to be
reported to the Customs Service. Con-
gress nonetheless concluded that the
value of the tax information to the
Customs Service would outweigh the
possible difficulties caused by the neces-
sity of adjusting the IRS data for use in
Customs Service audits. Moreover, the
Customs Service has informed the IRS
that the Customs Service is committed
to a policy of full disclosure and com-
munication with importers during audits.
In light of that policy, any apparent
discrepancies between tax data and Cus-
toms Service reporting will be brought
to the attention of the importer when
discovered in order to allow the im-
porter to explain or reconcile the data.
The Customs Service also notes that
importers have an additional opportunity
to review and comment upon the find-
ings of an auditor before the preparation
of the auditor’s final report.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in EO 12866.
Therefore, a regulatory assessment is not
required. It has also been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations, and be-
cause the notice of proposed rulemaking
preceding the regulations was issued
prior to March 29, 1996, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does
not apply. Pursuant to section 7805(f) of
the Internal Revenue Code, the notice of
proposed rulemaking preceding these
regulations was submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comment on
their impact on small business.
Drafting Information
The principal author of these regula-
tions is Donald Squires, Office of the
Assistant Chief Counsel (Disclosure
Litigation), IRS. However, other person-
nel from the IRS, Customs Service and
Treasury Department participated in
their development.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Ex-
cise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.
Adoption of Amendments to the Regula-
tions
Accordingly, 26 CFR part 301 is
amended as follows:
PART 301—PROCEDURE AND AD-
MINISTRATION
Paragraph 1. The authority citation for
part 301 is amended by removing the
entry for Section 301.6103(l)(14)–1T’’
and adding an entry in numerical order
to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.6103(l)(14)–1 also issued
under 26 U.S.C. 6103(l)(14). * * *
§ 301.6103(l)(14)–1T [Redesignated
as § 301.6103(l)(14)–1]
Par. 2. Section 301.6103(l)(14)–1T is
redesignated as § 301.6103(l)(14)–1 and
the section heading is amended by re-
moving the language ‘‘(temporary)’’.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved November 13, 1996.
Donald C. Lubick,
Acting Assistant Secretary
of the Treasury.
(Filed by the Office of the Federal Register on
December 16, 1996, 8:45 a.m., and published in
the issue of the Federal Register for December 17,
1996, 61 F.R. 66218)
12

Part III. Administrative, Procedural, and Miscellaneous
Notice of Intent to Issue Guidance
Allowing Farmers to Expeditiously
Change Their Method of
Accounting for Deferred Payment
Sales Contracts in Computing
Alternative Minimum Tax
Notice 97–13
SUMMARY: The Internal Revenue Ser-
vice intends to provide approval for
taxpayers engaged in the business of
farming to change their method of ac-
counting for the income from certain
deferred payment sales contracts for
purposes of computing their alternative
minimum tax (AMT). Farmers will be
allowed to change to a permissible
method of accounting for this income,
effective for taxable years beginning
after December 31, 1996, by attaching
Form 3115 to their 1997 federal income
tax returns to be filed during 1998.
Farmers who change their method of
accounting in accordance with this pro-
cedure will then receive audit protection
with respect to the use of an impermis-
sible method of accounting for all tax-
able years prior to the change, in accor-
dance with generally applicable rules.
BACKGROUND: The Service has re-
ceived numerous inquiries on the proper
treatment, for AMT purposes, of income
from the sale of products raised by
farmers or other inventory property sold
in the ordinary course of the farming
business under deferred payment sales
contracts. A deferred payment sales con-
tract is one where at least one payment
is to be received after the close of the
taxable year in which the product is
sold.
Section 56(a)(6) of the Code provides
that, in computing alternative minimum
taxable income (AMTI), income from
the disposition of property such as farm
products is determined without regard to
the installment method under § 453.
Thus, a farmer using the cash method,
who sells farm products under a de-
ferred payment sales contract and does
not elect out of the installment method
of reporting, must include in AMTI in
the year of the sale both the cash
received and the fair market value (or
the issue price) of the deferred payment
obligation. Otherwise, the farmer is us-
ing an impermissible method of ac-
counting. If the farmer elects not to
apply the installment method to the sale,
and reports the income in the year of
the sale, there is no AMTI adjustment
with respect to the sale.
Section 446(e) generally provides that
a taxpayer that changes its method of
accounting must secure the Commis-
sioner’s consent before computing in-
come using the new method. In general,
taxpayers who wish to change their
method of accounting must file Form
3115, Application for Change in Ac-
counting Method, with the Commis-
sioner within the first 180 days of the
taxable year in which the taxpayer de-
sires to make the change, and must pay
a user fee (ranging from $500 to $900).
Treas. Reg. § 1.446–1(e)(3)(i). In addi-
tion, § 1.446–1(e)(3)(ii) authorizes the
Commissioner to prescribe administra-
tive procedures setting forth the limita-
tions, terms, and conditions necessary to
obtain consent to change a method of
accounting.
AUTOMATIC CHANGE IN METHOD
OF ACCOUNTING: The Service will
issue guidance that will allow farmers
currently using an impermissible method
of accounting for income from the sale
of farm products under deferred pay-
ment sales contracts for AMT purposes
to automatically change to a permissible
method of accounting. Under the forth-
coming guidance, farmers will be al-
lowed to request the method change by
attaching Form 3115 to their timely filed
1997 federal income tax return (due in
1998). No user fee will be required.
