Internal Revenue Bulletin 2001-42 (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. 2001–45, page 323.
LIFO; price indexes; department stores.The August
2001 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, August 31,
2001.
Rev. Rul. 2001–46, page 321.
Step transaction.Under the facts presented, if, pursuant
to an integrated plan, a newly formed wholly owned sub-
sidiary of an acquiring corporation merges into a target cor-
poration, followed by the merger of the target corporation
into the acquiring corporation, the transaction is treated as
a single statutory merger of the target corporation into the
acquiring corporation that qualifies as a reorganization under
section 368(a)(1)(A) of the Code. Rev. Rul. 67-274 amplified.
Rev. Rul. 90–95 distinguished.
Rev. Rul. 2001–48, page 324.
This ruling updates the list of countries that grant a recipro-
cal exemption for income from the international operation of
ships or aircraft to U.S. persons for purposes of sections
872(b) and 883 of the Code. Rev. Ruls. 89–42 and 97–31
modified and superseded.
T.D. 8964, page 320.
Final regulations under section 301 of the Code relate to lia-
bilities assumed in connection with corporate distributions.
Announcement 2001–99, page 340.
For purposes of the Archer MSA pilot program under section
220(j)(2) of the Code, 2001 is not a cut-off year.
EXEMPT ORGANIZATIONS
Announcement 2001–102, page 340.
A list is provided of organizations now classified as private
foundations.
ADMINISTRATIVE
Rev. Proc. 2001–47, page 332.
Per diemallowances. This procedure provides rules for
deeming substantiated the amount of certain reimbursed
traveling expenses of an employee as well as optional rules
for determining the amount of deductible meals and inciden-
tal expenses while traveling away from home. Rev. Proc.
2000–39 superseded.
Internal Revenue
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Bulletin No. 2001–42
October 15, 2001
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
Actions Relating to Court Decisions is on the page following the Introduction.
Finding Lists begin on page ii.

October 15, 20012001–42 I.R.B.
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 are consolidated 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 Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to
these subjects are contained in the other Parts and 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.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The first Bulletin for each month includes a cumulative index
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These monthly indexes are cumulated on a semiannual basis,
and are published in the first Bulletin of the succeeding semi-
annual period, respectively.
The IRS Mission
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.
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.

2001–42 I.R.B.October 15, 2001
It is the policy of the Internal Revenue
Service to announce at an early date
whether it will follow the holdings in cer-
tain cases. An Action on Decision is the
document making such an announcement.
An Action on Decision will be issued at
the discretion of the Service only on un-
appealed issues decided adverse to the
government. Generally, an Action on De-
cision is issued where its guidance would
be helpful to Service personnel working
with the same or similar issues. Unlike a
Treasury Regulation or a Revenue Ruling,
an Action on Decision is not an affirma-
tive statement of Service position. It is not
intended to serve as public guidance and
may not be cited as precedent.
Actions on Decisions shall be relied
upon within the Service only as conclu-
sions applying the law to the facts in the
particular case at the time the Action on
Decision was issued. Caution should be
exercised in extending the recommenda-
tion of the Action on Decision to similar
cases where the facts are different. More-
over, the recommendation in the Action
on Decision may be superseded by new
legislation, regulations, rulings, cases, or
Actions on Decisions.
Prior to 1991, the Service published ac-
quiescence or nonacquiescence only in
certain regular Tax Court opinions. The
Service has expanded its acquiescence
program to include other civil tax cases
where guidance is determined to be help-
ful. Accordingly, the Service now may ac-
quiesce or nonacquiesce in the holdings
of memorandum Tax Court opinions, as
well as those of the United States District
Courts, Claims Court, and Circuit Courts
of Appeal. Regardless of the court decid-
ing the case, the recommendation of any
Action on Decision will be published in
the Internal Revenue Bulletin.
The recommendation in every Action
on Decision will be summarized as ac-
quiescence, acquiescence in result only,
or nonacquiescence. Both “acquies-
cence” and “acquiescence in result only”
mean that the Service accepts the holding
of the court in a case and that the Service
will follow it in disposing of cases with
the same controlling facts. However, “ac-
quiescence” indicates neither approval
nor disapproval of the reasons assigned
by the court for its conclusions; whereas,
“acquiescence in result only” indicates
disagreement or concern with some or all
of those reasons. “Nonacquiescence” sig-
nifies that, although no further review
was sought, the Service does not agree
with the holding of the court and, gener-
ally, will not follow the decision in dis-
posing of cases involving other taxpay-
ers. In reference to an opinion of a circuit
court of appeals, a “nonacquiescence” in-
dicates that the Service will not follow
the holding on a nationwide basis. How-
ever, the Service will recognize the
precedential impact of the opinion on
cases arising within the venue of the de-
ciding circuit.
The Actions on Decisions published in
the weekly Internal Revenue Bulletin are
consolidated semiannually and appear in
the first Bulletin for July and the Cumu-
lative Bulletin for the first half of the
year. A semiannual consolidation also ap-
pears in the first Bulletin for the follow-
ing January and in the Cumulative Bul-
letin for the last half of the year.
The Commissioner ACQUIESCES in
the following decision:
Therese Hahn v. Commissioner,
1
110 T.C. 140 (1998)
T.C. Dkt. No. 17210–96
Actions Relating to Decisions of the Tax Court
1
Acquiescence relating to whether I.R.C. section 2040(b)(1) applies to joint interest created before January 1, 1977, where the deceased joint tenant died after
December 31, 1981.

October 15, 20013202001–42 I.R.B.
Section 62.—Adjusted Gross
Income Defined
26 CFR 1.62–2: Reimbursements and other expense
allowance arrangements.
Rules are set forth under which reimbursement or
other expense allowance arrangement for the cost of
lodging, meal, and incidental expenses or meal and
incidental expenses incurred by an employee while
traveling away from home will satisfy the require-
ment of § 62(c) of the Code as to substantiation of
the amount of the expense. See Rev. Proc. 2001–47,
page 332.
Section 162.—Trade or Business
Expenses
26 CFR 1.162–17: Reporting and substantiation of
certain business expenses of employees.
Rules are set forth for substantiating the amount
of a deduction or an expense for lodging, meal, and
incidental expenses or meal and incidental expenses
incurred while traveling away from home. See Rev.
Proc. 2001–47, page 332.
Section 267.—Losses,
Expenses, and Interest With
Respect to Transactions
Between Related Taxpayers
26 CFR 1.267(a)–1: Deductions disallowed.
When a payor provides a per diemallowance to
an employee who is a related party, the rules set
forth for the deemed substantiation to the payor of
the amount of the employee’s ordinary and neces-
sary business expenses for lodging, meal, and inci-
dental expenses incurred while traveling away from
home do not apply. See Rev. Proc. 2001–47, page
332.
Section 274.—Disallowance of
Certain Entertainment, etc.,
Expenses
26 CFR 1.274–5: Substantiation requirements.
Rules are set forth for an optional method for
substantiating the amount of ordinary and necessary
business expenses of an employee for lodging, meal,
and incidental expenses or meal and incidental ex-
penses incurred while traveling away from home
when a payor provides a per diemallowance under a
reimbursement or other expense allowance arrange-
ment to pay for such expenses. Rules are also set
forth for an optional method for employees and self-
employed individuals to use in computing the de-
ductible costs of business meal and incidental ex-
penses paid or incurred while traveling away from
home. See Rev. Proc. 2001–47, page 332.
Section 301.—Distributions of
Property
26 CFR 1.301-1: Rules applicable with respect to
distributions of money and other property.
T.D. 8964
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
Liabilities Assumed in Certain
Corporate Transactions
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains
final regulations relating to the assump-
tion of liabilities in certain corporate
transactions under section 301 of the In-
ternal Revenue Code. These final regula-
tions affect corporations and their share-
holders. Changes to the applicable law
were made by the Miscellaneous Trade
and Technical Corrections Act of 1999.
DATES: Effective Date: These regula-
tions are effective September 27, 2001.
Applicability Date: For dates of applic-
ability, see the Effective Date portion of
the preamble under SUPPLEMENTARY
INFORMATION.
FOR FURTHER INFORMATION CON-
TACT: Douglas Bates (202) 622-7550
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
Changes to the applicable law were
made by the Miscellaneous Trade and
Technical Corrections Act of 1999, Public
Law 106-36 (113 Stat. 127). On January
4, 2001, temporary regulations (T.D.
8924, 2001–6 I.R.B. 489) were published
in the Federal Register(66 FR 723)
under section 301 of the Internal Revenue
Code, relating to liabilities assumed in
connection with a distribution of property
made by a corporation with respect to its
stock. A notice of proposed rulemaking
cross-referencing the temporary regula-
tions (REG–106791–00, 2001–6 I.R.B.
521) was published in the Federal Regis-
terfor the same day (66 FR 748). No
public hearing was requested or held.
No written comments responding to the
notice were received. This document
adopts, without substantive change, final
regulations with respect to the notice of
proposed rulemaking.
Effective Date
The regulations apply generally to dis-
tributions occurring after January 4, 2001.
The regulations also apply to distributions
occurring on or prior to January 4, 2001,
if the distribution is made as part of a
transaction described in, or substantially
similar to, the transaction in Notice 99–59
(1999–2 C.B. 761), including transactions
designed to reduce gain. Under section
7805(b)(3), the Secretary may provide
that any regulation may take effect or
apply retroactively to prevent abuse.
These regulations are being applied
retroactively to prevent the abuse de-
scribed in Notice 99–59. No inference
should be drawn regarding the tax treat-
ment of distributions not covered by these
regulations.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assess-
ment is not required.
It is hereby certified that these final regu-
lations do not have a significant economic
impact on a substantial number of small en-
tities. These final regulations under section
301 address distributions by corporations in
which liabilities are assumed by the share-
holders or in which the distributed property
is subject to liabilities. These final regula-
tions provide that the amount of a distribu-
tion under section 301 will be reduced by
the amount of any liability that is treated as
assumed by the distributee within the
meaning of section 357(d).
These regulations apply to persons re-
ceiving distributions of property in
Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

2001–42 I.R.B.321October 15, 2001
which the property is subject to a liabil-
ity, or in which liabilities are assumed by
the distributee. These regulations, how-
ever, will affect only those persons de-
scribed in the preceding sentence that
would have, but for the regulations, con-
sidered liabilities to have been assumed
in circumstances other that those de-
scribed in section 357(d). Therefore,
most businesses will not be affected by
the final regulations in any given year.
Therefore, a Regulatory Flexibility
Analysis under the Regulatory Flexibil-
ity Act (5 U.S.C. chapter 6) is not re-
quired. Pursuant to section 7805(f) of
the Code, the notice of proposed rule-
making accompanying these regulations
was submitted to the Chief Counsel for
Advocacy of the Small Business Admin-
istration for comment on its impact on
small businesses.
Drafting Information
The principal author of these regula-
tions is Michael N. Kaibni of the Office
of the Associate Chief Counsel (Corpo-
rate). However, other personnel from the
IRS and Treasury Department partici-
pated in their development.
* * * * *
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 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Section 1.301–1 also issued under 26
U.S.C. 357(d)(3). * * *
Par. 2. Section 1.301–1 is amended by
revising paragraph (g) to read as follows:
§1.301–1 Rules applicable with respect
to distributions of money and other
property.
* * * * *
(g) Reduction for liabilities- - (1) Gen-
eral rule. For the purpose of section 301,
no reduction shall be made for the amount
of any liability, unless the liability is as-
sumed by the shareholder within the
meaning of section 357(d).
(2) No reduction below zero. Any re-
duction pursuant to paragraph (g)(1) of
this section shall not cause the amount of
the distribution to be reduced below zero.
(3) Effective dates— (i) In general.
This paragraph (g) applies to distributions
occurring after January 4, 2001.
(ii) Retroactive application. This para-
graph (g) also applies to distributions
made on or before January 4, 2001, if the
distribution is made as part of a transac-
tion described in, or substantially similar
to, the transaction in Notice 99–59
(1999–2 C.B. 761), including transactions
designed to reduce gain (see
§ 601.601(d)(2) of this chapter). For rules
for distributions on or before January 4,
2001 (other than distributions on or before
that date to which this paragraph (g)
applies), see rules in effect on January 4,
2001 (see §1.301–1(g) as contained in 26
CFR Part 1 revised April 1, 2001).
* * * * *
§ 1.301–1T [Removed]
Par. 3. Section 1.301–1T is removed.
Robert E. Wenzel,
Deputy Commissioner
of Internal Revenue.
Approved September 17, 2001.
Mark Weinberger,
Assistant Secretary
of the Treasury for Tax Policy.
(Filed by the Office of the Federal Register on Sep-
tember 26, 2001, 8:45 a.m., and published in the
issue of the Federal Register for September 27,
2001, 66 F.R. 49278)
Section 368(a)(1)(A).—Definitions
Relating to Corporate
Reorganizations
26 CFR 1.368–1: Purpose and scope of exception
of reorganization exchanges.
Step transaction.Under the facts
presented, if, pursuant to an integrated
plan, a newly formed wholly owned sub-
sidiary of an acquiring corporation
merges into a target corporation, fol-
lowed by the merger of the target corpo-
ration into the acquiring corporation, the
transaction is treated as a single statuto-
ry merger of the target corporation into
the acquiring corporation that qualifies
as a reorganization under section
368(a)(1)(A).
Rev. Rul. 2001–46
ISSUE
Under the facts described below, what
is the proper tax treatment if, pursuant to
an integrated plan, a newly formed whol-
ly owned subsidiary of an acquiring cor-
poration merges into a target corporation,
followed by the merger of the target cor-
poration into the acquiring corporation?
FACTS
Situation (1).Corporation X owns all
the stock of Corporation Y, a newly
formed wholly owned subsidiary. Pur-
suant to an integrated plan, X acquires all
of the stock of Corporation T, an unre-
lated corporation, in a statutory merger of
Y into T (the “Acquisition Merger”), with
T surviving. In the Acquisition Merger,
the T shareholders exchange their T stock
for consideration, 70 percent of which is
X voting stock and 30 percent of which is
cash. Following the Acquisition Merger
and as part of the plan, T merges into X in
a statutory merger (the “Upstream
Merger”). Assume that, absent some pro-
hibition against the application of the step
transaction doctrine, the step transaction
doctrine would apply to treat the Acquisi-
tion Merger and the Upstream Merger as
a single integrated acquisition by X of all
the assets of T. Also assume that the sin-
gle integrated transaction would satisfy
the nonstatutory requirements of a reorga-
nization under § 368(a) of the Internal
Revenue Code.
Situation (2).The facts are the same as
in Situation (1) except that in the
Acquisition Merger the T shareholders
receive solely X voting stock in exchange
for their T stock, so that the Acquisition
Merger, if viewed independently of the
Upstream Merger, would qualify as a
reorganization under § 368(a)(1)(A) by
reason of § 368(a)(2)(E).
LAW
Section 338(a) provides that if a corpo-
ration makes a qualified stock purchase
and makes an election under that section,
then the target corporation (i) shall be
treated as having sold all of its assets at
the close of the acquisition date at fair
market value and (ii) shall be treated as a
new corporation which purchased all of

