us-irs-revenue-rulings-irb-1997-40-pdf•Internal Revenue Bulletin 1997-40 (PDF rendition): IRS Revenue Rulings
Internal Revenue Bulletin 1997-40 (PDF rendition): IRS Revenue Rulings
us-irs-revenue-rulings-irb-1997-40-pdfInternal Revenue Bulletin 1997-40 (PDF rendition): IRS Revenue RulingsGuidance
Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.
INCOME TAX Rev. Rul. 97–41, page 4. Federal rates; adjusted federal rates; adjusted feder- al long-term rate, and the long-term exempt rate. For purposes of sections 1274, 1288, 382, and other sections of the Code, tables set forth the rates for October 1997. EMPLOYEE PLANS Notice 97–53, page 6. Individual retirement accounts. This notice provides guid- ance relating to penalty-free withdrawals from IRAs for high- er education expenses. EXEMPT ORGANIZATIONS Announcement 97–99, page 7. A list is given of organizations now classified as private foun- dations. ADMINISTRATIVE Notice 97–55, page 6. T.D. 8656, 1996–1 C.B. 329, relating to the imposition of the accuracy-related penalty, is corrected. Announcement 97–100, page 8. T.D. 8722, 1997–29 I.R.B. 4, relating to the eligibility for benefits under income tax treaties for payments to entities, is corrected. Internal Revenue bbuulllleettiinn Bulletin No. 1997–40 October 6, 1997 HIGHLIGHTS OF THIS ISSUE These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations. Department of the Treasury Internal Revenue Service Finding Lists begin on page 10. Index for July–September begins on page 12. Mission of the Service The purpose of the Internal Revenue Service is to collect the proper amount of tax revenue at the least cost; serve the public by continually improving the quality of our prod- ucts and services; and perform in a manner warranting the highest degree of public confidence in our integrity, effi- ciency, and fairness. 2 Statement of Principles of Internal Revenue Tax Administration The function of the Internal Revenue Service is to adminis- ter the Internal Revenue Code. Tax policy for raising revenue is determined by Congress. With this in mind, it is the duty of the Service to carry out that policy by correctly applying the laws enacted by Congress; to determine the reasonable meaning of various Code provi- sions in light of the Congressional purpose in enacting them; and to perform this work in a fair and impartial manner, with neither a government nor a taxpayer point of view. At the heart of administration is interpretation of the Code. It is the responsibility of each person in the Service, charged with the duty of interpreting the law, to try to find the true meaning of the statutory provision and not to adopt a strained construction in the belief that he or she is “protect- ing the revenue.” The revenue is properly protected only when we ascertain and apply the true meaning of the statute. The Service also has the responsibility of applying and administering the law in a reasonable, practical manner. Issues should only be raised by examining officers when they have merit, never arbitrarily or for trading purposes. At the same time, the examining officer should never hesi- tate to raise a meritorious issue. It is also important that care be exercised not to raise an issue or to ask a court to adopt a position inconsistent with an established Service position. Administration should be both reasonable and vigorous. It should be conducted with as little delay as possible and with great courtesy and considerateness. It should never try to overreach, and should be reasonable within the bounds of law and sound administration. It should, howev- er, be vigorous in requiring compliance with law and it should be relentless in its attack on unreal tax devices and fraud. The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing offi- cial rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly and may be obtained from the Superintendent of Documents on a subscription basis. Bulletin contents of a permanent nature are consoli- dated semiannually into Cumulative Bulletins, which are sold on a single-copy basis. It is the policy of the Service to publish in the Bulletin all sub- stantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless other- wise indicated. Procedures relating solely to matters of in- ternal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying pub- lished rulings and procedures, the effect of subsequent leg- islation, regulations, court decisions, rulings, and proce- dures must be considered, and Service personnel and oth- ers concerned are cautioned against reaching the same con- clusions in other cases unless the facts and circumstances are substantially the same. The Bulletin is divided into four parts as follows: Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986. Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions, and Subpart B, Legislation and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Sub- parts. Also included in this part are Bank Secrecy Act Admin- istrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secretary (Enforcement). Part IV.