The method change will be effective
for taxable years beginning after De-
cember 31, 1996. In addition, the
method change will result in audit pro-
tection for all prior taxable years with
respect to the impermissible method of
accounting (i.e., the examining agent
will not propose that a farmer change
the impermissible method of accounting
for any prior taxable year) in accordance
with generally applicable rules. See Rev.
Proc. 92–20, Section 10.12, 1992–1
C.B. 685. Farmers currently using an
impermissible method of accounting for
such sales should continue to use that
method in computing AMT for taxable
years ending prior to January 1, 1997.
The automatic method change proce-
dure will not be available to farmers
who have received written notification
from an examining agent (e.g., by ex-
amination plan, information document
request, notification of proposed adjust-
ments or income tax examination
changes) prior to January 28, 1997,
specifically citing as an issue under
consideration the farmer’s method of
accounting for income from sales of
farm products under deferred payment
sales contracts for AMT purposes. In
addition, the guidance will not apply if
the farmer’s method of accounting for
such income for AMT purposes is an
issue under consideration by an appeals
office or a federal court.
DRAFTING INFORMATION: The prin-
cipal author of this notice is William A.
Jackson of the Office of Assistant Chief
Counsel (Income Tax and Accounting).
For further information regarding this
notice, contact Jonathan Strum at (202)
622–4960 (not a toll-free call).
Rev. Proc. 97–11
Section 1. Purpose
The purpose of this revenue proce-
dure is to increase the charge imposed
for each request for a copy of a tax
return or other related document (other
than Employee Plans and Exempt Orga-
nization returns and related documents).
In so doing, it further modifies Rev.
Proc. 66–3, 1966–1 C.B. 601.
Section 2. Background
.01 Pursuant to I.R.C. § 6103 (p) (2),
the Internal Revenue Service may pre-
scribe a reasonable fee for furnishing
copies of returns and related documents
as authorized under the Internal Rev-
enue Code.
.02 Rev. Proc. 66–3 sets forth proce-
dures to be followed by District Direc-
tors of the Internal Revenue Service in
permitting inspection of federal tax re-
turns and related documents under the
Internal Revenue Code, and in furnish-
ing copies of such returns and docu-
ments. Section 15 of Rev. Proc. 66–3 is
entitled ‘‘Charges for Copies of Returns
and Related Documents.’’
.03 Rev. Proc. 87–21, 1987–1 C.B.
718, modified Rev. Proc. 66–3, as previ-
ously modified by Rev. Proc. 84–71,
1984–2 C.B. 735, and Rev. Proc. 85–56,
1985–2 C.B. 739, by substituting a new
section 15, effective January 1, 1987.
Section 15 as modified by Rev. Proc.
87–21 maintained a charge of $4.25,
payable in advance, for each request for
a copy of a return or other related
document (other than Employee Plans
13

and Exempt Organizations returns and
related documents), and maintained a
charge of $1.00 for the first page and
$.15 for each subsequent page for copies
of Employee Plans and Exempt Organi-
zations tax returns and related docu-
ments.
.04 Rev. Proc. 94–52, 1994–2 C.B.
712, further modified Rev. Proc. 66–3,
by further modifying section 15.01, ef-
fective October 1, 1994, to reflect a
$14.00 charge for each request for a
copy of a return or other related docu-
ment (other than Employee Plans and
Exempt Organizations returns and re-
lated documents).
Section 3. Procedures
.01 Rev. Proc. 66–3 as previously
modified is further modified to reflect a
$23.00 charge in section 15.01.
.02 The next revision of Form 4506,
Request for Copy or Transcript of Tax
Form, will reflect the $23.00 charge in
section 15.01.
.03 Form 4506, Request for Copy or
Transcript of Tax Form, is used by a
taxpayer or the taxpayer’s authorized
representative to request a tax return and
all attachments and schedules to the
return for a charge of $23.00. Form
4506 is also used to request a tax return
transcript, a copy of Form(s) W–2, or
verification of nonfiling, free of charge.
A return or account transcript can also
be obtained, free of charge, by calling
the Internal Revenue Service or by
visiting a local Internal Revenue Service
office. A return transcript shows most
lines from the original return including
accompanying forms and schedules. It
does not reflect any changes the tax-
payer or the IRS made to the original
return, such as corrections due to math-
ematical errors. An account transcript, or
statement of account, reflects a taxpay-
er’s current account status including
subsequent payments or amended re-
turns.
.04 The revised section 15.01 shall
read as follows:
Sec. 15. CHARGES FOR COPIES OF
RETURNS AND RELATED
DOCUMENTS
Charges for furnishing copies of re-
turns and related documents will be as
follows:
.01 EffectiveMay 1, 1997,a charge
of $23.00 will be made for each request
for a copy of a return or other related
document (other than Employee Plans
and Exempt Organizations returns). Pay-
ments will be submitted in advance us-
ing Internal Revenue Service Form
4506, Request for Copy or Transcript of
Tax Form. The completed Form 4506
should be sent to the Internal Revenue
Service office where the return was
filed.
