Internal Revenue Bulletin 1997-50 (PDF rendition): IRS Revenue Rulings

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

INCOME TAX
Rev. Rul. 97–52, page 4.
LIFO; price indexes; department stores.The October
1997 Bureau of Labor Statistics price indexes are accepted
for use by department stores employing the retail inventory
and last-in, first-out inventory methods for valuing inventories
for tax years ended on, or with reference to, October 31,
1997.
Notice 97–72, page 7.
Leased property; substantial modification.Taxpayers
are informed of certain conditions under which changes in
rental payment terms resulting from a lessor’s refinancing
of its indebtedness will not be a substantial modification of
the rental agreement for purposes of section 467 of the
Code.
Announcement 97–120, page 61.
Uniform capitalization; farming exception; nursery
growers. The Service confirms that recently issued pro-
posed regulations specifically permit nursery growers to
qualify for the “farming exception” to the uniform capitaliza-
tion rules under section 263A of the Code.
EMPLOYEE PLANS
T.D. 8736, page 5.
Final and temporary regulations under section 6071 of the
Code relate to the filing date by which Form 4720 returns
must be filed by disqualified persons and organization man-
agers liable for Code section 4958 excise taxes.
Announcement 97–121, page 62.
This announcement sets forth administrative programs es-
tablished by the Service that, if applicable, may be utilized
by a sponsor of a qualified plan or a tax-sheltered annuity
(collectively “the plan”) in order for a plan to maintain its tax-
favored status.
Announcement 97–122, page 63.
This announcement describes interim guidance with respect
to model and prototype Roth IRAs within the meaning of sec-
tion 408A of the Code as added by section 302 of the Tax-
payer Relief Act of 1997.
EXEMPT ORGANIZATIONS
Announcement 97–119, page 61.
A list is provided of organizations now classified as private
foundations.
ADMINISTRATIVE
Rev. Proc. 97–54, page 8.
Substitute printed, computer-prepared, and computer-
generated tax forms and schedules for 1997.Re-
quirements are set forth for privately designed and printed
federal tax return forms and conditions under which the
Service will accept computer-prepared and computer-generat-
ed tax forms and schedules. Rev. Proc. 96–48 superseded.
Internal Revenue
bbuulllleettiinn
Bulletin No. 1997–50
December 15, 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 66.

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

The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly and may be obtained
from the Superintendent of Documents on a subscription
basis. Bulletin contents of a permanent nature are consoli-
dated semiannually into Cumulative Bulletins, which are sold
on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of in-
ternal management are not published; however, statements
of internal practices and procedures that affect the rights
and duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
revenue ruling. In those based on positions taken in rulings
to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature
are deleted to prevent unwarranted invasions of privacy and
to comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have
the force and effect of Treasury Department Regulations,
but they may be used as precedents. Unpublished rulings
will not be relied on, used, or cited as precedents by Service
personnel in the disposition of other cases. In applying pub-
lished rulings and procedures, the effect of subsequent leg-
islation, regulations, court decisions, rulings, and proce-
dures must be considered, and Service personnel and oth-
ers concerned are cautioned against reaching the same con-
clusions in other cases unless the facts and circumstances
are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions, and Subpart B, Legislation and Related
Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to
these subjects are contained in the other Parts and Sub-
parts. Also included in this part are Bank Secrecy Act Admin-
istrative Rulings. Bank Secrecy Act Administrative Rulings
are issued by the Department of the Treasury’s Office of the
Assistant Secretary (Enforcement).
Part IV.—Items of General Interest.
With the exception of the Notice of Proposed Rulemaking
and the disbarment and suspension list included in this part,
none of these announcements are consolidated in the Cumu-
lative Bulletins.
The first Bulletin for each month includes a cumulative index
for the matters published during the preceding months.
These monthly indexes are cumulated on a quarterly and
semiannual basis, and are published in the first Bulletin of the
succeeding quarterly and semiannual period, respectively.
3
Introduction
The contents of this publication are not copyrighted and may be reprinted freely.A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.

December 15, 199741997–50 I.R.B.
Section 472.—Last-in, First-out
Inventories
26 CFR 1.472–1: Last-in, first-out inventories.
LIFO; price indexes; department
stores. The October 1997 Bureau of
Labor Statistics price indexes are ac-
cepted for use by department stores em-
ploying the retail inventory and last-in,
first-out inventory methods for valuing
inventories for tax years ended on, or
within reference to, October 31, 1997.
Rev. Rul. 97–52
The following Department Store Inven-
tory Price Indexes for October 1997
were issued by the Bureau of Labor Sta-
tistics on November 18, 1997. The in-
dexes are accepted by the Internal Rev-
enue Service, under § 1.472–1(k) of the
Income Tax Regulations and Rev. Proc.
86–46, 1986–2 C.B. 739, for appropriate
application to inventories of department
stores employing the retail inventory and
last-in, first-out inventory methods for tax
years ended on, or with reference to, Oc-
tober 31, 1997.
The Department Store Inventory Price
Indexes are prepared on a national basis
and include (a) 23 major groups of depart-
ments, (b) three special combinations of
the major groups - soft goods, durable
goods, and miscellaneous goods, and (c) a
store total, which covers all departments,
including some not listed separately, ex-
cept for the following: candy, foods,
liquor, tobacco, and contract departments.
Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
BUREAU OF LABOR STATISTICS, DEPARTMENTSTORE
INVENTORYPRICE INDEXES BYDEPARTMENTGROUPS
(January 1941 = 100, unless otherwise noted)
Percent Change
GroupsOct.Oct.from Oct. 1996
19961997to Oct. 1997
1
1. Piece Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .561.0534.5–4.7
2. Domestics and Draperies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .641.0638.4–0.4
3. Women’s and Children’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .661.8672.21.6
4. Men’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .920.1910.2–1.1
5. Infants’Wear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .626.4615.5–1.7
6. Women’s Underwear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .536.8560.14.3
7. Women’s Hosiery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .285.7301.65.6
8. Women’s and Girls’Accessories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .557.5541.7–2.8
9. Women’s Outerwear and Girls’Wear . . . . . . . . . . . . . . . . . . . . . . . . . . . . .417.5431.33.3
10. Men’s Clothing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .621.9625.30.5
11. Men’s Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .581.7601.03.3
12. Boys’Clothing and Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .490.7505.93.1
13. Jewelry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1043.6995.5–4.6
14. Notions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .797.3844.45.9
15. Toilet Articles and Drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .901.4916.41.7
16. Furniture and Bedding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .667.5666.2–0.2
17. Floor Coverings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .585.2578.2–1.2
18. Housewares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .808.1812.10.5
19. Major Appliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .246.2243.3–1.2
20. Radio and Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77.874.5–4.2
21. Recreation and Education
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .111.8108.6–2.9
22. Home Improvements
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .125.6132.75.7
23. Auto Accessories
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .107.4107.90.5
Groups 1 – 15: Soft Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .603.4610.11.1
Groups 16 – 20: Durable Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .467.7463.9–0.8
Groups 21 – 23: Misc. Goods
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .112.9111.6–1.2
Store Total
3
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .556.1558.50.4
1
Absence of a minus sign before percentage change in this column signifies price increase.
2
Indexes on a January 1986=100 base.
3
The store total index covers all departments, including some not listed separately, except for the following: candy, foods, liquor, to-
bacco, and contract departments.

DRAFTING INFORMATION
The principal author of this revenue
ruling is Stan Michaels of the Office of
Assistant Chief Counsel (Income Tax and
Accounting). For further information re-
garding this revenue ruling, contact Mr.
Michaels on (202) 622-4970 (not a toll-
free call).
Section 6071.—Time for Filing
Returns and Other Documents
26 CFR 53.6071–1: Time for filing returns.
T.D. 8736
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 53
Time for Filing Form 4720
Return
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regula-
tions.
SUMMARY: This document contains a
regulation that specifies the filing date by
which Form 4720 returns must be filed by
disqualified persons and organization
managers liable for Internal Revenue
Code section 4958 excise taxes. These
excise taxes are imposed on excess bene-
fit transactions between disqualified per-
sons and section 501(c)(3) organizations
(except for private foundations) or section
501(c)(4) organizations.
DATES: This regulation is effective Oc-
tober 7, 1997.
For dates of applicability, see
§ 53.6071–1(f).
FOR FURTHER INFORMATION CON-
TACT: Phyllis Haney, (202) 622-4290
(not a toll-free number).
SUPPLEMENTARYINFORMATION:
Background
This document contains amendments to
the Foundation and Similar Excise Taxes
regulations (26 CFR part 53) under Inter-
nal Revenue Code (Code) section 6071.
Those amendments provide guidance on
the time for filing the return that is required
to accompany payment of section 4958 ex-
cise taxes. This rule was first published in
Notice 96–46 (1996–39 I.R.B. 7) (Septem-
ber 23, 1996). Anotice of proposed rule-
making (NPRM) of that rule was published
at 62 Fed. Reg. 84, by cross reference to a
temporary regulation, (T.D. 8705, 62 FR
25), on January 2, 1997. The deadline for
comments on the NPRM was April 2,
1997; no comments were received.
Taxpayer Bill of Rights 2, Public Law
104-168, 110 Stat. 1452 (TBOR2), en-
acted July 30, 1996, added section 4958
to the Code, which imposes excise taxes
on excess benefit transactions. Section
4958 taxes apply retroactively to excess
benefit transactions occurring on or after
September 14, 1995. The taxes do not,
however, apply to any benefit arising
from a transaction pursuant to any written
contract which was binding on September
13, 1995, and at all times thereafter before
such transaction occurred.
An “excess benefit transaction” subject
to tax under section 4958 is any transac-
tion in which an economic benefit is pro-
vided by an organization described in
Code section 501(c)(3) (except for a pri-
vate foundation) or 501(c)(4) directly or
indirectly to, or for the use of, any dis-
qualified person if the value of the eco-
nomic benefit provided exceeds the value
of the consideration (including the perfor-
mance of services) received for providing
the benefit. A“disqualified person” is
any person who was, at any time during
the 5-year period ending on the date of the
excess benefit transaction, in a position to
exercise substantial influence over the af-
fairs of the organization. Disqualified
persons also include family members and
certain entities in which at least 35 per-
cent of the control or beneficial interest
are held by persons described in the pre-
ceding sentence.
Code section 4958 imposes three taxes.
The first tax is equal to 25 percent of the
excess benefit amount, and is to be paid
by any disqualified person who engages
in an excess benefit transaction. The sec-
ond tax is equal to 200 percent of the ex-
cess benefit amount, and is to be paid by
any disqualified person if the excess ben-
efit transaction is not corrected within the
taxable period. The third tax is equal to
10 percent of the excess benefit amount,
and is to be paid generally by any organi-
zation manager who knowingly partici-
pates in an excess benefit transaction.
The maximum amount of this third tax
with respect to any one excess benefit
transaction may not exceed $10,000. An
“organization manager” is any officer, di-
rector, trustee, or any individual having
powers or responsibilities similar to those
of any officer, director, or trustee. Final
regulations under Code section 6011 were
published on January 2, 1997, at T.D.
8705 (62 FR 25), prescribing Form 4720
for calculating and paying the first and
third taxes described above.
TBOR2 also amended Code section
6033(b) to require section 501(c)(3) orga-
nizations to report the amounts of the
taxes paid under section 4958 with re-
spect to excess benefit transactions in-
volving the organization, as well as any
other information the Secretary may re-
quire concerning those transactions. Sec-
tion 6033(f) also was amended to impose
the same reporting requirements on sec-
tion 501(c)(4) organizations. Those
amendments to section 6033 only apply to
organizations’returns for taxable years
beginning after July 30, 1996. These and
other TBOR2 amendments to the report-
ing requirements for section 501(c)(3)
and section 501(c)(4) organizations are
reflected on IRS Forms 990 and 990-EZ
beginning with the 1996 versions.
Explanation of Provisions
This regulation provides the general rule
that Form 4720 returns will be due on or
before the 15th day of the fifth month fol-
lowing the close of the taxable year of any
disqualified person or organization man-
ager who is liable for section 4958 excise
taxes on excess benefit transactions. The
regulations also provide that returns on
Form 4720 for taxable years ending after
September 13, 1995, and on or before July
30, 1996, will be due on or before Decem-
ber 15, 1996. See also Notice 96–46
(1996–39 I.R.B. 7) (September 23, 1996),
and 62 FR 25, 84 (January 2, 1997).
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in EO 12866.
1997–50 I.R.B.5December 15, 1997

Therefore, a regulatory assessment is not
required. It also has been determined that
section 553(b) of the Administrative Pro-
cedure Act (5 U.S.C. chapter 5) does not
apply to these regulations, and because
the regulation does not impose a collec-
tion of information on small entities, the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to
section 7805(f) of the Internal Revenue
Code, these regulations will be submitted
to the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on their impact on small business.
Drafting Information
The principal author of these regulations
is Phyllis Haney, Office of Associate Chief
Counsel (Employee Benefits and Exempt
Organizations). However, other personnel
from the IRS and Treasury Department
participated in their development.
List of Subjects in 26 CFR Part 53
Excise taxes, Foundations, Invest-
ments, Lobbying, Reporting and record-
keeping requirements.
Adoption of Amendments to the Regu-
lations
Accordingly, 26 CFR part 53 is amended
as follows:
PART53—FOUNDATION AND
SIMILAR EXCISE TAXES
Paragraph 1. The authority citation for
part 53 continues to read as follows:
Authority: 26 U.S.C. 7805.
§53.6071–1T[Amended]
§53.6071–1 [Amended]
Par 2. In §53.6071–1T, paragraph (f) is
redesignated as paragraph (f) of
§53.6071–1.
§53.6071-1T[Removed]
Par 3. §53.6071–1Tis removed.
Michael P. Dolan,
Acting Commissioner of
Internal Revenue.
Donald C. Lubick,
Acting Assistant Secretary of
the Treasury.
(Filed by the Office of the Federal Register on Octo-
ber 6, 1997, 8:45 a.m., and published in the issue of
the Federal Register for October 7, 1997, 62 F.R.
52256)
December 15, 199761997–50 I.R.B.

