Internal Revenue Bulletin 1999-12 (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. 99–15, page 4.
LIFO; price indexes; department stores.The January
1999 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, January 31,
1999.
T.D. 8798, page 16.
REG–120168–97, page 21.
Temporary and proposed regulations under section 6695 of
the Code relate to the due diligence requirements for paid
preparers of federal income tax returns or claims for refund
involving the earned income credit. A public hearing is
scheduled for May 20, 1999.
T.D. 8803, page 15.
REG–106386–98, page 31.
Final and temporary regulations under section 6695 of the
Code provide income tax return preparers with two alterna-
tive means of meeting the requirements that a preparer re-
tain the manually signed (by the preparer) copy of the return
or claim.
T.D. 8804, page 5.
Final regulations relate to delaying the effective date and
making technical amendments to final regulations under sec-
tion 1441 of the Code.
REG–105964–98, page 22.
Proposed regulations under section 1502 of the Code clarify
the treatment of the transfer or extinguishment of rights
under an intercompany obligation.
ESTATE TAX
REG–106177–98, page 25.
Proposed regulations under sections 2001, 2504, and
6501 of the Code relate to changes made by the Taxpayer
Relief Act of 1997 and the Internal Revenue Service Restruc-
turing and Reform Act of 1998 regarding the valuation of
prior gifts in determining estate and gift tax liability, and the
period of limitations for assessing and collecting gift tax. A
public hearing is scheduled for April 28, 1999.
GIFT TAX
REG–106177–98, page 25.
Proposed regulations under sections 2001, 2504, and
6501 of the Code relate to changes made by the Taxpayer
Relief Act of 1997 and the Internal Revenue Service Restruc-
turing and Reform Act of 1998 regarding the valuation of
prior gifts in determining estate and gift tax liability, and the
period of limitations for assessing and collecting gift tax. A
public hearing is scheduled for April 28, 1999.
EMPLOYEE PLANS
Notice 99–15, page 20.
Weighted average interest rate update.Guidelines are
set forth for determining the weighted average interest rate
for March 1999 and the resulting permissible range of inter-
est rates used to calculate current liability for purposes of
the full funding limitation of section 412(c)(7) of the Code.
EXEMPT ORGANIZATIONS
Announcement 99–22, page 32.
A list is given of organizations now classified as private foun-
dations.
ADMINISTRATIVE
REG–116099–98, page 34.
This notice withdraws certain proposed regulations under
section 162 of the Code.
Announcement 99–25, page 35.
The Joint Board for the Enrollment of Actuaries is proposing
a restructuring of the examination program. Clarification is
also provided on the Continuing Professional Education
(CPE) requirements and the use of the four-digit enrollment
number.
Internal Revenue
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Bulletin No. 1999–12
March 22, 1999
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 43.
Announcement of Disbarments and Suspensions begins on page 38.
IRB 1999-12 3/17/99 12:40 PM Page 1

Mission of the Service
Provide America’s taxpayers top quality service by help-
ing them understand and meet their tax responsibilities
and by applying the tax law with integrity and fairness to
all.
2
IRB 1999-12 3/17/99 12:40 PM Page 2

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.
IRB 1999-12 3/17/99 12:40 PM Page 3

March 22, 199941999–12 I.R.B.
Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 472.—Last-in, First-out
Inventories
26 CFR 1.472-1: Last-in, first-out inventories.
LIFO; price indexes; department
stores.The January 1999 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, January 31, 1999.
Rev. Rul. 99–15
The following Department Store In-
ventory Price Indexes for January 1999
were issued by the Bureau of Labor Sta-
tistics. The indexes are accepted by the
Internal Revenue Service, under §
1.472–1(k) of the Income Tax Regula-
tions and Rev. Proc. 86–46, 1986–2 C.B.
739, for appropriate application to inven-
tories of department stores employing
the retail inventory and last-in, first-out
inventory methods for tax years ended
on, or with reference to, January 31,
1999.
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, food,
liquor, tobacco, and contract departments.
BUREAU OF LABOR STATISTICS, DEPARTMENT STORE
INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS
(January 1941 = 100, unless otherwise noted)
Percent Change
Jan.Jan.from Jan. 1998
Groups19981999to Jan. 1999
1
1. Piece Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .536.7507.3–5.5
2. Domestics and Draperies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .627.9643.12.4
3. Women’s and Children’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .656.3640.4–2.4
4. Men’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .890.5894.00.4
5. Infants’ Wear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .619.0628.61.6
6. Women’s Underwear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .558.3560.70.4
7. Women’s Hosiery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .304.6316.2 3.8
8. Women’s and Girls’ Accessories . . . . . . . . . . . . . . . . . . . . . . . . . . . .544.1535.4–1.6
9. Women’s Outerwear and Girls’ Wear . . . . . . . . . . . . . . . . . . . . . . . .395.6376.9–4.7
10. Men’s Clothing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .614.6603.8–1.8
11. Men’s Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .584.2585.20.2
12. Boys’ Clothing and Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . .504.4482.1–4.4
13. Jewelry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .981.2965.3–1.6
14. Notions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .803.3729.7–9.2
15. Toilet Articles and Drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .929.7946.81.8
16. Furniture and Bedding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .662.8678.42.4
17. Floor Coverings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .583.9602.43.2
18. Housewares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .811.8813.60.2
19. Major Appliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .241.8237.7–1.7
20. Radio and Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73.569.6–5.3
21. Recreation and Education
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .108.3100.7–7.0
22. Home Improvements
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .134.0130.3–2.8
23. Auto Accessories
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .107.8107.80.0
Groups 1 – 15: Soft Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .593.1586.4–1.1
Groups 16 – 20: Durable Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .461.9459.0–0.6
Groups 21 – 23: Misc. Goods
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .111.5106.0–4.9
Store Total
3
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .547.5539.4–1.5
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, food, liquor, tobacco, and contract departments.
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1999–12 I.R.B.5March 22, 1999
DRAFTING INFORMATION
The principal author of this revenue
ruling is Richard C. Farley, Jr. of the Of-
fice of Assistant Chief Counsel (Income
Tax and Accounting). For further infor-
mation regarding this revenue ruling, con-
tact Mr. Farley on (202) 622-4970 (not a
toll-free call).
Section 1441.—Withholding of
Tax on Nonresident Aliens
26 CFR 1.1441–1: Requirement for the deduction
and withholding of tax on payments to foreign
persons.
T.D. 8804
DEPARTMENT OF THE TREASURY
Internal Revenue Services
26 CFR Parts 1, 31, 35a and
301
General Revision of Regulations
Relating to Withholding of Tax
on Certain U.S. Source Income
Paid to Foreign Persons and
Related Collection, Refunds,
and Credits; Revision of
Information Reporting and
Backup Withholding
Regulations; and Removal of
Regulations Under Parts 1 and
35a and of Certain Regulations
Under Income Tax Treaties
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final rule; delay of effective
date, technical amendments, and partial
withdrawal.
SUMMARY: This document contains
changes delaying the effective date and
making technical amendments to final
regulations (T.D. 8734, 1997–2 C.B.
109), relating to the withholding of in-
come tax on certain U.S. source income
payments to foreign persons. The Depart-
ment of the Treasury and the IRS believe
it is in the best interest of tax administra-
tion to extend the effective date of the
final withholding regulations to ensure
that both taxpayers and the government
can complete changes necessary to imple-
ment the new withholding regime. As ex-
tended by this document, the final with-
holding regulations will apply to pay-
ments made after December 31, 1999.
This document also withdraws two
amendments which have already been
dealt with in T.D. 8772, (1998–31 I.R.B.
8), which was published in the Federal
Registerfor June 30, 1998.
DATES: Effective Dates: The amend-
ments in this final rule are effective Janu-
ary 1, 2000. As of December 31, 1998,
the effective date of the final regulations
published at 62 F.R. 53387, October 14,
1997, is delayed from January 1, 1999,
until January 1, 2000; however, the effec-
tive date of the addition of §31.9999–0
and §35a.9999–0 and the removal of
§35a.9999–0T remains October 14, 1997.
Withdrawal:Effective December 31,
1998, the amendments removing
§§1.6045–1T and 1.6045–2T published at
62 F.R. 53387, October 14, 1997, are
withdrawn.
FOR FURTHER INFORMATION CON-
TACT: Lilo Hester, (202) 622-3840 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The final regulations that are the sub-
ject of this amendment provide guidance
under sections 1441, 1442, and 1443 of
the Internal Revenue Code (Code) on cer-
tain U.S. source income paid to foreign
persons, the related tax deposit and re-
porting requirements under section 1461
of the Code, and the related changes
under sections 163(f), 165(j), 871, 881,
1462, 1463, 3401, 3406, 6041, 6041A,
6042, 6045, 6049, 6050A, 6050N, 6109,
6114, 6402, 6413, and 6724 of the Code.
Need for Changes
On April 13, 1998, in Notice 98–16
(1998–15 I.R.B. 12), the IRS and Trea-
sury announced their decision to extend
the effective date of the final regulations,
and to make correlative changes to the
transition rules for obtaining new with-
holding certificates and statements con-
taining the necessary information and rep-
resentations required by the final
regulations. As published in the Federal
Registeron October 14, 1997 (62 F.R.
53387 [T.D. 8734, 1997–2 C.B. 109]), the
final regulations were generally applica-
ble to payments made after December 31,
1998, and generally granted withholding
agents until after December 31, 1999, to
obtain the new withholding certificates
and statements required under those regu-
lations. This amendment serves to make
the final regulations applicable to pay-
ments made after December 31, 1999, and
to require mandatory use of the new with-
holding certificates and statements after
December 31, 2000. In addition, this
amendment serves to address typographi-
cal errors, and to withdraw the removal of
§§1.6045–1T and 1.6045–2T since those
sections were already removed on June
30, 1998, in T.D. 8772 (63 F.R. 35517).
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in EO 12866.
Therefore, a regulatory assessment is not
required. It has also been determined that
section 553(b) of the Administrative Pro-
cedure Act (5 U.S.C. chapter 5) does not
apply to these regulations. Finally, it has
been determined that the Regulatory Flex-
ibility Act (5 U.S.C. chapter 6) does not
apply to these regulations because the
regulations do not impose a collection of
information on small entities. Pursuant to
7805(f) of the Code, the notice of pro-
posed rulemaking preceding these regula-
tions (61 F.R. 17614) was submitted to
the Small Business Administration for
comment on its impact on small business.
*****
Amendments to the Regulations
Accordingly, under the authority of 26
U.S.C. 7805, 26 CFR parts 1, 31, 35a, and
301 are amended by making the following
correcting amendments:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. In §1.871–14, paragraph (h) is
revised to read as follows:
§1.871–14 Rules relating to repeal of tax
on interest of nonresident alien
individuals and foreign corporations
received from certain portfolio debt
investments.
* * * * *
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March 22, 199961999–12 I.R.B.
(h) Effective date—(1) In general.
This section shall apply to payments of
interest made after December 31, 1999.
(2) Transition rule.For purposes of
this section, the validity of a Form W-8
that was valid on January 1, 1998, under
the regulations in effect prior to January
1, 2000 (see 26 CFR parts 1 and 35a, re-
vised April 1, 1998) and expired, or will
expire, at any time during 1998, is ex-
tended until December 31, 1998. The va-
lidity of a Form W-8 that is valid on or
after January 1, 1999, remains valid until
its validity expires under the regulations
in effect prior to January 1, 2000 (see 26
CFR parts 1 and 35a, revised April 1,
1998) or, if earlier, until December 31,
2000. The rule in this paragraph (h)(2),
however, does not apply to extend the va-
lidity period of a Form W-8 that expires
solely by reason of changes in the circum-
stances of the person whose name is on
the certificate. Notwithstanding the first
three sentences of this paragraph (h)(2), a
withholding agent or payor may choose to
not take advantage of the transition rule in
this paragraph (h)(2) with respect to one
or more withholding certificates valid
under the regulations in effect prior to
January 1, 2000 (see 26 CFR parts 1 and
35a, revised April 1, 1998) and, therefore,
may choose to obtain withholding certifi-
cates conforming to the requirements de-
scribed in this section (new withholding
certificates). For purposes of this section,
a new withholding certificate is deemed
to satisfy the documentation requirement
under the regulations in effect prior to
January 1, 2000 (see 26 CFR parts 1 and
35a, revised April 1, 1998). Further, a
new withholding certificate remains valid
for the period specified in §1.1441–
1(e)(4)(ii), regardless of when the certifi-
cate is obtained.
Par. 3. In §1.1441–1 as revised at 62
F.R. 53424, paragraph (f) is revised to
read as follows:
§1.1441–1 Requirement for the
deduction and withholding of tax on
payments to foreign persons.
* * * * *
(f) Effective date—(1) In general.
This section applies to payments made
after December 31, 1999.
(2) Transition rules—(i) Special rules
for existing documentation. For purposes
of paragraphs (d)(3) and (e)(2)(i) of this
section, the validity of a withholding cer-
tificate (namely, Form W-8, 8233, 1001,
4224, or 1078 , or a statement described
in §1.1441–5 in effect prior to January 1,
2000 (see §1.1441–5 as contained in 26
CFR part 1, revised April 1, 1998)) that
was valid on January 1, 1998 under the
regulations in effect prior to January 1,
2000 (see 26 CFR parts 1 and 35a, revised
April 1, 1998) and expired, or will expire,
at any time during 1998, is extended until
December 31, 1998. The validity of a
withholding certificate that is valid on or
after January 1, 1999, remains valid until
its validity expires under the regulations
in effect prior to January 1, 2000 (see 26
CFR parts 1 and 35a, revised April 1,
1998) or, if earlier, until December 31,
2000. The rule in this paragraph (f)(2)(i),
however, does not apply to extend the va-
lidity period of a withholding certificate
that expires solely by reason of changes in
the circumstances of the person whose
name is on the certificate. Notwithstand-
ing the first three sentences of this para-
graph (f)(2)(i), a withholding agent may
choose to not take advantage of the transi-
tion rule in this paragraph (f)(2)(i) with re-
spect to one or more withholding certifi-
cates valid under the regulations in effect
prior to January 1, 2000 (see 26 CFR parts
1 and 35a, revised April 1, 1998) and,
therefore, to require withholding certifi-
cates conforming to the requirements de-
scribed in this section (new withholding
certificates). For purposes of this section,
a new withholding certificate is deemed to
satisfy the documentation requirement
under the regulations in effect prior to Jan-
uary 1, 2000 (see 26 CFR parts 1 and 35a,
revised April 1, 1998). Further, a new
withholding certificate remains valid for
the period specified in paragraph (e)(4)(ii)
of this section, regardless of when the cer-
tificate is obtained.
(ii) Lack of documentation for past
years. A taxpayer may elect to apply the
provisions of paragraphs (b)(7)(i)(B), (ii),
and (iii) of this section, dealing with lia-
bility for failure to obtain documentation
timely, to all of its open tax years, includ-
ing tax years that are currently under ex-
amination by the IRS. The election is
made by simply taking action under those
provisions in the same manner as the tax-
payer would take action for payments
made after December 31, 1999.
Par. 4. In §1.1441–4 as amended at 62
F.R. 53450, paragraph (g) is revised to
read as follows:
§1.1441–4 Exemptions from withholding
for certain effectively connected income
and other amounts.
* * * * *
(g) Effective date—(1) General rule.
This section applies to payments made
after December 31, 1999.
(2) Transition rules. The validity of a
Form 4224 or 8233 that was valid on Janu-
ary 1, 1998, under the regulations in effect
prior to January 1, 2000 (see 26 CFR part
1, revised April 1, 1998) and expired, or
will expire, at any time during 1998, is ex-
tended until December 31, 1998. The va-
lidity of a Form 4224 or 8233 that is valid
on or after January 1, 1999, remains valid
until its validity expires under the regula-
tions in effect prior to January 1, 2000 (see
26 CFR part 1, revised April 1, 1998) or, if
earlier, until December 31, 2000. The rule
in this paragraph (g)(2), however, does not
apply to extend the validity period of a
Form 4224 or 8223 that expires solely by
reason of changes in the circumstances of
the person whose name is on the certifi-
cate. Notwithstanding the first three sen-
tences of this paragraph (g)(2), a withhold-
ing agent may choose to not take
advantage of the transition rule in this
paragraph (g)(2) with respect to one or
more withholding certificates valid under
the regulations in effect prior to January 1,
2000 (see 26 CFR part 1, revised April 1,
1998) and, therefore, to require withhold-
ing certificates conforming to the require-
ments described in this section (new with-
holding certificates). For purposes of this
section, a new withholding certificate is
deemed to satisfy the documentation re-
quirement under the regulations in effect
prior to January 1, 2000 (see 26 CFR part
1, revised April 1, 1998). Further, a new
withholding certificate remains valid for
the period specified in §1.1441–1(e)(4)(ii),
regardless of when the certificate is ob-
tained.
Par. 5. In §1.1441–5 as revised at 62
F.R, 53452, paragraph (g) is revised to
read as follows:
IRB 1999-12 3/17/99 12:40 PM Page 6

