us-irs-revenue-procedures-irb-2011-25-pdf•Internal Revenue Bulletin 2011-25 (PDF rendition): IRS Revenue Procedures
Internal Revenue Bulletin 2011-25 (PDF rendition): IRS Revenue Procedures
us-irs-revenue-procedures-irb-2011-25-pdfInternal Revenue Bulletin 2011-25 (PDF rendition): IRS Revenue ProceduresGuidance
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Bulletin No. 201 1-25 June 20, 2011 HIGHLIGHTS OF THIS ISSUE These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations. INCOME TAX Notice 2011–45, page 886. This notice informs tax practitioners that until all of the condi- tions for becoming a registered tax return preparer are able to be satisfied, no individual may represent that he or she is a reg- istered tax return preparer. This notice also informs tax practi- tioners that registered tax return preparers will be required to add a specified statement to all mediums of paid advertising and broadcasting. Rev. Proc. 2011–35, page 890. This procedure provides survey guidelines and estimation pro- cedures to be used for determining basis in stock acquired in transferred basis transactions. This procedure updates and expands Rev. Proc. 81–70, while at the same time it obso- letes Rev. Proc. 81–70 and Notice 2009–4 with respect to transferred basis transactions completed on or after June 20, 2011. Rev. Proc. 81–70 and Notice 2009–4 obsoleted in part. EXEMPT ORGANIZATIONS Rev. Proc. 2011–33, page 887. This procedure provides the extent to which grantors and con- tributors (including donors) may rely on the listing of an organ- ization in Publication 78,Cumulative List of Organizations De- scribed in Section 170(c) of the Internal Revenue Code,oron the IRS Business Master File (“BMF”) extract, for purposes of deducting contributions under section 170 of the Code and making grants under sections 4942, 4945, and 4966. In addi- tion, this revenue procedure clarifies that the Internal Revenue Service (“IRS”) may give notice of revocation, including revo- cations under section 6033(j), through an appropriate public announcement, such as publication in the Internal Revenue Bul- letinorontheIRS’swebsiteatIRS.gov. Finally, this revenue procedure advises that the IRS will no longer publish a paper version of Publication 78. Rev. Proc. 82–39 and 2009–32 modified and superseded. Announcement 2011–35, page 916. The Internal Revenue Service willpublish a list of organizations that have had their federal tax-exempt status automatically re- voked for failing to file an annual return or notice for three con- secutive years onIRS.gov. EMPLOYMENT TAX Notice 2011–35, page 879. The Affordable Care Act added new sections 4375, 4376, 4377, and 9511 to the Code. This notice requests public com- ments on the implementation of these new sections, which im- pose fees to be paid by issuers of health insurance policies and self-insured health plan sponsors. Comments are requested by September 6, 2011. EXCISE TAX Notice 2011–35, page 879. The Affordable Care Act added new sections 4375, 4376, 4377, and 9511 to the Code. This notice requests public com- ments on the implementation of these new sections, which im- pose fees to be paid by issuers of health insurance policies and self-insured health plan sponsors. Comments are requested by September 6, 2011. (Continued on the next page) Finding Lists begin on page ii. Notice 2011–46, page 887. This notice defers the date to June 10, 2011, by which a cov- ered entity must submit an error report and defers the date to August 24, 2011, by which the IRS will send covered entities their 2011 final fee calculation and, if applicable, notification of the final determination with respect to error reports. Notice 2011–9 and Rev. Proc. 2011–24 modified. ADMINISTRATIVE Notice 2011–43, page 882. This notice provides transitional relief for certain small orga- nizations that have lost their tax-exempt status because they failed to file an annual electronic notice for taxable years be- ginning in 2007, 2008 and 2009. This notice describes what criteria a small organization must satisfy to qualify for the transi- tional relief and explains how qualifying organizations can apply for reinstatement of tax-exempt status and request retroactive reinstatement. Notice 2011–44, page 883. This notice provides guidance with respect to applying for re- instatement of tax-exempt status and requesting retroactive reinstatement and establishing reasonable cause under sec- tion 6033(j)(2) and (3) of the Code for an organization that has had its tax-exempt status automatically revoked under section 6033(j)(1). Notice 2011–45, page 886. This notice informs tax practitioners that until all of the condi- tions for becoming a registered tax return preparer are able to be satisfied, no individual may represent that he or she is a reg- istered tax return preparer. This notice also informs tax practi- tioners that registered tax return preparers will be required to add a specified statement to all mediums of paid advertising and broadcasting. Rev. Proc. 2011–36, page 915. This procedure provides a reduced user fee for applications for reinstatement of tax-exempt status filed by small organiza- tion that lost their tax-exempt status under section 6033(j) and qualify for the transitional relief described in Notice 2011–43. Rev. Proc. 2011–8 modified. June 20, 20112011–25 I.R.B. The IRS Mission Provide Americ a’s taxpayers top-quality service by helping them understa nd and meet their tax responsibilities and en- force the law wi th integrity and fairness to all. Introduction The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conven- tions, legislation, court decisions, and other items of general interest. It is published weekly and may be obtained from the Superintendent of Documents on a subscription basis. Bulletin contents are compiled semiannually into Cumulative Bulletins, which are sold on a single-copy basis. It is the policy of the Service to publish in the Bulletin all sub- stantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, mod- ify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indi- cated. Procedures relating solely to matters of internal man- agement are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same. The Bulletin is divided into four parts as follows: Part I.—19 86 Code. This part i ncludes rulings and decisions based on provisions of the Intern al Revenue Code of 1986. Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Leg- islation and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rul- ings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secre- tary (Enforcement). Part IV .—Items of General Interest. This par t includes notices of proposed rulemakings, disbar- ment an d suspension lists, and announcements. The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period. The c ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate. For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402. 2011–25 I.R.B.June 20, 2011 June 20, 20112011–25 I.R.B. Part I. Rulings and Decisions Under the Internal Revenue Code of 1986 Section 351.— Transfer to Corporatio nControlled by Transferor 26 CFR 1.351–3: Basis to transferee corporations. This revenue procedure provides rules for satisfy- ing the reporting requirements of § 1.351–3 for tax- payers acquiring stock in transferred basis transac- tions. See Rev. Proc. 2011-35, page 890, Section 5. Section 358.— Basis to Distributees 26 CFR 1.358–6: Stock basis in certain triangular reorganizations. This revenue procedure provides survey guide- lines and estimation procedures to be used for determining basis in stock acquired in certain trian- gular reorganizations. See Rev. Proc. 2011-35, page 890. Section 362.— Basis to Corporations 26 CFR 1.362–1 : Basis to corporations. This revenue p rocedure provides survey guide- lines and esti mation procedures to be used for determining basis in stock acquired in transferred basis transa ctions. See Rev. Proc. 2011-35, page 890. Section 368.—Definitions Relating to Corporate Reorganizations 26 CFR 1.368–3: Basis to transferee corporations. This revenue procedure provides rules for satisfy- ing the reporting requirements of § 1.368–3 for tax- payers acquiring stock in transferred basis transac- tions. See Rev. Proc. 2011-35, page 890, Section 5. Section 4376.—Self- Insured Health Plans The Affordable Care Act added new sections 4375, 4376, 4377, and 9511 to the Code. This notice re- quests public comments on the implementation of these new sect ions, which impose fees to be paid by issuers of hea lth insurance policies and self-insured health plan sp onsors. See Notice 2011-35, page 879. Section 4377.—Definitions and Special Rules The Affordable Care Act added new sections 4375, 4376, 4377, and 9511 to the Code. This notice re- quests public comments on the implementation of these new sections, which impose fees to be paid by issuers of health insurance policies and self-insured health plans sponsors. See Notice 2011-35, page 879. Section 9511.—Patient- Centered Outcomes Research Trust Fund The Affordable Care Act added new sections 4375, 4376, 4377, and 9511 to the Code. This notice re- quests public comments on the implementation of these new sections, which impose fees to be paid by issuers of health insurance policies and self-insured health plans sponsors. See Notice 2011-35, page 879. 2011–25 I.R.B.878June 20, 2011 Part III. Administrative, Procedural, and Miscellaneous Request for Comments on Funding of Patient-Centered Outcomes Research Through Fees Payable by Issuers of Health Insurance Policies and Self-Insured Health Plan Sponsors Notice 2011–35 Section 1. PURPOSE This notice requests public comments on the implementation of provisions of the Patient Protection and Affordable Care Act, P.L. 111–148, (Affordable Care Act) to fund comparative clinical effectiveness research relating to patient-centered out- comes. The Affordable Care Act includes provisions that promote research to eval- uate and compare health outcomes and the clinical effectiveness,risks, and benefits of medical treatments, services, procedures, drugs, and other strategies or items that treat, manage, diagnose, or prevent illness or injury. As required by the Affordable Care Act, a nonprofit corporation — the Pa- tient-Centered Outcomes Research In- stitute (Institute) — was established to assist patients, clinicians, purchasers, and policy-makers in making informed health decisions by advancingcomparative clini- cal effectiveness research. The Affordable Care Act provides that the Institute will not be an agency or establishment of the United States Government, and will be funded by a Patient-Centered Outcomes Research Trust Fund (Trust Fund). The Trust Fund, in turn, is to be funded in part by fees to be paid by issuers of health insurance policies and sponsors of self-in- sured health plans. The Department of the Treasury (Trea- sury) and the Internal Revenue Service (Service) intend to publish proposed regu- lations implementing and providing guid- ance on the statutory requirements appli- cable to issuers and plan sponsors that pay those fees. To inform the development of the proposed regulations, this notice in- vites comments on how the fees should be determined and paid, including comments on several possible rules, safe harbors, and issues outlined below. Accordingly, while this notice does not provide guidance, it describes potential guidance that Treasury and the Service expect to propose to imple- ment the new fees and seeks comments on this potential guidance. Section 2. BACKGROUND .01 Section 6301 of the Affordable CareActaddednew§9511totheIn- ternal Revenue Code (Code) to establish the Patient-Centered Outcomes Research Trust Fund as a funding source for the Patient-Centered Outcomes Research In- stitute. The Trust Fund, in turn, will be funded in part through fees payable by issuers of health insurance policies and sponsors of self-insured health plans. Sec- tion 6301 of the Affordable Care Act also added new §§ 4375, 4376, and 4377 to the Code to impose those fees on what the statute refers to as “specified health insur- ance policies” and “applicable self-insured health plans” based on the average number of lives covered under the policy or plan. The fees are effective for policy and plan years ending after September 30, 2012. Fees on Specified Health Insurance Policies Under § 4375 .02 Section 4375(a) imposes a fee on each specified health insurance pol- icy for each policy year ending after September 30, 2012. Therefore, the first policy year to which the fee on a specified health insurance policy applies would be a policy year that ends on October 1, 2012. The fee does not apply to policy years ending after September 30, 2019. Accordingly, if the policy year were the calendar year, the fee would apply to calendar policy years 2012 through 2018. .03 The fee under § 4375 is equal to two dollars (one dollar in the case of policy years ending before October 1, 2013) mul- tiplied by the average number of lives cov- ered under the policy. Under § 4375(b), the feemustbepaidbytheissuerofthepolicy. .04 Section 4375(c) defines “specified health insurance policy” as any accident or health insurance policy (including a policy under a group health plan) issued with re- spect to individuals residing in the United States. The term also includes an arrange- ment under which fixed payments or pre- miums are received as consideration for a person’s agreement to provide or arrange for the provision of accident or health cov- erage to residents of the United States, re- gardless of how such coverage is provided or arranged to be provided. In such a case, the person agreeing to provide or arrange for the provision of coverage is treated as the issuer. “Specified health insurance pol- icy” does not include any insurance if sub- stantially all of its coverage is of excepted benefits described in § 9832(c). .05 Section 4375(d) provides that, for any policy year ending in any fiscal year beginning after September 30, 2014, the dollar amount in effect under § 4375(a) is equal to the sum of (1) the dollar amount for policy years ending in the previous fiscal year, plus (2) the amount equal to the product of (A) the dollar amount for policy years ending in the previous fiscal year, and (B) the percentage increase in the projectedper capitaamount of National Health Expenditures,as most recently pub- lished by the Secretary before the begin- ning of the fiscal year. For purposes of § 4375, the term “fiscal year” means the Federal government’s fiscal year, which runs from October 1 to September 30. Be- cause Treasury does not publish the Na- tional Health Expenditures, Treasury and the Service intend that the proposed regu- lations will refer to the National Health Ex- penditures published by the Department of Health and Human Services. Fees on Applicable Self-Insured Health Plans Under § 4376 .06 Section 4376(a) imposes a fee on any applicable self-insured health plan for each plan year ending after September 30, 2012. Therefore, the first plan year to which the fee on an applicable self-insured health plan applies would be a plan year that ends on October 1, 2012. The fee does not apply to plan years ending after September 30, 2019. Accordingly, if the plan year were the calendar year, the fee would apply to calendar plan years 2012 through 2018. The fee is equal to two dol- lars (one dollar in the case of plan years ending before October 1, 2013) multiplied by the average number of lives covered un- der the plan. June 20, 20118792011–25 I.R.B. .07 Under § 4376(b)(1), the fee must be paid by the plan sponsor. Section 4376(b)(2) defines “plan sponsor” as the employer in the case of a plan established or maintained by a single employer or the employee organization in the case of a plan established or maintained by an employee organization. Section 4376(b)(2) provides that, in the case of (1) a plan established or maintained by two or more employers or jointly by one or more employers and one or more employee organizations, (2) a multiple employer welfare arrangement, or (3) a voluntary employees’ beneficiary association described in § 501(c)(9), the “plan sponsor” is the association, commit- tee, joint board of trustees, or other similar group of representatives of the parties that establish or maintain the plan, and, in the case of a plan established or maintained by a cooperative or association described in § 4376(c)(2)(F), the “plan sponsor” is the cooperative or association. .08 Section 4376(c) defines “applicable self-insured health plan” as any plan for providing accident orhealth coverage if any portion of the coverage is provided other than through an insurance policy, and the plan is established or maintained (1) by one or more employers for the benefit of their employees or former employees, (2) by one or more employee organizations for the benefit of their members or for- mer members, (3) jointly by one or more employers and one or more employee or- ganizations for the benefit of employees or former employees, (4) by a voluntary em- ployees’ beneficiary association described in § 501(c)(9), (5) byany organization described in § 501(c)(6), or (6) in the case of a plan not previously described, by a multiple employer welfare arrangement (as defined in § 3(40) of the Employee Retirement Income Security Act of 1974 (ERISA)), a rural electric cooperative (as defined in § 3(40)(B)(iv) of ERISA), or a rural telephone cooperative association (as defined in § 3(40)(B)(v) of ERISA). .09 Section 4376(d) provides that, for any plan year ending in any fiscal year beginning after September 30, 2014, the dollar amount in effect under § 4376(a) is equal to the sum of (1) that dollar amount for plan years ending in the previous fiscal year, plus (2) an amount equal to (A) that dollar amount for plan years ending in the previous fiscal year, multiplied by (B) the percentage increase in the projectedper capitaamount of National Health Expen- ditures, as most recently published by the Secretary before the beginning of the fiscal year. For purposes of § 4376, the term “fis- cal year” means the Federal government’s fiscal year, which, as noted, runs from Oc- tober 1 to September 30. As noted, be- cause Treasury does not publish National Health Expenditures, Treasury and the Ser- vice intend that the proposed regulations will refer to the National Health Expen- ditures published by the Department of Health and Human Services. Definitions and Special Rules Under § 4377 for the Fees Imposed Under §§ 4375 and 4376 .10 Section 4377(a)(1) defines “acci- dent and health coverage” for purposes of §§ 4375 and 4376 as any coverage that, if provided by an insurance policy, would cause the policy to be aspecified health in- surance policy (as defined in § 4375(c)). .11 Section 4377(a)(2) defines “insur- ance policy” as any policy or other instru- ment whereby a contract of insurance is is- sued, renewed, or extended. .12 Section 4377(a)(3) defines “United States” to include any possession of the United States. Section 4377(d) pro- vides that no amount collected under §§ 4375–4377 is to be covered over to any possession of the United States. .13 Governmental entities that are is- suers of specified health insurance policies or plan sponsors of applicable self-insured plans are generally subject to the fees im- posed under §§ 4375 and 4376. However, § 4377(b) provides that no such fee will be imposed on any covered life under an “exempt governmental program.” Section 4377(b) defines “exempt governmental program” as (A) any insurance program established under title XVIII of the So- cial Security Act (42 U.S.C. 1395et seq.) (Medicare), (B) the medical assistance program established by title XIX of the Social Security Act (42 U.S.C. 1396et seq.) (Medicaid) or title XXI of the Social Security Act (42 U.S.C. 1397aaet seq.) (Children’s Health Insurance Program), (C) any program established by Federal law for providing medical care (other than through insurance policies) to