1997–50 I.R.B.7December 15, 1997
Substantial Modification of
Rental Agreements
Notice 97–72
PURPOSE
This notice informs taxpayers of cer-
tain conditions under which changes in
rental payment terms resulting from a re-
financing of indebtedness incurred by a
lessor to acquire property that is the sub-
ject of a rental agreement will not be a
substantial modification of the rental
agreement for purposes of § 467 of the In-
ternal Revenue Code. The Treasury De-
partment intends to issue final regulations
under § 467 that will incorporate these
conditions.
BACKGROUND
On June 3, 1996, the Internal Revenue
Service and Treasury issued proposed In-
come Tax Regulations under § 467, pub-
lished in a Notice of Proposed Rulemak-
ing (61 Fed. Reg. 27834). The regulations
provide that, if a rental agreement is a
§ 467 rental agreement, the lessor and
lessee must take into account for a taxable
year the § 467 rent and the § 467 interest
for that year. The proposed regulations
provide that a rental agreement is a § 467
rental agreement if it has increasing or de-
creasing rent, or deferred or prepaid rent,
and the aggregate rental payments and
other consideration to be received for the
use of the property exceed $250,000.
Under § 1.467–3 of the proposed regu-
lations, if a § 467 rental agreement is a
leaseback or long-term agreement that
provides for increases or decreases in rent
that have a principal purpose of Federal
income tax avoidance (a disqualified
leaseback or long-term agreement), the
Commissioner may require the lessor and
lessee to use constant rental accrual. Sec-
tion 467(e)(1) provides that the “constant
rental amount” is an amount that, if paid
at the close of each lease period under the
agreement, would result in an aggregate
present value equal to the present value of
the aggregate payments required under
the agreement. Section 467(b)(5) and the
§ 467 proposed regulations provide cer-
tain safe harbor exceptions to the applica-
tion of constant rental accrual.
The regulations are proposed to be ef-
fective for (1) disqualified leasebacks and
long-term agreements entered into after
June 3, 1996, and (2) all other rental
agreements entered into after the date on
which final § 467 regulations are pub-
lished.
Under § 1.467–1(f) of the proposed
regulations, if, after the lease term begins,
the lessor and lessee agree to a substantial
modification of the terms of the lease, the
remaining portion of the rental agree-
ment, as modified, is treated as a new
rental agreement for purposes of § 467
and the regulations thereunder, including
the effective date provisions. Thus, for
example, such a rental agreement must be
retested to determine whether increases or
decreases in rent were motivated by Fed-
eral income tax avoidance, or whether a
safe harbor exception to constant rental
accrual applies.
The proposed regulations provide no
guidance regarding whether a substantial
modification has occurred. Conse-
quently, commentators have expressed
concern that a refinancing of indebted-
ness incurred to acquire property that is
the subject of a rental agreement entered
into prior to the effective date of the §
467 regulations will result in a substantial
modification of the rental agreement.
This treatment may occur because, even
though the lessee is not directly obligated
to pay the principal of, or interest on,
such indebtedness, in many leases, the
rent paid by the lessee is affected by the
lessor’s debt service costs. Thus, the
concern of the commentators is that a re-
financing of the lessor’s indebtedness
after June 3, 1996, will cause a change in
rental payments that will constitute a sub-
stantial modification of the rental agree-
ment and may cause the remaining por-
tion of the rental agreement to be treated
as a disqualified leaseback or long-term
agreement under the § 467 regulations
(and therefore subject to constant rental
accrual).
EFFECTOF REFINANCING
In response to the concerns of com-
mentators, the final regulations under
§ 467 will provide that the refinancing of
any indebtedness incurred by the lessor to
acquire the property subject to a rental
agreement and secured by the property,
together with any corresponding changes
in the rights or obligations of the lessee
under the rental agreement, will not be
treated as a substantial modification of the
rental agreement if all of the following
conditions are met:
(a) Neither the amount, nor the time
for payment, of the principal amount of
the new indebtedness differs from the
amount and time for payment of the prin-
cipal amount of the refinanced indebted-
ness, except for de minimis changes;
(b) For each of the remaining rental
periods, the rent allocation schedule, the
payments of rent and interest, and the
amount accrued under § 467 are changed
only as necessary to take into account the
change in financing costs, and such
changes are made pursuant to the terms of
the rental agreement;
(c) The lessor and the lessee are not re-
lated persons (as defined in § 1.467–
1(h)(7) of the proposed regulations) to
each other or to any lender to the lessor
with respect to the property (whether
under the refinanced indebtedness or the
new indebtedness); and
(d) The lessor has a unilateral option
(within the meaning of § 1.1001–3(c)(3)),
with or without the consent of the lessee,
to repay the refinanced indebtedness.
DRAFTING INFORMATION
The principal author of this notice is
Stephen J. Toomey of the Office of Assis-
tant Chief Counsel (Income Tax and Ac-
counting). For further information re-
garding this notice, contact Mr. Toomey
at (202) 622-4960 (not a toll-free call).
Part III. Administrative, Procedural, and Miscellaneous

December 15, 199781997–50 I.R.B.
Rev. Proc. 97–54
TABLE OF CONTENTS
CHAPTER ONE—INTRODUCTION TO SUBSTITUTE FORMS
Overview of Revenue Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
IRS Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Nature of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
CHAPTER TWO—GENERALGUIDELINES FOR SUBMISSIONS AND APPROVALS
General Specificiations for Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Highlights of Permitted Changes and Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Vouchers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Restrictions on Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Guidelines for Obtaining IRS Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Office of Management and Budget (OMB) Requirements
for All Substitute Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
CHAPTER THREE—PHYSICALASPECTS AND REQUIREMENTS
General Guidelines for Substitute Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Printing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Examples of Approved Formats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Miscellaneous Information for Substitute Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
CHAPTER FOUR—ADDITIONALRESOURCES
Guidance From Other Revenue Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Ordering Publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Electronic Tax Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Federal Tax Forms on CD-ROM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
CHAPTER FIVE—REQUIREMENTS FOR SPECIFIC TAX RETURNS
Tax Returns (Form 1040, 1040A, 1120, Etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Changes Permitted to Graphics (Forms 1040Aand 1040) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Changes Permitted to Form 1040AGraphics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Changes Permitted to Form 1040 Graphics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
CHAPTER SIX—FORMATAND CONTENTOF SUBSTITUTE RETURNS
Acceptable Formats for Computer-Generated Forms and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Additional Instructions for All Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
CHAPTER SEVEN—OCR FORMS
Special Form 1040EZ Optical Character Recognition/Image
Character Recognition (OCR/ICR) Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Computer-Generated Alternative Returns,
Form 1040PC Format Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Form 941 Requirements—OCR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Specifications for OCR Scannable Application Forms for Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43

CHAPTER EIGHT—MISCELLANEOUS FORMS AND PROGRAMS
Paper Substitutes for Form 1042–S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Specifications for Filing Substitute Schedules K–1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Procedures for Printing Internal Revenue Service Envelopes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Procedures for Substitute Form 5471 and Form 5472 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
CHAPTER NINE—ALTERNATIVE METHODS OF FILING
Forms for Electronically Filed Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
FTD Magnetic Tape Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Effect on Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
EXHIBITS
Exhibit A–1. Schedule A(Preferred)
Exhibit A–2. Schedule A(Acceptable)
Exhibit B–1. Schedule B (Preferred)
Exhibit B–2. Schedule B (Acceptable)
Exhibit CG–A. Schedule A(Computer Generated)
Exhibit CG–B. Schedule B (Computer Generated)
Exhibit C. Sample Checklist
Exhibit L–1. List of Forms Referred to in Revenue Procedure
1997–50 I.R.B.9December 15, 1997

Chapter 1
Introduction to Substitute Forms
Overview of Revenue Procedure 97–54
PurposeThis revenue procedure provides the general requirements and conditions for the development, printing, and
approval of all substitute tax forms to be acceptable for filing in lieu of official IRS forms.
Unique FormsCertain unique, specialized forms require the use of other additional revenue procedures to supplement this
publication. See Chapter 4.
ScopeThe Internal Revenue Service accepts quality substitute tax forms that are consistent with the official forms,
and that do not have an adverse impact on our processing. The IRS Substitute Forms Program administers
the formal acceptance and processing of these forms nationwide. While this program deals primarily with
paper documents, it also interfaces with other processing and filing media such as:
• magnetic tape,
• optical character recognition, and
• electronic filing, etc.
Only those substitute forms that comply fully with the requirements set forth herein are acceptable. Exhibit
L–1 lists the form numbers mentioned in this document and their titles. This revenue procedure is updated as
required to reflect pertinent tax year form changes and to meet processing and/or legislative requirements.
Forms Covered by The following types of forms are covered by this revenue procedure:
This Revenue
Procedure• IRS tax returns and their related forms and schedules.
• Applications for permission to file returns electronically and forms submitted as required documentation
for electronically filed returns.
• Powers of Attorney.
• Estimated tax payment vouchers.
• Forms and schedules relating to partnerships, exempt organizations, and employee plans.
Forms NOTCovered The following types of forms are not covered:
by This Revenue
Procedure• W–2, W–3, 1096, 1098, 1099 series, 5498, and W–2G (see following table).
• Federal Tax Deposit (FTD) coupons, which may not be reproduced.
• Requests for information or documentation initiated by the Service.
• Forms used internally by the Service.
• State tax forms.
• Forms developed outside IRS (except for
Form TD F 90–22.1, Report of Foreign Bank and Financial Accounts).
December 15, 1997101997–50 I.R.B.

IRS Contacts
Where To Send Send your substitute forms to the following offices:
Substitute Forms
1997–50 I.R.B.11December 15, 1997
FormOffice and Address
W–2, W–3Internal Revenue Service
Attn: Substitute Form W–2
Coordinator
CP:CO:SC:A
5000 Ellin Road
Lanham, MD 20706
1096, 1098, 1099 Series, 5498, and W–2GInternal Revenue Service
Attn: IRPCoordinator
T:S:P:S
5000 Ellin Road
Lanham, MD 20706
4461, 4461–A, 4461–B, 5300, 5323, 5327, 5310, Internal Revenue Service
5310–A, and 6406Attn: EPOCR Forms Coordinator
E:EP:FC
1111 Constitution Avenue, NW
Room 2232 IR
Washington, DC 20224
All othersInternal Revenue Service
Attn: Substitute Forms Program
T:FP:S
1111 Constitution Avenue, NW
Room 2708 IR
Washington, DC 20224
In addition, the Substitute Forms Program can be contacted via email at steves@publish.no.irs.gov. DO NOT
attach graphic files for approval with email.

Nature of Changes
Changes to • Information on IRS Contact offices has been consolidated.
the Revenue
Procedure• Payment vouchers size requirements have been revised and specifications moved from exhibits to text.
• Graphics changes revised for Form 1040, Page 2.
• Asample exhibit of a checklist of forms for use in submitting substitute forms has been included.
• Instructions for machine reading (scanning) Form 941 OCR or Schedule B (Form 941) have been delet-
ed.
• Previous instructions labeled “Special Form 941 Requirements” have been removed from this revenue
procedure.
• The office phone number and address for 1040PC Project Office has been updated.
• Aparagraph has been added on Tax Fax and CD-ROM ordering instructions have been updated.
• Various editorial changes have been made.
December 15, 1997121997–50 I.R.B.

Definitions
Substitute FormAtax form (or related schedule) that differs in any way from the official version and is intended to replace
the entire form that is printed and distributed by the Service. This term also covers those approved substi-
tute forms exhibited in this revenue procedure.
PrintedAform produced using conventional printing processes. Also, a printed form which has been reproduced
(orPreprinted)by photocopying or similar processes.
Form
Preprinted Pin- Aprinted form that has marginal perforations for use with automated and high-speed printing equipment.
Fed Form
Computer-Prepared Apreprinted form in which the taxpayer’s tax entry information has been inserted by a computer, computer-
Substitute Formprinter, or other computer type equipment, such as word-processing equipment.
Computer-GeneratedAtax return or form that is entirely designed and printed by the use of a computer printer, such as a laser
Substitute Tax printer, etc., on plain white paper. This return or form must conform to the physical layout of the corre-
Return orFormsponding Service form although the typeface may differ. The text should match the text on the officially
printed form as closely as possible; condensed text and abbreviations will be considered on a case-by-case
basis. Exception: All jurats (perjury statements) must be reproduced verbatim.
Manually-Prepared Apreprinted reproduced form in which the taxpayer’s tax entry information is entered by an individual
Formusing a pen, pencil, typewriter, or other non-automated equipment.
Computer- Atax return that contains only the taxpayer’s significant line entries, and is formatted three columns per
Generated Answerpage with tax form headings, a summary, and jurat. This return is printed on plain white paper using a
Sheet Format computer printer.
Tax Return
GraphicsThose parts of a printed tax form that are not tax amount entries nor called-for information. Generally, these
are line numbers, captions, shadings, instructions, special indicators, borders, rules, and strokes created by
typesetting, photographics, photocomposition, etc.
AcceptableAlegible photocopy of an original form.
Reproduced Form
Supporting Adocument providing detailed information to support an entry for a line(s) on an official or approved substitute
Statement form and filed with (attached to) a tax return. (Asupporting statement is not a tax form and does not take the
(Supplementalplace of an official form, unless specifically permitted elsewhere in this procedure.)
Schedule)
Specific Forms The following terms are used throughout this revenue procedure in reference to all substitute forms, with the
Termsexception of the 1040PC “answer sheet format” tax return.
FormatThe overall physical arrangement and general layout of a substitute form.
SequenceThe same numeric and logical placement order of data, as reflected on the official form version. Sequence is
an integral part of the total format requirement.
Line ReferenceThe line numbers, letters or alphanumerics used to identify each captioned line on the official forms, and
(Code)printed to the immediate left of each caption or data entry field.
Item CaptionThe textual portion of each line on the form identifying the specific data elements required.
Data Entry FieldAll areas designated on a form for the insertion of data, such as dollar amounts, quantities, responses, check-
boxes, etc.
1997–50 I.R.B.13December 15, 1997

Agreement
Important Any person or company who uses substitute forms and makes all or part of the changes specified in this
Stipulation of revenue procedure agrees to the following stipulations:
This Revenue
Procedure
• The Internal Revenue Service presumes the changes are made in accordance with these procedures and, as
such, will be noninterruptive to the processing of the tax return.
• Should any of the changes prove to be not exactly as described, and as a result become disruptive to the In-
ternal Revenue Service during processing of the tax return, the person or company agrees to accept the de-
termination of the IRS as to whether or not the form may continue to be used during the filing season.
• Also agrees to work with the IRS in correcting noted deficiencies. Notification of deficiencies may be
made by any combination of fax, letter, email, or phone contact and may include the return of unaccept-
able forms for resubmission of acceptable forms.
December 15, 1997141997–50 I.R.B.

Chapter 2
General Guidelines for Submissions and Approvals
General Specifications for Approval
OverviewIf you produce any tax returns and forms using IRS guidelines on permitted changes, you can generate your
own substitutes without further approval. If your changes are more extensive, you must get official approval
before using substitute forms. These changes include the use of typefaces and sizes other than those found
on the official form and the condensing of line item descriptions to save space.
SchedulesSchedules are considered to be an integral part of a complete tax return when assigned consecutive page num-
bers and printed contiguously with page 1 of the return.
Example of Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, is an example of this
Schedules That situation, where Schedules Athrough S have pages numbered as part of the basic return. For a Form 706
Must Be Submitted to be approved, the entire form including Schedules Athrough S must be submitted.
With the Return
Examples of However, Schedules 1, 2, and 3 of Form 1040Aare examples of schedules that can be separately computer-
Schedules That generated. Although IRS printed as a continuation of Form 1040A, none of these schedules have page num-
Can Be Submittedbers that require them to be filed with Form 1040A, and may, therefore, be separated from Form 1040Aand
Separatelysubmitted as computer-generated substitute schedules.
Use and Distribution The Internal Revenue Service is continuing a program to identify and contact tax return preparers, forms
of Unapproved developers, and software publishers who use or distribute unapproved forms that do not conform to this
Formsrevenue procedure. The use of unapproved forms impedes processing of the returns.
1997–50 I.R.B.15December 15, 1997

Highlights of Permitted Changes and Requirements
Methods of Official versions are supplied by the Internal Revenue Service, such as those in the taxpayer’s tax package,
Reproducing those printed in revenue procedures, and over-the-counter forms available at IRS and other governmental
Internal Revenue public offices or buildings. Forms are also available on CD-ROM, and on-line via Fedworld and the
Service FormsInternet.
There are methods of reproducing Internal Revenue Service printed tax forms suitable for use as substitute
tax forms without prior approval.
• You can photocopy most tax forms and use them instead of the official ones. The entire substitute form,
including entries, must be legible.
• You can reproduce any current tax form as cut sheets, snapsets, and marginally punched, pin-fed forms so
long as you use an official IRS version as the master copy.
• You can reproduce a “signature form” as a valid substitute form. Many tax forms (including returns) have
a taxpayer signature requirement as part of the form layout. The jurat/perjury statement/signature line
areas must be retained and worded exactly as on the official form. The requirement for a signature by itself
does not prohibit a tax form from being properly computer-generated.
• You can computer-generate Answer Sheet Format Tax Returns on plain bond paper using IRS-accepted
software for the 1040PC format for return types 1040EZ, 1040, 1040A, and attachments, forms, and
schedules.
December 15, 1997161997–50 I.R.B.

