Internal Revenue Bulletin 2003-46 (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.

Bulletin No. 2003-46
November 17, 2003
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 2003–110, page 1083.
Stocks and securities; distribution.This ruling concludes that,
in determining whether a distribution of controlled corporation
stock satisfies the business purpose requirement of regulations
section 1.355–2(b), the fact that the distribution avoids gain
recognition under section 311(b) of the Code does not present
a potential for avoidance of federal income tax.
Rev. Rul. 2003–115, page 1052.
Gross income; compensation for injuries
or sickness; disaster
relief payments.Taxpayers are info
rmed of the tax treatment
under sections 61, 104, 130, and 139
of the Code of periodic
payments to claimants of the Septem
ber 11th Victim Compen-
sation Fund.
Rev. Rul. 2003–116, page 1083.
Helicopters.This ruling concludes that a helicopter is not an
airplane for purposes of section 147(e) of the Code which pro-
vides that a private activity bond is not a qualified bond if issued
as part of an issue and any portion of the proceeds of such is-
sue is to be used to provide any airplane, skybox, or other
private luxury box, health club facility, facility primarily used for
gambling, or store the principal business of which is the sale
of alcoholic beverages for consumption off premises.
Rev. Rul. 2003–117, page 1051.
Low-income housing credit; satisfactory bond; “bond factor”
amounts for the period October through December 2003.
This ruling announces the monthly bond factor amounts to be
used by taxpayers who dispose of qualified low-income build-
ings or interests therein during the period October through De-
cember 2003. This ruling also provides a summary of the bond
factor amounts for dispositions occurring during the period Jan-
uary through September 2003.
T.D. 9092, page 1055.
Final regulations under section 61 of the Code provide compre-
hensive guidance on the federal tax treatment of split-dollar life
insurance arrangements. The regulations provide two mutu-
ally exclusive regimes to tax split-dollar life insurance arrange-
ments for federal income, employment, and gift tax purposes.
Under the economic benefit regime, the owner of the life insur-
ance contract is treated as providing current life insurance pro-
tection and other taxable economic benefits to the non-owner
of the contract. Under the loan regime, the non-owner of the life
insurance contract is treated as loaning premium payments to
the owner of the contract. If the loan from the non-owner does
not provide for sufficient interest, the loan is a below-market
loan, and is subject to imputations under section 7872 as mod-
ified by these final regulations.
Announcement 2003–70, page
1090.
The Internal Revenue Service
announces that it will resume rul-
ing on the issue of significa
nt chemical change for synthetic
fuels for purposes of sectio
n29oftheCode.
EXEMPT ORGANIZATIONS
Announcement 2003–69, page 1086.
A list is provided of organizations now classified as private foun-
dations.
(Continued on the next page)
Anno
uncements of Disbarments and Suspensions begin on page 1090.
Finding Lists begin on page ii.

EMPLOYMENT TAX
T.D. 9092, page 1055.
Final regulations under section 61 of the Code provide compre-
hensive guidance on the federal tax treatment of split-dollar life
insurance arrangements. The regulations provide two mutu-
ally exclusive regimes to tax split-dollar life insurance arrange-
ments for federal income, employment, and gift tax purposes.
Under the economic benefit regime, the owner of the life insur-
ance contract is treated as providing current life insurance pro-
tection and other taxable economic benefits to the non-owner
of the contract. Under the loan regime, the non-owner of the life
insurance contract is treated as loaning premium payments to
the owner of the contract. If the loan from the non-owner does
not provide for sufficient interest, the loan is a below-market
loan, and is subject to imputations under section 7872 as mod-
ified by these final regulations.
November 17, 20032003-46 I.R.B.

The IRS Mission
Provide AmericaÊs taxpayers top quality service by helping
them understand and meet their tax responsibilities and by
applying the tax law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bul-
letin 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, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decision
s 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, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the TreasuryÊs Office of the Assistant Sec-
retary (Enforcement).
Part IV.—Items of Gener
al Interest.
This part includes noti
ces of proposed rulemakings, disbar-
ment and suspension l
ists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.*
The content
s 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.
* Beginning with Internal Revenue Bulletin 2003–43, we are publishing the index at the end of the month, rather than at the beginning.
2003-46 I.R.B.November 17, 2003

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 42.—Low-Income
Housing Credit
Low-income housing credit; satisfac-
tory bond; “bond factor” amounts for
the period October through December
2003.This ruling announces the monthly
bond factor amounts to be used by taxpay-
ers who dispose of qualified low-income
buildings or interests therein during the
period October through December 2003.
This ruling also provides a summary of the
bond factor amounts for dispositions oc-
curring during the period January through
September 2003.
Rev. Rul. 2003–117
In Rev. Rul. 90–60, 1990–2 C.B. 3,
the Internal Revenue Service provided
guidance to taxpayers concerning the gen-
eral methodology used by the Treasury
Department in computing the bond factor
amounts used in calculating the amount
of bond considered satisfactory by the
Secretary under § 42(j)(6)oftheInternal
Revenue Code. It further announced that
the Secretary would publishintheInternal
Revenue Bulletin a table of bond factor
amounts for dispositions occurring during
each calendar month.
Rev. Proc. 99–11, 1999–1 C.B. 275,
established a collateral program as an al-
ternative to providing a surety bond for
taxpayers to avoid or defer recapture of
the low-income housing tax credits under
§ 42(j)(6). Under this program, taxpayers
may establish a Treasury Direct Account
and pledge certain United States Treasury
securities to the Internal Revenue Service
as security.
This revenue ruling provides in Table
1 the bond factor amounts for calculat-
ing the amount of bond considered satis-
factory under § 42(j)(6) or the amount of
United States Treasury securities to pledge
in a Treasury Direct Account under Rev.
Proc. 99–11 for dispositions of qualified
low-income buildings or interests therein
during the period October through Decem-
ber 2003. Table 1 also provides a sum-
mary of the bond factor amounts for dispo-
sitions occurring during the period January
through September 2003.
Table 1
Rev. Rul. 2003–117
Monthly Bond Factor Amounts for Dispositions Expressed
As a Percentage of Total Credits
Calendar Year Building Placed in Service
or, if Section 42(f)(1) Election Was Made,
the Succeeding Calendar Year
Month of
Disposition
19891990199119921993199419951996199719981999
Jan ’0316.2330.0441.8351.9360.5060.2460.1260.1160.1860.3960.62
Feb ’0316.2330.0441.8351.9360.5060.0959.9759.9660.0360.2460.47
Mar ’0316.2330.0441.8351.9360.5059.9459.8259.8259.8960.1060.33
Apr ’0316.2330.0441.8351.9360.5059.7959.6859.6859.7559.9660.20
May ’0316.2330.0441.8351.9360.5059.6559.5459.5459.6159.8360.07
Jun ’0316.2330.0441.8351.9360.5059.5159.4059.4059.4859.7059.95
Jul ’0316.2330.0441.8351.9360.5059.3759.2759.2759.3559.5859.83
Aug ’0316.2330.0441.8351.9360.5059.2459.1459.1459.2359.4559.72
Sep ’0316.2330.0441.8351.9360.5059.1159.0159.0259.1059.3459.60
Oct ’0315.4328.5539.7649.3657.5055.5154.8754.3453.8953.5753.29
Nov ’0315.4328.5539.7649.3657.5055.3954.7654.2353.7853.4753.20
Dec ’0315.4328.5539.7649.3657.5055.2854.6454.1253.6853.3853.12
2003-46 I.R.B.1051November 17, 2003

Table 1 (cont’d)
Rev. Rul. 2003–117
Monthly Bond Factor Amounts for Dispositions Expressed
As a Percentage of Total Credits
Calendar Year Building Placed in Service
or, if Section 42(f)(1) Election Was Made,
the Succeeding Calendar Year
Month of
Disposition
2000200120022003
Jan ’0360.8961.5562.4962.68
Feb ’0360.7561.4162.3362.68
Mar ’0360.6261.2762.1962.68
Apr ’0360.4961.1562.0662.68
May ’0360.3761.0461.9662.68
Jun ’0360.2660.9361.8662.68
Jul ’0360.1560.8361.7762.68
Aug ’0360.0560.7461.7062.68
Sep ’0359.9560.6561.6362.68
Oct ’0353.0953.2153.5854.15
Nov ’0353.0153.1553.5454.15
Dec ’0352.9453.0953.5054.15
For a list of bond factor amounts ap-
plicable to dispositions occurring during
other calendar years, see: Rev. Rul. 98–3,
1998–1 C.B. 248; Rev. Rul. 2001–2,
2001–1 C.B. 255; Rev. Rul. 2001–53,
2001–2 C.B. 488; and Rev. Rul. 2002–72,
2002–2 C.B. 759.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Gregory N. Doran of the Office
of Associate Chief Counsel (Passthroughs
and Special Industries). For further in-
formation regarding this revenue ruling,
contact Mr. Doran at (202) 622–3040 (not
a toll-free call).
Section 61.—Gross Income
Defined
26 CFR 1.61–1: Gross income.
(Also § 104, 130, 139, 451; 1.451–2.)
Gross income; compensation for in-
juries or sickness; disaster relief pay-
ments.Taxpayers are informed of the tax
treatment under sections 61, 104, 130, and
139 of the Code of periodic payments to
claimants of the September 11th Victim
Compensation Fund.
Rev. Rul. 2003–115
ISSUES
(1) Are periodic payments made to
a claimant of the September 11
th
Vic-
tim Compensation Fund of 2001 (Fund)
pursuant to an Award Determination
Agreement among the claimant, the Spe-
cial Master, and an assignment company
(Agreement) excluded from the gross in-
come of the claimant under §§ 139(f) and
104(a)(2) of the Internal Revenue Code?
(2) Is the amount transferred by the
United States to an assignment company
pursuant to an Agreement and in exchange
for the assignmentcompany’s assuming
the United States’ obligation to make peri-
odic payments to a claimant excluded from
the gross income of the assignment com-
pany under § 130(a)?
FACTS
On September 11, 2001, terrorist-re-
lated airline crashes occurred in New York,
Virginia, and Pennsylvania. Following the
attacks, the United States Government,
under Title IV of the Air Transportation
Safety and System Stabilization Act (Act),
Pub. L. No. 107–42, 115 Stat. 230 (2001),
created the Fund. The Act authorizes an
award of compensation to any individual
physically injured and to the personal
representative of any individual killed as
a result of the September 11
th
terrorist-re-
lated airline crashes.
To receive an award, a claimant must
file a claim with the Fund no later than
December 22, 2003. The Special Mas-
ter, appointed under section 404 of the
Act to administer the Fund, reviews the
claim and notifies the claimant of any ad-
ditional information needed to process the
claim. Once the Special Master receives
sufficient information to make an initial
evaluation of the claim, the Special Mas-
ter determines the claim to be substantially
complete and notifies the claimant by let-
ter. When a claim is determined to be sub-
stantially complete, the claimant is deemed
to have waived any right to file a civil ac-
tion or be a party to an action in any fed-
eral or state court for damages sustained
November 17, 200310522003-46 I.R.B.

as a result of the September 11, 2001,
airline crashes, except to recover collat-
eral-source obligations or to recover from
a person who is a knowing participant in a
conspiracy to hijack an aircraft.
The Special Master, within 120 days of
his determination that the claimant’s appli-
cation is substantially complete, must de-
termine (1) whether the claimant is enti-
tled to an award and (2) the amount of the
award. Once the Special Master makes an
award determination, the claimant is noti-
fied in writing. The claimant then has 21
days to either accept the award determi-
nation or appeal it by requesting a hear-
ing before the Special Master. Alterna-
tively, a claimant, following the submis-
sion of a claim, may proceed directly to a
hearing process for purposes of determin-
ingtheawardamount.
The amount of an award is affected by
a number of factors including whether the
claimant received an insurance or workers’
compensation award as aresult of either in-
juries incurred by, or the death of, the vic-
tim from the attack; the income of the vic-
tim; the nature, severity and duration of the
victim’s injuries resulting from the attack;
the size of the victim’s household, includ-
ing the number of surviving dependents;
and the victim’s age. The particular needs
of a claimant also may be taken into ac-
count in determining the award amount.
The Special Master allows a claimant
to make an election to receive an award in
the form of periodic payments instead of
a lump sum payment. The claimant, how-
ever, must elect periodic payments before
the Special Master issues the letter noti-
fying the claimant that his or her claim is
substantially complete. If a claimant who
applies for advance benefits as provided
by the Fund desires periodic payments,
the claimant must elect periodic payments
when he or she files the form applying for
advance benefits. An election may not be
revoked by the claimant.
When electing to receive periodic pay-
ments, the claimant may choose to receive
the entire award in periodic payments, or
only a portion of the award in periodic pay-
ments with the remainder to be received
as a single payment. Further, at the time
the claimant elects periodic payments,
the claimant must choose the period of
time over which the payments are to be
made and the frequency of payments dur-
ing that period. For example, a claimant
may choose to receive his or her award in
monthly payments over twenty years or
in monthly payments over the claimant’s
lifetime. Finally, all periodic payments
must be of an equal amount unless the
claimant specifies otherwise at the time he
or she elects to receive periodic payments.
If a claimant chooses to receive all or a
portion of the award in periodic payments,
and if the Special Master determines that
the claimant is entitled to an award, then
the terms of the award are set forth in an
Agreement. Each Agreement sets forth the
amount to be paid and the frequency and
duration of the payments. In addition, an
Agreement may state that, if the claimant
dies before the entire interest is distributed,
the remaining payments are payable to the
claimant’s estate or to a secondary benefi-
ciary duly designated by the claimant dur-
ing the claimant’s lifetime. Each Agree-
ment provides that no payee or beneficiary
shall have the right or power to transfer,
mortgage, encumber or anticipate the pe-
riodic payments, by assignment or other-
wise.
Each Agreement also includes an as-
signment by the Special Master of the
United States’ periodic payment obli-
gation to, and an assumption of that
obligation by, an assignment company in
exchange for a payment from the United
States to the assignment company. Each
Agreement provides that the assignment
company’s periodic payment obligation is
equal to the periodic payment obligation of
the United States prior to the assignment,
and that the periodic payments cannot be
accelerated, deferred, increased, or de-
creased by the claimant or any beneficiary
or payee. Each Agreement allows the as-
signment company to fund its obligation to
make periodic payments through the pur-
chase of an annuity contract that complies
with the requirements set forth in § 130(d)
for a qualified funding asset. Under an
Agreement, the assignment company is
the owner of the annuity, which is subject
to claims of the general creditors of the
assignment company.
LAW AND ANALYSIS
Issue 1
The first issue concerns whether pe-
riodic payments made to a claimant of
the Fund pursuant to an Agreement are
excluded from the gross income of the
claimant under § 139(f) and § 104(a)(2).
Section 61 provides that, except as oth-
erwise provided by the Code, gross income
includes all income from whatever source
derived.
Section 139(f) provides that gross in-
come does not include “any amount re-
ceived as payment under section 406 of the
Air Transportation Safety and System Sta-
bilization Act.” The § 139(f) exclusion ap-
plies to amounts paid to claimants in the
form of a lump sum or periodic payments.
Section 104(a)(2) provides that gross
income does not include the amount of any
damages (other than punitive damages) re-
ceived (whether by suit or agreement and
whether as a lump sum or as periodic pay-
ments) on account of personal physical in-
juries or physical sickness.
Neither § 139(f) nor § 104(a)(2) ex-
cludes from gross income amounts that are
earned from the investment by the claimant
of a lump sum amount received as either
payment under section 406 of the Act or
damages on account of personal physical
injuries or physical sickness, respectively.
If such a lump sum payment is invested for
the benefit of a claimant who has actual or
constructive receipt, or the economic ben-
efit, of the lump sum payment, only the
lump sum payment is excluded from gross
income, and none of the income from the
investment of the lump sum payment is ex-
cludable from the claimant’s gross income.
Rev. Rul. 65–29, 1965–1 C.B. 59.
Section 1.451–2 of the Income Tax
Regulations provides rules relating to
constructive receipt. Under § 1.451–2(a),
an amount is constructively received in
the taxable year in which such amount is
credited to a taxpayer’s account, set apart
for the taxpayer, or otherwise made avail-
able so that the taxpayer may draw upon it
at any time if notice of intention is given.
Income is not constructively received if
the taxpayer’s control of receipt of the
amount is subject to substantial limitations
or restrictions. Section 1.451–2(a).
The economic benefit doctrine, devel-
oped in case law, provides that if a promise
topayanamountisfundedandsecuredby
the payor, and the payee is not required to
do anything other than wait for the pay-
ments, an economic benefit is considered
to have been conferred on the payee and
the amount of such benefit is considered to
2003-46 I.R.B.1053November 17, 2003

have been received. InSproull v. Commis-
sioner, 16 T.C. 244 (1951),aff’d., 194 F.2d
541 (6
th
Cir. 1952), the court found that
an economic benefit had been conferred on
a taxpayer when the taxpayer’s employer
established a trust to compensate the tax-
payer for past services. In 1945, the em-
ployertransferredmoneytothetrusttobe
paid to the taxpayer in 1946 and 1947. The
taxpayer was the trust’s sole beneficiary.
The court held that the taxpayer received
compensation in 1945 in an amount equal
to the value of the amount transferred to
the trust for the taxpayer’s benefit because
such transfer to the trust provided the tax-
payer with an economic benefit.
Not all rights to receive periodic pay-
ments, however, trigger application of the
economic benefit doctrine. Rev. Rul.
79–220, 1979–2 C.B. 74, concludes that a
right to receive certain periodic payments
under the facts of the ruling does not con-
fer an economic benefit on the recipient.
In Rev. Rul. 79–220, a taxpayer entered
into a settlement with an insurance com-
pany for the periodic payment of nontax-
able damages for an agreed period. The
taxpayer was given no immediate right to
a lump sum amount and no control of the
investment of the amount set aside to fund
the insurance company’s obligation. The
insurance company funded its obligation
with an annuity payable directly to the tax-
payer. The insurance company, as owner
of the annuity, had all rights to the annuity
and the annuity was subject to the claims of
the general creditors of the insurance com-
pany. The ruling concludes that all of the
periodic payments are excluded from the
taxpayer’s gross income under § 104(a)(2)
because the taxpayer did not receive, or
have the economic benefit of, the lump
sum amount used to fund the annuity. Fur-
ther, the ruling holds that if the taxpayer
dies before the end of the agreed period,
the payments made to the taxpayer’s estate
under the settlement agreement are also ex-
cludable from the gross income of the es-
tate under § 104(a)(2).
With respect to a claimant of the Fund,
the award claim procedure requires the
claimant to make an irrevocable election
relating to periodic payments while the
claimant’s control of receipt of payments
is subject to substantial limitations or
restrictions. Consequently, the claimant
is not in constructive receipt of a lump
sum amount. Further, no economic ben-
efit of a lump sum has been conferred
on the claimant by the Agreement. The
assignment company making the periodic
payments to the claimant may fund its
obligation with an annuity to which the
assignment company has all rights and
that it continues to own. The periodic pay-
ments under the Agreement are, therefore,
amounts “received as payment under sec-
tion 406 of the Air Transportation Safety
and System Stabilization Act” and thus ex-
cluded from the claimant’s gross income
under § 139(f). Moreover, the payments
are excluded from the claimant’s gross
income under § 104(a)(2) as damages
received on account of personal physical
injuries or physical sickness. Finally,
any payments to a successor beneficiary
pursuant to the Agreement are excludable
from the gross income of the successor
beneficiary under §§ 104(a)(2) and 139(f).
Issue 2
The second issue concerns whether the
amount transferred by the United States
to an assignment company in exchange
for the assignment company assuming the
United States’ obligation to make periodic
payments to a claimant is excluded from
the assignment company’s gross income
under § 130(a). Section 130 provides
tax-favored treatment to certain structured
settlement arrangements. Under § 130(a),
any amount received for agreeing to a
qualified assignment is excluded from
the gross income of the assignee to the
extent such amount does not exceed the
aggregate cost of any qualified funding
assets. Section 130(c) defines a qualified
assignment as any assignment of a liability
to make periodic payments as damages
(whether by suit or agreement) on account
of personal injury or sickness (in a case
involving physical injury or physical sick-
ness), provided the liability is assumed
fromapersonwhoisapartytothesuit
or agreement, and the terms of the assign-
ment satisfy the following requirements—
(1) the periodic payments must be fixed
and determinable as to amount and
time of payment;
(2) the periodi
c payments cannot be
accelerate
d, deferred, increased, or
decreased
by the recipient of such
payments;
(3) the assignee’s obligation on
account of the personal injuries or
sickness must be no greater than
the obligation of the person who
assigned the liability; and
(4) the periodic payments must be
excludable from the gross income
of the recipient under § 104(a)(1)
or (2).
Under § 130(d), a qualified funding
asset means any annuity contract issued
by an insurance company licensed in the
United States, or any obligation of the
United States, meeting the requirements
set forth in § 130(d)(1) through (4).
Each Agreement meets the require-
ments set forth in § 130(c)(1) through (4).
Moreover, the Special Master is consid-
ered a person who is a party to a suit or
agreement because the Fund was created
to compensate the victims of the terrorist
attack. Accordingly, any payment by the
United States to the assignment company
for agreeing to a qualified assignment is
excluded from the assignment company’s
gross income under § 130 to the extent
such amount does not exceed the aggre-
gate cost of any qualified funding assets
purchased by the assignment company to
fund the payment obligation assumed by
it.
HOLDINGS
Under the facts of this revenue ruling:
(1) Periodic payments made to a
claimant of the Fund pursuant to an
Agreement are excluded from the gross
income of the claimant under §§ 139(f)
and 104(a)(2). Similarly, any payments
to an estate or secondary beneficiary pur-
suant to an Agreement are excluded from
the gross income of the successor benefi-
ciary under §§ 104(a)(2) and 139(f).
(2) The amount transferred by the
United States to an assignment company
pursuant to an Agreement and in exchange
for the assignmentcompany’s assuming
the United States’ obligation to make pe-
riodic payments to a claimant is excluded
from the gross income of the assignment
company under § 130(a) to the extent the
amount transferred does not exceed the
aggregate cost of any qualified funding as-
set purchased by the assignment company
to fund the periodic payment obligation.
November 17, 200310542003-46 I.R.B.

GRACE PERIODS FOR CERTAIN
CLAIMANTS
Any claimant of the Fund who has been
notified by the Special Master that his or
her claim is substantially complete (or who
has applied to receive advance benefits)
but who has not made an election relat-
ing to periodic payments (including spec-
ifying the period of time over which the
payments are to be made, the frequency of
such payments, and, if the claimant so de-
sires, a periodic-payment stream other than
equal payments) may make such election
and rely on this revenue ruling provided
the claimant makes his or her election be-
fore the earlier of (1) December 17, 2003,
or (2) the date the Special Master issues the
claimant’s award determination letter.
In addition, a claimant may rely on this
revenue ruling if: (1) before issuance of
the claimant’s award determination letter,
the claimant informed the Special Mas-
ter of the claimant’s wish to receive peri-
odic payments but provided no informa-
tion regarding the period or frequency of
such payments (and, if desired, a peri-
odic-payment stream other than equal pay-
ments); (2) before October 28, 2003, the
Special Master confirmed in writing that
the claimant so informed the Special Mas-
ter; and (3) the claimant provides the ad-
ditional information required to perfect his
or her election by December 2, 2003.
DRAFTING INFORMATION
The author of the revenue ruling is
Shareen S. Pflanz of the Office of As-
sociate Chief Counsel (Income Tax and
Accounting). For further information
regarding this revenue ruling, please call
Shareen Pflanz or Stephen Toomey at
(202) 622–4920 (not a toll-free call).
26 CFR 1.61–22: Taxation of split-dollar life insur-
ance arrangements.
T.D. 9092
DEPARTMENT OF
THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 31, and 602
Split-Dollar Life Insurance
Arrangements
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains final
regulations relating to the income, employ-
ment, and gift taxation of split-dollar life
insurance arrangements. The final regula-
tions provide needed guidance to persons
who enter into split-dollar life insurance
arrangements.
DATES:Effective Date: These regulations
are effective September 17, 2003.
Applicability Dates: For dates of ap-
plicability of the final regulations, see
§§1.61–22(j), 1.83–3(e), 1.83–6(a)(5)(ii),
1.301–1(q)(4), and 1.7872–15(n).
FOR FURTHER INFORMATION
CONTACT: Concerning the section 61
regulations, please contact Elizabeth Kaye
at (202) 622–4920; concerning the sec-
tion 83 regulations, please contact Erinn
Madden at (202) 622–6030; concerning
the section 301 regulations, please contact
Krishna Vallabhaneni at (202) 622–7550;
concerning the section7872regulations,
please contact Rebecca Asta at (202)
622–3930; and concerning the application
of these regulations to the Federal gift
tax, please contact Lane Damazo at (202)
622–3090.
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in these final regulations has been
reviewed and approved by the Office
of Management and Budget in accor-
dance with the Paperwork Reduction Act
(44 U.S.C. 3507) under control number
1545–1792. The collections of informa-
tion are in §1.7872–15(d)(2) and (j)(3)(ii).
Responses to these collections of infor-
mation are required by the IRS to verify
consistent treatment by the borrower and
lender of split-dollar loans with nonre-
course or contingent payments. In addi-
tion, in the case of a split-dollar loan that
provides for nonrecourse payments, the
collections of information are voluntary
and are required to obtain a benefit (that is,
the treatment of a nonrecourse split-dollar
loan as a noncontingent split-dollar loan).
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
control number assigned by the Office of
Management and Budget.
The estimated annual burden per re-
spondent varies from 15 minutes to 30
minutes, depending on individual circum-
stances, with an estimated average of 17
minutes.
Comments concerning the accuracy
of this burden estimate and sugges-
tions for reducing this burden should
be sent to theInternal Revenue Service,
Attn: IRS Reports Clearance Officer,
W:CAR:MP:T:T:SP, Washington, DC
20224, and to theOffice of Manage-
ment and Budget, Attn: Desk Officer for
the Department of the Treasury, Office
of Information and Regulatory Affairs,
Washington, DC 20503.
Books or records relating to this col-
lection of information must be retained as
long as their contents may become mate-
rial in the administration of any internal
revenue law. Generally, tax returns and tax
return information are confidential, as re-
quired by 26 U.S.C. 6103.
BACKGROUND AND
EXPLANATION OF PROVISIONS
1.Summary of the Prior Notices of
Proposed Rulemaking
On July 9, 2002, a notice of proposed
rulemaking (REG–164754–01, 2002–2
C.B. 212 [67 FR 45414]) was published in
theFederal Registerproposing compre-
hensive rules for the income, gift, employ-
ment, and self-employment taxation of
equity and non-equity split-dollar life in-
surance arrangements (the 2002 proposed
regulations). In general, a split-dollar life
2003-46 I.R.B.1055November 17, 2003

insurance arrangement is an arrangement
between two or more parties to allocate
the policy benefits and, in some cases, the
costs of a life insurance contract. Under
an equity split-dollar life insurance ar-
rangement, one party to the arrangement
typically receives an interest in the policy
cash value (or equity) of the life insurance
contract disproportionate to that party’s
share of policy premiums. That party also
typically receives the benefit of current life
insurance protection under the arrange-
ment. Under a non-equity split-dollar life
insurance arrangement, one party typically
provides the other party with current life
insurance protection but not any interest
in the policy cash value.
The 2002 proposed regulations pro-
vide two mutually exclusive regimes
for taxation of split-dollar life insurance
arrangements—a loan regime and an eco-
nomic benefit regime. Under the loan
regime (which is set forth in §1.7872–15
of the 2002 proposed regulations), the
non-owner of the life insurance con-
tract is treated as loaning the amount
of its premium payments to the owner
of the contract. The loan regime gen-
erally governs the taxation of collateral
assignment arrangements. Under the eco-
nomic benefit regime (which is set forth
in §1.61–22(d) through (g) of the 2002
proposed regulations), the owner of the
life insurance contract is treated as provid-
ing economic benefits to the non-owner
of the contract. The economic benefit
regime generally governs the taxation of
endorsement arrangements. The 2002 pro-
posed regulations reserved on the rules for
valuing economic benefits provided to the
non-owner under an equity split-dollar life
insurance arrangement governed by the
economic benefit regime, pending receipt
of comments from interested parties.
On May 9, 2003, a notice of proposed
rulemaking (REG–164754–01, 2003–22
I.R.B. 975 [68 FR 24898]) was published
in theFederal Registerproposing rules
for the valuation of economic benefits
under an equity split-dollar life insurance
arrangement governed by the economic
benefit regime (the 2003 proposed regu-
lations). The 2003 proposed regulations
provide that, in the case of an equity
split-dollar life insurance arrangement, the
value of the economic benefits provided to
the non-owner under the arrangement for
a taxable year equals the cost of any cur-
rent life insurance protection provided to
the non-owner, the amount of policy cash
value to which the non-owner has current
access (to the extent that such amount
was not actually taken into account for a
prior taxable year), and the value of any
other economic benefits provided to the
non-owner (to the extent not actually taken
into account for a prior taxable year).
A public hearing on the 2002 proposed
regulations was held on October 23, 2002,
and a public hearing on the 2003 proposed
regulations was held on July 29, 2003. In
addition, interested parties submitted com-
ments on the 2002 proposed regulations
and on the 2003 proposed regulations.
2.Overview of the Final Regulations
These final regulations provide guid-
ance on the taxation of split-dollar life
insurance arrangements and apply for
purposes of Federal income, employment,
self-employment, and gift taxes. After
consideration of all comments, the 2002
and 2003 proposed regulations are adopted
as amended by this Treasury decision. In
general, the amendments are discussed
below.
Definition of split-dollar life insurance
arrangement
The final regulations generally define a
split-dollar life insurance arrangement as
any arrangement between an owner of a
life insurance contract and a non-owner of
the contract under which either party to the
arrangement pays all or part of the premi-
ums, and one of the parties paying the pre-
miums is entitled to recover (either condi-
tionally or unconditionally) all or any por-
tion of those premiums and such recovery
is to be made from, or is secured by, the
proceeds of the contract. The definition
does not cover the purchase of an insur-
ance contract in which the only parties to
the arrangement are the policy owner and
the life insurance company acting only in
its capacity as issuer of the contract.
The final regulations also retain the spe-
cial rules from the 2002 proposed regu-
lations that treat certain arrangements en-
tered into either in connection with the per-
formance of services or between a corpo-
ration and another person in that person’s
capacity as a shareholder in the corpora-
tion as split-dollar life insurance arrange-
ments regardless of whether the arrange-
ments otherwise satisfy the general defi-
nition of a split-dollar life insurance ar-
rangement. Neither the general rule nor
the special rules cover so-called “key man”
life insurance arrangements under which a
company purchases a life insurance con-
tract to insure the life of a “key” employee
or shareholder but retains all the rights
and benefits of the contract (including the
rights to all death benefits and cash value).
The IRS and Treasury are concerned
that certain arrangements may be inappro-
priately structured to avoid the application
of these regulations (for example, by us-
ing separate life insurance contracts that
are, in substance, one life insurance con-
tract). The Commissioner will use exist-
ing authority to challenge any such trans-
action.
Mutually exclusive regimes
The final regulations retain the ap-
proach of using two mutually exclusive
regimes — an economic benefit regime
and a loan regime — for determining the
tax treatment of split-dollar life insur-
ance arrangements. As under the 2002
proposed regulations, ownership of the
life insurance contract determines which
regime applies. Several commentators
on both the 2002 and the 2003 proposed
regulations argued that the use of the two
mutually exclusive regimes is an artificial
and rigid approach that fails to account
adequately for the economic reality of a
split-dollar life insurance arrangement.
However, the IRS and Treasury believe
that the final regulations, like the 2002
and 2003 proposed regulations, properly
account for the division of the costs and
benefits of a split-dollar life insurance
arrangement.
Several commentators asked that tax-
payers be permitted to elect which regime
would apply to their split-dollar life insur-
ance arrangements. However, in the view
of the IRS and the Treasury, taxpayers ef-
fectively have the ability to elect which
regime will apply by designating one party
or the other as the owner of the life insur-
ance contract.
One commentator asserted that there is
no authority under section 7872 to treat
payments made pursuant to split-dollar life
November 17, 200310562003-46 I.R.B.