October 15, 20013222001–42 I.R.B.
its assets as of the beginning of the day
after the acquisition date. Section
338(d)(3) defines a qualified stock pur-
chase as any transaction or series of trans-
actions in which stock (meeting the
requirements of § 1504(a)(2)) of one cor-
poration is acquired by another corpora-
tion by purchase during a 12-month
acquisition period. Section 338(h)(3)
defines a purchase generally as any acqui-
sition of stock, but excludes acquisitions
of stock in exchanges to which § 351,
§ 354, § 355, or § 356 applies.
Rev. Rul. 90–95 (1990–2 C.B. 67)
(Situation 2), holds that the merger of a
newly formed wholly owned domestic
subsidiary into a target corporation with
the target corporation shareholders receiv-
ing solely cash in exchange for their
stock, immediately followed by the merg-
er of the target corporation into the
domestic parent of the merged subsidiary,
will be treated as a qualified stock pur-
chase of the target corporation followed
by a § 332 liquidation of the target corpo-
ration. As a result, the parent’s basis in
the target corporation’s assets will be the
same as the basis of the assets in the target
corporation’s hands. The ruling explains
that even though “the step-transaction
doctrine is properly applied to disregard
the existence of the [merged subsidiary],”
so that the first step is treated as a stock
purchase, the acquisition of the target cor-
poration’s stock is accorded independent
significance from the subsequent liquida-
tion of the target corporation and, there-
fore, is treated as a qualified stock pur-
chase regardless of whether a § 338
election is made.
Section 1.338–3(d) of the Income Tax
Regulations incorporates the approach of
Rev. Rul. 90–95 into the regulations by
requiring the purchasing corporation (or a
member of its affiliated group) to treat
certain asset transfers following a quali-
fied stock purchase (where no § 338 elec-
tion is made) independently of the quali-
fied stock purchase. In the example in
§ 1.338–3(d)(5), the purchase for cash of
85 percent of the stock of a target corpo-
ration, followed by the merger of the tar-
get corporation into a wholly owned sub-
sidiary of the purchasing corporation, is
treated (other than by certain minority
shareholders) as a qualified stock pur-
chase of the stock of the target corporation
followed by a § 368 reorganization of the
target corporation into the subsidiary. As
a result, the subsidiary’s basis in the target
corporation’s assets is the same as the
basis of the assets in the target corpora-
tion’s hands.
Section 368(a)(1)(A) defines the term
“reorganization” as a statutory merger or
consolidation. Section 368(a)(2)(E) pro-
vides that a transaction otherwise qualify-
ing under § 368(a)(1)(A) shall not be dis-
qualified by reason of the fact that stock
of a corporation (controlling corporation),
which before the merger was in control of
the merged corporation, is used in the
transaction if (i) after the transaction, the
corporation surviving the merger holds
substantially all of its properties and the
properties of the merged corporation, and
(ii) in the transaction, former shareholders
of the surviving corporation exchange, for
an amount of voting stock of the control-
ling corporation, an amount of stock in the
surviving corporation which constitutes
control of such corporation.
In Rev. Rul. 67–274 (1967–2 C.B. 141),
Corporation Y acquires all of the stock of
Corporation X in exchange for some of the
voting stock of Y and, thereafter, X com-
pletely liquidates into Y. The ruling holds
that because the two steps are parts of a plan
of reorganization, they cannot be consid-
ered independently of each other. Thus, the
steps do not qualify as a reorganization
under § 368(a)(1)(B) followed by a liquida-
tion under § 332, but instead qualify as an
acquisition of X’s assets in a reorganization
under § 368(a)(1)(C).
ANALYSIS
Situation (1)
Because of the amount of cash consid-
eration paid to the T shareholders, the
Acquisition Merger could not qualify as a
reorganization under § 368(a)(1)(A) and
§ 368(a)(2)(E). If the Acquisition Merger
and the Upstream Merger in Situation (1)
were treated as separate from each other,
as were the steps in Situation (2) of Rev.
Rul. 90–95, the Acquisition Merger would
be treated as a stock acquisition that is a
qualified stock purchase, because the
stock is not acquired in a § 354 or § 356
exchange. The Upstream Merger would
qualify as a liquidation under § 332.
However, if the approach reflected in
Rev. Rul. 67–274 were applied to
Situation (1), the transaction would be
treated as an integrated acquisition of T’s
assets by X in a single statutory merger
(without a preliminary stock acquisition).
Accordingly, unless the policies underly-
ing § 338 dictate otherwise, the integrated
asset acquisition in Situation (1) is prop-
erly treated as a statutory merger of T into
X that qualifies as a reorganization under
§ 368(a)(1)(A). See King Enterprises,
Inc. v. United States, 418 F.2d 511 (Ct. Cl.
1969) (in a case that predated § 338, the
court applied the step transaction doctrine
to treat the acquisition of the stock of a
target corporation followed by the merger
of the target corporation into the acquiring
corporation as a reorganization under
§ 368(a)(1)(A)); J.E. Seagram Corp. v.
Commissioner, 104 T.C. 75 (1995)
(same). Therefore, it is necessary to
determine whether the approach reflected
in Rev. Rul. 90–95 applies where the step
transaction doctrine would otherwise
apply to treat the transaction as an asset
acquisition that qualifies as a reorganiza-
tion under § 368(a).
Rev. Rul. 90–95 and § 1.338–3(d) re-
ject the approach reflected in Rev. Rul.
67–274 where the application of that ap-
proach would treat the purchase of a tar-
get corporation’s stock without a § 338
election followed by the liquidation or
merger of the target corporation as the
purchase of the target corporation’s assets
resulting in a cost basis in the assets under
§ 1012. The rejection of step integration
in Rev. Rul. 90–95 and § 1.338–3(d) is
based on Congressional intent that § 338
“replace any nonstatutory treatment of a
stock purchase as an asset purchase under
the Kimbell-Diamonddoctrine.” H.R.
Rep. No. 760, 97
th
Cong., 2d Sess. 536
(1982), 1982–2 C.B. 600, 632. (In Kim-
bell-Diamond Milling Co. v. Commis-
sioner, 14 T.C. 74, aff ’d per curiam, 187
F.2d 718 (1951), cert. denied, 342 U.S.
827 (1951), the court held that the pur-
chase of the stock of a target corporation
for the purpose of obtaining its assets
through a prompt liquidation should be
treated by the purchaser as a purchase of
the target corporation’s assets with the
purchaser receiving a cost basis in the as-
sets.) Rev. Rul. 90–95 and § 1.338–3(d)
treat the acquisition of the stock of the tar-
get corporation as a qualified stock pur-
chase followed by a separate carryover
basis transaction in order to preclude any
nonstatutory treatment of the steps as an
integrated asset purchase.

2001–42 I.R.B.323October 15, 2001
The policy underlying § 338 is not vio-
lated by treating Situation (1) as a single
statutory merger of T into X because such
treatment results in a transaction that qual-
ifies as a reorganization under § 368(a)
(1)(A) in which X acquires the assets of T
with a carryover basis under § 362, and
does not result in a cost basis for those
assets under § 1012. Thus, in Situation
(1), the step transaction doctrine applies to
treat the Acquisition Merger and the
Upstream Merger not as a stock acquisi-
tion that is a qualified stock purchase fol-
lowed by a § 332 liquidation, but instead
as an acquisition of T’s assets through
a single statutory merger of T into X
that qualifies as a reorganization under
§ 368(a)(1)(A). Accordingly, a § 338 elec-
tion may not be made in such a situation.
Situation (2)
Situation (2) differs from Situation (1)
only in that the Acquisition Merger, if
viewed independently of the Upstream
Merger, would qualify as a reorganization
under § 368(a)(1)(A) by reason of § 368(a)
(2)(E). This difference does not change the
result from that in Situation (1). The trans-
action is treated as a single statutory merg-
er of T into X that qualifies as a reorganiza-
tion under § 368(a)(1)(A) without regard to
§ 368(a)(2)(E).
HOLDING
Under the facts presented, if, pursuant to
an integrated plan, a newly formed wholly
owned subsidiary of an acquiring corpora-
tion merges into a target corporation, fol-
lowed by the merger of the target corpora-
tion into the acquiring corporation, the
transaction is treated as a single statutory
merger of the target corporation into the
acquiring corporation that qualifies as a
reorganization under § 368(a)(1)(A).
APPLICATION
Pursuant to § 7805(b)(8), the Service
will not apply the principles of this rev-
enue ruling to challenge a taxpayer’s posi-
tion with respect to the treatment of a
multi-step transaction, one step of which,
viewed independently, is a qualified stock
purchase if:
(1) a timely (including extensions) and
valid (without regard to whether there was
a qualified stock purchase under the prin-
ciples of this revenue ruling) election
under § 338(h)(10) or § 338(g) (Election)
is or was filed with respect to the acquisi-
tion of the stock of the target corporation;
and
(2) either
(a) the acquisition date for the target
corporation is on or before September 24,
2001; or
(b) the acquisition of stock of the tar-
get corporation meeting the requirements
of § 1504(a)(2) by the purchasing corpo-
ration is pursuant to a written agreement
that (subject to customary conditions) is
binding on September 24, 2001, and at all
times thereafter until the acquisition date;
and
(3) such taxpayer does not take a posi-
tion for U.S. tax purposes that is inconsis-
tent with the treatment of the acquisition
as a qualified stock purchase with respect
to which the Election was made.
Further, the Service and the Treasury
are considering whether to issue regula-
tions that would reflect the general princi-
ples of this revenue ruling, but would
allow taxpayers to make a valid election
under § 338(h)(10) with respect to a step
of a multi-step transaction that, viewed
independently, is a qualified stock pur-
chase if such step is pursuant to a written
agreement that requires, or permits the
purchasing corporation to cause, a
§ 338(h)(10) election in respect of such
step to be made. The Service and the
Treasury request comments regarding the
adoption of such an approach.
EFFECT ON OTHER DOCUMENTS
Rev. Rul. 67–274 is amplified and Rev.
Rul. 90–95 is distinguished.
DRAFTING INFORMATION
The principal authors of this revenue
ruling are Reginald Mombrun and Joseph
M. Calianno of the Office of the Associate
Chief Counsel (Corporate). For further
information regarding this revenue ruling,
contact Mr. Mombrun at (202) 622-7750
(not a toll-free call) or Mr. Calianno at
(202) 622-7930 (not a toll-free call).
Section 472.—Last-in, First-out
Inventories
26 CFR 1.472–1: Last-in, first-out inventories.
LIFO; price indexes; department
stores.The August 2001 Bureau of Labor
Statistics price indexes are accepted for
use by department stores employing the
retail inventory and last-in, first-out in-
ventory methods for valuing inventories
for tax years ended on, or with reference
to, August 31, 2001.
Rev. Rul. 2001–45
The following Department Store Inven-
tory Price Indexes for August 2001 were is-
sued by the Bureau of Labor Statistics. The
indexes are accepted by the Internal Rev-
enue Service, under § 1.472–1(k) of the In-
come Tax Regulations and Rev. Proc.
86–46 (1986–2 C.B. 739), for appropriate
application to inventories of department
stores employing the retail inventory and
last-in, first-out inventory methods for tax
years ended on, or with reference to, Au-
gust 31, 2001.
The Department Store Inventory Price
Indexes are prepared on a national basis
and include (a) 23 major groups of
departments, (b) three special combina-
tions 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, except for the following:
candy, food, liquor, tobacco, and contract
departments.

October 15, 20013242001–42 I.R.B.
BUREAU OF LABOR STATISTICS, DEPARTMENT STORE
INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS
(January 1941 = 100, unless otherwise noted)
Percent Change
GroupsAug.Aug.from Aug. 2000
20002001to Aug. 2001
1
1. Piece Goods - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 509.2485.7–4.6
2. Domestics and Draperies - - - - - - - - - - - - - - - - - - - - - - - - 617.9591.8–4.2
3. Women’s and Children’s Shoes - - - - - - - - - - - - - - - - - - - - 618.3655.46.0
4. Men’s Shoe - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 913.2856.4–6.2
5. Infants’ Wear - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 619.8609.5–1.7
6. Women’s Underwear - - - - - - - - - - - - - - - - - - - - - - - - - - 570.2567.5–0.5
7. Women’s Hosiery- - - - - - - - - - - - - - - - - - - - - - - - - - - - - 334.7354.86.0
8. Women’s and Girls’ Accessories - - - - - - - - - - - - - - - - - - - 532.0547.22.9
9. Women’s Outerwear and Girls’ Wear - - - - - - - - - - - - - - - - 370.5361.6–2.4
10. Men’s Clothing - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 605.4579.2–4.3
11. Men’s Furnishings - - - - - - - - - - - - - - - - - - - - - - - - - - - - 612.9583.9–4.7
12. Boys’ Clothing and Furnishings - - - - - - - - - - - - - - - - - - - 473.0469.2 –0.8
13. Jewelry - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 936.5936.30.0
14. Notions- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 785.9793.00.9
15. Toilet Articles and Drugs - - - - - - - - - - - - - - - - - - - - - - - - 971.0969.9–0.1
16. Furniture and Bedding - - - - - - - - - - - - - - - - - - - - - - - - - 687.9633.9–7.8
17. Floor Coverings- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 603.2623.83.4
18. Housewares - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 778.5767.6–1.4
19. Major Appliances- - - - - - - - - - - - - - - - - - - - - - - - - - - - - 230.9226.9–1.7
20. Radio and Television - - - - - - - - - - - - - - - - - - - - - - - - - - 58.853.4–9.2
21. Recreation and Education
2
- - - - - - - - - - - - - - - - - - - - - - - 92.289.3–3.1
22. Home Improvements
2
- - - - - - - - - - - - - - - - - - - - - - - - - - 129.2125.8–2.6
23. Auto Accessories
2
- - - - - - - - - - - - - - - - - - - - - - - - - - - - 106.2109.43.0
Groups 1 – 15: Soft Goods - - - - - - - - - - - - - - - - - - - - - - - - 585.3575.5–1.7
Groups 16 – 20: Durable Goods- - - - - - - - - - - - - - - - - - - - - - 437.2421.8–3.5
Groups 21 – 23: Misc. Goods
2
- - - - - - - - - - - - - - - - - - - - - - - 99.898.2–1.6
Store Total
3
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 529.7518.8 –2.1
1
Absence of a minus sign before the percentage change in this column signifies a 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.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Michael Burkom of the Office of
Associate Chief Counsel (Income Tax and
Accounting). For further information
regarding this revenue ruling, contact Mr.
Burkom at (202) 622-4930 (not a toll-free
call).
Section 872. — Gross Income
(Also sections 883, 894.)
26 CFR 1.872–2: Exclusions from gross income of
nonresident alien individuals.
(Also 26 CFR 1.883–1.)
This revenue ruling updates the list of
countries that grant a reciprocal exemp-
tion for income from the international op-
eration of ships or aircraft to U.S. persons
for purposes of sections 872(b) and 883 of
the Code.
Rev. Rul. 2001–48
PURPOSE
The purpose of this revenue ruling is to
assist foreign persons who derive income
from the international operation of ships
or aircraft in determining whether such
income is exempt from U.S. taxation
under section 872(b) or 883(a) of the
Internal Revenue Code of 1986, by pro-
viding a current list of countries that grant
United States persons equivalent exemp-
tions from tax for various categories of
income from the international operation
of ships and aircraft. This revenue ruling
modifies and supersedes Rev. Rul. 89–42
(1989–1 C.B. 234), as supplemented by
Rev. Rul. 97–31 (1997–2 C.B. 77).
Section 872(b) of the Code provides
that gross income shall not include
income from the international operation
of a ship or ships or aircraft, and such
income shall be exempt from U.S. Federal
income taxation, if the income is derived
by an individual resident of a foreign
country, and such foreign country grants
an equivalent exemption to individual res-
idents of the United States. Section
883(a) provides a similar exemption for
such income derived by corporations
organized in a foreign country that grants

