Internal Revenue Bulletin 2002-32 (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.

HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 2002–49, page 288.
Spin offs. Guidance is provided under section 355(b) of the
Code regarding the active trade or business requirement. Rev.
Rul. 92–17 amplified.
T.D. 9003, page 294.
Final regulations under section 6015 of the Code provide guid-
ance to married individuals filing joint returns who seek relief
from joint and several liability. Section 6015 was added by the
Internal Revenue Service Restructuring and Reform Act of
1998 to replace former section 6013(e) by providing new and
expanded means for a spouse to obtain relief from joint and
several liability.
Notice 2002–56, page 319.
This document notifies states and other issuers of qualified
exempt facility bonds described in section 142(a)(13) of the
Code of the proper population figures to be used for calculat-
ing the limitation under section 142(k)(5) of the annual aggre-
gate face amount of tax-exempt bonds described in section
142(a)(13).
Announcement 2002–71, page 323.
This document contains corrections to final regulations (T.D.
8999, 2002–28 I.R.B. 78) under section 894 relating to the
eligibility for treaty benefits of items of income paid by domes-
tic entities.
EMPLOYEE PLANS
T.D. 9005, page 290.
Final regulations under section 401 of the Code provide guid-
ance relating to the return of employer contributions or with-
drawal liability payments made to multiemployer plans due to a
mistake of fact or law.
T.D. 9006, page 315.
Final regulations under section 7476 of the Code set forth stan-
dards by which a plan sponsor may satisfy the notice to inter-
ested parties requirement.
EXEMPT ORGANIZATIONS
Announcement 2002–72, page 323.
A list is provided of organizations now classified as private
foundations.
GIFT TAX
REG–123345–01, page 321.
Proposed regulations under section 2519 of the Code relate to
the amount treated as a transfer under section 2519 when
there is a right to recover gift tax under section 2207A(b) of the
Code and the related gift tax consequences if the right to
recover the gift tax is not exercised. A public hearing is sched-
uled for October 15, 2002.
(Continued on the next page).
Finding Lists begin on page ii.
Bulletin No. 2002–32
August 12, 2002

EXCISE TAX
Rev. Rul. 2002–50, page 292.
Tax-free sale of articles for use by the purchaser as sup-
plies for vessels or aircraft. For purposes of section 4092,
an aircraft that flies a person for hire between the United States
and a foreign country is actually engaged in foreign trade within
the meaning of section 4221(d)(3). That aircraft is also actually
engaged in foreign trade when flying that person from a city in
the United States to another city in the United States as part of
the transportation between the United States and the foreign
country. Rev. Rul. 69–259 modified and superseded.
ADMINISTRATIVE
T.D. 9003, page 294.
Final regulations under section 6015 of the Code provide guid-
ance to married individuals filing joint returns who seek relief
from joint and several liability. Section 6015 was added by the
Internal Revenue Service Restructuring and Reform Act of
1998 to replace former section 6013(e) by providing new and
expanded means for a spouse to obtain relief from joint and
several liability.
August 12, 20022002–32 I.R.B.

The IRS Mission
Provide America’s taxpayers top quality service by helping
them understand and meet their tax responsibilities and by
applying the tax law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are consolidated semiannually into Cumulative Bulle-
tins, 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 Bul-
letin. All published rulings apply retroactively unless otherwise
indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal 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 rev-
enue ruling. In those based on positions taken in rulings to tax-
payers or technical advice to Service field offices, identifying
details and information of a confidential nature are deleted to
prevent unwarranted invasions of privacy and to comply with
statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion and Related Committee Reports.
Part III.—Administrative, Procedural, and
Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The first Bulletin for each month includes a cumulative index for
the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the first Bulletin of the succeeding semiannual
period, respectively.
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.
2002–32 I.R.B.August 12, 2002

This page is reserved for missing child Mercedes Rodriguez.
August 12, 20022002–32 I.R.B.

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 103.—Interest on
State and Local Bonds
The Service notifies states and other issuers of
qualified exempt facility bonds described in
§ 142(a)(13) of the Internal Revenue Code of the
proper population figures to be used for calculating
the limitation under § 142(k)(5) on the annual
aggregate face amount of tax-exempt bonds
described in § 142(a)(13). See Notice 2002–56,
page 319.
Section 142(a)(13).—Exempt
Facility Bond—Qualified
Public Educational Facilities
The Service notifies states and other issuers of
qualified exempt facility bonds described in
§ 142(a)(13) of the Internal Revenue Code of the
proper population figures to be used for calculating
the limitation under § 142(k)(5) on the annual
aggregate face amount of tax-exempt bonds
described in § 142(a)(13). See Notice 2002–56,
page 319.
Section 142(k)(5).—Annual
Aggregate Face Amount of
Tax-Exempt Financing
The Service notifies states and other issuers of
qualified exempt facility bonds described in
§ 142(a)(13) of the Internal Revenue Code of the
proper population figures to be used for calculating
the limitation under § 142(k)(5) on the annual
aggregate face amount of tax-exempt bonds
described in § 142(a)(13). See Notice 2002–56,
page 319.
Section 355.—Distribution of
Stock and Securities of a
Controlled Corporation
26 CFR 1.355–3: Active conduct of a trade or busi-
ness.
Spin-offs. Guidance is provided under
section 355(b) of the Code regarding the
active trade or business requirement.
Rev. Rul. 2002–49
ISSUE
Under the facts described below, is the
5-year active conduct of a trade or busi-
ness requirement of § 355(b) of the Inter-
nal Revenue Code satisfied when, during
the 5-year period prior to a transaction
that otherwise meets the requirements of
§ 355, a corporation holding a member-
ship interest in a member-managed lim-
ited liability company purchases the
remaining interests in that limited liability
company, contributes a portion of the
business to a newly formed controlled
subsidiary, and then distributes the stock
of the controlled subsidiary to its share-
holders?
FACTS
Situation 1. As of the first day of Year
1, LLC is a domestic member-managed
limited liability company that has been
classified as a partnership for Federal tax
purposes since its date of organization. As
of that day, LLC owns several commer-
cial office buildings that it leases to unre-
lated third parties. On the first day of
Year 1, D, a corporation, owns a 20 per-
cent profit/loss and capital interest in
LLC (the Interest). At that time, D has no
business assets other than the Interest. In
addition, at that time, X, a corporation,
owns a 20 percent profit/loss and capital
interest in LLC and one or more persons
hold the remaining 60 percent profit/loss
and capital interests of LLC.
LLC periodically repaints and refur-
bishes its existing properties. In addition,
LLC continuously seeks to acquire addi-
tional properties to expand its rental busi-
ness. When a property is located, LLC
negotiates its purchase and financing and
determines whether renovations or alter-
ations are necessary to make the building
suitable for rental.
Pursuant to the terms of its leases,
LLC provides day-to-day upkeep and
maintenance services for its office build-
ings. These services include trash collec-
tion, ground maintenance, electrical and
plumbing repair, and insect control. Addi-
tionally, LLC advertises for new tenants,
verifies information contained in lease
applications, negotiates leases, handles
tenant complaints, prepares eviction
notices and warnings for delinquent ten-
ants, collects rent, and pays all expenses,
including gas, water, sewage, electricity
and insurance for the office buildings.
LLC also maintains financial and
accounting records to reflect income and
expenses relating to each of its rental
properties as well as LLC’s general
expenses.
Throughout the period during which D
owns the Interest, D and X jointly man-
age LLC and have equal control over the
management of LLC. D’s and X’s offic-
ers perform active and substantial man-
agement functions with respect to LLC’s
activities, including the decision-making
regarding significant business decisions
of LLC (e.g., decisions with respect to
significant renovations of properties, the
purchase and sale of properties, and sig-
nificant financings and refinancings).
Neither D nor X, however, can make a
significant business decision without the
consent of the other. In addition, D’s and
X’s officers regularly participate in the
overall supervision, direction, and control
of LLC’s employees in their performance
of LLC’s operational functions. None of
the members of LLC other than D and X
participate in the management or opera-
tional functions of LLC.
On the first day of Year 3, D purchases
all of the remaining interests in LLC (the
Remaining Interests) from the other
members of LLC. At all times prior to the
first day of Year 3, the other members of
LLC are unrelated to D, X, or their
respective shareholders. In connection
with D’s purchase of the Remaining Inter-
ests, LLC becomes an entity disregarded
as an entity separate from D. After the
purchase of the Remaining Interests, D’s
officers continue to conduct the activities
and functions with respect to LLC that
they and X’s officers conducted prior to
D’s purchase of the Remaining Interests
and LLC’s employees continue to con-
duct the activities and functions with
respect to LLC that they conducted prior
to D’s purchase of the Remaining Inter-
ests.
On the first day of Year 6, for a valid
business purpose, when D owns no busi-
ness assets other than those that it owns
through LLC, D causes LLC to distribute
to D rental properties that constitute 40
percent of the value of LLC’s rental prop-
erties. D then transfers those properties to
C, a newly formed, wholly owned subsid-
iary of D, and distributes the stock of C
2002–32 I.R.B.288August 12, 2002

pro ratato D’s shareholders in a transac-
tion intended to meet the requirements of
§355. After the distribution, D and LLC,
together, and C will conduct the same
activities and functions with respect to the
portions of the business that they each
own after the distribution that D and LLC
conducted as of the beginning of Year 1.
Assume that, except for the issue of
whether the distribution satisfies the
requirements of§355(b), D’s distribution
of C stock otherwise satisfies all of the
requirements of§355.
Situation 2. The facts are the same as
in Situation 1 except that, instead of own-
ing the Interest on the first day of Year 1,
on the first day of Year 2, D acquires the
Interest by contributing appreciated secu-
rities to LLC in a transaction described in
§721.
LAW
Section 355(a) provides that, under
certain circumstances, a corporation may
distribute stock and securities in a corpo-
ration it controls to its shareholders and
security holders in a transaction that is
nontaxable to such shareholders and secu-
rity holders. Sections 355(a)(1)(C) and
355(b)(1) require that both the distribut-
ing and controlled corporations be
engaged, immediately after the distribu-
tion, in the active conduct of a trade or
business. Section 355(b)(2)(B) requires
that such trade or business have been
actively conducted throughout the 5-year
period ending on the date of the distribu-
tion. In addition, under§355(b)(2)(C),
that trade or business must not have been
acquired in a transaction in which gain or
loss was recognized, in whole or in part,
within the 5-year period.
Section 1.355–3(b)(2)(iii) of the
Income Tax Regulations provides, in part,
that the determination of whether a trade
or business is actively conducted will be
made from all of the facts and circum-
stances. Generally, the corporation is
required itself to perform active and sub-
stantial management and operational
functions. Generally, activities performed
by the corporation itself do not include
activities performed by independent con-
tractors. A corporation, however, may sat-
isfy the active conduct of a trade or busi-
ness requirement through the activities
that it performs itself even though some
of its activities are performed by others.
Under§1.355–3(b)(2)(iv), however, the
active conduct of a trade or business does
not include the ownership and operation
(including leasing) of real or personal
property used in a trade or business
unless the owner performs significant ser-
vices with respect to the operation and
management of the property.
Section 1.355–3(b)(3)(ii) provides that
the fact that a trade or business underwent
change during the 5-year period preced-
ing the distribution (for example, by the
addition of new or the dropping of old
products, changes in production capacity,
and the like) shall be disregarded, pro-
vided that the changes are not of such a
character as to constitute the acquisition
of a new or different business.
Section 721(a) provides that no gain or
loss shall be recognized to a partnership
or to any of its partners in the case of a
contribution of property to the partnership
in exchange for an interest in the partner-
ship.
Rev. Rul. 92–17, 1992–1 C.B. 142,
considers whether D, a corporate general
partner in a limited partnership, is
engaged in the active conduct of a trade
or business within the meaning of
§355(b). For more than 5 years, D owned
a 20 percent interest in LP, a limited part-
nership that owned several commercial
office buildings leased to unrelated third
parties. D’s officers performed active and
substantial management functions with
respect to LP, including the significant
business decision-making of the partner-
ship, and regularly participated in the
overall supervision, direction, and control
of LP’s employees in operating LP’s
rental business. Rev. Rul. 92–17 con-
cludes that D is engaged in the active
conduct of trade or business within the
meaning of§355(b).
Rev. Rul. 99–6, 1999–1 C.B. 432, con-
siders the Federal income tax conse-
quences of one person’s purchase of own-
ership interests in a limited liability
company that is classified as a partnership
for Federal tax purposes. In Situation 1 of
Rev. Rul. 99–6, A and B are equal part-
ners in AB, a domestic limited liability
company. A sells A’s entire interest in AB
to B. After the sale, the business is con-
tinued by the limited liability company,
which then is owned solely by B. After
the sale, no entity classification election
is made under§301.7701–3(c) of the
Procedure and Administration Regula-
tions to treat the limited liability company
as an association for Federal tax pur-
poses. Rev. Rul. 99–6 holds, in part, that,
when B purchases A’s entire interest in
AB, the AB partnership terminates. For
purposes of determining the treatment of
B, AB is deemed to make a liquidating
distribution of all its assets to A and B,
and, following this distribution, B is
treated as acquiring from A the assets
deemed to have been distributed to A in
liquidation of A’s partnership interest.
ANALYSIS
Situation 1. In order to satisfy the
active conduct of a trade or business
requirement of§355(b), each of D and C
must be engaged in the active conduct of
a trade or business immediately after the
distribution in Year 6. In this case, imme-
diately after the distribution, each of D
and C is engaged in commercial office
leasing activities that constitute the con-
duct of an active trade or business.See
§1.355–3(b)(2)(iv).
Under§355(b)(2)(B) and (C), this
trade or business must have been actively
conducted throughout the 5-year period
ending on the date of the distribution, and
must not have been acquired within that
5-year period in a transaction in which
gain or loss was recognized in whole or
in part. During Years 1 and 2, while D
owns the Interest, D conducts active and
substantial management functions with
respect to LLC, and regularly participates
in the overall supervision, direction, and
control of LLC’s employees. Accordingly,
consistent with Rev. Rul. 92–17, for pur-
poses of§355(b), during that period, D is
engaged in the active conduct of the com-
mercial office leasing business.
The commercial office leasing busi-
ness actively conducted by D during
Years 3, 4, and 5 is the same commercial
office leasing business actively conducted
by D in Years 1 and 2. Therefore, D’s
purchase of the Remaining Interests on
the first day of Year 3, which causes the
LLC to become disregarded as an entity
separate from D, does not result in the
acquisition of a new or different business.
See§1.355–3(b)(3)(ii). Because this
transaction does not result in the acquisi-
tion of a new or different business, the
requirements of§355(b)(2)(B) and (C)
August 12, 20022892002–32 I.R.B.

are satisfied even though gain or loss is
recognized in the transaction.
Because immediately after the distri-
bution of C stock to D’s shareholders
each of D and C will be engaged in the
active conduct of a trade or business that
is treated as having been actively con-
ducted throughout the 5-year period end-
ing on the date of the distribution and that
was not acquired during that period in a
transaction prohibited by§355(b)(2)(C),
the distribution satisfies the 5-year active
conduct of a trade or business require-
ment of§355(b).
Situation 2. As in Situation 1, for pur-
poses of§355(b), prior to D’s purchase
of the Remaining Interests, while D owns
the Interest, conducts active and substan-
tial management functions with respect to
LLC, and regularly participates in the
overall supervision, direction, and control
of LLC’s employees, D is engaged in the
active conduct of the commercial office
leasing business. In addition, as in Situa-
tion 1, D is not treated as acquiring a new
or different trade or business as a result of
purchasing the Remaining Interests on the
first day of Year 3.
Unlike in Situation 1, however, D will
be treated as having acquired such trade
or business in a transaction in which gain
or loss was recognized within the 5-year
pre-distribution period in violation of
§355(b)(2)(C). Although D’s acquisition
of the Interest on the first day of Year 2
was a transaction in which no gain or loss
was recognized (under§721(a)), had D
instead directly acquired the trade or busi-
ness that the Interest represents in
exchange for the property D contributed
to LLC, such exchange would have been
a transaction in which gain or loss was
recognized. For purposes of§355(b),
therefore, D will be treated as acquiring
the trade or business attributable to the
Interest on the first day of Year 2 in a
transaction in which gain or loss was rec-
ognized.
Because both immediately before and
immediately after the distribution D and
C are engaged in a trade or business that
is treated as having been acquired in a
transaction in which gain or loss was rec-
ognized within the 5-year pre-distribution
period, the distribution violates the prohi-
bition of§355(b)(2)(C). Accordingly, the
distribution does not satisfy the 5-year
active conduct of a trade or business
requirement of§355(b).
EFFECT ON OTHER REVENUE
RULING(S)
Rev. Rul. 92–17 is amplified.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Russell P. Subin of the Office of
Associate Chief Counsel (Corporate). For
further information regarding this revenue
ruling, contact Mr. Subin at (202) 622–
7790 (not a toll-free call).
Section 401.—Qualified
Pension, Profit-Sharing, and
Stock Bonus Plans
26 CFR 1.401(a)(2)–1: Refund of mistaken
employer contributions and withdrawal liability
payments to multiemployer plans.
T.D. 9005
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Refund of Mistaken
Contributions and Withdrawal
Liability Payments
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document provides
final regulations relating to the return of
employer contributions or withdrawal
liability payments made to multiemployer
plans due to a mistake of fact or law.
Changes to the applicable laws were
made by the Multiemployer Pension Plan
Amendments Act of 1980 (MPPAA). The
final regulations provide guidance to the
public in complying with MPPAA. The
regulations affect multiemployer plans
which receive mistaken contributions or
withdrawal liability payments.
EFFECTIVE DATE: These regulations
are effective July 22, 2002.
FOR FURTHER INFORMATION CON-
TACT: John T. Ricotta at (202) 622–6060
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Section 401(a)(2) generally requires a
trust instrument forming part of a pen-
sion, profit sharing or stock bonus plan to
prohibit the diversion of corpus or income
for purposes other than the exclusive ben-
efit of employees or their beneficiaries.
Section 403(c)(1) of the Employee
Retirement Income Security Act of 1974
(ERISA), Public Law 93–406 (88 Stat.
829), contains a parallel rule that prohib-
its the assets of a plan from inuring to the
benefit of any employer and that requires
the plan assets be held for the exclusive
purposes of providing benefits to plan
participants and their beneficiaries and
defraying reasonable expenses of admin-
istering the plan. Under these rules,
employer contributions to qualified plans
were generally not refundable. However,
a contribution made due to a mistake of
fact was permitted to be returned to the
employer within one year after the date of
the contribution.
The Multiemployer Pension Plan
Amendments Act of 1980 (Public Law
96–364, 410(b) (94 Stat. 1208, 1308))
amended section 401(a)(2) of the Internal
Revenue Code to reflect Congressional
concern that the requirements of prior law
for the return of an employer contribution
were too narrow in the multiemployer
context. Under section 401(a)(2), as
amended, a contribution made to a multi-
employer plan due to a mistake of fact or
law may be returned within six months
after the date that the plan administrator
determines that it was made in error. Sec-
tion 401(a)(2) was also amended by
MPPAA to permit the return of any with-
drawal liability payment determined to be
an overpayment made due to a mistake of
fact or law within six months after that
determination.
The effective date of section 410(b) of
MPPAA was January 1, 1975, except that
in the case of any determination by a plan
administrator made before September 26,
1980 (the date of enactment), that a past
contribution was made by mistake of fact
or law was deemed to have been
2002–32 I.R.B.290August 12, 2002

made on the date of enactment. Accord-
ingly, the period of time for refund of
these contributions was 6 months from
the date of enactment.
The IRS published a notice of pro-
posed rulemaking (EE–133–80, 1983–1
C.B. 821) in theFederal Registeron
March 11, 1983, (48 FR 10374) to amend
the Income Tax Regulations (26 CFR part
1) under section 401(a)(2) of the Internal
Revenue Code of 1954 (Code). At that
time, the public was invited to comment
in writing, or to make a request for public
hearing, upon issues addressed in the pro-
posals. Eight comments were received,
but no public hearing was requested.
The proposed amendment to the regu-
lationswouldhavebeennumbered
§1.401(a)–3. However, in the intervening
period of time the IRS has changed its
system of numbering regulations to more
closely align the regulation number to the
number of the underlying Code section.
Accordingly, the regulations are being
finalized as§1.401(a)(2)–1.
After consideration of all comments,
the proposed provisions are revised and
adopted as final regulations under this
Treasury decision.
Explanation of Provisions
In general, the final regulations follow
the proposed regulations with minor
changes described below.
1.Amount to be refunded. Several
comments concerned the amount to be
refunded to the employer when a determi-
nation of mistake is made by the plan
administrator. Questions were raised
relating to the earnings and losses attrib-
utable to the excess contribution or over-
payment of withdrawal liability, and the
Pension Benefit Guaranty Corporation
rules regarding the refund of overpay-
ments of withdrawal liability.
These final regulations provide a nar-
row exception to the general rule that
trust assets not be used for, or diverted to,
purposes other than the exclusive benefit
of employees. That the employer may,
under limited circumstances, receive a
refund of a mistaken contribution does
not detract from the primary purpose of
ERISA to protect individual pension
rights and maintain the solvency and
integrity of pension funds.
In general, any earnings attributable to
an excess contribution shall not be
returned to the employer, and any losses
attributable to an excess contribution
must reduce the amount to be returned to
the employer. As a further limitation on
the return of contributions, the final regu-
lations provide that a refund of an excess
contribution must in no event reduce a
participant’s account balance in a defined
contribution plan to an amount less than
that amount which would properly have
been in that participant’s account had no
mistake occurred.
In the case of an overpayment of with-
drawal liability, established by the plan
sponsor under section 4219(c)(2) of
ERISA, the plan will not fail to satisfy
section 401(a)(2) if, in accordance with
Pension Benefit Guaranty Corporation
regulations regarding the overpayment of
withdrawal liability, the overpayment
with interest is returned to the employer.
(See 29 CFR Ch. XL 4219.31(d)).
2.Amount to be included in income.In
general, the amount of the excess contri-
bution or overpayment must be included
in gross income by the employer if the
excess contribution or overpayment
resulted in a tax benefit in a prior year.
Any interest credited or paid on the
refund of mistaken withdrawal liability
payments must also be included in gross
income by the employer.
Effective Date
These regulations apply for refunds
made after July 22, 2002. However, plans
and employers may apply the rules of
these regulations to refunds made prior to
that date.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assess-
ment is not required. It also has been
determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regula-
tions, and because the preceding proposed
rule was issued prior to March 29, 1996,
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply.
Drafting Information
The principal author of these regula-
tions is John T. Ricotta, Office of the
Division Counsel/ Associate Chief Coun-
sel (Tax Exempt/Government Entities).
However, other personnel from the Ser-
vice and Treasury Department partici-
pated in their development.
*****
Adoption of amendments to the
regulations
Accordingly, 26 CFR part 1 is
amended as follows:
PA RT 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding an entry to
read in part as follows:
Authority: 26 U.S.C. 7805***
§1.401(a)(2)–1 also issued under Mul-
tiemployer Pension Plan Amendments
Act, Pub. L. 96–364, 410, (94 Stat. 1208,
1308) (1980).***
Par. 2. Section 1.401(a)(2)–1 is added
to read as follows:
§1.401(a)(2)–1 Refund of mistaken
employer contributions and withdrawal
liability payments to multiemployer
plans.
(a)Introduction—(1)In general. Sec-
tion 401(a)(2) provides that a contribution
or payment of withdrawal liability made
to a multiemployer plan due to a mistake
of fact or mistake of law can be returned
to the employer under certain conditions.
This section specifies the conditions
under which an employer’s contribution
or payment may be returned.
(2)Effective dates. This section applies
to refunds made after July 22, 2002.
(b)Conditionsforreturnof
contribution—(1)In general. In the case
of a contribution or a withdrawal liability
payment to a multiemployer plan which
was made because of a mistake of fact or
a mistake of law, the plan will not violate
section 401(a)(2) merely because the con-
tribution or payment is returned within
six months after the date on which the
plan administrator determines that the
contribution or payment was the result of
a mistake of fact or law. The contribution
or payment is considered as returned
August 12, 20022912002–32 I.R.B.

within the required period if the employer
establishes a right to a refund of the
amount mistakenly contributed or paid by
filing a claim with the plan administrator
within six months after the date on which
the plan administrator determines that a
mistake did occur. For purposes of this
section, plan administrator is defined in
section 414(g) and the regulations there-
under.
(2)Applicable conditions—(i)In gen-
eral. The employer making the contribu-
tion or withdrawal liability payment to a
multiemployer plan must demonstrate
that an excessive contribution or overpay-
ment has been made due to a mistake of
fact or law. A mistake of fact or law relat-
ing to plan qualification under section
401 or to trust exemption under section
501 is not considered to be a mistake of
fact or law which entitles an employer to
a refund under this section. For purposes
of this section, a multiemployer plan is
defined in section 414(f) and the regula-
tions thereunder.
(ii)Amount to be returned—(A)Gen-
eral rule. The amount to be returned to
the employer is the excess of the amount
contributed or paid over the amount that
would have been contributed or paid had
no mistake been made. This amount is the
excess contribution or overpayment.
Except as provided in paragraph
(b)(2)(ii)(B) of this section, interest or
earnings attributable to an excess contri-
bution shall not be returned to the
employer, and any losses attributable to
an excess contribution must reduce the
amount returned to the employer. For pur-
poses of the previous sentence, the appli-
cation of plan-wide investment experi-
ence to the excess contribution would be
an acceptable method of calculating
losses. A refund of a mistaken contribu-
tion must in no event reduce a partici-
pant’s account balance in a defined con-
tribution plan to an amount less than that
amount which would properly have been
in that participant’s account had no mis-
take occurred. Thus, to the extent that the
refund of an excess contribution would
reduce a participant’s account balance in
a defined contribution plan to an amount
less than the amount which would prop-
erly be in the participant’s account had no
mistake occurred, the return of the excess
contribution would be prohibited by this
section.
(B)Overpayment of withdrawal liabil-
ity. In the case of an overpayment of
withdrawal liability established by the
plan sponsor under section 4219(c)(2) of
ERISA, the plan will not fail to satisfy
section 401(a)(2) if, in accordance with
Pension Benefit Guaranty Corporation
regulations regarding the overpayments
of withdrawal liability (29 CFR
4219.31(d)), the overpayment, with inter-
est, is returned to the employer.
(c)Amount refunded includible in
employer’s income. In general, the
amount of the excess contribution or
overpayment must be included in gross
income by the employer if the excess
contribution or overpayment resulted in a
tax benefit in a prior year. Any interest
credited or paid on the refund of mistaken
withdrawal liability payments must also
be included in gross income by the
employer.
(d)Application of section 412.An
amount returned under paragraph
(b)(2)(ii) of this section is charged to the
funding standard account under section
412 in the year in which the amount is
returned.
David A. Mader,
Acting Deputy Commissioner
of Internal Revenue.
Approved July 10, 2002.
Pamela F. Olson,
Acting Assistant Secretary
of the Treasury.
(Filed by the Office of the Federal Register on July
19, 2002, 8:45 a.m., and published in the issue of
the Federal Register for July 22, 2002, 67 F.R.
47692)
Section 4041.—Imposition of
Ta x
26 CFR 48.4041–10: Exemption for use as supplies
for vessels or aircraft.
When is an aircraft“actually engaged in foreign
trade”within the meaning of§4221(d)(3)? See Rev.
Rul. 2002–50, on this page.
Section 4081.—Imposition of
Ta x
When is an aircraft“actually engaged in foreign
trade”within the meaning of§4221(d)(3)? See Rev.
Rul. 2002–50, on this page.
Section 4091.—Imposition of
Ta x
When is an aircraft“actually engaged in foreign
trade”within the meaning of§4221(d)(3)? See Rev.
Rul. 2002–50, on this page.
Section 4092.—Exemptions
When is an aircraft“actually engaged in foreign
trade”within the meaning of§4221(d)(3)? See Rev.
Rul. 2002–50, on this page.
Section 4221.—Certain Tax-
Free Sales
26 CFR 48.4221–4: Tax-free sale of articles for use
by the purchaser as supplies for vessels or aircraft.
(Also§§4041, 4081, 4091, 4092, 6416, 6421, 6427,
7805;§§48.4041–10, 48.6416(b)(2)–2, 301.7805–
1.)
Tax-free sale of articles for use by
the purchaser as supplies for vessels or
aircraft. For purposes of section 4092 of
the Code, an aircraft that flies a person
for hire between the United States and a
foreign country is actually engaged in for-
eign trade within the meaning of section
4221(d)(3) of the Code, That aircraft is
also actually engaged in foreign trade
when flying that person from a city in the
United States to another city in the United
States as part of the transportation
between the United States and the foreign
country.
Rev. Rul. 2002–50
ISSUE
For purposes of§4092 of the Internal
Revenue Code, when is an aircraft“actu-
ally engaged in foreign trade”within the
meaning of§4221(d)(3)?
2002–32 I.R.B.292August 12, 2002