insurance arrangements as loans. There-
fore, this commentator recommends that
taxation of split-dollar life insurance ar-
rangements under section 7872 should oc-
cur only if affirmatively elected by the par-
ties to the arrangement. The IRS and Trea-
sury believe there is sufficient authority
to require the application of section 7872
to split-dollar life insurance arrangements.
There is no legislative history indicating
that Congress did not intend section 7872
to apply to payments made pursuant to
these arrangements.
A number of commentators expressed
concern about the possible application of
section 402 of the Sarbanes-Oxley Act
of 2002 (Sarbanes-Oxley), Public Law
107–204, to all or certain split-dollar life
insurance arrangements entered into by
companies subject to Sarbanes-Oxley.
These regulations do not address this is-
sue, as interpretation and administration
of Sarbanes-Oxley fall within the juris-
diction of the Securities and Exchange
Commission.
The final regulations adopt the general
rule in the 2002 proposed regulations for
determining which regime applies to a
split-dollar life insurance arrangement.
The 2002 proposed regulations provided
a special rule that the economic benefit
regime applied to a split-dollar life insur-
ance arrangement if the arrangement is
entered into in connection with the per-
formance of services, and the employee
or service provider is not the owner of the
life insurance contract; or the arrangement
is entered into between a donor and a
donee (for example, a life insurance trust)
and the donee is not the owner of the life
insurance contract. The final regulations
adopt this special rule, but provide that this
rule applies when the employer, service
recipient or donor is the owner.
The final regulations add a rule re-
garding the treatment of a transfer of a
life insurance contract under a split-dol-
lar life insurance arrangement from an
owner to a non-owner when payments
under the arrangement had been treated,
prior to transfer, as split-dollar loans under
§1.7872–15. Under this rule, the economic
benefit regime applies to the split-dollar
life insurance arrangement from the date
of the transfer and the payments made
(both before and after the transfer) are
not treated as split-dollar loans on or after
thedateofthetransfer. The transferor of
the life insurance contract must fully take
into account all economic benefits pro-
vided under the split-dollar life insurance
arrangement.
Owners and non-owners
The final regulations generally retain
the rules in the 2002 proposed regulations
for determining the owner and the non-
owner of the life insurance contract. Thus,
the owner generally is the person named
as the policy owner. If two or more per-
sons are designated as the policy owners,
the first-named person generally is treated
as the owner of the entire contract.
Several commentators argued that de-
termining tax ownership based on whom
the parties name as the policy owner of the
life insurance contract represents a depar-
ture from general tax principles. Commen-
tators suggested that a split-dollar life in-
surance arrangement is like any co-owner-
ship situation in which two or more parties
agree to share in the costs and benefits of
a policy such that each party will be enti-
tled to exercise certain rights with respect
to the underlying policy and will have cer-
tain responsibilities.
The IRS and Treasury disagree with
that argument. Split-dollar life insurance
arrangements are structured in myriad
ways, some formally as loans to the
employee (for example,collateral-assign-
ment arrangements), some formally as
co-ownership arrangements between the
employer and the employee, and some
as arrangements in which the employer
is, in form, the sole owner (for example,
endorsement arrangements). In addition,
split-dollar life insurance arrangements
ordinarily involve division of the benefits
and costs of the life insurance contract,
but the division of benefits ordinarily does
not correspond to the division of costs.
Because the division of the burdens and
benefits of the life insurance contract vary
widely in split-dollar life insurance ar-
rangements, and because title ownership
generally is a factor in determining tax
ownership, it is reasonable to determine
taxownershipbasedonwhoisthenamed
owner of the policy. In addition, this rule
provides a clear objective standard so that
both taxpayers and the IRS can readily
determine which regime applies under the
final regulations.
If two or more persons are named as
policy owners of a life insurance contract
and each person has, at all times, all the in-
cidents of ownership with respect to an un-
divided interest in the contract, those per-
sons are treated as owners of separate con-
tracts for purposes of these regulations (al-
though not for purposes of section 7702
and other rules for the taxation of life in-
surance contracts). An undivided interest
in a life insurance contract consists of an
identical fractional or percentage interest
or share in each right, benefit, and obliga-
tion with respect to the contract. For exam-
ple, if an employer and an employee own
a life insurance contract and share equally
in all rights, benefits and obligations under
the contract, they are treated as owning two
separate contracts; ordinarily neither con-
tract would be treated as part of a split-dol-
lar life insurance arrangement. However,
if the employer and the employee agree
to enter into a split-dollar life insurance
arrangement with respect to what other-
wise would have been treated as the em-
ployer’s (or the employee’s) separate con-
tract, the purported undivided interests will
be disregarded, and the entire arrangement
will be treated as a split-dollar life insur-
ance arrangement. The Commissioner will
consider all of the facts and circumstances
of an arrangement to determine whether
the parties have appropriately character-
ized the arrangement as one involving un-
divided interests and, therefore, not subject
to these regulations.
The final regulations provide attribution
rules for compensatory split-dollar life in-
surance arrangements. Under these rules,
the employer or service recipient will be
treated as the owner of the life insurance
contract if the contract is owned by a mem-
ber of the employer’s controlled group (de-
termined under the rules of sections 414(b)
and 414(c)), a trust described in section
402(b) (sometimes referred to as a “secular
trust”), a grantor trust treated as owned by
the employer (including a rabbi trust), or
a welfare benefit fund (within the meaning
of section 419(e)(1)).
The final regulations retain the special
rule for non-equity split-dollar life insur-
ance arrangements. Under this special
rule, non-equity arrangements entered into
in a compensatory context or a gift context
will be subject to the economic benefit
regime. The final regulations provide
rules for determining the tax treatment
2003-46 I.R.B.1057November 17, 2003

of the arrangement if the parties subse-
quently modify the arrangement so that
it is no longer a non-equity arrangement.
If, immediately after the modification, the
employer, service recipient, or donor is
the owner of the life insurance contract
(determined without regard to the special
rule for non-equity arrangements), the
employer, service recipient, or donor con-
tinues to be treated as the owner of the life
insurance contract (such that the normal
rules of the economic benefit regime for
equity split-dollar life insurance arrange-
ments will apply). If, immediately after
the modification, the employer, service
recipient, or donor is not the owner, the
employer, service recipient, or donor is
treated as having made a transfer of the
contract to the employee, service provider,
or donee as of the date of the modification.
For purposes of these rules, the replace-
ment of a non-equity arrangement with
a successor equity arrangement will be
treated as a modification of the non-equity
arrangement.
3.Taxation Under the Economic Benefit
Regime
a.In general
The final regulations retain the basic
rules for taxation under the economic
benefit regime that had been set forth in
the 2002 and 2003 proposed regulations.
Thus, the final regulations provide that, for
these arrangements, the owner of the life
insurance contract is treated as providing
economic benefits to the non-owner of the
contract, and those economic benefits must
be accounted for fully and consistently by
both the owner and the non-owner. The
value of the economic benefits, reduced by
any consideration paid by the non-owner
to the owner, is treated as provided from
the owner to the non-owner.
The tax consequences of the provision
of economic benefits will depend on the
relationship between the owner and the
non-owner. Thus, the provision of the ben-
efit may constitute a payment of compen-
sation, a distribution under section 301, a
capital contribution, a gift, or a transfer
having a different tax character. The ben-
efit must be taken into account based on
its character. For example, in a split-dol-
lar life insurance arrangement in which an
employer provides an employee with eco-
nomic benefits, the employee would take
those economic benefits into account by
reporting them as compensation on the em-
ployee’s Federal incometaxreturnforthe
year in which the benefits are provided
and the employer would take the economic
benefits into account by reporting them on
the appropriate employment tax and infor-
mation returns. In a split-dollar life insur-
ance arrangement in which a donor pro-
vides economic benefits to an irrevocable
life insurance trust, the donor would take
those economic benefits into account by
reporting them on the Federal gift tax re-
turn required to be filed by the donor; the
trust, however, generally would not be re-
quired to take any action to take the bene-
fits into account because those economic
benefits would be excludable from gross
income under section 102.
Non-Equity Split-Dollar Life Insurance
Arrangements
Under the final regulations, the tax
treatment of a non-equity split-dollar
arrangement generally follows the tax
treatment of a non-equity split-dollar
arrangement under Rev. Rul. 64–328,
1964–2 C.B. 11, and its progeny. The
proposed regulations required that the
average death benefit for the taxable year
be used to compute current life insurance
protection. Commentators objected to the
use of an “average” death benefit. They
explained that the computation of the
average death benefitimposed additional
administrative burdens on life insurance
companies as well as both owners and
non-owners. In addition, the commenta-
tors stated that the proposed regulations
were not clear on how the average death
benefit for the taxable year was to be
determined. As an alternative, the com-
mentators suggested that the death benefit
as of the policy anniversary date would be
an appropriate measure of the death ben-
efit for purposes of determining current
life insurance protection. In response to
these commentators, the final regulations
provide that, subject to an anti-abuse rule,
current life insurance protection is deter-
mined on the last day of the non-owner’s
taxable year unless the parties agree to use
the policy anniversary date. Taxpayers
may change the valuation date with the
consent of the Commissioner.
Equity Split-Dollar Life Insurance
Arrangements
The final regulations generally retain
the rules set out in the 2002 and 2003
proposed regulations for the taxation of
equity split-dollar life insurance arrange-
ments. Therefore, the value of the eco-
nomic benefits provided by the owner to
the non-owner for a taxable year equals the
cost of any current life insurance protec-
tion provided to the non-owner, the amount
of policy cash value to which the non-
owner has current access (to the extent that
such amount was not actually taken into
account for a prior taxable year), and the
value of any other economic benefits pro-
vided to the non-owner (to the extent not
actually taken into account for a prior tax-
able year). The owner and the non-owner
also must account fully and consistently
for any right in, or benefit of, a life insur-
ance contract provided to the non-owner
under an equity split-dollar life insurance
arrangement.
The final regulations provide that the
non-owner has current access to any por-
tion of the policy cash value to which the
non-owner has a current or future right and
that currently is directly or indirectly ac-
cessible by the non-owner, inaccessible to
the owner, or inaccessible to the owner’s
general creditors. As indicated in the pre-
amble of the 2003 proposed regulations,
the IRS and Treasury intend that the con-
cept of ‘‘access’’ be construed broadly to
include any direct or indirect right under
the arrangement allowing the non-owner to
obtain, use, or realize potential economic
value from the policy cash value. Thus, for
example, a non-owner has access to policy
cash value if the non-owner can directly or
indirectly make a withdrawal from the pol-
icy, borrow from the policy, or effect a to-
tal or partial surrender of the policy. Simi-
larly, for example, the non-owner has ac-
cess if the non-owner can anticipate, as-
sign (either at law or in equity), alienate,
pledge, or encumber the policy cash value
or if the policy cash value is available to
the non-owner’s creditors by attachment,
garnishment, levy, execution, or other le-
gal or equitable process. Policy cash value
is inaccessible to the owner if the owner
does not have the full rights to policy cash
valuenormallyheldbyanownerofalife
insurance contract. Policy cash value is
November 17, 200310582003-46 I.R.B.

inaccessible to the owner’s general cred-
itors if, under the terms of the split-dol-
lar life insurance arrangement or by oper-
ation of law or any contractual undertak-
ing, the creditors cannot, for any reason,
effectively reach the policy cash value in
the event of the owner’s insolvency.
Commentators on the 2003 proposed
regulations generally objected to the rule
requiring the non-owner under an equity
arrangement to include in income the
portion of the policy cash value to which
the non-owner has current access. Several
commentators argued that section 72(e)
specifically provides for tax-free inside
build-up under a life insurance contract,
precluding any taxation of policy cash
value to the non-owner prior to a “realiza-
tion event” (such as rollout of the policy).
That argument ignores the plain language
of section 72(e)(1), which states that the
rules of section 72(e) apply only if no
other provision of subtitle A of the Inter-
nal Revenue Code (Code) applies. In the
case of an equity arrangement subject to
the economic benefit regime, the relation-
ship between the owner and the non-owner
and the terms of the arrangement between
them ordinarily make other provisions
of subtitle A applicable, such as section
61(a)(1).
The tax-deferred inside build-up pro-
vided by section 72(e) properly applies
only to the taxpayer that owns the life in-
surancecontract. Iftheownerofthecon-
tract provides any of the rights or bene-
fits under the contract to another taxpayer,
that provision of rights and benefits is sub-
ject to tax under the rules that otherwise
follow from the relationship between the
parties. For example, this result applies
whenever an employer that owns a life in-
surance contract compensates an employee
by giving the employee rights to the policy
cash value. In that case, the employer (as
the owner of the contract) enjoys tax-de-
ferred inside build-up under section 72(e),
but the employee has gross income under
section 61(a)(1) equal to the value of the
economic benefit attributable to the em-
ployee’s rights to the policy cash value.
Thus, the regulations are consistent with
section 72(e).
Other commentators generally ac-
knowledged that the 2003 proposed
regulations properly tax the non-owner
whenever the non-owner has “current ac-
cess” to the policy cash value in an equity
arrangement but argued that the tax should
be imposed under section 83 rather than
under section 61. In effect, these commen-
tators argued that the employee’s current
access to policy cash value should give
rise to transfers of property with respect
to portions of the life insurance contract.
The commentators argued that the pri-
mary difference between this suggested
approach and the approach set out in the
2003 proposed regulations would be the
treatment of inside build-up on amounts
already taxed to the non-owner. Specifi-
cally, the commentators argued that, under
the proposed section 83 approach, inside
build-up on amounts already taxed to
thenon-ownerwouldbetax-freetothe
non-owner under section 72(e); under the
approach of the 2003 proposed regula-
tions, the subsequent inside build-up is
tax-deferred to the owner but not to the
non-owner.
The IRS and Treasury believe that the
approach set out in the 2003 proposed reg-
ulations remains appropriate and so have
not followed the suggestion to adopt a sec-
tion 83 approach. Section 83 applies only
in connection with a transfer of property,
but a non-owner may have currently in-
cludible income by reason of another rule
— such as the doctrines of constructive re-
ceipt, cash equivalence, or economic ben-
efit. It would be inappropriate to limit cur-
rent taxation to circumstances that consti-
tute transfers of property under section 83,
and it would be inappropriate in this con-
text to apply section 83 to circumstances
that give rise to income under other Code
provisions or judicial doctrines.
Several commentators raised questions
about the effect of state law limitations on
access to policy cash value by the owner’s
creditors. These commentators read Ex-
ample 2 in the 2003 proposed regulations
as stating that any such state law restric-
tion would in and of itself cause the non-
owner to have current access to the pol-
icy cash value. Thus, these commenta-
tors argued, the 2003 regulations poten-
tially imposed current tax on the policy
cash value of any non-equity arrangement
where state law limited the rights of the
owner’s creditors toreach the policy cash
value. However, Example 2 indicated that
the owner there had the right to receive
the lesser of the policy cash value or to-
tal premiums; in other words, Example 2
indicated that the arrangement was an eq-
uity arrangement. The final regulations
clarify that the non-owner has current ac-
cess to policy cash value only if, under
the arrangement, the non-owner has a cur-
rent or future right to policy cash value;
the non-owner will not have any such right
in a true non-equity arrangement. If the
non-owner does have such a right, any re-
striction on the owner’s creditors to reach
policy cash value, whether established by
contract or by local law, results in an eco-
nomic benefit to the non-owner.
Several commentators objected to the
rule in the 2003 proposed regulations that
the non-owner has current access to any
portion of the policy cash value that cannot
be accessed by the owner. These com-
mentators argued that as long as policy
cash value can be accessed by the owner’s
creditors in the event of insolvency, the
owner should not be viewed as providing
any economic benefit to the non-owner.
That objection, however, overlooks the
economic reality of an equity split-dollar
life insurance arrangement. If the owner
commits funds to a life insurance contract
andundertakesthatitwillnotwithdraw
those funds from the insurance contract,
the amounts so committed do not remain
a general asset of the owner. The owner
of the life insurance contract in such an
arrangement has parted with the owner-
ship and use of the funds for the benefit of
the non-owner. This contrasts with an ir-
revocable rabbi trust, where the employer
effectively remains the tax owner of the
assets held by the trustee and the rabbi
trust assets may still be (and very often
are) invested in the employer’s business.
In response to the suggestions of
commentators, the final regulations pro-
vide that the policy cash value, like the
amount of current life insurance protec-
tion, is determined as of the last day of
the non-owner’s taxable year unless the
parties agree to use the policy anniver-
sary date. The final regulations retain
the anti-abuse rule preventing the parties
from manipulating the policy cash value
for purposes of determining the value of
the economic benefit that the non-owner
must take into account and extend that rule
to the value of the current life insurance
protection.
Taxpayers should note that, in certain
cases, a separate tax rule may require a
non-owner to include an amount in gross
2003-46 I.R.B.1059November 17, 2003

income under an equity split-dollar life
insurance arrangement at a time earlier
than would be required under these regu-
lations. For example, section 457(f) gen-
erally requires an employee of a tax-ex-
empt organization (other than a church or-
ganization under section 3121(w)(3)) or of
a state or local government to include de-
ferred compensation in gross income when
the employee’s rights to the deferred com-
pensation are not subject to a substantial
risk of forfeiture. An equity split-dol-
lar life insurance arrangement governed by
the economic benefit regime constitutes a
deferred compensation arrangement. Ac-
cordingly, an employee of a tax-exempt or-
ganization or of a state or local government
may have to include an amount in gross in-
come attributable to an equity split-dollar
life insurance arrangement even if the em-
ployee does not have current access to the
policy cash value under these regulations.
Other Tax Consequences
These final regulations retain the rule of
the 2002 proposed regulations that the non-
owner has no investment in the contract
under section 72(e) prior to a transfer of
the contract. The final regulations also
retain the rule that any amount paid by the
non-owner to the owner for any economic
benefit is included in the owner’s gross
income.
Several commentators objected to the
rule providing no investment in the con-
tract to the non-owner for amounts paid
to the owner. They argued that section
72(e)(6) provides for such investment in
the contract. Commentators also objected
to the rule requiring that the owner include
in gross income any amount paid by the
non-owner. These commentators argued
that the owner does not have an accession
to wealth as a result of the non-owner’s
payments because such payments ordinar-
ily are made to fulfill the non-owner’s obli-
gation under the split-dollar life insurance
arrangement to pay part of the premiums
of the life insurance contract.
The regulations generally treat only one
person as the owner of the life insurance
contract. Because only the owner of a
life insurance contract can have an invest-
ment in that contract, a non-owner em-
ployee cannot have basis in the contract
for any of the costs of current life insur-
ance protection. In addition, such costs
should not be included in the non-owner’s
basis or investment in the contract if and
when the non-owner becomes the owner of
the contract because those payments were
made for annual life insurance protection,
which protection was exhausted prior to
the non-owner’s acquisition of the con-
tract. Similarly, the fact that the split-dol-
lar life insurance arrangement may require
the non-owner to reimburse the owner for
the cost of the death benefit protection pro-
vided to the non-owner does not mean that
such payment is not income to the owner.
In these cases, the owner is “renting” out
part of the benefit of the life insurance con-
tract to the non-owner for consideration;
such consideration constitutes income to
the owner.
b.Taxation of amounts received under the
life insurance contract
The final regulations retain the rule in
the 2002 proposed regulations that any
amount received under the life insurance
contract (other than an amount received
by reason of death) and provided, directly
or indirectly, to the non-owner is treated
as though paid by the insurance company
to the owner and then by the owner to the
non-owner. As under the 2002 proposed
regulations, this rule applies to certain pol-
icy loans (referred to in the regulations as
“specified policy loans”). Although sev-
eral commentators objected to this treat-
ment of policy loans, the IRS and Treasury
believe that the rule is necessary to ensure
that parties to a split-dollar life insurance
arrangement do not avoid current taxation
of the non-owner with respect to amounts
provided to the non-owner through the
contract.
The final regulations retain the rule
that section 101(a) applies to exclude
death benefit proceeds paid to a bene-
ficiary (other than the owner of the life
insurance policy) from the gross income
of the beneficiary only to the extent such
amount is allocable to current life insur-
ance protection provided to the non-owner
under the split-dollar life insurance ar-
rangement, the cost of which was paid by
the non-owner, or the value of which the
non-owner actually took into account as an
economic benefit provided by the owner
to the non-owner. Commentators objected
to this rule, arguing that the section 101(a)
exclusion extends to the entire amount of
death benefit proceeds paid on the death
of the insured. They asserted that there is
no authority to limit the exclusion to death
proceeds allocable to current life insur-
ance protection provided to the non-owner
pursuant to the split-dollar life insurance
arrangement, the cost of which was paid
by the non-owner, or the value of which
the non-owner actually took into account.
The IRS and Treasury disagree with
that argument. Under the regulations, the
owner is treated as providing economic
benefits to the non-owner. Although the
section 101(a) exclusion extends to the en-
tire amount of death benefit proceeds, the
IRS and Treasury believe that only the
amount of the death benefit proceeds at-
tributable to the current life insurance pro-
tection for which the non-owner paid or
which the non-ownertook into account un-
der these regulations is excludable from
the income of the non-owner’s estate or
designated beneficiary.
To the extent the non-owner has nei-
ther paid for nor taken into account the
current life insurance protection, the pro-
ceeds paid to the estate or designated bene-
ficiary of the non-owner is a separate trans-
fer of cash that is not shielded from tax by
the section 101(a) exclusion. Specifically,
those proceeds are deemed payable to the
owner, and are excluded from the owner’s
income by reason of the section 101(a) ex-
clusion,andthenpaidbytheownertothe
non-owner’s beneficiary (whether or not
paid to the beneficiary directly by the in-
surance company) in a transfer to be taken
into account under these regulations.
The character of death benefit proceeds
transferred or deemed transferred by the
owner to the non-owner is determined
by the relationship between the owner
and the non-owner. Thus, death benefit
proceeds received by the beneficiary of
a shareholder who is a non-owner that
were paid or payable to a corporation will
be treated as a taxable distribution to the
shareholder. The same principle applies
where death benefit proceeds under a life
insurance contract subject to a split-dollar
life insurance arrangement are payable to
a beneficiary of a service provider who is
a non-owner, except that the death benefit
proceeds would constitute a compensation
payment to the service provider for past
services rather than a corporate distri-
bution. This treatment is similar to the
situation in Rev. Rul. 61–134, 1961–2
November 17, 200310602003-46 I.R.B.

C.B. 250, which also denied exclusion
under section 101(a) to death benefits paid
under a corporate-owned life insurance
policy. In Rev. Rul. 61–134, various
shareholders were the beneficiaries of a
corporate-owned life insurance policy by
reason of their capacity as shareholders.
The ruling concluded that the death bene-
fit proceeds received by the shareholders
directly from the insurer constituted a
taxable distribution of property from the
corporation to the shareholders, even
though the proceeds would have been
excludable from the corporation’s income
if they had been paid directly to the cor-
poration.
c.Transfer of life insurance contract to
the non-owner
The final regulations follow the 2002
proposed regulations in determining the
tax treatment of a transfer of the life in-
surance contract from the owner to the
non-owner. Consistent with the general
rule for determining ownership, the final
regulations provide that a transfer of a life
insurance contract (or an undivided inter-
est therein) underlying a split-dollar life
insurance arrangement occurs on the date
that the non-owner becomes the owner of
the entire contract (or the undivided inter-
est therein). Unless and until ownership of
the contract is formally changed, the owner
will continue to be treated as the owner for
all Federal income, employment, and gift
tax purposes. The fair market value of an
undivided interest must be the proportion-
ate share of the fair market value of the
entire contract without regard to any dis-
counts or other arrangements between the
parties.
After a transfer of an entire life insur-
ance contract, the transferee generally be-
comes the owner for Federal income, em-
ployment, and gift tax purposes, includ-
ing for purposes of these final regulations.
Thus, if the transferor pays premiums after
thetransfer,thepaymentofthosepremi-
ums may be includible in the transferee’s
gross income if the payments are not split-
dollar loans under §1.7872–15. Alterna-
tively, the arrangement will be subject to
the loan regime if the payments constitute
split-dollar loans under §1.7872–15.
4.Taxation Under the Loan Regime
a.In general
The final regulations generally adopt
the rules of the 2002 proposed regulations
for the loan regime. Under §1.7872–15,
a payment made pursuant to a split-dol-
lar life insurance arrangement is a split-
dollar loan and the owner and non-owner
are treated, respectively, as borrower and
lender if (i) the payment is made either
directly or indirectly by the non-owner to
the owner; (ii) the payment is a loan under
general principles of Federal tax law or, if
not a loan under general principles of Fed-
eral tax law, a reasonable person would ex-
pect the payment to be repaid in full to the
non-owner (whether with or without inter-
est); and (iii) the repayment is to be made
from, or is secured by, either the policy’s
death benefit proceeds or its cash surren-
der value, or both.
Commentators questioned whether the
additional standard (“if not a loan under
general principles of Federal tax law, a
reasonable person would expect the pay-
ment to be repaid in full to the non-owner
(whether with or without interest)”) is
necessary. The IRS and Treasury recog-
nize that, in the earlier years during which
a split-dollar life insurance arrangement
is in effect, policy surrender and load
charges may significantly reduce the pol-
icy’s cash surrender value, resulting in
under-collateralization of a non-owner’s
right to be repaid its premium payments.
Nevertheless, so long as a reasonable per-
son would expect the payment to be repaid
in full, the payment is a split-dollar loan
under §1.7872–15, rather than a trans-
fer under §1.61–22(b)(5) on the date the
payment is made. However, the rules in
§1.7872–15(a)(2) do not cause a payment
to be treated as a loan for Federal tax pur-
poses if, because of an agreement between
the owner and non-owner, the arrangement
does not provide for repayment by the
owner to the non-owner. For example, if a
non-owner makes a payment purported to
be a split-dollar loan to an owner, and the
non-owner and owner enter into a separate
agreement providing that the non-owner
will make a transfer to the owner in an
amount sufficient to repay the purported
split-dollar loan, §1.7872–15(a)(2) will
not cause the payment to be treated as a
loan. See §1.61–22(b)(5) for the treatment
of payments by a non-owner that are not
split-dollar loans. The final regulations in-
clude a new rule under §1.7872–15(a)(4)
that disregards certain stated interest if
such interest is to be paid directly or indi-
rectly by the lender (or person related to
the lender).
Under §1.7872–15, each payment un-
der a split-dollar life insurance arrange-
ment is treated as a separate loan for Fed-
eral tax purposes. Commentators have
suggested that treating each payment as a
separate loan will be difficult to administer
and overly burdensome for certain taxpay-
ers and have suggested allowing an elec-
tion to treat all payments made during a
single year (or single calendar quarter) as
one loan (made on a specified date during
the year). However, the final regulations
adopt the approach in the 2002 proposed
regulations that each premium payment is
treated as a separate loan. Treating sepa-
rate extensions of credit as separate loans
is consistent with the 1985 proposed reg-
ulations under section 7872 and the leg-
islative history of section 7872, and most
accurately accounts for the benefits pro-
vided by the lender to the borrower when
the loans are below-market.
If a payment on a split-dollar loan is
nonrecourse to the borrower and the loan
does not otherwise provide for contingent
payments, §1.7872–15 treats the loan
as a split-dollar loan that provides for
contingent payments unless the parties
to the split-dollar life insurance arrange-
ment provide a written representation with
respect to the loan. In response to a com-
mentator, the final regulations delete the
requirement in the proposed regulations
that a nonrecourse split-dollar loan pro-
vide for interest payable at a stated rate.
If a split-dollar loan does not provide
for sufficient interest, the loan is a be-
low-market split-dollar loan subject to sec-
tion 7872 and §1.7872–15. If the split-
dollar loan provides for sufficient interest,
then, except as provided in §1.7872–15,
the loan is subject to the general rules for
debt instruments (including the rules for
OID). In general, interest on a split-dol-
lar loan is not deductible by the borrower
under sections 264 and 163(h). Section
1.7872–15 provides special rules for split-
dollar loans that provide for certain vari-
able rates of interest, contingent interest
payments, and lender or borrower options.
Section 1.7872–15 also provides rules for
2003-46 I.R.B.1061November 17, 2003

below-market split-dollar loans with indi-
rect participants.
If a split-dollar loan is a below-market
loan, then, in general, the loan is recharac-
terized as a loan with interest at the appli-
cable Federal rate (AFR), coupled with an
imputed transfer by the lender to the bor-
rower. The timing, amount, and charac-
terization of the imputed transfers between
the lender and borrower of the loan will
depend upon the relationship between the
lender and the borrower (for example, the
imputed transfer is generally characterized
as a compensation payment if the lender is
the borrower’s employer), and whether the
loan is a demand loan or a term loan.
b.Special rules for certain term loans
Special rules are provided for split-dol-
lar term loans payable upon the death of
an individual, certain split-dollar term
loans that are conditioned on the future
performance of substantial services by an
individual, and gift split-dollar term loans.
Under §1.7872–15, these split-dollar loans
are split-dollar term loans for purposes of
determining whether the loan provides for
sufficient interest. However, if the loan
does not provide for sufficient interest
when the loan is made, forgone interest is
determined on the loan annually similar to
a split-dollar demand loan. Commentators
requested clarification on whether the rate
used for purposes of imputation under
§1.7872–15(e)(5) for these split-dollar
loans is the AFR for the month in which
the loan is made (redetermined annually)
or the AFR as of the month in which the
loan is made (determined on the date the
loan is made). The rate used to determine
the amount of forgone interest each year
is the AFR based on the term of the loan,
determined on the date the split-dollar loan
is made, and the rate is not redetermined
annually.
c.Split-dollar loans with stated interest
that is subsequently waived, cancelled or
forgiven
If a split-dollar loan provides for stated
interest that is subsequently waived, can-
celled or forgiven, appropriate adjustments
are required to be made by the parties
to reflect the difference between the in-
terest payable at the stated rate and the
interest actually paid by the borrower at
that time. Further, the final regulations
provide that, if stated interest is subse-
quently waived, cancelled or forgiven, an
amount is treated as retransferred from the
lender to the borrower. The final regu-
lations add a new rule under which this
amount generally is increased by a de-
ferral charge. The final regulations pro-
vide a new rule that a payment by the
lender to the borrower that, in substance,
is a waiver, cancellation or forgiveness is
treated as a waiver, cancellation, or for-
giveness under the final regulations. The
final regulations also provide a new rule
that, if a split-dollar loan is nonrecourse
and the parties to the split-dollar life insur-
ance arrangement had made the represen-
tation under §1.7872–15(d)(2), although
adjustments are required to be made by the
parties if the interest paid on the split-dol-
lar loan is less than the interest payments
required under the split-dollar loan if all
payments were made, a deferral charge is
not imposed.
d.Payment ordering rules
Payments made by a borrower to a
lender pursuant to a split-dollar life in-
surance arrangement are applied in the
following order: to accrued but unpaid
interest (including any OID) on all out-
standing split-dollar loans in the order the
interest accrued; to principal on the out-
standing split-dollar loans in the order in
which the loans were made; to payments
of amounts previously paid by the lender
pursuant to the split-dollar life insurance
arrangement that were not reasonably
expected to be repaid; and to any other
payment with respect to a split-dollar life
insurance arrangement. One commentator
suggested limiting the payments to which
the payment ordering rule applies to those
that are made to or for the benefit of the
lender. The final regulations adopt this
suggestion in the payment ordering rule in
§1.7872–15(k).
e.Employment taxes and self-employment
tax
An imputed transfer under §1.7872–15
that is treated as an imputed transfer of
compensation will haveconsequences for
the Federal Insurance Contributions Act
(FICA) and the Federal Unemployment
Tax Act (FUTA) if the adjustment repre-
sents wages to the borrower. In response
to questions regarding the consequences
of an imputed transfer for employment and
self-employment tax purposes, the regu-
lations under sections 1402(a), 3121(a),
3231(e), and 3306(b) were clarified to ref-
erence §1.7872–15 as well as §1.61–22.
5.Gift Tax Treatment of Split-Dollar Life
Insurance Arrangements
The final regulations apply for gift tax
purposes, including private split-dollar life
insurance arrangements. Thus, if an ir-
revocable life insurance trust is the owner
ofthelifeinsurancecontract underlying
the split-dollar life insurance arrangement,
and a reasonable person would expect that
the donor, or the donor’s estate, will re-
cover an amount equal to the donor’s pre-
mium payments, those premium payments
are treated as loans made by the donor to
the trust and are subject to §1.7872–15. In
such a case, payment of a premium by the
donor is treated as a split-dollar loan to the
trust in the amount of the premium pay-
ment. If the loan is repayable upon the
death of the donor, the term of the loan is
the donor’s life expectancy determined un-
der the appropriate table under §1.72–9 as
of the date of the payment and the value
of the gift is the amount of the premium
payment less the present value (determined
under section 7872 and §1.7872–15) of the
donor’s right to receive repayment. If,
however, the donor makes premium pay-
ments that are not split-dollar loans, then
the premium payments are governed by
general gift tax principles. In such a case,
with each premium payment, the donor is
treated as making a gift to the trust equal
to the amount of that payment.
Different rules apply, however, if the
donor is treated under §1.61–22(c) as the
owner of the life insurance contract un-
derlying the split-dollar life insurance ar-
rangement. Under these circumstances,
the donor is treated as making a gift to the
trust. The value of the gift is the value of
the economic benefits provided to the trust,
less the amount of any premium paid by
the trustee. For example, assume that un-
der the terms of the split-dollar life insur-
ance arrangement, on termination of the ar-
rangement or the donor’s death, the donor
or donor’s estate is entitled to receive an
amount equal to the greater of the aggre-
gate premiums paid by the donor or the
cash surrender value of the contract. In this
case, the donor makes a gift to the trust
November 17, 200310622003-46 I.R.B.

