Internal Revenue Bulletin 2009-21 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 200
9-21
May 26, 2009
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.
SPECIAL ANNOUNCEMENT
Notice 2009–43, page 1037.
The Department of Treasury and the Service invite public com-
ments on recommendations for items that should be included
on the 2009–2010 Guidance Priority List. Taxpayers may sub-
mit recommendations for guidance at any time during the year.
Recommendations submitted by May 31, 2009, will be re-
viewed for possible inclusion on the original 2009-2010 Guid-
ance Priority List. Recommendations received after May 31,
2009, will be reviewed for inclusion in the next periodic up-
date.
INCOME TAX
Rev. Rul. 2009–13, page 1029.
Primary sale of life insurance contract; tax treatment of
a sale or surrender.This ruling provides guidance to policy-
holders who surrender or sell their life insurance contracts.
Rev. Rul. 2009–14, page 1031.
Secondary sale of life insurance contract by investors.
This ruling provides guidance to investors who purchase life
insurance contracts.
Rev. Rul. 2009–15, page 1035.
Formless conversion of partnership to S corporation.
This ruling explains that a partnership that converts to a cor-
poration under either regulations section 301.7701–3(c)(1)(i)
or under a state law formless conversion statute is allowed to
make an S election effective for the corporation’s first taxable
year.
Notice 2009–44, page 1037.
This notice clarifies that, under regulations section 1.42–10
(the utility allowance regulations), utility costs paid by a tenant
based on actual consumption in a sub-metered rent-restricted
unit are treated as paid directly by the tenant for purposes of
section 42(g)(2)(B)(ii) of the Code.
ADMINISTRATIVE
Announcement 2009–45, page 1040.
This document contains corrections to final regulations
(T.D. 9446, 2009–9 I.R.B. 607) concerning gain recognition
agreements filed by United States persons with respect to
transfers of stock or securities to foreign corporations.
Announcements of Disbarments and Suspensions begin on page 1040.
Fi
nding Lists begin on page ii.
Index for January through May begins on page vi.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d 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 compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents 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.
May 26, 20092009–21 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 72.—Annuities;
Certain Proceeds of
Endowment and Life
Insurance Contracts
(Also §§ 1001, 1011, 1012, 1221, and 1234A.)
Primary sale of life insurance con-
tract; tax treatment of a sale or surren-
der.This ruling provides guidance to pol-
icyholders who surrender or sell their life
insurance contracts.
Rev. Rul. 2009–13
ISSUE
What is the amount and character of
A’s income recognized upon the surrender
or sale of the life insurance contracts de-
scribed in the situations below?
FACTS
Situation 1
On January 1 of Year 1,A, an individ-
ual, entered into a “life insurance contract”
(as defined in § 7702 of the Internal Rev-
enue Code (Code)) with cash value. Un-
der the contract,Awas the insured, and
the named beneficiary was a member of
A’s family.Ahad the right to change the
beneficiary, take out a policy loan, or sur-
render the contract for its cash surrender
value. The contract inA’s hands was not
property described in § 1221(a)(1)–(8).
On June 15 of Year 8,Asurrendered
the contract for its $78,000 cash surren-
der value, which reflected the subtraction
of $10,000 of “cost-of-insurance” charges
collected by the issuer for periods ending
on or before the surrender of the contract.
Through that date,Ahad paid premiums
totaling $64,000 with regard to the life in-
surance contract.Ahad neither received
any distributions under the contract nor
borrowed against the contract’s cash sur-
render value.
Adetermines taxable income using the
cash method of accounting and files in-
come tax returns on a calendar year ba-
sis. As of June 15 of Year 8,Awas not
a terminally ill individual, nor a chroni-
cally ill individual, within the meaning of
§ 101(g)(4).
Situation 2
The facts are the same as in Situation 1,
except that on June 15 of Year 8,Asold
the life insurance contract for $80,000 to
B, a person unrelated toAand who would
suffer no economic loss uponA’s death.
Situation 3
The facts are the same as in Situation
1, except that the contract was a level
premium fifteen-year term life insurance
contract without cash surrender value.
The monthly premium for the contract was
$500. Through June 15 of Year 8,Apaid
premiums totaling $45,000 with regard to
the contract. On June 15 of Year 8,Asold
the life insurance contract for $20,000 to
B, a person unrelated toAand who would
suffer no economic loss uponA’s death.
LAW AND ANALYSIS
SITUATION 1
Amount of income recognized upon
surrender of the life insurance contract
Section 61(a) provides that, except
as otherwise provided in the income tax
provisions of the Code, gross income in-
cludes all income from whatever source
derived, including (but not limited to) in-
come from life insurance contracts.See
§ 61(a)(10). To the extent that another
section of the Code or regulations provides
specific treatment of any item of income,
that other provision applies notwithstand-
ing § 61 and the regulations thereunder.
See§ 1.61–1(b) of the Income Tax Regu-
lations.
Section 72(e) governs the federal in-
come tax treatment of amounts received
under an annuity, endowment, or life in-
surance contract that are not received as
an annuity. In general, under § 72(e)(2), a
non-annuity amount that is received on or
after the annuity starting date is included
in gross income. If a non-annuity amount
is received before the annuity starting date,
it is included in gross income to the extent
allocable to income on the contract, but not
to the extent allocable to investment in the
contract (i.e., it is taxed on an income-first
basis).
Section 72(e)(5) provides an excep-
tion to the income-first rule in the case
of –(1) certain contracts including, un-
der § 72(e)(5)(C), life insurance contracts
other than a “modified endowment con-
tract” (as defined in § 7702A) and (2)
any non-annuity amount received under
a contract on its complete surrender, re-
demption, or maturity.
If a non-annuity amount is received un-
der a life insurance contract other than a
modified endowment contract before the
annuity starting date, or is received under
a life insurance contract on the complete
surrender, redemption, or maturity of the
contract, § 72(e)(5)(A) requires that the
amount be included in gross income but
only to the extent it exceeds investment in
the contract. For this purpose, § 72(e)(6)
defines “investment in the contract” as of
any date as the aggregate amount of pre-
miums or other consideration paid for the
contract before that date, less the aggregate
amount received under the contract before
that date to the extent that amount was ex-
cludable from gross income.
In Situation 1,Areceived $78,000 on
the complete surrender of a life insurance
contract.A’s income upon surrender of the
contract is determined under § 72(e)(5).
Under § 72(e)(5)(A),the amount received
is included in gross income to the extent
it exceeds the investment in the contract.
AsApaid aggregate premiums of $64,000
with regard to the contract, and neither re-
ceived any distributions under the contract
nor borrowed against the contract’s cash
surrender value prior to surrender,A’s “in-
vestment in the contract” as required by
§ 72(e)(6) was $64,000. Consequently,
pursuant to § 72(e)(5)(A),Arecognized
$14,000 of income on surrender of the con-
tract, which is the excess of $78,000 re-
ceived over $64,000.
Character of income recognized upon
surrender of the life insurance contract
Section 72(e) does not specify whether
income recognized upon the surrender of
a life insurance contract is treated as or-
dinary income or as capital gain. Thus,
the character of the income thatArecog-
nized on the surrender of the life insurance
2009–21 I.R.B.1029May 26, 2009

contract is capital gain only if it so quali-
fies under the general rules of subchapter
P (§§ 1201–1260).
Section 1222(3) defines long-term
capital gain as gain from the sale or ex-
change of a capital asset held for more
than one year, if and to the extent such
gain is taken into account in computing
gross income. Section 1221(a) provides
that the term “capital asset” means prop-
erty held by the taxpayer (whether or
not connected with a trade or business),
but does not include items described in
§ 1221(a)(1)–(8). As noted above, the
life insurance contract was not property
described in § 1221(a)(1)–(8).
The surrender of a life insurance con-
tract does not, however, produce a cap-
ital gain.See, e.g., Rev. Rul. 64–51,
1964–1 C.B. 322 (noting that “[u]nder sec-
tion 61(a)(10) of the Code, the proceeds
received by an insured upon the surrender
of, or at maturity of, a life insurance policy
constitutes ordinary income to the extent
such proceeds exceed the cost of the pol-
icy”). Section 1234A, originally enacted
in 1981, does not change this result.
Accordingly, in Situation 1 the $14,000
of income recognized byAon the surren-
der of the life insurance contract is ordi-
nary income.
SITUATION 2
Amount of income recognized on sale of
the life insurance contract
Section 61(a)(3) provides that gross in-
come includes gains derived from dealings
in property.
Section 1001(a) provides that the gain
realized from the sale or other disposition
of property is the excess of the amount
realized over the adjusted basis provided
in § 1011 for determining gain. Thus, to
determine the amount ofA’s income from
the sale of the life insurance contract in
Situation 2, it is necessary to determine
A’s amount realized from the sale, andA’s
adjusted basis in the contract.
Pursuant to § 1001(b),A’s amount real-
izedfromthesaleofthelifeinsurancecon-
tract is the sum of money received from the
sale, or $80,000.
Under §§ 1011 and 1012, the ad-
justed basis for determining gain or loss
is generally the cost of the property ad-
justed as provided in § 1016, except
as otherwise provided in subchapters O
(§§ 1011 through 1092), C (§§ 301 through
386), K (§§ 701 through 777), and P
(§§ 1201 through 1298).See also§ 263(a);
§ 1.263(a)–4. Under § 1016(a)(1), proper
adjustment must be made for expenditures,
receipts, losses, or other items properly
chargeable to capital account.See also
§ 1.1016–2(a). Section 72 has no bearing
on the determination of the basis of a life
insurance contract that is sold, because
§ 72 applies only to amounts received
under the contract.
BoththeCodeandthecourtsac-
knowledge that a life insurance contract,
although a single asset, may have both
investment characteristics and insurance
characteristics.See, e.g., § 7702 (defining
life insurance contract for federal income
tax purposes by reference, in part, to both
the cash surrender value and death benefits
under the contract);London Shoe Co. v.
Commissioner,80F.2d230,231(2dCir.
1935) (“A life insurance policy ordinar-
ily combines investment with insurance
protection.”);Century Wood Preserving
Co.v.Commissioner,69F.2d967,968
(3d Cir. 1934) (“The policies of insurance
involved here have a double aspect. They
provide the present protection of ordinary
life insurance and also a means of invest-
ment.”). To measure a taxpayer’s gain
upon the sale of a life insurance contract,
it is necessary to reduce basis by that por-
tion of the premium paid for the contract
that was expended for the provision of
insurance before the sale.
InCentury Wood Preserving Co. v.
Commissioner, 69 F.2d 967 (3d Cir. 1934),
a corporate taxpayer paid $98,242 of pre-
miums on life insurance contracts over a
period of several years to insure the lives
of its officers. The taxpayer then sold the
contracts to the officers for their cash sur-
render value of $57,646, claiming a loss
for the difference between the total premi-
ums paid and the amount for which it sold
the contracts. The court held that the tax-
payer did not have a loss, because it did not
have a basis equal to the full amount of the
premiums paid:
If the [taxpayer] is entitled to a deduc-
tion from gross income, it is because [it
has] sustained a loss, the basis of deter-
mining which is the cost of the property.
... The cost of an asset is the real ques-
tion here. It is obvious that cost is not
the total amount paid in as premiums,
since continuing insurance protection is
part of the consideration for the con-
tract. The part of the premiums which
represents annual insurance protection
has been earned and used. 69 F.2d at
968.
See also London Shoe Co.,80F.2dat
233 (noting, in the context of a situa-
tion in which the policy was surrendered,
not sold, that “the cost [of the policy]
was approximately reflected in the cash
surrender value ... [t]he portion of the
premiums not used to build up the reserve
was paid to obtain insurance protection
which was for many years afforded.”);
Keystone Consolidated Publishing Co.
v. Commissioner, 26 B.T.A. 1210, 1211
(1932) (stating “[t]otal premiums paid
did not represent the cost of the [life
insurancecontract]....[t]osohold
would be to disregard the element of
insurance protection in the period prior
to the sale, the benefit of which accrued
to petitioner.”); § 1.1016–2(a) (cost or
other basis of property adjusted for any
expenditures, receipts, losses or other
items properly chargeable to capital
account).CompareRev. Rul. 2009–14,
page 1031, this Bulletin (not requiring a
reduction for cost of insurance charges
imposed after a preexisting life insurance
contract was purchased for profit by a
taxpayer with no insurable interest in the
insured).
In Situation 2,Apaid total premiums of
$64,000 under the life insurance contract
through the date of sale, and $10,000 was
subtracted from the contract’s cash sur-
render value as cost-of-insurance charges.
Accordingly,A’s adjusted basis in the con-
tract as of the date of sale under §§ 1011
and 1012 and the authorities cited above
was $54,000 ($64,000 premiums paid less
$10,000 expended as cost of insurance).
Accordingly,Amust recognize $26,000
on the sale of the life insurance contract to
B, which is the excess of the amount re-
alized on the sale ($80,000) overA’s ad-
justed basis of the contract ($54,000).
Character of income recognized on sale of
the life insurance contract
Unlike Situation 1, which involves the
surrender of the life insurance contract to
the issuer of the contract, Situation 2 in-
volves an actual sale of the contract. Nev-
ertheless some or all of the gain on the
May 26, 200910302009–21 I.R.B.