2001–42 I.R.B.325October 15, 2001
an equivalent exemption to corporations
organized in the United States. For pur-
poses of sections 872(b) and 883(a), a for-
eign country may grant an equivalent
exemption from tax through an exchange
of diplomatic notes or other agreement, by
not imposing a tax on income from the
international operation of ships or aircraft,
or by a decree or specific statutory
exemption.
Part A of Table I provides a list of the
countries that grant exemptions through
diplomatic notes exchanged with the
United States.
Part B of Table I provides a list of the
countries for which the Service has deter-
mined, upon examination of their domes-
tic law, that an equivalent exemption is
granted by statute or decree, or by not
imposing a tax on income from the inter-
national operation of ships or aircraft.
This determination is made on a country-
by-country basis and relies upon informa-
tion submitted to the Internal Revenue
Service by the foreign country regarding
the foreign law in effect at the time of the
submission. The date of the Service’s
review is reflected in the first column of
Part B of Table I. Since its initial review,
the Service has not attempted to deter-
mine whether any of the foreign laws of
the countries listed in Part B of Table I
have been amended or repealed.
Therefore, taxpayers should independent-
ly verify the accuracy of the information
in Part B of Table I at such time that a
determination is relevant.
Part B of Table I does not represent an
exclusive list of countries the domestic
law of which provides an equivalent
exemption. Other countries that have not
submitted the information necessary for
the Service to make a determination also
may grant an equivalent exemption. In
those cases, an individual resident of, or a
corporation organized in, such a foreign
country may be treated as a resident of, or
a corporation organized in, a foreign
country that grants an equivalent exemp-
tion, even though the foreign country is
not included in Part B of Table I.
Consistent with past practice, the Service
will entertain a request from a foreign
government to determine whether the
domestic law of the country provides an
equivalent exemption. Accordingly, tax-
payers may seek to have the relevant for-
eign government request a determination
that the particular country qualifies as an
equivalent-exemption jurisdiction.
Table II provides a list of countries that
grant an exemption under the shipping
and aircraft article or capital gains article
of an income tax convention to which the
United States is a party. Table II is pro-
vided to assist a foreign corporation orga-
nized in one of the countries listed in
Table I in demonstrating that it also meets
the ownership requirements of section
883(c). In general, a foreign corporation
can demonstrate that it meets the owner-
ship requirements of section 883(c) if the
corporation can show that more than 50
percent of the value of the stock of the
corporation is owned by individuals who
are residents of countries that grant an
equivalent exemption to corporations
organized in the United States. For the
sole purpose of determining if an individ-
ual shareholder’s country of residence
grants an equivalent exemption for pur-
poses of section 883(c), a foreign country
will also be considered to grant an equiv-
alent exemption if it grants such an
exemption through an income tax conven-
tion with the United States.
Accordingly, Table II is relevant only in
determining whether a shareholder of a
foreign corporation seeking an exemption
from tax under section 883 is a sharehold-
er that qualifies under section 883(c)(1)
because the shareholder’s country of resi-
dence grants an equivalent exemption
under an income tax convention with the
United States. Table II is not relevant in
determining whether a nonresident alien
individual or a foreign corporation itself is
eligible to claim an exemption under sec-
tion 872(b) or 883(a), respectively.
Table II includes a summary of the
requirements for the exemption, such as
whether the exemption is based solely on
residence, or, as in the case of certain
older income tax conventions, the exemp-
tion has an additional requirement of doc-
umentation or registration. Table II does
not set forth other benefits relating to a
shipping or an air transport business that
may be provided under articles covering
business profits, rentals and royalties, and
other income because such benefits are
not relevant for purposes of section
883(c).
These Tables are intended only as a
summary. The full text of any relevant
diplomatic note, foreign law, or income
tax convention should be consulted. It
may be necessary to consult the technical
explanation of an income tax convention,
including any protocol thereto, any agree-
ment, or any diplomatic note accompany-
ing a convention, to determine the items
of income exempted. Income tax conven-
tions and diplomatic notes are published
in the Cumulative Bulletin and Internal
Revenue Bulletins. These Tables will
continue to be updated periodically.
CHANGES TO REV. RUL. 97–31
The changes to the table published in
Rev. Rul. 89–42, as supplemented by Rev.
Rul. 97–31, are summarized below.
The table in the prior rulings has been
reorganized to clarify the limited rele-
vance of Part I of that table, relating to
treaties, as discussed above. Accordingly,
in this revenue ruling Part II of the prior
table (diplomatic notes) has become Part
A of Table I; Part III (domestic law) of the
prior table has become Part B of Table I;
and Part I of the prior table (treaties) has
become Table II.
In Part A of Table I, Bahrain, Ethiopia,
Saudi Arabia, and the United Arab
Emirates have been added to the list of
countries that have exchanged diplomatic
notes with the United States. Although a
diplomatic note was signed with Bolivia
in November 1987, that note required rat-
ification by the Bolivian Government to
enter into force. The diplomatic note was
ratified on March 24, 1999, and officially
became effective upon publication in the
official Gazette on March 31, 1999, for
income earned after that date. Therefore,
Bolivia also has been added to the list.
In Part B of Table I, Aruba, Peru (with
respect to aircraft), and the Republic of
Surinam have been added to the list of
countries whose domestic law has been
determined to provide an equivalent
exemption.
In Table II, the following countries
have been added to the list of countries
that provide an exemption under an
income tax convention: Estonia, Latvia,
Lithuania, Slovenia, South Africa,
Thailand, Turkey, the Ukraine, and
Venezuela. The following countries have
entered into new income tax conventions
with the United States that supersede prior
income tax conventions reported in Rev.
Rul. 97–31: Austria, Denmark, Ireland,
Luxembourg, and Switzerland.

October 15, 20013262001–42 I.R.B.
TO CLAIM AN EXEMPTION
Taxpayers claiming an exemption from
U.S. Federal income tax under section
872(b) of the Code must file a return on
Form 1040NR (U.S. Income Tax Return
of a Nonresident Alien). Taxpayers
claiming an exemption from U.S. Federal
income tax under section 883 must file a
return on Form 1120F (U.S. Income Tax
Return of a Foreign Corporation). Both
must comply with the relevant provisions
of section 8 of Rev. Proc. 91–12 (1991–1
C.B. 473).
EFFECT ON OTHER REVENUE
RULINGS
Rev. Rul. 97–31 and Rev. Rul. 89–42
are modified and superseded.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Patricia A. Bray of the Office of
Associate Chief Counsel (International).
For information regarding this revenue
ruling, contact Ms. Bray at (202) 622-
3880 (not a toll-free call).
TABLE I
Countries Currently Granting Equivalent Exemptions For
Income From The International Operation of
Ships and Aircraft
PART A - EXCHANGE OF NOTES
1
TYPES OF SHIPPING AND AIRCRAFT INCOME EXEMPTED
2
Opera-FullBare-Con-Capital
tingRentalBoattainerGains
3
CountriesCumulative BulletinIncome(TimeRentalRental
3
andOr Internal Revenueor voy-
TerritoriesBulletin Citationage char-
ter)
Argentina1988-1 C.B. 456XXXXX
Bahamas1988-1 C.B. 458XXXX-
Bahrain2000-46 I.R.B. 475XXXXX
Belgium1988-1 C.B. 459XX-X-
Bolivia
4
1988-1 C.B. 460XXXX-
Chile
5
1991-1 C.B. 304XXX
3
X-
Colombia1988-1 C.B. 461XXXX-
Cyprus1989-2 C.B. 332XXXX-
Denmark1988-1 C.B. 462XXXX-
El Salvador
5
1988-1 C.B. 463XXXXX
Ethiopia1999-1 C.B. 1134XXXXX
Fiji1996-2 C.B. 202XXXXX
Finland1989-2 C.B. 334XXXX-
Greece1988-2 C.B. 366 XXXX-
Hong Kong
6/7
1995-1 C.B. 228XXXXX
India1990-2 C.B. 316XXX
3
XX
Isle of Man
6
1990-2 C.B. 317XXXXX
Japan1990-2 C.B. 318XXXX-
Jordan1996-2 C.B. 202XXXX-
Liberia1988-1 C.B. 463XXXXX
Luxembourg1996-2 C.B. 203XXXX-
Malaysia1990-2 C.B. 319XXX
3
XX

2001–42 I.R.B.327October 15, 2001
TABLE I—Continued
Countries Currently Granting Equivalent Exemptions For
Income From The International Operation of
Ships and Aircraft
PART A - EXCHANGE OF NOTES
1
TYPES OF SHIPPING AND AIRCRAFT INCOME EXEMPTED
2
Opera-FullBare-Con-Capital
tingRentalBoattainerGains
3
CountriesCumulative BulletinIncome(TimeRentalRental
3
andOr Internal Revenueor voy-
TerritoriesBulletin Citationage char-
ter)
Malta1997-1 C.B. 314XXXXX
Marshall Islands1990-2 C.B. 321XXXXX
Norway1991-1 C.B. 304XXXXX
Pakistan
6
1991-1 C.B. 305X
8
-- --
Panama1988-2 C.B. 366XXXX -
Peru
6
1989-2 C.B. 335XXX
3
X-
Saudi Arabia
9
2000-22 I.R.B. 1126XXXXX
St. Vincent & Grenadines1989-2 C.B. 336XXXX-
Singapore 1990-2 C.B. 323 XXXX-
Sweden1988-1 C.B. 466XXX
3
X-
Taiwan1989-2 C.B. 337XXXX-
United Arab Emirates1998-2 C.B. 528XXXXX
Venezuela1988-1 C.B. 467XXX
3
XX
PART B - DOMESTIC LAW
TYPES OF SHIPPING AND AIRCRAFT INCOME EXEMPTED
2
Opera-FullBare-Con-Capital
DatetingRentalBoattainerGains
3
CountriesForeignIncome(TimeRentalRental
3
andLawor voy-
TerritoriesReviewedage char-
ter)
Antigua & Barbuda
6
NOV 1991XXXXX
ArubaJUNE 1999XXXX-
BarbadosOCT 1989XXXXX
BermudaNOV 1988XXXXX
Brazil
10
DEC 1988XXX
3
X -
BulgariaFEB 1989XXXXX
Cayman Islands
11
JAN 1987XXXXX
Chile
6
OCT 1988XXXXX
Ecuador
6/12
DEC 1989XXX
3
XX
IsraelFEB 1991XXXXX

October 15, 20013282001–42 I.R.B.
TABLE I—Continued
Countries Currently Granting Equivalent Exemptions For
Income From The International Operation of
Ships and Aircraft
PART B - DOMESTIC LAW—Continued
TYPES OF SHIPPING AND AIRCRAFT INCOME EXEMPTED
2
Opera-FullBare-Con-Capital
DatetingRentalBoattainerGains
3
CountriesForeignIncome(TimeRentalRental
3
andLawor voy-
TerritoriesReviewedage char-
ter)
NetherlandsOCT 1988XXX
3
X-
Netherlands AntillesMAY 1988XXXXX
Peru
5
SEPT 1995XXXXX
Portugal
10
ShipsJUNE 1989XXX--
AircraftFEB 1989XXX--
Qatar
5
AUG 1994X
8
-- --
Spain
13
DEC 1988XX-X-
SurinamNOV 1999XXXXX
Turkey
14
JAN 1987X--X-
Turks & Caicos
11
FEB 1990XXXXX
U.S. Virgin IslandsOCT 1988XXXXX
VanuatuMAY 1987XXXXX
TABLE II
Countries Currently Granting by Income Tax Convention
Equivalent Exemptions For Purposes of Qualifying a
Shareholder Under Section 883(c)(1)
15
BASIS FOR EXEMPTIONTYPES OF SHIPPING AND AIRCRAFT INCOME EXEMPTED
2
Resi-Resi-Resi-Opera-FullBare-Con-Capital
dencedencedencetingRentalBoattainerGains
CountriesBased& Flag & FlagIncome(TimeRentalRental
andNoReci-Uni-or voy-
TerritoriesFlagprocallateralage char-
ter)
AustraliaXXX
16
X
17
X
17
X
3/18
Austria
19
XXX
20
X
20
XX
BarbadosXXX
20
X
20
XX
BelgiumX
21
XX
3
X
3
X
3
X
3
CanadaXXXXXX
China
22
(Peoples
Republic)XXX
20
X
20
XX
CyprusXXX
20
X
20
XX

2001–42 I.R.B.329October 15, 2001
TABLE II—Continued
Countries Currently Granting by Income Tax Convention
Equivalent Exemptions For Purposes of Qualifying a
Shareholder Under Section 883(c)(1)
15
BASIS FOR EXEMPTIONTYPES OF SHIPPING AND AIRCRAFT INCOME EXEMPTED
2
Resi-Resi-Resi-Opera-FullBare-Con-Capital
dencedencedencetingRentalBoattainerGains
CountriesBased& Flag & FlagIncome(TimeRentalRental
andNoReci-Uni-or voy-
TerritoriesFlagprocallateralage char-
ter)
Czech
RepublicXXXX
3
XX
Denmark
19
XXXX
20
XX
EgyptXXX
3
X
3
X
3
-
Estonia
19
XXXX
3
XX
FinlandXXX
3
X
3
X
23
X
FranceXXXX
20
X
3
X
3
Germany
24
XXX- XX
GreeceXX
8
-- --
HungaryXXX
3
X
3
XX
IcelandX
25
XX
3
X
3
X
3
X
IndiaXXX
3
X
3
XX
3/26
IndonesiaXXXX
27
X
3
X
Ireland
19
XXXX
20
XX
IsraelXXX
3
X
3
X
3
X
3
Italy
28/29
X
25
XX
30
X
3
XX
3
JamaicaXXX
20
X
20
XX
3
Japan
28
X
31
XX
3
X
3
X
3
X
3
KazakhstanXXXX
20
XX
KoreaXXX
32
-X
3
-
Latvia
19
XXXX
17
XX
Lithuania
19
XXXX
17
X
3
X
Luxembourg
19
XXXX
20
XX
MexicoXXXX
23
XX
MoroccoX
21
X
8
-- -X
3
NetherlandsXXX
3
X
3
-X
New Zealand XXXX
3
X
3
X
18
Norway
28
XXX
32
X
3
X
3
X
Pakistan
5
XX
8
-- --
Philippines
6
X--- -X
3