Vouchers
OverviewAll payment vouchers (Forms 940–V, 940–EZ(V), 941–V, 943–V, 945–V, 1040–V, and 2290–V) must be
reproduced. Substitute vouchers must be the same size as the officially printed vouchers. Vouchers that are
prepared for printing on a laser printer may include a scanline.
Scanline FieldsNNNNNNNNN AAAAAANN N NNNN NNN
AB C D E F G
A- Social Security Number/Employer Identification Number (SSN/EIN) has 9 numeric spaces.
B - Check Digit has 2 alpha spaces.
C - Name Control has 4 alphanumeric spaces.
D - Master File Tax (MFT) Code has 2 numeric spaces (see below).
E - Taxpayer Identification Number (TIN) Type has 1 numeric space (see below)
F - Tax period has four numeric spaces in year/month format (YYMM).
G - Transaction Code has 3 numeric spaces.
MFTCodeCode Number for:
• Form 1040 family - 30;
• Form 940/940-EZ - 10;
• Form 941 - 01;
• Form 943 - 11;
• Form 945 - 16; and
• Form 2290 - 60.
TIN TypeType Number for:
• Form 1040 family - 0; and
• Forms 940, 940–EZ, 941, 943, 945, and 2290–2.
VoucherSizeThe voucher size must be exactly 8.0033.250. The document scanline must be vertically positioned 1.625
inches from the bottom of the scanline to the bottom of the voucher. The right most character of the scan-
line must be placed 3.5 inches from the right leading edge of the document. The maximum vertical dis-
placement is .06 inches. The minimum required horizontal clear space between characters is .014 inches.
The line to be scanned must have a clear band 0.25 inches in height from top to bottom of the scanline, and
from border to border of the document. “Clear band” means no printing except for dropout ink.
Print and PaperVouchers must be printed in black ink using OCR Aor OCR B, size 1 font. The paper must be 20 to 24
Weightpound OCR bond paper weight.
1997–50 I.R.B.17December 15, 1997

Restrictions on Changes
Things You You cannot, without prior IRS approval, change any Internal Revenue Service tax form or use your own
CANNOTDo(non-approved) versions (preprinted labels), including graphics, unless specifically permitted by this rev-
to IRS Forms enue procedure.
Suitable for
Substitute Tax You cannot adjust any of the graphics on Forms 1040, 1040A, and 1040EZ (except in those areas specified
Formsin Chapter 5 of this revenue procedure) without prior approval from the IRS Substitute Forms Program.
You cannot use your own preprinted label on tax returns filed with IRS, unless you fully comply with the
exception criteria specified in the section on use of preaddressed IRS labels in this revenue procedure.
December 15, 1997181997–50 I.R.B.

Guidelines for Obtaining IRS Approval
BasicPreparers who desire to file substitute privately designed and printed tax forms and/or computer-generated
Requirementsand computer-prepared tax forms must develop such substitutes using the guidelines for substitute forms
established in this chapter. These substitutes, unless excepted by revenue procedure, must be approved by the
IRS before being filed.
1040PC Format Asoftware developer who wants to market, distribute, or use for its own clientele, a tax preparation pack-
Returnage featuring the 1040PC tax return format, must first file an application to participate in the program. Only
after successfully fulfilling test requirements will a developer’s software package be accepted by the IRS to
produce 1040PC tax returns.
Conditional The Internal Revenue Service cannot grant final approval of your substitute form until the official form has
Approval Basedbeen published. However, the IRS usually releases advance proof copies of selected major tax forms that
on Advanced are subject to further changes and OMB approval before their release in final format for printing and distri-
Proofsbution to the public.
We encourage submission of proposed substitutes of these advance proof forms, and will grant conditional
approval based solely on these early proofs. These advance proofs are subject to significant change before
forms are finalized. If these advance proofs are used as the basis for your substitute forms, you will be
responsible for subsequently updating your final forms to agree with the final official version before use.
These revisions need not be submitted for further approval.
NOTE: Conditional approval will not be granted after the final version of an official form is published.
Any alteration of forms must be within the limits acceptable to the Service. It is possible that, from one fil-
ing period to another, a change in law or a change in internal need (processing, audit, compliance, etc.) may
change the allowable limits for the alteration of the official form.
When specific approval of any substitute form (other than those specified in Chapter 2, IRS Contacts) is
desired, a sample of the proposed substitute should be forwarded for consideration by letter to the Substitute
Forms Program Coordinator at the address shown in Chapter 2.
To expedite multiple forms approval, we prefer that your proposed forms be submitted in separate sets by
return. For example, Forms 1040 and their normally related schedules or attachments should be submitted
separately from Forms 1120, 1065, 5500 Series, etc., if at all possible. Schedules and forms (e.g., Forms
3468, 4136, etc.) that can be used with more than one type of return (e.g., 1040, 1041, 1120, etc.) should be
submitted only once for approval, regardless of the number of different tax returns with which they may be
ultimately associated. In addition, all pages of a multipage form or return should be submitted in the same
package.
Approving OfficesAs no IRS office except the ones specified in this procedure are authorized to approve substitute forms,
unnecessary delay may result if forms are sent elsewhere for approval. All forms submitted to any other
office must be forwarded to the appropriate office for formal control and review. The Substitute Forms
Program Coordinator may then coordinate the response with the program analyst responsible for the pro-
cessing of that form. Such coordination may include allowing the analyst to officially approve the form. No
IRS office is authorized to allow deviations from this revenue procedure.
Service’s Review The IRS does not review or approve the logic of specific software programs, nor confirm the calculations
of Software entered on forms output from these programs that are submitted for approval. The accuracy of the program
Programs, etc.itself remains the responsibility of the software package developer, distributor, or user. The Substitute Forms
Program is primarily concerned with the prefiling quality review of the final forms output, produced by what-
ever means, that are expected to be processed by IRS field offices. For the above reasons, it is suggested that
you submit forms without including any “taxpayer” information such as names, addresses, monetary
amounts, etc.
When to Send Proposed substitutes, which are required to be submitted per this revenue procedure, should be sent as
Proposed much in advance of the filing period as possible. This is to allow adequate time for analysis and response.
Substitutes
1997–50 I.R.B.19December 15, 1997

Guidelines for Obtaining IRS Approval, Continued
Accompanying When the sample substitute is submitted, there should be an accompanying statement that lists the form
Statementnumber of each substitute requested and detail those items that deviate from the official form in position,
arrangement, appearance, line numbers, additions, deletions, etc. Included with each of the items should be
a detailed reason or justification for the change and an approximation of the number of forms expected to be
filed.
When requesting approval for multiple forms, the statement should be presented as a checksheet.
Checksheets are not mandatory, but do facilitate the approval process. The checksheet may look like the
example (Exhibit C) displayed in the back of this procedure or may be one of your own design. Please
include your fax number on the checksheet.
Approval/Non- The Substitute Forms Coordinator will fax the checksheet or an approval letter back to the originator if a
Approval Noticefax number has been provided, unless:
• the requester has asked for a formal letter, or;
• significant corrections are required to the submitted forms.
Notice of approval may contain qualifications for use of the substitutes. Notices of non-approval letters may
specify the changes required for approval, and may also require resubmission of the form(s) in question.
Telephone contact is used when possible.
Duration of Most signature tax returns and many of their schedules and related forms have the tax (liability) year printed
Approvalin the upper right corner. Approvals for these forms are usually good for one calendar year (January through
December of the year of filing). Quarterly tax forms in the 94X series, and Form 720, require approval for
any quarter in which the form has been revised.
• If the preprinted year is the only change made to a form, the form for the upcoming year is not subject to
review.
• Otherwise, each new filing season requires a new approval.
Limited Continued Limited continued use of a change approved for one tax year may be allowed for the same form in the fol-
Use of Approved lowing tax year. Examples of such limitations and requirements are the use of abbreviated words, revised
Changeform spacing, compressed text lines, shortened captions, etc., which do not change the consistency of lines
or text on the official forms.
If substantial changes are made to the form, new substitutes must be submitted for approval. If only minor
editorial changes are made to the form, it is not subject to review.
If you received written approval of a previous tax year substitute form governed by this revenue procedure
and continue to use the approved change on your current tax year substitute form, you may revise your form
to include this change and, without additional written approval, use it as a current tax year substitute form,
provided you comply with the requirements in this revenue procedure.
When Approval If you received written approval for a specific change on a specific form last year, such as deleting the
Is Not Requiredvertical lines used to separate dollars and cents on some forms and schedules, e.g., Schedules A& B of Form
1040, you may again make the same change on the same form this year if the item changed is present on this
year’s official form.
• The new substitute does not have to be sent to the IRS and written approval is not required.
• However, the new substitute must conform to the official current year IRS form in other respects: date,
Office of Management and Budget (OMB) approval number, attachment sequence number, Paperwork
Reduction Act Notice statement, arrangement, item caption, line number, line reference, data sequence, etc.
•It must also comply with this revenue procedure—which may have eliminated, added to, or otherwise
changed the guideline(s) which affected the change approved last year.
Exception: Those written approvals which state that the approved change or form would not be allowed in
any other tax year, or for a temporary, limited, or interim approval pending resolution of a failure to meet one
or more IRS-prescribed requirements.
• This authorization for continued use of an approved change is limited to the continuation of design logic
from an immediately prior tax year substitute form to a current tax year substitute form.
December 15, 1997201997–50 I.R.B.

Guidelines for Obtaining IRS Approval, Continued
Continuous Forms without preprinted tax years are called “continuous use” forms. Many of these forms had expiration
Use Formsdates, but these are being phased out. Continuous use forms are revised when a legislative change affects the
form or a change will facilitate processing.
Internet Program Achart of print dates (for annual and quarterly forms) and most current revision dates (for continuous use
Chartforms) will be maintained on the Internet. For further details, see the section on Internet access in Chapter
4 of this revenue procedure.
Required CopiesGenerally, you must send us one copy of each form being submitted for approval. However, if you are pro-
ducing forms for different computer systems (e.g., IBM (or compatible) vs. MacIntosh) or different types of
printers (laser vs. dot matrix), and these forms differ significantly in appearance, submit one copy for each
type of system or printer.
Requestor’s Following the receipt of initial approval for a substitute forms package, or of a software output program to
Responsibility Afterprint substitute forms, it is the responsibility of the originator (designer or distributor) to provide each sub-
Receipt of Approval sequent client firm or individual with the pertinent Service forms requirements that must be met for contin-
uing acceptability.
Examples of this responsibility include:
• The use of prescribed print paper, font size, legibility, state tax data deletion,
• The legal requirements of the Paperwork Reduction Act Notice for informing all users of substitute forms
of the official use and collection requirements stated in the instructions for the official IRS forms, com-
pletion of documents, etc.
Source CodeThe Substitute Forms Program Coordinator Office, T:FP:S, will assign a unique source code to each firm
that submits substitute paper forms for approval. This will be a permanent control number that should be
used on every form created by a particular firm.
• This source code should be printed at the bottom left margin area on the first page of every approved sub-
stitute paper form.
• The source code for paper returns consists of three alpha characters.
• This source code should not be used on optically scanned (OCR) forms, except for certain specified Forms
1040–ES.
1997–50 I.R.B.21December 15, 1997

Office of Management and Budget (OMB) Requirements for All Substitute Forms
OMB Legal Requirements of the Paperwork Reduction Act of 1995 (“Act”). Public Law 104-13 requires that:
Requirements
forAll Substitute • OMB approve all IRS tax forms that are subject to the Act,
Forms
• Each IRS form contains (in the upper right corner) the OMB number, if any, and
• Each IRS form (or its instructions) states why IRS needs the information, how it will be used, and whether
or not the information is required to be furnished.
This information must be provided to every user of official or substitute tax forms.
Application of Act On forms to which OMB numbers have been assigned:
to Substitute Forms
• All substitute forms must contain in the upper right corner the OMB number that is on the official form.
• Format Required - OMB No. XXXX-XXXX (Preferred) or OMB # XXXX-XXXX.
RequiredYou must also inform the users of your substitute forms of the IRS use and collection requirements stated
Explanation to in the instructions for the official Internal Revenue Service form.
Users
• If you provide your users or customers with the official IRS instructions, page 1 of each form must retain
either the Paperwork Reduction Act Notice, or a reference to it as the IRS does on the official forms (usu-
ally in the lower left corner of the forms).
• If the IRS instructions are not provided to users of your forms, the exact text of the Paperwork Reduction
Act Notice must be furnished on the form or separately.
• This notice reads, in part, “We ask for this information to carry out the Internal Revenue laws of the United
States. You are required to give us the information. We need it to insure that you are complying with these
laws and to allow us to figure and collect the right amount of tax...”
• You must also include a copy of the alternative statement provided to users of your forms with the forms
you submit for approval.
Obtaining OMB The OMB number and Paperwork Reduction Act Notice may be obtained from the official form (or its
Numberand Noticeinstructions), any format produced by the IRS (e.g., Compact Disc (CD), Internet download, or Bulletin
Board System (BBS) download).
December 15, 1997221997–50 I.R.B.

Chapter 3
Physical Aspects and Requirements
General Guidelines for Substitute Forms
General The Official Form is the Standard. Because a substitute form is a variation from the official form, you
Informationshould know the requirements of the official form for the year of use before you modify it to meet your needs.
The Internal Revenue Service provides several means of obtaining the most frequently used tax forms. These
include the Internet, fax-on-demand, CD-ROM and an electronic forms bulletin board (see chapter 4).
DesignEach form must follow the design of the official form as to format arrangement, item caption, line numbers,
line references, and sequence.
State Tax State tax information must not appear (be visible) on the federal tax return or associated form or schedule
Information which is filed with the Internal Revenue Service, except where amounts are claimed on or required by the
Prohibitedfederal return, e.g., state and local income taxes, Schedule A(Form 1040).
Attachment • Most individual income tax forms have a required “attachment sequence number” located just below
Sequence Numberthe year designation in the upper right corner of the form. The Internal Revenue Service uses this number
to indicate the order in which forms are to be attached to the tax return so they may be processed in that
order. Some of the attachment sequence numbers may change each year.
On Computer-prepared forms:
• It must be printed in no less than 12-point boldface type and centered below the form’s year designation.
• The sequence number must be placed following the year designation for the tax form and separate with an
asterisk.
• It is not necessary to duplicate the “Attachment Sequence Number” wording, except for the actual num-
ber.
Paid Preparer’s On Forms 1040EZ, 1040A, 1040, and 1120, etc., the “Paid Preparer’s Use Only” area may not be re-
Information and arranged or relocated. You may, however, add three extra lines to the paid preparer’s address area without
Signature Areaprior approval. This applies to other tax forms as well. Please note that the preparer’s area on Form 1040EZ
is on the bottom of page 2. Substitute Forms 1040EZ with the preparer area in any location other than the
bottom of page 2 will not be accepted.
Assembly of FormsIf developing software or forms for use by others, please inform your customers/clients that the order in
which the forms are arranged may affect the processing of the package. Areturn must be arranged in this
order:
1997–50 I.R.B.23December 15, 1997
Vertical Alignment
of Amount Fields
IfThen
a form is to be manually prepared• the federal column must have a vertical line or some type
of indicator in the amount field to separate dollars from
cents if the official form has a vertical line.
• the cents column must be at least 2/10” wide.
a form is to be computer-generated• vertically align the amount entry fields where possible.
• use one of the following amount formats:
• 0,000,000.
• 0,000,000.00
a form is to be computer-prepared• you may remove the vertical line in the amount field that
separates dollars from cents.
• use one of the following amount formats:
• 0,000,000.
• 0,000,000.00