§1.1441–5 Withholding on payments to
partnerships, trusts, and estates.
* * * * *
(g) Effective date—(1) General rule.
This section applies to payments made
after December 31, 1999.
(2) Transition rules. The validity of a
withholding certificate that was valid on
January 1, 1998, under the regulations in
effect prior to January 1, 2000 (see 26
CFR parts 1 and 35a, revised April 1,
1998) and expired, or will expire, at any
time during 1998, is extended until De-
cember 31, 1998. The validity of a with-
holding certificate that is valid on or after
January 1, 1999, remains valid until its
validity expires under the regulations in
effect prior to January 1, 2000 (see 26
CFR parts 1 and 35a, revised April 1,
1998) or, if earlier, until December 31,
2000. The rule in this paragraph (g)(2),
however, does not apply to extend the va-
lidity period of a withholding certificate
that expires solely by reason of changes in
the circumstances of the person whose
name is on the certificate. Notwithstand-
ing the first three sentences of this para-
graph (g)(2) , a withholding agent may
choose to not take advantage of the transi-
tion rule in this paragraph (g)(2) with re-
spect to one or more withholding certifi-
cates valid under the regulations in effect
prior to January 1, 2000 (see 26 CFR
parts 1 and 35a, revised April 1, 1998)
and, therefore, to require withholding cer-
tificates conforming to the requirements
described in this section (new withhold-
ing certificates). For purposes of this sec-
tion, a new withholding certificate is
deemed to satisfy the documentation re-
quirement under the regulations in effect
prior to January 1, 2000 (see 26 CFR
parts 1 and 35a, revised April 1, 1998).
Further, a new withholding certificate re-
mains valid for the period specified in
§1.1441–1(e)(4)(ii), regardless of when
the certificate is obtained.
Par. 6. In §1.1441–6 as revised at 62
F.R. 53458, paragraph (g) is revised to
read as follows:
§1.1441–6 Claim of reduced withholding
under an income tax treaty.
* * * * *
(g) Effective date—(1) General rule.
This section applies to payments made
after December 31, 1999.
(2) Transition rules.For purposes of
this section, the validity of a Form 1001
or 8233 that was valid on January 1, 1998,
under the regulations in effect prior to
January 1, 2000 (see 26 CFR parts 1 and
35a, revised April 1, 1998) and expired,
or will expire, at any time during 1998, is
extended until December 31, 1998. The
validity of a Form 1001 or 8233 is valid
on or after January 1, 1999, remains valid
until its validity expires under the regula-
tions in effect prior to January 1, 2000
(see 26 CFR parts 1 and 35a, revised
April 1, 1998) or, if earlier, until Decem-
ber 31, 2000. The rule in this paragraph
(g)(2), however, does not apply to extend
the validity period of a Form 1001 or
8233 that expires solely by reason of
changes in the circumstances of the per-
son whose name is on the certificate or in
interpretation of the law under the regula-
tions under §1.894–1T(d). Notwithstand-
ing the first three sentences of this para-
graph (g)(2), a withholding agent may
choose to not take advantage of the transi-
tion rule in this paragraph (g)(2) with re-
spect to one or more withholding certifi-
cates valid under the regulations in effect
prior to January 1, 2000 (see 26 CFR
parts 1 and 35a, revised April 1, 1998)
and, therefore, to require withholding cer-
tificates conforming to the requirements
described in this section (new withhold-
ing certificates). For purposes of this sec-
tion, a new withholding certificate is
deemed to satisfy the documentation re-
quirement under the regulations in effect
prior to January 1, 2000 (see 26 CFR
parts 1 and 35a, revised April 1, 1998).
Further, a new withholding certificate re-
mains valid for the period specified in
§1.1441–1(e)(4)(ii), regardless of when
the certificate is obtained.
Par. 7. In §1.1441–8 as redesignated
and amended at 62 F.R. 53464, paragraph
(f) is revised to read as follows:
§1.1441–8 Exemption from withholding
for payments to foreign governments,
international organizations, foreign
central banks of issue, and the Bank for
International Settlements.
* * * * *
(f) Effective date—(1) In general.
This section applies to payments made
after December 31, 1999.
(2) Transition rules. For purposes of
this section, the validity of a Form 8709
that was valid on January 1, 1998, under
the regulations in effect prior to January
1, 2000 (see 26 CFR part 1, revised April
1, 1998) and expired, or will expire, at
any time during 1998, is extended until
December 31, 1998. The validity of a
Form 8709 that is valid on or after Janu-
ary 1, 1999, remains valid until its valid-
ity expires under the regulations in effect
prior to January 1, 2000 (see 26 CFR part
1, revised April 1, 1998) or, if earlier,
until December 31, 2000. The rule in this
paragraph (f)(2), however, does not apply
to extend the validity period of a Form
8709 that expires solely by reason of
changes in the circumstances of the per-
son whose name is on the certificate.
Notwithstanding the first three sentences
of this paragraph (f)(2), a withholding
agent may choose to not take advantage
of the transition rule in this paragraph
(f)(2) with respect to one or more with-
holding certificates valid under the regu-
lations in effect prior to January 1, 2000
(see 26 CFR part 1, revised April 1, 1998)
and, therefore, to require withholding cer-
tificates conforming to the requirements
described in this section (new withhold-
ing certificates). For purposes of this sec-
tion, a new withholding certificate is
deemed to satisfy the documentation re-
quirement under the regulations in effect
prior to January 1, 2000 (see 26 CFR part
1, revised April 1, 1998). Further, a new
withholding certificate remains valid for
the period specified in §1.1441–1(e)-
(4)(ii), regardless of when the certificate
is obtained.
Par. 8. In §1.1441–9, paragraph (d) is
revised to read as follows:
§1.1441–9 Exemption from withholding
on exempt income of a foreign tax-exempt
organization, including foreign private
foundations.
* * * * *
(d) Effective date—(1) In general.
This section applies to payments made
after December 31, 1999.
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(2) Transition rules. For purposes of
this section, the validity of a Form W-8,
1001, or 4224 or a statement that was
valid on January 1, 1998, under the regu-
lations in effect prior to January 1, 2000
(see 26 CFR parts 1 and 35a, revised
April 1, 1998) and expired, or will expire,
at any time during 1998, is extended until
December 31, 1998. The validity of a
Form W-8, 1001, or 4224 or a statement
that is valid on or after January 1, 1999
remains valid until its validity expires
under the regulations in effect prior to
January 1, 2000 (see 26 CFR parts 1 and
35a, revised April 1, 1998) or, if earlier,
until December 31, 2000. The rule in this
paragraph (d)(2), however, does not apply
to extend the validity period of a Form
W-8, 1001, or 4224 or a statement that
expires solely by reason of changes in the
circumstances of the person whose name
is on the certificate. Notwithstanding the
first three sentences of this paragraph
(d)(2), a withholding agent may choose to
not take advantage of the transition rule in
this paragraph (d)(2) with respect to one
or more withholding certificates valid
under the regulations in effect prior to
January 1, 2000 (see 26 CFR parts 1 and
35a, revised April 1, 1998) and, therefore,
to require withholding certificates con-
forming to the requirements described in
this section (new withholding certifi-
cates). For purposes of this section, a new
withholding certificate is deemed to sat-
isfy the documentation requirement under
the regulations in effect prior to January
1, 2000 (see 26 CFR parts 1 and 35a, re-
vised April 1, 1998). Further, a new with-
holding certificate remains valid for the
period specified in §1.1441–1(e)(4)(ii),
regardless of when the certificate is
obtained.
Par. 9. In §1.1443–1 as revised at 62
F.R. 53466, paragraph (c) is revised to
read as follows:
§1.1443–1 Foreign tax-exempt
organizations.
* * * * *
(c) Effective date—(1) In general.
This section applies to payments made
after December 31, 1999.
(2) Transition rules.For purposes of
this section, the validity of an affidavit or
opinion of counsel described in §1.1443–
1(b)(4)(i) in effect prior to January 1,
2000 (see §1.1443–1(b)(4)(i) as contained
in 26 CFR part 1, revised April 1, 1998)
that is valid on December 31, 1998 is ex-
tended until December 31, 2000. How-
ever, a withholding agent may choose to
not take advantage of the transition rule in
this paragraph (c)(2) with respect to one
or more withholding certificates valid
under the regulations in effect prior to
January 1, 2000 (see 26 CFR part 1, re-
vised April 1, 1998) and, therefore, to re-
quire withholding certificates conforming
to the requirements described in this sec-
tion (new withholding certificates). For
purposes of this section, a new withhold-
ing certificate is deemed to satisfy the
documentation requirement under the reg-
ulations in effect prior to January 1, 2000
(see 26 CFR part 1, revised April 1,
1998). Further, a new withholding certifi-
cate remains valid for the period specified
in §1.1441–1(e)(4)(ii), regardless of when
the certificate is obtained.
§1.6041–3 [Amended]
Par. 10. Section 1.6041–3 as amended
at 62 F.R. 53472 is further amended by re-
moving the last sentence of the introduc-
tory text.
Par. 11. In §1.6042–3 as amended at 62
F.R. 53475, paragraph (b)(5) is revised to
read as follows:
§1.6042–3 Dividends subject to
reporting.
* * * * *
(b) * * *
(5) Effective date—(i) General rule.
The provisions of this paragraph (b) apply
to payments made after December 31,
1999.
(ii) Transition rules.The validity of a
withholding certificate (namely, Form W-
8 or other form upon which the payor is
permitted to rely to hold the payee as a
foreign person) that was valid on January
1, 1998, under the regulations in effect
prior to January 1, 2000 (see 26 CFR
parts 1 and 35a, revised April 1, 1998)
and expired, or will expire, at any time
during 1998, is extended until December
31, 1998. The validity of a withholding
certificate that is valid on or after January
1, 1999, remains valid until its validity
expires under the regulations in effect
prior to January 1, 2000 (see 26 CFR
parts 1 and 35a, revised April 1, 1998) or,
if earlier, until December 31, 2000. The
rule in this paragraph (b)(5)(ii), however,
does not apply to extend the validity pe-
riod of a withholding certificate that ex-
pires solely by reason of changes in the
circumstances of the person whose name
is on the certificate. Notwithstanding the
first three sentences of this paragraph
(b)(5)(ii), a payor may choose not to take
advantage of the transition rule in this
paragraph (b)(5)(ii) with respect to one or
more withholding certificates valid under
the regulations in effect prior to January
1, 2000 (see 26 CFR parts 1 and 35a, re-
vised April 1, 1998) and, therefore, to re-
quire withholding certificates conform-
ing to the requirements described in this
section (new withholding certificates).
For purposes of this section, a new with-
holding certificate is deemed to satisfy the
documentation requirement under the reg-
ulations in effect prior to January 1, 2000
(see 26 CFR parts 1 and 35a, revised
April 1, 1998). Further, a new withhold-
ing certificate remains valid for the period
specified in §1.1441–1(e)(4)(ii), regard-
less of when the certificate is obtained.
Par. 12. In §1.6045–1 as amended at
62 F.R. 53476, paragraph (g)(5) is revised
to read as follows:
§1.6045–1 Returns of information of
brokers and barter exchanges.
* * * * *
(g) * * *
(5) Effective date—(i) General rule.
The provisions of this paragraph (g) apply
to payments made after December 31,
1999.
(ii) Transition rules.The validity of a
withholding certificate (namely, Form W-
8 or other form upon which the payor is
permitted to rely to hold the payee as a
foreign person) that was valid on January
1, 1998, under the regulations in effect
prior to January 1, 2000 (see 26 CFR
parts 1 and 35a, revised April 1, 1998)
and expired, or will expire, at any time
during 1998, is extended until December
31, 1998. The validity of a withholding
certificate that is valid on or after January
1, 1999, remains valid until its validity
expires under the regulations in effect
prior to January 1, 2000 (see 26 CFR
parts 1 and 35a, revised April 1, 1998) or,
if earlier, until December 31, 2000. The
rule in this paragraph (g)(5)(ii), however,
March 22, 199981999–12 I.R.B.
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does not apply to extend the validity pe-
riod of a form that expires in 1998 solely
by reason of changes in the circumstances
of the person whose name is on the cer-
tificate. Notwithstanding the first three
sentences of this paragraph (g)(5)(ii), a
payor may choose not to take advantage
of the transition rule in this paragraph
(g)(5)(ii) with respect to one or more
withholding certificates valid under the
regulations in effect prior to January 1,
2000 (see 26 CFR parts 1 and 35a, revised
April 1, 1998) and, therefore, to require
withholding certificates conforming to the
requirements described in this section
(new withholding certificates). For pur-
poses of this section, a new withholding
certificate is deemed to satisfy the docu-
mentation requirement under the regula-
tions in effect prior to January 1, 2000
(see 26 CFR parts 1 and 35a, revised
April 1, 1998). Further, a new withhold-
ing certificate remains valid for the period
specified in §1.1441–1(e)(4)(ii), regard-
less of when the certificate is obtained.
Par 13. Effective December 31, 1998,
the amendments removing §§1.6045–1T
and 1.6045–2T, published at 62 F.R.
53480, are withdrawn.
Par. 14. In §1.6049–5 as amended at
62 F.R. 53483, paragraph (g) is revised to
read as follows:
§1.6049–5 Interest and original issue
discount subject to reporting after
December 31, 1982.
* * * * *
(g) Effective date—(1) General rule.
The provisions of paragraphs (b)(6)
through (15), (c), (d), and (e) of this sec-
tion apply to payments made after De-
cember 31, 1999.
(2) Transition rules.The validity of a
withholding certificate (namely, Form W-
8 or other form upon which the payor is
permitted to rely to hold the payee as a
foreign person) that was valid on January
1, 1998, under the regulations in effect
prior to January 1, 2000 (see 26 CFR
parts 1 and 35a, revised April 1, 1998)
and expired, or will expire, at any time
during 1998, is extended until December
31, 1998. The validity of a withholding
certificate that is valid on or after January
1, 1999, remains valid until its validity
expires under the regulations in effect
prior to January 1, 2000 (see 26 CFR
parts 1 and 35a, revised April 1, 1998) or,
if earlier, until December 31, 2000. The
rule in this paragraph (g)(2), however,
does not apply to extend the validity pe-
riod of a withholding certificate that ex-
pires solely by reason of changes in the
circumstances of the person whose name
is on the certificate. Notwithstanding the
first three sentences of this paragraph
(g)(2), a payor may choose not to take
advantage of the transition rule in this
paragraph (g)(2) with respect to one or
more withholding certificates valid under
the regulations in effect prior to January
1, 2000 (see 26 CFR parts 1 and 35a, re-
vised April 1, 1998) and, therefore, may
require withholding certificates conform-
ing to the requirements described in this
section (new withholding certificates).
For purposes of this section, a new with-
holding certificate is deemed to satisfy the
documentation requirement under the reg-
ulations in effect prior to January 1, 2000
(see 26 CFR parts 1 and 35a, revised
April 1, 1998). Further, a new withhold-
ing certificate remains valid for the period
specified in §1.1441–1(e)(4)(ii), regard-
less of when the certificate is obtained.
PARTS 1, 31, 35a, and 301
[AMENDED]
Par. 15. In the list below, for each sec-
tion indicated in the left column (which
was added, revised, or amended at 62 F.R.
53387), remove the language in the mid-
dle column and add the language in the
right column:
1999–12 I.R.B.9March 22, 1999
SectionRemoveAdd
1.871–14(c)(2)(iii)1.1441–1(c)(3)(ii)1.1441–1(e)(3)(ii)
1.871–14(c)(3)(ii),October 12, 1999October 12, 2000
Example, first and sixth sentences
1.871–14(c)(3)(ii),December 31, 1999December 31, 2000
Example, sixth sentence
1.871–14(c)(3)(ii),June 15, 2003June 15, 2004
Example,sixth and seventh sentences
1.1441–1(b)(2)(iii)(B),savings clausesaving clause
fifth sentence
1.1441–1(b)(2)(iv)(E),actually maintainactually maintains
second sentence
1.1441–1(b)(3)(iii)(B),that cannot reliablycannot reliably
first sentence
1.1441–1(b)(3)(iii)(C),1.1441–4(e)1.1441–4(d)
last sentence
1.1441–1(b)(3)(x),W s W’s
Example 1, seventh and ninth sentences
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1.1441–1(b)(3)(x),W sW’s
Example 2, sixth and seventh sentences
1.1441–1(b)(3)(x), X, nc.X, Inc.
Example 3, third sentence
1.1441–1(b)(4)(i),1.871–7(b)(2)(i)1.871–7(b)(2)
first sentence
1.1441–1(b)(4)(xix)January 1, 1999January 1, 2000
1.1441–1(b)(4)(xix)April 1, 1997April 1, 1998
1.1441–1(b)(5)(viii)I.R.B. 1996–491996–2 C.B. 227
1.1441–1(b)(7)(v),June 15, 1999June 15, 2000
Example 1, first, fourth, and
eighth sentences
1.1441–1(b)(7)(v),September 30, 2001September 30, 2002
Example 1, third and ninth sentences
1.1441–1(b)(7)(v),March 15, 2000March 15, 2001
Example 1,ninth sentence
1.1441-1(b)(7)(v),June 15, 1999June 15, 2000
Example 2,first, fourth, and seventh
sentences
1.1441–1(b)(7)(v),September 30, 2001September 30, 2002
Example 2,third and seventh sentences
1.1441–1(b)(7)(v),March 15, 2000March 15, 2001
Example 2,seventh and ninth sentences
1.1441–1(c)(6)(ii)(B)January 1, 1999January 1, 2000
1.1441–1(c)(6)(ii)(B)April 1, 1997April 1, 1998
1.1441–1(e)(4)(ii)(A)September 30, 1999September 30, 2000
1.1441–1(e)(4)(ii)(A)December 31, 2002December 31, 2003
1.1441–1(e)(4)(vi),provided the acceptableprovided on the acceptable
sixth sentence
1.1441–1(e)(4)(ix)(A)(2),§31.3406(c)1(c)(3)(ii)§31.3406(c)–(c)(3)(ii)
second sentence
1.1441–1(e)(5)(i),reportable paymentsreportable amounts
penultimate sentence
1.1441–1(e)(5)(v)(A),the intermediary the qualified intermediary
third sentence
1.1441–1(e)(5)(v)(A),the intermediary to the qualified intermediary to
fourth sentence
March 22, 1999101999–12 I.R.B.
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1.1441–1(e)(5)(v)(B), paragraph (b)(3)(vi)paragraph (e)(3)(vi)
introductory text, third sentence
1.1441–1(e)(5)(v)(B)(1),withholding agent qualified intermediary
second sentence
1.1441–1(e)(5)(v)(C),The intermediaryThe qualified intermediary
first sentence
1.1441–2(a), last871(h)(5)(B)871(h)(5)(B) or a member of a clearing
sentence organization which member is the benefi-
cial owner of the obligation
1.1441–2(b)(1)(ii),someone ssomeone’s
fifth sentence
1.1441–2(b)(3)(iv)December 31, 1998December 31, 1999
1.1441–2(f)December 31, 1998December 31, 1999
1.1441–3(h)December 31, 1998December 31, 1999
1.1441–4(a)(2)(i), secondUnited StatesUnited States and is includable in the
sentencebeneficial owner’s gross income for the
taxable year
1.1441–5(a)(6),withholding partnershipwithholding foreign partnership
second sentence
1.1441–5(c)(2)(ii)(B),qualified intermediarywithholding foreign partnership
sixth sentence
1.1441–5(c)(2)(ii)(B),customerspartners
sixth sentence
1.1441–5(c)(3)(iii)(D)that the partnersthat the amounts allocable to the partners
1.1441–5(d)(4), Example 2,depending ofdepending on
second sentence
1.1441–6(b)(1), first§1.1441–1(e)(1)(ii)(B)§1.1441–1(e)(1)(ii)(A)(2)
sentence
1.1441–6(c)(2)(ii), firstupon a certificateupon receipt of a certificate
sentence
1.1441–6(d), secondrate of taxrate of withholding
sentence
1.1441–7(g)December 31, 1998December 31, 1999
1.1461–1(b)(2)(v)foreign partnership shallforeign partnership (whether or not a
withholding foreign partnership) shall
1.1461–1(b)(2)(vi),banks, securities dealers,banks, or insurance companies.
paragraph headingor insurance companies.
1999–12 I.R.B.11March 22, 1999
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1.1461–1(c)(4)(iv), firstcertificate attached to the intermediary’s certificate or documentary evidence at-
sentenceor partnership withholding certificateattached to the intermediary’s or partner-
that is from a qualified intermediary or a ship withholding certificate
withholding foreign partnership
1.1461–1(i)December 31, 1998December 31, 1999
1.1461–2(a)(1), thirdan adjustment to a refund of
sentence
1.1461–2(a)(3),beneficial owner beneficial owner or payee
first sentence
1.1461–2(a)(4),December 1999December 2000
Example 1(i), second sentence
1.1461–2(a)(4), February 10, 2000February 10, 2001
Example 1(i), third sentence
1.1461–2(a)(4),19992000
Example 1(ii), first, second, and last
sentences
1.1461–2(a)(4),March 15, 2000March 15, 2001
Example 1(ii), first sentence
1.1461–2(a)(4),20002001
Example 1(ii), third sentence
1.1461–2(a)(4),20002001
Example 2, second and
last sentences
1.1461–2(a)(4),June 2000June 2001
Example 2,second sentence
1.1461–2(a)(4), July 15, 2000July 15, 2001
Example 2,third sentence
1.1461–2(a)(4), 19992000
Example 2,third sentence
1.1461–2(a)(4),March 15, 2001March 15, 2002
Example 2,last sentence
1.1461–2(a)(4), Example 3,February 15, 2000February 15, 2001
last sentence
1.1461–2(a)(4), Example 3,March 15, 2000March 15, 2001
last sentence
1.1461–2(d)December 31, 1998December 31, 1999
1.1462–1(c)December 31, 1998December 31, 1999
1.1463–1(a), last sentence§1.1441–7(b)(7)§1.1441–7(b)
1.1463–1(b)December 31, 1989December 31, 1999
March 22, 1999121999–12 I.R.B.
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1.1464–1(b)§1.1461–4§1.1461–2
1.6041–4(d)December 31, 1998December 31, 1999
1.6041A–1(d)(3)(i)(B),if payments made if payments are made
first sentence
1.6041A–1(d)(3)(iv),amount paidamounts paid
paragraph heading
1.6041A–1(d)(3)(v)December 31, 1998December 31, 1999
1.6043–2(a), first, second, 9661099
and last sentences
1.6045–1(d)(6)(ii)(B)December 31, 1998December 31, 1999
1.6045–1(g)(3)(iv),Example 7Example 6
second sentence
1.6045–1(g)(4),Y sY’s
Example 7(ii), last sentence
1.6049–4(c)(1)(ii)(A),certificate meeting the certification certificate stating that each member of the
second sentencerequirements of paragraphs (c)(2)(ii)(A) partnership meets the requirements of
(1) through (5) of this section.paragraphs (c)(1)(ii)(A)(1) through (4) of
this section.
1.6049–4(d)(3)(ii)(B)December 31, 1998December 31, 1999
1.6049–5(b)(12), firstReturns of information are not required Payments that
sentence for payments that
1.6049–5(c)(4)(i), firstthe payor maythe bank or other financial institution may
sentence
1.6049–5(c)(4)(ii), second sentencethen the financial institutionthen the bank or other financial institution
1.6049–5(c)(4)(v)January 1, 1999January 1, 2000
1.6049–5(d)(2)(ii), secondpublicly traded actively traded
and last sentences
1.6049–5(d)(2)(ii), eighthis less than 31is equal to or less than 31
sentence
1.6049–5(e)(1)(i), The amountAn amount is described in this paragraph
introductory text(e)(1)(i) if it
1.6049–5(e)(1)(ii)The amountAn amount is described in this paragraph
(e)(1)(ii) if it
1.6049–5(e)(4), second sentence specifically identifiesspecifically identify
1.6049–5(e)(5),of is sectionof this section
Example 5,last sentence
1999–12 I.R.B.13March 22, 1999
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1.6049–5(e)(5),a holdsA holds
Example 9,second sentence
1.6049–5(e)(5),paid to apaid to A
Example 9,third sentence
1.6049–5(e)(5),a’sA’s
Example 9,third sentence
1.6049–5(e)(5),to a by DBto A by DB
Example 9,last sentence
1.6050N–1(e), first sentenceis applies toapplies to
1.6050N–1(e), last sentence December 31, 1998December 31, 1999
31.3401(a)(6)–1(e), January 1, 1999January 1, 2000
paragraph heading
31.3401(a)(6)–1(e),January 1, 1999January 1, 2000
first sentence
31.3401(a)(6)–1(f),December 31, 1998December 31, 1999
paragraph heading
31.3401(a)(6)–1(f),December 31, 1998December 31, 1999
first sentence
31.3406(g)–1(e),December 31, 1998December 31, 1999
first sentence
31.3406(h)–2(d),December 31, 1998December 31, 1999
penultimate sentence
31.9999–0January 1, 1999January 1, 2000
301.6114–1(b)(4)(ii)(C),December 31, 1998December 31, 1999
introductory text
301.6114–1(b)(4)(ii)(D)December 31, 1998December 31, 1999
301.6724–1(g)(2) Q-11January 1, 1999January 1, 2000
301.6724–1(g)(2) Q-11April 1, 1997April 1, 1998
301.6724–1(g)(2) A-11January 1, 1999January 1, 2000
301.6724–1(g)(2) A-11April 1, 1997April 1, 1998
301.6724–1(g)(3), firstDecember 31, 1998December 31, 1999
sentence
301.6724–1(g)(3), lastJanuary 1, 1999January 1, 2000
sentence in both places
301.6724–1(g)(3), lastApril 1, 1997April 1, 1998
sentence
March 22, 1999141999–12 I.R.B.
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Robert E. Wenzel,
Deputy Commissioner of
Internal Revenue.
Approved January 7, 1998.
Donald C. Lubick,
Assistant Secretary of
the Treasury.
(Filed by the Office of the Federal Register on De-
cember 30, 1998, 8:45 a.m., and published in the
issue of the Federal Register for December 31, 1998,
63 F.R. 72183)
Section 6695.—Other
Assessable Penalties With
Respect to the Preparation of
Income Tax Returns for Other
Persons
26 CFR 1.6695–1: Other assessable penalties with
respect to the preparation of income tax returns for
other persons.
T.D. 8803
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
Retention of Income Tax Return
Preparers’ Signatures
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regula-
tions.
SUMMARY: This document contains
final and temporary regulations that pro-
vide income tax return preparers with two
alternative means of meeting the require-
ment that a preparer retain the manually
signed (by the preparer) copy of the return
or claim. The regulations are necessary to
inform preparers of the two alternatives
and provide preparers with the guidance
needed to comply with the alternatives.
The text of the temporary regulations also
serves as the text of the proposed regula-
tions set forth in the notice of proposed
rulemaking on this subject in REG–
106386–98, page 31.
DATES: Effective date.These regulations
are effective December 31, 1998.
Applicability date: For dates of applic-
ability, see §1.6695–1T(g) of these regu-
lations.
FOR FURTHER INFORMATION CON-
TACT: Marc C. Porter (202) 622-4940
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to
the Income Tax Regulations (26 CFR part
1) relating to the penalty for failure to
sign an income tax return under section
6695(b) of the Internal Revenue Code.
Section 6695(b) provides that any person
who is an income tax return preparer with
respect to a return or claim for refund,
who is required by regulations prescribed
by the Secretary to sign the return or
claim, and who fails to comply with those
regulations, must pay a penalty of $50 for
such failure, unless it is shown that the
failure is due to reasonable cause and not
willful neglect. The maximum penalty
imposed with respect to documents filed
during a calendar year will not exceed
$25,000.
Section 7701(a)(36)(A) provides that,
in general, the term “income tax return
preparer” means any person who prepares
for compensation, or who employs one or
more persons to prepare for compensa-
tion, any return of tax or claim for refund
imposed by subtitle A. For purposes of
the preceding sentence, the preparation of
a substantial portion of a return or claim is
treated as if it were the preparation of
such return or claim.
Section 1.6695–1(b)(1) and (c) gener-
ally provides that an income tax return
preparer, with respect to a return or claim
for refund, must manually sign the return
or claim (which may be a photocopy) in
the appropriate space provided on the re-
turn or claim after it is completed and be-
fore it is presented to the taxpayer (or
nontaxable entity) for signature.
Section 1.6695–1(b)(4)(i) provides that
the manual signature requirement may be
satisfied by a photocopy of a copy of the
return or claim for refund if the copy is
manually signed by the income tax return
preparer after completion of its prepara-
tion. The taxpayer may file a photocopy
of this manually signed return with the
IRS, see Rev. Proc. 78–370, (1978–2 C.B.
335). The employer of the preparer or the
partnership in which the preparer is a
partner, or the preparer (if not employed
or engaged by a preparer and not a partner
of a partnership which is a preparer), must
retain the manually signed copy of the re-
turn or claim.
Explanation of Provisions
The regulations provide that, if an in-
come tax return preparer presents for a
taxpayer’s signature a return or claim for
refund that has a copy of the preparer’s
manual signature, the preparer may either
retain a photocopy of the manually signed
copy of the return or claim for refund or
use an electronic storage system meeting
the requirements of section 4 of Rev.
Proc. 97–22, (1997–1 C.B. 652) or proce-
dures subsequently prescribed by the
Commissioner, to store and produce a
copy of the return of claim manually
signed by the preparer.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in EO 12866. There-
fore, a regulatory assessment is not
required. It also has been determined that
section 553(b) of the Administrative Pro-
cedure Act (5 U.S.C. chapter 5) does not
apply to these regulations, and because the
regulations do not impose a collection of
information on small entities, the Regula-
tory Flexibility Act (5 U.S.C. chapter 6)
does not apply. Pursuant to section 7805(f)
of the Internal Revenue Code, these tem-
porary regulations will be submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
their impact on small business.
Drafting Information
The principal author of these regula-
tions is Marc C. Porter, Office of Assis-
tant Chief Counsel (Income Tax & Ac-
counting). However, other personnel from
the IRS and Treasury Department partici-
pated in their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding an entity in
1999–12 I.R.B.15March 22, 1999
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numerical order to read as follows:
Authority: 26 U.S.C. 7805 ***
Section 1.6695–1T also issued under
U.S.C. 6695(b) ***
Par 2. Section 1.6695–1 is amended by
revising paragraph (b)(4)(i) to read as fol-
lows:
§1.6695–1 Other assessable penalties
with respect to the preparation of income
tax returns for other persons.
*****
(b) ***
(4) (i) [Reserved]. For further guid-
ance on acceptable methods of meeting
the manual signature requirement of para-
graph (b)(1) and (2), see §1.6695–1T(b)-
(4)(i).
*****
Par. 3. Section 1.6695–1T is added to
read as follows:
§1.6695–1T Other assessable penalties
with respect to the preparation of income
tax returns for other persons (temporary).
(a) through (b)(3) [Reserved]. For fur-
ther guidance, see §1.6695–1(a) through
(b)(3).
(4) (i) The manual signature require-
ment of paragraph 1.6695–1(b)(1) and (2)
of this section may be satisfied by a pho-
tocopy of a copy of the return or claim for
refund which copy is manually signed by
the preparer after completion of its prepa-
ration. After a copy of the return or claim
for refund is signed by the preparer and
before it is photocopied, no person other
than the preparer may alter any entries on
the copy other than to correct arithmetical
errors discernible on the return or claim
for refund. The employer of the preparer
or the partnership in which the preparer is
a partner, or the preparer (if not employed
or engaged by a preparer and not a partner
of a partnership which is a preparer), must
retain the manually signed copy of the re-
turn or claim for refund. In the alternative,
for a return or claim for refund presented
to a taxpayer for signature after December
31, 1998 and for returns or claims for re-
fund retained on or before that date, the
person required to retain the manually
signed copy of the return or claim for re-
fund may choose to retain a photocopy of
the manually signed copy of the return or
claim for refund, or use an electronic stor-
age system to store and produce a copy of
the manually signed return or claim for
refund. For purposes of paragraph
(b)(4)(i) of this section, an electronic stor-
age system must meet the electronic stor-
age system requirements prescribed in
section 4 of Rev. Proc. 97–22 (1997–1
C.B. 652) or procedures subsequently
prescribed by the Commissioner. A record
of any arithmetical errors corrected must
be retained and made available upon re-
quest by the person required to retain the
manually signed copy of the return or
claim for refund.
(b)(4)(ii) through (f) [Reserved]. For
further guidance, see §1.6695–1(b)(4)(ii)
through (f).
(g) Effective date.This section applies
to income tax returns and claims for re-
fund presented to a taxpayer for signature
after December 31, 1998 and for returns
or claims for refund retained on or before
that date. This section expires on Decem-
ber 31, 2001.
Robert E. Wenzel,
Deputy Commissioner of
Internal Revenue.
Approved December 17, 1998.
Donald C. Lubick,
Assistant Secretary of
the Treasury.
(Filed by the Office of the Federal Register on De-
cember 30, 1998, 8:45 a.m., and published in the
issue of the Federal Register for December 31, 1998,
63 F.R. 72182)
26 CFR 1.6695–2T: Preparer due diligence
requirements for determining earned income credit
eligibility (temporary).
T.D. 8798
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Preparer Due Diligence
Requirements for Determining
Earned Income Credit Eligibility
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Temporary regulations.
SUMMARY: This document contains
temporary regulations relating to the due
diligence requirements for paid preparers
of federal income tax returns or claims for
refund involving the earned income
credit. The temporary regulations reflect
changes to the law made by the Taxpayer
Relief Act of 1997. The temporary regu-
lations provide guidance to paid preparers
who prepare federal income tax returns or
claims for refund claiming the earned in-
come credit. The text of the temporary
regulations also serves as the text of the
proposed regulations set forth in the no-
tice of proposed rulemaking on this sub-
ject in REG–120168–97, page 21.
DATES: These regulations are effective
December 21, 1998.
FOR FURTHER INFORMATION CON-
TACT: Marc C. Porter (202) 622-4940
(not a toll free call).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
These regulations are being issued
without prior notice and public procedure
pursuant to the Administrative Procedure
Act (5 U.S.C. 553). For this reason, the
collection of information contained in
these regulations has been reviewed and
pending receipt and evaluation of public
comments, approved by the Office of
Management and Budget under control
number 1545–1570. Responses to this
collection of information are mandatory.
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.
For further information concerning this
collection of information, and where to
submit comments on the collection of in-
formation and the accuracy of the esti-
mated burden, and suggestions for reduc-
ing this burden, please refer to the
preamble to the cross-referencing notice
of proposed rulemaking published in
REG–120168–97.
Books and 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
March 22, 1999161999–12 I.R.B.
IRB 1999-12 3/17/99 12:40 PM Page 16