October 15, 20013302001–42 I.R.B.
TABLE II—Continued
Countries Currently Granting by Income Tax Convention
Equivalent Exemptions For Purposes of Qualifying a
Shareholder Under Section 883(c)(1)
15
BASIS FOR EXEMPTIONTYPES OF SHIPPING AND AIRCRAFT INCOME EXEMPTED
2
Resi-Resi-Resi-Opera-FullBare-Con-Capital
dencedencedencetingRentalBoattainerGains
CountriesBased& Flag & FlagIncome(TimeRentalRental
andNoReci-Uni-or voy-
TerritoriesFlagprocallateralage char-
ter)
PolandX
25
XX
3
X
3
X
3
X
PortugalXXXX
3
-X
RomaniaXXX
3
X
3
X
3
X
Russian
FederationXXXX
20
XX
Slovak
RepublicXXXX
3
XX
Slovenia
19
XXXX
20
XX
South
Africa
19
XXXX
20
XX
SpainXXXX
3
XX
SwedenXXXX
3
XX
Switzerland
19
XXX
33
X
3
-X
Thailand
19
X
5
XXX
3
X
3
X
X
6
--- -X
Trinidad &
TobagoX
25
XX
3
X
3
-X
TunisiaXXX
20
X
20
X
3
X
Turkey
19
XXXX
3
XX
Ukraine
19
XXXX
20
XX
3
USSR/NIS
34
XX
8
-- -X
3
U.K.
29
X
25
XXX
3
XX
3
Venezuela
19
XXXX
20
XX
1
Notes signed prior to the Technical and Miscellaneous Revenue Act of 1988 will be interpreted in accordance with Technical Corrections enacted by that Act.
2
Unless otherwise footnoted, an “X” indicates full exemption whether or not there is a permanent establishment.
3
The tax exemption is available only if the income is incidental to operating income.
4
The note was ratified by the Bolivian Congress and signed by the Bolivian President. The note and exemption officially became effective upon publication in the
official Gazette on March 31, 1999, for income earned after that date.
5
This exemption applies to aircraft only.
6
This exemption applies to shipping only.
7
This diplomatic note applies to Hong Kong before July 1, 1997, and pursuant to Notice 97-40 (1997-2 C.B. 287), to the Hong Kong Special Administrative Region
of the People’s Republic of China on or after July 1, 1997. The note does not apply with respect to the People’s Republic of China, which will continue to be treat-
ed as a separate country for purposes of the Internal Revenue Code.
8
Operating income is not defined.
9
The note is effective for all taxable years beginning on or after January 1, 1999, and for all prior open taxable years.

2001–42 I.R.B.331October 15, 2001
10
Brazilian and Portuguese statutes exempt only companies.
11
The country generally imposes no income tax.
12
This exemption is generally effective for all open years beginning on or after January 1, 1987.
13
The Spanish statute exempts only corporations.
14
See generally Rev. Rul. 87-18 (1987-1 C.B. 178) (explaining the application of Turkey’s domestic-law exemption).
15
Table II is relevant only in determining whether a shareholder of a foreign corporation seeking an exemption from tax under section 883 is a shareholder that qual-
ifies under section 883(c)(1) because the shareholder’s country of residence grants an equivalent exemption under an income tax convention with the United States.
Table II is not relevant in determining whether a nonresident alien individual or foreign corporation itself is eligible to claim an exemption under section 872(b)
or 883(a), respectively.
16
Lessor must either regularly lease ships or aircraft on a full basis or operate them in international traffic.
17
This exemption applies if the ships or aircraft are operated in international traffic by the lessee, and the rental income is incidental to the operation of ships or air-
craft in international traffic by the lessor.
18
Except to the extent depreciation has been allowed in the other country.
19
The following income tax treaties were ratified after the publication of Rev. Rul. 97-31 and are generally effective on the following dates:
Austria . . . . . . . . . . . . . . . . . . . . . . January 1, 1999
Denmark . . . . . . . . . . . . . . . . . . . . . January 1, 2001
Estonia . . . . . . . . . . . . . . . . . . . . . . January 1, 2000
Ireland . . . . . . . . . . . . . . . . . . . . . . January 1, 1998
Latvia . . . . . . . . . . . . . . . . . . . . . . . January 1, 2000
Lithuania . . . . . . . . . . . . . . . . . . . . January 1, 2000
Luxembourg . . . . . . . . . . . . . . . . . . January 1, 2001
Slovenia . . . . . . . . . . . . . . . . . . . . . January 1, 2002
South Africa . . . . . . . . . . . . . . . . . . January 1, 1998
Switzerland . . . . . . . . . . . . . . . . . . . January 1, 1998
Thailand . . . . . . . . . . . . . . . . . . . . . January 1, 1998
Turkey . . . . . . . . . . . . . . . . . . . . . . January 1, 1998
Ukraine . . . . . . . . . . . . . . . . . . . . . . January 1, 2001
Venezuela . . . . . . . . . . . . . . . . . . . . January 1, 2000
The U.S.-Slovenia tax treaty entered into force on June 22, 2001. The treaty applies, with respect to taxes withheld at source, in respect of amounts paid or cred-
ited on or after September 1, 2001, and, with regard to other taxes, in respect of taxable years beginning on or after January 1, 2002.
20
This exemption applies if the ships or aircraft are operated in international traffic by the lessee, or the rental income is incidental to the operation of ships or air-
craft in international traffic by the lessor.
21
In the case of aircraft only, the registration may be in the country of residence or in any country with a treaty providing a reciprocal exemption between such coun-
try and the country of residence.
22
Pursuant to Notice 97-40 (1997-2 C.B. 287), the treaty between the United States and the People’s Republic of China (China) will continue to apply only to China
and will not apply to the Hong Kong Special Administrative Region of the People’s Republic of China.
23
The exemption applies except where the containers are used solely between places within the other Contracting State.
24
This treaty is effective for the eastern States of Germany (the former East Germany) from January 1, 1991.
25
Documentation or registration required for ships or aircraft of United States residents only.
26
This treaty exempts gains derived by an enterprise of a Contracting State if the ships, aircraft or containers are owned and operated by the enterprise and the income
from them is taxable only in that State.
27
Income from the bareboat rental of aircraft used in international traffic is exempt. Income from the bareboat rental of ships also is exempt if the ship is operated
in international traffic and if the lessee is not a resident of, or does not have a permanent establishment in, the other Contracting State.
28
See also the diplomatic notes or protocol accompanying this treaty.
29
The United States has entered into new treaties with Italy and the United Kingdom, but neither treaty has entered into force as of the date of publication of this
ruling.
30
This exemption applies if the ship or aircraft is operated in international traffic or if the rental income is incidental to income from such international operation.
31
With regard to residents of Japan, the ships or aircraft need not be registered in Japan if the ships or aircraft are leased by such a resident.
32
As a result of correspondence, it was clarified that income from the international operation of ships or aircraft includes this category of income.
33
This exemption applies if the ships or aircraft are used by the lessee in international traffic.
34
The U.S. - U.S.S.R. income tax treaty signed June 20, 1973, continues to apply to the New Independent States (NIS) of Armenia, Azerbaijan, Belarus, Georgia,
Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan.
Section 883.—Exclusions From
Gross Income
This revenue ruling updates the Table of coun-
tries that grant a reciprocal exemption for income
from the international operation of ships or aircraft
to U.S. persons for purposes of sections 872(b) and
883 of the Code. See Rev. Rul. 2001–48, page 324.
Section 894.—Income Affected
By Treaty
This revenue ruling updates the Table of coun-
tries that grant a reciprocal exemption for income
from the international operation of ships or aircraft
to U.S. persons for purposes of sections 872(b) and
883 of the Code. See Rev. Rul. 2001–48, page 324.

October 15, 20013322001–42 I.R.B.
26 CFR 601.105: Examination of returns and
claims for refund, credit, or abatement;
determination of correct tax liability.
(Also Part I, §§ 62, 162, 267, 274; 1.62–2,
1.162–17, 1.267(a)–1, 1.274–5.)
Rev. Proc. 2001–47
SECTION 1. PURPOSE
This revenue procedure updates Rev.
Proc. 2000–39 (2000–41 I.R.B. 340), by
providing rules under which the amount
of ordinary and necessary business ex-
penses of an employee for lodging, meal,
and incidental expenses or for meal and
incidental expenses incurred while travel-
ing away from home will be deemed sub-
stantiated under § 1.274–5 of the Income
Tax Regulations when a payor (the em-
ployer, its agent, or a third party) provides
a per diemallowance under a reimburse-
ment or other expense allowance arrange-
ment to pay for such expenses. This rev-
enue procedure also provides an optional
method for employees and self-employed
individuals to use in computing the de-
ductible costs of business meal and inci-
dental expenses paid or incurred while
traveling away from home. Use of a
method described in this revenue proce-
dure is not mandatory, and a taxpayer
may use actual allowable expenses if the
taxpayer maintains adequate records or
other sufficient evidence for proper sub-
stantiation. This revenue procedure does
not provide rules under which the amount
of an employee’s lodging expenses will
be deemed substantiated when a payor
provides an allowance to pay for those ex-
penses but not meal and incidental ex-
penses.
SECTION 2. BACKGROUND AND
CHANGES
.01 Section 162(a) of the Internal Rev-
enue Code allows a deduction for all the
ordinary and necessary expenses paid or
incurred during the taxable year in carry-
ing on any trade or business. Under that
provision, an employee or self-employed
individual may deduct expenses paid or
incurred while traveling away from home
in pursuit of a trade or business. How-
ever, under § 262, no portion of such
travel expenses that is attributable to per-
sonal, living, or family expenses is de-
ductible.
.02 Section 274(n) generally limits the
amount allowable as a deduction under
§ 162 for any expense for food, bever-
ages, or entertainment to 50 percent of the
amount of the expense that otherwise
would be allowable as a deduction. In the
case of any expenses for food or bever-
ages consumed while away from home
(within the meaning of § 162(a)(2)) by an
individual during, or incident to, the pe-
riod of duty subject to the hours of service
limitations of the Department of Trans-
portation, § 274(n)(3) gradually increases
the deductible percentage to 80 percent
for taxable years beginning in 2008. For
taxable years beginning in 2001, the de-
ductible percentage for these expenses is
60 percent. For taxable years beginning
in 2002, the deductible percentage for
these expenses is 65 percent.
.03 Section 274(d) provides, in part,
that no deduction shall be allowed under
§ 162 for any traveling expense (includ-
ing meals and lodging while away from
home) unless the taxpayer complies with
certain substantiation requirements. The
section further provides that regulations
may prescribe that some or all of the sub-
stantiation requirements do not apply to
an expense that does not exceed an
amount prescribed by such regulations.
.04 Section 1.274–5(g) of the regula-
tions, in part, grants the Commissioner
the authority to prescribe rules relating to
reimbursement arrangements or per diem
allowances for ordinary and necessary ex-
penses paid or incurred while traveling
away from home. Pursuant to this grant
of authority, the Commissioner may pre-
scribe rules under which such arrange-
ments or allowances, if in accordance
with reasonable business practice, will be
regarded (1) as equivalent to substantia-
tion, by adequate records or other suffi-
cient evidence, of the amount of such
travel expenses for purposes of § 1.274
–5(c), and (2) as satisfying the require-
ments of an adequate accounting to the
employer of the amount of such travel ex-
penses for purposes of § 1.274–5(f).
.05 For purposes of determining ad-
justed gross income, § 62(a)(2)(A) allows
an employee a deduction for expenses al-
lowed by Part VI (§ 161 and following),
subchapter B, chapter 1 of the Code, paid
or incurred by the employee in connection
with the performance of services as an em-
ployee under a reimbursement or other ex-
pense allowance arrangement with a payor.
.06 Section 62(c) provides that an
arrangement will not be treated as a reim-
bursement or other expense allowance
arrangement for purposes of § 62(a)(2)
(A) if it—
(1) does not require the employee to
substantiate the expenses covered by the
arrangement to the payor, or
(2) provides the employee with the
right to retain any amount in excess of the
substantiated expenses covered under the
arrangement.
Section 62(c) further provides that the
substantiation requirements described
therein shall not apply to any expense to
the extent that, under the grant of regula-
tory authority prescribed in § 274(d), the
Commissioner has provided that substan-
tiation is not required for such expense.
.07 Under § 1.62–2(c)(1) a reimburse-
ment or other expense allowance arrange-
ment satisfies the requirements of § 62(c)
if it meets the requirements of business
connection, substantiation, and returning
amounts in excess of expenses as speci-
fied in the regulations. Section
1.62–2(e)(2) specifically provides that
substantiation of certain business ex-
penses in accordance with rules pre-
scribed under the authority of § 1.274
–5(g) or 1.274–5(j)(1) will be treated as
substantiation of the amount of such ex-
penses for purposes of § 1.62–2. Under
§ 1.62–2(f)(2), the Commissioner may
prescribe rules under which an arrange-
ment providing per diemallowances will
be treated as satisfying the requirement of
returning amounts in excess of expenses,
even though the arrangement does not re-
quire the employee to return the portion
of such an allowance that relates to days
of travel substantiated and that exceeds
the amount of the employee’s expenses
deemed substantiated pursuant to rules
prescribed under § 274(d), provided the
allowance is reasonably calculated not to
exceed the amount of the employee’s ex-
penses or anticipated expenses and the
employee is required to return any portion
of such an allowance that relates to days
of travel not substantiated.
.08 Section 1.62–2(h)(2)(i)(B) provides
that if a payor pays a per diemallowance
Part III. Administrative, Procedural, and Miscellaneous