Section 4. Effective Date
This revenue procedure is effective
May 1, 1997.
Section 5. Effect on Other Revenue
Procedures
EffectiveMay 1, 1997,Rev. Proc.
66–3 as modified by Rev. Proc. 87–21
is further modified; Rev. Proc. 87–21 is
modified; and Rev. Proc. 94–52 is re-
voked.
Section 6. Drafting Information
Questions concerning this revenue
procedure should be directed to Janet
Stadtmiller, T:C:O:A:CSC, at (606) 292–
7886.
14

Part IV. Items of General Interest
Withdrawal of Notice of Proposed
Rulemaking
Credit for Employer Social Security
Taxes Paid on Employee Tips
REG–209672–93
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Withdrawal of notice of pro-
posed rulemaking.
SUMMARY: This document withdraws
the notice of proposed rulemaking relat-
ing to the credit for employer FICA
taxes paid with respect to certain tips
received by employees of food or bever-
age establishments. The proposed regu-
lations were published in theFederal
Registeron December 23, 1993.
Changes to the law made by the Small
Business Job Protection Act of 1996
have made these proposed regulations
obsolete.
FOR FURTHER INFORMATION CON-
TACT: Jean M. Casey at (202) 622–
6060 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On December 23, 1993, the IRS is-
sued proposed regulations (EE–71–93
[1994–1 C.B. 784])(58 FR 68091) under
section 45B of the Internal Revenue
Code relating to the credit for employer
FICA taxes paid with respect to certain
tips received by employees of food or
beverage establishments. Amendments
made by section 1112(a) of the Small
Business Job Protection Act of 1996
(Public Law 104–188) render the pro-
posed regulations obsolete. Therefore,
proposed regulation § 1.45B–1 is being
withdrawn.
On December 23, 1993, the IRS also
published temporary regulations (T.D.
8503 [1994–1 C.B. 17])(58 FR 68033)
under section 45B of the Code. These
temporary regulations are being re-
moved in a separate document.
* * * * *
Withdrawal of Notice of Proposed
Rulemaking
Accordingly, under the authority of 26
U.S.C. 7805, the notice of proposed
rulemaking that was published in the
Federal Registeron December 23,
1993 (58 FR 68091) is withdrawn.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
(Filed by the Office of the Federal Register on
December 19, 1996, 8:45 a.m., and published in
the issue of the Federal Register for December 20,
1996, 61 F.R. 67260)
Notice of Proposed Rulemaking
and Notice of Public Hearing
Nuclear Decommissioning Funds;
Revised Schedules of Ruling
Amounts
REG–209828–96
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing and notice of public hearing.
SUMMARY: This document contains
proposed regulations relating to requests
for revised schedules of ruling amounts
for nuclear decommissioning reserve
funds. The proposed regulations would
amend existing regulations to ease the
burden on affected taxpayers by permit-
ting them to adjust their ruling amounts
under a formula or method rather than
by filing a request for a revised sched-
ule of ruling amounts. This document
also provides notice of a public hearing
on these proposed regulations.
DATES: Comments must be received
by March 24, 1997. Requests to speak
and outlines of oral comments to be
discussed at the public hearing sched-
uled for May 13, 1997, at 10 a.m., must
be received by April 22, 1997.
ADDRESSES: Send submissions to
CC:DOM:CORP:R [REG–209828–96],
room 5226, Internal Revenue Service,
POB 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may be
hand-delivered between the hours of 8
a.m. and 5 p.m. to: CC:DOM:CORP:R
[REG–209828–96], Courier’s Desk, In-
ternal Revenue Service, 1111 Constitu-
tion Avenue, N.W., Washington, DC.
Alternatively, taxpayers may submit
comments electronically via the Internet
by selecting the ‘‘Tax Regs’’ option on
the IRS Home Page, or by submitting
comments directly to the IRS Internet
site at http://www.irs.ustreas.gov/prod/
tax_regs/comments.html. A public hear-
ing will be held in the NYU Classroom,
Second Floor, Room 2615, Internal Rev-
enue Building, 1111 Constitution Av-
enue, N.W., Washington, DC.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Peter C. Friedman, (202)
622–3110 (not a toll-free number); con-
cerning submissions and the hearing,
Evangelista Lee, (202) 622–7190 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in this notice of proposed
rulemaking has been submitted to the
Office of Management and Budget for
review in accordance with the Paper-
work Reduction Act of 1995 (44 U.S.C.
3507(d)). Comments on the collection of
information should be sent to theOffice
of Management and Budget,Attn:
Desk Officer for the Department of the
Treasury, Office of Information and
Regulatory Affairs, Washington, DC
20503, with copies to theInternal Rev-
enue Service,Attn: IRS Reports Clear-
ance Officer, T:FP, Washington, DC
20224. Comments on the collection of
information should be received by Feb-
ruary 21, 1997. Comments are specifi-
cally requested concerning:
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Internal Revenue Service, including
whether the collection will have a prac-
tical utility;
The accuracy of the estimated burden
associated with the proposed collection
of information (see below);
How the quality, utility, and clarity of
the information to be collected may be
enhanced;
How the burden of complying with
the proposed collection of information
may be minimized, including through
the application of automated collection
techniques or other forms of information
technology; and
Estimates of capital or start-up costs
and costs of operation, maintenance, and
purchase of service to provide informa-
tion.