equal to the cost of the current life insur-
ance protection provided to the trust less
any premium amount paid by the trustee.
(Thus, a payment by the donor will not
constitute a gift if the trust pays the portion
of the premium equal to the cost of the cur-
rent life insurance protection and the donor
pays the balance of the premium.) On the
other hand, if the donor or the donor’s es-
tate is entitled to receive an amount equal
to the lesser of the aggregate premiums
paid by the donor, or the cash surrender
value of the contract, the amount of the
economic benefits provided to the trust by
the donor equals the cost of any current life
insurance protection provided to the trust,
the amount of policy cash value to which
the trust has current access (to the extent
that such amount was not actually taken
into account for a prior taxable year), and
the value of any other economic benefits
provided to the trust (to the extent not ac-
tually taken into account for a prior taxable
year). The value of the donor’s gift of eco-
nomic benefits equals the value of those
economic benefits provided to the trust for
the year minus the amount of premiums
paid by the trustee.
As discussed earlier, the final regula-
tions treat the donor as the owner of a
life insurance contract where the donee
is named as the policy owner if, under
the split-dollar life insurance arrangement,
the only economic benefit provided to the
donee by the donor under the arrangement
is the value of current life insurance protec-
tion. Any amount paid by a donee, directly
or indirectly, to the donor for such current
life insurance protection would generally
be included in the donor’s gross income.
Where the donor is the owner of the
life insurance contract that is part of the
split-dollar life insurance arrangement,
amounts received by the irrevocable in-
surance trust (either directly or indirectly)
under the contract (for example, as a
policy owner dividend or proceeds of a
specified policy loan) are treated as gifts
by the donor to the irrevocable insurance
trust as provided in §1.61–22(e). The
donor must also treat as a gift to the trust
the amount set forth in §1.61–22(g) upon
the transfer of the life insurance contract
(or undivided interest therein) from the
donor to the trust.
The gift tax consequences of the trans-
fer of an interest in a life insurance con-
tract to a third party will continue to be de-
termined under established gift tax princi-
ples notwithstandingwho is treated as the
owner of the life insurance contract un-
der the final regulations. See, for exam-
ple, Rev. Rul. 81–198, 1981–2 C.B. 188.
Similarly, for estate tax purposes, regard-
less of who is treated as the owner of a
life insurance contract under the final reg-
ulations, the inclusion of the policy pro-
ceeds in a decedent’s gross estate will con-
tinue to be determined under section 2042.
Thus, the policy proceeds will be included
in the decedent’s grossestate under section
2042(1) if receivable by the decedent’s ex-
ecutor, or under section 2042(2) if the pol-
icy proceeds are receivable by a benefi-
ciary other than the decedent’s estate and
the decedent possessed any incidents of
ownership with respect to the policy. One
commentator requested that these regula-
tions address the extent to which a dece-
dent’s interest in a co-owned policy is in-
cluded in that decedent’s gross estate un-
der section 2042, but the IRS and Treasury
believe that issue is beyond the scope of
these regulations and may be addressed in
future guidance.
6.Effective Date and Obsolescence of
Prior Guidance
These final regulations apply to any
split-dollar life insurance arrangement
entered into after September 17, 2003.
Additionally, these final regulations apply
to any split-dollar life insurance arrange-
ment entered into on or before September
17, 2003, if the arrangement is materi-
ally modified after September 17, 2003.
However, a split-dollar life insurance ar-
rangement that is otherwise described in
Section IV, Paragraph 4 of Notice 2002–8,
2002–1 C.B. 398, will not be treated as
materially modified for these purposes if
the change in the split-dollar life insurance
arrangement is made solely to comply
with Section IV, Paragraph 4 of Notice
2002–8.
These final regulations provide a non-
exclusive list of changes that will not result
in a material modification for purposes of
the effective date. For example, the final
regulations provide that a change solely in
the mode of premium payment or a change
solely in the interest rate payable on a pol-
icy loan under the life insurance contract
will not be treated as a material modifica-
tion.
The 2002 and 2003 proposed regula-
tions provided rules under which taxpay-
ers were permitted to rely on the 2002
and 2003 proposed regulations for arrange-
ments entered into on or before Septem-
ber 17, 2003. This reliance also was in-
tended to be available in circumstances un-
der which taxpayers relied on the proposed
regulations to determine that the arrange-
ment would not be subject to the proposed
regulations (for example, if the arrange-
ment does not fall within the definition of
a split-dollar life insurance arrangement).
Concurrent with the publication of
these final regulations in theFederal Reg-
ister, the IRS and Treasury are issuing
Rev. Rul. 2003–105, 2003–40 I.R.B.
696, to obsolete certain revenue rulings
with respect to split-dollar life insurance
arrangements enteredintoormaterially
modified after September 17, 2003.
Special Analyses
It has been determined that this Treasury
decision is not a significant regulatory ac-
tion as defined in Executive Order 12866.
Therefore, a regulatory flexibility assess-
ment is not required. It is hereby certi-
fied that the collection of information re-
quirements in these regulations will not
have a significant economic impact on a
substantial number of small entities. This
certification is based on the fact that the
regulations merely require a taxpayer to
prepare a written representation that con-
tains minimal information (if the loan pro-
vides for nonrecourse payments) or a pro-
jected payment schedule (if the loan pro-
vides for contingent payments). In addi-
tion, the preparation of these documents
should take no more than .28 hours per tax-
payer. Therefore, a Regulatory Flexibility
Analysis under the Regulatory Flexibility
Act (5 U.S.C. chapter 6) is not required.
Pursuant to section 7805(f) of the Code,
the notice of proposed rulemaking preced-
ing this regulation was submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business. The Chief
Counsel for Advocacy did not submit any
comments on the regulations.
2003-46 I.R.B.1063November 17, 2003

Drafting Information
The principal author of these final reg-
ulations are Rebecca Asta of the Office
of Associate Chief Counsel (Financial
Institutions and Products), Lane Damazo
of the Office of Associate Chief Counsel
(Passthroughs and Special Industries),
Elizabeth Kaye of the Office of Asso-
ciate Chief Counsel (Income Tax and
Accounting), Erinn Madden of the Office
of Associate Chief Counsel (Tax-Exempt
and Government Entities), and Krishna
Vallabhaneni of the Office of Associate
Chief Counsel (Corporate). However,
other personnel from the IRS and Trea-
sury Department participated in their
development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1, 31, and
602 are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.7872–15also issued under 26
U.S.C. 1275 and 7872. * * *
Par. 2. Section 1.61–2 is amended by:
1. Redesignating paragraphs (d)(2)
(ii)(a)and(b) as paragraphs (d)(2)(ii)(A)
and (B), respectively.
2. Adding two sentences immediately
following the second sentence in newly
designated paragraph (d)(2)(ii)(A).
The additions read as follows:
§1.61–2 Compensation for services,
including fees, commissions, and similar
items.
*****
(d) * * *
(2) * * *
(ii)(A)Cost of life insurance on the life
of the employee. ***Forexample,if
an employee or independent contractor is
the owner (as defined in §1.61–22(c)(1))
of a life insurance contract and the pay-
ments with regard to such contract are not
split-dollar loans under §1.7872–15(b)(1),
the employee or independent contractor
must include in income the amount of
any such payments by the employer or
service recipient with respect to such con-
tract during any year to the extent that the
employee’s or independent contractor’s
rights to the life insurance contract are
substantially vested (within the meaning
of §1.83–3(b)). This result is the same
regardless of whether the employee or in-
dependent contractor has at all times been
the owner of the life insurance contract or
the contract previously has been owned by
the employer or service recipient as part of
a split-dollar life insurance arrangement
(as defined in §1.61–22(b)(1) or (2)) and
was transferred by the employer or service
recipient to the employee or independent
contractor under §1.61–22(g). * * *
*****
Par. 3. Section 1.61–22 is added to read
as follows:
§1.61–22 Taxation of split-dollar life
insurance arrangements.
(a)Scope—(1)In general. This sec-
tion provides rules for the taxation of a
split-dollar life insurance arrangement for
purposes of the income tax, the gift tax,
the Federal Insurance Contributions Act
(FICA), the Federal Unemployment Tax
Act (FUTA), the Railroad Retirement Tax
Act (RRTA), and the Self-Employment
Contributions Act of 1954 (SECA). For
the Collection of Income Tax at Source
on Wages, this section also provides
rules for the taxation of a split-dollar life
insurance arrangement, other than a pay-
ment under a split-dollar life insurance
arrangement that is a split-dollar loan
under §1.7872–15(b)(1). A split-dollar
life insurance arrangement (as defined in
paragraph (b) of this section) is subject
to the rules of paragraphs (d) through (g)
of this section, §1.7872–15, or general
tax rules. For rules to determine which
rules apply to a split-dollar life insurance
arrangement, see paragraph (b)(3) of this
section.
(2)Overview. Paragraph (b) of this sec-
tion defines a split-dollar life insurance ar-
rangement and provides rules to determine
whether an arrangement is subject to the
rules of paragraphs (d) through (g) of this
section, §1.7872–15, or general tax rules.
Paragraph (c) of this section defines cer-
tain other terms. Paragraph (d) of this sec-
tion sets forth rules for the taxation of eco-
nomic benefits provided under a split-dol-
lar life insurance arrangement. Paragraph
(e)ofthissectionsetsforthrulesforthe
taxation of amounts received under a life
insurance contract that is part of a split-
dollar life insurance arrangement. Para-
graph (f) of this section provides rules for
additional tax consequences of a split-dol-
lar life insurance arrangement, including
the treatment of death benefit proceeds.
Paragraph (g) of this section provides rules
for the transfer of a life insurance contract
(or an undivided interest in the contract)
that is part of a split-dollar life insurance
arrangement. Paragraph (h) of this section
provides examples illustrating the applica-
tion of this section. Paragraph (j) of this
section provides the effective date of this
section.
(b)Split-dollar life insurance arrange-
ment—(1)In general. A split-dollar life
insurance arrangement is any arrangement
between an owner and a non-owner of a
life insurance contract that satisfies the fol-
lowing criteria—
(i) Either party to the arrangement pays,
directly or indirectly, all or any portion of
the premiums on the life insurance con-
tract, including a payment by means of a
loan to the other party that is secured by
the life insurance contract;
(ii) At least one of the parties to the ar-
rangement paying premiums under para-
graph (b)(1)(i) of this section is entitled to
recover (either conditionally or uncondi-
tionally) all or any portion of those premi-
ums and such recovery is to be made from,
or is secured by, the proceeds of the life in-
surance contract; and
(iii) The arrangement is not part of a
group-term life insurance plan described in
section 79 unless the group-term life insur-
ance plan provides permanent benefits to
employees (as defined in §1.79–0).
(2)Special rule—(i)In general.Any
arrangement between an owner and a non-
owner of a life insurance contract is treated
as a split-dollar life insurance arrangement
(regardless of whether the criteria of para-
graph (b)(1) of this section are satisfied) if
the arrangement is described in paragraph
(b)(2)(ii) or (iii) of this section.
(ii)Compensatory arrangements.An
arrangement is described in this paragraph
(b)(2)(ii) if the following criteria are satis-
fied—
(A) The arrangement is entered into in
connection with the performance of ser-
vices and is not part of a group-term life
insurance plan described in section 79;
November 17, 200310642003-46 I.R.B.

(B) The employer or service recipient
pays, directly or indirectly, all or any por-
tion of the premiums; and
(C) Either—
(1) The beneficiary of all or any portion
of the death benefit is designated by the
employee or service provider or is any
person whom the employee or service
provider would reasonably be expected to
designate as the beneficiary; or
(2) The employee or service provider
has any interest in the policy cash value of
the life insurance contract.
(iii)Shareholder arrangements.Anar-
rangement is described in this paragraph
(b)(2)(iii) if the following criteria are sat-
isfied—
(A) The arrangement is entered into be-
tween a corporation and another person in
that person’s capacity as a shareholder in
the corporation;
(B) The corporation pays, directly or in-
directly, all or any portion of the premi-
ums; and
(C) Either—
(1) The beneficiary of all or any por-
tion of the death benefit is designated by
the shareholder or is any person whom the
shareholder would reasonably be expected
to designate as the beneficiary; or
(2) The shareholder has any interest in
the policy cash value of the life insurance
contract.
(3)Determination of whether this sec-
tion or §1.7872–15 applies to a split-dollar
life insurance arrangement—(i)Split-dol-
lar life insurance arrangements involving
split-dollar loans under §1.7872–15.Ex-
cept as provided in paragraph (b)(3)(ii) of
this section, paragraphs (d) through (g) of
this section do not apply to any split-dollar
loan as defined in §1.7872–15(b)(1). Sec-
tion 1.7872–15 applies to any such loan.
See paragraph (b)(5) of this section for
the treatment of a payment made by a
non-owner under a split-dollar life insur-
ance arrangement if the payment is not a
split-dollar loan.
(ii)Exceptions. Paragraphs (d) through
(g) of this section apply (and §1.7872–15
does not apply) to any split-dollar life in-
surance arrangement if—
(A) The arrangement is entered into in
connection with the performance of ser-
vices, and the employer or service recip-
ient is the owner of the life insurance con-
tract (or is treated asthe owner of the con-
tract under paragraph (c)(1)(ii)(A)(1)of
this section); or
(B) The arrangement is entered into be-
tween a donor and a donee (for example,
a life insurance trust) and the donor is the
owner of the life insurance contract (or is
treated as the owner of the contract under
paragraph (c)(1)(ii)(A)(2)ofthissection).
(4)Consistency requirement.A
split-dollar life insurance arrangement
described in paragraph (b)(1) or (2) of
this section must be treated in the same
manner by the owner and the non-owner
of the life insurance contract under either
the rules of this section or §1.7872–15. In
addition, the owner and non-owner must
fully account for all amounts under the
arrangement under paragraph (b)(5) of
this section, paragraphs (d) through (g) of
this section, or §1.7872–15.
(5)Non-owner payments that are not
split-dollar loans. If a non-owner of a
life insurance contract makes premium
payments (directly or indirectly) under
a split-dollar life insurance arrangement,
and the payments are neither split-dol-
lar loans nor consideration for economic
benefits described in paragraph (d) of
this section, then neither the rules of
paragraphs (d) through (g) of this sec-
tion nor the rules in §1.7872–15 apply to
such payments. Instead, general income
tax, employment tax, self-employment
tax, and gift tax principles apply to the
premium payments. See, for example,
§1.61–2(d)(2)(ii)(A).
(6)Waiver, cancellation, or forgive-
ness. If a repayment obligation described
in §1.7872–15(a)(2) is waived, cancelled,
or forgiven at any time, then the parties
must take the amount waived, cancelled,
or forgiven into account in accordance
with the relationships between the parties
(for example, as compensation in the case
of an employee-employer relationship).
(7)Change in the owner.Ifpay-
mentsmadebyanon-ownertoanowner
were treated as split-dollar loans under
§1.7872–15 and the split-dollar life insur-
ance arrangement is modified such that,
after the modification, the non-owner is
the owner (within the meaning of para-
graph (c)(1) of this section) of the life
insurance contract under the arrangement,
paragraphs (d) through (g) of this section
apply to the split-dollar life insurance
arrangement from the date of the modifi-
cation. The payments made (both before
and after the modification) are not treated
as split-dollar loans under §1.7872–15 on
or after the date of the modification. The
non-owner of the life insurance contract
under the modified split-dollar life in-
surance arrangement must fully take into
account all economic benefits provided
under the arrangement under paragraph
(d) of this section on or after the date
of the modification. For the treatment
of a transfer of the contract when the
unmodified arrangement is governed by
paragraphs (d) through (g) of this section,
see paragraph (g) of this section.
(c)Definitions. The following defini-
tions apply for purposes of this section:
(1)Owner—(i)In general. With re-
spect to a life insurance contract, the per-
son named as the policy owner of such con-
tract generally is the owner of such con-
tract. If two or more persons are named
as policy owners of a life insurance con-
tract and each person has, at all times, all
the incidents of ownership with respect to
an undivided interest in the contract, each
person is treated as the owner of a sepa-
rate contract to the extent of such person’s
undivided interest. If two or more persons
are named as policy owners of a life in-
surance contract but each person does not
have, at all times, all the incidents of own-
ership with respect to an undivided inter-
est in the contract, the person who is the
first-named policy owner is treated as the
owner of the entire contract.
(ii)Special rule for certain arrange-
ments—(A)In general. Notwithstanding
paragraph (c)(1)(i) of this section—
(1) An employer or service recipient is
treated as the owner of a life insurance con-
tract under a split-dollar life insurance ar-
rangement that is entered into in connec-
tion with the performance of services if, at
all times, the only economic benefit that
will be provided under the arrangement
is current life insurance protection as de-
scribed in paragraph (d)(3) of this section;
and
(2) A donor is treated as the owner of a
life insurance contract under a split-dollar
life insurance arrangement that is entered
into between a donor and a donee (for ex-
ample, a life insurance trust) if, at all times,
2003-46 I.R.B.1065November 17, 2003

the only economic benefit that will be pro-
vided under the arrangement is current life
insurance protection as described in para-
graph (d)(3) of this section.
(B)Modifications. If an arrangement
described in paragraph (c)(1)(ii)(A) of this
section is modified such that the arrange-
ment is no longer described in paragraph
(c)(1)(ii)(A) of this section, the following
rules apply:
(1) If, immediately after such modifi-
cation, the employer, service recipient, or
donor is the owner of the life insurance
contract under the split-dollar life insur-
ance arrangement (determined without re-
gard to paragraph (c)(1)(ii)(A) of this sec-
tion), the employer, service recipient, or
donor continues to be treated as the owner
of the life insurance contract.
(2) If, immediately after such modifi-
cation, the employer, service recipient, or
donor is not the owner of the life insurance
contract under the split-dollar life insur-
ance arrangement (determined without re-
gard to paragraph (c)(1)(ii)(A) of this sec-
tion), the employer, service recipient, or
donor is treated as having made a transfer
of the entire life insurance contract to the
employee, service provider, or donee un-
der the rules of paragraph (g) of this sec-
tion as of the date of such modification.
(3) For purposes of this paragraph
(c)(1)(ii)(B), entering into a successor
split-dollar life insurance arrangement
that has the effect of providing any eco-
nomic benefit in addition to that described
in paragraph (d)(3) of this section is treated
as a modification of the prior split-dollar
life insurance arrangement.
(iii)Attribution rules for compensatory
arrangements. For purposes of this sec-
tion, if a split-dollar life insurance arrange-
ment is entered into in connection with the
performance of services, the employer or
service recipient is treated as the owner
of the life insurance contract if the owner
(within the meaning of paragraph (c)(1)(i)
of this section) of the life insurance con-
tract under the split-dollar life insurance
arrangement is—
(A) A trust described in section 402(b);
(B) A trust that is treated as owned
(within the meaning of sections 671
through 677) by the employer or the ser-
vice recipient;
(C) A welfare benefit fund within the
meaning of section 419(e)(1); or
(D) A member of the employer or ser-
vice recipient’s controlled group (within
the meaning of section 414(b)) or a trade
or business that is under common con-
trol with the employer or service recipient
(within the meaning of section 414(c)).
(iv)Life insurance contracts owned by
partnerships.[Reserved]
(2)Non-owner—(i)Definition.With
respect to a life insurance contract, a non-
owner is any person (other than the owner
of such contract under paragraph (c)(1) of
this section) that has any direct or indirect
interest in such contract (but not including
a life insurance company acting only in its
capacity as the issuer of a life insurance
contract).
(ii)Example. The following example
illustrates the provisions of this paragraph
(c)(2):
Example. (i) On January 1, 2009, Employer R
and Trust T, an irrevocable life insurance trust
that is
not treated under sections 671 through 677 as owned
by a grantor or other person, enter into a split-dol-
lar life insurance arrangement in connection
with the
performance of services under which R will pay all
the premiums on the life insurance contract until the
termination of the arrangement or the death
of E, an
employee of R. C, the beneficiary of T, is E’s child. R
is the owner of the contract under paragraph (c)(1)(i)
of this section. E is the insured under
the life insur-
ance contract. Upon termination of the arrangement
or E’s death, R is entitled to receive the lesser of the
aggregate premiums or the policy ca
sh value of the
contract and T will be entitled to receive any remain-
ing amounts. Under the terms of the arrangement and
applicable state law, the poli
cy cash value is fully ac-
cessible by R and R’s creditors but T has the right to
borrow or withdraw at any time the portion of the pol-
icy cash value exceeding the
amount payable to R.
(ii) Because E and T each have an indirect in-
terest in the life insurance contract that is part of
the split-dollar life insur
ance arrangement, each is a
non-owner under paragraph (c)(2)(i) of this section.
E and T each are provided economic benefits de-
scribedinparagraph(d)
(2) of this section pursuant to
the split-dollar life insurance arrangement. Economic
benefits are provided by owner R to E as a payment
of compensation, and s
eparately provided by E to T
as a gift.
(3)Transfer of entire contract or un-
divided interest therein. A transfer of the
ownership of a life insurance contract (or
an undivided interestin such contract)
that is part of a split-dollar life insurance
arrangement occurs on the date that a
non-owner becomes the owner (within
the meaning of paragraph (c)(1) of this
section) of the entire contract or of an
undivided interest in the contract.
(4)Undivided interest. An undivided
interest in a life insurance contract consists
of an identical fractional or percentage in-
terest or share in each right, benefit, and
obligation with respect to the contract. In
the case of any arrangement purporting to
create undivided interests where, in sub-
stance, the rights, benefits or obligations
are shared to any extent among the hold-
ers of such interests, the arrangement will
be treated as a split-dollar life insurance ar-
rangement.
(5)Employment tax.Thetermemploy-
ment tax means any tax imposed by, or col-
lected under, the Federal Insurance Con-
tributions Act (FICA), the Federal Unem-
ployment Tax Act (FUTA), the Railroad
Retirement Tax Act (RRTA), and the Col-
lection of Income Tax at Source on Wages.
(6)Self-employment tax.Thetermself-
employment tax means the tax imposed by
the Self-Employment Contributions Act of
1954 (SECA).
(d)Economic benefits provided under
a split-dollar life insurance arrange-
ment—(1)In general. In the case of a
split-dollar life insurance arrangement
subject to the rules of paragraphs (d)
through (g) of this section, economic
benefits are treated as being provided
to the non-owner of the life insurance
contract. The non-owner (and the owner
for gift and employment tax purposes)
must take into account the full value of
all economic benefits described in para-
graph (d)(2) of this section, reduced by the
consideration paid directly or indirectly
by the non-owner to the owner for those
economic benefits. Depending on the
relationship between the owner and the
non-owner, the economic benefits may
constitute a payment of compensation,
a distribution under section 301, a con-
tribution to capital, a gift, or a transfer
having a different tax character. Further,
depending on the relationship between
or among a non-owner and one or more
other persons (including a non-owner or
non-owners), the economic benefits may
be treated as provided from the owner to
the non-owner and as separately provided
from the non-owner to such other person
or persons (for example, as a payment
of compensation from an employer to an
employee and as a gift from the employee
to the employee’s child).
(2)Value of economic benefits.The
value of the economic benefits provided to
a non-owner for a taxable year under the
arrangement equals—
November 17, 200310662003-46 I.R.B.

(i) The cost of current life insurance
protection provided to the non-owner as
determined under paragraph (d)(3) of this
section;
(ii) The amount of policy cash value to
which the non-owner has current access
within the meaning of paragraph (d)(4)(ii)
of this section (to the extent that such
amount was not actually taken into ac-
count for a prior taxable year); and
(iii) The value of any economic benefits
not described in paragraph (d)(2)(i) or (ii)
of this section provided to the non-owner
(to the extent not actually taken into ac-
count for a prior taxable year).
(3)Current life insurance protec-
tion—(i)Amount of current life insurance
protection. In the case of a split-dollar life
insurance arrangement described in para-
graph (d)(1) of this section, the amount
of the current life insurance protection
provided to the non-owner for a taxable
year (or any portion thereof in the case
of the first year or the last year of the
arrangement) equals the excess of the
death benefit of the life insurance contract
(including paid-up additions thereto) over
the total amount payable to the owner
(including any outstanding policy loans
that offset amounts otherwise payable
to the owner) under the split-dollar life
insurance arrangement, less the portion of
the policy cash value actually taken into
account under paragraph (d)(1) of this
section or paid for by the non-owner under
paragraph (d)(1) of this section for the
current taxable year or any prior taxable
year.
(ii)Cost of current life insurance pro-
tection. The cost of current life insur-
ance protection provided to the non-owner
for any year (or any portion thereof in
the case of the first year or the last year
of the arrangement) equals the amount of
the current life insurance protection pro-
vided to the non-owner (determined under
paragraph (d)(3)(i) of this section) multi-
plied by the life insurance premium factor
designated or permitted in guidance pub-
lished in the Internal Revenue Bulletin (see
§601.601(d)(2)(ii) of this chapter).
(4)Policy cash value—(i)In general.
For purposes of this paragraph (d), policy
cash value is determined disregarding sur-
render charges or other similar charges or
reductions. Policy cash value includes pol-
icy cash value attributable to paid-up addi-
tions.
(ii)Current access. For purposes of
this paragraph (d), a non-owner has current
access to that portion of the policy cash
value—
(A) To which, under the arrangement,
the non-owner has a current or future right;
and
(B) That currently is directly or indi-
rectly accessible by the non-owner, inac-
cessible to the owner, or inaccessible to the
owner’s general creditors.
(5)Valuation date—(i)General rules.
For purposes of this paragraph (d), the
amount of the current life insurance pro-
tection and the policy cash value shall
be determined on the same valuation
date. The valuation date is the last day of
the non-owner’s taxable year, unless the
owner and non-owner agree to instead use
the policy anniversary date as the valua-
tion date. Notwithstanding the previous
sentence, if the split-dollar life insurance
arrangement terminates during the taxable
year of the non-owner, the value of such
economic benefits is determined on the
day that the arrangement terminates.
(ii)Consistency requirement.The
owner and non-owner of the split-dollar
life insurance arrangement must use the
same valuation date. In addition, the same
valuation date must be used for all years
prior to termination of the split-dollar life
insurance arrangement unless the parties
receive consent of the Commissioner to
change the valuation date.
(iii)Artifice or device. Notwithstand-
ing paragraph (d)(5)(i) of this section, if
anyartificeordeviceisusedtounderstate
the amount of any economic benefit on the
valuation date in paragraph (d)(5)(i) of this
section, then, for purposes of this para-
graph (d), the date on which the amount of
the economic benefit is determined is the
date on which the amount of the economic
benefit is greatest during that taxable year.
(iv)Special rule for certain taxes.For
purposes of employment tax (as defined
in paragraph (c)(5) of this section), self-
employment tax (as defined in paragraph
(c)(6) of this section), and sections 6654
and 6655 (relating to the failure to pay esti-
mated income tax), the portions of the cur-
rent life insurance protection and the pol-
icy cash value that are treated as provided
by the owner to the non-owner shall be
treated as so provided on the last day of
the taxable year of the non-owner. Not-
withstanding the previous sentence, if the
split-dollar life insurance arrangement ter-
minates during the taxable year of the non-
owner, such portions of the current life
insurance protection and the policy cash
value shall be treated as so provided on the
day that the arrangement terminates.
(6)Examples. The following examples
illustrate the rules of this paragraph (d).
Except as otherwise provided, both exam-
ples assume the following facts: employer
(R) is the owner (as defined in paragraph
(c)(1)(i) of this section) and employee (E)
is the non-owner (as defined in paragraph
(c)(2)(i) of this section) of a life insurance
contract that is part of a split-dollar life in-
surance arrangement that is subject to the
provisions of paragraphs (d) through (g) of
this section; the contract is a life insurance
contract as defined in section 7702 and not
a modified endowment contract as defined
in section 7702A; R does not withdraw or
obtain a loan of any portion of the policy
cash value and does not surrender any por-
tion of the life insurance contract; the com-
pensation paid to E is reasonable; E is not
provided any economic benefits described
in paragraph (d)(2)(iii) of this section; E
does not make any premium payments; E’s
taxable year is the calendar year; the value
of the economic benefits is determined on
the last day of E’s taxable year; and E re-
ports on E’s Federal income tax return for
each year that the split-dollar life insurance
arrangement is in effect the amount of in-
come required to be reported under para-
graph (d) of this section. The examples are
as follows:
Example 1.(i)Facts. OnJanuary1ofyear1,R
and E enter into the spli
t-dollar life insurance arrange-
ment. Under the arrangement, R pays all of the pre-
miums on the life insurance contract until the termi-
nation of the arrang
ement or E’s death. The arrange-
ment provides that upon termination of the arrange-
ment or E’s death, R is entitled to receive the lesser of
the aggregate prem
iums paid or the policy cash value
of the contract and E is entitled to receive any remain-
ing amounts. Under the terms of the arrangement and
applicable stat
e law, the policy cash value is fully ac-
cessible by R and R’s creditors but E has the right
to borrow or withdraw at any time the portion of the
policy cash va
lue exceeding the amount payable to R.
To fund the arrangement, R purchases a life insurance
contract with constant death benefit protection equal
to $1,500,0
00. R makes premium payments on the
life insurance contract of $60,000 in each of years 1,
2, and 3. The policy cash value equals $55,000 as of
December
31 of year 1, $140,000 as of December 31
of year 2, and $240,000 as of December 31 of year 3.
(ii)Analysis. Under the terms of the split-dollar
life insu
rance arrangement, E has the right for year
1 and all subsequent years to borrow or withdraw the
portion of the policy cash value exceeding the amount
2003-46 I.R.B.1067November 17, 2003

payable to R. Thus, under paragraph (d)(4)(ii) of this
section, E has current access to such portion of the
policy cash value for each year that the arrangement is
in effect. In addition, because R pays all of the premi-
ums on the life insurance contract, R provides to E all
of the economic benefits that E receives under the ar-
rangement. Therefore, under paragraph (d)(1) of this
section, E includes in gross income the value of all
economic benefits described in paragraphs (d)(2)(i)
and (ii) of this section provided to E under the ar-
rangement.
(iii)Results for year 1. For year 1, E is provided,
under paragraph (d)(2)(ii) of this section, $0 of policy
cash value (excess of $55,000 policy cash value de-
termined as of December 31 of year 1 over $55,000
payable to R). For year 1, E is also provided, un-
der paragraph (d)(2)(i) of this section, current life in-
surance protection of $1,445,000 ($1,500,000 minus
$55,000 payable to R). Thus, E includes in gross in-
come for year 1 the cost of $1,445,000 of current life
insurance protection.
(iv)Results for year 2. For year 2, E is provided,
under paragraph (d)(2)(ii) of this section, $20,000 of
policy cash value ($140,000 policy cash value dete
r-
mined as of December 31 of year 2 minus $120,000
payable to R). For year 2, E is also provided, under
paragraph (d)(2)(i) of this section, curre
nt life insur-
ance protection of $1,360,000 ($1,500,000 minus the
sum of $120,000 payable to R and the aggregate of
$20,000 of policy cash value that E actual
ly includes
in income on E’s year 1 and year 2 federal income tax
returns). Thus, E includes in gross income for year 2
the sum of $20,000 of policy cash val
ue and the cost
of $1,360,000 of current life insurance protection.
(v)Resultsforyear3. For year 3, E is provided,
under paragraph (d)(2)(ii) of this
section, $40,000 of
policy cash value ($240,000 policy cash value deter-
mined as of December 31 of year 3 minus the sum
of $180,000 payable to R and $20,0
00 of aggregate
policy cash value that E actually included in gross
income on E’s year 1 and year 2 federal income tax
returns). For year 3, E is als
o provided, under para-
graph (d)(2)(i) of this section, current life insurance
protection of $1,260,000 ($1,500,000 minus the sum
of $180,000 payable to R an
d $60,000 of aggregate
policy cash value that E actually includes in gross in-
come on E’s year 1, year 2, and year 3 federal income
tax returns). Thus, E i
ncludes in gross income for
year 3 the sum of $40,000 of policy cash value and
the cost of $1,260,000 of current life insurance pro-
tection.
Example 2.(i)Facts. The facts are the same as in
Example 1except that E cannot directly or indirectly
access any portion o
f the policy cash value, but the
terms of the split-dollar life insurance arrangement or
applicable state law provide that the policy cash value
in excess of the am
ount payable to R is inaccessible
to R’s general creditors.
(ii)Analysis. Under the terms of the split-dollar
life insurance a
rrangement or applicable state law, the
portion of the policy cash value exceeding the amount
payable to R is inaccessible to R’s general creditors
and E has a curr
ent or future right to that portion of the
cash value. Thus, under paragraph (d)(4)(ii) of this
section, E has current access to such portion of the
policycashv
alue for each year that the arrangement is
in effect. In addition, because R pays all of the premi-
ums on the life insurance contract, R provides to E all
of the economic benefits that E receives under the ar-
rangement. Therefore, under paragraph (d)(1) of this
section, E includes in gross income the value of all
economic benefits described in paragraphs (d)(2)(i)
and (ii) of this section provided to E under the ar-
rangement.
(iii)Results for years 1, 2 and 3. The results for
this example are the same as the results inExample 1.
(e)Amounts received under the con-
tract—(1)In general. Except as otherwise
provided in paragraph (f)(3) of this section,
any amount received under a life insurance
contract that is part of a split-dollar life in-
surance arrangement subject to the rules
of paragraphs (d) through (g) of this sec-
tion (including, but not limited to, a pol-
icy owner dividend, proceeds of a spec-
ified policy loan described in paragraph
(e)(2) of this section, or the proceeds of
a withdrawal from or partial surrender of
the life insurance contract) is treated, to
the extent provided directly or indirectly
to a non-owner of the life insurance con-
tract, as though such amount had been paid
to the owner of the life insurance con-
tract and then paid by the owner to the
non-owner. The amount received is tax-
able to the owner in accordance with the
rules of section 72. The non-owner (and
the owner for gift tax and employment tax
purposes) must take the amount described
in paragraph (e)(3) of this section into ac-
count as a payment of compensation, a dis-
tribution under section 301, a contribution
to capital, a gift, or other transfer depend-
ing on the relationship between the owner
and the non-owner.
(2)Specified policy loan. A policy loan
is a specified policy loan to the extent—
(i) The proceeds of the loan are dis-
tributed directly from the insurance com-
pany to the non-owner;
(ii) A reasonable person would not ex-
pect that the loan will be repaid by the
non-owner; or
(iii) The non-owner’s obligation to re-
pay the loan to the owner is satisfied or is
capable of being satisfied upon repayment
by either party to the insurance company.
(3)Amount required to be taken into ac-
count. With respect to a non-owner (and
the owner for gift tax and employment tax
purposes), the amount described in this
paragraph (e)(3) is equal to the excess of—
(i) The amount treated as received by
the owner under paragraph (e)(1) of this
section; over
(ii) The amount of all economic bene-
fits described in paragraphs (d)(2)(ii) and
(iii) of this section actually taken into ac-
count by the non-owner (and the owner
for gift tax and employment tax purposes)
plus any consideration described in para-
graph(d)(1)ofthissectionpaidbythe
non-owner for such economic benefits de-
scribed in paragraphs (d)(2)(ii) and (iii) of
this section. The amount determined under
the preceding sentence applies only to the
extent that neither this paragraph (e)(3)(ii)
nor paragraph (g)(1)(ii) of this section pre-
viously has applied to such economic ben-
efits.
(f)Other tax consequences—(1)Intro-
duction. In the case of a split-dollar life
insurance arrangement subject to the rules
of paragraphs (d) through (g) of this sec-
tion, this paragraph (f) sets forth other tax
consequences to the owner and non-owner
of a life insurance contract that is part of
the arrangement for the period prior to the
transfer (as defined in paragraph (c)(3) of
this section) of the contract (or an undi-
vided interest therein) from the owner to
the non-owner. See paragraph (g) of this
section and §1.83–6(a)(5) for tax conse-
quences upon the transfer of the contract
(or an undivided interest therein).
(2)Investment in the contract—(i)To
the non-owner. A non-owner does not re-
ceive any investment in the contract under
section 72(e)(6) with respect to a life insur-
ance contract that is part of a split-dollar
life insurance arrangement subject to the
rules of paragraphs (d) through (g) of this
section.
(ii)To owner. Any premium paid by
an owner under a split-dollar life insur-
ance arrangement subject to the rules of
paragraphs (d) through (g) of this section
is included in the owner’s investment in
the contract under section 72(e)(6). No
premium or amount described in para-
graph (d) of this section is deductible by
the owner (except as otherwise provided
in §1.83–6(a)(5)). Any amount paid by
a non-owner, directly or indirectly, to
the owner of the life insurance contract
for current life insurance protection or
for any other economic benefit under the
life insurance contract is included in the
owner’s gross income and is included
in the owner’s investment in the life in-
surance contract for purposes of section
72(e)(6) (but only to the extent not other-
wise so included by reason of having been
paid by the owner as a premium or other
consideration for the contract).
November 17, 200310682003-46 I.R.B.