2001–42 I.R.B.333October 15, 2001
that meets the requirements of § 1.62
–2(c)(1), the portion, if any, of the al-
lowance that relates to days of travel sub-
stantiated in accordance with § 1.62–2(e),
that exceeds the amount of the em-
ployee’s expenses deemed substantiated
for such travel pursuant to rules pre-
scribed under § 274(d) and § 1.274–5(g)
or § 1.274–5(j)(1), and that the employee
is not required to return, is subject to
withholding and payment of employment
taxes. See §§ 31.3121(a)–3, 31.3231(e)
–1(a)(5), 31.3306(b)–2, and 31.3401(a)–4
of the Employment Tax Regulations. Be-
cause the employee is not required to re-
turn this excess portion, the reasonable
period of time provisions of § 1.62–2(g)
(relating to the return of excess amounts)
do not apply to this portion.
.09 Under § 1.62–2(h)(2)(i)(B)(4), the
Commissioner may, in his or her discre-
tion, prescribe special rules regarding the
timing of withholding and payment of
employment taxes on per diemal-
lowances.
.10 Section 1.274–5(j)(1) grants the
Commissioner the authority to establish a
method under which a taxpayer may elect
to use a specified amount for meals paid
or incurred while traveling away from
home in lieu of substantiating the actual
cost of meals.
.11 Section 5.04 of this revenue proce-
dure contains revisions to the list of high-
cost localities and to the high-low rates
for purposes of section 5.
.12 Sections 3.02, 4.04(5), and 5.06
provide transition rules for the last 3
months of calendar year 2001 due to
changes in the effective date of the
CONUS rates published by GSA.
SECTION 3. DEFINITIONS
.01 Per diem allowance. The term “per
diemallowance” means a payment under
a reimbursement or other expense al-
lowance arrangement that meets the re-
quirements specified in § 1.62–2(c)(1)
and that is
(1) paid with respect to ordinary and
necessary business expenses incurred, or
which the payor reasonably anticipates
will be incurred, by an employee for lodg-
ing, meal, and incidental expenses or for
meal and incidental expenses for travel
away from home in connection with the
performance of services as an employee
of the employer,
(2) reasonably calculated not to ex-
ceed the amount of the expenses or the
anticipated expenses, and
(3) paid at or below the applicable
federal per diemrate, a flat rate or stated
schedule, or in accordance with any other
Service-specified rate or schedule.
.02 Federal per diem rate and federal
M&IE rate.
(1)General rule. The federal per
diemrate is equal to the sum of the applic-
able federal lodging expense rate and the
applicable federal meal and incidental ex-
pense (M&IE) rate for the day and local-
ity of travel.
(a) CONUS rates. The rates for lo-
calities in the continental United States
(“CONUS”) are set forth in Appendix A
to 41 C.F.R. ch. 301. However, in apply-
ing section 4.01, 4.02, or 4.03 of this rev-
enue procedure, taxpayers may continue
to use the CONUS rates in effect for the
first 9 months of 2001 for expenses of all
CONUS travel while away from home
that are paid or incurred during calendar
year 2001 in lieu of the updated GSA
rates. A taxpayer must consistently use
either these rates or the updated rates for
the period of October 1, 2001, through
December 31, 2001.
(b) OCONUS rates. The rates for lo-
calities outside the continental United
States (“OCONUS”) are established by
the Secretary of Defense (rates for non-
foreign localities, including Alaska,
Hawaii, Puerto Rico, the Northern Mari-
ana Islands, and the possessions of the
United States) and by the Secretary of
State (rates for foreign localities), and are
published in the Per Diem Supplement to
the Standardized Regulations (Govern-
ment Civilians, Foreign Areas) (updated
on a monthly basis).
(c)Internet access to the rates. The
CONUS and OCONUS rates may be
found on the Internet at www.policy-
works.gov/perdiem.
(2) Locality of travel. The term “lo-
cality of travel” means the locality where
an employee traveling away from home in
connection with the performance of ser-
vices as an employee of the employer
stops for sleep or rest.
(3) Incidental expenses. The term
“incidental expenses” includes, but is not
limited to, expenses for laundry, cleaning
and pressing of clothing, and fees and tips
for services, such as for porters and bag-
gage carriers. The term “incidental ex-
penses” does not include taxicab fares,
lodging taxes, or the costs of telegrams or
telephone calls.
.03 Flat rate or stated schedule.
(1) In general. Except as provided in
section 3.03(2) of this revenue procedure,
an allowance is paid at a flat rate or stated
schedule if it is provided on a uniform and
objective basis with respect to the expens-
es described in section 3.01 of this rev-
enue procedure. Such allowance may be
paid with respect to the number of days
away from home in connection with the
performance of services as an employee
or on any other basis that is consistently
applied and in accordance with reasonable
business practice. Thus, for example, an
hourly payment to cover meal and inci-
dental expenses paid to a pilot or flight
attendant who is traveling away from
home in connection with the performance
of services as an employee is an
allowance paid at a flat rate or stated
schedule. Likewise, a payment based on
the number of miles traveled (e.g., cents
per mile) to cover meal and incidental
expenses paid to an over-the-road truck
driver who is traveling away from home
in connection with the performance of
services as an employee is an allowance
paid at a flat rate or stated schedule.
(2) Limitation. For purposes of this
revenue procedure, an allowance that is
computed on a basis similar to that used in
computing the employee’s wages or other
compensation (e.g., the number of hours
worked, miles traveled, or pieces pro-
duced) does not meet the business con-
nection requirement of § 1.62–2(d), is not
a per diemallowance, and is not paid at a
flat rate or stated schedule, unless, as of
December 12, 1989, (a) the allowance
was identified by the payor either by mak-
ing a separate payment or by specifically
identifying the amount of the allowance,
or (b) an allowance computed on that
basis was commonly used in the industry
in which the employee is employed. See
§ 1.62–2(d)(3)(ii).
SECTION 4. PER DIEM
SUBSTANTIATION METHOD
.01 Per diem allowance. If a payor
pays a per diemallowance in lieu of reim-
bursing actual expenses for lodging, meal,
and incidental expenses incurred or to be
incurred by an employee for travel away

October 15, 20013342001–42 I.R.B.
from home, the amount of the expenses
that is deemed substantiated for each cal-
endar day is equal to the lesser of the per
diemallowance for such day or the
amount computed at the federal per diem
rate (see section 3.02 of this revenue pro-
cedure) for the locality of travel for such
day (or partial day, see section 6.04 of this
revenue procedure).
.02 Meals only per diem allowance. If
a payor pays a per diemallowance only
for meal and incidental expenses in lieu of
reimbursing actual expenses for meal and
incidental expenses incurred or to be in-
curred by an employee for travel away
from home, the amount of the expenses
that is deemed substantiated for each cal-
endar day is equal to the lesser of the per
diemallowance for such day or the
amount computed at the federal M&IE
rate (see section 3.02 of this revenue pro-
cedure) for the locality of travel for such
day (or partial day, see section 6.04 of this
revenue procedure). Aper diemal-
lowance is treated as paid only for meal
and incidental expenses if (1) the payor
pays the employee for actual expenses for
lodging based on receipts submitted to the
payor, (2) the payor provides the lodging
in kind, (3) the payor pays the actual ex-
penses for lodging directly to the provider
of the lodging, (4) the payor does not
have a reasonable belief that lodging ex-
penses were or will be incurred by the
employee, or (5) the allowance is com-
puted on a basis similar to that used in
computing the employee’s wages or other
compensation (e.g., the number of hours
worked, miles traveled, or pieces pro-
duced).
.03 Optional method for meals only de-
duction. In lieu of using actual expenses,
employees and self-employed individu-
als, in computing the amount allowable as
a deduction for ordinary and necessary
meal and incidental expenses paid or in-
curred for travel away from home, may
use an amount computed at the federal
M&IE rate (see section 3.02 of this rev-
enue procedure) for the locality of travel
for each calendar day (or partial day, see
section 6.04 of this revenue procedure)
the employee or self-employed individual
is away from home. Such amount will be
deemed substantiated for purposes of
paragraphs (b)(2) (travel away from
home) and (c) of § 1.274–5, provided the
employee or self-employed individual
substantiates the elements of time, place,
and business purpose of the travel ex-
penses in accordance with those regula-
tions.
.04 Special rules for transportation in-
dustry.
(1) In general. This section 4.04
applies to (a) a payor that pays a per diem
allowance only for meal and incidental
expenses for travel away from home as
described in section 4.02 of this revenue
procedure to an employee in the trans-
portation industry, or (b) an employee or
self-employed individual in the trans-
portation industry who computes the
amount allowable as a deduction for meal
and incidental expenses for travel away
from home in accordance with section
4.03 of this revenue procedure.
(2) Rates. A taxpayer described in
section 4.04(1) of this revenue procedure
may treat $38 as the federal M&IE rate
for any locality of travel in CONUS,
and/or $42 as the federal M&IE rate for
any locality of travel OCONUS. A payor
that uses either (or both) of these special
rates with respect to an employee must
use the special rate(s) for all amounts sub-
ject to section 4.02 of this revenue proce-
dure paid to that employee for travel away
from home within CONUS and/or
OCONUS, as the case may be, during the
calendar year. Similarly, an employee or
self-employed individual that uses either
(or both) of these special rates must use
the special rate(s) for all amounts comput-
ed pursuant to section 4.03 of this revenue
procedure for travel away from home
within CONUS and/or OCONUS, as the
case may be, during the calendar year.
See section 4.04(5) of this revenue proce-
dure for transition rules.
(3) Periodic rule. A payor described
in section 4.04(1) of this revenue proce-
dure may compute the amount of the
employee’s expenses that is deemed sub-
stantiated under section 4.02 of this rev-
enue procedure periodically (not less fre-
quently than monthly), rather than daily,
by comparing the total per diem
allowance paid for the period to the sum
of the amounts computed at the federal
M&IE rate(s) for the localities of travel
for the days (or partial days, see section
6.04 of this revenue procedure) the
employee is away from home during the
period. For example, assume an employ-
ee in the transportation industry travels
away from home within CONUS on 17
days (including partial days, see section
6.04 of this revenue procedure) during a
calendar month and receives a per diem
allowance only for meal and incidental
expenses from a payor that uses the spe-
cial rule under section 4.04(2) of this rev-
enue procedure. The amount deemed sub-
stantiated under section 4.02 of this
revenue procedure is equal to the lesser of
the total per diemallowance paid for the
month or $646 (17 days at $38 per day).
(4) Transportation industry defined.
For purposes of this section 4.04 of this
revenue procedure, an employee or self-
employed individual is “in the transporta-
tion industry” only if the employee’s or
individual’s work (a) is of the type that
directly involves moving people or goods
by airplane, barge, bus, ship, train, or
truck, and (b) regularly requires travel
away from home which, during any single
trip away from home, usually involves
travel to localities with differing federal
M&IE rates. For purposes of the preced-
ing sentence, a payor must determine that
an employee or a group of employees is
“in the transportation industry” by using a
method that is consistently applied and in
accordance with reasonable business
practice.
(5) Transition rules. Under the cal-
endar-year convention provided in section
4.04(2), a taxpayer who used the federal
M&IE rates during the first 9 months of
calendar year 2001 to substantiate the
amount of an individual’s travel expenses
under sections 4.02 or 4.03 of Rev. Proc.
2000–39 may not use, for that individual,
the special transportation industry rates
provided in this section 4.04 until January
1, 2002. Similarly, a taxpayer who used
the special transportation industry rates
during the first 9 months of calendar year
2001 to substantiate the amount of an
individual’s travel expenses may not use,
for that individual, the federal M&IE rates
until January 1, 2002.
SECTION 5. HIGH-LOW
SUBSTANTIATION METHOD
.01 General rule. If a payor pays a per
diemallowance in lieu of reimbursing ac-
tual expenses for lodging, meal, and inci-
dental expenses incurred or to be incurred
by an employee for travel away from
home and the payor uses the high-low
substantiation method described in this

2001–42 I.R.B.335October 15, 2001
section 5 for travel within CONUS, the
amount of the expenses that is deemed
substantiated for each calendar day is
equal to the lesser of the per diemal-
lowance for such day or the amount com-
puted at the rate set forth in section 5.02
of this revenue procedure for the locality
of travel for such day (or partial day, see
section 6.04 of this revenue procedure).
Except as provided in section 5.06 of this
revenue procedure, this high-low substan-
tiation method may be used in lieu of the
per diemsubstantiation method provided
in section 4.01 of this revenue procedure,
but may not be used in lieu of the meals
only substantiation method provided in
section 4.02 or 4.03 of this revenue proce-
dure.
.02 Specific high-low rates. Except as
provided in section 5.06 of this revenue
procedure, the per diemrate set forth in
this section 5.02 is $204 for travel to any
“high-cost locality” specified in section
5.03 of this revenue procedure, or $125
for travel to any other locality within
CONUS. Whichever per diemrate ap-
plies, it is applied as if it were the federal
per diemrate for the locality of travel.
For purposes of applying the high-low
substantiation method and the § 274(n)
limitation on meal expenses (see section
6.05 of this revenue procedure), the fed-
eral M&IE rate shall be treated as $42 for
a high-cost locality and $34 for any other
locality within CONUS.
.03 High-cost localities. The following
localities have a federal per diemrate of
$165 or more, and are high-cost localities
for all of the calendar year or the portion
of the calendar year specified in parenthe-
sis under the key city name, except as
provided in section 5.06 of this revenue
procedure:
Key cityCounty or other defined location
California
NapaNapa
(April 1-November 15)
Palm SpringsRiverside
(January 1-May 31)
San FranciscoSan Francisco
San Mateo/Redwood CitySan Mateo
Sunnyvale/Palo Alto/San JoseSanta Clara
Tahoe CityPlacer
Colorado
AspenPitkin
(January 1-April 30)
Silverthorne/KeystoneSummit
TellurideSan Miguel
(December 20-September 30)
VailEagle
(December 1-March 31)
District of Columbia
Washington, D.C.Washington, D.C.; the cities of Alexandria, Fairfax, and Falls Church, and
the counties of Arlington, Fairfax, and Loudoun, in Virginia; and the coun-
ties of Montgomery and Prince George’s in Maryland
Florida
Key WestMonroe
(January 1-April 30)
Palm BeachCities of Boca Raton, Delray Beach, Jupiter, Palm Beach Gardens, Palm
(January 1-April 30)Beach Shores, Singer Island, and West Palm Beach
Idaho
Sun ValleyCity limits of Sun Valley
Illinois
ChicagoCook and Lake
Louisiana
New Orleans/St. BernardOrleans, St. Bernard, Plaquemine, and Jefferson Parishes
(January 1-May 31)
Maine
Kennebunk/Kittery/SanfordYork
(June 15-October 31)

October 15, 20013362001–42 I.R.B.
Key cityCounty or other defined location
Maryland
(For the counties of Montgomery and Prince George’s, see District of Columbia)
Ocean City Worcester
(June 15-October 31)
Massachusetts
BostonSuffolk
CambridgeMiddlesex County (except Lowell)
Martha’s VineyardDukes
(June 1-October 15)
NantucketNantucket
(June 15-October 15)
Michigan
Mackinac IslandMackinac
Traverse CityGrand Traverse
Montana
Big SkyGallatin (except West Yellowstone Park)
Nevada
StatelineDouglas
New Jersey
Atlantic CityAtlantic
(June 1-November 30)
Cape MayCape May (except Ocean City)
(June 1-November 30)
EdisonMiddlesex (except Piscataway)
NewarkEssex, Bergen, Hudson and Passaic
Ocean CityCity limits of Ocean City
(June 15-September 15)
Piscataway/Belle MeadSomerset; and City limits of Piscataway
Princeton/TrentonMercer County
New York
The Bronx/Brooklyn/QueensThe boroughs of The Bronx, Brooklyn, and Queens
ManhattanManhattan
Nassau County/Great NeckNassau County
Suffolk CountySuffolk County
White PlainsCity limits of White Plains
Pennsylvania
HersheyCity limits of Hershey
(June 1-September 15)
Utah
Ogden/Layton/Davis CountyWeber and Davis
(January 1-February 28)
Park CitySummit
(December 15-March 31)
ProvoUtah
(January 15-February 28)
Salt Lake CitySalt Lake, Dugway Proving Ground, and Tooele Army Depot
(January 15-February 28)
Virginia
(For the cities of Alexandria, Fairfax, and Falls Church, and the counties of Arlington, Fairfax, and Loudoun, see District of
Columbia)
WintergreenNelson

