Internal Revenue Bulletin 2019-18 (PDF rendition): IRS Revenue Procedures

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

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.
Finding Lists begin on page ii.
HIGHLIGHTS
OF THIS ISSUE
Bulletin No. 2019–18
April 29, 2019
INCOME TAX
T.D. 9854, page 1075.
A bond is an arbitrage bond under §148 if the bond’s pro-
ceeds are used to purchase certain investment property
with a yield higher than the yield on the issue. Investment
property includes not only securities but also, among other
things, “investment-type property.” Investment-type property
is generally defined as any property that is held principally as
a passive vehicle for the production of income. The final reg-
ulation amends this definition to clarify that real or tangible
personal property purchased with proceeds of tax-exempt
bonds is not investment-type property if that property is used
in furtherance of the public purposes for which the tax-ex-
empt bonds are issued.
NOT. 2019-28, page 1077.
This notice publishes the reference price under § 45K(d)(2)(C)
of the Internal Revenue Code for calendar year 2018. The
reference price applies in determining the amount of the
enhanced oil recovery credit under § 43, the marginal well
production credit under § 45I, and the percentage depletion
in case of oil produced from marginal properties under §
613A.
REV. PROC. 2019-18, page 1077.
This revenue procedure provides a safe harbor for profes-
sional sports teams to treat certain personnel contacts and
rights to draft players as having a zero value for the pur-
pose of determining gain or loss to be recognized for feder-
al income tax purposes on the trade of personnel contracts
or draft picks.

April 29, 2019 Bulletin No. 2019–18
The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing of-
ficial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings 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.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and 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 contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

Bulletin No. 2019–18 1075 April 29, 2019
Part I.
26 CFR 1.148-1: Definitions and elections
T.D. 9854
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Arbitrage Investment
Restrictions on Tax-Exempt
Bonds
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final Regulations.
SUMMARY: This document contains
final regulations regarding the arbitrage
investment restrictions under section 148
of the Internal Revenue Code (Code) ap-
plicable to tax-exempt bonds and other
tax-advantaged bonds issued by State and
local governments. The final regulations
clarify existing regulations regarding the
definition of “investment-type property”
by expressly providing an exception for
investment in capital projects that are
used in furtherance of the public purpos-
es of the bonds. The final regulations af-
fect State and local governmental issuers
of these bonds and potential investors in
capital projects financed with these bonds.
DATES: Effective Date: These final regu-
lations are effective April 9, 2019.
Applicability Date: For the date of appli-
cability, see §1.148-11(n).
FOR FURTHER INFORMATION CON-
TACT: Lewis Bell at (202) 317-6980 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments
to 26 CFR part 1 under section 148 of the
Code. For interest on State or local bonds
to be excluded from the gross income of
the bondholder under section 103, the
bonds must satisfy various eligibility re-
quirements, including a requirement that
the bonds not be arbitrage bonds as de-
fined in section 148. Section 148(a) gen-
erally defines an “arbitrage bond” as any
bond issued as part of an issue any portion
of the proceeds of which are reasonably
expected to be used or are intentionally
used to acquire “higher yielding invest-
ments” or to replace funds so used. Sec-
tion 148(b)(1) defines the term “higher
yielding investments” as any “investment
property” that produces a yield over the
term of the issue that is materially high-
er than the yield on the issue. Section
148(b)(2) defines the term “investment
property” to include any security (within
the meaning of section 165(g)(2)(A) or
(B)), any obligation, any annuity contract,
certain residential rental property, and
any “investment-type property.” Section
1.148-1(e)(1) of the Income Tax Regula-
tions defines “investment-type property”
to include any property (other than secu-
rities, obligations, annuity contracts, and
covered residential rental property for
family units under section 148(b)(2)(A),
(B), (C), and (E)) “that is held principally
as a passive vehicle for the production of
income.” Section 1.148-1(e)(1) provides
that, for this purpose, the production of
income includes any benefit based on the
time value of money.
Institutional investors have suggested
clarification of the scope of the regulatory
definition of investment-type property un-
der §1.148-1(e)(1) to ensure that the defi-
nition does not impede greater investment
in public infrastructure.
The legislative history to the Tax Re-
form Act of 1986, Public Law 99-514,
100 Stat. 2085, indicates that Congress
intended to limit the scope of the arbitrage
restriction on investment-type property
so that it did not extend to investments in
capital projects in furtherance of the pub-
lic purposes of the bonds. In this regard,
the House Report to the Tax Reform Act
of 1986 included the following statement
about the intended scope of the definition
of investment-type property: “The restric-
tion would not apply, however, to real or
tangible personal property acquired with
bond proceeds for reasons other than in-
vestment (e.g., courthouse facilities fi-
nanced with bond proceeds).” H.R. Rep.