individuals (or their spouses and dependents) by rea- son of the individuals being members of the Armed Forces of the United States or veterans, and (D) any program established by Federal law for providing medical care (other than through insurance policies) to members of Indian tribes (as defined in § 4(d) of the Indian Health Care Improve- ment Act, 25 U.S.C. 1603). .14 Section 4377(c) provides that, for purposes of subtitle F of the Code, the fees imposed by §§ 4375 and 4376 are treated as if they were taxes. Data Reported on the NAIC Supplemental Health Care Exhibit .15 State insurance departments cur- rently require issuers operating in their jurisdictions to provide a primary financial report referred to as an Annual Statement. The format of the Annual Statement and the rules to be followed in preparing it are established by the National Association of Insurance Commissioners (NAIC). After the Affordable Care Act was enacted, the NAIC developed a Supplemental Health Care Exhibit (Exhibit) for the purpose of collecting comprehensive major medical data by company, state, and market. Infor- mation collected on the Exhibit includes the number of individual policies (for individual and association business) or certificates issued toindividuals covered under a group policy in force as of the end of the reporting period and the total number of lives insured, including depen- dents, under individual policies and group certificates as of the end of the reporting period. Many issuers of specified health insurance policies are required by one or more state insurance commissioners to file the Exhibit. Section 3. REQUEST FOR COMMENTS Treasury and the Service anticipate proposing regulations under §§ 4375 and 4376. To inform the development of the proposed regulations, Treasury and the Service request comments on the follow- ing topics: Average Number of Lives Covered Under the Policy Under § 4375 .01 The fee imposed by § 4375(a) on specified health insurance policies is based on the “average number of lives covered under the policy.” Treasury and the Ser- vice invite comments on reasonable meth- ods an issuer may use to determine the av- 2011–25 I.R.B.880June 20, 2011 erage number of lives covered under the policy for purposes of § 4375. Under any such method other than the safe har- bor described below, it is contemplated that issuers that are required to file the NAIC Supplemental Health Care Exhibit would be expected to be able to account for any differences between the numbers com- puted under the alternative method and the data reported on the Exhibit. .02 Treasury and the Service also invite comments on whether guidance should provide a safe harbor for issuers that are required to report the number of lives cov- ered on the NAIC Supplemental Health Care Exhibit. For example, a safe harbor might provide that the Service will not challenge an issuer’s calculation of the fee based on the number of lives reported on the most recently filed Exhibit, or based on the average of the number of lives re- ported on the most recently filed Exhibit and the Exhibit filed one year before the most recently filed Exhibit. Comments are requested on the scope and operation of a safe harbor rule, including comments on the circumstances, if any, under which amounts so determined may be too unrep- resentative to form a sufficiently reliable basis for calculating the fee. Applicable Self-Insured Health Plan Under § 4376 .03 Under § 4376(c), an applicable self-insured health plan is a plan that provides “accident and health coverage” any portion of which is provided other than through an insurance policy and that meets certain other conditions. Section 4377(a)(1) defines “accident and health coverage” as any coverage that, if pro- vided by an insurance policy, would cause the policy to be a specified health insur- ance policy (as defined in § 4375(c)). Section 4375(c)(2) provides that a spec- ified health insurance policy does not include any insurance if substantially all of its coverage is of excepted benefits described in § 9832(c). Benefits pro- vided under a health flexible spending arrangement (health FSA), as described in § 106(c)(2), are excepted benefits for purposes of § 9832(c) if: 1. Other group health plan coverage, not limited to excepted benefits, is made available to the eligible class of par- ticipants; and 2. The arrangement is structured so that the maximum benefit payable to any eligible participant cannot exceed two times the participant’s salary reduc- tion election (or, if greater, $500 plus the amount of the salary reduction election). See § 54.9831–1(c)(3)(v) of the regu- lations relating to group health plans. Because coverage under a health FSA that satisfies these requirements is treated as excepted benefits for purposes of § 9832(c), such coverage would not, if provided by an insurance policy, cause the policy to be a “specified insurance policy,” as defined in § 4375(c). Accordingly, the coverage under a health FSA that satisfies these requirements is not “accident and health coverage” within the meaning of § 4377(a)(1), and such a health FSA is not an “applicable self-insured health plan” within the meaning of § 4376(c). With respect to health FSAs that do not satisfy the requirements to be treated as an excepted benefit, comments are invited on the variations that exist and which types would be excluded from the definition of an applicable self-insured health plan un- der § 4376 because they provide a type of coverage that, if provided by an insur- ance policy, would not be treated as a spec- ified health insurance policy (as defined in § 4375(c)). .04 Treasury and the Service in- vite comments on the type or types of health reimbursement arrange- ments (HRAs), as described in Notice 2002–45, 2002–2 C.B. 93, that would be excluded from the definition of applicable self-insured health plan under § 4376 because they provide a type of coverage that, if provided by an insurance policy, would not cause the policy to be treated as a specified health insurance policy (as defined in § 4375(c)). If so, what would be the basis for reaching such a conclusion? For example, to what extent does a limitation on annual contributions, or the availability of other employer-sponsored health coverage affect the determination as to whether an HRA provides coverage that, if provided by an insurance policy, would not cause the policy to be treated as a specified health insurance policy? Comments are also invited on whether there are types of HRAs that should be treated as applicable self-insured health plans under § 4376. Average Number of Lives Covered Per Applicable Self-Insured Health Plan Under § 4376 .05 The fee imposed by § 4376(a) on applicable self-insured health plans is based on the “average number of lives covered under the plan.” Treasury and the Service invite comments on how future guidance could reduce administrative bur- den by providing for reasonable methods to determine the average number of lives covered under an applicable self-insured plan; on whether guidance should provide a safe harbor that would permit sponsors of applicable self-insured health plans to compute the average number of lives cov- ered using a formula based on the number of participants and one or more additional factors that account for the number of dependents without requiring that actual dependents covered under the plan be counted; and on formulas and factors that could be used to determine the number of dependents for applicable self-insured health plans. Administration of the Fees .06 Under § 4377(c), the fees im- posed by §§ 4375 and 4376 are treated as taxes for purposes of subtitle F of the Code (§§ 6001–7874). Thus, references in subtitle F to “taxes imposed by this title,” “internal revenue tax,” and simi- lar references are also references to the fees imposed by §§ 4375 and 4376. For example, the fees imposed by §§ 4375 and 4376 are assessed (§ 6201), collected (§ 6301), enforced (§ 7602), and subject to confidentiality rules (§ 6103), in the same manner as taxes imposed by other sections of the Code. .07 The deficiency procedures of §§ 6211–6216 apply only to income, es- tate, and gift taxes imposed by subtitles A and B and excise taxes imposed by chap- ters 41, 42, 43, and 44. The fees imposed by §§ 4375 and 4376 are imposed by chapter 34 and, therefore, the deficiency procedures of §§ 6211–6216 do not apply to those fees. .08 Future proposed regulations could require each issuer and plan sponsor to re- port and pay the §§ 4375 and 4376 fees an- nually as opposed to quarterly. Proposed June 20, 20118812011–25 I.R.B. regulations might also require the report- ing and payment to occur on the same cal- endar date regardless of the “policy year” or “plan year” of any individual issuer or plan sponsor. Comments are invited on this approach and possible alternatives. Other Issues That Should be Addressed in Guidance .09 In addition to comments on the top- ics described above, comments are invited on the following specific issues: 1. What transition rules, if any, would be appropriate for the first “policy year” or first “plan year” ending after September 30, 2012? For example, would any of the information neces- sary to determine the average number of lives covered be unavailable for the first year for which the fee is in effect? 2. Is guidance needed concerning the definition of “policy year” or “plan year” for purposes of §§ 4375 and 4376? If so, how should these terms be defined? 3. Are there circumstances under which an issuer or plan sponsor might not know whether a covered individual resides in the United States? If so, how should those circumstances be addressed? Is guidance needed on the application of §§ 4375 and 4376 to plans that cover expatriates? 4. Should future guidance permit all em- ployers treated as a single employer under § 414 to be treated as a single employer for purposes of § 4376(b)? If so, under what conditions? 5. In the case of the fee imposed on self- insured health plans, what guidance is needed concerning the ability of a third-party administrator to act on be- half of a plan sponsor in complying with the § 4376 fee requirements? .10 Comments will be considered if submitted in writing by September 6, 2011. All comments will be available for public inspection and copying. Comments may be submitted in one of three ways: 1. By mail to CC:PA:LPD:PR (Notice 2011–35), Room 5203, Internal Rev- enue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. 2. Electronically toNotice.Com- ments@irscounsel.treas.gov.Please include “Notice 2011–35” in the sub- ject line of any electronic communi- cations. 3. By hand-delivery Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (Notice 2011–35), Courier’s Desk, Internal Revenue Service, 1111 Constitution Ave., NW, Washington, DC 20224. DRAFTING INFORMATION The principal author of this notice is Rebecca L. Baxter of the Office of Asso- ciate Chief Counsel (Financial Institutions & Products). For further information re- garding this notice, contact Ms. Baxter at (202) 622–7117 (not a toll-free call). Transitional Relief Under Internal Revenue Code § 6033(j) for Small Organizations Notice 2011–43 This notice provides transitional relief for certain small organizations that have lost their tax-exempt status because they failed to file a required annual electronic notice (Form 990–N e-Postcard) for tax- able years beginning in 2007, 2008 and 2009. A small organization — that is, one that normally has annual gross receipts of not more than $50,000 in its most recently completed taxable year — that qualifies for the transitional relief under this notice and applies for reinstatement of tax-ex- empt status by December 31, 2012, will be treated by the Internal Revenue Service (“IRS”) as having established reasonable cause for its filing failures and its tax-ex- empt status will be reinstated retroactive to the date it was automatically revoked. Organizations not described in this no- tice should consult Notice 2011–44, in this Bulletin, for guidance on how to apply for reinstatement of tax-exempt status and re- quest retroactive reinstatement. BACKGROUND The Pension Protection Act of 2006, Pub. L. No. 109–280, 120 Stat. 780, § 1223 (2006), added sections 6033(i) and (j) to the Internal Revenue Code (“Code”), both of which became effective for tax- able years beginning after 2006. Section 6033(i) requires tax-exempt organizations excepted from filing annual information returns because they normally have annual gross receipts of not more than $25,000 (increased to normally not more than $50,000 for taxable years beginning on or after January 1, 2010) to annually file a Form 990–N e-Postcard. Section 6033(j) automatically revokes the tax-exempt sta- tus of any organization that fails to file a required annual return or Form 990–N e-Postcard for three consecutive years. In order to obtain reinstatement of its tax-exempt status, an organization that has had its tax-exempt status automatically re- voked under section 6033(j) must apply for reinstatement with the IRS, even if it was not originally required to submit such an application. I.R.C. § 6033(j)(2). If an organization applying for reinstatement of tax-exempt status can show reasonable cause for its consecutive filing failures, the organization’s tax-exempt status may, in the discretion of the Secretary, be rein- stated retroactive to the date of the auto- matic revocation. I.R.C. § 6033(j)(3). ELIGIBILITY FOR TRANSITIONAL RELIEF The IRS recognizes that many small organizations that have lost their tax-ex- empt status because they failed to file a Form 990–N e-Postcard for their 2007, 2008, and 2009 taxable years were never required to file an annual return or notice prior to their 2007 taxable year. The IRS also recognizes that many small organiza- tions are operated by volunteers and may face unique challenges in meeting federal tax obligations. Accordingly, the IRS will treat a small organization (one that nor- mally has annual gross receipts of not more than $50,000 in its most recently com- pleted taxable year) as having established reasonable cause for failing to file a Form 990–N e-Postcard or an annual return for its taxable years beginning in 2007, 2008, and 2009 if it meets each of the following criteria: •The organization was not required to file annual information returns (such as Form 990,Return of Organiza- tion Exempt from Income Taxor Form 2011–25 I.R.B.882June 20, 2011 990–EZ,Short Form Return of Organ- ization Exempt from Income Tax)for taxable years beginning before 2007. •The organization was eligible in each of its taxable years beginning in 2007, 2008, and 2009 to file a Form 990–N e-Postcard (rather than an annual in- formation return). Generally organi- zations (other than private foundations and most section 509(a)(3) support- ing organizations) with annual gross receipts that were normally not more than $25,000 in such taxable years would have been eligible to file a Form 990–N e-Postcard. •On or before December 31, 2012, the organization submits to the IRS a prop- erly completed and executed applica- tion for reinstatement of tax-exempt status. An organization’s annual gross receipts are “normally not more than” $25,000 or $50,000 in a taxable year if its average an- nual gross receipts for that taxable year and the two taxable years immediately pre- ceding it are not more than $25,000 or $50,000, respectively.SeeRev. Proc. 2011–15, 2011–3 I.R.B. 322, section 4. The IRS will reinstate the tax-exempt status of a small organization that meets the above criteria retroactive to the date it was revoked. APPLICATION FOR REINSTATEMENT OF TAX-EXEMPT STATUS An organization seeking reinstate- ment of tax-exempt status under section 6033(j)(2) must use the same forms that are filed by all other applicants for tax-ex- emption. Thus, an organization seeking reinstatement of tax-exempt status under section 501(c)(3) must submit Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. Most other organizations seeking reinstatement of tax-exempt sta- tus must submitForm 1024, Application for Recognition of Exemption Under Sec- tion 501(a). Any organization that seeks reinstatement of tax-exempt status must submit the appropriate application re- gardless of whether the organization was originally required to apply with the IRS for recognition of tax-exemption. A small organization seeking the tran- sitional relief described in this notice must write “Notice 2011–43” on the top of the form it uses to apply for reinstatement of tax-exempt status and on the envelope. A small organization seeking the tran- sitional relief described in this notice must also attach to its application for reinstate- ment of tax-exempt status the following statement: [Name of Organization] was not re- quired to file annual information re- turns for taxable years beginning before 2007; was eligible in each of its tax- able years beginning in 2007, 2008 and 2009 to file a Form 990–N e-Postcard; and had annual gross receipts of nor- mally not more than $25,000 in each of its taxable years beginning in 2007, 2008 and 2009. Small organizations that are eligible for the transitional relief described in this no- tice are also eligible for a reduced user fee of $100 for the application of rein- statement of tax-exempt status.SeeRev. Proc. 2011–36, this Bulletin,modifying Rev. Proc. 2011–8, 2011–1 I.R.B. 237, section 6.07. For information on where to mail the application for reinstatement of tax-exempt status, see the Instructions for Form 1023 or Form 1024 (whichever is ap- plicable). SUBSEQUENT AUTOMATIC REVOCATIONS An organization whose tax-exempt sta- tus has been automatically revoked and re- instated may have its tax-exempt status au- tomatically revoked a second time under section 6033(j)(1) only if it fails to file re- turns or notices for another three consecu- tive taxable years, beginning with the tax- able year the IRS approves its application for reinstatement of tax-exempt status. For example, if an organization reporting on a calendar year basis has its tax-exempt status automatically revoked for failing to file required returns or notices for 2007, 2008, and 2009 and receives a determina- tion letter recognizing the reinstatement of its tax-exempt status dated September 1, 2011, the organization’s tax-exempt status will not be automatically revoked a second time for failing to timely file a return or no- tice for 2008, 2009, and 2010. However, the organization’s tax-exempt status will be automatically revoked a second time if the organization fails to timely file a return or notice for 2011, 2012, and 2013. DRAFTING INFORMATION The principal authors of this no- tice are Monice Rosenbaum and Preston Quesenberry of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities) and Matthew Giuliano of the Tax Exempt and Government Entities Division of the IRS. However, other personnel from the IRS and Treasury Department participated in developing this notice. For further information regarding this notice, contact Ms. Rosenbaum at (202) 622–6070, Mr. Quesenberry at (202) 622–1124, or Mr. Giuliano at (202) 283–8917 (not toll-free numbers). Application for Reinstatement and Retroactive Reinstatement for Reasonable Cause Under Internal Revenue Code § 6033(j) Notice 2011–44 SECTION 1. PURPOSE This notice provides guidance with respect to applying for reinstatement of tax-exempt status and requesting retroactive reinstatement under sections 6033(j)(2) and (3) of the Internal Revenue Code (“Code”) for an organization that has had its tax-exempt status automatically revoked under section 6033(j)(1) of the Code. The Treasury Department (“Trea- sury”) and the Internal Revenue Service (“IRS”) intend to issue regulations under section 6033(j) that will prescribe rules relating to the application for reinstate- ment of tax-exempt status under section 6033(j)(2) and the request for retroactive reinstatement under section 6033(j)(3). To assist in the drafting of these