sale of the contract may be ordinary if the
substitute for ordinary income doctrine ap-
plies.
The Supreme Court has held, under
the so-called “substitute for ordinary in-
come” doctrine, that “property” within the
meaning of § 1221 does not include claims
or rights to ordinary income. Instead,
the Court “has consistently construed
‘capital asset’ to exclude property rep-
resenting income items or accretions to
the value of a capital asset themselves
properly attributable to income.”United
States v. Midland-Ross Corp.,381U.S.
54, 57 (1965).See also Commissioner
v. P.G. Lake, Inc., 356 U.S. 260 (1958)
(consideration received on the sale of
a working interest in an oil well repre-
sented a substitute for what would have
been received in the future as ordinary
income, therefore taxable as ordinary in-
come and not capital gain);Arkansas Best
Corp.v.Commissioner,485U.S.212,
217, n.5 (1988) (noting that the “substi-
tute for ordinary income” doctrine had no
application to thatcase). Thus, ordinary
income that has been earned but not rec-
ognized by a taxpayer cannot be converted
into capital gain by a sale or exchange.
See also Prebola v. Commissioner,482
F.3d 610 (2d Cir. 2007);United States v.
Maginnis,356 F.3d 1179 (9
th
Cir. 2004);
Davis v. Commissioner,119 T.C. 1 (2002)
(applying the “substitute for ordinary
income” doctrine after theArkansas Best
decision).
The “substitute for ordinary income”
doctrine has been applied to characterize
the profit on a sale of an annuity contract or
life insurance contract as ordinary income.
For example, inGallun v. Commisssioner,
327 F.2d 809, 811 (7th Cir. 1964), the
court stated:
The question presented has been con-
sidered by other courts. Uniformly,
they have held that the assignment of in-
comedoctrine...shouldbeapplied
and the profits realized from the sale
or the surrender value of an annuity or
life insurance contract should be treated
as ordinary income rather than capital
gain. These cases are:First Nat’l Bank
of Kansas City v. Commissioner,309
F.2d 587 (8
th
Cir. 1962);Rolf v. Com-
missioner, 304 F.2d 450 (3d Cir. 1962);
Commissioner v. Phillips, 275 F.2d 33
(4
th
Cir. 1960);Arnfeld v. United
States, 163 F. Supp. 865, 143 Ct. Cl.
277 (1958).
Application of the “substitute for or-
dinary income” doctrine is limited to the
amount that would be recognized as ordi-
nary income if the contract were surren-
dered (i.e., to the inside build-up under the
contract). Hence, if the income recognized
on the sale or exchange of a life insurance
contract exceeds the “inside build-up” un-
der the contract, the excess may qualify as
gain from the sale or exchange of a capital
asset.See,e.g.,Commissioner v. Phillips,
275F.2d33,36n.3(4
th
Cir. 1960).
In Situation 2, the inside build-up un-
derA’s life insurance contract immediately
prior to the sale toBwas $14,000 ($78,000
cash surrender value less $64,000 aggre-
gate premiums paid). Hence, $14,000 of
the $26,000 of income thatAmust recog-
nize on the sale of thecontract is ordinary
income under the “substitute for ordinary
income” doctrine. Because the life insur-
ance contract inA’s hands was not property
described in § 1221(a)(1)–(8) and was held
byAfor more than one year, the remain-
ing $12,000 of income is long-term capital
gain within the meaning of § 1222(3).
SITUATION 3
Amount of income recognized on sale of
the term life insurance contract
In Situation 3, the amount realized from
the sale of the term life insurance contract
is the sum of money received from the sale,
or $20,000.
A’s adjusted basis in the life insurance
contract for purposes of determining its
gain or loss on sale is equal to the to-
tal premiums paid under the contract, less
charges for the provision of insurance be-
fore the sale. Absent other proof, the cost
of the insurance provided toAeach month
is presumed to equal the monthly premium
under the contract, or $500. The cost of
the insurance protection provided toAdur-
ing the 89.5 month period thatAheld the
contract was $500 times 89.5 months, or
$44,750. Hence,A’s adjusted basis in the
contract on the date of the sale toBwas
$250 ($45,000 total premiums paid, less
$44,750 cost of insurance protection).
Accordingly,Amust recognize $19,750
on the sale of the term life insurance con-
tract toBin Situation 3, which is the ex-
cess of the amount realized on the sale
($20,000) over the adjusted basis of the
contract ($250).
Character of income recognized on sale of
the term life insurance contract
In Situation 3, the term life insurance
contract had no cash surrender value.
Hence, there was no inside buildup un-
der the contract to which the substitute
for ordinary income doctrine could ap-
ply. Because the life insurance contract
inA’s hands was not property described
in § 1221(a)(1)–(8) and was held byAfor
more than one year, the $19,750 of income
thatAmust recognize on the sale of the
contract is long-term capital gain within
the meaning of § 1222(3).
HOLDINGS
1. In Situation 1,Amust recognize
$14,000 of ordinary income upon surren-
der of the life insurance contract.
2. In Situation 2,Amust recognize
$26,000 of income upon sale of the life in-
surance contract. Of this $26,000 of in-
come, $14,000 is ordinary income, and
$12,000 is long-term capital gain.
3. In Situation 3,Amust recognize
$19,750 of long-term capital gain upon
sale of the life insurance contract.
EFFECTIVE DATE
Under the authority of § 7805(b)(8), the
holdings of this revenue ruling with re-
spect to Situations 2 and 3 will not be ap-
plied adversely to sales occurring before
August 26, 2009.
DRAFTING INFORMATION
The principal authors of this revenue
ruling are Josephine H. Firehock of the Of-
fice of Associate Chief Counsel (Interna-
tional) and Stephen D. Hooe of the Of-
fice of Associate Chief Counsel (Finan-
cial Institutions and Products). For further
information regarding this ruling, contact
Stephen D. Hooe at (202) 622–7595 (not a
toll-free call).
Section 101.—Certain
Death Benefits
(Also §§ 263, 865, 1001, 1011, 1012, and 1221.)
Secondary sale of life insurance con-
tract by investors.This ruling provides
2009–21 I.R.B.1031May 26, 2009

guidance to investors who purchase life in-
surance contracts.
Rev. Rul. 2009–14
ISSUE
What are the tax consequences toB,in
the situations described below, upon the
receipt of death benefits, or upon the re-
ceipt of sale proceeds, with regard to a term
life insurance contract thatBpurchased for
profit?
FACTS
Situation 1
Ais a United States citizen residing in
the United States.Bis a United States per-
son as defined in § 7701(a)(30) of the Inter-
nal Revenue Code (Code).Bdetermines
taxable income using the cash method of
accounting and files its income tax returns
on a calendar year basis.
On June 15, 2008,Bpurchased from
Afor $20,000 a “life insurance contract”
(as defined in § 7702) on the life ofA.
The contract was originally issued byIC,
a domestic corporation, toAon January
1, 2001. The contract was a level pre-
mium fifteen-year term life insurance con-
tract without cash surrender value. At the
time of purchase, the remaining term of
the contract was 7 years, 6 months, and 15
days. The monthly premium for the con-
tract was $500, due and payable on the first
day of each month. As owner of the con-
tract,Bhad the right to change the bene-
ficiary and, pursuant to that right, named
itself beneficiary under the contract imme-
diately after acquiring the contract.
BhadnoinsurableinterestinA’s life
and, except for the purchase of the con-
tract,BhadnorelationshiptoAand would
suffer no economic loss uponA’s death.
Bpurchased the contract with a view to
profit. The contract inB’s hands was not
property described in § 1221(a)(1)–(8).
The likelihood thatBwould allow the
contract to lapse by failing to pay any of
the remaining premiums was remote.
On December 31, 2009,Adied, and
ICpaid $100,000 under the life insur-
ance contract toBby reason ofA’s death.
Through that date,Bhad paid monthly
premiums totaling $9,000 to keep the con-
tract in force.
Situation 2
The facts are the same as in Situation 1,
except thatAdid not die and, on December
31, 2009,Bsold the contract toC(a person
unrelated toAorB) for $30,000.
Situation 3
The facts are the same as in Situation 1,
except thatBis a foreign corporation that
is not engaged in a trade or business within
the United States (including the trade or
business of purchasing, or taking assign-
ments of, life insurance contracts).
LAW AND ANALYSIS
SITUATION 1.
Amount of income recognized by B upon
the receipt of death benefits
Section 61(a) provides that, except
as otherwise provided in the income tax
provisions of the Code, gross income in-
cludes all income from whatever source
derived, including (but not limited to) in-
come from life insurance contracts.See
§ 61(a)(10). To the extent that another
section of the Code or regulations provides
specific treatment of any item of income,
that other provision applies notwithstand-
ing § 61 and the regulations thereunder.
See§ 1.61–1(b) of the Income Tax Regu-
lations.
Section 72(e) governs the federal in-
come tax treatment of amounts received
under an annuity, endowment, or life in-
surance contract that are not received as
an annuity. In general, under § 72(e)(2), a
non-annuity amount that is received on or
after the annuity starting date is included
in gross income. If a non-annuity amount
is received before the annuity starting date,
it is included in gross income to the extent
allocable to income on the contract, but not
to the extent allocable to investment in the
contract (i.e.,itistaxedonanincome-first
basis).
Section 72(e)(5) provides an excep-
tion to the income-first rule in the case
of –(1) certain contracts including, un-
der § 72(e)(5)(C), life insurance contracts
other than a “modified endowment con-
tract” (as defined in § 7702A) and (2)
any non-annuity amount received under
a contract on its complete surrender, re-
demption, or maturity.
If a non-annuity amount is received un-
der a life insurance contract other than a
modified endowment contract before the
annuity starting date, or is received under
a life insurance contract on the complete
surrender, redemption, or maturity of the
contract, § 72(e)(5)(A) requires that the
amount be included in gross income but
only to the extent it exceeds investment in
the contract. For this purpose, § 72(e)(6)
defines “investment in the contract” as of
any date as the aggregate amount of pre-
miums or other consideration paid for the
contract before that date, less the aggregate
amount received under the contract before
that date to the extent that amounts was ex-
cludable from gross income. In the case of
a transferee for value, only the actual value
of consideration paid for the contract, plus
premiums and other consideration paid af-
ter the transfer, is taken into account.See
generally§ 72(g); § 1.72–10.
Section 101(a)(1) provides, gener-
ally, that gross income does not include
amounts received (whether in a single sum
or otherwise) under a life insurance con-
tract, if such amounts are paid by reason
of the death of the insured. In the case
of a transfer for valuable consideration,
however, § 101(a)(2) provides that the
amount excluded from gross income shall
not exceed an amount equal to the sum
of the actual value of the consideration
paid and the premiums and other amounts
subsequently paid by the transferee. The
“transfer for value” rule of § 101(a)(2)
does not apply in the case of a transfer
involving a carryover basis or in the case
of a transfer to the insured, a partner of the
insured, a partnership in which the insured
is a partner, or to a corporation in which
the insured is a shareholder or officer.
In Situation 1,Breceived $100,000
fromICby reason of the death ofA,the
insured under the contract. BecauseB
purchased the contract fromAin exchange
for a purchase price of $20,000,B’s ac-
quisition of the contract was a “transfer
for a valuable consideration” within the
meaning of § 101(a)(2). Neither the car-
ryover basis exception of § 101(a)(2)(A)
nor the exception for transfers involv-
ing parties related to the insured under
§ 101(a)(2)(B) applied. Accordingly,
§ 101(a)(1) excludes fromB’s gross in-
come the amount received by reason ofA’s
death, but § 101(a)(2) limits the exclusion
to the sum of the actual value of the con-
May 26, 200910322009–21 I.R.B.