FACTS
AircraftA, AircraftB, and AircraftC
are operated by a domestic airline in the
business of transporting persons by air for
hire. The aviation fuel purchased for use
in the aircraft is purchased in the United
States.
Situation 1. AircraftAflies from city
#1 in the United States to city #3 in a for-
eign country. En route to city #3 Aircraft
Astops in city #2 in the United States.
The flight from city #1 to city #2 is des-
ignated Flight No. 111 and the flight from
city #2 to city #3 is designated Flight No.
333. AircraftAtransports at least one per-
son for hire from city #1 to city #3.
Situation 2. AircraftBflies from city
#4 in a foreign country to city #6 in the
United States. En route to city #6 Aircraft
Bstops in city #5 in the United States.
The flight from city #4 to city #5 is des-
ignated Flight No. 555 and the flight from
city #5 to city #6 is designated Flight No.
777. AircraftBtransports at least one per-
son for hire from city #4 to city #6.
Situation 3. AircraftCflies only
within the United States. AircraftCtrans-
ports persons for hire from city #1 to city
#2, some of whom will transfer to Air-
craftAfor its flight from city #2 to city
#3 in a foreign country.
LAW AND ANALYSIS
Section 4092 provides that no tax is
imposed under§4091 on aviation fuel
sold by a producer for use by the pur-
chaser in a nontaxable use (as defined in
§6427(l)(2)(B)).
Section 6427(l)(2)(B) provides that the
term“nontaxable use”means, in the case
of aviation fuel, any use that is exempt
from the tax imposed by§4041(c)(1)
other than by reason of a prior imposition
of tax.
Section 4041(g)(1) provides that no
tax is imposed under§4041(c)(1) on any
liquid sold for use or used as supplies for
vessels or aircraft (within the meaning of
§4221(d)(3)).
Section 4221(d)(3) provides that the
term“supplies for vessels or aircraft”
includes fuel supplies, ships’stores, sea
stores, or legitimate equipment on vessels
actually engaged in foreign trade or trade
between the United States and any of its
possessions. For purposes of the preced-
ing sentence, the term“vessels”includes
civil aircraft employed in foreign trade or
trade between the United States and any
of its possessions.
Section 48.4221–4(b)(2) of the Manu-
facturers and Retailers Excise Tax Regu-
lations provides that the terms“fuel sup-
plies”and“legitimate equipment”include
all articles, materials, supplies, and equip-
ment necessary for the navigation, pro-
pulsion, and upkeep of vessels actually
engaged in foreign trade, even though
such vessels may make intermediate stops
in the United States.
Section 48.4221–4(b)(7) provides that
the exemption relating to supplies for ves-
sels or aircraft, with respect to aircraft not
constituting equipment of the armed
forces, extends to aircraft only when
employed in foreign trade.
Section 48.4221–4(b)(8) provides that
the term“trade”includes the transporta-
tion of persons or property for hire and
the making of the necessary preparations
for the transportation.
Rev. Rul. 69–259, 1969–1 C.B. 287,
addresses the question of whether Plane
No. 1 and Plane No. 2 are engaged in for-
eigntradewithinthemeaningof
§4221(d)(3). Plane No. 1 flies from a
city in the United States to a city in a for-
eign country with intermediate stops in
the United States. The ruling holds that
Plane No. 1 is engaged in foreign trade
within the meaning of the statute and
regulations even though it makes interme-
diate stops in the United States. Plane No.
2 flies only within the United States and
carries passengers whose ultimate desti-
nations are cities within the United States
and other passengers with tickets to a city
in a foreign country. The foreign bound
passengers are transferred from Plane No.
2 to another airplane for completion of
their flights. The ruling holds that Plane
No. 2 cannot be considered engaged in
foreign trade because, to be so engaged,
the plane itself must travel to a foreign
destination.
Section 4221(d)(3) defines the term
supplies for vessels or aircraft as includ-
ing fuel supplies on vessels actually
engagedinforeigntrade.Under
§48.4221–4(b)(8), the term trade
includes the transportation of persons or
property for hire. Thus, an aircraft is
“actually engaged in foreign trade”when
it is transporting any person for hire
between the United States and a foreign
country. Under§48.4221–4(b)(2), once
an aircraft is actually engaged in foreign
trade the aircraft remains so engaged even
though it makes intermediate stops in the
United States.
Situation 1. When flying from city #1
to city #3, AircraftAis actually engaged
in foreign trade within the meaning of
§4221(d)(3) because at least one person
is transported for hire on that aircraft
from city #1 to city #3. The stop in city
#2 is an intermediate stop in the United
States and thus AircraftAis actually
engaged in foreign trade on the flight
from city #1 to city #2. Accordingly, the
aviation fuel used in the aircraft on the
flight from city #1 to city #2 is used in a
nontaxable use for purposes of§4092.
The change in the flight number from
Flight No. 111 to Flight No. 333 does not
affect the determination of whether the
aircraft is actually engaged in foreign
trade.
Situation 2. When flying from city #4
to city #6, AircraftBis actually engaged
in foreign trade within the meaning of
§4221(d)(3) because at least one person
is transported for hire on that aircraft
from city #4 to city #6. The stop in city
#5 is an intermediate stop in the United
States and thus AircraftBis actually
engaged in foreign trade on the flight
from city #5 to city #6. Accordingly, the
aviation fuel used in the aircraft on the
flight from city #5 to city #6 is used in a
nontaxable use for purposes of§4092.
The change in the flight number from
Flight No. 555 to Flight No. 777 does not
affect the determination of whether the
aircraft is actually engaged in foreign
trade.
Situation 3. AircraftCis not engaged
in foreign trade even though some of its
passengers transfer to AircraftAfor trans-
port to a foreign country because Aircraft
Cflies only within the United States.
HOLDING
For purposes of§4092, an aircraft that
flies a person for hire between the United
States and a foreign country is actually
engaged in foreign trade within the mean-
ing of§4221(d)(3). That aircraft is also
actually engaged in foreign trade when
flying that person from a city in the
United States to another city in the United
August 12, 20022932002–32 I.R.B.

States as part of the transportation
between the United States and the foreign
country.
This holding applies equally with
respect to: fuel used in foreign aircraft
thatmeettherequirementsof
§4221(e)(1); aviation fuel not used for a
taxable purpose within the meaning of
§6427(l); gasoline sold for specified uses
and resales within the meaning of
§6416(b)(2); and gasoline sold for cer-
tain exempt purposes within the meaning
of§6421(c). This ruling does not con-
sider the application of§§4092 and
4221(d)(3) to charter flights and no infer-
ences should be drawn from this ruling
regarding such flights.
EFFECT ON OTHER REVENUE
RULINGS
Rev. Rul. 69–259 is modified and
superseded.
PROSPECTIVE APPLICATION
Pursuant to the authority provided by
§7805(b)(8), this revenue ruling will not
apply before January 1, 2003.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Susan Athy of the Office of
Associate Chief Counsel (Passthroughs
and Special Industries). For further infor-
mation regarding this revenue ruling, con-
tact Susan Athy at (202) 622–3130 (not a
toll-free call).
Section 6015.—Relief From
Joint and Several Liability on
Joint Return
26 CFR 1.6015–1: Relief from joint and several
liability on a joint return.
T.D. 9003
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Relief From Joint and Several
Liability
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations relating to relief from
joint and several liability under section
6015 of the Internal Revenue Code. The
regulations reflect changes in the law
made by the Internal Revenue Service
Restructuring and Reform Act of 1998
and by the Community Renewal Tax
Relief Act of 2000. The regulations pro-
vide guidance to married individuals fil-
ing joint returns who seek relief from
joint and several liability.
EFFECTIVE DATE: These regulations
are effective on July 18, 2002.
FOR FURTHER INFORMATION CON-
TACT: Charles A. Hall, 202–622–4940
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in these final regulations has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act (44
U.S.C. 3507) under control number
1545–1719. Responses to this collection
of information are required in order for
certain individuals to receive relief from
the joint and several liability imposed by
section 6013(d)(3).
An agency may not conduct or spon-
sor, and a person is not required to
respond to, a collection of information
unless the collection of information dis-
plays a valid control number assigned by
the Office of Management and Budget.
The burden contained in§1.6015–5is
reflected in the burden of Form 8857.
Comments concerning the accuracy of
the burden estimate and suggestions for
reducing the burden should be sent to the
Internal Revenue Service, Attn: IRS
ReportsClearanceOfficer,W:CAR:
MP:FP:S Washington, DC 20224, and to
theOffice of Management and Budget,
Attn: Desk Officer for the Department of
the Treasury, Office of Information and
Regulatory Affairs, Washington, DC
20503.
Books or records relating to this col-
lection of information must be retained as
long as their contents may become mate-
rial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.
Background
This document contains amendments
to the Regulations on Procedure and
Administration (26 CFR part 301) under
section 6013 of the Internal Revenue
Code (Code), relating to the election to
file a joint Federal income tax return, and
section 6015, relating to relief from the
joint and several liability. Section 6015
was added to the Code by section 3201 of
the Internal Revenue Service Restructur-
ing and Reform Act of 1998, Public Law
105–206 (112 Stat. 685) (1998) (RRA),
effective for any joint liability that was
unpaid as of July 22, 1998, and for any
liability that arises after July 22, 1998.
Section 6015 was amended by section
313 of the Community Renewal Tax
Relief Act of 2000, which was enacted as
part of the Consolidated Appropriations
Act, 2001, Public Law 106–554 (114 Stat.
2763) (2000) (CRA).
This document also removes final
regulation§1.6013–5, relating to relief
from joint and several liability under
former section 6013(e). The final regula-
tion under§1.6013–5 is obsolete due to
amendments to section 6013 of the Code
by the Internal Revenue Service Restruc-
turing and Reform Act of 1998. The
removal of this regulation will not affect
taxpayers.
A notice of proposed rulemaking
(REG–106446–98, 2001–1 C.B. 945) was
published in theFederal Register(66 FR
3888) on January 17, 2001, with correc-
tion dated March 29, 2001 (66 FR
17130). Several comment letters were
received, and three of the commentators
spoke at the public hearing on May 30,
2001. After consideration of the com-
ments, the proposed regulations are
adopted as modified by this Treasury
decision. The comments are discussed
below.
2002–32 I.R.B.294August 12, 2002

Summary of Comments and
Explanation of Revisions
1. Section 1.6015–1
Section 1.6015–1 of the proposed
regulations contains general provisions
that apply to all three types of relief from
joint and several liability.
A. Types of relief considered
Section 1.6015–1 of the proposed
regulations provides that if a requesting
spouse only requests equitable relief
under section 6015(f) and does not elect
relief under section 6015(b) or (c), the
IRS may not grant relief under either sec-
tion 6015(b) or (c). Several commentators
suggested that, regardless of the type of
relief requested, the regulations should
require that the IRS consider all three
types of relief.
Relief under section 6015(b) and (c)
must be elected by the requesting spouse.
When an election is made, the statute of
limitations on collection of the requesting
spouse’s liability relating to such election
is suspended. In addition, the IRS is statu-
torily prohibited from pursuing certain
collection activities until the claim for
relief under section 6015(b) or (c) is
resolved. When, however, a requesting
spouse only requests equitable relief
under section 6015(f), the statute of limi-
tations on collection is not suspended,
and the IRS is not prohibited from col-
lecting the liability from the requesting
spouse. The IRS cannot assume, absent
an election under section 6015(b) or (c),
that a requesting spouse, in only request-
ing relief under section 6015(f), would
have elected relief under section 6015(b)
or (c). Such an assumption would
improperly suspend the requesting
spouse’s statute of limitations on collec-
tion when the requesting spouse did not
elect relief under section 6015(b) or (c).
Thus, the final regulations do not adopt
this recommendation.
If, in the course of reviewing a request
for relief only under section 6015(f), the
IRS determines that the requesting spouse
may qualify for relief under section
6015(b) or (c) instead of section 6015(f),
the IRS will contact the requesting spouse
to see if he or she wishes to amend the
claim for relief by affirmatively electing
relief under section 6015(b) or (c). If the
requesting spouse so chooses, he or she
may submit a statement that amends the
claim for relief and elects relief under
section 6015(b) or (c). The final regula-
tions provide that the amended claim for
relief will relate back to the original claim
for purposes of determining the timeli-
ness of the claim.
B. Duress
Section 1.6013–4(d) of the proposed
regulations provides that if an individual
asserts and establishes that he or she
signed a return underlegal duress, the
return is not a joint return, and the indi-
vidual is not jointly and severally liable
for the tax shown on the return, or any
deficiency in tax with respect to the
return.
Two commentators suggested that
§1.6013–4(d) of the proposed regulations
improperly denies the benefits of section
6015 to those individuals who establish
that they signed returns under duress. The
rule in§1.6013–4(d) reflects well estab-
lished case law regarding the conse-
quences of filing a joint return under
duress.Compare Stanley v. Commis-
sioner, 45 T.C. 555 (1966), withBrown v.
Commissioner, 51 T.C. 116 (1968). Under
section 6013, married taxpayers may elect
to file a joint return. If such an election is
made, section 6013(d)(3) provides that
both spouses are jointly and severally
liable for the combined liability of both
spouses. The election under section 6013
must be voluntarily made by both
spouses. If either spouse involuntarily
makes the election under duress, then the
election is invalid with respect to both
spouses.
One commentator suggested that the
invalidation of the joint election when
one spouse signs a return under duress
inappropriately denies such spouse the
benefits of certain credits (e.g., the earned
income credit) and the joint filing rates.
An allegation that a spouse was forced to
sign a joint return against his or her will
indicates that, in the absence of the threat,
the spouse would have filed a separate
return. In order to qualify for the earned
income credit or the joint return rates, the
Code mandates that the spouse file a joint
return. If the spouse filed a joint return in
order to benefit from the earned income
credit, the joint return rates, or other ben-
efits flowing from a joint return, and not
due to duress, then the election to file the
joint return was voluntary and valid. If
the requesting spouse raises the issue of
duress and it is determined that the
requesting spouse would owe more tax if
he or she filed a married filing separately
return, then the requesting spouse may
choose not to pursue the issue of duress.
Both commentators suggested that the
rule regarding the treatment of returns
signed under duress was inconsistent with
the language of section 6015(c)(3)(C).
Section 6015(c)(3)(C) provides that the
limitation on relief under section 6015(c),
when the requesting spouse has actual
knowledge of the item giving rise to the
deficiency, does not apply if the request-
ing spouse establishes that he or she
signed the return under duress. Neither
the limitation of section 6015(c)(3)(C),
nor any portion of section 6013 or 6015
applies to a return signed under duress,
i.e., a return for which no valid joint
return election was made. To interpret the
rule to allow the benefits of a joint return
in the absence of a valid joint return elec-
tion, as the commentators suggest, would
require that the IRS treat joint return elec-
tions as valid for purposes of section
6015(c), but invalid for purposes of sec-
tions 6015(b) and (f), when the requesting
spouse establishes that the return was
signed under duress. Placing the duress
rule in the regulations under section 6013
results in consistent treatment of a claim
of duress that would apply to the three
relief provisions under section 6015.
One commentator suggested that, the
Treasury and IRS refer toduressas
opposed tolegal duressbecause the term
legal duresssuggests that something
more specific thanduressis intended. In
particular, the commentator noted that in
some cases courts have declined to define
legal duressto include domestic abuse.
Although the final regulations use the
term,duressrather thanlegal duress,
Treasury and the IRS believe the terms
are synonymous, andduresscontinues to
provide a basis for invalidating the joint
return election.
Nonetheless, Treasury and the IRS
have taken these comments into consider-
ation in interpreting the specific duress
provision in section 6015(c)(3)(C). See
the discussion of the abuse exception to
August 12, 20022952002–32 I.R.B.

actual knowledge (§1.6015–3(c)(2)(v)) in
section 3.B. of this preamble.
C. Prior closing agreement or offer in
compromise
Section 1.6015–1(c) of the proposed
regulations provides that relief is not
available if the requesting spouse signed a
closing agreement or entered into an offer
in compromise with the IRS for the same
tax year for which he or she seeks relief
under section 6015. One commentator
suggested that there was no support for
this position in the statute. Section
6015(g)(1) provides that“[e]xcept as pro-
vided in paragraphs (2) and (3), notwith-
standing any other law or rule of law
(other than section 6511, 6512(b), 7121,
7122), credit or refund shall be allowed
or made to the extent attributable to the
application of this section.”(Emphasis
added). Sections 7121 and 7122 deal with
closing agreements and offers in compro-
mise, respectively. Section 301.7121–1(c)
of the Regulations on Procedure and
Administration provides that a closing
agreement is final and will not be set
aside in the absence of fraud, malfea-
sance, or misrepresentation. Section
301.7122–1T(d)(5) of the Temporary
Regulations on Procedure and Adminis-
tration provides a similar rule for the
finality of offers in compromise. Thus,
the statute and the regulations directly
support the position in the proposed regu-
lations that relief under section 6015 is
not available if the requesting spouse
signed a closing agreement or offer in
compromise disposing of the same liabil-
ity that is the subject of the claim for
relief.
Another commentator suggested that
the requesting spouse should be given an
opportunity to establish that he or she was
not a party to the closing agreement or
offer in compromise and that such signed
documents should not preclude relief. In
Hopkins v. Commissioner, 146 F.3d 729
(9th Cir. 1998), the United States Court of
Appeals for the Ninth Circuit held that a
claim for relief from joint and several
liability under section 6013(e) was pre-
cluded if a closing agreement was signed
by the requesting spouse for the tax year
in question. Nothing in section 6015 nor
the legislative history indicates that Con-
gress intended to change the rules regard-
ing the finality of such documents when
relief is requested under section 6015. If
the requesting spouse did not sign the
closing agreement or offer in compro-
mise, then the requesting spouse is not
bound by that document, and relief under
section 6015 would be available. Thus,
there is no need to amend the final regu-
lations to incorporate this comment.
D. Fraudulent scheme and fraud
Section 1.6015–1(d) of the proposed
regulations provides that if the Secretary
establishes that one spouse transferred
assets to the other spouse as part of a
fraudulent scheme, relief is not available
under section 6015. Section 1.6015–
3(d)(2)(ii) of the proposed regulations
provides that the Service may allocate
any item between the spouses if the Ser-
vice establishes that the allocation is
appropriate due to fraud by one or both
spouses. Two commentators requested
that the Treasury and IRS provide
examples to distinguish between a
fraudulent scheme and fraud.
Fraudulent schemein§1.6015–1(d)
refers to a fraudulent transfer of assets.
The final regulations clarify that a fraudu-
lent scheme is a scheme to defraud the
IRS or another third party, including, but
not limited to, creditors, ex-spouses, and
business partners. In contrast,fraudin
§1.6015–3(d)(2)(ii) encompasses any
fraud of either spouse including, but not
limited to, the fraudulent alteration of
documents, the fraudulent filing of a
return or claim for relief, or any other
fraud that may be relevant to the claim
for relief. The fraudulent scheme and
fraud exceptions are very broad and
might overlap in some circumstances. It
would be misleading to provide discrete
examples that attempt to distinguish
between a fraudulent scheme and fraud.
Thus, the final regulations do not adopt
this recommendation.
E. Definition of item
Section 1.6015–1(g)(3) of the pro-
posed regulations definesitemas that
which is required to be separately listed
on an individual income tax return or any
required attachments, subject to one
exception. The exception provides that
interest and dividend income from the
same source would be treated as one
item. Several commentators suggested
that this rule be eliminated because the
source of the income should not be rel-
evant. The requesting spouse’s ability to
receive partial relief from the deficiency
relating to an erroneous item when the
requesting spouse knew of part but not all
of the item addresses the concern for
which this rule was originally drafted.
Thus, the final regulations adopt this rec-
ommendation.
F. Definition of“erroneous item”
Section 1.6015–1(g)(4) of the pro-
posed regulations defineserroneous item
as any item resulting in an understatement
or deficiency in tax to the extent that such
item is omitted from, or improperly
reported (including improperly character-
ized) on an individual income tax return.
One commentator suggested that it was
improper to include items that were
improperly characterized on the return as
erroneous items. The commentator sug-
gested that such a rule would require a
requesting spouse to know the proper
characterization of an item in order for
the spouse to receive relief. The proposed
regulations, however, do not require a
requesting spouse to know the proper
characterization of an item for the item to
be“erroneous.”To the contrary, if the
requesting spouse knew of the item that
gave rise to an understatement or defi-
ciency, regardless of whether the request-
ing spouse also knew the item was
improperly characterized, the item is
“erroneous”under§1.6015–1(g)(4). To
remove improper characterization from
the definition of erroneous item might
create an inference that requesting
spouses are not entitled to relief for an
item that was improperly characterized on
a return. Such a rule would be inconsis-
tent with the statutory language. There-
fore, the final regulations do not adopt
this recommendation.
This provision was also amended to
clarify that penalties and interest are not
erroneous items. Rather, relief from pen-
alties and interest will generally be deter-
mined based on the proportion of the total
erroneous items from which the request-
ing spouse is relieved. If a penalty relates
to a particular erroneous item, then relief
from such penalty will be determined
based on whether the requesting spouse
was relieved of liability from the errone-
ous item.
2002–32 I.R.B.296August 12, 2002

G. Collection
Section 1.6015–1(h) of the proposed
regulations provides that the relief provi-
sions of section 6015 do not negate liabil-
ity that arises under the operation of other
laws. One commentator suggested that
the regulations adopt a rule that the IRS
would not look to community property as
a collection source when a requesting
spouse with an interest in such commu-
nity property is granted relief under sec-
tion 6015. A federal tax lien arising under
section 6321 attaches to all property and
rights to property of the taxpayer.
Whether a taxpayer has an interest in
property to which the lien can attach is
determined by state law.Aquilino v.
United States, 363 U.S. 509 (1960). Once
that property interest is defined, federal
law alone determines the consequences
resulting from the attachment of the fed-
eral lien on the property.United States v.
Drye, 528 U.S. 49 (1999). If under the
law of the community property state in
which the spouses reside, the IRS can
look to community property to collect a
liability of one of the spouses, the deter-
mination that the other spouse is entitled
to relief under section 6015 does not
affect the Service’s ability to collect the
nonrequesting spouse’s liability from the
community property. See,e.g.,United
States v. Stolle, 2000–1 U.S.T.C.¶50,329
(C.D. Cal. 2000);Hegg v. IRS,28P.3d
1004 (Idaho 2001). The final regulations
do not adopt this recommendation
because it goes beyond the scope of the
statute.
H. Res judicata
Section 6015(g)(2) provides that, in
the case of any election under section
6015(b) or (c), if a decision of a court in
any prior proceeding for the same taxable
year has become final, such decision shall
be conclusive except with respect to the
qualification of the requesting spouse for
relief which was not at issue in that pro-
ceeding. This exception does not apply if
the court determines that the requesting
spouse participated meaningfully in the
prior proceeding. In other words, a
requesting spouse who participated mean-
ingfully in a prior court proceeding con-
cerning the underlying liability for which
relief is sought is precluded by section
6015(g)(2) from electing relief under sec-
tion 6015(b) or (c) after the decision
becomes final, whether or not the request-
ing spouse’s eligibility for relief under
section 6015(b) or (c) was at issue in the
prior proceeding. In addition, under sec-
tion 6015(g)(2) if the requesting spouse’s
entitlement to relief from liability under
section 6015 for the same tax year was at
issue in a prior proceeding, then, regard-
less of the extent of the requesting
spouse’s participation in such proceeding,
the requesting spouse would be precluded
from electing relief under section 6015(b)
or (c) after the decision in such proceed-
ing has become final. Thus,§1.6015–
1(e) of the final regulations was amended
to emphasize thatres judicatawill apply
if relief under section 6015 was at issue
in the prior proceeding, or if the request-
ing spouse meaningfully participated in
the prior proceeding.
I. Scope of section 6015
The final regulations add§1.6015–
1(g), and redesignate§1.6015–1(g) and
(h) of the proposed regulations as
§1.6015–1(h) and (j), respectively. Sec-
tion 1.6015–1(g) of the final regulations
clarifies that relief under section 6015
will not be available for any portion of a
liability for any taxable year for which a
claim for credit or refund is barred by
operation of any law or rule of law.
2. Section 1.6015–2
Section 1.6015–2 of the proposed
regulations provides the rules regarding
relief from joint and several liability
under section 6015(b) that are applicable
to all qualifying joint filers.
A. Knowledge or reason to know
Section 1.6015–2(a)(3) of the pro-
posed regulations provides that one of the
requirements of relief under section
6015(b) is that the requesting spouse
establish that he or she had no knowledge
or reason to know of theitem giving rise
to the understatement. Two commentators
pointed out that the underlined language
isnotconsistentwithsection
6015(b)(1)(C), which articulates the
requirement as knowledge or reason to
know of theunderstatement. Both com-
mentators suggested that the rules regard-
ing knowledge under section 6015(b)
should be consistent with the knowledge
standard developed under former section
6013(e).
The language in§1.6015–2(a)(3) of
the proposed regulations was not intended
to reflect a new standard of knowledge in
section 6015(b) cases. Indeed, the stan-
dards for knowledge or reason to know
that were developed under former section
6013(e) should be used in determining a
requesting spouse’s knowledge or reason
to know under section 6015(b). The Trea-
sury and IRS did not intend to suggest a
harsher standard of knowledge under sec-
tion 6015(b) than that which existed
under section 6013(e). Therefore, the
final regulations adopt this recommenda-
tion by amending the language of
§1.6015–2(a)(3) of the proposed regula-
tions to be consistent with the language of
section 6015(b)(1)(C).
B. Inequity
Section 1.6015–2(d) of the proposed
regulations provides that all of the facts
and circumstances are considered in
determining whether it was inequitable to
hold a requesting spouse liable for the
understatement attributable to the nonre-
questing spouse. Among the factors con-
sidered is whether the requesting spouse
significantly benefitted, in excess of nor-
mal support, either directly or indirectly
from the understatement. Such significant
benefit may include transfers of property
or rights to property, including transfers
that may be received several years after
the year of the understatement (e.g., life
insurance proceeds) that are traceable to
items omitted from gross income.
Two commentators suggested that the
Treasury and IRS definenormal support
for purposes of this section. Normal sup-
port depends on the taxpayer’s particular
circumstances, including the cost of liv-
ing, which varies across the country.
Thus, a general definition in the final
regulations would not be useful. Rules
regarding normal support have been
developed in case law under section
6013(e) and are applicable to section
6015(b) as well. The final regulations do
not adopt this recommendation.
Another commentator questioned the
conclusionintheexamplewithin
§1.6015–2(d) of the proposed regulations
that life insurance proceeds that are trace-
able to items of omitted income of the
August 12, 20022972002–32 I.R.B.