tax return information are confidential, as
required by 26 U.S.C. 6103.
Background
This document contains amendments to
the Income Tax Regulations (26 CFR
parts 1 and 602) under section 6695(g) re-
lating to the penalty for failure of a pre-
parer to be diligent in determining a tax-
payer’s eligibility for the earned income
credit (EIC). Section 6695(g) was added
by section 1085(a)(2) of the Taxpayer Re-
lief Act of 1997, Public Law 105-34 (11
Stat. 788, 955 (1997)) (the Act), effective
for taxable years beginning after Decem-
ber 31, 1996.
Section 6695(g) imposes a $100
penalty for each failure by an income tax
return preparer to meet the due diligence
requirements set forth in this regulation.
The IRS may impose the section 6695(g)
penalty in addition to any other applicable
penalty provided by law.
In Notice 97–65 (1997–51 I.R.B. 14
(December 22, 1997)), the IRS set forth
the preparer due diligence requirements
for 1997 returns and claims for refund in-
volving the EIC. To avoid the imposition
of the section 6695(g) penalty for 1997
returns and claims for refund, Notice 97-
65 requires preparers to meet four re-
quirements: (1) complete the Earned In-
come Credit Eligibility Checklist attached
to Notice 97-65 (Eligibility Checklist), or
otherwise record the information neces-
sary to complete the Eligibility Checklist;
(2) complete the Earned Income Credit
Worksheet (Computation Worksheet), as
contained in the 1997 Form 1040 instruc-
tions, or otherwise record the computa-
tion and information necessary to com-
plete the Computation Worksheet; (3)
have no knowledge that any information
used by the preparer in determining eligi-
bility for, and amount of, the EIC is incor-
rect; and (4) retain for three years the Eli-
gibility Checklist and Computation
Worksheet (or alternative records), and a
record of how and when the information
used to determine eligibility for, and
amount of, the EIC was obtained by the
preparer. This information may be re-
tained either as a paper record or in mag-
netic media format consistent with Rev.
Proc. 81–46 (1981–2 C.B. 621).
Notice 97–65 also requested comments
on preparer due diligence requirements
for tax years after 1997. Two comments
were received. The commentators did not
suggest alternative due diligence require-
ments. One commentator suggested,
however, increased education for the pub-
lic. The IRS and Treasury Department
adhere to the principle that education is an
integral part of good tax administration.
Therefore, as part of its overall EIC strat-
egy, the IRS has established various edu-
cational tools and outreach programs for
taxpayers and preparers. These efforts are
intended to provide the public with the
tools necessary to receive the full amount
of the EIC allowed by law.
The second commentator suggested
that preparers should be able to meet the
due diligence requirements by using soft-
ware reviewed and approved by the IRS.
The IRS does not approve commercial
software. The IRS is currently exploring,
however, new opportunities for partner-
ship with outside stakeholders to reduce
burden, enhance customer service, and in-
crease compliance. As part of this effort,
the IRS will continue to review this com-
ment and evaluate options.
Explanation of Provisions
The temporary and proposed regula-
tions impose due diligence standards on
persons who are income tax return prepar-
ers with respect to determining eligibility
for, or the amount of, the EIC. Consistent
with existing regulations under section
6695, these temporary regulations apply a
modified definition of income tax return
preparer. Section 7701(a)(36) provides
that, in general, the term income tax re-
turn preparermeans any person who pre-
pares for compensation, or who employs
one or more persons to prepare for com-
pensation, any return or claim for refund
of tax imposed by subtitle A. The prepa-
ration of a substantial portion of a return
or claim for refund is treated as if it were
the preparation of such return or claim for
refund. Persons are considered preparers
if they give legal advice concerning a re-
turn or claim for refund or if they prepare
another return which affects the return or
claim for refund (§301.7701–15(a)(2) and
(b) and §301.7701–15(b)(3), respec-
tively). The regulations retain this defini-
tion of an income tax return preparer, ex-
cept that preparers who merely give
advice or prepare another return that af-
fects the EIC return or claim for refund
are not preparers for purposes of the sec-
tion 6695(g) penalty. Rather, the due dili-
gence standards are imposed only on paid
preparers who prepare the return claiming
the EIC.
The temporary regulations essentially
adopt the four due diligence requirements
in Notice 97-65. Thus, to avoid the
penalty under section 6695(g), a preparer
must: (1) complete the Eligibility Check-
list (Form 8867, Paid Preparer’s Earned
Income Credit Checklist,or such other
form as may be prescribed by the IRS), or
otherwise record in the preparer’s files the
information necessary to complete the El-
igibility Checklist; (2) complete the Com-
putation Worksheet (Earned Income
Credit Worksheetcontained in the Form
1040 instructions), or otherwise record in
the preparer’s files the computation and
information necessary to complete the
Computation Worksheet; (3) have no
knowledge, and have no reason to know,
that any information used by the preparer
in determining eligibility for, and amount
of, the EIC is incorrect; and (4) retain for
three years the Eligibility Checklist and
the Computation Worksheet (or alterna-
tive records), and a record of how and
when the information used to determine
eligibility for, and the amount of, the EIC
was obtained by the preparer.
The temporary regulations also provide
that the income tax return preparer may
avoid the section 6695(g) penalty with re-
spect to a particular income tax return or
claim for refund if the preparer can
demonstrate to the satisfaction of the IRS
that, considering all the facts and circum-
stances, the preparer’s normal office pro-
cedures are reasonably designed and rou-
tinely followed to ensure compliance with
the due diligence requirements of the reg-
ulations, and that the particular failure
was isolated and inadvertent.
The temporary regulations will be ef-
fective for taxable years beginning after
December 31, 1996. However, the Eligi-
bility Checklist contained in Notice 97-65
has been expanded in Form 8867. There-
fore, for taxable year 1997, the applicable
Eligibility Checklist is the Eligibility
Checklist contained in Notice 97-65. For
taxable year 1998, a preparer may choose
as the applicable Eligibility Checklist ei-
ther the Eligibility Checklist published in
Notice 97-65 modified however, by re-
1999–12 I.R.B.17March 22, 1999
IRB 1999-12 3/17/99 12:40 PM Page 17

placing, $9,770, $25,760, $29,290, and
$2,250 each time these figures appear on
the 1997 Eligibility Checklist with
$10,030, $26,473, $30,095, and $2,300,
respectively, or Form 8867. For taxable
years beginning after December 31, 1998,
the applicable Eligibility Checklist will be
the Form 8867.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in EO 12866.
Therefore, a regulatory assessment is not
required. It also has been determined that
section 553(b) of the Administrative Pro-
cedure Act (5 U.S.C. chapter 5) does not
apply to these regulations. Further, it is
hereby certified, pursuant to sections
603(a) and 605(b) of the Regulatory Flex-
ibility Act, that the collection of informa-
tion in these regulations will not have a
significant economic impact on a substan-
tial number of small entities. This certifi-
cation is based upon the fact that the
amount of time necessary to record and
retain the required information will be
nominal for those income tax return pre-
parers that choose to use the Alternative
Eligibility Record and Alternative Com-
putation Record. Therefore, a Regulatory
Flexibility Analysis under the Regulatory
Flexibility Act (5 U.S.C. chapter 6) is not
required. Pursuant to section 7805(f) of
the Internal Revenue Code, these tempo-
rary regulations will be submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
their impact.
Drafting Information
The principal author of these regula-
tions is Marc C. Porter, Office of Assis-
tant Chief Counsel (Income Tax & Ac-
counting). However, other personnel
from the IRS and Treasury Department
participated in their development.
*****
Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 602
are amended as follows:
PART 1 — INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding an entry in
numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6695–2T also issued under 26
U.S.C. 6695(g). * * *
Par. 2. Section 1.6695–2T is added to
read as follows:
§1.6695–2T Preparer due diligence
requirements for determining earned
income credit eligibility (temporary).
(a) Penalty for failure to meet due dili-
gence requirements.A person who is an
income tax return preparer (preparer) of
an income tax return or claim for refund
under subtitle A of the Internal Revenue
Code (Code) with respect to determining
the eligibility for, or the amount of, the
earned income credit (EIC) under section
32 and who fails to satisfy the due dili-
gence requirements of paragraph (b) of
this section will be subject to a penalty of
$100 for each such failure. However, no
penalty will be imposed under section
6695(g) on a person who is an income tax
return preparer solely by reason of —
(1) Section 301.7701–15(a)(2) and (b)
of this chapter, on account of having
given advice on specific issues of law; or
(2) Section 301.7701–15(b)(3) of this
chapter, on account of having prepared
the return solely because of having pre-
pared another return that affects amounts
reported on the return.
(b) Due diligence requirements.A pre-
parer must satisfy the following due dili-
gence requirements:
(1) Completion of eligibility checklist.
(i) The preparer must either —
(A) Complete Form 8867, Paid Pre-
parer’s Earned Income Credit Checklist,
or such other form as may be prescribed
by the IRS (Eligibility Checklist); or
(B) Otherwise record in the preparer’s
paper or electronic files the information
necessary to complete the Eligibility
Checklist (Alternative Eligibility Record).
The Alternative Eligibility Record may
consist of one or more documents contain-
ing the required information.
(ii) The preparer’s completion of the
Eligibility Checklist or Alternative Eligi-
bility Record must be based on informa-
tion provided by the taxpayer to the pre-
parer or otherwise reasonably obtained by
the preparer.
(2) Computation of credit.(i) The pre-
parer must either —
(A) Complete the Earned Income
Credit Worksheetin the Form 1040 in-
structions or such other form as may be
prescribed by the IRS (Computation
Worksheet); or
(B) Otherwise record in the preparer’s
paper or electronic files the preparer’s
EIC computation, including the method
and information used to make the compu-
tation (Alternative Computation Record).
The Alternative Computation Record may
consist of one or more documents con-
taining the required information.
(ii) The preparer’s completion of the
Computation Worksheet or Alternative
Computation Record must be based on in-
formation provided by the taxpayer to the
preparer or otherwise reasonably obtained
by the preparer.
(3) Knowledge.The preparer must not
know, or have reason to know, that any in-
formation used by the preparer in deter-
mining the taxpayer’s eligibility for, or
the amount of, the EIC is incorrect. The
preparer may not ignore the implications
of information furnished to, or known by,
the preparer, and must make reasonable
inquiries if the information furnished to,
or known by, the preparer appears to be
incorrect, inconsistent, or incomplete.
(4) Retention of records.(i) The pre-
parer must retain —
(A) A copy of the completed Eligibility
Checklist or Alternative Eligibility
Record;
(B) A copy of the Computation Work-
sheet or Alternative Computation Record;
and
(C) A record of how and when the in-
formation used to complete the Eligibility
Checklist or Alternative Eligibility
Record and the Computation Worksheet
or Alternative Computation Record was
obtained by the preparer, including the
identity of any person furnishing the in-
formation.
(ii) These items must be retained for
three years after the June 30th following
the date the return or claim for refund was
presented to the taxpayer for signature,
and may be retained on paper or electroni-
cally in the manner prescribed in applica-
ble regulations, revenue rulings, revenue
procedures, or other appropriate guidance.
(c) Exception to penalty.The section
6695(g) penalty will not be applied with
respect to a particular income tax return
or claim for refund if the preparer can
demonstrate to the satisfaction of the IRS
that, considering all the facts and circum-
March 22, 1999181999–12 I.R.B.
IRB 1999-12 3/17/99 12:40 PM Page 18

stances, the preparer’s normal office pro-
cedures are reasonably designed and rou-
tinely followed to ensure compliance with
the due diligence requirements of para-
graph (b) of this section, and the failure to
meet the due diligence requirements of
paragraph (b) of this section with respect
to the particular return or claim for refund
was isolated and inadvertent.
(d) Effective date.(1) In general. This
section applies to income tax returns and
claims for refund for taxable years begin-
ning after December 31, 1996. This sec-
tion expires on, December 21, 2001. For
the applicable Eligibility Checklist see
paragraph (d)(2) of this section.
(2) Eligibility Checklist—(i) For the
1997 taxable year.For taxable year 1997,
the applicable Eligibility Checklist is the
Eligibility Checklist published in Notice
97-65 (1997–51 I.R.B.14) December 22,
1997. (See §601.601(d)(2)(ii)(b) of this
chapter.)
(ii) For the 1998 taxable year. For tax-
able year 1998 the applicable Checklist is
either—
(A) The Checklist published in Notice
97-65 (1997-51 I.R.B.14) December 22,
1997, modified however, by applying the
figures $10,030, $26,473, $30,095, and
$2,300 in place of $9,770, $25,760,
$29,290, and $2,250, respectively, each
time these figures appear on the 1997
Checklist; or
(B) Form 8867, Paid Preparer’s
Earned Income Credit Checklist.
(iii) For taxable years after 1998.For
taxable years beginning after December
31, 1998, the applicable Eligibility
Checklist is the Eligibility Checklist con-
tained in Form 8867, Paid Preparer’s
Earned Income Credit Checklist,or such
other form as may be prescribed by the
IRS.
PART 602 — OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION ACT
Par. 3. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 4. In §602.101, paragraph (c) is
amended by adding the following entry in
numerical order to the table to read as fol-
lows:
§602.101 OMB Control numbers.
* * * * *
(c) * * *
CFR part or section Current OMB
where identified control No.
and described
* * * * *
1.6695–2T . . . . . . . . . . . . . . . 1545–1570
* * * * *
David S. Mader,
Acting Deputy Commissioner
of Internal Revenue.
Approved December 9, 1998.
Donald C. Lubick,
Assistant Secretary of
the Treasury.
(Filed by the Office of the Federal Register on De-
cember 18, 1998, 8:45 a.m., and published in the
issue of the Federal Register for December 21, 1998,
63 F.R. 70339)
1999–12 I.R.B.19March 22, 1999
IRB 1999-12 3/17/99 12:40 PM Page 19