—Items of General Interest. With the exception of the Notice of Proposed Rulemaking and the disbarment and suspension list included in this part, none of these announcements are consolidated in the Cumu- lative Bulletins. The first Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a quarterly and semiannual basis, and are published in the first Bulletin of the succeeding quarterly and semiannual period, respectively. 3 Introduction The contents of this publication are not copyrighted and may be reprinted freely. Acitation 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. October 6, 199741997–40 I.R.B. Section 42.—Low-Income Housing Credit The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1997. See Rev. Rul. 97–41, on this page. Section 280G.—Golden Parachute Payments Federal short-term, mid-term, and long-term rates are set forth for the month of October 1997. See Rev. Rul. 97–41, on this page. Section 382.—Limitation on Net Operating Loss Carryforwards and CertainBuilt-In Losses Following Ownership Change The adjusted federal long-term rate is set forth for the month of October 1997. See Rev. Rul. 97–41, on this page. Section 412.—Minimum Funding Standards The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1997. See Rev. Rul. 97–41, on this page. Section 467.—Certain Payments for the Use of Property or Ser- vices The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1997. See Rev. Rul. 97–41, on this page. Section 468.—Special Rules for Mining and Solid Waste Recla- mation and Closing Costs The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1997. See Rev. Rul. 97–41, on this page. Section 482.—Allocation of In- come and Deductions Among Taxpayers Federal short-term, mid-term, and long-term rates are set forth for the month of October 1997. See Rev. Rul. 97–41, on this page. Section 483.—Interest on Cer- tain Deferred Payments The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1997. See Rev. Rul. 97–41, on this page. Section 642.—Special Rules for Credits and Deductions Federal short-term, mid-term, and long-term rates are set forth for the month of October 1997. See Rev. Rul. 97–41, on this page. Section 807.—Rules for Certain Reserves The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1997. See Rev. Rul. 97–41, on this page. Section 846.—Discounted Un- paid Losses Defined The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1997. See Rev. Rul. 97–41, on this page. Section 1274.—Determination of Issue Price in the Case of Certain Debt Instruments Issued for Property (Also Sections 42, 280G, 382, 412, 467, 468, 482, 483, 642, 807, 846, 1288, 7520, 7872.) Federal rates; adjusted federal rates; adjusted federal long-term rate, and the long-term exempt rate.For purposes of sections 1274, 1288, 382, and other sections of the Code, tables set forth the rates for October 1997. Rev. Rul. 97–41 This revenue ruling provides various prescribed rates for federal income tax purposes for October 1997 (the current month.) Table 1 contains the short-term, mid-term, and long-term applicable fed- eral rates (AFR) for the current month for purposes of section 1274(d) of the In- ternal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (ad- justed AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 con- tains the appropriate percentages for de- termining the low-income housing credit described in section 42(b)(2) for build- ings placed in service during the current month. Finally, Table 5 contains the fed- eral rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of sec- tion 7520. Part I. Rulings and Decisions Under the Internal Revenue Code of 1986 REV. RUL. 97–41 TABLE 1 Applicable Federal Rates (AFR) for October 1997 Period for Compounding Annual SemiannualQuarterlyMonthly Short-Term AFR 5.84% 5.76% 5.72%5.69% 110% AFR6.44%6.34%6.29%6.26% 120% AFR7.03%6.91%6.85%6.81% 130% AFR7.63%7.49%7.42% 7.38% Mid-Term AFR6.34%6.24%6.19%6.16% 110% AFR6.98%6.86%6.80%6.76% 120% AFR7.63%7.49%7.42%7.38% 130% AFR8.27%8.11%8.03%7.98% 150% AFR9.58%9.36%9.25%9.18% 175% AFR11.22%10.92%10.77%10.68% REV. RUL. 97–41 TABLE 2 Adjusted AFR for October 1997 Period for Compounding AnnualSemiannualQuarterlyMonthly Short-term adjusted AFR3.98%3.94%3.92%3.91% Mid-term adjusted AFR4.46% 4.41%4.39%4.37% Long-term adjusted AFR5.27%5.20%5.17%5.14% REV. RUL. 97–41 TABLE 1 — (Continued) Applicable Federal Rates (AFR) for October 1997 Period for Compounding Annual SemiannualQuarterlyMonthly Long-Term AFR6.68%6.57%6.52%6.48% 110% AFR7.36%7.23%7.17%7.12% 120% AFR8.04%7.88%7.80%7.75% 130% AFR8.72%8.54%8.45%8.39% 1997–40 I.R.B.5October 6, 1997 REV. RUL. 97–41 TABLE 3 Rates Under Section 382 for October 1997 Adjusted federal long-term rate for the current month5.27% Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months.) 5.33% REV. RUL. 97–41 TABLE 4 Appropriate Percentages Under Section 42(b)(2) for October 1997 Appropriate percentage for the 70% present value low-income housing credit8.53% Appropriate percentage for the 30% present value low-income housing credit3.66% REV. RUL. 97–41 TABLE 5 Rate Under Section 7520 for October 1997 Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest7.6% Section 1288.