nonrequesting spouse are considered a
significant benefit. The commentator
pointed to the legislative history as sug-
gesting that Congress intended widows to
benefit from the relief provided by the
statute, and it is likely that widows would
receive such a benefit. The reference to
widows in the legislative history to sec-
tion 6015 is contained in a footnote to the
legislative history for section 6015(c).
The footnote provides thatno longer mar-
riedfor purposes of that section includes
widowed. The reference to widows is not
in the legislative history for section
6015(b) with respect to the rules regard-
ing equity under section 6015(b).
The courts have recognized that the
rules regarding knowledge or reason to
know and equity under section 6015(b)
are consistent with the rules regarding
knowledge or reason to know that were
developed under section 6013(e). See,
e.g.,Von Kalinowski v. Commissioner,
T.C. Memo. 2001–21. The rule regarding
significant benefit from life insurance
proceeds was contained in the regulations
under§1.6013–5. As life insurance pro-
ceeds traceable to items of omitted
income were considered a significant
benefit for purposes of section 6013(e),
they are also considered a significant ben-
efit for purposes of section 6015(b).
While, the final regulations do not adopt
this recommendation, they do clarify that
the receipt of property, such as insurance
proceeds or the value of life insurance,
traceable to items omitted by the nonre-
questing spouse must be beyond normal
support before they are considered a sig-
nificant benefit.
One commentator suggested that the
final regulations provide that the IRS
should consider the entire property settle-
ment, if any, in order to determine
whether the requesting spouse signifi-
cantly benefitted from the understate-
ment. The commentator suggested that if
the requesting spouse did not receive an
equitable distribution of assets during the
divorce proceedings, the Service should
not consider any items received by the
requesting spouse that are traceable to
items of omitted income as a significant
benefit. Such a rule, however, would
require the IRS to make a determination
of whether the distribution of assets was
fair in a divorce proceeding, which may
have taken place years before and to
which the IRS was not a party. Many fac-
tors, including equity, are typically con-
sidered under state and local laws in
determining the distribution of assets in a
divorce proceeding. It would be inappro-
priate for the IRS to pass judgment on the
equity of such determinations. The final
regulations do not adopt this recommen-
dation.
One commentator suggested that the
final regulations adopt ade minimis
exception to significant benefit. However,
if the benefit wasde minimis, it would not
be significant. Thus, the final regulations
do not adopt this recommendation.
Section 1.6015–2(d) of the proposed
regulations also provides a list of factors
that may be considered in determining
whether it would be inequitable to hold
the requesting spouse liable for an under-
statement. Such factors include the fact
that the nonrequesting spouse has not ful-
filled support obligations, or that the
spouses are divorced, legally separated,
or have not been members of the same
household for the 12 months directly pre-
ceding the election. One commentator
suggested that whether the spouses are
divorced or legally separated, and the
duration of the spouses’separation,
should not be relevant to a determination
of equity. The language in the proposed
regulations was used in an attempt to be
consistent with the marital status determi-
nation in section 6015(c). After further
consideration, the Treasury and IRS have
determined that, as the rules regarding
equity under section 6015(b) are the same
as those developed under section 6013(e),
the final regulations should adopt the lan-
guage that was used in former§1.6013–5
regarding the couple’s marital status.
Thus, although the final regulations do
not adopt the commentator’s recommen-
dation, the final regulations amend the
language of§1.6015–2(d) of the pro-
posed regulations to be consistent with
the language regarding equity under
former§6013–5, which provided that
facts relevant to the determination of
equity include whether the requesting
spouse was abandoned by the nonrequest-
ing spouse and whether the spouses are
divorced or separated.
Section 1.6015–2(d) of the proposed
regulations cross-references Rev. Proc.
2000–15 (2000–1 C.B. 447), for addi-
tional guidance on the definition ofineq-
uitable. Two commentators suggested that
this cross-reference was inappropriate
because the public did not have an oppor-
tunity to comment on the procedures in
Rev. Proc. 2000–15. The procedures in
Rev. Proc. 2000–15 were originally pub-
lished in Notice 98–61 (1998–2 C.B.
756). Notice 98–61 was published on
December 21, 1998, and the Treasury and
IRS specifically requested comments on
the procedures prescribed therein. The
comment period was extended from April
30, 1999, to June 30, 1999, by Notice
99–29 (1999–1 C.B. 1101). Those proce-
dures were finalized, with minor changes,
in Rev. Proc. 2000–15, in January 2000.
In addition, as the proposed regulations
cross-referenced Rev. Proc. 2000–15, the
procedures prescribed therein were again
subject to comment during the comment
period for the proposed regulations. No
such comments were received.
Both§§1.6015–2 and 1.6015–4
require a determination of whether it was
inequitable to hold a requesting spouse
liable, and such a determination should be
consistent under both relief provisions.
Thus, it is appropriate for the final regu-
lations to cross-reference the procedures
for determining whether it is inequitable
to hold a requesting spouse liable as out-
lined in Rev. Proc. 2000–15. The final
regulations do not adopt this recommen-
dation.
3. Section 1.6015–3
Section 1.6015–3 of the proposed
regulations provides the rules regarding
the allocation of a deficiency under sec-
tion 6015(c) for spouses who are no
longer married, legally separated, or not
members of the same household.
A. Marital status
Section 1.6015–3(a) of the proposed
regulations provides that spouses who are
no longer married, legally separated, or
who have not been members of the same
household for the 12 months preceding
the election may allocate a deficiency
between the spouses in proportion to each
spouse’s share of the deficiency. Section
1.6015–3(b)(1) of the proposed regula-
tions definesdivorcedas a requesting
spouse having a decree of divorce that is
recognized in the jurisdiction in which the
requestingspouseresides.Section
2002–32 I.R.B.298August 12, 2002

1.6015–3(b)(2) defineslegally separated
as a separation that is recognized under
the laws of the jurisdiction in which the
requesting spouse resides. Several com-
mentators suggested that the final regula-
tions cross-reference the rules of section
7703, and the regulations thereunder, for
a determination of whether a requesting
spouse is divorced or legally separated.
The final regulations adopt this recom-
mendation.
Section 1.6015–3(b)(3)(i) of the pro-
posed regulations definesmembers of the
same householdand provides that
spouses are considered members of the
same household if one of the spouses is
temporarily absent from the household,
and the household is maintained in antici-
pation of that spouse’s return. Such tem-
porary absences include, but are not lim-
ited to, incarceration, hospitalization,
business travel, vacation travel, military
service, or education away from home.
One commentator suggested that the
inclusion of incarceration and hospitaliza-
tion as temporary absences was inappro-
priate under the circumstances of a typi-
cal case where a spouse is requesting
relief from joint and several liability. Sec-
tion 6015(c), however, provides relief to
spouses who are divorced, widowed,
legally separated, or who were not mem-
bers of the same household for the 12
months preceding the election. H.R.
Conf. Rept. No. 599, 105th Cong., 2d
Sess. 252 (1998); S. Rep. No. 105–174
(1998). The Treasury and IRS have inter-
preted“not members of the same house-
hold”as meaning that the spouses live
apart and are estranged. Thus, if the
spouses live apart due to a temporary
absence, but the household is being main-
tained in anticipation of the absent
spouse’s return, then the spouses are still
considered members of the same house-
hold. The exceptions regarding temporary
absences are also consistent with the
regulations under section 152, regarding
temporary absences for purposes of a
dependency exemption. The election to
allocate liability is not available to
spouses who are not divorced, widowed,
legally separated, or living apart and
estranged. Although the language in the
final regulations was modified to more
closely track the language of the regula-
tions under section 152, the final regula-
tions do not adopt this recommendation.
One commentator suggested that,
because the election to allocate liability
was meant to address the situation where
spouses were divorced, widowed, or
estranged, the final regulations should
adopt a rule that spouses who indefinitely
maintain separate households (the
spouses have jobs in different cities, for
example) but who are not estranged are
considered members of the same house-
hold for purposes of this provision. This
clarification is adopted in the final regu-
lations.
In addition,§1.6015–3(a) of the final
regulations clarifies that, for purposes of
section 6015(c), the marital status of a
deceased requesting spouse is determined
on the earlier of the date of the election or
the date of the requesting spouse’s death
in accordance with section 7703(a)(1).
B. Actual knowledge
Section 1.6015–3(c)(2) of the pro-
posed regulations provides that relief
under section 6015(c) is not available if
the IRS demonstrates that the requesting
spouse had actual knowledge of the item
giving rise to the deficiency at the time he
or she signed the return. The proposed
regulations adopt the holding inCheshire
v. Commissioner, 115 T.C. 183 (2000),
aff’d, 282 F.3d 326 (5th Cir. 2002), that,
in an omission of income case, the rel-
evant inquiry is whether the requesting
spouse had actual knowledge of the item,
rather than whether the requesting spouse
had actual knowledge of the tax conse-
quences of the item. Several commenta-
tors suggested that the regulations pro-
vide that actual knowledge of the item
means actual knowledge of the proper tax
treatment of the item. The legislative his-
tory to section 6015(c) provides an
example of a requesting spouse who had
actual knowledge of a portion of the non-
requesting spouse’s self-employment
income that was omitted from the return.
See H.R. Conf. Rep. No. 599, 105th
Cong., 2d Sess. 253 (1998). The example
provides that the requesting spouse
remains liable for the portion of the
income tax and self-employment tax defi-
ciency attributable to the portion of the
self-employment income of which the
requesting spouse had actual knowledge.
Id. Nothing in the example indicates that
the IRS would have to establish that such
spouse had actual knowledge that self-
employment income was subject to
income tax and self-employment tax in
order to invalidate the requesting spouse’s
section 6015(c) election under section
6015(c)(3)(C). In addition, in many cases,
neither spouse may know the proper tax
treatment of an item, and both spouses
may have equal knowledge regarding the
item. The fact that the spouse to whom
the item is not attributable does not
understand the intricacies of tax law
should not be relevant to a determination
of whether the spouse had actual knowl-
edge of the item. Therefore, the final
regulations do not adopt the recommen-
dation to have the regulations provide that
actual knowledge of the item means
actual knowledge of the proper tax treat-
ment of the item.
The Tax Court also held that, in an
erroneous deduction case, the relevant
inquiry is whether the requesting spouse
had actual knowledge of the factual cir-
cumstances which made the item unal-
lowable as a deduction, rather than
whether the requesting spouse knew the
proper tax consequences of the item.King
v. Commissioner, 116 T.C. 198 (2001).
The final regulations adopt the standard
for erroneous deductions set forth inKing
in§1.6015–3(c)(2)(i)(B)(1).
Section 1.6015–3(c)(2)(i)(B)(2)ofthe
final regulations also clarifies that if a
deduction or credit is fictitious or
inflated, the relevant inquiry is whether
the requesting spouse had actual knowl-
edge that the expense was not incurred, or
not incurred to that extent.
Section 1.6015–3(c)(2)(iii) of the pro-
posed regulations provides that one factor
that may be relied upon in demonstrating
that a requesting spouse had actual
knowledge of an item giving rise to a
deficiency is whether the requesting
spouse deliberately avoided learning
about the item. Several commentators
suggested that this factor was inappropri-
ate in that it would harm those individu-
als who do not pay attention to the family
finances, or who are afraid to confront the
nonrequesting spouse about financial
matters. This rule, however, addresses
situations where the requesting spouse
makes a deliberate effort to avoid learn-
ing about an item in an attempt to be
shielded from liability. For an example of
deliberate avoidance, seeUnited States v.
Campbell, 977 F.2d 854 (4th Cir. 1992)
August 12, 20022992002–32 I.R.B.

(Criminal money laundering case where
the Fourth Circuit found that a finding of
knowledge may be made by inferences
drawn when a party deliberately closes
his or her eyes to what would otherwise
be obvious,i.e., willful blindness to the
existence of a fact).
As discussed above in section 1.B. of
this preamble, section 6015(c)(3)(C) pro-
vides that the limitation on a requesting
spouse’s ability to allocate an erroneous
item to the nonrequesting spouse when
the requesting spouse had actual knowl-
edge of that item does not apply if the
requesting spouse establishes that he or
she signed the return under duress. When
a requesting spouse signs a return under
duress, it is not that spouse’s return, and
accordingly, the spouse is not jointly and
severally liable for the tax on that return.
Thus, such spouse does not need the
relief from joint and several liability pro-
vided by section 6015. The final regula-
tions interpret the“duress”provision in
section 6015(c)(3)(C) to mean that a
requesting spouse in an abusive situation
who does not establish that he or she
signed the joint return under duress and
elects relief from joint and several liabil-
ity can receive such relief regardless of
the requesting spouse’s knowledge of the
erroneous item at the time the return was
signed. Although the requesting spouse
may have voluntarily signed the joint
return without a direct threat of abuse
from the nonrequesting spouse, he or she
may have not challenged the content of
the joint return due to a long history of
abuse from the nonrequesting spouse,
resulting in a general fear of the nonre-
questingspouse’sreprisal.Thus,
§1.6015–3(c)(2)(v) of the final regula-
tions provides that if a requesting spouse
establishes that he or she was the victim
of domestic abuse prior to the time the
return was signed, and that, as a result of
the prior abuse, the requesting spouse did
not challenge the treatment of any items
on the return for fear of the nonrequesting
spouse’s reprisal, the actual knowledge
limitation in§1.6015–3(c)(2) will not
apply.
C. Disqualified assets
Section 1.6015–3 of the proposed
regulations provides that the portion of a
deficiency for which a requesting spouse
remains liable will be increased (up to the
entire amount of the deficiency) by the
value of any disqualified asset that is
transferred to the requesting spouse. A
disqualified asset is defined as that which
is transferred for the purpose of avoid-
ance of tax or payment of tax. Any asset
transferred from the date that is 1 year
prior to the date the first letter of pro-
posed deficiency (30-day letter) is mailed,
is presumed disqualified. The presump-
tion will not apply if the asset is trans-
ferred pursuant to a divorce decree or
separate maintenance agreement. Two
commentators suggested that the use of
the termsdivorce decreeandseparate
maintenance agreementis inconsistent
with the language of the statute. The final
regulations adopt this recommendation by
amending the language of the regulation
to read“decree of divorce or separate
maintenance or written instrument inci-
dent to such decree.”
One commentator suggested that there
should be ade minimisexception to the
disqualified asset limitation of $5,000.
The Treasury and IRS have determined
that ade minimisexception to the dis-
qualified asset rule is inappropriate. The
disqualified asset rule limits relief under
section 6015(c) when an asset is trans-
ferred to the requesting spouse for the
purpose of avoidance of tax or payment
of tax. The requesting spouse’s participa-
tion in the attempt to avoid tax or the
payment of tax should prevent the spouse
from obtaining relief no matter how small
the value of the asset. Thus, the final
regulations do not adopt this recommen-
dation for ade minimisexception.
One commentator suggested that an
example of when a requesting spouse
overcomes the disqualified asset pre-
sumption in§1.6015–3(c)(3)(iii) be
included in the final regulations. The final
regulations adopt this recommendation.
One commentator suggested that some
assets should be disqualified, even if they
are transferred pursuant to a decree of
divorce or separate maintenance or a writ-
ten instrument incident to such a decree,
if it can be shown that the assets are
transferred for the purpose of avoidance
of tax or payment of tax. The final regu-
lations adopt this recommendation by
clarifying the rule. A disqualified asset is
defined as that which is transferred for
the purpose of avoidance of tax or pay-
ment of tax. Regardless of the situation, if
the asset is transferred for that purpose, it
is a disqualified asset. The rule regarding
a transfer pursuant to a decree of divorce
or separate maintenance provides that the
“presumption”that an asset is disquali-
fied will not apply if the asset is trans-
ferred pursuant to a decree unless the IRS
can establish that the asset was trans-
ferred for the purpose of avoidance of tax
or the payment of tax. If, however, in the
absence of a decree, the requesting
spouse cannot establish that the purpose
of the transfer was not the avoidance of
tax or payment of tax, the asset will be
disqualified, and its value will be added
to the amount of the deficiency for which
the requesting spouse remains liable.
D. Burden of proof for allocation
Section 1.6015–3(d)(3) of the pro-
posed regulations provides that a request-
ing spouse seeking to allocate liability
under section 6015(c) has the burden of
proof to establish the proper allocation of
items. One commentator suggested that
the final regulations provide an exception
to this rule for cases where the requesting
spouse is unable to locate the appropriate
documents to establish the proper alloca-
tion. Section 6015(c)(2) places the burden
on the requesting spouse. The final regu-
lations do not adopt this recommendation.
E. Other comments on allocation of
items
Section 1.6015–3(d)(4)(ii) of the pro-
posed regulations provides that any por-
tion of a deficiency that is attributable to
an item allocable solely to one spouse and
that results from the disallowance of a
credit, or a tax or addition to tax (other
than a tax imposed by section 1 or 55) is
allocated separately to that spouse. One
commentator suggested that such items
should be allocated proportionately
between the spouses instead of solely to
one spouse or the other. Section
6015(d)(2) provides that if a deficiency is
attributable to the disallowance of a
credit, or any tax (other than tax imposed
by section 1 or 55) required to be
included with the joint return, and the
item is allocated to one individual, the
deficiency shall be allocated to that indi-
vidual. The item will not be subject to the
proportionate allocation in section
6015(d)(1). The statutory language of
2002–32 I.R.B.300August 12, 2002

section 6015(d)(2) suggests that separate
treatment of items is only appropriate
when the item is allocable solely to one
spouse or the other. Thus, the final regu-
lations adopt this recommendation by
providing that the allocation of taxes and
credits attributable to both spouses will be
determined by the IRS on a case-by-case
basis.
F. Child’s liability
Section 1.6015–3(d)(4)(iii) of the pro-
posed regulations provides that any por-
tion of a deficiency relating to the liabil-
ity of a child of the requesting and
nonrequesting spouse will be allocated
jointly to both spouses. If one of the
spouses has sole custody of the child, the
proposed regulations provided that the
liability will be allocated solely to that
spouse. One commentator suggested that
the liability should be allocated based on
the child’s residence; another commenta-
tor suggested that the liability be allo-
cated based on which parent is in control
of the child’s finances; and a third com-
mentator suggested that it is not clear to
which spouse a child’s liability should be
allocated. The final regulations address
these recommendations, in part, by
removing the exception to allocating the
child’s liability jointly to both parents
when only one parent has custody of the
child.
4. Section 1.6015–4
Section 1.6015–4 of the proposed
regulations provides the rules regarding
equitable relief from joint and several
liability under section 6015(f). Section
1.6015–4(b) of the proposed regulations
provides that relief under§1.6015–4is
not available to circumvent the“no
refund”rule of§1.6015–3(c)(1). Several
commentators suggested that this rule be
removed. Under Rev. Proc. 2000–15,
refunds under section 6015(f) are gener-
ally limited to amounts paid pursuant to
an installment agreement, on which the
requesting spouse is not in default, from
the date the claim for relief is filed until a
final determination is made. The rule
regarding installment payments is
intended to encourage individuals to
remain current on their installment agree-
ments. Therefore, the Treasury and IRS
determined that limited refunds would be
appropriate to encourage such compli-
ance. Section 6015(g)(3), however, pre-
cludes the allowance of a credit or refund
under section 6015(c). It would be inap-
propriate to circumvent the rule of section
6015(g)(3) by giving equitable relief in
the form of a refund when the requesting
spouse qualifies for relief under section
6015(c). Thus, the final regulations do not
adopt this recommendation.
5. Section 1.6015–5
Section 1.6015–5(b)(2) of the pro-
posed regulations definescollection activ-
ityas, among other things, an administra-
tive levy or seizure described by section
6331. Section 1.6015–5(b)(2) of the final
regulations provides that the termcollec-
tion activityincludes a collection due pro-
cess (CDP) notice under section 6330.
That notice, which occurs in all cases
before levy or seizure except in the case
of levies on state tax refunds and in jeop-
ardy situations, provides taxpayer notice
of the Service’s intent to levy and the tax-
payer’s right to a pre-levy CDP hearing.
This change is consistent with the legisla-
tive history of section 6015(e). See H.R.
Conf. Rep. No. 599, 105th Cong. 2d Sess.
250–251 (1998).
6. Section 1.6015–6
Section 1.6015–6 of the proposed
regulations provides rules regarding the
nonrequesting spouse’s right to notice and
to participate in the administrative deter-
mination of whether the requesting
spouse is entitled to relief under any of
the provisions of section 6015. Some
commentators suggested that the pro-
posed regulations are overly broad in pro-
viding rights to the nonrequesting spouse,
while other commentators suggested that
the proposed regulations unnecessarily
limit the rights of the nonrequesting
spouse. One commentator suggested that
the IRS have minimal contact with the
nonrequesting spouse and that the nonre-
questing spouse not be automatically
notified at the administrative level. This
commentator also suggested that all of the
information submitted by the nonrequest-
ing spouse be shared with the requesting
spouse, but not vice versa. The commen-
tator suggested that the nonrequesting
spouse should only be given information
submitted by the requesting spouse if the
nonrequesting spouse files his or her own
request for relief. Section 6015 specifi-
cally provides the nonrequesting spouse
with two opportunities to participate in
the determination of whether the request-
ing spouse is entitled to relief (once at the
administrative level under section
6015(h)(2), and once when the petition
has been filed in the Tax Court under sec-
tion 6015(e)(4)). The nonrequesting
spouse’s participation is necessary to
ensure that relief is only granted in meri-
torious cases. The final regulations do not
adopt these recommendations.
Section 1.6015–6(a)(1) of the pro-
posed regulations provides that, at the
request of one spouse, the IRS will omit
from shared documents the spouse’s new
name, address, employer, telephone num-
ber, and any other information that would
reasonably identify the spouse’s location.
One commentator suggested that this
information always be omitted from
shared documents regardless of whether a
spouse requests such treatment. The final
regulations do not adopt this recommen-
dation. Instead, this statement is removed
from the final regulations. To address this
concern, however, the Internal Revenue
Manual provides that the IRS will omit
from shared documents any information
that could reasonably identify a spouse’s
location.
A commentator made several sugges-
tions to help ensure that the nonrequest-
ing spouse will have a meaningful oppor-
tunity to participate in the administrative
determination. One suggestion is that the
nonrequesting spouse have access to all
information submitted by the requesting
spouse, including the basis for relief.
Under the proposed regulations, the IRS
has the discretion to share information
submitted by one spouse with the other
spouse. It is the Service’s practice to
share information at the request of one of
the spouses. The final regulations adopt
this recommendation by clarifying that
information will be shared on request as
long as the information would not impair
tax administration.
Another suggestion was that the nonre-
questing spouse be afforded administra-
tive appeal rights if the nonrequesting
spouse disagrees with the Service’s deter-
mination that the requesting spouse is
entitled to relief. The nonrequesting
spouse’s participation is essential to a
August 12, 20023012002–32 I.R.B.

proper determination of relief. The nonre-
questing spouse may participate during
the preliminary determination of relief,
and if the requesting spouse files an
administrative appeal or a petition in
court, the nonrequesting spouse may par-
ticipate in those proceedings as well. In
addition, if a requesting spouse files a
petition in Tax Court, the IRS is pre-
cluded from settling with the requesting
spouse unless the nonrequesting spouse
agrees to the settlement. SeeCorson v.
Commissioner, 114 T.C. 354 (2000). The
nonrequesting spouse is afforded a mean-
ingful opportunity to participate in the
administrative determination of relief, as
well. Thus, the final regulations do not
prohibit the nonrequesting spouse from
administratively appealing the IRS’s
determination that the requesting spouse
is entitled to relief from joint and several
liability.
7. Section 1.6015–7
Section 1.6015–7 of the final regula-
tions reflects changes to section 6015 that
were made by section 313 of the CRA
with respect to waivers and the 90-day
period for filing a Tax Court petition.
Section 1.6015–7(c)(1) of the final
regulations reflects the fact that when the
requesting spouse elects relief under
§1.6015–2 or 1.6015–3, the IRS is
restricted from taking collection actions
until a decision of the Tax Court becomes
final. Section 1.6015–7(c)(1) also reflects
the fact that section 6015(e)(1)(B)(i) pro-
vides that rules similar to the rules of sec-
tion 7485 will apply with respect to col-
lection actions. Section 7485 provides
that the IRS may begin collection activity
upon the filing of a notice of appeal from
a Tax Court decision unless the taxpayer
files an appeal bond. Because refunds
may be limited under section 6015, a
requesting spouse may be denied a refund
of amounts collected during the pendency
of an appeal proceeding, even if he or she
is granted relief on appeal. Therefore, the
IRS has determined that at this time it
will not begin any collection activities
against the requesting spouse upon the fil-
ing of a notice of appeal unless the expi-
ration of the statute of limitations on col-
lection is imminent, or that collection will
be jeopardized by delay.
Special Analyses
It has been determined that these final
regulations are not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assess-
ment is not required. It has also been
determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to the regula-
tions, and because these regulations do
not impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply.
Drafting Information
The principal authors of the regula-
tions are Bridget E. Finkenaur and
Charles A. Hall of the Office of Associate
Chief Counsel, Procedure and Adminis-
tration (Administrative Provisions and
Judicial Practice Division).
*****
Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 602
are amended as follows:
PA RT 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding the follow-
ing entries in numerical order to read as
follows:
Authority: 26 U.S.C. 7805***
Section 1.6015–1 also issued under 26
U.S.C. 6015(h).
Section 1.6015–2 also issued under 26
U.S.C. 6015(h).
Section 1.6015–3 also issued under 26
U.S.C. 6015(h).
Section 1.6015–4 also issued under 26
U.S.C. 6015(h).
Section 1.6015–5 also issued under 26
U.S.C. 6015(h).
Section 1.6015–6 also issued under 26
U.S.C. 6015(h).
Section 1.6015–7 also issued under 26
U.S.C. 6015(h).
Section 1.6015–8 also issued under 26
U.S.C. 6015(h).
Section 1.6015–9 also issued under 26
U.S.C. 6015(h).***
Par.2.In§1.6013–4, paragraph (d) is
added to read as follows:
§1.6013–4 Applicable rules.
*****
(d)Return signed under duress.Ifan
individual asserts and establishes that he
or she signed a return under duress, the
return is not a joint return. The individual
who signed such return under duress is
not jointly and severally liable for the tax
shown on the return or any deficiency in
tax with respect to the return. The return
is adjusted to reflect only the tax liability
of the individual who voluntarily signed
the return, and the liability is determined
at the applicable rates in section 1(d) for
married individuals filing separate
returns. Section 6212 applies to the
assessment of any deficiency in tax on
such return.
§ 1.6013–5 [Removed]
Par. 3. Section 1.6013–5 is removed.
Par. 4. Sections 1.6015–0 through
1.6015–9 are added to read as follows:
§1.6015–0 Table of contents.
This section lists captions contained in
§§1.6015–1 through 1.6015–9.
§1.6015–1 Relief from joint and several
liability on a joint return.
(a) In general.
(b) Duress.
(c) Prior closing agreement or offer in
compromise.
(1) In general.
(2) Exception for agreements relating to
TEFRA partnership proceedings.
(3) Examples.
(d) Fraudulent scheme.
(e)Res judicataand collateral estoppel.
(f) Community property laws.
(1) In general.
(2) Example.
(g) Scope of this section and§§1.6015–2
through 1.6015–9.
(h) Definitions.
(1) Requesting spouse.
(2) Nonrequesting spouse.
(3) Item.
(4) Erroneous item.
(5) Election or request.
(i) [Reserved]
(j) Transferee liability.
(1) In general.
(2) Example.
2002–32 I.R.B.302August 12, 2002