No. 99-426, at 552 (1985), 1986-3 (vol. 2)
C.B. 457; see also S. Rep. No. 99-313, at
844 (1986), 1986-3 (vol. 3) C.B. 682 (con-
taining a statement substantially identical
to that in the House report); H.R. Rep.
No. 99-841, at II-747 (1986) (Conf. Rep.),
1986-3 (vol. 4) C.B. 608 (stating that the
conference agreement follows the House
bill and the Senate amendment on this re-
striction).
To clarify the scope of the invest-
ment-type property definition consistent
with Congressional intent reflected in the
legislative history, in a notice of proposed
rulemaking published in the Federal Reg-
ister (83 FR 27302; REG-106977-18) on
June 12, 2018 (the Proposed Regulations),
the Department of the Treasury (Treasury
Department) and the IRS proposed an ex-
ception to the definition of investment-type
property for certain capital projects that
further the public purposes for which the
tax-exempt bonds were issued.
The Treasury Department and the IRS
solicited requests for a public hearing
and written comments on the Proposed
Regulations. No public hearing was held
because no request for a hearing was re-
ceived. The Treasury Department and the
IRS received four public comments favor-
ing finalization of the Proposed Regula-
tions to allow greater capital investment
in public infrastructure and did not receive
any unfavorable public comments. Ac-
cordingly, the Treasury Department and
the IRS adopt the Proposed Regulations,
without substantive change, as final regu-
lations by this Treasury Decision.
Explanation of Provisions
1. §1.148-1(e)(4): Exception to Invest-
ment-Type Property Definition for Certain
Capital Projects
Section 1.148-1(e)(4) of the Final Reg-
ulations provides that investment-type
property does not include real property
or tangible personal property (for exam-
ple, land, buildings, and equipment) that
is used in furtherance of the public pur-

April 29, 2019 1076 Bulletin No. 2019–18
poses for which the tax-exempt bonds
are issued. For example, investment-type
property does not include a courthouse
financed with governmental bonds or an
eligible exempt facility under section 142,
such as a public road, financed with pri-
vate activity bonds.
2. Applicability Dates and Reliance
The amendments to the definition of in-
vestment-type property in the Final Regu-
lations apply to bonds sold on or after July
8, 2019. Issuers may apply the provisions
of the Final Regulations to bonds that are
sold before July 8, 2019.
Special Analyses
This regulation is not subject to re-
view under section 6(b) of Executive Or-
der 12866 pursuant to the Memorandum
of Agreement (April 11, 2018) between
the Treasury Department and the Office
of Management and Budget regarding
review of tax regulations. Because this
regulation does not impose a collection
of information on small entities, the Reg-
ulatory Flexibility Act (5 U.S.C. chapter
6) does not apply. Pursuant to section
7805(f) of the Code, the notice of pro-
posed rulemaking preceding this regula-
tion was submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on its impact
on small business, and no comments
were received.
Drafting Information
The principal authors of these reg-
ulations are Lewis Bell and Spence
Hanemann of the Office of Associate
Chief Counsel (Financial Institutions and
Products). However, other personnel from
the Treasury Department and the IRS par-
ticipated in their development.
* * * *
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amend-
ed as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.148-0(c) is amended
by adding entries for §§1.148-1(e)(4) and
1.148-11(n) to read as follows:
§1.148-0 Scope and table of contents.
* * * * *
(c) * * *
§1.148-1 Definitions and elections.
* * * * *
(e) * * *
(4) Exception for certain capital proj-
ects.
* * * * *
§1.148-11 Effective/applicability dates.
* * * * *
(n) Investment-type property.
Par. 3. Section 1.148-1 is amended by:
1. Revising the first sentence of para-
graph (e)(1).
2. Adding paragraph (e)(4).
The revision and addition read as fol-
lows:
§1.148-1 Definitions and elections.
* * * * *
(e) Investment-type property--(1) In
general. Except as otherwise provided in
this paragraph (e), investment-type prop-
erty includes any property, other than
property described in section 148(b)(2)
(A), (B), (C), or (E), that is held principal-
ly as a passive vehicle for the production
of income. * * *
* * * * *
(4) Exception for certain capital proj-
ects. Investment-type property does not
include real property or tangible person-
al property (for example, land, buildings,
and equipment) that is used in further-
ance of the public purposes for which
the tax-exempt bonds are issued. For
example, investment-type property does
not include a courthouse financed with
governmental bonds or an eligible exempt
facility under section 142, such as a public
road, financed with private activity bonds.
