Internal Revenue Bulletin 1998-4 (PDF rendition): IRS Revenue Rulings

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

INCOME TAX
Rev. Rul. 98–6, page 4.
LIFO; price indexes; department stores. The November
1997 Bureau of Labor Statistics price indexes are accepted
for use by department stores employing the retail inventory
and last-in, first-out inventory methods for valuing inventories
for tax years ended on, or with reference to, November 30,
1997.
EMPLOYEE PLANS
REG–209463–82, page 27.
This proposed regulation contains amendments to
EE–113–82, 1987–2 C.B. 881, under section 401(a)(9) of
the Code that makes changes to the rules that apply if a
trust is named as a beneficiary of an employee’s retirement
benefit under a qualified plan.
Rev. Proc. 98–14, page 22.
Determination letters; Small Business Job Protection
Act.This procedure opens the determination letter program
for qualified plans that seek to comply with changes in the
qualification requirements made by the Uruguay Round
Agreements Act and the Taxpayer Relief Act of 1997, as well
as those changes in the qualification requirements made by
the Small Business Job Protection Act of 1996 that are ef-
fective before the first day of the first plan year beginning on
or after January 1, 1999.
Notice 98–9, page 8.
Weighted average interest rate update. Guidelines are
set forth for determining for January 1998, the weighted av-
erage interest rate and the resulting permissible range of in-
terest rates used to calculate current liability for purposes of
the full funding limitation of section 412(c)(7) of the Code as
amended by the Omnibus Budget Reconciliation Act of 1987
and by the Uruguay Round Agreements Act (GATT).
EXEMPT ORGANIZATIONS
Announcement 98–4, page 31.
A list is given of organizations now classified as private foun-
dations.
ADMINISTRATIVE
Notice 98–8, page 6.
Eligible deferred compensation plans under section
457.This notice provides guidance relating to the new statu-
tory requirements applicable to eligible deferred compensa-
tion plans of state and local government and tax-exempt
employers under section 457 of the Code after the Small
Business Job Protection Act of 1996 and the Taxpayer Relief
Act of 1997.
Rev. Proc. 98–11, page 9.
Insurance companies; loss reserves; discounting un-
paid losses. The loss payment patterns and discount fac-
tors are set forth for the 1997 accident year, which is a de-
termination year. These factors will be used for computing
discounted unpaid losses under section 846 of the Code.
Rev. Proc. 98–12, page 18.
Insurance companies; discounting estimated salvage
recoverable. The salvage discount factors are set forth for
the 1997 accident year. These factors will be used for com-
puting estimated salvage recoverable under section 832 of
the Code.
Rev. Proc. 98–13, page 21.
Section 646 election. This procedure provides the proce-
dures and requirements for making the section 646 election
to treat certain revocable trusts as part of an estate.
Rev. Proc. 98–15, page 25.
Underpayment interest; interest expense deduction;
estates. Procedures are provided for estates of decedents
dying before January 1, 1998, to elect, under section
503(d)(2) of the Taxpayer Relief Act of 1997, to reduce the
rate of interest on estate taxes deferred under section 6166
of the Code and forgo the deduction for interest paid on the
deferred estate taxes under sections 2053 and 163(h) of
the Code.
Internal Revenue
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Bulletin No. 1998–4
January 26, 1998
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.
Department of the Treasury
Internal Revenue Service
Finding Lists begin on page 34.

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

The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial 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 and may be obtained
from the Superintendent of Documents on a subscription
basis. Bulletin contents of a permanent nature are consoli-
dated 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,
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 in-
ternal 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 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 pub-
lished rulings and procedures, the effect of subsequent leg-
islation, regulations, court decisions, rulings, and proce-
dures must be considered, and Service personnel and oth-
ers concerned are cautioned against reaching the same con-
clusions in other cases unless the facts and circumstances
are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions, and Subpart B, Legislation and Related
Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to
these subjects are contained in the other Parts and Sub-
parts. Also included in this part are Bank Secrecy Act Admin-
istrative 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.
With the exception of the Notice of Proposed Rulemaking
and the disbarment and suspension list included in this part,
none of these announcements are consolidated in the Cumu-
lative Bulletins.
The first Bulletin for each month includes a cumulative index
for the matters published during the preceding months.
These monthly indexes are cumulated on a quarterly and
semiannual basis, and are published in the first Bulletin of the
succeeding quarterly and semiannual period, respectively.
3
Introduction
The contents of this publication are not copyrighted and may be reprinted freely.A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.

Section 163.—Interest
26 CFR 1.163–1: Interest deduction in general.
What procedures apply for estates of decedents
dying before January 1, 1998, to make an election
under § 503(d)(2) of the Taxpayer Relief Act of 1997
to reduce the rate of interest on estate taxes deferred
under § 6166 of the Code and forgo the deduction for
interest paid on the deferred estate taxes under
§§ 2053 and 163(h). See Rev. Proc. 98–15, page 25.
Section 401.—Qualified
Pension, Profit-Sharing and
Stock Bonus Plans
26 CFR 1.401(b)–1: Certain retroactive changes in
plans.
Aremedial amendment period for changes in
plan qualification requirements made by the Tax-
payer Relief Act of 1997 is provided. See Rev. Proc.
98–14, page 22.
Section 472.—Last-in, First-out
Inventories
26 CFR 1.472–1: Last-in, first-out inventories.
LIFO; price indexes; department
stores.The November 1997 Bureau of
Labor Statistics price indexes are ac-
cepted for use by department stores em-
ploying the retail inventory and last-in,
first-out inventory methods for valuing
inventories for tax years ended on, or with
reference to, November 30, 1997.
Rev. Rul. 98–6
The following Department Store Inven-
tory Price Indexes for November 1997
were issued by the Bureau of Labor Sta-
tistics on December 16, 1997. The in-
dexes are accepted by the Internal Rev-
enue Service, under § 1.472–1(k) of the
Income Tax Regulations and Rev. Proc.
86–46, 1986–2 C.B. 739, for appropriate
application to inventories of department
stores employing the retail inventory and
last-in, first-out inventory methods for tax
years ended on, or with reference to, No-
vember 30, 1997.
The Department Store Inventory Price
Indexes are prepared on a national basis
and include (a) 23 major groups of depart-
ments, (b) three special combinations of
the major groups – soft goods, durable
goods, and miscellaneous goods, and (c) a
store total, which covers all departments,
including some not listed separately, ex-
cept for the following: candy, foods,
liquor, tobacco, and contract departments.
January 26, 199841998–4 I.R.B.
Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
BUREAU OF LABOR STATISTICS, DEPARTMENTSTORE
INVENTORYPRICE INDEXES BYDEPARTMENTGROUPS
(January 1941 = 100, unless otherwise noted)
Percent Change
GroupsNov.Nov.from Nov. 1996
19961997to Nov. 1997
1
1. Piece Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55.9524.6–5.6
2. Domestics and Draperie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .634.7628.2–1.0
3. Women’s and Children’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .656.1661.70.9
4. Men’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .903.7906.90.4
5. Infants’Wear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .614.8618.20.6
6. Women’s Underwear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .535.4552.93.3
7. Women’s Hosiery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .287.4298.84.0
8. Women’s and Girls’Accessories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .562.5543.7–3.3
9. Women’s Outerwear and Girls’Wear . . . . . . . . . . . . . . . . . . . . . . . . . . . . .415.9428.43.0
10. Men’s Clothing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .633.0621.2–1.9
11. Men’s Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .591.5604.02.1
12. Boys’Clothing and Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .495.1513.13.6
13. Jewelry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1020.6978.9–4.1
14. Notions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .740.7807.79.0
15. Toilet Articles and Drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .903.4917.81.6
16. Furniture and Bedding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .667.8665.8–0.3
17. Floor Coverings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .585.6580.1–0.9
18. Housewares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .804.5811.70.9
19. Major Appliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .244.2241.0–1.3
20. Radio and Television- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78.174.2–5.0
21. Recreation and Education
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .111.3108.3–2.7
22. Home Improvements
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .130.6133.22.0
23. Auto Accessories
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .107.1107.90.7
Groups 1 – 15: Soft Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .602.1606.50.7

DRAFTING INFORMATION
The principal author of this revenue
ruling is Stan Michaels of the Office of
Assistant Chief Counsel (Income Tax and
Accounting). For further information re-
garding this revenue ruling, contact Mr.
Michaels on (202) 622-4970 (not a toll-
free call).
Section 646.—Election To Treat
Certain Revocable Trusts as
Part of an Estate
What are the procedures and requirements for
making the § 646 election to treat certain revocable
trusts as part of an estate? See Rev. Proc. 98–13,
page 21.
Section 832.—Insurance
Company Taxable Income
26 CFR 1.832–4: Gross income.
The salvage discount factors are set forth for the
1997 accident year. These factors will be used for
computing estimated salvage recoverable for pur-
poses of section 832 of the Code. See Rev. Proc.
98–12, page 18.
Section 846.—Discounted
Unpaid Losses Defined
26 CFR 1.846–1: Application of discount factors.
The loss payment patterns and discount factors
are set forth for the 1997 accident year, which is a
determination year. These factors will be used for
computing discounted unpaid losses under section
846 of the Code. See Rev. Proc. 98–11, page 9.
The salvage discount factors are set forth for the
1997 accident year. These factors will be used for
computing estimated salvage recoverable for pur-
poses of section 832. See Rev. Proc. 98–12, page 18.
Section 2053.—Expenses,
Indebtedness, and Taxes
26 CFR 20.2053–1: Expenses, indebtedness, and
taxes in general.
What procedures apply for estates of decedents
dying before January 1, 1998, to make an election
under § 503(d)(2) of the Taxpayer Relief Act of
1997 to reduce the rate of interest on estate taxes de-
ferred under § 6166 of the Code and forgo the de-
duction for interest paid on the deferred estate taxes
under §§ 2053 and 163(h). See Rev. Proc. 98–15,
page 25.
Section 6166.—Extension of
Time for Payment of Estate Tax
Where Estate Consists Largely
of Interest in Closely Held
Business
26 CFR 20.6166–1: Election of alternate extension
of time for payment of estate tax where estate
consists largely of interest in closely held
business.
What procedures apply for estates of decedents
dying before January 1, 1998, to make an election
under § 503(d)(2) of the Taxpayer Relief Act of
1997 to reduce the rate of interest on estate taxes de-
ferred under § 6166 of the Code and forgo the de-
duction for interest paid on the deferred estate taxes
under §§ 2053 and 163(h). See Rev. Proc. 98–15,
page 25.
1998–4 I.R.B5January 26, 1998
BUREAU OF LABOR STATISTICS, DEPARTMENTSTORE
INVENTORYPRICE INDEXES BYDEPARTMENTGROUPS—Continued
(January 1941 = 100, unless otherwise noted)
Percent Change
GroupsNov.Nov.from Nov. 1996
19961997to Nov. 1997
1
Groups 16 – 20: Durable Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .466.5462.6–0.8
Groups 21 – 23: Misc. Goods
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .113.0111.4–1.4
Store Total
3
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .555.1555.90.1
1
Absence of a minus sign before percentage change in this column signifies price increase.
2
Indexes on a January 1986=100 base.
3
The store total index covers all departments, including some not listed separately, except for the following: candy, foods, liquor, to-
bacco, and contract departments.

January 26, 199861998–4 I.R.B.
Eligible Deferred Compensation
Plans Under Section 457
Notice 98–8
I.PURPOSE
This notice provides guidance relating
to the requirements applicable to eligible
deferred compensation plans described in
§ 457(b) of the Internal Revenue Code
(“§ 457(b) plans”). Section 457 was
amended by §§ 1447 and 1448 of the
Small Business Job Protection Act of
1996, Pub. L. 104–188 (“SBJPA”), and
more recently by § 1071 of the Taxpayer
Relief Act of 1997, Pub. L. 105–34
(“TRA’97”). Unless indicated otherwise,
references to § 457 in this notice refer to
§ 457 as amended by the SBJPAand TRA
‘97.
Specifically, this notice provides guid-
ance on—
• in-service distributions from a
§ 457(b) plan if the total amount payable
to the participant does not exceed $5,000;
• an additional election to defer com-
mencement of distributions from a
§ 457(b) plan;
• cost of living adjustments to the
$7,500 limitation on maximum deferrals
under a § 457(b) plan; and
• the trust requirements applicable to
state and local government employers
maintaining a § 457(b) plan, including the
requirements for custodial accounts and
annuity contracts.
II.BACKGROUND
Section 457 provides rules for nonqual-
ified deferred compensation plans estab-
lished by state and local governments or
tax-exempt organizations. These employ-
ers can establish either § 457(b) plans or
ineligible plans under § 457(f) of the In-
ternal Revenue Code (“Code”). Section
457 was amended by §§ 1447 and 1448 of
the SBJPA, as well as by § 1071 of TRA
’97. These amendments and the guidance
provided by this notice relate only to
§ 457(b) plans.
Section 1447 of the SBJPAamended
§ 457(e)(9) of the Code to permit, under
certain conditions, in-service distributions
from a § 457(b) plan if the total amount
payable to the participant does not exceed
$3,500. Under § 1071 of TRA’97, this
$3,500 amount was increased to $5,000.
Section 1447 of the SBJPAalso permits
an additional election by a participant to
defer commencement of distributions
under a § 457(b) plan. Further, § 1447 of
the SBJPAprovides for the $7,500 maxi-
mum deferral amount, under §§ 457(b)(2)
and 457(c)(1), to be adjusted (in $500 in-
crements) to reflect increases in the cost
of living.
Section 1448 of the SBJPAadded new
§ 457(g) of the Code, which requires that
§ 457(b) plans maintained by state or local
government employers hold all plan assets
and income in trust, or in custodial ac-
counts or annuity contracts (described in
§ 401(f) of the Code), for the exclusive ben-
efit of their participants and beneficiaries.
III.IN-SERVICE DISTRIBUTIONS
OFSMALLER AMOUNTS
Section 457(e)(9)(A), as amended by
the SBJPAand TRA’97, permits certain
in-service distributions from a § 457(b)
plan if the total amount payable to the
participant does not exceed a specified
dollar amount. This specified dollar
amount was changed from $3,500 to
$5,000 effective for plan years beginning
after August 5, 1997. Each participant
can be given only one such in-service dis-
tribution from the plan. This in-service
distribution is available only if no amount
has been deferred under the § 457(b) plan
for the participant during the 2-year pe-
riod ending on the date of the distribution.
Under this provision, for plan years be-
ginning after August 5, 1997, a § 457(b)
plan may provide for the total amount
payable to a participant with a balance of
$5,000 or less to be distributed to the par-
ticipant if the participant so elects. Alter-
natively, the plan may provide for the
total amount payable to a participant with
a balance of $5,000 or less to be distrib-
uted automatically to the participant. A
§ 457(b) plan is permitted to substitute a
specified dollar amount that is less than
$5,000 under either of these alternatives.
In addition, these two alternatives can be
combined; for example, a plan could pro-
vide for automatic cashout for balances
up to $500 and allow participants to elect
a cashout for balances above $500 but not
above $5,000. A§ 457(b) plan is not re-
quired to permit in-service distributions
under any of these alternatives.
IV.ADDITIONALDEFERRAL
ELECTION
Under § 457(d)(1)(A), benefits under a
§ 457(b) plan generally may not be made
available to a participant before the par-
ticipant separates from service with the
employer. In-service distributions are
permitted only if the participant has an
unforeseeable emergency or attains age
70
1
⁄
2
, or if the in-service distribution pro-
vision described in section III of this no-
tice applies.
Section 1.457–1(b) of the regulations
provides that amounts are not made avail-
able if a participant irrevocably elects,
prior to the time the amounts become
payable, to defer the payment to a fixed
and determinable future time. For this
purpose, the time at which amounts be-
come payable (the “first permissible pay-
out date”) is the earliest date on which a
plan permits payments to begin after sep-
aration from service (i.e., disregarding
payments to a participant who has an un-
foreseeable emergency or attains age 70
1
⁄
2
,
or under the in-service distribution provi-
sion described in section III of this no-
tice). Prior to the changes made by the
SBJPA, a participant could not change
this deferral election after the first permis-
sible payout date.
Section 457(e)(9)(B), as amended by
the SBJPA, provides that the amount
payable to a participant under a § 457(b)
plan is not treated as made available
merely because the plan allows the partic-
ipant to make an additional election, after
the first permissible payout date, to defer
the commencement of distributions so
long as this additional deferral election is
made before distributions begin (a
Ҥ 457(e)(9)(B) additional deferral elec-
tion”). Only one § 457(e)(9)(B) addi-
tional deferral election can be made after
the end of the period in which the plan
permits a participant to make deferral
elections under § 457(d)(1)(A) and
§ 1.457–1(b) of the regulations.
Aparticipant is not precluded from
making a § 457(e)(9)(B) additional defer-
ral election merely because the participant
Part III. Administrative, Procedural, and Miscellaneous