(3)Treatment of death benefit pro-
ceeds—(i)Death benefit proceeds to
beneficiary (other than the owner).Any
amount paid to a beneficiary (other than
the owner) by reason of the death of the
insured is excluded from gross income by
such beneficiary under section 101(a) as
an amount received under a life insurance
contract to the extent such amount is allo-
cable to current life insurance protection
provided to the non-owner pursuant to the
split-dollar life insurance arrangement, the
cost of which was paid by the non-owner,
or the value of which the non-owner
actually took into account pursuant to
paragraph (d)(1) of this section.
(ii)Death benefit proceeds to owner as
beneficiary. Any amount paid or payable
to an owner in its capacity as a beneficiary
by reason of the death of the insured is ex-
cluded from gross income of the owner un-
der section 101(a) as an amount received
under a life insurance contract to the ex-
tent such amount is not allocable to current
life insurance protection provided to the
non-owner pursuant to the split-dollar life
insurance arrangement, the cost of which
was paid by the non-owner, or the value of
which the non-owner actually took into ac-
count pursuant to paragraph (d)(1) of this
section.
(iii)Transfers of death benefit proceeds.
Death benefit proceeds paid to a party to
a split-dollar life insurance arrangement
(or the estate or beneficiary of that party)
that are not excludable from that party’s
income under section 101(a) to the extent
provided in paragraph (f)(3)(i) or (ii) of
this section, are treated as transferred to
that party in a separate transaction. The
death benefit proceeds treated as so trans-
ferred will be taxed in a manner similar
to other transfers. For example, if death
benefit proceeds paid to an employee,
the employee’s estate, or the employee’s
beneficiary are not excludable from the
employee’s gross income under section
101(a) to the extent provided in paragraph
(f)(3)(i) of this section, then such payment
is treated as a payment of compensation
by the employer to the employee.
(g)Transfer of entire contract or un-
divided interest therein—(1)In general.
Upon a transfer within the meaning of
paragraph (c)(3) of this section of a life
insurance contract (or an undivided inter-
est therein) to a non-owner (transferee),
the transferee (and the owner (transferor)
for gift tax and employment tax purposes)
takes into account the excess of the fair
market value of the life insurance contract
(or the undivided interest therein) trans-
ferred to the transferee at that time over
the sum of—
(i) The amount the transferee pays to
the transferor to obtain the contract (or the
undivided interest therein); and
(ii) The amount of all economic ben-
efits described in paragraph (d)(2)(ii) and
(iii) of this section actually taken into ac-
count by the transferee (and the transferor
for gift tax and employment tax purposes),
plus any consideration described in para-
graph (d)(1) of this section paid by the
transferee for such economic benefits de-
scribed in paragraphs (d)(2)(ii) and (iii) of
this section. The amount determined under
the preceding sentence applies only to the
extent that neither this paragraph (g)(1)(ii)
nor paragraph (e)(3)(ii) of this section pre-
viously has applied to such economic ben-
efits.
(2)Determination of fair market value.
For purposes of paragraph (g)(1) of this
section, the fair market value of a life
insurance contract is the policy cash value
and the value of all other rights under
such contract (including any supplemen-
tal agreements thereto and whether or
not guaranteed), other than the value of
current life insuranceprotection. Notwith-
standing the preceding sentence, the fair
market value of a life insurance contract
for gift tax purposes is determined under
§25.2512–6(a) of this chapter.
(3)Exception for certain transfers in
connection with the performance of ser-
vices. To the extent the ownership of a life
insurance contract (or undivided interest in
such contract) is transferred in connection
with the performance of services, para-
graph (g)(1) of this section does not ap-
ply until such contract (or undivided inter-
est in such contract) is taxable under sec-
tion 83. For purposes of paragraph (g)(1)
of this section, fair market value is deter-
mined disregarding any lapse restrictions
and at the time the transfer of such contract
(or undivided interest in such contract) is
taxable under section 83.
(4)Treatment of non-owner after trans-
fer—(i)In general. After a transfer of
an entire life insurance contract (except
when such transfer is in connection with
the performance of services and the trans-
fer is not yet taxable under section 83),
the person who previously had been the
non-owner is treated as the owner of such
contract for all purposes, including for pur-
poses of paragraph (b) of this section and
for purposes of §1.61–2(d)(2)(ii)(A). Af-
ter the transfer of an undivided interest in
a life insurance contract (or, if later, at the
time such transfer is taxable under section
83), the person who previously had been
the non-owner is treated as the owner of a
separate contract consisting of that interest
for all purposes, including for purposes of
paragraph (b) of this section and for pur-
poses of §1.61–2(d)(2)(ii)(A).
(ii)Investment in the contract after
transfer—(A)In general. The amount
treated as consideration paid to acquire the
contract under section 72(g)(1), in order
to determine the aggregate premiums paid
by the transferee for purposes of section
72(e)(6)(A) after the transfer (or, if later,
at the time such transfer is taxable under
section 83), equals the greater of the fair
market value of the contract or the sum of
the amounts determined under paragraphs
(g)(1)(i) and (ii) of this section.
(B)Transfers between a donor and a
donee. In the case of a transfer of a con-
tract between a donor and a donee, the
amount treated as consideration paid by
the transferee to acquire the contract under
section 72(g)(1), in order to determine the
aggregate premiums paid by the transferee
forpurposesofsection 72(e)(6)(A) after
the transfer, equals the sum of the amounts
determined under paragraphs (g)(1)(i) and
(ii) of this section except that—
(1) The amount determined under para-
graph (g)(1)(i) of this section includes the
aggregate of premiums or other considera-
tion paid or deemed to have been paid by
the transferor; and
(2) The amount of all economic benefits
determined under paragraph (g)(1)(ii) of
this section actually taken into account by
the transferee does not include such bene-
fits to the extent such benefits were exclud-
able from the transferee’s gross income at
the time of receipt.
(C)Transfers of an undivided interest
in a contract. If a portion of a contract
is transferred to the transferee, then the
amount to be included as consideration
paid to acquire the contract is determined
by multiplying the amount determined un-
der paragraph (g)(4)(ii)(A) of this section
(as modified by paragraph (g)(4)(ii)(B) of
this section, if the transfer is between a
2003-46 I.R.B.1069November 17, 2003

donor and a donee) by a fraction, the nu-
merator of which is the fair market value
of the portion transferred and the denom-
inator of which is the fair market value of
the entire contract.
(D)Example. The following exam-
ple illustrates the rules of this paragraph
(g)(4)(ii):
Example. (i) In year 1, donor D and donee E en-
ter into a split-dollar life insurance arrangement as
defined in paragraph (b)(1) of this section. D is the
owner of the life insurance contract under paragraph
(c)(1) of this section. The life insurance contract is
not a modified endowment contract as defined in sec-
tion 7702A. In year 5, D gratuitously transfers the
contract, within the meaning of paragraph (c)(3) of
this section, to E. At the time of the transfer, the fair
market value of the contract is $200,000 and D had
paid $50,000 in premiums under the arrangement. In
addition, by the time of the transfer, E had current
access to $80,000 of policy cash value which was ex-
cludable from E’s gross income under section 102.
(ii) E’s investment in the contract is $50,000, con-
sisting of the $50,000 of premiums paid by D. The
$80,000 of policy cash value to which E had curr
ent
access is not included in E’s investment in the con-
tract because such amount was excludable from E’s
gross income when E had current access to tha
tpol-
icy cash value.
(iii)No investment in the contract for
current life insurance protection. Except
as provided in paragraph (g)(4)(ii)(B) of
this section, no amount allocable to cur-
rent life insurance protection provided to
the transferee (the cost of which was paid
by the transferee or the value of which was
provided to the transferee) is treated as
consideration paid to acquire the contract
under section 72(g)(1) to determine the
aggregate premiums paid by the transferee
for purposes of determining the trans-
feree’s investment in the contract under
section 72(e) after the transfer.
(h)Examples. The following examples
illustrate the rules of this section. Ex-
cept as otherwise provided, each of the ex-
amples assumes that the employer (R) is
the owner (as defined in paragraph (c)(1)
of this section) of a life insurance con-
tract that is part of a split-dollar life in-
surance arrangement subject to the rules of
paragraphs (d) through (g) of this section,
that the employee (E) is not provided any
economic benefits described in paragraph
(d)(2)(iii) of this section, that the life in-
surance contract is not a modified endow-
ment contract under section 7702A, that
the compensation paid to E is reasonable,
and that E makes no premium payments.
The examples are as follows:
Example 1. (i) In year 1, R purchases a life in-
surance contract on the life of E. R is named as the
policy owner of the contract. R and E enter into an ar-
rangement under which R will pay all the premiums
on the life insurance contract until the termination of
the arrangement or E’s death. Upon termination of
the arrangement or E’s death, R is entitled to receive
the greater of the aggregate premiums or the policy
cash value of the contract. The balance of the death
benefit will be paid to a beneficiary designated by E.
(ii) Because R is designated as the policy owner
of the contract, R is the owner of the contract un-
der paragraph (c)(1)(i) of this section. In addition,
R would be treated as the owner of the contract re-
gardless of whether R were designated as the policy
owner under paragraph (c)(1)(i) of this section be-
cause the split-dollar life insurance arrangement is
described in paragraph (c)(1)(ii)(A)(1)ofthissect
ion.
E is a non-owner of the contract. Under the arrange-
mentbetweenRandE,aportionofthedeathbene-
fit is payable to a beneficiary designated by E. The
arrangement is a split-dollar life insurance arrange-
ment under paragraph (b)(1) or (2) of this section.
Because R pays all the premiums on the life insur-
ance contract, R provides to E the entire amount of
the current life insurance protection E receives un-
der the arrangement. Therefore, for each
year that the
split-dollar life insurance arrangement is in effect, E
must include in gross income under paragraph (d)(1)
of this section the value of current lif
e insurance pro-
tection described in paragraph (d)(2)(i) of this section
provided to E in each year.
Example 2. (i)Thefactsarethesame
as inEx-
ample 1except that, upon termination of the arrange-
ment or E’s death, R is entitled to receive the lesser
of the aggregate premiums or the p
olicy cash value
of the contract. Under the terms of the arrangement
and applicable state law, the policy cash value is fully
accessible by R and R’s credito
rs but E has the right
to borrow or withdraw at any time the portion of the
policy cash value exceeding the amount payable to R.
(ii) Because R is designated
as the policy owner, R
is the owner of the contract under paragraph (c)(1)(i)
of this section. E is a non-owner of the contract. For
each year that the split-d
ollar life insurance arrange-
ment is in effect, E has the right to borrow or with-
draw at any time the portion of the policy cash value
exceeding the amount p
ayable to R. Thus, under para-
graph (d)(4)(ii) of this section, E has current access
to such portion of the policy cash value for each year
that the arrangement
is in effect. In addition, because
R pays all the premiums on the life insurance con-
tract, R provides to E all the economic benefits that E
receives under the
arrangement. Therefore, for each
year that the split-dollar life insurance arrangement is
in effect, E must include in gross income under para-
graph (d)(1) of
this section, the value of all economic
benefits described in paragraph (d)(2)(i) and (ii) of
this section provided to E in each year.
Example 3.(i)T
he facts are the same as in
Example 1except that in year 5, R and E modify
the split-dollar life insurance arrangement to provide
that, upon te
rmination of the arrangement or E’s
death, R is entitled to receive the greater of the ag-
gregate premiums or one-half the policy cash value
of the contr
act. Under the terms of the modified
arrangement and applicable state law, the policy cash
value is fully accessible by R and R’s creditors but
Ehasther
ight to borrow or withdraw at any time
the portion of the policy cash value exceeding the
amount payable to R.
(ii) For each year that the split-dollar life in-
surance arrangement is in effect, E must include in
gross income under paragraph (d)(1) of this section
the value of the economic benefits described in
paragraph (d)(2)(i) of this section provided to E
under the arrangement during that year. In year 5
(and subsequent years), E has the right to borrow or
withdraw at any time the portion of the policy cash
value exceeding the amount payable to R. Thus, un-
der paragraph (d)(4)(ii) of this section, E has current
access to such portion of the policy cash value. Thus,
in year 5 (and each subsequent year), E must also in-
clude in gross income under paragraph (d)(1) of this
section the value of the economic benefits described
in paragraph (d)(2)(ii) of this section provided to E
in each year.
(iii) The arrangement is not described in para-
graph (c)(1)(ii)(A)(1) of this section after it is
modified in year 5. Because R is the designated
owner of the life insurance contract, R continues
to be treated as the owner of the contract under
paragraph (c)(1)(ii)(B)(1) of this section after
the
arrangement is modified. In addition, because the
modification made by R and E in year 5 does not
involve the transfer (within the meaning of
paragraph
(c)(3) of this section) of an undivided interest in the
life insurance contract from R to E, the modification
is not a transfer for purposes of paragrap
h (g) of this
section.
Example 4. (i) The facts are the same as in
Example 2except that in year 7, R and E m
odify
the split-dollar life insurance arrangement to provide
that, upon termination of the arrangement or E’s
death, R will be paid the lesser of 80
percent of
the aggregate premiums or the policy cash value
of the contract. Under the terms of the modified
arrangement and applicable stat
e law, the policy cash
value is fully accessible by R and R’s creditors but E
has the right to borrow or withdraw at any time the
portion of the policy cash va
lue exceeding the lesser
of 80 percent of the aggregate premiums paid by R
or the policy cash value of the contract.
(ii) Commencing in year 7 (an
d in each subse-
quent year), E must include in gross income the eco-
nomic benefits described in paragraph (d)(2)(ii) of
this section as provide
dinthisExample 4(ii)rather
than as provided inExample 2(ii). Thus, in year 7
(and in each subsequent year) E must include in gross
income under paragrap
h (d) of this section, the excess
of the policy cash value over the lesser of 80 percent
of the aggregate premiums paid by R or the policy
cash value of the con
tract (to the extent E did not actu-
ally include such amounts in gross income for a prior
taxable year). In addition, in year 7 (and each subse-
quent year) E must
also include in gross income the
value of the economic benefits described in paragraph
(d)(2)(i) of this section provided to E under the ar-
rangement in ea
ch such year.
Example 5. (i) The facts are the same as inEx-
ample 3except that in year 7, E is designated as the
policy owner.
At that time, E’s rights to the contract
are substantially vested as defined in §1.83–3(b).
(ii) In year 7, R is treated as having made a trans-
fer (within th
e meaning of paragraph (c)(3) of this
section) of the life insurance contract to E. E must in-
clude in gross income the amount determined under
paragraph (
g)(1) of this section.
November 17, 200310702003-46 I.R.B.

(iii) After the transfer of the contract to E, E is
the owner of the contract and any premium payments
by R will be included in E’s income under paragraph
(b)(5) of this section and §1.61–2(d)(2)(ii)(A) (un-
less R’s payments are split-dollar loans as defined in
§1.7872–15(b)(1)).
Example 6. (i) In year 1, E and R enter into a
split-dollar life insurance arrangement as defined in
paragraph (b)(2) of this section. Under the arrange-
ment, R is required to make annual premium pay-
ments of $10,000 and E is required to make annual
premium payments of $500. In year 5, a $500 policy
owner dividend payable to E is declared by the insur-
ance company. E directs the insurance company to
use the $500 as E’s premium payment for year 5.
(ii) For each year the arrangement is in effect, E
must include in gross income the value of the eco-
nomic benefits provided during the year, as required
by paragraph (d)(2) of this section, over the $500 pre-
mium payments paid by E. In year 5, E must also in-
clude in gross income as compensation the excess, if
any, of the $500 distributed to E from the proceeds
of the policy owner dividend over the amount deter-
mined under paragraph (e)(3)(ii) of this section.
(iii) R must include in income the premiums paid
by E during the years the split-dollar life insurance
arrangement is in effect, including the $500 o
fthe
premium E paid in year 5 with proceeds of the pol-
icy owner dividend. R’s investment in the contract is
increased in an amount equal to the premiums
paid
by E, including the $500 of the premium paid by E
in year 5 from the proceeds of the policy owner divi-
dend. In year 5, R is treated as receivi
ng a $500 dis-
tribution under the contract, which is taxed pursuant
to section 72.
Example 7. (i) The facts are the same a
sinExam-
ple 2except that in year 10, E withdraws $100,000
from the cash value of the contract.
(ii) In year 10, R is treated as receiv
ing a
$100,000 distribution from the insurance company.
This amount is treated as an amount received by R
under the contract and taxed pur
suanttosection72.
This amount reduces R’s investment in the contract
under section 72(e). R is treated as paying the
$100,000 to E as cash compensa
tion, and E must in-
clude that amount in gross income less any amounts
determined under paragraph (e)(3)(ii) of this section.
Example 8. (i) The facts are
the same as inEx-
ample 7except E receives the proceeds of a $100,000
specified policy loan directly from the insurance com-
pany.
(ii) The transfer of the proceeds of the specified
policy loan to E is treated as a loan by the insurance
companytoR.Undertheru
les of section 72(e), the
$100,000 loan is not included in R’s income and does
not reduce R’s investment in the contract. R is treated
as paying the $100,00
0 of loan proceeds to E as cash
compensation. E must include that amount in gross
income less any amounts determined under paragraph
(e)(3)(ii) of this s
ection.
(i) [Reserved]
(j)Effective date—(
1)General
rule—(i)In genera
l. This section ap-
plies to any split-
dollar life insurance
arrangement (as d
efined in paragraph
(b)(1) or (2) of t
his section) entered into
after September
17, 2003.
(ii)Determination of when an arrange-
ment is entered into. For purposes of para-
graph (j) of this section, a split-dollar life
insurance arrangement is entered into on
the latest of the following dates:
(A) The date on which the life insurance
contract under the arrangement is issued;
(B) The effective date of the life insur-
ance contract under the arrangement;
(C) The date on which the first premium
on the life insurance contract under the ar-
rangement is paid;
(D) The date on which the parties to the
arrangement enter into an agreement with
regard to the policy; or
(E) The date on which the arrangement
satisfies the definition of a split-dollar life
insurance arrangement (as defined in para-
graph (b)(1) or (2) of this section).
(2)Modified arrangements treated as
new arrangements—(i)In general.For
purposes of paragraph (j)(1) of this sec-
tion,ifanarrangemententeredintoonor
before September 17, 2003, is materially
modified after September 17, 2003, the ar-
rangement is treated as a new arrangement
entered into on the date of the modifica-
tion.
(ii)Non-material modifications.The
following is a non-exclusive list of changes
that are not material modifications under
paragraph (j)(2)(i) of this section (either
alone or in conjunction with other changes
listed in paragraphs (j)(2)(ii)(A) through
(I)ofthissection)—
(A) A change solely in the mode of
premium payment (for example, a change
from monthly to quarterly premiums);
(B) A change solely in the beneficiary
of the life insurance contract, unless the
beneficiary is a party to the arrangement;
(C) A change solely in the interest rate
payable under the life insurance contract
on a policy loan;
(D) A change solely necessary to pre-
serve the status of the life insurance con-
tract under section 7702;
(E) A change solely to the ministerial
provisions of the life insurance contract
(for example, a change in the address to
send payment);
(F) A change made solely under the
terms of any agreement (other than the life
insurance contract) that is a part of the
split-dollar life insurance arrangement if
the change is non-discretionary by the par-
ties and is made pursuant to a binding com-
mitment (whether set forth in the agree-
ment or otherwise) in effect on or before
September 17, 2003;
(G) A change solely in the owner of
the life insurance contract as a result of a
transaction to which section 381(a) applies
and in which substantially all of the former
owner’s assets are transferred to the new
owner of the policy;
(H) A change to the policy solely if such
change is required by a court or a state
insurance commissioner as a result of the
insolvency of the insurance company that
issued the policy; or
(I) A change solely in the insurance
company that administers the policy as a
result of an assumption reinsurance trans-
action between the issuing insurance com-
pany and the new insurance company to
which the owner and the non-owner were
not a party.
(iii)Delegation to Commissioner.The
Commissioner, in revenue rulings, notices,
and other guidance published in the Inter-
nal Revenue Bulletin, may provide addi-
tional guidance with respect to other mod-
ifications that are not material for purposes
of paragraph (j)(2)(i) of this section. See
§601.601(d)(2)(ii) of this chapter.
Par. 4. Section 1.83–1 is amended by:
1. Removing the second sentence of
paragraph (a)(2).
2. Adding a sentence at the end of para-
graph (a)(2).
The addition reads as follows:
§1.83–1 Property transferred in
connection with the performance of
services.
(a) * * *
(2)Life insurance.***Forthetax-
ation of life insurance protection under
a split-dollar life insurance arrangement
(as defined in §1.61–22(b)(1) or (2)), see
§1.61–22.
*****
Par. 5. Section 1.83–3 is amended by:
1. Adding a sentence at the end of para-
graph (a)(1).
2. Adding a sentence immediately prior
to the last sentence in paragraph (e).
The additions read as follows:
2003-46 I.R.B.1071November 17, 2003

§1.83–3 Meaning and use of certain
terms.
(a)***(1)***Forspecialrules
applying to the transfer of a life insurance
contract (or an undivided interest therein)
that is part of a split-dollar life insurance
arrangement (as defined in §1.61–22(b)(1)
or (2)), see §1.61–22(g).
*****
(e) * * * Notwithstanding the previous
sentence, in the case of a transfer of a life
insurance contract, retirement income con-
tract, endowment contract, or other con-
tract providing life insurance protection,
or any undivided interest therein, that is
part of a split-dollar life insurance arrange-
ment (as defined in §1.61–22(b)(1) or (2))
that is entered into, or materially modified
(within the meaning of §1.61–22(j)(2)), af-
ter September 17, 2003, the policy cash
value and all other rights under such con-
tract (including any supplemental agree-
ments thereto and whether or not guaran-
teed), other than current life insurance pro-
tection, are treated asproperty for purposes
of this section. * * *
*****
Par. 6. Section 1.83–6 is amended as
follows:
1. Redesignating paragraph (a)(5) as
paragraph (a)(6).
2. Adding a new paragraph (a)(5).
The addition reads as follows:
§1.83–6 Deduction by employer.
(a) * * *
(5)Transfer of life insurance contract
(or an undivided interest therein)—(i)
General rule. In the case of a transfer of a
life insurance contract (or an undivided in-
terest therein) described in §1.61–22(c)(3)
in connection with the performance of
services, a deduction is allowable under
paragraph (a)(1) of this section to the
person for whom the services were per-
formed. The amount of the deduction,
if allowable, is equal to the sum of the
amount included as compensation in the
gross income of the service provider under
§1.61–22(g)(1) and the amount deter-
mined under §1.61–22(g)(1)(ii).
(ii)Effective date—(A)General
rule—Paragraph (a)(5)(i) of this section
applies to any split-dollar life insurance
arrangement (as defined in §1.61–22(b)(1)
or (2)) entered into after September 17,
2003. For purposes of this paragraph
(a)(5), an arrangement is entered into as
determined under §1.61–22(j)(1)(ii).
(B)Modified arrangements treated as
new arrangements. If an arrangement
entered into on or before September 17,
2003, is materially modified (within the
meaning of §1.61–22(j)(2)) after Septem-
ber 17, 2003, the arrangement is treated
as a new arrangement entered into on the
date of the modification.
*****
Par. 7. In §1.301–1, paragraph (q) is
added to read as follows:
§1.301–1 Rules applicable with respect to
distributions of money and other property.
*****
(q)Split-dollar and other life insur-
ance arrangements—(1)Split-dollar life
insurance arrangements—(i)Distribution
of economic benefits. The provision by a
corporation to its shareholder pursuant to a
split-dollar life insurance arrangement, as
defined in §1.61–22(b)(1) or (2), of eco-
nomic benefits described in §1.61–22(d)
or of amounts described in §1.61–22(e)
is treated as a distribution of property,
the amount of which is determined under
§1.61–22(d) and (e), respectively.
(ii)Distribution of entire contract or
undivided interest therein. A transfer
(within the meaning of §1.61–22(c)(3)) of
the ownership of a life insurance contract
(or an undivided interest therein) that is
part of a split-dollar life insurance ar-
rangement is a distribution of property, the
amount of which is determined pursuant
to §1.61–22(g)(1) and (2).
(2)Other life insurance arrangements.
A payment by a corporation on behalf
of a shareholder of premiums on a life
insurance contract or an undivided interest
therein that is owned by the shareholder
constitutes a distribution of property,
even if such payment is not part of a
split-dollar life insurance arrangement
under §1.61–22(b).
(3)When distribution is made—(i)In
general. Except as provided in paragraph
(q)(3)(ii) of this section, paragraph (b) of
this section shall apply to determine when
a distribution described in paragraph (q)(1)
or (2) of this section is taken into account
by a shareholder.
(ii)Exception. Notwithstanding para-
graph (b) of this section, a distribution de-
scribed in paragraph (q)(1)(ii) of this sec-
tion shall be treated as made by a corpo-
ration to its shareholder at the time that
the life insurance contract, or an undivided
interest therein, is transferred (within the
meaning of §1.61–22(c)(3)) to the share-
holder.
(4)Effective date—(i)General rule.
This paragraph (q) applies to split-dollar
and other life insurance arrangements
entered into after September 17, 2003.
For purposes of this paragraph (q)(4),
a split-dollar life insurance arrange-
ment is entered into as determined under
§1.61–22(j)(1)(ii).
(ii)Modified arrangements treated as
new arrangements. If a split-dollar life
insurance arrangement entered into on
or before September 17, 2003, is mate-
rially modified (within the meaning of
§1.61–22(j)(2)) after September 17, 2003,
the arrangement is treated as a new ar-
rangement entered into on the date of the
modification.
Par. 8. Section 1.1402(a)–18 is added
to read as follows:
§1.1402(a)–18 Split-dollar life insurance
arrangements.
See §§1.61–22 and 1.7872–15 for rules
relating to the treatment of split-dollar life
insurance arrangements.
Par. 9. Section 1.7872–15 is added to
read as follows:
§1.7872–15 Split-dollar loans.
(a)General rules—(1)Introduction.
This section applies to split-dollar loans as
defined in paragraph (b)(1) of this section.
If a split-dollar loan is not a below-market
loan, then, except as provided in this sec-
tion, the loan is governed by the general
rules for debt instruments (including the
rules for original issue discount (OID)
under sections 1271 through 1275 and the
regulations thereunder). If a split-dollar
loan is a below-market loan, then, except
as provided in this section, the loan is
governed by section 7872. The timing,
amount, and characterization of the im-
puted transfers between the lender and
borrower of a below-market split-dollar
loan depend upon the relationship between
the parties and upon whether the loan is
November 17, 200310722003-46 I.R.B.