2001–42 I.R.B.337October 15, 2001
.04 Changes in high-cost localities.
The list of high-cost localities in section
5.03 of this revenue procedure differs
from the list of high-cost localities in sec-
tion 5.03 of Rev. Proc. 2000–39.
(1) The following localities (listed by
key cities) have been added to the list of
high-cost localities: Napa, California; San
Mateo/Redwood City, California; Palm
Beach, Florida; Kennebunk/Kittery/San-
ford, Maine; Nantucket, Massachusetts;
Stateline, Nevada; Atlantic City, New Jer-
sey; Edison, New Jersey; Newark, New
Jersey; Ogden/Layton/Davis County, Utah;
Provo, Utah; and Salt Lake City, Utah.
(2) The portion of the year for which
the following are high-cost localities (list-
ed by key cities) has been changed:
Telluride, Colorado; Vail, Colorado; Big
Sky, Montana; and Park City, Utah.
(3) The following locality has been
removed from the list of high-cost locali-
ties: Philadelphia, Pennsylvania.
.05 Specific limitation.
(1) Except as provided in section
5.05(2) of this revenue procedure, a payor
that uses the high-low substantiation
method with respect to an employee must
use that method for all amounts paid to
that employee for travel away from home
within CONUS during the calendar year.
See section 5.06 of this revenue procedure
for transition rules.
(2) With respect to an employee
described in section 5.05(1) of this rev-
enue procedure, the payor may reimburse
actual expenses or use the meals only per
diemmethod described in section 4.02 of
this revenue procedure for any travel
away from home, and may use the per
diemsubstantiation method described in
section 4.01 of this revenue procedure for
any OCONUS travel away from home.
.06 Transition rules. A payor who used
the substantiation method of section 4.01
of Rev. Proc. 2000–39 for an employee
during the first 9 months of calendar year
2001 may not use the High-Low Substan-
tiation Method in section 5 of this revenue
procedure for that employee until January
1, 2002. A payor who used the High-Low
Substantiation Method of section 5 of
Rev. Proc. 2000–39 for an employee dur-
ing the first 9 months of calendar year
2001 must continue to use the High-Low
Substantiation Method for the remainder
of calendar year 2001 for that employee.
A payor described in the previous sen-
tence may use the rates and high-cost lo-
calities published in section 5 of Rev.
Proc. 2000–39, in lieu of the updated rates
and high-cost localities provided in sec-
tion 5 of this revenue procedure, for travel
on or after October 1, 2001, and before
January 1, 2002, if those rates and locali-
ties are used consistently during this pe-
riod for all employees reimbursed under
this method.
SECTION 6. LIMITATIONS AND
SPECIAL RULES
.01 In general. The federal per diem
rate and the federal M&IE rate described
in section 3.02 of this revenue procedure
for the locality of travel will be applied in
the same manner as applied under the
Federal Travel Regulations, 41 C.F.R.
Part 301–11 (2000), except as provided in
sections 6.02 through 6.04 of this revenue
procedure.
.02 Federal per diem rate. A receipt
for lodging expenses is not required in de-
termining the amount of expenses deemed
substantiated under section 4.01 or 5.01
of this revenue procedure. See section
7.01 of this revenue procedure for the re-
quirement that the employee substantiate
the time, place, and business purpose of
the expense.
.03 Federal per diem or M&IE rate. A
payor is not required to reduce the federal
per diemrate or the federal M&IE rate for
the locality of travel for meals provided in
kind, provided the payor has a reasonable
belief that meal and incidental expenses
were or will be incurred by the employee.
.04 Proration of the federal per diem or
M&IE rate. Pursuant to the Federal
Travel Regulations, in determining the
federal per diemrate or the federal M&IE
rate for the locality of travel, the full ap-
plicable federal M&IE rate is available
for a full day of travel from 12:01 a.m. to
12:00 midnight. For purposes of deter-
mining the amount deemed substantiated
under section 4 or 5 of this revenue proce-
dure with respect to partial days of travel
away from home, either of the following
methods may be used to prorate the fed-
eral M&IE rate to determine the federal
per diemrate or the federal M&IE rate for
the partial days of travel:
(1) Such rate may be prorated using
the method prescribed by the Federal
Travel Regulations. Currently the Federal
Travel Regulations allow three-fourths of
the applicable federal M&IE rate for each
partial day during which the employee or
self-employed individual is traveling
away from home in connection with the
performance of services as an employee
or self-employed individual; or
(2) Such rate may be prorated using
any method that is consistently applied
and in accordance with reasonable busi-
ness practice. For example, if an employ-
ee travels away from home from 9 a.m.
one day to 5 p.m. the next day, a method
of proration that results in an amount
equal to 2 times the federal M&IE rate
will be treated as being in accordance
with reasonable business practice (even
though only 1 1/2 times the federal M&IE
rate would be allowed under the Federal
Travel Regulations).
.05 Application of the appropriate
§ 274(n) limitation on meal expenses. All
or part of the amount of an expense
deemed substantiated under this revenue
procedure is subject to the appropriate
limitation under § 274(n) (see section
2.02 of this revenue procedure) on the de-
ductibility of food and beverage ex-
penses.
(1) When an amount for meal and
incidental expenses is computed pursuant
to section 4.03 of this revenue procedure,
the taxpayer must treat such amount as an
expense for food and beverages.
(2) When a per diemallowance is
paid only for meal and incidental expens-
es, the payor must treat an amount equal
to the lesser of the allowance or the feder-
al M&IE rate for the locality of travel for
such day (or partial day, see section 6.04
of this revenue procedure) as an expense
for food and beverages.
(3) When a per diemallowance is
paid for lodging, meal, and incidental
expenses, the payor must treat an amount
equal to the federal M&IE rate for the
locality of travel for each calendar day (or
partial day, see section 6.04 of this rev-
enue procedure) the employee is away
from home as an expense for food and
beverages. For purposes of the preceding
sentence, when a per diemallowance for
lodging, meal, and incidental expenses is
paid at a rate that is less than the federal
per diemrate for the locality of travel for
such day (or partial day, see section 6.04
of this revenue procedure), the payor may
treat an amount equal to 40 percent of
such allowance as the federal M&IE rate

October 15, 20013382001–42 I.R.B.
for the locality of travel for such day (or
partial day, see section 6.04 of this rev-
enue procedure).
.06 No double reimbursement or de-
duction. If a payor pays a per diemal-
lowance in lieu of reimbursing actual ex-
penses for lodging, meal, and incidental
expenses or for meal and incidental ex-
penses in accordance with section 4 or 5
of this revenue procedure, any additional
payment with respect to such expenses is
treated as paid under a nonaccountable
plan, is included in the employee’s gross
income, is reported as wages or other
compensation on the employee’s Form
W-2, and is subject to withholding and
payment of employment taxes. Similarly,
if an employee or self-employed individ-
ual computes the amount allowable as a
deduction for meal and incidental ex-
penses for travel away from home in ac-
cordance with section 4.03 or 4.04 of this
revenue procedure, no other deduction is
allowed to the employee or self-employed
individual with respect to such expenses.
For example, assume an employee re-
ceives a per diemallowance from a payor
for lodging, meal, and incidental expenses
or for meal and incidental expenses in-
curred while traveling away from home.
During that trip, the employee pays for
dinner for the employee and two business
associates. The payor reimburses as a
business entertainment meal expense the
meal expense for the employee and the
two business associates. Because the
payor also pays a per diemallowance to
cover the cost of the employee’s meals,
the amount paid by the payor for the em-
ployee’s portion of the business entertain-
ment meal expense is treated as paid
under a nonaccountable plan, is reported
as wages or other compensation on the
employee’s Form W-2, and is subject to
withholding and payment of employment
taxes.
.07 Related parties. Sections 4.01 and
5 of this revenue procedure will not apply
in any case in which a payor and an em-
ployee are related within the meaning of
§ 267(b), but for this purpose the percent-
age of ownership interest referred to in
§ 267(b)(2) shall be 10 percent.
SECTION 7. APPLICATION
.01 If the amount of travel expenses is
deemed substantiated under the rules pro-
vided in section 4 or 5 of this revenue pro-
cedure, and the employee actually sub-
stantiates to the payor the elements of
time, place, and business purpose of the
travel expenses in accordance with para-
graphs (b)(2) (travel away from home)
and (c) (other than subparagraph
(2)(iii)(A) thereof) of § 1.274–5, the em-
ployee is deemed to satisfy the adequate
accounting requirements of § 1.274–5(f)
as well as the requirement to substantiate
by adequate records or other sufficient ev-
idence for purposes of § 1.274–5(c). See
§ 1.62–2(e)(1) for the rule that an
arrangement must require business ex-
penses to be substantiated to the payor
within a reasonable period of time.
.02 An arrangement providing per diem
allowances will be treated as satisfying
the requirement of § 1.62–2(f)(2) with re-
spect to returning amounts in excess of
expenses if the employee is required to re-
turn within a reasonable period of time (as
defined in § 1.62–2(g)) any portion of
such an allowance that relates to days of
travel not substantiated, even though the
arrangement does not require the em-
ployee to return the portion of such an al-
lowance that relates to days of travel sub-
stantiated and that exceeds the amount of
the employee’s expenses deemed substan-
tiated. For example, assume a payor pro-
vides an employee an advance per diem
allowance for meal and incidental ex-
penses of $200, based on an anticipated 5
days of business travel at $40 per day to a
locality for which the federal M&IE rate
is $34, and the employee substantiates 3
full days of business travel. The require-
ment to return excess amounts will be
treated as satisfied if the employee is re-
quired to return within a reasonable pe-
riod of time (as defined in § 1.62–2(g))
the portion of the allowance that is attrib-
utable to the 2 unsubstantiated days of
travel ($80), even though the employee is
not required to return the portion of the al-
lowance ($18) that exceeds the amount of
the employee’s expenses deemed substan-
tiated under section 4.02 of this revenue
procedure ($102) for the 3 substantiated
days of travel. However, the $18 excess
portion of the allowance is treated as paid
under a nonaccountable plan as discussed
in section 7.04 of this revenue procedure.
.03 An employee is not required to in-
clude in gross income the portion of a per
diemallowance received from a payor
that is less than or equal to the amount
deemed substantiated under the rules pro-
vided in section 4 or 5 of this revenue pro-
cedure if the employee substantiates the
business travel expenses covered by the
per diemallowance in accordance with
section 7.01 of this revenue procedure.
See§ 1.274–5(f)(2)(i). In addition, such
portion of the allowance is treated as paid
under an accountable plan, is not reported
as wages or other compensation on the
employee’s Form W-2, and is exempt
from the withholding and payment of em-
ployment taxes. See§ 1.62–2(c)(2) and
(c)(4).
.04 An employee is required to include
in gross income only the portion of the
per diemallowance received from a payor
that exceeds the amount deemed substan-
tiated under the rules provided in section
4 or 5 of this revenue procedure if the em-
ployee substantiates the business travel
expenses covered by the per diemal-
lowance in accordance with section 7.01
of this revenue procedure. See§ 1.274
–5(f)(2)(ii). In addition, the excess por-
tion of the allowance is treated as paid
under a nonaccountable plan, is reported
as wages or other compensation on the
employee’s Form W-2, and is subject to
withholding and payment of employment
taxes. See§ 1.62–2(c)(3)(ii), (c)(5), and
(h)(2)(i)(B).
.05 If the amount of the expenses that is
deemed substantiated under the rules pro-
vided in section 4.01, 4.02, or 5 of this
revenue procedure is less than the amount
of the employee’s business expenses for
travel away from home, the employee
may claim an itemized deduction for the
amount by which the business travel ex-
penses exceed the amount that is deemed
substantiated, provided the employee sub-
stantiates all the business travel expenses,
includes on Form 2106, Employee Busi-
ness Expenses, the deemed substantiated
portion of the per diemallowance re-
ceived from the payor, and includes in
gross income the portion (if any) of the
per diemallowance received from the
payor that exceeds the amount deemed
substantiated. See§ 1.274–5(f)(2)(iii).
However, for purposes of claiming this
itemized deduction with respect to meal
and incidental expenses, substantiation of
the amount of the expenses is not required
if the employee is claiming a deduction
that is equal to or less than the amount
computed under section 4.03 of this rev-

2001–42 I.R.B.339October 15, 2001
enue procedure minus the amount deemed
substantiated under sections 4.02 and 7.01
of this revenue procedure. The itemized
deduction is subject to the appropriate
limitation (seesection 2.02 of this rev-
enue procedure) on meal and entertain-
ment expenses provided in § 274(n) and
the 2-percent floor on miscellaneous
itemized deductions provided in § 67.
.06 An employee who does not receive
a per diemallowance for meal and inci-
dental expenses may deduct an amount
computed pursuant to section 4.03 of this
revenue procedure only as an itemized de-
duction. This itemized deduction is sub-
ject to the appropriate limitation (seesec-
tion 2.02 of this revenue procedure) on
meal and entertainment expenses pro-
vided in § 274(n) and the 2-percent floor
on miscellaneous itemized deductions
provided in § 67.
.07 A self-employed individual may
deduct an amount computed pursuant to
section 4.03 of this revenue procedure in
determining adjusted gross income under
§ 62(a)(1). This deduction is subject to
the appropriate limitation (see section
2.02 of this revenue procedure) on meal
and entertainment expenses provided in
§ 274(n).
.08 If a payor’s reimbursement or other
expense allowance arrangement evi-
dences a pattern of abuse of the rules of
§ 62(c) and the regulations thereunder, all
payments under the arrangement will be
treated as made under a nonaccountable
plan. Thus, such payments are included
in the employee’s gross income, are re-
ported as wages or other compensation on
the employee’s Form W-2, and are subject
to withholding and payment of employ-
ment taxes. See§ 1.62–2(c)(3), (c)(5),
and (h)(2).
SECTION 8. WITHHOLDING AND
PAYMENT OF EMPLOYMENT
TAXES.
.01 The portion of a per diemal-
lowance, if any, that relates to the days of
business travel substantiated and that ex-
ceeds the amount deemed substantiated
for those days under section 4.01, 4.02, or
5 of this revenue procedure is subject to
withholding and payment of employment
taxes. See§ 1.62–2(h)(2)(i)(B).
.02 In the case of a per diemallowance
paid as a reimbursement, the excess de-
scribed in section 8.01 of this revenue
procedure is subject to withholding and
payment of employment taxes in the pay-
roll period in which the payor reimburses
the expenses for the days of travel sub-
stantiated. See § 1.62–2(h)(2)(i)(B)(2).
.03 In the case of a per diemallowance
paid as an advance, the excess described
in section 8.01 of this revenue procedure
is subject to withholding and payment of
employment taxes no later than the first
payroll period following the payroll pe-
riod in which the days of travel with re-
spect to which the advance was paid are
substantiated. See§ 1.62–2(h)(2)(i)
(B)(3). If some or all of the days of travel
with respect to which the advance was
paid are not substantiated within a reason-
able period of time and the employee does
not return the portion of the allowance
that relates to those days within a reason-
able period of time, the portion of the al-
lowance that relates to those days is sub-
ject to withholding and payment of
employment taxes no later than the first
payroll period following the end of the
reasonable period. See§ 1.62–2(h)(2)
(i)(A).
.04 In the case of a per diemallowance
only for meal and incidental expenses for
travel away from home paid to an em-
ployee in the transportation industry by a
payor that uses the rule in section 4.04(3)
of this revenue procedure, the excess of
the per diemallowance paid for the period
over the amount deemed substantiated for
the period under section 4.02 of this rev-
enue procedure (after applying section
4.04(3) of this revenue procedure), is sub-
ject to withholding and payment of em-
ployment taxes no later than the first pay-
roll period following the payroll period in
which the excess is computed. See§ 1.62
–2(h)(2)(i)(B)(4).
.05 For example, assume that an em-
ployer pays an employee a per diemal-
lowance to cover business expenses for
meals and lodging for travel away from
home at a rate of 120 percent of the fed-
eral per diemrate for the localities to
which the employee travels. The em-
ployer does not require the employee to
return the 20 percent by which the reim-
bursement for those expenses exceeds the
federal per diemrate. The employee sub-
stantiates 6 days of travel away from
home: 2 days in a locality in which the
federal per diemrate is $100 and 4 days in
a locality in which the federal per diem
rate is $125. The employer reimburses
the employee $840 for the 6 days of travel
away from home (2 x (120% x $100) + 4
x (120% x $125)), and does not require
the employee to return the excess pay-
ment of $140 (2 days x $20 ($120-$100)
+ 4 days x $25 ($150-$125)). For the
payroll period in which the employer re-
imburses the expenses, the employer must
withhold and pay employment taxes on
$140. Seesection 8.02 of this revenue
procedure.
SECTION 9. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2000–39 is hereby super-
seded (except to the extent specified in
sections 4.04(5) and 5.06 of this revenue
procedure) for per diemallowances that
are paid both (1) to an employee on or
after October 1, 2001, and (2) with re-
spect to lodging, meal, and incidental ex-
penses or with respect to meal and inci-
dental expenses paid or incurred for travel
while away from home on or after Octo-
ber 1, 2001. Rev. Proc. 2000–39 is also
hereby superseded (except to the extent
specified in section 4.04(5) of this rev-
enue procedure) for purposes of comput-
ing the amount allowable as a deduction
for meal and incidental expenses paid or
incurred by an employee or self-em-
ployed individual for travel while away
from home on or after October 1, 2001.
DRAFTING INFORMATION
The principal author of this revenue
procedure is John L. Trevey, Jr., of the Of-
fice of Associate Chief Counsel (Income
Tax and Accounting). For further infor-
mation regarding this revenue procedure,
contact Mr. Trevey at (202) 622-4970 (not
a toll-free call).