* * * * *
Par. 4. Section 1.148-11 is amended by
adding paragraph (n) to read as follows:
§1.148-11 Effective/applicability dates.
* * * * *
(n) Investment-type property. Section
1.148-1(e)(1) and (4) apply to bonds sold
on or after July 8, 2019
. An issuer may
apply the provisions of §1.148-1(e)(1) and
(4) to bonds sold before July 8, 2019.
Kirsten Wielobob,
Deputy Commissioner for Services
and Enforcement.
Approved: November 16, 2018.
David J. Kautter,
Assistant Secretary of the Treasury
(Tax Policy).
(Filed by the Office of the Federal Register on April
8, 2019, 8:45 a.m., and published in the issue of the
Federal Register for April 9, 2019, 84 F.R. 14006)

Bulletin No. 2019–181077 April 29, 2019
Part III.
Notice 2019-28
SECTION 1. PURPOSE
This notice publishes the reference
price under § 45K(d)(2)(C) of the In-
ternal Revenue Code for calendar year
2018. The credit period for the noncon-
ventional source production credit under
§ 45K ended on December 31, 2013, for
facilities producing coke or coke gas (oth-
er than from petroleum based products).
However, the reference price continues to
apply in determining the amount of the en-
hanced oil recovery credit under § 43, the
marginal well production credit for quali-
fied crude oil production under § 45I, and
the percentage depletion in case of oil and
natural gas produced from marginal prop-
erties under § 613A.
SECTION 2. BACKGROUND
Section 45K(d)(2)(C) provides that the
term “reference price” means, with respect
to a calendar year, the Secretary’s estimate
of the annual average wellhead price per
barrel for all domestic crude oil the price
of which is not subject to regulation by the
United States.
Section 43(a) provides that, for pur-
poses of § 38, the enhanced oil recovery
credit for any taxable year is an amount
equal to 15 percent of the taxpayer’s qual-
ified enhanced oil recovery costs for such
taxable year.
Section 43(b)(1) provides that the
amount of enhanced oil recovery credit
for any taxable year shall be reduced by
an amount which bears the same ratio to
the amount of such credit (determined
without regard to this paragraph) as - (A)
the amount by which the reference price
for the calendar year preceding the cal-
endar year in which the taxable year be-
gins exceeds $28, bears to (B) $6. Section
43(b)(2) provides that the term “reference
price” means, with respect to any calendar
year, the reference price determined for
such calendar year under § 45K(d)(2)(C).
Section 45I(a) provides that, for pur-
poses of § 38, the marginal well pro-
duction credit for any taxable year is an
amount equal to the product of the credit
amount and the qualified crude oil produc-
tion and the qualified natural gas produc-
tion which is attributable to the taxpayer.
Section 45I(b)(1) provides that for
crude oil, the amount of the marginal well
production credit is $3 per barrel of quali-
fied crude oil production.
Section 45I(b)(2) provides that the $3
amount under § 45I(b)(1) shall each be re-
duced (but not below zero) by an amount
which bears the same ratio to such amount
(determined without regard to this para-
graph) as – (i) the excess (if any) of the
applicable reference price over $15, bears
to (ii) $3. The applicable reference price
for a taxable year is the reference price of
the calendar year preceding the calendar
year in which the taxable year begins.
Section 45I(c) provides that the term
reference price means, with respect to any
calendar year – (i) in the case of qualified
crude oil production, the reference price
determined under § 45K(d)(2)(C).
Section 613A(c)(6)(A) provides, in
general, the allowance for depletion un-
der § 611 shall be computed in accor-
dance with § 613 with respect to - (i)
so much of the taxpayer’s average daily
marginal production of domestic crude
oil as does not exceed the taxpayer’s de-
pletable oil quantity (determined without
regard to paragraph (3)(A)(ii)), and (ii)
so much of the taxpayer’s average daily
marginal production of domestic natural
gas as does not exceed the taxpayer’s de-
pletable natural gas quantity (determined
without regard to paragraph (3)(A)(ii)),
and the applicable percentage shall be
deemed to be specified in subsection (b)
of § 613 for purposes of subsection (a) of
that section.