• Supporting statements must be in the same sequence as the forms they support, and
• Additional information required or voluntarily submitted.
In this way, they are received in the order in which they must be processed. If you do not send them to us in
this order, the Internal Revenue Service has to delay the return package to disassemble them and place them
in order before processing is continued.
December 15, 1997241997–50 I.R.B.
If the Form IsThen Sequence Is
1040• Form 1040, schedules
• Schedules and forms in sequence number
order
Any other (Form 1120, 1120S, 1065, 1041, etc.)• the tax return
• lettered schedules (Schedule D, etc.) in
alphabetical order
• numbered forms in numerical order
Assembly of Forms
Continued
General Guidelines for Substitute Forms Continued

Paper
PaperContentThe paper must be:
• Chemical wood writing paper that is equal to or better than the quality used for the official form
• At least 18 pound (1703220, 500 sheets), or
• At least 50 pound offset book (2503380, 500 sheets).
Paperwith There are several kinds of paper prohibited for substitute forms. These are:
Chemical• Carbon-bonded paper
Transfer• Chemical transfer paper except when the following specifications are met:
Properties• Each ply within the chemical transfer set of forms must be labeled.
• Only the top ply (ply one and white in color), the one that contains chemical on the back only (coated
back), may be filed with the Service.
ExampleAset containing three plies would be constructed as follows: one ply (coated back), “Federal Return, File
with IRS”; ply two (coated front and back), “Taxpayer’s copy”, and ply three (coated front),
“Preparer’s copy.”
• The file designation, “Federal Return, File with IRS,” for ply one must be printed in the bottom right mar-
gin (just below the last line of the form) in 12-point, bold-face type.
• It is not mandatory, but recommended, that the file designation ”Federal Return, File with IRS,” be print-
ed in a contrasting ink for visual emphasis.
Carbon PaperDo not attach any carbon paper to any return you file with the Internal Revenue Service.
Paperand Ink We prefer that the color and opacity of paper substantially duplicates that of the original form. This means
Colorthat your substitute must be printed in black ink and may be on white or on the colored paper the IRS form
is printed on. Forms 1040Aand 1040 substitute reproductions may be in black ink without the colored shad-
ing. The only exception to this rule is Form 1041–ES, which should always be printed with a very light gray
shading in the color screened area. This is necessary to assist us in expeditiously separating this form from
the very similar Form 1040–ES.
Page SizeSubstitute or reproduced forms and computer prepared/generated substitutes may be the same size as the offi-
cial form (803110in most cases) or they may be the standard commercial size (8
1
⁄
2
03110) exclusive of pin-
feed holes. The thickness of the stock cannot be less than .003 inch.
1997–50 I.R.B.25December 15, 1997

Printing
Printing MediumThe private printing of all substitute tax forms must be by conventional printing processes, photocopying,
computer-graphics, or similar reproduction processes.
LegibilityAll forms must have a high standard of legibility, both as to printing and reproduction and as to fill-in mat-
ter. Entries of taxpayer data may be no smaller than eight points. The Internal Revenue Service reserves the
right to reject those with poor legibility. The ink and printing method used must ensure that no part of a form
(including text, graphics, data entries, etc.) develops “smears” or similar quality deterioration. This includes
any subsequent copies or reproductions made from an approved master substitute form, either during prepa-
ration or during IRS processing.
Type FontMany federal tax forms are printed using “Helvetica” as the basic type font. We request that you use this
type font when composing substitute forms.
Print SpacingSubstitute forms should be printed using a 6 lines/inch vertical print option. They should also be printed hor-
izontally in 10 pitch pica (i.e., 10 print characters per inch) or 12 pitch elite (i.e., 12 print positions per inch).
Image SizeThe image size of printed substitute form should be as close as possible to that of the official form. You may
omit any text on both computer-prepared and computer-generated forms that is solely instructional.
Title Area ChangesTo allow a large top margin for marginal printing and more lines per page, the title line(s) for all substitute
forms (not including the form’s year designation and sequence number, when present), may be photograph-
ically reduced by 40 percent or reset as one line of type. When reset as one line, the type size may be no
smaller than 14-point. You may omit “Department of the Treasury, Internal Revenue Service” and all refer-
ence to instructions in the form’s title area.
Remove When privately printing substitute tax forms, the Government Printing Office symbol and/or jacket number
Government must be removed. In the same place, using the same type size, print the Employer Identification Number
Printing Office (EIN), the Social Security Number (SSN) of the printer or designer, or the IRS assigned source code. (We
Symbol and IRS prefer this last number be printed in the lower left area of the first page of each form.) Also remove the IRS
Catalog NumberCatalog Number, if one is present in the bottom center margin, and the Recycle Symbol, if the substitute is
not produced on recycled paper.
Printing On One While it is preferred that both sides of the paper be used for substitute and reproduced forms, resulting in the
Side of Papersame page arrangement as that of the official form or schedule, the IRS will not reject your forms if only one
side of the paper is used.
Photocopy The Internal Revenue Service does not undertake to approve or disapprove the specific equipment or process
Equipmentused in reproducing official forms. Photocopies of forms must be entirely legible and satisfy the conditions
stated in this and other revenue procedures.
ReproductionsReproductions of official forms and substitute forms that do not meet the requirements of this revenue pro-
cedure may not be filed instead of the official forms. Illegible photocopies are subject to being returned to
the filer for resubmission of legible copies.
Removal of You may remove all references to instructions. No prior approval is needed. One exception is that the state-
Instructionsment, “For Paperwork Reduction Act Notice, See Instructions”, must be retained or a similar statement pro-
vided on each form.
December 15, 1997261997–50 I.R.B.

Margins
Margin SizeThe format of a reproduced tax return when printed on the page must have margins on all sides at least as
large as the margins on the official form. This allows room for IRS employees to make the necessary entries
on the form during processing.
• A1/20to 1/40inch margin must be maintained across the top, bottom, and both sides (exclusive of any pin-
fed holes) of all computer-generated substitutes.
• The marginal, perforated strips containing the pin-fed holes must be removed from all forms prior to fil-
ing with the Internal Revenue Service.
Marginal PrintingNon-tax material allowed in limited areas.
• Printing is never allowed in the top right margin of the tax return form (i.e., Forms 1040, 1040A, 1040EZ,
1120, 940, 941, 5500 Series, etc.). The Service uses this area to imprint a Document Locator Number for
each return.
• With the exception of the actual tax return forms (i.e., Forms 1040, 1040A, 1040EZ, 1120, 940, 941, etc.),
you may print in the left vertical margin and in the left half of the bottom margin.
Prior approval is not required for the marginal printing allowed when printed on an official form or on a pho-
tocopy of an official form.
The marginal printing allowance is also the guide for the preparation of acceptable substitute forms. There
is no exception to the requirement that no printing is allowed in the top right margin of the tax return form.
1997–50 I.R.B.27December 15, 1997

Examples of Approved Formats
Examples of Two sets of exhibits (Exhibits A–1, A–2, B–1, and B–2) are at the end of this revenue procedure. These are
Approved Formats examples of how the guidelines in this revenue procedure may be used in some specific cases. Vertical spac-
From the Exhibitsing is six (6) lines to the inch. These examples are from a prior year and are not to be used as substitute
forms.
Examples of Examples of acceptable computer-generated formats are also shown in the Exhibits section of this revenue
Acceptable procedure. Exhibits CG-Aand CG-B show computer-generated Schedules Aand B. Vertical spacing is six
computer-generated(6) lines to the inch. You may also refer to them as examples of how the guidelines in this revenue proce-
formatsdure may be used in specific cases. Acombination of upper and lower case print fonts is acceptable in pro-
ducing the computer-generated forms included in this procedure. This same logic for computer-generated
forms can be applied to any IRS form that is normally reproducible as a substitute form, with the exception
of tax return forms as discussed elsewhere.
December 15, 1997281997–50 I.R.B.

Miscellaneous Information for Substitute Forms
Filing Substitute To be acceptable for filing, a substitute return or form must print out in a format that will allow the party sub-
Formsmitting the return to follow the same instructions as for filing official forms. These instructions are in the
taxpayer’s tax package or in the related form instructions. The form must be on the appropriate size paper,
be legible, and include a jurat where one appears on the published form.
Caution to Software The IRS has received returns produced by software packages with approved output where either the form
Publishersheading was altered or the lines were spaced irregularly. This produces an illegible or unrecognizable return
or a return with the wrong number of pages. We realize that many of these problems are caused by individ-
ual printer differences but they may delay input of return data and, in some cases, generate correspondence
to the taxpayer. Therefore, in the instructions to the purchasers of your product, both individual and profes-
sional, please stress that their returns will be processed more efficiently if they are properly formatted. This
includes:
• Having the correct form numbers and titles at the top of the return, and
• Submitting the same number of pages as if the form were an official IRS form, with the line items on the
proper pages.
Use Preaddressed If you are a practitioner filling out a return for a client or a software publisher who prints instruction manu-
IRS Labelals, stress the use of the preaddressed label provided in the tax package the IRS sent to the taxpayer, when
available. The use of this label (or its precisely duplicated label information) is extremely important for the
efficient, accurate, and economical processing of a taxpayer’s return. Labeled returns indicate that a taxpayer
is an established filer and permits us to automatically accelerate processing of those returns. This results in
quicker refunds, more accurate names/addresses and postal deliveries, and less manual review by IRS func-
tions.
Caution to If you are producing a software package that generates name and address data onto the tax return, do not
Producers of under any circumstances program either the Service preprinted check digits or a practitioner-derived Name
Software PackagesControl to appear on any return prepared and filed with the Internal Revenue Service.
Programming to Whenever applicable:
Print Forms
• Use only the following label information format for single filers:
000-00-0000
JOHN Q. PUBLIC
310 OAK DRIVE
HOMETOWN, STATE 94000
• Use only the following information for joint filers:
000-00-0000 000-00-0000
JOHN Q. PUBLIC
MARYI. PUBLIC
310 OAK DRIVE
HOMETOWN, STATE 94000
1997–50 I.R.B.29December 15, 1997

Chapter 4
Additional Resources
Guidance from Other Revenue Procedures
General Guidance for the substitute tax forms not covered in this revenue procedure and the revenue procedures that
govern their use are as follows:
• Revenue Procedure 94–79, IRS Publication 1355, Requirements and Conditions for the Reproduction,
Private Design, and Printing of Substitute Forms 1040–ES.
• Revenue Procedures 96–24 and 96–24a, IRS Publication 1141, General Rules and Specifications for
Private Printing of Substitute Forms W–2 and W–3.
• Revenue Procedure 97–32* and 97–32A, IRS Publication 1179, Specifications for Paper Document
Reporting and Paper Substitutes for Forms 1096, 1098, 1099 Series, 5498, and W–2G.
*Due to a numbering error, some copies of Revenue Procedure 97–32 may display 97–43 instead. Please
refer to the publication number and title to be sure that you have the correct publication.
• Revenue Procedure 96–11, IRS Publication 1187, Specifications for Filing Form 1042–S, Foreign Person’s
U.S. Source Income Subject to Withholding, on Magnetic Tape.
• Revenue Procedure 96–36, IRS Publication 1220, Specifications for Filing Forms 1098, 1099, 5498, and
W–2G Magnetically or Electronically.
• Revenue Procedure 95–18, IRS Publication 1223, Specifications for Private Printing of Substitute Forms
W–2c and W–3c.
December 15, 1997301997–50 I.R.B.

Ordering Publications
Sources of The publications listed below may be ordered by calling 1-800-TAX-FORM (1-800-829-3676). Identify the
Publicationsrequested document by IRS publication number:
• Pub. 1141, the revenue procedure on specifications for private printing for Forms W–2 and W–3.
• Pub. 1167, the revenue procedure on substitute printed, computer- prepared, and computer-generated tax
forms and schedules. This publication is available from the IRS Internet website.
• Pub. 1179, the revenue procedure on paper substitute information returns (Forms 1096, 1098, 1099 series,
5498, and W–2G).
• Pub. 1192, Catalog of Reproducible Forms and Instructions.
• Pub. 1220, the revenue procedure on electronic or magnetic tape and magnetic diskette reporting for infor-
mation returns (Forms 1098, 1099 series, 5498, and W–2G).
• Pub. 1223, the revenue procedure on substitute Forms W–2c and W–3c.
• Pub. 1239, Specifications for Filing Form 8027, Employer’s Annual Information Return of Tip Income and
Allocated Tips, on Magnetic Tape.
• Pub. 1245, Magnetic Tape Reporting for Forms W–4.
• Pub. 1345, Handbook for Electronic Filers of Individual Income Tax Returns (Tax Year 1997). (This is an
annual publication; tax year is subject to change). This publication is available from the IRS Internet web-
site.
• Pub. 1345–A, Handbook for Electronic Filers of Individual Income Tax Returns (Tax Year 1997)
(Supplement). This publication, printed in the late fall, supplements Publication 1345.
• Pub. 1355, the revenue procedure on the requirements for substitute Form 1040–ES.
Where To OrderIf you are mailing your order, the address to use is determined by your location.
If you are located in:
• Alaska, Arizona, California, Colorado, Hawaii, Idaho, Kansas, Montana, Nevada, New Mexico,
Oklahoma, Oregon, Utah, Washington, Wyoming, Guam, Northern Marianas, or American Samoa
• mail your request to:
Western Area Distribution Center
Rancho Cordova, CA95743-0001
• Alabama, Arkansas, Illinois, Indiana, Iowa, Kentucky, Louisiana, Michigan, Minnesota, Mississippi,
Missouri, Nebraska, North Dakota, Ohio, South Dakota, Tennessee, Texas, or Wisconsin
• mail your request to:
Central Area Distribution Center
P.O. Box 8903
Bloomington, IL61702-8903
• Connecticut, Delaware, District of Columbia, Florida, Georgia, Maine, Maryland, Massachusetts, New
Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Vermont,
Virginia, West Virginia, as well as all foreign countries and Puerto Rico
• mail your request to:
Eastern Area Distribution Center
P.O. Box 85074
Richmond, VA23261-5074
• Taxpayers in the Virgin Islands should mail their requests to:
V.I. Bureau of Internal Revenue
9601 Estate Thomas
Charlotte Amalie, St. Thomas, VI 00802
1997–50 I.R.B.31December 15, 1997

Electronic Tax Products
The InternetCopies of tax forms with instructions, publications, and other tax related materials may be obtained via the
Internet. Forms can be downloaded in several file formats (PDF-Portable Document Format, PS - PostScript,
and PCL- Printer Control Language). Those choosing to use PDF files for viewing on personal computer
can also download a free copy of the Adobe Acrobat Reader.
• World Wide Web - http://www.irs.ustreas.gov
• FTP—ftp.irs.ustreas.gov
• Telnet—iris.irs.ustreas.gov
This service is free but time on the Internet is subject to the fees charged by your Internet provider.
Fedworld (BBS)The Internal Revenue Information Systems (IRIS) Bulletin Board can be reached via FedWorld, an aggrega-
tion of federal BBS maintained by the Department of Commerce. IRIS can be reached directly by modem
at (703) 321-8020; FedWorld’s main number is (703) 321-3339. These are toll calls.
Tax FaxThe most frequently requested tax forms, instrucitons, and other information are available through IRS Tax
Fax. Priorto 12/1/97 dial (703) 487-4160. The new numberstarting 12/1/97 will be (703) 368-9694.
Call from your fax machine and follow the voice prompts. Your request will be transmitted directly back to
you. Each call is limited to requesting three items; users pay the telephone line charges.
Report of Print The Service makes available a text file that shows print dates for returns processing forms. It is in three parts:
Dates
• Schedule of anticipated print dates of annual returns,
• Schedule of anticipated print dates of quarterly returns, and
• Schedule of last revision dates for continuous use only forms.
The file name is 0prtdate.txt and is located in the File Transfer Protocol (FTP) library of the Internet at
ftp://ftp.fedworld.gov/pub/irs-utl and in the IRS/UTLlibrary on the IRIS Bulletin Board. The file will be
updated weekly during peak printing periods and as necessary at other times. NOTE: All dates in the FTP
area are reloaded daily and do not reflect the most recent posting of the report. IRIS Bulletin Board shows
the most recent posting by date.
December 15, 1997321997–50 I.R.B.