Weighted Average Interest
Rate Update
Notice 99–15
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 February
1999 is 5.37 percent.
The following rates were determined
for the plan years beginning in the month
shown below.
March 22, 1999201999–12 I.R.B.
Part III. Administrative, Procedural, and Miscellaneous
90% to 105%90% to 110%
WeightedPermissiblePermissible
MonthYearAverageRangeRange
March19996.155.54 to 6.465.54 to 6.77
Drafting Information
The principal author of this notice is
Todd Newman 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). Mr. Newman’s number
is (202) 622-8458 (also not a toll-free
number).
IRB 1999-12 3/17/99 12:40 PM Page 20

1999–12 I.R.B.21March 22, 1999
Part IV. Items of General Interest
Notice of Proposed Rulemaking
Notice of Public Hearing
Preparer Due Diligence
Requirements for Determining
Earned Income Credit Eligibility
REG–120168–97
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing by cross-reference to temporary regu-
lations and notice of public hearing.
SUMMARY: In T.D. 8798, page 16, the
IRS is issuing temporary regulations re-
lating to the due diligence requirements in
determining eligibility for the earned in-
come credit for paid preparers of federal
income tax returns or claims for refund.
The text of those regulations also serves
as the text of these proposed regulations.
This document also provides notice of a
public hearing on these proposed regula-
tions.
DATES: Written comments must be re-
ceived by, March 22, 1999. Outlines of
topics to be discussed at the public hear-
ing scheduled for Thursday, May 20,
1999, at 10 a.m. must be received by
Thursday, April 29, 1999.
ADDRESSES: Send submissions to:
CC:DOM:CORP:R (REG–120168–97),
room 5226, Internal Revenue Service,
POB 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may be
hand delivered Monday through Friday
between the hours of 8 a.m. and 5 p.m. to:
CC:DOM:CORP:R (REG–120168–97),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue NW,
Washington, DC. Alternatively, taxpayers
may submit comments electronically via
the Internet by selecting the “Tax Regs”
option on the IRS Home Page, or by sub-
mitting comments directly to the IRS In-
ternet site at http://www.irs.ustreas.gov/
prod/tax_regs/comments.html. The pub-
lic hearing will be held in room 2615 of
the Internal Revenue Building, 1111 Con-
stitution Avenue NW, Washington, DC.
FOR FURTHER INFORMATION CON-
TACT: Concerning submissions, LaNita
Van Dyke, (202) 622-7190; concerning
the regulations, Marc C. Porter, (202)
622-4940 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
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 Treasury, Office of In-
formation and Regulatory Affairs, Wash-
ington, DC 20503, with copies to the In-
ternal Revenue Service,Attn: IRS
Reports Clearance Officer, OP:FS:FP,
Washington, DC 20224. Comments on
the collection of information should be re-
ceived by, February 19, 1998. Comments
are specifically 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
enhanced;
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 service to provide information.
The collection of information in this
proposed regulation is in §1.6695–2T.
This information is required by the IRS to
determine preparer due diligence compli-
ance. This information will be used to
avoid the imposition of the penalty im-
posed by section 6695(g) of the Internal
Revenue Code. The collection of infor-
mation is mandatory. The likely record-
keepers are individuals, business or other
for profit institutions, and small busi-
nesses or organizations.
The collection of information in
§1.6695–2T is generally satisfied by com-
pleting: 1) the required information on
the Checklist published in Notice 97–65
or the Form 8867, Paid Preparer’s
Earned Income Credit Checklist;and 2)
the required Worksheet information on
the Earned Income Credit Worksheetcon-
tained in the instructions to the Form
1040. The burden for the Checklist re-
quirement is reflected in the burden esti-
mate for Form 8867. The burden for the
Worksheet requirement is reflected in the
burden estimate for the Earned Income
Credit Worksheetcontained in the instruc-
tions to the Form 1040. Preparers may
also choose to record the information nec-
essary to complete the Checklist and
Worksheet in their paper or electronic
files (alternative method).
The information collections in this reg-
ulation were originally included in Notice
97–65 and have been approved by the Of-
fice of Management and Budget under
control number 1545–1570.
The collection of information for pre-
parers who choose to record the informa-
tion required by the regulations in alterna-
tive paper or electronic form is as follows:
Estimated total annual recordkeeping
burden: 507,136 hours.
Estimated average annual burden hours
per recordkeeper: 5 hours 4 minutes (40
minutes per return or claim for refund, 7.6
returns per preparer).
Estimated number of recordkeepers:
100,000.
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 and 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.
IRB 1999-12 3/17/99 12:40 PM Page 21

March 22, 1999221999–12 I.R.B.
Background and Explanation of
Provisions
Temporary regulations in T.D. 8798
amend the Income Tax Regulations (26
CFR part 1) relating to section 6695. The
temporary regulations set forth due dili-
gence requirements that paid preparers of
federal income tax returns or claims for
refund involving the Earned Income
Credit (EIC) must meet to avoid imposi-
tion of the penalty under section 6695(g)
for taxable years beginning after Decem-
ber 31, 1996. The text of those regula-
tions also serves as the text of these pro-
posed regulations. The preamble to the
temporary regulations explains the
amendments.
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. Further, it is hereby certified, pur-
suant to sections 603(a) and 605(b) of the
Regulatory Flexibility Act, that the col-
lection of information in these regulations
will not have a significant economic im-
pact on a substantial number of small en-
tities. This certification is based upon the
fact that the amount of time necessary to
record and retain the required information
will be minimal for those income tax re-
turn preparers that choose to use the Al-
ternative Eligibility Record and Alterna-
tive Computation Record. Therefore, a
Regulatory Flexibility Analysis under the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) is not required. Pursuant 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 Business Admin-
istration for comment on their impact.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, considera-
tion will be given to any comments (a
signed original and eight (8) copies) that
are submitted timely to the IRS. The IRS
and Treasury specifically request com-
ments on the clarity of the proposed rule
and how it may be made easier to under-
stand. All comments will be available for
public inspection and copying.
A public hearing has been scheduled for
May 20, 1999, beginning at 10 a.m. in
room 2615 of the Internal Revenue Build-
ing, 1111 Constitution Avenue, NW,
Washington, DC. Due to building security
procedures, visitors must enter at the 10th
Street entrance, located between Constitu-
tion and Pennsylvania Avenues, NW. In
addition, all visitors must present photo
identification to enter the building. Be-
cause of access restrictions, visitors will
not be admitted beyond the immediate en-
trance area more than 15 minutes before
the hearing starts. For information about
having your name placed on the building
access list to attend the hearing, see the
“FOR FURTHER INFORMATION CON-
TACT” section of this preamble.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing. Persons who wish to
present oral comments at the hearing must
submit written comments and an outline
of the topics to be discussed and the time
to be devoted to each topic (signed origi-
nal and eight (8) copies) by (April 29,
1999). A period of 10 minutes will be al-
lotted to each person for making com-
ments. An agenda showing the schedul-
ing of the speakers will be prepared after
the deadline for receiving outlines has
passed. Copies of the agenda will be
available free of charge at the hearing.
Drafting Information
The principal author of these regula-
tions is Marc C. Porter, Office of Assis-
tant Chief Counsel (Income Tax & Ac-
counting). However, other personnel
from the IRS and Treasury Department
participated in their development.
*****
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
PART 1 — INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding an entry in
numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6695–2 also issued under 26
U.S.C. 6695(g). * * *
Par. 2. Section 1.6695–2 is added to
read as follows:
§1.6695–2 Preparer due diligence
requirements for determining earned
income tax credit eligibility.
[The text of proposed §1.6695–2 is the
same as the text of §1.6695–2T published
in T.D. 8798.]
David S. Mader,
Acting Deputy Commissioner
of Internal Revenue.
(Filed by the Office of the Federal Register on De-
cember 18, 1998, 8:45 a.m., and published in the
issue of the Federal Register for December 21, 1998,
63 F.R. 70357)
Notice of Proposed Rulemaking
Intercompany Obligations
REG–105964–98
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing.
SUMMARY: This document contains a
proposed regulation that clarifies the
treatment of the transfer or extinguish-
ment of rights under an intercompany
obligation. The existing regulation has
caused uncertainty concerning the tax
treatment of such transactions. The pro-
posed regulation affects corporations that
are members of consolidated groups, their
subsidiaries, and their shareholders.
DATES: Comments and requests for a
public hearing must be received by March
22, 1999.
ADDRESSES: Send submissions to:
CC:DOM:CORP:R (REG–105964–98),
room 5228, Internal Revenue Service,
POB 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may be
hand delivered Monday through Friday
between the hours of 8 a.m. and 5 p.m. to:
CC:DOM:CORP:R (REG–105964–98),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue NW,
Washington, DC. Alternatively, taxpayers
IRB 1999-12 3/17/99 12:40 PM Page 22

1999–12 I.R.B.23March 22, 1999
may submit comments electronically via
the Internet by selecting the “Tax Regs”
option on the IRS Home Page, or by sub-
mitting comments directly to the IRS In-
ternet site at http://www.irs.ustreas.gov/
prod/tax_regs/comments.html.
FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regula-
tion, Theresa A. Abell, (202) 622-7790;
concerning submissions of comments,
LaNita Van Dyke, (202) 622-7180 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to §1.1502–13(g) of the In-
come Tax Regulations. Section 1.1502–
13(g) prescribes rules relating to the treat-
ment of the transfer or extinguishment of
rights an intercompany obligation. An in-
tercompany obligation is generally de-
fined as an obligation between members
of a consolidated group, but only for the
period during which both parties are
members of the group. The current regu-
lation provides that if a member of a con-
solidated group realizes an amount (other
than zero) of income, gain, deduction, or
loss upon the transfer or extinguishment
of all or part of its remaining rights or
obligations under an intercompany oblig-
ation, the obligation is treated as satisfied
(and the transferor’s basis in the property
received is adjusted to reflect the satisfac-
tion amount) and , if the obligation re-
mains outstanding, it is treated as reissued
as a new obligation.
The current regulation is, however, am-
biguous regarding the form of the recast
transaction, i.e., the deemed transaction
that encompasses the satisfaction,reis-
suance, and actual transaction. Under one
interpretation of the regulation, there is a
potential that the form of the recast jeop-
ardizes the tax-free treatment of common
corporates restructuring transactions.
While it is not clear the regulation pro-
duces such consequences, the IRS and
Treasury believe that any such conse-
quences would be inappropriate and un-
necessary to achieve the objectives of the
regulation. Accordingly, the IRS and
Treasury propose to amend the regulation
as described below.
Explanation of Provisions
The existing regulation does not apply
to transactions in which the amount of in-
come, gain, deduction, or loss realized is
zero. This rule was intended to avoid ap-
plication of the regulation to transactions
in which preservation of gain or loss loca-
tion, an objective of §1.1502–13(g),
would not be at issue. However, the deter-
mination of whether the amount of in-
come, gain, deduction, or loss realized is
zero might depend on the fair market
value of property received in an ex-
change. The difficulty and manipulability
of that valuation is a reason for the enact-
ment of certain provisions of the original
issue discount (OID) rules, particularly
section 1274. To the extent that taxpayers
were able to avoid the deemed satisfac-
tion and reissuance rule by inaccurately
maintaining that the amount of income,
gain, deduction, or loss realized is zero,
taxpayers could avoid those OID rules
and could inappropriately shift gain or
loss among members. The IRS and Trea-
sury have concluded that the better and
more administrable approach is not to
condition the application of the regulation
on a realization of some amount of in-
come, gain, deduction, or loss other than
zero. Accordingly, the regulation as pro-
posed will apply to all transactions in
which any amount is realized due to the
transfer or extinguishment of rights in an
intercompany obligation.
The IRS and Treasury believe the ex-
ception from the operation of this provi-
sion for transactions that will not have
significant effect on any person’s Federal
income tax liability for any year is unclear
in its application and scope. Further, the
exception offers little, if any, relief from
the requirements of the provision. Ac-
cordingly, the exception is eliminated
from the regulation.
The proposed regulation clarifies the
form and timing of the recast applied to
transactions subject to the regulation. In
particular, it clarifies that the deemed sat-
isfaction proceeds (rather than the obliga-
tion) are treated as transferred by the ini-
tial creditor in the actual transaction and
then advanced by the transferee to the
debtor in the deemed reissuance of the
obligation. The proposed regulation in-
cludes an example to illustrate clearly the
mechanics of the proposed regulation. It
also includes certain conforming adjust-
ments.
The proposed regulation retains the
rule that the deemed satisfaction and reis-
suance amounts are determined under the
principles of the OID provisions if the
debt is transferred for property. The IRS
and Treasury recognize that an alternate
rule providing for a fair market value de-
termination of the deemed satisfaction
and reissuance amounts might (in theory)
more accurately preserve location of eco-
nomic gain or loss. In such an alternate
regime, however, the inherent difficulty
of valuing intercompany obligations
would prove burdensome to both taxpay-
ers and the IRS and may provide signifi-
cant potential for abuse when member
obligations are transferred. Certain provi-
sions of the OID rules are intended to ad-
dress the difficulty and manipulability o
this valuation. Other developments in the
tax law have recognized that issue price,
as determined under the OID rules, is the
surrogate for fair market value in the case
of a debt obligation. For example,
§1.100–1(g) provides that issue price is
used in determining the amount realized
from the receipt of a debt instrument. For
these reasons, and consistent with the ob-
jective of promoting single entity treat-
ment of the group, the IRS and Treasury
continue to believe that the use of the OID
provisions is appropriate and desirable in
determining the deemed satisfaction
amount and the amount for which the
obligation is deemed reissued. Accord-
ingly, the regulation as proposed contin-
ues to use the OID provisions to deter-
mine both the amount repaid in the
deemed satisfaction and the issue price of
the reissued obligation in cases involving
the exchange of an intercompany obliga-
tion for cash or property.
In addition, the proposed regulation
clarifies that the term “conversion” in-
cludes only conversions pursuant to the
terms of the instrument.
Proposed Effective Date
The regulation is proposed to be effec-
tive on the date that the final regulation is
published in the Federal Register.For
purposes of determining the tax treatment
of transactions undertaking prior to such
effective date, taxpayers may rely on the
form and timing of the recast transaction,
IRB 1999-12 3/17/99 12:40 PM Page 23

as clarified by these proposed regulations.
No inference is intended, however, as to
the correct interpretation of the existing
regulation.
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 is hereby certified
that these regulations will not have a sig-
nificant impact on a substantial number of
small entities. This certification is based
on the fact that these regulations princi-
pally affect corporations filing consoli-
dated Federal income tax returns. Avail-
able data indicates that many consolidated
return filers are larger companies (not
small businesses). Therefore, a Regula-
tory Flexibility Analysis under the Regu-
latory Flexibility ct (5 U.S.C. chapter 6) is
not required. Pursuant 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 Business Administration for com-
ment on its impact on small business.
Comments and Requests for a Public
hearing
Before this proposed regulation is
adopted as a final regulation, considera-
tion will be given to any written com-
ments (preferably a signed original and
eight copies) that are timely submitted to
the IRS. All comments will be available
for public inspection and copying. A pub-
lic hearing may be scheduled if requested
in writing by any person that timely sub-
mits written comments. If a public hear-
ing is scheduled, notice of the date, time,
and place of the hearing will be published
in theFederal Register.
Drafting Information
The principal author of this regulation
is Theresa A. Abell of the Office of Assis-
tant Chief Counsel (Corporate), IRS.
However, other personnel from the IRS
and Treasury Department participated in
its development.
*****
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 ***
Section 1.1502–13 also issued under 26
U.S.C. 1502.
Par. 2. Section 1.1502–13 is amended
by:
1. Revising paragraphs (g)(3)(i)(A),
(g)(3)(i)(B)(3), (g)(3)(ii)(A), and (g)(3)-
(ii), and removing paragraph (g)(3)(i)-
(B)(4).
2. Revising paragraph (g)(4)(i)(B).
3. Amending paragraph (g)(5) by:
a. Removing the language “Exam-
ple 2” in each place it appears in para-
graphs (d), (e) and (f) of Example 2 and
adding “Example 3” in its place.
b. Removing the language “Exam-
ple 3” in each place it appears in para-
graph (c) and (d) of Example 3 and
adding “Example 4” in its place.
c. Removing the language “Exam-
ple 5” in each place it appears in para-
graph (c) of Example 5 and adding “Ex-
ample 6” in its place.
d. Redesignating Examples 2, 3, 4
and 5 as Examples 3, 4, 5 and 6 and
adding a new Example 2.
The revisions and additions read as fol-
lows:
§1.1502–13 Intercompany transactions.
*****
(g) ***
(3) Deemed satisfaction and reis-
suance of intercompany obligations—(i)
Application—(a) In general.If a member
realizes an amount from the assignment
or extinguishment of all or part of its re-
maining rights or obligations under an in-
tercompany obligation, the intercompany
obligation is treated for all Federal in-
come tax purposes as satisfied under para-
graph (g)(3)(ii) of this section and, if it re-
mains outstanding (either as an
intercompany obligation or a noninter-
company obligations), reissued under
paragraph (g)(3)(iii) of this section. Simi-
lar principles apply under this paragraph
(g)(3) if a member realizes an amount, di-
rectly or indirectly, from a comparable
transaction (for example, a marking-to-
market of an obligation or a bad debt de-
duction), or if an intercompany obligation
becomes an obligation that is not an inter-
company obligation.
(B) ***
(3) The amount realized is from the
conversion of an obligation (under the
terms of the instrument) into stock of the
obligor.
(ii) Satisfaction—(A) General rule.If
a creditor member sells an intercompany
debt for cash, the debt is treated as satis-
fied by the debtor immediately before the
sale for an amount equal to the amount of
the cash. If the debt is transferred for
property, the debt is treated as satisfied
immediately before the transaction for an
amount equal to the issue price (deter-
mined under section 1273 or section
1274) of a new debt issued on the date of
the transaction, with identical terms, for
such property. If this paragraph (g)(3) ap-
plies because the debtor or creditor be-
comes a nonmember, the debt is treated as
satisfied for cash in an amount equal to its
fair market value immediately before the
debtor or creditor becomes a nonmember.
If the debt is transferred for cash or prop-
erty, the proceeds of the deemed satisfac-
tion are treated as transferred by the cred-
itor tot he transferee of the debt in
exchange for the cash or property. Similar
principles apply to other transactions and
to transactions involving intercompany
obligations other than debt. For example,
if a corporation assumes the debtor’s lia-
bility in exchange for property of the
debtor, the debt is treated as satisfied for
an amount equal to the issue price (deter-
mined under section 1273 or section
1274) of a new debt issued on the date of
the transaction, with identical terms, for
such property. If, in a transaction to which
this paragraph (g)(3) applies, the obliga-
tion is extinguished, including in a trans-
action in which the creditor and debtor
become the same entity, the obligation is
treated as satisfied for an amount equal to
the issue price (determined under section
1273 or section 1274) of a new debt is-
sued on the date of the transaction, with
identical terms, to a third party, for prop-
erty that is not publicly traded.
*****
(iii) Reissuance. If an intercompany
debt is transferred for cash or property, it
is treated as a new debt (with a new hold-
ing period but otherwise identical terms)
issued to the transferee in exchange for
the proceeds of the deemed satisfaction as
determined under paragraph (g)(3)(ii) of
March 22, 1999241999–12 I.R.B.
IRB 1999-12 3/17/99 12:40 PM Page 24