Section 613A(c)(6)(C) provides that
the term “applicable percentage” means
the percentage (not greater than 25 per-
cent) equal to the sum of - (i) 15 percent,
plus (ii) 1 percentage point for each whole
dollar by which $20 exceeds the refer-
ence price for crude oil for the calendar
year preceding the calendar year in which
the taxable year begins. For purposes of
this paragraph, the term “reference price”
means, with respect to any calendar year,
the reference price determined for such
calendar year under § 45K(d)(2)(C).
SECTION 3. REFERENCE PRICE
The reference price under § 45K(d)(2)
(C) for calendar year 2018 is $61.41.
SECTION 4. DRAFTING
INFORMATION
The principal author of this notice
is Martha M. Garcia of the Office of As-
sociate Chief Counsel (Passthroughs &
Special Industries). For further informa-
tion regarding this notice, contact Ms.
Garcia on (202) 317-6853 (not a toll-free
number).

26 CFR 601.601: Rules and regulations
(Also Part 1, §§ 61, 165, 167, 197, 1001, 1011,
1012, 1231, 1245; 1.167(a)-3, 1.167(a)-8.)
Rev. Proc. 2019-18
SECTION 1. PURPOSE
This revenue procedure provides a safe
harbor for a professional sports team to
treat certain personnel contracts and rights
to draft players as having a zero value
for determining gain or loss to be recog-
nized for federal income tax purposes on
the trade of a personnel contract or a draft
pick that is within the scope of this reve-
nue procedure.
SECTION 2. BACKGROUND
.01 Applicable law.
(1) Section 61(a)(3) of the Internal
Revenue Code provides that, except as
otherwise provided by law, gross income
means all income from whatever source
derived, including gains from dealings in
property.
(2) Section 165(a) allows a deduction
for any loss sustained during the taxable
year that is not compensated for by insur-
ance or otherwise. Under § 165(b), the ba-
sis for determining the amount of the de-
duction for any loss is the adjusted basis
provided in § 1011.
(3) Section 167(a) allows as a depre-
ciation deduction a reasonable allowance
for the exhaustion, wear and tear, and ob-

April 29, 2019 1078 Bulletin No. 2019–18
solescence of property used in a trade or
business, or of property held for the pro-
duction of income. Section 1.167(a)-3(a)
of the Income Tax Regulations provides
that if an intangible asset is known from
experience or other factors to be of use
in the business or in the production of
income for only a limited period of time,
the length of which can be estimated with
reasonable accuracy, such an intangible
asset may be the subject of a depreciation
allowance. However, see §§ 167(f), 197,
1.167(a)-14, and 1.197-2 for amortization
of goodwill and certain other intangibles
acquired after August 10, 1993.
(4) Section 1001(a) provides that gain
from the sale or other disposition of prop-
erty is the excess of the amount realized
on the disposition over the adjusted basis
provided in § 1011 for determining gain,
and loss is the excess of the adjusted ba-
sis over the amount realized. Under §
1001(b), the amount realized from the sale
or other disposition of property is the sum
of any money received, plus the fair mar-
ket value of the property (other than mon-
ey) received, with certain adjustments.
Section 1001(c) provides that except as
otherwise provided, the entire amount of
gain or loss determined on a sale or ex-
change of property is recognized.
(5) Section 1012 generally provides
that the basis of property is the cost of
such property, with certain exceptions.
(6) Section 1231 provides rules for de-
termining whether gain or loss on sales or
exchanges of property used in a trade or
business is capital or ordinary.
(7) Section 1245(a)(1) generally pro-
vides that, upon the disposition of section
1245 property, the amount by which the
lower of (A) the recomputed basis of the
property, or (B) the amount realized in the
case of a sale, exchange, or involuntary
conversion, or the fair market value of the
property in the case of any other disposi-
tion, exceeds the adjusted basis of such
property is treated as ordinary income.
Such gain is recognized notwithstanding
any other provision of Subtitle A of the
Code.
.02 Trades of player contracts,
staff-member contracts, and draft picks.
(1) Professional sports teams (teams)
generally engage the services of players
and staff members, such as managers and
coaches, through the use of employment
contracts that provide agreed upon com-
pensation to the employed individual in
return for future performance of speci-
fied services for a defined period of time,
usually longer than one year (personnel
contract). During the term of a personnel
contract, the value of that contract may
fluctuate based on a variety of factors, in-
cluding player performance, the changing
needs of the team, the changing needs of
other teams, a player’s effect on fan at-
tendance, and the number of years until a
player becomes a free agent and is able to
sign a contract to play for any team in a
league. Other considerations affecting the
value of a player contract include the size
of the team’s market (whether a smaller
city or a major urban population), the cost
of player development, and the impact
of injuries and slumps on player perfor-
mance. Players may underperform or out-
perform the expectations of their teams,
and the performance of other players on
the team, or future prospects, may cause
the team to develop a different view as to
the value of the player and the contract.