Federal Tax Forms on CD-ROM
Information About The IRS also offers access to current and prior year tax forms and instructions through its Federal Tax Forms
Federal Tax Forms CD-ROM, Publication 1796. The CD will contain over 600 current year tax forms, instructions, and
CD-ROMTaxpayer Information Publications (TIPs). Also included are prior year forms and instructions from 1991
and some prior year. All necessary software to view the files must be installed from the CD-ROM. Software
for Microsoft Windows 3.x and Macintosh System 7.5 and later is included on the disk. The software will
also run under Windows 95. All products are presented in Adobe’s Portable Document Format (PDF). A
copy of the Adobe Acrobat Reader is on the CD. In addition, the TIPs will be provided in the Standard
Generalized Markup Language (SGML). The cost of the CD is $20 and it will be released in February 1998.
Please reference stock number 648-097-00003-4. Those who order before December 2, 1997 will also
receive the January early release CD containing tax products issued to that point.
System For system requirements and to order the 1996 Federal Tax Forms CD-ROM, Publication 1796 (stock
Requirements and number 648-097-00003-4), contact the Government Printing Office’s (GPO) Superintendent of Documents:
How To Orderthe
Federal Tax Forms • by telephone—(202) 512-1800; select option 1;
CD-ROM
• by fax—(202) 512-2250;
• through GPO’s Federal Bulletin Board—(202) 512-1387; after sign on type “/go irs”;
• through GPO’s World Wide Web site at http://www.gpo.gov/su
_
docs;
• by mail using the order form contained in IRS Publication 1045 (Information for Tax Practitioners); or
• by mail to:
Superintendent of Documents
P.O. Box 371954
Pittsburgh, PA15250-7954.
1997–50 I.R.B.33December 15, 1997

Chapter 5
Requirements for Specific Tax Returns
Tax Returns (Form 1040, 1040A, 1120, Etc.)
Acceptable FormsThere are acceptable computer-generated versions of a tax return form (e.g., Form 1040, 1040A, 1120, etc.,
which requires a signature and that establishes tax liability) that are permitted under the following conditions:
• These substitute returns must be printed on plain white paper.
• Substitute returns and forms must conform to the physical layout of the corresponding Service form
although the typeface may differ. The text should match the text on the officially published form as close-
ly as possible; condensed text and abbreviations will be considered on a case-by-case basis.
Exception: All jurats (perjury statements) must be reproduced verbatim. No text can be added, deleted, or
changed in meaning. It must be readily identifiable as a valid tax return.
• Various computer-graphic print media such as laser printing, dot matrix addressable printing, etc., may be
used to produce the substitute forms.
• The substitute return must be the same exact number of pages, and contain the same line text as the offi-
cial return.
• All computer-generated tax returns MUSTbe submitted for approval prior to their original use. Should
you receive an approval letter for a return and the following year’s return has no changes except the
preprinted year, the latter return is not subject to approval. Exception: If the approval letter specifies a
one-time exception for your return, the next year’s return must be approved.
Computer- The accepted condensed print format version for individual returns is the 1040PC “answer sheet format” tax
Generated return. The approval process for Form 1040PC differs from that of traditional forms. See Chapter 7 for ad-
Condensed Format ditional information.
Versions
Prohibited FormsThe following are prohibited:
• Tax returns (e.g., Forms 1040, etc.) computer-generated on lined orcolor-barred paper.
• Tax returns that differ from the official IRS forms in a manner that makes them not standard or process-
able.
Changes Permitted Certain changes (listed below) are permitted to the graphics of the form without prior approval, but these
to Forms 1040 changes apply only to acceptable preprinted forms. Changes not requiring prior approval are good only for
and 1040Athe annual filing period, which is the current Tax Year. Such changes are valid in subsequent years only if
the official form does not change.
OtherChanges All changes not listed here require prior approval from the Service BEFORE the form may be filed.
Not Listed
December 15, 1997341997–50 I.R.B.

Changes Permitted to Graphics (Forms 1040A and 1040)
AdjustmentsYou may make minor vertical and horizontal spacing adjustments to allow for computer or word-processing
printing. This includes widening the amount columns or tax entry areas so long as the adjustments do not
exceed other provisions stated in revenue procedures. No prior approval is needed for these changes.
Name and Address The horizontal rules and instructions within the name and address area may be removed and the entire area
Arealeft blank; no line or instruction can remain in the area. However, the statement regarding use of the IRS
mail label should be retained. The heavy ruled border (when present) that outlines the name and address area
must not be removed, relocated, expanded, or contracted.
Required FormatWhen the name and address area is left blank, the following format must be used when printing the taxpay-
er’s name and address. Otherwise, unless the taxpayer’s preprinted label is affixed over the information
entered in this area, the lines must be filled in as shown:
• 1st name line (35 characters maximum)
• 2nd name line (35 characters maximum)
• In-care-of name line (35 characters maximum)
• City, State (24 char. max.), one blank char., & ZIP(five char.)
Conventional When there is no in-care-of name line, the name and address will consist of only three lines (single filer) or
Name and Address four lines (joint filer).
DataName and address (joint filer) with no in-care-of name line:
JOHN Z. JONES
MARYI. JONES
1234 ANYWHERE ST., APT111
ANYTOWN, STATE 12321
Example of In- Name and address (single filer) with in-care-of name line:
Care-Of Name Line
JOHN Z. JONES
C/O THOMAS A. JONES
4311 SOMEWHERE AVE.
SAMETOWN, STATE 54345
Social Security The vertical lines separating the format arrangement of the SSN/EIN may be removed. When the vertical
Number(SSN) and lines are removed, the SSN and EIN formats must be 000-00-0000 or 00-0000000, respectively.
Employer
Identification
Number(EIN)
Area
Cents Column• You may remove the vertical rule that separates the dollars from the cents.
• All entries in the amount column should have a decimal point following the whole dollar amounts whether
or not the vertical line that separates the dollars from the cents is present.
• You may omit printing the cents, but all amounts entered on the form must follow a consistent format. You
are strongly urged to round off the figures to whole dollar amounts, following the official return instruc-
tions.
• Where several amounts are summed together, the total should be rounded off subsequent to the addition
(i.e, individual amounts should not be rounded off for computation purposes).
• When printing money amounts, you must use one of the following ten-character formats: (a) 0,000,000.
(b) 000,000.00
• When there is no entry for a line, leave the line blank.
“Paid Preparer’s On all forms, the paid preparer’s information area may not be rearranged or relocated. You may add three
Use Only” Arealines and remove the horizontal rules in the preparer’s address area.
1997–50 I.R.B.35December 15, 1997

Changes Permitted to Form 1040A Graphics
GeneralNo prior approval is needed for the following changes (for use with computer-prepared forms only).
Line 4 of Form This line may be compressed horizontally (to allow for same line entry for the name of the qualifying child)
1040Aby using the following caption: “Head of household; child’s name” (name field).
OtherLinesAny line whose caption takes up two or more vertical lines may be compressed to one line by using con-
tractions, etc., and by removing instructional references.
Page 2 of Form All lines must be present and numbered in the order shown on the official form. These lines may also be
1040Acompressed.
ColorScreeningIt is not necessary to duplicate the colorscreening used on the official form. Asubstitute Form 1040Amay
be printed in black and white only, with no color screening.
OtherChanges No other changes to the Form 1040Agraphics are allowed without prior approval, except for the removal of
Prohibitedinstructions and references to instructions.
December 15, 1997361997–50 I.R.B.

Changes Permitted to Form 1040 Graphics
GeneralNo prior approval is needed for the following changes (for use with computer-prepared forms only).
Line 4 of Form This line may be compressed horizontally (to allow for a larger entry area for the name of the qualifying
1040child) by using the following caption: “Head of household; child’s name” (name field).
Line 6c of Form The vertical lines separating columns (1) through (4) may be removed. The captions may be shortened to
1040allow a one-line caption for each column.
OtherLinesAny other line whose caption takes up two or more vertical lines may be compressed to one line by using
contractions, etc., and by removing instructional references.
Line 21 - OtherThe fill-in portion of this line may be expanded vertically to three lines.
IncomeThe amount entry box must remain a single entry.
Line 39 of FormYou may change the line caption to read “Tax” and computer print the words “Total includes tax from” and
1040 - Taxeither “Form(s) 8814”, or “Form 4972”.
Line 44 of Form You may change the caption to read: “Other credits from Form” and computer-print only the form(s) that
1040apply.
ColorScreeningIt is not necessary to duplicate the color screening used on the official form. Asubstitute Form 1040 may be
printed in black and white only, with no color screening.
OtherChangesNo other changes to the Form 1040 graphics are permitted without prior approval except for the removal of
Prohibitedinstructions and references to instructions.
1997–50 I.R.B.37December 15, 1997

Chapter 6
Format and Content of Substitute Returns
Acceptable Formats for Computer-Generated Forms and Schedules
Exhibits and Use Exhibits of acceptable computer-generated formats for the schedules usually attached to the Form 1040 are
of Acceptable shown in the Exhibits section of this revenue procedure.
Computer-• If your computer-generated forms appear exactly like the exhibits, no prior authorization is needed.
Generated• Those who want to computer-generate forms not shown here may do so, but they must design such forms
Formatsthemselves by following the manner and style of those in the Exhibits section of this revenue procedure,
and by taking care to observe other requirements and conditions stated here. The Service encourages the
submission of all proposed forms covered by this revenue procedure.
InstructionsThe format of each substitute schedule or form must follow the format of the official schedule or form as to
item captions, line references, line numbers, sequence, form arrangement and format, etc. Basically, try to
make the form look like the official one, with readability and consistency being primary factors. You may
use periods and/or other similar special characters to separate the various parts and sections of the form. DO
NOTuse alpha or numeric characters for these purposes. With the exceptions in the paragraph below, all line
numbers and items must be printed even though an amount is not entered on the line.
Line NumbersWhen a line on an official form is designated by a number or a letter, that designation (reference code) must
be used on a substitute form. The reference code must be printed to the left of the corresponding captioned
line and also immediately preceding the data entry field even if there is no reference code immediately pre-
ceding the data entry field on the official form. If an entry field contains multiple lines but shows the line
references only one time on the left and right side of the form, do not use more than the same number of line
references on the substitute return.
In addition, the reference code that is immediately before the data field must either be followed by a period
or enclosed in parentheses. There also must be at least two blank spaces between the period or the right
parenthesis and the first digit of the data field. (See example below.)
Decimal PointsAdecimal point (i.e., a period) should be used for each money amount regardless of whether the amount is
reported in dollars and cents or in whole dollars, or whether or not the vertical line that separates the dollars
from the cents is present. The decimal points must be vertically aligned when possible.
Example:
5 STATE & LOCALINC.
TAX....................5 495.00
6 REALESTATE
TAXES................6
7 PERSONALPROPERTY
TAXES................7 198.00
or
5 STATE & LOCALINC.
TAX...................(5) 495.00
6 REALESTATE
TAXES................(6)
7 PERSONALPROPERTY
TAXES................(7) 198.00
Multiple Page When submitting multiple page forms, send all pages of the form in the same package. If you are not
Formsproducing certain pages, please note that in your cover letter.
December 15, 1997381997–50 I.R.B.

Additional Instructions for All Forms
Use of YourOwn Internal control numbers and identifying symbols of the computer preparer may be shown on the substitute,
Internal Control if the use of such numbers or symbols is acceptable to the taxpayer and the taxpayer’s representative. If
Numbers and shown, such information must not be printed in the top
1
⁄
2
-inch clear area of any form or schedule requiring
Identifying a signature. With the exception of the actual tax return form (i.e., Forms 1040, 1120, 940, 941, 5500 Series,
Symbolsetc.), you may print in the left vertical and bottom left margins. The bottom left margin you may use extends
3
1
⁄
2
inches from the left edge of the form.
Descriptions forDescriptions for captions, lines, etc., appearing on the substitute forms may be limited to one print line by
Captions, Lines, using abbreviations and contractions, and by omitting articles, prepositions, etc. However, sufficient key
etc.words must be retained to permit ready identification of the caption, line, or item.
Derivation of Explanatory detail and/or intermediate calculations for derivation of final line totals may be included on the
Final Totalssubstitute. We prefer that such calculations be submitted in the form of a supporting statement. If interme-
diate calculations are included on the substitute, the line on which they appear may not be numbered or let-
tered. Intermediate calculations may not be printed in the right column. This column is reserved for official
numbered and lettered lines that correspond to the ones on the official form. If a supporting statement is sub-
mitted, intermediate calculations or subtotals may be formatted at the preparer’s option.
Instructional Text Text prescribed for the official form, which is solely instructional in nature, e.g., “Attach this schedule to
Prescribed forthe Form 1040,” “See instructions,” etc., may be omitted from the substitute form.
Official Form
Mixing of Forms Information for more than one schedule or form may not be shown on the same printout page. Both sides of
on the Same Pagethe paper may be printed for multiple page official forms; but it is unacceptable to intermix single page
Prohibited schedules of forms, except for Schedules Aand B (Form 1040), which are printed back to back by the Ser-
vice.
Schedule E can be printed on both sides of the paper, because the official form is multiple page, with page 2
continued on the back. However, do not print Schedule E on the front page and Schedule SE on the back, or
Schedule Aon the front and Form 8615 on the back, etc. Both pages of a substitute form must match the
official form version it represents, except that the back page may be blank if the Service form only contains
the instructions thereon.
Identifying Identify all computer-prepared substitutes clearly; print the form designation
1
⁄
2
0from the top margin and 1
1
⁄
2
0
Computer-from the left margin; print the title centered on the first line of print; and print the taxable year and, where
Prepared applicable, the sequence number on the same line
1
⁄
2
to 10from right margin. Include the taxpayer’s name
Substitutesand SSN on all forms and attachments. Also, print the OMB number as reflected on the official form.
Negative AmountsNegative (or loss) monetary amount entries should be enclosed in brackets, or signed minus, to assist in the
accurate computation and input of form data. On many official forms the Service preprints brackets in select-
ed negative data fields, and these designations should be retained or inserted on affected substitute forms.
1997–50 I.R.B.39December 15, 1997

Chapter 7
OCR Forms
Special Form 1040EZ Optical Character Recognition/Image Character
Recognition (OCR/ICR) Requirements
Form 1040EZ The Form 1040EZ is designed in OCR/ICR format. The IRS has the capability to machine read this form by
Designed in optical character recognition/image character recognition (OCR/ICR) equipment. Form 1040EZ data may
OCR/ICR Formatalso be filed electronically or on a 1040PC format return.
An acceptable substitute OCR/ICR Form 1040EZ must generally be an exact replica of the official OCR/ICR
reproduction proof with respect to layout, content, and required OCR/ICR characteristics.
PaperThe special paper requirements which must be met for the development of a substitute (privately printed)
Requirements OCR/ICR Form 1040EZ include the following:
forOCR/ICR Form
1040EZ
Specific Ink The specific ink requirements which must be met for this form include the following:
Requirements
December 15, 1997401997–50 I.R.B.
PropertyRequirements
Color and quality of paperPaper must be white, OCR/ICR grade bond, with no fluorescent
additives or water marks, and with zero rag content.
Reflectivity of paperMust be 80% or greater.
OpacityThe paper opacity ratio must be 80% or more.
Paper WeightSpecified paper weight is 20 lb. OCR/ICR bond (.0035”).
DirtMust not exceed 10 parts per million.
Finish (smoothness)Must be between 90 and 160 units (Sheffield).
PorosityPaper should have a Gurley reading between 15 and 95.
GlossPaper with shiny or lustrous appearance (glossy) should be
avoided.
SizeForm trim size must be 803110.
PropertyRequirements
Print ColorThe face of the form prints in black and green, the back prints in
black only (70 % screen).
InkGreen ink used must be highly reflective OCR/ICR type, such as
Flint J-27975, or an exact match. Black ink used must be nonre-
flective.
Face RegistrationBlack to green must be .020(plus or minus) both horizontally
and vertically.