1998–4 I.R.B7January 26, 1998
has previously received a hardship distri-
bution under § 457(d)(1)(A) or has made
other deferral elections prior to separation
from service.
The § 457(e)(9)(B) additional deferral
election is not available if the participant
has separated from service and distribu-
tions have begun. The § 457(e)(9)(B) ad-
ditional deferral election permits the par-
ticipant to elect only to defer, and not to
accelerate, commencement of distribu-
tions under the plan.
The § 457(e)(9)(B) additional deferral
election provision is illustrated by the fol-
lowing examples:
Example (1).(i) Employee Ais a participant in an
eligible § 457(b) plan. The plan provides that the total
amount deferred under the plan is payable to a partic-
ipant who separates from service before age 65. Pay-
ment is made in a lump sum 90 days after separation
from service, unless, during a 30-day “window pe-
riod” immediately following the separation, the par-
ticipant elects to receive the payment at a later date or
in 10 annual installments to begin 90 days after sepa-
ration from service or at a later date. The plan also
permits eligible participants to make a § 457(e)(9)(B)
additional deferral election. Employee Aseparates
from service at age 50. The next day, during the 30-
day window period provided in the plan, Employee A
elects to receive distribution in the form of 10 annual
installment payments beginning at age 55. Two
weeks later, within the 30-day window period, Em-
ployee Amakes a new election permitted under the
plan to receive 10 annual installment payments begin-
ning at age 60 (instead of at age 55).
(ii) In this example, the two elections Employee
Amakes during the 30-day window period are not
§ 457(e)(9)(B) additional deferral elections (because
they are made before the first permissible payout
date under the plan) and therefore do not preclude
the plan from allowing Employee Ato make a
§ 457(e)(9)(B) additional deferral election after Em-
ployee A’s election to receive 10 annual installment
payments beginning at age 60.
Example (2). (i) The facts are the same as in Ex-
ample (1). Employee Ahas made no other deferral
elections after the 30-day window period and before
age 59. While age 59, Employee Aelects to defer
commencement of the installment payments until
Employee Aattains age 65.
(ii) In this example, under § 457(e)(9)(B), the
total amount payable to Employee Awill not be
treated as made available merely because Employee
Amade this additional election at age 59 (after the
first permissible payout date under the plan, but be-
fore commencement of distributions). However,
after making this election, Employee Amay make
no further elections to change the date on which dis-
tributions commence.
V. COSTOFLIVING
ADJUSTMENTS IN MAXIMUM
DEFERRALAMOUNT
Sections 457(b)(2) and (c)(1) limit the
maximum deferrals under an eligible
§ 457(b) plan during any taxable year to
$7,500. Section 457(e)(15) provides for
cost of living adjustments (in $500 incre-
ments) of this maximum deferral amount
at the same time and, generally, in the
same manner as adjustments are made to
the limitations for tax-qualified plans
under § 415(d). This change is effective
for taxable years beginning after Decem-
ber 31, 1996. The maximum deferral
amount for each year is announced before
the beginning of the year at the same time
as cost of living adjustments under
§ 415(d).
For 1997, the maximum deferral
amount remains at $7,500. For 1998, the
maximum deferral amount is $8,000.
VI. TRUSTREQUIREMENTS
UNDER § 457(g)
Section 457(g) requires that all assets
and income of a § 457(b) plan maintained
by a state or local government employer
(“governmental § 457(b) plan”) be held in
trust, or in custodial accounts or annuity
contracts described in § 401(f), for the ex-
clusive benefit of participants and benefi-
ciaries. Section 457(g) applies generally
to assets and income held by a govern-
mental § 457(b) plan on and after August
20, 1996. However, with respect to a gov-
ernmental § 457(b) plan in existence on
August 20, 1996, a trust (or a custodial ac-
count or annuity contract) is not required
to be established before January 1, 1999.
Section 457(g) does not apply to a
§ 457(b) plan established by a tax-exempt
organization that is not a governmental
entity. Prior to the addition of § 457(g) to
the Code, all § 457(b) plans were subject
to § 457(b)(6), which mandates that a
§ 457(b) plan be unfunded and that plan
assets not be set aside for participants.
Section 457(b)(6) continues to apply to a
§ 457(b) plan of a tax-exempt employer.
To satisfy the trust requirement applic-
able to governmental § 457(b) plans
under § 457(g)(1), a trust must be estab-
lished pursuant to a written agreement
that constitutes a valid trust under state
law. The terms of the trust must make it
impossible, prior to the satisfaction of all
liabilities with respect to plan participants
and their beneficiaries, for any part of the
assets and income of the trust to be used
for, or diverted to, purposes other than for
the exclusive benefit of plan participants
and their beneficiaries.
In order to satisfy the requirement that
all plan assets and income be held in trust,
amounts deferred under a governmental
§ 457(b) plan after a trust has been estab-
lished must be transferred to the trust
within a period that is not longer than is
reasonable for the proper administration
of the accounts of participants. For pur-
poses of this requirement, a governmental
§ 457(b) plan may provide for amounts
deferred for a participant under the plan to
be transferred to the trust within a speci-
fied period after the date the amounts
would otherwise have been paid to the
participant. For example, a governmental
§ 457(b) plan could provide for amounts
deferred under the plan to be contributed
to the trust within 15 business days fol-
lowing the month in which these amounts
would otherwise have been paid to the
participant.
1
Unless all assets or income of a plan
are held in one or more trusts that satisfy
the requirements of this section VI (or in
custodial accounts or annuity contracts
that are treated as trusts under section VII
of this notice), the plan is not a § 457(b)
plan because the requirements of § 457(g)
are not met.
VII. CUSTODIALACCOUNTS AND
ANNUITYCONTRACTS UNDER
§ 457(g)(3) TREATED AS TRUSTS
Section 457(g)(3) provides that, for
purposes of the § 457(g)(1) trust require-
ments, custodial accounts and annuity
contracts described in § 401(f) will be
treated as trusts under rules similar to the
rules under § 401(f). Section 1.401(f)–
1(b) of the regulations contains require-
ments that a custodial account or an annu-
ity contract must satisfy to be treated as a
trust. For purposes of applying the
§ 401(f) rules under § 457(g), the require-
ments under § 1.401(f)–1(b) of the regu-
lations generally will be used to deter-
mine whether a custodial account or
annuity contract meets the requirements
of § 457(g)(3).
Acustodial account will be treated as a
trust under § 457(g)(1) if the custodian is
1
Cf.section 2510.3–102(b) of the Department of
Labor regulations concerning contributions to an
employee pension plan that is subject to the
Employee Retirement Income Security Act
(“ERISA”) (such as a plan qualifying under
§ 401(k) of the Code). Agovernmental § 457(b) plan
is not subject to ERISA, and, thus, is not subject to
the Department of Labor regulations.

January 26, 199881998–4 I.R.B.
a bank, as described in § 408(n), or a per-
son who meets the nonbank trustee re-
quirements of section VIII of this notice,
and the account meets the requirements of
section VI of this notice, other than the re-
quirement that it be a trust.
An annuity contract will be treated as a
trust under § 457(g)(1) if the contract is
an annuity contract, as defined in
§ 401(g), that has been issued by an insur-
ance company qualified to do business in
the state, and the contract meets the re-
quirements of section VI of this notice,
other than the requirement that it be a
trust. An annuity contract does not in-
clude a life, health or accident, property,
casualty, or liability insurance contract.
The use of a custodial account or annu-
ity contract as part of a governmental
§ 457(b) plan does not preclude the use of
a trust or another custodial account or an-
nuity contract as part of the same govern-
mental § 457(b) plan, provided that all
such vehicles satisfy the requirements of
§§ 457(g)(1) and (3) and all assets and in-
come of the plan are held in such vehicles.
Unless all assets and income of a plan are
held in one or more trusts, custodial ac-
counts, or annuity contracts that satisfy
section VI or VII of this notice, the plan is
not a governmental § 457(b) plan because
the requirements of § 457(g) are not met.
VIII. NONBANK CUSTODIANS
The custodian of a custodial account
may be a person other than a bank only if
the person demonstrates to the satisfaction
of the Commissioner that the manner in
which the person will administer the cus-
todial account will be consistent with the
requirements of §§ 457(g)(1) and (g)(3).
To do so, the person must demonstrate that
the requirements of paragraphs (2)–(6) of
§ 1.408–2(e) of the regulations relating to
nonbank trustees will be met. The written
application must be sent to the address
prescribed by the Commissioner in rev-
enue rulings, notices and other guidance
published in the Internal Revenue Bulletin
in the same manner as prescribed under
1.408–2(e) of the regulations.
To the extent that a person has already
demonstrated to the satisfaction of the
Commissioner that the person satisfies the
requirements of § 1.408–2(e) of the regu-
lations in connection with a qualified trust
(or custodial account or annuity contract)
under § 401(a), that person will be
deemed to satisfy the requirements of this
section VIII.
IX. PAPERWORK REDUCTION
ACT
The collection of information require-
ment contained in this notice has been re-
viewed and approved by the Office of
Management and Budget (OMB) in ac-
cordance with the Paperwork Reduction
Act (44 U.S.C. 3507) under control num-
ber 1545–1580.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless the col-
lection of information displays a valid
OMB control number.
The collection of information in this
notice is pursuant to section 457(g) of the
Internal Revenue Code of 1986. This in-
formation is required to ensure compli-
ance with the statutory requirements that
certain eligible deferred compensation
plans hold their assets in trust for the ex-
clusive benefit of their participants and
beneficiaries. The collection of informa-
tion is mandatory. The likely respondents
are state or local governments.
The estimated total reporting burden is
10,600 hours.
The estimated burden per respondent
varies from .033 hour to 2 hours per trust
established depending upon individual re-
spondents’circumstances, with an esti-
mated average of one hour for each trust
established, and from 20 hours to 50 hours
per application for approval as a custodian
with an estimated average of 35 hours for
each application submitted to qualify as a
custodian. The estimated number of re-
spondents is 10,260 including 10 applica-
tions for approval as a custodian.
The estimated frequency of responses
is one-time only.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mater-
ial in the administration of any internal
revenue law. Generally tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.
DRAFTING INFORMATION
The principal author of this notice is
Cheryl Press of the Office of the Associ-
ate Chief Counsel (Employee Benefits
and Exempt Organizations). However,
other personnel from the IRS and Trea-
sury participated in its development. For
further information regarding this notice,
contact Cheryl Press at (202) 622-6030
(not a toll-free number).
Weighted Average Interest Rate
Update
Notice 98–9
Notice 88–73 provides guidelines for
determining the weighted average interest
rate and the resulting permissible range of
interest rates used to calculate current lia-
bility for the purpose of the full funding
limitation of § 412(c)(7) of the Internal
Revenue Code as amended by the Om-
nibus Budget Reconciliation Act of 1987
and as further amended by the Uruguay
Round Agreements Act, Pub. L. 103–465
(GATT).
The average yield on the 30-year Trea-
sury Constant Maturities for December
1997 is 5.99 percent.
The following rates were determined
for the plan years beginning in the month
shown below.
90% to 106%90% to 110%
WeightedPermissiblePermissible
Month YearAverage RangeRange
January1998 6.77 6.09 to 7.176.09 to 7.44