In addition to these unique factors, the
market in which personnel contracts are
traded is small and private. From time to
time, teams trade one or more personnel
contracts to other teams in exchange for
one or more personnel contracts for the
services of other personnel. Trades may
include the transfer of a right to draft play-
ers in the league’s player draft (draft pick)
or a cash payment. Some trades involve
only draft picks.
(2) In general, a team does not agree to
a trade of one personnel contract (or set
of personnel contracts) or a draft pick (or
set of draft picks) unless the team believes
that it is receiving something of equal or
greater value to what it is giving up in
light of the team’s circumstances and pri-
orities at the time. The exact value that a
team places on the future performance of
services by the personnel it is receiving
in a trade is highly subjective and may be
influenced by the team’s specific needs at
the time rather than by whether the com-
pensation provided for under the contract
may be viewed as at market value, over
market value, or under market value. In
addition, for the reasons stated above,
judgments as to whether the amount of
compensation agreed to in the personnel
contract is at, above, or below what a will-
ing third-party would pay at a particular
point in time to the personnel member for
services to be performed in the future are
highly subjective. Indeed, these judgments
may fluctuate often depending on the per-
formance of a player or staff member and
the circumstances under which each indi-
vidual team in a league is operating. The
subjective needs of each team will differ
for particular players at different points in
time throughout a league’s season and is
highly dependent on the particular needs
of each team. Financial considerations, in-
cluding leagues rules and regulations, and
the market in which a personnel contract
may be traded may impact the valuation
of a personnel contract. As a result, al-
though each team may believe it is receiv-
ing something of equal or greater value to
what it is giving up in a trade of personnel
contracts or draft picks in light of its par-
ticular circumstances and priorities at the
time, it is unusually difficult to assign an
objective monetary value to the personnel
contracts or draft picks.
(3) In order to avoid highly subjective,
complex, lengthy, and expensive disputes
between professional sports teams and
the IRS regarding the value of personnel
contracts and draft picks for the purpose
of determining the proper amount of gain
or loss to be recognized for federal income
tax purposes on the trade of one or more
personnel contracts or draft picks, this
revenue procedure provides a safe harbor
permitting teams to treat the value of trad-
ed personnel contracts and draft picks as
zero if certain conditions are satisfied.
SECTION 3. SCOPE
This revenue procedure applies to
trades of personnel contracts and draft
picks by professional sports teams (trades)
that meet all of the following require-
ments:
.01 All parties to trade must use safe
harbor. The parties to the trade that are
subject to federal income tax in the United
States must treat the trade on their respec-
tive federal income tax returns consistent
with this revenue procedure;
.02 Only personnel contracts, draft
picks, and cash. Each team that is a par-
ty to the trade must transfer and receive
a personnel contract or draft pick. In the
trade, no team may transfer property oth-

Bulletin No. 2019–18 1079 April 29, 2019
er than a personnel contract, draft pick, or
cash;
.03 No amortizable section 197 intan-
gibles. In the trade, no personnel contract
or draft pick may be an amortizable sec-
tion 197 intangible; and
.04 Accounting treatment. The financial
statements of teams that are parties to the
trade must not reflect assets or liabilities
resulting from the trade other than cash.
SECTION 4. SAFE HARBOR
.01 In general. This revenue procedure
provides a safe harbor for determining the
amount of gain or loss to be recognized
on a trade by a professional sports team
of personnel contracts or draft picks. For
a team making a trade of a personnel con-
tract or draft pick within the scope of this
revenue procedure, the value of the per-
sonnel contract or draft pick is treated as
zero for purposes of this section 4.
.02 Application of safe harbor.
(1) No gain or loss on a trade. Except
as provided in paragraph (5), below, for a
professional sports team making a trade of
a personnel contract or draft pick within
the scope of this revenue procedure, be-
cause the contract value of each personnel
contract or draft pick is treated as zero for
purposes of this revenue procedure, no
gain or loss is recognized on the trade for
federal income tax purposes.
(2) Receipt of cash in a trade, com-
puting amount realized. Under § 1001, a
team receiving cash in a trade includes in
amount realized the cash the team receives
from another team in the trade. Under this
revenue procedure, because the contract
value of each personnel contract or draft
pick is treated as zero for purposes of this
revenue procedure, a team that does not
receive cash in a trade has an amount re-
alized of zero.