regulations, Treasury and the IRS solicit comments on the issues addressed in this notice. In this Bulletin, the IRS has also pub- lished Notice 2011–43, which provides transitional relief for certain small organi- zations (those that normally have annual gross receipts of not more than $50,000 in their most recently completed taxable year) that have lost their tax-exempt status because they failed to file an annual elec- tronic notice for taxable years beginning June 20, 20118832011–25 I.R.B. in 2007, 2008, and 2009. Notice 2011–43 sets forth the criteria for qualifying for the transitional relief and instructions on how qualifying organizations can apply for reinstatement of tax-exempt status retroactive to the date such status was au- tomatically revoked. SECTION 2. BACKGROUND In general, section 6033(a)(1) requires an organization exempt from taxation under section 501(a) to file an annual information return, such as a Form 990, Return of Organization Exempt from In- come Tax, a Form 990–EZ,Short Form Return of Organization Exempt from In- come Tax, or a Form 990–PF,Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation. Several categories of tax-exempt organizations, including most organizations (other than private foun- dations or section 509(a)(3) supporting organizations) whose annual gross re- ceipts are normally not more than $50,000 ($25,000 for taxable years beginning be- fore January 1, 2010), are not required to file an annual information return.See I.R.C. § 6033(a)(3); Rev. Proc. 2011–15, 2011–3 I.R.B. 322. The Pension Protection Act of 2006, Pub. L. No.109–280, 120 Stat. 780, § 1223 (2006) (“PPA”), added sections 6033(i) and (j) to the Code, both of which became effective for taxable years begin- ning after 2006. Section 6033(i) added an annual notification requirement for tax-exempt organizations that, pursuant to section 6033(a)(3)(A)(ii) or (a)(3)(B), are not required to file an annual infor- mation return under section 6033(a)(1) because their gross receipts fall below certain thresholds. An organization sat- isfies the annual notification requirement under section 6033(i) by filing an annual electronic notice, also known as a Form 990–N e-Postcard. The annual notifica- tion requirement is also deemed satisfied if an organization files a complete Form 990 or Form 990–EZ.SeeTreas. Reg. § 1.6033–6(c)(4). Section 6033(j)(1) automatically re- vokes the tax-exempt status of any organ- ization described insection 6033(a)(1) that fails to file a required annual return for three consecutive years or any organ- ization described in section 6033(i) that fails to file an annual return or notice for three consecutive years. Revocation under section 6033(j)(1) is effective on and after the date set by the Secretary for the filing of the third annual return or notice. Section 6033(j)(1) also requires the Secretary to publishand maintain a list of all organizations that have had their tax-exempt statuses revoked under section 6033(j)(1) (“revocation list”). The IRS is publishing such a revocation list on the IRS website (http://www.irs.gov), which it will update monthly. The IRS is also mail- ing a letter to the last known address of each organization on the revocation list to notify the organization that its tax-exempt status has been revoked under section 6033(j)(1) (“IRS revocation letter”). Section 7428(b)(4), as added by the PPA, provides that an organization may not bring a declaratory judgment action challenging automatic revocation under section 6033(j)(1). Section 6033(j)(2) provides that any or- ganization that has had its tax-exempt sta- tus automatically revoked under section 6033(j)(1) must apply with the IRS in or- der to obtain reinstatement of its tax-ex- empt status, regardless of whether the or- ganization was originally required to ap- ply for recognition of its tax exemption. If the application for reinstatement of tax-ex- empt status is approved, the effective date of the organization’s reinstated tax-exempt status generally will be the date the organ- ization filed its application for reinstate- ment. However, section 6033(j)(3) pro- vides that if, upon application for reinstate- ment, an organization “can show to the sat- isfaction of the Secretary evidence of rea- sonable cause for the failure described in [section 6033(j)(1)], the organization’s ex- empt status may, in the discretion of the Secretary, be reinstated effective from the date of the revocation.” SECTION 3. EFFECTIVE DATE OF AUTOMATIC REVOCATION For taxable years beginning after De- cember 31, 2006, the tax-exempt status of any organization that fails to file an annual information return required under section 6033(a)(1) or an electronic notice required under section 6033(i) for three consecu- tive years is automatically revoked pur- suant to section 6033(j)(1) on and after the date set by regulation for the filing of the third annual return or notice, without re- gard to any extension of time for filing. Sections 1.6033–2(e) and 1.6033–6(f) of the Treasury Regulations generally require annual returns and notices, respectively, to be filed on or before the 15th day of the fifth month following the close of the pe- riod for which the return or notice is re- quired to be filed. When the filing dead- line falls on a Saturday, Sunday, or legal holiday the deadline may be timely satis- fied if the filing is made on the next busi- ness day that is not a Saturday, Sunday, or a legal holiday.SeeI.R.C. § 7503. Thus, for example, in the case of an organization reporting on a calendar-year basis that did not file a required annual return or notice for 2007, 2008, or 2009, the revocation un- der section 6033(j)(1) would be effective as of May 17, 2010, given that May 15, 2010 fell on a Saturday. SECTION 4. APPLICATION FOR REINSTATEMENT OF TAX-EXEMPT STATUS An organization seeking reinstatement of its tax-exempt status under section 6033(j)(2) must apply using the same forms that are filed by all other applicants for tax exemption. Thus, an organization seeking reinstatement of its tax-exempt status under section 501(c)(3) must submit Form 1023,Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code.Most other organizations seeking reinstatement of tax-exempt status must submit Form 1024, Application for Recognition of Exemption Under Section 501(a).Any organization that seeks reinstatement of its tax-exempt status must submit the appropriate applica- tion regardless of whether the organization was originally required to apply with the IRS for recognition of tax exemption. For example, if the tax-exempt status of a sub- ordinate organization included in a group exemption letter is automatically revoked under section 6033(j)(1), the subordinate organization must submit an application for reinstatement of its tax-exempt sta- tus on its own behalf. In addition, all organizations seeking reinstatement of tax-exempt statusmust pay the appro- priate user fee.SeeRev. Proc. 2011–8, 2011–1 I.R.B. 237, section 6.07 or its suc- cessor. (Small tax-exempt organizations described in Notice 2011–43 are eligible 2011–25 I.R.B.884June 20, 2011 for a reduced user fee described in Rev. Proc. 2011–36, this Bulletin.) To facilitate processing of applications for reinstatement of tax-exempt status, organizations should write “automatically revoked” on the top of the application form and on the envelope. For informa- tion on where to mail the application for reinstatement of tax-exempt status, see the Instructions for Form 1023 or Form 1024 (whichever is applicable). SECTION 5. RETROACTIVE REINSTATEMENT .01 Request for Retroactive Reinstate- ment An organization (other than a small organization that qualifies for the transi- tional relief described in Notice 2011–43) seeking to have its tax-exempt status rein- stated effective from the date of automatic revocation pursuant to section 6033(j)(3) must submit a request for retroactive reinstatement with its application for re- instatement of tax-exempt status. The request for retroactive reinstatement must include the following: (1) A written statement setting forth all of the facts that support its claim for rea- sonable cause for failing to file a required return or notice in each of the three consec- utive years and over the entire consecutive three-year period, including a detailed de- scription of all the facts and circumstances that led to each failure and the continuous failure, the discovery of the failures, and the steps taken to avoid or mitigate the fail- ures; (2) A written statement describing the safeguards the organization has put into place to ensure that the organization will not fail to file returns or notices in the fu- ture; (3) Evidence to substantiate all material aspects of the written statements described in paragraphs (1) and (2) of this section; (4) Properly completed and executed paper annual information returns (Forms 990, Forms 990–EZ, or Forms 990–PF, whichever is applicable) for all taxable years during and after the consecutive three-year period that the organization was required, but failed, to file an annual information return; (5) Properly completed and executed Forms 990–EZ for all taxable years during and after the consecutive three-year period that the organization was eligible to file a Form 990–N e-Postcard but failed to file either a Form 990–N e-Postcard or an an- nual information return; and (6) An original declaration, dated and signed under penalties of perjury by an of- ficer, director, trustee, or other official who is authorized to sign for the organization in the following form: I, (Name), (Title) declare, under penalties of per- jury, that I am authorized to sign this request for retroactive reinstatement on behalf of [Name of Organization], and I further declare that I have examined this request for retroactive reinstate- ment, including the written explanation of all the facts and information pertain- ing to the claim for reasonable cause and the evidence to substantiate the claim for reasonable cause, and to the best of my knowledge and belief, this request is true, correct, and complete. .02 Reasonable Cause Standard Because the failure described in section 6033(j)(1) involvesa repeated and contin- uous failure to file annual returns or no- tices for a consecutive three-year period, an organization seeking retroactive rein- statement under section 6033(j)(3) must demonstrate that it had reasonable cause forfailingtofileareturnornoticenotonly for each of the three years but also over the entire three-year period. Thus, for exam- ple, showing reasonable cause for failing to file a required return or notice for the first of the three years by the date it was due would be insufficient; an organization also would have to show reasonable cause for not filing that return or notice at any later time during the three-year period and for not filing required returns or notices for the second and third years of the three-year period. In order to establish reasonable cause under section 6033(j)(3), an organization requesting retroactive reinstatement must provide evidence that it exercised ordinary business care and prudence in determining and attempting to comply with its report- ing requirements under section 6033 for each of the three years and over the en- tire three-year period, but was neverthe- less unable to file the required returns or notices for three consecutive years. In de- termining whether the organization estab- lishes reasonable cause, the IRS will take into account all pertinent facts and circum- stances, including, but not limited to, the following factors that weigh in favor of finding reasonable cause (with no single factor being either necessary or determina- tive): (1) The organization’s failure was due to its reasonable, good faith reliance on er- roneous written information from the IRS, stating that the organization was not re- quired to file a return or notice under sec- tion 6033, provided the IRS was made aware of all relevant facts. (2) The failure to file the returns or no- tices arose from events beyond the organi- zation’s control (“impediment”) that made it impossible for the organization to file re- turns or notices foreach of the three years at issue and over the entire three-year pe- riod. (3) The organization acted in a respon- sible manner by undertaking significant steps to avoid or mitigate the failure to file the required returns or notices and to pre- vent similar failures in the future, includ- ing, but not limited to— (a) Attempting to prevent an impedi- ment or a failure, if it was foreseeable; (b)Actingaspromptlyaspossibletore- move an impediment or the cause of the reporting failure, once the failure was dis- covered; and (c) After the failure was discovered, im- plementing sufficient safeguards to ensure future compliance with the reporting re- quirements under section 6033. (4) Aside from the three consecutive years in which the organization failed to file returns or notices, the organization has an established history of complying with its reporting requirements (if any) under section 6033 and/or any other applicable reporting or other requirements under the Code. In determining whether reasonable cause exists, the IRS will only consider a factor on the above list or any other factor (such as the fact that substantially all of an organization’s activities are performed by volunteers) if the organization shows to the satisfaction of the IRS evidence to substantiate the factor. .03 Timing of Request for Retroactive Reinstatement Except for small organizations that qualify for the transitional relief described in Notice 2011–43, the IRS will, in exer- cising the discretion granted under section 6033(j)(3), consider an organization’s re- June 20, 20118852011–25 I.R.B. quest for retroactive reinstatement only if it submits such a request, together with a properly completed and executed appli- cation for reinstatement of its tax-exempt status, within 15 months of the later of the date of the IRS revocation letter or thedateonwhichtheIRSpoststhename of the organization on the revocation list available on the IRS website (or otherwise provides notice of the revocation to the public). SECTION 6. SUBSEQUENT AUTOMATIC REVOCATIONS An organization whose tax-exempt sta- tus has been automatically revoked and re- instated may have its tax-exempt status au- tomatically revoked a second time under section 6033(j)(1) only if it fails to file re- turns or notices for another three consecu- tive taxable years, beginning with the tax- able year the IRS approves its application for reinstatement of tax-exempt status. For example, if an organization reporting on a calendar year basis has its tax-exempt status automatically revoked for failing to file required returns or notices for 2007, 2008, and 2009 and receives a determina- tion letter recognizing the reinstatement of its tax-exempt status dated September 1, 2011, the organization’s tax-exempt status will not be automatically revoked a second time for failing to timely file a return or no- tice for 2008, 2009, and 2010. However, the organization’s tax-exempt status will be automatically revoked a second time if the organization fails to timely file a return or notice for 2011, 2012, and 2013. SECTION 7. PAPERWORK REDUCTION ACT The collection of information contained in this notice has been submitted to the Of- fice of Management and Budget in accor- dance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) and approved under OMB control number 1545–2206. The collection of information in this no- tice is in section 5. In order to have its tax-exempt status retroactively reinstated under section 6033(j)(3), an organization must show to the satisfaction of the IRS evidence that it exercised ordinary busi- ness care and prudence in determining and attempting to comply with its reporting obligations under section 6033 for each of the three years (and over the entire three- year period) that it failed to meet such re- quirements. This information is necessary for inspection by the IRS in determining whether reasonable cause exists. The col- lection of information is required to meet the reasonable causestandard under sec- tion 6033(j)(3). The likely respondents providing the information required in sec- tion 5 of this notice are tax-exempt organi- zations that have had their tax-exempt sta- tuses automatically revoked under section 6033(j)(1), have applied for reinstatement of such status under section 6033(j)(2), and are seeking that such reinstatement be made retroactive to the date of revocation under section 6033(j)(3). Estimated total annual reporting bur- den: 2,917 hours. Estimated average annual burden per respondent: 1 hour. Estimated number of respondents over the next three years: 8,750. Additional collection of information is proposed in section 4 of the notice, which will be reported and approved through Forms 1023 and 1024 (OMB approval numbers 1545–0056 and 1545–0057, re- spectively). An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Of- fice of Management and Budget. SECTION 8. REQUEST FOR COMMENTS Treasury and the IRS request comments regarding this notice and suggestions for future guidance regarding the provisions of section 6033(j). Comments should be submitted on or before August 19, 2011. Please include “Notice 2011–44” on the cover page. Comments should be sent to the following address: Internal Revenue Service CC:PA:LPD:PR (Notice 2011–44), Room 5203 P.O. Box 7604 Ben Franklin Station Washington, D.C. 20224. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: Internal Revenue Service Courier’s Desk, 1111 Constitution Avenue, N.W. Washington, D.C. 20224 Attn: CC:PA:LPD:PR (Notice 2011–44) Submissions may also be sent electron- ically to the following e-mail address: Notice.Comments@irscounsel.treas.gov. Please include “Notice 2011–44” in the subject line. All comments will be available for pub- lic inspection and copying. SECTION 9. DRAFTING INFORMATION The principal authors of this no- tice are Monice Rosenbaum and Preston Quesenberry of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities) and Matthew Giuliano of the Tax Exempt and Government Entities Division of the IRS. However, other personnel from the IRS and Treasury Department participated in developing this notice. For further information regarding this notice, contact Ms. Rosenbaum at (202) 622–6070, Mr. Quesenberry at (202) 622–1124, or Mr. Giuliano at (202) 283–8917 (not toll-free numbers). Restrictions on Use of the Term Registered Tax Return Preparer Notice 2011–45 The Department of the Treasury and the IRS are implementing the recommenda- tions contained in Publication 4832, “Re- turn Preparer Review.” As part of this im- plementation, the Department of the Trea- sury and the IRS have issued final regu- lations (T.D. 9527) that include registered tax return preparers as practitioners under 31 CFR Part 10 (reprinted as Treasury De- partment Circular 230). The Department of the Treasury and the IRS have also published final regulations under I.R.C. § 6109 (75 FR 60309) pro- viding that attorneys, certified public ac- countants, enrolled agents, and registered 2011–25 I.R.B.886June 20, 2011 tax return preparers who prepare all or sub- stantially all of a tax return must obtain a preparer tax identification number (PTIN). In Notice 2011–6, 2011–3 I.R.B. 315, the IRS identified two additional groups of individuals who are eligible to obtain a PTIN: (1) specified individuals who are supervised by the attorney, certified public accountant, enrolled agent, enrolled retire- ment plan agent, or enrolled actuary who signs the tax return or claim for refund pre- pared by the individual, and (2) individu- als who certify they do not prepare or assist in the preparation of all or substantially all of any tax return or claim for refund cov- ered by a competency examination. No- tice 2011–6 further provided that individ- uals who are not attorneys, certified pub- lic accountants, enrolled agents, or regis- tered tax return preparers may obtain a pro- visional PTIN before the date that the reg- istered tax return preparer competency ex- amination is first offered. After the com- petency examination is offered, only at- torneys, certified public accountants, en- rolled agents, registered tax return prepar- ers, or the additional groups of individuals identified above will be eligible to obtain a PTIN. The IRS began issuing PTINs at the end of September 2010. To become a registered tax return pre- parer, an applicant must pass a competency examination and tax compliance and suit- ability checks. The IRS has selected a ven- dor to develop and administer the compe- tency examination, but the examination is not yet available. Additionally, the IRS is currently in the process of developing the suitability check. Because the conditions for becoming a registered tax return pre- parer are not yet able to be satisfied by any individual, no individual may repre- sent that he is a registered tax return pre- parer. An individual with a provisional PTIN may not represent that he is a reg- istered tax return preparer or has passed the competency examination. Once the competency examination is available, only an individual who has met all of the con- ditions to becoming a registered tax re- turn preparer, including passing the com- petency examination and the tax compli- ance and suitability checks, may represent that he is a registered tax return preparer. An individual who becomes a regis- tered tax return preparer must comply with the applicable rules in Circular 230, including section 10.30 regarding practi- tioner advertising and solicitation. Section 10.30 will be amended to require a reg- istered tax return preparer using any paid advertising involving print, television or radio, in which the individual represents himself or herself to be a registered tax return preparer to display or broadcast the following statement: “The IRS does not endorse any particular individual tax return preparer. For more information on tax return preparers go toIRS.gov.” The principal author of this notice is Emily M. Lesniak of the Office of Asso- ciate Chief Counsel (Procedure & Admin- istration). For further information regard- ing this notice, contact Emily M. Lesniak at (202) 622–4570 (not a toll-free call). Deferral of Dates Related to the 2011 Branded Prescription Drug Fee Notice 2011–46 Purpose This notice defers two dates by which certain actions are to be taken for purposes of the branded prescription drug fee. Background An annual fee on covered entities en- gaged in the business of manufacturing or importing branded prescription drugs was enacted by section 9008 of the Pa- tient Protection and Affordable Care Act (ACA), Public Law 111–148 (124 Stat. 119 (2010)), as amended by section 1404 of the Health Care and Education Rec- onciliation Act of 2010 (HCERA), Public Law 111–152 (124 Stat. 1029 (2010)). Notice 2011–9, 2011–6 I.R.B. 459, provides guidance for implementing this fee in 2011. Among other things, Notice 2011–9 states that the IRS will provide each covered entity with a preliminary fee calculation by May 16, 2011, and a final fee calculation by August 15, 2011. Rev. Proc. 2011–24, 2011–20 I.R.B. 787, provides a dispute resolution process by which a covered entity may dispute its preliminary fee calculation before the IRS sends it a final fee calculation. Sec- tion 4.01 of the Rev. Proc. provides that a covered entity must provide a written error report to the IRS, postmarked by June 1, 2011, in order for a correction to any claimed error to be considered by the IRS. Section 5.02(1) of the Rev. Proc. provides that the IRS will notify the covered entity in writing of the final determination with respect to error reports when the IRS sends the covered entity the final fee calculation no later than August 15, 2011. Reason for change and deferral of dates The IRS has been told that certain cov- ered entities may have difficulty meeting the June 1 deadline for submitting these er- ror reports because of the volume of data they need to review. Accordingly, this no- tice defers until June 10, 2011, the date by which error reports under Rev. Proc. 2011–24 must be postmarked in order to receive IRS consideration. To preserve the time needed to give ap- propriate consideration to the error reports, the IRS will send covered entities their 2011 final fee calculation and, if applica- ble, notification of the final determination with respect to error reports by August 24, 2011, instead of August 15, 2011. Effect on Other Documents Notice 2011–9 and Rev. Proc. 2011–24 are modified. Drafting Information The principal author of this notice is Celia Gabrysh of the Office of Associate Chief Counsel (Passthroughs & Special In- dustries). For furtherinformation regard- ing this notice, contact Celia Gabrysh at (202) 622–3130 (not a toll-free call). Updated Reliance Rules for Contributors Rev. Proc. 2011–33 SECTION 1. PURPOSE This revenue procedure modifies and supersedes Revenue Procedure 82–39, 1982–2 C.B. 759, and Revenue Proce- dure 2009–32, 2009–28 I.R.B. 142, and provides the extent to which grantors and contributors (including donors) may rely on the listing of an organization in June 20, 20118872011–25 I.R.B. Publication 78,Cumulative List of Or- ganizations described in § 170(c) of the Internal Revenue Code,orontheIRS Business Master File (“BMF”) extract, for purposes of deducting contributions under § 170 and making grants under §§ 4942, 4945, and 4966. In addition, this revenue procedure clarifies that the Internal Rev- enue Service (“IRS”) may give notice of revocation, including revocations under §6033(j), through an appropriate public announcement, such as publication in the Internal Revenue Bulletin or on the IRS’s website atwww.irs.gov. SECTION 2. BACKGROUND .01 Section 170, with certain limita- tions, allows deductions for federal in- come tax purposes of contributions or gifts made to or for the use of an organization that qualifies as an organization described in § 170(c). In order for contributions to be deductible, the organization must qualify at the time of the contribution. Thus, it is the responsibility of an organ- ization receiving contributions to ensure that its character, purposes, activities, and method of operation satisfy the qualifi- cation requirements of § 170(c) in order for grantors and contributors to have the assurance that their contributions at the time made are deductible. .02 Treas. Reg. § 1.509(a)–7(a) sets forth general rules regarding reliance by grantors and contributors to organizations describedin§§509(a)(1),(2),and(3). This regulation provides that once an or- ganization has received a ruling or deter- mination letter classifying it as an organi- zation described in § 509(a)(1), (2), or (3), the treatment of contributions and grants, and the status of grantors and contribu- tors to such organization under §§ 170, 507, 545(b)(2), 642(c), 4942, 4945, 2055, 2106(a)(2), and 2522, will not be affected by reason of a subsequent revocation by the IRS of the organization’s classification as described in § 509(a)(1), (2), or (3) until thedateonwhichnoticeofchangeofsta- tusismadetothepublic. .03 Generally, Publication 78 lists orga- nizations that have received a ruling or de- termination letter from the IRS stating that contributions by grantors or contributors to the listed organization (or to the listed cen- tral (or parent) organization and those local (or subordinate) units covered by the group exemption letter) are deductible as pro- vided in § 170. (Note that Publication 78 does not include separate listings for local organizations included in a group ruling.) Each ruling or determination letter is based on a factual showing by the listed organiza- tion that its character, purposes, activities, and method of operation satisfy the statu- tory requirements for qualification at the time the ruling or determination letter is is- sued. If there is a material change in the character, purposes,activities, or method of operation of an organization from those on which the ruling or determination let- ter was based and the change is such that the organization ceases, as a matter of law, to qualify under § 170(c), the ruling or de- termination letter also immediately ceases to be applicable (see also Sec. 11.02 of Rev. Proc. 2011–9, 2011–2 I.R.B. 283). Where this circumstance occurs, except for the validation provision of § 7428(c) (see Sec. 5.02), it is only by exercise of the authority under § 7805(b) that grantors or contributors to the organization may be al- lowed a deduction for grants or contribu- tions made after the organization ceases to qualify under § 170(c). .04 Through the use of a “deductibil- ity code,” Publication 78 generally indi- cates the foundation classification under § 509(a) of the listed organizations. This classification determines the appropriate limitations for deductibility purposes and whether private foundations and sponsor- ing organizations of donor-advised funds making grants to particular organizations would be required to exercise expenditure responsibility. The coding system in Pub- lication 78 does not indicate specifically whether an organization is described in § 509(a)(1), (2), or (3), or a particular sub- paragraph of § 170(b)(1)(A). .05 The IRS no longer publishes a paper version of Publication 78. Grantors and contributors can no longer rely on the pa- per version of Publication 78 or any paper supplements for current information after the date of publication of this revenue pro- cedure. Publication 78 now appears solely in electronic format on the IRS website athttp://www.irs.gov/app/pub–78. Elec- tronic Publication 78 and its electronic ad- denda are generally updated at least quar- terly. .06 The IRS also makes an extract of certain information on exempt organiza- tions from the BMF available to the public through the Tax Statistics section of the IRS website. The extract of the BMF con- tains more information, in a slightly differ- ent format, than Publication 78. Among the data fields provided are an organiza- tion’s name and Employer Identification Number (“EIN”), address, subsection code (the paragraph under § 501(c) under which it is recognizedas exempt), ruling date, affiliation code (status as an inde- pendent, central, or local organization), deductibility code, foundation code (indi- cating whether an organization is a private foundation, private operating foundation, or public charity described in § 509(a)(1), (2), or (3)), and, if applicable, the appro- priate subparagraph of § 170(b)(1)(A)), and other data fields. The IRS plans to modify the foundation codes in early 2011 to indicate whether a § 509(a)(3) organ- ization is a Type I, Type II, Type III, or Type III functionally integrated support- ing organization. Unlike Publication 78, the BMF extract contains information on all organizations that have been recog- nized by the IRS as tax-exempt, including organizations not eligible to receive tax deductible contributions. References to listing in or reliance on the BMF extract in this revenue procedure only pertain to organizations contributions to which have been determined to be deductible under §170, as reflected in the deductibility code in Publication 78 or the BMF extract. .07 Due to its large size, the BMF ex- tract is available as compressed ASCII Text or Excel spreadsheet files. These files must be downloaded and uncompressed before viewing. The BMF extract and its corresponding instructions are available for download directly from the IRS web- site athttp://www.irs.gov/taxstats/char- itablestats/article/0,,id=97186,00.html. Generally, the BMF information is ex- tracted and updated on a monthly basis. .08TemporaryRegulations §§1.170A–9T(f)(5)(ii)and 1.509(a)–3T(e)(2), 73 Fed. Reg. 52,528 (Sept. 9, 2008), state generally that grantors and contributors may rely on an organization’s ruling that the organization is described in §§ 170(b)(1)(A)(vi) and 509(a)(1) or in § 509(a)(2) until the IRS publishes notice of a change of status (for example, in the Internal Revenue Bulletin or Publication 78), unless the grantor or contributor was responsible for, or aware of, the act or failure to act that results in 2011–25 I.R.B.888June 20, 2011 the organization’s loss of public charity status. .09 Section 6033(j) was added to the In- ternal Revenue Code as part of the Pension Protection Act of 2006, and is effective for returns and notices for tax years beginning after December 31, 2006. Section 6033(j) provides that an organization exempt from tax under § 501(a) that fails to file an an- nual return or submit an electronic notice for 3 consecutive years will lose its Fed- eral tax exempt status. Section 6033(j) fur- ther provides that the IRS shall publish and maintain a list of any organization that is so revoked. SECTION 3. RELIANCE ON PUBLICATION 78 AND THE BMF .01 Revocations. Where an organiza- tion listed in or covered by Publication 78 or the BMF extract ceases to qualify as an organization contributions to which are de- ductible under § 170: (1) and the IRS subsequently revokes a ruling or a determination letter pre- viously issued to such organization, grants and contributions made to the or- ganization by persons unaware of such change in status of the organization generally will be considered allowable if made on or before the date of an ap- propriate public announcement stating that the organization ceases to qual- ifyasanorganizationcontributionsto which are deductible under § 170. (2) as a result of loss of exempt sta- tus pursuant to § 6033(j), grants and contributions made to the organization by persons unaware of the change in the status of the organization generally will be considered allowable if made on or before the date of publication of the list of revoked organizations required by § 6033(j). Publication in either case may be ef- fected in the Internal Revenue Bulletin or on the IRS’s website at http://www.irs.gov or by such other means designed to put the public on notice of the change in the organ- ization’s status. Under certain circumstances, such as where a legally enforceable obligation un- der local law has been made to the organi- zation prior to the date of publication, and the satisfaction of such obligation is on or after the date, the allowance period may be extended upon specific exercise of au- thority under § 7805(b). See, for example, Rev. Rul. 78–129, 1978–1 C.B. 67. How- ever, the IRS is not precluded from dis- allowing a deduction for any contribution made after an organization ceases to qual- ify under § 170, where grantor or contrib- utor (1) had knowledge of the revocation of the ruling or determination letter prior to publication of the revocation, (2) was aware that such revocation was imminent, or (3) was in part responsible for, or was aware of, the activities or deficiencies on the part of the organization that gave rise to the loss of qualification. .02 Foundation status. With regard to an organization’s public charity status un- der § 509(a)(1), (2), or (3), grantors and contributors may rely on the classification of an organization listed in or covered by Publication 78 or the BMF extract for such purpose to the same extent as provided for § 170 purposes in paragraph .01 above. To the extent included in Publication 78 or the BMF extract, this includes whether a § 509(a)(3) organization is a Type I, Type II, Type III, or Type III functionally in- tegrated supporting organization. Private foundations and sponsoring organizations of donor-advised funds may rely on an or- ganization’s foundation status (or support- ing organization type) set forth in Publica- tion 78 or the BMF extract for grant mak- ing purposes under §§ 4942, 4945, and 4966, except where the grantor (1) had knowledge of the revocation of the ruling or determination letter classifying the or- ganization as one described in § 509(a)(1), (2), or (3) (or specifying its supporting or- ganization type) prior to the publication of the revocation; or (2) was in part responsi- ble for, or was aware of, the act or the fail- ure to act that gave rise to the revocation of the ruling or determination letter clas- sifying the organization as one described in § 509(a)(1), (2), or (3) (or specifying its supporting organization type). .03 The advance assurance of de- ductibility and foundation status provided by paragraphs .01 and .02 above, respec- tively, applies only to grants or contribu- tions made to an organization listed in or covered by Publication 78 or the BMF ex- tract in the organization’s official name, its recognized popular name, or a contraction of either of these names that is reason- ably identifiable or widely known. The advance assurance of deductibility and foundation status provided by paragraphs .01 and .02 does not apply to contributions or grants made nominally to an organi- zation listed in or covered by Publication 78 or the BMF extract but with the un- derstanding or on a condition that they be made available to or for the use of an organization not listed in or covered by Publication 78 or the BMF extract. .04 The provisions of paragraphs .01 and .02 above do not apply to an organiza- tion that is not listed in or covered by Pub- lication78ortheBMFextract. Insucha case the effect of a ruling or determination letter concerning the deductibility of con- tributions to the organization or its foun- dation status is determined in the manner described in Rev. Proc. 2011–4, 2011–1 I.R.B. 123. .05 The advance assurance of de- ductibility and foundation status provided by paragraphs .01 and .02 above do not apply to local organizations included in a group ruling regardless of whether the local organization appears in the BMF extract. For further reliance information, follow the procedures listed in Publication 4573,Group Exemptions, and contact the tax-exempt central organization. SECTION 4. RELIANCE ON BMF INFORMATION FROM OTHER SOURCES A grantor or contributor may rely on in- formation about an organization from the BMF extract that is obtained from a third party, so long as the following require- ments are met: (1) The third party provides a report to the grantor or contributor that includes: (A) the organization’s name, EIN, foun- dation status under § 509(a)(1), (2), or (3) (including supporting organization type, if applicable), and whether con- tributions to such organization are de- ductible; (B) a statement that the infor- mation is from the most current update of the BMF extract and the BMF ex- tract revision date; and (C) the date and time the information was provided to the grantor or contributor; and (2)Thegrantororcontributorretains a copy of the report in hard copy or electronically. June 20, 20118892011–25 I.R.B. SECTION 5. RELATIONSHIP WITH § 7428 .01 Section 7428 creates a remedy un- der declaratory judgment procedures, in part, for cases involving a determination by the IRS with respect to the continuing qualification of an organization as one de- scribed in § 170(c)(2) or § 501(c)(3), or to the continuing classification of an or- ganization under § 509(a). The remedy is available in these cases if the IRS de- termines that revocation of exemption un- der § 501(c)(3), deductibility status un- der §170(c)(2), or foundation status under § 509(a) is appropriate, the organization has exhausted its administrative remedies, and the IRS has issued a final adverse de- termination letter to the organization. Un- der § 7428(b)(4), no action may be brought under § 7428 with respect to any revoca- tion of status described in § 6033(j)(1). .02 However, § 7428(c) provides for the “validation of certaincontributions” made during the pendency of a proceeding for declaratory judgment involving the revo- cation of a determination that the organi- zation is described in § 170(c)(2). Under this provision, the organization continues to be treated as an eligible organization de- scribed in § 170(c)(2) with respect to con- tributions from individuals (up to a max- imum of $1,000 in the aggregate during the pendency of the proceeding) and from other charitable organizations described in § 170(c)(2). Statutory protection for such contributions, if declaratory judgment is sought on the revocation action, would be- gin on the date of publication of the re- vocationandendonthedateonwhicha decision in the Tax Court becomes final or a judgment of the District Court of the United States for the District of Colum- bia or the Court of Federal Claims is en- tered that the organization is not described in § 170(c)(2). This reliance, however, is not extended to any individual who was re- sponsible, in whole or in part, for the ac- tivities (or failures to act) on the part of the organization that were the basis for the re- vocation. SECTION 6. ERRORS OR OMISSIONS Any errors or omissions in Publica- tion 78 or the BMF extract should be reported by the tax-exempt organization to the toll-free IRS customer service line at 1–877–829–5500. SECTION 7. EFFECT ON OTHER DOCUMENTS Rev. Proc. 82–39, 1982–1 C.B. 759, is modified and superseded. Rev. Proc. 2009–32, 2009–28 I.R.B. 142 is modified and superseded. SECTION 8. EFFECTIVE DATE Thisrevenueprocedureiseffectiveim- mediately upon publication in the Internal Revenue Bulletin. SECTION 9. DRAFTING INFORMATION The principal author of this Revenue Procedure is Melinda Williams of the Ex- empt Organizations, Tax Exempt and Gov- ernment Entities Division. For further in- formation regarding this notice, contact Ms. Williams at 202–283–9467 (not a toll-free call). 