October 15, 20013402001–42 I.R.B.
Archer MSAs
Announcement 2001–99
PURPOSE
Sections 220(i) and (j) of the Internal
Revenue Code provide that if the number
of Medical Savings Account (MSA)
returns filed for 2000 or a statutorily spec-
ified projection of the number of MSA
returns that will be filed for 2001 exceeds
750,000, then October 1, 2001, is a “cut-
off” date for the Archer MSA pilot pro-
ject. The Internal Revenue Service (IRS)
has determined that the applicable number
of MSA returns filed for 2000 is 36,250
and that the applicable number of MSA
returns projected to be filed for 2001 is
76,035 (after reduction in each case for
statutorily specified exclusions, such as
the exclusion for previously uninsured
taxpayers). Consequently, October 1,
2001, is not a “cut-off ” date and 2001 is
not a “cut-off ” year for the Archer MSA
pilot project.
BACKGROUND
The Health Insurance Portability and
Accountability Act of 1996 added section
220 to the Code to permit eligible individ-
uals to establish Archer MSAs under a
pilot project effective January 1, 1997.
The pilot project, as amended by The
Community Renewal Tax Relief Act of
2000, has a scheduled “cut-off” year of
2002, but may have an earlier “cut-off”
year if the number of individuals who
have established Archer MSAs exceeds
certain numerical limitations. See sec-
tions 220(i) and (j).
If a year is a “cut-off” year, section
220(i)(1) generally provides that no indi-
vidual will be eligible for a deduction or ex-
clusion for Archer MSA contributions for
any taxable year beginning after the “cut-
off ” year unless the individual (A) was an
active MSA participant for any taxable year
ending on or before the close of the “cut-
off ” year, or (B) first became an active
MSA participant for a taxable year ending
after the “cut-off ” year by reason of cover-
age under a high deductible health plan of
an MSA-participating employer.
Section 220(j)(2)(A) provides that the
numerical limitation for 2001 is exceeded
if the number of MSA returns filed on or
before April 15, 2001, for taxable years
ending with or within the 2000 calendar
year, plus the Secretary’s estimate of the
number of MSA returns for those taxable
years which will be filed after April 15,
2001, exceeds 750,000. For this purpose,
section 220(j)(2)(A) provides that a tax
return is an MSA return for a taxable year
if any exclusion is claimed under section
106(b) or any deduction is claimed under
section 220 for that taxable year. Section
220(j)(2)(B) provides, as an alternative
test, that the numerical limitation for
2001 is also exceeded if the sum of 90
percent of the MSA returns for 2000 plus
the product of 2.5 and the number of
Archer MSAs for taxable years beginning
in 2001 that are established during the
portion of 2001 preceding July 1 (based
on reports by Archer MSA trustees and
custodians), exceeds 750,000.
Under section 220(j)(3), in determining
whether any calendar year is a “cut-off”
year, the Archer MSA of any previously
uninsured individual is not taken into
account. In addition, section 220(j)(4)(D)
specifies that, to the extent practical, all
Archer MSAs established by an individ-
ual are aggregated and two married indi-
viduals opening separate Archer MSAs
are to be treated as having a single Archer
MSA for purposes of determining the
number of Archer MSAs.
A total of 54,979 tax returns reporting
an excludable or deductible contribution
to an Archer MSA for the 2000 taxable
year were filed by April 15, 2001. Of this
total, 22,968 taxpayers were reported as
being previously uninsured. It has been
estimated that an additional 7,253 tax
returns reporting Archer MSA contribu-
tions for the 2000 taxable year have been
or will be filed after April 15, 2001,
including 3,014 taxpayers who were pre-
viously uninsured. Accordingly, it has
been determined that there were 62,232
(54,979 plus 7,253) MSA returns for
2000. Of this total, 25,982 (22,968 plus
3,014) were for taxpayers reported as
being previously uninsured. As a result,
36,250 (62,232 minus 25,982) MSA
returns count toward the applicable statu-
tory limitation for 2001 MSA returns of
750,000.
Based on the Forms 8851 filed on or
before August 1, 2001, by Archer MSA
trustees and custodians, it has been deter-
mined that 22,640 taxpayers who did not
have Archer MSA contributions for 2000
established Archer MSAs for 2001 during
the portion of 2001 preceding July 1. Of
this total, 4,967 taxpayers were reported
by trustees and custodians as previously
uninsured, and therefore are not taken into
account in determining whether 2001 is a
“cut-off” year. In addition, 272 taxpayers
were reported by trustees and custodians
as excludable from the count because their
spouse also established an Archer MSA,
and 37 taxpayers had more than one
account. Accordingly, the applicable num-
ber of Archer MSAs established from
January 1, 2001, through June 30, 2001, is
17,364 (22,640 minus (4,967 plus 272 plus
37)). The alternative limitation for 2001
(90 percent of the applicable number of
MSA returns for 2000 plus the product of
2.5 and the number of applicable Archer
MSAs established from January 1, 2001,
through June 30, 2001) is 76,035 (90 per-
cent of 36,250 plus 2.5 times 17,364),
which is less than the statutory limit of
750,000. Thus, 2001 is not a “cut-off”
year for the Archer MSA pilot project by
reason of either the 2000 MSA returns test
of section 220(j)(2)(A) or the alternative
test of section 220(j)(2)(B) of the Code.
Questions regarding this announcement
may be directed to Felix Zech in the Of-
fice of Division Counsel/Associate Chief
Counsel (Tax Exempt and Government
Entities) at (202) 622-6080 (not a toll-free
number).
Foundations Status of Certain
Organizations
Announcement 2001–102
The following organizations have
failed to establish or have been unable to
maintain their status as public charities
or as operating foundations. Accord-
ingly, grantors and contributors may not,
after this date, rely on previous rulings
or designations in the Cumulative List
of Organizations (Publication 78), or on
the presumption arising from the filing
of notices under section 508(b) of the
Part IV. Items of General Interest

2001–42 I.R.B.341October 15, 2001
Code. This listing does notindicate that
the organizations have lost their status
as organizations described in section
501(c)(3), eligible to receive deductible
contributions.
Former Public Charities.The follow-
ing organizations (which have been
treated as organizations that are not pri-
vate foundations described in section
509(a) of the Code) are now classified as
private foundations:
A.C. Milan Futbol Club, Plano, TX
Aids Prevention Education and Advocacy
Resource, Austin, TX
Alumni Association of Martin Luther
King, Jr. High School, New York, NY
Anew a Renewal Center for Men and
Women, Los Angeles, CA
Anointed Voices, Corpus Christi, TX
Austin Revitalization Authority,
Austin, TX
Austin Sign Language Theatre Academy,
Austin, TX
Baptist Ministries of South Texas, Inc.,
San Antonio, TX
Beta Education Foundation, Austin, TX
Bible Memory Challenge Ministries,
San Antonio, TX
Bishop College Historical Society, Inc.,
Dallas, TX
Bridge the Gap, Inc., Fort Worth, TX
Buckingham Terrace, Inc., Atlanta, GA
Burleson County Reserve Law
Enforcement Officers Association,
Caldwell, TX
Cadillac Power Hitters Association,
Kaufman, TX
Calvary Center, Inc., Laredo, TX
Centro De Inmigracion, Dallas, TX
CFIDS Walk-A-Thon Committee,
Hicksville, NY
Cherokees of North Texas, Dallas, TX
Childrens Life Link, Inc., Waco, TX
Chinese Broadcasting Network, Inc.,
Richardson, TX
Colorado Museum of Contemporary Arts,
Inc., Denver, CO
Colorado Volunteer Victim Advocate
Program, Arvada, CO
Court Appointed Special Advocates of
Upshur County, Inc., Gilmer, TX
Denton Public School Foundation, Inc.,
Denton, TX
Divine Health Care Systems, Inc.,
San Antonio, TX
East Texas Critical Incident Stress
Management Team, Inc., Tyler, TX
Ecotema, Davis, CA
El Paso Charities Community Chest,
El Paso, TX
El Paso Million Man March Initiative,
Inc., El Paso, TX
El Paso Minority Supplier Development
Council, Inc., El Paso, TX
Elite Credit Services, Inc., Dallas, TX
Emergency Assistance Alliance, Inc.,
Fort Worth, TX
Environmental Mobility, Inc.,
Corpus Christi, TX
Everyman Project, Austin, TX
Fillmore Civic Arts Council, Inc.,
Fillmore, UT
First Motion, Inc., Mokena, IL
Forth Worth Rugby Football Corporation,
Ft. Worth, TX
Foundation for Aquatic Safety and
Training, Dallas, TX
Foundation of Behavior Education
Modification FBEM, Fort Worth, TX
Friends Who Care Foundation,
Georgetown, TX
Gambian Association of Massachusetts,
Somerville, MA
Gamma Education Foundation,
Austin, TX
Gay and Lesbian Leaders Outreach
Project Gallop, Dallas, TX
Good News Music Ministry, Bryan, TX
Grace Vocational Academy, Post, TX
Griggs Foundation, Inc., Dallas, TX
Hatzolah Jerusalem, Inc., Brooklyn, NY
Helping Hands for Life, Inc., Austin, TX
HFJ Community Services, Tacoma, WA
Hispanic Women for Progress,
Big Spring, TX
Houston Musicians Benefit Foundation,
Houston, TX
Human Potential Development Corp.,
Texarkana, TX
Imagination Young Peoples Center for
Science Music and Movement in East
Austin, Austin, TX
Institute for Learning and
Communication Strategies, Inc.,
Austin, TX
Institute of New Physics, Inc.,
Los Angeles, CA
Internet Archive, San Francisco, CA
Jaguar Museum for British Car History a
NJ Non-Profit Corp., Mahwah, NJ
Johnson County Business Development
Corporation, Tecumseh, NE
Joshua Community Development, Inc.,
Joshua, TX
Kathleen Akin Scholarship Fund,
Rockport, TX
Kids Voting California, San Jose, CA
Killeen Amateur Boxing Association,
Kileen, TX
King Preservation Corporation,
Chicago, IL
Knights of Malta Sovereign Order of
Hospitallers of St. John of Jerusalem,
Gallatin, TN
Kosher Kesher, Inc., Brooklyn, NY
KPCH, Inc., Winston-Salem, NC
La Habra High School Volleyball
Boosters, La Habra, CA
La Junta Housing Development
Corporation, La Junta, CO
Lake State Community Housing, Inc.,
St. Joseph, MI
Lake Villa Township Youth Football,
Lake Villa, IL
Lazarus Alliance, Draper, UT
Learning Safari, Great Falls, VA
Lets Help Sunray, Inc., Dumas, TX
Life Match, Waco, TX
Liga Pan Americana Aguilas, Inc.,
San Antonio, TX
Lilies of the Field, Walnut, CA
Lillian J. Robinson Community
Development Corporation, Bryan, TX
Living Word Outreach, Inc.,
Fairburn, GA
Love of Life Pregnancy Center, Inc.,
El Paso, TX
Love on 4 Paws, Ennis, TX
Love the Animals Charitable Trust,
El Cerrito, CA
Maggies Playhouse, Dallas, TX
Manos Extendidas, Kent, WA
Mary Starke Harper Foundation, Inc.,
Tuscaloosa, AL
Massachusetts Vietnam Veterans
Foundation, Inc., W. Springfield, MA
Mercy Wings International, Inc.,
Caddo Mills, TX
Mica League, Inc., Philadelphia, PA
Migala Foundation, Duncanville, TX
Mingeikan USA Tour, Fort Worth, TX
Minnesota Housing Initiative,
Brooklyn Park, MN
Mohawk Area Development Corporation,
Cincinnati, OH
Montgomery Times Foundation, Inc.,
Rockville, MD
Morgantown Lacrosse Club, Inc.,
Morgantown, WV
Morning Mist Ranch, Lubbock, TX
National Sexual Trauma Center, Inc.,
Pass Christian, MS
NCOA Student Civic Action Program,
Inc., Mcghee Tyson, TN