—Treatment of Original Issue Discount on Tax-Exempt Obligations The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1997. See Rev. Rul. 97–41, page 4. Section 7520.—Valuation Tables The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1997. See Rev. Rul. 97–41, page 4. Section 7872.—Treatment of Loans With Below-Market Interest Rates The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of October 1997. See Rev. Rul. 97–41, page 4. October 6, 199761997–40 I.R.B. Penalty-Free Withdrawals From IRAs for Higher Education Expenses Notice 97–53 Section 203 of the Taxpayer Relief Act of 1997 provides that the 10-percent addi- tional tax on early distributions from indi- vidual retirement arrangements (IRAs) does not apply to certain distributions for educational expenses after 1997. This Notice provides guidance concerning the effective date of this provision. In general, section 72(t) of the Internal Revenue Code imposes an additional 10- percent tax on amounts withdrawn from a qualified retirement plan (including an IRA) before age 59 1 ⁄ 2 subject to certain exceptions. Section 203 of the Taxpayer Relief Act of 1997 added certain educa- tional expenses to the list of exceptions to the 10-percent additional tax. The excep- tion for educational expenses is limited to the qualified higher education expenses of the taxpayer, the taxpayer’s spouse, or any child or grandchild of the taxpayer or spouse. Section 203 is effective for IRAdistrib- utions made after December 31, 1997, with respect to expenses paid after that date, for education provided in academic periods beginning after that date. An “academic period” includes a semester, trimester, quarter, or other academic term designated by the educational institution. For this purpose, an academic period be- gins on the first day of classes, and does not include periods of orientation, coun- seling or vacation. For example, assume the 1997-1998 schedule of a college or university divides the academic year into two semesters; the first semester begins in September 1997, and the second semester begins in January 1998. The benefits are not available for the September semester. The benefits of section 203 would be available, however, for the qualified expenses for the semester that begins in January 1998, provided the IRAdistribution is made after December 31, 1997 and the expenses are paid after that date. This result applies to students who are enrolled in both semesters as well as to students whose enrollment begins only with the January semester. For further information concerning the term “academic period” contact Monice Rosenbaum of the Office of Associate Chief Counsel (Employee Benefits and Exempt Organizations) at (202) 622-6070 (not a toll-free call). For other informa- tion concerning this Notice contact Cathy Vohs of the Office of Associate Chief Counsel (Employee Benefits and Exempt Organizations) at (202) 622-6030 (not a toll-free call). Section 6662—Imposition of the Accuracy-Related Penalty; Correction Notice 97–55 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Correcting amendment. SUMMARY: This document contains a correction to final regulations (T.D. 8656[1996–1 C.B. 329]) in the Code of Federal Regulations, which were pub- lished in the Federal Registeron Friday, February 9, 1996 (61 FR 4876). The final regulations provide guidance on the im- position of the accuracy related penalty. EFFECTIVE DATE: February 9, 1996. FOR FURTHER INFORMATION CON- TACT: Lisa G. Sams (202) 622-3880 (not a toll-free number). SUPPLEMENTARYINFORMATION: Background The final regulations that are the sub- ject of these corrections are under section 6662 of the Internal Revenue Code. Need for Correction As published, T.D. 8656 contains an error that may prove to be misleading and is in need of clarification. * * * * * Accordingly, 26 CFR part 1 is cor- rected by making the following correcting amendment: PART1—INCOME TAXES Paragraph 1. The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * § 1.6662–6 [Corrected] Par. 2. In § 1.6662-6, paragraph (d)(2)- (ii)(E) is amended by removing the lan- guage “§1.482–1(e)(2)(ii)(B)” from the last sentence and adding the language “§1.482–1(e)(2)(iii)(B)” in its place. Cynthia E. Grigsby, Chief, Regulations Unit, Assistant Chief Counsel (Corporate). (Filed by the Office of the Federal Register on Sep- tember 4, 1997, 8:45 a.m., and published in the issue of the Federal Register for September 5, 1997, 62 F.R. 46877) Part III. Administrative, Procedural, and Miscellaneous 1997–40 I.R.B.7October 6, 1997 Foundations Status of Certain Organizations Announcement 97–99 The following organizations have failed to establish or have been unable to maintain their status as public charities or as operating foundations. Accordingly, grantors and contributors may not, after this date, rely on previous rulings or des- ignations in the Cumulative List of Orga- nizations (Publication 