26 CFR 601.105: Examination of returns and claims for refund, credit or abatement; determination of correct tax liability. (Also: Part I §§ 362, 1.362–1, 351, 1.351–3, 1.358–6.) Basis In Stock Acquired In Transferred Basis Transactions Rev. Proc. 2011–35 SECTION 1. PURPOSE This revenue procedure provides proce- dures that a corporation (Acquiring) may use to establish its basis in stock of another corporation (Target) when it acquires the Target stock in a transferred basis transac- tion. SECTION 2. BACKGROUND The Internal Revenue Service has long held that the optimal method for establish- ing basis in stock acquired in a reorganiza- tion described in § 368(a)(1)(B) of the In- ternal Revenue Code (B reorganizations) is a survey of the surrendering Target share- holders. The Service has also long recog- nized that it will not be practical to sur- vey all surrendering Target shareholders in all such cases, particularly where Tar- get stock is publicly traded. To mitigate this concern, the Service published Rev. Proc. 81–70, 1981–2 C.B. 729, which pro- vides survey procedures, as well as proce- dures for the use of statistical sampling and estimation of basis, for establishing basis in stock acquired in a B reorganization if a survey of all surrendering shareholders would not be practical or feasible. Since the publication of Rev. Proc. 81–70, however, the operation of the se- curities market has changed significantly. Foremost among the changes has been the pervasive shift to the holding of stock in street name, that is, the holding of stock by nominees, typically clearinghouses or other financial institutions, on behalf of their members or customers. Because these nominee holders are subject to confi- dentiality and other restrictions, it is often difficult, if not impossible, for corpora- tions acquiring stock in a B reorganization to obtain the information necessary to establish basis in acquired stock using the procedures prescribed by Rev. Proc. 81–70. Furthermore, the difficulties as- sociated with determining basis in stock acquired in a B reorganization can also be present when determining basis in stock acquired in any transferred basis transac- tion. In 2004, the Service undertook a study of the need for revised and further guid- ance in the determination of basis of shares acquired in transferred basis transactions. See Notice 2004–44, 2004–2 C.B. 32. The comments received in response to Notice 2004–44 were reflected in Notice 2009–4, 2009–2 I.R.B. 251, which affirmed the in- tent to revise the general provisions of Rev. Proc. 81–70, described three ba- sis-determination safe harbors under con- sideration, and requested comments. The basis-determination safe harbors in Notice 2009–4 were: a survey-based methodol- ogy for shares surrendered by or on behalf of reporting shareholders, an estimation model based on stock registry and trading data for shares surrendered by registered, nonreporting shareholders, and an estima- tion model based on public trading data for shares surrendered by nominee sharehold- ers. Comments were received affirming 2011–25 I.R.B.890June 20, 2011 the need for such guidance and suggest- ing various modifications to the safe har- bor models. This revenue procedure adopts the sur- veying and statistical sampling guidelines in Rev. Proc. 81–70, but updates and revises them to take current market prac- tices into account. This revenue proce- dure also adopts the safe harbor method- ologies described in Notice 2009–4, but modifies them to reflect the comments re- ceived, particularly regarding the need for a model that uses data more readily ac- cessible to acquiring corporations. Finally, this revenue procedure expands the appli- cability of these provisions by permitting their use in any transferred basis transac- tion. SECTION 3. OVERVIEW, GENERALLY APPLICABLE PROVISIONS .01In General. Section 4.0 of this rev- enue procedure sets forth procedures for four methodologies that taxpayers may use to determine basis in stock acquired in a transferred basis transaction. Section 4.01 provides procedures for surveying all sur- rendering Target shareholders to determine actual basis in surrendered shares. Sec- tion 4.02 provides procedures for the use of statistical sampling when a full survey is not feasible. Sections 4.03 and 4.04 provide estimation techniques that may be used in lieu of a full survey or statistical sampling when specified criteria are satis- fied. Taxpayers may use one or more of these methodologies in any combination. If a taxpayer cannot or does not use the methodologies prescribed in this revenue procedure, basis in acquired Target shares may be established by such other method- ologies as agreed by the Service and Ac- quiring. Notwithstanding any provision of this revenue procedure, if Acquiring or the Service has or acquires (including by survey and by examining Target’s books and records) knowledge of a surrendering shareholder’s actual basis in a surrendered share, Acquiring’s basis in the share is the surrendering shareholder’s actual ba- sis. For example, in many cases, if Target issued shares to employee plans or with respect to options, convertible stock, or convertible debt, the basis of the shares can be determined using Target’s books and records. In thosecases, Acquiring’s basis in the shares will be the actual basis as determined using Target’s books and records. However, the Service will not undertake its own survey of shareholders (other than, perhaps, reporting sharehold- ers) for the purpose of obtaining actual knowledge of their basis. In the absence of actual knowledge, the Service will not assertan alternative basis, or an alternative method for determining basis, to the extent a taxpayer determines basis in Target stock in compliance with this revenue procedure. The Appendix to this revenue proce- dure sets forth an illustration of the appli- cation of the estimation and modeling pro- visionsinSection4. .02Definitions. For purposes of this revenue procedure, the following defini- tions apply: (1)Registered shareholder.Theterm “registered shareholder” means any Target shareholder that surrendered Target shares held in certificated form at the time of the transferred basis transaction. (2)Nominee shareholder.Theterm “nominee shareholder” means any surren- dering Target shareholder (whether surren- dering shares it held on its own account or on behalf of a customer, member, or other beneficial owner) that, at the time of the transferred basis transaction, was either— (a) A participant or member of the Depository Trust Company (DTC), or such other clearinghouse determined by the Ser- vice to be substantially similar to the DTC, that holds securities positions on its own behalf or on behalf of its clients, partici- pants, members, or other persons, or (b) A person required to file an SEC Form 13F or such other reporting form determined by the Service to be sub- stantially similar to the SEC Form 13F. (3)Reporting shareholder.Theterm “reporting shareholder” means any surren- dering Target shareholder that, immedi- ately before the transferred basis transac- tion, was either— (a) The registered or nominee shareholder of publicly traded Target shares representing at least five percent of the vote or the value of all outstanding Target shares (or, in the case of shares that were not publicly traded, one percent of the vote or value of all outstanding Tar- get shares), or, if identified in a nominee survey or otherwise known to Acquiring, the beneficial owner of such amount of shares, or (b) An officer or director of Tar- get, or a plan that acquired Target stock for or on behalf of Target employees (such as an employee stock option or pension plan). (4)Security Position Report (SPR). The term “Security Position Report” (SPR) means the securities position list- ings issued by the DTC and reporting the closing positions for securities held by DTC members. The term also includes similar publications of other clearing- houses, whether domestic or foreign, if it is established to the satisfaction of the Ser- vice that the publication is substantially similar to the DTC-issued SPR and the clearinghouse is substantially similar to the DTC. (5)SEC Form 13F.Theterm“SEC Form 13F” means the reporting form filed by institutional investment managers pur- suant to Section 13(f) of the Securities Ex- change Act of 1934. The term also in- cludes such other reporting forms required to be filed by a foreign jurisdiction if it is established to the satisfaction of the Ser- vice that such filing is substantially similar to the SEC Form 13F. (6)Master Securityholder File.The term “Master Securityholder File” means the official listing of individual securi- tyholder accounts holding certificated shares, see 17 C.F.R. § 240.17Ad–9 (1983). (7)Transferred basis transaction.The term “transferred basis transaction” means any transaction in which Acquiring’s ba- sis in Target stock acquired in the trans- action is determined by reference to the surrendering Target shareholders’ bases in their surrendered shares. Transferred ba- sis transactions include B reorganizations, § 351 exchanges, and certain triangular re- organizations (see § 1.358–6(c)(2)(ii) of the Income Tax Regulations). (8)Adjusted closing price.Theterm “adjusted closing price” means the price at which a share of stock closed on an es- tablished securities market on a specified date, adjusted to take stock splits into ac- count. SECTION 4. PROCEDURES .01Surveying. This Section 4.01 pro- vides procedures for surveying surrender- ing Target shareholders to establish basis June 20, 20118912011–25 I.R.B. in the shares surrendered by or on behalf of such shareholders. The procedures of this Section 4.01 apply to all surveys, whether done with respect to all acquired shares, with respect to a sample of acquired shares under the statistical sampling procedures described in Section 4.02, or with respect to shares that are surrendered by or on be- half of reporting shareholders when basis is estimated under Section 4.03 or Section 4.04. (1)Timeliness requirement.Allsur- veys under this Section 4.01 must be done timely. A survey will generally be con- sidered to have been done timely if it is substantially completed within two years of the transferred basis transaction. How- ever, see Section 7 of this revenue proce- dure for the application of this requirement to transferred basis transactions completed prior to June 20, 2011. (2)Survey procedure. All surveys done pursuant to this Section 4.01 are to be done in accordance withthe following— (a)Identifying the Target sharehold- ers to be surveyed. Acquiring first identi- fies the surrendering shareholders that will be included in the survey. For this pur- pose, Acquiring may use Target’s books and records, or such other information as is appropriate and available, including, for example, the Master Securityholder Files maintained by the stock transfer agent, or Securities ExchangeCommission (SEC) filings, including Schedule 13 series and SPR data. In general, Acquiring must survey all registered and nominee shareholders that surrendered Target stock in the transferred basis transaction. In addition, Acquiring must survey all other reporting share- holders identified by survey or otherwise. However, Acquiring need not survey— (i) Any shareholder that is not a member of the survey sample and that sur- rendered Target stock the basis of which is to be determined under the statistical sam- pling method described in Section 4.02, (ii) Any registered shareholder that is not a reporting shareholder and that surrendered Target stock the basis of which is to be determined under the esti- mation methodology described in Section 4.03, or (iii) Any nominee shareholder that is not a reporting shareholder and that sur- rendered Target stock the basis of which is to be determined under the estimation methodology described in Section 4.04. (b)Conducting the survey. Once the survey subjects are identified, Acquiring begins the survey process by sending a letter to the last known address of each such shareholder, asking the shareholder to disclose the number of Target com- mon and preferred shares surrendered, the shareholder’s aggregate basis (by class) of those shares, and whether the share- holder held the shares as the beneficial or nominee owner. The letter must state the purpose for requesting the information, explain how basis is determined, and ex- plain the importance of responding timely and accurately. In addition, the letter must request that— (i) Any surrendering shareholder that was a beneficial owner provide the identity and contact information of any nominee holder of its surrendered share or shares; and (ii) Any surrendering shareholder that was a nominee owner either: (A) Provide the identity and contact information of the beneficial owner or owners of the shares it surren- dered; (B) Provide the aggregate number of common and preferred shares that it surrendered and the aggregate basis (byclass)ofthoseshares;or (C) Forward the request for information (in a form provided by Ac- quiring) to the beneficial owners of its surrendered shares, requesting that such owners provide the basis information either directly to Acquiring or to the nominee (who would then provide the information to Acquiring). After 30 days, Acquiring must make at least two additional attempts to contact all shareholders that failed to respond to the initial survey letter. This follow-up contact may be made by telephone, email, and/or such other means as appropriate and available. (3)Allowable basis. The basis reported by surveyed shareholders will be deemed to be the surrendering shareholder’s actual basis, and Acquiring’s basis will therefore be the basis reported by such shareholders, unless the reported basis— (i) Differs from the actual basis known by Acquiring or the Service, in which case Acquiring’s basis will be such actual basis, or (ii) Is inaccurate on its face and dif- fers significantly from the trading prices of the shares at any time within a week of the date they were acquired in a cost-basis transaction. In such a case, the shareholder is considered to have failed to respond to the survey. If a shareholder surveyed in accordance with this Section 4.01 fails to respond to Acquiring’s request for basis information within 30 days of Acquiring’s second fol- low-up attempt, Acquiring may determine its basis in a share or shares surrendered by or on behalf of the shareholder using such other procedures in this revenue procedure as are applicable. .02Statistical Sampling. This Section 4.02 provides procedures for the use of standard statisticalsampling techniques to establish basis in Section 4.02 Eligi- ble Shares (as defined in Section 4.02(1)) when the administrative cost of surveying all surrendering shareholders is unreason- ably high. Factors that determine whether administrative cost is unreasonably high include the time, burden, and financial cost of conducting a full survey. The administrative cost of surveying every sur- rendering Target shareholder is presumed unreasonably high if, immediately before the transaction, Target stock was traded on an established securities market (within the meaning of § 1.7704–1(b) of the Pro- cedure and Administration Regulations). Under this Section 4.02, Acquiring’s ba- sis in each Section 4.02 Eligible Share is determined in accordance with the follow- ing— (1)Section 4.02 Eligible Share.The term “Section 4.02 Eligible Share” means any Target share— (a) The actual basis of which is not known, and (b) That is not surrendered by or on behalf of a reporting shareholder. (2)Statistical sampling procedure.To satisfy the requirements of this Section 4.02— (a) Statistical sampling is done sepa- rately for common and preferred shares. (b) No reporting shareholders may be included in a sample to be surveyed. (c) All shareholders in the sample must be surveyed under procedures described in Section 4.01, and (d) The statistical sampling procedures used must comply with standard statistical sampling procedures recognized by the 2011–25 I.R.B.892June 20, 2011 Service. The use of statistical sampling has been provided for in several items of published guidance. See, for example, Rev. Proc. 2004–29, 2004–1 C.B. 918 (statistical sampling methodology for use in establishing the amount of substantiated meal and entertainment expenses that are excepted from the 50% deduction disal- lowance under section 274(n)(1)); Rev. Proc. 2007–35, 2007–1 C.B. 1349 (ad- dressing when statistical sampling may be used for purposes of section 199 of the Code (income attributable to domes- tic production activities)); Rev. Proc. 2002–55, 2002–2 C.B. 435 (permitting external auditors of qualified intermedi- aries to use statistical sampling); and Rev. Proc. 72–36, 1972–2 C.B. 771 (setting forth statistical sampling guidelines for determining the redemption rate of trading stamps). If the Service determines that Acquir- ing’s sampling procedure fails to comply with accepted statistical sampling proce- dures, Acquiring will have an opportunity to recompute the estimate (Sample Basis Estimate), expand the sample, or make such other adjustments to the basis calcula- tion as necessary to comply with standard statistical sampling procedures. Alterna- tively, Acquiring may determine its basis in Target stock using such other procedures in this revenue procedure as are applicable. (3)Allowable basis. Acquiring’s al- lowable basis in each Section 4.02 Eligi- ble Share will be a valid estimate (Sam- ple Basis Estimate) computed at the least advantageous 95% one-sided confidence limit. The “least advantageous” confi- dence limit is either the upper or lower limit that results in the least benefit to Ac- quiring. If the relative precision, as de- scribed in Section 4.02(4) of this revenue procedure, does not exceed 10%, the Sam- ple Basis Estimate may be used as the basis for each Section 4.02 Eligible Share. For purposes of determining basis under this revenue procedure, where the relative pre- cision is less than 15% and greater than 10%, Allowable Basis is an amount be- tween the least advantageous 95% one- sided confidence limit and the Sample Ba- sis Estimate, determined as follows: Sample Basis Estimate - (Relative Pre- cision - .10) / .05 × (Sample Basis Es- timate - Least Advantageous 95% One- Sided Confidence Limit) (4)Calculating the relative precision for each estimator. The relative