1998–4 I.R.B9January 26, 1998
Drafting Information
The principal author of this notice is
Donna Prestia of the Employee Plans Di-
vision. For further information regarding
this notice, call (202) 622-6076 between
2:30 and 3:30 p.m. Eastern time (not a
toll-free number). Ms. Prestia’s number
is (202) 622-7377 (also not a toll-free
number).
26 CFR 601.201: Rulings and determination
letters.
(Also Part I, §§ 846, 1.846–1.)
Rev. Proc. 98–11
SECTION 1. PURPOSE
This revenue procedure prescribes the
loss payment patterns and discount fac-
tors for the 1997 determination year.
These factors will be used for computing
discounted unpaid losses under § 846 of
the Internal Revenue Code.
SEC. 2. BACKGROUND
.01 Section 846 provides that dis-
counted unpaid losses must be separately
determined for each accident year of each
line of business by applying an interest
rate determined under § 846(c) and the
appropriate loss payment pattern to the
amount of unpaid losses as measured at
the end of the tax year.
Section 846(d) directs the Secretary to
use the most recent aggregate loss pay-
ment data of property and casualty insur-
ance companies to determine and publish
a loss payment pattern for each line of
business every five years. This payment
pattern is used to discount unpaid losses
for the accident year ending with a deter-
mination year and for each of the four
succeeding accident years.
Section 846(e) allows a taxpayer to
make an election in each determination
year to use its own historical payment pat-
tern instead of the Secretary’s tables. This
election does not apply to any interna-
tional insurance or reinsurance line of
business.
Section 846(f)(4) defines the term “line
of business” as a category for the report-
ing of loss payment patterns on the annual
statement for fire and casualty companies
approved by the National Association of
Insurance Commissioners (NAIC), except
that the multiple peril lines shall be
treated as a single line of business. Sec-
tion 846(f)(5) states that the term “multi-
ple peril lines” means the lines of busi-
ness relating to farmowners multiple
peril, homeowners multiple peril, com-
mercial multiple peril, ocean marine, air-
craft (all perils) and boiler and machinery.
.02 Pursuant to § 846(d), the Secretary
has determined a loss payment pattern for
each property and casualty line of busi-
ness for the 1997 determination year that,
pursuant to § 846(d)(1), must be applied
through the 2001 accident year. The loss
payment patterns for the 1997 determina-
tion year are based on the aggregate in-
dustry loss payment experience as re-
ported on the 1995 annual statements
filed by property and casualty insurance
companies and compiled by A.M. Best
and Co.
.03 The loss payment patterns for the
1997 determination year are based on the
aggregate loss payment information re-
ported on the 1995 annual statements of
property and casualty insurance compa-
nies. The tables are now arranged in al-
phabetical order. Following is an addi-
tional explanation of some of the tables.
(1) NAIC changes in lines of business.
The NAIC has changed the reporting of
unpaid loss experience on the annual
statement for fire and casualty insurance
companies. These changes are reflected
in the lines of business set forth below.
(2) Treatment of Multiple Peril Lines.
Section 846(f)(4) defines the term “line of
business” and states that the multiple peril
lines are to be treated as a single line of
business. The term “multiple peril lines”
means lines of business relating to far-
mowners multiple peril, homeowners mul-
tiple peril, commercial multiple peril,
ocean marine, aircraft (all perils) and
boiler and machinery. On the 1990 annual
statement the multiple peril line was repre-
sented by the following three lines:
Homeowners/Farmowners; Commercial
Multiple Peril; and Special Liability
(Ocean Marine, Aircraft (all Perils), Boiler
and Machinery. On the 1995 annual state-
ment, the multiple peril lines continue to
be represented by the same three lines.
Revenue Procedure 92–47, 1992–2
C.B. 980, prescribed the loss payment
patterns and discount factors for the 1992
determination year. In that revenue pro-
cedure, the loss payment patterns that
were used followed the changes made to
the 1990 annual statement, including re-
porting the multiple peril lines as three
separate lines of business. Subsequent
revenue procedures did the same. See
Rev. Proc. 93–29, 1993–2 C.B. 344, for
the 1993 accident year; Rev. Proc. 94–47,
1994–2 C.B. 688, for the 1994 accident
year; Rev. Proc. 95–40, 1995–2 C.B. 402,
for the 1995 accident year; and Rev. Proc.
96–44, 1996–2 C.B. 330, for the 1996 ac-
cident year.
Because § 846(f)(4) requires that the
multiple peril lines be treated as a single
line of business, the lines of business that
are shown on the 1995 annual statement
as Homeowners/Farmowners; Commer-
cial Multiple Peril; and Special Liability
(Ocean Marine, Aircraft (all Perils),
Boiler and Machinery) are merged in this
revenue procedure as one multiple peril
line of business. The merged line is enti-
tled “Multiple Peril Lines (Homeown-
ers/Farmowners Multiple Peril, Commer-
cial Multiple Peril, and Special Liability
(Ocean Marine, Aircraft (All Perils),
Boiler and Machinery)).”
(3) Factors to be used when tables indi-
cate loss fully paid.In many situations,
losses are deemed fully paid under the
Secretary’s table prior to AY+14, and no
discount factor is shown for AY+14 and
earlier accident years. If taxpayers have
unpaid losses relating to an accident year
which is older than the last accident year
for which a discount factor is presented in
the Secretary’s table, those unpaid losses
should be discounted using the discount
factor for the last accident year in the Sec-
retary’s table.
SEC. 3. SCOPE
This revenue procedure applies to any
taxpayer that is required to discount un-
paid losses under section 846 for a line of
business using the discount factors pub-
lished by Secretary.
SEC. 4. TABLES OF DISCOUNT
FACTORS
.01 The following tables present sepa-
rately for each line of business the dis-
count factors under section 846 of the

Code for accident year 1997. All the dis-
count factors presented in this section
were determined using the applicable in-
terest rate under § 846(c) for 1997, 6.33
percent, and by assuming all loss pay-
ments occur in the middle of the calendar
year.
.02 If the groupings of individual lines
of business on the annual statement
change, taxpayers must discount the un-
paid losses on the resulting line of busi-
ness in accordance with the discounting
patterns that would have applied to those
unpaid losses based on their classification
on the 1995 annual statement.
January 26, 1998101998–4 I.R.B.
.03 Tables
Accident and Health (OtherThan Disability Income orCredit Disability Insurance)
The discount factor for all years equals 96.9777 percent.
Auto Physical Damage
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 089.943089.943010.05709.700696.4556
AY+ 199.38149.43840.61860.582194.0911
AY+ 2N/A0.30930.30930.300096.9777
The discount factor for AY+3 and subsequent years equals 96.9777 percent.
Commercial Auto/Truck Liability/Medical
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 025.807525.807574.192564.895687.4691
AY+ 149.879324.071850.120744.181488.1501
AY+ 267.659217.779932.340828.644188.5696
AY+ 379.771112.111920.228917.967988.8231
AY+ 488.21328.442111.786810.400188.2353
AY+ 593.17784.96466.82225.939187.0558
AY+ 695.96232.78454.03773.443885.2909
AY+ 797.00911.04682.99092.582386.3405
AY+ 897.57190.56282.42812.165489.1841
AY+ 998.21910.64711.78091.635291.8184
AY+10N/A0.64711.13381.071594.4995
AY+11N/A0.64710.48670.472096.9777
The discount factor for AY+12 and subsequent years equals 96.9777 percent.

1998–4 I.R.B11January 26, 1998
Composite Discount Factors
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 035.461135.461164.538955.167185.4789
AY+ 159.144923.683840.855134.237383.8018
AY+ 270.822011.677129.178024.363583.4996
AY+ 381.901911.079918.098114.480680.0114
AY+ 486.36884.466913.631210.791179.1644
AY+ 590.04973.68099.9503 7.678577.1686
AY+ 692.74882.69917.25125.381374.2131
AY+ 793.82591.07716.17414.611374.6881
AY+ 894.24150.41565.75854.474777.7054
AY+ 994.85680.61535.14324.123480.1725
AY+10N/A0.61534.52793.749982.8190
AY+11N/A0.61533.91253.352885.6937
AY+12N/A0.61533.29722.930588.8789
AY+13N/A0.61532.68192.481592.5291
AY+14N/A0.61532.06652.004196.9777
The discount factor for AY+15 and subsequent years equals 96.9777 percent.
Fidelity/Surety
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 024.154024.154075.846070.081892.4001
AY+ 159.096134.942140.903938.487094.0911
AY+ 2N/A20.452020.452019.833996.9777
The discount factor for AY+3 and subsequent years equals 96.9777 percent.
Financial Guaranty/Mortgage Guaranty
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 09.25139.251390.748783.810192.3540
AY+ 150.565941.314649.434146.513194.0911
AY+ 2N/A24.717124.717123.970096.9777
The discount factor for AY+3 and subsequent years equals 96.9777 percent.

International (Composite)
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 035.461135.461164.538955.167185.4789
AY+ 159.144923.683840.855134.237383.8018
AY+ 270.822011.677129.178024.363583.4996
AY+ 381.901911.079918.098114.480680.0114
AY+ 486.36884.466913.631210.791179.1644
AY+ 590.04973.68099.9503 7.678577.1686
AY+ 692.74882.69917.25125.381374.2131
AY+ 793.82591.07716.17414.611374.6881
AY+ 894.24150.41565.75854.474777.7054
AY+ 994.85680.61535.14324.123480.1725
AY+10N/A0.61534.52793.749982.8190
AY+11N/A0.61533.91253.352885.6937
AY+12N/A0.61533.29722.930588.8789
AY+13N/A0.61532.68192.481592.5291
AY+14N/A0.61532.06652.004196.9777
The discount factor for AY+15 and subsequent years equals 96.9777 percent.
Medical Malpractice — Claims-Made
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 06.38996.389993.610176.701681.9372
AY+ 124.001117.611275.998963.396783.4179
AY+ 242.697018.695957.303048.131283.9942
AY+ 358.061015.364041.939035.335184.2535
AY+ 469.665311.604330.334725.605884.4110
AY+ 575.60335.938024.396721.103686.5019
AY+ 681.87866.275318.121415.968688.1202
AY+ 787.85395.975312.146110.817989.0649
AY+ 889.52071.666810.47939.783993.3644
AY+ 994.30254.78185.69755.472496.0499
AY+10N/A4.78180.91570.888096.9777
The discount factor for AY+11 and subsequent years equals 96.9777 percent.
January 26, 1998121998–4 I.R.B.

1998–4 I.R.B13January 26, 1998
Medical Malpractice — Occurrence
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 02.12392.123997.876171.347672.8958
AY+ 16.48314.359293.516971.368976.3165
AY+ 215.59879.115684.401366.486978.7747
AY+ 331.906216.307568.093853.879779.1257
AY+ 445.093113.186854.906943.692579.5755
AY+ 550.07514.982149.924941.320982.7662
AY+ 660.972810.897639.027232.699383.7858
AY+ 769.21388.241130.786226.271285.3345
AY+ 872.86583.651927.134224.168589.0700
AY+ 980.00057.134719.999518.341291.7085
AY+10N/A7.134712.864812.145294.4063
AY+11N/A7.13475.73005.556996.9777
The discount factor for AY+12 and subsequent years equals 96.9777 percent.
Miscellaneous Casualty
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 077.666977.666922.333121.154694.7229
AY+ 194.067316.40045.93275.582294.0911
AY+ 2N/A2.96642.96642.876796.9777
The discount factor for AY+3 and subsequent years equals 96.9777 percent.
Multiple Peril Lines (Homeowners/Farmowners Multiple Peril, Commercial Multiple Peril, and Special Liability (Ocean
Marine, Aircraft (All Perils), Boilerand Machinery))
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 055.958755.958744.041339.031788.6251
AY+ 177.893921.935222.106118.883685.4224
AY+ 284.00836.114415.991713.773986.1318
AY+ 391.31887.31058.68127.107581.8723
AY+ 492.16700.84827.83306.682785.3156
AY+ 594.38382.21685.61624.819985.8215
AY+ 696.49592.11213.50412.947184.1041
AY+ 797.36700.87122.63302.235484.8988
AY+ 898.00340.63641.99661.720786.1793
AY+ 998.40590.40251.59411.414688.7355
AY+10N/A0.40251.19161.089191.3925
AY+11N/A0.40250.78920.743094.1488
AY+12N/A0.40250.38670.375096.9777
The discount factor for AY+13 and subsequent years equals 96.9777 percent.

January 26, 1998141998–4 I.R.B.
Other(Including Credit)
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 066.741866.741833.258231.342894.2407
AY+ 189.275522.533710.724510.090894.0911
AY+ 2N/A5.36225.36225.200296.9777
The discount factor for AY+3 and subsequent years equals 96.9777 percent.
OtherLiability — Claims-Made
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 010.244010.244089.756073.717882.1313
AY+ 129.376319.132370.623758.655683.0537
AY+ 244.411115.034955.588946.865184.3066
AY+ 367.819723.408632.180325.693579.8425
AY+ 473.47535.655526.524721.488181.0117
AY+ 578.86045.385221.139617.295381.8150
AY+ 683.50274.642216.497313.603282.4571
AY+ 784.06760.564915.932413.881887.1292
AY+ 885.21291.145314.787113.579591.8334
AY+ 990.59925.38639.40088.884994.5123
AY+10N/A5.38634.01453.893296.9777
The discount factor for AY+11 and subsequent years equals 96.9777 percent.
OtherLiability — Occurrence
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 013.575113.575186.424967.667878.2967
AY+ 126.396412.821373.603658.730479.7927
AY+ 240.272513.876159.727548.139480.5984
AY+ 355.456615.184144.543435.529379.7634
AY+ 465.33099.874234.669127.596479.5992
AY+ 574.06478.733925.935320.337278.4151
AY+ 680.90906.844219.091014.567076.3027
AY+ 784.36223.453215.637811.928276.2781
AY+ 884.61630.254215.383712.421280.7428
AY+ 986.73112.114713.268911.026883.1026
AY+10N/A2.114711.15429.544285.5659
AY+11N/A2.11479.03957.967788.1435
AY+12N/A2.11476.92476.291490.8543
AY+13N/A2.11474.81004.509093.7427
AY+14N/A2.11472.69532.613896.9777

1998–4 I.R.B15January 26, 1998
The discount factor for AY+15 and subsequent years equals 96.9777 percent.
Private PassengerAuto Liability/Medical
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 037.933937.933962.066156.240590.6139
AY+ 167.704429.770532.295629.102390.1122
AY+ 281.531613.827218.468416.686490.3507
AY+ 389.88988.358310.11029.123990.2445
AY+ 494.65314.76335.34694.789789.5789
AY+ 597.12652.47342.87352.542488.4775
AY+ 698.45871.33221.54131.329686.2663
AY+ 798.98110.52241.01890.875185.8870
AY+ 899.23300.25190.76700.670787.4508
AY+ 999.40670.17370.59330.534190.0213
AY+10N/A0.17370.41960.388892.6584
AY+11N/A0.17370.24600.234495.2808
AY+12N/A0.17370.07230.070196.9777
The discount factor for AY+13 and subsequent years equals 96.9777 percent.
Products Liability — Claims-Made
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 04.97504.975095.025075.300579.2428
AY+ 115.107210.132284.892869.619182.0082
AY+ 230.956015.848869.044057.683283.5456
AY+ 338.24207.286061.758053.821587.1490
AY+ 468.610130.368131.389925.913882.5548
AY+ 578.59669.986521.403417.256580.6250
AY+ 688.39719.800511.60298.242971.0419
AY+ 793.29574.89866.70433.713555.3889
AY+ 888.3815–4.914211.61859.015877.5989
AY+ 989.61051.229010.38958.319280.0734
AY+10N/A1.22909.16047.578582.7304
AY+11N/A1.22907.93146.790885.6198
AY+12N/A1.22906.70245.953488.8249
AY+13N/A1.22905.47335.062992.5009
AY+14N/A1.22904.24434.116096.9777
The discount factor for AY+15 and subsequent years equals 96.9777 percent.

January 26, 1998161998–4 I.R.B.
Products Liability — Occurrence
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 09.06539.065390.934768.490075.3178
AY+ 114.90355.838285.096566.805278.5053
AY+ 229.259114.355570.740956.231179.4888
AY+ 345.646216.387154.353842.892778.9139
AY+ 457.594511.948342.405533.287278.4972
AY+ 563.86346.268936.136628.930080.0572
AY+ 675.226611.363224.773419.043976.8723
AY+ 778.26793.041321.732117.113378.7466
AY+ 878.1898–0.078121.810218.277183.8007
AY+ 981.87223.682518.127815.636886.2591
AY+10N/A3.682514.445312.829488.8138
AY+11N/A3.682510.76289.844391.4657
AY+12N/A3.68257.08036.670294.2072
AY+13N/A3.68253.39793.295296.9777
The discount factor for AY+14 and subsequent years equals 96.9777 percent.
Reinsurance A(Nonproportional Property)
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 027.166827.166872.833264.583088.6725
AY+ 168.700841.534031.299225.842782.5667
AY+ 270.03621.335429.963826.101587.1103
AY+ 387.533817.497612.46629.710977.8976
AY+ 490.21322.67949.78687.562777.2743
AY+ 591.37511.16198.62496.843379.3434
AY+ 694.38453.00955.61554.173274.3169
AY+ 793.3293–1.05526.67075.525582.8327
AY+ 8N/A1.03875.63204.804285.3021
AY+ 9N/A1.03874.59324.037287.8942
AY+10N/A1.03873.55453.221690.6354
AY+11N/A1.03872.51582.354593.5882
AY+12N/A1.03871.47711.432496.9777
The discount factor for AY+13 and subsequent years equals 96.9777 percent.