§1.6015–2 Relief from liability
applicable to all qualifying joint filers.
(a) In general.
(b) Understatement.
(c) Knowledge or reason to know.
(d) Inequity.
(e) Partial relief.
(1) In general.
(2) Example.
§1.6015–3 Allocation of liability for
individuals who are no longer married,
are legally separated, or are not
members of the same household.
(a) Election to allocate liability.
(b) Definitions.
(1) Divorced.
(2) Legally separated.
(3) Members of the same household.
(i) Temporary absences.
(ii) Separate dwellings.
(c) Limitations.
(1) No refunds.
(2) Actual knowledge.
(i) In general.
(A) Omitted income.
(B) Deduction or credit.
(1) Erroneous deductions in general.
(2) Fictitious or inflated deduction.
(ii) Partial knowledge.
(iii) Knowledge of the source not suffi-
cient.
(iv) Factors supporting actual knowledge.
(v) Abuse exception.
(3) Disqualified asset transfers.
(i) In general.
(ii) Disqualified asset defined.
(iii) Presumption.
(4) Examples.
(d) Allocation.
(1) In general.
(2) Allocation of erroneous items.
(i) Benefit on the return.
(ii) Fraud.
(iii) Erroneous items of income.
(iv) Erroneous deduction items.
(3) Burden of proof.
(4) General allocation method.
(i) Proportionate allocation.
(ii) Separate treatment items.
(iii) Child’s liability.
(iv) Allocation of certain items.
(A) Alternative minimum tax.
(B) Accuracy-related and fraud penalties.
(5) Examples.
(6) Alternative allocation methods.
(i) Allocation based on applicable tax
rates.
(ii) Allocation methods provided in sub-
sequent published guidance.
(iii) Example.
§1.6015–4 Equitable relief.
§1.6015–5 Time and manner for
requesting relief.
(a) Requesting relief.
(b) Time period for filing a request for
relief.
(1) In general.
(2) Definitions.
(i) Collection activity.
(ii) Section 6330 notice.
(3) Requests for relief made before com-
mencement of collection activity.
(4) Examples.
(5) Premature requests for relief.
(c) Effect of a final administrative deter-
mination.
§1.6015–6 Nonrequesting spouse’s
notice and opportunity to participate in
administrative proceedings.
(a) In general.
(b) Information submitted.
(c) Effect of opportunity to participate.
§1.6015–7 Tax Court review.
(a) In general.
(b) Time period for petitioning the Tax
Court.
(c) Restrictions on collection and suspen-
sion of the running of the period of limi-
tations.
(1) Restrictions on collection under
§1.6015–2 or 1.6015–3.
(2) Waiver of the restrictions on collec-
tion.
(3) Suspension of the running of the
period of limitations.
(i) Relief under§1.6015–2 or 1.6015–3.
(ii) Relief under§1.6015–4.
(4) Definitions.
(i) Levy.
(ii) Proceedings in court.
(iii) Assessment to which the election
relates.
§1.6015–8 Applicable liabilities.
(a) In general.
(b) Liabilities paid on or before July 22,
1998.
(c) Examples.
§1.6015–9 Effective date.
§1.6015–1 Relief from joint and several
liability on a joint return.
(a)In general. (1) An individual who
qualifies and elects under section 6013 to
file a joint Federal income tax return with
another individual is jointly and severally
liable for the joint Federal income tax
liabilities for that year. A spouse or
former spouse may be relieved of joint
and several liability for Federal income
tax for that year under the following three
relief provisions:
(i)Innocentspousereliefunder
§1.6015–2.
(ii) Allocation of deficiency under
§1.6015–3.
(iii) Equitable relief under§1.6015–4.
(2) A requesting spouse may submit a
single claim electing relief under both or
either§§1.6015–2 and 1.6015–3, and
requesting relief under§1.6015–4. How-
ever, equitable relief under§1.6015–4is
available only to a requesting spouse who
failstoqualifyforreliefunder
§§1.6015–2 and 1.6015–3. If a request-
ing spouse elects the application of either
§1.6015–2 or 1.6015–3, the Internal Rev-
enue Service will consider whether relief
is appropriate under the other elective
provision and, to the extent relief is
unavailableundereither,under
§1.6015–4. If a requesting spouse seeks
relief only under§1.6015–4, the Secre-
tarymaynotgrantreliefunder
§1.6015–2 or 1.6015–3 in the absence of
an affirmative election made by the
requesting spouse under either of those
sections. If in the course of reviewing a
request for relief only under§1.6015–4,
the IRS determines that the requesting
spouse may qualify for relief under
§1.6015–2 or 1.6015–3 instead of
§1.6015–4, the Internal Revenue Service
will correspond with the requesting
spouse to see if the requesting spouse
would like to amend his or her request to
elect the application of§1.6015–2or
1.6015–3. If the requesting spouse
chooses to amend the claim for relief, the
requesting spouse must submit an affir-
mative election under§1.6015–2or
1.6015–3. The amended claim for relief
August 12, 20023032002–32 I.R.B.

will relate back to the original claim for
purposes of determining the timeliness of
the claim.
(3) Relief is not available for liabilities
that are required to be reported on a joint
Federal income tax return but are not
income taxes imposed under Subtitle A of
the Internal Revenue Code (e.g., domestic
service employment taxes under section
3510).
(b)Duress. For rules relating to the
treatment of returns signed under duress,
see§1.6013–4(d).
(c)Prior closing agreement or offer in
compromise—(1)In general. A request-
ing spouse is not entitled to relief from
jointandseveralliabilityunder
§1.6015–2, 1.6015–3, or 1.6015–4 for
any tax year for which the requesting
spouse has entered into a closing agree-
ment with the Commissioner that dis-
poses of the same liability that is the sub-
ject of the claim for relief. In addition, a
requesting spouse is not entitled to relief
from joint and several liability under
§1.6015–2, 1.6015–3, or 1.6015–4 for
any tax year for which the requesting
spouse has entered into an offer in com-
promise with the Commissioner. For rules
relating to the effect of closing agree-
ments and offers in compromise, see sec-
tions 7121 and 7122, and the regulations
thereunder.
(2)Exception for agreements relating
to TEFRA partnership proceedings. The
rule in paragraph (c)(1) of this section
regarding the unavailability of relief from
joint and several liability when the liabil-
ity to which the claim for relief relates
was the subject of a prior closing agree-
ment entered into by the requesting
spouse, shall not apply to an agreement
described in section 6224(c) with respect
to partnership items (or any penalty, addi-
tion to tax, or additional amount that
relates to adjustments to partnership
items) that is entered into while the
requesting spouse is a party to a pending
partnership-level proceeding conducted
under the provisions of subchapter C of
chapter 63 of subtitle F of the Internal
Revenue Code (TEFRA partnership pro-
ceeding). If, however, a requesting spouse
enters into a closing agreement pertaining
to any penalty, addition to tax, or addi-
tional amount that relates to adjustments
to partnership items, at a time when the
requesting spouse is not a party to a pend-
ing TEFRA partnership proceeding (e.g.,
in connection with an affected items pro-
ceeding), then the provisions of paragraph
(c)(1) shall apply. Similarly, if a request-
ing spouse enters into a closing agree-
ment with respect to both partnership
items (including affected items) and non-
partnership items, while the requesting
spouse is a party to a pending TEFRA
partnership proceeding, the provisions of
paragraph (c)(1) shall apply to the portion
of the closing agreement that relates to
nonpartnership items and the provisions
of this paragraph (c)(2) shall apply to the
remainder of the closing agreement.
(3)Examples. The following examples
illustrate the rules of this paragraph (c):
Example 1. H and W file joint returns for taxable
years 2002–2004, on which they claim losses attrib-
utable to H’s limited partnership interest in Partner-
ship A. In January 2006, the Internal Revenue Ser-
vice commences an audit under the provisions of
subchapter C of chapter 63 of subtitle F of the Inter-
nal Revenue Code (TEFRA partnership proceeding)
regarding Partnership A’s 2002–2004 taxable years,
and sends H and W a notice under section
6223(a)(1). In September 2007, H files a bankruptcy
petition under chapter 7 of the Bankruptcy Code and
receives a discharge in April 2008. In August 2008,
H and W enter into a closing agreement with the
Internal Revenue Service, in which H and W agree
to the disallowance of some of the claimed losses
from Partnership A for taxable years 2002 through
2007. W may not later claim relief from joint and
several liability under section 6015 as to the disal-
lowed losses attributable to Partnership A for tax-
able years 2002 to 2007. This is because at the time
W entered into the closing agreement, H’s partner-
ship items attributable to Partnership A had con-
verted to nonpartnership items as a result of H’s fil-
ing of the bankruptcy petition. The conversion of
H’s items also terminated W’s status as a partner in
the TEFRA partnership proceeding regarding Part-
nership A. Consequently, the closing agreement did
not pertain to partnership items and W was not a
party to a pending partnership-level proceeding
regarding Partnership A when she entered into the
closing agreement. Accordingly, the exception in
paragraph (c)(2) of this section for agreements relat-
ing to TEFRA partnership proceedings does not
apply.
Example 2. H and W file a joint return for tax-
able year 2002, on which they claim $25,000 in
losses attributable to H’s general partnership interest
in Partnership B. In November 2003, the Service
proposes a deficiency in tax relating to H’s and W’s
2002 joint return arising from omitted taxable inter-
est income in the amount of $2,000 that is attribut-
able to H. In July 2005, the Internal Revenue Ser-
vice commences a TEFRA partnership proceeding
regarding Partnership B’s 2002 and 2003 taxable
years, and sends H and W a notice under section
6223(a)(1). In March 2006, H and W enter into a
closing agreement with the Service. The closing
agreement provides for the disallowance of the
claimed losses from Partnership B in excess of H’s
and W’s out-of-pocket expenditures relating to Part-
nership B for taxable year 2002 and any subsequent
year(s) in which H and W claimed losses from Part-
nership B. In addition, H and W agree to the impo-
sition of the accuracy-related penalty under section
6662 with respect to the disallowed losses attribut-
able to partnership B. In the closing agreement, H
and W also agree to the deficiency resulting from
the omitted interest income for taxable year 2002.
W may not later claim relief from joint and several
liability under section 6015 as to the deficiency in
tax attributable to the omitted income of $2,000 for
taxable year 2002, because this portion of the clos-
ing agreement pertains to nonpartnership items. In
contrast, W may claim relief from joint and several
liability as to the disallowed losses and accuracy-
related penalty attributable to Partnership B for tax-
able year 2002 or any subsequent year(s). This is
because this portion of the closing agreement per-
tains to partnership and affected items and was
entered into at a time when W was a party to the
pending partnership-level proceeding regarding
Partnership B. Consequently, W never had the
opportunity to raise the innocent spouse defense in
the course of that TEFRA partnership proceeding.
(See§1.6015–5(b)(5) relating to premature claims).
(d)Fraudulent scheme. If the Secre-
tary establishes that a spouse transferred
assets to the other spouse as part of a
fraudulent scheme, relief is not available
under section 6015, and section
6013(d)(3) applies to the return. For pur-
poses of this section, a fraudulent scheme
includes a scheme to defraud the Service
or another third party, including, but not
limited to, creditors, ex-spouses, and
business partners.
(e)Res judicata and collateral estop-
pel. A requesting spouse is barred from
relief from joint and several liability
under section 6015 byres judicatafor
any tax year for which a court of compe-
tent jurisdiction has rendered a final deci-
sion on the requesting spouse’s tax liabil-
ity if relief under section 6015 was at
issue in the prior proceeding, or if the
requesting spouse meaningfully partici-
pated in that proceeding and could have
raised relief under section 6015. A
requesting spouse has not meaningfully
participated in a prior proceeding if, due
to the effective date of section 6015,
relief under section 6015 was not avail-
able in that proceeding. Also, any final
decisions rendered by a court of compe-
tent jurisdiction regarding issues relevant
to section 6015 are conclusive and the
requesting spouse may be collaterally
estopped from relitigating those issues.
(f)Community property laws—(1)In
general. In determining whether relief is
available under§1.6015–2, 1.6015–3, or
1.6015–4, items of income, credits, and
deductions are generally allocated to the
2002–32 I.R.B.304August 12, 2002

spouses without regard to the operation of
community property laws. An erroneous
item is attributed to the individual whose
activities gave rise to such item. See
§1.6015–3(d)(2).
(2)Example. The following example
illustrates the rule of this paragraph (f):
Example. (i) H and W are married and have
lived in State A (a community property state) since
1987. On April 15, 2003, H and W file a joint Fed-
eral income tax return for the 2002 taxable year. In
August 2005, the Internal Revenue Service proposes
a $17,000 deficiency with respect to the 2002 joint
return. A portion of the deficiency is attributable to
$20,000 of H’s unreported interest income from his
individual bank account. The remainder of the defi-
ciency is attributable to $30,000 of W’s disallowed
business expense deductions. Under the laws of
State A, H and W each own½of all income earned
and property acquired during the marriage.
(ii) In November 2005, H and W divorce and W
timely elects to allocate the deficiency. Even though
the laws of State A provide that½of the interest
income is W’s, for purposes of relief under this sec-
tion, the $20,000 unreported interest income is allo-
cable to H, and the $30,000 disallowed deduction is
allocable to W. The community property laws of
State A are not considered in allocating items for
this purpose.
(g)Scopeofthissectionand
§§1.6015–2 through 1.6015–9. This sec-
tion and§§1.6015–2 through 1.6015–9
do not apply to any portion of a liability
for any taxable year for which a claim for
credit or refund is barred by operation of
law or rule of law.
(h)Definitions—(1)Requesting
spouse. A requesting spouse is an indi-
vidual who filed a joint return and elects
relief from Federal income tax liability
arising from that return under§1.6015–2
or 1.6015–3, or requests relief from Fed-
eral income tax liability arising from that
return under§1.6015–4.
(2)Nonrequesting spouse. A nonre-
questing spouse is the individual with
whom the requesting spouse filed the
joint return for the year for which relief
from liability is sought.
(3)Item. An item is that which is
required to be separately listed on an indi-
vidual income tax return or any required
attachments. Items include, but are not
limited to, gross income, deductions,
credits, and basis.
(4)Erroneous item. An erroneous item
is any item resulting in an understatement
or deficiency in tax to the extent that such
item is omitted from, or improperly
reported (including improperly character-
ized) on an individual income tax return.
For example, unreported income from an
investment asset resulting in an under-
statement or deficiency in tax is an erro-
neous item. Similarly, ordinary income
that is improperly reported as capital gain
resulting in an understatement or defi-
ciency in tax is also an erroneous item. In
addition, a deduction for an expense that
is personal in nature that results in an
understatement or deficiency in tax is an
erroneous item of deduction. An errone-
ous item is also an improperly reported
item that affects the liability on other
returns (e.g., an improper net operating
loss that is carried back to a prior year’s
return). Penalties and interest are not
erroneous items. Rather, relief from pen-
alties and interest will generally be deter-
mined based on the proportion of the total
erroneous items from which the request-
ing spouse is relieved. If a penalty relates
to a particular erroneous item, see
§1.6015–3(d)(4)(iv)(B).
(5)Election or request. A qualifying
election under§1.6015–2 or 1.6015–3, or
request under§1.6015–4, is the first
timely claim for relief from joint and sev-
eral liability for the tax year for which
relief is sought. A qualifying election also
includes a requesting spouse’s second
election to seek relief from joint and sev-
eral liability for the same tax year under
§1.6015–3 when the additional qualifica-
tions of paragraphs (h)(5)(i) and (ii) of
this section are met—
(i) The requesting spouse did not
qualify for relief under§1.6015–3 when
the Internal Revenue Service considered
the first election solely because the quali-
fications of§1.6015–3(a) were not satis-
fied; and
(ii) At the time of the second election,
thequalificationsforreliefunder
§1.6015–3(a) are satisfied.
(i) [Reserved]
(j)Transferee liability—(1)In general.
The relief provisions of section 6015 do
not negate liability that arises under the
operation of other laws. Therefore, a
requesting spouse who is relieved of joint
and several liability under§1.6015–2,
1.6015–3, or 1.6015–4 may nevertheless
remain liable for the unpaid tax (includ-
ing additions to tax, penalties, and inter-
est) to the extent provided by Federal or
state transferee liability or property laws.
For the rules regarding the liability of
transferees,seesections 6901 through
6904 and the regulations thereunder. In
addition, the requesting spouse’s property
may be subject to collection under Fed-
eral or state property laws.
(2)Example. The following example
illustrates the rule of this paragraph (j):
Example. H and W timely file their 1998 joint
income tax return on April 15, 1999. H dies in
March 2000, and the executor of H’s will transfers
all of the estate’s assets to W. In July 2001, the
Internal Revenue Service assesses a deficiency for
the 1998 return. The items giving rise to the defi-
ciency are attributable to H. W is relieved of the
liability under section 6015, and H’s estate remains
solely liable. The Internal Revenue Service may
seek to collect the deficiency from W to the extent
permitted under Federal or state transferee liability
or property laws.
§1.6015–2 Relief from liability
applicable to all qualifying joint filers.
(a)In general. A requesting spouse
may be relieved of joint and several
liability for tax (including additions to
tax, penalties, and interest) from an
understatement for a taxable year under
this section if the requesting spouse elects
the application of this section in accor-
dance with§§1.6015–1(h)(5) and
1.6015–5, and—
(1) A joint return was filed for the tax-
able year;
(2) On the return there is an under-
statement attributable to erroneous items
of the nonrequesting spouse;
(3) The requesting spouse establishes
that in signing the return he or she did not
know and had no reason to know of the
understatement; and
(4) It is inequitable to hold the request-
ing spouse liable for the deficiency attrib-
utable to the understatement.
(b)Understatement. The termunder-
statementhas the meaning given to such
term by section 6662(d)(2)(A) and the
regulations thereunder.
(c)Knowledge or reason to know.A
requesting spouse has knowledge or rea-
son to know of an understatement if he or
she actually knew of the understatement,
or if a reasonable person in similar cir-
cumstances would have known of the
understatement. For rules relating to a
requesting spouse’s actual knowledge, see
§1.6015–3(c)(2). All of the facts and cir-
cumstances are considered in determining
whether a requesting spouse had reason to
know of an understatement. The facts and
circumstances that are considered include,
but are not limited to, the nature of the
erroneous item and the amount of the
August 12, 20023052002–32 I.R.B.

erroneous item relative to other items; the
couple’s financial situation; the request-
ing spouse’s educational background and
business experience; the extent of the
requesting spouse’s participation in the
activity that resulted in the erroneous
item; whether the requesting spouse
failed to inquire, at or before the time the
return was signed, about items on the
return or omitted from the return that a
reasonable person would question; and
whether the erroneous item represented a
departure from a recurring pattern
reflected in prior years’returns (e.g.,
omitted income from an investment regu-
larly reported on prior years’returns).
(d)Inequity. All of the facts and cir-
cumstances are considered in determining
whether it is inequitable to hold a request-
ing spouse jointly and severally liable for
an understatement. One relevant factor
for this purpose is whether the requesting
spouse significantly benefitted, directly or
indirectly, from the understatement. A sig-
nificant benefit is any benefit in excess of
normal support. Evidence of direct or
indirect benefit may consist of transfers
of property or rights to property, includ-
ing transfers that may be received several
years after the year of the understatement.
Thus, for example, if a requesting spouse
receives property (including life insur-
ance proceeds) from the nonrequesting
spouse that is beyond normal support and
traceable to items omitted from gross
income that are attributable to the nonre-
questing spouse, the requesting spouse
will be considered to have received sig-
nificant benefit from those items. Other
factors that may also be taken into
account, if the situation warrants, include
the fact that the requesting spouse has
been deserted by the nonrequesting
spouse, the fact that the spouses have
been divorced or separated, or that the
requesting spouse received benefit on the
return from the understatement. For guid-
ance concerning the criteria to be used in
determining whether it is inequitable to
hold a requesting spouse jointly and sev-
erally liable under this section, see Rev.
Proc. 2000–15, 2000–1 C.B. 447, or other
guidance published by the Treasury and
IRS (see§601.601(d)(2) of this chapter).
(e)Partial relief—(1)In general.Ifa
requesting spouse had no knowledge or
reason to know of only a portion of an
erroneous item, the requesting spouse
may be relieved of the liability attribut-
able to that portion of that item, if all
other requirements are met with respect to
that portion.
(2)Example. The following example
illustrates the rules of this paragraph (e):
Example. H and W are married and file their
2004 joint income tax return in March 2005. In
April 2006, H is convicted of embezzling $2 million
from his employer during 2004. H kept all of his
embezzlement income in an individual bank
account, and he used most of the funds to support
his gambling habit. H and W had a joint bank
account into which H and W deposited all of their
reported income. Each month during 2004, H trans-
ferred an additional $10,000 from the individual
account to H and W’s joint bank account. W paid
the household expenses using this joint account, and
regularly received the bank statements relating to
the account. W had no knowledge or reason to know
of H’s embezzling activities. However, W did have
knowledge and reason to know of $120,000 of the
$2 million of H’s embezzlement income at the time
she signed the joint return because that amount
passed through the couple’s joint bank account.
Therefore, W may be relieved of the liability arising
from $1,880,000 of the unreported embezzlement
income, but she may not be relieved of the liability
for the deficiency arising from $120,000 of the
unreported embezzlement income of which she
knew and had reason to know.
§1.6015–3 Allocation of deficiency for
individuals who are no longer married,
are legally separated, or are not
members of the same household.
(a)Election to allocate deficiency.A
requesting spouse may elect to allocate a
deficiency if, as defined in paragraph (b)
of this section, the requesting spouse is
divorced, widowed, or legally separated,
or has not been a member of the same
household as the nonrequesting spouse at
any time during the 12-month period end-
ing on the date an election for relief is
filed. For purposes of this section, the
marital status of a deceased requesting
spouse will be determined on the earlier
of the date of the election or the date of
death in accordance with section
7703(a)(1). Subject to the restrictions of
paragraph (c) of this section, an eligible
requesting spouse who elects the applica-
tion of this section in accordance with
§§1.6015–1(h)(5) and 1.6015–5 gener-
ally may be relieved of joint and several
liability for the portion of any deficiency
that is allocated to the nonrequesting
spouse pursuant to the allocation methods
set forth in paragraph (d) of this section.
Relief may be available to both spouses
filing the joint return if each spouse is
eligible for and elects the application of
this section.
(b)Definitions—(1)Divorced. A deter-
mination of whether a requesting spouse
is divorced for purposes of this section
will be made in accordance with section
7703 and the regulations thereunder. Such
determination will be made as of the date
the election is filed.
(2)Legally separated. A determination
of whether a requesting spouse is legally
separated for purposes of this section will
be made in accordance with section 7703
and the regulations thereunder. Such
determination will be made as of the date
the election is filed.
(3)Members of the same household—
(i)Temporary absences. A requesting
spouse and a nonrequesting spouse are
considered members of the same house-
hold during either spouse’s temporary
absences from the household if it is rea-
sonable to assume that the absent spouse
will return to the household, and the
household or a substantially equivalent
household is maintained in anticipation of
such return. Examples of temporary
absences may include, but are not limited
to, absence due to incarceration, illness,
business, vacation, military service, or
education.
(ii)Separate dwellings. A husband and
wife who reside in the same dwelling are
considered members of the same house-
hold. In addition, a husband and wife who
reside in two separate dwellings are con-
sidered members of the same household if
the spouses are not estranged or one
spouse is temporarily absent from the oth-
er’s household within the meaning of
paragraph (b)(3)(i) of this section.
(c)Limitations—(1)No refunds. Relief
under this section is only available for
unpaid liabilities resulting from under-
statements of liability. Refunds are not
authorized under this section.
(2)Actual knowledge—(i)In general.
If, under section 6015(c)(3)(C), the Sec-
retary demonstrates that, at the time the
return was signed, the requesting spouse
had actual knowledge of an erroneous
item that is allocable to the nonrequesting
spouse, the election to allocate the defi-
ciency attributable to that item is invalid,
and the requesting spouse remains liable
for the portion of the deficiency attribut-
able to that item. The IRS, having
2002–32 I.R.B.306August 12, 2002