78), or on the pre- sumption arising from the filing of notices under section 508(b) of the Code. This listing does notindicate that the organiza- tions have lost their status as organiza- tions described in section 501(c)(3), eligi- ble to receive deductible contributions. Former Public Charities.The following organizations (which have been treated as organizations that are not private founda- tions described in section 509(a) of the Code) are now classified as private foun- dations: Academy of Comedy Arts & Sciences, Los Angeles, CA AGainer Technical & Assistance Foundation, New York, NY Allen South Fork Preserve, Palos Verdes Estates, CA Barrasco Sebania Anastatica, San Diego, CA Caliban Incorporated, Laguna Beach, CA Community Legal Services, Inc., Beverly Farms, MA Community Mediators and Arbitrators, Inc., New York, NY Community Uplift Through Perseverance, Inc., New York, NY Connecticut Chapter of the American Chestnut Foundation, Inc., Haddam, CT Crossroads Quilters Guild, Inc., Ipswich, MA Crotona Terrace Housing Development Fund Company, Inc., Bronx, NY Cultural Computing Foundation Incorporated, New York, NY Curious Group Ensemble, Inc., New York, NY D.A.R.E. Massachusetts, Braintree, MA Dare to Care Fund Foster Parent Association of Broome County, Castle Creek, NY Diabetic Cure Foundation, Inc., New Rochelle, NY Dubois Group ACaucus of Concerned Black Professionals, San Bruno, CA Florida Foundation for Research in Spinal Disorders Inc., Gainesville, FL FWRTFund, Inc., Boston, MA Garmendia Gardens Housing Develop- ment Fund Corporation, Bronx, NY Gay Lesbian Alliance of Danbury, Inc., Danbury, CT Genesee County Citizens Crime Prevention Advisory Board, Batavia, NY Global Action Plan International, Inc., Woodstock, NY Global Jewish Assistance and Relief Network, Brooklyn, NY Great Basin Society for Parenteral and Enternal Nutrition, Carson City, NV Greater Boston Relief Society, Inc., Malden, MA Griffith Sandiford Family Assistance Fund, Inc., Brooklyn, NY Haitian American Education and Development Association, Inc., Malden, MA Haitian American Solidarity Corp., Rosedale, NY Haiti Communications Project Fund, Boston, MA Happiness is Sharing Charities, Inc., Valhalla, NY Harlem Economic Foundation, Inc., New York, NY Harmonia Dance, Inc., New York, NY Harvest House, Inc., Charlestown, ME Hawk and Handsaw Theatre Company, Inc., New York, NY Health Care We Gotta Have It, Inc., Philadelphia, PA Health on Earth, Wakefield, RI Heart to Heart-American Jewish Society for Distinguished Children, Inc., Monsey, NY HEATin the Central Valley, Fresno, CA Helderberg Ambulance Squad, Inc., East Berne, NY Hells Kitchen Aids Project, Inc., New York, NY Helpline Hand House, Belfast, ME Helpline Soul Rescue Ministry, Inc., Long Beach, NY Heritage of Pride, New York, NY High Mountain Health Center, Ltd., Webster, MA Hispanic Employees of Restaurants Outstanding Service, Burbank, CA Homers Kids, Ltd., Macedon, NY Horse Trails Conservancy, Inc., New York, NY Housing Network Rhode Island Association of Nonprofit Housing Developers, Providence, RI Humanities Preservation Corporation, New York, NY Icorojoy-Yemenite Heritage Foundation, Inc., Brooklyn, NY I Have a Dream-New Haven, Inc., New Haven, CT International Communications Association, Inc., New York, NY Italian Businessmen’s Foundation, Inc., Portland, OR Jabualu-Nur Foundation, Wyandanch, NY JB Williams Charitable Foundation, Longmeadow, MA Jesucristo Es El Senor Ministries, New Haven, CT JLB, Inc., Cold Springs, NY John Stamatakis Trust, Watertown, MA Joseph Haggerty Childrens Fund, New York, NY Joshua House, Inc., Sidney Center, NY Jurupa 12 Step Recovery, Inc., Riverside, CA Kalgidhar Trust, Jackson, MS Keep Me Company, Inc., Jamaica Plains, MA Keep Kids Lead Free, Inc., Stamford, CT Kids Toy Lending Club, Lincoln, MA Kiruv Rechokim Fund, Inc., Brooklyn, NY KQC Foundation, Inc., Boston, MA LAImage Academy, Honolulu, HI Miles Ahead Ministries, San Diego, CA National Association of Small Business International Trade Educators, Dallas, TX New Foundation Ministries, Inc., Benton, LA Nu Vision Modeling and Entertainment, Inc., Los Angeles, CA Ocean Challenge of Southern California, Inc., Torrance, CA Parents Association for Scholarship and Sensitivity, Orange, CA Pentucket Activities Association, Inc., West Newbury, MA Progressive Educational Initiatives, Providence, RI Read It Believe It & Do It, Berkeley, CA Real Colegio Complutense, Inc., Cambridge, MA Part IV. Items of General Interest October 6, 199781997–40 I.R.B. Santa Ana Public Library Auxiliary, Santa Ana, CA Something Familiar, Inc., New York, NY South Bay Classic, Inc., Torrance, CA Valley Partnership for a Drug Free Community, Palm Desert, CA Valley Youth Conference, Inc., Chatsworth, CA Vancouver Amateur Hockey Association, Vancouver, WA Wrentham Elementary Parent Teacher Organization, Inc., Wremtham, MA If an organization listed above submits information that warrants the renewal of its classification as a public charity or as a pri- vate operating foundation, the