sideration paid for the transfer ($20,000)
and other amounts paid byB($9,000), or
$29,000.Btherefore must include in gross
income $71,000, which is the difference
between the total death benefit received
($100,000) and the amount excluded un-
der § 101 ($29,000).
Character of income recognized by B
upon the receipt of death benefits
Neither § 61(a) nor § 72(e) specifies
whether taxable amounts of death bene-
fits received by a transferee for value of
a life insurance contract by reason of the
death of the insured are treated as ordi-
nary income or as capital gain. Thus, the
character of the income thatBrecognized
upon receipt of death benefits under the
contract is capital gain only if it so qual-
ifies under the general rules of subchapter
P (§§ 1201–1260).
Section 1222(3) defines long-term cap-
ital gain as gain from the sale or exchange
of a capital asset held for more than one
year if and to the extent such gain is taken
into account in computing gross income.
Section 1221(a) provides that the term
“capital asset” means property held by the
taxpayer (whether or not connected with
a trade or business), but does not include
items described in § 1221(a)(1)–(8). The
life insurance contract inB’s hands was
not property described in § 1221(a)(1)–(8),
and was thus a capital asset inB’s hands.
Neither the surrender of a life insur-
ance or annuity contract nor the receipt
of a death benefit from the issuer under
the terms of the contract produces a capi-
tal gain. Accordingly, the $71,000 income
recognized by B upon the receipt of death
benefits under the contract is ordinary in-
come.
SITUATION 2.
Amount of income recognized by B upon
sale of life insurance contract
Section 1001(a) provides that the gain
realized from the sale or other disposition
of property is the excess of the amount
realized over the adjusted basis provided
in § 1011 for determining gain. Thus, to
determine the amount ofB’s income from
the sale of the life insurance contract to
C, it is necessary to determineB’s amount
realized from the sale, andB’s adjusted
basis in the contract.
Pursuant to § 1001(b),B’s amount real-
ized from the sale of the life insurance con-
tract is the sum of money received from the
sale, or $30,000.
Under §§ 1011 and 1012, the adjusted
basis for determining gain or loss is gen-
erally the cost of the property as adjusted
provided in § 1016, except as other-
wise provided in subchapters O (§§ 1011
through 1092), C (§§ 301 through 386),
K (§§ 702 through 777), and P (§§ 1201
through 1298). Section 101(a)(2) has no
bearing on the determination of the basis
of a life insurance contract that is sold, be-
cause § 101(a)(2) applies only to amounts
received by reason of the death of the
insured.
The starting point for determining the
basis of a life insurance contract for pur-
poses of measuring gain on its sale is its
cost. Section 1.263(a)–4(c)(1)(iv) requires
taxpayers to capitalize an amount paid to
another party to acquire an intangible (in-
cluding a life insurance contract) from that
party in a purchase or similar transaction.
In Situation 2,Bpaid $20,000 toAto ac-
quire the life insurance contract fromA,
which is included inB’s cost basis.
In Situation 2,Balso paid $9,000 in
monthly premiums to prevent the contract
from lapsing. No deduction is allowed
for these monthly premiums under section
264. However, § 1.263(a)–4(b)(1)(iv) au-
thorizes the Service and Treasury to pub-
lish guidance in the Internal Revenue Bul-
letin that identifies a future benefit as an
intangible for which capitalization is re-
quired. The premiums paid by a secondary
market purchaser of a term life insurance
contract serve to create or enhance a fu-
ture benefit for which capitalization is ap-
propriate. Accordingly, this revenue rul-
ing requires a secondary market purchaser
to capitalize premiums paid to prevent a
term life insurance contract (without cash
value) from lapsing. The Service will not
challenge the capitalization of such premi-
ums paid or incurred prior to the issuance
of this ruling.
In Situation 2,Bpaid $20,000 to ac-
quire the life insurance contract and $9,000
in monthly premiums to prevent the con-
tract from lapsing. Therefore,B’s adjusted
basis for purposes of measuring gain on the
sale toCwas $29,000.
In Rev. Rul. 2009–13, page 1029,
this Bulletin, Situation 2, a taxpayer paid
premiums totaling $64,000 with regard
to a life insurance contract, and $10,000
of “cost of insurance” charges were sub-
tracted from the contract’s cash surrender
value. The taxpayer sold the contract
for $80,000. The ruling concludes that
the taxpayer’s gain on the sale was equal
to $26,000, representing the $80,000
amount realized less $54,000 adjusted
basis ($64,000 total premiums paid mi-
nus $10,000 cost of insurance charges).
The ruling notes that on these facts, the
reduction for cost of insurance charges
is necessary to account for the insurance
protection the taxpayer received before
the sale. Similarly, inCentury Wood Pre-
serving Co. v. Commissioner,69F.2d967
(3rd Cir. 1934), the court concluded that
a taxpayer who sold a life insurance con-
tract could not include in basis amounts
that were used to provide annual insurance
protection.See also London Shoe Co.
v. Commissioner,80F.2d230(2dCir.
1935);Keystone Consolidated Publishing
Co.v.Commissioner,26B.T.A.1210
(1932).
Bis not required to reduce its basis in
the life insurance contract by any cost of
insurance charges that may have been im-
posed. In Rev. Rul. 2009–13,Century
Wood Preserving,London Shoe,andKey-
stone Consolidated, adjusted basis was re-
duced by cost of insurance charges because
those charges represented the cost of in-
surance protection that was enjoyed by the
policyholder as the beneficiary of the pol-
icy. In contrast, in Situation 2,Bis wholly
unrelated toAand did not purchase the life
insurance contract for protection against
any economic loss uponA’s death.Bac-
quired and held the contract solely with a
view to profit, and paid additional premi-
ums to prevent the lapse ofB’s purely fi-
nancial investment, the contract. Situation
2 is thus distinguishable from Rev. Rul.
2009–13 and the authorities cited therein.
As the amount realized onB’s sale
of the life insurance contract toCwas
$30,000, and the adjusted basis was
$29,000,Bmust recognize $1,000 on the
sale toCin Situation 2.
Character of income recognized by B
upon sale of life insurance contract
Because the term life insurance con-
tract was not property described in
§ 1221(a)(1)–(8) and was held for more
than one year, the $1,000 of gain recog-
2009–21 I.R.B.1033May 26, 2009

nized by B under § 1001 upon the sale of
the contract to C is long-term capital gain.
Rev. Rul. 2009–13. Additionally, the
contract was a term contract without any
cash value. Hence, the substitute for ordi-
nary income doctrine underUnited States
v. Midland Ross, 381 U.S. 54 (1965), and
its progeny does not apply.
SITUATION 3
Amount and characterization of income
recognized by B upon the receipt of death
benefits
As in Situation 1,Bmust recognize
$71,000 of income upon the receipt of
death benefits. This income is “fixed or
determinable annual or periodical” income
within the meaning of § 881(a)(1).See
§ 1.1441–2(b); Rev. Rul. 64–51, 1964–1
C.B. 322; Rev. Rul. 2004–75, 2004–2
C.B. 109. Consequently,Bis subject to tax
under § 881(a) with respect to this income,
if the income is from sources within the
United States.
Source of income recognized by B upon
the receipt of death benefits
Section 861(a)(1) provides that interest
received from a domestic corporation is
generally from sources within the United
States.
Section 861(a)(7) provides that premi-
ums received from the issuance of any life
insurance contract are generally income
from sources within the United States
when the premiums are derived in connec-
tion with a life insurance contract issued
in respect of the lives of residents of the
United States.
Section 865 provides that the source of
income from the sale of personal property
is generally determined by reference to the
residence of the taxpayer.
When the source of an item of income
is not specified by statute or by regulation,
courts have determined the source of the
item by comparison and analogy to classes
of income specified within the statute.See
Bank of America v. United States, 680 F.2d
142, 147 (Ct. Cl. 1982);Howkins v. Com-
missioner, 49 T.C. 689 (1968);Clayton v.
United States, 33 Fed. Cl. 628 (1995),
aff’d without published opinion,91F.3d
170 (Fed. Cir. 1996), cert. denied, 519
U.S. 1040 (1996).See alsoRev. Rul.
79–388, 1979–2 C.B. 270.
The Code does not specify the source
of income resulting from the payment
of death benefits pursuant to a term life
insurance contract.See alsoRev. Rul.
2004–75. Consequently, the source of
such income is determined by comparison
and analogy to classes of income that are
specified within the statute.
In the current situation,Ais a United
States citizen residing in the United States,
andICis a domestic corporation.B’s in-
come is from sources within the United
States.
HOLDINGS
1. In Situation 1,Bmust recognize
$71,000 of ordinary income on the receipt
of death benefits with respect to the life in-
surance contract.
2. In Situation 2,Bmust recognize
$1,000 of long-term capital gain on the sale
of the life insurance contract.
3. In Situation 3,Bmust recognize
$71,000 of ordinary income from sources
within the United States, and tax is im-
posed under § 881(a)(1) with respect to
this amount.
DRAFTING INFORMATION
The principal authors of this revenue
ruling are Josephine H. Firehock of the Of-
fice of Associate Chief Counsel (Interna-
tional) and Stephen D. Hooe of the Of-
fice of Associate Chief Counsel (Finan-
cial Institutions and Products). For further
information regarding this ruling, contact
Stephen D. Hooe at (202) 622–7595 (not
a toll-free call). For questions relating to
section 263(a), contact the Office of As-
sociate Chief Counsel (Income Tax & Ac-
counting) at (202) 622–4800. For ques-
tions relating to section 861 or 881, contact
Josephine H. Firehock at (202) 622–4233.
Section 263.—Capital
Expenditures
26 CFR 1.2
63(a)–1: Capital expenditures; in gen-
eral.
Guidance
is provided to investors who purchase
life insu
rance contracts. See Rev. Rul. 2009-14, page
1031.
Section 865.—Source Rules
for Personal Property Sales
26 CFR 1.865–1: Loss with respect to personal prop-
erty other than stock.
Guidance is provided to investors who purchase
life insurance contracts. See Rev. Rul. 2009-14, page
1031.
Section 1001.—Determi-
nation of Amount of and
RecognitionofGainorLoss
26 CFR 1.1001: Computation of gain or loss.
Guidance is provided to policyholders that sell
their life insurance contracts. See Rev. Rul. 2009-13,
page 1029.
Guidance is pr
ovidedtoinvestorswhopurchase
life insuranc
e contracts. See Rev. Rul. 2009-14, page
1031.
Section 1011.—Adjusted
Basis for Determining
Gain or Loss
26 CFR 1.1011–1: Adjusted basis.
Guidance is provided to policyholders that sell
their life insurance contracts. See Rev. Rul. 2009-13,
page 1029.
Guidance is provided to investors who purchase
life insurance contracts. See Rev. Rul. 2009-14, page
1031.
Section 1012.—Basis of
Property-Cost
26 CFR 1.1012–1: Basis of property.
Guidance is provided to policyholders that sell
their life insurance contracts. See Rev. Rul. 2009-13,
page 1029.
Guidance is provided to investors who purchase
life insurance contracts. See Rev. Rul. 2009-14, page
1031.
Section 1221.—Capital
Asset Defined
26 CFR 1.1221: Meaning of terms.
Guidance is provided to policyholders that sell
their life insurance contracts. See Rev. Rul. 2009-13,
page 1029.
May 26, 200910342009–21 I.R.B.