Reinsurance B (Nonproportional Liability)
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 06.69626.696293.303868.434373.3457
AY+ 122.394415.698277.605656.578872.9055
AY+ 232.648610.254267.351449.586473.6235
AY+ 350.223417.574849.776634.602769.5161
AY+ 453.58393.360546.416133.327971.8024
AY+ 555.68382.099944.316233.272175.0790
AY+ 663.61447.930636.385627.200574.7564
AY+ 766.42112.806633.578926.028277.5135
AY+ 8N/A2.806630.772324.781780.5325
AY+ 9N/A2.806627.965623.456383.8753
AY+10N/A2.806625.159022.046987.6304
AY+11N/A2.806622.352420.548491.9294
AY+12N/A2.806619.545718.955096.9777
The discount factor for AY+13 and subsequent years equals 96.9777 percent.
Reinsurance C (Financial Lines)
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 011.462211.462288.537876.839886.7875
AY+ 144.579133.116955.420947.554785.8065
AY+ 263.913419.334336.086630.628184.8740
AY+ 365.61851.705134.381530.808689.6082
AY+ 479.977814.359320.022217.952089.6607
AY+ 588.91528.937411.08489.872589.0632
AY+ 691.24902.33388.75108.090992.4566
AY+ 794.76453.51555.23554.978095.0811
AY+ 8N/A3.51551.72001.668096.9777
The discount factor for AY+9 and subsequent years equals 96.9777 percent.
Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Glass, Burglary and Theft)
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 057.489557.489542.510540.421095.0847
AY+ 190.519333.02979.48078.920594.0911
AY+ 2N/A4.74044.74044.597196.9777
The discount factor for AY+3 and subsequent years equals 96.9777 percent.
1998–4 I.R.B17January 26, 1998

SEC. 5. EFFECTIVE DATE
This revenue procedure is effective for
taxable years beginning after December
31, 1996.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Katherine A. Hossofsky of
the Office of Assistant Chief Counsel (Fi-
nancial Institutions & Products). For fur-
ther information regarding this revenue
procedure, contact Ms. Hossofsky on
(202) 622-3970 (not a toll-free call).
26 CFR 601.201: Rulings and determination letters.
(Also Part I, §§ 832, 846; 1.832–4, 1.846–1.)
Rev. Proc. 98–12
SECTION 1. PURPOSE
This revenue procedure prescribes the
salvage discount factors for the 1997 acci-
dent year. These factors will be used for
computing discounted estimated salvage
recoverable under § 832 of the Internal
Revenue Code.
SEC. 2. BACKGROUND
Section 832(b)(5)(A) requires that all
estimated salvage recoverable (including
that which cannot be treated as an asset
for state accounting purposes) be taken
into account in computing the deduction
for losses incurred. Under § 832(b)-
(5)(A), paid losses are to be reduced by
salvage and reinsurance recovered during
the taxable year. This amount is adjusted
to reflect changes in discounted unpaid
losses on nonlife insurance contracts and
in unpaid losses on life insurance con-
tract. An adjustment is then made to re-
flect any changes in discounted estimated
salvage recoverable and in reinsurance re-
coverable.
Pursuant to § 832(b), the amount of es-
timated salvage is determined on a dis-
counted basis in accordance with proce-
dures established by the Secretary.
SEC. 3. SCOPE
This revenue procedure applies to any
taxpayer that is required to discount esti-
mated salvage recoverable under § 832.
SEC. 4. APPLICATION
.01 The following tables present sepa-
rately for each line of business the dis-
count factors under § 832 for the 1997 ac-
cident year. All the discount factors
presented in this section were determined
using the applicable interest rate under
§ 846(c) for 1997, which is 6.33 percent,
and by assuming all estimated salvage is
recovered in the middle of each calendar
year. The discount factors for the 1997
accident year have been adjusted to take
into account changes in the groupings of
the lines of business on the annual state-
ment. In addition, see Rev. Proc. 98–11,
page 9, for an explanation of the treat-
ment of the multiple peril lines.
.02 These tables must be used by tax-
payers irrespective of whether they
elected to discount unpaid losses using
their own historical experience under
§ 846.
.03 Tables.
Accident and Health (OtherThan
Disability Income orCredit Disability
Insurance)
The discount factor for all years equals
96.9777 percent.
Auto Physical Damage
Discount
Tax YearFactors
(%)
AY+ 095.5498
AY+ 194.0911
AY+ 296.9777
January 26, 1998181998–4 I.R.B.
Workers’Compensation
Discounted
CumulativeEstimatedUnpaidUnpaid
LossesLosses PaidLosses atLosses atDiscount
Tax YearPaidEach YearYear EndYear EndFactor
(%)(%)(%)(%)(%)
AY+ 023.646123.646176.353962.154481.4030
AY+ 144.816621.170555.183444.258580.2025
AY+ 257.965213.148642.034833.501679.6998
AY+ 372.054214.088927.945821.094375.4828
AY+ 480.55428.500019.445813.664670.2704
AY+ 584.88764.333415.112410.061166.5754
AY+ 687.11732.229712.88278.398865.1946
AY+ 788.26471.147311.73537.747366.0173
AY+ 888.54040.275711.45967.953469.4041
AY+ 988.80620.265811.19388.182873.1011
AY+10N/A0.265810.92798.426677.1108
AY+11N/A0.265810.66218.685981.4653
AY+12N/A0.265810.39638.961686.2002
AY+13N/A0.265810.13049.254891.3560
AY+14N/A0.26589.86469.566596.9777
The discount factor for AY+15 and subsequent years equals 96.9777 percent.

The discount factor for AY+3 and subse-
quent years equals 96.9777 percent.
Commercial Auto/Truck Liability/
Medical
Discount
Tax YearFactors
(%)
AY+ 088.0553
AY+ 187.1995
AY+ 288.9446
AY+ 388.2138
AY+ 488.0377
AY+ 590.4504
AY+ 685.6730
AY+ 791.3816
AY+ 889.7918
AY+ 992.4220
AY+1095.0477
AY+1196.9777
The discount factor for AY+12 and subse-
quent years equals 96.9777 percent.
Composite Discount Factors
Discount
Tax YearFactors
(%)
AY+ 085.5529
AY+ 183.9261
AY+ 283.4985
AY+ 383.3876
AY+ 484.1370
AY+ 584.7213
AY+ 684.7741
AY+ 784.8647
AY+ 887.7469
AY+ 990.3325
AY+1092.9868
AY+1195.6242
AY+1296.9777
The discount factor for AY+13 and subse-
quent years equals 96.9777 percent.
Fidelity/Surety
Discount
Tax YearFactors
(%)
AY+ 092.7512
AY+ 194.0911
AY+ 296.9777
The discount factor for AY+3 and subse-
quent years equals 96.9777 percent.
Financial Guaranty/Mortgage
Guaranty
Discount
Tax YearFactors
(%)
AY+ 094.6118
AY+ 194.0911
AY+ 296.9777
The discount factor for AY+3 and subse-
quent years equals 96.9777 percent.
International (Composite)
Discount
Tax YearFactors
(%)
AY+ 085.5529
AY+ 183.9261
AY+ 283.4985
AY+ 383.3876
AY+ 484.1370
AY+ 584.7213
AY+ 684.7741
AY+ 784.8647
AY+ 887.7469
AY+ 990.3325
AY+1092.9868
AY+1195.6242
AY+1296.9777
The discount factor for AY+13 and subse-
quent years equals 96.9777 percent.
Medical Malpractice — Claims-Made
Discount
Tax YearFactors
(%)
AY+ 069.7444
AY+ 172.4408
AY+ 270.9597
AY+ 370.2975
AY+ 473.8865
AY+ 572.2143
AY+ 682.0526
AY+ 791.3471
AY+ 896.2732
AY+ 996.9777
The discount factor for AY+10 and subse-
quent years equals 96.9777 percent.
Medical Malpractice — Occurrence
Discount
Tax YearFactors
(%)
AY+ 063.4849
AY+ 166.8754
AY+ 271.4631
AY+ 375.2927
AY+ 472.0433
AY+ 578.1594
AY+ 683.1757
AY+ 786.3387
AY+ 890.8773
AY+ 993.5843
AY+1096.3144
AY+1196.9777
The discount factor for AY+12 and subse-
quent years equals 96.9777 percent.
Miscellaneous Casualty
Discount
Tax YearFactors
(%)
AY+ 094.9505
AY+ 194.0911
AY+ 296.9777
The discount factor for AY+3 and subse-
quent years equals 96.9777 percent.
Multiple Peril Lines (Homeowners/
Farmowners Multiple Peril, Commer-
cial Multiple Peril, and Special Liabil-
ity (Ocean Marine, Aircraft (All Per-
ils), Boilerand Machinery))
Discount
Tax YearFactors
(%)
AY+ 088.1442
AY+ 187.0828
AY+ 287.8621
AY+ 387.5115
AY+ 488.6539
AY+ 590.1258
AY+ 690.1198
AY+ 789.0542
AY+ 891.5003
AY+ 994.2350
AY+1096.9777
1998–4 I.R.B19January 26, 1998

January 26, 1998201998–4 I.R.B.
The discount factor for AY+11 and subse-
quent years equals 96.9777 percent.
Other(Including Credit)
Discount
Tax YearFactors
(%)
AY+ 096.0160
AY+ 194.0911
AY+ 296.9777
The discount factor for AY+3 and subse-
quent years equals 96.9777 percent.
OtherLiability — Claims-Made
Discount
Tax YearFactors
(%)
AY+ 077.1913
AY+ 182.7511
AY+ 281.7452
AY+ 379.3754
AY+ 482.4055
AY+ 587.1445
AY+ 685.6308
AY+ 791.3857
AY+ 893.5459
AY+ 996.2673
AY+1096.9777
The discount factor for AY+11 and subse-
quent years equals 96.9777 percent.
OtherLiability — Occurrence
Discount
Tax YearFactors
(%)
AY+ 078.1808
AY+ 178.9149
AY+ 281.3348
AY+ 383.3371
AY+ 484.6107
AY+ 582.1372
AY+ 686.2972
AY+ 788.2925
AY+ 892.4786
AY+ 995.1025
AY+1096.9777
The discount factor for AY+11 and subse-
quent years equals 96.9777 percent.
Private PassengerAuto Liability/Medical
Discount
Tax YearFactors
(%)
AY+ 091.4258
AY+ 190.8687
AY+ 289.9218
AY+ 389.5302
AY+ 489.0574
AY+ 589.5204
AY+ 688.2913
AY+ 789.0287
AY+ 889.7296
AY+ 992.3587
AY+1094.9871
AY+1196.9777
The discount factor for AY+12 and subse-
quent years equals 96.9777 percent.
Products Liability — Claims-Made
Discount
Tax YearFactors
(%)
AY+ 078.6232
AY+ 180.6940
AY+ 285.2594
AY+ 385.1672
AY+ 480.6815
AY+ 587.8085
AY+ 680.3554
AY+ 787.9607
AY+ 896.6992
AY+ 996.9777
The discount factor for AY+10 and subse-
quent years equals 96.9777 percent.
Products Liability — Occurrence
Discount
Tax YearFactors
(%)
AY+ 075.1149
AY+ 177.7623
AY+ 276.1078
AY+ 377.4296
AY+ 479.2166
AY+ 578.5502
AY+ 679.9464
AY+ 771.9235
AY+ 877.4789
AY+ 979.9620
AY+1082.6312
AY+1185.5373
AY+1288.7650
AY+1392.4698
AY+1496.9777
The discount factor for AY+15 and subse-
quent years equals 96.9777 percent.
Reinsurance A(Nonproportional
Property)
Discount
Tax YearFactors
(%)
AY+ 086.2624
AY+ 189.5106
AY+ 292.2926
AY+ 391.6380
AY+ 478.5001
AY+ 594.6795
AY+ 693.2638
AY+ 795.9330
AY+ 896.9777
The discount factor for AY+9 and subse-
quent years equals 96.9777 percent.
Reinsurance B (Nonproportional
Liability)
Discount
Tax YearFactors
(%)
AY+ 074.1864
AY+ 176.4932
AY+ 277.2282
AY+ 376.6129
AY+ 479.1554
AY+ 574.1193
AY+ 675.9021
AY+ 783.5464
AY+ 886.0047
AY+ 988.5652
AY+1091.2350
AY+1194.0259
AY+1296.9777
The discount factor for AY+13 and subse-
quent years equals 96.9777 percent.

1998–4 I.R.B21January 26, 1998
Reinsurance C (Financial Lines)
Discount
Tax YearFactors
(%)
AY+ 080.6765
AY+ 183.1043
AY+ 286.4423
AY+ 392.4514
AY+ 490.9915
AY+ 592.9165
AY+ 689.3489
AY+ 796.8614
AY+ 896.9777
The discount factor for AY+9 and subse-
quent years equals 96.9777 percent.
Special Property (Fire, Allied Lines,
Inland Marine, Earthquake, Glass,
Burglary and Theft)
Discount
Tax YearFactors
(%)
AY+ 092.0611
AY+ 194.0911
AY+ 296.9777
The discount factor for AY+3 and subse-
quent years equals 96.9777 percent.
Workers’Compensation
Discount
Tax YearFactors
(%)
AY+ 078.0209
AY+ 180.4915
AY+ 282.4316
AY+ 384.0275
AY+ 484.1405
AY+ 584.3058
AY+ 685.5062
AY+ 786.2679
AY+ 888.7269
AY+ 991.3845
AY+1094.1425
AY+1196.9777
The discount factor for AY+12 and subse-
quent years equals 96.9777 percent.
SEC. 5. EFFECTIVE DATE
This revenue procedure is effective for
taxable years beginning after December
31, 1996.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Katherine A. Hossofsky of
the Office of Assistant Chief Counsel (Fi-
nancial Institutions & Products). For fur-
ther information regarding this revenue
procedure, contact Ms. Hossofsky on
(202) 622-3970 (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, § 646.)
Rev. Proc. 98–13
SECTION 1. PURPOSE
Section 1305 of the Taxpayer Relief
Act of 1997, Pub. L. No. 105–34, 111
Stat. 788 (1997) (Act) added § 646
1
to the
Internal Revenue Code, which provides
an election to have certain revocable
trusts be treated and taxed as part of an es-
tate. This revenue procedure provides the
procedures and requirements for making
the § 646 election.
SECTION 2. BACKGROUND
Both estates and trusts can function to
settle the affairs of a decedent and distrib-
ute assets to heirs. In the case of a revo-
cable inter vivos trust, the grantor trans-
fers property to a trust that is revocable
during the grantor’s lifetime. When the
grantor dies, the power to revoke ceases
and the trustee performs the settlement
functions typically performed by an estate
executor. H.R. Conf. Rep. No. 220, 105th
Cong., 1st Sess. at 711 (1997).
Section 646(a) provides that if both the
executor (if any) of an estate and the
trustee of a qualified revocable trust elect
the treatment provided in § 646, such trust
shall be treated and taxed for income tax
purposes as part of such estate (and not as
a separate trust) for all taxable years of
the estate ending after the date of the
decedent’s death and before the applica-
ble date, as defined in § 646(b)(2).
Section 646(b)(1) provides that the
term “qualified revocable trust” means
any trust (or portion thereof) that was
treated under § 676 as owned by the dece-
dent by reason of a power in the decedent
to revoke (determined without regard to
§ 672(e)).
Section 646(b)(2) provides that the
term “applicable date” means—(A) if no
estate tax return is required to be filed, the
date that is 2 years after the date of the
decedent’s death, and (B) if an estate tax
return is required to be filed, the date that
is 6 months after the date of the final de-
termination of the estate tax liability.
Section 646(c) provides that the elec-
tion under § 646(a) shall be made not later
than the time prescribed for filing the in-
come tax return for the first taxable year
of the estate (determined with regard to
extensions), and once made, shall be ir-
revocable.
SECTION 3. PROCEDURES AND
REQUIREMENTS FOR MAKING THE
§ 646 ELECTION
.01 Required Statement.
To make the election, a required state-
ment must be attached to a Form 1041,
U.S. Income Tax Return for Estates and
Trusts, at the time and in the manner de-
scribed in this revenue procedure. The re-
quired statement must:
(1) Identify the election as an election
made under § 646;
(2) Contain the name, address, date of
death, and taxpayer identification number
(TIN) of the decedent;
(3) Contain the qualified revocable
trust’s name, address, and TIN. If the
trust does not have a TIN because the
trust was reporting pursuant to § 1.671–
4(b)(2)(i)(A) of the Income Tax Regula-
tions, the trustee must obtain a TIN unless
a Form 1041 does not have to be filed
under SECTION 3.03. See§ 301.6109–
1(a)(2) of the Procedure and Administra-
tion Regulations;
(4) Contain the estate’s name, address,
and TIN;
1
H.R. 2676, 105th Cong. § 612 (1997) would re-
designate § 646 as § 645. If the redesignation is en-
acted, all references in this revenue procedure to
§ 646 shall be deemed to be references to § 645.