TypographyType must be substantially identical in both size and shape with corresponding type on the official form
reproduction proof.
ProperAlignmentTo assure proper alignment and position of handprinted characters representing return lines 1 through 10 tax
and Position of data, they must be handprinted (entered) into the preprinted amount field boxes on the form. A#2 lead
Handprinted wooden pencil, or blue, and/or black ink pen (ball point, fountain, or felt-tipped) is recommended as the
Characterswriting tool that will consistently provide the required stroke width and print contrast on entered characters.
Reading of Reading of handprinted characters requires adherence to the following techniques:
Handprinted
Character• Enter numeric amount digits carefully and clearly. Fill at least 2/3 of the individual character box
Techniquesheight, keeping the character within the box with no overlapping or touching characters. Specific required
digit constraints are shown below.
• When entering “fours”, keep the top open.
• When entering “ones”, do not use serifs.
• When entering “twos”, do not add extra loops.
• All character lines must be connected with no gaps.
Note:All the general and detailed provisions of this revenue procedure apply (in addition to this specific OCR/ICR
Section) to the development of substitute OCR/ICR Forms 1040EZ.
Computer Generated Alternative Returns, 1040PC Format Return
IntroductionThe Internal Revenue Service offers an electronic approach for filing individual income tax returns. The
1040PC Format Return is an alternative to the conventional preprinted tax return. The 1040PC is an answer
sheet return, generated on a personal computer in a three-column format, that prints only tax data that is input
into the software. Tax returns are filed by tax preparers and taxpayers using commercially available tax
preparation software packages that include the 1040PC Format Return print option.
1040PC Format1040PC Format Returns are computer-prepared, printed on plain white paper, signed and mailed to the
Returns designated processing center, and processed like any other conventionally filed return.
1997–50 I.R.B.41December 15, 1997
PropertyRequirements
Face ScreenForms contain a green-screened background equal to a 15% tone
of 110-line screen. Follow registration marks on repro-proof for
screen positioning. Handprinted boxes are included on Page 1 of
the reproduction proof and should be printed as a 50% value of
the recommended OCR/ICR green ink. Inks used for hand-
printed boxes must reflect at least 90% of the background on
which it is printed as measured in the visible range.
Face MarginsApproximately 2/60head from top trimmed edge to screen (
1
⁄
2
0to
black image). 1/60outside from trimmed edges to screen.
Back Margins
1
⁄
2
0head, 5/160foot, and 5/160sides.
Back ScreenBack copy should be screened for 70% tone value.
Specific Ink
Requirements
Continued
Special Form 1040EZ Optical Character Recognition/Image Character
Recognition (OCR/ICR) Requirements,
Continued

Computer Generated Alternative Returns, 1040PC Format Return, Continued
Software Packages Preparers, or taxpayers, must purchase IRS-accepted tax preparation software packages that include the
Must Be Purchased1040PC print option. All that is necessary to participate in 1040PC is a personal computer, accepted soft-
ware, a printer, and plain white paper. The 1040PC is attractive to tax preparers and taxpayers who might
not be interested or capable of electronic filing.
Options Available The Direct Deposit option is available to taxpayers filing 1040PC returns. Balance due returns may also
to Taxpayersbe filed using 1040PC. The payment may be forwarded to the Service Center with a separate payment
voucher(Form 1040–V).
Use of the 1040PC All software used to generate the 1040PC Format Return must be tested and accepted by the Internal
ProgramRevenue Service. Testing will validate 1040PC returns generated by the software and that the software pro-
gram is in compliance with validity and consistency checks in the IRS 1040PC project specifications.
Software developers who wish to participate in the 1040PC program must submit Form 9356, Application
for Software Developers to Participate in the 1040PC Answer Sheet for Individual Income Tax Returns, to
the 1040PC Filing Section.
Acceptance CodeUpon successful completion of software acceptance testing, the software developer will be issued a software
acceptance code that will be embedded into the software and print on every 1040PC return generated. This
is not the same as the Source Code issued by the Substitute Forms Program or the approval number which is
generated for OCR Scannable Application Forms for Employee Plans.
References/ The Internal Revenue Service believes that 1040PC will prove beneficial to taxpayers, tax preparers, and
Information on the the Service. For specific information about the alternative computer-generated 1040PC Format Return,
1040PC Format refer to Publication 1678, Project 1040PC, Handbook for 1040PC Format Preparers and Publication 1630,
ReturnProject 1040PC, Specifications for Software Developers. You may also call (202) 283-0823 or write:
Internal Revenue Service
1040PC Filing Office, T:S:P:S
5000 Ellin Rd
Lanham, MD 20706
Form 941 Requirements—OCR
Form 941 Not The Service is not currently machine reading (scanning) Form 941 or Schedule B (Form 941). Previous
Machine Readinstructions labeled “Special Form 941 Requirements” have been removed from this revenue procedure.
December 15, 1997421997–50 I.R.B.

OCR Scannable Application Forms for Employee Plans
OCR Scannable Forms 4461, 4461–A, 4461–B, 5300, 5303, 5307, 5310–A, and 6406 are OCR scannable documents sub-
Documentsmitted to key district offices for employee plans matters. They may be submitted as computer-generated sub-
stitute forms if the requirements of this section are satisfied.
OCR Data Sheet An OCR data sheet must be generated according to the following requirements:
Requirements• Set at least 1” margin at top, bottom, and both sides.
• Adata element consists of a less than sign (delimiter), information or at least 5 blank spaces, and a greater
than sign (delimiter). All data elements from page one of the application forms listed above must be print-
ed on the OCR data sheet, even if no information is entered between the delimiters.
• Each data element must start at the left margin.
• One line for each data field, except for employer and plan name fields which may be two lines. However,
only one set of delimiters may bracket the field, even if the field is on two lines.
• Each data element must appear on the OCR data sheet in the same sequence as printed on the preprinted
form, reading top to bottom and from left to right.
• Each data field must be sequentially numbered at left commencing with 1. See Notice 90-38 for examples
of the acceptable format.
• The data sheet must be printed on 8
1
⁄
2
” 311” white nonrecycled paper suitable for use with printing equip-
ment and duplicating machines. Aphotocopy is not acceptable. Heavyweight bond paper and onion skin
paper are not acceptable.
• Use 10 pitch type in a standard business font (e.g., courier, elite, pica).
• Add at least two spaces before and after each less than and greater than sign (delimiters).
• Do not fold or staple the OCR data sheet. It may remain loose, or be paper or spring clipped to the appli-
cation.
• At the top of the OCR data sheet add the heading “OCR Data Sheet, File With Application Form (Enter
Form Number), Approval Number” (leave nine spaces for approval number).
Where To Send The OCR data sheet must be submitted for approval to EPOCR Forms Coordinator, E:EP:FC, Room 2232,
OCR Data Sheet 1111 Constitution Ave., NW, Washington, DC 20024.
forApproval
Submission The OCR data sheet must be submitted with a complete word-for-word identical copy of the application form
Requirements except as described below. This copy may be a photocopy or a computer-generated substitute form.
Computer-generated substitute forms may be submitted for approval to the address above. However, except
for the OCR data sheet, such approval is not required if the requirements of this revenue procedure are sat-
isfied. If approval is requested, leave nine spaces for the approval number above the OMB approval num-
ber.
Procedures forThe OCR data sheet replaces the first copy of page 1 of the application which must otherwise be submitted
Filing the OCR in duplicate. To avoid confusion when generating the OCR data sheet, the following wording should be
Data Sheetdeleted from page 1 of the application: “File page 1 of the form in duplicate” and “Both copies of this page
must be signed”. If the Procedural Requirements Checklist is being generated, the following line item state-
ments should be modified as indicated. The question “Has page one been submitted in duplicate” should be
modified to read, “Have you submitted the OCR data sheet?”, and the question “Have you signed both copies
of page 1 of the application?” should be modified to read “Have you signed the application?”
Nonscannable Nonscannable EPapplication forms, e.g., Form(s) 5305 and 5306, may be computer generated. They need
EPApplication not be submitted for approval if the requirements of this revenue procedure are satisfied. If approval is
Formsdesired, these forms may be submitted to the Substitute Forms Coordinator.
1997–50 I.R.B.43December 15, 1997

Chapter 8
Miscellaneous Forms and Programs
Paper Substitutes for Form 1042–S
PaperSubstitutesPaper substitutes for Form 1042–S, Foreign Person’s U.S. Source Income Subject to Withholding, that total-
ly conform to the specifications contained in this procedure may be privately printed without prior approval
from the Internal Revenue Service. Proposed substitutes not conforming to these specifications must be sub-
mitted for consideration.
Timeframe forThe request should be submitted by November 15 of the year prior to the year the form is to be used. This
Submission of is to allow the Service adequate time to respond and the submitter adequate time to make any corrections.
Form 1042–S These requests should contain a copy of the proposed form, the need for the specific deviation(s), and the
number of information returns to be printed.
RevisionsForm 1042–S is subject to annual review and possible change. Withholding agents and form suppliers are
cautioned against overstocking supplies of the privately printed substitutes.
Obtaining CopiesCopies of the official form for the reporting year may be obtained from most Service offices. The Service
provides only cut sheets (no carbon interleaves) of these forms. Continuous fan-fold/pin-fed forms are not
provided.
Instructions ForInstructions for withholding agents:
Withholding Agents
• Only original copies may be filed with the Service. Carbon copies and reproductions are not acceptable.
• The term “Recipient’s U.S. taxpayer identification number” for an individual means the social security
number (SSN) or individual taxpayer identification number (ITIN), consisting of nine digits separated by
hyphens as follows: 000-00-0000. For all other recipients, the term means employer identification num-
ber (EIN). The EIN consists of nine digits separated by hyphen as follows: 00-0000000. The taxpayer
identification number (TIN) must be in one of these formats.
• Withholding agents are requested to type or machine print whenever possible, provide quality data entries
on the forms (that is, use black ribbon and insert data in the middle of blocks well separated from other
printing and guidelines), and take other measures to guarantee a clear, sharp image. Withholding agents
are not required, however, to acquire special equipment solely for the purpose of preparing these forms.
• On corrected returns, the words CORRECTED RETURN must be typed in all capital letters in the top 1/4”,
right of center margin. All required information must be completed on a corrected return since it replaces
and supersedes the information return previously filed.
• Substitute forms prepared in continuous or strip form must be burst and stripped to conform to the size
specified for a single form before they are filed with the Service. The dimensions are found below.
Computer cards are acceptable provided they meet all requirements regarding layout, content, and size.
Substitute Forms
Format
Requirements
December 15, 1997441997–50 I.R.B.
PropertySubstitute Forms Format Requirements
PrintingPrivately printed substitute Forms 1042–S must be exact replicas of
the official forms with respect to layout and contents. Only the
dimensions of the substitute form may differ and the printing of the
Government Printing Office symbol must be deleted. The exact
dimensions are found below.
Line EntriesLine 1 must be present, line 2 may be omitted if it is not needed. If
line 2 is omitted, also omit line 3.
BoxesNone of the boxes can be omitted. Each box (a through h) must be
present and in the exact order. The box for each payment amount
must contain the appropriate caption.

1997–50 I.R.B.45December 15, 1997
PropertySubstitute Forms Format Requirements
Color Quality of Paper• Paper For Copy Amust be white chemical wood bond, or equiva-
lent, 20 pound (basis 17 322-500), plus or minus 5 percent; or off-
set book paper, 50 pound (basis 25 338-500). No optical bright-
eners may be added to the pulp or paper during manufacture. The
paper must consist of principally bleach chemical woodpulp or
recycled printed paper. It also must be suitable sized to accept ink
without feathering.
• Copies B, C, D (for Recipient), and E (For Withholding Agent) are
provided in the official assembly solely for the convenience of the
withholding agent. Withholding agents may choose the format,
design, color and quality of the paper used for these copies.
Color and Quality of InkAll printing must be in a high quality non-gloss black ink. Bar codes
should be free from picks and voids.
TypographyType must be substantially identical in size and shape to correspond-
ing type on the official form. All rules on the document are either 1
point (0.015”) or 3 point (0.045”). Vertical rules must be parallel to
the left edge of the document; horizontal rules, parallel to the top
edge.
Dimensions• The official form is 80 wide 35-1/20deep, exclusive of a
1
⁄
2
snap
stub on the left side of the form. The snap feature is not required on
substitutes.
• The width of a substitute Copy Amust be a minimum of 70and a
maximum of 80, although adherence to the size of the official form
is preferred. If the width of substitute Copy Ais reduced from that
of the official form, the width of each field on the substitute form
must be reduced proportionately. The left margin must be 1/20and
free of all printing other than that shown on the official form.
• The depth of a substitute Copy Amust be a minimum of 5 1/60and
a maximum of 5 1/20.
CarbonsCarbonized forms or “spot carbons” are not permissible. Interleaved
carbons, if used, must be of good quality to preclude smudging and
should be black.
Other CopiesCopies B, C, and D are required to be furnished for the convenience
of payees who are required to send a copy of the form with other fed-
eral and state returns they file. Copy E may be desired as a withhold-
ing agent’s record/copy.
Assembly If all five parts are present, the parts of the assembly shall be arranged
from top to bottom as follows: Copy A(Original) “For Internal
Revenue Service,” Copies B, C, and D “For Recipient,” and Copy E
“For Withholding Agent.”
Paper Substitutes for Form 1042–S, Continued
Substitute Forms
Format
Requirements
Continued

Specifications for Filing Substitute Schedules K–1
Schedule K–1 Prior approval is NOTrequired for a substitute Schedule K–1 that accompanies Form 1065 (for partnership),
Requirementsa Form 1120S (for small business corporation), or a Form 1041 (for fiduciary) when the substitute Schedule
K–1 meets all of the following requirements.
• The Schedule K–1 must contain the payer and recipient’s name, address and SSN/EIN.
• The Schedule K–1 must contain all the items required for use by the taxpayer.
• The line items must be in the same order and arrangement as those on the official form.
• Each taxpayer’s information must be on a separate sheet of paper. Therefore, all continuously printed sub-
stitutes must be separated, by taxpayer, before filing with the Service.
• Schedule K–1 for recipients must have instructions for required line items attached.
• You may be subject to penalties if you file Schedules K–1 with the Service and furnish Schedules K–1 to
partners, shareholders, or beneficiaries that do not conform to the specifications of this revenue procedure.
• The amount of each partner’s shareholder’s or beneficiary’s share of each line item must be shown. The
furnishing of a total amount of each line item and a percentage (or decimal equivalent) to be applied to
such total amount by the partner, shareholder, or beneficiary does not satisfy the law and the specifications
of this revenue procedure.
• If you file Schedules K–1 not conforming to the above specifications, IRS may consider these as not
processable and return them to you to be filed correctly. You may also be subjected to the penalty as men-
tioned
Procedures for Printing Internal Revenue Service Envelopes
Procedures forOrganizations are permitted to produce substitute tax return envelopes. Use of substitute return envelopes
Printing IRS that comply with the requirements set forth in this section will assist in delivery of mail by the U.S. Postal
EnvelopesService and facilitate internal sorting once the envelopes are received at the Internal Revenue Service
Centers.
The permanent five-digit ZIPcodes must be utilized when mailing returns to the prescribed service center:
December 15, 1997461997–50 I.R.B.
Service CenterZip Code
Atlanta, GA39901
Kansas City, MO64999
Austin, TX73301
Philadelphia, PA19255
Memphis, TN37501
Andover, MA05501
Cincinnati, OH45999
Holtsville, NY00501
Ogden, UT84201
Fresno, CA93888