Guidance is provided to investors who purchase
life insurance contracts. See Rev. Rul. 2009-14, page
1031.
Section 1234A.—Gains
or Losses From Certain
Terminations
Guidance is provided topolicyholders that sell
their life insurance contracts. See Rev. Rul. 2009-13,
page 1029.
Section 1361.—S
Corporation Defined
26 CFR 1.1362–6: Elections and consents.
(Also: Sections 7701, 301.7701–1, 301.7701–2,
301.7701–3.)
Formless conversion of partnership
to S corporation.This ruling explains
that a partnership that converts to a cor-
poration under either regulations section
301.7701–3(c)(1)(i) or under a state law
formless conversion statute is allowed to
make an S election effective for the corpo-
ration’s first taxable year.
Rev. Rul. 2009–15
ISSUE
InSituations 1and2below, when an
unincorporated entity taxed as a partner-
ship becomes a corporation for federal
tax purposes, is the corporation eligible
to elect to be taxed as an S corporation
effective its first taxable year?
FACTS
Situation 1
On January 1, 2009,X, a calendar year
taxpayer, is organized inStateas an unin-
corporated entity thatis classified as a part-
nership for federal tax purposes.Xelects
under § 301.7701–3(c)(1)(i) of the Proce-
dure and Administrative Regulations to be
treated as an association for federal tax
purposes, effective January 1, 2010. On
February 1, 2010,Xfiles an election un-
der section 1362(a) of the Internal Rev-
enue Code to be taxed as an S corpora-
tion, effective January 1, 2010. There is no
personwhoheldstockinXon January 1,
2010, who does not hold stock at the time
the election is made.
Situation 2
On January 1, 2009,Y, a calendar year
taxpayer, is organized inStateas an unin-
corporated entity that is classified as a part-
nership for federal tax purposes.Ycon-
verts into a corporation under a state law
formless conversion statute, effective Jan-
uary 1, 2010. As a result of the conver-
sion,Yis classified as a corporation for
federal tax purposes. On February 1, 2010,
Yfiles an election under section 1362(a) to
be taxed as an S corporation, effective Jan-
uary 1, 2010. There is no person who held
stock inYon January 1, 2010, who does
not hold stock at the time the election is
made.
LAW
Section 1361(a)(1) provides that the
term “S corporation” means, with re-
spect to any taxable year, a small business
corporation for whichanelectionunder
section 1362(a) is in effect for that year.
Section 1361(b)(1)(B) provides that an
S corporation cannot have as a shareholder
aperson(otherthananestate,atrustde-
scribed in section 1361(c)(2), or an organi-
zation described in section 1361(c)(6)) that
is not an individual.
Section 1362(a) provides that a small
business corporation may elect to be an
S corporation.
Section 1362(b)(1) provides that a
small business corporation may make an
election to be treated as an S corporation
for any taxable year (A) at any time during
the preceding taxable year, or (B) at any
time during the taxable year and on or
before the 15th day of the third month of
the taxable year.
Section 1.1362–6(a)(2)(ii)(B) of the
Income Tax Regulations provides that a
timely election made by a small busi-
ness corporation during the taxable year
for which it is intended to be effective is
nonetheless treated as made for the fol-
lowing taxable year if (1) the corporation
is not a small business corporation during
the entire portion of the taxable year that
occurs before the date the election is made;
or (2) any person who held stock in the
corporation at any time during the portion
of the taxable year that occurs before the
time the election is made, and who does
not hold stock at the time the election is
made, does not consent to the election.
Section 7701(a)(2) provides that the
term “partnership” includes a syndicate,
group, pool, joint venture, or other un-
incorporated organization, through or by
means of which any business, financial
operation, or venture is carried on, and
which is not, within the meaning of this
title, a trust or estate or a corporation.
Section 7701(a)(3) provides that the
term “corporation” includes associations,
joint-stock companies, and insurance com-
panies.
Section 301.7701–2(b)(1) defines the
term “corporation” to include a business
entity organized under a federal or state
statute, or under a statute of a federally
recognized Indian tribe, if the statute de-
scribes or refers to the entity as incorpo-
rated or as a corporation, body corporate,
or body politic.
Section 301.7701–3(a) provides that a
business entity that is not classified as a
corporation under § 301.7701–2(b)(1), (3),
(4), (5), (6), (7) or (8) (an eligible entity),
can elect its classification for federal tax
purposes.
Section 301.7701–3(g)(1)(i) provides
that, if an eligible entity classified as a part-
nership elects under § 301.7701–3(c)(1)(i)
to be classified as an association, the fol-
lowing is deemed to occur: the partnership
contributes all of its assets and liabilities to
the association in exchange for stock in the
association, and immediately thereafter,
the partnership liquidates by distributing
the stock of the association to its partners.
Section 301.7701–3(g)(3)(i) provides
that an election under § 301.7701–
3(c)(1)(i) that changes the classification of
an eligible entity for federal tax purposes
is treated as occurring at the start of the
day for which the election is effective.
Any transactions that are deemed to
occur under § 301.7701–3(g) as a result
of a change in classification are treated
as occurring immediately before the
close of the day before the election is
effective. For example, if an election
is made to change the classification
of an entity from an association to
a partnership effective on January 1,
the deemed transactions specified in
§ 301.7701–3(g)(1)(ii) (including the
liquidation of the association) are treated
as occurring immediately before the close
of December 31 and must be reported
by the owners of the entity on December
31. Thus, the last day of the association’s
2009–21 I.R.B.1035May 26, 2009

taxable year will be December 31 and the
first day of the partnership’s taxable year
will be January 1.
Rev. Rul. 2004–59, 2004–1 C.B. 1050,
explains the federal tax consequences
where an unincorporated entity classified
as a partnership for federal tax purposes
converts into a state law corporation under
a state law formless conversion statute.
Rev. Rul. 2004–59 concludes that for
federal tax purposes, an unincorporated
entity classified as a partnership that con-
verts to a corporation under a state law
formless conversion statute will be treated
in the same manner as one that makes an
election to be classified as an association
under § 301.7701–3(c)(1)(i).
ANALYSIS
Situation 1
WhenX, an entity classified as a part-
nership for federal tax purposes, elects un-
der § 301.7701–3(c)(1)(i) to be classified
as an association for federal tax purposes,
the following steps are deemed to occur:
Xcontributes all of its assets and liabili-
ties to the association in exchange for stock
in the association, and immediately there-
afterXliquidates by distributing the stock
of the association to its partners. Under
§ 301.7701–3(g)(3)(i), these deemed steps
are treated as occurring immediately be-
fore the close of the day before the elec-
tion is effective. Thus, the partnership’s
taxable year ends on December 31, 2009,
and the association’s first taxable year be-
gins on January 1, 2010. Therefore, the
partnership will not be deemed to own the
stock of the association during any portion
of the association’s first taxable year be-
ginning January 1, 2010, andXis eligible
to elect to be an S corporation effective
January 1, 2010. Additionally, because
the partnership’s taxable year ends imme-
diately before the close of the day on De-
cember 31, 2009, and the association’s first
taxable year begins at the start of the day
on January 1, 2010, the deemed steps will
not causeXto have an intervening short
taxable year in which it was a C corpora-
tion.
Situation 2
Rev. Rul. 2004–59 provides that the
conversion of a partnership into a state
law corporation under a state law formless
conversion statute is treated in the same
manner as if the entity had made an elec-
tion to be treated as an association un-
der § 301.7701–3(c)(1)(i). Therefore,Yis
deemed to contribute all of its assets and
liabilities to the corporation in exchange
for stock in the corporation, and immedi-
ately thereafterYliquidates by distribut-
ing the stock of the corporation to its part-
ners. As inSituation 1, the partnership will
not be deemed to own the stock of the cor-
poration during any portion of the corpo-
ration’s first taxable year beginning Jan-
uary 1, 2010, andYis eligible to elect to
be an S corporation effective January 1,
2010. Additionally, because the partner-
ship’s taxable year ends immediately be-
fore the close of the day on December 31,
2009, and the corporation’s first taxable
year begins at the start of the day on Jan-
uary 1, 2010, the deemed steps will not
causeYto have an intervening short tax-
able year in which it was a C corporation.
HOLDINGS
InSituations 1and2, when an unincor-
porated entity taxed as a partnership be-
comes a corporation for federal tax pur-
poses, the corporation is eligible to elect
to be taxed as an S corporation effective its
first taxable year. Additionally, the corpo-
ration will not be deemed to have an inter-
vening short taxable year in which it was a
C corporation.
DRAFTING INFORMATION
The principal author of this revenue rul-
ingisStevenA.SchmolloftheOfficeof
Associate Chief Counsel (Passthroughs &
Special Industries). For further informa-
tion regarding this revenue ruling, contact
Steven A. Schmoll at (202) 622–3050 (not
a toll-free call).
May 26, 200910362009–21 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Public Comment Invited
on Recommendations for
2009–2010 Guidance Priority
List
Notice 2009–43
The Department of Treasury and Inter-
nal Revenue Service invite public com-
ment on recommendations for items that
should be included on the 2009–2010
Guidance Priority List.
The Treasury Department’s Office of
Tax Policy and the Service use the Guid-
ance Priority Listeach year to identify
and prioritize the tax issues that should
be addressed through regulations, revenue
rulings, revenue procedures, notices, and
other published administrative guidance.
The 2009–2010 Guidance Priority List
will establish the guidance that the Trea-
sury Department and the Service intend to
issue from July 1, 2009, through June 30,
2010. The Treasury Department and the
Service recognize the importance of pub-
lic input to formulate a Guidance Priority
List that focuses resources on guidance
items that are most important to taxpayers
and tax administration. Published guid-
ance plays an important role in increasing
voluntary compliance by helping to clarify
ambiguous areas of the tax law.
As is the case whenever significant
legislation is enacted, the Treasury De-
partment and the Service have continued
to dedicate substantial resources during
the current plan year to published guid-
ance projects necessary to implement
the provisions of the multitude of tax
Acts that have been enacted over the past
several years including, but not limited
to, the American Jobs Creation Act of
2004, Pub. L. No. 108–357, 118 Stat.
1418, which was enacted on October 22,
2004; the Pension Protection Act of 2006,
Pub. L. No. 109–280, 120 Stat. 780,
which was enacted on August 17, 2006;
the Economic Stimulus Act of 2008,
Pub. L. No. 110–185, 122 Stat. 613,
which was enacted on February 13, 2008;
the Housing Assistance Tax Act of 2008,
Pub. L. No. 110–289, 122 Stat. 2654,
which was enacted on July 30, 2008;
the Emergency Economic Stabilization
Act of 2008, Energy Improvement and
Extension Act of 2008, and Tax Extenders
and Alternative Minimum Tax Relief
Act of 2008, Pub. L. No. 110–343,
122 Stat. 3765, which were enacted
on October 3, 2008; and the American
Recovery and Reinvestment Tax Act of
2009, Pub. L. No. 111–5, 123 Stat.
115, which was enacted on February 17,
2009. The Treasury Department and
the Service will continue to evaluate the
priority of each guidance project in light
of the above-mentioned tax legislation and
other developments occurring during the
2009–2010 plan year.
In reviewing recommendations and
selecting projects for inclusion on the
2009–2010 Guidance Priority List, the
Treasury Department and the Service will
consider the following:
1. Whether the recommended guid-
ance resolves significant issues relevant to
many taxpayers;
2. Whether the recommended guidance
promotes sound tax administration;
3. Whether the recommended guidance
can be drafted in a manner that will enable
taxpayers to easily understand and apply
the guidance;
4. Whether the Service can administer
the recommended guidance on a uniform
basis; and
5. Whether the recommended guidance
reduces controversy and lessens the bur-
den on taxpayers or the Service.
Taxpayers may submit recommenda-
tions for guidance at any time during the
year. Please submit recommendations by
May 31, 2009, for possible inclusion on
the original 2009–2010 Guidance Priority
List. The Treasury Department and the
Service may update the 2009–2010 Guid-
ance Priority List periodically to reflect
additional guidancethat the Treasury De-
partment and the Service intend to publish
during the plan year. The periodic updates
allow the Treasury Department and the
Service to respond to the need for addi-
tional guidance that may arise during the
plan year. Recommendations for guidance
received after May 31, 2009, will be re-
viewed for inclusion in the next periodic
update.
Taxpayers are not required to submit
recommendations for guidance in any par-
ticular format. Taxpayers should, how-
ever, briefly describe the recommended
guidance and explain the need for the guid-
ance. In addition, taxpayers may include
an analysis of how the issue should be re-
solved. It would be helpful if taxpayers
suggesting more than one guidance project
prioritize the projects by order of impor-
tance. If a large number of projects are be-
ing suggested, it also would be helpful if
the projects were grouped in terms of high,
medium or low priority.
Taxpayers should send written com-
ments to:
Internal Revenue Service
Attn: CC:PA:LPD:PR
(Notice 2009–43)
Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, D.C. 20044
or hand deliver comments Monday
through Friday between the hours of
8a.m.and4p.m.to:
Courier’s Desk
Internal Revenue Service
Attn: CC:PA:LPD:PR
(Notice 2009–43)
1111 Constitution Avenue, N.W.
Washington, D.C. 20224
Alternatively, taxpayers may sub-
mit comments electronically via
e-mail to the following address:
Notice.Comments@irscounsel.treas.gov.
Taxpayers should include “Notice
2009–43” in the subject line. All
comments submitted by the public will
be available for public inspection and
copying in their entirety.
For further information regarding this
notice, contact Henry Schneiderman of
the Office of Associate Chief Counsel
(Procedure and Administration) at (202)
622–3400 (not a toll-free call).
Low-Income Housing Credit
Notice 2009–44
PURPOSE
The purpose of this notice is to clarify
that, under § 1.42–10 of the Income Tax
2009–21 I.R.B.1037May 26, 2009