(3) Providing cash in a trade, comput-
ing basis. Under § 1012, a team providing
cash to another team in a trade has a basis
in the personnel contract or draft pick re-
ceived equal to the cash the team provides
in the trade. Under this revenue procedure,
because the contract value of each person-
nel contract or draft pick is treated as zero
for purposes of this revenue procedure, a
team that provides no cash in the trade has
a zero basis in the personnel contract or
draft pick received in the trade.
(4) Providing cash in a trade for mul-
tiple personnel contracts or draft picks,
allocating basis. A team providing cash to
another team in a trade for two or more
personnel contracts or draft picks must al-
locate its basis to each personnel contract
or draft pick received from such team in
the trade by dividing the basis by the num-
ber of personnel contracts or draft picks
received from the team.
(5) Trades of personnel contracts or
draft picks, determining gain or loss.
Under §§ 1001 and 1.167(a)-8, a team
making a trade of a personnel contract or
draft pick recognizes gain to the extent
of the excess of the amount realized un-
der section 4.02(2), over the unrecovered
basis (if any) of the personnel contract or
draft pick traded, subject to the rules of
§§ 1231 and 1245. Under §§ 1001, 165,
and 1.167(a)-8, a team making a trade of a
personnel contract or draft pick recogniz-
es a loss to the extent of the excess of the
unrecovered basis of the personnel con-
tract or draft pick traded, over the amount
realized under section 4.02(2), subject to
the rules of § 1231. A team’s unrecovered
basis in a personnel contract or draft pick
is the team’s basis in such contract or draft
pick as determined under § 167(c).
.03 Limited applicability. This reve-
nue procedure applies only to trades of
personnel contracts or draft picks among
teams in professional sports leagues and
has no application to transactions not de-
scribed in this revenue procedure. In ad-
dition, this revenue procedure does not
apply to trades of a team for another team
or a sale of a team.
.04 No inference. No inference is in-
tended with respect to the federal income
tax treatment of transactions similar to,
but outside the scope of, those described
in this revenue procedure.
.05 Examination. Nothing in this reve-
nue procedure precludes the examination
and adjustment, if appropriate, of amounts
reported in income in connection with
trades of personnel contracts or draft picks
in order to ensure that this revenue proce-
dure is properly administered.
.06 Substantiation. Teams making
trades to which this revenue procedure ap-
plies must retain books and records to sub-
stantiate that all requirements of section 3
of this revenue procedure have been met.
Pursuant to § 6001, teams making trades
to which this revenue procedure applies
also must make available to the IRS, upon
request, all documentation substantiating
compliance with this revenue procedure.
SECTION 5. EXAMPLES
The following examples illustrate the
application of the safe harbor described
in section 4 of this revenue procedure.
Unless otherwise provided, the teams in
the examples have a $0 basis in the play-
er contracts being traded. In addition, as-
sume the requirements of section 3 of this
revenue procedure are met, and the player
contracts with signing bonuses were en-
tered into on the first day of the applicable
team’s taxable year.
Example 1. Trade with no cash. In 2018, Team
A trades Player Contract 1 to Team B for Player
Contract 2. The teams apply the safe harbor in this
revenue procedure. Under section 4.02(1), neither
Team A nor Team B has an amount realized or gain
on the trade because neither team received cash in
the trade. Under section 4.02(3), Team A has a $0
basis in Player Contract 2, and Team B has a $0 basis
in Player Contract 1.
Example 2. One team provides cash in the trade.
The facts are the same as in Example 1, except Team
A trades Player Contract 1 and $10x to Team B for
Player Contract 2. Under section 4.02(1), Team A
has no amount realized or gain on the trade because
Team A did not receive cash in the trade. Under sec-
tion 4.02(2), Team B has a $10x amount realized on
the trade because Team B received $10x from Team
A in the trade. Under section 4.02(5), Team B must
recognize $10x of gain, the excess of Team B’s $10x
amount realized over its $0 basis in the Player Con-
tract 2 it traded. Team B’s $10x gain is subject to the
rules of §§ 1231 and 1245. Under section 4.02(3),
Team A has a $10x basis in Player Contract 2, the
amount of cash Team A provided to Team B in the
trade. Team A’s $10x basis is recovered through
depreciation under § 1.167(a)-3(a) over the life of
Player Contract 2. Under section 4.02(3), Team B
has a $0 basis in Player Contract 1 because Team B
provided no cash to Team A in the trade.