Procedures for Printing Internal Revenue Service Envelopes, Continued
Sorting of The sorting of returns by form type is accomplished by the preprinted bar codes on return envelopes that are
Returns by Form included in each specific type of form or package mailed to the taxpayer. The 32 bit bar code located to the
Typeleft of the address on each envelope identifies the type of form that person is filing and assists the Service in
consolidating like returns for processing. Failure to use the envelopes furnished by the Service results in
additional processing time and effort, and possibly delays the timely deposit of funds, processing of returns,
and issuance of refund checks.
Sorting of Returns The Internal Revenue Service will not furnish or sell bulk quantities of preprinted tax return envelopes to tax-
by ZIP+ 4 or9 payers or tax practitioners. Asuitable alternative has been developed that will accommodate the sorting
Digit ZIPCodesneeds of both the IRS and the U.S. Postal Service. The new alternative is based on the use of ZIP+ 4 or 9
digit ZIPcodes for mailing various types of tax returns to the different area service centers. Essentially, the
Postal Service will utilize the last four digits to identify and sort the various form types into separate groups
for processing. The list of add-on four digits or + 4 portion of the 9 digit ZIPcodes with the related form
designations is provided below and is to become a permanent part of the five digit service center ZIPcodes
shown above.
Add-on FourDigits
or+ 4 Portion of
the 9 Digit
ZIPCodes
ReproducibleThe Reproducible Program that in past years supplied the envelope Reproduction Proofs was abolished
Program IsSeptember 30, 1996. The IRS will no longer provide camera copy to practitioners for the production of
Abolishedenvelopes. Practitioners must develop their own camera copy.
1997–50 I.R.B.47December 15, 1997
Form ZIP+ FOURPackage
XXXXX-0001Reserved
XXXXX-00021040
XXXXX-0005941
XXXXX-0006940
XXXXX-0008943
XXXXX-00111065
XXXXX-00121120
XXXXX-00131120S
XXXXX-00141040EZ
XXXXX-00151040A
XXXXX-00205500-CR
XXXXX-00245500EZ
XXXXX-0027990
XXXXX-00312290
XXXXX-00445500

Procedures for Printing Internal Revenue Service Envelopes, Continued
Guidelines forUse of preparer company names, addresses, and logos is permissible as long as prescribed clear areas are not
Having Envelopes invaded. The government recommends that the envelope stock have an average opacity not less than 89 per-
Preprintedcent and contain a minimum of 50 percent waste paper. Use of carbon-based ink is essential for effective
address and bar code reading. Envelope construction can be of side seam or diagonal seam design. The gov-
ernment recommends that the size of the envelope should be 5-3/40by 90. Continuous pin-fed construction
is not desirable but is permissible if the glued edge is at the top. This requirement is firm because mail open-
ing equipment is designed to slice or otherwise open the bottom edge of each envelope.
Envelopes/The above procedures or guidelines are written for the user having envelopes preprinted. Many practition-
Zip Codesers may not wish to have volumes of the different envelopes with differing ZIPcodes/form designations
preprinted for reasons of low volume, warehousing, waste, etc. In this case, the practitioner can type or
machine print the addresses with the appropriate ZIPcodes to accommodate sorting. If the
requirements/guidelines outlined in this section cannot be met, then use of only the appropriate five digit ser-
vice center ZIPcode is needed.
Procedures for Substitute Form 5471 and Form 5472
Form 5471 and This section covers instructions for producing substitutes for:
Form 5472
• Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations and accom-
panying Schedules J, M, N, and O.
• Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation
Engaged in a U.S. Trade or Business (Under Sections 6038Aand 6038C of the Internal Revenue Code).
Paperand Paper and computer-generated substitutes for Form 5471 and the accompanying Schedules J, M, N, and O,
Computer-and Form 5472 that totally conform to the specifications contained in this procedure may be privately print-
Generated ed, but must have prior approval and are subject to annual review from the Internal Revenue Service.
Substitutes
Official Forms Copies of the official forms for the reporting year may be obtained from most Service offices. The Service
Can Be Obtained provides only cut sheets of these forms. Continuous fan-folded/pin-fed forms are not provided.
From Most Service
Offices
Quality Substitute The Service will accept quality substitute tax forms that are consistent with the official forms they represent
FormsAND that do not have an adverse impact on our processing. Therefore, only those substitute forms that con-
form to, and do not deviate from, the corresponding official forms are acceptable.
Computer- If the substitute returns and schedules meet the guidelines prescribed herein, the Service will (for filing pur-
Prepared Tax poses) accept computer-prepared Forms 5471 and 5472 filled in by a computer, word processing equipment
Formsor similar automated equipment or a combination of computer-prepared/generated and filled in information.
They may be filed separately or attached to individual or business income tax returns.
Format The specifications for Form 5471 and 5472 are as follows:
Arrangement
• The Substitute must follow the design of the official form as to format, arrangement, item caption, line
numbers, line references, and sequence. It must be an exact textual and graphic MIRROR image of the
official form for it to be acceptable.
• The filer must use one of the official ten character amount formats. All entries in the amount column
should have a decimal point following the whole dollar amounts whether or not the vertical line that sep-
arates the dollars from the cents is present. It must follow a consistent format.
December 15, 1997481997–50 I.R.B.

Procedures for Substitute Form 5471 and Form 5472, Continued
Format • The reference code must be printed to the left of the corresponding captioned line and also immediately
Arrangementpreceding the data entry field EVEN if there is no reference code preceding the data entry field on the
Continuedofficial form. The reference code that is immediately before the data field must either be followed by a
period or enclosed in parentheses. There also must be at least two blank spaces between the period or the
right parenthesis and the first digit of the data field.
• The size of the page must be the same as the official form (8
1
⁄
2
03110).
• The acceptable type is “Helvetica”.
• The spacing of the type must be 6 lines/inch vertical, 10 or 12 print characters per inch horizontally.
• A
1
⁄
2
to 1/4” margin must be maintained across the top, bottom, and both sides (exclusive of any pin-fed
holes).
• The substitute form must be of the same number of pages as the official one.
• The preprinted brackets in the money fields should be retained.
• The filer must COMPLETELYfill in all the specified numbers or referenced lines as they appear on the
official form (not just totals) BEFORE attaching any supporting statement.
• Supporting statements are NEVER to be used until the required official form they support are first totally
filled in (completed). Ablank or incomplete form that refers to a supporting statement, in lieu of com-
pleting a tax return, is unacceptable.
• Descriptions for captions, lines, etc., appearing in the substitute forms may be limited to one print line by
using abbreviations and contractions, and by omitting articles, prepostitons, etc. However, sufficient key
words must be retained to permit ready identification of the caption, line, or item.
• Text prescribed for the official form, which is solely instructional in nature, e.g., “Attach this schedule to
Form 1040”, “See instruction”, etc., may be omitted from the form.
Filing InstructionsInstructions for filing substitute forms are the same as for filing official forms.
1997–50 I.R.B.49December 15, 1997

Chapter 9
Alternative Methods of Filing
Forms for Electronically Filed Returns
Electronic Filing Since the 1986 filing season, the Service has been accepting current processing year electronically filed
Programrefund returns. Since tax year 1991, we accept balance due returns that are filed electronically. Electronic
filing is a method by which qualified filers transmit tax return information directly to an IRS Service Center
over telephone lines in the format of the official Internal Revenue Service forms.
Applying forthe Anyone wishing to participate in the Electronic Filing Program for individual income tax returns must sub-
Electronic Filing mit a Form 8633, Application To Participate in the Electronic Filing Program. (Note:For business returns,
Program prospective participants must submit a Form 9041, Application For Electronic/Magnetic Media Filing of
Business and Employee Benefit Plan Returns.)
Mailing
Intructions
Obtaining the The taxpayer signature does not appear on the electronically transmitted tax return and is obtained by the
TaxpayerSignaturequalified electronic filer on Form 8453, U. S. Individual Income Tax Declaration for Electronic Filing, for
Forms 1040, 1040A, and 1040EZ. Form 8453, which serves as a transmittal for the associated non electronic
(paper) documents, such as Forms W–2, W–2G, and 1099–R, is a one-page form and can only be approved
through the Substitute Forms Program in that format. For specific information about electronic filing, refer
to Publication 1345, Handbook for Electronic Filers of Individual Income Tax Returns. (Note:For business
returns, the electronic/magnetic media participants must use the official Form 8453–E, F or P, or an approved
substitute that duplicates the official form in language, format, content, color, and size.)
December 15, 1997501997–50 I.R.B.
If an application is filed for...Mail it to:
Form 8633 for Individual Income Internal Revenue Service
Taxes (regular mail)Andover Service Center
Attn: EFU Acceptance - Stop 983
P.O. Box 4099
Woburn, MA01888-4099
Form 8633 for Individual Income Internal Revenue Service
Taxes (overnight mail)Andover Service Center
Attn: EFU Acceptance -Stop 983
310 Lowell Street
Andover, MA05501
Form 9041 for Forms 1065Internal Revenue Service
Andover Service Center
Attn: EFU Acceptance - Stop 983
P.O. Box 4050
Woburn, MA01888-4050
Form 9041 for Forms 1041Internal Revenue Service
Philadelphia Service Center
Attn: DP115
11601 Roosevelt Blvd.
Philadelphia, PA19154
Form 9041 for Forms 5500,Internal Revenue Service
5500-C/R, and 5500-EZAttn: EFU (EPMF), Stop 261
P.O. Box 30309, A.M.F.
Memphis, TN 38310

Forms for Electronically Filed Returns, Continued
Guidelines forAparticipant in the electronic filing program who wants to develop a substitute form should follow the
Preparing guidelines for preparing substitute forms throughout this publication, and send a sample of the form for
Substitute Forms approval to the Substitute Forms Coordinator at the address in Chapter 2. Forms 8453 prepared using a
in the Electronic font where all IRS-approved wording will not fit on a single page will not be accepted as a substitute form.
Filing ProgramThis applies primarily to dot-matrix printers, although forms prepared similarly on laser and inkjet printers
will also be rejected. PLEASE NOTE:Use of unapproved forms could result in suspension of the partici-
pant from the electronic filing program.
FTD Magnetic Tape Payments
Instructions forPublication 1315 provides the requirements and instructions for reporting agents who sumit Federal Tax
Reporting Agents Deposits (FTD) payment information on magnetic tape. Magnetic tape submissions for FTD can be made
for Forms 940, 941, 942, 943, 720, CT–1, 990–PF, 990–T, 990–C, 1042, 1120, and Schedule A(Form 941)
Backup Withholding.
Instructions forRevenue Procedure 89–49 (Pub. 1374) provides the requirements and instructions for certain banks and fidu-
Banks and ciaries to submit quarterly Form 1041–ES payments on magnetic tape through the Federal Tax Deposit (FTD)
Fiduciaries system.
Effect on Other Documents
Effect on OtherThis revenue procedure supersedes Revenue Procedure 96–48, I.R.B. 1996–48.
Documents
1997–50 I.R.B.51December 15, 1997

December 15, 1997521997–50 I.R.B.
Exhibit 1

1997–50 I.R.B.53December 15, 1997

December 15, 1997541997–50 I.R.B.

1997–50 I.R.B.55December 15, 1997

December 15, 1997561997–50 I.R.B.

1997–50 I.R.B.57December 15, 1997

December 15, 1997581997–50 I.R.B.

1997–50 I.R.B.59December 15, 1997

December 15, 1997601997–50 I.R.B.

1997–50 I.R.B.61December 15, 1997
Foundations Status of Certain
Organizations
Announcement 97–119
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:
Alpha Community Programs, Inc.,
Toledo, OH
Amber and Babe Animal Foundation,
Vermilion, OH
Boys & Girls Club of Camilla-Mitchell
County, Inc., Camilla, GA
Boys and Girls Club of Denton County,
Inc., Lewisville, TX
Boys and Girls Club of Drew County
Arkansas, Inc., Monticello, AR
Boys & Girls Club of Edcouch-Elsa, Inc.,
Edcouch, TX
Boys and Girls Club of Kenosha, Inc.,
Kenosha, WI
Boys and Girls Clubs of the Mississippi
Valley, Inc., Moline, IL
Boys & Girls Club of Santa Cruz County,
Inc., Nogales, AZ
Boys & Girls Club of Toccoa,
Toccoa, GA
Boys Ranch of Nacogdoches, Inc.,
Nacogdoches, TX
Bradford County Families Against Drugs,
Inc., Starke, FL
Brain Injury Resource Network Inc.,
Richmond, VA
Brandcarr Publications Inc.,
Baltimore, MD
Brazos Retreat and Conference Center,
Sugar Land, TX
Breast Implant Information Foundation
Support Group, Oklahoma City, OK
Brecksville-Broadview Heights Schools
Foundation Program, Brecksville, OH
Brentwood Educational Assistance
Foundation, Inc., Springfield, OH
Brentwood Park Resident Management
Corporation, Inc., Jacksonville, FL
Brian Betzler Memorial Scholarship, Inc.,
Mt. Pleasant, MD
Brian Shimer Bobsled Club Inc.,
Naples, FL
Bridgefilm Company Inc., Aspen, CO
Bridgerland Amateur Radio Club Inc.,
Hyde Park, UT
Bridges Ministries Incorporated,
Chicago, IL
Bright Center Inc., Lawrenceburg, IN
Bright Star International Inc., Tulsa, OK
Brighton Township Beaver Soccer
Association, Beaver, PA
Bristlecone Development Corporation,
Olmsted TWP, OH
Britvil Community Food Pantry Inc.,
Oklahoma City, OK
Broken Promises Inc., Marietta, GA
Brookside Park Memorial to Veterans,
Jackson, MO
Brotherhood Community Fund Inc.,
Burlington, IA
Brotherhood Society of St. Anagiri of the
United States, LTD., Monticlair, NJ
Brothers Joined Striders, Austin, TX
Broward Autism Foundation Inc.,
Coral Springs, FL
Broward Coalition for the Homeless Inc.,
Ft. Lauderdale, FL
Brownsburg Junior Soccer League Inc.,
Brownsburg, IN
Bruce Crampton Foundation Inc.,
Vienna, VA
Brunswick Neighborhood Association,
Gary, IN
Buchanan County Olympics Inc.,
St. Joseph, MO
Bucks Co. Center for the Performing
Arts, Doylestown, PA
Build for Michigan, Bloomfield Hills, MI
Bulgarian Orthodox Religious Education
Society, Fort Wayne, IN
Burlington County Friends of the
Environment, Inc., Mt. Holly, NJ
Burns United Support Groups Inc.,
Grosse Pointe Farms, MI
Burt Lake Band of Ottawa and Chippewa
Indians, Inc., Brutus, MI
Business Leadership for Tomorrow,
Miami, FL
Buster L. Brown Memorial Scholarship
Fund, Tyler, TX
Butler County Health Network,
Hamilton, OH
Buy American Inc., Flushing, MI
Delta Epsilon Kappa, Inc. Accounting
Honor Society, Montgomery, AL
Families Unlimited, Bay Minette, AL
Heavenly Vision Economic Development
Corporation, Los Angeles, CA
Krzyzowa Kreisau Foundation,
Rumson, NJ
Lifecare Ministries of Oklahoma, Inc.,
Purcell, OK
Majestic Opera Association Inc.,
New York, NY
Merced Heights Childrens Center,
San Francisco, CA
Minnesota International Corporation,
Excelsior, MN
National Domestic Violence Hotline,
South Orange, NJ
National Policy Center on Blindness,
Sacramento, CA
People to People Foundation for
International Development,
Portage, MI
Randolph County Mayors Committee for
Disabled Persons, Asheboro, NC
396 Straight Street Corp., Patterson, NJ
Traffic Safety Association, Kirkland, WA
Women and Family Counseling Services
Inc., E. Lansing, MI
If an organization listed above submits
information that warrants the renewal of
its classification as a public charity or as a
private operating foundation, the Internal
Revenue Service will issue a ruling or de-
termination letter with the revised classi-
fication as to foundation status. Grantors
and contributors may thereafter rely upon
such ruling or determination letter as pro-
vided in section 1.509(a)–7 of the Income
Tax Regulations. It is not the practice of
the Service to announce such revised clas-
sification of foundation status in the Inter-
nal Revenue Bulletin.
IRS Reassures Nursery Growers
About Farming Exception
Announcement 97–120
This announcement confirms that re-
cently issued proposed regulations specif-
ically permit nursery growers to qualify
Part IV. Items of General Interest