Regulations (the utility allowance regula-
tions), utility costs paid by a tenant based
on actual consumption in a sub-metered
rent-restricted unit as described herein are
treated as paid directly by the tenant for
purposes of § 42(g)(2)(B)(ii) of the Inter-
nal Revenue Code.
BACKGROUND
Section 42 sets forth rules for determin-
ing the amount of the low-income hous-
ing credit, which is allowed as a credit
against income tax pursuant to § 38. Sec-
tion 42(a) provides that the amount of the
low-income housing credit determined un-
der § 42 for any taxable year in the credit
period is an amount equal to the appli-
cable percentage of the qualified basis of
each qualified low-income building. A
qualified low-income building is defined
in § 42(c)(2) as any building that is part of
a qualified low-income housing project.
A qualified low-income housing project
is defined in § 42(g)(1) as any project for
residential rental property if the project
meets one of the following tests elected by
the taxpayer: (A) At least 20 percent of the
residential units in the project are rent-re-
stricted and occupied by individuals whose
income is 50 percent or less of area median
gross income; or (B) at least 40 percent
of the residential units in the project are
rent-restricted and occupied by individuals
whose income is 60 percent or less of area
median gross income. Failure to qualify as
a rent-restricted unit may result in ineligi-
bility for the section 42 credit, reduction
in the amount of the credit, and/or recap-
ture of previously allowed credits. In order
to qualify as a rent-restricted unit within
the meaning of § 42(g)(2), the gross rent
for the unit must not exceed 30 percent of
the applicable income limitation. Section
42(g)(2)(B)(ii) provides that gross rent in-
cludes a utility allowance determined by
the Secretary after taking into account the
procedures under section 8 of the United
States Housing Act of 1937.
Section 1.42–10, which was recently
amended by Treasury decision 9420 on
July 29, 2008 (73 FR 43863), sets forth
the circumstances under which gross rent
includes a utility allowance and provides
rules for determining the applicable util-
ity allowance. Under § 1.42–10(a), if the
cost of any utility (other than telephone,
cable television, or Internet) for a residen-
tial rental unit is paid directly by the ten-
ant(s), and not by or through the owner of
the building, the gross rent for that unit in-
cludes a utility allowance.
If gross rent includes a utility al-
lowance, § 1.42–10(b) provides rules
for determining the applicable utility al-
lowance depending upon whether (1)
the building receives rental assistance
from the Rural Housing Service (RHS)
(“RHS-assisted building”), (2) the build-
ing has any tenant that receives RHS rental
assistance payments (“RHS tenant assis-
tance”), (3) the rents and utility allowances
of the building are reviewed by the Depart-
ment of Housing and Urban Development
(HUD) (“HUD-regulated building”), or
(4) the building is not described in (1),
(2), or (3) (“other building”). Section
1.42–10(b)(1) and (2) provides that, for an
RHS-assisted building and a building with
RHS tenant assistance,the applicable util-
ity allowance is the applicable RHS utility
allowance. Section 1.42–10(b)(3) pro-
vides that, for a HUD-regulated building,
the applicable utility allowance is the ap-
plicable HUD utility allowance. With re-
spect to other buildings, § 1.42–10(b)(4)(i)
provides that, for all rent-restricted units
occupied by tenants receiving HUD tenant
assistance, the applicable utility allowance
is the applicable Public Housing Author-
ity (PHA) utility allowance established
for the Section 8 Existing Housing Pro-
gram. With respect to all other tenants
in other buildings, § 1.42–10(b)(4)(ii)
provides that the applicable utility al-
lowance is the applicable PHA utility
allowance under § 1.42–10(b)(4)(ii)(A),
a local utility company estimate un-
der § 1.42–10(b)(4)(ii)(B), an estimate
from the State or local housing credit
agency that has jurisdiction over the
building under § 1.42–10(b)(4)(ii)(C),
the HUD Utility Schedule Model
under § 1.42–10(b)(4)(ii)(D), or an
energy consumption model under
§ 1.42–10(b)(4)(ii)(E).
Some buildings in qualified low-in-
come housing projects are sub-metered.
Sub-metering measures tenants’ actual
utility consumption, and tenants pay for
the utilities they use. A sub-metering
system typically includes a master meter,
which is owned or controlled by the utility
supplying the electricity, gas, or water,
with overall utility consumption billed
to the building owner. In a sub-metered
system, building owners (or their agents)
use unit-based meters to measure utility
consumption and prepare a bill for each
residential unit based on consumption.
The building owners (or their agents)
retain records of resident utility consump-
tion, and tenants receive documentation of
utility costs as specified in the lease.
DISCUSSION
For purposes of § 1.42–10(a) of the
utility allowance regulations, utility
costs paid by a tenant based on actual
consumption in a sub-metered rent-re-
stricted unit are treated as paid directly
by the tenant, and not by or through the
owner of the building. For RHS-assisted
buildings under § 1.42–10(b)(1), build-
ings with RHS tenant assistance under
§ 1.42–10(b)(2), HUD-regulated buildings
under § 1.42–10(b)(3), and rent-restricted
units in other buildings occupied by ten-
ants receiving HUD rental assistance un-
der § 1.42–10(b)(4)(i), the applicable RHS
or HUD rules apply. For all other tenants
in rent-restricted units in other buildings
under § 1.42–10(b)(4)(ii):
(1) The utility rates charged to tenants
in each sub-metered rent-restricted unit
must be limited to the utility company
rates incurred by the building owners (or
their agents);
(2) If building owners (or their agents)
charge tenants a reasonable fee for the ad-
ministrative costs of sub-metering, then
the fee will not be considered gross rent
under § 42(g)(2). The fee must not exceed
an aggregate amount per unit of 5 dollars
per month unless State law provides other-
wise; and
(3) If the costs for sewerage are based
on the tenants’ actual water consumption
determined with a sub-metering system
and the sewerage costs are on a combined
water and sewerage bill, then the tenants’
sewerage costs are treated as paid directly
by the tenants for purposes of the utility
allowances regulations.
The utility allowance regulations will
be amended to incorporate the guidance set
forth in this notice.
EFFECTIVE DATE
This notice is effective for utility al-
lowances subject to the effective date
in § 1.42–12(a)(4). Consistent with
§ 1.42–12(a)(4), building owners (or their
May 26, 200910382009–21 I.R.B.

agents) may rely on this notice for any
utility allowances effective no earlier than
the first day of the building owner’s tax-
able year beginning on or after July 29,
2008.
REQUEST FOR COMMENTS
The Treasury Department and IRS
invite taxpayers to submit written com-
ments on issues relating to this notice.
Send comments to: CC:PA:LPD:PR
(Notice 2009–44), Room 5205, Inter-
nal Revenue Service, P.O. Box 7604,
Ben Franklin Station, Washington, DC
20044. Submissions may be hand-de-
livered Monday through Friday be-
tween the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (Notice 2009–44),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue,
NW, Washington, DC. Submissions
may also be sent electronically via the
Internet to the following e-mail address:
Notice.comments@irscounsel.treas.gov.
Include the notice number (Notice
2009–44) in the subject line. Comments
must be received on or before July 27,
2009. All comments will be available for
public inspection and copying.
DRAFTING INFORMATION
The principal author of this notice is
David Selig, Office of the Associate Chief
Counsel (Passthroughs and Special Indus-
tries). For further information regarding
this notice, please contact Mr. Selig at
(202) 622–3040 (not a toll-free call).
2009–21 I.R.B.1039May 26, 2009

Part IV. Items o
fGeneralInterest
Gain Recognition Agreements
With Respect to Certain
Transfers of Stock or
Securities by United
States Persons to Foreign
Corporations; Correction
Announcement 2009–45
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correcting amendments.
SUMMARY: This document contains cor-
rections to final regulations (T.D. 9446,
2009–9 I.R.B. 607) that were published
in theFederal Registeron Wednesday,
February 11, 2009 (74 FR 6952) concern-
ing gain recognition agreements filed by
United States persons with respect to trans-
fers of stock or securities to foreign corpo-
rations.
DATES: This correction is effective on
May 26, 2009, and is applicable on March
13, 2009.
FOR FURTHER INFORMATION
CONTACT: S. James Hawes, (202)
622–3860 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The final regulationsthat are the subject
of this document are under section 367(a)
of the Internal Revenue Code.
Need for Correction
The final regulations (T.D. 9446) that
were published in theFederal Registeron
February 11, 2009, inadvertently removed
Treas. Reg. §1.367(a)–3T in its entirety
rather than removing §1.367(a)–3T(e),
(f)(1), (f)(2), and the second sentence of
§1.367(a)–3T(f)(3). This document cor-
rectly adds the text of §1.367(a)–3T back
into the Code of Federal Regulations.
*****
Accordingly, 26 CFR Part 1 is cor-
rected by making the following correcting
amendments:
PART 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 1.367(a)–3T is added to
read as follows:
§1.367(a)–3T Treatment of transfers of
stock or securities to foreign corporations
(temporary).
(a) through (b)(2)(i)(B) [Reserved].
For further guidance, see §1.367(a)–3(a)
through (b)(2)(i)(B).
(b)(2)(i)(C) If in connection with a
transaction described in §1.367(b)–14T,
one or more U.S. persons transfer stock
of T, as defined in §1.358–6(b)(1)(iii), to
a corporation in a transfer described in
section 367(a), and the amount of gain
in the T stock that would otherwise be
recognized under section 367(a) is less
than the deemed distribution that would
result from the adjustments made under
§1.367(b)–14T and that would be treated
as a dividend under section 301(c)(1), then
section 367(b), and not section 367(a),
shall apply to such transaction. This
paragraph (b)(2)(i)(C) applies to transfers
occurring on or after May 23, 2008.
(b)(2)(ii) through (f) [Reserved]. For
further guidance, see §1.367(a)–3(b)(2)(ii)
through (f).
(g)Effective/applicability date. Para-
graph (b)(2)(i)(C) of this section applies
to transfers occurring on or after May 23,
2008.
(h)Expiration date. The applicability
of paragraph (b)(2)(i)(C) of this section ex-
pires on May 23, 2011.
§1.367(a)–8(r)(2) [Corrected]
Par. 3. Section 1.367(a)–8(r)(2) is
amended by revising the paragraph head-
ing to read as follows:
(2)Applicability to transfers occurring
before March 13, 2009—(i) * * *
*****
Robin Jones,
Federal Register Liaison,
Publications and Regulations Branch,
Legal Processing Division,
Associate Chief Counsel
(Procedure and Administration).
(Filed by the Office of the Federal Register on March 26,
2009, 8:45 a.m., and published in the issue of the Federal
Register for March 27, 2009, 74 F.R. 13340)
Announcement of Disciplinary Sanctions From the Office
of Professional Responsibility
Announcement 2009-46
TheOfficeofProfessionalResponsi-
bility (OPR) announcesrecent disciplinary
sanctions involving attorneys, certified
public accountants, enrolled agents, en-
rolled actuaries, enrolled retirement plan
agents, and appraisers. These individuals
are subject to the regulations governing
practice before the Internal Revenue Ser-
vice (IRS), which are set out in Title 31,
Code of Federal Regulations, Part 10, and
which are published in pamphlet form as
Treasury Department Circular No. 230.
The regulations prescribe the duties and
restrictions relating to such practice and
prescribe the disciplinary sanctions for
violating the regulations.
The disciplinary sanctions to be im-
posed for violation of the regulations are:
Disbarred from practice before the
IRS—An individual who is disbarred is
not eligible to represent taxpayers before
the IRS.
Suspended from practice before the
IRS—An individual who is suspended is
not eligible to represent taxpayers before
the IRS during the term of the suspension.
Censured in practice before the
IRS—Censure is a public reprimand. Un-
like disbarment or suspension, censure
does not affect an individual’s eligibility
May 26, 200910402009–21 I.R.B.