Example 3. No cash in the trade, one team has an
unrecovered basis. (i) In 2019, Team C signs Player
3 to a contract (Player Contract 3) for 5 years. Under
the terms of Player Contract 3, Team C pays Player
3 a $25x signing bonus in 2019. In each of 2019 and
2020, Team C takes a depreciation deduction under
§ 1.167(a)-3(a) of $5x for the $25x it paid to Player
3. In 2021, Team C trades Player Contract 3 to Team
D for Player Contract 4, and the teams apply the safe
harbor in this revenue procedure.
(ii) Under section 4.02(1), neither Team C nor
Team D has an amount realized or gain on the trade
because neither team received cash in the trade. Be-
cause neither team provided cash in the trade, under
section 4.02(3), each team has a $0 basis in the con-
tract it received in the trade. Under section 4.02(5),
Team C may deduct in 2021 a $15x loss under §§
165 and 1.167(a)-8, the excess of its unrecovered

April 29, 2019 1080 Bulletin No. 2019–18
basis in Player Contract 3 over its amount realized
of $0. Team C’s $15x loss is subject to the rules of
§ 1231.
Example 4. One team provides cash and one team
has an unrecovered basis. The facts are the same as in
Example 3, except Team D trades Player Contract 4
and $20x to Team C for Player Contract 3. Under sec-
tion 4.02(2), Team C has a $20x amount realized on
the trade because Team C received $20x from Team
D in the trade. Under section 4.02(1), Team D has no
amount realized or gain on the trade because Team
D did not receive cash in the trade. Under section
4.02(5), Team C must recognize $5x of gain, the ex-
cess of Team C’s $20x amount realized over its $15x
basis in the Player Contract 3 it traded. Team C’s $5x
gain is subject to the rules of §§ 1231 and 1245. Under
section 4.02(3), Team C has a $0 basis in Player Con-
tract 4 because Team C provided no cash to Team D in
the trade. Under section 4.02(3), Team D has a $20x
basis in Player Contract 3, the amount of cash Team D
provided to Team C in the trade. Team D’s $20x basis
is recovered through depreciation under § 1.167(a)-
3(a) over the life of Player Contract 3.
Example 5. Allocation of basis among multiple
contracts. (i) In 2019, Team E trades Player Contract
5 and $30x to Team F for Player Contract 6, Player
Contract 7, and Player Contract 8. The teams apply
the safe harbor in this revenue procedure.
(ii) Under section 4.02(1), Team E has no
amount realized or gain on the trade because Team
E did not receive cash in the trade. Under section
4.02(3), Team E has a $30x basis in Player Contract
6, Player Contract 7, and Player Contract 8, collec-
tively. Under section 4.02(4), Team E has a basis of
$10x in Player Contract 6, $10x in Player Contract
7, and $10x in Player Contract 8 because Team E
allocates the $30x cash provided to Team F in the
trade by dividing the basis equally among the three
player contracts received in the trade. Team E’s $10x
basis of each player contract is recovered through de-
preciation under § 1.167(a)-3(a) over the life of the
respective player contract.
(iii) Under section 4.02(2), Team F has a $30x
amount realized on the trade because Team F re-
ceived $30x from Team E in the trade. Under sec-
tion 4.02(5), Team F must recognize $30x of gain,
the excess of Team F’s $30x amount realized over its
$0 basis in the Player Contract 5 it traded. Team F’s
$30x gain is subject to the rules of §§ 1231 and 1245.
Under section 4.02(3), Team F has a $0 basis in Play-
er Contract 5 because Team F provided no cash to
Team E in the trade.
SECTION 6. EFFECTIVE DATE
This revenue procedure is effective
only for agreements involving trades of
personnel contracts or draft picks entered
into by a professional sports team after
April 10, 2019. However, a team may
choose to apply this revenue procedure in
any open taxable year.
SECTION 7. DRAFTING
INFORMATION
The principal authors of this revenue
procedure are Edward C. Schwartz, Su-
zanne R. Sinno, and Stephen J. Toomey
of the Office of Associate Chief Counsel
(Income Tax and Accounting). For fur-
ther information regarding the revenue
procedure, contact Mr. Schwartz at (202)
317-7006, or Ms. Sinno or Mr. Toomey at
(202) 317-4718 (not toll-free numbers).

Bulletin No. 2019–18 i April 29, 2019
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is 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 rul-
ing is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is 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
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings 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.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes 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 previous-
ly published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is 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 cas-
es in litigation, or the outcome of a Ser-
vice study.