both the burden of production and the
burden of persuasion, must establish, by a
preponderance of the evidence, that the
requesting spouse had actual knowledge
of the erroneous item in order to invali-
date the election.
(A)Omitted income. In the case of
omitted income, knowledge of the item
includes knowledge of the receipt of the
income. For example, assume W received
$5,000 of dividend income from her
investment in X Co. but did not report it
on the joint return. H knew that W
received $5,000 of dividend income from
X Co. that year. H had actual knowledge
of the erroneous item (i.e., $5,000 of
unreported dividend income from X Co.),
and no relief is available under this sec-
tion for the deficiency attributable to the
dividend income from X Co. This rule
applies equally in situations where the
other spouse has unreported income
although the spouse does not have an
actual receipt of cash (e.g., dividend rein-
vestment or a distributive share from a
flow-through entity shown on Schedule
K–1,“Partner’s Share of Income, Credits,
Deductions, etc.”).
(B)Deduction or credit—(1)Errone-
ous deductions in general. In the case of
an erroneous deduction or credit, knowl-
edge of the item means knowledge of the
facts that made the item not allowable as
a deduction or credit.
(2)Fictitious or inflated deduction.If
a deduction is fictitious or inflated, the
IRS must establish that the requesting
spouse actually knew that the expenditure
was not incurred, or not incurred to that
extent.
(ii)Partial knowledge. If a requesting
spouse had actual knowledge of only a
portion of an erroneous item, then relief
is not available for that portion of the
erroneous item. For example, if H knew
that W received $1,000 of dividend
income and did not know that W received
an additional $4,000 of dividend income,
relief would not be available for the por-
tion of the deficiency attributable to the
$1,000 of dividend income of which H
had actual knowledge. A requesting
spouse’s actual knowledge of the proper
tax treatment of an item is not relevant
for purposes of demonstrating that the
requesting spouse had actual knowledge
of an erroneous item. For example,
assume H did not know W’s dividend
income from X Co. was taxable, but
knew that W received the dividend
income. Relief is not available under this
section. In addition, a requesting spouse’s
knowledge of how an erroneous item was
treated on the tax return is not relevant to
a determination of whether the requesting
spouse had actual knowledge of the item.
For example, assume that H knew of W’s
dividend income, but H failed to review
the completed return and did not know
that W omitted the dividend income from
the return. Relief is not available under
this section.
(iii)Knowledge of the source not suffi-
cient. Knowledge of the source of an
erroneous item is not sufficient to estab-
lish actual knowledge. For example,
assume H knew that W owned X Co.
stock, but H did not know that X Co. paid
dividends to W that year. H’s knowledge
of W’s ownership in X Co. is not suffi-
cient to establish that H had actual knowl-
edge of the dividend income from X Co.
In addition, a requesting spouse’s actual
knowledge may not be inferred when the
requesting spouse merely had reason to
know of the erroneous item. Even if H’s
knowledge of W’s ownership interest in
X Co. indicates a reason to know of the
dividend income, actual knowledge of
such dividend income cannot be inferred
from H’s reason to know. Similarly, the
IRS need not establish that a requesting
spouse knew of the source of an errone-
ous item in order to establish that the
requesting spouse had actual knowledge
of the item itself. For example, assume H
knew that W received $1,000, but he did
not know the source of the $1,000. W and
H omit the $1,000 from their joint return.
H has actual knowledge of the item giv-
ing rise to the deficiency ($1,000), and
relief is not available under this section.
(iv)Factors supporting actual knowl-
edge. To demonstrate that a requesting
spouse had actual knowledge of an erro-
neous item at the time the return was
signed, the IRS may rely upon all of the
facts and circumstances. One factor that
may be relied upon in demonstrating that
a requesting spouse had actual knowledge
of an erroneous item is whether the
requesting spouse made a deliberate effort
to avoid learning about the item in order
to be shielded from liability. This factor,
together with all other facts and circum-
stances, may demonstrate that the
requesting spouse had actual knowledge
of the item, and the requesting spouse’s
election would be invalid with respect to
that entire item. Another factor that may
be relied upon in demonstrating that a
requesting spouse had actual knowledge
of an erroneous item is whether the
requesting spouse and the nonrequesting
spouse jointly owned the property that
resulted in the erroneous item. Joint own-
ership is a factor supporting a finding that
the requesting spouse had actual knowl-
edge of an erroneous item. For purposes
of this paragraph, a requesting spouse
will not be considered to have had an
ownership interest in an item based solely
on the operation of community property
law. Rather, a requesting spouse who
resided in a community property state at
the time the return was signed will be
considered to have had an ownership
interest in an item only if the requesting
spouse’s name appeared on the ownership
documents, or there otherwise is an indi-
cation that the requesting spouse asserted
dominion and control over the item. For
example, assume H and W live in State A,
a community property state. After their
marriage, H opens a bank account in his
name. Under the operation of the commu-
nity property laws of State A, W owns½
of the bank account. However, W does
not have an ownership interest in the
account for purposes of this paragraph
(c)(2)(iv) because the account is not held
in her name and there is no other indica-
tion that she asserted dominion and con-
trol over the item.
(v)Abuse exception. If the requesting
spouse establishes that he or she was the
victim of domestic abuse prior to the time
the return was signed, and that, as a result
of the prior abuse, the requesting spouse
did not challenge the treatment of any
items on the return for fear of the nonre-
questing spouse’s retaliation, the limita-
tion on actual knowledge in this para-
graph (c) will not apply. However, if the
requesting spouse involuntarily executed
the return, the requesting spouse may
choose to establish that the return was
signed under duress. In such a case,
§1.6013–4(d) applies.
(3)Disqualified asset transfers—(i)In
general. The portion of the deficiency for
which a requesting spouse is liable is
increased (up to the entire amount of the
August 12, 20023072002–32 I.R.B.

deficiency) by the value of any disquali-
fied asset that was transferred to the
requesting spouse. For purposes of this
paragraph (c)(3), the value of a disquali-
fied asset is the fair market value of the
asset on the date of the transfer.
(ii)Disqualified asset defined. A dis-
qualified asset is any property or right to
property that was transferred from the
nonrequesting spouse to the requesting
spouse if the principal purpose of the
transfer was the avoidance of tax or pay-
ment of tax (including additions to tax,
penalties, and interest).
(iii)Presumption. Any asset trans-
ferred from the nonrequesting spouse to
the requesting spouse during the
12-month period before the mailing date
of the first letter of proposed deficiency
(e.g., a 30-day letter or, if no 30-day let-
ter is mailed, a notice of deficiency) is
presumed to be a disqualified asset. The
presumption also applies to any asset that
is transferred from the nonrequesting
spouse to the requesting spouse after the
mailing date of the first letter of proposed
deficiency. The presumption does not
apply, however, if the requesting spouse
establishes that the asset was transferred
pursuant to a decree of divorce or sepa-
rate maintenance or a written instrument
incident to such a decree. If the presump-
tion does not apply, but the Internal Rev-
enue Service can establish that the pur-
pose of the transfer was the avoidance of
tax or payment of tax, the asset will be
disqualified, and its value will be added
to the amount of the deficiency for which
the requesting spouse remains liable. If
the presumption applies, a requesting
spouse may still rebut the presumption by
establishing that the principal purpose of
the transfer was not the avoidance of tax
or payment of tax.
(4)Examples. The following examples
illustrate the rules in this paragraph (c):
Example 1.Actual knowledge of an erroneous
item. (i) H and W file their 2001 joint Federal
income tax return on April 15, 2002. On the return,
H and W report W’s self-employment income, but
they do not report W’s self-employment tax on that
income. H and W divorce in July 2003. In August
2003, H and W receive a 30-day letter from the
Internal Revenue Service proposing a deficiency
with respect to W’s unreported self-employment tax
on the 2001 return. On November 4, 2003, H files
an election to allocate the deficiency to W. The erro-
neous item is the self-employment income, and it is
allocable to W. H knows that W earned income in
2001 as a self-employed musician, but he does not
know that self-employment tax must be reported on
and paid with a joint return.
(ii) H’s election to allocate the deficiency to W
is invalid because, at the time H signed the joint
return, H had actual knowledge of W’s self-
employment income. The fact that H was unaware
of the tax consequences of that income (i.e., that an
individual is required to pay self-employment tax on
that income) is not relevant.
Example 2.Actual knowledge not inferred from
a requesting spouse’s reason to know. (i) H has long
been an avid gambler. H supports his gambling habit
and keeps all of his gambling winnings in an indi-
vidual bank account, held solely in his name. W
knows about H’s gambling habit and that he keeps a
separate bank account, but she does not know
whether he has any winnings because H does not
tell her, and she does not otherwise know of H’s
bank account transactions. H and W file their 2001
joint Federal income tax return on April 15, 2002.
On October 31, 2003, H and W receive a 30-day
letter proposing a $100,000 deficiency relating to
H’s unreported gambling income. In February 2003,
H and W divorce, and in March 2004, W files an
election under section 6015(c) to allocate the
$100,000 deficiency to H.
(ii) While W may have had reason to know of
the gambling income because she knew of H’s gam-
bling habit and separate account, W did not have
actual knowledge of the erroneous item (i.e., the
gambling winnings). The Internal Revenue Service
may not infer actual knowledge from W’s reason to
know of the income. Therefore, W’s election to allo-
cate the $100,000 deficiency to H is valid.
Example 3.Actual knowledge and failure to
review return. (i) H and W are legally separated. In
February 1999, W signs a blank joint Federal
income tax return for 1998 and gives it to H to fill
out. The return was timely filed on April 15, 1999.
In September 2001, H and W receive a 30-day letter
proposing a deficiency relating to $100,000 of unre-
ported dividend income received by H with respect
to stock of ABC Co. owned by H. W knew that H
received the $100,000 dividend payment in August
1998, but she did not know whether H reported that
payment on the joint return.
(ii) On January 30, 2002, W files an election to
allocate the deficiency from the 1998 return to H. W
claims she did not review the completed joint return,
and therefore, she had no actual knowledge that
there was an understatement of the dividend income.
W’s election to allocate the deficiency to H is
invalid because she had actual knowledge of the
erroneous item (dividend income from ABC Co.) at
the time she signed the return. The fact that W
signed a blank return is irrelevant. The result would
be the same if W had not reviewed the completed
return or if W had reviewed the completed return
and had not noticed that the item was omitted.
Example 4.Actual knowledge of an erroneous
item of income. (i) H and W are legally separated. In
June 2004, a deficiency is proposed with respect to
H’s and W’s 2002 joint Federal income tax return
that is attributable to $30,000 of unreported income
from H’s plumbing business that should have been
reported on a Schedule C. No Schedule C was
attached to the return. At the time W signed the
return, W knew that H had a plumbing business but
did not know whether H received any income from
the business. W’s election to allocate to H the defi-
ciency attributable to the $30,000 of unreported
plumbing income is valid.
(ii) Assume the same facts as in paragraph (i) of
thisExample 5except that, at the time W signed the
return, W knew that H received $20,000 of plumb-
ing income. W’s election to allocate to H the defi-
ciency attributable to the $20,000 of unreported
plumbing income (of which W had actual knowl-
edge) is invalid. W’s election to allocate to H the
deficiency attributable to the $10,000 of unreported
plumbing income (of which W did not have actual
knowledge) is valid.
(iii) Assume the same facts as in paragraph (i) of
thisExample 5except that, at the time W signed the
return, W did not know the exact amount of H’s
plumbing income. W did know, however, that H
received at least $8,000 of plumbing income. W’s
election to allocate to H the deficiency attributable
to $8,000 of unreported plumbing income (of which
W had actual knowledge) is invalid. W’s election to
allocate to H the deficiency attributable to the
remaining $22,000 of unreported plumbing income
(of which W did not have actual knowledge) is
valid.
(iv) Assume the same facts as in paragraph (i) of
thisExample 5except that H reported $26,000 of
plumbing income on the return and omitted $4,000
of plumbing income from the return. At the time W
signed the return, W knew that H was a plumber,
but she did not know that H earned more than
$26,000 that year. W’s election to allocate to H the
deficiency attributable to the $4,000 of unreported
plumbing income is valid because she did not have
actual knowledge that H received plumbing income
in excess of $26,000.
(v) Assume the same facts as in paragraph (i) of
thisExample 5except that H reported only $20,000
of plumbing income on the return and omitted
$10,000 of plumbing income from the return. At the
time W signed the return, W knew that H earned at
least $26,000 that year as a plumber. However, W
did not know that, in reality, H earned $30,000 that
year as a plumber. W’s election to allocate to H the
deficiency attributable to the $6,000 of unreported
plumbing income (of which W had actual knowl-
edge) is invalid. W’s election to allocate to H the
deficiency attributable to the $4,000 of unreported
plumbing income (of which W did not have actual
knowledge) is valid.
Example 5.Actual knowledge of a deduction
that is an erroneous item. (i) H and W are legally
separated. In February 2005, a deficiency is asserted
with respect to their 2002 joint Federal income tax
return. The deficiency is attributable to a disallowed
$1,000 deduction for medical expenses H claimed
he incurred. At the time W signed the return, W
knew that H had not incurred any medical expenses.
W’s election to allocate to H the deficiency attribut-
able to the disallowed medical expense deduction is
invalid because W had actual knowledge that H had
not incurred any medical expenses.
(ii) Assume the same facts as in paragraph (i) of
thisExample 6except that, at the time W signed the
return, W did not know whether H had incurred any
medical expenses. W’s election to allocate to H the
deficiency attributable to the disallowed medical
expense deduction is valid because she did not have
actual knowledge that H had not incurred any medi-
cal expenses.
2002–32 I.R.B.308August 12, 2002

(iii) Assume the same facts as in paragraph (i) of
thisExample 6except that the Internal Revenue Ser-
vice disallowed $400 of the $1,000 medical expense
deduction. At the time W signed the return, W knew
that H had incurred some medical expenses but did
not know the exact amount. W’s election to allocate
to H the deficiency attributable to the disallowed
medical expense deduction is valid because she did
not have actual knowledge that H had not incurred
medical expenses (in excess of the floor amount
under section 213(a)) of more than $600.
(iv) Assume the same facts as in paragraph (i) of
thisExample 6except that H claims a medical
expense deduction of $10,000 and the Internal Rev-
enue Service disallows $9,600. At the time W
signed the return, W knew H had incurred some
medical expenses but did not know the exact
amount. W also knew that H incurred medical
expenses (in excess of the floor amount under sec-
tion 213(a)) of no more than $1,000. W’s election to
allocate to H the deficiency attributable to the por-
tion of the overstated deduction of which she had
actual knowledge ($9,000) is invalid. W’s election
to allocate the deficiency attributable to the portion
of the overstated deduction of which she had no
knowledge ($600) is valid.
Example 6.Disqualified asset presumption. (i) H
and W are divorced. In May 1999, W transfers
$20,000 to H, and in April 2000, H and W receive a
30-day letter proposing a $40,000 deficiency on
their 1998 joint Federal income tax return. The
liability remains unpaid, and in October 2000, H
elects to allocate the deficiency under this section.
Seventy-five percent of the net amount of erroneous
items are allocable to W, and 25% of the net amount
of erroneous items are allocable to H.
(ii) In accordance with the proportionate alloca-
tion method (see paragraph (d)(4) of this section), H
proposes that $30,000 of the deficiency be allocated
to W and $10,000 be allocated to himself. H submits
a signed statement providing that the principal pur-
pose of the $20,000 transfer was not the avoidance
of tax or payment of tax, but he does not submit any
documentation indicating the reason for the transfer.
H has not overcome the presumption that the
$20,000 was a disqualified asset. Therefore, the por-
tion of the deficiency for which H is liable
($10,000) is increased by the value of the disquali-
fied asset ($20,000). H is relieved of liability for
$10,000 of the $30,000 deficiency allocated to W,
and remains jointly and severally liable for the
remaining $30,000 of the deficiency (assuming that
H does not qualify for relief under any other provi-
sion).
Example 7.Disqualified asset presumption inap-
plicable. On May 1, 2001, H and W receive a
30-day letter regarding a proposed deficiency on
their 1999 joint Federal income tax return relating to
unreported capital gain from H’s sale of his invest-
ment in Z stock. W had no actual knowledge of the
stock sale. The deficiency is assessed in November
2001, and in December 2001, H and W divorce.
According to a decree of divorce, H must transfer½
of his interest in mutual fund A to W. The transfer
takes place in February 2002. In August 2002, W
elects to allocate the deficiency to H. Although the
transfer of½of H’s interest in mutual fund A took
place after the 30-day letter was mailed, the mutual
fund interest is not presumed to be a disqualified
asset because the transfer of H’s interest in the fund
was made pursuant to a decree of divorce.
Example 8.Overcoming the disqualified asset
presumption. (i) H and W are married for 25 years.
Every September, on W’s birthday, H gives W a gift
of $500. On February 28, 2002, H and W receive a
30-day letter from the Internal Revenue Service
relating to their 1998 joint individual Federal
income tax return. The deficiency relates to H’s
Schedule C business, and W had no knowledge of
the items giving rise to the deficiency. H and W are
legally separated in June 2003, and, despite the
separation, H continues to give W $500 each year
for her birthday. H is not required to give such
amounts pursuant to a decree of divorce or separate
maintenance.
(ii) On January 27, 2004, W files an election to
allocate the deficiency to H. The $1,500 transferred
from H to W from February 28, 2001 (a year before
the 30-day letter was mailed) to the present is pre-
sumed disqualified. However, W may overcome the
presumption that such amounts were disqualified by
establishing that such amounts were birthday gifts
from H and that she has received such gifts during
their entire marriage. Such facts would show that
the amounts were not transferred for the purpose of
avoidance of tax or payment of tax.
(d)Allocation—(1)In general. (i) An
election to allocate a deficiency limits the
requesting spouse’s liability to that por-
tion of the deficiency allocated to the
requesting spouse pursuant to this section.
(ii) Only a requesting spouse may
receive relief. A nonrequesting spouse
who does not also elect relief under this
section remains liable for the entire
amount of the deficiency. Even if both
spouses elect to allocate a deficiency
under this section, there may be a portion
of the deficiency that is not allocable, for
which both spouses remain jointly and
severally liable.
(2)Allocation of erroneous items. For
purposes of allocating a deficiency under
this section, erroneous items are generally
allocated to the spouses as if separate
returns were filed, subject to the follow-
ing four exceptions:
(i)Benefit on the return. An erroneous
item that would otherwise be allocated to
the nonrequesting spouse is allocated to
the requesting spouse to the extent that
the requesting spouse received a tax ben-
efit on the joint return.
(ii)Fraud. The Internal Revenue Ser-
vice may allocate any item between the
spouses if the Internal Revenue Service
establishes that the allocation is appropri-
ate due to fraud by one or both spouses.
(iii)Erroneous items of income. Erro-
neous items of income are allocated to the
spouse who was the source of the income.
Wage income is allocated to the spouse
who performed the services producing
such wages. Items of business or invest-
ment income are allocated to the spouse
who owned the business or investment. If
both spouses owned an interest in the
business or investment, the erroneous
item of income is generally allocated
between the spouses in proportion to each
spouse’s ownership interest in the busi-
ness or investment, subject to the limita-
tions of paragraph (c) of this section. In
the absence of clear and convincing evi-
dence supporting a different allocation, an
erroneous income item relating to an asset
that the spouses owned jointly is gener-
ally allocated 50% to each spouse, subject
to the limitations in paragraph (c) of this
section and the exceptions in paragraph
(c)(2)(iv) of this section. For rules regard-
ing the effect of community property
laws, see§1.6015–1(f) and paragraph
(c)(2)(iv) of this section.
(iv)Erroneous deduction items. Erro-
neous deductions related to a business or
investment are allocated to the spouse
who owned the business or investment. If
both spouses owned an interest in the
business or investment, an erroneous
deduction item is generally allocated
between the spouses in proportion to each
spouse’s ownership interest in the busi-
ness or investment. In the absence of
clear and convincing evidence supporting
a different allocation, an erroneous
deduction item relating to an asset that
the spouses owned jointly is generally
allocated 50% to each spouse, subject to
the limitations in paragraph (c) of this
section and the exceptions in paragraph
(d)(4) of this section. Deduction items
unrelated to a business or investment are
also generally allocated 50% to each
spouse, unless the evidence shows that a
different allocation is appropriate.
(3)Burden of proof. Except for estab-
lishing actual knowledge under paragraph
(c)(2) of this section, the requesting
spouse must prove that all of the qualifi-
cations for making an election under this
section are satisfied and that none of the
limitations (including the limitation relat-
ing to transfers of disqualified assets)
apply. The requesting spouse must also
establish the proper allocation of the erro-
neous items.
(4)General allocation method—(i)
Proportionate allocation. (A) The portion
of a deficiency allocable to a spouse is
August 12, 20023092002–32 I.R.B.

the amount that bears the same ratio to
the deficiency as the net amount of erro-
neous items allocable to the spouse bears
to the net amount of all erroneous items.
This calculation may be expressed as fol-
lows:
X = (deficiency)x
net amount of erroneous items
allocable to the spouse
net amount of all erroneous items
where X = the portion of the deficiency allocable to the spouse.
(B) The proportionate allocation
applies to any portion of the deficiency
other than—
(1) Any portion of the deficiency
attributable to erroneous items allocable
to the nonrequesting spouse of which the
requesting spouse had actual knowledge;
(2) Any portion of the deficiency
attributable to separate treatment items
(as defined in paragraph (d)(4)(ii) of this
section);
(3) Any portion of the deficiency relat-
ing to the liability of a child (as defined
in paragraph (d)(4)(iii) of this section) of
the requesting spouse or nonrequesting
spouse;
(4) Any portion of the deficiency
attributable to alternative minimum tax
under section 55;
(5) Any portion of the deficiency
attributable to accuracy-related or fraud
penalties;
(6) Any portion of the deficiency allo-
cated pursuant to alternative allocation
methods authorized under paragraph
(d)(6) of this section.
(ii)Separate treatment items. Any por-
tion of a deficiency that is attributable to
an item allocable solely to one spouse and
that results from the disallowance of a
credit, or a tax or an addition to tax (other
than tax imposed by section 1 or section
55) that is required to be included with a
joint return (a separate treatment item) is
allocated separately to that spouse. If
such credit or tax is attributable in whole
or in part to both spouses, then the IRS
will determine on a case by case basis
how such item will be allocated. Once the
proportionate allocation is made, the
liability for the requesting spouse’s sepa-
rate treatment items is added to the
requesting spouse’s share of the liability.
(iii)Child’s liability. Any portion of a
deficiency relating to the liability of a
child of the requesting and nonrequesting
spouse is allocated jointly to both
spouses. For purposes of this paragraph, a
child does not include the taxpayer’s step-
son or stepdaughter, unless such child
was legally adopted by the taxpayer. If
the child is the child of only one of the
spouses, and the other spouse had not
legally adopted such child, any portion of
a deficiency relating to the liability of
such child is allocated solely to the parent
spouse.
(iv)Allocation of certain items—(A)
Alternative minimum tax. Any portion of
a deficiency relating to the alternative
minimum tax under section 55 will be
allocated appropriately.
(B)Accuracy-related and fraud penal-
ties. Any accuracy-related or fraud penal-
ties under section 6662 or 6663 are allo-
cated to the spouse whose item generated
the penalty.
(5)Examples. The following examples
illustrate the rules of this paragraph (d).
In each example, assume that the request-
ing spouse or spouses qualify to elect to
allocate the deficiency, that any election
is timely made, and that the deficiency
remains unpaid. In addition, unless other-
wise stated, assume that neither spouse
has actual knowledge of the erroneous
items allocable to the other spouse. The
examples are as follows:
Example 1.Allocation of erroneous items. (i) H
and W file a 2003 joint Federal income tax return on
April 15, 2004. On April 28, 2006, a deficiency is
assessed with respect to their 2003 return. Three
erroneous items give rise to the deficiency—
(A) Unreported interest income, of which W had
actual knowledge, from H’s and W’s joint bank
account;
(B) A disallowed business expense deduction on
H’s Schedule C; and
(C) A disallowed Lifetime Learning Credit for
W’s post-secondary education, paid for by W.
(ii) H and W divorce in May 2006, and in Sep-
tember 2006, W timely elects to allocate the defi-
ciency. The erroneous items are allocable as fol-
lows:
(A) The interest income would be allocated½to
H and½to W, except that W has actual knowledge
of it. Therefore, W’s election to allocate the portion
of the deficiency attributable to this item is invalid,
and W remains jointly and severally liable for it.
(B) The business expense deduction is allocable
to H.
(C) The Lifetime Learning Credit is allocable to
W.
Example 2.Proportionate allocation. (i) W and
H timely file their 2001 joint Federal income tax
return on April 15, 2002. On August 16, 2004, a
$54,000 deficiency is assessed with respect to their
2001 joint return. H and W divorce on October 14,
2004, and W timely elects to allocate the deficiency.
Five erroneous items give rise to the deficiency—
(A) A disallowed $15,000 business deduction
allocable to H;
(B) $20,000 of unreported income allocable to
H;
(C) A disallowed $5,000 deduction for educa-
tional expense allocable to H;
(D) A disallowed $40,000 charitable contribu-
tion deduction allocable to W; and
(E) A disallowed $40,000 interest deduction
allocable to W.
(ii) In total, there are $120,000 worth of errone-
ous items, of which $80,000 are attributable to W
and $40,000 are attributable to H.
W’s items
H’s items
$40,000 charitable deduction$15,000 business deduction
$40,000 interest deduction
$20,000 unreported income
$ 5,000 education deduction
$80,000$40,000
2002–32 I.R.B.310August 12, 2002

(iii) The ratio of erroneous items allocable to W
to the total erroneous items is 2/3 ($80,000/
$120,000). W’s liability is limited to $36,000 of the
deficiency (2/3 of $54,000). The Internal Revenue
Service may collect up to $36,000 from W and up
to $54,000 from H (the total amount collected, how-
ever, may not exceed $54,000). If H also made an
election, there would be no remaining joint and sev-
eral liability, and the Internal Revenue Service
would be permitted to collect $36,000 from W and
$18,000 from H.
Example 3.Proportionate allocation with joint
erroneous item. (i) On September 4, 2001, W elects
to allocate a $3,000 deficiency for the 1998 tax year
to H. Three erroneous items give rise to the
deficiency—
(A) Unreported interest in the amount of $4,000
from a joint bank account;
(B) A disallowed deduction for business
expenses in the amount of $2,000 attributable to H’s
business; and
(C) Unreported wage income in the amount of
$6,000 attributable to W’s second job.
(ii) The erroneous items total $12,000. Gener-
ally, income, deductions, or credits from jointly held
property that are erroneous items are allocable 50%
to each spouse. However, in this case, both spouses
had actual knowledge of the unreported interest
income. Therefore, W’s election to allocate the por-
tion of the deficiency attributable to this item is
invalid, and W and H remain jointly and severally
liable for this portion. Assume that this portion is
$1,000. W may allocate the remaining $2,000 of the
deficiency.
H’s items
W’s items
$2,000 business deduction$6,000 wage income
Total allocable items: $8,000
(iii) The ratio of erroneous items allocable to W
to the total erroneous items is 3/4 ($6,000/$8,000).
W’s liability is limited to $1,500 of the deficiency
(3/4 of $2,000) allocated to her. The Internal Rev-
enue Service may collect up to $2,500 from W (3/4
of the total allocated deficiency plus $1,000 of the
deficiency attributable to the joint bank account
interest) and up to $3,000 from H (the total amount
collected, however, cannot exceed $3,000).
(iv) Assume H also elects to allocate the 1998
deficiency. H is relieved of liability for 3/4 of the
deficiency, which is allocated to W. H’s relief totals
$1,500 (3/4 of $2,000). H remains liable for $1,500
of the deficiency (1/4 of the allocated deficiency
plus $1,000 of the deficiency attributable to the joint
bank account interest).
Example 4.Separate treatment items (STIs). (i)
On September 1, 2006, a $28,000 deficiency is
assessed with respect to H’s and W’s 2003 joint
return. The deficiency is the result of 4 erroneous
items—
(A) A disallowed Lifetime Learning Credit of
$2,000 attributable to H;
(B) A disallowed business expense deduction of
$8,000 attributable to H;
(C) Unreported income of $24,000 attributable
to W; and
(D) Unreported self-employment tax of $14,000
attributable to W.
(ii) H and W both elect to allocate the defi-
ciency.
(iii) The $2,000 Lifetime Learning Credit and
the $14,000 self-employment tax are STIs totaling
$16,000. The amount of erroneous items included in
computing the proportionate allocation ratio is
$32,000 ($24,000 unreported income and $8,000
disallowed business expense deduction). The
amount of the deficiency subject to proportionate
allocation is reduced by the amount of STIs
($28,000-$16,000 = $12,000).
(iv) Of the $32,000 of proportionate allocation
items, $24,000 is allocable to W, and $8,000 is allo-
cable to H.
W’s share of allocable items
H’s share of allocable items
3/4 ($24,000/$32,000)1/4 ($8,000/$32,000)
(v) W’s liability for the portion of the deficiency
subject to proportionate allocation is limited to
$9,000 (3/4 of $12,000) and H’s liability for such
portion is limited to $3,000 (1/4 of $12,000).
(vi) After the proportionate allocation is com-
pleted, the amount of the STIs is added to each
spouse’s allocated share of the deficiency.
W’s share of total deficiency
H’s share of total deficiency
$ 9,000 allocated deficiency$3,000 allocated deficiency
$14,000 self-employment tax$2,000 Lifetime Learning Credit
$23,000$5,000
(vii) Therefore, W’s liability is limited to
$23,000 and H’s liability is limited to $5,000.
Example 5.Requesting spouse receives a benefit
on the joint return from the nonrequesting spouse’s
erroneous item. (i) In 2001, H reports gross income
of $4,000 from his business on Schedule C, and W
reports $50,000 of wage income. On their 2001 joint
Federal income tax return, H deducts $20,000 of
business expenses resulting in a net loss from his
business of $16,000. H and W divorce in September
2002, and on May 22, 2003, a $5,200 deficiency is
assessed with respect to their 2001 joint return. W
elects to allocate the deficiency. The deficiency on
the joint return results from a disallowance of all of
H’s $20,000 of deductions.
(ii) Since H used only $4,000 of the disallowed
deductions to offset gross income from his business,
W benefitted from the other $16,000 of the disal-
lowed deductions used to offset her wage income.
Therefore, $4,000 of the disallowed deductions are
allocable to H and $16,000 of the disallowed deduc-
tions are allocable to W. W’s liability is limited to
$4,160 (4/5 of $5,200). If H also elected to allocate
the deficiency, H’s election to allocate the $4,160 of
the deficiency to W would be invalid because H had
actual knowledge of the erroneous items.
Example 6.Calculation of requesting spouse’s
benefit on the joint return when the nonrequesting
spouse’s erroneous item is partially disallowed.
Assume the same facts as in Example 6, except that
H deducts $18,000 for business expenses on the
joint return, of which $16,000 are disallowed. Since
H used only $2,000 of the $16,000 disallowed
deductions to offset gross income from his business,
W received benefit on the return from the other
$14,000 of the disallowed deductions used to offset
her wage income. Therefore, $2,000 of the disal-
lowed deductions are allocable to H and $14,000 of
the disallowed deductions are allocable to W. W’s
liability is limited to $4,550 (7/8 of $5,200).
(6)Alternative allocation methods—(i)
Allocation based on applicable tax rates.
August 12, 20023112002–32 I.R.B.