The collection of information is in
§ 1.468A–3. This information is re-
quired by the IRS to ensure compliance
with the provisions of section 468A
relating to deductions for payments
made to nuclear decommissioning re-
151997–6 I.R.B.

serve funds. This information will be
used by the IRS to support the issuance
to taxpayers of schedules of ruling
amounts under section 468A. The col-
lection of information is voluntary to
obtain a benefit. The likely recordkeep-
ers are businesses or other for-profit
institutions. Estimated total annual
recordkeeping burden:100 hours.Esti-
mated average annual burden per
recordkeeper:5 hours.Estimated num-
ber of recordkeepers:20.
An agency may not conduct or spon-
sor, and a person is not required to
respond to, a collection of information
unless the collection of information dis-
plays a valid control number.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become ma-
terial in the administration of any inter-
nal revenue law. Generally, tax returns
and return information are confidential,
as required by 26 U.S.C. 6103.
Background
This document contains proposed
regulations under section 468A of the
Internal Revenue Code. Section 468A
was added to the Internal Revenue Code
by section 91(c) of the Tax Reform Act
of 1984 (Public Law 98–369). Signifi-
cant amendments were made to section
468A by section 1917 of the Energy
Policy Act of 1992 (Public Law 102–
486).
Section 468A(a) allows an electing
taxpayer to deduct the amount of pay-
ments made by the taxpayer to a nuclear
decommissioning reserve fund. Section
468A(b) limits the amount of these
payments for any taxable year to the
lesser of the ruling amount or the
amount of decommissioning costs in-
cluded in the taxpayer’s cost of service
for ratemaking purposes for that taxable
year.
Section 468A(d) provides that no de-
duction shall be allowed unless the
taxpayer requests, and receives, a sched-
ule of ruling amounts from the Secre-
tary. A ruling amount is, with respect to
any taxable year, the amount determined
by the Secretary as necessary to (1)
fund that portion of the nuclear decom-
missioning costs of the taxpayer with
respect to the nuclear power plant which
bears the same ratio to the total nuclear
decommissioning costs with respect to
such nuclear power plant as the period
for which the nuclear decommissioning
fund is in effect bears to the estimated
useful life of such nuclear power plant;
and (2) prevent any excessive funding
of such costs or the funding of such
costs at a rate more rapid than level
funding, taking into account such dis-
count rates as the Secretary deems ap-
propriate. Section 468A(d)(3) provides
that the Secretary shall, at least once
during the useful life of the nuclear
power plant (or more frequently, upon
the request of the taxpayer), review and,
if necessary, revise the schedule of rul-
ing amounts.
Section 1.468A–3 sets forth the rules
relating to the determination of ruling
amounts. Section 1.468A–3(a)(4) per-
mits the use of a formula or method for
determining a schedule of ruling
amounts (in lieu of a schedule of ruling
amounts specifying a dollar amount for
each taxable year), but only if the public
utility commission establishing or ap-
proving the amount of decommissioning
costs to be included in cost of service
for ratemaking does not estimate the
cost of decommissioning in future dol-
lars.
Section 1.468A–3(i) contains provi-
sions for the review and revision of
schedules of ruling amounts. Section
1.468A–3(i)(1) sets forth circumstances
under which a taxpayer must request a
revision to its schedule of ruling
amounts. In general, a schedule of rul-
ing amounts must be reviewed at ten-
year intervals. If the schedule is deter-
mined under a formula or method,
however, the period between reviews
may not exceed five years.
Section 1.468A–3(i)(2) provides that a
taxpayer may request an elective review
of its schedule of ruling amounts so
long as such request is made in accor-
dance with the rules of § 1.468A–3(h).
A taxpayer seeking to maximize its
deductions under section 468A generally
needs to request an elective review of
its schedule of ruling amounts each time
a public utility commission changes pre-
viously established amounts of decom-
missioning costs. These proposed regu-
lations amend § 1.468A–3(a)(4) by
eliminating the restriction on the use of
a formula or method for determining a
schedule of ruling amounts. In addition,
these proposed regulations revise the
mandatory review requirements of
§ 1.468A–3(i)(1).
Explanation of Provisions
The proposed regulations provide that
a taxpayer may request approval of a
formula or method for determining a
schedule of ruling amounts (rather than
a schedule specifying a dollar amount
for each taxable year) that is consistent
with the principles and provisions of the
rules relating to the determination of
ruling amounts.
The proposed regulation would ease
the filing burden on taxpayers by per-
mitting them to adjust their ruling
amounts under a formula or method
(rather than by filing a request for a
revised schedule of ruling amounts).
Thus, under the proposed regulations, a
taxpayer may maximize its deductions
under section 468A without requesting a
revised schedule of ruling amounts each
time a public utility commission
changes the amount of decommissioning
costs included in the taxpayer’s cost of
service if, under the taxpayer’s formula
or method, the commission’s action re-
sults in a corresponding change in ruling
amounts.