a demand loan or a term loan. For ad-
ditional rules relating to the treatment of
split-dollar life insurance arrangements,
see §1.61–22.
(2)Loan treatment—(i)General rule.
A payment made pursuant to a split-dol-
lar life insurance arrangement is treated as
a loan for Federal tax purposes, and the
owner and non-owner are treated, respec-
tively, as the borrower and the lender, if—
(A) The payment is made either directly
or indirectly by the non-owner to the owner
(including a premium payment made by
the non-owner directly or indirectly to the
insurance company with respect to the pol-
icyheldbytheowner);
(B) The payment is a loan under gen-
eral principles of Federal tax law or, if it
is not a loan under general principles of
Federal tax law (for example, because of
the nonrecourse nature of the obligation or
otherwise), a reasonable person neverthe-
less would expect the payment to be repaid
in full to the non-owner (whether with or
without interest); and
(C) The repayment is to be made from,
or is secured by, the policy’s death ben-
efit proceeds, the policy’s cash surrender
value, or both.
(ii)Payments that are only partially re-
payable. For purposes of §1.61–22 and
this section, if a non-owner makes a pay-
ment pursuant to a split-dollar life insur-
ance arrangement and the non-owner is en-
titled to repayment of some but not all of
the payment, the payment is treated as two
payments: one that is repayable and one
that is not. Thus, paragraph (a)(2)(i) of this
section refers to the repayable payment.
(iii)Treatment of payments that are not
split-dollar loans. See §1.61–22(b)(5) for
the treatment of payments by a non-owner
that are not split-dollar loans.
(iv)Examples. The provisions of this
paragraph (a)(2) are illustrated by the fol-
lowing examples:
Example 1. Assume an employee owns a life in-
surance policy under a
split-dollar life insurance ar-
rangement, the employer makes premium payments
on this policy, there is a reasonable expectation that
the payments will be r
epaid, and the repayments are
secured by the policy. Under paragraph (a)(2)(i) of
this section, each premium payment is a loan for Fed-
eral tax purposes
.
Example 2. (i) Assume an employee owns a life
insurance policy under a split-dollar life insurance ar-
rangement and the
employer makes premium pay-
ments on this policy. The employer is entitled to
be repaid 80 percent of each premium payment, and
the repayments are secured by the policy. Under
paragraph (a)(2)(ii) of this section, the taxation of
20 percent of each premium payment is governed by
§1.61–22(b)(5). If there is a reasonable expectation
that the remaining 80 percent of a payment will be
repaid in full, then, under paragraph (a)(2)(i) of this
section, the 80 percent is a loan for Federal tax pur-
poses.
(ii) If less than 80 percent of a premium payment
is reasonably expected to be repaid, then this para-
graph (a)(2) does not cause any of the payment to be
a loan for Federal tax purposes. If the payment is not
a loan under general principles of Federal tax law, the
taxation of the entire premium payment is governed
by §1.61–22(b)(5).
(3)No de minimis exceptions.Forpur-
poses of this section, section 7872 is ap-
plied to a split-dollar loan without regard
to thede minimisexceptions in section
7872(c)(2) and (3).
(4)Certain interest provisions disre-
garded—(i)In general. If a split-dollar
loan provides for the payment of interest
and all or a portion of the interest is to be
paid directly or indirectly by the lender
(or a person related to the lender), then the
requirement to pay the interest (or portion
thereof) is disregarded for purposes of th
is
section. All of the facts and circumstanc
es
determine whether a payment to be made
by the lender (or a person related to t
he
lender) is sufficiently independe
nt from
the split-dollar loan for the paym
ent to not
be an indirect payment of the inter
est (or a
portion thereof) by the lender (o
raperson
related to the lender).
(ii)Examples. The provisions
of this
paragraph (a)(4) are illustr
ated by the fol-
lowing examples:
Example 1—(i) On January 1, 2009, Employee
Bissues a split-dollar term loan to EmployerY.The
split-dollar term loan prov
ides for five percent in-
terest, compounded annually. Interest and principal
on the split-dollar term loan are due at maturity. On
January 1, 2009,BandYal
so enter into a fully vested
non-qualified deferred compensation arrangement
that will provide a payment toBin an amount equal
to the accrued but unpa
id interest due at the maturity
of the split-dollar term loan.
(ii) Under paragraph (a)(4)(i) of this section,B’s
requirement to pay i
nterest on the split-dollar term
loan is disregarded for purposes of this section, and
the split-dollar term loan is treated as a loan that does
not provide for int
erest for purposes of this section.
Example 2—(i) On January 1, 2004, EmployeeB
and EmployerYenter into a fully vested non-qualified
deferred compensa
tion arrangement that will provide
apaymenttoBequal toB’s salary in the three years
preceding the retirement ofB. On January 1, 2009,
BandYenter int
o a split-dollar life insurance ar-
rangement and, under the arrangement,Bissues a
split-dollar term loan toYon that date. The split-dol-
lar term loan p
rovides for five percent interest, com-
pounded annually. Interest and principal on the split-
dollar term loan are due at maturity. Over the pe-
riod in which the non-qualified deferred compensa-
tion arrangement is effective, the terms and condi-
tions ofB’s non-qualified deferred compensation ar-
rangement do not change in a way that indicates that
the payment of the non-qualified deferred compen-
sation is related toB’s requirement to pay interest
on the split-dollar term loan. No other facts and cir-
cumstances exist to indicate that the payment of the
non-qualified deferred compensation is related toB’s
requirement to pay interest on the split-dollar term
loan.
(ii) The facts and circumstances indicate that the
payment byYof non-qualified deferred compensa-
tion is independent fromB’s requirement to pay inter-
est under the split-dollar term loan. Under paragraph
(a)(4)(i) of this section, the fully vested non-qualified
deferred compensation does not causeB’s require-
ment to pay interest on the split-dollar term loan to be
disregarded for purposes of this section. For purposes
of this section, the split-dollar term loan is treat
ed as
a loan that provides for stated interest of five percent,
compounded annually.
(b)Definitions. For purposes of this
section, the termssplit-dollar life insur-
ance arrangement,owner,andnon-owner
have the same meanings as provided in
§1.61–22(b) and (c). In addition, the fol-
lowing definitions apply for purposes of
this section:
(1) Asplit-dollar loanis a loan de-
scribed in paragraph (a)(2)(i) of this sec-
tion.
(2) Asplit-dollar demand loanis any
split-dollar loan that is payable in full at
any time on the demand of the lender (or
within a reasonable time after the lender’s
demand).
(3) Asplit-dollar term loanis any
split-dollar loan other than a split-dollar
demand loan. See paragraph (e)(5) of this
section for special rules regarding certain
split-dollar term loans payable on the
death of an individual, certain split-dol-
lar term loans conditioned on the future
performance of substantial services by an
individual, and gift split-dollar term loans.
(c)Interest deductions for split-dollar
loans. The borrower may not deduct any
qualified stated interest, OID, or imputed
interest on a split-dollar loan. See sec-
tions 163(h) and 264(a). In certain circum-
stances, an indirect participant may be al-
lowed to deduct qualified stated interest,
OID, or imputed interest on a deemed loan.
See paragraph (e)(2)(iii) of this section (re-
lating to indirect loans).
(d)Treatment of split-dollar loans pro-
viding for nonrecourse payments—(1)In
general. Except as provided in paragraph
(d)(2) of this section, if a payment on a
2003-46 I.R.B.1073November 17, 2003

split-dollar loan is nonrecourse to the bor-
rower, the payment is a contingent pay-
ment for purposes of this section. See
paragraph (j) of this section for the treat-
ment of a split-dollar loan that provides for
one or more contingent payments.
(2)Exception for certain loans with re-
spect to which the parties to the split-dollar
life insurance arrangement make a repre-
sentation—(i)Requirement.Anotherwise
noncontingent payment on a split-dollar
loan that is nonrecourse to the borrower is
not a contingent payment under this sec-
tion if the parties to the split-dollar life in-
surance arrangement represent in writing
that a reasonable person would expect that
all payments under the loan will be made.
(ii)Time and manner for providing
written representation. The Commis-
sioner may prescribe the time and manner
for providing the written representation
required by paragraph (d)(2)(i) of this sec-
tion. Until the Commissioner prescribes
otherwise, the written representation
that is required by paragraph (d)(2)(i) of
this section must meet the requirements
of this paragraph (d)(2)(ii). Both the
borrower and the lender must sign the
representation not later than the last day
(including extensions) for filing the Fed-
eral income tax return of the borrower or
lender, whichever is earlier, for the taxable
year in which the lender makes the first
split-dollar loan under the split-dollar life
insurance arrangement. This representa-
tion must include the names, addresses,
and taxpayer identification numbers of the
borrower, lender, and any indirect partic-
ipants. Unless otherwise stated therein,
this representation applies to all subse-
quent split-dollar loans made pursuant to
the split-dollar life insurance arrangement.
Each party should retain an original of
the representation as part of its books and
records and should attach a copy of this
representation to its Federal income tax
return for any taxable year in which the
lender makes a loan to which the repre-
sentation applies.
(e)Below-marketsplit-dollar
loans—(1)Scope—(i)In general.This
paragraph (e) applies to below-mar-
ket split-dollar loans enumerated under
section 7872(c)(1), which include gift
loans, compensation-related loans, and
corporation-shareholder loans. The char-
acterization of a split-dollar loan under
section 7872(c)(1) and of the imputed
transfers under section 7872(a)(1) and
(b)(1) depends upon the relationship be-
tweenthelenderandtheborrowerorthe
lender, borrower, and any indirect partic-
ipant. For example, if the lender is the
borrower’s employer, the split-dollar loan
is generally a compensation-related loan,
and any imputed transfer from the lender
to the borrower is generally a payment
of compensation. The loans covered by
this paragraph (e) include indirect loans
between the parties. See paragraph (e)(2)
of this section for the treatment of certain
indirect split-dollar loans. See paragraph
(f) of this section for the treatment of any
stated interest or OID on split-dollar loans.
See paragraph (j) of this section for addi-
tional rules that apply to a split-dollar loan
that provides for one or more contingent
payments.
(ii)Significant-effect split-dollar loans.
If a direct or indirect below-market
split-dollar loan is not enumerated in
section 7872(c)(1)(A), (B), or (C), the
loan is a significant-effect loan under sec-
tion 7872(c)(1)(E).
(2)Indirect split-dollar loans—(i)In
general. If, based on all the facts and cir-
cumstances, includingthe relationship be-
tweentheborrowerorlenderandsome
third person (the indirect participant), the
effect of a below-market split-dollar loan
is to transfer value from the lender to the
indirect participant and from the indirect
participant to the borrower, then the be-
low-market split-dollar loan is restructured
as two or more successive below-market
loans (the deemed loans) as provided in
this paragraph (e)(2). The transfers of
value described in the preceding sentence
include (but are not limited to) a gift, com-
pensation, a capital contribution, and a dis-
tribution under section 301 (or, in the case
of an S corporation, under section 1368).
The deemed loans are—
(A) A deemed below-market split-dol-
lar loan made by the lender to the indirect
participant; and
(B) A deemed below-market split-dol-
lar loan made by the indirect participant to
the borrower.
(ii)Application. Each deemed loan is
treated as having the same provisions as
the original loan between the lender and
borrower, and section 7872 is applied to
each deemed loan. Thus, for example, if,
under a split-dollar life insurance arrange-
ment, an employer (lender) makes an inter-
est-free split-dollar loan to an employee’s
child (borrower), the loan is restructured
as a deemed compensation-related below-
market split-dollar loan from the lender
to the employee (the indirect participant)
and a second deemed gift below-market
split-dollar loan from the employee to the
employee’s child. In appropriate circum-
stances, section 7872(d)(1) may limit the
interest that accrues on a deemed loan for
Federal income tax purposes. For loan ar-
rangements between husband and wife, see
section 7872(f)(7).
(iii)Limitations on investment interest
for purposes of section 163(d).Forpur-
poses of section 163(d), the imputed in-
terest from the indirect participant to the
lender that is taken into account by the
indirect participant under this paragraph
(e)(2) is not investment interest to the ex-
tent of the excess, if any, of—
(A) The imputed interest from the indi-
rect participant to the lender that is taken
into account by the indirect participant;
over
(B) The imputed interest to the indirect
participant from the borrower that is rec-
ognized by the indirect participant.
(iv)Examples. The provisions of this
paragraph (e)(2) are illustrated by the fol-
lowing examples:
Example 1. (i) On January 1, 2009, EmployerX
and IndividualAenter into a spl
it-dollar life insurance
arrangement under whichAis named as the policy
owner.Ais the child ofB, an employee ofX.OnJan-
uary 1, 2009,Xmakes a $30,000
premium payment,
repayable upon demand without interest. Repayment
of the premium payment is fully recourse toA.The
payment is a below-market sp
lit-dollar demand loan.
A’s net investment income for 2009 is $1,100, and
there are no other outstanding loans betweenAand
B. Assume that the blend
ed annual rate for 2009 is 5
percent, compounded annually.
(ii) Based on the relationships among the par-
ties, the effect of the b
elow-market split-dollar loan
fromXtoAis to transfer value fromXtoBand
then to transfer value fromBtoA. Under paragraph
(e)(2) of this secti
on, the below-market split-dollar
loan fromXtoAis restructured as two deemed be-
low-market split-dollar demand loans: a compensa-
tion-related belo
w-market split-dollar loan between
XandBand a gift below-market split-dollar loan be-
tweenBandA. Each of the deemed loans has the same
terms and condit
ions as the original loan.
(iii) Under paragraph (e)(3) of this section, the
amount of forgone interest deemed paid toBbyAin
2009 is $1,500 (
[$30,000 x 0.05] - 0). Under section
7872(d)(1), however, the amount of forgone interest
deemed paid toBbyAis limited to $1,100 (A’s net
investment in
come for the year). Under paragraph
November 17, 200310742003-46 I.R.B.

(e)(2)(iii) of this section,B’s deduction under sec-
tion 163(d) in 2009 for interest deemed paid onB’s
deemed loan fromXis limited to $1,100 (the interest
deemed received fromA).
Example 2. (i) The facts are the same as the facts
inExample 1, except thatT, an irrevocable life insur-
ance trust established for the benefit ofA(B’s child),
is named as the policy owner.Tis not a grantor trust.
(ii) Based on the relationships among the parties,
the effect of the below-market split-dollar loan fromX
toTis to transfer value fromXtoBandthentotransfer
value fromBtoT. Under paragraph (e)(2) of this sec-
tion, the below-market split-dollar loan fromXtoTis
restructured as two deemed below-market split-dollar
demand loans: a compensation-related below-mar-
ket split-dollar loan betweenXandBand a gift be-
low-market split-dollar loan betweenBandT.Each
of the deemed loans has the same terms and condi-
tions as the original loan.
(iii) Under paragraph (e)(3) of this section, the
amount of forgone interest deemed paid toBbyT
in 2009 is $1,500 ([$30,000 x 0.05] - 0). Section
7872(d)(1) does not apply becauseTis not an indi-
vidual. The amount of forgone interest deemed paid
toBbyTis $1,500. Under paragraph (e)(2)(iii) of this
section,B’s deduction under section 163(d) in 2009
for interest deemed paid onB’s deemed loan fro
mX
is $1,500 (the interest deemed received fromT).
(3)Split-dollar demand loans—(i)In
general. This paragraph (e)(3) provides
rules for testing split-dollar demand loans
for sufficient interest, and, if the loans do
not provide for sufficient interest, rules for
the calculation and treatment of forgone in-
terest on these loans. See paragraph (g) of
this section for additional rules that apply
to a split-dollar loan providing for certain
variable rates of interest.
(ii)Testing for sufficient interest. Each
calendar year that a split-dollar demand
loan is outstanding, the loan is tested to de-
termine if the loan provides for sufficient
interest. A split-dollar demand loan pro-
vides for sufficient interest for the calen-
dar year if the rate (based on annual com-
pounding) at which interest accrues on the
loan’s adjusted issue price during the year
is no lower than the blended annual rate for
the year. (The Internal Revenue Service
publishes the blended annual rate in the
Internal Revenue Bulletin in July of each
year (see §601.601(d)(2)(ii) of this chap-
ter).) If the loan does not provide for suf-
ficient interest, the loan is a below-market
split-dollar demand loan for that calendar
year. See paragraph (e)(3)(iii) of this sec-
tion to determine the amount and treatment
of forgone interest for each calendar year
the loan is below-market.
(iii)Imputations—(A)Amount of for-
gone interest. For each calendar year, the
amount of forgone interest on a split-dollar
demand loan is treated as transferred by the
lender to the borrower and as retransferred
as interest by the borrower to the lender.
This amount is the excess of—
(1) The amount of interest that would
have been payable on the loan for the cal-
endar year if interest accrued on the loan’s
adjusted issue price at the blended annual
rate (determined in paragraph (e)(3)(ii)
of this section) and were payable annu-
ally on the day referred to in paragraph
(e)(3)(iii)(B) of this section; over
(2) Any interest that accrues on the loan
during the year.
(B)Timing of transfers of forgone inter-
est—(1)In general. Except as provided in
paragraphs (e)(3)(iii)(B)(2)and(3)ofthis
section, the forgone interest (as determined
under paragraph (e)(3)(iii)(A) of this sec-
tion) that is attributable to a calendar year
is treated as transferred by the lender to the
borrower (and retransferred as interest by
the borrower to the lender) on the last day
of the calendar year and is accounted for by
each party to the split-dollar loan in a man-
ner consistent with that party’s method of
accounting.
(2)Exception for death, liquidation, or
termination of the borrower. In the tax-
able year in which the borrower dies (in the
case of a borrower who is a natural person)
or is liquidated or otherwise terminated (in
the case of a borrower other than a natural
person), any forgone interest is treated, for
both the lender and the borrower, as trans-
ferred and retransferred on the last day of
the borrower’s final taxable year.
(3)Exception for repayment of below-
market split-dollar loan. Any forgone in-
terest is treated, for both the lender and the
borrower, as transferred and retransferred
on the day the split-dollar loan is repaid in
full.
(4)Split-dollar term loans—(i)In gen-
eral. Except as provided in paragraph
(e)(5) of this section, this paragraph (e)(4)
provides rules for testing split-dollar term
loans for sufficient interest and, if the loans
do not provide for sufficient interest, rules
for imputing payments on these loans. See
paragraph (g) of this section for additional
rules that apply to a split-dollar loan pro-
viding for certain variable rates of interest.
(ii)Testing a split-dollar term loan for
sufficient interest. A split-dollar term loan
is tested on the day the loan is made to
determine if the loan provides for suffi-
cient interest. A split-dollar term loan pro-
vides for sufficient interest if the imputed
loan amount equals or exceeds the amount
loaned. The imputed loan amount is the
present value of all payments due under
the loan, determined as of the date the
loan is made, using a discount rate equal
to the AFR in effect on that date. The
AFR used for purposes of the preceding
sentence must be appropriate for the loan’s
term (short-term, mid-term, or long-term)
and for the compounding period used in
computing the present value. See section
1274(d)(1). If the split-dollar loan does not
provide for sufficient interest, the loan is
a below-market split-dollar term loan sub-
ject to paragraph (e)(4)(iv) of this section.
(iii)Determining loan term. This para-
graph (e)(4)(iii) provides rules to deter-
mine the term of a split-dollar term loan
for purposes of paragraph (e)(4)(ii) of this
section. The term of the loan determined
under this paragraph (e)(4)(iii) (other than
paragraph (e)(4)(iii)(C) of this section) ap-
plies to determine the split-dollar loan’s
term, payment schedule, and yield for all
purposes of this section.
(A)In general. Except as provided in
paragraph (e)(4)(iii)(B), (C), (D) or (E) of
this section, the term of a split-dollar term
loan is based on the period from the date
the loan is made until the loan’s stated ma-
turity date.
(B)Special rules for certain op-
tions—(1)Payment schedule that min-
imizes yield. If a split-dollar term loan
is subject to one or more unconditional
options that are exercisable at one or
more times during the term of the loan
and that, if exercised, require payments
to be made on the split-dollar loan on
an alternative payment schedule (for ex-
ample, an option to extend or an option
to call a split-dollar loan), then the rules
of this paragraph (e)(4)(iii)(B)(1) deter-
mine the term of the loan. However, this
paragraph (e)(4)(iii)(B)(1) applies only if
the timing and amounts of the payments
that comprise each payment schedule are
known as of the issue date. For purposes
of determining a split-dollar loan’s term,
the borrower is projected to exercise or
not exercise an option or combination of
options in a manner that minimizes the
loan’s overall yield. Similarly, the lender
is projected to exercise or not exercise
an option or combination of options in a
2003-46 I.R.B.1075November 17, 2003

manner that minimizes the loan’s overall
yield. If different projected patterns of
exercise or non-exercise produce the same
minimum yield, the parties are projected
to exercise or not exercise an option or
combination of options in a manner that
produces the longest term.
(2)Change in circumstances. If the bor-
rower (or lender) does or does not exer-
cise the option as projected under para-
graph (e)(4)(iii)(B)(1) of this section, the
split-dollar loan is treated for purposes of
this section as retired and reissued on the
date the option is or is not exercised for
an amount of cash equal to the loan’s ad-
justed issue price on that date. The reis-
sued loan must be retested using the ap-
propriate AFR in effect on the date of reis-
suance to determine whether it is a be-
low-market loan.
(3)Examples. The following exam-
ples illustrate the rules of this paragraph
(e)(4)(iii)(B):
Example 1.EmployeeBissues a 10-year split-
dollar term loan to EmployerY.Bhas the righ
ttopre-
pay the loan at the end of year 5. Interest is payable
on the split-dollar loan at 1 percent for the first 5
years and at 10 percent for the remaini
ng5years.Un-
der paragraph (e)(4)(iii)(B)(1)ofthissection,thisar-
rangement is treated as a 5-year split-dollar term loan
fromYtoB, with interest payable at
1 percent.
Example 2. The facts are the same as the facts in
Example 1, except thatBdoes not in fact prepay the
split-dollar loan at the end of year
5. Under paragraph
(e)(4)(iii)(B)(2) of this section, the first loan is treated
as retired at the end of year 5 and a new 5-year split-
dollar term loan is issued at th
at time, with interest
payable at 10 percent.
Example 3.EmployeeAissues a 10-year split-
dollar term loan on which the l
ender, EmployerX,has
the right to demand payment at the end of year 2. In-
terest is payable on the split-dollar loan at 7 percent
each year that the loan is out
standing. Under para-
graph (e)(4)(iii)(B)(1) of this section, this arrange-
ment is treated as a 10-year split-dollar term loan be-
cause the exercise ofX’
s put option would not re-
duce the yield of the loan (the yield of the loan is 7
percent, compounded annually, whether or notXde-
mands payment).
(C)Split-dollar term
loans providing
for certain variabl
e rates of interest.If
a split-dollar term
loan is subject to para-
graph (g) of this se
ction (a split-dollar loan
that provides for c
ertain variable rates of
interest), the te
rm of the loan for purposes
of paragraph (e)(
4)(ii) of this section is de-
termined under
paragraph (g)(3)(ii) of this
section.
(D)Split-doll
ar loans payable upon
the death of an i
ndividual. If a split-dol-
lar term loan i
s described in paragraph
(e)(5)(ii)(A
)or(v)(A)ofthissection,the
term of the loan for purposes of paragraph
(e)(4)(ii) of this section is determined
under paragraph (e)(5)(ii)(C) or (v)(B)(2)
of this section, whichever is applicable.
(E)Split-dollar loans conditioned on
the future performance of substantial
services by an individual. If a split-dol-
lar term loan is described in paragraph
(e)(5)(iii)(A)(1)or(v)(A)ofthissec-
tion, the term of the loan for purposes
of paragraph (e)(4)(ii) of this section is
determined under paragraph (e)(5)(iii)(C)
or (v)(B)(2) of this section, whichever is
applicable.
(iv)Timing and amount of imputed
transfer in connection with below-market
split-dollar term loans. If a split-dollar
term loan is a below-market loan, then
the rules applicable to below-market term
loans under section 7872 apply. In general,
the loan is recharacterized as consisting
of two portions: an imputed loan amount
(as defined in paragraph (e)(4)(ii) of this
section) and an imputed transfer from the
lender to the borrower. The imputed trans-
fer occurs at the time the loan is made (for
example, when the lender makes a pre-
mium payment on a life insurance policy)
and is equal to the excess of the amount
loaned over the imputed loan amount.
(v)Amount treated as OID. In the case
of any below-market split-dollar term loan
described in this paragraph (e)(4), for pur-
poses of applying sections 1271 through
1275 and the regulations thereunder, the
issue price of the loan is the amount de-
termined under §1.1273–2, reduced by the
amount of the imputed transfer described
in paragraph (e)(4)(iv)ofthissection.
Thus, the loan is generally treated as hav-
ing OID in an amount equal to the amount
of the imputed transfer described in para-
graph (e)(4)(iv) of this section, in addition
to any other OID on the loan (determined
without regard to section 7872(b)(2)(A) or
this paragraph (e)(4)).
(vi)Example. The provisions of this
paragraph(e)(4)areillustratedbythefol-
lowing example:
Example. (i) On July 1, 2009, CorporationZ
and Shareholder
Aenter into a split-dollar life insur-
ance arrangement under whichAis named as the pol-
icy owner. On July 1, 2009,Zmakes a $100,000
premium payme
nt, repayable without interest in 15
years. Repayment of the premium payment is fully
recourse toA. The premium payment is a split-dollar
term loan. A
ssume the long-term AFR (based on an-
nual compounding) at the time the loan is made is 7
percent.
(ii) Based on a 15-year term and a discount rate
of 7 percent, compounded annually (the long-term
AFR), the present value of the payments under
the loan is $36,244.60, determined as follows:
$100,000/[1+(0.07/1)]
15
. Thisloanisabelow-mar-
ket split-dollar term loan because the imputed loan
amount of $36,244.60 (the present value of the
amount required to be repaid toZ)islessthanthe
amount loaned ($100,000).
(iii) In accordance with section 7872(b)(1) and
paragraph (e)(4)(iv) of this section, on the date that
the loan is made,Zis treated as transferring toA
$63,755.40 (the excess of $100,000 (amount loaned)
over $36,244.60 (imputed loan amount)). Under sec-
tion 7872 and paragraph (e)(1)(i) of this section,Zis
treated as making a section 301 distribution toAon
July 1, 2009, of $63,755.40.Zmust take into account
as OID an amount equal to the imputed transfer. See
§1.1272–1 for the treatment of OID.
(5)Special rules for certain split-dollar
term loans—(i)In general. This paragraph
(e)(5) provides rules for split-dollar loans
payable on the death of an individual, split-
dollar loans conditioned on the future per-
formance of substantial services by an in-
dividual, and gift term loans. These split-
dollar loans are split-dollar term loans for
purposes of determining whether the loan
provides for sufficient interest. If, how-
ever, the loan is a below-market split-dollar
loan, then, except as provided in paragraph
(e)(5)(v) of this section, forgone interest is
determined annually, similar to a demand
loan, but using an AFR that is appropriate
for the loan’s term and that is determined
when the loan is issued.
(ii)Split-dollar loans payable not later
than the death of an individual—(A)Ap-
plicability. This paragraph (e)(5)(ii) ap-
plies to a split-dollar term loan payable not
later than the death of an individual.
(B)Treatment of loan. A split-dollar
loan described in paragraph (e)(5)(ii)(A)
of this section is tested under paragraph
(e)(4)(ii) of this section to determine if the
loan provides for sufficient interest. If the
loan provides for sufficient interest, then
section 7872 does not apply to the loan,
and the interest on the loan is taken into
account under paragraph (f) of this sec-
tion. If the loan does not provide for suf-
ficient interest, then section 7872 applies
to the loan, and the loan is treated as a be-
low-market demand loan subject to para-
graph (e)(3)(iii) of this section. For each
year that the loan is outstanding, however,
therateusedinthedeterminationoffor-
gone interest under paragraph (e)(3)(iii) of
this section is not the blended annual rate
but rather is the AFR (based on annual
compounding) appropriate for the loan’s
November 17, 200310762003-46 I.R.B.

term as of the month in which the loan is
made. See paragraph (e)(5)(ii)(C) of this
section to determine the loan’s term.
(C)Term of loan. For purposes of para-
graph (e)(5)(ii)(B) of this section, the term
of a split-dollar loan payable on the death
of an individual (including the death of
the last survivor of a group of individu-
als) is the individual’s life expectancy as
determined under the appropriate table in
§1.72–9 on the day the loan is made. If a
split-dollar loan is payable on the earlier of
the individual’s death or another term de-
termined under paragraph (e)(4)(iii) of this
section, the term of the loan is whichever
term is shorter.
(D)Retirement and reissuance of loan.
If a split-dollar loan described in paragraph
(e)(5)(ii)(A) of this section remains out-
standing longer than the term determined
under paragraph (e)(5)(ii)(C) of this sec-
tion because the individual outlived his or
her life expectancy, the split-dollar loan is
treated for purposes of this section as re-
tired and reissued as a split-dollar demand
loan at that time for an amount of cash
equal to the loan’s adjusted issue price on
that date. However, the loan is not retested
at that time to determine whether the loan
provides for sufficient interest. For pur-
poses of determining forgone interest un-
der paragraph (e)(5)(ii)(B) of this section,
the appropriate AFR for the reissued loan
is the AFR determined under paragraph
(e)(5)(ii)(B) of this section on the day the
loan was originally made.
(iii)Split-dollar loans conditioned
on the future performance of substantial
services by an individual—(A)Applica-
bility—(1)In general. This paragraph
(e)(5)(iii) applies to a split-dollar term
loan if the benefits of the interest arrange-
ments of the loan are not transferable and
are conditioned on the future performance
of substantial services (within the meaning
of section 83) by an individual.
(2)Exception. Notwithstanding para-
graph (e)(5)(iii)(A)(1)ofthissection,this
paragraph (e)(5)(iii) does not apply to a
split-dollar loan described in paragraph
(e)(5)(v)(A) of this section (regarding a
split-dollar loan that is payable on the later
of a term certain and the date on which
the condition to perform substantial future
services by an individual ends).
(B)Treatment of loan. A split-dol-
lar loan described in paragraph
(e)(5)(iii)(A)(1) of this section is tested
under paragraph (e)(4)(ii) of this section
to determine if the loan provides for suf-
ficient interest. Except as provided in
paragraph (e)(5)(iii)(D) of this section, if
the loan provides for sufficient interest,
then section 7872 does not apply to the
loan and the interest on the loan is taken
into account under paragraph (f) of this
section. If the loan does not provide for
sufficient interest, then section 7872 ap-
plies to the loan and the loan is treated as
a below-market demand loan subject to
paragraph (e)(3)(iii) of this section. For
each year that the loan is outstanding,
however,therateusedinthedetermina-
tion of forgone interest under paragraph
(e)(3)(iii) of this section is not the blended
annual rate but rather is the AFR (based on
annual compounding) appropriate for the
loan’s term as of the month in which the
loan is made. See paragraph (e)(5)(iii)(C)
of this section to determine the loan’s
term.
(C)Term of loan. The term of a
split-dollar loan described in paragraph
(e)(5)(iii)(A)(1) of this section is based
on the period from the date the loan is
made until the loan’s stated maturity date.
However, if a split-dollar loan described in
paragraph (e)(5)(iii)(A)(1)ofthissection
does not have a stated maturity date, the
termoftheloanispresumedtobeseven
years.
(D)Retirement and reissuance of loan.
If a split-dollar loan described in para-
graph (e)(5)(iii)(A)(1) of this section re-
mains outstanding longer than the term
determined under paragraph (e)(5)(iii)(C)
of this section because of the continued
performance of substantial services, the
split-dollar loan is treated for purposes of
this section as retired and reissued as a
split-dollar demand loan at that time for
an amount of cash equal to the loan’s ad-
justed issue price on that date. The loan is
retested at that time to determine whether
the loan provides for sufficient interest.
(iv)Gift split-dollar term loans—(A)
Applicability. This paragraph (e)(5)(iv)
applies to gift split-dollar term loans.
(B)Treatment of loan. A split-dollar
loan described in paragraph (e)(5)(iv)(A)
of this section is tested under paragraph
(e)(4)(ii) of this section to determine if the
loan provides for sufficient interest. If the
loan provides for sufficient interest, then
section 7872 does not apply to the loan
and the interest on the loan is taken into
account under paragraph (f) of this sec-
tion. If the loan does not provide for suf-
ficient interest, then section 7872 applies
to the loan and the loan is treated as a be-
low-market demand loan subject to para-
graph (e)(3)(iii) of this section. For each
year that the loan is outstanding, however,
therateusedinthedeterminationoffor-
gone interest under paragraph (e)(3)(iii) of
this section is not the blended annual rate
but rather is the AFR (based on annual
compounding) appropriate for the loan’s
term as of the month in which the loan is
made. See paragraph (e)(5)(iv)(C) of this
section to determine the loan’s term.
(C)Term of loan. For purposes of para-
graph (e)(5)(iv)(B) of this section, the term
of a gift split-dollar term loan is the term
determined under paragraph (e)(4)(iii) of
this section.
(D)Limited application for gift split-
dollar term loans. The rules of paragraph
(e)(5)(iv)(B) of this section apply to a gift
split-dollar term loan only for Federal in-
come tax purposes. For purposes of Chap-
ter 12 of the Internal Revenue Code (relat-
ing to the gift tax), gift below-market split-
dollar term loans are treated as term loans
under section 7872(b) and paragraph (e)(4)
of this section. See section 7872(d)(2).
(v)Split-dollar loans payable on the
later of a term certain and another spec-
ified date—(A)Applicability. This para-
graph (e)(5)(v) applies to any split-dollar
term loan payable upon the later of a term
certain or—
(1) The death of an individual; or
(2) For a loan described in paragraph
(e)(5)(iii)(A)(1) of this section, the date on
which the condition to perform substantial
future services by an individual ends.
(B)Treatment of loan—(1)In general.
A split-dollar loan described in paragraph
(e)(5)(v)(A) of this section is a split-dollar
term loan, subject to paragraph (e)(4) of
this section.
(2)Term of the loan. The term of a
split-dollar loan described in paragraph
(e)(5)(v)(A) of this section is the term
certain.
(3)Appropriate AFR. The appropriate
AFR for a split-dollar loan described in
paragraph (e)(5)(v)(A) of this section is
based on a term of the longer of the term
certain or the loan’s expected term as de-
termined under eitherparagraph (e)(5)(ii)
or (iii) of this section, whichever is appli-
cable.
2003-46 I.R.B.1077November 17, 2003