Internal Revenue Service will issue a ruling or de- termination letter with the revised classifi- cation as to foundation status. Grantors and contributors may thereafter rely upon such ruling or determination letter as provided in section 1.509(a)–7 of the Income Tax Regulations. It is not the practice of the Service to announce such revised classifi- cation of foundation status in the Internal Revenue Bulletin. Guidance Regarding Claims for Certain Income Tax Convention Benefits; Correction Announcement 97–100 AGENCY: Internal Revenue Service, Treasury. ACTION: Correction to temporary regu- lations. SUMMARY: This document contains corrections to temporary regulations (T.D. 8722 [1997–29 I.R.B. 4]) which were published in the Federal Registeron Wednesday, July 2, 1997 (62 F.R. 35673). The temporary regulations relate to the el- igibility for benefits under income tax treaties for payments to entities. EFFECTIVE DATE: July 2, 1997. FOR FURTHER INFORMATION CON- TACT: Elizabeth Karzon, (202) 622- 3880 (not a toll-free number). SUPPLEMENTARYINFORMATION: Background The temporary regulations that are sub- ject to these corrections are under section 894 of the Internal Revenue Code. Need for Correction As published, the temporary regula- tions (T.D. 8722) contain errors that may prove to be misleading and are in need of clarification. Correction of Publication Accordingly, the publication of the temporary regulations (T.D. 8722) which are the subject of F.R. Doc. 97–17467 is corrected as follows: 1. On page 35673, column 1, in the pre- amble in the caption “FOR FURTHER INFORMATION CONTACT”, line 2, the language “Elizabeth Karzon, (202) 622- 3860 (not a” is corrected to read “Eliza- beth Karzon, (202) 622-3880 (not a”. § 1.894–1T[Corrected] 2. On page 35676, column 3, § 1.894– 1T, paragraph (d)(1), line 5 from the bot- tom of the column, the language “a resi- dent of the jurisdiction only to the” is cor- rected to read “a resident of the jurisdiction to the”. 3. On page 35677, column 1, § 1.894– 1T, paragraph (d)(1), line 9, the language “a resident of such jurisdiction only if” is corrected to read “a resident of such juris- diction if”. 4. On page 35679, column 2, § 1.894– 1T, paragraph (d)(6), paragraph (i) of Ex- ample 11., line 16, the language “holder, is a corporation organized in Country” is corrected to read “holder, is a business or- ganization organized in Country”. 5. On page 35679, column 3, § 1.894– 1T, paragraph (d)(6), paragraph (ii) of Ex- ample 11., line 15, the language “jurisdic- tion. F, however, may claim the” is corrected to read “jurisdiction. F, how- ever, is entitled to the”. 5. On page 35679, column 3, § 1.894– 1T, paragraph (d)(6), paragraph (ii) of Ex- ample 11., line 20, the language “of X, be- cause X qualifies as a resident of X” is corrected to read “of X, because F quali- fies as a resident of X”. Cynthia E. Grigsby, Chief, Regulations Unit, Assistant Chief Counsel (Corporate). (Filed by the Office of the Federal Register on Sep- tember 4, 1997, 8:45 a.m., and published in the issue of the Federal Register for September 5, 1997, 62 F.R. 46876) 1997–40 I.R.B.9October 6, 1997 Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the effect: Amplified describes a situation where no change is being made in a prior pub- lished position, but the prior position is being extended to apply to a variation of the fact situation set forth therein. Thus, if an earlier ruling held that a principle applied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare with modified, below). Clarified is used in those instances where the language in a prior ruling is being made clear because the language has caused, or may cause, some confu- sion. It is not used where a position in a prior ruling is being changed. Distinguisheddescribes a situation where a ruling mentions a previously published ruling and points out an essen- tial difference between them. Modified is used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to Abut not to B, and the new ruling holds that it ap- plies to both Aand B, the prior ruling is modified because it corrects a published position. (Compare with amplified and clarified, above). Obsoleted describes a previously pub- lished ruling that is not considered deter- minative with respect to future transac- tions. This term is most commonly used in a ruling that lists previously published rulings that are obsoleted because of changes in law or regulations. Aruling may also be obsoleted because the sub- stance has been included in regulations subsequently adopted. Revoked describes situations where the position in the previously published rul- ing is not correct and the correct position is being stated in the new ruling. Superseded describes a situation where the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same position published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a pe- riod of time in separate rulings. If the new ruling does more than restate the substance of a prior ruling, a combination of terms is used. For example, modified and superseded describes a situation where the substance of a previously pub- lished ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case the previously published ruling is first modified and then, as modified, is super- seded. Supplemented is used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original ruling has been supplemented several times, a new ruling may be pub- lished that includes the list in the original ruling and the additions, and supersedes all prior rulings in the series. Suspended is used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study. Abbreviations The following abbreviations in current use and for- merly used will appear in material published in the Bulletin. A—Individual. Acq.