If a deficiency arises from two or more
erroneous items that are subject to tax at
different rates (e.g., ordinary income and
capital gain items), the deficiency will be
allocated after first separating the errone-
ous items into categories according to
their applicable tax rate. After all errone-
ous items are categorized, a separate allo-
cation is made with respect to each tax
rate category using the proportionate allo-
cation method of paragraph (d)(4) of this
section.
(ii)Allocation methods provided in
subsequent published guidance. Addi-
tional alternative methods for allocating
erroneous items under section 6015(c)
may be prescribed by the Treasury and
IRS in subsequent revenue rulings, rev-
enue procedures, or other appropriate
guidance.
(iii)Example. The following example
illustrates the rules of this paragraph
(d)(6):
Example.Allocation based on applicable tax
rates. H and W timely file their 1998 joint Federal
income tax return. H and W divorce in 1999. On
July 13, 2001, a $5,100 deficiency is assessed with
respect to H’s and W’s 1998 return. Of this defi-
ciency, $2,000 results from unreported capital gain
of $6,000 that is attributable to W and $4,000 of
capital gain that is attributable to H (both gains
being subject to tax at the 20% marginal rate). The
remaining $3,100 of the deficiency is attributable to
$10,000 of unreported dividend income of H that is
subject to tax at a marginal rate of 31% . H and W
both timely elect to allocate the deficiency, and
qualify under this section to do so. There are erro-
neous items subject to different tax rates; thus, the
alternative allocation method of this paragraph
(d)(6) applies. The three erroneous items are first
categorized according to their applicable tax rates,
then allocated. Of the total amount of 20% tax rate
items ($10,000), 60% is allocable to W and 40% is
allocable to H. Therefore, 60% of the $2,000 defi-
ciency attributable to these items (or $1,200) is allo-
cated to W. The remaining 40% of this portion of
the deficiency ($800) is allocated to H. The only
31% tax rate item is allocable to H. Accordingly, H
is liable for $3,900 of the deficiency ($800 +
$3,100), and W is liable for the remaining $1,200.
§1.6015–4 Equitable relief.
(a) A requesting spouse who files a
joint return for which a liability remains
unpaid and who does not qualify for full
relief under§1.6015–2 or 1.6015–3 may
request equitable relief under this section.
The Internal Revenue Service has the dis-
cretion to grant equitable relief from joint
and several liability to a requesting
spouse when, considering all of the facts
and circumstances, it would be inequi-
table to hold the requesting spouse jointly
and severally liable.
(b) This section may not be used to
circumvent the limitation of§1.6015–
3(c)(1) (i.e., no refunds under§1.6015–
3). Therefore, relief is not available under
this section to obtain a refund of liabili-
ties already paid, for which the requesting
spouse would otherwise qualify for relief
under§1.6015–3.
(c) For guidance concerning the crite-
ria to be used in determining whether it is
inequitable to hold a requesting spouse
jointly and severally liable under this sec-
tion, see Rev. Proc. 2000–15, 2000–1
C.B. 447, or other guidance published by
the Treasury and IRS (see§601.601
(d)(2) of this chapter).
§1.6015–5 Time and manner for
requesting relief.
(a)Requesting relief.To elect the
application of§1.6015–2 or 1.6015–3, or
to request equitable relief under
§1.6015–4, a requesting spouse must file
Form 8857,“Request for Innocent Spouse
Relief”(or other specified form); submit
a written statement containing the same
information required on Form 8857,
which is signed under penalties of per-
jury; or submit information in the manner
prescribed by the Treasury and IRS in
forms, relevant revenue rulings, revenue
procedures, or other published guidance
(see§601.601(d)(2) of this chapter).
(b)Time period for filing a request for
relief—(1)In general.To elect the appli-
cation of§1.6015–2 or 1.6015–3, or to
request equitable relief under§1.6015–4,
a requesting spouse must file Form 8857
or other similar statement with the Inter-
nal Revenue Service no later than two
years from the date of the first collection
activity against the requesting spouse
after July 22, 1998, with respect to the
joint tax liability.
(2)Definitions—(i)Collection activity.
For purposes of this paragraph (b), collec-
tion activity means a section 6330 notice;
an offset of an overpayment of the
requesting spouse against a liability under
section 6402; the filing of a suit by the
United States against the requesting
spouse for the collection of the joint tax
liability; or the filing of a claim by the
United States in a court proceeding in
which the requesting spouse is a party or
which involves property of the requesting
spouse. Collection activity does not
include a notice of deficiency; the filing
of a Notice of Federal Tax Lien; or a
demand for payment of tax. The term
property of the requesting spouse,for pur-
poses of this paragraph (b), means prop-
erty in which the requesting spouse has
an ownership interest (other than solely
through the operation of community
property laws), including property owned
jointly with the nonrequesting spouse.
(ii)Section 6330 notice.A section
6330 notice refers to the notice sent, pur-
suant to section 6330, providing taxpay-
ers notice of the Service’s intent to levy
and of their right to a collection due pro-
cess (CDP) hearing.
(3)Requests for relief made before
commencement of collection activity.An
election or request for relief may be made
before collection activity has commenced.
For example, an election or request for
relief may be made in connection with an
audit or examination of the joint return or
a demand for payment, or pursuant to the
CDP hearing procedures under sections
6320 in connection with the filing of a
Notice of Federal Tax Lien. For more
information on the rules regarding collec-
tion due process for liens, see the Trea-
sury regulations under section 6320.
However, no request for relief may be
made before the date specified in para-
graph (b)(5) of this section.
(4)Examples.The following examples
illustrate the rules of this paragraph (b):
Example 1. On January 11, 2000, a section 6330
notice is mailed to H and W regarding their 1997
joint Federal income tax liability. The Internal Rev-
enue Service levies on W’s employer on June 5,
2000. The Internal Revenue Service levies on H’s
employer on July 10, 2000. An election or request
for relief must be made by January 11, 2002, which
is two years after the Internal Revenue Service sent
the section 6330 notice.
Example 2. The Internal Revenue Service offsets
an overpayment against a joint liability for 1995 on
January 12, 1998. The offset only partially satisfies
the liability. The Internal Revenue Service takes no
other collection actions. On July 24, 2001, W elects
relief with respect to the unpaid portion of the 1995
liability. W’s election is timely because the Internal
Revenue Service has not taken any collection activ-
ity after July 22, 1998; therefore, the two-year
period has not commenced.
Example 3. Assume the same facts as in
Example 2, except that the Internal Revenue Service
sends a section 6330 notice on January 22, 1999.
W’s election is untimely because it is filed more
than two years after the first collection activity after
July 22, 1998.
Example 4. H and W do not remit full payment
with their timely filed joint Federal income tax
2002–32 I.R.B.312August 12, 2002

return for the 1989 tax year. No collection activity is
taken after July 22, 1998, until the United States
files a suit against both H and W to reduce the tax
assessment to judgment and to foreclose the tax lien
on their jointly-held business property on July 1,
1999. H elects relief on October 2, 2000. The elec-
tion is timely because it is made within two years of
the filing of a collection suit by the United States
against H.
Example 5. W files a Chapter 7 bankruptcy peti-
tion on July 10, 2000. On September 5, 2000, the
United States files a proof of claim for her joint
1998 income tax liability. W elects relief with
respect to the 1998 liability on August 20, 2002. The
election is timely because it is made within two
years of the date the United States filed the proof of
claim in W’s bankruptcy case.
(5)Premature requests for relief. The
Internal Revenue Service will not con-
sider premature claims for relief under
§1.6015–2, 1.6015–3, or 1.6015–4. A
premature claim is a claim for relief that
is filed for a tax year prior to the receipt
of a notification of an audit or a letter or
notice from the IRS indicating that there
may be an outstanding liability with
regard to that year. Such notices or letters
do not include notices issued pursuant to
section 6223 relating to TEFRA partner-
ship proceedings. A premature claim is
not considered an election or request
under§1.6015–1(h)(5).
(c)Effect of a final administrative
determination—(1)In general. A request-
ing spouse is entitled to only one final
administrative determination of relief
under§1.6015–1 for a given assessment,
unless the requesting spouse properly
submits a second request for relief that is
described in§1.6015–1(h)(5).
(2)Example. The following example
illustrates the rule of this paragraph (c):
Example. In January 2001, W becomes a limited
partner in partnership P, and in February 2001, she
starts her own business from which she earns
$100,000 of net income for the year. H and W file a
joint return for tax year 2001, on which they claim
$20,000 in losses from their investment in P, and
they omit W’s self-employment tax. In March 2003,
the Internal Revenue Service commences an audit
under the provisions of subchapter C of chapter 63
of subtitle F of the Internal Revenue Code (TEFRA
partnership proceeding) and sends H and W a notice
under section 6223(a)(1). In September 2003, the
Internal Revenue Service audits H’s and W’s 2001
joint return regarding the omitted self-employment
tax. H may file a claim for relief from joint and sev-
eral liability for the self-employment tax liability
because he has received a notification of an audit
indicating that there may be an outstanding liability
on the joint return. However, his claim for relief
regarding the TEFRA partnership proceeding is pre-
mature under paragraph (b)(5) of this section. H will
have to wait until the Internal Revenue Service
sends him a notice of computational adjustment or
assesses the liability resulting from the TEFRA part-
nership proceeding before he files a claim for relief
with respect to any such liability. The assessment
relating to the TEFRA partnership proceeding is
separate from the assessment for the self-
employment tax; therefore, H’s subsequent claim for
relief for the liability from the TEFRA partnership
proceeding is not precluded by his previous claim
for relief from the self-employment tax liability
under this paragraph (c).
§1.6015–6 Nonrequesting spouse’s
notice and opportunity to participate in
administrative proceedings.
(a)In general. (1) When the Internal
Revenue Service receives an election
under§1.6015–2 or 1.6015–3, or a
request for relief under§1.6015–4, the
Internal Revenue Service must send a
notice to the nonrequesting spouse’s last
known address that informs the nonre-
questing spouse of the requesting
spouse’s claim for relief. For further guid-
ance regarding the definition of last
known address, see§301.6212–2 of this
chapter. The notice must provide the non-
requesting spouse with an opportunity to
submit any information that should be
considered in determining whether the
requesting spouse should be granted relief
from joint and several liability. A nonre-
questing spouse is not required to submit
information under this section. Upon the
request of either spouse, the Internal Rev-
enue Service will share with one spouse
the information submitted by the other
spouse, unless such information would
impair tax administration.
(2) The Internal Revenue Service must
notify the nonrequesting spouse of the
Service’s preliminary and final determi-
nations with respect to the requesting
spouse’s claim for relief under section
6015.
(b)Information submitted. The Inter-
nal Revenue Service will consider all of
the information (as relevant to each par-
ticular relief provision) that the nonre-
questing spouse submits in determining
whether relief from joint and several
liability is appropriate, including informa-
tion relating to the following—
(1) The legal status of the requesting
and nonrequesting spouses’marriage;
(2) The extent of the requesting
spouse’s knowledge of the erroneous
items or underpayment;
(3) The extent of the requesting
spouse’s knowledge or participation in
the family business or financial affairs;
(4) The requesting spouse’s education
level;
(5) The extent to which the requesting
spouse benefitted from the erroneous
items;
(6) Any asset transfers between the
spouses;
(7) Any indication of fraud on the part
of either spouse;
(8) Whether it would be inequitable,
within the meaning of§§1.6015–2(d)
and 1.6015–4, to hold the requesting
spouse jointly and severally liable for the
outstanding liability;
(9) The allocation or ownership of
items giving rise to the deficiency; and
(10) Anything else that may be rel-
evant to the determination of whether
relief from joint and several liability
should be granted.
(c)Effect of opportunity to participate.
The failure to submit information pursu-
ant to paragraph (b) of this section does
not affect the nonrequesting spouse’s abil-
ity to seek relief from joint and several
liability for the same tax year. However,
information that the nonrequesting spouse
submits pursuant to paragraph (b) of this
section is relevant in determining whether
relief from joint and several liability is
appropriate for the nonrequesting spouse
should the nonrequesting spouse also sub-
mit an application for relief.
§1.6015–7 Tax Court review.
(a)In general. Requesting spouses
may petition the Tax Court to review the
denial of relief under§1.6015–1.
(b)Time period for petitioning the Tax
Court. Pursuant to section 6015(e), the
requesting spouse may petition the Tax
Court to review a denial of relief under
§1.6015–1 within 90 days after the date
notice of the Service’s final determination
is mailed by certified or registered mail
(90-day period). If the IRS does not mail
the requesting spouse a final determina-
tion letter within 6 months of the date the
requesting spouse files an election under
§1.6015–2 or 1.6015–3, the requesting
spouse may petition the Tax Court to
review the election at any time after the
expiration of the 6-month period, and
before the expiration of the 90-day
August 12, 20023132002–32 I.R.B.

period. The Tax Court also may review a
claim for relief if Tax Court jurisdiction
has been acquired under another section
of the Internal Revenue Code such as sec-
tion 6213(a) or 6330(d).
(c)Restrictions on collection and sus-
pension of the running of the period of
limitations—(1) Restrictions on collection
under§1.6015–2 or 1.6015–3. Unless
the Internal Revenue Service determines
that collection will be jeopardized by
delay, no levy or proceeding in court shall
be made, begun, or prosecuted against a
requesting spouse electing the application
of§1.6015–2 or 1.6015–3 for the collec-
tion of any assessment to which the elec-
tion relates until the expiration of the
90-day period described in paragraph (b)
of this section, or if a petition is filed with
the Tax Court, until the decision of the
Tax Court becomes final under section
7481. For more information regarding the
date on which a decision of the Tax Court
becomes final, see section 7481 and the
regulations thereunder. Notwithstanding
the above, if the requesting spouse
appeals the Tax Court’s decision, the
Internal Revenue Service may resume
collection of the liability from the
requesting spouse on the date the request-
ing spouse files the notice of appeal,
unless the requesting spouse files an
appeal bond pursuant to the rules of sec-
tion 7485. Jeopardy under this paragraph
(c)(1) means conditions exist that would
require an assessment under section 6851
or 6861 and the regulations thereunder.
(2)Waiver of the restrictions on col-
lection. A requesting spouse may, at any
time (regardless of whether a notice of
the Service’s final determination of relief
is mailed), waive the restrictions on col-
lection in paragraph (c)(1) of this section.
(3)Suspension of the running of the
period of limitations—(i)Relief under
§1.6015–2 or 1.6015–3. The running of
the period of limitations in section 6502
on collection against the requesting
spouse of the assessment to which an
election under§1.6015–2 or 1.6015–3
relates is suspended for the period during
which the Internal Revenue Service is
prohibited by paragraph (c)(1) of this sec-
tion from collecting by levy or a proceed-
ing in court and for 60 days thereafter.
However, if the requesting spouse signs a
waiver of the restrictions on collection in
accordance with paragraph (c)(2) of this
section, the suspension of the period of
limitations in section 6502 on collection
against the requesting spouse will termi-
nate on the date that is 60 days after the
date the waiver is filed with the Internal
Revenue Service.
(ii)Relief under§1.6015–4.Ifa
requesting spouse seeks only equitable
relief under§1.6015–4, the restrictions
on collection of paragraph (c)(1) of this
section do not apply. Accordingly, the
request for relief does not suspend the
running of the period of limitations on
collection.
(4)Definitions—(i) Levy. For pur-
poses of this paragraph (c), levy means an
administrative levy or seizure described
by section 6331.
(ii)Proceedings in court. For purposes
of this paragraph (c), proceedings in court
means suits filed by the United States for
the collection of Federal tax. Proceedings
in court does not refer to the filing of
pleadings and claims and other participa-
tion by the Internal Revenue Service or
the United States in suits not filed by the
United States, including Tax Court cases,
refund suits, and bankruptcy cases.
(iii)Assessment to which the election
relates. For purposes of this paragraph
(c), the assessment to which the election
relates is the entire assessment of the
deficiency to which the election relates,
even if the election is made with respect
to only part of that deficiency.
§1.6015–8 Applicable liabilities.
(a)In general. Section 6015 applies to
liabilities that arise after July 22, 1998,
and to liabilities that arose prior to July
22, 1998, that were not paid on or before
July 22, 1998.
(b)Liabilities paid on or before July
22, 1998. A requesting spouse seeking
relief from joint and several liability for
amounts paid on or before July 22, 1998,
must request relief under section 6013(e)
and the regulations thereunder.
(c)Examples. The following examples
illustrate the rules of this section:
Example 1. H and W file a joint Federal income
tax return for 1995 on April 15, 1996. There is an
understatement on the return attributable to an omis-
sion of H’s wage income. On October 15, 1998, H
and W receive a 30-day letter proposing a defi-
ciency on the 1995 joint return. W pays the out-
standing liability in full on November 30, 1998. In
March 1999, W files Form 8857, requesting relief
from joint and several liability under section
6015(b). Although W’s liability arose prior to July
22, 1998, it was unpaid as of that date. Therefore,
section 6015 is applicable.
Example 2. H and W file their 1995 joint Federal
income tax return on April 15, 1996. On October 14,
1997, a deficiency of $5,000 is assessed regarding a
disallowed business expense deduction attributable
to H. On June 30, 1998, the Internal Revenue Ser-
vice levies on the $3,000 in W’s bank account in
partial satisfaction of the outstanding liability. On
August 31, 1998, W files a request for relief from
joint and several liability. The liability arose prior to
July 22, 1998. Section 6015 is applicable to the
$2,000 that remained unpaid as of July 22, 1998,
and section 6013(e) is applicable to the $3,000 that
was paid prior to July 22, 1998.
§1.6015–9 Effective date.
Sections 1.6015–0 through 1.6015–9
are applicable for all elections under
§1.6015–2 or 1.6015–3 or any requests
for relief under§1.6015–4 filed on or
after July 18, 2002.
PART 602—OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION ACT
Par.5.In§602.101, paragraph (b) is
amended by adding an entry in numerical
order to read as follows:
§602.101 OMB Control Numbers.
*****
(b)***
2002–32 I.R.B.314August 12, 2002

CFR part or section where
identified and described
Current OMB
control No.
*****
1.6015–5 ................................................................................................................................................................... 1545–1719
*****
Robert E. Wenzel,
Deputy Commissioner
of Internal Revenue.
Approved July 3, 2002.
Pamela F. Olson,
Acting Assistant Secretary
of the Treasury.
(Filed by the Office of the Federal Register on July
17, 2002, 8:45 a.m., and published in the issue of
the Federal Register for July 18, 2002, 67 F.R.
47278)
Section 6416.—Certain Taxes
on Sales and Services
26 CFR 48.6416(b)(2)–2: Exportations, uses, sales,
and resales included.
When is an aircraft“actually engaged in foreign
trade”within the meaning of§4221(d)(3)? See Rev.
Rul. 2002–50, page 292.
Section 6421.—Gasoline
Used for Certain Nonhighway
Purposes, Used by Local
Transit Systems, or Sold for
Certain Exempt Purposes
When is an aircraft“actually engaged in foreign
trade”within the meaning of§4221(d)(3)? See Rev.
Rul. 2002–50, page 292.
Section 6427.—Fuels Not
Used for Taxable Purposes
When is an aircraft“actually engaged in foreign
trade”within the meaning of§4221(d)(3)? See Rev.
Rul. 2002–50, page 292.
Section 7476.—Declaratory
Judgments Relating to
Qualification of Certain
Retirement Plans
26 CFR 1.7476–2: Notice to interested parties.
T.D. 9006
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1 and 601
Notice to Interested Parties
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations relating to the notice to
interested parties requirement. Before the
IRS can issue an advance determination
regarding the qualification of a retirement
plan, a plan sponsor must provide evi-
dence that it has notified all persons who
qualify as interested parties that an appli-
cation for an advance determination will
be filed with the IRS. These regulations
set forth standards by which a plan spon-
sor may satisfy the notice to interested
parties requirement. The final regulations
affect retirement plan sponsors, plan par-
ticipants and other interested parties with
respect to a determination letter applica-
tion, and certain representatives of inter-
ested parties.
DATES:Effective Date: These regula-
tions are effective on July 19, 2002.
Applicability Date: These regulations
apply to applications made on or after
January 1, 2003.
FOR FURTHER INFORMATION CON-
TACT: Pamela R. Kinard, (202) 622–
6060 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments
to 26 CFR parts 1 and 601 under section
7476 of the Internal Revenue Code of
1986 (Code). On May 21, 1976, final
regulations (T.D. 7421, 1976–1 C.B. 405)
under section 7476 were published in the
Federal Register(41 FR 20874). These
final regulations provide guidance on the
nature and method of giving notice to
interested parties. On January 17, 2001, a
notice of proposed rulemaking (REG–
129608–00, 2001–1 C.B. 1011) was pub-
lished in theFederal Register(66 FR
3954), setting forth the proposed new
standards for delivery of the notice to
interested parties. No public hearing was
requested or held. Written comments
responding to the notice of proposed rule-
making were received. After consider-
ation of all the comments, the proposed
regulations are adopted as amended by
this Treasury decision. The revisions are
discussed below.
Explanation of Provisions and
Summary of Comments
A.Overview
Section 7476(b)(2) provides that, with
respect to a pleading filed by a petitioner
for a request for a determination on the
qualified status of a retirement plan under
section 7476(a), the United States Tax
Court may find the pleading to be prema-
ture unless the petitioner establishes to
the satisfaction of the Court that he has
complied with the requirements pre-
scribed by the regulations of the Secretary
regarding the notice to interested parties
of the filing of the request for a determi-
nation. Section 3001(a) of the Employee
Retirement Income Security Act of 1974
(ERISA) provides that before issuing an
advance determination regarding the
qualification of a retirement plan, the
Secretary of Treasury shall require that an
applicant provide evidence satisfactory to
the Secretary that the applicant has noti-
fied each employee who qualifies as an
interested party of the application for a
determination. The final regulations
August 12, 20023152002–32 I.R.B.