this section. If this paragraph (g)(3) ap-
plies because the debtor or creditor be-
comes a nonmember, the debt is treated as
a new debt (with a new holding period but
otherwise identical terms) issued to the
creditor for the deemed satisfaction pro-
ceeds. Similar principles apply to other
transactions and to transactions involving
intercompany obligations other than debt.
*****
(4) ***
(i) ***
(B) Exception. This paragraph (g)(4)
does not apply to an obligation if the
obligation becomes an intercompany
obligation by reason of an event described
in §1.108–2(e) (exceptions to the applica-
tion of section 108(e)(4)).
*****
(5) Examples.
*****
Example 2. Nonrecognition transactions. (a)
Facts. On January 1 of Year 1, B borrows $100 from
S in return for B’s not providing for $10 of interest
annually at the end of each year, and repayment of
$100 at the end of Year 5. B fully performs its oblig-
ations with the same tax consequences as described
in paragraph (a) of Example 1. At the end of Year 3,
S transfers the note to a newly formed subsidiary,
Newco, in exchange for Newco stock. Section 351
applies to the exchange. The interest is adequate
stated interest within the meaning of section
1274(c)(2) (determined on the date of the transfer).
Neither B’s not nor Newco’s stock is publicly
traded.
(b) Deemed satisfaction and reissuance of note.
Under paragraph (g)(3)(ii) of this section, B’s note is
treated as satisfied for $100 (the issue price of the
reissued note, determined under section 1273(b)(4))
immediately before S’s transfer of the note to
Newco. Zero gain or loss is recognized by S and B
on the deemed satisfaction of B’s note. S is then
treated as transferring the deemed proceeds of the
satisfaction of the note ($100) to Newco in exchange
for the Newco stock. S’s basis in the Newco stock is
$100. Under paragraph (g)(3)(iii) of this section, B
is treated as reissuing the note to Newco for $100.
Newco’s basis in B’s note is $100.
(c) Intercompany obligation transferred in sec-
tion 332 transaction. The facts are the same as in
paragraph (a) of this Example 2, except that S trans-
fers the note to P in a complete liquidation under
section 332. Under paragraph (g)(3)(ii) of this sec-
tion, B’s note is treated as satisfied for $100 (the
issue price of the reissued note, determined under
section 1273(b)(4)) immediately before S’s transfer
of the note to P. Zero gain or loss is recognized by S
and B on the deemed satisfaction of the note. S is
then treated as transferring the deemed proceeds of
the satisfaction of the note, with its other assets, to P
in complete liquidation. Under paragraph (g)(3)(iii)
of this section, B is treated as reissuing the note to P
for $100. P’s basis in the note is $100.
*****
Robert E. Wenzel,
Deputy Commissioner of
Internal Revenue.
(Filed by the Office of the Federal Register on De-
cember 18, 1998, 8:45 a.m., and published in the
issue of the Federal Register for December 21, 1998,
63 F.R. 70354)
Notice of Proposed Rulemaking
and Notice of Public Hearing
Adequate Disclosure of Gifts
REG–106177–98
AGENCY:Internal Revenue Service
(IRS), Treasury.
ACTION:Notice of proposed rulemak-
ing and notice of public hearing.
SUMMARY:This document contains
proposed regulations relating to changes
made by the Taxpayer Relief Act of 1997
and the Internal Revenue Service Restruc-
turing and Reform Act of 1998 regarding
the valuation of prior gifts in determining
estate and gift tax liability, and the period
of limitations for assessing and collecting
gift tax. The proposed regulations affect
individual donors and the estates of those
donors. This document also provides no-
tice of a public hearing on these proposed
regulations.
DATES:Written and electronic com-
ments must be received by March 22,
1999. Outlines of topics to be discussed
at the public hearing scheduled for
Wednesday, April 28, 1999, must be re-
ceived by Wednesday, April 7, 1999.
ADDRESSES:Send submissions to
CC:DOM:CORP:R [REG–106177–98]
room 5226, Internal Revenue Service,
POB 7604, Ben Franklin Station, Wash-
ington DC 20044. Submissions may also
be hand delivered Monday through Friday
between the hours of 8 a.m. and 5 p.m. to:
CC:DOM:CORP:R [REG–106177–98],
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC. Alternatively, taxpayers
may submit comments electronically via
the internet by selecting the “Tax Regs”
option on the IRS Home Page, or by sub-
mitting comments directly to the IRS in-
ternet site at http://www.irs.ustreas.gov/
prod/tax_regs/comments.html. The pub-
lic hearing will be held in room 2615, at
10 a.m., Internal Revenue Building, 1111
Constitution Avenue, NW, Washington
DC.
FOR FURTHER INFORMATION
CONTACT:Concerning the regulations,
William L. Blodgett, (202) 622-3090;
concerning submissions and the hearing,
and/or to be placed on the building access
list to attend the hearing, LaNita Van
Dyke, (202) 622-7180 (not toll- free num-
bers).
SUPPLEMENTARY INFORMATION:
Introduction
This document proposes to amend the
Estate and Gift Tax Regulations (26 CFR
parts 20 and 25) under sections 2001 and
2504 relating to the value of prior gifts for
purposes of computing the estate and gift
tax. This document also proposes to
amend the Procedure and Administration
Regulations relating to the period for as-
sessment and collection of gift tax under
section 6501.
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, OP:FS:FP,
Washington, DC 20224. Comments on
the collection of information should be re-
ceived by February 22, 1999. Comments
are specifically 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;
1999–12 I.R.B.25March 22, 1999
IRB 1999-12 3/17/99 12:40 PM Page 25

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
purchase of service to provide informa-
tion.
The collection of information in this
proposed regulation is proposed
§301.6501(c)–1(f) of the Procedure and
Administration Regulations. This infor-
mation is required by statute in order to
commence the period of limitations on as-
sessment. This information will be used
to identify gift tax issues relating to the
reported transfers. The collection of in-
formation is mandatory. The likely re-
spondents are individuals.
The reporting burden contained in
§301.6501–1(f) is reflected in the burden
of Form 709, U.S. Gift (and Generation-
Skipping Transfer) Tax Return.
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 mater-
ial in the administration of any internal
revenue law. Generally, tax returns and
tax information are confidential, as re-
quired by 26 U.S.C. 6103.
Background
Under the unified estate and gift tax
system, a single rate schedule is applied
to an individual’s cumulative gifts and be-
quests. Gift tax is computed by determin-
ing a tax on the total of the gifts made by
the donor in the current calendar year plus
the gifts made in prior years (prior taxable
gifts). The tax computed is then reduced
by the tax that would have been payable
on the prior taxable gifts. The result
(after taking into account the applicable
credit amount under section 2505) is the
gift tax on the current gifts. Similarly, the
estate tax is computed by determining a
tax on the value of the decedent’s taxable
estate plus the value of lifetime gifts (ad-
justed taxable gifts) made by the dece-
dent. The tax computed is then reduced
by the gift tax that would have been
payable on the adjusted taxable gifts. The
result (after allowing for various credits)
is the estate tax on the taxable estate.
The Statute of Limitations for Assessment
of Gift Tax Under Section 6501(c)(9) of
the Internal Revenue Code
Prior to the Taxpayer Relief Act of 1997
(the 1997 Act) and the Internal Revenue
Service Restructuring and Reform Act of
1998 (the 1998 Act), the period for assess-
ment of gift tax for a calendar period gen-
erally expired three years from the date a
gift tax return for that period was deemed
to be filed. The statute of limitation pro-
tection extended to all gifts made in a cal-
endar period for which a return was filed,
including gifts not reported on the gift tax
return for the period. An exception to this
general rule applied for gifts subject to the
special valuation rules of sections 2701
and 2702. For gifts subject to these rules,
section 6501(c)(9) extends the period of
assessment indefinitely unless the gifts
were disclosed on the gift tax return in a
manner adequate to apprise the IRS of the
nature of the transfer.
Under the 1997 and 1998 Acts, this ad-
equate disclosure requirement was ex-
tended to all gifts, whether or not subject
to section 2701 or 2702. Consequently,
the period of assessment will not close for
any gift made in a calendar year ending
after August 5, 1997, or with respect to
any increase in gift tax required under
section 2701(d), that is not adequately
disclosed on a gift tax return.
The proposed regulations provide a list
of information that, if applicable to a
transaction, must be reported on a gift tax
return, or a statement attached thereto, in
order for the transaction to be considered
adequately disclosed to cause the period
for assessment to commence. The re-
quired information must completely and
accurately describe the transaction and in-
clude: the nature of the transferred prop-
erty; the parties involved; the value of the
transferred property; and how the value
was determined, including any discounts
or adjustments used in valuing the trans-
ferred property.
Specific rules are provided in the case
of transfers of entities that are not actively
traded that own interests in other non-ac-
tively traded entities. Comments are re-
quested on how these rules should be ap-
plied when the required information is not
available to the donor.
In addition, the return must disclose
the facts affecting the gift tax treatment of
the transaction in a manner that reason-
ably may be expected to apprise the IRS
of the nature of any potential controversy
regarding the gift tax treatment of the
transfer. In lieu of this statement, the tax-
payer may provide a statement of any
legal issue presented by the facts. Finally,
the taxpayer must also provide a state-
ment of any position taken by the tax-
payer that is contrary to any temporary or
final Treasury regulation or any revenue
ruling. These standards are based on
those currently employed under §6662 in
determining whether an item is ade-
quately disclosed under that section, such
that accuracy-related penalties will not be
imposed.
The proposed regulations contain ex-
amples that illustrate adequate disclosure
under these standards.
Under the proposed regulations, ade-
quate disclosure of a transfer that is re-
ported as a completed gift on the gift tax
return will commence the running of the
statute of limitations under section
6501(c)(9) even if the transfer is ulti-
mately determined to be an incomplete
gift. Thus, if the donor reports a transfer
on the gift tax return as a completed gift
for gift tax purposes, the period for as-
sessing a gift tax with respect to the trans-
fer will commence. If the IRS does not
examine the transaction reported on the
gift tax return prior to the expiration of
the running of the statute of limitations,
the transaction will be treated as a com-
pleted gift as reported on the gift tax re-
turn. If the IRS, upon examination, dis-
agrees with the donor’s characterization
of the transaction, and the issue remains
unresolved through the administrative
process, the donor will be sent a final no-
tice of determination and the donor will
be able to seek a declaratory judgment on
the matter pursuant to section 7477.
On the other hand, if a donor initially
reports a transfer as an incomplete gift,
even if adequately disclosed, the statute
of limitations does not commence to run
March 22, 1999261999–12 I.R.B.
IRB 1999-12 3/17/99 12:40 PM Page 26

until the donor reports the transfer as a
completed gift. The IRS would have
three years from the date of filing of the
subsequent gift tax return disclosing the
completed gift to make any assessment
with respect to the gift.
As discussed below, the 1997 and 1998
Act amendments to sections 2001 and
2504 curtail the IRS’ ability to redeter-
mine the value of a gift in computing the
estate or gift tax, after the statute of limi-
tations expires. However, the adequate
disclosure requirement contained in sec-
tion 6501(c)(9) is intended to afford the
IRS the reasonable opportunity to identify
in a timely manner and with a minimum
expenditure of resources returns that pre-
sent issues that merit further examination.
Accordingly, the information required is
intended to enable the IRS to identify is-
sues, if any, without imposing an undue
burden on taxpayers.
The proposed regulations conform the
regulations to the new statutory rules for
gifts made in calendar years ending after
August 5, 1997, if such gift tax return is
filed after the regulations are published as
final regulations. In the interim period,
the statutory provisions apply.
Valuation of Prior Gifts for Gift Tax
Purposes
Prior to the 1997 and 1998 Acts, sec-
tion 2504(c) provided that if a gift tax had
been paid or assessed with respect to the
calendar period in which the gift occurred
and the statute of limitations on assess-
ment for the prior gift had expired, then
the value of any gift made in such calen-
dar period could not be adjusted for pur-
poses of determining the total amount of
prior taxable gifts that the individual had
made. This prohibition on adjustments
applied even if a particular gift was not
disclosed on the gift tax return. This rule
continues to apply for gifts made prior to
August 6, 1997.
Under section 2504(c) as amended by
the 1997 and 1998 Acts, if a gift was ade-
quately disclosed such that the time has
expired for assessing gift tax for a preced-
ing calendar period under section 6501,
then the value of such gift made in the
prior calendar period cannot be adjusted
(regardless of whether or not a gift tax has
been assessed or paid for a prior calendar
period). Rather, the value of the gift is the
value as finally determined for gift tax
purposes, as defined in section 2001(f). A
similar rule applies with respect to any in-
crease in taxable gifts required under sec-
tion 2701(d) (pertaining to the transfer of
applicable retained interests under section
2701).
Section 2504(c) applies only to adjust-
ments involving issues of valuation.
Thus, even after the 1997 and 1998
amendments to section 2504(c), adjust-
ments to prior taxable gifts may be made
if the adjustment is not related to the valu-
ation of the gift; e.g., the erroneous inclu-
sion or exclusion of property for gift tax
purposes. See Rev. Rul. 76–451 (1976–2
C.B. 304). This result is consistent with
the legislative history to the 1997 Act
which emphasizes that the statutory
change imposes a prohibition on revalu-
ing certain gifts. The House Committee
report states that a gift for which the limi-
tations period has passed cannot be reval-
ued for purposes of determining the ap-
plicable estate tax bracket and available
unified credit. H.R. Rep. No. 148, 105th
Cong., 1st Sess. 359 (1997).
The proposed regulations conform the
regulations to the new statutory rules for
gift tax returns filed after the regulations
are published as final regulations. In the
interim period, the statutory provisions
apply.
Valuation of Prior Gifts for Estate Tax
Purposes
Prior to the enactment of the 1997 and
1998 Acts, there was no estate tax provi-
sion corresponding to section 2504(c).
Therefore, even where the period of as-
sessment expired for a calendar period,
and gift tax was paid or assessed for that
period, the value of any gifts made in that
period could be adjusted for purposes of
determining the estate tax liability. The
statutory change and these proposed regu-
lations preserve that treatment for gifts
made prior to August 6, 1997.
Section 2001(f) was added by the 1997
Act and amended by the 1998 Act. Under
section 2001(f) as amended, if the time
has expired for assessing gift tax for a
preceding calendar period under section
6501, then the value of the gift, for pur-
poses of computing the estate tax liability,
is the value of the gift as finally deter-
mined for gift tax purposes. A similar
rule applies for any increase in taxable
gifts required under section 2701(d).
Under the statute, the value of a gift is fi-
nally determined if: the value is shown
on a gift tax return and the IRS does not
contest the value before the period for as-
sessing gift tax expires; or, before the pe-
riod for assessing gift tax expires, the
value is specified by the IRS and the tax-
payer does not contest the specified value;
or, the value is determined by a court or
pursuant to a settlement agreement be-
tween the taxpayer and the IRS.
As discussed above, the provision only
limits the IRS’ ability to make adjust-
ments related to the value of a gift. Thus,
the IRS is not precluded from making ad-
justments that are not related to value,
such as the erroneous inclusion or exclu-
sion of property for gift tax purposes.
The proposed regulations conform the
current regulations to the statutory change
for gift tax returns filed after the regula-
tions are published as final regulations.
In the interim period, the statutory provi-
sions apply.
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, and because these regulations do
not impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply.
Therefore, a Regulatory Flexibility
Analysis is not required. Pursuant to sec-
tion 7805(f) of the Internal Revenue
Code, this notice of proposed rulemaking
will be submitted to the Small Business
Administration for comment on their im-
pact on small business.
Comment and Public Hearing
Before these proposed regulations are
adopted as final regulations, considera-
tion will be given to electronic and writ-
ten comments (a signed original and eight
(8) copies) that are timely submitted to
the IRS. The IRS and Treasury specifi-
cally request comments on the clarity of
the proposed regulations and how it may
be made easier to understand. All com-
ments will be available for public inspec-
tion and copying.
1999–12 I.R.B.27March 22, 1999
IRB 1999-12 3/17/99 12:40 PM Page 27