to represent taxpayers before the IRS, but
OPR may subject the individual’s future
representations to conditions designed to
promote high standards of conduct.
Monetary penalty—A monetary
penalty may be imposed on an individual
who engages in conduct subject to sanc-
tion or on an employer, firm, or entity
if the individual was acting on its behalf
and if it knew, or reasonably should have
known, of the individual’s conduct.
Disqualification of appraiser—An
appraiser who is disqualified is barred
from presenting evidence or testimony in
any administrative proceeding before the
Department of the Treasury or the IRS.
Under the regulations, attorneys, cer-
tified public accountants, enrolled agents,
enrolled actuaries, and enrolled retirement
plan agents may not assist, or accept assis-
tance from, individuals who are suspended
or disbarred with respect to matters consti-
tuting practice (i.e., representation) before
the IRS, and they may not aid or abet sus-
pended or disbarred individuals to practice
before the IRS.
Disciplinary sanctions are described in
these terms:
Disbarred by decision after hearing,
Suspended by decision after hearing,
Censured by decision after hearing,
Monetary penalty imposed after hear-
ing, and Disqualified after hearing—An
administrative law judge (ALJ) conducted
an evidentiary hearing upon OPR’s com-
plaint alleging violation of the regulations
and issued a decision imposing one of
these sanctions. After 30 days from the
issuance of the decision, in the absence of
an appeal, the ALJ’s decision became the
final agency decision.
Disbarred by default decision, Sus-
pended by default decision, Censured by
default decision, Monetary penalty im-
posed by default decision, and Disqual-
ified by default decision—An ALJ, after
findingthatnoanswertoOPR’scomplaint
had been filed, granted OPR’s motion for a
default judgment and issued a decision im-
posing one of these sanctions.
Disbarment by decision on appeal,
Suspended by decision on appeal, Cen-
sured by decision on appeal, Monetary
penalty imposed by decision on ap-
peal, and Disqualified by decision on
appeal—The decision of the ALJ was
appealed to the agency appeal authority,
acting as the delegate of the Secretary
of the Treasury, and the appeal authority
issued a decision imposing one of these
sanctions.
Disbarred by consent, Suspended by
consent, Censured by consent, Mone-
tary penalty imposed by consent, and
Disqualified by consent—In lieu of a
disciplinary proceeding being instituted
or continued, an individual offered a con-
sent to one of these sanctions and OPR
accepted the offer. Typically, an offer
of consent will provide for: suspension
for an indefinite term; conditions that the
individual must observe during the sus-
pension; and the individual’s opportunity,
after a stated number of months, to file
with OPR a petition for reinstatement af-
firming compliance with the terms of the
consent and affirming current eligibility
to practice (i.e., an active professional
license or active enrollment status). An
enrolled agent or an enrolled retirement
plan agent may also offer to resign in order
to avoid a disciplinary proceeding.
Suspended by decision in expedited
proceeding, Suspended by default de-
cision in expedited proceeding, Sus-
pended by consent in expedited pro-
ceeding—OPR instituted an expedited
proceeding for suspension (based on cer-
tain limited grounds, including loss of a
professional license and criminal convic-
tions).
OPR has authority to disclose the
grounds for disciplinary sanctions in these
situations: (1) an ALJ or the Secretary’s
delegate on appeal has issued a decision
on or after September 26, 2007, which was
theeffectivedateofamendmentstothe
regulations that permit making such deci-
sions publicly available; (2) the individual
has settled a disciplinary case by signing
OPR’s “consent to sanction” form, which
requires consenting individuals to admit to
one or more violations of the regulations
and to consent to the disclosure of the in-
dividual’s own return information related
to the admitted violations (for example,
failure to file Federal income tax returns);
or (3) OPR has issued a decision in an
expedited proceeding for suspension.
Announcements of disciplinary sanc-
tions appear in the Internal Revenue Bul-
letin at the earliest practicable date. The
sanctions announced below are alphabet-
ized first by the names of states and sec-
ond by the last names of individuals. Un-
less otherwise indicated, section numbers
(e.g., §10.51) refer to the regulations.
City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Alabama
AndalusiaWhite, Gregory B.CPASuspended by consent
for violation of § 10.51
(failure to timely file
several Federal tax
returns)
Indefinite from
April 20, 2009
2009–21 I.R.B.1041May 26, 2009

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Arizona
PhoenixEverett, James J.AttorneySuspended by decision
in expedited proceeding
under § 10.82 (conviction
under 18 U.S.C. § 152,
false declaration in
bankruptcy proceedings;
18 U.S.C. § 157
bankruptcy fraud; and
18 U.S.C. §1956, money
laundering/concealment)
Indefinite from
May 7, 2009
TucsonLacsamana, VincentAttorneySuspended by consent
for violation of § 10.51
(failure to file several
Federal tax returns)
Indefinite from
March 26, 2009
Arkansas
CamdenLindsey, Jr., Lloyd E.CPASuspended by consent
for violation of § 10.51
(failure to timely file
several Federal tax
returns)
Indefinite from
April 16, 2009
California
Laguna HillsLlorente, Alex J.AttorneyDisbarred by decision on
appeal for violation of
§ 10.51 (willful failure to
file a Federal tax return)
Indefinite from
April 10, 2009
Colorado
Fort CollinsSweetman, Debra A.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(attorney disbarment)
Indefinite from
April 17, 2009
Georgia
LagrangeRainey, Esther S.CPASuspended by consent
for violation of § 10.51
(failure to timely file
several Federal tax
returns)
Indefinite from
April 16, 2009
Illinois
ChicagoKearns, John W.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(attorney disbarment)
Indefinite from
April 17, 2009
May 26, 200910422009–21 I.R.B.

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
New York
OrangeburgRogers, Barnett R.AttorneySuspended by decision
in expedited proceeding
under § 10.82 (suspension
of attorney license)
Indefinite from
April 15, 2009
Pennsylvania
BoyertownFryer, Charles E.AttorneySuspended by consent
for violation of § 10.51
(failure to timely file
several Federal tax
returns)
Indefinite from
April 6, 2009
Tennessee
CrossvilleMercer, Howard L.CPASuspended by consent
for violation of § 10.51
(failure to timely file
several Federal tax
returns)
Indefinite from
April 20, 2009
Texas
HoustonElsom, William D.CPASuspended by decision
in expedited proceeding
under § 10.82 (suspension
CPA license in Wyoming)
Indefinite from
May 6, 2009
OdessaHargus, RichardEnrolled AgentSuspended by consent for
violation of § 10.22 (failed
to exercise due diligence
while employed with two
companies that specialize
in tax resolution services
through the Offer in
Compromise (OIC)
program; specifically
that practitioner did not
perform services related
to OIC’s paid for by
taxpayers)
Indefinite from
April 6, 2009
Wyoming
Elsom, William D.
See Texas
2009–21 I.R.B.1043May 26, 2009

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published 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 fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
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—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
May 26, 2009i2009–21 I.R.B.

Numerical Finding List
1
Bulletins 2009–1 through 2009–21
Announcements:
2009-1, 2009-1 I.R.B.242
2009-2, 2009-5 I.R.B.424
2009-3, 2009-6 I.R.B.459
2009-4, 2009-8 I.R.B.597
2009-5, 2009-8 I.R.B.569
2009-6, 2009-9 I.R.B.643
2009-7, 2009-10 I.R.B.663
2009-8, 2009-8 I.R.B.598
2009-9, 2009-9 I.R.B.643
2009-10, 2009-9 I.R.B.644
2009-11, 2009-10 I.R.B.663
2009-12, 2009-11 I.R.B.686
2009-13, 2009-11 I.R.B.686
2009-14, 2009-11 I.R.B.687
2009-15, 2009-11 I.R.B.687
2009-16, 2009-11 I.R.B.691
2009-17, 2009-12 I.R.B.714
2009-18, 2009-12 I.R.B.714
2009-19, 2009-12 I.R.B.715
2009-20, 2009-12 I.R.B.716
2009-21, 2009-13 I.R.B.730
2009-22, 2009-13 I.R.B.731
2009-23, 2009-13 I.R.B.731
2009-24, 2009-13 I.R.B.732
2009-25, 2009-14 I.R.B.755
2009-26, 2009-14 I.R.B.755
2009-27, 2009-14 I.R.B.756
2009-28, 2009-15 I.R.B.760
2009-29, 2009-14 I.R.B.757
2009-30, 2009-15 I.R.B.794
2009-31, 2009-15 I.R.B.798
2009-32, 2009-15 I.R.B.799
2009-33, 2009-15 I.R.B.799
2009-34, 2009-18 I.R.B.916
2009-35, 2009-17 I.R.B.892
2009-36, 2009-18 I.R.B.927
2009-37, 2009-19 I.R.B.940
2009-38, 2009-19 I.R.B.940
2009-39, 2009-20 I.R.B.1022
2009-40, 2009-20 I.R.B.1023
2009-41, 2009-20 I.R.B.1026
2009-42, 2009-20 I.R.B.1027
2009-45, 2009-21 I.R.B.1040
2009-46, 2009-21 I.R.B.1040
Notices:
2009-1, 2009-2 I.R.B.250
2009-2, 2009-4 I.R.B.344
2009-3, 2009-2 I.R.B.250
2009-4, 2009-2 I.R.B.251
2009-5, 2009-3 I.R.B.309
Notices— Continued:
2009-6, 2009-3 I.R.B.311
2009-7, 2009-3 I.R.B.312
2009-8, 2009-4 I.R.B.347
2009-9, 2009-5 I.R.B.419
2009-10, 2009-5 I.R.B.419
2009-11, 2009-5 I.R.B.420
2009-12, 2009-6 I.R.B.446
2009-13, 2009-6 I.R.B.447
2009-14, 2009-7 I.R.B.516
2009-15, 2009-6 I.R.B.449
2009-16, 2009-8 I.R.B.572
2009-17, 2009-8 I.R.B.575
2009-18, 2009-10 I.R.B.648
2009-19, 2009-10 I.R.B.660
2009-20, 2009-12 I.R.B.711
2009-21, 2009-13 I.R.B.724
2009-22, 2009-14 I.R.B.741
2009-23, 2009-16 I.R.B.802
2009-24, 2009-16 I.R.B.817
2009-25, 2009-15 I.R.B.758
2009-26, 2009-16 I.R.B.833
2009-27, 2009-16 I.R.B.838
2009-29, 2009-16 I.R.B.849
2009-30, 2009-16 I.R.B.852
2009-31, 2009-16 I.R.B.856
2009-32, 2009-17 I.R.B.865
2009-33, 2009-17 I.R.B.865
2009-34, 2009-17 I.R.B.876
2009-35, 2009-17 I.R.B.876
2009-36, 2009-17 I.R.B.883
2009-37, 2009-18 I.R.B.898
2009-38, 2009-18 I.R.B.901
2009-39, 2009-18 I.R.B.902
2009-40, 2009-19 I.R.B.931
2009-41, 2009-19 I.R.B.933
2009-42, 2009-20 I.R.B.1011
2009-43, 2009-21 I.R.B.1037
2009-44, 2009-21 I.R.B.1037
Proposed Regulations:
REG-144615-02, 2009-7 I.R.B.561
REG-144689-04, 2009-18 I.R.B.906
REG-148568-04, 2009-5 I.R.B.421
REG-160872-04, 2009-4 I.R.B.358
REG-158747-06, 2009-4 I.R.B.362
REG-116699-07, 2009-13 I.R.B.727
REG-138326-07, 2009-9 I.R.B.638
REG-143686-07, 2009-8 I.R.B.579
REG-150670-07, 2009-4 I.R.B.378
REG-113462-08, 2009-4 I.R.B.379
REG-147636-08, 2009-9 I.R.B.641
REG-150066-08, 2009-5 I.R.B.423
REG-107845-08, 2009-20 I.R.B.1014
REG-119532-08, 2009-20 I.R.B.1017
Revenue Procedures:
2009-1, 2009-1 I.R.B.1
2009-2, 2009-1 I.R.B.87
2009-3, 2009-1 I.R.B.107
2009-4, 2009-1 I.R.B.118
2009-5, 2009-1 I.R.B.161
2009-6, 2009-1 I.R.B.189
2009-7, 2009-1 I.R.B.226
2009-8, 2009-1 I.R.B.229
2009-9, 2009-2 I.R.B.256
2009-10, 2009-2 I.R.B.267
2009-11, 2009-3 I.R.B.313
2009-12, 2009-3 I.R.B.321
2009-13, 2009-3 I.R.B.323
2009-14, 2009-3 I.R.B.324
2009-15, 2009-4 I.R.B.356
2009-16, 2009-6 I.R.B.449
2009-17, 2009-7 I.R.B.517
2009-18, 2009-11 I.R.B.670
2009-19, 2009-14 I.R.B.747
2009-20, 2009-14 I.R.B.749
2009-21, 2009-16 I.R.B.860
2009-22, 2009-16 I.R.B.862
2009-23, 2009-17 I.R.B.884
2009-24, 2009-17 I.R.B.885
2009-26, 2009-19 I.R.B.935
2009-27, 2009-19 I.R.B.938
2009-28, 2009-20 I.R.B.1011
Revenue Rulings:
2009-1, 2009-2 I.R.B.248
2009-2, 2009-2 I.R.B.245
2009-3, 2009-5 I.R.B.382
2009-4, 2009-5 I.R.B.408
2009-5, 2009-6 I.R.B.432
2009-6, 2009-12 I.R.B.694
2009-7, 2009-13 I.R.B.717
2009-8, 2009-10 I.R.B.645
2009-9, 2009-14 I.R.B.735
2009-10, 2009-14 I.R.B.738
2009-11, 2009-18 I.R.B.896
2009-12, 2009-19 I.R.B.928
2009-13, 2009-21 I.R.B.1029
2009-14, 2009-21 I.R.B.1031
2009-15, 2009-21 I.R.B.1035
Tax Conventions:
2009-5, 2009-8 I.R.B.569
Treasury Decisions:
9434, 2009-4 I.R.B.339
9435, 2009-4 I.R.B.333
9436, 2009-3 I.R.B.268
9437, 2009-4 I.R.B.341
9438, 2009-5 I.R.B.387
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2008–27 through 2008–52 is in Internal Revenue Bulletin
2008–52, dated December 29, 2008.
2009–21 I.R.B.iiMay 26, 2009