—Acquiescence. B—Individual. BE—Beneficiary. BK—Bank. B.T.A.—Board of Tax Appeals. C.—Individual. C.B.—Cumulative Bulletin. CFR—Code of Federal Regulations. CI—City. COOP—Cooperative. Ct.D.—Court Decision. CY—County. D—Decedent. DC—Dummy Corporation. DE—Donee. Del. Order—Delegation Order. DISC—Domestic International Sales Corporation. DR—Donor. E—Estate. EE—Employee. E.O.—Executive Order. ER—Employer. ERISA—Employee Retirement Income Security Act. EX—Executor. F—Fiduciary. FC—Foreign Country. FICA—Federal Insurance Contribution Act. FISC—Foreign International Sales Company. FPH—Foreign Personal Holding Company. F.R.—Federal Register. FUTA—Federal Unemployment Tax Act. FX—Foreign Corporation. G.C.M.—Chief Counsel’s Memorandum. GE—Grantee. GP—General Partner. GR—Grantor. IC—Insurance Company. I.R.B.—Internal Revenue Bulletin. LE—Lessee. LP—Limited Partner. LR—Lessor. M—Minor. Nonacq.—Nonacquiescence. O—Organization. P—Parent Corporation. PHC—Personal Holding Company. PO—Possession of the U.S. PR—Partner. PRS—Partnership. PTE—Prohibited Transaction Exemption. Pub. L.—Public Law. REIT—Real Estate Investment Trust. Rev. Proc.—Revenue Procedure. Rev. Rul.—Revenue Ruling. S—Subsidiary. S.P.R.—Statements of Procedral Rules. Stat.—Statutes at Large. T—Target Corporation. T.C.—Tax Court. T.D.—Treasury Decision. TFE—Transferee. TFR—Transferor. T.I.R.—Technical Information Release. TP—Taxpayer. TR—Trust. TT—Trustee. U.S.C.—United States Code. X—Corporation. Y—Corporation. Z—Corporation. Definition of Terms October 6, 1997101997–40 I.R.B. Numerical Finding List 1 Bulletins 1997–27 through 1997–39 Announcements: 97–61, 1997–29 I.R.B. 13 97–67, 1997–27 I.R.B. 37 97–68, 1997–28 I.R.B. 13 97–69, 1997–28 I.R.B. 13 97–70, 1997–29 I.R.B. 14 97–71, 1997–29 I.R.B. 15 97–72, 1997–29 I.R.B. 15 97–73, 1997–30 I.R.B. 86 97–74, 1997–31 I.R.B.16 97–75, 1997–32 I.R.B. 28 97–76, 1997–32 I.R.B. 28 97–77, 1997–33 I.R.B. 58 97–78, 1997–34 I.R.B. 11 97–79, 1997–35 I.R.B. 8 97–80, 1997–34 I.R.B. 12 97–81, 1997–34 I.R.B. 12 97–82, 1997–34 I.R.B. 12 97–83, 1997–34 I.R.B. 13 97–84, 1997–34 I.R.B. 13 97–85, 1997–35 I.R.B. 8 97–86, 1997–35 I.R.B. 9 97–87, 1997–35 I.R.B. 9 97–88, 1997–35 I.R.B. 9 97–89, 1997–36 I.R.B. 10 97–90, 1997–36 I.R.B. 10 97–91, 1997–37 I.R.B. 25 97–92, 1997–37 I.R.B. 26 97–93, 1997–36 I.R.B. 11 97–94, 1997–36 I.R.B. 12 97–95, 1997–36 I.R.B. 12 97–96, 1997–39 I.R.B.15 97–97, 1997–38 I.R.B. 22 97–98, 1997–39 I.R.B. 15 Court Decisions: 2061, 1997–31 I.R.B. 5 2062, 1997–32 I.R.B. 8 Delegation Orders: 172 (Rev. 5), 1997–28 I.R.B. 6 Notices: 97–37, 1997–27 I.R.B. 4 97–38, 1997–27 I.R.B. 8 97–39, 1997–27 I.R.B. 8 97–40, 1997–28 I.R.B. 6 97–41, 1997–28 I.R.B. 6 97–42, 1997–29 I.R.B. 12 97–43, 1997–30 I.R.B. 9 97–44, 1997–31 I.R.B. 15 97–45, 1997–33 I.R.B. 7 97–46, 1997–34 I.R.B. 10 97–47, 1997–35 I.R.B. 5 97–48, 1997–35 I.R.B. 5 97–49, 1997–36 I.R.B. 8 97–50, 1997–37 I.R.B. 21 97–51, 1997–38 I.R.B. 20 97–52, 1997–38 I.R.B. 20 Railroad Retirement Quarterly Rate: 1997–28 I.R.B. 5 Proposed Regulations: REG–104893–97, 1997–29 I.R.B. 13 REG–105160–97, 1997–37 I.R.B. 22 REG–106043–97, 1997–37 I.R.B. 24 REG–107644–97, 1997–32 I.R.B. 24 REG–208151–91, 1997–38 I.R.B. 21 Revenue Procedures: 97–32, 1997–27 I.R.B. 9 97–32A, 1997–34 I.R.B. 10 97–33, 1997–30 I.R.B. 10 97–34, 1997–30 I.R.B.14 97–35, 1997–33 I.R.B. 11 97–36, 1997–33 I.R.B. 14 97–37, 1997–33 I.R.B. 18 97–38, 1997–33 I.R.B. 43 97–39, 1997–33 I.R.B. 48 97–40, 1997–33 I.R.B. 50 97–41, 1997–33 I.R.B. 5 97–42, 1997–33 I.R.B. 57 97–43, 1997–39 I.R.B. 12 Revenue Rulings: 97–27, 1997–27 I.R.B. 4 97–28, 1997–28 I.R.B. 4 97–29, 1997–28 I.R.B. 4 97–30, 1997–31 I.R.B.12 97–31, 1997–32 I.R.B.4 97–32, 1997–33 I.R.B. 4 97–33, 1997–34 I.R.B. 4 97–34, 1997–34 I.R.B. 14 97–35, 1997–35 I.R.B. 4 97–36, 1997–36 I.R.B. 5 97–37, 1997–37 I.R.B.15 97–38, 1997–38 I.R.B.14 97–39, 1997–39 I.R.B. 4 97–40, 1997–39 I.R.B. 8 Treasury Decisions: 8722, 1997–29 I.R.B. 4 8723, 1997–30 I.R.B. 4 8724, 1997–36 I.R.B. 4 8725, 1997–37 I.R.B. 16 8726, 1997–34 I.R.B. 7 8727, 1997–34 I.R.B. 5 8728, 1997–37 I.R.B. 4 8729, 1997–38 I.R.B. 4 8730, 1997–38 I.R.B. 16 1 Acumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 1997–1 through 1997–26 will be found in Internal Revenue Bulletin 1997–27, dated July 7, 1997. 