(C)Retirement and reissuance.Ifa
split-dollar loan described in paragraph
(e)(5)(v)(A) of this section remains out-
standing longer than the term certain, the
split-dollar loan is treated for purposes
of this section as retired and reissued at
the end of the term certain for an amount
of cash equal to the loan’s adjusted is-
sue price on that date. The reissued loan
is subject to paragraph (e)(5)(ii) or (iii)
of this section, whichever is applicable.
However, the loan is not retested at that
time to determine whether the loan pro-
vides for sufficient interest. For purposes
of paragraph (e)(3)(iii) of this section,
the appropriate AFR for the reissued loan
is the AFR determined under paragraph
(e)(5)(v)(B)(3)ofthissectionontheday
the loan was originally made.
(vi)Example. The provisions of this
paragraph (e)(5) are illustrated by the fol-
lowing example:
Example. (i) On January 1, 2009, CorporationY
and ShareholderB, a 65 year-old male, ente
rintoa
split-dollar life insurance arrangement under which
Bis named as the policy owner. On January 1, 2009,
Ymakes a $100,000 premium payment, repa
yable,
without interest, from the death benefits of the under-
lying contract uponB’s death. The premium payment
is a split-dollar term loan. Repay
ment of the premium
payment is fully recourse toB. Assume the long-term
AFR (based on annual compounding) at the time of
the loan is 7 percent. BothYandBu
se the calendar
year as their taxable years.
(ii) Based on Table 1 in §1.72–9, the expected
termoftheloanis15years. Un
der paragraph
(e)(5)(ii)(C) of this section, the long-term AFR
(based on annual compounding) is the appropriate
test rate. Based on a 15-yea
rtermandadis-
count rate of 7 percent, compounded annually (the
long-term AFR), the present value of the payments
under the loan is $36,244.
60, determined as fol-
lows: $100,000/[1+(0.07/1)]
15
. Under paragraph
(e)(5)(ii)(B) of this section, this loan is a below-mar-
ket split-dollar ter
m loan because the imputed loan
amount of $36,244.60 (the present value of the
amount required to be repaid toY)islessthanthe
amount loaned ($100
,000).
(iii) Under paragraph (e)(5)(ii)(B) of this section,
the amount of forgone interest for 2009 (and each sub-
sequent full calend
ar year that the loan remains out-
standing) is $7,000, which is the amount of interest
that would have been payable on the loan for the cal-
endar year if int
erest accrued on the loan’s adjusted
issue price ($100,000) at the long-term AFR (7 per-
cent, compounded annually). Under section 7872 and
paragraph (e)(
1)(i) of this section, on December 31,
2009,Yis treated as making a section 301 distribution
toBof $7,000. In addition,Yhas $7,000 of imputed
interest in
come for 2009.
(f)Treatmen
tofstatedinterestandOID
for split-d
ollar loans—(1)In general.If
a split-dol
lar loan provides for stated in-
terest or O
ID, the loan is subject to this
paragraph (f), regardless of whether the
split-dollar loan has sufficient interest. Ex-
cept as otherwise provided in this section,
split-dollar loans are subject to the same
Internal Revenue Code and regulatory pro-
visions for stated interest and OID as other
loans. For example, the lender of a split-
dollar loan that provides for stated inter-
est must account for any qualified stated
interest (as defined in §1.1273–1(c)) un-
der its regular method of accounting (for
example, an accrual method or the cash
receipts and disbursements method). See
§1.446–2 to determine the amount of qual-
ified stated interest that accrues during an
accrual period. In addition, the lender must
account under §1.1272–1 for any OID on
a split-dollar loan. However, §1.1272–1(c)
does not apply to any split-dollar loan. See
paragraph (h) of this section for a subse-
quent waiver, cancellation, or forgiveness
of stated interest on a split-dollar loan.
(2)Term, payment schedule, and yield.
The term of a split-dollar term loan deter-
mined under paragraph (e)(4)(iii) of this
section (other than paragraph (e)(4)(iii)(C)
of this section) applies to determine the
split-dollar loan’s term, payment schedule,
and yield for all purposes of this section.
(g)Certain variable rates of inter-
est—(1)In general. This paragraph (g)
provides rules for a split-dollar loan that
provides for certain variable rates of inter-
est. If this paragraph (g) does not apply to
a variable rate split-dollar loan, the loan is
subject to the rules in paragraph (j) of this
section for split-dollar loans that provide
for one or more contingent payments.
(2)Applicability—(i)In general.Ex-
cept as provided in paragraph (g)(2)(ii) of
this section, this paragraph (g) applies to
a split-dollar loan that is a variable rate
debt instrument (within the meaning of
§1.1275–5) and that provides for stated in-
terest at a qualified floating rate (or rates).
(ii)Interest rate restrictions. This para-
graph (g) does not apply to a split-dollar
loan if, as a result of interest rate restric-
tions (such as an interest rate cap), the ex-
pected yield of the loan taking the restric-
tions into account is significantly less than
the expected yield of the loan without re-
gard to the restrictions. Conversely, if rea-
sonably symmetric interest rate caps and
floors or reasonably symmetric governors
are fixed throughout the term of the loan,
these restrictions generally do not prevent
this paragraph (g) from applying to the
loan.
(3)Testing for sufficient interest—(i)
Demand loan. For purposes of paragraph
(e)(3)(ii) of this section (regarding testing
a split-dollar demand loan for sufficient in-
terest), a split-dollar demand loan is treated
as if it provided for a fixed rate of interest
for each accrual period to which a qualified
floating rate applies. The projected fixed
rate for each accrual period is the value of
the qualified floating rate as of the begin-
ning of the calendar year that contains the
last day of the accrual period.
(ii)Term loan. For purposes of para-
graph (e)(4)(ii) of this section (regarding
testing a split-dollar term loan for suffi-
cient interest), a split-dollar term loan sub-
ject to this paragraph (g) is treated as if
it provided for a fixed rate of interest for
each accrual period to which a qualified
floating rate applies. The projected fixed
rate for each accrual period is the value
of the qualified floating rate on the date
the split-dollar term loan is made. The
term of a split-dollar loan that is subject to
this paragraph (g)(3)(ii) is determined us-
ing the rules in §1.1274–4(c)(2). For ex-
ample, if the loan provides for interest at a
qualified floating rate that adjusts at vary-
ing intervals, the term of the loan is de-
termined by reference to the longest in-
terval between interest adjustment dates.
See paragraph (e)(5) of this section for
special rules relating to certain split-dollar
term loans, such as a split-dollar term loan
payable not later than the death of an indi-
vidual.
(4)Interest accruals and imputed trans-
fers. For purposes of paragraphs (e) and
(f) of this section, the projected fixed rate
or rates determined under paragraph (g)(3)
of this section are used for purposes of de-
termining the accrual of interest each pe-
riod and the amount of any imputed trans-
fers. Appropriate adjustments are made to
the interest accruals and any imputed trans-
fers to take into account any difference be-
tween the projected fixed rate and the ac-
tual rate.
(5)Example. The provisions of this
paragraph (g) are illustrated by the follow-
ing example:
Example. (i) On January 1, 2010, EmployerV
and Employee
Fenter into a split-dollar life insur-
ance arrangement under whichFis named as the pol-
icy owner. On January 1, 2010,Vmakes a $100,000
premium pay
ment, repayable in15 years. The pre-
mium payment is a split-dollar term loan. Under the
November 17, 200310782003-46 I.R.B.

arrangement between the parties, interest is payable
on the split-dollar loan each year on January 1, start-
ing January 1, 2011, at a rate equal to the value of
1-year LIBOR as of the payment date. The short-term
AFR (based on annual compounding) at the time of
the loan is 7 percent. Repayment of both the premium
payment and the interest due thereon is nonrecourse
toF. However, the parties made a representation un-
der paragraph (d)(2) of this section. Assume that the
value of 1-year LIBOR on January 1, 2010, is 8 per-
cent, compounded annually.
(ii) The loan is subject to this paragraph (g) be-
cause the loan is a variable rate debt instrument that
bears interest at a qualified floating rate. Because
the interest rate is reset each year, under paragraph
(g)(3)(ii) of this section, the short-term AFR (based
on annual compounding) is the appropriate test rate
used to determine whether the loan provides for suf-
ficient interest. Moreover, under paragraph (g)(3)(ii)
of this section, to determine whether the loan pro-
vides for sufficient interest, the loan is treated a
sif
it provided for a fixed rate of interest equal to 8 per-
cent, compounded annually. Based on a discount rate
of 7 percent, compounded annually (the short-ter
m
AFR), the present value of the payments under the
loan is $109,107.91. The loan provides for sufficient
interest because the loan’s imputed loan
amount of
$109,107.91 (the present value of the payments) is
more than the amount loaned of $100,000. Therefore,
the loan is not a below-market split-do
llar term loan,
and interest on the loan is taken into account under
paragraph (f) of this section.
(h)Adjustments for interest paid at less
than the stated rate—(1)Application—(i)
In general. To the extent required by this
paragraph (h), if accrued but unpaid inter-
est on a split-dollar loan is subsequently
waived, cancelled, or forgiven by the
lender, then the waiver, cancellation, or
forgiveness is treated as if, on that date, the
interest had in fact been paid to the lender
and retransferred by the lender to the bor-
rower. The amount deemed transferred
and retransferred is determined under
paragraph (h)(2) or (3) of this section. Ex-
cept as provided in paragraph (h)(1)(iv) of
this section, the amount treated as retrans-
ferred by the lender to the borrower under
paragraph (h)(2) or (3) of this section is in-
creased by the deferral charge determined
under paragraph (h)(4) of this section. To
determine the character of any retrans-
ferred amount, see paragraph (e)(1)(i) of
this section. See §1.61–22(b)(6) for the
treatment of amounts other than interest
on a split-dollar loan that are waived,
cancelled, or forgiven by the lender.
(ii)Certain split-dollar term loans.For
purposes of this paragraph (h), a split-dol-
lar term loan described in paragraph (e)(5)
of this section (for example, a split-dollar
term loan payable not later than the death
of an individual) is subject to the rules of
paragraph (h)(3) of this section.
(iii)Payments treated as a waiver, can-
cellation, or forgiveness. For purposes of
this paragraph (h), if a payment by the
lender (or a person related to the lender)
to the borrower is, in substance, a waiver,
cancellation, or forgiveness of accrued but
unpaid interest, the payment by the lender
(or person related to the lender) is treated
as an amount retransferred to the borrower
by the lender under this paragraph (h) and
is subject to the deferral charge in para-
graph (h)(4) of this section to the extent
that the payment is, in substance, a waiver,
cancellation, or forgiveness of accrued but
unpaid interest.
(iv)Treatment of certain nonrecourse
split-dollar loans. For purposes of this
paragraph (h), if the parties to a split-dollar
life insurance arrangement make the rep-
resentation described in paragraph (d)(2)
of this section and the interest actually
paid on the split-dollar loan is less than
the interest required to be accrued on the
split-dollar loan, the excess of the interest
required to be accrued over the interest ac-
tually paid is treated as waived, cancelled,
or forgiven by the lender under this para-
graph (h). However, the amount treated as
retransferred under paragraph (h)(1)(i) of
this section is not increased by the deferral
charge in paragraph (h)(4) of this section.
(2)Split-dollar term loans. In the case
of a split-dollar term loan, the amount of
interest deemed transferred and retrans-
ferred for purposes of paragraph (h)(1) of
this section is determined as follows:
(i) If the loan’s stated rate is less than
or equal to the appropriate AFR (the AFR
used to test the loan for sufficient inter-
est under paragraph (e) of this section), the
amount of interest deemed transferred and
retransferred pursuant to this paragraph (h)
is the excess of the amount of interest
payable at the stated rate over the interest
actually paid.
(ii) If the loan’s stated rate is greater
than the appropriate AFR (the AFR used
to test the loan for sufficient interest under
paragraph (e) of this section), the amount
of interest deemed transferred and retrans-
ferred pursuant to this paragraph (h) is the
excess, if any, of the amount of interest
payable at the AFR over the interest actu-
ally paid.
(3)Split-dollar demand loans.Inthe
case of a split-dollar demand loan, the
amount of interest deemed transferred and
retransferred for purposes of paragraph
(h)(1) of this section is equal to the aggre-
gate of—
(i) For each year that the split-dollar de-
mand loan was outstanding in which the
loan was a below-market split-dollar de-
mand loan, the excess of the amount of in-
terest payable at the stated rate over the in-
terest actually paid allocable to that year;
plus
(ii) For each year that the split-dollar
demand loan was outstanding in which the
loan was not a below-market split-dollar
demand loan, the excess, if any, of the
amount of interest payable at the appropri-
ate rate used for purposes of imputation for
that year over the interest actually paid al-
locable to that year.
(4)Deferral charge.TheCommis-
sioner may prescribe the method for
determining the deferral charge treated as
retransferred by the lender to the borrower
under paragraph (h)(1) of this section. Un-
til the Commissioner prescribes otherwise,
the deferral charge is determined under
paragraph (h)(4)(i) of this section for a
split-dollar term loan subject to paragraph
(h)(2) of this section and under paragraph
(h)(4)(ii) of this section for a split-dollar
demand loan subject to paragraph (h)(3)
of this section.
(i)Split-dollar term loan. The defer-
ral charge for a split-dollar term loan sub-
ject to paragraph (h)(2) of this section is
determined by multiplying the hypothet-
ical underpayment by the applicable un-
derpayment rate, compounded daily, for
the period from the date the split-dollar
loan was made to the date the interest is
waived, cancelled, or forgiven. The hy-
pothetical underpayment is equal to the
amount determined under paragraph (h)(2)
of this section, multiplied by the highest
rate of income tax applicable to the bor-
rower (for example, the highest rate in ef-
fect under section 1 for individuals) for the
taxable year in which the split-dollar term
loan was made. The applicable underpay-
ment rate is the average of the quarterly
underpayment rates in effect under section
6621(a)(2) for the period from the date the
split-dollar loan was made to the date the
interest is waived, cancelled, or forgiven.
(ii)Split-dollar demand loan.The
deferral charge for a split-dollar demand
loan subject to paragraph (h)(3) of this sec-
tion is the sum of the following amounts
2003-46 I.R.B.1079November 17, 2003

determined for each year the loan was
outstanding (other than the year in which
the waiver, cancellation, or forgiveness
occurs): For each year the loan was
outstanding, multiply the hypothetical un-
derpayment for the year by the applicable
underpayment rate, compounded daily,
for the applicable period. The hypotheti-
cal underpayment is equal to the amount
determined under paragraph (h)(3) of this
section for each year, multiplied by the
highest rate of income tax applicable to
the borrower for that year (for example,
the highest rate in effect under section 1
for individuals). The applicable underpay-
ment rate is the average of the quarterly
underpayment rates in effect under section
6621(a)(2) for the applicable period. The
applicable period for a year is the period
of time from the last day of that year until
the date the interest is waived, cancelled,
or forgiven.
(5)Examples. The provisions of this
paragraph (h) are illustrated by the follow-
ing examples:
Example 1. (i) On January 1, 2009, EmployerY
and EmployeeBentered into a split-doll
ar life insur-
ance arrangement under whichBis named as the pol-
icy owner. On January 1, 2009,Ymade a $100,000
premium payment, repayable on Dec
ember 31, 2011,
with interest of 5 percent, compounded annually. The
premium payment is a split-dollar term loan. Assume
the short-term AFR (based on ann
ual compounding)
at the time the loan was made was 5 percent. Repay-
ment of both the premium payment and the interest
due thereon was fully recou
rse toB. On December
31, 2011,Yis repaid $100,000 butYwaives the re-
mainder due on the loan ($15,762.50). BothYandB
use the calendar year as th
eir taxable years.
(ii) When the split-dollar term loan was made, the
loan was not a below-market loan under paragraph
(e)(4)(ii) of this secti
on. Under paragraph (f) of this
section,Ywas required to accrue compound interest
of 5 percent each year the loan remained outstanding.
B,however,wasnoten
titled to any deduction for this
interest under paragraph (c) of this section.
(iii) Under paragraph (h)(1) of this section, the
waived amount is trea
ted as if, on December 31, 2011,
it had in fact been paid toYand was then retransferred
byYtoB. The amount deemed transferred toYand re-
transferred toBe
quals the excess of the amount of in-
terest payable at the stated rate ($15,762.50) over the
interest actually paid ($0), or $15,762.50. In addition,
the amount deeme
d retransferred toBis increased by
the deferral charge determined under paragraph (h)(4)
of this section. Because of the employment relation-
ship betweenY
andB, the total retransferred amount
is treated as compensation paid byYtoB.
Example 2. (i) On January 1, 2009, EmployerY
and Employee
Bentered into a split-dollar life insur-
ance arrangement under whichBis named as the pol-
icy owner. On January 1, 2009,Ymade a $100,000
premium pay
ment, repayable on the demand ofY,
with interest of 7 percent, compounded annually. The
premium payment is a split-dollar demand loan. As-
sume the blended annual rate (based on annual com-
pounding) in 2009 was 5 percent and in 2010 was 6
percent. Repayment of both the premium payment
and the interest due thereon was fully recourse toB.
On December 31, 2010,Ydemands repayment and
is repaid its $100,000 premium payment in full; how-
ever,Ywaives all interest due on the loan. BothYand
Buse the calendar year as their taxable years.
(ii) For each year that the split-dollar demand loan
was outstanding, the loan was not a below-market
loan under paragraph (e)(3)(ii) of this section. Under
paragraph (f) of this section,Ywasrequiredtoaccrue
compound interest of 7 percent each year the loan re-
mained outstanding.B, however, was not entitled to
any deduction for this interest under paragraph (c) of
this section.
(iii) Under paragraph (h)(1) of this section, a por-
tion of the waived interest is treated as if, on Decem-
ber 31, 2010, it had in fact been paid toYand was
then retransferred byYtoB. The amount of interest
deemed transferred toYand retransferred toBequals
the excess, if any, of the amount of interest payable
at the blended annual rate for each year the loan is
outstanding over the interest actually paid with re-
spect to that year. For 2009, the interest payable at the
blended annual rate is $5,000 ($100,000 x 0.
05). For
2010, the interest payable atthe blended annual rate is
$6,000 ($100,000 x 0.06). Therefore, the amount of
interest deemed transferred toYand retr
ansferred to
Bequals $11,000. In addition, the amount deemed re-
transferred toBis increased by the deferral charge de-
termined under paragraph (h)(4) of
this section. Be-
cause of the employment relationship betweenYand
B, the total retransferred amount is treated as com-
pensation paid byYtoB.
(i) [Reserved]
(j)Split-dollar loans that provid
efor
contingent payments—(1)In gener
al.Ex-
cept as provided in paragraph (
j)(2) of this
section, this paragraph (j) p
rovides rules
forasplit-dollarloanthatp
rovides for one
or more contingent payments
. This para-
graph (j), rather than §1.1
275–4, applies
to split-dollar loans that
provide for one or
more contingent paymen
ts.
(2)Exceptions—(i)Cert
ain contingen-
cies. For purposes of th
is section, a split-
dollar loan does not pro
vide for contingent
payments merely becau
se—
(A) The loan provides fo
r options de-
scribed in paragraph (
e)(4)(iii)(B) of this
section (for exampl
e, certain call options,
put options, and opt
ions to extend); or
(B) The loan is descr
ibed in paragraph
(e)(5) of this secti
on (relating to certain
split-dollar term
loans, such as a split-dol-
lar term loan paya
ble not later than the
death of an indiv
idual).
(ii)Insolvency
and default.Forpur-
posesofthissec
tion, a payment is not con-
tingent merely
because of the possibility of
impairment by insolvency, default, or sim-
ilar circumstances. However, if any pay-
ment on a split-dollar loan is nonrecourse
to the borrower, the payment is a contin-
gent payment for purposes of this para-
graph (j) unless the parties to the arrange-
ment make the written representation pro-
vided for in paragraph (d)(2) of this sec-
tion.
(iii)Remote and incidental contingen-
cies. For purposes of this section, a pay-
ment is not a contingent payment merely
because of a contingency that, as of the
date the split-dollar loan is made, is either
remote or incidental (within the meaning
of §1.1275–2(h)).
(iv)Exceptions for certain split-dol-
lar loans. This paragraph (j) does not
apply to a split-dollar loan described
in §1.1272–1(d) (certain debt instru-
ments that provide for a fixed yield) or a
split-dollar loan described in paragraph
(g) of this section (relating to split-dollar
loans providing for certain variable rates
of interest).
(3)Contingent split-dollar method—(i)
In general. If a split-dollar loan provides
for one or more contingent payments,
then the parties account for the loan under
the contingent split-dollar method. In
general, except as provided in this para-
graph (j), this method is the same as the
noncontingent bond method described in
§1.1275–4(b).
(ii)Projected payment schedule—(A)
Determination of schedule. No compa-
rable yield is required to be determined.
The projected payment schedule for the
loan includes all noncontingent payments
and a projected payment for each contin-
gent payment. The projected payment for
a contingent payment is the lowest possi-
ble value of the payment. The projected
payment schedule, however, must produce
a yield that is not less than zero. If the pro-
jected payment schedule produces a nega-
tive yield, the schedule must be reasonably
adjusted to produce a yield of zero.
(B)Split-dollar term loans payable
upon the death of an individual.Ifa
split-dollar term loan described in para-
graph (e)(5)(ii)(A) or (v)(A)(1)ofthis
section provides for one or more contin-
gent payments, the projected payment
schedule is determined based on the term
of the loan as determined under paragraph
(e)(5)(ii)(C) or (v)(B)(2) of this section,
whichever is applicable.
November 17, 200310802003-46 I.R.B.

(C)Certain split-dollar term loans
conditioned on the future performance
of substantial services by an individual.
If a split-dollar term loan described in
paragraph (e)(5)(iii)(A)(1)or(v)(A)(2)of
this section provides for one or more con-
tingent payments, the projected payment
schedule is determined based on the term
of the loan as determined under paragraph
(e)(5)(iii)(C) or (v)(B)(2) of this section,
whichever is applicable.
(D)Demand loans. If a split-dollar de-
mand loan provides for one or more con-
tingent payments, the projected payment
schedule is determined based on a reason-
able assumption as to when the lender will
demand repayment.
(E)Borrower/lender consistency.Con-
trary to §1.1275–4(b)(4)(iv), the lender
rather than the borrower is required to
determine the projected payment schedule
and to provide the schedule to the borrower
and to any indirect participant as described
in paragraph (e)(2) of this section. The
lender’s projected payment schedule is
used by the lender, the borrower, and any
indirect participant to compute interest
accruals and adjustments.
(iii)Negative adjustments.Iftheis-
suer of a split-dollar loan is not allowed to
deduct interest or OID (for example, be-
cause of section 163(h) or 264), then the
issuer is not required to include in income
any negative adjustment carryforward de-
termined under §1.1275–4(b)(6)(iii)(C) on
the loan, except to the extent that at matu-
rity the total payments made over the life
of the loan are less than the issue price of
the loan.
(4)Application of section 7872—(i)
Determination of below-market status.
The yield based on the projected payment
schedule determined under paragraph
(j)(3) of this section is used to deter-
mine whether the loan is a below-market
split-dollar loan under paragraph (e) of
this section.
(ii)Adjustment upon the resolution of a
contingent payment. To the extent that in-
terest has accrued under section 7872 on
a split-dollar loan and the interest would
not have accrued under this paragraph (j)
in the absence of section 7872, the lender
is not required to recognize income under
§1.1275–4(b) for a positive adjustment and
the borrower is not treated as having in-
terest expense for a positive adjustment.
To the same extent, there is a reversal of
the tax consequences imposed under para-
graph (e) of this section for the prior im-
puted transfer from the lender to the bor-
rower. This reversal is taken into account
in determining adjusted gross income.
(5)Examples.Thefollowingexamples
illustrate the rules of this paragraph (j). For
purposes of this paragraph (j)(5), assume
that the contingent payments are neither
remote nor incidental. The examples are
as follows:
Example 1. (i) On January 1, 2010, EmployerT
and EmployeeGenter into a split-dollar life insur-
ance arrangement under whichGis named as the pol-
icy owner. On January 1, 2010, T makes a $100,000
premium payment. On December 31, 2013,Twill be
repaid an amount equal to the premium payment plus
an amount based on the increase, if any, in the price
of a specified commodity for the period the loan is
outstanding. The premium payment is a split-dollar
term loan. Repayment of both the premium payment
and the interest due thereon is recourse toG. Assum
e
that the appropriate AFR for this loan, based on an-
nual compounding, is 7 percent. BothTandGuse
the calendar year as their taxable years.
(ii) Under this paragraph (j), the split-dollar term
loan betweenTandGprovides for a contingent pay-
ment. Therefore, the loan is subject to the c
ontingent
split-dollar method. Under this method, the projected
payment schedule for the loan provides for a noncon-
tingent payment of $100,000 and a proj
ected payment
of $0 for the contingent payment (because it is the
lowest possible value of the payment) on December
31, 2013.
(iii) Based on the projected payment schedule
and a discount rate of 7 percent, compounded an-
nually (the appropriate AFR), the
present value of
the payments under the loan is $76,289.52. Under
paragraphs (e)(4) and (j)(4)(i) of this section, the
loan does not provide for suff
icient interest because
the loan’s imputed loan amount of $76,289.52 (the
present value of the payments) is less than the
amount loaned of $100,000. T
herefore, the loan is
a below-market split-dollar term loan and the loan
is recharacterized as consisting of two portions: an
imputed loan amount of $
76,289.52 and an imputed
transfer of $23,710.48 (amount loaned of $100,000
minus the imputed loan amount of $76,289.52).
(iv) In accordance with
section 7872(b)(1) and
paragraph (e)(4)(iv) of this section, on the date
the loan is made,Tis treated as transferring toG
$23,710.48 (the impu
ted transfer) as compensation.
In addition,Tmust take into account as OID an
amount equal to the imputed transfer. See §1.1272–1
for the treatment o
fOID.
Example 2. (i) Assume, in addition to the facts
inExample 1, that on December 31, 2013,Treceives
$115,000 (its pre
mium payment of $100,000 plus
$15,000).
(ii) Under the contingent split-dollar method,
when the loan is r
epaid, there is a $15,000 posi-
tive adjustment ($15,000 actual payment minus $0
projected payment). Under paragraph (j)(4) of this
section, becau
seTaccrued imputed interest under
section 7872 on this split-dollar loan toGand this
interest would not have accrued in the absence of
section 7872,
Tis not required to include the positive
adjustment in income, andGis not treated as having
interest expense for the positive adjustment. To the
same extent,Tmust include in income, andGis
entitled to deduct, $15,000 to reverse their respective
prior tax consequences imposed under paragraph (e)
of this section (T’s prior deduction for imputed com-
pensationdeemedpaidtoGandG’s prior inclusion
of this amount).Gtakes the reversal into account
in determining adjusted gross income. That is, the
$15,000 is an “above-the-line” deduction, whether
or notGitemizes deductions.
Example 3. (i) Assume the same facts as inEx-
ample 2, except that on December 31, 2013,Tre-
ceives $127,000 (its premium payment of $100,000
plus $27,000).
(ii) Under the contingent split-dollar method,
when the loan is repaid, there is a $27,000 pos-
itive adjustment ($27,000 actual payment minus
$0 projected payment). Under paragraph (j)(4) of
this section, becauseTaccrued imputed interest of
$23,710.48 under section 7872 on this split-dollar
loan toGand this interest would not have accrued
in the absence of section 7872,Tis not required
to include $23,710.48 of the positive adjustment
in income, andGis not treated as having interest
expense for the positive adjustment. To the same
extent, in 2013, T must include in income, an
dG
is entitled to deduct, $23,710.48 to reverse their
respective prior tax consequences imposed under
paragraph (e) of this section (T’s prior d
eduction for
imputed compensation deemed paid toGandG’s
prior inclusion of this amount).GandTtake these
reversals into account in determin
ing adjusted gross
income. Under the contingent split-dollar method,T
must include in income $3,289.52 upon resolution of
the contingency ($27,000 positi
ve adjustment minus
$23,710.48).
(k)Payment ordering rule.Forpur-
poses of this section, a payment made by
the borrower to or for the benefit of the
lender pursuant to a split-dollar life insur-
ance arrangement is applied to all direct
and indirect split-dollar loans in the fol-
lowing order—
(1) A payment of interest to the extent
of accrued but unpaid interest (including
any OID) on all outstanding split-dollar
loans in the order the interest accrued;
(2) A payment of principal on the out-
standing split-dollar loans in the order in
which the loans were made;
(3) A payment of amounts previously
paid by a non-owner pursuant to a split-
dollar life insurance arrangement that were
not reasonably expected to be repaid by the
owner; and
(4) Any other payment with respect to
a split-dollar life insurance arrangement,
other than a payment taken into account
under paragraphs (k)(1), (2), and (3) of this
section.
(l) [Reserved]
(m)Repayments received by a lender.
Any amount received by a lender under a
2003-46 I.R.B.1081November 17, 2003

life insurance contract that is part of a split-
dollar life insurance arrangement is treated
as though the amount had been paid to the
borrowerandthenpaidbytheborrowerto
the lender. Any amount treated as received
by the borrower under this paragraph (m)
is subject to other provisions of the Internal
Revenue Code as applicable (for example,
sections 72 and 101(a)). The lender must
take the amount into account as a payment
received with respect to a split-dollar loan,
in accordance with paragraph (k) of this
section. No amount received by a lender
with respect to a split-dollar loan is treated
as an amount received by reason of the
death of the insured.
(n)Effective date—(1)General rule.
This section applies to any split-dollar life
insurance arrangement entered into after
September 17, 2003. For purposes of this
section, an arrangement is entered into as
determined under §1.61–22(j)(1)(ii).
(2)Modified arrangements treated as
new arrangements. If an arrangement
entered into on or before September 17,
2003, is materially modified (within the
meaning of §1.61–22(j)(2)) after Septem-
ber 17, 2003, the arrangement is treated
as a new arrangement entered into on the
date of the modification.
PART 31—EMPLOYMENT TAXES
AND COLLECTION OF INCOME TAX
AT SOURCE
Par. 10. The authority citation for part
31 continues to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 11. In §31.3121(a)–1, paragraph
(k) is added to read as follows:
§31.3121(a)–1 Wages.
*****
(k)Split-dollar life insurance arrange-
ments. Except as otherwise provided un-
der section 3121(v), see §§1.61–22 and
1.7872–15 of this chapter for rules relat-
ing to the treatment of split-dollar life in-
surance arrangements.
Par. 12. In §31.3231(e)–1, paragraph
(a)(6) is added to read as follows:
§31.3231(e)–1 Compensation.
(a) * * *
(6)Split-dollar life insurance arrange-
ments. See §§1.61–22 and 1.7872–15 of
this chapter for rules relating to the treat-
ment of split-dollar life insurance arrange-
ments.
*****
Par. 13. In §31.3306(b)–1, paragraph
(l) is added to read as follows:
§31.3306(b)–1 Wages.
*****
(l)Split-dollar life insurance arrange-
ments. Except as otherwise provided un-
der section 3306(r), see §§1.61–22 and
1.7872–15 of this chapter for rules relat-
ing to the treatment of split-dollar life in-
surance arrangements.
Par. 14. In §31.3401(a)–1, paragraph
(b)(15) is added to read as follows:
§31.3401(a)–1 Wages.
*****
(b) * * *
(15)Split-dollar life insurance ar-
rangements. See §1.61–22 of this chapter
for rules relating to the treatment of
split-dollar life insurance arrangements.
*****
PART 602—OMB CONTROL
NUMBERS UNDER THE PAPERWORK
REDUCTION ACT
Par. 15. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 16. In section 602.101, paragraph
(b) is amended by adding an entry in nu-
merical order for §1.7872–15 to read as
follows:
§602.101 OMB Control numbers.
*****
(b) * * *
CFR part or section where
identified and described
Current OMB
control No.
*****
1.7872–15............................................................................ 1545–1792
*****
Robert E. Wenzel,
Deputy Commissioner for
Services and Enforcement.
Approved September 11, 2003.
Pamela F. Olson,
Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on September 11,
2003, 4:13 p.m., and published in the issue of the Federal
Register for September 17, 2003, 68 F.R. 54336)
Section 104.—Compensation
for Injuries or Sickness
Taxpayers are informed of the tax treatment under
sections 61, 104, 130, and 139 of periodic payments
to claimants of the September 11th Victim Compen-
sation Fund. See Rev. Rul. 2003-115, page 1052.
Section 130.—Certain
Personal Injury Liability
Assignments
Taxpayers are informed of the tax treatment under
sections 61, 104, 130, and 139 of periodic payments
to claimants of the September 11th Victim Compen-
sation Fund. See Rev. Rul. 2003-115, page 1052.
Section 139.—Disaster
Relief Payments
Taxpayers are informed of the tax treatment under
sections 61, 104, 130, and 139 of periodic payments
to claimants of the September 11th Victim Compen-
sation Fund. See Rev. Rul. 2003-115, page 1052.
November 17, 200310822003-46 I.R.B.