Treasury Decisions— Continued:
9439, 2009-5 I.R.B.416
9440, 2009-5 I.R.B.409
9441, 2009-7 I.R.B.460
9442, 2009-6 I.R.B.434
9443, 2009-8 I.R.B.564
9444, 2009-9 I.R.B.603
9445, 2009-9 I.R.B.635
9446, 2009-9 I.R.B.607
9447, 2009-12 I.R.B.694
9448, 2009-20 I.R.B.942
May 26, 2009iii2009–21 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2009–1 through 2009–21
Notices:
99-35
Obsoleted by
Notice 2009-15, 2009-6 I.R.B.449
2001-55
Modified by
Notice 2009-1, 2009-2 I.R.B.250
2002-27
Modified by
Notice 2009-9, 2009-5 I.R.B.419
2005-74
Obsoleted by
T.D. 9446, 2009-9 I.R.B.607
2007-26
Modified by
Notice 2009-15, 2009-6 I.R.B.449
2007-52
Clarified, modified, and amplified by
Notice 2009-24, 2009-16 I.R.B.817
2007-53
Clarified, modified, and ampilfied by
Notice 2009-23, 2009-16 I.R.B.802
2007-54
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
2008-11
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
2008-12
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
Rev. Proc. 2009-11, 2009-3 I.R.B.313
2008-13
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
List of forms modified and superseded by
Rev. Proc. 2009-11, 2009-3 I.R.B.313
Modified and clarified by
Notice 2009-5, 2009-3 I.R.B.309
2008-46
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
Rev. Proc. 2009-11, 2009-3 I.R.B.313
2008-100
Amplified and superseded by
Notice 2009-14, 2009-7 I.R.B.516
Notices— Continued:
2008-110
Modified by
Notice 2009-34, 2009-17 I.R.B.876
2009-31
Modified by
Notice 2009-42, 2009-20 I.R.B.1011
Proposed Regulations:
REG-144615-02
Corrected by
Ann. 2009-19, 2009-12 I.R.B.715
REG-149519-03
Withdrawn by
Ann. 2009-4, 2009-8 I.R.B.597
REG-148326-05
Corrected by
Ann. 2009-14, 2009-11 I.R.B.687
REG-158747-06
Hearing scheduled by
Ann. 2009-29, 2009-14 I.R.B.757
REG-143686-07
Corrected by
Ann. 2009-40, 2009-20 I.R.B.1023
REG-150066-08
Corrected by
Ann. 2009-31, 2009-15 I.R.B.798
Hearing cancelled by
Ann. 2009-36, 2009-18 I.R.B.927
Revenue Procedures:
2007-17
Superseded by
Rev. Proc. 2009-14, 2009-3 I.R.B.324
2007-66
Modified and superseded by
Rev. Proc. 2009-21, 2009-16 I.R.B.860
2007-68
Superseded by
Rev. Proc. 2009-17, 2009-7 I.R.B.517
2007-71
Modified by
Notice 2009-3, 2009-2 I.R.B.250
2008-1
Superseded by
Rev. Proc. 2009-1, 2009-1 I.R.B.1
2008-2
Superseded by
Rev. Proc. 2009-2, 2009-1 I.R.B.87
2008-3
Superseded by
Rev. Proc. 2009-3, 2009-1 I.R.B.107
Revenue Procedures— Continued:
2008-4
Superseded by
Rev. Proc. 2009-4, 2009-1 I.R.B.118
2008-5
Superseded by
Rev. Proc. 2009-5, 2009-1 I.R.B.161
2008-6
Superseded by
Rev. Proc. 2009-6, 2009-1 I.R.B.189
2008-7
Superseded by
Rev. Proc. 2009-7, 2009-1 I.R.B.226
2008-8
Superseded by
Rev. Proc. 2009-8, 2009-1 I.R.B.229
2008-9
Superseded by
Rev. Proc. 2009-9, 2009-2 I.R.B.256
2008-17
Obsoleted in part by
Rev. Proc. 2009-18, 2009-11 I.R.B.670
2008-19
Obsoleted in part by
Rev. Proc. 2009-27, 2009-19 I.R.B.938
2008-61
Superseded by
Rev. Proc. 2009-3, 2009-1 I.R.B.107
2008-65
Amplified and supplemented by
Rev. Proc. 2009-16, 2009-6 I.R.B.449
2008-66
Modified and superseded by
Rev. Proc. 2009-21, 2009-16 I.R.B.860
2008-68
Amplified and superseded by
Rev. Proc. 2009-15, 2009-4 I.R.B.356
2009-19
Modified and superseded by
Rev. Proc. 2009-26, 2009-19 I.R.B.935
Revenue Rulings:
65-286
Obsoleted by
T.D. 9435, 2009-4 I.R.B.333
71-381
Obsoleted in part by
Rev. Rul. 2009-9, 2009-14 I.R.B.735
76-54
Obsoleted by
T.D. 9435, 2009-4 I.R.B.333
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2008–27 through 2008–52 is in Internal Revenue Bulletin 2008–52, dated December 29,
2008.
2009–21 I.R.B.ivMay 26, 2009

Revenue Rulings— Continued:
92-19
Supplemented by
Rev. Rul. 2009-3, 2009-5 I.R.B.382
2008-19
Modified by
Rev. Rul. 2009-3, 2009-5 I.R.B.382
Treasury Decisions:
9394
Corrected by
Ann. 2009-42, 2009-20 I.R.B.1027
9436
Corrected by
Ann. 2009-15, 2009-11 I.R.B.687
9438
Corrected by
Ann. 2009-30, 2009-15 I.R.B.794
9439
Corrected by
Ann. 2009-12, 2009-11 I.R.B.686
9441
Corrected by
Ann. 2009-18, 2009-12 I.R.B.714
Ann. 2009-39, 2009-20 I.R.B.1022
9442
Corrected by
Ann. 2009-13, 2009-11 I.R.B.686
Ann. 2009-20, 2009-12 I.R.B.716
9446
Corrected by
Ann. 2009-23, 2009-13 I.R.B.731
Ann. 2009-45, 2009-21 I.R.B.1040
May 26, 2009v2009–21 I.R.B.

INDEX
Internal Revenue Bulletins 2009–1 through
2009–21
The abbreviation and number in parenthesis following the index entry
refer to the specific item; numbers in roman and italic type following
the parenthesis refers to the Internal Revenue Bulletin in which the item
may be found and the page number on which it appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Asset valuation, funding (Notice 22) 14,741
Calculation of amount includible in income under section 409A,
correction to REG–148326–05 (Ann 14) 11,703
COBRA continuation coverage (Notice 27) 16,838
Contributions, automatic contribution arrangements (TD 9447)
12,694
Determination letters, issuing procedures (RP 6) 1,189
Full funding limitations, weighted average interest rates, seg-
ments rates for:
January 2009 (Notice 2) 4,344
February 2009 (Notice 16) 8,572
March 2009 (Notice 20) 12,711
April 2009 (Notice 39) 18,902
Interim guidance under section 457A relating to deferred com-
pensation of nonqualified entities (Notice 8) 4,347
Letter rulings:
And determination letters, areas which will not be issued
from:
Associates Chief Counsel and Division Counsel (TE/GE)
(RP 3) 1,107
Associate Chief Counsel (International) (RP 7) 1,226
And general information letters, procedures (RP 4) 1,118
User fees, request for letter rulings (RP 8) 1,229
Multiemployer plans:
Funding (Notice 31) 16,856
WRERA, funding (Notice 42) 20,1011
Penalties:
Categories of tax returns and claims for refund, tax return
preparer penalty under section 6694 (RP 11) 3,313
Tax return preparer (TD 9436) 3,268; correction (Ann 15) 11,
703
EMPLOYEE PLANS—Cont.
Prototype program, 403(b) plans, request for comments (Ann 34)
18,916
Qualified retirement plans:
Covered compensation tables, permitted disparity (RR 2) 2,
245
Required minimum distributions (RMDs) (Notice 9) 5,419
Section 403(b) plans, writtenplan requirement (Notice 3) 2,
250
Regulations:
26 CFR 1.401(k)–0 thru –3, –6, amended; 1.401(m)–0 thru
–3, amended; 1.402(c)–2, amended; 1.411(a)–4, amended;
1.414(w)–1, added; 54.4979–1, revised; automatic contri-
bution arrangements (TD 9447) 12,694
26 CFR 1.6060–1, amended; 1.6107–1, revised; 1.6109–2,
amended; 1.6694–0 thru –4, revised; 1.6695–1, –2, revised;
1.6696–1, revised; 54.6060–1, added; 54.6107–1, added;
54.6109–1, added; 54.6694–1 thru –4, added; 54.6695–1,
added; 54.6696–1, added; 54.7701–1, added; tax return pre-
parer penalties under sections 6694 and 6695 (TD 9436) 3,
268; correction (Ann 15) 11,703
Technical advice to IRS employees (RP 5) 1,161
EMPLOYMENT TAX
COBRA continuation coverage (Notice 27) 16,838
Differential wage payments to active duty members of the uni-
formed services (RR 11) 18,896
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1
Penalties:
Categories of tax returns and claims for refund, tax return
preparer penalty under section 6694 (RP 11) 3,313
Tax return preparer (TD 9436) 3,268;correction(Ann15)11,
687
Postponement of certain tax-related deadlines by reason of a fed-
erally declared disaster or terroristic or military action (TD
9443) 8,564
Proposed Regulations:
26 CFR 31.3402(t)–0 thru –6, added and reserved;
31.3402(t)–7, added;31.3406(g)–2, amended;
31.6011(a)–4, amended; 31.6051–5, added; 31.6071(a)–1,
amended; 31.6302–1, –4, amended; withholding under
section 3402(t) (REG–158747–06) 4,362; hearing (Ann
29) 14,757
26 CFR 31.6011(a)–1, –4, amended; 31.6302–0, –1,
amended; employer’s annual federal tax return and modi-
fications to the deposit rules (REG–148568–04) 5,421
Qualification to file Form 944, Employer’s ANNUAL Federal
Tax Return, or request to file Form 941, Employer’s QUAR-
TERLY Federal Tax Return (RP 13) 3,323
Regulations:
26 CFR 31.6011(a)–1, –4, amended; 31.6011(a)–1T, –4T,
revised; 31.6302–0, –1, amended; 31.6302–0T, added;
2009–21 I.R.B.viMay 26, 2009