A public hearing has been scheduled for
Wednesday, April 28, 1999, at 10 a.m. in
Room 2615 of the Internal Revenue
Building, 1111 Constitution Avenue, NW,
Washington, DC. Due to building security
procedures, visitors must enter at the 10th
Street entrance, located between Constitu-
tion and Pennsylvania Avenues, NW. In
addition, all visitors must present photo
identification to enter the building. Be-
cause of access restrictions, visitors will
not be admitted beyond the immediate en-
trance area more than 15 minutes before
the hearing starts. For information about
having your name placed on the building
access list to attend the hearing, see the
“FOR FURTHER INFORMATION CON-
TACT” section of this preamble.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing. Persons who wish to
present oral comments at the hearing must
submit written comments and an outline
of the topics to be discussed and the time
to be devoted to each topic (a signed orig-
inal and eight (8) copies) by Wednesday,
April 7, 1999.
A period of 10 minutes will be allo-
cated to each person for making com-
ments.
An agenda showing the scheduling of
the speakers will be prepared after the
deadline for receiving outlines has
passed. Copies of the agenda will be
available free of charge at the hearing.
Drafting Information
The principal author of these regula-
tions is William L. Blodgett, Office of As-
sistant Chief Counsel (Passthroughs and
Special Industries), IRS. However, other
personnel from the IRS and Treasury De-
partment participated in their develop-
ment.
*****
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 20 is pro-
posed to be amended as follows:
PART 20—ESTATE TAX; ESTATES OF
DECEDENTS DYING AFTER
AUGUST 16, 1954
Paragraph 1. The authority citation for
part 20 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 20.2001–1 is revised to
read as follows:
§20.2001–1 Valuation of adjusted
taxable gifts and section 2701(d) taxable
events.
(a) Adjusted taxable gifts made prior
to August 6, 1997.For purposes of deter-
mining the value of adjusted taxable gifts
as defined in section 2001(b), if the gift
was made prior to August 6, 1997, the
value of the gift may be adjusted at any
time, even if the time within which a gift
tax may be assessed has expired under
section 6501. This paragraph (a) also ap-
plies to adjustments involving issues
other than valuation.
(b) Adjusted taxable gifts and section
2701(d) taxable events occurring after
August 5, 1997.For purposes of deter-
mining the value of adjusted taxable gifts
as defined in section 2001(b), if, under
section 6501, the time has expired within
which a gift tax may be assessed under
chapter 12 of the Internal Revenue Code
(or under corresponding provisions of
prior laws) with respect to a gift made
after August 5, 1997, and during a preced-
ing calendar period (as defined in
§25.2502–1(c)(2) of this chapter), or with
respect to an increase in taxable gifts re-
quired under section 2701(d) and
§25.2701–4 of this chapter, then the value
of the gift will be the value as finally de-
termined for gift tax purposes under chap-
ter 12 of the Internal Revenue Code. This
paragraph (b) does not apply to adjust-
ments involving issues other than valua-
tion. See §25.2504–1(d) of this chapter.
(c) Finally determined. For purposes
of paragraph (a) of this section, the value
of a gift is finally determined for gift tax
purposes if—
(1) The value is shown on a gift tax re-
turn, or on a statement attached to the re-
turn, and the Internal Revenue Service
does not contest the value before the time
has expired under section 6501 within
which gift taxes may be assessed;
(2) The value is specified by the Inter-
nal Revenue Service before the time has
expired under section 6501 within which
gift taxes may be assessed on the gift and
such specified value is not timely con-
tested by the taxpayer;
(3) The value is finally determined by a
court of competent jurisdiction; or
(4) The value is determined pursuant to
a settlement agreement entered into be-
tween the taxpayer and the Internal Rev-
enue Service.
(d) Definitions.For purposes of para-
graph (b) of this section, the value is fi-
nally determined by a court of competent
jurisdiction when the court enters a final
decision, judgment, decree or other order
passing on the valuation that is not subject
to appeal. See, for example, section 7481
regarding the finality of a decision by the
U.S. Tax Court. Also, for purposes of
paragraph (b) of this section, a settlement
agreement means any agreement entered
into by the Internal Revenue Service and
the taxpayer that is binding on both. The
term includes a closing agreement under
section 7121, a compromise under section
7122, and an agreement entered into in
settlement of litigation involving a valua-
tion issue.
(e) Expiration of period of assessment.
For purposes of determining if the time
has expired within which a tax may be as-
sessed under chapter 12 of the Internal
Revenue Code, see §301.6501(c)-1(e)
and (f) of this chapter.
(f) Examples.The following examples
illustrate the rules of this section:
Example 1. (i) Facts.A owns Blackacre and B,
A’s child, owns Whiteacre. In 1999, A and B ex-
change ownership of these properties. On A’s federal
gift tax return, Form 709, for the 1999 calendar year,
the transfer of Blackacre to B is adequately disclosed
under §301.6501(c)–1(f)(2) of this chapter. A reports
the transfer as nontaxable, representing that the fair
market values of Whiteacre and Blackacre, at the
time of the transfer, were equal. A dies after the pe-
riod of assessment for the transfer has expired.
(ii) Application of the rule limiting adjustments to
valuation issues. The fair market values of Black-
acre and Whiteacre at the time of the transfer are
valuation issues. Because A filed the return ade-
quately disclosing the transfer, the period of assess-
ment with respect to A’s transfer has expired,
notwithstanding the fact that no gift tax return was
required to be filed. Therefore, the Internal Revenue
Service is precluded from revaluing Blackacre and
Whiteacre in determining the amount of A’s adjusted
taxable gifts in computing A’s estate tax liability.
Example 2. (i) Facts.In 1999, A transfers stock
in a closely-held corporation to an irrevocable trust.
Under the terms of the trust, the trustee has the dis-
cretion to accumulate trust net income or distribute
it among A’s children. At A’s death, the trust is to
terminate and the trust corpus is to be paid to A’s
surviving issue. On A’s federal gift tax return, Form
709, filed for the 1999 calendar year, the transfer is
adequately disclosed under §301.6501(c)–1(f)(2) of
this chapter. A claims an annual exclusion under
March 22, 1999281999–12 I.R.B.
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section 2503(b) for the transfer. A dies after the pe-
riod of assessment for the transfer has expired.
(ii) Application of the rule limiting adjustments to
valuation issues.Because the period of assessment
has closed on the transfer due to adequate disclo-
sure, the Internal Revenue Service is precluded from
revaluing the transferred stock for purposes of as-
sessing gift tax. Therefore, the value of the transfer
as reported on A’s 1999 Federal gift tax return may
not be redetermined for purposes of determining A’s
adjusted taxable gifts. However, the applicability of
the annual exclusion to the transfer is a question of
law and not of valuation. Accordingly, although the
Internal Revenue Service may not assess or collect
additional gift tax on the 1999 transfer (because the
period of assessment has closed), the Internal Rev-
enue Service is not precluded from challenging the
annual exclusion claimed by A for purposes of deter-
mining A’s adjusted taxable gifts in computing the
estate tax liability.
(g) Effective dates. Paragraph (a) of
this section applies to transfers of prop-
erty by gift made prior to August 6, 1997,
if the estate tax return for the donor/dece-
dent’s estate is filed after this document is
published as a final regulation in the Fed-
eral Register.Paragraphs (b) through (f)
of this section apply to transfers of prop-
erty by gift made after August 5, 1997, if
the gift tax return for the calendar period
in which the gift is made is filed after this
document is published as a final regula-
tion in the Federal Register.
PART 25—GIFT TAX; GIFTS MADE
AFTER DECEMBER 31, 1954
Par. 3. The authority citation for part
25 continues to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 4. Section 25.2504–2 is revised to
read as follows:
§25.2504–2 Valuation of certain gifts for
preceding calendar periods.
(a) Gifts made before August 6, 1997.
If the time has expired within which a tax
may be assessed under chapter 12 of the
Internal Revenue Code (or under corre-
sponding provisions of prior laws) on the
transfer of property by gift made during a
preceding calendar period, as defined in
§25.2502–1(c)(2), the gift was made prior
to August 6, 1997, and a tax has been as-
sessed or paid for such prior calendar pe-
riod, the value of the gift, for purposes of
arriving at the correct amount of the tax-
able gifts for the preceding calendar peri-
ods (as defined under §25.2504–1(a)), is
the value used in computing the tax for
the last preceding calendar period for
which a tax was assessed or paid under
chapter 12 of the Internal Revenue Code
or the corresponding provisions of prior
laws. However, this rule does not apply
where no tax was paid or assessed for the
prior calendar period. Furthermore, this
rule does not apply to adjustments involv-
ing issues other than valuation. See
§25.2504–(d).
(b) Gifts made or section 2701(d) tax-
able events occurring after August 5,
1997.If the time has expired under sec-
tion 6501 within which a gift tax may be
assessed under chapter 12 of the Internal
Revenue Code (or under corresponding
provisions of prior laws) on the transfer of
property by gift made during a preceding
calendar period, as defined in §25.2502–
1(c)(2), or with respect to an increase in
taxable gifts required under section
2701(d) and §25.2701–4, and the gift was
made, or the section 2701(d) taxable
event occurred, after August 5, 1997, the
value of the gift or the amount of the in-
crease in taxable gifts, for purposes of de-
termining the correct amount of taxable
gifts for the preceding calendar periods
(as defined in §25.2504–1(a)), is the value
that is finally determined for gift tax pur-
poses (within the meaning of §20.2001–
1(c) of this chapter). This rule does not
apply to adjustments involving issues
other than valuation. See §25.2504–1(d).
For an illustration of this rule, see the ex-
amples under §20.2001–1(f) of this chap-
ter. For purposes of determining if the
time has expired within which a gift tax
may be assessed, see §301.6501(c)–1(e)
and (f) of this chapter.
(c) Example.The following example
illustrates the rules of paragraphs (a) and
(b) of this section:
Example.(i) Facts.In 1996, A transfers closely-
held stock to B, A’s child. A timely filed a federal
gift tax return reporting the 1996 transfer to B. No
gift tax was assessed or paid as a result of applica-
tion of A’s available unified credit. In 1999, A trans-
fers additional closely-held stock to B. A’s federal
gift tax return reporting the 1999 transfer is timely
filed and the transfer is adequately disclosed under
§301.6501(c)-1(f)(2) of this chapter. In 2003, A
transfers additional property to B and timely files a
federal gift tax return reporting the gift.
(ii) Application of the rule limiting adjustments
to valuation of prior gifts. Under section 2504(c), in
determining A’s 2003 gift tax liability, the value of
A’s 1996 gift can be adjusted for purposes of com-
puting the value of prior taxable gifts, since that gift
was made prior to August 6, 1997, and therefore, the
provisions of paragraph (a) of this section apply.
However, A’s 1999 transfer was adequately dis-
closed on a timely filed gift tax return and, thus,
under §25.2504-1(b), the value of the 1999 gift by A
may not be adjusted for purposes of computing the
value of prior taxable gifts in determining A’s 2003
gift tax liability.
(d) Effective dates.Paragraph (a) of
this section applies to transfers of prop-
erty by gift made prior to August 6, 1997.
Paragraphs (b) and (c) of this section
apply to transfers of property by gift made
after August 5, 1997, if the gift tax return
for the calendar period in which the trans-
fer is reported is filed after this document
is published as a final regulation in the
Federal Register.
PART 301—PROCEDURE AND
ADMINISTRATION
Par. 5. The authority citation for part
301 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 6. Section 301.6501(c)-1 is
amended by:
1. Revising the heading to paragraph
(e).
2. Adding paragraph (f).
The revision and addition reads as fol-
lows:
§301.6501(c)–1 Exceptions to general
period of limitations on assessment and
collection.
* * * * *
(e) Gifts subject to chapter 14 of the In-
ternal Revenue Code not adequately dis-
closed on the return—
* * * * *
(f) Gifts made after August 5, 1997, not
adequately disclosed on the return—(1)
In general. If a transfer of property, other
than a transfer described in paragraph (e)
of this section, is not adequately disclosed
on a gift tax return (Form 709 United
States Gift (and Generation-Skipping
Transfer) Tax Return) filed for the calen-
dar period in which the transfer occurs,
then any gift tax imposed by chapter 12 of
subtitle B of the Internal Revenue Code
on the transfer may be assessed, or a pro-
ceeding in court for the collection of the
appropriate tax may be begun without as-
sessment, at any time.
(2) Adequate disclosure of transfers of
property reported as gifts.A transfer will
be adequately disclosed on the return only
1999–12 I.R.B.29March 22, 1999
IRB 1999-12 3/17/99 12:40 PM Page 29

if it is reported in a manner adequate to
apprise the Internal Revenue Service of
the nature of the gift and the basis for the
value so reported. Transfers reported on
the gift tax return as transfers of property
by gift will be considered adequately dis-
closed under this paragraph (f) only if the
return provides a complete and accurate
description of the transaction including—
(i) A description of the transferred
property and any consideration received
by the transferor;
(ii) The identity of, and relationship
between, the transferor and the transferee;
(iii) A detailed description of the
method used to determine the fair market
value of property transferred, including
any relevant financial data and a descrip-
tion of any discounts, such as discounts
for blockage, minority or fractional inter-
ests, and lack of marketability, claimed in
valuing the property. In the case of the
transfer of an interest in an entity (e.g., a
corporation or partnership) that is not ac-
tively traded, a description of any dis-
count claimed in valuing the entity or any
assets owned by such entity, including a
statement regarding the fair market value
of 100 percent of the entity (determined
without regard to any discounts in valuing
the entity or any assets owned by the en-
tity), the pro rata portion of the entity sub-
ject to the transfer, and the fair market
value of the transferred interest as re-
ported on the return. If the entity that is
the subject of the transfer owns an interest
in another non-actively traded entity (ei-
ther directly or through ownership of an
entity), the information required in this
paragraph (f)(2)(iii) must be provided for
each entity and the assets owned by each
entity;
(iv) If the property is transferred in
trust, the trust’s tax identification number
and a brief description of the terms of the
trust;
(v) Any restrictions on the transferred
property that were considered in deter-
mining the fair market value of the prop-
erty; and
(vi) A statement of the relevant facts
affecting the gift tax treatment of the
transfer that reasonably may be expected
to apprise the Internal Revenue Service of
the nature of any potential controversy
concerning the gift tax treatment of the
transfer, or in lieu of this statement, a con-
cise description of the legal issue pre-
sented by the facts. In addition, a state-
ment describing any position taken that is
contrary to any temporary or final Trea-
sury regulations or revenue rulings.
(3) Adequate disclosure of non-gift
completed transfers or transactions.
Completed transfers, all or a portion of
which are reported as not constituting a
transfer by gift (for example, a transaction
in the ordinary course of business), will
be considered adequately disclosed under
this paragraph (f) only if the following in-
formation is provided on or attached to
the return—
(i) The information required for ade-
quate disclosure under paragraph (f)(2) of
this section; and
(ii) An explanation as to why the trans-
fer is not a transfer by gift under chapter
12 of the Internal Revenue Code.
(4) Adequate disclosure of incomplete
transfers.Adequate disclosure of a trans-
fer that is reported as a completed gift on
the gift tax return will commence the run-
ning of the statute of limitations for as-
sessment of gift tax on the transfer, even
if the transfer is ultimately determined to
be an incomplete gift for purposes of
§25.2511–2 of this chapter. For example,
if an incomplete gift is reported as a com-
pleted gift on the gift tax return and is ad-
equately disclosed, the period for assess-
ment of the gift tax will begin running
when the return is filed, as determined
under section 6501(b). On the other hand,
if the transfer is reported as an incomplete
gift and adequately disclosed, the period
for assessing a gift tax with respect to the
transfer will not commence to run even if
the transfer is ultimately determined to be
a completed gift. In that situation, the gift
tax with respect to the transfer may be as-
sessed at any time, up until three years
after the donor files a return reporting the
transfer as a completed gift.
(5) Examples.The following examples
illustrate the rules of this paragraph (f):
Example 1.(i) Facts.In 1999, A transfers 100
shares of common stock of XYZ Corporation to A’s
child. The common stock of XYZ Corporation is
actively traded on a major stock exchange. For gift
tax purposes, the fair market value of one share of
XYZ common stock on the date of the transfer, de-
termined in accordance with §25.2512-2(b) of this
chapter (based on the mean between the highest and
lowest quoted selling prices), is $150.00. On A’s
federal gift tax return, Form 709, for the 1999 calen-
dar year, A reports the gift as 100 shares of common
stock of XYZ Corporation with a value for gift tax
purposes of $15,000. A specifies the date of the
transfer, recites that the stock is publicly traded, and
identifies the stock exchange on which the stock is
traded.
(ii) Application of the adequate disclosure stan-
dard. A has adequately disclosed the transfer.
Therefore, the period of assessment for the transfer
under section 6501 will run from the time the return
is filed (as determined under section 6501(b)).
Example 2. (i) Facts.On December 30, 1999, A
transferred closely-held stock to B, A’s child. A de-
termined that the value of the transferred stock, on
December 30, 1999, was $9,000. A made no other
transfers to B, or any other donee, during 1999. On
A’s federal gift tax return, Form 709, filed for the
1999 calendar year, A provides the information re-
quired under paragraph (f)(2) of this section (includ-
ing the method used to determine the fair market
value of the stock and a description of discounts
claimed) such that the transfer is adequately dis-
closed. A claims an annual exclusion under section
2503(b) for the transfer.
(ii) Application of the adequate disclosure stan-
dard. Because the transfer was adequately disclosed
under paragraph (f)(2) of this section, the period of
assessment for the transfer will expire as prescribed
by section 6501(b), notwithstanding that if A’s valu-
ation of the closely-held stock was correct, A was
not required to file a gift tax return reporting the
transfer under section 6019. After the period of as-
sessment has expired on the transfer, the Internal
Revenue Service is precluded from revaluing the
transferred stock for purposes of assessing gift tax or
for purposes of determining the estate tax liability.
Therefore, the value of the transfer as reported on
A’s 1999 federal gift tax return may not be redeter-
mined for purposes of determining A’s prior taxable
gifts (for gift tax purposes) or A’s adjusted taxable
gifts (for estate tax purposes).
Example 3. (i) Facts.A owns 100 percent of the
common stock of X, a closely-held corporation. X
does not hold an interest in any other entity that is
not actively traded. In 1999, A transfers 20 percent
of the X stock to B and C, A’s children, in a transfer
that is not subject to the special valuation rules of
section 2701. The transfer is made outright with no
restrictions on ownership rights, including voting
rights and the right to transfer the stock. The re-
ported value of the transferred stock incorporates the
use of minority discounts and lack of marketability
discounts. No other discounts were used in arriving
at the fair market value of the transferred stock or
any assets owned by X. A reports the transfer on a
federal gift tax return, Form 709, for the 1999 calen-
dar year. On the return, A provides a statement re-
porting the fair market value of 100 percent of X
(before taking into account any discounts), the pro
rata portion of X subject to the transfer, and the re-
ported value of the transfer. A also attaches a state-
ment regarding the determination of value that in-
cludes a discussion of the discounts claimed and
how the discounts were determined.
(ii) Application of the adequate disclosure stan-
dard. A has provided sufficient information such
that the transfer will be considered adequately dis-
closed and the period of assessment for the transfer
under section 6501 will run from the time the return
is filed (as determined under section 6501(b)).
Example 4. (i) Facts.A owns a 70 percent lim-
ited partnership interest in PS. PS owns 40 percent
March 22, 1999301999–12 I.R.B.
IRB 1999-12 3/17/99 12:40 PM Page 30

of the stock in X, a closely-held corporation. The as-
sets of X include a 50 percent general partnership in-
terest in PB. PB owns an interest in commercial real
property. None of the entities (PS, X, or PB) is ac-
tively traded. In 1999, A transfers a 25 percent lim-
ited partnership interest in PS to B, A’s child. On the
federal gift tax return, Form 709, filed for the 1999
calendar year, A reports the transfer of the 25 percent
limited partnership interest in PS and that the fair
market value of 100 percent of PS is $y and that the
value of 25 percent of PS is $z, reflecting marketabil-
ity and minority discounts with respect to the 25 per-
cent interest. However, A does not disclose that PS
owns 40 percent of X, and that X owns 50 percent of
PB and that, in arriving at the $y fair market value of
100 percent of PS, discounts were claimed in valuing
PS’s interest in X, X’s interest in PB, and PB’s inter-
est in the commercial real property.
(ii) Application of the adequate disclosure stan-
dard. Because A has failed to comply with require-
ments of paragraph (f)(2) of this section regarding
PS’s interest in X, X’s interest in PB, and PB’s inter-
est in the commercial real property, the transfer will
not be considered adequately disclosed and the pe-
riod of assessment for the transfer under section
6501 will remain open indefinitely.
(6) Effective date.This paragraph (f)
is applicable to gifts made in calendar
years ending after August 5, 1997, if the
gift tax return for such calendar year is
filed after this document is published as a
final regulation in the Federal Register.
Robert E. Wenzel,
Deputy Commissioner of
Internal Revenue.
(Filed by the Office of the Federal Register on De-
cember 21, 1998, 8:45 a.m., and published in the
issue of the Federal Register for December 22, 1998,
63 F.R. 70701)
Notice of Proposed Rulemaking
Retention of Income Tax Return
Preparers’ Signatures
REG–106386–98
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
by cross-reference to temporary regula-
tions.
SUMMARY: In T.D. 8803, page 15, the
IRS is issuing temporary regulations re-
lating to the retention of income tax return
preparers’ signatures. The text of those
temporary regulations also serves as the
text of these proposed regulations.
DATES: Written comments and requests
for a public hearing must be received by
March 31, 1999. The IRS and Treasury
Department request comments on the
clarity of the proposed rules and how they
can be made easier to understand.
ADDRESSES: Send submissions to:
CC:DOM:CORP:R (REG–106386–98),
room 5226, Internal Revenue Service,
POB 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may be
hand delivered Monday through Friday
between the hours of 8 a.m. and 5 p.m. to
CC:DOM:CORP:R (REG–106386–98),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC. Alternatively, taxpayers
may submit comments electronically via
the Internet by selecting the “Tax Regs”
option on the IRS Home Page, or by sub-
mitting comments directly to the IRS In-
ternet site at http://www.irs.ustreas.gov/
prod/tax_regs/comments.html.
FOR FURTHER INFORMATION CON-
TACT: Concerning the regulations, Marc
C. Porter, (202) 622-4940; concerning
submissions, LaNita Van Dyke, (202)
622-7190 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
Temporary regulations in T.D. 8803
amend Income Tax Regulations (26 CFR
part 1) under section 6695(b) of the Inter-
nal Revenue Code. These regulations re-
quire an income tax return preparer to
keep a manually signed (by the preparer)
copy of a return or claim for refund if the
preparer presented to the taxpayer for sig-
nature a return or claim with a copy of the
preparer’s manual signature.
The text of those temporary regulations
also serves as the text of these proposed
regulations. The preamble to the tempo-
rary regulations explains the temporary
regulations.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in EO
12866. Therefore, a regulatory assess-
ment is not required. It has also been 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, and because the regulations do not
impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Internal
Revenue Code, this notice of proposed
rulemaking will be submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small business.
Proposed Effective Date
The proposed regulations are proposed
to be effective for returns or claims for re-
fund presented to a taxpayer for signature
after December 31, 1998 and for returns
or claims retained on or before that date.
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 (a signed original and 8 copies) that
are submitted timely to the IRS. All com-
ments will be available for public inspec-
tion and copying. A public hearing may
be scheduled if requested in writing by
any person that timely submits written
comments. If a public hearing is sched-
uled, 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 Marc C. Porter, Office of Assis-
tant Chief Counsel (Income Tax & Ac-
counting). However, other personnel
from the IRS and Treasury Department
participated in its development.
*****
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.6695–1 is amended
by:
1999–12 I.R.B.31March 22, 1999
IRB 1999-12 3/17/99 12:40 PM Page 31