(5) Provide a representation that as of
the date of the decedent’s death, the trust
for which the election is being made, or a
portion thereof, was treated under § 676
as owned by the decedent of the estate re-
ferred to in § 646(a) by reason of a power
in the decedent to revoke (determined
without regard to § 672(e)); and
(6) Be signed and dated by both an ex-
ecutor or administrator of the estate and a
trustee of the qualified revocable trust. If
there is more than one trustee, only one
must sign the required statement, unless
otherwise required by the governing in-
strument or by local law. Similarly, if
there is more than one executor, only one
must sign the required statement, unless
otherwise required by the governing in-
strument or by local law. If there is no
probate estate and, hence, no executor or
administrator, the election may still be
made. In that case, a TIN must still be ob-
tained for the estate and only a trustee of
the qualified revocable trust must sign the
required statement; however, the required
statement must then include a representa-
tion that there is no executor or adminis-
trator and that neither an executor nor an
administrator will be appointed.
.02 Submission of the Required State-
ment.
The original required statement must
be attached to the Form 1041 filed for the
estate for its first taxable year. Addition-
ally, except as provided in SECTION
3.03, a copy of the required statement
must be attached to a Form 1041 filed for
the trust for the taxable year ending after
the date of the decedent’s death. The
election is considered made when the
original required statement is attached to
the Form 1041 filed for the estate’s first
taxable year, or when a copy of the re-
quired statement is attached to the Form
1041 filed for the trust, whichever occurs
first. Once made, the election is effective
from the date of the decedent’s death.
If the election is made, then the items
of the trust, including income, deductions
and credits, that are attributable to the
qualified revocable trust for the period
subsequent to the decedent’s death must
be excluded from the Form 1041 filed for
the trust for the taxable year ending after
the date of the decedent’s death and must
be reported on the estate’s Form 1041. If
there is no executor or administrator and
neither one will be appointed, a trustee of
the qualified revocable trust must sign
every Form 1041 filed for the estate.
If a Form 1041 reporting the items of
the trust has already been filed for the
trust for its taxable year ending after the
date of the decedent’s death without a
copy of the required statement attached to
the form, then the trust must file an
amended Form 1041 and attach a copy of
the required statement to the amended
form. The items of the trust that are at-
tributable to the qualified revocable trust
for the period subsequent to the dece-
dent’s death must be excluded from the
amended Form 1041 and reported on the
estate’s Form 1041.
.03 AForm 1041 Does Not Have to be
Filed for Certain Trusts.
The trust does not have to file a Form
1041 for its taxable year ending after the
date of the decedent’s death if the follow-
ing conditions are met: (1) The Form
1041 for the estate’s first taxable year is
filed before the due date for filing a Form
1041 for the trust for the taxable year end-
ing after the date of the decedent’s death;
(2) The trust items attributable to the
decedent are reported pursuant to § 1.671–
4(b)(2)(i)(A) or (B); and (3) The entire
trust is a qualified revocable trust.
SECTION 4. EFFECTIVE DATE
Section 646 applies with respect to es-
tates of decedents dying after August 5,
1997, the date of enactment of the Act.
This revenue procedure applies to elec-
tions made after August 5, 1997.
SECTION 5. PAPERWORK
REDUCTION ACT
The collection of information con-
tained in this revenue procedure has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act (44
U.S.C. 3507) under control number
1545–1578.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless the col-
lection of information displays a valid
control number.
The collection of information in this
revenue procedure is in the section
headed Procedures and Requirements for
Making the § 646 Election. This informa-
tion is required to be submitted in order to
make the § 646 election. The likely re-
spondents are trusts and estates.
The estimated total reporting burden is
5,000 hours.
The estimated average burden per re-
spondent is .5 hours. The estimated num-
ber of respondents is 10,000.
The estimated frequency of responses
is twice.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mater-
ial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Eliana Dolgoff of the Office
of Assistant Chief Counsel (Passthroughs
and Special Industries). For further infor-
mation regarding this revenue procedure,
contact Eliana Dolgoff at (202) 622-3060
(not a toll-free call).
26 CFR 601.601: Rules and regulations.
(Also Part I, §§ 401; 1.401(b)–1.)
Rev. Proc. 98–14
SECTION 1. PURPOSE
.01 This revenue procedure opens the
Internal Revenue Service’s determination
letter program for qualified plans that
seek to comply with the changes in the
qualification requirements made by the
Uruguay Round Agreements Act, Pub. L.
103–465 (GATT), and the Taxpayer Re-
lief Act of 1997, Pub. L. 105–34 (TRA
‘97), as well as those changes in the qual-
ification requirements made by the Small
Business Job Protection Act of 1996, Pub.
L. 104–188 (SBJPA) (including § 414(u)
and the Uniformed Services Employment
and Reemployment Rights Act of 1994,
Pub. L. 103–353 (USERRA)), that are ef-
fective before the first day of the first plan
year beginning on or after January 1,
1999. Beginning April 27, 1998, the Ser-
vice will consider these changes when it
reviews applications for determination of
the tax-qualified status of pension, profit-
sharing and stock bonus plans and appli-
cations for opinion and notification letters
January 26, 1998221998–4 I.R.B.

for pre-approved plans. This revenue pro-
cedure provides guidance to plan spon-
sors regarding this change in the Service’s
procedures.
.02 This revenue procedure also pro-
vides that the remedial amendment period
for amending plans for GATTand SBJPA,
which was described in Rev. Proc. 97–41,
1997–33 I.R.B. 51, will apply to plan
amendments that relate to TRA‘97. In
addition, this revenue procedure extends
the remedial amendment period under
Rev. Proc. 97–41 for amending govern-
mental plans to the extent the period
would otherwise end before the last day
of the last plan year beginning before Jan-
uary 1, 2001.
.03 Finally, this revenue procedure
clarifies that a plan will not satisfy any of
the nondiscrimination in amount safe har-
bors in the regulations under § 401(a)(4)
if the plan’s provisions reflecting the fam-
ily aggregation requirements of § 414(q)-
(6) or § 401(a)(17)(A), as in effect prior to
their repeal by SBJPA, continue to apply.
SECTION 2. BACKGROUND
.01 GATTand SBJPAmade a number
of changes to the plan qualification re-
quirements. Many of these changes are
already in effect for most plans while
other changes do not take effect until plan
years beginning after December 31, 1998
or December 31, 1999. TRA’97 also
made several changes to the qualification
requirements. The TRA’97 changes are
generally effective for plan years begin-
ning after December 31, 1997, but certain
changes are effective for plan years be-
ginning after the date of enactment of
TRA’97, August 5, 1997.
.02 In Rev. Proc. 97–41, the Service
provided a remedial amendment period
under § 401(b) with respect to certain
amendments for GATTand SBJPA. The
remedial amendment period generally
permits plan amendments to be made
retroactively effective if they are adopted
on or before the last day of the first plan
year beginning on or after January 1,
1999, and they relate to GATTand SBJPA
qualification changes that are effective
before the first day of that plan year. (In
the case of governmental plans, as de-
fined in § 414(d), the plan amendment
deadline is the later of (i) the first day of
the first plan year beginning on or after
January 1, 2000, or (ii) the last day of the
first plan year beginning on or after the
“1999 legislative date” (that is, the 90th
day after the opening of the first legisla-
tive session beginning on or after January
1, 1999, of the governing body with au-
thority to amend the plan, if that body
does not meet continuously).) Those
amendments that are required to be made
to retain qualified status as a result of
GATTand SBJPAqualification changes
must be made retroactively effective as of
the date on which the qualification change
became effective with respect to the plan.
Operational compliance prior to actual
amendment is required if the qualification
change is effective before the first day of
the first plan year beginning on or after
January 1, 1998 (or January 1, 2000, in
the case of a governmental plan). Those
amendments that are not required but that
amend plan provisions that are integrally
related to SBJPAqualification changes
may be made retroactively effective as of
the first day on which the plan was oper-
ated in accordance with the amended plan
provision.
.03 Rev. Proc. 98–6, 1998–1 I.R.B.
183, contains the Service’s general proce-
dures for employee plan determination
letter requests. Section 3.03 of Rev Proc.
98–6 states that until further notice is
given, determination letters, other than
those issued for terminating plans, will
not include consideration by the Service
of any amendments to the qualification
requirements made by TRA’97 or by
GATTor SBJPA, except for § 1432 and
§ 1454 of SBJPA, which amended
§ 401(a)(26) and § 414(n), respectively.
.04 Section 1431(b)(1) of SBJPAre-
pealed the family aggregation require-
ments of § 414(q)(6), effective for years
beginning after December 31, 1996. Sec-
tion 1431(b)(2) of SBJPAalso repealed
the family aggregation requirement that
formerly applied under § 401(a)(17)(A),
effective for years beginning after De-
cember 31, 1996. Prior to its repeal,
§ 414(q)(6) required the compensation
and benefits of certain family members of
a highly compensated employee who was
a 5-percent owner or among the ten high-
est paid employees of the employer to be
combined with the compensation and
benefits of the highly compensated em-
ployee. The resulting family unit was
treated as one employee for purposes of
applying the nondiscrimination require-
ments of § 401(a)(4) to a plan. Section
401(a)(17)(A) provided similar rules with
respect to the application of the limitation
on compensation that may be taken into
account under a qualified plan.
SECTION 3. PROGRAM OPENING
.01 Applications for determination,
opinion, notification, and advisory letters
involving § 401(a) or § 403(a) that are
filed with the Service on or after April 27,
1998 will be reviewed taking into account
the changes in the qualification require-
ments made by GATTand TRA’97, as
well as those changes in the qualification
requirements made by SBJPAthat are ef-
fective before the first day of the first plan
year beginning on or after January 1,
1999. However, except in the case of ter-
minating plans, applications for determi-
nation letters involving master or proto-
type (M&P) and regional prototype plans
that have not yet been amended to comply
with the changes in the qualification re-
quirements made by GATT, SBJPA, and
TRA’97 will be reviewed without taking
these changes into account.
.02 Until further notice, the Service’s
review of applications for determination
and other letters will not consider changes
in the qualification requirements made by
SBJPAthat are first effective in a plan
year beginning after December 31, 1998.
Thus, for example, the Service’s review
will not consider the § 401(k)(12) and
§ 401(m)(11) safe harbors described in
§ 1433(a) and (b) of SBJPA, which are ef-
fective for plan years beginning after De-
cember 31, 1998, or the repeal of § 415(e)
by § 1452(a) of SBJPA, which is effective
for limitation years beginning after De-
cember 31, 1999. Nevertheless, the re-
view will take into account the changes to
§ 417(e) and § 415(b) made by § 767 of
GATTand § 1449 of SBJPA, even though
application of these changes may not be
required until the first plan (or limitation)
year beginning after December 31, 1999.
Although defined benefit plans that are
submitted for determination on or after
April 27, 1998 will be required to incor-
porate provisions that reflect the changes
to § 417(e) and § 415(b) made by GATT
and SBJPA, the application of such provi-
sions may be deferred under the plan to
the extent permitted by § 417(e)(3)(B)
and § 767(d)(3) of GATT(as amended by
§ 1449(a) of SBJPA), respectively. Like-
1998–4 I.R.B23January 26, 1998

wise, the vesting provisions of multiem-
ployer plans submitted on or after April
27, 1998 will have to reflect the repeal of
§ 411(a)(2)(C) by § 1442 of SBJPA, al-
though application of this change may be
deferred under the plan to the extent per-
mitted by § 1442(c) of SBJPA.
.03 Except as provided below, favor-
able letters that are issued with respect to
applications for determination or other
letters filed on or after April 27, 1998 will
contain a statement to the effect that the
determination (or opinion) takes into ac-
count the requirements of GATTand
TRA’97, as well as those requirements of
SBJPAthat are effective before the first
day of the first plan year beginning on or
after January 1, 1999.
.04 The statement described in the pre-
ceding paragraph will not be included in
determination letters issued with respect
to applications filed on Form 6406, Short
Form Application for Determination for
Minor Amendment of Employee Benefit
Plan.The statement described in the pre-
ceding paragraph also will not be in-
cluded in determination letters issued
with respect to applications filed by
adopters of M&Por regional prototype
plans on Form 5307, Application for De-
termination for Adopters of Master or
Prototype, Regional Prototype, or Volume
Submitter Plans, regardless of whether
the opinion or notification letter for the
plan contains such statement.The state-
ment described in the preceding para-
graph will be included in opinion and no-
tification letters issued with respect to
applications filed on Form 4461–B, Ap-
plication for Approval of Master or Pro-
totype Plan, or Regional Prototype
Plan/Mass Submitter Adopting Sponsor,
only if a letter containing such a statement
has been issued with respect to the mass
submitter’s plan.
SECTION 4. REMEDIAL
AMENDMENTPERIOD FOR
CHANGES IN PLAN
QUALIFICATION REQUIREMENTS
MADE BYTRA’97
.01 Section 1541 of TRA’97 contains
provisions relating to plan amendments
that are adopted as a result of TRA’97. If
§ 1541 applies to a plan amendment,
§ 1541(a) provides that the plan will be
treated as operated in accordance with its
terms and will not fail to satisfy the re-
quirements of § 411(d)(6) by reason of
the amendment. Section 1541 applies to a
plan amendment that is made pursuant to
a legislative change in the pension and
employee benefit provisions of TRA’97,
provided the following conditions are sat-
isfied. First, the plan amendment must be
adopted before the first day of the first
plan year beginning on or after January 1,
1999 (2001, in the case of a governmental
plan, as defined in § 414(d)). Second, the
plan must be operated in accordance with
the terms of the plan amendment begin-
ning on the date the legislative change
takes effect, or, if the amendment is not
required by the legislative change, the ef-
fective date of the amendment specified
by the plan. Third, the plan amendment
must be made retroactively effective.
.02 Pursuant to the Commissioner’s
authority under §1.401(b)–1, a plan pro-
vision is hereby designated as a disquali-
fying provision under § 1.401(b)–1(b) to
which the remedial amendment period de-
scribed in section 6 of Rev. Proc. 97–41
applies if the provision causes a plan to
fail to satisfy the qualification require-
ments of the Code because of changes
made to those requirements by TRA’97
or if the provision is integral to a qualifi-
cation requirement changed by TRA’97.
The operational compliance and retroac-
tive amendment conditions described in
§ 1541(b)(2) of TRA’97 must be satisfied
throughout such remedial amendment pe-
riod with respect to any amendment of a
disqualifying provision described in the
preceding sentence.
.03 For example, § 1071 of TRA’97
increased the amount of the accrued bene-
fit subject to involuntary distribution
under § 411(a)(11) from $3,500 to $5,000,
effective for plan years beginning after
August 5, 1997. Aplan provision that re-
flects the $3,500 limit under § 411(a)(11),
as in effect prior to TRA’97, is integral to
a qualification requirement changed by
TRA’97. Thus, for example, a plan that
contains the $3,500 limit may, for plan
qualification purposes, be operated during
the remedial amendment period in antici-
pation of a retroactive amendment reflect-
ing the increase in the limit under § 1071
of TRA’97, provided the amendment is
adopted on or before the last day of the re-
medial amendment period and is made
retroactively effective as of the beginning
of the remedial amendment period. In
this case, the plan provision containing
the $3,500 limit is integrally related to a
qualification requirement changed by
TRA’97 but the plan provision would not
disqualify the plan as a result of the statu-
tory change. Therefore, the remedial
amendment period begins on the date on
or after the first day of the first plan year
beginning after August 5, 1997, on which
the plan was first operated in anticipation
of the amendment increasing the limit to
$5,000. In the case of a nongovernmental
plan, the remedial amendment period
ends on the last day of the first plan year
beginning on or after January 1, 1999.
SECTION 5. REMEDIAL
AMENDMENTPERIOD FOR
GOVERNMENTALPLANS
Pursuant to the Commissioner’s au-
thority under § 1.401(b)–1, the remedial
amendment period described in section 6
of Rev. Proc. 97–41 with respect to gov-
ernmental plans, as defined in § 414(d), is
hereby extended to the later of (i) the last
day of the last plan year beginning before
January 1, 2001, or (ii) the last day of the
first plan year beginning on or after the
“1999 legislative date.” Thus, the reme-
dial amendment period for amending a
governmental plan for GATT, SBJPA, and
TRA’97 will not end before the amend-
ment deadline applicable to governmental
plans under § 1541 of TRA’97.
SECTION 6. EFFECTOF REPEALOF
FAMILYAGGREGATION ON
NONDISCRIMINATION SAFE
HARBORS
.01 The regulations under § 401(a)(4)
provide safe harbors that a plan may meet
to satisfy the requirement that either the
contributions or the benefits under the
plan be nondiscriminatory in amount.
See, for example, § 1.401(a)(4)–2(b) and
§ 1.401(a)(4)–3(b). The safe harbors gen-
erally are designed to ensure that a plan
that meets a safe harbor will automati-
cally satisfy the nondiscrimination in
amount requirement if the plan is oper-
ated in accordance with its terms. In gen-
eral, the safe harbors require a uniform al-
location or benefit formula, although
formulas that provide lower allocations or
benefits for highly compensated employ-
ees are permitted.
.02 In section 6.09 of Rev. Proc. 97–
January 26, 1998241998–4 I.R.B.