preci- sion for each estimator is commonly cal- culated by dividing the relative precision at the 95% one-sided confidence limit (some- times referred to as the sampling error) of the Sample Basis Estimate by the estima- tor. Where a Sample Basis Estimate may be calculated using either a corrected value or difference perspective, as in the case of Ratio and Regression methods or solely a corrected value perspective as in the case of a Mean method, the test will be applied on the basis of a difference perspective. In such cases the numerator of the calcula- tion is the sampling error of the adjustment and the denominator the Sample Basis Es- timate of the adjustment. .03Estimation Procedure for shares surrendered by registered shareholders and certain reporting shareholders.This Section 4.03 provides procedures for de- termining basis of Section 4.03 Eligible Shares (as defined in Section 4.03(1)) us- ing data from the Master Securityholder Files. Under this Section 4.03, Acquir- ing’s basis in each Section 4.03 Eligible Share is determined in accordance with the following— (1)Section 4.03 Eligible Share.The term “Section 4.03 Eligible Share” means any Target share— (a) The actual basis of which is not known, and (b) That was surrendered by a regis- tered shareholder— (i) That is not a reporting share- holder, or (ii) That is a reporting shareholder that was surveyed and that failed to re- spond to the survey. (2)Estimation procedure.Underthis Section 4.03, Acquiring’s basis in each Section 4.03 Eligible Share is determined in accordance withthe following— (a)Establishing initial estimated basis of each Section 4.03 Eligible Share.The initial estimated basis of each Section 4.03 Eligible Share is determined by treating the shareholder who surrendered the share as acquiring the share by purchase for the adjusted closing price on the date that the shareholder was issued its stock certificate. However, any amount so determined must be adjusted or revised to take into account any extraordinary issuance event. For this purpose, an extraordinary issuance event is any transaction or event that could have caused the basis of a share to be materially different from the adjusted closing price on its issuance date, including but not limited to the following— (i) On or about the date a stock certificate was issued to a surrendering Target shareholder, another certificate held by the same shareholder was cancelled. In such case, to the extent that the number of shares issued is less than or equal to the number of shares cancelled, the adjusted closing price for such newly issued shares will not be the adjusted closing price on the date the new certificate was issued, but, instead, the adjusted closing price on the date the earlier certificate was issued. If a cancelled certificate was originally issued concurrently with the cancellation of an- other certificate, the adjusted closing price is that on the date of the earlier (or earliest) issuance. (ii) A share was acquired in a tax- free stock split or as a stock dividend by the shareholder who surrendered the share. In such case, the share will be assigned a pro- portionate amount of the basis of the orig- inal share determined under the applicable provisions of the Code and regulations. Or, (iii) A share was acquired in a prior tax-free exchange by the shareholder who surrendered the share. In such case, the share will be assigned a basis deter- mined under the applicable provisions of the Code and regulations (including the provisions of this revenue procedure). (b)Adjusting initial estimated basis. The initial estimated basis of each Section 4.03 Eligible Share determined under Sec- tion 4.03(2)(a) must be adjusted for all sub- sequent transactions and events that would require an adjustment to basis under the Code (for example, to take into account distributions under § 301(c)(2)). (3)Allowable basis. Acquiring’s ba- sis in each Section 4.03 Eligible Share is the initial estimated basis for the share de- termined under Section 4.03(2)(a) and ad- justed as required bySection 4.03(2)(b). .04Estimation procedure for shares surrendered by nominees. This Section 4.04 provides procedures for determining the basis of Section 4.04 Eligible Shares (as defined in Section 4.04(1)(a)) using data from Target Security Position Reports (SPRs) or from SEC Form 13F filings (but not both). Under this Section 4.04, Acquiring’s basis in each Section 4.04 El- June 20, 20118932011–25 I.R.B. igible Share is determined in accordance with the following— (1)Definitions. For purposes of this Section 4.04, the following definitions ap- ply— (a)Section 4.04 Eligible Share.The term “Section 4.04 Eligible Share” means any Target share— (i) The actual basis of which is not known, and (ii) That was surrendered by a nominee shareholder— (A) That is not a reporting shareholder, or (B) That is a reporting share- holder that was surveyed and failed to re- spond to the survey. (b)Data Collection Period. The “Data Collection Period” is the period of time— (i) Beginning on the later of— (A) The first day of Target’s first taxable year, and (B) Either— (1)thelaterofthefirst date that the shares to be modeled are pub- licly traded and the date that is seven years before the date of the transferred basis transaction if Acquiring is estimating ba- sis using Target’s SPR data, or (2) the date that is ten years before the date of the transferred ba- sis transaction if Acquiring is estimating basis using SEC Form 13F data, and (ii) Ending on the date of the transferred basis transaction. (c)Measuring Date. The term “Mea- suring Date” means any date with respect to which data is to be collected. The Mea- suring Dates are: (i) IfSPRdataisbeingusedtoes- timate basis, each Friday in the Data Col- lection Period on which SPR data was pub- lished or, if SPR data is not published on a Friday in a particular week, then the last date prior to that Friday on which SPR data was published, provided that such data is available from the DTC as of the date of the transferred basis transaction, and (ii) If SEC Form 13F data is be- ing used to estimate basis, each date in the Data Collection Period on which SEC Forms 13F are filed. (2)Estimation procedure.Theestima- tion of basis under this Section 4.04 is done separately for common and preferred shares, and estimations are made as fol- lows— (a)Identifying modeled shareholders. Acquiring first identifies the surrendering shareholders to be included in the esti- mation model (the modeled shareholders), and each such shareholder’s first and last Measuring Date. For this purpose— (i)If SPR data is being used to estimate basis, the modeled shareholders are all surrendering shareholders identified on an SPR published at any time during the Data Collection Period (SPR modeled shareholder). With respect to each SPR modeled shareholder— (A) The shareholder’s first Measuring Date is the first date on which the shareholder is continuously identified on Target SPRs, and (B) The shareholder’s last Measuring Date is the last date for which Target SPR data is available. (ii)If SEC Form 13F data is being used to estimate basis, the modeled share- holders are all surrendering shareholders that filed an SEC Form 13F at any time during the Data Collection Period (SEC modeled shareholders). With respect to each SEC modeled shareholder— (A) The shareholder’s first Measuring Date is the first date on which the shareholder is identified in the SEC Form 13F data as holding Target shares, and (B) The shareholder’s last Measuring Date is the last date on which the shareholder filed an SEC Form 13F. (b)Establishing each modeled share- holder’s aggregate initial estimated basis. Each modeled shareholder is treated as purchasing the shares it is identified as holding on its first Measuring Date for an amount equal to the volume-weighted av- erage adjusted closing prices for the pe- riod— (i) Beginning on the later of the date that is three months prior to the share- holder’s first Measuring Date and the date that is Target’s first day of its first taxable year, and (ii) Ending on the modeled share- holder’s first Measuring Date. This is the modeled shareholder’s aggregate initial es- timated basis. (c)Adjusting each modeled share- holder’s initial estimated basis. Each modeled shareholder’s initial estimated basisisadjustedbytreatingtheshare- holder as having purchased shares to the extent of any increase, and having sold shares to the extent of any decrease, in the number of Target shares that the share- holder holds on the next Measuring Date for which data is available (the next date for which Acquiring has a Target SPR in the case of an SPR modeled shareholder, and the next date that the shareholder made an SEC Form 13F filing in the case of an SEC modeled shareholder). All deemed purchases are treated as having been made for an amount equal to the volume-weighted average of the adjusted closing prices for the period between the modeled shareholder’s immediately preceding Measuring Date and the next Measuring Date for which data is avail- able; all deemed sales are treated as having been made on the average cost method. The process is repeated for every Measur- ing Date until the shareholder’s aggregate adjusted estimated basis is determined as of its last Measuring Date. Each modeled shareholder’s aggregate adjusted basis on its last Measuring Date is divided by the total number of shares held by the shareholder on that date to deter- mine the shareholder’s per share final es- timated basis. For purposes of the model, each Tar- get share actually surrendered by a mod- eled shareholder is deemed to have a basis equal to the surrendering shareholder’s per share final estimated basis. (d)Section 4.04 per share modeled ba- sis. The deemed bases of all shares actu- ally surrendered by modeled shareholders are combined and the total is divided by the number of shares actually surrendered by those shareholders. The result is the per share modeled basis. (3)Allowable basis . Acquiring’s basis in each Section 4.04 Eligible Share is de- termined in accordance with the follow- ing— (i)If SPR data is usedto compute the Section 4.04 per share modeled basis, Acquiring’s basis in each Section 4.04 El- igible Share is equal to the Section 4.04 per share modeled basis multiplied by the percentage of Measuring Dates in the Data Collection Period for which SPR data is obtained. Thus, if there are 60 Measur- ing Dates in the Data Collection Period and Acquiring obtained SPR data for only 54 of those Measuring Dates, Acquiring’s ba- sis in each Section 4.04 Eligible Share is an amount equal to 90 percent (54/60) of the Section 4.04 per share modeled basis. Fur- 2011–25 I.R.B.894June 20, 2011 ther, appropriate adjustments will be made if the Service determines that SPRs not in- cluded in the determination represent ma- terial omissions. (ii)If SEC Form 13F data is usedto compute the Section 4.04 per share mod- eled basis, Acquiring’s basis in each Sec- tion 4.04 Eligible Share is equal to the Sec- tion 4.04 per share modeled basis multi- pliedby75percent. SECTION 5. REPORTING REQUIREMENTS Taxpayers acquiring stock in trans- ferred basis transactions described in this revenue procedure are deemed to satisfy the reporting requirements of §§ 1.351–3 and 1.368–3 if they include a statement on or with the timely filed original re- turn for the taxable year of the transferred basis transaction that identifies the trans- ferred basis transaction and states that a basis study is pending with respect to the acquired stock. However, to satisfy the requirements of those sections in such cases, the taxpayer must include complete statements as required under those reg- ulations, with basis amounts determined pursuant to the study or otherwise under this revenue procedure, on or with a timely filed original return for a tax year that is no later than the tax year that includes the date that is two years after the date of the transferred basis transaction. See Section 7 of this revenue procedure for the appli- cation of this requirement to transferred basis transactions prior to June 20, 2011. This Section 5 applies to all transferred ba- sis transactions without regard to whether basis is determined under Section 4 of this revenue procedure. SECTION 6. PRE-FILING AGREEMENTS The determination of whether a basis study is done in compliance with one of the procedures described in Section 4 of this revenue procedure may be the subject of a pre-filing agreement. SECTION 7. EFFECTIVE DATE, EFFECT ON OTHER DOCUMENTS This revenue procedure is effective with respect to transferred basis trans- actions completed on or after June 20, 2011. However, taxpayers may use this revenue procedure with respect to trans- ferred basis transactions completed prior to June 20, 2011; in such cases, surveys will be considered timely if substantially completed, and reporting requirements will be considered satisfied if filed, on or before June 20, 2013. Rev. Proc. 81–70 and Notice 2009–4 are obsoleted with respect to transferred basis transactions completed on or after June 20, 2011. June 20, 20118952011–25 I.R.B. APPENDIX EXAMPLE, PART 1 D ETERMINATIONOFBASISUSING STOCKREGISTRY,CORPORATEBOOKSANDRECORDS, MARKETTRADINGDATA,AND SECFORM13FFILINGDATA On January 1, Year 1, Target was formed. On February 2, Year 3, Acquiring acquired all 1000 outstanding shares of Target publicly traded common stock and all 100 outstanding shares of Targe t nonvoting preferred stock in a transferred basis transaction. The non- voting preferred stock is not publicly traded and, at the ti me of the transferred basis transaction, represents 2 percent of the value of Target. Immediately after the transaction, Acquiring col lected information to establish its basisin the acquired shares. Acquiring will use the survey and estimation methods provided in this reve nue procedure. Note that, to simplify computations, all numbers (other than those related to individual shares) are rounded to w hole numbers; individual shares are rounded to the second place. D ATACOLLECTION: 1. From the stock registry, publicly available records (trading prices), and its own books and records, Acquiring collected the following information: ShareholderIssue dateIssue priceShares issued and surren dered Preferred shares Officer1/1/Y1No amount recorded20 Employee Plan14/1/Y1 $10/share 30 Employee Plan24/1/Y2 $36/share 50 Total preferred shares surrendered by registered shareholders100 ShareholderIssue dateAdjusted closing price on issue date High/Low trading price within one week of issue date Shares issued and surrendered Common shares Individual A1/1/ Y1 $ 9/share$7–12/share 10 Individual B1/1/ Y1 $ 9/share$7–12/share 10 Individual C1/1/ Y2 $12/share$8–13/share 50 Individual D1/1/ Y2 $12/share$8–13/share 50 Individual E1/1/ Y2 $12/share$8–13/share 50 Director A1/1/ Y2 $12/share$8–13/share 30 Private Placement1/1/ Y2 $12/share$8–13/share 50 Total common shares s urrendered by registered shareholders 250 Target’s books and records also indicate: a. There was a $5 distribution declared on each preferred share outstanding on 4/15/Y1. The distributions were made to Officer ($100) and to Employee Plan1 ($150) on 5/1/Y1. For the yearof the distribution, Target had no earnings and profits. b. On or about 1/1/Y2, the date that a certificate was issued to Individual C for 50 shares, a certificate issued on 1/1/Y1 to Individual C for 25 shares was cancelled. 2. From SEC Form 13F Filings, publicly available trading information, and its own books and records, Acquiring collected the following information regarding the ownership of its common shares held by nominees: 2011–25 I.R.B.896June 20, 2011 Nominee shareholderSEC Form 13F Filing date Shares reported Vol Wtd Avg adjusted closing price* High/low trading price in quarter Shares surrendered Y1: 1 st quarter308 $5–14/share Y1: 2 nd quarter 45 10 $5–14/Share Y1: 3 rd quarter12011 $5–14/Share Y1: 4 th quarter16012 $5–14/share Y2: 1 st quarter20010 $6–15/share Y2: 2 nd quarter 150 12 $6–15/share Y2: 3 rd quarter20014 $6–15/share Nominee1 Y2: 4 th quarter20016 $6–18/share250 Y1: 1 st quarterNo Form13F filed 8 $5–14/share Y1: 2 nd quarter 250 10 $5–14/Share Y1: 3 rd quarter 250 11 $5–14/Share Y1: 4 th quarter20012 $5–14/share Y2: 1 st quarter20010 $6–15/share Y2: 2 nd quarter30012 $6–15/share Y2: 3 rd quarter30014 $6–15/share Nominee2 Y2: 4 th quarter 150 16 $6–18/share175 Y1: 1 st quarterNo Form13F filed 8 $5–14/share Y1: 2 nd quarterNo Form13F filed 10 $5–14/Share Y1: 3 rd quarter 75 11 $5–14/Share Y1: 4 th quarter 75 12 $5–14/share Y2: 1 st quarterNo Form13F filed 10 $6–15/share Y2: 2 nd quarter10012 $6–15/share Y2: 3 rd quarter 135 14 $6–15/share Nominee3 Y2: 4 th quarter 150 16 $6–18/share100 June 20, 20118972011–25 I.R.B. Y1: 1 st quarter 50 8 $5–14/share Y1: 2 nd quarter 50 10 $5–14/Share Y1: 3 rd quarter10011 $5–14/Share Y1: 4 th quarterNo Form13F filed 12 $5–14/share Y2: 1 st quarter10010 $6–15/share Y2: 2 nd quarter 150 12 $6–15/share Y2: 3 rd quarter20014 $6–15/share Nominee4 Y2: 4 th quarterNo Form13F filed 16 $6–18/share 100 Y1: 1 st quarterNo Form13F filed 8 $5–14/share Y1: 2 nd quarterNo Form13F filed 10 $5–14/Share Y1: 3 rd quarterNo Form13F filed 11 $5–14/Share Y1: 4 th quarter 50 12 $5–14/share Y2: 1 st quarter 50 10 $6–15/share Y2: 2 nd quarterNo Form13F filed 12 $6–15/share Y2: 3 rd quarter20014 $6–15/share Nominee5 Y2: 4 th quarter 250 16 $6–18/share125 * the volume weighted average adjusted closing price applicablewith respect to the first Measuring Date is determined for the period beginning on the later of Target’s first day of its first tax year and the day that is three months prior to the first Measuring Date; the volume weighted average adjusted closing price applicable to all subsequent Measuring Dates is determined for the period between Measuring Dates. D ATAANALYSIS: IDENTIFYINGAPPLICABLEBASISDETERMINATIONMETHODS ShareholderReporting shareholder statusSurvey required Eligible procedure(s) Preferred shares (not publicly traded, one percent standard applies): OfficerReporting shareholder (<1% vote and value, but specified relationship); issue price not recorded Yes4.01 Employee Plan1 Reporting shareholder (<1% vote and value, but specified relationship); issue price recorded NoNone, actual basis known Employee Plan2 Reporting shareholder (1% of value and specified relationship); issue price recorded NoNone, actual basis known 2011–25 I.R.B.898June 20, 2011 Common shares (publicly traded, five percent standard applies): Individual A Not reporting shareholder (<5% vote and value, no specified relationship) No4.01 or 4.03 Individual B Not reporting shareholder (<5% vote and value, no specified relationship) No4.01 or 4.03 Individual C Reporting shareholder (5% vote) Yes4.01; 4.03 if surveyed and no response Individual D Reporting shareholder (5% vote) Yes4.01; 4.03 if surveyed and no response Individual E Reporting shareholder (5% vote) Yes4.01; 4.03 if surveyed and no response Director A Reporting shareholder (<5% vote and value but specified relationship) Yes4.01; 4.03 if surveyed and no response Private Placement Reporting shareholder (5% vote) Yes4.01; 4.03 if surveyed and no response Nominee1 Reporting shareholder (5% vote and value) Yes4.01; 4.04 if surveyed and no response Nominee2 Reporting shareholder (5% vote and value) Yes4.01; 4.04 if surveyed and no response Nominee3 Reporting shareholder (5% vote and value) Yes4.01; 4.04 if surveyed and no response Nominee4 Reporting shareholder (5% vote and value) Yes4.01; 4.04 if surveyed and no response Nominee5Reporting shareholder (5% vote and value) Yes4.01; 4.04 if surveyed and no response BASISDETERMINATIONSUNDERSECTION4.01(SURVEYMETHOD) Acquiring conducted a survey of the following shareholders. The survey complied with the procedures of Section 4.01(2)(b). The following summarizes the results of the survey: Shareholder surveyedShareholder’s response/basis Allowable basis from survey Eligible for other procedure? Preferred