In addition, the proposed regulations
modify the mandatory review provisions
applicable to schedules of ruling
amounts determined under a formula or
method. One modification eliminates the
rule requiring review of those schedules
after five years; the schedules will,
however, be subject to the general rule
requiring review at ten-year intervals. In
addition, a taxpayer using a formula or
method will be required to request a
revised schedule of ruling amounts if,
beginning with the second taxable year
during which the most recently issued
formula or method is in effect, the
ruling amount for a taxable year (1)
differs by more than 25 percent from
the ruling amount for any preceding
taxable year during which such formula
or method was in effect; or (2) differs
by more than 10 percent from the ruling
amount for the immediately preceding
taxable year. Under these circumstances
a taxpayer must file a request for a
revised schedule of ruling amounts on
or before the deemed payment deadline
for the next taxable year.
Proposed Effective Date
The regulations are proposed to be
effective for requests for schedules of
ruling amounts made on or after the
date that the final regulations are filed
with the Federal Register.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in EO
12866. Therefore, a regulatory assess-
ment is not required. It has also been
161997–6 I.R.B.

determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these
regulations, and because the regulation
does not impose a collection of informa-
tion on small entities, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does
not apply. Pursuant to section 7805(f) of
the Internal Revenue Code, this notice
of proposed rulemaking will be submit-
ted to the Chief Counsel for Advocacy
of the Small Business Administration for
comment on its impact on small busi-
ness.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consider-
ation will be given to any written com-
ments (a signed original and eight (8)
copies) that are submitted timely to the
IRS. All comments will be available for
public inspection and copying.
A public hearing has been scheduled
for May 13, 1997, in room 2615. Be-
cause of access restrictions, visitors will
not be admitted beyond the Internal
Revenue Building lobby more than 15
minutes before the hearing starts.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing.
Persons that wish to present oral
comments at the hearing must submit
comments by March 24, 1997, and
submit an outline of the topics to be
discussed and the time to be devoted to
each topic by April 22, 1997.
A period of 10 minutes will be allot-
ted to each person for making com-
ments.
An agenda showing the scheduling of
the speakers will be prepared after the
deadline for receiving outlines has
passed. Copies of the agenda will be
available free of charge at the hearing.
Drafting Information
The principal author of these regula-
tions is Peter C. Friedman, Office of
Assistant Chief Counsel (Passthroughs
and Special Industries). However, other
personnel from the IRS and Treasury
Department participated in their devel-
opment.
* * * * *
Proposed Amendments to the Regula-
tions
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.468A–2 is amended
as follows:
1. The text of paragraph (f)(3) is
redesignated as paragraph (f)(3)(i).
2. Paragraph (f)(3)(ii) is added.
The addition reads as follows:
§ 1.468A–2 Treatment of electing tax-
payer.
* * * * *
(f) * * *
(3) * * * (i) * * *
(ii) The requirement of this paragraph
(f)(3) does not apply if the taxpayer
determines its schedule of ruling
amounts under a formula or method
obtained under § 1.468A–3(a)(4) and
the cost of service amount is a variable
element of that formula or method.
* * * * *
Par. 3. Section 1.468A–3 is amended
as follows:
1. Paragraph (a)(4) is revised.
2. Paragraph (e)(5) is added.
3. Paragraphs (i)(1)(ii)(A), (i)(1)(iii)-
(A)(3), and (i)(1)(iii)(B) are revised.
4. Paragraph (i)(1)(iii)(C) is added.
The revisions and additions read as
follows:
§ 1.468A–3 Ruling amount.
(a) * * *
(4) The Internal Revenue Service will
approve, at the request of the taxpayer, a
formula or method for determining a
schedule of ruling amounts (rather than
a schedule specifying a–11–dollar
amount for each taxable year) that is
consistent with the principles and provi-
sions of this section. See paragraph
(i)(1)(ii) of this section for a special rule
relating to the mandatory review of
ruling amounts that are determined pur-
suant to a formula or method.
* * * * *
(e) * * *
(5) A formula or method obtained
under paragraph (a)(4) of this section
may provide for changes in an estimated
date described in paragraph (e)(1) or (2)
of this section to reflect changes in the
ratemaking assumptions used to deter-
mine rates (whether interim or final)
that are established or approved by the
applicable public utility commission af-
ter the filing of the request for approval
of a formula or method.
* * * * *
(i) * * *
(1) * * *
(ii)(A) Any taxpayer that has ob-
tained a formula or method for deter-
mining a schedule of ruling amounts for
any taxable year under paragraph (a)(4)
of this section must file a request for a
revised schedule of ruling amounts on
or before the deemed payment deadline
for a taxable year if the period for
which the most recently issued formula
or method has been in effect (the ruling
period) began at least two taxable years
before such year and —
(1) The ruling amount for the preced-
ing taxable year and the ruling amount
for any earlier taxable year in the ruling
period differ by more than 25 percent of
the smaller amount; or
(2) The ruling amounts for the two
most recent taxable years differ by more
than 10 percent of the smaller amount.
* * * * *
(iii) * * *
(A) * * *
(3) Reduces the amount of decom-
missioning costs to be included in cost
of service for any taxable year;
(B) The taxpayer’s most recent re-
quest for a schedule of ruling amounts
did not provide notice to the Internal
Revenue Service of such action by the
public utility commission; and
(C) In the case of a taxpayer that
determines its schedule of ruling
amounts under a formula or method
obtained under paragraph (a)(4) of this
section, the item increased, adjusted, or
reduced is a fixed (rather than a vari-
able) element of that formula or method.