41, it was noted that in many cases plans
would remain qualified even though the
family aggregation rules of § 414(q)(6)
and § 401(a)(17)(A) continued to apply
under the plans subsequent to the repeal
of these rules. Nevertheless, the contin-
ued application of family aggregation will
cause a plan to fail to be a safe harbor
plan. This is because the application of
family aggregation may, in some circum-
stances, result in lower allocations or ben-
efits for employees who are not highly
compensated.
.03 Thus, a plan will not satisfy a
nondiscrimination in amount safe harbor
for a plan year beginning after December
31, 1996, unless family aggregation is
disregarded in the operation of the plan
and the plan is amended within the reme-
dial amendment period, retroactive to the
first day of such plan year, to eliminate its
family aggregation provisions. There-
fore, in an application for a determination
letter (other than with respect to an M&P
or regional prototype plan) that is filed on
or after April 27, 1998, an employer may
not designate a plan as one that is in-
tended to satisfy a nondiscrimination in
amount safe harbor if the family aggrega-
tion rules continue to apply under the
plan. Instead, the employer must either
demonstrate that the plan satisfies the
general test for nondiscrimination in
amount or request a letter that contains a
caveat regarding the nondiscrimination in
amount requirement.
SECTION 7. EFFECTON OTHER
DOCUMENTS
Rev. Proc. 98–6 and Rev. Proc. 97–41
are modified.
SECTION 8. EFFECTIVE DATE
This revenue procedure is effective
January 26, 1998.
DRAFTING INFORMATION
The principal author of this revenue
procedure is James Flannery of the Em-
ployee Plans Division. For further infor-
mation regarding this revenue procedure,
contact the Employee Plans Division’s
telephone assistance service between the
hours of 1:30 and 3:30 p.m. Eastern time,
Monday through Thursday, on (202) 622-
6074 (not a toll-free call). Mr. Flannery
can be contacted by calling (202) 622-
6214 (also not a toll-free call).
26 CFR 301.6601–1: Interest on underpayments.
(Also Part I, §§ 163, 2053, 6166, 6601.)
Rev. Proc. 98–15
SECTION 1. PURPOSE
This revenue procedure provides proce-
dures for estates of decedents dying before
January 1, 1998, to make an election
under § 503(d)(2) of the Taxpayer Relief
Act of 1997, Pub. L. No. 105–34, 111 Stat.
788 (the “Act”). This § 503(d)(2) election
allows an estate to reduce the rate of inter-
est on estate taxes deferred under § 6166
of the Internal Revenue Code and forgo
the deduction for interest paid on the de-
ferred estate taxes under §§ 2053 and
163(h).
SECTION 2. BACKGROUND
.01 Deferral of Estate Taxes.
(1) Section 6166 provides an elec-
tion to extend the time for payment of es-
tate tax where greater than 35 percent of
the value of the adjusted gross estate con-
sists of one or more interests in a closely
held business. Only the estate of a dece-
dent who, at the date of death, was a
United States citizen or resident is eligible
to make a § 6166 election.
(2) If an estate makes a § 6166 elec-
tion, the estate tax may be paid in up to
ten installments, with the first payment of
tax due not more than five years after the
date prescribed for payment of the tax.
However, interest on the estate tax is not
deferred. Under § 6166(f), the interest
must be paid annually.
(3) Section 6601(a) imposes under-
payment interest at the § 6621 underpay-
ment rate, which for estates is the federal
short-term rate plus 3 percentage points.
However, § 6601(j), prior to its amend-
ment by the Act, imposed a reduced inter-
est rate of 4 percent on a portion (the “4-
percent portion”) of the estate tax
deferred under § 6166. The 4-percent
portion is the lesser of (i) $345,800 re-
duced by the amount of the credit allow-
able under § 2010(a) (prior to amendment
by § 501(a) of the Act), or (ii) the amount
of deferred estate tax. The 4 percent rate
continues to apply to estates of decedents
dying before January 1, 1998, (the effec-
tive date of § 503 of the Act) unless such
an estate properly makes the § 503(d)(2)
election in the manner discussed below.
.02 Changes Made by the Act
(1) Reduced interest rates.
(a) In general.Section 503(a)-
(1) of the Act amends § 6601(j) to provide
a 2-percent interest rate on the “2-percent
portion” (defined below) of deferred es-
tate tax. The interest rate on deferred es-
tate tax in excess of the 2-percent portion
is 45 percent of the underpayment rate de-
termined under § 6621.
(b) 2-percent portion.Section
503(a)(2) of the Act provides that the 2-
percent portion is an amount of deferred
estate tax not exceeding the lesser of (i)
the tentative tax under § 2001(c) com-
puted on $1,000,000 plus the § 2010(c)
(as amended by § 501(a) of the Act) ap-
plicable exclusion amount, reduced by the
§ 2010(c) applicable credit amount, or (ii)
the amount of the deferred estate tax.
(2) Elimination of interest deduc-
tion.Section 503(b) of the Act amends
§§ 163 and 2053 to eliminate both the in-
come tax and the estate tax deductions for
interest paid on § 6166 deferred estate tax.
(3) Effective dates.Pursuant to
§ 503(d)(1) of the Act, the amendments
described in this section 2.02 generally
apply to estates of decedents dying after
December 31, 1997. However, § 503(d)-
(2) provides that any estate of a decedent
dying before January 1, 1998, that has
made a § 6166 election may elect to have
the reduced interest rates and nonde-
ductibility amendments (but not the 2-
percent portion) contained in § 503 apply
to installments due after the effective date
of the election. The election must be
made before January 1, 1999, in a manner
prescribed by the Secretary and, once
made, is irrevocable.
SECTION 3. SCOPE
This revenue procedure applies to es-
tates of decedents dying before January 1,
1998, that properly elect under § 6166 to
defer payment of estate taxes, and that
wish to elect to apply the new reduced in-
terest rates of § 6601(j), as amended, and
forgo the estate tax and income tax deduc-
tions for interest paid on deferred estate
tax. The new rates and the nondeductibil-
1998–4 I.R.B25January 26, 1998

ity provision apply automatically in the
case of estates of decedents dying after
December 31, 1997.
SECTION 4. PROCEDURE
.01 Making a § 503(d)(2) Election.
After August 5, 1997, but before January
1, 1999, an estate may make a § 503(d)(2)
election by writing a letter to the Service
Center where the next installment of es-
tate tax or interest is due. If an estate of a
decedent dying before January 1, 1998,
has not filed an estate tax return as of Jan-
uary 26, 1998, the letter may be attached
to the estate tax return. No § 503(d)(2)
election may be made before a § 6166
election is made. The letter must include
the following information:
(1) the decedent’s name;
(2) the estate’s EIN;
(3) a statement that the letter is an elec-
tion under § 503(d)(2) of the Taxpayer
Relief Act of 1997; and
(4) the due date of the installment of es-
tate tax or interest for which the election
is to be effective.
The letter must be signed and dated by the
executor. Once made, the § 503(d)(2)
election cannot be modified or revoked.
.02 Effective Date of the § 503(d)(2)
Election.Generally, a § 503(d)(2) elec-
tion is effective beginning with the first
installment of estate tax or interest due on
or after the date the election is filed with
the appropriate Service Center. However,
a § 503(d)(2) election made by April 27,
1998, will be effective beginning with any
installment, designated by the executor,
due after August 5, 1997, and on or before
April 27, 1998. Any assessment that was
proper when made, but that becomes ex-
cessive as a result of the election, will be
abated. Future installments due will be
calculated and any overpayment of an in-
stallment of either tax or interest will be
applied to the next installment in accor-
dance with § 6403.
SECTION 5. PAPERWORK
REDUCTION ACT
The collections of information contained
in this revenue procedure have been re-
viewed and approved by the Office of Man-
agement and Budget in accordance with the
Paperwork Reduction Act (44 U.S.C. 3507)
under control number 1545–1585.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless the col-
lection of information displays a valid
OMB control number.
The collections of information in this
revenue procedure are contained in SEC-
TION 4 of this revenue procedure. This
information is required to verify that es-
tates are electing under § 503(d)(2) of the
Taxpayer Relief Act of 1997 to apply the
reduced interest rates of § 6601(j), as
amended, to deferred estate taxes. The
likely respondents are estates.
The estimated total annual recordkeep-
ing burden will be 3,300 hours.
The estimated annual burden per re-
spondent will vary from 15 minutes to 45
minutes, depending on individual circum-
stances, with an estimated average of 30
minutes.
The estimated number of respondents
is 6,600.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mater-
ial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Brendan P. O’Hara of the Of-
fice of Assistant Chief Counsel (Income
Tax and Accounting). For further infor-
mation regarding this revenue procedure
contact Brendan P. O’Hara at (202) 622-
4910 (not a toll-free call).
January 26, 1998261998–4 I.R.B.

1998–4 I.R.B27January 26, 1998
Notice of Proposed Rulemaking
Required Distributions From
Qualified Plans and Individual
Retirement Plans
REG–209463–82
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing.
SUMMARY: This document contains
amendments to the existing proposed reg-
ulations under section 401(a)(9) that
make changes to the rules that apply if a
trust is named as a beneficiary of an em-
ployee’s benefit under a retirement plan.
These proposed regulations will affect ad-
ministrators of, participants in, and bene-
ficiaries of qualified plans, institutions
which sponsor and individuals who ad-
minister individual retirement plans, indi-
viduals who use individual retirement
plans, simplified employee pensions and
SIMPLE Savings Plans for retirement in-
come and beneficiaries of individual re-
tirement plans; and employees for whom
amounts are contributed to section 403(b)
annuity contracts, custodial accounts, or
retirement income accounts and benefi-
ciaries of such contracts and accounts.
DATES: Written comments and requests
for a public hearing must be received by
March 30, 1998.
ADDRESSES: Send submissions to
CC:DOM:CORP:R (REG–209463–82),
room 5226, Internal Revenue Service,
POB 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may be
hand delivered between the hours of 8
a.m. and 5 p.m. to CC:DOM:CORP:R
(REG–209463–82), Courier’s Desk, In-
ternal Revenue Service, 1111 Constitution
Avenue NW, Washington, DC. Alterna-
tively, taxpayers may submit comments
electronically via the Internet by selecting
the “Tax Regs” option on the IRS Home
Page, or by submitting comments directly
to the IRS Internet site at http://www.irs.
ustreas.gov/prod/tax_regs/comments.html
FOR FURTHER INFORMATION CON-
TACT: Thomas Foley at (202) 622-6030
(not a toll-free number).
SUPPLEMENTARYINFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in this notice of proposed rulemak-
ing has been submitted to the Office of
Management and Budget for review in ac-
cordance with the Paperwork Reduction
Act of 1995 (44 U.S.C. 3507(d)). Com-
ments on the collection of information
should be sent to the Office of Manage-
ment and Budget,Attn: Desk Officer for
the Department of the Treasury, Office of
Information and Regulatory Affairs,
Washington, DC 20503, with copies to
the Internal Revenue Service,Attn: IRS
Reports Clearance Officer, T:FP, Wash-
ington, DC 20224. Comments on the col-
lection of information should be received
by March 2, 1998. Comments are specifi-
cally requested concerning:
Whether the proposed collection of in-
formation is necessary for the proper per-
formance of the functions of the Internal
Revenue Service,including whether the
information will have practical utility;
The accuracy of the estimated burden
associated with the proposed collection of
information (see below);
How the quality, utility, and clarity of
the information to be collected may be en-
hanced;
How the burden of complying with the
proposed collection of information may
be minimized, including through the ap-
plication of automated collection tech-
niques or other forms of information tech-
nology; and
Estimates of capital or start-up costs and
costs of operation, maintenance, and pur-
chase of services to provide information.
The collection of information in this
proposed regulation is in Question and
Answer D–7 of §1.401(a)(9)–1. This in-
formation is required for a taxpayer who
wants to name a trust and treat the under-
lying beneficiaries of the trust as desig-
nated beneficiaries of the taxpayer’s ben-
efit under a retirement plan or an
individual retirement plan (“IRA”). The
taxpayer must provide a copy of the trust
instrument or IRAtrustee, custodian, or
issuer, or provide a list of all the benefi-
ciaries of the trust, certify that, to the best
of the taxpayer’s knowledge, this list is
correct and complete, and agree to pro-
vide a copy of the trust instrument upon
demand. In addition, other related re-
quirements for the beneficiaries of the
trust to be treated as designated beneficia-
ries must be satisfied. If the trust instru-
ment is amended at any time in the future,
the taxpayer must, within a reasonable
time, provide a copy of each such amend-
ment, or provide corrected certifications
to the extent that the amendment changes
the information previously certified. In
addition, by the end of the ninth month
after the death of the taxpayer, the trustee
of the trust must provide a copy of the
trust to the plan administrator or IRA
trustee, custodian, or issuer, or provide a
list of all the beneficiaries of the trust,
certify that, to the best of the taxpayer’s
knowledge, this list is correct and com-
plete, and agrees to provide a copy of the
trust instrument upon demand. The col-
lection of information is required to ob-
tain a benefit. The likely respondents are
individuals or households.
Estimated total annual reporting hours
is 333 hours.
The estimated average burden per re-
spondent is 20 minutes.
The estimated total number of respon-
dents is 1,000.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless it dis-
plays a valid control number assigned by
the Office of Management and Budget.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become
material in the administration of any in-
ternal revenue law. Generally, tax returns
and tax return information are confiden-
tial, as required by 26 U.S.C. 6103.
Background
On July 27, 1987, Proposed Regula-
tions (EE–113–82 [1987–2 C.B. 881])
under sections 401(a)(9), 403(b), 408, and
4974 of the Internal Revenue Code of
1986 were published in the Federal Reg-
ister(52 FR 28070) Those proposed reg-
ulations provide guidance for complying
with the rules relating to required distrib-
utions from qualified plans, individual re-
tirement plans, and section 403(b) annuity
contracts, custodial accounts, and retire-
ment income accounts. This document
Part IV. Items of General Interest