shares: OfficerNo responseNoneNo, insufficient data for models Employee Plan1 $4.50/share for 30 preferred shares; in addition, Employee Plan1 reported it owned 50 common shares surrendered by Nominee1 ($12/share) None for preferred (actual =$10-5=$5);asreported ($12/share) for common No June 20, 20118992011–25 I.R.B. Common shares: Individual A $13/shareAs reported ($13/share) No Individual CNo responseNoneYes, Section 4.03 Individual E $40/share (nonresponsive, $40 inaccurate on its face) NoneYes, Section 4.03 Director A $1/share (nonresponsive, $1 inaccurate on its face) NoneYes, Section 4.03 Private PlacementNo responseNoneYes, Section 4.03 Nominee1No responseNoneYes, Section 4.04 Nominee2 $65/share (nonresponsive, $65 inaccurate on its face) NoneYes, Section 4.04 Nominee4No responseNoneYes, Section 4.04 Nominee5 No responseNoneYes, Section 4.04 Notes: Officer. Although Acquiring surveyed Officer and received no response, Acquiring cannot determine basis in the shares surren- dered by Officer by the methods described in Section 4.03 and Section 4.04 because the requisite market information is not available. Employee Plans. Because Acquiring had knowledge of actual basis (issue price was recorded inthe register), Acquiring’s basis is the actual basis of the shares ($10, reduced by the $5/share “section 301(c)(2)” distribution, or $5), notwithstanding that Employee Plan1 reported a basis of $4.50in the shares. Although Acquiring was not required to survey Employee Plan1, because it did and Employee Plan1 reported that, in addition to the preferred shares,it also beneficially owned 50 of the shares of common stock held by Nominee1, the basis of each of those 50 common shares is the $12/share basis reported by Employee Plan1 (even though all of Nominee1’s trading activity, including with respect to the 50 shares held on behalf of Employee Plan1, will be taken into account in modeling basis in Section 4.04). Individual A. Although Acquiring was not required to survey Individual A in order to use the estimation method in Section 4.03, Acquiring did survey Individual A and Individual A responded to the survey. Accordingly, the basis in the shares surrendered by Individual A is Individual A’s reported basis of $13 per share, notwithstanding that the basis determined under Section 4.03 would only be $9/share for those shares. Individual B. Acquiring does not have an actual basis for Individual B and was not required to survey Individual B in order to use the estimation method in Section 4.03. Accordingly, Acquiring may determine the basis of Individual B’s shares using the estimation method in Section 4.03. Individual C. Individual C, a reporting shareholder, was surveyed but did not respond. Accordingly, Acquiring may determine the basis of Individual C’s shares using the estimation method in Section 4.03. Individual D. Individual D, a reporting shareholder, was not surveyed. As a result, Acquiring has not satisfied the requirements for using the estimation procedures in this revenue procedure and, thus, cannot establish the bases of those shares under this revenue procedure. However, Acquiring may establish its bases in those shares under such other method as agreed to by the Service. Individual E and Director A. Individual E and Director A, both reporting shareholders, were surveyed and responded. However, the survey responses given by Individual E ($40/share) and Director A ($1/share) areinaccurate on their faces because they differ significantly from the high/low trading prices within a week of theiracquisition by the surrendering shareholders ($8-$13/share), and thus Individual E and Director A are considered to have not responded to the survey and the reported bases are disregarded. Acquiring may therefore establish its bases in those shares using the procedures in Section 4.03. Nominee shareholders. All five of the nominee shareholders are reporting shareholders and must therefore be surveyed in order to determine the bases of their surrendered shares under the modeling procedure of Section 4.04. Acquiring surveyed all the nominee shareholders except Nominee3. Nominee1, Nominee4, and Nominee5 failed to respond. Further, although Nominee2 responded, its response was inaccurate on its face ($65/share) and so Nominee2 isconsidered also to have not responded. As a result, Acquiring has generally satisfied the requirements to determine its bases in the shares surrendered by Nominee1, Nominee2, Nominee4, and Nominee5 under Section 4.04. However, with respect to Nominee1, Acquiring received survey information on the basis of 50 common shares it held and surrendered on behalf of Employee Plan1, and so 50 of the shares surrendered by Nominee1 will have a basis equal to the reported basis. Because Nominee3 was not surveyed, Acquiring has not satisfied the requirements for using the estimation 2011–25 I.R.B.900June 20, 2011 procedures in this revenue procedure and socannot use these procedures to determine thebases of those shares. However, Acquiring may establish its bases in the shares surrendered by Nominee3 under such other method as agreed to bythe Service. Notethat, although the bases of 50 shares surrendered by Nominee1 and all the shares surrendered by Nominee3 are not determined under Section 4.04, all the trading information collected with respect to Nominee1 and Nominee3 is included in the modeling computations. B ASISDETERMINATIONSUNDERSECTION4.03 Even though Individual C, Individual E, Director A, and Private Placement were reporting shareholders, Acquiring surveyed them, they failed to respond, and Acquiring has knowledge of the issue date of shares issued to such shareholders. Thus, the shares they surrendered are Section 4.03 Eligible Shares. The bases in the Section 4.03 Eligible Shares are computed as follows (rounding numbers other than “per share” numbers): Surrendering shareholderAdjusted closing price on issue date Number of shares surrendered Allowable basis Common shares: Individual B $9 10 $90 $9 25 $225 Individual C $12 25 $300 Individual E $12 50 $600 Director A $12 30 $360 Private Placement $12 50 $600 Note: In determining the basis of IndividualC’s 50 shares, Acquiring must take intoaccount the cancellation of a certificate for 25 shares (issued to Individual C on 1/1/Y1) on the same day that the certificate for 50 shares was issued to Individual C. Individual C is treated as surrendering 25 shares with a basis equal to the closing price on 1/1/Y1 and 25 shares with a basis equal to the closing price on 1/1/Y2. B ASISDETERMINATIONSUNDERSECTION4.04(FORM13FDATA) Acquiring’s bases in Section 4.04 Eligible Shares are computed as follows: June 20, 20119012011–25 I.R.B. Surrendering shareholder Filing date Shares reported Vol wtd avg adj closing price for period Modeled basis (Initial estimated basis adjusted each measuring date for increases and decreases in reported holdings) Deemed basis in surrendered shares Y1: 1 st quarter 308I nitialestimatedbasis: 30 shares reported x $8 vol wtd avg closing price per share = $2 40 Y1: 2 nd quarter 45 10 Reported shares increased (30 to 45): 15 shs @$10/sh = $150 A djustedestimatedbasis: $240+$150 = $3 90 Y1: 3 rd quarter 12011Reported shares increased (45to120): 75 shs @$11/sh = $825 A djustedestimatedbasis: $390+825 = $1 215 Y1: 4 th quarter 16012Reported shares increased (120 to 160): 40 shs @$12/sh = $480 A djustedestimatedbasis: $1215+480 = $1 695 Y2: 1 st quarter 20010Reported shares increased (160 to 200): 40 shs @$10/sh = $400 A djustedestimatedbasis: $1695+400 = $2 095 Y2: 2 nd quarter 150 12Reported shares decreased (200 to 150): Average cost of shares: $2095/200 = $10.48/sh; 50 shs @$10.48/sh = $524 A djustedestimatedbasis: $2095–524 = $1571 Y2: 3 rd quarter 20014Reported shares increased (150 to 200): +50 shs @$14/sh = $700 Adjusted estimated basis $1571+700 = $2 271 Nominee1 Y2: 4 th quarter 20016No change in holdings $2271 aggregate adjusted estimated basis / 200 shares = $11.36 per share final estimated basis 250 shares surrendered x $11.36 per share final estimated basis = $2840 deemed basis in surrendered shares$2840 2011–25 I.R.B.902June 20, 2011 Y1: 1 st quarter No 13F filed 8 Y1: 2 nd quarter 250 10I nitialestimatedbasis: 250 shares reported x $10 vol wtd avg closing price per share = $2500 Y1: 3 rd quarter 250 11No change in holdings Y1: 4 th quarter 20012Reported shares decreased (250 to 200): Average cost of shares: $2500/250 = $10; 50 shs @$10/sh = $500 A djustedestimatedbasis: $2500–500 = $2000 Y2: 1 st quarter 20010No change in holdings Y2: 2 nd quarter 30012Reported shares increased (200 to 300): +100 shs @$12/sh = $1200 A djustedestimatedbasis: $2000+1200 = $3200 Y2: 3 rd quarter 30014No change in holdings Nominee2 Y2: 4 th quarter 150 16Reported shares decreased (300 to 150): Average cost of shares: $3200/300 = $10.67; 150 shs @$10.67/sh = $1601 A djustedestimatedbasis: $3200–1601 = $1599 $1600 aggregate adjusted estimated basis / 150 shares = $10.67 per share final estimated basis 175 shares surrendered x $10.66 per share final estimated basis = $1867 deemed basis in surrendered shares$1867 June 20, 20119032011–25 I.R.B. Y1: 1 st quarter No 13F filed 8 Y1: 2 nd quarter No 13F filed 10 Y1: 3 rd quarter 75 11I nitialestimatedbasis: 75 shares reported x $11 vol wtd avg closing price per share = $8 25 Y1: 4 th quarter 75 12No change in holdings Y2: 1 st quarter No 13F filed 10No change in holdings Y2: 2 nd quarter 10012Reported shares increased (75to100): +25 shs @$12/sh = $300 A djustedestimatedbasis: $825+300 = $1 125 Y2: 3 rd quarter 135 14Reported shares increased (100 to 135): +35 shs @$14/sh = $490 A djustedestimatedbasis: $1125+490 = 1 615 Nominee3 Y2: 4 th quarter 150 16Reported shares increased (135 to 150): +15 shs @$16/sh = $240 A djustedestimatedbasis: $1615+240 = 1 855 $1855 aggregate adjusted estimated basis / 150 shares = $12.37 per share final estimated basis 100 shares surrendered x $12.37 per share final estimated basis = $1237 deemed basis in surrendered shares$1237 2011–25 I.R.B.904June 20, 2011 Y1: 1 st quarter 50 8I nitialestimatedbasis: 50 shares reported x $8 vol wtd avg closing price per share = $4 00 Y1: 2 nd quarter 50 10No change in holdings Y1: 3 rd quarter 10011Reported shares increased (50to100): +50 shs @$11/sh = $550 A djustedestimatedbasis: $400+550 = $9 50 Y1: 4 th quarter No 13F filed 12No change in holdings Y2: 1 st quarter 10010No change in holdings Y2: 2 nd quarter 150 12Reported shares increased (100 to 150): +50 shs @$12/sh = $600 A djustedestimatedbasis: $950+600 = $1 550 Y2: 3 rd quarter 20014Reported shares increased (150 to 200): +50 shs @$14/sh = $700 A djustedestimatedbasis: $1550+700 = $2 250 Nominee4 Y2: 4 th quarter No 13F filed 16No change in holdings $2250 aggregate adjusted estimated basis / 200 shares = $11.25 per share final estimated basis 100 shares surrendered x $11.25 per share final estimated basis = $1125 deemed basis in surrendered shares$1125 June 20, 20119052011–25 I.R.B. Y1: 1 st quarter No 13F filed $8 Y1: 2 nd quarter No 13F filed $10 Y1: 3 rd quarter No 13F filed $11 Y1: 4 th quarter 50 $12 I nitialestimatedbasis: 50 shares reported x $12 vol wtd avg closing price per share = $600 Y2: 1 st quarter 50 $10 No change in holdings Y2: 2 nd quarter No 13F filed $12 No change in holdings Y2: 3 rd quarter 200 $14 Reported shares increased (50to200): +150 shs @ $14/sh = $2100 A djustedestimatedbasis: $600 + 2100 = $2700 Nominee5 Y2: 4 th quarter 250 $16 Reported shares increased (200 to 250): +50 shs @ $16/sh = $800 A djustedestimatedbasis: $2700 + 800 = $3500 $3500 aggregate adjusted estimated basis / 250 shares = $14 per share final estimated basis 125 shares surrendered x $14 per share final estimated basis = $1750 deemed basis in surrendered shares$1750 Computation of Section 4.04 per share modeled basis (common shares): Nominee shareholderPer share final estimated basisSurrendered sharesDeemed basis in surrendered shares Nominee111.36 250 $2840 Nominee210.67 175 $1867 Nominee312.37100 $1237 Nominee4 11.25 100 $1125 Nominee5 14.00 125 $1750 Total deemed basis in surrendered shares $8819 Total number of surrendered shares 750 Section 4.04 per share modeled basis $11.76 Section 4.04 per share modeled basis x 75% = Allowable basis for each Section 4.04 Eligible Share$8.82 2011–25 I.R.B.906June 20, 2011 ALLOCATIONOFALLOWABLEBASIS TOSECTION4.04ELIGIBLESHARES Surrendering shareholder Allowable basis per share Surrendered Section 4.04 Eligible Shares Total allowable basis Nominee1 $8.82 200 $1764 Nominee2 $8.82 175 $1544 Nominee3 $8.82 00 Nominee4 $8.82 100 $882 Nominee5 $8.82 125 $1103 Notes: Nominee1. As noted above, the basis of 50 of the 250 shares surrendered by Nominee1 was reported by Employee Plan1 and so was not determined under the Section 4.04 model. Nominee3. As noted above, Acquiring did not satisfy the requirements to determine its basis in the shares surrendered by Nominee3 under this revenue procedure. Thus, there is no basis allowable under the model; however, Acquiring may establish its bases in those shares under such other method as agreed to by the Service. S UMMARY BASISDETERMINEDUNDERREVENUEPROCEDURE (SECFORM13FFILINGDATA) Surrendering shareholderApplicable method Allowable basisShares surrendered Total allowable basis under revenue procedure Preferred shares (100 outstanding): OfficerCannot be established under this revenue procedure TBD under procedures as agreed to by Service 20 $0 Employee Plan1Actual, as determined by Target’s records $5/share ($10 issue price, less $5 §301(c)(2) distribution) 30 $150 Employee Plan2Actual, as determined by Target’s records $36/share 50 $1800 Total basis in preferred shares $1950 Common shares (1000 outstanding): Employee Plan1As reported in survey, 4.01 $12/share 50 $600 Individual AAs reported in survey, 4.01 $13/share 10 $130 Individual B4.03 $9/share 10 $90 June 20, 20119072011–25 I.R.B. Individual C4.03 $9/share $12/share 25 25 $525 Individual DCannot be established under this revenue procedure TBD under procedures as agreed to by Service 50 $0 Individual E4.03 $12/share 50 $600 Director A4.03 $12/share 30 $360 Private Placement4.03 $12/share 50 $600 Nominee14.04 $8.82/share 200 $1764 Nominee24.04 $8.82/share 175 $1544 Nominee3Cannot be established under this revenue procedure TBD under procedures as agreed to by Service 100 $0 Nominee44.04 $8.82/share 100 $882 Nominee5 4.04 $8.82/share 125 $1103 Total basis in common shares $8,198 Total number of shares (preferred plus common) surrendered1100 Total basis in all shares $10,148 EXAMPLE, PART 2: D ETERMINATIONOFBASISUSING STOCKREGISTRY,BOOKSANDRECORDS, ANDSPRDATA Assume that the facts are the same as inExample 1, except that Acquiring uses data fromTarget’s SPRs instead of the SEC Form 13F filings. Further, Acquiring obtains 100 of the 109 SPRs thatwere published during the data collection period and that were available from the DTC as of the date of the transaction (the missing SPRs are not a material omission); the first SPR obtained by Acquiring that shows Target stock ownership was published in Week 4; the only other SPRs that show movement in Target holdings were published in Weeks 21, 34, 48, 60, 72, 80, and 104. (Note that, tosimplify the illustration, the SPR dates correspond to the SEC Form 13F filing dates in Part 1 of this example; thus, the numbers of shares reported (and their volume weighted average adjusted closing price) on the first SEC Form 13F filing correspond to those on the Week 4 SPR, the second SEC Form 13F filing numbers (and prices) to those in SPR Week 21, and so forth; where no SEC Form 13F was filed, the shares reported are zero; the number of shares surrendered are unchanged.) Thedetermination of the Section 4.04 modeled basis using SPR data is done as follows: 2011–25 I.R.B.908June 20, 2011 Surrendering shareholder Date of SPR Shares listed on SPR Vol wtd avg closing price for period* Modeled basis (Initial estimated basis adjusted each measuring date for increases and decreases in reported holdings) Deemed basis in surrendered shares Week 4308Initialestimatedbasis: 30 shares reported x $8 vol wtd avg closing price per share = $2 40 Week21 45 10Reported shares increased (30 to 45): 15 shs @$10/sh = $150 A djustedestimatedbasis: $240+$150 = $3 90 Week3412011Reported shares increased (45to120): 75 shs @$11/sh = $825 A djustedestimatedbasis: $390+825 = $1 215 Week4816012Reported shares increased (120 to 160): 40 shs @$12/sh = $480 A djustedestimatedbasis: $1215+480 = $1 695 Week6020010Reported shares increased (160 to 200): 40 shs @$10/sh = $400 A djustedestimatedbasis: $1695+400 = $2 095 Week72 150 12Reported shares decreased (200 to 150): Average cost of shares: $2095/200 = $10.48/sh; 50 shs @$10.48/sh = $524 A djustedestimatedbasis: $2095–524 = $1571 Week8020014Reported shares increased (150 to 200): +50 shs @$14/sh = $700 Adjusted estimated basis $1571+700 = $2 271 Nominee1 Week10420016No change in holdings $2271 aggregate adjusted estimated basis / 200 shares = $11.36 per share final estimated basis 250 shares surrendered x $11.36 per share final estimated basis = $2840 deemed basis in surrendered shares$2840 June 20, 20119092011–25 I.R.B. Week4Not listed on SPR 8 Week21 250 10Initialestimatedbasis: 250 shares reported x $10 vol wtd avg closing price per share = $2500 Week34 250 11No change in holdings Week4820012Reported shares decreased (250 to 200): Average cost of shares: $2500/250 = $10; 50 shs @$10/sh = $500 A djustedestimatedbasis: $2500–500 = $2000 Week6020010No change in holdings Week7230012Reported shares increased (200 to 300): +100 shs @$12/sh = $1200 A djustedestimatedbasis: $2000+1200 = $3200 Week8030014No change in holdings Nominee2 Week104 150 16Reported shares decreased (300 to 150): Average cost of shares: $3200/300 = $10.67; 150 shs @$10.67/sh = $1600 A djustedestimatedbasis: $3200–1601 = $1600 $1600 aggregate adjusted estimated basis / 150 shares = $10.67 per share final estimated basis 175 shares surrendered x $10.67 per share final estimated basis = $1866 deemed basis in surrendered shares$1867 2011–25 I.R.B.910June 20, 2011 Week4Not listed on SPR 8 Week21Not listed on SPR 10 Week34 75 11This is not Nominee3’s first measuring date because Nominee3 does not appear on Target SPRs continuously to last measuring date Week48 75 12 Week60Not listed on SPR 10 Week7210012Initialestimatedbasis: 100 shares reported x $12 vol wtd avg closing price per share = $1200 Week80 135 14Reported shares increased (100 to 135): +35 shs @$14/sh = $490 A djustedestimatedbasis: $1200+490 = 1690 Nominee3 Week104 150 16Reported shares increased (135 to 150): +15 shs @$16/sh = $240 A djustedestimatedbasis: $1690+240 = 1930 $1930 aggregate adjusted estimated basis / 150 shares = $12.87 per share final estimated basis 100 shares surrendered x $12.87 per share final estimated basis = $1287 deemed basis in surrendered shares$1287 June 20, 20119112011–25 I.R.B. Week4 50 8 Week21 50 10 Week3410011 Week48Not listed on SPR 12 Week6010010 Week72 150 12 Week8020014 Nominee4 Week104 Not listed on SPR 16No initial estimated basis can be determined (Nominee4 holds no shares on the SPR immediately preceding the transaction date) $0 aggregate adjusted estimated basis / 0 shares = $0 per share final estimated basis 100 shares surrendered x $0 per share final estimated basis = $0 deemed basis in surrendered shares$0 Week4Not listed on SPR $8 Week21Not listed on SPR $10 Week34Not listed on SPR $11 Week48 50 $12 Week60 50 $10 Week72Not listed on SPR $12 Week80200 $14 Initialestimatedbasis: 200 shares reported x $14 vol wtd avg closing price per share = $2800 Nominee5 Week104 250 $16 Reported shares increased (200 to 250): +50 shs @$16/sh = $800 A djustedestimatedbasis: $2800 + 800 = $3600 $3600 aggregate adjusted estimated basis / 250 shares = $14.40 per share final estimated basis 125 shares surrendered x $14.40 per share final estimated basis = $1800 deemed basis in surrendered shares$1800 2011–25 I.R.B.912June 20, 2011 ComputationofSection4.04persharemodeledbasis(commonshares): Nominee