* * * * *
Margaret Milner Richardson,
Commissioner of Internal Revenue.
(Filed by the Office of the Federal Register on
December 20, 1996, 8:45 a.m., and published in
the issue of the Federal Register for December 23,
1996, 61 F.R. 67510)
Notice of Proposed Rulemaking
Gasoline and Diesel Fuel Excise
Tax; Special Rules for Alaska;
Definition of Aviation Gasoline and
Kerosene
REG–247678–96
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Proposed Rule and Notice of
proposed rulemaking by cross-reference
to temporary regulations.
171997–6 I.R.B.

SUMMARY: In T.D. 8693, page 9, this
Bulletin, the IRS is issuing temporary
regulations relating to the application of
the diesel fuel excise tax to fuel used in
Alaska. The text of those temporary
regulations also serves as a portion of
the text of these proposed regulations.
This document also contains other pro-
posed regulations relating to gasoline
and diesel fuel excise taxes. The pro-
posed regulations implement certain
changes made by the Omnibus Budget
Reconciliation Act of 1993 and the
Small Business Job Protection Act of
1996 and affect certain enterers, refin-
ers, retailers, terminal operators,
throughputters, and users. DATES: Writ-
ten comments and requests for a public
hearing must be received by March 17,
1997.
ADDRESSES: Send submissions to:
CC:DOM:CORP:R (REG–247678–96),
room 5226, Internal Revenue Service,
POB 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may be
hand delivered between the hours of 8
a.m. and 5 p.m. to: CC:DOM:CORP:R
(REG–247678–96), Courier’s Desk, In-
ternal Revenue Service, 1111 Constitu-
tion Avenue, NW, Washington, DC. Al-
ternatively, taxpayers may submit
comments electronically via the Internet
by selecting the ‘‘Tax Regs’’ option on
the IRS Home Page, or by submitting
comments directly to the IRS Internet
site at http://www.irs.ustreas.gov/prod/
tax_regs/comments/html.
FOR FURTHER INFORMATION CON-
TACT: Frank Boland (202) 622–3130
(not a toll-free call).
SUPPLEMENTARY INFORMATION:
Background
Temporary regulations published in
T.D. 8693 provide rules relating to die-
sel fuel that is removed, entered, or sold
in the state of Alaska. The text of those
temporary regulations also serves as the
text of these proposed regulations relat-
ing to Alaska. The preamble to the
temporary regulations explains the tem-
porary rules.
In addition, this document proposes
definitions ofaviation gasoline, for pur-
poses of the tax on aviation gasoline as
added by the Small Business Job Protec-
tion Act of 1996, andkerosene, for
purposes of the tax on diesel fuel. These
definitions are based on definitions used
by the Department of Energy. This
document also proposes changes to the
effective date of proposed regulations
relating to gasoline and diesel fuel that
were published in theFederal Register
on March 14, 1996 (61 FR 10490).
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in EO
12866. Therefore, a regulatory assess-
ment is not required. It also has been
determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these reg-
ulations and, because these regulations
do not impose on small entities a collec-
tion of information requirement, the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Therefore, a
Regulatory Flexibility Analysis is not
required. Pursuant to section 7805(f) of
the Internal Revenue Code, this notice
of proposed rulemaking will be submit-
ted to the Chief Counsel for Advocacy
of the Small Business Administration for
comment on its impact on small busi-
ness.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consider-
ation will be given to any written com-
ments (a signed original and eight (8)
copies) that are submitted timely to the
IRS. All comments will be available for
public inspection and copying. A public
hearing may be scheduled if requested
in writing by a person that timely
submits written comments. If a public
hearing is scheduled, a notice of the
date, time, and place for the hearing will
be published in theFederal Register.
Drafting Information
The principal author of these regula-
tions is Frank Boland, Office of Assis-
tant Chief Counsel (Passthroughs and
Special Industries). However, other per-
sonnel from the IRS and Treasury De-
partment participated in their develop-
ment.
* * * * *
Proposed Amendments to the Regula-
tions
Accordingly, 26 CFR part 48 is pro-
posed to be amended as follows:
PART 48—MANUFACTURERS AND
RETAILERS EXCISE TAXES
Paragraph 1. The authority citation for
part 48 is amended by adding an entry
in numerical order to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
Section 48.4082–5 also issued under
26 U.S.C. 4082. * * *
Par. 2. Section 48.4081–1 is amended
as follows:
1. Paragraph (b) is amended by add-
ing new definitions in alphabetical order.
2. The second sentence of paragraph
(c)(2)(i) is amended by adding the lan-
guage ‘‘aviation fuel (as defined in
section 4093(a)),’’ after ‘‘does not in-
clude’’.
3. Paragraph (d) is revised.
The additions and revision read as
follows:
§ 48.4081–1 Taxable fuel; definitions.
* * * * *
(b) * * *
* * * * *
Aviation gasolinemeans all special
grades of gasoline that are suitable for
use in aviation reciprocating engines, as
described in ASTM Specification D 910
and Military Specification MIL–G–5572
(For availability, see paragraph (c)(2)(i)
of this section.).