amend§§1.7476–2 and 601.201 regard-
ing the nature and method of giving
notices to interested parties. The final
regulations generally adopt the standards
in the proposed regulations. These final
regulations provide that the notice may be
provided by any method reasonably cal-
culated to ensure that each interested
party is notified of the application for
determination. Whether a particular
method of delivery satisfies this standard
is determined on the basis of all the facts
and circumstances. The final regulations
retain the safe harbor provided in the pro-
posed regulations for plans using an elec-
tronic medium to deliver the notice to
interested parties. Under that safe harbor,
a plan sponsor will be treated as satisfy-
ing the requirements under§1.7476–
2(c)(1) if the plan sponsor delivers the
notice using an electronic medium under
a system that satisfies the requirements of
§1.402(f)–1 Q&A–5.
B.Application of the Notification
Requirement to Governmental Plans
Section 1.7476–1(b)(7) provides that
§1.7476–1(b), relating to the definition
of interested parties, applies only to
retirement plans filing an application for
advance determination with the IRS that
are subject to the requirements under sec-
tion 410. Section 1.7476–1(c)(5) provides
that in the case of an organization
described in section 410(c)(1), which
includes governmental plans within the
meaning of section 414(d), section 410
will be considered to apply to a plan year
of such organization for any plan year in
which section 410(c)(2) applies to the
plan.
Section 410(c)(1)(A) provides that the
provisions of section 410 (other than sec-
tion 410(c)(2)) do not apply to govern-
mental plans within the meaning of sec-
tion 414(d). Section 410(c)(2) provides
that a governmental plan will be treated
as meeting the requirements under section
410 for purposes of section 401(a). Prior
to 1997, section 410(c)(2) provided that,
in order to be treated as satisfying the
requirements of section 410, a govern-
mental plan must meet the requirements
under section 401(a)(3) as in effect on
September 1, 1974, relating to minimum
participation standards. Section
1505(a)(1) of the Taxpayer Relief Act of
1997 (TRA’97) (Public Law 105–34, 111
Stat. 788) added section 401(a)(5)(G),
which provides that the nondiscrimination
and minimum participation requirements
under section 401(a)(3) and (4) do not
apply to a governmental plan (within the
meaning of section 414(d)) maintained by
a State or local government or political
subdivision thereof (or agency or instru-
mentality thereof). Thus, section 410 no
longer applies to such governmental
plans.
One commentator requested clarifica-
tion that the notice to interested parties
requirement under section 7476 no longer
applies to governmental plans after TRA
’97. Section 1.7476–1(b)(7) of the regula-
tions limits the applicability of the notice
to interested parties requirement to retire-
ment plans that are subject to section 410
of the Code. Because a governmental
plan established and maintained by a
State or local government or political sub-
division thereof (or agency or instrumen-
tality thereof) is not subject to section 410
of the Code, it is also not subject to the
notice to interested parties requirement.
C.Miscellaneous Comments
Proposed regulations under§601.
201(o)(3)(xv) provide that when the
notice is given other than by mailing, it
should be given not less than 7 days nor
more than 21 days prior to the date that
the application for a determination is
made. When the notice is provided by
mailing, prior final regulations under
§601.201(o)(3)(xv) provide that the
notice be given not less than 10 days nor
more than 24 days prior to the date that
the application for a determination is
made. One commentator requested clarifi-
cation on whether the time period for pro-
viding notice by electronic mail is the
same time period for when notice is given
by a means other than postal mailing. In
the interest of simplification, the final
regulations provide a single time period
for providing the notice. Under these final
regulations, the notice must be given not
less than 10 days nor more than 24 days
prior to the date that the application for a
determination is made. This time period
applies to all methods of delivering the
notice to interested parties. Taxpayers
may continue to rely on the prior time
periods until the applicability date of this
Treasury decision.
Section 601.201(o)(3)(xvii) describes
the procedures for providing additional
informationalmaterialrequiredby
§601.201(o)(3)(xviii), (xix), and (xx), to
the extent that such information is not
provided in the notice to interested par-
ties. Such materials may include an
updated copy of the plan and related trust
agreement or the determination letter
application. One commentator suggested
that§601.201(o)(3)(xvii) be revised to
provide that any reasonable delivery
method should be available for providing
additional information to interested par-
ties.Thefinalregulationsamend
§601.201(o)(3)(xvii) to clarify that the
procedure for making materials related to
an application for determination available
to interested parties may include any
delivery method or a combination thereof
that reasonably ensures accessibility to all
interested parties.
Section 601.201(o)(3)(xxi) provides
that the notice to interested parties will be
deemed given when it is given in person,
posted as prescribed in the regulations
under section 7476, or received through
the mail. One commentator suggested that
§601.201(o)(3)(xxi) be revised to reflect
the new standards by which a plan spon-
sor may satisfy the notice to interested
parties requirement. The final regulations
amend§601.201(o)(3)(xxi) to clarify that
the notice to interested parties required by
§601.201(o)(3)(xiv) shall be deemed
given when the notice is posted or sent to
the person in the manner prescribed in the
regulations under section 7476.
Effective date
These regulations apply to applications
made on or after January 1, 2003. For
applications made prior to that date, tax-
payers may continue to rely on the stan-
dards set forth in the prior final regula-
tions or the proposed regulations
published in theFederal Registeron
January 17, 2001 (66 FR 3954).
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assess-
ment is not required. It also has been
determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
2002–32 I.R.B.316August 12, 2002

chapter 5) does not apply to these regula-
tions, and because these regulations do
not impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Code,
the notice of proposed rulemaking pre-
ceding these regulations was submitted to
the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on its impact on small business.
Drafting Information
The principal author of these regula-
tions is Pamela R. Kinard, Office of Divi-
sion Counsel/Associate Chief Counsel
(Tax Exempt and Government Entities).
However, other personnel from the IRS
and Treasury Department participated in
their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and 601
are amended as follows:
PA RT 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805***
Par. 2. Section 1.7476–1 is amended
by adding paragraph (e) to read as fol-
lows:
§1.7476–1 Interested parties.
*****
(e)Effective date.The provisions of
this section apply to applications referred
to in paragraph (a) of this section made
on or after June 21, 1976.
Par. 3. Section 1.7476–2 is amended as
follows:
1. Paragraphs (b), (c), and (d) are
revised.
2. Paragraph (e) is added.
The revisions and addition read as fol-
lows:
§1.7476–2 Notice to interested parties.
*****
(b)Nature of notice.The notice
required by this section shall—
(1) Contain the information and be
given within the time period prescribed in
§601.201(o)(3) of this chapter; and
(2) Be given in a manner prescribed in
paragraph (c) of this section.
(c)Method of giving notice.(1) In the
case of a present employee, former
employee, or beneficiary who is an inter-
ested party, the notice may be provided
by any method reasonably calculated to
ensure that each interested party is noti-
fied of the application for a determina-
tion. If an interested party who is a
present employee is in a unit of employ-
ees covered by a collective-bargaining
agreement between employee representa-
tives and one or more employers, notice
shall also be given to the collective-
bargaining representative of such inter-
ested party by any method that satisfies
this paragraph. Whether the notice is pro-
vided in a manner that satisfies the
requirements of this paragraph is deter-
mined on the basis of all the relevant
facts and circumstances. Because the
facts and circumstances differ depending
on the interested party, it may be neces-
sary to use more than one method of
delivery in order to ensure timely and
adequate notice to all interested parties.
(2) If the notice to interested parties is
delivered using an electronic medium
under a system that satisfies the require-
ments of§1.402(f)–1 Q&A–5, the notice
is deemed to be provided in a manner that
satisfies the requirements of paragraph
(c)(1).
(d)Examples.The principles of this
section are illustrated by the following
examples:
Example 1.(i) Employer A is amending Plan C
and applying for a determination letter. Plan C is not
maintained pursuant to one or more collective bar-
gaining agreements and is not being terminated. As
part of the determination letter application process,
Employer A provides the notice required under this
section to interested parties. For present employees,
Employer A provides the notice by posting the
notice at those locations within the principal places
of employment of the interested parties which are
customarily used for employer notices to employees
with regard to employment and employee benefit
matters.
(ii) In thisExample 1, Employer A satisfies the
notice to interested parties requirement described in
this section.
Example 2. (i) Employer B is amending Plan D
and applying for a determination letter. As part of
the determination letter application process,
Employer B provides the notice required under this
section to interested parties.
(ii) Employer B has multiple worksites.
Employer B’s employees located at worksites 1
through 4 have reasonable access to computers at
their workplace. However, Employer B’s employees
located at worksite 5 do not have access to comput-
ers.
(iii) For present employees with reasonable
access to computers (worksites 1 through 4),
Employer B provides the notice by posting the
notice on Employer B’s web site (Internet or intra-
net). Employees at worksites 1 through 4 customar-
ily receive employer notification with regard to
employment and employee benefit matters from the
Employer B’s web site. For present employees with-
out access to computers (worksite 5), Employer B
provides the notice by posting the notice at worksite
5 in a location that is customarily used for employer
notices to employees with regard to employment
and employee benefit matters.
(iv) Employer B also sends the notice by e-mail
to each collective-bargaining representative of inter-
ested parties who are present employees of
Employer B covered by a collective-bargaining
agreement between employee representatives and
Employer B, using the e-mail address previously
provided to Employer B by such collective-
bargaining representative.
(v) In thisExample 2, Employer B satisfies the
notice to interested parties requirement described in
this section.
Example 3. (i) Employer C is terminating Plan E
and applying for a determination letter as to whether
the plan termination affects the continuing qualifica-
tion of Plan E. As part of the determination letter
application process, Employer C provides the notice
required under this section to interested parties.
(ii) All of Employer C’s employees have reason-
able access to computers. Each employee has an
e-mail address where he or she can receive mes-
sages from Employer C. Employees of Employer C
customarily receive employer notices regarding
employment and employee benefit matters by
e-mail.
(iii) For present employees, Employer C pro-
vides the notice by sending the notice by e-mail.
(iv) Employer C also sends the notice by e-mail
to each collective-bargaining representative of inter-
ested parties who are present employees of
Employer C covered by a collective-bargaining
agreement between employee representatives and
Employer C, using the e-mail address previously
provided to Employer C by such collective-
bargaining representative.
(v) In addition, Employer C sends the notice by
e-mail to each interested party who is a former
employee or beneficiary, using the e-mail address
previously provided to Employer C by such inter-
ested party. For any former employee or beneficiary
who did not provide an e-mail address, Employer C
sends the notice by regular mail to the last known
address of such former employee or beneficiary.
(vi) In thisExample 3, Employer C satisfies the
notice to interested parties requirement described in
this section.
(e)Effective date. (1) The provisions
of this section shall apply to applications
referred to in§1.7476–1(a) made on or
after January 1, 2003.
August 12, 20023172002–32 I.R.B.

(2) For applications made on or after
June 21, 1976 and before January 1,
2003,§1.7476–2 (as it appeared in the
April 1, 2002 edition of 26 CFR part 1)
applies.
PART 601—STATEMENT OF
PROCEDURAL RULES
Paragraph 4. The authority citation for
part 601 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 5. Section 601.201 is amended as
follows:
1. In paragraph (o)(3)(xv), the first two
sentences are removed and a new sen-
tence is added in their place.
2. In paragraph (o)(3)(xvi), the intro-
ductory text is revised.
3. Paragraph (o)(3)(xvii) is revised.
4. In paragraph (o)(3)(xxi), the second
sentence is revised.
The revisions and addition read as fol-
lows:
§601.201 Rulings and determination
letters.
*****
(o)***
(3)***
(xv) When the notice referred to in
paragraph (o)(3)(xiv) of this section is
given in the manner set forth in§1.7476–
2(c) of this chapter, such notice must be
given not less than 10 days nor more than
24 days prior to the date the application
for a determination is made.***
(xvi) The notice referred to in para-
graph (o)(3)(xiv) of this section shall be
given in the manner prescribed in
§1.7476–2 of this chapter and shall con-
tain the following information:
*****
(xvii) The procedure referred to in
paragraph (o)(3)(xvi)(i) of this section
whereby the additional informational
material required by paragraphs
(o)(3)(xviii), (xix), and (xx) of this sec-
tion will (to the extent not included in this
notice) be made available to interested
parties, may consist of making such mate-
rial available for inspection and copying
by interested parties at a place or places
reasonably accessible to such parties, or
supplying such material by using a
method of delivery or a combination
thereof that is reasonably calculated to
ensure that all interested parties will have
access to the materials. The procedure
referred to in paragraph (o)(3)(xvi)(i) of
this section must be immediately avail-
able to all interested parties and must be
designed to supply them with such addi-
tional informational material in time for
them to pursue their rights within the time
period prescribed, and must be available
until the earlier of the filing of a pleading
commencing a declaratory judgment
action under section 7476 with respect to
the qualification of the plan or the ninety-
second day after the day the notice of
final determination is mailed to the appli-
cant.
*****
(xxi)***Thenotice to interested
parties required by paragraph (o)(3)(xiv)
of this section shall be deemed given
when the notice is posted or sent to the
person in the manner prescribed in
§1.7476–2 of this chapter.***
*****
David A. Mader,
Acting Deputy Commissioner
of Internal Revenue.
Approved July 10, 2002.
Pamela F. Olson,
Acting Assistant Secretary
of the Treasury (Tax Policy).
(Filed by the Office of the Federal Register on July
18, 2002, 8:45 a.m., and published in the issue of
the Federal Register for July 19, 2002, 67 F.R.
47454)
Section 7805.—Rules and
Regulations
26 CFR 301.7805–1: Rules and regulations.
When is an aircraft“actually engaged in foreign
trade”within the meaning of§4221(d)(3)? See Rev.
Rul. 2002–50, page 292.
2002–32 I.R.B.318August 12, 2002

Part III. Administrative, Procedural, and Miscellaneous
Qualified Public Educational
Facility Bonds—2002
Calendar Year Resident
Population Estimates
Notice 2002–56
This notice informs states and other
issuers of qualified exempt facility bonds
described in§142(a)(13) of the Internal
Revenue Code (“Qualified Public Educa-
tional Facility Bonds”) of the proper
population figures to be used for calculat-
ing the 2002 calendar year limitation
under§142(k)(5) on the annual aggregate
face amount of tax-exempt bonds
described in§142(a)(13).
Section 142(k)(5) provides that an
issue shall not be treated as an issue
described in§142(a)(13) if the aggregate
face amount of bonds issued by the state
pursuant thereto (when added to the
aggregate face amount of bonds previ-
ously so issued during the calendar year)
exceeds an amount equal to the greater of
(i) $10 multiplied by the state population,
or (ii) $5,000,000.
There is no definition of“state popula-
tion”under§142(k)(5). However, the
volume limitation under§142(k)(5) is
analogous to the volume cap under§146.
Section 146(j) provides generally that, for
purposes of§146, determinations of
population for any calendar year are made
on the basis of the most recent census
estimate of the resident population of a
state (or issuing authority) released by the
Bureau of the Census before the begin-
ning of such calendar year. The same
population figures are to be used for pur-
poses of§142(k)(5). The 2002 calendar
year population figures to be used for
purposes of§146 were published in
Notice 2002–13, 2002–8 I.R.B. 547 (Feb-
ruary 25, 2002). In future years, the popu-
lation figures for purposes of§142(k)(5)
and§146 will be published in the same
notice.
The proper population figures for cal-
culating the volume limitation under
§142(k)(5) for the 2002 calendar year are
the estimates of the resident population of
the 50 states and the District of Colum-
bia, released by the Bureau of the Census
on December 28, 2001, in Press Release
CB01–203. The proper population figures
for calculating the volume limitation
under§142(k)(5) for the 2002 calendar
year for Puerto Rico are the estimates of
the resident population for July 1, 2001,
released by the Bureau of the Census on
December 31, 2001, in Press Release
CB01–205. The proper population figures
for calculating the volume limitation
under§142(k)(5) for the 2002 calendar
year for the insular areas (American
Samoa, Guam, Northern Mariana Islands,
and U.S. Virgin Islands) are the figures
released by the Bureau of the Census on
July 3, 2001, in press release CB01–
CN.1. For convenience, these estimates
are reprinted below.
Resident Population Figures
Alabama ............................................................................................................................................................................. 4,464,356
Alaska ................................................................................................................................................................................634,892
American Samoa................................................................................................................................................................57,291
Arizona............................................................................................................................................................................... 5,307,331
Arkansas............................................................................................................................................................................. 2,692,090
California ........................................................................................................................................................................... 34,501,130
Colorado............................................................................................................................................................................. 4,417,714
Connecticut ........................................................................................................................................................................ 3,425,074
Delaware ............................................................................................................................................................................796,165
District of Columbia..........................................................................................................................................................571,822
Florida ................................................................................................................................................................................ 16,396,515
Georgia............................................................................................................................................................................... 8,383,915
Guam..................................................................................................................................................................................154,805
Hawaii ................................................................................................................................................................................ 1,224,398
Idaho .................................................................................................................................................................................. 1,321,006
Illinois ................................................................................................................................................................................ 12,482,301
Indiana................................................................................................................................................................................ 6,114,745
Iowa.................................................................................................................................................................................... 2,923,179
Kansas ............................................................................................................................................................................... 2,694,641
Kentucky ........................................................................................................................................................................... 4,065,556
August 12, 20023192002–32 I.R.B.

Resident Population Figures
Louisiana............................................................................................................................................................................ 4,465,430
Maine ................................................................................................................................................................................. 1,286,670
Maryland ............................................................................................................................................................................ 5,375,156
Massachusetts .................................................................................................................................................................... 6,379,304
Michigan ............................................................................................................................................................................ 9,990,817
Minnesota........................................................................................................................................................................... 4,972,294
Mississippi ......................................................................................................................................................................... 2,858,029
Missouri ............................................................................................................................................................................. 5,629,707
Montana .............................................................................................................................................................................904,433
Nebraska ............................................................................................................................................................................ 1,713,235
Nevada ............................................................................................................................................................................... 2,106,074
New Hampshire ................................................................................................................................................................ 1,259,181
New Jersey......................................................................................................................................................................... 8,484,431
New Mexico ...................................................................................................................................................................... 1,829,146
New York .......................................................................................................................................................................... 19,011,378
North Carolina .................................................................................................................................................................. 8,186,268
North Dakota ....................................................................................................................................................................634,448
Northern Mariana Islands ................................................................................................................................................69,221
Ohio.................................................................................................................................................................................... 11,373,541
Oklahoma ........................................................................................................................................................................... 3,460,097
Oregon................................................................................................................................................................................ 3,472,867
Pennsylvania ...................................................................................................................................................................... 12,287,150
Puerto Rico ........................................................................................................................................................................ 3,839,810
Rhode Island ..................................................................................................................................................................... 1,058,920
South Carolina .................................................................................................................................................................. 4,063,011
South Dakota ....................................................................................................................................................................756,600
Tennessee .......................................................................................................................................................................... 5,740,021
Texas .................................................................................................................................................................................. 21,325,018
U.S. Virgin Islands ...........................................................................................................................................................108,612
Utah.................................................................................................................................................................................... 2,269,789
Vermont..............................................................................................................................................................................613,090
Virginia .............................................................................................................................................................................. 7,187,734
Washington ........................................................................................................................................................................ 5,987,973
West Virginia ..................................................................................................................................................................... 1,801,916
Wisconsin........................................................................................................................................................................... 5,401,906
Wyoming............................................................................................................................................................................494,423
The principal authors of this notice are Michael P. Brewer and Timothy L. Jones of the Office of Assistant Chief Counsel (Tax
Exempt and Governmental Entities). For further information regarding this notice, contact Mr. Brewer at (202) 622–3980 (not a
toll-free call).
2002–32 I.R.B.320August 12, 2002

Part IV. Items of General Interest
Notice of Proposed
Rulemaking and Notice of
Public Hearing
Net Gift Treatment Under
Section 2519
REG–123345–01
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains
proposed amendments to the regulations
relating to the amount treated as a trans-
fer under section 2519 of the Internal
Revenue Code when there is a right to
recover gift tax under section 2207A(b)
and the related gift tax consequences if
the right to recover the gift tax is not
exercised. The proposed regulations will
affect donee spouses who make lifetime
dispositions of all or part of a qualifying
income interest in qualified terminable
interest property. This document also pro-
vides notice of a public hearing on these
proposed regulations.
DATES: Written comments and outlines
of topics to be discussed at the public
hearing scheduled for Tuesday, October
15, 2002, at 10 a.m., must be received by
Tuesday, September 24, 2002.
ADDRESSES: Send submissions to:
CC:ITA:RU (REG–123345–01), room
5226, Internal Revenue Service, POB
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may also be
hand delivered Monday through Friday
between the hours of 8 a.m. and 5 p.m.
to: CC:ITA:RU (REG–123345–01), Cou-
rier’s Desk, Internal Revenue Service,
1111Constitution Avenue NW, Washing-
ton, DC. Alternatively, taxpayers may
submit comments electronically directly
to the IRS internet site atwww.irs.gov/
regs. The public hearing will be held in
room 4718, Internal Revenue Building,
1111Constitution Avenue NW, Washing-
ton, DC.
FOR FURTHER INFORMATION CON-
TACT: Concerning the regulations,
DeAnn K. Malone, (202) 622–7830; con-
cerning submissions of comments, the
hearing, and/or to be placed on the build-
ing access list to attend the hearing, Guy
Traynor, (202) 622–7180 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
Background
A marital deduction for qualified ter-
minable interest property is allowed for
estate tax purposes under section
2056(b)(7) and for gift tax purposes under
section 2523(f). Qualified terminable
interest property is property transferred
by the decedent or donor spouse, in
which the donee spouse has a qualifying
income interest for life, and for which an
election has been made. If the donee
spouse makes a lifetime disposition of all
or a portion of the qualifying income
interest, section 2519 provides that the
donee spouse is treated for estate and gift
tax purposes as transferring all interests in
the property other than the qualifying
income interest. Under section 2207A(b),
the donee spouse is entitled to recover
any gift tax paid with respect to a transfer
under section 2519 from the person
receiving the transferred property.
Proposed regulations under several
sections including sections 2519 and
2207A(b) were issued on May 21, 1984
(LR–211–76, 1984–1 C.B. 598 [49 FR
21350]). The proposed regulations pro-
vided that the amount of the gift under
section 2519 is reduced by the amount of
the gift tax that the donee spouse is
entitled to recover under section
2207A(b) and that the donee spouse
makes an additional gift if the donee
spouse fails to exercise the right to
recover the gift tax. These two provisions
were not included in the regulations when
they were finalized (T.D. 8522, 1994–1
C.B. 236). The preamble to the final regu-
lations stated that these issues would be
the subject of future proposed regulations.
Sections 25.2519–1(c)(4) and 25.2207A–
1(b) were reserved for those provisions.
Explanation of Provisions
Section 2207A(b) statutorily shifts the
burden for paying the gift tax imposed on
a transfer under section 2519 from the
donee spouse to the person receiving the
transferred property. The payment of gift
tax by the person receiving the property
benefits the donee spouse because the
donee spouse is liable for the payment of
this tax and, absent the right of recovery,
would be required to pay the tax from the
donee spouse’s own assets.
The proposed regulations will amend
the regulations under section 2519 to pro-
vide that the amount of the transfer under
section 2519 is reduced by the amount of
the gift tax that the donee spouse is
entitled to recover under section
2207A(b). The amount of gift tax recov-
erable and the amount of the remainder
interest treated as transferred under sec-
tion 2519 are determined by using the
interrelated computation applicable to
other transfers in which the transferee
agrees to pay the gift tax. See Rev. Rul.
81–223, 1981–2 C.B. 189.
In addition, the proposed regulations
will amend the regulations under section
2207A(b) to provide that if the donee
spouse fails to exercise the right to
recover the gift tax, the donee spouse
makes a gift in the amount of the unre-
covered gift tax to the person from whom
the recovery of gift tax could have been
obtained.
Proposed Effective Date
The regulations will apply to any
transfer under section 2519 where there is
a right to recover gift tax under section
2207A(b) that occurs on or after the date
final regulations are published in theFed-
eral Register.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in
Executive Order 12866. Therefore, a
regulatory assessment is not required. It
also has been determined that section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply to
these regulations, and because these regu-
lations do not impose a collection of
information on small entities, the Regula-
tory Flexibility Act (5 U.S.C. chapter 6)
does not apply. Therefore, a Regulatory
August 12, 20023212002–32 I.R.B.

Flexibility Analysis is not required. Pur-
suant to section 7805(f) of the Internal
Revenue Code, the regulations will be
submitted to the Small Business Adminis-
tration for comment on their impact on
small business.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments (a
signed original and eight (8) copies) that
are submitted timely to the IRS. The IRS
and Treasury Department request com-
ments on the clarity of the proposed rule
and how it may be made easier to under-
stand. All comments will be available for
public inspection and copying.
A public hearing has been scheduled
for Tuesday, October 15, 2002, at 10 a.m.,
in room 4718, Internal Revenue Building,
1111Constitution Avenue NW, Washing-
ton, DC. Due to building security proce-
dures, visitors must use the main building
entrance on Constitution Avenue, NW. In
addition, all visitors must present photo
identification to enter the building.
Because of access restrictions, visitors
will not be admitted beyond the immedi-
ate entrance area more than 30 minutes
before the hearing starts. For information
about having your name placed on the
building access list to attend the hearing,
see the“FOR FURTHER INFORMA-
TION CONTACT”section of this pre-
amble.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing. Persons who wish to
present oral comments at the hearing
must submit comments and an outline of
the topics to be discussed and the time to
be devoted to each topic (signed original
and eight (8) copies) by Tuesday, Septem-
ber 24, 2002. A period of 10 minutes will
be allotted to each person for making
comments. An agenda showing the sched-
uling of the speakers will be prepared
after the deadline for receiving outlines
has passed. Copies of the agenda will be
available free of charge at the hearing.
Drafting Information
The principal author of these proposed
regulations is DeAnn K. Malone, Office
of the Chief Counsel, IRS. Other person-
nel from the IRS and Treasury Depart-
ment participated in their development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 25 is pro-
posed to be amended as follows:
PA RT 2 5—GIFT TAX; GIFTS MADE
AFTER DECEMBER 31, 1954
Par. 1. The authority citation for part
25 continues to read in part as follows:
Authority: 26 U.S.C. 7805.***
Par. 2. Section 25.2207A–1is
amended by adding the text of paragraph
(b) to read as follows:
§25.2207A–1 Right of recovery of gift
taxes in the case of certain marital
deduction property.
*****
(b)Failure of a person to exercise the
right of recovery. The failure of a person
to exercise a right of recovery provided
by section 2207A(b) upon a lifetime
transfer subject to section 2519 is treated
as a transfer for Federal gift tax purposes
of the unrecovered amounts to the per-
son(s) from whom the recovery could
have been obtained. See§25.2511–1.
The transfer is considered to be made
when the right to recovery is no longer
enforceable and is treated as a gift even if
recovery is impossible. Any delay in the
exercise of the right of recovery shall be
treated as an interest-free loan with the
appropriate gift tax consequences.
*****
Par. 3. Section 25.2519–1 is amended
as follows:
1. Paragraph (c)(1) is amended by add-
ing a sentence to the end of the para-
graph.
2. The paragraph heading for para-
graph (c)(4) is revised and the text of
paragraph (c)(4) is added.
3. Paragraph (g) introductory text is
revised.
The additions and revisions read as
follows:
§25.2519–1 Disposition of certain life
estates.
*****
(c)***(1)***Seeparagraph (c)(4)
of this section for the effect of gift tax
that the donee spouse is entitled to
recover under section 2207A.
*****
(4)Effect of gift tax entitled to be
recovered under section 2207A on the
amount of the transfer. The amount
treated as a transfer under paragraph
(c)(1) of this section is further reduced by
the amount the donee spouse is entitled to
recover under section 2207A(b) (relating
to the right to recover gift tax attributable
to the remainder interest). If the spouse is
entitled to recover gift tax under section
2207A(b), the amount of gift tax recover-
able and the value of the remainder inter-
est treated as transferred under section
2519 are determined by using the same
interrelated computation applicable for
other transfers in which the transferee
assumes the gift tax liability. The gift tax
consequences of failing to exercise the
right of recovery are determined sepa-
rately under§25.2207A–1(b).
*****
(g)Examples. The following examples
illustrate the application of paragraphs (a)
through (f) of this section. Except as pro-
vided otherwise in the examples, assume
that the decedent, D, was survived by
spouse, S, that in each example the sec-
tion 2503(b) exclusion has already been
fully utilized for each year with respect to
the donee in question, that section
2503(e) is not applicable to the amount
deemed transferred, and that the gift taxes
on the amount treated as transferred under
paragraph (c) are offset by S’s unified
credit. The examples are as follows:
*****
Robert E. Wenzel,
Deputy Commissioner
of Internal Revenue.
(Filed by the Office of the Federal Register on July
19, 2002, 8:45 a.m., and published in the issue of
the Federal Register for July 22, 2002, 67 F.R.
47755)
2002–32 I.R.B.322August 12, 2002