Section 147.—No Portion
of Bonds May Be Issued
for Skyboxes, Airplanes,
Gambling Establishments,
etc.
Helicopters.This ruling concludes that
a helicopter is not an airplane for purposes
of section 147(e) of the Code which pro-
vides that a private activity bond is not a
qualified bond if issued as part of an is-
sue and any portion of the proceeds of
suchissueistobeusedtoprovideanyair-
plane, skybox, or other private luxury box,
health club facility, facility primarily used
for gambling, or store the principal busi-
ness of which is the sale of alcoholic bev-
erages for consumption off premises.
Rev. Rul. 2003–116
ISSUE
Whether a helicopter is an “airplane”
within the meaning of § 147(e) of the In-
ternal Revenue Code of 1986.
FACTS
Entity is an organization exempt from
Federal income tax under § 501(a) as an
organization described in § 501(c)(3). En-
tity owns and operates certain hospital fa-
cilities that include a trauma center. En-
tity provides emergency medical care and
treatment in its trauma center. Entity pro-
poses to expand the trauma center to add
additional emergency rooms. As part of
the expansion, Entity intends to purchase a
helicopter to provide helicopter ambulance
service to the trauma center for accident
victims and other medical emergencies.
Issuer will issue bonds (Bonds) as qual-
ified 501(c)(3) bonds under § 145 and loan
the proceeds to Entity to finance the expan-
sion of the trauma center and the purchase
of the helicopter.
LAW AND ANALYSIS
Section 103(a) provides that, except as
provided in § 103(b), gross income does
not include interest on any State or local
bond. Section 103(b) provides, in part, that
§ 103 (a) shall not apply to any private
activity bond that is not a qualified bond
(within the meaning of § 141).
Section 141 provides, in part, that a
bond is a private activity bond if the bond
is issued as part of an issue that meets
the private business use test of § 141(b)(1)
and the private security or payment test of
§ 141(b)(2). The private business use test
is met if more than 10 percent of the pro-
ceeds of an issue are to be used for any pri-
vate business use. The private security or
payment test is met if the payment of the
principal of, or the interest on, more than
10 percent of the proceeds of an issue is
directly or indirectly (1) secured by an in-
terest in property used or to be used for a
private business use, (2) secured by an in-
terest in payments in respect of such prop-
erty, or (3) to be derived from payments,
whether or not to the issuer, in respect of
property, or borrowed money, used or to be
used for a private business use.
Section 141(e) provides, in part, that
the term “qualified bond” includes any pri-
vate activity bond that (1) is a qualified
501(c)(3) bond; (2) meets the applicable
requirements of § 146; and (3) meets the
applicable requirements of each subsec-
tion of § 147.
Section 145(a) provides, in general, that
the term “qualified 501(c)(3) bond” means
any private activity bond issued as part of
an issue if (1) all property which is to be
provided by the net proceeds of the issue
is to be owned by a 501(c)(3) organiza-
tion or a governmental unit, and (2) such
bond would not be a private activity bond
if (A) 501(c)(3) organizations were treated
as governmental units with respect to their
activities which do not constitute unrelated
trades or businesses, determined by apply-
ing § 513(a), and (B) §§ 141(b)(1) and (2)
wereappliedbysubstituting“5percent”
for “10 percent” each place it appears and
by substituting “net proceeds” for “pro-
ceeds” each place it appears.
Section 147(e) provides that a private
activity bond shall not be a qualified bond
if issued as part of an issue and any portion
of the proceeds of such issue is to be used
to provide any airplane, skybox, or other
private luxury box, health club facility, fa-
cility primarily used for gambling, or store
the principal business of which is the sale
of alcoholic beverages for consumption off
premises.
Section 147(e) does not define the term
“airplane.” When a word is not defined by
statute, it is construed in accord with its or-
dinary and common meaning.See Carlson
v. Commissioner, 116 T.C. 87, 93 (2001).
In this regard, Webster’s Collegiate Dic-
tionary (11
th
Ed. 2003), defines the term
“airplane” as a “powered heavier-than-air
aircraft that has fixed wings from which it
derives most of its lift.”
Here, Entity will use a portion of the
proceeds of the Bonds to finance the pur-
chase of a helicopter. Webster’s Collegiate
Dictionary defines the term “helicopter” as
“an aircraft whose lift is derived from the
aerodynamic forces acting on one or more
powered rotors turning about substantially
vertical axes.” It defines the term “aircraft”
as “a vehicle (as an airplane or balloon) for
traveling through the air.” Thus, airplanes
and helicopters are types of aircraft, but a
helicopter is not an airplane. Accordingly,
the helicopter to be purchased by Entity
with proceeds of the Bonds is not an “air-
plane” for purposes of § 147(e).
HOLDING
A helicopter is not an “airplane” withi
n
the meaning of § 147(e).
DRAFTING INFORMATION
The principal authors of this revenue
ruling are Vicky Tsilas and Johanna
Som de Cerff of the Office of the Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities). For
further information regarding this rev-
enue ruling, contact Vicky Tsilas at (202)
622–3980 (not a toll-free call).
Section 355.—Distribution
of Stock and Securities of a
Controlled Corporation
26 CFR 1.355–2: Bus
iness purpose.
Stocks and securities; distribution.
This ruling concludes that, in determining
whether a distribution of controlled cor-
poration stock satisfies the business pur-
pose requirement of regulations section
1.355–2(b), the fact that the distribution
avoids gain recognition under section
311(b) of the Code does not present a
potential for avoidance of federal income
tax.
2003-46 I.R.B.1083November 17, 2003

Rev. Rul. 2003–110
ISSUE
In determining whether a distribution of
the stock of a controlled corporation sat-
isfies the business purpose requirement of
§ 1.355–2(b) of the Income Tax Regula-
tions that the distribution be motivated, in
whole or substantial part, by one or more
corporate business purposes, does the fact
that § 355 of the Internal Revenue Code
permits a distributing corporation to dis-
tribute the stock of a controlled corpora-
tion without recognition of gain present a
potential for the avoidance of Federal taxes
under § 1.355–2(b)?
FACTS
Distributing is a publicly traded corpo-
ration that conducts a pesticides business.
Controlled, a wholly owned subsidiary of
Distributing, conducts a baby foods busi-
ness. The pesticides business formulates,
manufactures, and markets pesticides for
agricultural use. The baby foods business
processes and markets baby foods.
A significant number of potential cus-
tomers of the baby foods business refuse
to buy from Controlled because of its affil-
iation with Distributing and its pesticides
business. Distributing’s management con-
sultant has advised Distributing that sepa-
rating Controlled from Distributing would
relieve the baby foods business of the ad-
verse market perception caused by its as-
sociation with the pesticides business.
To solve the market perception prob-
lem, Distributing distributes the Con-
trolled stock to Distributing’s sharehold-
ers,pro rata. There is no other nontaxable
solution to the problem. Sale of the Con-
trolled stock by Distributing would have
resulted in recognition of gain. Distribut-
ing’s directors expect that the baby foods
business will benefit in a real and sub-
stantial way from the improved market
perception producedby the separation.
Apart from the issue of whether
the business purpose requirement of
§ 1.355–2(b) is satisfied, the distribution
of the Controlled stock meets all the re-
quirements of § 355.
LAW
Section 355 provides that if certain re-
quirements are met, acorporation may dis-
tribute stock and securities in a controlled
corporation to its shareholders and secu-
rity holders without causing the distribut-
ing corporation or the distributees to rec-
ognize gain or loss or include any amount
in income.
To qualify as a distribution described
in § 355, a distribution must, in addition
to satisfying the statutory requirements of
§ 355, satisfy certain requirements in the
regulations, including the business pur-
pose requirement. Section 1.355–2(b)(1)
provides that a distribution must be mo-
tivated, in whole or substantial part, by
one or more corporate business purposes.
A corporate business purpose is a real
and substantial non-Federal tax purpose
germane to the business of the distributing
corporation, the controlled corporation,
or the affiliated group to which the dis-
tributing corporation belongs. Section
1.355–2(b)(2). The potential for the avoid-
ance of Federal taxes by the distributing
or controlled corporation (or a corporation
controlled by either) is relevant in deter-
mining the extent to which an existing
corporate business purpose motivated the
distribution. Section 1.355–2(b)(1). The
principal reason for the business purpose
requirement is to provide nonrecognition
treatment only to distributions that are
incident to readjustments of corporate
structures required by business exigen-
cies and that effect only readjustments
of continuing interests in property un-
der modified corporate forms. Section
1.355–2(b)(1). If a corporate business
purpose can be achieved through a nontax-
able transaction that does not involve the
distribution of stock of a controlled corpo-
ration and that is neither impractical nor
unduly expensive, then the separation is
not carried out for that corporate business
purpose. Section 1.355–2(b)(3).
Section 355(c) provides that no gain or
loss will be recognized by a corporation on
any distribution to which § 355 (or so much
of § 356 as relates to § 355) applies.See
also§ 361(c) (to the same effect if the dis-
tribution is pursuant to a plan of reorgani-
zation). Absent § 355, such a distribution
would be subject to § 311(b), which pro-
vides that, if the fair market value of the
distributed property exceeds its adjusted
basis, then gain will be recognized by the
distributing corporation as if the property
had been sold to the distributee at its fair
market value. Section 355(c)(3).
ANALYSIS
To satisfy the business purpose require-
ment, a distribution must be motivated,
in whole or substantial part, by one or
more corporate business purposes. Sec-
tion 1.355–2(b)(1). The market perception
business purpose motivates Distribut-
ing’s directors to approve the distribution,
there is no other nontaxable transaction
that would solve the market perception
problem, and it is expected that the baby
foods business will benefit in a real and
substantial way from the improved market
perception produced by the separation.
Except as provided in § 355(d) and (e),
the application of § 355(c) or § 361(c)
to distributions that qualify under § 355
is part of the statutory scheme of § 355
and implicit in all such distributions. Ac-
cordingly, the fact that § 355 permits a
distributing corporation to distribute the
stock of a controlled corporation without
the recognition of gain does not present a
potential for the avoidance of Federal taxes
under § 1.355–2(b). This is further im-
plied by § 1.355–2(b)(3), which provides
that the business purpose requirement is
not satisfied if the purpose can be achieved
through a nontaxable alternative transac-
tion. That is, the distributing corporation
is entitled to reject a taxable disposition in
favorofatax-freedistribution.
Therefore, althoughthe distribution of
Controlled stock results in the nonrecogni-
tion of gain that otherwise would be recog-
nized under § 311(b) if § 355(c) did not ap-
ply, the distribution is motivated in whole
by a real and substantial non-Federal tax
purpose germane to the business of Dis-
tributing. Hence, the business purpose re-
quirement of § 1.355–2(b) is satisfied.
HOLDING
In determining whether a distribution
of the stock of a controlled corporation
satisfies the business purpose requirement
of § 1.355–2(b) that the distribution be
motivated, in whole or substantial part,
by one or more corporate business pur-
poses, the fact that § 355 permits a dis-
tributing corporation to distribute the stock
November 17, 200310842003-46 I.R.B.

of a controlled corporation without recog-
nition of gain does not present a potential
for the avoidance of Federal taxes under
§ 1.355–2(b).
DRAFTING INFORMATION
The principal author of this revenue
ruling is Wayne T. Murray of the Office
of Associate Chief Counsel (Corporate).
For further information regarding this rev-
enue ruling, contact Mr. Murray at (202)
622–7700 (not a toll-free call).
Section 451.—General Rule
for Taxable Year of Inclusion
26 CFR 1.451–2: Constructive receipt of income.
Taxpayers are informed of the tax treatment under
sections 61, 104, 130, and 139 of periodic payments
to claimants of the September 11th Victim Compen-
sation Fund. See Rev. Rul. 2003-115, page 1052.
2003-46 I.R.B.1085November 17, 2003

Part IV. Items of General Interest
Foundations Status of Certain
Organizations
Announcement 2002–69
The following organizations have failed
to establish or have been unable to main-
tain their status as public charities or as op-
erating foundations. Accordingly, 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 sec-
tion 508(b) of the Code. This listing does
notindicate that the organizations have lost
their status as organizations described in
section 501(c)(3), eligible to receive de-
ductible contributions.
Former Public Charities.The follow-
ing organizations (which have been treated
as organizations that are not private foun-
dations described in section 509(a) of the
Code) are now classified as private foun-
dations:
Acts of Praise, Inc., Norcross, GA
Adullam Services, Olympic, WA
Agency Niagara, Inc., Tonawanda, NY
Akan Studies Institute, Washington, DC
All Nations Fund, Woodland Hills, CA
Allegiance Ministries, Inc.,
Pickerington, OH
Alpha Watch Family Counceling, Inc.,
Staten Island, NY
Alternatives for Youth, Cleveland, OH
Alumnae Association St. Elizabeth
HospitalSchoolofNursing,
Lafayette, IN
American Alliance for Charity, Inc.,
Bronx, NY
American Association of Artists, Inc.,
Venice, CA
American Friends of Aphrodisias,
New York, NY
American Gospel Music Heritage
Foundation, Inc., Baltimore, MD
American Housing Foundation,
Schaumberg, IL
Americans for a Better America, Inc.,
White Plains, NY
AnCam Antique Airfield Museum,
West Burlington, IA
Angels Touch Foundation, Clovis, CA
Anthony Kincade Scholarship Foundation,
Inc., Crown Point, IN
Archipelagos Regeneration & Restoration
Group, Honolulu, HI
Art of Living, Inc., Ft. Lauderdale, FL
Art Rod Foundation, Inc., Metamora, FL
Asamang Relief Donation,
Delray Beach, FL
Aurora Puerto Rican Cultural Council,
Inc., Aurora, IN
Autumn Hills Health Foundation,
Kansas City, MO
Azusa Pacific University Foundation,
Azusa, CA
B C Inspiration, Inc., West Hollywood, FL
Basin Educational Excelence Foundation,
Burton, TX
Belding Housing Development and
Services Corporation, Belding, MI
Ben Benavidez Advocacy Center,
Fontana, CA
Bethlehem Babe Ruth, Inc., Delmar, NY
Birthright of Aurora, Aurora, MN
Big Island Residential, Inc., Honolulu, HI
Blessed Brotherhood of the Ancient
Church — Minnesota, St. Paul, MN
Booker T. Washington Education Training
& Community Development, Inc.,
Fresno, CA
Books to Read, Murrieta, CA
Brave New World, Inc., Washington, DC
Bread of Life Community Development
Corporation, Detroit, MI
Breaking Chains, Inc., Philadelphia, PA
Business and Economic Access,
Incorporated, Whittier, CA
California Womens Basketball Academy,
Newport Beach, CA
Capistrano Charitable Foundation,
SanJuanCapo,CA
Caritas Traditionalis — The Institute of
Biomedicine and Sciences, Tucson, AZ
Cars for Charities, Inc., Texarkana, TX
Celestial Flight Nonprofit Housing
Corporation, Detroit, MI
Center for National Software Studies,
Reston, VA
Center for Strategic Economic Studies and
Institutional Dvlp., Inc., Baltimore, MD
Center for Teacher Professionalism,
Grass Valley, CA
Center for Teaching Learning and Culture,
Inc., Landover Hills, MD
Chaplain Services, Inc., Sandy, OR
Charitable Religious Organization,
Boston, MA
Charles E. Beard Memorial School
Corporation, Knightstown, IN
Cherish the Children Foundation-Luwann
Youth Center, Inglewood, CA
Chicago Health Initiative CHI,
Chicago, IL
Chicago Juvenile Advisory Council,
Chicago, IL
Chicago Printing Ink Production Club,
Inc., Hickory Hills, IL
Chice, Inc., Omaha, NE
Childhood Incontinence Institute,
Austin, TX
Children 2000, Inc., New York, NY
Children Oncology Cycling of America,
Clifton Park, NY
Children’s 2000 Foundation, Justin, TX
Children’s Depot, Calumet Park, IL
Childrens Empowerment Fund,
Huntsville, TX
Christ Is First Productions, Chicago, IL
Christian Children Complete Camping,
Philadelphia, PA
Christian Faith Outreach Community
Development Corporation, Inc.,
Ft. Lauderdale, FL
Christian Mission Learning Foundation,
Jackson, MS
Christian Voices in Unity, Inc.,
Baltimore, MD
City of Ardmore Cemetery Trust Fund,
Inc., Ardmore, OK
Coalition for Alcohol-Free Kids, Inc.,
Natick, MA
Coalition for Corrections Reform,
Jackson, MI
Coitsville Historical Society, Inc.,
Lowellville, OH
Columbia Research Institute,
Olympia, WA
Community Caring Centers of New
Orleans, Inc., New Orleans, LA
Community Church of Christ of Colorado
Springs, Colorado Springs, CO
Community Connections, Inc.,
Buchanan, MI
Community Empowerment Organization,
Inc., Yorktown, VA
Community Hope Foundation,
Long Beach, CA
Community Media Services, Fairfax, VA
Compassionate Hearts & Hands
International, Columbia, SC
Co-Operative Opportunity for Online
Learning, Tiburon, CA
Copper Basin Lady Cougar Tip-Off Club,
Inc., Copperhill, TN
Creatures Great & Small, Davis, OK
November 17, 200310862003-46 I.R.B.

David Yaghoubi Foundation, Inc.,
Secaucus, NJ
Developmental Resource Corporation,
Shreveport, LA
Doggone Dogs of South Florida, Inc.,
Hollywood, FL
Dogwood SpringsOutreach, Inc.,
Richmond Hill, GA
Don Smith Ministries, Aurora, CO
Dream Camps of Cary, Inc., Cary, NC
Dzilth Na Odilth Ne Resident
Organization, Bloomfield, NM
Eagles Nest Ranch of North Carolina,
Randleman, NC
East African Refugees in North America,
Minneapolis, MN
Eco Balance, La Mesa, CA
Eco Impact, La Mesa, CA
Eco-Watch, Inc., Bettendorf, IA
Edge Jumper Children’s Foundation,
Sonoma, CA
Education Project Foundation, Detroit, MI
Educational and Group Support Found.
for Epilepsy and Asthma, Ventura, CA
El Paso Association of Adult Educators,
El Paso, TX
Emerald Therapeutic Riding Academy,
Westlake, OH
Emergency Transportation Team or Iron
Posse, Michigan City, IN
Employment Action Resource Network,
Inc.,NewYork,NY
Empowerment Through Perserverance,
Inc., Saint Albans, NY
Enabling Sport Foundation, Franklin, NH
Endangered Species Arts Alliance,
Denver, CO
Environmentally Correct, Inc., Reno, NV
Equal Employment Opportunity Network,
Bel Air, MD
Equal Partners, Inc., Southhampton, NJ
Esti Topfer Foundation, Miami, FL
Every-Day Angels Foundation,
Beverly Hills, CA
Excell Clinical Laboratories, Inc.,
Brighton, MA
Faith Tabernacle Community
Development Corporation, Inc.,
Chicago, IL
Fellowship Deliverance Ministries, Inc.,
Lagrange, GA
First Congregational Christian United
Church of Christ, Irvington, NJ
First Night Gloucester, Inc.,
Gloucester, MA
First Page New Chapter & Peer Adviser
Learning Skills FPNC & PAL,
Castro Valley, CA
First Tee of Howard County, Inc.,
Columbia, MD
Florida Institute of Research Science &
Technology, Inc., Jacksonville, FL
Forensis, Inc., San Diego, CA
Foundation for Entrepreneurship, Inc.,
New York, NY
Freedom Farm, Cary, IL
Freeport Community Services Center,
Inc., Freeport, NY
Friends of Arborough Games, Inc.,
Ann Arbor, MI
Friends of Callithea Farm, Inc.,
Potomac, MD
Friends of Santa, Inc., Sicklerville, NJ
Friends of the Elderly, Inc.,
Lincolndale, NY
Friends of West Portland, Inc.,
Springfield Gardens, NY
Gabryelski Film Art Foundation,
New York, NY
Georgia Sulprizio Scholarship Fund,
Danville, CA
Gesher L. Kehillatenu Foundation,
Cambridge, MA
Girls Unlimited, Inc., Decatur, GA
Giving Tree Foundation, Inc.,
Agoura Hills, CA
Global Education Development, Inc.,
Albuquerque, NM
Global Foundation, Woburn, MA
Global Imperative, La Mesa, CA
God’s People, Incorporated, Atlanta, GA
Goddard Foundation, Cordova, TN
Gold Coast Shakespeare Festival, Inc.,
New York, NY
Grayson’s Awareness Outreach,
Los Angeles, CA
Greater Flint RC IMAA Chapter 365,
Flint, MI
Greater New Jericho Bible College,
Rosewood, CA
Guardian Angel Foundation for Homeless
Children, Lumberton, NC
Haitian American Community
Broadcasting Association, Inc.,
Miami, FL
Hammond Babe Ruth League,
Hammond, IN
Hawkins Village Resident Council,
Pittsburgh, PA
Heartland Railroad Historical Society,
Council Bluff, IA
Hearts Hands Center for Mental Health,
Inc., Platteville, WI
Helping Home of America,
Los Angeles, CA
Home for Every Child Foundation,
Sharpsville, IN
Homes for Families, Inc., New York, NY
Homesteade Assist Living, Inc.,
West Friendship, MD
Hoop City Foundation, Wichita, KS
Hope of North Carolina, Zebulon, NC
H.O.P.E. Vocational Services, Ltd.,
Walnut Creek, CA
House of Prayer Economic Development,
Inc., Lakeland, FL
House of Reuben, Andover, MA
Idaho Celebrity Classics, Inc., Boise, ID
India for Jesus, Colleyville, TX
Indiana Consortium on Professional Dev.
for Educ. of Young Children, Inc.,
Indianapolis, IN
Indy Jazz Fest, Inc., Indianapolis, IN
Inner City Development Foundation,
Los Angeles, CA
International Center for Education About
Aging, Inc., Auburndale, MA
International College of Psychology
Foundation, Carlsbad, NM
International Health Resources, Pryor, OK
International Sailing Hall of Fame,
Jensen Beach, FL
Irene E. Boothe Book Review Club,
Fort Worth, TX
Island Business Connection, Inc.,
Pawtucket, RI
Ivie Carter Home, Inc., Lithonia, GA
Jade Art Foundation, New York, NY
Jefferson 21st Century Institute,
Centerville, UT
Jefferson Park Housing Development
Fund Company, Inc., Rochester, NY
Jermiah Restoration Ministry, Inc.,
Elgin, IL
Jesus Loves You, Inc., Colleyville, TX
Joes Good Samaritan Soup Kitchen,
Prichard, AL
John and Mildred Medic Wuchenich
Foundation, Redlands, CA
John Campbell Ministries,
Youngstown, OH
Jones Community Support Center,
Clarksdale, MS
Journey With Jesus, Dyersburg, TN
K A S T, Inc., Springfield, MO
Kevin Ghelli Celebration Fund, Inc.,
Holliston, MA
Khan Universal Foundation, Inc.,
Armonk, NY
Kids Land Daycare and Teenage
Mentoring Service, Inc.,
Kansas City, KS
Kinship of Monticello, Monticello, MN
2003-46 I.R.B.1087November 17, 2003

Kiwanis Club of Concord NH Charitable
Foundation, Concord, NH
Kiwanis Club of Covington Foundation,
Covington, WA
Koda Foundation, Peever, SD
Ladies Health Foundation, Cerritos, CA
Lancaster Community Housing
Corporation, Lancaster, OH
Landhealers Ministries, Kalamazoo, MI
Learning Disabilities Association
for Nassau Suffolk Counties, Inc.,
Massapequa Park, NY
Leon and Ollie Craig Foundation, Inc.,
Visalia, CA
Let’s Grow, Inc., Silver Spring, MD
Lighted Candle Society, Bountiful, UT
Living With Lupus Foundation, Inc.,
Jacksonville, AR
Londonderry Basketball Club,
Londonderry, NH
Long Beach Air Museum, Lawndale, CA
Long View Learning, Inc., Raleigh, NC
Loveforce Ministries, Inc., Atlanta, GA
Lynnhaven Kiwanis Charity Foundation,
Norfolk, VA
M. B. Peterson Ministries, Inc., Miami, FL
Majestic Wildlife Rehabilitation &
Education Center, Inc., Bethlehem, PA
Maloney Group, Florissant, MO
Maloney Group II, Florissant, MO
Maloney Group III, Florissant, MO
Maloney Group IV, Hazelwood, MO
Marriage & Family Success Center, Inc.,
Mission Viejo, CA
Martina Starke Foundation, Incorporated,
Whitakers, NC
McCloud Memorial Foundation,
Elmendorf AFB, AK
Medical Center Resident Advisory Group,
San Bernardino, CA
Memphis Community Development
Partnership, Inc., Memphis, TN
Men-N-Effect Civic Sports,
Chesapeake, VA
Meriden Community Action Agency, Inc.,
Meriden, CT
Metro Ferals, Inc., Arlington, VA
Midwest Care Centers, Inc.,
Kansas City, MO
Midwest Care Center II, Inc.,
Kansas City, MO
Midwest Care Center III, Inc.,
Kansas City, MO
Midwest Care Center IV, Inc.,
Kansas City, MO
Midwest Care Center V, Inc.,
Kansas City, MO
Midwest Care Center VI, Inc.,
Kansas City, MO
Midwest Care Center VII, Inc.,
Kansas City, MO
Midwest Care Center VIII, Inc.,
Kansas City, MO
Midwest Care Center IX, Inc.,
Kansas City, MO
Ministry Resources, Inc., Charlotte, NC
Minnesota Attainable Housing
Corporation I, Minneapolis, MN
Mission of Light, Inc., Sherwood, MI
Mixed Pickles Vintage Dance Company,
Philadelphia, PA
Moon School Parents Club, Waterford, CA
Mothers Dream, Lexington, SC
Mountain Empire Athletic League,
Campo, CA
Mt. Olive Community Development
Ministries, Inc., Jacksonville, FL
Multi-Cultural Center of Southeast Texas,
Beaumont, TX
My Brothers Helper, Inc., Oakland, CA
Nashua Downtown Development
Corporation, Nashua, NH
National Alliance for the Protection of
Our Children, Salt Lake City, UT
National Association of Federal Law
Enforcement Assistance Group, Ltd.,
New York, NY
National Baptist Convention Housing
Board, Inc., Newark, OH
Natural High Adventures,
Los Angeles, CA
Natures Neighbors, Jemul, CA
Neighborhood Educational Empowerment
Development Services, Joliet, IL
Never Again Treatment Facility,
Chicago, IL
New Dawn Foundation, Palmdale, CA
New Dawn Residential Facility,
Youngstown, OH
New Jersey Community Development
Enterprises, Inc., Orange, NJ
New Light Consultants, Millington, MI
New Priorities Child Refuge, Bend, OR
New Ventures Community Development
Corporation, Inc., Bridgeport, CT
New World Youth Center, Gardena, CA
New York Metro American Studies
Association, Inc., Brooklyn, NY
Niche Ministries, Inc., Sonora, CA
Nigerian Peoples Forum NPF,
Rockville, MD
Nineteenth Street Baptist Church
Community Development Corporation,
Washington, DC
NISAA, Inc., Syracuse, NY
Northwest Colorectal Foundation,
Seattle, WA
Ogden Business Development Committee,
Ogden, IL
Olive Branch Early Learning &
Enrichment Center, Inc., Atlanta, GA
Omonoia Cretan Charitable Foundation,
Inc., Hauppauge, NY
Open Arms Outreach, Inc., Valdosta, GA
Open Mind Foundation,
Salt Lake City, UT
Order of Ahepa District 17 Scholarship,
Belen, NM
Ordinary Theater, New York, NY
Orlando Branches Steel Orchestra, Inc.,
Orlando, FL
Outreach Needs Effort, Seattle, WA
Overton Park SDA Church Community
Center, Memphis, TN
Owensboro Family YMCA Endowment
Fund, Inc., Owensboro, KY
Palm Reef, Inc., Thayne, WY
Pan American Institute for Medical
Education and Research, Inc.,
Houston, TX
Parama Retreat Center, Inc., Elmore, VT
Parental Guidance Associates,
Wallingford, PA
Park Flava Foundation,
Stone Mountain, GA
Partners in Art, Inc., Sheldonville, MA
Partnership for Sri Lanku-USA,
West Springfield, MA
Paw Patch, Ltd., Pawling, NY
Pawnee Pioneer Trails Scenic and
Historical Byway Council, Inc.,
Sterling, CO
Penn North Revitalize Corporation,
Baltimore, MD
Pens Across the Metroplex,
Kansas City, MO
People Aiding Feral Cats, Ventura, CA
Perry County Community Association,
Newbern, AL
Personal Touch Incentive Center, Inc.,
Los Angeles, CA
PHA Development Corporation,
Miami, OK
Philadelphia Scholastic Rowing
Association, Philadelphia, PA
Phoenix Project, Inc., Baltimore, MD
Podiatry Research & Educational
Foundation, Inc., Belleville, NJ
Possibilities for Youth, Divide, CO
Power of Tehillum, Brooklyn, NY
Prairie Health Services, Inc., Hopedale, IL
Praxis Youth Development Corp.,
Layton, UT
November 17, 200310882003-46 I.R.B.

Presbyterian Homes Mill Pond Care
Center, Inc., Roseville, MN
Professional Education and Training
Association of Alaska, Inc., Juneau, AK
Progressive Housing Solutions of Florida,
Inc., St. Petersburg, FL
Promise, Incorporated, Toledo, OH
Quality Childcare Center, Kenner, LA
Quantize Records, Inc., McCormick, SC
Rainbow Club, Inc., Old Greenwich, CT
Rammoth Deliverance Ministries,
Raymond, MS
Ranch, Inc., Menomonee Falls, WI
Reading Education for Adults, Inc.,
Lake Jackson, TX
Recap Development, Inc., Houston, TX
Red River Place Housing, Inc.,
Houston, TX
Religious Times, Philadelphia, PA
Remembrance Society, Alameda, CA
Resident’s Council of Brevard Housing
Authority, Inc., Brevard, NC
Rock, Tampa, FL
Rodney McBride Arts Society,
Palo Alto, CA
S A C, Inc., Washington, DC
San Angelo Chamber of Commerce
Development Organization,
San Angelo, TX
Santa Barbara Jazz Hall, Inc.,
Santa Barbara, CA
Save a Life 2000 Coalition, Bronx, NY
School Bus Drug Prevention, Inc.,
Aventura, FL
Scope USA, Inc., Wauseon, OH
Seafood Producers Cooperative
Foundation, Bellingham, WA
Share a Suit Foundation, Chicago, IL
Sharetech, Inc., Chubbuck, ID
Shelton Youth Programs, Shelton, WA
Shepherd Ministries, Columbia, SC
Sirenia Center, Inc., Sunrise, FL
Simon Peter Ministries, Yamika, WA
Sister Cities Foundation, Tempe, AZ
Sister Niguma Productions, Inc.,
Boulder, CO
Sisters Striving for Entrepreneurship, Inc.,
Decatur, GA
Society for the Prevention of Domestic
Violence, Inc., New York, NY
Southeast Corner Alliance of
Neighborhoods, Austin, TX
Southeast Texas Girls Softball
Association, Inc., Beaumont, TX
Spine & Scoliosis Research Associates,
Inc., Summit, NJ
Spirit Word Teaching Ministries and Bible
Training Center Intl., Inc., Barstow, CA
Spur on Ministries, Inc., Okeechobee, FL
St. Ephrem Foundation, Inc.,
Kiennelon, NJ
S.T.E.P., Compton, CA
Step Up Community Partnership for Good
Parenting, Cleveland, MS
Stepfamily Network, Palo Alto, CA
Still Water Area Baseball Boosters,
Still Water, MN
Students at Risk, Inc., Prospect, KY
Summit of Fairfield County, Incorporated,
Fairfield, CT
Sure Foundation, Inc., Baltimore, MD
Surrogate Father Program, Inc.,
Martinsburg, WV
Survivor Fund, New York, NY
S V U Outreach Programs, Inc.,
Detroit, MI
Task of Rome GA, Inc., Rome, GA
Tejano Policy Institute, Houston, TX
Texas Volunteer, Mission, TX
Thapar Institute of Engineering and
Technology Patiala Ed Tr Ltd.,
Iowa City, IA
Third Millenium Catholic Artists,
Miami, FL
Third Wave Institute, Inc.,
Bloomington, IN
Thomas Alva Edison Foundation,
Washington, DC
Thunder Fastpitch, Inc., Eagle, ID
Tiger Baseball Association, Inc.,
Lees Summit, MO
Tobey Homestead Restoration Trust, Inc.,
Wareham, MA
Todd Theatre Troupe, New York, NY
Torat Hayim, Los Angeles, CA
Trainease International, Inc.,
Middletown, NY
Transform and Transcend, Inc., Salem, OR
Transformation Retreats, Incorporated,
Richmond, VA
Tri State Animal Rescue Services, Inc.,
Mineola, NY
Tri State Urban Renewal, East Orange, NJ
Trigg Hospital Foundation,
Tucumcari, NM
Trinity Alliance, Inc., N. Miami Beach, FL
Troy Local Development Corporation,
Troy, NY
Tyn, Inc., Santa Barbara, CA
Ultimate Vision Ministries, Inc.,
Arnold, MO
Universal Divine Saviors, Chicago, IL
Utah Woodcarvers Guild, Sandy, UT
Veterans Memorial of Alto Pass Area,
Alto Pass, IL
Virginia Skeet Shooting Association, Inc.,
Annandale, VA
Virtual Diagnostic and Rehabilitation
Scenarios, Inc., Newton, MA
Volleyball Development Corp.,
Saint Louis, MO
Wang Yun-Wu Foundation, Inc.,
Redwood City, CA
Warwick Revitalization, Inc.,
Warwick, GA
Wasco County Historical Museum,
The Dalles, OR
Watchkeepers, Inc., Middleboro, MA
Wayne Morse Youth Program,
Eugene, OR
Waynoka Ministries, Inc.,
Oklahoma City, OK
We Share, Inc., Atlanta, GA
Western Health Foundation, Arcadia, CA
Williamsburg Basketball League, Inc.,
Brooklyn, NY
Willits Senior Housing Corporation,
Ukiah, CA
Willing Hearts, Inc., San Antonio, TX
Wind Symphony of Corpus Christi,
Alice, TX
Windsor Repertory Theater Co., Inc.,
Mineola, NY
Women’s Day USA, Santa Monica, CA
Women’s Institute for Personal and
Political Justice, Santa Barbara, CA
Worcester Area Dual Diagnosis Task
Force, Inc., Worcester, MA
Word & Praise Ministries International,
Inc., Tulsa, OK
World Center for Clinical Research,
Reno, NV
World Foundation for Smart
Communities, La Jolla, CA
World Species List-Natural Features
Registry Institute, Savannah, GA
Wounded Healers, Miami, FL
Wyoming Press Association Foundation,
Cheyenne, WY
Yankton Swim Team, Yankton, SD
Yesterday, Today, Tomorrow, Inc.,
Lake Charles, LA
You Belong, Inc., Fontana, CA
Young Eagles, Inc., Los Angeles, CA
Yuba Volunteer Fire Dept., Hendrix, OK
Zanadu Performing Arts Centre,
Newport News, VA
If an organization listed above submits
information that warrants the renewal of
its classification as a public charity or as
a private operating foundation, the Inter-
nal Revenue Service will issue a ruling or
2003-46 I.R.B.1089November 17, 2003