* * * * *
Kerosenemeans No. 1–K and No.
2–K kerosene described in ASTM
Specification D 3699 (the specification),
applied without regard to any agreement
permitted by the specification (For
availability, see paragraph (c)(2)(i) of
this section.). Any other fuel is not
kerosene even if an agreement permitted
by the specification modifies the appli-
cable requirements and the fuel is
treated as kerosene under the agreement.
* * * * *
(d)Effective date.This section is ef-
fective January 1, 1994, except that in
paragraph (b) of this section the defini-
tions ofaviation gasolineandkerosene
are effective on the date the final regu-
lations are published in theFederal
Register.
Par. 3. In § 48.4081–8(c) (as pro-
posed in theFederal Registerfor
March 14, 1996 (61 FR 10491)), the
language ‘‘October 1, 1996.’’ is removed
and ‘‘the date that is 60 days after the
date that the final regulations are pub-
lished in theFederal Register.’’ is
added in its place.
Par. 4. In § 48.4082–1(d)(7) (as pro-
posed in theFederal Registerfor
181997–6 I.R.B.

March 14, 1996 (61 FR 10491)), the
language ‘‘April 1, 1997.’’ is removed
and ‘‘the date that is 180 days after the
date that the final regulations are pub-
lished in theFederal Register.’’ is
added in its place.
Par. 5. Section 48.4082–5 is added to
read as follows:
§ 48.4082–5 Diesel fuel; Alaska.
[The text of this proposed section is
the same as the text of § 48.4082–5T
published in T.D. 8693, page 9.]
Par. 6. Section 48.6715–2 is added to
read as follows:
§ 48.6715–2 Application of section
6715(a)(3) to Alaska.
[The text of this proposed section is
the same as the text of § 48.6715–2T
published in T.D. 8693, page 9.]
Margaret Milner Richardson,
Commissioner of Internal Revenue.
(Filed by the Office of the Federal Register on
December 16, 1996, and published in the issue of
the Federal Register for December 17, 1996, 61
F.R. 66246)
Foundations Status of Certain
Organizations
Announcement 97–11
The following organizations have
failed to establish or have been unable
to maintain their status as public chari-
ties or as operating foundations. Accord-
ingly, grantors and contributors may not,
after this date, rely on previous rulings
or designations in the Cumulative List
of Organizations (Publication 78), or on
the presumption arising from the filing
of notices under section 508(b) of the
Code. This listing doesnotindicate that
the organizations have lost their status
as organizations described in section
501(c)(3), eligible to receive deductible
contributions.
Former Public Charities. The follow-
ing organizations (which have been
treated as organizations that are not
private foundations described in section
509(a) of the Code) are now classified
as private foundations:
A C O R N Inc., Green Bay, WI
Actors for Change (A Theatre of Broad
Insight), Minneapolis, MN
Alisa Stevens Torhorst Foundation Inc.,
Monona, WI
Anoka County Chamber of Commerce
Health and Civic Forum, Coon
Rapids, MN
Aurora Child Development, Aurora, NE
College Community Little League Inc.,
Cedar Rapids, IA
Contractors Assistance Program Inc., St.
Louis, MO
Coss Grove Institute, Iowa City, IA
County Rescue Life Divers Inc., St.
Charles, MO
David and Chris Harris Foundation, St.
Louis, MO
Deliverance Academy Christian Day, St.
Louis, MO
Disadvantaged Youth of America, St.
Louis, MO
Educational Concepts and Connections
Inc., St. Louis, MO
Emma Cornelis Hospitality House Inc.,
Fort Madison, IA
Fair Field Educational Radio Station,
Fair Field, IA
Family Values Institute, Rapid City, SD
FF-6 Fire Dept., Edwards, MO
Four Winds Institute Inc., Omaha, NE
Friends of Police on Bikes Inc., Omaha,
NE
Friends of the Des Moines Human
Rights Commission, Des Moines, IA
Friends of the West Des Moines Public
Library, West Des Moines, IA
Friends of Warsaw University Inc., St.
Louis, MO
Gates Park Youth Basketball League,
Waterloo, IA
George Washington Carver Memorial,
Fulton, MO
Glasgow High School Alumni Park
Committee Inc., Glasgow, MT
Greyhound Companions, Waterloo, IA
Guatemala Neighbors, Plymouth, MN
Head of the Red Community Theatre
Inc., Brecken Ridge, MN
Hellenic Spirit Foundation, St. Louis,
MO
Helping Hands Recycling Centers Inc.,
Chesterfield, MO
Heritage Singers, Minot, ND
Hmong American Community
Association Inc., Menomonie, WI
Humane Society of Beaverhead County
Inc., Dillon, MT
International Counseling Foundation, St.