January 26, 1998281998–4 I.R.B.
contains amendments to proposed
§ 1.401(a)(9)–1 (hereinafter referred to
as the Existing Proposed Regulations)
that was included in EE–113–82. Specifi-
cally this document contains amendments
to Q&As D–5 and Q&AD–6 of the Exist-
ing Proposed Regulations which prescribe
specific requirements that must be met
when a trust is named as a beneficiary of
an employee’s benefit under a plan, and
adds a new Q&AD–7 to the Existing Pro-
posed Regulations. Proposed § § 1.408–8
and 1.403(b)–2 (also included in
EE–113–82) provide that the provisions
of proposed § 1.401(a)(9)–1 generally
apply to individual retirement plans, and
section 403(b) annuity contracts, custo-
dial accounts, and retirement income ac-
counts. Accordingly, these amendments
and additions also generally apply to such
plans, contracts, and accounts.
The amendments and additions to the
Existing Proposed Regulations in these
proposed regulations are issued in re-
sponse to comments and questions re-
ceived regarding the Existing Proposed
Regulations with respect to section
401(a)(9). Treasury and the IRS continue
to welcome additional comments concern-
ing the Existing Proposed Regulations and
the other sections of EE–113–82.
As in the case of the Existing Proposed
Regulations and the other sections of EE–
113–82, taxpayers may rely on these pro-
posed regulations for guidance pending
the issuance of final regulations. If, and to
the extent, future guidance is more re-
strictive than the guidance in these pro-
posed regulations, the future guidance
will be applied without retroactive effect.
Explanation of provisions
Overview
Section 401(a)(9)(A) provides that, in
order for a plan to be qualified under sec-
tion 401(a), distributions of each em-
ployee’s interest in the plan must com-
mence no later than the “required
beginning date” for the employee and
must be distributed over a period not to
exceed the joint lives or joint life ex-
pectancy of the employee and the em-
ployee’s designated beneficiary. Section
401(a)(9)(B) provides that if distribution
does not commence prior to death in ac-
cordance with section 401(a)(9)(A), dis-
tributions of the employee’s interest must
be made within 5 years of the employee’s
death or, generally, commence within one
year of the employee’s death and be made
over the life or life expectancy of the des-
ignated beneficiary.
Section 401(a)(9)(E) defines the term
“designated beneficiary” as an individual
designated as a beneficiary by the em-
ployee. The Existing Proposed Regula-
tions provide that, for purposes of section
401(a)(9), only individuals may be desig-
nated beneficiaries. Abeneficiary who is
not an individual, such as the employee’s
estate, may not be a designated benefi-
ciary for purposes of determining the
minimum required distribution, but nev-
ertheless may be designated as the em-
ployee’s beneficiary under the plan. If a
beneficiary who is not an individual is
designated to receive an employee’s bene-
fit after death, the employee is treated as
having no designated beneficiary when
determining the required minimum distri-
bution. In that case, under section
401(a)(9), distributions commencing be-
fore death must be made over the em-
ployee’s single life or life expectancy and
distributions commencing after death
must be made within 5 years of the em-
ployee’s death.
However, the Existing Proposed Regu-
lations provide that if a trust is named as a
beneficiary of an employee’s benefit under
the plan, the underlying beneficiaries of
the trust may be treated as designated ben-
eficiaries for purposes of section 401(a)(9)
if certain requirements are satisfied. In re-
sponse to comments, these proposed regu-
lations modify these trust beneficiary re-
quirements as explained below by:
• Permitting the designated beneficiary
of a revocable trust to be treated as the
designated beneficiary for purposes of de-
termining the minimum distribution under
section 401(a)(9), provided that the trust
becomes irrevocable upon the death of the
employee.
• Providing relief from the requirement
that the plan be provided with a copy of
the trust document if certain certification
requirements are met.
Irrevocability of trust
The Existing Proposed Regulations
generally provide that a trust must be ir-
revocable as of the employee’s required
beginning date in order for the beneficia-
ries of the trust to be treated as designated
beneficiaries under the plan for purposes
of determining the distribution period
under section 401(a)(9)(A). Commenta-
tors have indicated that most trusts estab-
lished for estate planning purposes and
designated as the beneficiary of an em-
ployee’s plan benefits are revocable in-
struments prior to the death of the em-
ployee. In response to those comments,
these proposed regulations provide that a
trust named as beneficiary of an em-
ployee’s interest in a retirement plan be
permitted to be revocable while the em-
ployee is alive, provided that it becomes
irrevocable, by its terms, upon the death
of the employee. The requirements in the
Existing Proposed Regulations that the
trust be valid under state law (or would be
but for the fact that there is no corpus) and
that the beneficiaries be identifiable from
the trust instrument are retained.
Information to Plan Administrator
In order to permit the plan administra-
tor to substantiate that the requirements
for treating the beneficiaries of the trust as
designated beneficiaries under the plan
are satisfied, the Existing Proposed Regu-
lations require that a copy of the trust in-
strument be provided to the plan adminis-
trator by the earlier of the required
beginning date or the date of the em-
ployee’s death. In response to comments,
this proposed regulation permits an alter-
native method of substantiation.
As under the Existing Proposed Regu-
lations, a copy of the trust instrument may
be provided to the plan administrator.
However, because the trust need not be ir-
revocable, under this method, the em-
ployee must also agree that if the trust in-
strument is amended at any time in the
future, the employee will, within a rea-
sonable time, provide a copy of each such
amendment.
Alternatively, the employee may pro-
vide a list of all of the beneficiaries of the
trust (including contingent beneficiaries)
with a description of the portion to which
they are entitled and any conditions on
their entitlement, and certify that, to the
best of the employee’s knowledge, this
list is correct and complete and that the
other requirements for the beneficiaries of
the trust to be treated as designated bene-
ficiaries are satisfied. Under the second
method, the employee must also agree to
provide corrected certifications to the ex-

1998–4 I.R.B29January 26, 1998
tent that the amendment changes the in-
formation previously certified. Finally,
the employee must agree to provide a
copy of the trust instrument to the plan
administrator upon demand.
In addition, these proposed regulations
provide that, if the minimum required dis-
tributions after death are determined by
treating the beneficiaries of the trust as
designated beneficiaries, a final certifica-
tion as to the beneficiaries of the trust in-
strument must be provided to the plan ad-
ministrator by the end of the ninth month
after the death of the employee. This rule
applies even if a copy of the trust instru-
ment were provided to the plan adminis-
trator before the employee’s death. Alter-
natively, an updated trust instrument may
be provided.
The proposed regulations also provide
that a plan will not fail to satisfy section
401(a)(9) merely because the terms of the
actual trust instrument are inconsistent
with the information in the certifications
or trust instruments previously provided
to the plan administrator if the plan ad-
ministrator reasonably relies on the infor-
mation provided in the certifications or
trust instruments. However, the mini-
mum required distributions for years after
the year in which the discrepancy is dis-
covered must be determined based on the
actual terms of the trust instrument. For
those years, the minimum required distri-
bution will be determined by treating the
beneficiaries of the employee as having
been changed in the year in which the
year the discrepancy was discovered to
conform to the corrected information and
by applying the change in beneficiary
provisions found under the Existing Pro-
posed Regulations. However, for pur-
poses of determining the amount of the
excise tax under section 4974 (including
application of a waiver, if any, for reason-
able error under section 4974), the mini-
mum required distribution is determined
for any year based on the actual terms of
the trust in effect during the year.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in EO
12866. Therefore, a regulatory assess-
ment is not required. It also has been de-
termined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regula-
tions. Moreover, it hereby certified that
the regulations in this document will not
have a significant economic impact on a
substantial number of small entities. This
certification is based on the fact that the
reporting burden is primarily on the plan
participant to supply the information
rather than on the entity maintaining the
retirement plan and the fact that the num-
ber of participants per plan to whom the
burden applies is insignificant. Accord-
ingly, a regulatory flexibility analysis
under the Regulatory Flexibility Act (5
U.S.C. chapter 6) is not required. Pur-
suant to section 7805(f) of the Internal
Revenue Code, this notice of proposed
rulemaking will be submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, considera-
tion will be given to any written com-
ments (preferably a signed original and
eight (8) copies) or comments transmitted
via Internet that are submitted timely to
the IRS. All comments will be available
for public inspection and copying.
Apublic hearing may be scheduled if
requested in writing by a person that
timely submits written comments. If a
public hearing is scheduled, notice of the
date, time, and place for the hearing will
be published in the Federal Register.
Drafting Information
The principal author of these regula-
tions is Cheryl Press, Office of the Asso-
ciate Chief Counsel (Employee Benefits
and Exempt Organizations), IRS. How-
ever, other personnel from the IRS and
Treasury Department participated in their
development.
* * * * *
Amendments to the Previously Proposed
Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
PART1—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 1.401(a)(9)–1, as pro-
posed to be added at 52 FR 28075, July
27, 1987, is amended by:
1. Revising Q&AD–5
2. Revising Q&AD–6.
3. Adding Q&AD–7
The additions and revisions read as fol-
lows:
§ 1.401(a)(9)–1 Required distributions
from trust and plans.
* * * * *
D. Determination of the Designated
Beneficiary.
* * * * *
D–5. Q. If a trust is named as a benefi-
ciary of an employee, will the beneficia-
ries of the trust with respect to the trust’s
interest in the employee’s benefit be
treated as having been designated as ben-
eficiaries of the employee under the plan
for purposes of determining the distribu-
tion period under section 401(a)(9)-
(A)(ii)?
A. (a) Pursuant to D–2Aof this sec-
tion, only an individual may be a desig-
nated beneficiary for purposes of deter-
mining the distribution period under
section 401(a)(9)(A)(ii). Consequently, a
trust itself may not be the designated ben-
eficiary even though the trust is named as
a beneficiary. However, if the require-
ments of paragraph (b) of this D–5 are
met, distributions made to the trust will be
treated as paid to the beneficiaries of the
trust with respect to the trust’s interest in
the employee’s benefit, and the beneficia-
ries of the trust will be treated as having
been designated as beneficiaries of the
employee under the plan for purposes of
determining the distribution period under
section 401(a)(9)(A)(ii). If, as of any date
on or after the employee’s required begin-
ning date, a trust is named as a benefi-
ciary of the employee and the require-
ments in paragraph (b) of this D–5Aare
not met, the employee will be treated as
not having a designated beneficiary under
the plan for purposes of section
401(a)(9)(A)(ii). Consequently, for cal-

January 26, 1998301998–4 I.R.B.
endar years beginning after that date, dis-
tribution must be made over the em-
ployee’s life (or over the period which
would have been the employee’s remain-
ing life expectancy determined as if no
beneficiary had been designated as of the
employee’s required beginning date).
(b) The requirements of this paragraph
(b) are met if, as of the later of the date on
which the trust is named as a beneficiary
of the employee, or the employee’s re-
quired beginning date, and as of all subse-
quent periods during which the trust is
named as a beneficiary, the following re-
quirements are met:
(1) The trust is a valid trust under state
law, or would be but for the fact that there
is no corpus.
(2) The trust is irrevocable or will, by
its terms, become irrevocable upon the
death of the employee.
(3) The beneficiaries of the trust who
are beneficiaries with respect to the trust’s
interest in the employee’s benefit are
identifiable from the trust instrument
within the meaning of D–2 of this section.
(4) The documentation described in D–
7 of this section has been provided to the
plan administrator.
(c) In the case of payments to a trust
having more than one beneficiary, see E–
5 of this section for the rules for determin-
ing the designated beneficiary whose life
expectancy will be used to determine the
distribution period. If the beneficiary of
the trust named as beneficiary is another
trust, the beneficiaries of the other trust
will be treated as having been designated
as beneficiaries of the employee under the
plan for purposes of determining the dis-
tribution period under section 401(a)(9)-
(A)(ii), provided that the requirements of
paragraph (b) of this D–5Aare satisfied
with respect to such other trust in addition
to the trust named as beneficiary.
D–6. Q. If a trust is named as a benefi-
ciary of an employee, will the beneficiaries
of the trust with respect to the trust’s inter-
est in the employee’s benefit be treated as
designated beneficiaries under the plan
with respect to the employee for purposes
of determining the distribution period
under section 401(a)(9)(B)(iii) and (iv)?
A. (a) If a trust is named as a benefi-
ciary of an employee and the require-
ments of paragraph (b) of D–5Aof this
section are satisfied as of the date of the
employee’s death or, in the case of the
documentation described in D–7 of this
section, by the end of the ninth month be-
ginning after the employee’s date of
death, then distributions to the trust for
purposes of section 401(a)(9) will be
treated as being paid to the appropriate
beneficiary of the trust with respect to the
trust’s interest in the employee’s benefit,
and all beneficiaries of the trust with re-
spect to the trust’s interest in the em-
ployee’s benefit will be treated as desig-
nated beneficiaries of the employee under
the plan for purposes of determining the
distribution period under section 401(a)-
(9)(B)(iii) and (iv). If the beneficiary of
the trust named as beneficiary is another
trust, the beneficiaries of the other trust
will be treated as having been designated
as beneficiaries of the employee under the
plan for purposes of determining the dis-
tribution period under section 401(a)(9)-
(B)(iii) and (iv), provided that the require-
ments of paragraph (b) of D–5Aof this
section are satisfied with respect to such
other trust in addition to the trust named
as beneficiary. If a trust is named as a
beneficiary of an employee and if the re-
quirements of paragraph (b) of D–5Aof
this section are not satisfied as of the
dates specified in the first sentence of this
paragraph, the employee will be treated as
not having a designated beneficiary under
the plan. Consequently, distribution must
be made in accordance with the five-year
rule in section 401(a)(9)(B)(ii).
(b) The rules of D–5 of this section and
this D–6 also apply for purposes of apply-
ing the provisions of section 401(a)(9)-
(B)(iv)(II) if a trust is named as a benefi-
ciary of the employee’s surviving spouse.
In the case of payments to a trust having
more than one beneficiary, see E–5 of this
section for the rules for determining the
designated beneficiary whose life ex-
pectancy will be used to determine the
distribution period.
D–7. Q. If a trust is named as a benefi-
ciary of an employee, what documenta-
tion must be provided to the plan adminis-
trator so that the beneficiaries of the trust
who are beneficiaries with respect to the
trust’s interest in the employee’s benefit
are identifiable to the plan administrator?
A. (a) Required distributions commenc-
ing before death.In order to satisfy the re-
quirement of paragraph (b)(4) of D–5Aof
this section for distributions required
under section 401(a)(9) to commence be-
fore the death of an employee, the em-
ployee must comply with either paragraph
(a)(1) or (2) of this D–7A:
(1) The employee provides to the plan
administrator a copy of the trust instru-
ment and agrees that if the trust instru-
ment is amended at any time in the future,
the employee will, within a reasonable
time, provide to the plan administrator a
copy of each such amendment.
(2) The employee—
(i) Provides to the plan administrator a
list of all of the beneficiaries of the trust
(including contingent and remainderman
beneficiaries with a description of the
conditions on their entitlement);
(ii) Certifies that, to the best of the em-
ployee’s knowledge, this list is correct
and complete and that the requirements of
paragraphs (b)(1), (2), and (3) of D–5Aof
this section are satisfied;
(iii) Agrees to provide corrected certifi-
cations to the extent that an amendment
changes any information previously certi-
fied; and
(iv) Agrees to provide a copy of the
trust instrument to the plan administrator
upon demand.
(b) Required distributions after death.
In order to satisfy the documentation re-
quirement of this D–7 for required distrib-
utions after death, by the end of the ninth
month beginning after the death of the em-
ployee, the trustee of the trust must either
(1) Provide the plan administrator with
a final list of all of the beneficiaries of the
trust (including contingent and remain-
derman beneficiaries with a description of
the conditions on their entitlement) as of
the date of death; certify that, to the best
of the trustee’s knowledge, this list is cor-
rect and complete and that the require-
ments of paragraph (b)(1), (2), and (3) of
D–5Aof this section are satisfied as of the
date of death; and agree to provide a copy
of the trust instrument to the plan admin-
istrator upon demand; or
(2) Provide the plan administrator with
a copy of the actual trust document for the
trust that is named as a beneficiary of the
employee under the plan as of the em-
ployee’s date of death.
(c) Relief for discrepancy between trust
instrument and employee certifications or
earlier trust instruments.(1) If required