Treaty Guidance Regarding
Payments With Respect to
Domestic Reverse Hybrid
Entities; Correction
Announcement 2002–71
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correction to final regulations.
SUMMARY: This document contains
corrections to final regulations (T.D.
8999, 2002–28 I.R.B. 78) that were pub-
lished in theFederal Registeron
Wednesday, June 12, 2002 (67 FR 40157)
relating to the eligibility for treaty ben-
efits of items of income paid by domestic
entities.
DATES: This correction is effective June
12, 2002.
FOR FURTHER INFORMATION CON-
TACT: Elizabeth U. Karzon (202) 622–
3880 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The final regulations that are the sub-
ject of these corrections is under section
894 of the Internal Revenue Code.
Need for Correction
As published, the final regulations
contain errors that may prove to be mis-
leading and are in need of clarification.
Correction of Publication
Accordingly, the publication of final
regulations (T.D. 8999), that were the
subject of FR Doc. 02–14506, is cor-
rected as follows:
1. On page 40159, column 1, in the
preamble under the paragraph heading
“III. Comments and Changes to§1.894–
1(d)(2)(ii)(B)(3): Definition of Related”,
first paragraph, line 1, the language“con-
structive ownership rules of sections”is
corrected to read“constructive ownership
rules of section”.
2. On page 40159, column 1, in the
preamble under the paragraph heading
“III. Comments and Changes to§1.894–
1(d)(2)(ii)(B)(3): Definition of Related”,
third paragraph, line 3, the language
“(d)(2)(ii)(B)(ii) of the final regulations”
is corrected to read“(d)(2)(ii)(B)(1)(ii)of
the final regulations”.
3. On page 40159, column 2, in the
preamble the paragraph heading“IV.
Comments and Changes to§1.894–
1(d)(2)(ii)(C): Commissioner’s discre-
tion.”is corrected to read“IV. Comments
and Changes to§1.894–1(d)(2)(ii)(C):
Commissioner’s discretion”.
4. On page 40159, column 2, in the
preamble under the paragraph heading
“IV. Comments and Changes to§1.894–
1(d)(2)(ii)(C): Commissioner’s discretion,
second paragraph, line 14, the language
“following conditions are met: (1) A”is
corrected to read“following conditions
are met: (1) a”.
5. On page 40162, column 2, second
signature block, the language“Assistant
Secretary of the Treasury (Tax Policy).”
is corrected to read“Acting Assistant
Secretary of the Treasury (Tax Policy).”
Cynthia E. Grigsby,
Chief, Regulations Unit,
Associate Chief Counsel
(Income Tax and Accounting).
(Filed by the Office of the Federal Register on July
16, 2002, 8:45 a.m., and published in the issue of
the Federal Register for July 17, 2002, 67 F.R.
46855)
Foundations Status of Certain
Organizations
Announcement 2002–72
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 doesnotindicate that the
organizations have lost their status as
organizations described in section
501(c)(3), eligible to receive deductible
contributions.
Former Public Charities. The follow-
ing organizations (which have been
treated as organizations that are not pri-
vate foundations described in section
509(a) of the Code) are now classified as
private foundations:
14 Karat Steppers, Philadelphia, PA
Absalom Jones Foundation,
Philadelphia, PA
African American Students in Africa,
Los Angeles, CA
Ahavah Respite Services, Inc.,
Lake Worth, FL
Amarillo Wildlife Refuge, Inc.,
Amarillo, TX
American Council for Greater
Understanding, San Francisco, CA
American Flyers Volleyball Club,
Long Beach, CA
American Folk Art Foundation,
Salt Lake City, UT
American Veterans Housing &
Rehabilitation Project,
Redwood City, CA
Arizona Gymnastics Boosters, Inc.,
Scottsdale, AZ
Art Museum of Southeast Texas Fund
Raising Foundation, Inc.,
Beaumont, TX
Art of Dove Healing Through Art &
Sailing, Inc., Volcano, HI
Art Resources Trust Fund,
Washington, DC
Artskate, Houston, TX
Ashe Village, Akron, OH
Ask the Angels Foundation, Carmel, CA
Assist Foundation, Inc., Atlanta, GA
Association of the Variety Clubs of the
United States, Los Angeles, CA
Atlantis Healing Center, Inc.,
Jacksonville, FL
Autaugaville Volunteer Fire Department,
Inc., Autaugaville, AL
Bartlett Youth League, Bartlett, TX
Basic Skills Foundation, Chicago, IL
Basketball Tournament Escrow Fund,
Sharon, MA
Bayview Hunters Point Contractors
Association, San Francisco, CA
Benton Conservation District,
Prosser, WA
Black Attorney General Employees of
Texas, Inc., Buda, TX
Blaze Junior Volleyball Club, Inc.,
Middleburg, FL
Blessed Children, Chicago, IL
Blocked Flock Repertory Company, Inc.,
Long Island City, NY
Bnei Reuven Organization, Inc.,
Brooklyn, NY
August 12, 20023232002–32 I.R.B.

Brown County Fair Building
Association, Brownwood, TX
California Indian Museum & Cultural
Center, Petaluma, CA
Capital Slavik Center,
Citrus Heights, CA
Caring Consumer Connection,
Greensboro, NC
Caring Place, Broadview, IL
Carteret Sports Leadership, Inc.,
Morehead City, NC
Center for American Indian Research
and Education, Inc., Carson City, NV
Century Corner Committee, Pittsfield, IL
Changes Behavioral Services,
Oak Park, IL
Charitable Merchants, Inc., Sarasota, FL
Cheer Foundation, Georgetown, DE
Chester Blazers Track and Field Team,
Brookhaven, PA
Chester Swarthmore College Community
Coalition, Swarthmore, PA
Children of the Earth, Inc.,
Coral Gables, FL
Christian Community Center of Calumet
Region, Inc., Hammond, IN
Christians Involved With Todays Youth,
Inc., Marrero, LA
Circle of the People, Inc., Chandler, IN
Civil Defense Corps, Inc., Gilford, NH
Clay Connection, Merrifield, VA
Communities in Schools of New
Mexico, La Cruces, NM
Communities in Schools of Texas, Inc.,
Austin, TX
Community Alliance for Responsible
Museum Development, Inc.,
New York, NY
Community Outreach for the Homeless,
Birmingham, AL
Concho Valley Disabled Sports
Association, Inc., San Angelo, TX
Congregation Eizer L’Nitzrochim, Inc.,
Spring Valley, NY
Consortium on Substance Abuse Free
Environment, El Paso, TX
Consumer Coalition of New Mexico,
Albuquerque, NM
Crosbyton CISD Foundation for
Academic Excellence, Crosbyton, TX
Cycle Messenger World Championship
96, San Francisco, CA
Dawn House, Inc., Bay Minette, AL
Dayton Rodeo Team, Dayton, TX
D C Housing Education Foundation,
Inc., Washington, DC
Del Norte Amateur, Crescent City, CA
Desert Institute of the Environment,
Skull Valley, AZ
Digs for Dogs, Bethesda, MD
Dolphin Aquatics Team, Inc.,
Farmington, MN
Dress for Success Los Angeles,
Los Angeles, CA
Eagle Foundation, Inc., Ashland, MO
Eagle Spirit Academy Parent
Organization, Cody, WY
Eagles Mickey Mantle Baseball Team,
Brier, WA
East Valley Softball League,
San Jose, CA
Elmhurst Youth Tennis Center,
Oakland, CA
Enable Scholarship Project, Chicago, IL
Environmental Center of Dallas, Inc.,
Dallas, TX
Epsom Elderly Housing, Inc.,
Concord, NH
Everyone Deserves Enough, Inc.,
Dorchester, MA
Executive Nutritional Management, Inc.,
Baton Rouge, LA
Fabra Elementary School PTO,
Boerne, TX
Fayetteville Vocational Center, Inc.,
Fayetteville, NC
Florida Main Street Association, Inc.,
Quincy, FL
Folks, Pomona, CA
Food for Life-Colorado, Inc.,
Denver, CO
Forest & Agricultural Reserve
Management, Waterford, VA
Fort Wayne Music Fest, Inc.,
Fort Wayne, IN
Foundation for Enhancing Education and
Literacy, Inc., Northfield, VT
Fund for Millenium House, Inc.,
New York, NY
Gabriels Passage, Inc., Memphis, TN
Gate City Thunderbirds, Nashua, NH
Gathering Ministries-Austin, Austin, TX
German-American Memorial Foundation,
Norco, LA
Ghetto Productions, Chicago, IL
Gift to Generation, San Francisco, CA
Global World Development Foundation,
Beverly Hills, CA
Greater Dallas Arts Consortium, Inc.,
Dallas TX
Groom Volunteer Ambulance Service,
Inc., Groom, TX
Groveland Neighborhood Center, Inc.,
Groveland, FL
Harvest Fund, Inc., New York, NY
Heart of the City Neighborhood
Association Beaumont Texas,
Beaumont, TX
Heartland Ministries, Inc., Loomis, CA
Heartright Foundation, Inc.,
Norman, OK
Heath Youth Athletic Association, Inc.,
W. Paducah, KY
Help for Haiti Mission, Cleveland, OH
Help One Help All Missionary Help
Center, Detroit, MI
Helping Unite Mothers and Children,
Detroit, MI
Hempstead Kiwanis Foundation, Inc.,
Hempstead, NY
Highlands Iron Conservancy, Inc.,
Rockaway, NJ
Hillside Education Association
Philanthropic Fund, Inc., Hillside, NJ
Holystar Music Foundation, Inc.,
Monterey, CA
In-Choir-er, Inc., Braintree, MA
Infinite Spirit Museum, Inc.,
Marietta, GA
Inner-City Childrens Foundation, Inc.,
Miami, FL
Institute for the Study of Families in
Transition, Houston, TX
Interfaith Initiative With Persons With
Disabilities, Inc., Boston, MA
Inter-National Foundation for the Living
Arts, Inc., Miami, FL
International Heart to Heart Foundation,
Cleveland, OH
Irvington International Parents
Association, Irvington, NJ
It’s Time, Inc., Springfield, IL
Jamaica Plain Symphony Orchestra, Inc.,
Jamaica Plain, MA
James R. Coulter Memorial Educational
Assistance Fund, Inc.,
Collingswood, NJ
Jessamine County Youth Softball
Association, Inc., Nicholsville, KY
Jewish Community Foundation of the
North Shore, Inc., Marblehead, MA
Jimmy Dickens Family Ministries, Inc.,
Cedar Bluff, VA
Kalamazoo City Comics Commission,
Kalamazoo, MI
Keith Alan Copeland Memorial
Scholarship Fund, Inc., Edmond, OK
Kids Helping Kids, Inc., Wellington, FL
Kids Voting Northern Illinois, Inc.,
Springfield, IL
Kimball Glassco Residential Center, Inc.,
Greenville, MS
2002–32 I.R.B.324August 12, 2002

Lakes Area Penguin Swimmers,
Perham, MN
Las Casitas De Socorro, Inc.,
Socorro, NM
Latria, Inc., Indianapolis, IN
Laura Jepson Institute, Inc.,
Tallahassee, FL
Leaves of Learning, Milwaukee, WI
Lincoln Magic Softball, Lincoln, NE
Little Rock Citizens Police Academy
Alumni Association, Little Rock, AR
Llama Community Development
Corporation, Salinas, CA
Lost Tribe Theatre Company, Inc.,
New York, NY
Love M’Thrift II, Inc., Mineola, NY
Marcus Garvey Youth Development
Institute, Southborough, MA
Maritime Youth Ministries, Inc.,
Oklahoma City, OK
Matthews Challenge Biking Across
America for Alzheimers, Inc.,
New York, NY
Maya Society of Minnesota, Inc.,
St. Paul, MN
McDowell County Board of Parks &
Recreation, Gary, WV
McDowell County Commission on
Aging, Inc., Welch, WV
Mem Group, Inc., Vallejo, CA
Mens Fathers Hotline, Austin, TX
Mercedes Affordable Housing Corp.,
Mercedes, TX
Miami Philharmonic Steel & Percussion
Orchestra, Inc., North Miami, FL
Mid-South Speakers Association,
Memphis, TN
Military Women of New York City &
Friends, Inc., Jamaica, NY
Millport Regional Resource Foundation,
Millport, AL
Mindanet, Inc., Little Rock, AR
Minnesota Professional Athletes Youth
Charity, Minneapolis, MN
Minority Economic Development, Inc.,
Chattanooga, TN
MMM Comprehensive Learning Center,
Inc., Riverdale, IL
Mokelumne Manor Thornton Homes
Resident Council, Thornton, CA
Mr. Muscle Foundation, Houston, TX
National Academy of Alternative
Education, New York, NY
National Brachial Plex-Erbs Palsy
Association, Inc., Larsen, WI
National Coalition of 100 Black Women
of Greater Charlotte, Inc.,
Fort Mill, SC
Nations of the World Interfaith
Ministries, Inc., Wewoka, OK
New Century Foundation, Ltd.,
Manhattan, NY
New Jersey Personal Assistance Services
Cooperative, Inc., Long Branch, NJ
New Milford Youth Baseball,
New Milford, CT
New Village Community Public Charter
School of the East Bay, Hayward, CA
New York Skyriders, Inc.,
Springfield Gardens, NY
Newberry Community Day Care Center,
Inc., Newberry, FL
North Texas Criminal Justice Ministries
Network, Garland, TX
Northeast Organization Allied for Hope,
Detroit, MI
Northern California Girls Athletics
Foundation, Petaluma, CA
Northwest Community Housing, Inc.,
Dodge City, KS
Northwest Polymer Clay Guild,
Seattle, WA
NSAA, Inc., Detroit, MI
Oak Lawn Library Friends, Inc.,
Dallas, TX
Oakland Jr. Olympic Softball
Association, Oakland, CA
Occasional Theater, Anniston, AL
Ohio Bulldogs, Reynoldsburg, OH
Old Town-Buda Association, Inc.,
Buda, TX
Orangemen Youth Basketball
Organization, Gurnee, IL
Pacific-West Associates, Inc.,
Bothell, WA
Parents Academic and Athletic
Community Career Counsel,
Pomona, CA
Park View Development Corporation,
Washington, DC
Pathfinder Historians,
W. Bloomfield, MI
People Effectively Assisting Kids to
Succeed, Inc., Lititz, PA
Persian Schools Network, Inc.,
Yonkers, NY
Pewaukee Fire Fighters Auxiliary, Inc.,
Waukesha, WI
Phenix, Incorporated, Westland, MI
Pinetree High School Crime Stoppers,
Longview, TX
Pink Ribbon, Inc., Bogart, GA
Pinnacle Park Association, Inc.,
Houston, TX
Playground Partners, Borger, TX
Prairie Family Chautauqua, Inc.,
Casper, WY
Prince Georges County Community
Development Corporation,
Forestville, MD
Project Respect, San Francisco, CA
Rafiki AIDS Ministry, Inc.,
Columbus, OH
Ramsey International Fine Arts Center
Foundation, Minneapolis, MN
Real Lewin Torah Research Int’l Fund,
Inc., Brooklyn, NY
Resources International, Inc.,
Cambridge, MA
Ride & Stride, Honolulu, HI
RISEEducational Services, Inc.,
Seaside, CA
Roanoke Valley Adoptive-Foster Care
Association, Vinton, VA
Robert L. Reed Tap Heritage Inst.,
St. Louis, MO
ROCK, St. Peter, MN
Rockwood Area Community
Organization, Rockwood, MI
Roslyn Booster Basketball Club, Inc.,
Roslyn Heights, NY
Sacramento Helping Professionals R
Entertaining, Sacramento, CA
Safety Village, Inc., Daytona Beach, FL
Salem Community Skating Rink, Inc.,
Salem, NH
Salinas Valley Aquatics Development
Foundation, Salinas, CA
San Angelo Housing Support, Inc.,
San Angelo, TX
Schutz American Schools of Alexandria
Foundation, Pittsburgh, PA
Section 8 Resident Council of New
Orleans, Inc., New Orleans, LA
Service Management, Incorporated,
Taylor, MI
Shades of Youth Foundation,
Tollhouse, CA
Shaw Neighborhood Improvement
Council, Washington, DC
Shelter the World, Inc., San Diego, CA
Short North Dallas Community
Development Corporation, Dallas, TX
Silver Spring Youth Baseball Assoc.,
New Kingston, PA
Simon Bolivar Institute, Inc., Miami, FL
Sioux Land Teens Encounter Christ,
Newcastle, NE
South Valley AIDS Network, Visalia, CA
Southeast Center for Ecological
Awareness, Inc., Chattanooga, TN
Southern Cal School Foundation,
Lake City, IA
August 12, 20023252002–32 I.R.B.

Southern York County Arena,
Sanford, ME
Sports, Inc., Detroit, MI
St. Bernard Resident Council,
New Orleans, LA
Stone-Hays Center for Independent
Living, Galesburg, IL
Stop-Students that Officially Patrol,
Little Rock, AR
Strake Jesuit Art Museum, Houston, TX
Sunrise Optimist Club of Appleton
Foundation, Inc., Neenah, WI
SW Florida Fibromyalgia Group, Inc.,
Fort Meyers, FL
Take-a-Break Respit Care, Inc.,
Sarasota, FL
Talamm, Silver Spring, MD
Tallahassee Youth Council Initiative,
Inc., Tallahassee, FL
Tecumseh Area Communities in Schools,
Tecumseh, MI
Tennessee Business Roundtable
Foundation, Nashville, TN
Texas Inmate Families Association,
San Antonio, TX
Texas Vocabulary Institute, Inc.,
San Antonio, TX
Therapeutic and Educational Animal
Center of Southwest Louisiana, Inc.,
Lake Charles, LA
TIPAAA Foundation, Inc., Oakland, CA
Turkmen Association, Inc.,
Franklin Park, NJ
Tuscaloosa Volleyball Club,
Tuscaloosa, AL
UPPCP-Unidos Para El Progresso De
Cameron Park, Brownsville, TX
US Falun-Buddhism Society,
Torrance, CA
Vacaville Pony Association,
Vacaville, CA
Victim Offender Reconciliation Program
of Sacramento County, Inc.,
Sacramento, CA
V M & R Home Services, Inc.,
Washington, MI
Wabash County Youth Baseball and
Softball, Inc., Mount Carmel, IL
Walkers Elderly Home Care Services,
Inc., New Orleans, LA
Waretown Education Association
Philanthropic Fund, Inc.,
Waretown, NJ
Washington Area Softball Association,
Inc., Washington, IA
West Point Society of the Piedmont,
Greensboro, NC
West Side Human Services Corporation,
Inc., Hollywood, FL
Westview PAC, Longmont, CO
Willamette Youth Chorusee Northwest,
Lake Oswego, OR
Williamson County Aquatic Team,
Franklin, TN
Willis Youth Council, Inc., Willis, TX
Wings A Positive Social Opportunities
Network, Commerce TWP, MI
WNC Retreat Center, Inc., Asheville, NC
Wolfpack Instrumental Music Support
Group, Van Nuys, CA
Women and Environmental Degradation,
Takoma Park, MD
Womens Outdoor Challenges, Inc.,
Grantham, NH
Wood Family International Foundation
for Multiple Sclorosis,
Ft. Lauderdale, FL
Woodlands Indian Community Center,
Lansing, MI
Woodlawn Park Parents Club,
Indian Mound, TN
Wynton M. Blount Cultural Park,
Montgomery, AL
Yonkers Sponsoring Committee,
Yonkers, NY
Youth Into Adulthood Corp.,
Brooklyn, NY
If an organization listed above submits
information that warrants the renewal of
its classification as a public charity or as
a private operating foundation, the Inter-
nal Revenue Service will issue a ruling or
determination letter with the revised clas-
sification as to foundation status. Grant-
ors and contributors may thereafter rely
upon such ruling or determination letter
as provided in section 1.509(a)–7ofthe
Income tax Regulations. It is not the prac-
tice of the Service to announce such
revised classification of foundation status
in the Internal Revenue Bulletin.
2002–32 I.R.B.326August 12, 2002

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as“rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplifieddescribes 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
withmodified, below).
Clarifiedis used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some 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.
Modifiedis used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but not
to B, and the new ruling holds that it
applies to both A and B, the prior ruling
is modified because it corrects a pub-
lished position. (Compare withamplified
andclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used
in a ruling that lists previously published
rulings that are obsoleted because of
changes in law or regulations. A ruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revokeddescribes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.
Supersededdescribes 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
period 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
andsupersededdescribes 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.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspendedis 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 formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Intemal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
August 12, 2002i2002–32 I.R.B.

Numerical Finding List
1
Bulletin 2002–26 through 2002–31
Announcements:
2002–59, 2002–26 I.R.B.28
2002–60, 2002–26 I.R.B.28
2002–61, 2002–27 I.R.B.72
2002–62, 2002–27 I.R.B.72
2002–63, 2002–27 I.R.B.72
2002–64, 2002–27 I.R.B.72
2002–65, 2002–29 I.R.B.182
2002–66, 2002–29 I.R.B.183
2002–67, 2002–30 I.R.B.237
2002–68, 2002–31 I.R.B.283
2002–69, 2002–31 I.R.B.283
2002–70, 2002–31 I.R.B.284
Notices:
2002–42, 2002–27 I.R.B.36
2002–43, 2002–27 I.R.B.38
2002–44, 2002–27 I.R.B.39
2002–45, 2002–28, I.R.B.93
2002–46, 2002–28 I.R.B.96
2002–47, 2002–28 I.R.B.97
2002–48, 2002–29 I.R.B.130
2002–49, 2002–29 I.R.B.130
2002–50, 2002–28 I.R.B.98
2002–51, 2002–29 I.R.B.131
2002–52, 2002–30 I.R.B.187
2002–53, 2002–30 I.R.B.187
2002–54, 2002–30 I.R.B.189
Proposed Regulations:
REG–248110–96, 2002–26 I.R.B.19
REG–110311–98, 2002–28 I.R.B.109
REG–103823–99, 2002–27 I.R.B.44
REG–103829–99, 2002–27 I.R.B.59
REG–103735–00, 2002–28 I.R.B.109
REG–106457–00, 2002–26 I.R.B.23
REG–106871–00, 2002–30 I.R.B.190
REG–107524–00, 2002–28 I.R.B.110
REG–115285–01, 2002–27 I.R.B.62
REG–116644–01, 2002–31 I.R.B.268
REG–126024–01, 2002–27 I.R.B.64
REG–164754–01, 2002–30 I.R.B.212
REG–165868–01, 2002–31 I.R.B.270
REG–122564–02, 2002–26 I.R.B.25
REG–123305–02, 2002–26 I.R.B.26
Revenue Procedures:
2002–43, 2002–28 I.R.B.99
2002–44, 2002–26 I.R.B.10
2002–45, 2002–27 I.R.B.40
2002–46, 2002–28 I.R.B.105
2002–47, 2002–29 I.R.B.133
2002–49, 2002–29 I.R.B.172
2002–50, 2002–29 I.R.B.173
2002–51, 2002–29 I.R.B.175
2002–52, 2002–31 I.R.B.242
2002–53, 2002–31 I.R.B.253
Revenue Rulings:
2002–38, 2002–26 I.R.B.4
2002–39, 2002–27 I.R.B.33
2002–40, 2002–27 I.R.B.30
2002–41, 2002–28 I.R.B.75
2002–42, 2002–28 I.R.B.76
2002–43, 2002–28 I.R.B.85
2002–44, 2002–28 I.R.B.84
2002–45, 2002–29 I.R.B.116
2002–46, 2002–29 I.R.B.117
2002–47, 2002–29 I.R.B.119
2002–48, 2002–31 I.R.B.239
Treasury Decisions:
8997, 2002–26 I.R.B.6
8998, 2002–26 I.R.B.1
8999, 2002–28 I.R.B.78
9000, 2002–28 I.R.B.87
9001, 2002–29 I.R.B.128
9002, 2002–29 I.R.B.120
1
A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 2002–1 through 2002–25 is
in Internal Revenue Bulletin 2002–26, dated July 1, 2002.
2002–32 I.R.B.iiAugust 12, 2002

Finding List of Current Actions
on Previously Published Items
1
Bulletin 2002–26 through 2002–31
Announcements:
98–99
Superseded by
Rev. Proc. 2002–44, 2002–26 I.R.B.10
2000–4
Modified by
Ann. 2002–60, 2002–26 I.R.B.28
2001–9
Superseded by
Rev. Proc. 2002–44, 2002–26 I.R.B.10
Proposed Regulations:
REG–209114–90
Corrected by
Ann. 2002–65, 2002–29 I.R.B.182
REG–209813–96
Withdrawn by
REG–106871–00, 2002–30 I.R.B.190
REG–103823–99
Corrected by
Ann. 2002–67, 2002–30 I.R.B.237
REG–105885–99
Corrected by
Ann. 2002–67, 2002–30 I.R.B.237
REG–105369–00
Clarified by
Notice 2002–52, 2002–30 I.R.B.187
Corrected by
Ann. 2002–67, 2002–30 I.R.B.237
REG–118861–00
Corrected by
Ann. 2002–67, 2002–30 I.R.B.237
REG–136193–01
Corrected by
Ann. 2002–67, 2002–30 I.R.B.237
REG–161424–01
Corrected by
Ann. 2002–67, 2002–30 I.R.B.237
REG–165706–01
Corrected by
Ann. 2002–67, 2002–30 I.R.B.237
REG–102740–02
Corrected by
Ann. 2002–67, 2002–30 I.R.B.237
REG–123305–02
Corrected by
Ann. 2002–69, 2002–31 I.R.B.283
Revenue Procedures:
91–23
Modified and superseded by
Rev. Proc. 2002–52, 2002–31 I.R.B.242
91–26
Modified and superseded by
Rev. Proc. 2002–52, 2002–31 I.R.B.242
95–18
Superseded by
Rev. Proc. 2002–51, 2002–29 I.R.B.175
96–13
Modified and superseded by
Rev. Proc. 2002–52, 2002–31 I.R.B.242
96–14
Modified and superseded by
Rev. Proc. 2002–52, 2002–31 I.R.B.242
96–53
Amplified by
Rev. Proc. 2002–52, 2002–31 I.R.B.242
2001–17
Modified and superseded by
Rev. Proc. 2002–47, 2002–29 I.R.B.133
2001–26
Superseded by
Rev. Proc. 2002–53, 2002–31 I.R.B.253
2002–9
Modified and amplified by
Rev. Proc. 2002–46, 2002–28 I.R.B.105
2002–13
Modified by
Rev. Proc. 2002–45, 2002–27 I.R.B.40
Revenue Rulings:
92–75
Clarified by
Rev. Proc. 2002–52, 2002–31 I.R.B.242
94–76
Amplified by
Rev. Rul. 2002–42, 2002–28 I.R.B.76
Treasury Decisions:
8997
Corrected by
Ann. 2002–68, 2002–31 I.R.B.283
1
A cumulative list of current actions on previously published
items in Internal Revenue Bulletins 2002–1 through 2002–25 is
in Internal Revenue Bulletin 2002–26, dated July 1, 2002.
August 12, 2002iii2002–32 I.R.B.