1997–40 I.R.B.11October 6, 1997 Finding List of Current Action on Previously Published Items 1 Bulletins 1997–27 through 1997–39 *Denotes entry since last publication Revenue Procedures: 96–36 Superseded by 97–34, 1997–30 I.R.B. 14 96–42 Superseded by 97–27, 1997–27 I.R.B. 9 97–32 Modified and amplified by 97–32A, 1997–34 I.R.B. 10 Revenue Rulings: 89–42 Supplemented by 97–31, 1997–32 I.R.B. 4 93–76 Clarified, modified, partially obsoleted, and superceded by 97–39, 1997–39 I.R.B 4 94–7 Clarified, modified, partially obsoleted, and superceded by 97–39, 1997–39 I.R.B 4 1 Acumulative finding list for previously published items mentioned in Internal Revenue Bulletins 1997–1 through 1997–26 will be found in Internal Revenue Bulletin 1997–27, dated July 7, 1997. October 6, 1997121997–40 I.R.B. Index Internal Revenue Bulletins 1997–27 Through 1997–39 For the index of items published during the first six months of 1997, see I.R.B. 1997–27, dated July 7, 1997. The abbreviation and number in paren- thesis following the index entry refer to the specific item; numbers in roman and italic type following the parenthesis refer to the Internal Revenue Bulletin in which the item may be found and the page number on which it appears. Key to Abbreviations: RRRevenue Ruling RPRevenue Procedure TDTreasury Decision CDCourt Decision PLPublic Law EOExecutive Order DODelegation Order TDOTreasury Department Order TCTax Convention SPRStatement of Procedural Rules PTEProhibited Transaction Exemption EMPLOYMENT TAX Penalty: Guidance regarding waiver of failure to deposit penalty for certain taxpayers required to begin using electronic funds transfer on or after July 1, 1997 (Notice 43) 30, 86 Railroad retirement: Rate determination; quarterly (July 1, 1997) 28, 5 Regulations: 26 CFR 31.0–1(a), 31.0–3(f), amended; 31.6302–1(h), added; 31.6302–1(i), redesignated; 31.6302–1T, removed; 31.6302(c)–3, amended; 31.6302–3T, removed; federal tax deposits by elec- tronic funds transfer (TD 8723) 30, 4 26 CFR 301.6634–1, 301.6601–1, 301.6651–1, 1.6013–2(b)(1), amended; 301.6656–3, added; 301.7122–1(e), revised; 301.7430–0, –1, –2, –4, –5, amended; 301.7430–6, revised; miscellaneous sections af- fected by TBOR 2 and PRWORA 1996 (TD 8725) 37, 16 ESTATE TAX Marital or charitable bequests (CtD 2062) 32, 8 26 CFR 301.6634–1, 301.6601–1, 301.6651–1, 1.6013–2(b)(1), amended; 301.6656–3, added; 301.7122–1(e), re- vised; 301.7430–0, –1, –2, –4, –5, amended; 301.7420–6, revised; miscel- laneous sections affected by TBOR 2 and PRWORA1996 (TD 8725) 37, 16 EXCISE TAX Group health plans; access, portability, and renewability requirements; correc- tion (Notice 41) 28, 6 Regulations: 26 CFR 40.6302(c)–1, amended; 40.6302(c)–1T, removed; federal tax deposits by electronic funds transfer (TD 8723) 30, 4 26 CFR 301.6634–1, 301.6601–1, 301.6651–1, 1.6013–2(b)(1), amended; 301.6656–3, added; 301.7122–1(e), re- vised; 301.7430–0, –1, –2, –4, –5, amended; 301.7420– 6, revised; mis- cellaneous sections affected by TBOR 2 and PRWORA1996 (TD 8725) 37, 16 GIFTTAX Regulations: 26 CFR 301.6634–1, 301.6601–1, 301.6651–1, 1.6013–2(b)(1), amended; 301.6656–3, added; 301.7122–1(e), re- vised; 301.7430–0, –1, –2, –4, –5, amended; 301.7420–6, revised; miscel- laneous sections affected by TBOR 2 and PRWORA1996 (TD 8725) 37, 16 INCOMETAX Allocation of interest expense among tax- payer’s expenditures (Notice 46) 34, 10 Calculation of partner’s limited deficit restoration obligation (RR 38) 38, 14 Changes to RP96–11 (Notice 48) 37, 5 Consent to change accounting method to comply with section 475 mark-to-mar- ket rules (RP43) 39, 12 Depreciation: Retail motor fuels outlet (RR29) 28, 4 Elections into mark-to-market account- ing (Notice 37) 27, 8 Electing Small Business Trust (ESBT) qualification (Notice 49) 36, 8 Electronic or magnetic media filing: Specifications for 1997 Forms 1098, 1099, 5498, and W–2G (RP34) 30, 14 Employee plans: Funding: Full funding limitations, weighted av- erage interest rate, July 1997 (Notice 44) 31, 15; August 1997 (Notice 47) 35, 5; September 1997 (Notice 51) 38, 20 Highly compensated employee, defini- tion (Notice 45) 33, 7 Organizations, functions, and authority delegations; director, Employee Plans Division (DO 172(Rev. 5)) 28, 6 Remedial amendment period extension (RP41) 33, 51 Enhanced oil recovery credit for 1997 (Notice 39) 27, 8 Extension of time to file, Form 926 (No- tice 42) 29, 12 Forms 1096, 1098, 1099 series, 5498, W–2G: Reproduction of forms; RP97–32, mod- ified and amplified (RP97–32A) 34, 10;Requirements for reproducing paper substitutes (RP27) 27, 9 Fringe benefits aircraft valuation formula (RR 33) 34, 4 Interest: Investment: Federal short-term, mid-term, and long-term rates for July 1997 (RR 27) 27, 4; August 1997 (RR 30) 31, 12; September 1997 (RR 36) 36, 5 Rates: Underpayments and overpayments for calendar quarter beginning Oc- tober 1, 1997 (RR 40) 39, 8 International operation of ships and air- craft; income exempt from tax (RR 31) 32, 4 Inventories: LIFO: Price indexes, department stores, May 1997 (RR 28) 28, 4; June 1997 (RR 32) 33, 4; July 1997 (RR 37) 37, 15 