shareholderPer share final estimated basisSurrendered sharesDeemed basis in surrendered shares Nominee111.36 250 $2840 Nominee210.67 175 $1867 Nominee312.87100 $1287 Nominee40100 $0 Nominee5 14.40 125 $1800 Total deemed basis in surrendered shares $7794 Total number of surrendered shares 750 Section 4.04 per share modeled basis $10.39 Section 4.04 per share modeled basis x 92% (100/109, the SPR ratio) = Allowable basis for each Section 4.04 Eligible Share$9.56 ALLOCATIONOFALLOWABLEBASISTOSECTION4.04ELIGIBLESHARES Surrendering shareholder Allowable basis per share Surrendered Section 4.04 Eligible Shares Aggregate allowable basis Nominee1 $9.56 200 $1912 Nominee2 $9.56 175 $1673 Nominee3 $9.56 0 $0 Nominee4 $9.56 100 $956 Nominee5 $9.56 125 $1195 Notes: Nominee1. As noted above, the basis of 50 of the 250 shares surrendered by Nominee1 was reported by Employee Plan1 and so was not determined under the Section 4.04 model. Nominee3. As noted above, Acquiring did not satisfy the requirements to determine its basis in the shares surrendered by Nominee3 under this revenue procedure. Thus, there is no basis allowable under the model; however, Acquiring may establish its bases in those shares under such other method as agreed to by the Service. June 20, 20119132011–25 I.R.B. SUMMARY BASISDETERMINEDUNDERREVENUEPROCEDURE (SPRDATA) Surrendering shareholderApplicable method Allowable basisShares surrendered Total allowable basis under revenue procedure Preferred shares (100 outstanding): OfficerCannot be established under this revenue procedure TBD under procedures as agreed to by Service 20 $0 Employee Plan1Actual, as determined by Target’s records $5/share ($10 issue price reduced by $5 §301(c)(2) distribution) 30 $150 Employee Plan2Actual, as determined by Target’s records $36/share 50 $1800 Total basis in preferred shares $1950 Common shares (1000 outstanding): Employee Plan1As reported in survey, 4.01 $12/share 50 $600 Individual AAs reported in survey, 4.01 $13/share 10 $130 Individual B4.03 $9/share 10 $90 Individual C4.03 $9/share $12/share 25 25 $525 Individual DCannot be established under this revenue procedure TBD under procedures as agreed to by Service 50 $0 Individual E4.03 $12/share 50 $600 Director A4.03 $12/share 30 $360 Private Placement4.03 $12/share 50 $600 Nominee14.04 $9.56/share 200 $1912 Nominee24.04 $9.56/share 175 $1673 Nominee3Cannot be established under this revenue procedure TBD under procedures as agreed to by Service 100 $0 Nominee44.04 $9.56/share 100 $956 Nominee5 4.04 $9.56/share 125 $1195 Total basis in common shares $8,641 2011–25 I.R.B.914June 20, 2011 Total number of shares (preferred plus common) surrendered1100 Total basis in all shares $10,591 26 CFR 601.201: Rulings and determination letters. Rev. Proc. 2011–36 SECTION 1. PURPOSE AND SCOPE .01 This revenue procedure modifies section 6.07 of Rev. Proc. 2011–8, 2011–1 I.R.B. 237, to provide for a reduced user fee for applications for reinstatement of tax-exempt status filed by certain small organizations following automatic revoca- tion of their tax-exempt status under sec- tion 6033(j) of the Internal Revenue Code. .02 This revenue procedure is effective as of the date stated in section 5 and shall be effective only for applications made by certain small organizations that are post- marked no later than December 31, 2012. .03 The reduced user fee described in section 3 of this revenue procedure shall apply only to small organizations that nor- mally have annual gross receipts of not more than $50,000 in their most recently completed taxable year and that are other- wise eligible for the transitional relief de- scribed in Notice 2011–43, this Bulletin. .04 All organizations not eligible for the transitional relief described in Notice 2011–43 must refer to the user fee sched- ule in section 6.07 of Rev. Proc. 2011–8 or its successor. SECTION 2. BACKGROUND The tax-exempt status of an organiza- tionthatisdescribedinsection6033(a)(1) or section 6033(i) of the Code and fails to file a required annual return or notice for three consecutive years is automati- cally revoked as of the date set for the filing of the third annual return or no- tice. I.R.C. § 6033(j)(1). An organiza- tion that has had its tax-exempt status au- tomatically revoked and wishes to have itstax-exemptstatusreinstatedisrequired to apply for reinstatement of tax-exempt status, even if it was not originally re- quired to make such an application. I.R.C. § 6033(j)(2). Notice 2011–43 provides transitional relief for certain small organi- zations that have lost their tax-exempt sta- tus for failing to file required annual no- tices for taxable years beginning in 2007, 2008, and 2009. For more information about how to apply for transitional relief and reinstatement of tax-exempt status, see Notice 2011–43, this Bulletin. SECTION 3. USER FEE The amount of the user fee payable with respect to an application for reinstatement of tax-exempt status postmarked no later than December 31, 2012 by an organiza- tion eligible for the transitional relief de- scribed in Notice 2011–43 is $100. SECTION 4. EFFECT ON OTHER REVENUE PROCEDURES Section 6.07 of Rev. Proc. 2011–8 is modified only with respect to applications for reinstatement of tax-exempt status filed by organizations that qualify for the transi- tional relief described in Notice 2011–43. SECTION 5. EFFECTIVE DATE This revenue procedure is effective June 9, 2011. SECTION 6. DRAFTING INFORMATION The principal author of this revenue procedure is Matthew Giuliano of the Exempt Organizations, Tax Exempt and Government Entities Division. For further information regarding this revenue procedure, please contact the TE/GE Customer Service office at (877) 829–5500 (a toll-free call). June 20, 20119152011–25 I.R.B. Part IV. Items o fGeneralInterest Publication o fthe Auto-Revocat ion List Announcement 2011–35 The Internal Revenue Service is re- quired to pub lish and maintain a list of organization s that have had their federal tax-exempt st atus automatically revoked for failing to file an annual return or notice for three cons ecutive years pursuant to section 6033( j) of the Internal Revenue Code of 1986. As provided in Revenue Procedure 20 11–33, the Internal Revenue Service will p ublish this auto-revocation list on its web site atwww.irs.gov.The auto-revocat ion list will not appear in the Internal Reve nue Bulletin. 2011–25 I.R.B.916June 20, 2011 Definition of Terms Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the ef- fect: Amplifieddescribes a situation where no change is being made in a prior pub- lished position, but the prior position is be- ingextendedtoapplytoavariationofthe fact situation set forth therein. Thus, if an earlier ruling held that a principle ap- plied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare withmodi- fied,below). Clarifiedis used in those instances where the language in a prior ruling is be- ing made clear because the language has caused, or may cause, some confusion. It is not used where a position in a prior ruling is being changed. Distinguisheddescribes a situation where a ruling mentions a previously pub- lished ruling and points out an essential difference between them. Modifiedis used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a published position. (Compare withamplifiedandclarified, above). Obsoleteddescribes a previously pub- lished ruling that is not considered deter- minative with respect to future transac- tions. This term is most commonly used in a ruling that lists previously published rul- ings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted. Revokeddescribes situations where the position in the previously published ruling is not correct and the correct position is beingstatedinanewruling. Supersededdescribes a situation where the new ruling does nothing more than re- state the substance and situation of a previ- ously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same po- sition published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single rul- ing a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new rul- ing does more than restate the substance of a prior ruling, a combination of terms is used. For example,modifiedandsu- persededdescribes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously pub- lished ruling is first modified and then, as modified, is superseded. Supplementedis used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original rul- ing has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the ad- ditions, and supersedes all prior rulings in the series. Suspendedis used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study. Abbreviations The fol lowing abbreviations in current use and for merly used will appear in material publis hedintheBulletin. A—Individual. Acq.—A cquiescence. B—Individual. BE—Beneficiary. BK—Bank . B.T.A.—Board of Tax Appeals. C—Individual. C.B.—Cu mulative Bulletin. CFR—Code of Federal Regulations. CI—City. COOP—Coo perative. Ct.D.—Court Decision. CY—County. D—Decede nt. DC—Dummy Corporation. DE—Donee. Del. Order —Delegation Order. DISC—Domestic International Sales Corporation. DR—Donor. E—Estate. EE—Employee. E.O.—Executive Order. ER—Emp loyer. ERISA—Employee Retirement Income Security Act. EX—Executor. F—Fiduc iary. FC—Foreign Country. FICA—Federal Insurance Contributions Act. FISC—Fo reign International Sales Company. FPH—Foreign Personal Holding Company. F.R.—Federal Register. FUTA—Fed eral Unemployment Tax Act. FX—Foreign corporation. G.C.M.—Chief Counsel’s Memorandum. GE—Grante e. GP—General Partner. GR—Grantor. IC—Insura nce Company. I.R.B.—Internal Revenue Bulletin. LE—Lessee. LP—Limited Partner. LR—Lessor. M—Minor. Nonacq.—No nacquiescence. O—Organization. P—Parent Corporation. PHC—Persona l Holding Company. PO—Possession of the U.S. PR—Partner. PRS—Pa rtnership. PTE—Prohibited Transaction Exemption. Pub. L.—Public Law. REIT—Re al Estate Investment Trust. Rev. Proc.—Revenue Procedure. Rev. Rul.—Revenue Ruling. S—Subsi diary. S.P.R.—Statement of Procedural Rules. Stat.—Statutes at Large. T—Target Corporation. T.C.—Tax Court. T.D.—Treasury Decision. TFE—Trans feree. TFR—Transferor. T.I.R.—Technical Information Release. TP—Taxpay er. TR—Trust. TT—Trustee. U.S.C.—Uni ted States Code. X—Corporation. Y—Corporation. Z—Corporat ion. June 20, 2011i2011–25 I.R.B. Numerical Finding List 1 Bulletin 2011–1 through 2011–25 Announcements: 2011-1, 2011-2 I.R.B.304 2011-2, 2011-3 I.R.B.324 2011-3, 2011-3 I.R.B.324 2011-4, 2011-4 I.R.B.424 2011-5, 2011-4 I.R.B.430 2011-6, 2011-4 I.R.B.433 2011-7, 2011-5 I.R.B.446 2011-8, 2011-5 I.R.B.446 2011-9, 2011-7 I.R.B.499 2011-10, 2011-7 I.R.B.499 2011-11, 2011-7 I.R.B.500 2011-12, 2011-9 I.R.B.532 2011-13, 2011-8 I.R.B.525 2011-14, 2011-9 I.R.B.532 2011-15, 2011-8 I.R.B.526 2011-16, 2011-7 I.R.B.500 2011-17, 2011-9 I.R.B.532 2011-18, 2011-12 I.R.B.567 2011-19, 2011-11 I.R.B.553 2011-20, 2011-10 I.R.B.542 2011-21, 2011-12 I.R.B.567 2011-22, 2011-16 I.R.B.672 2011-23, 2011-12 I.R.B.568 2011-24, 2011-12 I.R.B.569 2011-25, 2011-14 I.R.B.608 2011-26, 2011-14 I.R.B.608 2011-27, 2011-15 I.R.B.651 2011-28, 2011-18 I.R.B.748 2011-29, 2011-18 I.R.B.748 2011-30, 2011-20 I.R.B.791 2011-31, 2011-22 I.R.B.836 2011-32, 2011-22 I.R.B.836 2011-34, 2011-24 I.R.B.877 2011-35, 2011-25 I.R.B.916 Notices: 2011-1, 2011-2 I.R.B.259 2011-2, 2011-2 I.R.B.260 2011-3, 2011-2 I.R.B.263 2011-4, 2011-2 I.R.B.282 2011-5, 2011-3 I.R.B.314 2011-6, 2011-3 I.R.B.315 2011-7, 2011-5 I.R.B.437 2011-8, 2011-8 I.R.B.503 2011-9, 2011-6 I.R.B.459 2011-10, 2011-6 I.R.B.463 2011-11, 2011-7 I.R.B.497 2011-12, 2011-8 I.R.B.514 2011-13, 2011-9 I.R.B.529 2011-14, 2011-11 I.R.B.544 2011-15, 2011-10 I.R.B.539 Notices— Continued: 2011-16, 2011-17 I.R.B.720 2011-17, 2011-10 I.R.B.540 2011-18, 2011-11 I.R.B.549 2011-19, 2011-11 I.R.B.550 2011-20, 2011-16 I.R.B.652 2011-21, 2011-19 I.R.B.761 2011-22, 2011-12 I.R.B.557 2011-23, 2011-13 I.R.B.588 2011-24, 2011-14 I.R.B.603 2011-25, 2011-14 I.R.B.604 2011-26, 2011-17 I.R.B.720 2011-27, 2011-17 I.R.B.723 2011-28, 2011-16 I.R.B.656 2011-29, 2011-16 I.R.B.663 2011-30, 2011-17 I.R.B.724 2011-31, 2011-17 I.R.B.724 2011-32, 2011-18 I.R.B.737 2011-33, 2011-19 I.R.B.761 2011-34, 2011-19 I.R.B.765 2011-35, 2011-25 I.R.B.879 2011-36, 2011-21 I.R.B.792 2011-37, 2011-20 I.R.B.785 2011-38, 2011-20 I.R.B.785 2011-39, 2011-20 I.R.B.786 2011-40, 2011-22 I.R.B.806 2011-41, 2011-21 I.R.B.798 2011-42, 2011-23 I.R.B.866 2011-43, 2011-25 I.R.B.882 2011-44, 2011-25 I.R.B.883 2011-45, 2011-25 I.R.B.886 2011-46, 2011-25 I.R.B.887 Proposed Regulations: REG-140108-08, 2011-13 I.R.B.591 REG-149335-08, 2011-6 I.R.B.468 REG-118761-09, 2011-21 I.R.B.803 REG-146097-09, 2011-8 I.R.B.516 REG-153338-09, 2011-14 I.R.B.606 REG-154159-09, 2011-19 I.R.B.777 REG-124018-10, 2011-2 I.R.B.301 REG-131151-10, 2011-8 I.R.B.519 REG-131947-10, 2011-8 I.R.B.521 REG-132724-10, 2011-7 I.R.B.498 REG-151687-10, 2011-23 I.R.B.867 Revenue Procedures: 2011-1, 2011-1 I.R.B.1 2011-2, 2011-1 I.R.B.90 2011-3, 2011-1 I.R.B.111 2011-4, 2011-1 I.R.B.123 2011-5, 2011-1 I.R.B.167 2011-6, 2011-1 I.R.B.195 2011-7, 2011-1 I.R.B.233 2011-8, 2011-1 I.R.B.237 2011-9, 2011-2 I.R.B.283 Revenue Procedures— Continued: 2011-10, 2011-2 I.R.B.294 2011-11, 2011-4 I.R.B.329 2011-12, 2011-2 I.R.B.297 2011-13, 2011-3 I.R.B.318 2011-14, 2011-4 I.R.B.330 2011-15, 2011-3 I.R.B.322 2011-16, 2011-5 I.R.B.440 2011-17, 2011-5 I.R.B.441 2011-18, 2011-5 I.R.B.443 2011-19, 2011-6 I.R.B.465 2011-20, 2011-11 I.R.B.551 2011-21, 2011-12 I.R.B.560 2011-22, 2011-18 I.R.B.737 2011-23, 2011-15 I.R.B.626 2011-24, 2011-20 I.R.B.787 2011-25, 2011-17 I.R.B.725 2011-26, 2011-16 I.R.B.664 2011-27, 2011-18 I.R.B.740 2011-28, 2011-18 I.R.B.743 2011-29, 2011-18 I.R.B.746 2011-30, 2011-21 I.R.B.802 2011-31, 2011-22 I.R.B.808 2011-32, 2010-22 I.R.B.835 2011-33, 2011-25 I.R.B.887 2011-34, 2011-24 I.R.B.875 2011-35, 2011-25 I.R.B.890 2011-36, 2011-25 I.R.B.915 Revenue Rulings: 2011-1, 2011-2 I.R.B.251 2011-2, 2011-2 I.R.B.256 2011-3, 2011-4 I.R.B.326 2011-4, 2011-6 I.R.B.448 2011-5, 2011-13 I.R.B.577 2011-6, 2011-10 I.R.B.537 2011-7, 2011-10 I.R.B.534 2011-8, 2011-12 I.R.B.554 2011-9, 2011-12 I.R.B.554 2011-10, 2011-14 I.R.B.597 2011-11, 2011-19 I.R.B.758 2011-13, 2011-23 I.R.B.841 Treasury Decisions: 9507, 2011-3 I.R.B.305 9508, 2011-7 I.R.B.495 9509, 2011-6 I.R.B.450 9510, 2011-6 I.R.B.453 9511, 2011-6 I.R.B.455 9512, 2011-7 I.R.B.473 9513, 2011-8 I.R.B.501 9514, 2011-9 I.R.B.527 9515, 2011-14 I.R.B.599 9516, 2011-13 I.R.B.575 9517, 2011-15 I.R.B.610 9518, 2011-17 I.R.B.710 1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2010–27 through 2010–52 is in Internal Revenue Bulletin 2010–52, dated December 27, 2010. 2011–25 I.R.B.iiJune 20, 2011 Treasury Decisions— Continued: 9519, 2011-18 I.R.B.734 9520, 2011-18 I.R.B.730 9521, 2011-19 I.R.B.750 9522, 2011-20 I.R.B.780 9523, 2011-20 I.R.B.781 9524, 2011-23 I.R.B.843 9525, 2011-23 I.R.B.837 9526, 2011-24 I.R.B.869 June 20, 2011iii2011–25 I.R.B. Finding List of Current Actions on Previously Published Items 1 Bulletin 2011–1 through 2011–25 Announcements: 85-88 Obsoleted by Rev. Proc. 2011-10, 2011-2 I.R.B.294 2008-11 Modified by Ann. 2011-6, 2011-4 I.R.B.433 2009-62 Obsoleted by Rev. Proc. 2011-10, 2011-2 I.R.B.294 Notices: 2006-87 Superseded by Notice 2011-8, 2011-8 I.R.B.503 2007-25 Superseded by Notice 2011-8, 2011-8 I.R.B.503 2007-77 Superseded by Notice 2011-8, 2011-8 I.R.B.503 2008-107 Superseded by Notice 2011-8, 2011-8 I.R.B.503 2009-4 Obsoleted by Rev. Proc. 2011-35, 2011-25 I.R.B.890 2009-23 Modified by Notice 2011-24, 2011-14 I.R.B.603 2009-24 Modified by Notice 2011-24, 2011-14 I.R.B.603 2009-83 Modified by Notice 2011-25, 2011-14 I.R.B.604 2009-93 Modified by Notice 2011-38, 2011-20 I.R.B.785 2010-27 Superseded by Notice 2011-8, 2011-8 I.R.B.503 2010-32 Modified and superseded by Notice 2011-37, 2011-20 I.R.B.785 Notices— Continued: 2010-59 Modified by Notice 2011-5, 2011-3 I.R.B.314 2010-60 Supplemented and superseded by Notice 2011-34, 2011-19 I.R.B.765 2010-71 Modified and superseded by Notice 2011-9, 2011-6 I.R.B.459 2010-79 Clarified and modified by Notice 2011-4, 2011-2 I.R.B.282 2011-9 Modified by Notice 2011-46, 2011-25 I.R.B.887 Proposed Regulations: REG-132554-08 Corrected by Ann. 2011-11, 2011-7 I.R.B.500 REG-149335-08 Hearing scheduled by Ann. 2011-26, 2011-14 I.R.B.608 REG-146097-09 Hearing rescheduled by Ann. 2011-30, 2011-20 I.R.B.791 Revenue Procedures: 72-50 Modified and superseded by Rev. Proc. 2011-10, 2011-2 I.R.B.294 76-34 Modified and superseded by Rev. Proc. 2011-10, 2011-2 I.R.B.294 81-70 Obsoleted by Rev. Proc. 2011-35, 2011-25 I.R.B.890 82-39 Modified and superseded by Rev. Proc. 2011-33, 2011-25 I.R.B.887 83-23 Modified and superseded by Rev. Proc. 2011-15, 2011-3 I.R.B.322 94-17 Modified and superseded by Rev. Proc. 2011-15, 2011-3 I.R.B.322 97-27 Clarified and modified by Rev. Proc. 2011-14, 2011-4 I.R.B.330 Revenue Procedures— Continued: 2001-10 Modified by Rev. Proc. 2011-14, 2011-4 I.R.B.330 2002-28 Modified by Rev. Proc. 2011-14, 2011-4 I.R.B.330 2003-21 Modified and superseded by Rev. Proc. 2011-15, 2011-3 I.R.B.322 2004-34 Modified by Rev. Proc. 2011-14, 2011-4 I.R.B.330 Modified and clarified by Rev. Proc. 2011-18, 2011-5 I.R.B.443 2006-44 Modified by Ann. 2011-6, 2011-4 I.R.B.433 2006-56 Modified by Rev. Proc. 2011-14, 2011-4 I.R.B.330 2008-52 Modified by Notice 2011-4, 2011-2 I.R.B.282 Rev. Proc. 2011-17, 2011-5 I.R.B.441 Superseded in part by Rev. Proc. 2011-14, 2011-4 I.R.B.330 2009-32 Modified and superseded by Rev. Proc. 2011-33, 2011-25 I.R.B.887 2009-39 Superseded in part by Rev. Proc. 2011-14, 2011-4 I.R.B.330 2009-44 Modified by Ann. 2011-6, 2011-4 I.R.B.433 2010-1 Superseded by Rev. Proc. 2011-1, 2011-1 I.R.B.1 2010-2 Superseded by Rev. Proc. 2011-2, 2011-1 I.R.B.90 2010-3 Superseded by Rev. Proc. 2011-3, 2011-1 I.R.B.111 2010-4 Superseded by Rev. Proc. 2011-4, 2011-1 I.R.B.123 2010-5 Superseded by Rev. Proc. 2011-5, 2011-1 I.R.B.167 1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2010–27 through 2010–52 is in Internal Revenue Bulletin 2010–52, dated December 27, 2010. 2011–25 I.R.B.ivJune 20, 2011 Revenue Procedures— Continued: 2010-6 Superseded by Rev. Proc. 2011-6, 2011-1 I.R.B.195 2010-7 Superseded by Rev. Proc. 2011-7, 2011-1 I.R.B.233 2010-8 Superseded by Rev. Proc. 2011-8, 2011-1 I.R.B.237 2010-9 Superseded by Rev. Proc. 2011-9, 2011-2 I.R.B.283 2010-15 Updated by Rev. Proc. 2011-13, 2011-3 I.R.B.318 2010-18 Amplified and modified by Rev. Proc. 2011-21, 2011-12 I.R.B.560 2010-25 Obsoleted in part by Rev. Proc. 2011-23, 2011-15 I.R.B.626 2011-1 Corrected by Ann. 2011-7, 2011-5 I.R.B.446 2011-8 Corrected by Ann. 2011-8, 2011-5 I.R.B.446 Modified by Rev. Proc. 2011-36, 2011-25 I.R.B.915 2011-11 Corrected by Ann. 2011-9, 2011-7 I.R.B.499 2011-14 Modified by Rev. Proc. 2011-27, 2011-18 I.R.B.740 Rev. Proc. 2011-28, 2011-18 I.R.B.743 Modified and amplified by Rev. Proc. 2011-22, 2011-18 I.R.B.737 2011-21 Amplified by Rev. Proc. 2011-26, 2011-16 I.R.B.664 2011-24 Modified by Notice 2011-46, 2011-25 I.R.B.887 Revenue Rulings: 81-100 Modified by Rev. Rul. 2011-1, 2011-2 I.R.B.251 2004-67 Modified by Rev. Rul. 2011-1, 2011-2 I.R.B.251 Revenue Rulings— Continued: 2008-40 Modified by Rev. Rul. 2011-1, 2011-2 I.R.B.251 2011-3 Corrected by Ann. 2011-16, 2011-7 I.R.B.500 Treasury Decisions: 9391 Corrected by Ann. 2011-12, 2011-9 I.R.B.532 9505 Corrected by Ann. 2011-10, 2011-7 I.R.B.499 June 20, 2011v2011–25 I.R.B. 2011–25 I.R.B.June 20, 2011 June 20, 20112011–25 I.R.B. INTERNAL REVENUE BULLETIN The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superin- tendent of Documents when their subscriptions must be renewed. CUMULATIVE BULLETINS The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are sold on a single copy basis andare notincluded as part of the subscription to the Internal Revenue Bulletin. Subscribers to the weekly Bulletin are notified when copies of the Cumulative Bulletin are available. 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