Abbreviations
The following abbreviations in current use
and formerly used will appear in material
published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI
—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

April 29, 2019 ii Bulletin No. 2019–18
Numerical Finding List
1
Bulletin 2019–17
Action on Decision:
2019-1, 2019-08 I.R.B. 569
Announcements:
2019-1, 2019-06 I.R.B. 566
2019-2, 2019-12 I.R.B. 910
2019-3, 2019-15 I.R.B. 965
Notices:
2019-01, 2019-02 I.R.B. 275
2019-02, 2019-02 I.R.B. 281
2019-03, 2019-03 I.R.B. 350
2019-04, 2019-02 I.R.B. 282
2019-05, 2019-02 I.R.B. 283
2019-06, 2019-03 I.R.B. 353
2019-07, 2019-09 I.R.B. 740
2019-08, 2019-03 I.R.B. 354
2019-09, 2019-04 I.R.B. 403
2019-10, 2019-13 I.R.B. 913
2019-11, 2019-05 I.R.B. 430
2019-13, 2019-08 I.R.B. 580
2019-16, 2019-10 I.R.B. 763
2019-17, 2019-12 I.R.B. 907
2019-18, 2019-13 I.R.B. 915
2019-19, 2019-12 I.R.B. 907
2019-20, 2019-14 I.R.B. 927
2019-21, 2019-14 I.R.B. 927
2019-22, 2019-14 I.R.B. 931
2019-23, 2019-15 I.R.B. 941
2019-24, 2019-14 I.R.B. 932
2019-25, 2019-15 I.R.B. 942
2019-26, 2019-15 I.R.B. 943
2019-28, 2019-18 I.R.B. 1077
Proposed Regulations:
REG-104259-18, 2019-02 I.R.B. 300
REG-104352-18, 2019-03 I.R.B. 357
REG-106089-18, 2019-05 I.R.B. 431
REG-134652-18, 2019-09 I.R.B. 747
REG-141739-08, 2019-09 I.R.B. 757
REG-121694-16, 2019-16 I.R.B. 1032
REG-135671-17, 2019-16 I.R.B. 1035
REG-103083-18, 2019-17 I.R.B. 1046
REG-113943-17, 2019-17 I.R.B. 1067
REG-143686-07, 2019-17 I.R.B. 1072
REG-124627-11, 2019-17 I.R.B. 1073
Revenue Procedures:
2019-1, 2019-01 I.R.B. 1
2019-2, 2019-01 I.R.B. 106
2019-3, 2019-01 I.R.B. 130
2019-4, 2019-01 I.R.B. 146
Revenue Procedures:—Continued
2019-5, 2019-01 I.R.B. 230
2019-6, 2019-02 I.R.B. 284
2019-7, 2019-01 I.R.B. 268
2019-8, 2019-03 I.R.B. 347
2019-9, 2019-02 I.R.B. 293
2019-10, 2019-02 I.R.B. 296
2019-11, 2019-09 I.R.B. 742
2019-12, 2019-04 I.R.B. 401
2019-13, 2019-09 I.R.B. 744
2019-14, 2019-15 I.R.B. 948
2019-15, 2019-14 I.R.B. 939
2019-17, 2019-17 I.R.B. 1045
2019-18, 2019-18 I.R.B. 1077
Revenue Rulings:
2019-03, 2019-02 I.R.B. 272
2019-04, 2019-07 I.R.B. 567
2019-05, 2019-11 I.R.B. 766
2019-06, 2019-14 I.R.B. 919
2019-07, 2019-10 I.R.B. 761
2019-08, 2019-14 I.R.B. 923
2019-09, 2019-14 I.R.B. 925
2019-10, 2019-16 I.R.B. 1010
2019-11, 2019-17 I.R.B. 1041
Treasury Decisions:
9844, 2019-11 I.R.B. 781
9845, 2019-08 I.R.B. 570
9846, 2019-09 I.R.B. 583
9847, 2019-09 I.R.B. 670
9848, 2019-11 I.R.B. 897
9850, 2019-12 I.R.B. 904
9852, 2019-16 I.R.B. 1010
9853, 2019-16 I.R.B. 1026
9855, 2019-17 I.R.B. 1042
9854, 2019-18 I.R.B. 1075
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–27 through 2018–52 is in Internal Revenue Bulletin
2018–52, dated December 27, 2018.

Bulletin No. 2019–18 iii April 29, 2019
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2019–18
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–27 through 2018–52 is in Internal Revenue Bulletin
2018–52, dated December 27, 2018.

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