October 15, 20013422001–42 I.R.B.
Neighborhood in Action, Austin, TX
Neighborhoods Acting Together,
San Antonio, TX
New Directions Network, Inc.,
Galveston, TX
New Life Ministries of the Rio Grande
Valley, Inc., Harlingen, TX
New Millennium Educational Institute,
Redwood City, CA
Nicaraguan - American Childrens
Foundation, Inc., Miami, FL
North Bay Volunteer Medical Clinic, Inc.,
Ingleside, TX
North Texas Junior Golf & Education
Foundation, Dallas, TX
Northeast Alamo Community
Development Corporation,
San Antonio, TX
Old East Dallas Neighborhood
Association, Dallas, TX
Omega Education Foundation,
Georgetown, TX
Organization for the Enrichment of
Human Resource, Fairfield, CA
Pacific Actors Company, Sonoma, CA
Parker County Child Protective Services
Board, Weatherford, TX
Pedastal Gardens Residents Association,
Baltimore, MD
Peoples First Intermediate Care, Phoenix, IL
Pioneer Mountain Foundation, Inc.,
Ketchum, ID
Plano Lacrosse Association, Plano, TX
Player Service Foundation, Newport, RI
Playground For All, Inc., Azle, TX
PPBA Scholarship Foundation, Inc.,
Toledo, OH
Pro-Action, El Paso, TX
Professional Outreach Ministries, Inc.,
San Antonio, TX
Project Hope Tenants Assoc., Inc.,
Bronx, NY
Project Wheelbarrow, Inc., Canton, OH
Quitman Foundation of Perpetual
Scholastic Funds, Quitman, TX
Raymine, Dallas, TX
Reaching & Identifying Special Kids-
R.I.S.K., Picayune, MS
Real Solution Living Program,
San Antonio, TX
Reconciled Ministries, Inc.,
San Antonio, TX
Recovery Haven Drug Recovery Center,
Medaryville, IN
Rediscover Opportunity, Inc.,
Louisville, CO
Rhythm of Life Foundation,
Los Angeles, CA
Rifled Arms Historical Association,
Wallkill, NY
Robbie Cave Ministries, Austin, TX
Roger Brown Benefit Fund, Inc.,
Greensboro, NC
Romanian Childrens Connection, Inc.,
Alexandria, VA
Running Creek Animal Refuge, Inc.,
San Antonio, TX
Ryan Dietzman Memorial Scholarship
Fund, Justin, TX
San Antonio Public Theatre,
San Antonio, TX
Sandy Ford Junior Shooters, Inc.,
Streator, IL
Save Our Kids Boxing Association,
Cleburne, TX
Save the World Ministries, Berkeley, CA
Scurry Youth Center, Snyder, TX
Seagraves-Loop Youth Association,
Seagraves, TX
Senior Care Careers, Inc.,
Schaumburg, IL
Shades of the African-American Woman,
Austin, TX
Share the Wealth Ministries,
Mt. Airy, GA
Shenango Presbyterian Senior Housing,
Inc., Oakmount, PA
Sierra Community Healthcare
Foundation, Las Vegas, NV
Silver City Jazz Society, Silver City, NM
Sisters of Safety, Buena Vista, CO
Southeastern Connecticut Mental Health
Authority, Inc., Norwich, CT
Southern Oregon Family Consortium,
Medford, OR
Southside Virginia Wildlife
Rehabilitation Center, Inc.,
South Hill, VA
Special Events for Aids, Inc.,
Sterling Hgts., MI
Springbrook Farm Corporation,
Stow, MA
SSG Richard A. Fitts Veterans Transitional
Center, Inc., Braintree, MA
St. Louis Bombers Rugby Football Club,
Inc., St. Louis, MO
Step-Save the Earth and Its People, Inc.,
Jasper, GA
Street Light Productions, Inc.,
San Antonio, TX
Surgery Education Fund, Ann Arbor, MI
Synergy Local Development
Corporation, Philadelphia, PA
Taskmates, Providence, RI
Taylors Charities Program, Dallas, TX
Telees Kids, Inc., Dallas, TX
Texas Hunter Education Instructors
Association, Inc., Georgetown, TX
Texas Pride Baseball, Fort Worth, TX
Texas Society for Medical Staff Services,
Austin, TX
Texas Socratic Foundation, Austin, TX
Theatre on Elm Street Toes, Dallas, TX
Thomas G. Daugherty Memorial
Scholarship Fund, Sacramento, CA
Three Rivers Housing Development
Corporation, Rome, GA
Transitional Services and Housing, Inc.,
Beavercreek, OH
Twla Gibson Transplant Fund,
Victoria, TX
Tyler County, Woodville, TX
U.I.S.D. Campus Crime Stoppers, Inc.,
Laredo, TX
Umoja, Inc., Fort Worth, TX
Unified Resident Council of Chandler,
Chandler, AZ
Unity Foundation, San Antonio, TX
Unlimited Access Educational Services,
Ann Arbor, MI
UPCOD, Inc., Freer, TX
Vaad Ahavas Chinum, Inc., Baltimore, MD
Venture Outreach International,
Fort Worth, TX
Virology Institute, San Antonio, TX
Visions of North Carolina, Greensboro, NC
Washington Times Foundation, Inc.,
Washington, DC
Weiss & Weiss Aquatics, Austin, TX
Wetstone Integrated Community
Services, San Diego, CA
Where Hearts Can Mend, San Antonio, TX
Women & Youth Supporting Each Other,
Los Angeles, CA
Yucca Corridor Coalition of Property Owners
& Managers, Inc., Hollywood, CA
Zion Arts Institute, Inc., San Antonio, TX
Zions Treatment Center, Inc., Miami, FL
If an organization listed above sub-
mits information that warrants the re-
newal of its classification as a public
charity or as a private operating founda-
tion, the Internal Revenue Service will
issue a ruling or determination letter
with the revised classification as to
foundation status. Grantors and contrib-
utors may thereafter rely upon such rul-
ing or determination letter as provided
in section 1.509(a)–7 of the Income Tax
Regulations. It is not the practice of the
Service to announce such revised classi-
fication of foundation status in the Inter-
nal Revenue Bulletin.

2001–42 I.R.B.iOctober 15, 2001
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 Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Definition of Terms

October 15, 2001ii2001–42 I.R.B.
Numerical Finding List
1
Bulletins 2001–27 through 2001–41
Announcements:
2001–69, 2001–27 I.R.B. 23
2001–70, 2001–27 I.R.B. 23
2001–71, 2001–27 I.R.B. 26
2001–72, 2001–28 I.R.B. 39
2001–73, 2001–28 I.R.B. 40
2001–74, 2001–28 I.R.B. 40
2001–75, 2001–28 I.R.B. 42
2001–76, 2001–29 I.R.B. 67
2001–77, 2001–30 I.R.B. 83
2001–78, 2001–30 I.R.B. 87
2001–79, 2001–31 I.R.B. 97
2001–80, 2001–31 I.R.B. 98
2001–81, 2001–33 I.R.B. 175
2001–82, 2001–32 I.R.B. 123
2001–83, 2001–35 I.R.B. 205
2001–84, 2001–35 I.R.B. 206
2001–85, 2001–36 I.R.B. 219
2001–86, 2001–35 I.R.B. 207
2001–87, 2001–35 I.R.B. 208
2001–88, 2001–36 I.R.B. 220
2001–89, 2001–38 I.R.B. 291
2001–90, 2001–35 I.R.B. 208
2001–91, 2001–36 I.R.B. 221
2001–92, 2001–39 I.R.B. 301
2001–94, 2001–39 I.R.B. 303
2001–95, 2001–39 I.R.B. 303
2001–96, 2001–41 I.R.B. 317
2001–97, 2001–40 I.R.B. 310
2001–98, 2001–41 I.R.B. 317
2001–100, 2001–41 I.R.B. 317
Court Decisions:
2070, 2001–31 I.R.B. 90
Notices:
2001–39, 2001–27 I.R.B. 3
2001–41, 2001–27 I.R.B. 2
2001–42, 2001–30 I.R.B. 70
2001–43, 2001–30 I.R.B. 72
2001–44, 2001–30 I.R.B. 77
2001–45, 2001–33 I.R.B. 129
2001–46, 2001–32 I.R.B. 122
2001–47, 2001–36 I.R.B. 212
2001–48, 2001–33 I.R.B. 130
2001–49, 2001–34 I.R.B. 188
2001–50, 2001–34 I.R.B. 189
2001–51, 2001–34 I.R.B. 190
2001–52, 2001–35 I.R.B. 203
2001–53, 2001–37 I.R.B. 225
2001–54, 2001–37 I.R.B. 225
2001–55, 2001–39 I.R.B. 299
2001–56, 2001–38 I.R.B. 277
2001–57, 2001–38 I.R.B. 279
2001–58, 2001–39 I.R.B. 299
2001–59, 2001–41 I.R.B. 315
2001–60, 2001–40 I.R.B. 304
2001–61, 2001–40 I.R.B. 305
2001–62, 2001–40 I.R.B. 307
2001–63, 2001–40 I.R.B. 308
2001–64, 2001–41 I.R.B. 316
Proposed Regulations:
REG–110311–98, 2001–35 I.R.B. 204
REG–106917–99, 2001–27 I.R.B. 4
REG–103735–00, 2001–35 I.R.B. 204
REG–103736–00, 2001–35 I.R.B. 204
REG–100548–01, 2001–29 I.R.B. 67
REG–106431–01, 2001–37 I.R.B. 272
Railroad Retirement Quarterly Rates:
2001–27, I.R.B. 1
2001–41, I.R.B. 314
Revenue Procedures:
2001–39, 2001–28 I.R.B. 38
2001–40, 2001–33 I.R.B. 130
2001–41, 2001–33 I.R.B. 173
2001–42, 2001–36 I.R.B. 212
2001–43, 2001–34 I.R.B. 191
2001–44, 2001–35 I.R.B. 203
2001–45, 2001–37 I.R.B. 227
2001–46, 2001–37 I.R.B. 263
2001–48, 2001–40 I.R.B. 308
2001–49, 2001–39 I.R.B. 300
Revenue Rulings:
2001–30, 2001–29 I.R.B. 46
2001–33, 2001–32 I.R.B. 118
2001–34, 2001–28 I.R.B. 31
2001–35, 2001–29 I.R.B. 59
2001–36, 2001–32 I.R.B. 119
2001–37, 2001–32 I.R.B. 100
2001–38, 2001–33 I.R.B. 124
2001–39, 2001–33 I.R.B. 125
2001–40, 2001–38 I.R.B. 276
2001–41, 2001–35 I.R.B. 193
2001–42, 2001–37 I.R.B. 223
2001–43, 2001–36 I.R.B. 209
2001–44, 2001–37 I.R.B. 223
2001–47, 2001–39 I.R.B. 293
2001–49, 2001–41 I.R.B. 312
Treasury Decisions:
8947, 2001–28 I.R.B. 36
8948, 2001–28 I.R.B. 27
8949, 2001–28 I.R.B. 33
8950, 2001–28 I.R.B. 34
8951, 2001–29 I.R.B. 63
8952, 2001–29 I.R.B. 60
8953, 2001–29 I.R.B. 44
8954, 2001–29 I.R.B. 47
8955, 2001–32 I.R.B. 101
8956, 2001–32 I.R.B. 112
8957, 2001–33 I.R.B. 125
8958, 2001–34 I.R.B. 183
8959, 2001–34 I.R.B. 185
8960, 2001–34 I.R.B. 176
8961, 2001–35 I.R.B. 194
8962, 2001–35 I.R.B. 201
8963, 2001–35 I.R.B. 197
1
A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 2001–1 through 2001–26
is in Internal Revenue Bulletin 2001–27, dated July
2, 2001.

2001–42 I.R.B.iiiOctober 15, 2001
Finding List of Current Actions on
Previously Published Items
1
Bulletins 2001–27 through 2001–41
Announcements:
2000–48
Modified by
Notice 2001–43, 2001–30 I.R.B. 72
Notices:
98–52
Modified by
Notice 2001–56, 2001–38 I.R.B. 277
99–41
Modified and superseded by
Notice 2001–62, 2001–40 I.R.B. 307
2001–4
Modified by
Notice 2001–43, 2001–30 I.R.B. 72
2001–9
Modified by
Notice 2001–46, 2001–32 I.R.B. 122
2001–15
Supplemented by
Notice 2001–51, 2001–34 I.R.B. 190
2001–42
Modified by
Notice 2001–57, 2001–38 I.R.B. 279
Proposed Regulations:
LR–97–79
Withdrawn by
REG–100548–01, 2001–29 I.R.B. 67
LR–107–84
Withdrawn by
REG–100548–01, 2001–29 I.R.B. 67
REG–110311–98
Supplemented by
T.D. 8961, 2001–35 I.R.B. 194
REG–106917–99
Corrected by
Ann. 2001–86, 2001–35 I.R.B. 207
REG–103735–00
Supplemented by
T.D. 8961, 2001–35 I.R.B. 194
REG–103736–00
Supplemented by
T.D. 8961, 2001–35 I.R.B. 194
REG–107186–00
Corrected by
Ann. 2001–71, 2001–27 I.R.B. 26
REG–130477–00
Supplemented by
Ann. 2001–82, 2001–32 I.R.B. 123
REG–130481–00
Supplemented by
Ann. 2001–82, 2001–32 I.R.B. 123
Revenue Procedures:
83–74
Revoked by
Rev. Proc. 2001–49, 2001–39 I.R.B. 300
Revenue Procedures—Continued:
84–84
Revoked by
Rev. Proc. 2001–49, 2001–39 I.R.B. 300
93–27
Clarified by
Rev. Proc. 2001–43, 2001–34 I.R.B. 191
97–13
Modified by
Rev. Proc. 2001–39, 2001–28 I.R.B. 38
97–19
Modified by
Notice 2001–62, 2001–40 I.R.B. 307
98–44
Superseded by
Rev. Proc. 2001–40, 2001–33 I.R.B. 130
99–27
Superseded by
Rev. Proc. 2001–42, 2001–36 I.R.B. 212
99–49
Modified and amplified by
Rev. Proc. 2001–46, 2001–37 I.R.B. 263
2000–20
Modified by
Notice 2001–42, 2001–30 I.R.B. 70
2000–39
Corrected by
Ann. 2001–73, 2001–28 I.R.B. 40
2001–2
Modified by
Rev. Proc. 2001–41, 2001–33 I.R.B. 173
2001–6
Modified by
Notice 2001–42, 2001–30 I.R.B. 70
Revenue Rulings:
57–589
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
65–316
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
68–125
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
69–563
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
70–379
Obsoleted by
Rev. Rul. 2001–39, 2001–33 I.R.B. 125
74–326
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
78–127
Modified by
Rev. Rul. 2001–40, 2001–38 I.R.B. 276
78–179
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
Revenue Rulings—Continued:
92–19
Supplemented by
Rev. Rul. 2001–38, 2001–33 I.R.B. 124
Treasury Decisions:
8948
Corrected by
Ann. 2001–90, 2001–35 I.R.B. 208
1
A cumulative list of current actions on previously
published items in Internal Revenue Bulletins
2001–1 through 2001–26 is in Internal Revenue
Bulletin 2001–27, dated July 2, 2001.

INTERNAL REVENUE BULLETIN
The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the
Superintendent of Documents when their subscriptions must be renewed.
CUMULATIVE BULLETINS
The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are sold
on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the weekly
Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print
and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the
Superintendent of Documents.
ACCESS THE INTERNAL REVENUE BULLETIN ON THE INTERNET
You may view the Internal Revenue Bulletin on the Internet at www.irs.gov. Select Tax Info for Business at the bottom of the page.
Then select Internal Revenue Bulletins.
INTERNAL REVENUE BULLETINS ON CD–ROM
Internal Revenue Bulletins are available annually as part of Publication 1796 (Tax Products CD–ROM). The CD–ROM can be
purchased from National Technical Information Service (NTIS) on the Internet at www.irs.gov/cdorders(discount for online orders)
or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January.
HOW TO ORDER
Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance,
detach entire page, and mail to the Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250–7954. Please allow two
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WE WELCOME COMMENTS ABOUT THE
INTERNAL REVENUE BULLETIN
If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page
(www.irs.gov) or write to the IRS Bulletin Unit, W:CAR:MP:FP, Washington, DC 20224.
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