determination letter with the revised clas-
sification as to foundation status. Grantors
and contributors may thereafter rely upon
such ruling or determination letter as pro-
vided in section 1.509(a)–7 of the Income
Tax Regulations. It is not the practice of
the Service to announce such revised clas-
sification of foundation status in the Inter-
nal Revenue Bulletin.
Section 29—Test Procedures
and Significant Chemical Change
Announcement 2003–70
Section 29 of the Internal Revenue
Code provides a tax credit for the pro-
duction and sale of solid synthetic fuels
produced from coal. Rev. Rul. 86–100,
1986–2 C.B. 3, adopts for purposes of
§ 29(c)(1)(C) the definition of synthetic
fuel in § 1.48–9(c)(5) of the Income Tax
Regulations. Section 1.48–9(c)(5)(ii) pro-
vides that, to be “synthetic,” a fuel must
differ significantly in chemical composi-
tion, as opposed to physical composition,
from the substance used to produce it.
Rev. Rul. 86–100 describes favorably
processes such as gasification, liquefac-
tion, and production of solvent refined
coal that result in substantial chemical
changes to the entire coal feedstock rather
than changes that affect only the surface
of the coal.
Consistent with its ruling practice that
began in the mid 1990’s, the Internal Rev-
enue Service, in Rev. Proc. 2001–30,
2001–1 C.B.1163, provided that taxpay-
ers must satisfy certain conditions in or-
der to obtain a letter ruling that a solid fuel
(other than coke) produced from coal is
a qualified fuel under § 29(c)(1)(C). Rev.
Proc. 2001–30, as modified by Rev. Proc.
2001–34, 2001–1 C.B. 1293. The revenue
procedure requires taxpayers to present ev-
idence that all, or substantially all, of the
coal used as feedstock undergoes a signif-
icant chemical change. To meet this re-
quirement and obtain favorable private let-
ter rulings, taxpayers have provided ex-
pert reports asserting that their processes
resulted in a significant chemical change.
In Announcement 2003–46, 2003–30
I.R.B. 222, the Service stated that it would
review the scientific validity of test proce-
dures and results presented as evidence of
significant chemical change. The Service
also stated that no additional rulings on the
question of significant chemical change
would be issued until the completion of the
review.
The principal tests used to determine
that chemical changes to coal have oc-
curred involve sophisticated technology
and a large number of complex steps to
prepare samples for testing as well as to
analyze and interpret results. In reviewing
these tests, the Service has consulted with
experts and has considered the views of
taxpayers in the synthetic fuels industry
and their experts and advisers.
The Service has finished the review
started with Announcement 2003–46. As
a result of this review, the Service has
determined that the test procedures and
results used by taxpayers are scientifically
valid if the procedures are applied in a
consistent and unbiased manner. The
Service believes, however, that the pro-
cesses approved under its long standing
ruling practice and as set forth in Rev.
Proc. 2001–30 do not produce the level
of chemical change required by § 29
(c)(1)(C) and Rev. Rul. 86–100. Never-
theless, the Service continues to recognize
that many taxpayers and their investors
have relied on its long standing ruling
practice to make investments. Therefore,
the Service will continue to issue rulings
on significant chemical change but only
under the guidelines set forth in Rev.
Proc. 2001–30, as modified by Rev. Proc.
2001–34.
Although the Service will resume its
ruling practice, the Service has continu-
ing concerns regarding the sampling and
data/record retention practices prevalent in
the synthetic fuels industry. Accordingly,
in order to receive future rulings, taxpay-
ers will be required to (i) maintain sam-
pling and quality control procedures that
conform to ASTM or other appropriate
industry guidelines at their synthetic fuel
production facilities, (ii) obtain regular re-
ports from independent laboratories that
have analyzed the synthetic fuel produced
in such facilities to verify that the coal used
to produce the fuel undergoes a significant
chemical change, consistent with prior rul-
ing practice, and (iii) maintain records and
data underlying the reports that taxpay-
ers obtain from independent laboratories
including raw FTIR data, and processed
FTIR data sufficient to document the se-
lection of absorption peaks and integration
points. The Service also plans to issue
guidance extending these requirements to
taxpayers already holding rulings on the is-
sue of significant chemical change. In ad-
dition to these requirements, the Service
is considering whether to impose certain
requirements on laboratories used by tax-
payers to demonstrate significant chemical
change, consistent with prior ruling prac-
tice, such as requiring that the laboratories
be accredited by the NIST National Volun-
tary Laboratory Accreditation Program.
DRAFTING INFORMATION
The principal author of this announce-
ment is Joseph H. Makurath of the Office
of Associate Chief Counsel (Passthroughs
& Special Industries). For further informa-
tion regarding this announcement, contact
Jaime C. Park at (202) 622–3120 (not a
toll-free call).
Announcement of Disciplinary Actions Involving Attorneys,
Certified Public Accountants, Enrolled Agents, and Enrolled
Actuaries — Suspensions, Censures, Disbarments, and
Resignations
November 17, 200310902003-46 I.R.B.

Announcement 2003-71
Under Title 31, Code of Federal Regu-
lations, Part 10, attorneys, certified public
accountants, enrolled agents, and enrolled
actuaries may not accept assistance from,
or assist, any person who is under disbar-
ment or suspension from practice before
the Internal Revenue Service if the assis-
tance relates to a matter constituting prac-
tice before the Internal Revenue Service
and may not knowingly aid or abet another
person to practice before the Internal Rev-
enue Service during a period of suspen-
sion, disbarment, or ineligibility of such
other person.
To enable attorneys, certified public
accountants, enrolled agents, and enrolled
actuaries to identify persons to whom
these restrictions apply, the Director, Of-
fice of Professional Responsibility will
announce in the Internal Revenue Bulletin
their names, their city and state, their pro-
fessional designation, the effective date
of disciplinary action, and the period of
suspension. This announcement will ap-
pear in the weekly Bulletin at the earliest
practicable date after such action and will
continue to appear in the weekly Bulletins
for five successive weeks.
Disbarments From Practice Before the Internal Revenue
Service After Notice and an Opportunity for a Proceeding
Under Title 31, Code of Federal Regu-
lations, Part 10, after notice and an oppor-
tunity for a proceeding before an adminis-
trative law judge, the following individuals
have been disbarred from practice before
the Internal Revenue Service:
NameAddressDesignationEffective Date
Loy, Michael F.Pittsburgh, KSCPAJuly 23, 2003
Consent Suspensions From Practice Before the Internal
Revenue Service
Under Title 31, Code of Federal Regu-
lations, Part 10, an attorney, certified pub-
lic accountant, enrolled agent, or enrolled
actuary, in order to avoid institution or con-
clusion of a proceeding for his or her dis-
barment or suspension from practice be-
fore the Internal Revenue Service, may of-
fer his or her consent to suspension from
such practice. The Director, Office of Pro-
fessional Responsibility, in his discretion,
may suspend an attorney, certified public
accountant, enrolled agent or enrolled ac-
tuary in accordance with the consent of-
fered.
The following individuals have been
placed under consent suspension from
practice before the Internal Revenue Ser-
vice:
NameAddressDesignationDate of Suspension
Gillis, Robert F.Jacksonville,FLEnrolled AgentJuly 1, 2003
to
January 31, 2004
Ziedins, AivarsCastle Rock, COEnrolled AgentIndefinite
from
July 1, 2003
A. N. HebeshaVisalia, CAEnrolled AgentIndefinite
from
July 11, 2003
Stafford, Robert M.Allston, MACPAIndefinite
from
July 14, 2003
2003-46 I.R.B.1091November 17, 2003

NameAddressDesignationDate of Suspension
Carnahan, Larry K.Ashland, KYAttorneyIndefinite
from
July 18, 2003
McAlarney, Nancy A.Kissimmee,FLEnrolled AgentIndefinite
from
July 24, 2003
Rahman, ErnestMelville, NYEnrolled AgentIndefinite
from
July 31, 2003
Oleksy, Dennis L.Cary, ILEnrolled AgentIndefinite
from
August 12, 2003
Witti, Mary E.Boulder City, NVEnrolled AgentIndefinite
from
September 1, 2003
Lau, WillieHowell, NJEnrolled AgentIndefinite
from
September 1, 2003
Couch, Leslie L.Kihei, HIEnrolled AgentIndefinite
from
September 5, 2003
Khoudary, NicholasEast Brunswick, NJEnrolled AgentIndefinite
from
September 15, 2003.
Solomon, DorothyLos Angeles, CAEnrolled AgentIndefinite
from
October, 6, 2003
McMahon, AngelaToms River, NJEnrolled AgentIndefinite
from
October 20, 2003
Lee, Chun HyongLakewood, WACPAIndefinite
from
October 22, 2003
Expedited Suspensions From Practice Before the Internal
Revenue Service
Under Title 31, Code of Federal Regu-
lations, Part 10, the Director, Office of Pro-
fessional Responsibility, is authorized to
immediately suspend from practice before
the Internal Revenue Service any practi-
tioner who, within five years from the date
the expedited proceeding is instituted (1)
has had a license to practice as an attorney,
certified public accountant, or actuary sus-
pended or revoked for cause or (2) has been
convicted of certain crimes.
The following individuals have been
placed under suspension from practice
before the Internal Revenue Service by
virtue of the expedited proceeding provi-
sions:
November 17, 200310922003-46 I.R.B.

NameAddressDesignationDate of Suspension
Daniels, MarioFlint, MICPAIndefinite
from
September 4, 2003
Hertz, KevinMcAllen, TXCPAIndefinite
from
October 1, 2003
Roselli, AntonioTopsfield, MACPAIndefinite
from
October 17, 2003
Moran, Maxine C.San Clemente, CACPAIndefinite
from
October 17, 2003
Muscio, Richard J.Solana Beach, CACPAIndefinite
from
October 17, 2003
Yates, James L.LaPlata, MDCPAIndefinite
from
October 21, 2003
Censure Issued by Consent
Under Title 31, Code of Federal Reg-
ulations, Part 10, in lieu of a proceeding
being instituted or continued, an attorney,
certified public accountant, enrolled agent,
or enrolled actuary, may offer his or her
consent to the issuance of a censure. Cen-
sure is a public reprimand.
The following individuals have con-
sented to the issuance of a Censure:
NameAddressDesignationDate of Censure
Haynes, Gwenivar L.Ellenwood, GAEnrolled AgentAugust 1, 2003
Ritchie, DonaldMilton, MAEnrolled AgentSeptember 3, 2003
Bagley, HaywoodVista, CAEnrolled AgentSeptember 4, 2003
Book, Robert L.Plymouth, MNEnrolled AgentSeptember 15, 2003
2003-46 I.R.B.1093November 17, 2003

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified,above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations
to show that the previous published rul-
ings 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 formerly used will appear in material
published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
November 17, 2003i2003-46 I.R.B.

Numerical Finding List
1
Bulletins 2003–27 through 2003–46
Announcements:
2003-45, 2003-28 I.R.B.73
2003-46, 2003-30 I.R.B.222
2003-47, 2003-29 I.R.B.124
2003-48, 2003-28 I.R.B.73
2003-49, 2003-32 I.R.B.339
2003-50, 2003-30 I.R.B.222
2003-51, 2003-37 I.R.B.555
2003-52, 2003-32 I.R.B.345
2003-53, 2003-32 I.R.B.345
2003-54, 2003-40 I.R.B.762
2003-55, 2003-38 I.R.B.597
2003-56, 2003-39 I.R.B.694
2003-57, 2003-37 I.R.B.555
2003-58, 2003-40 I.R.B.746
2003-59, 2003-40 I.R.B.746
2003-60, 2003-45 I.R.B.1049
2003-61, 2003-42 I.R.B.890
2003-62, 2003-41 I.R.B.821
2003-63, 2003-45 I.R.B.1015
2003-64, 2003-43 I.R.B.934
2003-65, 2003-43 I.R.B.935
2003-66, 2003-45 I.R.B.1049
2003-67, 2003-44 I.R.B.1005
2003-68, 2003-45 I.R.B.1050
2003-69, 2003-46 I.R.B.1086
2003-70, 2003-46 I.R.B.1090
2003-71, 2003-46 I.R.B.1090
Notices:
2003-38, 2003-27 I.R.B.9
2003-39, 2003-27 I.R.B.10
2003-40, 2003-27 I.R.B.10
2003-41, 2003-28 I.R.B.49
2003-42, 2003-28 I.R.B.49
2003-43, 2003-28 I.R.B.50
2003-44, 2003-28 I.R.B.52
2003-45, 2003-29 I.R.B.86
2003-46, 2003-28 I.R.B.53
2003-47, 2003-30 I.R.B.132
2003-48, 2003-30 I.R.B.133
2003-49, 2003-32 I.R.B.294
2003-50, 2003-32 I.R.B.295
2003-51, 2003-33 I.R.B.361
2003-52, 2003-32 I.R.B.296
2003-53, 2003-33 I.R.B.362
2003-54, 2003-33 I.R.B.363
2003-55, 2003-34 I.R.B.395
2003-56, 2003-34 I.R.B.396
2003-57, 2003-34 I.R.B.397
2003-58, 2003-35 I.R.B.429
2003-59, 2003-35 I.R.B.429
Notices— Continued:
2003-60, 2003-39 I.R.B.643
2003-61, 2003-42 I.R.B.851
2003-62, 2003-38 I.R.B.576
2003-63, 2003-38 I.R.B.577
2003-64, 2003-39 I.R.B.646
2003-65, 2003-40 I.R.B.748
2003-67, 2003-40 I.R.B.753
2003-68, 2003-41 I.R.B.824
2003-69, 2003-42 I.R.B.851
2003-70, 2003-43 I.R.B.916
2003-71, 2003-43 I.R.B.922
2003-72, 2003-44 I.R.B.964
2003-73, 2003-45 I.R.B.
Proposed Regulations:
REG-209377-89, 2003-36 I.R.B.521
REG-208199-91, 2003-40 I.R.B.757
REG-106486-98, 2003-42 I.R.B.853
REG-108639-99, 2003-35 I.R.B.431
REG-106736-00, 2003-28 I.R.B.60
REG-108524-00, 2003-42 I.R.B.869
REG-115037-00, 2003-44 I.R.B.967
REG-140378-01, 2003-41 I.R.B.825
REG-107618-02, 2003-27 I.R.B.13
REG-122917-02, 2003-27 I.R.B.15
REG-128203-02, 2003-41 I.R.B.828
REG-131997-02, 2003-33 I.R.B.366
REG-133791-02, 2003-35 I.R.B.493
REG-138495-02, 2003-37 I.R.B.541
REG-138499-02, 2003-37 I.R.B.541
REG-140808-02, 2003-38 I.R.B.582
REG-140930-02, 2003-38 I.R.B.583
REG-141402-02, 2003-43 I.R.B.932
REG-141669-02, 2003-34 I.R.B.408
REG-142538-02, 2003-38 I.R.B.590
REG-143679-02, 2003-38 I.R.B.592
REG-144908-02, 2003-38 I.R.B.593
REG-146893-02, 2003-44 I.R.B.967
REG-157164-02, 2003-44 I.R.B.1004
REG-162625-02, 2003-35 I.R.B.500
REG-163974-02, 2003-38 I.R.B.595
REG-108676-03, 2003-36 I.R.B.523
REG-112039-03, 2003-35 I.R.B.504
REG-113112-03, 2003-40 I.R.B.761
REG-116914-03, 2003-32 I.R.B.338
REG-121122-03, 2003-37 I.R.B.550
REG-129709-03, 2003-35 I.R.B.506
REG-130262-03, 2003-37 I.R.B.553
REG-132483-03, 2003-34 I.R.B.410
REG-132760-03, 2003-43 I.R.B.933
Revenue Procedures:
2003-45, 2003-27 I.R.B.11
2003-46, 2003-28 I.R.B.54
Revenue Procedures— Continued:
2003-47, 2003-28 I.R.B.55
2003-48, 2003-29 I.R.B.86
2003-49, 2003-29 I.R.B.89
2003-50, 2003-29 I.R.B.119
2003-51, 2003-29 I.R.B.121
2003-52, 2003-30 I.R.B.134
2003-53, 2003-31 I.R.B.230
2003-54, 2003-31 I.R.B.236
2003-55, 2003-31 I.R.B.242
2003-56, 2003-31 I.R.B.249
2003-57, 2003-31 I.R.B.257
2003-58, 2003-31 I.R.B.262
2003-59, 2003-31 I.R.B.268
2003-60, 2003-31 I.R.B.274
2003-61, 2003-32 I.R.B.296
2003-62, 2003-32 I.R.B.299
2003-63, 2003-32 I.R.B.304
2003-64, 2003-32 I.R.B.306
2003-65, 2003-32 I.R.B.336
2003-66, 2003-33 I.R.B.364
2003-67, 2003-34 I.R.B.397
2003-68, 2003-34 I.R.B.398
2003-69, 2003-34 I.R.B.403
2003-70, 2003-34 I.R.B.406
2003-71, 2003-36 I.R.B.517
2003-72, 2003-38 I.R.B.578
2003-73, 2003-39 I.R.B.647
2003-74, 2003-43 I.R.B.923
2003-75, 2003-45 I.R.B.1018
2003-76, 2003-43 I.R.B.924
2003-77, 2003-44 I.R.B.964
2003-78, 2003-45 I.R.B.1029
2003-79, 2003-45 I.R.B.1036
2003-80, 2003-45 I.R.B.1037
2003-81, 2003-45 I.R.B.1046
Revenue Rulings:
2003-70, 2003-27 I.R.B.3
2003-71, 2003-27 I.R.B.1
2003-72, 2003-33 I.R.B.346
2003-73, 2003-28 I.R.B.44
2003-74, 2003-29 I.R.B.77
2003-75, 2003-29 I.R.B.79
2003-76, 2003-33 I.R.B.355
2003-77, 2003-29 I.R.B.75
2003-78, 2003-29 I.R.B.76
2003-79, 2003-29 I.R.B.80
2003-80, 2003-29 I.R.B.83
2003-81, 2003-30 I.R.B.126
2003-82, 2003-30 I.R.B.125
2003-83, 2003-30 I.R.B.128
2003-84, 2003-32 I.R.B.289
2003-85, 2003-32 I.R.B.291
2003-86, 2003-32 I.R.B.290
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2003-1 through 2003-26 is in Internal Revenue Bulletin 2003-27,
dated July 7, 2003.
2003-46 I.R.B.iiNovember 17, 2003

Revenue Rulings— Continued:
2003-87, 2003-29 I.R.B.82
2003-88, 2003-32 I.R.B.292
2003-89, 2003-37 I.R.B.525
2003-90, 2003-33 I.R.B.353
2003-91, 2003-33 I.R.B.347
2003-92, 2003-33 I.R.B.350
2003-93, 2003-33 I.R.B.346
2003-94, 2003-33 I.R.B.357
2003-95, 2003-33 I.R.B.358
2003-96, 2003-34 I.R.B.386
2003-97, 2003-34 I.R.B.380
2003-98, 2003-34 I.R.B.378
2003-99, 2003-34 I.R.B.388
2003-100, 2003-34 I.R.B.385
2003-101, 2003-36 I.R.B.513
2003-102, 2003-38 I.R.B.559
2003-103, 2003-38 I.R.B.568
2003-104, 2003-39 I.R.B.636
2003-105, 2003-40 I.R.B.696
2003-106, 2003-44 I.R.B.936
2003-107, 2003-41 I.R.B.815
2003-108, 2003-44 I.R.B.963
2003-109, 2003-42 I.R.B.839
2003-110, 2003-46 I.R.B.1083
2003-111, 2003-45 I.R.B.1009
2003-112, 2003-45 I.R.B.1007
2003-113, 2003-44 I.R.B.962
2003-114, 2003-45 I.R.B.1012
2003-115, 2003-46 I.R.B.1052
2003-116, 2003-46 I.R.B.1083
2003-117, 2003-46 I.R.B.1051
Tax Conventions:
2003-58, 2003-40 I.R.B.746
2003-59, 2003-40 I.R.B.746
2003-62, 2003-41 I.R.B.821
2003-63, 2003-45 I.R.B.
Treasury Decisions:
9061, 2003-27 I.R.B.5
9062, 2003-28 I.R.B.46
9063, 2003-36 I.R.B.510
9064, 2003-36 I.R.B.508
9065, 2003-36 I.R.B.515
9066, 2003-36 I.R.B.509
9067, 2003-32 I.R.B.287
9068, 2003-37 I.R.B.538
9069, 2003-37 I.R.B.525
9070, 2003-38 I.R.B.574
9071, 2003-38 I.R.B.560
9072, 2003-37 I.R.B.527
9073, 2003-38 I.R.B.570
9074, 2003-39 I.R.B.601
9075, 2003-39 I.R.B.608
9076, 2003-38 I.R.B.562
9077, 2003-39 I.R.B.634
9078, 2003-39 I.R.B.630
Treasury Decisions— Continued:
9079, 2003-40 I.R.B.729
9080, 2003-40 I.R.B.696
9081, 2003-35 I.R.B.420
9082, 2003-41 I.R.B.807
9083, 2003-40 I.R.B.700
9084, 2003-40 I.R.B.742
9085, 2003-41 I.R.B.775
9086, 2003-41 I.R.B.817
9087, 2003-41 I.R.B.781
9088, 2003-42 I.R.B.841
9089, 2003-43 I.R.B.906
9090, 2003-43 I.R.B.891
9091, 2003-44 I.R.B.939
9092, 2003-46 I.R.B.1055
November 17, 2003iii2003-46 I.R.B.

Findings List of Current Actions on
Previously Published Items
1
Bulletins 2003-27 through 2003-46
Notices:
87-5
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
87-66
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
87-79
Modified by
Notice 2003-65, 2003-40 I.R.B.748
89-79
Modified and superseded by
Rev. Proc. 2003-47, 2003-28 I.R.B.55
89-94
Modified by
Notice 2003-50, 2003-32 I.R.B.295
94-46
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
95-18
Modified by
Notice 2003-70, 2003-43 I.R.B.916
95-50
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
95-53
Modified and superseded by
Notice 2003-55, 2003-34 I.R.B.395
2001-4
Section III.C. superseded for 2004 and subsequent
calendar years by
Rev. Proc. 2003-64, 2003-32 I.R.B.306
2001-70
Amplified by
Notice 2003-45, 2003-29 I.R.B.86
2001-74
Amplified by
Notice 2003-45, 2003-29 I.R.B.86
2002-1
Amplified by
Notice 2003-49, 2003-32 I.R.B.294
2003-12
Obsoleted by
T.D. 9090, 2003-43 I.R.B.891
REG-141402-02, 2003-43 I.R.B.932
Notices— Continued:
2003-36
Modified by
Notice 2003-59, 2003-35 I.R.B.429
Proposed Regulations:
REG-EE-86-88 (LR-279-81)
Withdrawn by
REG-122917-02, 2003-27 I.R.B.15
REG-105606-99
Withdrawn by
REG-133791-02, 2003-35 I.R.B.493
Revenue Procedures:
66-3
Revoked by
Rev. Proc. 2003-74, 2003-43 I.R.B.923
66-50
Modified, amplified, and superseded by
Rev. Proc. 2003-62, 2003-32 I.R.B.299
68-23
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
68-41
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
70-6
Modified and superseded, in part by
Notice 2003-70, 2003-43 I.R.B.916
77-12
Amplified, modified, and superseded by
Rev. Proc. 2003-51, 2003-29 I.R.B.121
80-4
Modified and amplified by
Notice 2003-70, 2003-43 I.R.B.916
81-40
Modified and superseded by
Rev. Proc. 2003-62, 2003-32 I.R.B.299
84-71
Revoked by
Rev. Proc. 2003-74, 2003-43 I.R.B.923
85–56
Revoked by
Rev. Proc. 2003-74, 2003-43 I.R.B.923
87–21
Revoked by
Rev. Proc. 2003-74, 2003-43 I.R.B.923
89-12
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
Revenue Procedures— Continued:
89-21
Superseded by
Rev. Proc. 2003-53, 2003-31 I.R.B.230
89-31
Obsoleted by
REG-108524-00, 2003-42 I.R.B.869
90-19
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
90-32
Section4supersededby
Rev. Proc. 2003-55, 2003-31 I.R.B.242
Section5supersededby
Rev. Proc. 2003-56, 2003-31 I.R.B.249
Section6supersededby
Rev. Proc. 2003-57, 2003-31 I.R.B.257
Section7supersededby
Rev. Proc. 2003-59, 2003-31 I.R.B.268
Section8supersededby
Rev. Proc. 2003-60, 2003-31 I.R.B.274
91-11
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
91-13
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
91-39
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
92-33
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
92-35
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
92–39
Superseded in part by
Rev. Proc. 2003-78, 2003-43 I.R.B.1029
92-66
Obsoleted by
REG-108524-00, 2003-42 I.R.B.869
92-88
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
93-17
Obsoleted by
REG-132483-03, 2003-34 I.R.B.408
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2003-1 through 2003-26 is in Internal Revenue Bulletin 2003-27, dated July 7, 2003.
2003-46 I.R.B.ivNovember 17, 2003

Revenue Procedures— Continued:
94-46
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
94-52
Revoked by
Rev. Proc. 2003-74, 2003-43 I.R.B.923
95-10
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
95-11
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
95-39
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
96-17
Modified and superseded by
Rev. Proc. 2003-69, 2003-34 I.R.B.402
96-30
Modified and amplified by
Rev. Proc. 2003-48, 2003-29 I.R.B.86
96-38
Obsoleted by
Rev. Proc. 2003-71, 2003-36 I.R.B.517
97-11
Revoked by
Rev. Proc. 2003-74, 2003-43 I.R.B.923
2000-12
Modified by
Rev. Proc. 2003-64, 2003-32 I.R.B.306
2000-15
Superseded by
Rev. Proc. 2003-61, 2003-32 I.R.B.296
2000-20
Modified by
Rev. Proc. 2003-72, 2003-38 I.R.B.578
2001-19
Amplified by
Rev. Proc. 2003-75, 2003-45 I.R.B.1018
2002-9
Modified by
T.D. 9090, 2003-43 I.R.B.891
REG-141402-02, 2003-43 I.R.B.932
Rev. Proc. 2003-45, 2003-27 I.R.B.11
Amplified and modified by
Rev. Proc. 2003-50, 2003-29 I.R.B.119
Modified and amplified by
Rev. Proc. 2003-63, 2003-32 I.R.B.304
Rev. Rul. 2003-81, 2003-30 I.R.B.126
2002-13
Revoked by
Rev. Proc. 2003-68, 2003-34 I.R.B.398
Revenue Procedures— Continued:
2002-14
Amplified by
Rev. Proc. 2003-75, 2003-45 I.R.B.1018
2002-29
Modified by
Rev. Proc. 2003-72, 2003-38 I.R.B.578
2002-33
Amplified and modified by
Rev. Proc. 2003-50, 2003-29 I.R.B.119
2002-34
Superseded by
Rev. Proc. 2003-52, 2003-30 I.R.B.134
2002-38
Modified by
Rev. Proc. 2003-79, 2003-45 I.R.B. 451036
2002-39
Modified by
Rev. Proc. 2003-79, 2003-45 I.R.B. 451036
2002-45
Revoked by
Rev. Proc. 2003-68, 2003-34 I.R.B.398
2002-60
Superseded by
Rev. Proc. 2003-73, 2003-39 I.R.B.647
2002-61
Superseded by
Rev. Proc. 2003-76, 2003-43 I.R.B.924
2002-63
Superseded by
Rev. Proc. 2003-80, 2003-45 I.R.B.1037
2003-3
Modified by
Rev. Proc. 2003-48, 2003-29 I.R.B.86
2003-15
Modified and superseded by
Rev. Proc. 2003-49, 2003-29 I.R.B.89
2003-28
Modified by
Ann. 2003-35, 2003-38 I.R.B.597
2003-44
Modified by
Rev. Proc. 2003-72, 2003-38 I.R.B.578
2003-49
Supplemented by
Rev. Proc. 2003-81, 2003-45 I.R.B.1046
Revenue Rulings:
53-56
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
Revenue Rulings— Continued:
54-139
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
54-396
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
55-105
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
55-372
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
56-128
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
56-160
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
56-212
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
56-220
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
56-271
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
56-344
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
56-448
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
56-451
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
56-586
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
56-680
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
56-681
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
57-116
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
57-296
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
November 17, 2003v2003-46 I.R.B.

Revenue Rulings— Continued:
57-542
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
58-92
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
58-618
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
59-108
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
59-120
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
59-122
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
59-233
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
59-326
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
59-356
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
59-400
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
59-412
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
60-49
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
60-246
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
60-262
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
60-307
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
61-96
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
63-157
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
Revenue Rulings— Continued:
63-224
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
63-248
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
64-147
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
64-177
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
64-285
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
65-110
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
65-260
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
65-273
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
66-4
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
66-23
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
66-610
Partially obsoleted by
Rev. Rul. 2003-105, 2003-40 I.R.B.696
66-290
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
67-186
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
67-189
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
67-326
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
68-309
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
68-388
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
Revenue Rulings— Continued:
68-434
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
68-477
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
68-522
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
68-608
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
68-640
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
68-641
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
69-18
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
69-20
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
69-241
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
69-361
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
69-426
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
69-485
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
69-517
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
70-6
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
70-111
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
70-229
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
70-230
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
2003-46 I.R.B.viNovember 17, 2003

Revenue Rulings— Continued:
70-264
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
70-286
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
70-378
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
70-409
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
70-496
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
71-13
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
71-384
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
71-440
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
71-453
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
71-454
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
71-495
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
71-518
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
71-565
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
71-582
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
72-61
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
72-116
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
72-212
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
Revenue Rulings— Continued:
72-357
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
72-472
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
72-526
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
72-599
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
72-603
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
73-46
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
73-119
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
73-182
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
73-257
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
73-277
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
73-473
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
73-490
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
73-498
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
74-6
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
74-59
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
74-73
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
74-83
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
Revenue Rulings— Continued:
74-87
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
74-211
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
74-376
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
74-476
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
74-521
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
74-610
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-53
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-54
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-105
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-106
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-107
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-111
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-134
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-160
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-174
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-179
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-212
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
November 17, 2003vii2003-46 I.R.B.

Revenue Rulings— Continued:
75-248
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-298
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-341
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-426
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-468
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-515
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
75-561
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
76-44
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
76-67
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
76-90
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
76-225
Revoked by
T.D. 9068, 2003–37538
76-239
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
76-329
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
76-347
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
76-535
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
77-41
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
77-81
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
Revenue Rulings— Continued:
77-150
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
77-256
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
77-284
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
77-321
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
77-343
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
77-405
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
77-456
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
77-482
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
77-483
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
78-89
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
78-287
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
78-420
Obsoleted by
Rev. Rul. 2003-105, 2003-40 I.R.B.696
78-441
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
79-29
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
79-50
Obsoleted by
Rev. Rul. 2003-105, 2003-40 I.R.B.696
79-71
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
79-82
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
Revenue Rulings— Continued:
79-104
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
79-116
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
79-314
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
79-410
Amplified by
Rev. Rul. 2003-90, 2003-33 I.R.B.353
79-424
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
80-78
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
80-79
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
80-101
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
80-167
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
80-170
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
80-358
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
81-190
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
81-225
Clarified and amplified by
Rev. Rul. 2003-92, 2003-33 I.R.B.350
81-247
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
82-164
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
82-226
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
83-101
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
2003-46 I.R.B.viiiNovember 17, 2003

Revenue Rulings— Continued:
83-119
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
84-28
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
84-30
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
85-55
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
85-136
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
86-52
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
87-1
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
87-95
Superseded by
Rev. Rul. 2003-109, 2003-42 I.R.B.839
88-7
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
89-72
Obsoleted by
Rev. Rul. 2003-99, 2003-34 I.R.B.388
94-56
Superseded by
Rev. Rul. 2003-109, 2003-42 I.R.B.839
2003-58
Distinguished by
Rev. Rul. 2003-102, 2003-38 I.R.B.559
Treasury Decisions:
9033
Removed by
T.D. 9065, 2003-36 I.R.B.515
9083
Corrected by
Ann. 2003-60, 2003-45 I.R.B.1049
November 17, 2003ix2003-46 I.R.B.
*U.S. Government Printing Office: 2003—304–774/60109