1998–4 I.R.B31January 26, 1998
distributions are determined based on the
information provided to the plan adminis-
trator in certifications or trust instruments
described in paragraph (a)(1), (a)(2) or (b)
of this D–7A, a plan will not fail to satisfy
section 401(a)(9) merely because the ac-
tual terms of the trust instrument are in-
consistent with the information in those
certifications or trust instruments previ-
ously provided to the plan administrator,
but only if the plan administrator reason-
ably relied on the information provided
and the minimum required distributions
for calendar years after the calendar year
in which the discrepancy is discovered are
determined based on the actual terms of
the trust instrument. For purposes of de-
termining whether the plan satisfies sec-
tion 401(a)(9) for calendar years after the
calendar year in which the discrepancy is
discovered, if the actual beneficiaries
under the trust instrument are different
from the beneficiaries previously certified
or listed in the trust instrument previously
provided to the plan administrator, or the
trust instrument specifying the actual ben-
eficiaries does not satisfy the other re-
quirements of paragraph (b) of D–5Aof
this section, the minimum required distri-
bution will be determined by treating the
beneficiaries of the employee as having
been changed in the calendar year in
which the discrepancy was discovered to
conform to the corrected information and
by applying the change in beneficiary
provisions of E–5 of this section.
(2) For purposes of determining the
amount of the excise tax under section
4974, the minimum required distribution
is determined for any year based on the
actual terms of the trust in effect during
the year.
* * * * *
Michael P. Dolan,
Deputy Commissioner of
Internal Revenue.
(Filed by the Office of the Federal Register on
December 29, 1997, 8:45 a.m., and published in the
issue of the Federal Register for December 30, 1997,
62 F.R. 67780)
Foundations Status of Certain
Organizations
Announcement 98–4
The following organizations have
failed to establish or have been unable to
maintain their status as public charities or
as operating foundations. Accordingly,
grantors and contributors may not, after
this date, rely on previous rulings or des-
ignations in the Cumulative List of Orga-
nizations (Publication 78), or on the pre-
sumption arising from the filing of notices
under section 508(b) of the Code. This
listing does notindicate that the organiza-
tions have lost their status as organiza-
tions described in section 501(c)(3), eligi-
ble to receive deductible contributions.
Former Public Charities.The following
organizations (which have been treated as
organizations that are not private founda-
tions described in section 509(a) of the
Code) are now classified as private foun-
dations:
Association of Business Administration
of Christian Colleges, River Forest, IL
Chicano-Latino Medical Association of
California Foundation, Montebello,
CA
Children of Light, Mill Valley, CA
Childrens Life Foundation of America,
San Diego, CA
Club Social San Pedro Tesistan, Wat-
sonville, CA
Coalition of Mental Health Professional
Inc., Los Angeles, CA
Comfort Zone Group Homes, Compton,
CA
Communications Connection Center Inc.,
Marina Del Rey, CA
Cook Island Institute, San Francisco, CA
Coos River Step Association Inc.,
Eastside, OR
Cosmos Affiliates, Highland, CA
Country Hospice Association, Enumclaw,
WA
Creative Response of the Arts Inc., La
Jolla, CA
Culpeppers Affordable Housing and
Emergency Shelter, Sherman Oaks,
CA
Cultural Bridges, Alameda, CA
I Became a Star Foundation Inc.,
Antioch, TN
I C E Supervised Independent Living
Center, Inc., New Orleans, LA
Idora Park Historical Society Inc.,
Youngstown, OH
Illegitimate Theater Company Inc., Sierra
Vista, AZ
Illinois Insurance Exchange Foundation,
Chicago, IL
Illinois Nursing Home Administrators
Foundation, Springfield, IL
Image Plus Organization Inc., Chicago,
IL
Immigration Support Services Inc.,
Lexington, KY
Immunodeficiency Collaberative of
America, Washington, DC
Independence Non Profit Housing
Corporation, Marquette, MI
Independence Nonprofit Development
Corporation, Detroit, MI
Independence Science and Technology
Center, Inc., Independence, KS
India Cultural and Education, Inc.,
Gainesville, FL
India League of Ohio, Columbus, OH
Indian Heritage Association Inc., Great
Falls, MT
Indian Trace Education Fund Inc., Ft.
Lauderdale, FL
Indiana Junior High Christian
Convention, Anderson, IN
Indiana Relief Foundation Inc.,
Indianapolis, IN
Indiana Spina Bifida Association, Inc.,
South Bend, IN
Indianapolis Tawl Inc., Carmel, IN
Indy-American Expeditions,
Incorporated, Rosedale, IN
Information Access Institute, La Porte,
TX
Inner-City Community Development
Corporation, Denver, CO
Inner City Community Task Force,
Lynchburg, VA
Inner City Development Group, Detroit,
MI
Inner City Development Non Profit
Housing Corporation, Ann Arbor, MI
Inner City Mountain Movers Community
Development Corporation, Detroit, MI
Inner City Recovery Program, Inc.,
Houston, TX
Inner Spaces Network Inc., Pittsburgh, PA
Innovative Human Services Corporation,
Southfield, MI
Inside Corporation, Chamblee, GA
Insight Unlimited Inc., Sebastian, FL
Inspirational Community Center Soup
Kitchen, Detroit, MI
In Step Ministries Inc., Memphis, TN
Institute for Adolescent Development,
Batavia, OH
Institute for Continuing Education in
Communications, Inc., Atlanta, GA
Institute for Health Care Research Inc.,
Miami Lakes, FL
Institute for International Trade &
Investment, Dekalb, IL

January 26, 1998321998–4 I.R.B.
Institute for Leadership Education
Advancement & Development, Inc.,
Philadelphia, PA
Institute for Quality in Professional
Speaking, Inc., Overland Park, KS
Institute for Research on Boards of
Directors, Inc., Sarasota, FL
Institute for Youth Development and
Educational Resources, Fayetteville,
NC
Institute of International Banking Law
and Practice, Inc., Gaithersburg, MD
Institute of Scholar Athletes Inc.,
Columbia, MD
Instituto Cultural Latino-Americano, Inc.,
Detroit, MI
Inter-Connections Drop-In Center Inc.,
Adrian, MI
Interdenominational Ministerial Alliance
Incorporated, Indianapolis, IN
Interdenominational Ministerial Alliance
of Greater Cincinnati, Cincinnati, OH
Interfaith Hospitality Network of
Washington County Inc., Ann Arbor,
MI
Intergenerational Festivals Inc., Tampa,
FL
Intermountain Child Care Services Inc.,
Murray, UT
Intermountain Education Center, Logan,
UT
International Assistance Project of
Alabama Inc., Montgomery, AL
International Center for Tourism Planning
and Design, Englewood, CO
International Children Care, Houston, TX
International Christian Single Helpmate
Groups, Inc., Woodridge, IL
International Federation of Palynological
Societies, Tucson, AZ
International Health Dynamics Inc.,
Colorado Springs, CO
International Institute for Baubiologie
and Ecology, Inc., Clearwater, FL
International Medical Outreach Inc.,
Houston, TX
International Orchid Seed Foundation,
Inc., Labelle, FL
International Society for Social Con-
sciousness, Southfield, MI
International Tribunal Fund Inc., Key
Biscayne, FL
International Youth Exchange Inc., Cape
Coral, FL
Intersouth Sheltercare, Tucson, AZ
Inter-Tribal Trade Center, Lafayette, CO
In The Paint Inc., Milwaukee, WI
In The Warmth of His Glow Ministries
Inc., Tulsa, OK
In Touch Ministries Inc., Richmond, VA
Inventors Network, Stillwater, MN
Iowa City Jazz Festival Inc., Iowa City,
IA
Iowa Hawkeye Floor Covering
Association, Inc., Des Moines, IA
Iowa Problem Gambling Council Inc.,
Des Moines, IA
IRCC Truckers Legal Defense and
Education Fund of Minnesota, Clinton,
MN
Irish American Information Service,
Livonia, MI
Irish Childrens Summer Program of
Aurens County, Clinton, SC
Iron Two Iron Church, Cleveland, OH
Ironton Metropolitan Housing Authority
Tenants Council, Inc., Ironton, OH
Irregular Pearl, Dallas, TX
Isis Performance Company-The World
Organization of Art Culture Music,
Atlanta, GA
Isis T. Johnson Foundation, New Orleans,
LA
Islamic Foundation of Florida Inc.,
Miami Beach, FL
Islamic Science Research Institute Inc.,
Mt. Clemens, MI
Mission Specialities, Inc., Marietta, GA
U.S. Prayer Track, Inc., Houston, TX
If an organization listed above submits
information that warrants the renewal of its
classification as a public charity or as a pri-
vate operating foundation, the Internal
Revenue Service will issue a ruling or de-
termination letter with the revised classifi-
cation as to foundation status. Grantors and
contributors may thereafter rely upon such
ruling or determination letter as provided
in section 1.509(a)–7 of the Income Tax
Regulations. It is not the practice of the
Service to announce such revised classifi-
cation of foundation status in the Internal
Revenue Bulletin.

1998–4 I.R.B33January 26, 1998
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”)
that have an effect on previous rulings
use the following defined terms to de-
scribe the effect:
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
applied 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
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial 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 Abut not
to B, and the new ruling holds that it ap-
plies to both Aand 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 transac-
tions. This term is most commonly used
in a ruling that lists previously published
rulings that are obsoleted because of
changes in law or regulations. Aruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revoked describes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the 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 pe-
riod of time in separate rulings. If the
new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example, modified
and superseded describes a situation
where the substance of a previously pub-
lished 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 published ruling is first
modified and then, as modified, is super-
seded.
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 pub-
lished that includes the list in the original
ruling and the additions, and supersedes
all prior rulings 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
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current use and for-
merly used will appear in material published in the
Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C.—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contribution Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Proc..—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedral 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.
Definition of Terms

January 26, 1998341998–4 I.R.B.
1
Acumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 1997–27 through
1997–52 will be found in Internal Revenue Bulletin
1998–1, dated January 5, 1998.
Numerical Finding List
1
Bulletins 1998–1 and 1998–3
Announcements:
98–1, 1998–2 I.R.B. 38
98–2, 1998–2 I.R.B.38
98–3, 1998–2 I.R.B.38
Notices:
98–1, 1998–3 I.R.B. 42
98–2, 1998–2 I.R.B. 22
98–3, 1998–3 I.R.B. 48
98–4, 1998–2 I.R.B. 25
98–5, 1998–3 I.B.R.49
98–6, 1998–3 I.R.B. 52
98–7, 1998–3 I.R.B. 54
Proposed Regulations:
REG–102894–97, 1998–3 I.R.B. 59
REG–109704–97, 1998–3 I.R.B. 60
Revenue Procedures:
98–1, 1998–1 I.R.B. 7
98–2, 1998–1 I.R.B. 74
98–3, 1998–1 I.R.B. 100
98–4, 1998–1 I.R.B. 113
98–5, 1998–1 I.R.B. 155
98–6, 1998–1 I.R.B. 183
98–7, 1998–1 I.R.B. 222
98–8, 1998–1 I.R.B. 225
98–9, 1998–3 I.R.B. 56
98–10, 1998–2 I.R.B. 35
Revenue Rulings:
98–1, 1998–2 I.R.B. 5
98–2, 1998–2 I.R.B. 15
98–3, 1998–2 I.R.B. 4
98–4, 1998–2 I.R.B. 18
98–5, 1998–2 I.R.B. 20
Treasury Decisions:
8740, 1998–3 I.R.B. 4
8741, 1998–3 I.R.B. 6

1998–4 I.R.B35January 26, 1998
Finding List of Current Action on
Previously Published Items
1
Bulletins 1998–1 and 1998–3
Revenue Procedures:
97–1
Superseded by
98–1, 1998–1 I.R.B. 7
97–2
Superseded by
98–2, 1998–1 I.R.B. 74
97–3
Superseded by
98–3, 1998–1 I.R.B. 100
97–4
Superseded by
98–4, 1998–1 I.R.B. 113
97–5
Superseded by
98–5, 1998–1 I.R.B. 155
97–6
Superseded by
98–6, 1998–1 I.R.B. 183
97–7
Superseded by
98–7, 1998–1 I.R.B. 222
97–8
Superseded by
98–8, 1998–1 I.R.B. 225
97–21
Superseded by
98–2, 1998–1 I.R.B. 74
97–53
Superseded by
98–3, 1998–1 I.R.B. 100
Revenue Rulings:
75–17
Supplemented and superseded by
98–5, 1998–2 I.R.B. 20
92–19
Supplemented in part by
98–2, 1998–2 I.R.B. 15
1
Acumulative finding list for previously published
items mentioned in Internal Revenue Bulletins
1997–27 through 1997–52 will be found in Internal
Revenue Bulletin 1998–1, dated January 5, 1998.

January 26, 1998361998–4 I.R.B.
Note

Note
1998–4 I.R.B37January 26, 1998

Note
January 26, 1998381998–4 I.R.B.

INTERNAL REVENUE BULLETIN
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