1. Revising paragraph (b)(4)(i).
2. Adding paragraph (g).
The revision and addition read as fol-
lows:
§1.6695–1 Other assessable penalties
with respect to the preparation of income
tax returns for other persons.
* * * * *
(b) * * *
(4)(i) [The text of proposed paragraph
(b)(4)(i) is the same as the text of
§1.6695–1T(b)(4)(i) published in T.D.
8803.]
* * * * *
(g) [The text proposed paragraph (g) is
the same as the text of §1.6695–1T(g)
published in T.D. 8803.]
Robert E. Wenzel,
Deputy Commissioner of
Internal Revenue.
(Filed by the Office of the Federal Register on De-
cember 30, 1998, 8:45 a.m., and published in the
issue of the Federal Register for December 31, 1998,
63 F.R. 72218)
Foundations Status of Certain
Organizations
Announcement 99–22
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:
L I Science and Engineering fair Inc.,
East Setauket, NY
La Alma Lincoln Park Neighborhood
Organization Inc., Denver, CO
La Charitable Organization Alliance Inc.,
Metairie, LA
Lanier Retirement Community, Inc.,
Gainesville, GA
Lansing Neighborhood Housing
Corporation, Lansing, MI
La Porte County Juvenile Service Center
Task Force Inc., LaPorte, IN
La Raza Lawyers Institute, Sacramento,
CA
The Last Harvest Inc., Irvine, CA
La Vida-2 Inc., Rochester, NY
La Vivienda Housing Development
Corporation, Chicago, IL
Labor-Environmental Solidarity
Network, Portland, OR
Lackawanna County Medical Society
Health Care Fund, Scranton, PA
Lady Boston Inc., Charlestown, MA
Lahoma Community Park Association,
Lahoma, OK
Lake Cinderella Improvement
Committee, Spring, TX
Lake County Minority Healty Coalition
Inc., East Chicago, IN
Lake Erie Native American Council Inc.,
Cleveland, OH
Lake Neatahwanta Reclamation
Committee Inc., Fulton, NY
Lake Ontario Youth Athletic League Inc.,
Medina, NY
Lake St. Louis Golf Charities Inc., Lake
St. Louis, MO
Lake Toxaway Community Club, Lake
Toxaway, NC
Lakeland Rebounders Inc., Lakeland, FL
Lakewood Works for Disabled Too,
Lakewood, OH
Laotian American Organized Support,
Fountain Valley, CA
Larimer Land Trust, Loveland, CO
Larose Institution for Development,
Kalamazoo, MI
Las Vegas Valley Fire Fighters
Association, Las Vegas, NV
Lathika International Film &
Entertainment Inc., Virginia Beach, VA
Latin American Mission Programs &
Publishing, National City, CA
Latin World Ministries Inc., Austin, TX
Latino Empowerment Association of
Delmarva – Lead, Dover, DE
Laura Lagrotteria Jill Sawyer Christy
Stevens Michael Gallo, Niantic, CT
Lauravetlan Foundation Inc., New York,
NY
Laurinburg Community Economic Action
Program Inc., Lauringburg, NC
Lawrence Bud Kern Trust Fund Inc.,
Somers Point, NJ
Lawyers for Affordable Housing Inc.,
Dallas, TX
Lay Ministry to Missions Inc., Arlington,
TX
Lay Missionaries of the Blessed
Sacrament, Dayton, OH
LDS International Student Exchange,
Weatherford, TX
Le Bayou Legendaire Company, Lake
Charles, LA
Lead or Leave Education Fund,
Washington, DC
Leadership Lindsay, Lindsay, CA
League of Benefactors for Childrens
Activities Inc., Guthrie, OK
League of Volunteers Association,
Fairfax, VA
Learning Lab Inc., Okemah, OK
Learning Parent Inc., Houston, TX
Learning S Way, Manchester, NH
Lee Guardianship Services Inc., Fort
Myers, FL
Leon-Wakulla County Community
Housing & Development Agency Inc.,
Tallahassee, FL
Leonard Music Institute of Texas Inc.,
Fort Worth, TX
Leroy Christian Youth Centre Inc., Leroy,
KS
Let Live Inc., Baltimore, MD
Life Inc., Lafayette, LA
Leva Tatidar Samaj Inc. USA, Waltham,
MA
Lewisburg Area Community Center Inc.,
Lewisburg, PA
Liberty Glass Company Foundation Inc.,
Sapulpa, OK
Liberty Park USA Foundation, Colorado
Springs, CO
Libraries Worl-Wide Inc., Weston, MO
Life Center Foundation Inc., Key West,
FL
Life-Flite Corporation, Miami, FL
Life From Life Mid-Iowa Transplant
Support Group, Des Moines, IA
Life Harvest, Hersey, MI
Life Involves New Connections Inc.,
Rockville, Centre, NY
Life Long Learning Center Inc.,
Southampton, PA
Life Out Reach Development Center,
Oregonia, OH
Lifechange Ministries Inc., Fort Mill, SC
Lifeline a Mental Retardation
Partnership, Washington, DC
Lifeline Institute Inc., Dale city, VA
March 22, 1999321999–12 I.R.B.
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Lifestream Ministries Inc., Brentwood,
TN
Lifta Society, Dallas, TX
Lighthouse Maternity Services, Oxford,
OH
Lighthouse Restoration Center, Castle
Hayne, NC
Lighthouse of the Virginian Sea, Louisa,
VA
Lincoln Avenue Community
Development Corporation Inc.,
Evansville, IN
Lindale Historical Society, Tyler, TX
Linden Ladies Auxiliary Inc., Linden, NC
Linesville Community Public Library
Inc., Linesville, PA
Link Community Inc., Philadelphia, PA
Link to Life Network Inc., New York,
NY
Linton Teen Center Inc., Linton, IN
Lionel Washingtons River Parishes Pro
Football Camp, Lutcher, LA
Listen to Me Inc., Baltimore, MD
Literacy Council of Colorado County
Inc., Columbus, TX
Lithuanian-American Historical Aviation
Society, Grand Rapids, MI
Little Frontier Inc., E Amherst, NY
Little Hand Charities Inc., New Port
Richey, FL
Little River Community Complex Inc.,
Durham, NC
Live Eyes Theatre Company Inc., New
York, NY
Live Foundation Inc., New Orleans, LA
Livermore Fire Department Inc.,
Livermore, CO
Livernois-Seven Mile Non-Profit
Housing Corporation, Detroit, MI
Living Climb Organization Inc., New
York, NY
Living Stones Fellowship Inc., Hixson,
TN
Living Tradition, Garden Grove, CA
Living Well Foundation, Dallas, TX
Living Word Explorations, Arriba, CO
Lo Society Branch of Wisconsin Inc.,
Oshkosh, WI
Lodgistics Interim Homes for Homeless
Veterans, Corpus Christi, TX
Lombard Orioles Baseball Club,
Lombard, IL
Long Island for Education Center Inc.,
Farmingdale, NY
Long Island Maritime Heritage Society
Inc., Riverhead, NY
Lou Brock Scholarship Foundation Inc.,
St. Louis, MO
Loudoun Families for Children,
Leesburg, VA
Louisiana Air National Guard
Community, New Orleans, LA
Louisiana for Low-Income Housing
Today Incorporated, New Orleans, LA
Louisiana League of Anglers, Marrero,
LA
Louisiana Mico Enterprise Development
Corporation, Monroe, LA
Louisianas Absolute Pitch Inc., Baton
Rouge, LA
Love & Action Midwest Inc.,
Mt. Prospect, IL
Love All Tennis Patrons Incorporated Not
for Profit, East Chicago, IN
Love and Hope Inc., Lynwood, CA
Love in Christ Foundation Incorporated,
Grand Prairie, TX
Love Inc. Anchorage, Anchorage, AK
Love Nutrition Program, Houston, TX
Love Our Kids Inc., Houston, TX
Love Santa Inc., Woodburn, OR
Loving Arms, Memphis, TN
Loving Hands Adult Day Program,
Bellefontaine, OH
Loving Hands Ministries Inc.,
Birmingham, AL
Loving Options, San Bernardino, CA
Lower Richland Community Care Center
Inc., Columbia, SC
LPS Ministry Inc., Folly Beach, SC
Lt. Eddie Kitchen Jr Foundation,
Natchez, MS
Lulac National Civil Rights Commission
Inc., Lubbock, TX
Luso American Social and Cultural
Center Inc., Providence, RI
Luther Village of Tampa Bay Inc.,
Tampa, FL
Lyme Disease Coalition of Minnesota,
Roseville, MN
Lyon County Girls Club Incorporated,
Kuttawa, KY
Lyons Community Association, Stilwell,
OK
Lyons Parent-Teacher Organization Inc.,
Randolph, MA
Lyric Opera of Erie Inc., Erie, PA
Lytal Aquatic Foundation Inc., Palm
Beach, FL
Maasai Nation, Inc., Atlanta, GA
Maine Immigration Advocacy Project,
Portland, ME
Merchants Foundation, Inc., Homestead,
PA
Midwest Childrens Theatre, Inc.,
Kenosha, WI
Mon County Housing Development
Corporation, Morgantown, WV
The Moreno Valley Arts Association,
Moreno Valley, CA
National Aquatic Foundation, Naperville,
IL
The National Jazz Hall of Fame and
Museum, Inc., Pittsburgh, PA
New Directions Community
Improvement Corp., Ravenna, OH
Northwest Florida Spinal Cord Injury
Council, Inc., Pensacola, FL
North Iowa Alliance for the Mentally Ill,
Mason City, IA
Ohio Jujitsu, Stow, OH
Operation Unity, Los Angeles, CA
Orange County Cocaine Anonymous,
Costa Mesa, CA
Outreach Ministries of the Greater New
Zion Missionary Baptist Church,
Los Angeles, CA
Oregon Horse Rescue, Eugene, OR
Pandora Playground, Inc., Pandora, OH
Paul Emerick Vocational Education
Foundation, Wilsonville, OR
Personal Physician Cave of Ohio, Inc.,
Cleveland, OH
Petersburg-Newburg Improvement
Association, Inc., Louisville, KY
PHS Community Development
Corporation, Detroit, MI
Pineland Early Learning Center, Inc.,
Pineland, TX
Pinnah Eben Ministries, Lawrenceville,
GA
Portland Metro Mens Council, Portland,
OR
Project Youth Life Skills Center,
Las Vegas, NV
Puritan Community Outreach, Baton
Rouge, LA
Puyallup Schools Foundation, Puyallup,
WA
Rivercrest Community Church Inc.,
Crescent Springs, KY
San Antonio Leadership Foundation,
San Antonio, TX
San Antonio Retired Educators
Foundation Inc., San Antonio, TX
San Joaquin County Bar Foundation,
Stockton, CA
San Quentin Productions, San Rafael, CA
Scuppernong Vision & Action, Creswell,
NC
Sea Ministries Charit Tr, Minonk, IL
Seenet, Charlottesville, VA
Shelter From Darkness Ministries,
Oroville, WA
1999–12 I.R.B.33March 22, 1999
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Shepherds Field, Mobile, AL
The Shiloh Community Services
Foundation, Sacramento, CA
Shriners Hospital for Crippled Children
Tr 2225, Boston, MA
Silver Lake Community Development
Corporation, Silver Lake, OR
The Simeon Institute, Claremont, CA
Smiles Learning Center, Inc., Starkville,
MS
Sonshine Sanctuary, Bellingham, WA
South Florida Aerospace Scholarship
Corporation, Miami, FL
Southern Housing Restoration &
Development, Inc., Atlanta, GA
Special Games for Special People, Inc.,
Milford, CT
St. Edmunds Community Service
Council, Inc., Chicago, IL
Steven Langs Aging & Disability
Services, Chicago, IL
St. Gregory’s Retreat Center, Inc.,
Mexico, NY
Sthle Wildlife Fdn., Brewer, ME
St. Louis Lesbian and Gay Community
Center, Inc., St. Louis, MO
Strive Inc., Hilton Head Is., SC
Symbiosis Foundation, Inc., Miami, FL
Targeted Research Foundation Inc.,
Irvine, CA
Together Grandview A Community Task
Force on Alcohol & Drug Abuse,
Grandview, MO
The Total Care Living Center
Incorporated, Baltimore, MD
Tri-Community Youthcare Center Inc.,
Angie, LA
Trinity Educational Foundation Inc.,
Las Vegas, NV
Triple S Rescue Mission, Chadron, NE
Under His Wings Ministries, Freeport, IL
United Black Fund of Tennessee,
Nashville, TN
United States School of Hammer
Throwing, Eugene, OR
Universal Network Intrust for Youth,
Inc., Highland park, NJ
Values, Inc., Birmingham, AL
Vermilion Education Foundation,
Vermilion, OH
Vincents Foundation Inc., Aulander, NC
Virtual Worlds Society, Seattle, WA
Vox Populi Inc., Bala Cynwyd, PA
Washington State Tissue Services,
Seattle, WA
Watershed Defense Fund, Bellingham,
WA
West Florida Child Development Center,
Inc., New Port Richey, FL
The West Tennessee Annual Conference
of the AME Church Inc., Memphis, TN
Whitfield Manor Inc., Anaheim, CA
World Entertainers Hall of Fame Inc.,
Reno, NV
Youth for a Change, Inc., Stone
Mountain, GA
Youth on a Mission of New York, Inc.,
North Babylon, NY
If an organization listed above submits
information that warrants the renewal of
its classification as a public charity or as a
private operating foundation, the Internal
Revenue Service will issue a ruling or de-
termination letter with the revised classi-
fication as to foundation status. Grantors
and contributors may thereafter rely upon
such ruling or determination letter as pro-
vided in section 1.509(a)–7 of the Income
Tax Regulations. It is not the practice of
the Service to announce such revised clas-
sification of foundation status in the Inter-
nal Revenue Bulletin.
Notice of Proposed Rulemaking
Withdrawal of Proposed
Regulations
REG–116099–98
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Withdrawal of proposed regu-
lations.
SUMMARY: This document withdraws
proposed regulations amending the in-
come tax regulations. This action is taken
to remove from the IRS’ inventory of reg-
ulations projects those proposed regula-
tions that are in an inactive status and
would remain in an inactive status for the
foreseeable future.
DATES: These proposed regulations are
withdrawn December 22, 1998.
FOR FURTHER INFORMATION CON-
TACT: George Bradley of the Office of
the Assistant Chief Counsel (Income Tax
& Accounting), Internal Revenue Service,
1111 Constitution Ave., NW, Washington,
DC 20224. Telephone (202) 622-4920,
not a toll-free number.
SUPPLEMENTARY INFORMATION:
Background
This document withdraws certain pro-
posed regulations previously published in
the Federal Registerby the IRS. These
proposed regulations are being withdrawn
because they are part of regulations pro-
jects that will not be pursued in the fore-
seeable future, and there are no current
plans to adopt the proposed regulations as
final regulations.
Drafting Information
The principal author of this withdrawal
notice is George H. Bradley, Office of the
Assistant Chief Counsel (Income Tax &
Accounting) within the Office of the
Chief Counsel, Internal Revenue Service.
Other personnel from the Internal Rev-
enue Service and the Treasury Depart-
ment participated in developing the with-
drawal notice.
*****
Withdrawal of Proposed Amendments to
the Regulations
Accordingly, under the authority of 26
U.S.C. 7805, the following proposed
amendments to 26 CFR part 1 are with-
drawn:
March 22, 1999341999–12 I.R.B.
IRB 1999-12 3/17/99 12:40 PM Page 34

Amendments Relating to
Proposed Regulations Section: FR Citation and Project NumberSubject
1.162, 1.162–16, FR Doc. 71–9954 Transfer of Franchises, Trademarks,
1.461–1(a)(3)(iii),Published 7/15/71 36 FR 13148 and Trade Names
1.1016
1.1253
1.1253–1,
1.1253–2,
1.1253–3
1.381(c)(4)–1(c)(1),FR Doc. 72–14187 Carryover of Inventories and Accounting
1.381(c)(4)–1(c)(3) Example (5),Published 8/23/72 37 FR 16947 Methods in Certain Corporate Acquisitions
1.381(c)(4)–1(d)(1)(iii),
1.381(c)(5),
1.381(c)(5)–1
1.351–1(c)(1)(ii),FR Doc. 80–40833 Limitations on Reorganization
1.351–1(c)(4), 1.351–1(c)(5)(i), Published 1/7/81 46 FR 1744 Treatment for Investment Companies
1.351–1(c)(5)(ii), 1.351–1(c)(6)(LR–135–76)
Examples (3) & (4), 1.368–4
1.278–2, 1.464–1, 1.464–2FR Doc. 83–30789Farming Syndicate Expenditures
Published 11/15/83 48 FR 51936
(LR–144–76)
1.453–2FR Doc. 84–891Installment Obligations Received
Published 1/13/84 49 FR 1742 From Liquidating Corporations
(LR–184–80)
1.6050J–2FR Doc. 84–23131 Published 8/31/84Returns Relating to Transfers of Security to
49 FR 34518 (LR–182–84)Persons Other Than the Lender
1.131–1FR Doc. 85–2718 Published 2/1/85 Exclusion From Gross Income for Certain
50 FR 4702 (LR–83–83)Foster Care Payments
1999–12 I.R.B.35March 22, 1999
Robert E. Wenzel,
Deputy Commissioner of
Internal Revenue.
(Filed by the Office of the Federal Register on De-
cember 22, 1998, 8:45 a.m., and published in the
issue of the Federal Register for December 23, 1998,
63 F.R 71047)
Joint Board for the Enrollment
of Actuaries
Announcement 99–25
Examinations
The Joint Board for the Enrollment of
Actuaries has under consideration the re-
structuring of the examinations it offers
under 20 CFR 901.13(d)(1). The need for
restructuring is based on the expansion of
the body of law affecting the private pen-
sion system and the corresponding in-
crease in the complexity of the work for
which enrolled actuaries are responsible.
The syllabus of the current law examina-
tion, one of two examinations an individ-
ual must pass in order to meet the knowl-
edge requirement for enrollment, does not
provide sufficient opportunity to test a
candidate’s knowledge of the relevant
pension law. In addition, the pension
mathematics segment of the basic actuar-
ial examination does not cover sufficient
material to test a candidate’s ability to
apply sound actuarial techniques to the in-
creasingly complex regulatory environ-
ment in which defined benefit pension
plans operate.
As a result of discussions held at a pub-
lic meeting on June 30, 1998, and in other
public forums, the Joint Board and the ex-
amination co-sponsors, the Society of Ac-
tuaries and the American Society of Pen-
sion Actuaries, propose to restructure the
examination program.
The major topics for the restructured
basic actuarial examination would be (1)
compound interest, and (2) life contingen-
cies. These topics are now covered in the
first segment of the basic actuarial exami-
nation (EA-1A). The restructured exami-
nation covering these topics would be 2
1
⁄
2
hours long, the same length as the current
EA-1A examination.
The restructured pension law examina-
tion would be offered in two segments.
The first would cover basic pension math-
IRB 1999-12 3/17/99 12:40 PM Page 35

ematics, including the law and regulations
that relate to funding qualified defined
benefit pension plans that are neither
overfunded nor seriously underfunded.
The second segment would cover the re-
maining relevant law and regulations.
This would include treatment of over-
funded plans, deficit reduction contribu-
tions, qualification standards, etc. A min-
imum standard of competence would be
established for each segment. Each seg-
ment of the restructured pension law ex-
amination would be 4 hours long.
It is the Joint Board’s intention to offer
each examination once a year. The basic
actuarial examination and the second seg-
ment of the pension law examination
would be offered in the spring. The first
segment of the pension law examination
would be offered in the fall. It is antici-
pated that the restructured program will
take effect in the spring of 2001 when the
basic actuarial examination and the sec-
ond segment of the pension law examina-
tion will be offered.
Appropriate transition credits would be
accorded to persons who have success-
fully completed portions of the enroll-
ment examination before 2001. The Joint
Board is considering the following system
of transition credits:
(1) A person who has successfully com-
pleted the first segment of the current
basic actuarial examination before
2001 will receive credit for the restruc-
tured basic actuarial examination and
will satisfy the examination require-
ment of the Joint Board’s regulations
only if he or she passes bothsegments
of the restructured pension law exami-
nation.
(2) A person who has successfully com-
pleted bothsegments of the current
basic actuarial examination before
2001 will receive credit for the restruc-
tured basic actuarial examination and
will satisfy the examination require-
ment of the Joint Board’s regulations
only if he or she passes bothsegments
of the restructured pension law exami-
nation.
(3) A person who has successfully com-
pleted the first segment of the current
basic actuarial examination andthe
current pension law examination before
2001 will receive credit for the restruc-
tured basic actuarial examination and
for the second segment of the restruc-
tured pension law examination and will
satisfy the examination requirement of
the Joint Board’s regulations only if he
or she passes the first segment of the
restructured pension law examination.
(4) A person who has successfully com-
pleted the second segment of the cur-
rent basic actuarial examination and
the current pension law examination
before 2001 will receive credit for both
segments of the restructured pension
law examination and will satisfy the
examination requirement of the Joint
Board’s regulations only if he or she
passes the restructured basic actuarial
examination.
(5) A person who has successfully com-
pleted the current pension law exami-
nation before 2001 will receive credit
for the second segment of the restruc-
tured pension law examination and will
satisfy the examination requirement of
the Joint Board’s regulations only if he
or she passes the restructured basic ac-
tuarial examination andthe first seg-
ment of the restructured pension law
examination.
(6) A person who does not meet the re-
quirements of one of the preceding five
paragraphs before 2001 will receive no
credit for any examinations passed
under the current examination program
and will satisfy the examination re-
quirement of the Joint Board’s regula-
tions only if he or she passes the re-
structured basic actuarial examination
and both segments of the restructured
pension law examination.
Enrollment
The regulations of the Joint Board for
the Enrollment of Actuaries define the pe-
riod during which Enrolled Actuaries
must fulfill their Continuing Professional
Education ( CPE ) requirements to be eli-
gible for renewal of enrollment. Those
regulations also define the period during
which the enrollment of an Enrolled Actu-
ary is valid and the date by which En-
rolled Actuaries must file their application
for renewal of enrollment for that applica-
tion to be timely filed.
The current enrollment cycle, the pe-
riod in which CPE requirements for the
upcoming cycle are fulfilled ran from
January 1, 1996 through December 31,
1998.
The current enrollment cycle techni-
cally started (with the use of the new
pre-fix) on April 1, 1996 and will end
on March 31, 1999.
Applications for renewal of enroll-
ment should have been filed by March
1st.
The Board has noted that there is a
wide spread impression that credits neces-
sary to meet the CPE requirements for re-
enrollment that were not earned by De-
cember 31, 1998 could be earned in
January and/or February 1999. This is
contrary to the regulations. However, the
Board recognizes that, in the past, certain
circumstances called for relaxation of the
rules and that what has happened in the
past might have been taken as a prece-
dent.
As result, the Board will not deny re-
enrollment to those actuaries solely be-
cause they fulfilled their CPE require-
ments in part with credits obtained in
January and/or February 1999. However,
the Board will require that Enrolled Actu-
aries who have availed themselves of this
relief should, in a signed letter to the
Board, disclose the number of hours of
credit thus obtained and how they were
obtained ( e.g. identify the course taken,
when and where the course was taken,
etc. ). Those credits earned in 1999 will
not count towards meeting the require-
ments for the next enrollment cycle.
Such administrative relief will not be
available at the end of the current re-en-
rollment cycle ( April 1, 1999 through
March 31, 2002 ) for credits earned in
January and/or February 2002, nor will it
be available in subsequent re-enrollment
cycles. Enrolled Actuaries who are un-
able to complete their CPE requirements
by the end of the last full year of the cycle
will be expected to provide the Board’s
Executive Director with an explanation of
the facts and circumstances which made it
impossible for them to meet the require-
ments in a timely fashion.
Four-Digit Enrollment Number
This notice provides enrolled actuaries
and other interested parties with a re-
minder of the Joint Board’s position,
which was adopted some years ago, on a
matter where some confusion has arisen
in the past. The confusion arises regard-
ing the prefix to the four-digit enrollment
March 22, 1999361999–12 I.R.B.
IRB 1999-12 3/17/99 12:40 PM Page 36

number an enrolled actuary should use
when signing a schedule B after Decem-
ber 31, 1998, but before the earlier of (1)
receipt of official notice of reenrollment,
and (2) April 1, 1999.
Accordingly, enrolled actuaries are ad-
vised that:
1. An enrolled actuary is not permitted
to use the (in this case 99-) prefix
until such time as he/she has been
officially notified in writing by the
Joint Board of his/her entitlement to
do so. See the Instructions for
Schedule B.
2. An enrolled actuary who has not yet
received official notification from
the Joint Board should use the 96-
prefix if he/she signs a Schedule B
in the first three months of 1999.
The IRS Service Center will not re-
ject the 96-prefix for a signature
date during this three month period.
The 96-prefix will be rejected for a
Schedule B where the signature date
is April 1, 1999 or later.
Paulette Tino, Chairperson,
Joint Board for the
Enrollment of Actuaries.
1999–12 I.R.B.37March 22, 1999
IRB 1999-12 3/17/99 12:40 PM Page 37