Louis, MO
Iowa Education Coalition, Newton, IA
Jobs for Missourians, St. Louis, MO
Kansas City African American Progress
Society, Kansas City, MO
Kansas City Missouri Public Housing,
Kansas City, MO
Kansas City Shade Tree Fund Inc.,
Kansas City, MO
Kathleen W. McCartan, Ames, IA
Lake Campbell Improvement
Association Inc., Brookings, SD
Lakota for Youth, Pine Ridge, SD
Little Soldier Sioux Pottery Inc.,
Mission, SD
Long Pine Recreation and Arts Center
LTD., Long Pine, NE
Lost Sheep Mission Charitable Trust,
Sedalia, MO
Love in the Name of Christ, Omaha, NE
MAC Foundation for the Arts, St. Louis,
MO
M A C H Force Ministries, Bellevue,
NE
MAC Sports Foundation, St. Louis, MO
Malcolm Public Schools Foundation,
Malcolm, NE
Malcolm Youth Sports Association,
Malcolm, NE
Marion Manor in a Corporation,
Alexandria, SD
Maxwell Area Community Center,
Maxwell, IA
M B R I Educational Services, St.
Louis, MO
Men in Action Inc., Aberdeen, SD
Midtown Development Group of Kansas
City Inc., Kansas City, MO
Ministry of Healing Inc., Kansas City,
MO
Minority Museum, Kansas City, MO
Minot Community Hockey Promoters
Inc., Minot, ND
Mission Mexico International, Milford,
IA
Missoula Public Library Foundation
Inc., Missoula, MT
Music Fest Midwest, Overland Park,
MO
Naic Education & Research Foundation,
Kansas City, MO
NBA GPVA Accessible Housing Inc.,
Overland, MO
Omaha Rowing Association, Omaha, NE
Operation Welcome Home Inc., Lees
Summit, MO
Palestine Outreach Center, Kansas City,
MO
Platte County Crimestoppers Inc.,
Columbus, NE
Project Respond, St. Louis, MO
Rockwood School and Student
Foundation, St. Louis, MO
Saint Louis Youth Chamber Orchestra
Inc., St. Louis, MO
San Blas Medical Mission, Bismarck,
ND
Southeastern Nebraska Railroad Assoc.
Inc., Nebraska City, NE
South Iron Fire Department, Annapolis,
MD
Springfield Chapter of M O A D,
Cabool, MO
Stinson Prairie Arts Council, Algona, IA
St. Louis Recovery, Fenton, MO
191997–6 I.R.B.

Sugar Bowl II Inc., Flandereau, SD
Transitional Family Turning Point,
Columbia, MO
Tremont Place Housing Corporation,
Kansas City, MO
Triad Archaeological Research Center
Inc., Columbia, MO
Voice of the Environment Inc., Darby,
MT
Watchful Home Inc., Mission, SD
Whitey Herzog Foundation, Hillsboro,
MO
World Organization for Research
Leadership Dev. & Educ., Lincoln,
NE
If an organization listed above sub-
mits information that warrants the re-
newal of its classification as a public
charity or as a private operating founda-
tion, the Internal Revenue Service will
issue a ruling or determination letter
with the revised classification as to
foundation status. Grantors and contribu-
tors may thereafter rely upon such rul-
ing or determination letter as provided
in section 1.509(a)–7 of the Income Tax
Regulations. It is not the practice of the
Service to announce such revised classi-
fication of foundation status in the Inter-
nal Revenue Bulletin.
201997–6 I.R.B.

Announcement of the Disbarment, Suspension, or Consent to Voluntary
Suspension of Attorneys, Certified Public Accountants, Enrolled Agents, and
Enrolled Actuaries From Practice Before the Internal Revenue Service
Under Section 330, Title 31 of the
United States Code, the Secretary of the
Treasury, after due notice and opportu-
nity for hearing, is authorized to sus-
pend or disbar from practice before the
Internal Revenue Service any person
who has violated the rules and regula-
tions governing the recognition of attor-
neys, certified public accountants, en-
rolled agents or enrolled actuaries to
practice before the Internal Revenue
Service.
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 under suspension from practice be-
fore the Internal Revenue Service.
To enable attorneys, certified public
accountants, enrolled agents, and en-
rolled actuaries to identify such dis-
barred or suspended practitioners, 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 of disbarment or pe-
riod of suspension. This announcement
will appear in the weekly Bulletin for
five successive weeks or as long as it is
practicable for each attorney, certified
public accountant, enrolled agent, or
enrolled actuary so suspended or dis-
barred and will be consolidated and
published in the Cumulative Bulletin.
After due notice and opportunity for
hearing before an administrative law
judge, the following individuals have
been disbarred from further practice be-
fore the Internal Revenue Service:
NameAddressDesignationEffective Date
Noske, Joan MarieBismarck, NDCPASeptember 7, 1996
Dalrymple, John K.Troy, MICPASeptember 26, 1996
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 1997–5
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
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
Proposed Regulations:
REG–209762–95, 1997–3 I.R.B.12
REG–209834–96, 1997–4 I.R.B.9
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
97–12, 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
97–17, 1997–5 I.R.B.25
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
Treasury Decisions:
8697, 1997–2 I.R.B.11
8688, 1997–3 I.R.B.7
8689, 1997–3 I.R.B.9
8692, 1997–3 I.R.B.4
8695, 1997–4 I.R.B.5
8690, 1997–5 I.R.B.5
8691, 1997–5 I.R.B.16
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 1997–5
*Denotes entry since last publication
Revenue Procedures:
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
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
Revenue Rulings:
70–480
Revoked by
97–6, 1997–4 I.R.B.4
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
Revenue Rulings—Continued
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