December 15, 1997621997–50 I.R.B.
for the “farming exception” to the uni-
form capitalization rules under § 263Aof
the Internal Revenue Code. In recent
weeks, the Internal Revenue Service has
received numerous form letters from
nursery growers expressing concern that
they would no longer be eligible for the
farming exception as a result of the pro-
posed regulations. However, as Service
and Treasury officials stated at a Novem-
ber 19, 1997, public hearing, these pro-
posed regulations did not change who is
eligible for the farming exception.
Under § 263A(d), enacted by the Tax
Reform Act of 1986, the farming excep-
tion to the uniform capitalization rules is
available for certain plants “produced”
(e.g.,grown) in a farming business. Thus,
the regulations permit nursery growers
using the farming exception to deduct the
costs of seeds and young plants purchased
for further development and cultivation
prior to sale, as well as the costs of grow-
ing the plants. Under the regulations,
nursery growers using the farming excep-
tion are permitted to deduct these costs
even if the plants are partly grown by an-
other person or are grown by the nursery
in temporary containers. Because the
statutory exception only applies to the
costs of plants “produced” in a farming
business, the exception cannot be used for
costs incurred by a taxpayer in activities
in which the taxpayer does not grow
plants, but merely buys and resells plants
grown entirely by others. An example
will be added to the final regulations to il-
lustrate these points.
Employee Plans Compliance
Programs
Announcement 97–121
The Office of the Assistant Commis-
sioner, Employee Plans and Exempt Or-
ganizations of the Internal Revenue Ser-
vice (Service) has established and is
committed to the enhancement of a num-
ber of programs to enable sponsors of
qualified retirement plans and tax-shel-
tered arrangements to maintain the tax-fa-
vored status of these plans without risking
the tax consequences of plan disqualifica-
tion. In addition to the Closing Agree-
ment Program (CAP), for plans under ex-
amination, there is the Administrative
Policy Regarding Self-Correction
(APRSC), the Standardized (SVP) and
regular Voluntary Compliance Resolution
(VCR) Programs, the Tax Sheltered An-
nuity Voluntary Compliance (TVC) Pro-
gram, and the Voluntary Closing Agree-
ment Program (Walk-in CAP).
APRSC is the self-correction program
that encourages employers to monitor
their plans and correct any operational de-
fect or violation they find as soon as pos-
sible. Under APRSC, if defects are dis-
covered and corrected within a short time
following the year of the qualification
error, there is no need to contact the Ser-
vice, no compliance fee and no tax sanc-
tion with respect to the error. APRSC, as
published in January 1997, allows plan
sponsors one year to correct defects with-
out penalty. Based on our experience to
date with this well-received and increas-
ingly used program, the Service is extend-
ing the self-correction period from one to
two years following the year in which the
operational violation occurs. As we con-
tinue to gain experience, we anticipate
that this program will continue to evolve
in order to best facilitate compliance.
The Service is about to issue a field di-
rective that will provide additional insight
on the self-correction program and clarify
certain issues including, for example, tim-
ing for correction. In addition, in early
1998, the Service will publish a consoli-
dated guide to the compliance programs
for plan sponsors and their advisors.
Since all of these programs operate out of
each of the EP/EO Key District Offices as
well as Employee Plans Division in Wash-
ington, communication to achieve consis-
tency and coordination in the programs is
essential. The following information
about how to contact the appropriate of-
fice for information and assistance will be
included in the consolidated guide.
HEADQUARTERS
EPDivisionProjects Branch 2
CP:E:EP:P:2
1111 Constitution, Ave., NW
Washington, DC 20224
Office (202) 622-6214
FAX (202) 622-6199
NORTHEASTREGION
EP/EO DivisionReview Staff
10 Metro Tech Center
625 Fulton St.
Brooklyn, NY11201
Phone (718) 488-2400
FAX (718) 488-2405
SOUTHEASTREGION
EP/EO DivisionTechnical Branch
P.O. Box 13163
Baltimore, MD 21203
Phone (410) 962-3709
FAX (410) 962-0867

Drafting Information
The principal author of this announce-
ment is Carlton Watkins of the Employee
Plans Division. For further information
regarding this announcement, call (202)
622-6074/622-6075 between 1:30 and
3:30 p.m. Eastern time (not a toll-free
number). Mr. Watkins’number is (202)
622-6214 (also not a toll-free number).
Interim Guidance on Roth IRAs
Announcement 97–122
The Service is issuing two model Roth
IRAForms, 5305–R and 5305–RA, for use
by trustees and custodians, respectively,
beginning in 1998. In addition, the follow-
ing interim guidance is provided for proto-
type sponsors and individual contributors
to Roth IRAs established under §408Aof
the Internal Revenue Code in response to
questions from the public.
Background
Individuals are permitted to make de-
ductible and nondeductible contributions
to individual retirement accounts and an-
nuities described in §408(a) or (b), re-
spectively (Traditional IRAs).
The Taxpayer Relief Act of 1997, Pub.
L. 105–34, added §408Acreating Roth
IRAs beginning in 1998. The rules that
apply to Roth IRAs and Traditional IRAs
are generally the same, except as modi-
fied by §408A. ARoth IRAmust be des-
ignated at the time of establishment as a
Roth IRA. Contributions to a Roth IRA
are not deductible and qualified distribu-
tions are not includible in gross income.
Interim Guidance
s
Model forms.—New Form 5305–R,
Roth Individual Retirement Trust Ac-
count, and Form 5305–RA, Roth Individ-
ual Retirement Custodial Account, will
serve as Service-approved model forms
for use by financial institutions to offer
Roth IRAs to their customers. These
forms can be downloaded from the IRS
homepage at www.irs.ustreas.gov.
s
Separate trusts.—Contributions to a
Roth IRAmust be maintained as a separate
trust, custodial account or annuity from
contributions to a Traditional IRA. Sepa-
rate accounting within a single trust, custo-
dial account or annuity is not permitted.
s
Opinion letters.—The Service is not
presently accepting submissions for opin-
ion letters on prototype Roth IRAs, but
will issue procedures in the future for re-
questing such opinion letters.
s
Combined documents.—The Service
will permit a prototype sponsor to com-
bine a Roth IRAand a Traditional IRAin
the same document provided that (1) the
separate trust requirement, above, is satis-
fied and (2) the document, as completed
by the owner, clearly indicates whether it
is to be used as a Traditional IRAor as a
Roth IRA. This must be done in a way
that makes clear that designation as one
type of IRAprecludes its designation as
the other type of IRA.
Transitional Relief
The Service will provide transitional
relief for sponsors of Roth IRAs and their
customers that is similar to the transition
relief provided for users of documents es-
tablishing SIMPLE IRAs that had not
been pre-approved by the Service. See
section 7.01 of Rev. Proc. 97–29, 1997–
24, I.R.B. 9. The Simple IRAtransition
relief was conditioned on the prototype
sponsors who furnished the documents
having them subsequently approved by
the Service and meeting certain other con-
ditions. Transition relief will also be con-
ditioned on the document, or associated
written material, clearly designating the
trust, custodial account or annuity as a
Roth IRAat the time of establishment.
Technical Corrections
The House of Representatives has
passed technical corrections legislation
(H.R. 2645) affecting, among other
things, the taxability of distributions from
Roth IRAs. The legislation, if enacted,
would be effective January 1, 1998. In
light of this pending legislation, prototype
sponsors may wish to consider maintain-
ing, or encouraging individuals to main-
tain, qualified rollover contributions (de-
scribed in §408A(e)) in separate Roth
IRAs from Roth IRAs containing regular
Roth IRAcontributions (described in
§408A(c)(2)).
Paperwork Reduction Act
The collection of information con-
tained in this announcement has been re-
viewed and approved by the Office of
Management and Budget (OMB) in ac-
cordance with the Paperwork Reduction
Act (44 U.S.C. 3507) under control num-
ber 1545–1568.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless the col-
lection of information displays a valid
OMB control number.
1997–50 I.R.B.63December 15, 1997
MIDSTATES REGION
EP/EO DivisionBranch Office (CHI)(1)
230 S. Dearborn
Chicago, IL60604
Phone (312) 886-4700
FAX (312) 886-3275
WESTERN REGION
EP/EO DivisionTechnical Branch
McCaslin Industrial Park
2 Cupania Circle
Monterey Park, CA91755
Phone (213) 725-7164
FAX (213) 725-1442

The collection of information in this
announcement is in the section headed
“Interim Guidance.” This information is
required to comply with §302 of the Tax-
payer Relief Act of 1997 in order to meet
the statutory requirements for establishing
a Roth IRA. The collection of informa-
tion is required to obtain a benefit. The
likely respondents are businesses or other
for-profit institutions, and not-for-profit
institutions.
The estimated total annual reporting
burden is 8,000 hours.
The estimated annual burden per re-
spondent varies from 0.5 hours to 4 hours,
depending on individual circumstances,
with an estimated average of 2 hours. The
estimated number of respondents is 4,000.
The estimated annual frequency of re-
sponses is one per respondent.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mater-
ial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.
December 15, 1997641997–50 I.R.B.

1997–50 I.R.B.65December 15, 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

December 15, 1997661997–50 I.R.B.
Numerical Finding List
1
Bulletins 1997–27 through 1997–49
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
97–99, 1997–40 I.R.B. 7
97–100, 1997–40 I.R.B. 8
97–101, 1997–41 I.R.B. 13
97–102, 1997–41 I.R.B. 15
97–103, 1997–41 I.R.B. 16
97–104, 1997–42 I.R.B. 39
97–105, 1997–42 I.R.B. 40
97–106, 1997–45 I.R.B. 11
97–107, 1997–43 I.R.B. 25
97–108, 1997–43 I.R.B. 25
97–109, 1997–45 I.R.B. 12
97–110, 1997–45 I.R.B. 14
97–111, 1997–47 I.R.B. 15
97–112, 1997–46 I.R.B. 20
97–113, 1997–46 I.R.B.21
97–114, 1997–46 I.R.B. 21
97–115, 1997–47 I.R.B. 17
97–116, 1997–48 I.R.B. 25
97–117, 1997–49 I.R.B. 12
97–118, 1997–49 I.R.B. 13
Court Decisions:
2061, 1997–31 I.R.B. 5
2062, 1997–32 I.R.B. 8
Delegation Orders:
97 (Rev. 34), 1997–41 I.R.B. 14
172 (Rev. 5), 1997–28 I.R.B. 6
Notices:
97–37, 1997–27 I.R.B. 4
Notices–Continued
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
97–53, 1997–40 I.R.B. 6
97–54, 1997–41 I.R.B. 7
97–55, 1997–40 I.R.B. 6
97–56, 1997–43 I.R.B. 19
97–57, 1997–43 I.R.B. 19
97–58, 1997–45 I.R.B. 7
97–59, 1997–45 I.R.B. 7
97–60, 1997–46 I.R.B.8
97–61, 1997–48 I.R.B.8
97–62, 1997–49 I.R.B.8
97–63, 1997–47 I.R.B. 6
97–64, 1997–47 I.R.B. 7
97–66, 1997–48 I.R.B.8
97–67, 1997–48 I.R.B.10
97–68, 1997–48 I.R.B. 11
97–69, 1997–48 I.R.B. 12
97–70, 1997–49 I.R.B.9
97–71, 1997–49 I.R.B.9
Railroad Retirement Quarterly Rate:
1997–28 I.R.B. 5
Public Laws
105–35, 1997–43 I.R.B. 13
Proposed Regulations:
REG–104893–97, 1997–29 I.R.B. 13
REG–105160–97, 1997–37 I.R.B. 22
REG–105162–97, 1997–48 I.R.B. 13
REG–106043–97, 1997–37 I.R.B. 24
REG–107644–97, 1997–32 I.R.B. 24
REG–107872–97, 1997–47 I.R.B. 11
REG–114000–97, 1997–47 I.R.B. 13
REG–208151–91, 1997–38 I.R.B. 21
REG–246250–96, 1997–42 I.R.B. 30
REG–251985–96, 1997–48 I.R.B. 18
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
97–44, 1997–41 I.R.B. 8
Revenue Procedures–Continued
97–45, 1997–41 I.R.B. 10
97–46, 1997–42 I.R.B. 10
97–47, 1997–42 I.R.B. 19
97–48, 1997–43 I.R.B. 19
97–49, 1997–43 I.R.B. 22
97–50, 1997–45 I.R.B. 8
97–51, 1997–45 I.R.B. 9
97–52, 1997–46 I.R.B.17
97–53, 1997–47 I.R.B.10
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
97–41, 1997–40 I.R.B. 4
97–42, 1997–41 I.R.B. 4
97–43, 1997–42 I.R.B. 8
97–44, 1997–45 I.R.B. 5
97–45, 1997–46 I.R.B.4
97–46, 1997–46 I.R.B.7
97–47, 1997–47 I.R.B.4
97–48, 1997–49 I.R.B.5
97–49, 1997–48 I.R.B. 4
97–50, 1997–49 I.R.B.5
97–51, 1997–49 I.R.B. 4
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
8731, 1997–42 I.R.B. 6
8732, 1997–42 I.R.B. 4
8733, 1997–43 I.R.B. 8
8734, 1997–44 I.R.B. 5
8735, 1997–43 I.R.B. 4
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.

1997–50 I.R.B.67December 15, 1997
Finding List of Current Action on
Previously Published Items
1
Bulletins 1997–27 through 1997–49
*Denotes entry since last publication
Notices:
97–9
Modified by
97–70, 1997–49 I.R.B. 9
Revenue Procedures:
82–36
Modified and superseded by
97–49, 1997–43 I.R.B. 22
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:
73–67
Revoked by
97–46, 1997–46 I.R.B. 7
75–7
Revoked by
97–48, 1997–49 I.R.B. 5
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.

December 15, 1997681997–50 I.R.B.
Notes

1997–50 I.R.B.69December 15, 1997
Notes

December 15, 1997701997–50 I.R.B.
Notes

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