March 22, 1999381999–12 I.R.B.
NameAddressDate of Resignation
Ellis, Ronald C.Billings, MTOctober 6, 1998
Announcement of the Consent Voluntary Suspension of Attorneys,
Certified Public Accountants, Enrolled Agents, and Enrolled Actuaries
From Practice Before the Internal Revenue Service
Under 31 Code of Federal Regulations,
Part 10, an enrolled agent, in order to
avoid the institution or conclusion of a
proceeding for his disbarment or suspen-
sion from practice before the Internal
Revenue Service, may offer his resigna-
tion from such practice. The Director of
Practice, in his discretion, may suspend
an enrolled agent in accordance with the
consent offered.
Attorneys, certified public accountants,
enrolled agents, and enrolled actuaries are
prohibited in any Internal Revenue Ser-
vice matter from directly or indirectly em-
ploying, accepting assistance from, being
employed by or sharing fees with, any en-
rolled agent who has resigned from prac-
tice before the Internal Revenue Service.
To enable attorneys, certified public ac-
countants, enrolled agents, and enrolled
actuaries to identify former enrolled
agents who have resigned from practice
before the Internal Revenue Service, the
Director of Practice will announce in the
Internal Revenue Bulletin the names and
addresses of former enrolled agents who
have resigned from such practice, and
date of resignation. This announcement
will appear in the weekly Bulletin at the
earliest practicable date after such action
and will continue to appear in the weekly
Bulletins for five successive weeks or for
as many weeks as is practicable for each
enrolled agent, who has resigned, and will
be consolidated and published in the Cu-
mulative Bulletin.
The following individual has offered
his resignation as an enrolled agent:
IRB 1999-12 3/17/99 12:40 PM Page 38

1999–12 I.R.B.39March 22, 1999
Announcement of the Expedited Suspension of Attorneys, Certified Public
Accountants, Enrolled Agents, and Enrolled Actuaries From Practice
Before the Internal Revenue Service
Under Title 31 of the Code of Federal
Regulations, section 10.76, the Director
of Practice is authorized to immediately
suspend from practice before the Internal
Revenue Service any practitioner who,
within five years, from the date the expe-
dited proceeding is instituted, (1) has had
a license to practice as an attorney, certi-
fied public accountant, or actuary sus-
pended or revoked for cause; or (2) has
been convicted of any crime under title 26
of the United States Code or, of a felony
under title 18 of the United States Code
involving dishonesty or breach of trust.
Attorneys, certified public accountants,
enrolled agents, and enrolled actuaries are
prohibited in any Internal Revenue Service
matter from directly or indirectly employ-
ing, accepting assistance from, being em-
ployed by, or sharing fees with, any practi-
tioner disbarred or suspended from practice
before the Internal Revenue Service.
To enable attorneys, certified public ac-
countants, enrolled agents, and enrolled ac-
tuaries to identify practitioners under expe-
dited suspension from practice before the
Internal Revenue Service, the Director of
Practice will announce in the Internal Rev-
enue Bulletin the names and addresses of
practitioners who have been suspended
from such practice, their designation as at-
torney, certified public accountant, en-
rolled agent, or enrolled actuary, and date
or period of suspension. This announce-
ment will appear in the weekly Bulletin at
the earliest practicable date after such ac-
tion and will continue to appear in the
weekly Bulletins for five successive weeks
or for as many weeks as is practicable for
each attorney, certified public accountant,
enrolled agent, or enrolled actuary so sus-
pended and will be consolidated and pub-
lished in the Cumulative Bulletin.
The following individual have been
placed under suspension from practice be-
fore the Internal Revenue Service by virtue
of the expedited proceeding provisions of
the applicable regulations:
NameAddressDesignationDate of Suspension
Pierce, Steven J.Aventura, FLAttorneyIndefinite from October 15, 1998
Baker, Charles C.Monteagle, TNAttorneyIndefinite from October 15, 1998
Kantor, Stanley L.New York, NYAttorneyIndefinite from October 15, 1998
Wagner, Richard E.Spencerport, NYEnrolled AgentIndefinite from October 15, 1998
Tuohey, SeamusMontclair, NJAttorneyIndefinite from October 15, 1998
Burke, Beau E.Santa Rosa, CACPAIndefinite from October 15, 1998
Marn, Eric Y.Honolulu, HIAttorneyIndefinite from October 15, 1998
Todd, KennethTulsa, OKAttorneyIndefinite from November 4, 1998
IRB 1999-12 3/17/99 12:40 PM Page 39

March 22, 1999401999–12 I.R.B.
NameAddressDesignationEffective Date
Shaw-Boatner, DeborahAustin, TXCPASeptember 24, 1998
Hannum, DavidPhiladelphia, PAEnrolled AgentSeptember 30, 1998
Miller, TheodoreNeshaminy Valley, PACPAFebruary 27, 1999
Announcement of the Disbarment and Suspension of Attorneys, Certified
Public Accountants, Enrolled Agents, and Enrolled Actuaries From
Practice Before the Internal Revenue Service
Under 330, Title 31 of the United
States Code, the Secretary of the Trea-
sury, after due notice and opportunity for
hearing, is authorized to suspend or dis-
bar from practice before the Internal Rev-
enue Service any person who has vio-
lated the rules and regulations governing
the recognition of attorneys, certified
public accountants, enrolled agents, or
enrolled actuaries to practice before the
Internal Revenue Service.
Attorneys, certified public accountants,
enrolled agents, and enrolled actuaries are
prohibited in any Internal Revenue Service
matter from directly or indirectly employ-
ing, accepting assistance from, being em-
ployed by, or sharing fees with, any practi-
tioner disbarred or under suspension from
practice before the Internal Revenue Ser-
vice.
To enable attorneys, certified public ac-
countants, enrolled agents, and enrolled
actuaries to identify such disbarred or sus-
pended practitioners, the Director
of Practice will announce in the Internal
Revenue Bulletin the names and ad-
dresses of practitioners who have been
suspended from such practice, their desig-
nation as attorney, certified public ac-
countant, enrolled agent, or enrolled actu-
ary, and date of disbarment or period of
suspension. This announcement will ap-
pear in the weekly Bulletin for five suc-
cessive weeks or as long as it is practica-
ble for each attorney, certified public
accountant, enrolled agent, or enrolled ac-
tuary so suspended or disbarred and will
be consolidated and published in the Cu-
mulative Bulletin.
After due notice and opportunity for
hearing before an administrative law
judge, the following individuals have
been disbarred from further practice be-
fore the Internal Revenue Service:
IRB 1999-12 3/17/99 12:40 PM Page 40

1999–12 I.R.B.41March 22, 1999
NameAddressDesignationDate of Suspension
Cohn, IrvingBaltimore, MDAttorneySeptember 4, 1998 to September 3, 2000
Hwang, Catherine T.Livingston, NJCPAOctober 1, 1998 to September 30, 1999
Bratek, RonaldN. Brunswick, NJCPAOctober 5, 1998 to July 4, 2000
Walker, Frank O.Bay City, TXCPAOctober 5, 1998 to April 4, 2001
Ng, Peter J.Monticello, NYAttorneyOctober 5, 1998 to May 4, 2002
Sopkovich, CarolGirard, OHAttorneyOctober 5, 1998 to October 4, 2001
Kappler, John E.Evansville, INCPAOctober 8, 1998 to October 7, 1999
Sarcia, Jerry J.Libertyville, ILCPAOctober 30, 1998 to August 29, 2002
Spey, Gregory E.Youngstown, OHCPANovember 1, 1998 to April 30, 2001
Jacobson, KennethJacksonville, FLCPANovember 9, 1998 to November 8, 2000
Lopshire, LarryWhiteland, INCPADecember 2, 1998 to December 1, 1999
Lederer, Christine L.Somers, CTAttorneyDecember 7, 1998 to December 6, 2001
Kieffer, Richard D.Olney, ILCPADecember 15, 1998 to December 14, 1999
Cleaver Jr., Thomas E.Severna Park, MDEnrolled AgentDecember 23, 1998 to June 22, 2002
Trent, Douglas I.Allen, TXCPAJanuary 1, 1999 to December 31, 1999
Winters, John E. Bayonne, NJCPAJanuary 1, 1999 to September 30, 1999
Todd Jr., Emory S.Chester SpringsCPAJanuary 15, 1999 to July 14, 1999
Hawkins, William M.Indianapolis, INAttorneyFebruary 1, 1999 to January 31, 2002
Gimbal, PeterUnion City, NJCPAApril 1, 1999 to September 30, 2000
Ryan, Thomas J.Danbury, CTAttorneyMay 1, 1999 to October 30, 2000
Announcement of the Consent Voluntary Suspension of Attorneys,
Certified Public Accountants, Enrolled Agents, and Enrolled Actuaries
From Practice Before the Internal Revenue Service
Under 31 Code of Federal Regulations,
Part 10, an attorney, certified public ac-
countant, enrolled agent, or enrolled ac-
tuary, in order to avoid the institution or
conclusion of a proceeding for his disbar-
ment or suspension from practice before
the Internal Revenue Service, may offer
his consent to suspension from such prac-
tice. The Director of Practice, in his dis-
cretion, may suspend an attorney, certi-
fied public accountant, enrolled agent, or
enrolled actuary in accordance with the
consent offered.
Attorneys, certified public accountants,
enrolled agents, and enrolled actuaries are
prohibited in any Internal Revenue Ser-
vice matter from directly or indirectly em-
ploying, accepting assistance from, being
employed by, or sharing fees with any
practitioner disbarred or suspended from
practice before the Internal Revenue Ser-
vice.
To enable attorneys, certified public ac-
countants, enrolled agents, and enrolled
actuaries to identify practitioners under
consent suspension from practice before the
Internal Revenue Service, the Director
of Practice will announce in the Internal
Revenue Bulletin the names and ad-
dresses of practitioners who have been
suspended from such practice, their desig-
nation as attorney, certified public ac-
countant, enrolled agent, or enrolled actu-
ary, and date or period of suspension. This
announcement will appear in the weekly
Bulletin at the earliest practicable date
after such action and will continue to ap-
pear in the weekly Bulletins for five suc-
cessive weeks or for as many weeks as is
practicable for each attorney, certified
public accountant, enrolled agent, or en-
rolled actuary so suspended and will be
consolidated and published in the Cumu-
lative Bulletin.
The following individuals have been
placed under consent suspension from
practice before the Internal Revenue Ser-
vice:
IRB 1999-12 3/17/99 12:40 PM Page 41

March 22, 1999421999–12 I.R.B.
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 A but not
to B, and the new ruling holds that it ap-
plies to both A and B, the prior ruling is
modified because it corrects a published
position. (Compare with amplified and
clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future 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. A ruling
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. Rul.—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
IRB 1999-12 3/17/99 12:40 PM Page 42

1999–12 I.R.B.43March 22, 1999
1
A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 1998–1 through 1998–52
will be found in Internal Revenue Bulletin 1999–1,
dated January 4, 1999.
Numerical Finding List
1
Bulletins 1999–1 through 1999–11
Announcements:
99–1, 1999–2 I.R.B. 41
99–2, 1999–2 I.R.B. 44
99–3, 1999–3 I.R.B. 15
99–4, 1999–3 I.R.B. 15
99–5, 1999–3 I.R.B. 16
99–6, 1999–4 I.R.B.24
99–7, 1999–2 I.R.B. 45
99–8, 1999–4 I.R.B.24
99–9, 1999–4 I.R.B. 24
99–10, 1999–5 I.R.B. 63
99–11, 1999–5 I.R.B. 64
99–12, 1999–5 I.R.B. 65
99–13, 1999–6 I.R.B. 18
99–14, 1999–7 I.R.B.60
99–15, 1999–8 I.R.B.78
99–16, 1999–8 I.R.B. 80
99–17, 1999–9 I.R.B. 59
99–19, 1999–10 I.R.B. 63
99–20, 1999–11 I.R.B.53
99–21, 1999–11 I.R.B.55
Notices:
99–1, 1999–2 I.R.B. 8
99–2, 1999–2 I.R.B. 8
99–3, 1999–2 I.R.B. 10
99–4, 1999–3 I.R.B. 9
99–5, 1999–3 I.R.B. 10
99–6, 1999–3 I.R.B. 12
99–7, 1999–4 I.R.B.23
99–8, 1999–5 I.R.B. 26
99–9, 1999–4 I.R.B. 23
99–10, 1999–6 I.R.B. 14
99–11, 1999–8 I.R.B.56
99–12, 1999–9 I.R.B. 44
99–13, 1999–10 I.R.B. 26
99–14, 1999–11 I.R.B.7
Proposed Regulations:
REG–209103–89, 1999–11 I.R.B. 10
REG–209619–93, 1999–10 I.R.B. 28
REG–245562–96, 1999–9 I.R.B. 45
REG–246256–96, 1999–11 I.R.B. 12
REG–104072–97, 1999–11 I.R.B. 12
REG–114663–97, 1999–6 I.R.B. 15
REG–114664–97, 1999–11 I.R.B. 21
REG–116826–97, 1999–10 I.R.B. 40
REG–118620–97, 1999–9 I.R.B. 46
REG–121806–97, 1999–10 I.R.B. 46
REG–104924–98, 1999–10 I.R.B.47
REG–106219–98, 1999–9 I.R.B. 51
REG–106388–98, 1999–11 I.R.B. 27
REG–106564–98, 1999–10 I.R.B.53
REG–106902–98, 1999–8 I.R.B. 57
REG–106905–98, 1999–11 I.R.B. 39
REG–110524–98, 1999–10 I.R.B. 55
REG–111435–98, 1999–7 I.R.B. 55
REG–113694–98, 1999–7 I.R.B. 56
REG–111435–98, 1999–7 I.R.B. 55
REG–113744–98, 1999–10 I.R.B. 59
REG–114841–98, 1999–11 I.R.B. 41
REG–115433–98, 1999–9 I.R.B. 54
REG–116824–98, 1999–7 I.R.B.57
REG–117620–98, 1999–7 I.R.B. 59
REG–119192–98, 1999–11 I.R.B. 45
REG–121865–98, 1999–8 I.R.B.63
Revenue Procedures:
99–1, 1999–1 I.R.B. 6
99–2, 1999–1 I.R.B. 73
99–3, 1999–1 I.R.B. 103
99–4, 1999–1 I.R.B. 115
99–5, 1999–1 I.R.B. 158
99–6, 1999–1 I.R.B. 187
99–7, 1999–1 I.R.B. 226
99–8, 1999–1 I.R.B. 229
99–9, 1999–2 I.R.B. 17
99–10, 1999–2 I.R.B. 11
99–11, 1999–2 I.R.B. 14
99–12, 1999–3 I.R.B. 13
99–13, 1999–5 I.R.B. 52
99–14, 1999–5 I.R.B. 56
99–15, 1999–7 I.R.B. 42
99–16, 1999–7 I.R.B. 50
99–17, 1999–7 I.R.B. 52
99–18, 1999–11 I.R.B.7
Revenue Rulings:
99–1, 1999–2 I.R.B. 4
99–2, 1999–2 I.R.B. 5
99–3, 1999–3 I.R.B. 4
99–4, 1999–4 I.R.B.19
99–5, 1999–6 I.R.B.8
99–6, 1999–6 I.R.B. 6
99–7, 1999–5 I.R.B. 4
99–8, 1999–6 I.R.B.8
99–9, 1999–7 I.R.B.14
99–10, 1999–10 I.R.B. 10
99–11, 1999–10 I.R.B. 18
99–12, 1999–11 I.R.B. 6
99–13, 1999–10 I.R.B. 4
Treasury Decisions:
8789, 1999–3 I.R.B. 5
8791, 1999–5 I.R.B. 7
8792, 1999–7 I.R.B.36
8793, 1999–7 I.R.B.15
8794, 1999–7 I.R.B.4
8795, 1999–7 I.R.B.8
8796, 1999–4 I.R.B. 16
8797, 1999–5 I.R.B. 5
8799, 1999–6 I.R.B. 10
8800, 1999–4 I.R.B. 20
8801, 1999–4 I.R.B. 5
8802, 1999–4 I.R.B. 10
8805, 1999–5 I.R.B. 14
8806, 1999–6 I.R.B.4
8807, 1999–9 I.R.B. 33
8808, 1999–10 I.R.B. 21
8809, 1999–7 I.R.B.27
8810, 1999–7 I.R.B.19
8811, 1999–10 I.R.B. 19
8812, 1999–8 I.R.B. 19
8813, 1999–9 I.R.B. 34
8814, 1999–9 I.R.B. 4
8815, 1999–9 I.R.B. 31
8816, 1999–8 I.R.B. 4
8817, 1999–8 I.R.B. 51
IRB 1999-12 3/17/99 12:40 PM Page 43

March 22, 1999441999–12 I.R.B.
Finding List of Current Action on
Previously Published Items
1
Bulletins 1999–1 through 1999–11
Revenue Procedures:
78–10
Obsoleted by
99–12, 1999–3 I.R.B. 13
94–56
Superseded by
99–9, 1999–2 I.R.B. 17
97–23
Superseded by
99–3, 1999–1 I.R.B. 103
98–1
Superseded by
99–1, 1999–1 I.R.B. 6
98–2
Superseded by
99–2, 1999–1 I.R.B. 73
98–3
Superseded by
99–3, 1999–1 I.R.B. 103
98–4
Superseded by
99–4, 1999–1 I.R.B. 115
98–5
Superseded by
99–5, 1999–1 I.R.B. 158
98–6
Superseded by
99–6, 1999–1 I.R.B. 187
98–7
Superseded by
99–7, 1999–1 I.R.B. 226
98–8
Superseded by
99–8, 1999–1 I.R.B. 229
98–22
Modified and amplified by
99–13, 1999–5 I.R.B. 52
98–56
Superseded by
99–3, 1999–1 I.R.B. 103
98–63
Modified by announcement
99–7, 1999–2 I.R.B. 45
1
A cumulative finding list for previously published
items mentioned in Internal Revenue Bulletins
1998–1 through 1998–52 will be found in Internal
Revenue Bulletin 1999–1, dated January 4, 1999.
IRB 1999-12 3/17/99 12:40 PM Page 44

1999–12 I.R.B.45March 22, 1999
Notes
IRB 1999-12 3/17/99 12:40 PM Page 45

March 22, 1999461999–12 I.R.B.
Notes
IRB 1999-12 3/17/99 12:40 PM Page 46

IRB 1999-12 3/17/99 12:41 PM Page 47

INTERNAL REVENUE BULLETIN
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IRB 1999-12 3/17/99 12:41 PM Page 48