Late S corporation elections (RP40) 33, 50 Low-income housing: Bond factor amounts, July–September 1997 (RR 34) 34, 4 Tax credit (RP42) 33, 57 Marginal production rates for 1997 (No- tice 38) 27, 8 Mark-to-market accounting method for dealers in securities (RR 39) 39, 4 Methods of accounting: Automatic consent to change (RP37) 33, 18 Last-in, first-out inventory method (RP 36) 33, 14 Original issue discount (RP39) 33, 48 Package design costs (RP35) 33, 11 Warranty contracts (RP38) 33, 43 Mutual life insurance companies; differ- ential earnings rate (RR 35) 35, 4 Private delivery services; timely filing or payment (Notice 50) 37, 21 Proposed regulations: 26 CFR 1.263A–0, amended; rules for property produced in a farming busi- ness (REG–208151–91) 38, 21 26 CFR 1.401(b)–1; remedial amend- ment period (REG–106043–97) 37, 24 26 CFR 1.411(d)–4, amended; permitted elimination of preretirement optional forms benefit (REG–107644–97) 32, 24 26 CFR 1.465–27, added; qualified nonrecourse financing under section 465(b)(6) (REG–105160–97) 37, 22 26 CFR 1.894–1(d), added; guidance regarding claims for certain income tax convention (REG–104893–97) 29, 13 Punitive damages for personal injuries (CtD 2061) 31, 5 Qualified state tuition programs (Notice 52) 38, 20 Regulations: 26 CFR 1.61–4, 1.162–12(a), 1.263A– 1, 1.471–6, amended; 1.263A–4T, re- vised; rules for property produced in a farming business (TD 8729) 38, 4 26 CFR 1.263A–0, –1, –15, amended; 1.263A, added; 1.263A–7T, re- moved; procedure for changing a method of accounting under section 263A(TD 8728) 37, 4 26 CFR 1.302–2, amended; 1.1059- (e)(1), added; extraordinary divi- dends (TD 8724) 36, 4 26 CFR 1.401(b)–1, amended; 1.401- (b)–1T, added; remedial amendment period (TD 8727) 34, 5 26 CFR 1.501(c)(5)–1, amended; tax- exempt organizations, requirements (TD 8726) 34, 7 26 CFR 1.704–3, 1.1245–1, amended; allocations of depreciation recapture among partners in a partnership (TD 8730) 38, 16 26 CFR 1.894–1T(a) through (c), added; guidance regarding claims for certain income tax convention (TD 8722) 29, 4 26 CFR 1.6302–1, –2, amended; 1.6302–1T, –2T, –3T, –4T, removed; 1.6302–3(c), revised; 1.6302–4, added; federal tax deposits by elec- tronic funds transfer (TD 8723) 30, 4 26 CFR 301.6334–1, 301.6601–1, 301.6651–1, 1.6013–2(b)(1), amended; 301.6656–3, added; 301.7122–1(e), re- vised; 301.7430–0, –1, –2, –4, –5, amended; 301.7430–6, revised; miscel- laneous sections affected by TBOR 2 and PRWORA1996 (TD 8725) 37, 16 Tax forms and instructions: Electronic Federal Tax Payment Sys- tem (EFTPS); electronic remittance system for federal tax deposits and payments (RP33) 30, 10 Treatment of Hong Kong and China (No- tice 40) 28, 6 1997–40 I.R.B.13October 6, 1997 Notes October 6, 1997141997–40 I.R.B. 1997–40 I.R.B.15October 6, 1997 INTERNAL REVENUE BULLETIN The Introduction on page 3 describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superintendent of Documents when their subscriptions must be renewed. CUMULATIVE BULLETINS The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the week- ly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the Superintendent of Documents. HOW TO ORDER Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance, detach entire page, and mail to the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. Please allow two to six weeks, plus mailing time, for delivery. WE WELCOME COMMENTS ABOUT THE INTERNAL REVENUE BULLETIN If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page (www.irs.ustreas.gov) or write to the IRS Bulletin Unit, T:FP:F:CD, Room 5560, 1111 Constitution Avenue NW, Washington, DC 20224. You can also leave a recorded message 24 hours a day, 7 days a week at 1–800–829–9043. Superintendent of Documents U.S. Government Printing Office Washington, DC 20402 Official Business Penalty for Private Use, $300 First Class Mail Postage and Fees Paid GPO Permit No. G–26 1997–40 I.R.B.17October 6, 1997 INTERNAL REVENUE BULLETIN The Introduction on page 3 describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superintendent of Documents when their subscriptions must be renewed. CUMULATIVE BULLETINS The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the week- ly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the Superintendent of Documents. HOW TO ORDER Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance, detach entire page, and mail to the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. Please allow two to six weeks, plus mailing time, for delivery. WE WELCOME COMMENTS ABOUT THE INTERNAL REVENUE BULLETIN If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page (www.irs.ustreas.gov) or write to the IRS Bulletin Unit, T:FP:F:CD, Room 5560, 1111 Constitution Avenue NW, Washington, DC 20224. You can also leave a recorded message 24 hours a day, 7 days a week at 1–800–829–9043. Internal Revenue Service Washington, DC 20224 Official Business Penalty for Private Use, $300 First Class Mail Postage and Fees Paid IRS Permit No. G–48
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