EMPLOYMENT TAX—Cont.
31.6302–1T, revised; employer’s annual federal tax return
and modifications to the deposit rules (TD 9440) 5,409
26 CFR 31.6060–1, added; 31.6107–1, added; 31.6109–2,
added; 31.6694–1 thru –4, added; 31.6695–1, added;
31.6696–1, added; 31.7701–1, added; tax return preparer
penalties under sections 6694 and 6695 (TD 9436) 3,268;
correction (Ann 15) 11,687
26 CFR 301.7508A–1, amended; postponement of certain
tax-related deadlines by reason of a federally declared dis-
aster or terroristic or military action (TD 9443) 8,564
Technical Advice Memoranda (TAMs) (RP 2) 1,87
Time for filing employment tax returns and modifications to de-
posit rules (TD 9440) 5,409; (REG–148568–04) 5,421
Withholding on payments by government entities for property
and services (REG–158747–06) 4,362;hearing(Ann29)14,
757
ESTATE TAX
Actuarial tables for valuing annuities, interests for life or terms
of years and remainder or reversionary interests (TD 9448) 20,
942; (REG–107845–08) 20,1014
Actuarial tables under section 7520, update (Notice 18) 10,648
Graduated retained interests (REG–119532–08) 20,1017
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1
Penalties:
Categories of tax returns and claims for refund, tax return
preparer penalty under section 6694 (RP 11) 3,313
Tax return preparer (TD 9436) 3,268; correction (Ann 15) 11,
687
Postponement of certain tax-related deadlines by reason of a fed-
erally declared disaster or terroristic or military action (TD
9443) 8,564
Proposed Regulations:
26 CFR 20.2031–7, amended; 20.2032–1, amended;
20.2055–2, amended; 20.2056A–4, amended; 20.7520–1,
amended; use of actuarial tables in valuing annuities, inter-
ests for life or terms of years, and remainder or reversionary
interests (REG–107845–08) 20,1014
26 CFR 20.2036–1, amended; grantor retained interests
(REG–119532–08) 20,1017
Regulations:
26 CFR 20.2031–0, revised; 20.2031–7, amended;
20.2031–7A, amended; 20.2031–7T, added; 20.2032–1,
amended; 20.2032–1T, added; 20.2055–2, amended;
20.2055–2T, added; 20.2056A–4, amended; 20.2056A–4T,
added; 20.7520–1, amended; 20.7520–1T, added; use of
actuarial tables in valuing annuities, interests for life or
terms of years and remainder or reversionary interests (TD
9448) 20,942
26 CFR 20.6060–1, added; 20.6107–1, added; 20.6109–1,
added; 20.6694–1 thru –4, added; 20.6695–1, added;
20.6696–1, added; 20.7701–1, added; 26.6060–1, added;
ESTATE TAX—Cont.
26.6107–1, added; 26.6109–1, added; 26.6694–1 thru –4,
added; 26.6695–1, added; 26.6696–1, added; 26.7701–1,
added; tax return preparer penalties under sections 6694
and 6695 (TD 9436) 3,268; correction (Ann 15) 11,687
26 CFR 301.7508A–1, amended; postponement of certain
tax-related deadlines by reason of a federally declared dis-
aster or terroristic or military action (TD 9443) 8,564
Technical Advice Memoranda (TAMs) (RP 2) 1,87
EXCISE TAX
Credits:
Biodiesal and renewable diesel fuels credit, extension of the
old ASTM D6751 standard until September 30, 2009 (No-
tice 34) 17,879
Calculation of volume of denaturants in alcohol for fuel cred-
its (Notice 6) 3,311
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1
Mandatory electronic filing of certain excise tax returns, impo-
sition and computation of tax, credits and refunds for certain
uses and sales of vehicles (REG–116699–07) 13,727
Penalties:
Categories of tax returns and claims for refund, tax return
preparer penalty under section 6694 (RP 11) 3,313
Tax return preparer (TD 9436) 3,268;correction(Ann15)11,
687
Postponement of certain tax-related deadlines by reason of a fed-
erally declared disaster or terroristic or military action (TD
9443) 8,564
Proposed Regulations:
26 CFR 41.4481–1, –2, amended; 41.4483–3, amended;
41.4483–7, removed; 41.6001–1, –2, amended;
41.6011(a)–1, amended; 41.6071(a)–1, amended;
41.6156–1, removed; highway use tax; sold vehicles and
electronic filing (REG–116699–07) 13,727
Regulations:
26 CFR 40.6060–1, added; 40.6107–1, added; 40.6109–1,
added; 40.6694–1 thru –4, added; 40.6695–1, added;
40.6696–1, added; 40.7701–1, added; 41.6060–1,
added; 41.6107–1, added; 41.6109–2, added; 41.6694–1
thru –4, added; 41.6695–1, added; 41.6696–1, added;
41.7701–1, added; 44.6060–1, added; 44.6107–1,
added; 44.6109–1, added; 44.6694–1 thru –4, added;
44.6695–1, added; 44.6696–1, added; 44.7701–1,
added; 55.6060–1, added; 55.6107–1, added; 55.6109–1,
added; 55.6694–1 thru –4, added; 55.6695–1, added;
55.6696–1, added; 55.7701–1, added; 156.6060–1, added;
156.6107–1, added; 156.6109–1, added; 156.6694–1
thru –4, added; 156.6695–1, added; 156.6696–1, added;
156.7701–1, added; 157.6060–1, added; 157.6107–1,
added; 157.6109–1, added; 157.6694–1 thru –4, added;
157.6695–1, added; 157.6696–1, added; 157.7701–1,
added; 301.7701–15, amended; tax return preparer penal-
May 26, 2009vii2009–21 I.R.B.

EXCISE TAX—Cont.
ties under sections 6694 and 6695 (TD 9436) 3,268;
correction (Ann 15) 11,687
26 CFR 301.7508A–1, amended; postponement of certain
tax-related deadlines by reason of a federally declared dis-
aster or terroristic or military action (TD 9443) 8,564
Technical Advice Memoranda (TAMs) (RP 2) 1,87
EXEMPT ORGANIZATIONS
Academic institution initiative, comments (Ann 26) 14,755
Annual notice to donors regarding pending and settled declara-
tory judgment suits (Ann 1) 1,242
Declaratory judgment suits (Ann 33) 15,799
Division web site address, request (Ann 25) 14,755
Letter rulings:
And determination letters:
Areas which will not be issued from Associates Chief
Counsel and Division Counsel (TE/GE) (RP 3) 1,107
Exemption application determination letter rulings under
sections 501 and 521 (RP 9) 2,256
And general information letters, procedures (RP 4) 1,118
User fees, request for letter rulings (RP 8) 1,229
List of organizations classified as private foundations (Ann 9) 9,
643; (Ann 22) 13,731; (Ann 38) 19,940
Penalties:
Categories of tax returns and claims for refund, tax return
preparer penalty under section 6694 (RP 11) 3,313
Tax return preparer (TD 9436) 3,268; correction (Ann 15) 11,
687
Regulations:
26 CFR 1.6060–1, amended; 1.6107–1, revised; 1.6109–2,
amended; 1.6694–0 thru –4, revised; 1.6695–1, –2, revised;
1.6696–1, revised; 53.6060–1, added; 53.6107–1, added;
53.6109–1, added; 53.6694–1 thru –4, added; 53.6695–1,
added; 53.6696–1, added; 53.7701–1, added; 56.6060–1,
added; 56.6107–1, added; 56.6109–1, added; 56.6694–1
thru –4, added; 56.6695–1, added; 56.6696–1, added;
56.7701–1, added; tax return preparer penalties under
sections 6694 and 6695 (TD 9436) 3,268; correction (Ann
15) 11,687
Revocations (Ann 3) 6,459;(Ann10)9,644; (Ann 21) 13,730;
(Ann 27) 14,756; (Ann 32) 15,799; (Ann 37) 19,940;(Ann
41) 20,1026
Suspension of tax-exempt statusof terrorist organization (Ann
17) 12,714
Technical advice to IRS employees (RP 5) 1,161
Tuition programs, modification to Notice 2001-55 (Notice 1) 2,
250
GIFT TAX
Actuarial tables for valuing annuities, interests for life or terms
of years and remainder or reversionary interests (TD 9448) 20,
942; (REG–107845–08) 20,1014
Actuarial tables under section 7520, update (Notice 18) 10,648
GIFT TAX—Cont.
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1
Penalties:
Categories of tax returns and claims for refund, tax return
preparer penalty under section 6694 (RP 11) 3,313
Tax return preparer (TD 9436) 3,268;correction(Ann15)11,
687
Postponement of certain tax-related deadlines by reason of a fed-
erally declared disaster or terroristic or military action (TD
9443) 8,564
Proposed Regulations:
26 CFR 25.2512–5, amended; 25.2522(c)–3, amended;
25.7520–1, –3, amended; 25.2512–5A, amended;
25.2512–5T, added;25.2522(c)–3,amended;
25.2522(c)–3T, added; 25.7520–1, amended; 25.7520–1T,
added; 25.7520–3, amended; 25.7520–3T, added; use of
actuarial tables in valuing annuities, interests for life or
terms of years and remainder or reversionary interests
(REG–107845–08) 20,1014
Regulations:
26 CFR 25.2512–0, revised; 25.2512–5, amended; use of ac-
tuarial tables in valuing annuities, interests for life or terms
of years and remainder or reversionary interests (TD 9448)
20,942
26 CFR 25.6060–1, added; 25.6107–1, added; 25.6109–1,
added; 25.6694–1 thru –4, added; 25.6695–1, added;
25.6696–1, added; 25.7701–1, added; tax return preparer
penalties under sections 6694 and 6695 (TD 9436) 3,268;
correction (Ann 15) 11,687
26 CFR 301.7508A–1, amended; postponement of certain
tax-related deadlines by reason of a federally declared dis-
aster or terroristic or military action (TD 9443) 8,564
Technical Advice Memoranda (TAMs) (RP 2) 1,87
INCOME TAX
Actuarial tables for valuing annuities, interests for life or terms
of years and remainder or reversionary interests (TD 9448) 20,
942; (REG–107845–08) 20,1014
Actuarial tables under section 7520, update (Notice 18) 10,648
Advance Pricing Agreement (APA) Program, annual report to the
public, 2008 (Ann 28) 15,760
Allocation of consideration and allocation and recovery of
basis in transactions involvingcorporate stock or securities
(REG–143686–07) 8,579; correction (Ann 40) 20,1023
Anonymous tax return information, disclosure by tax return pre-
parer (Notice 13) 6,447
Annual notice to donors regarding pending and settled declara-
tory judgment suits (Ann 1) 1,242
Bonds:
Allocation of qualified school construction bond (QSCB) na-
tional limitation for 2009 (Notice 35) 17,880
Build America Bonds, Recovery Zone Economic Develop-
ment Bonds (Notice 26) 16,833
2009–21 I.R.B.viiiMay 26, 2009

INCOME TAX—Cont.
National and area median gross income figures, guidance for
2009 (RP 27) 19,938
Qualified energy conservation bonds, allocations for 2009
(Notice 29) 16,849
Qualified zone academy bond limitation (Notice 30) 16,852
Calculation of amount includible in income under section 409A,
correction to REG–148326–05 (Ann 14) 11,703
Conduit financing arrangements (REG–113462–08) 4,379
Consolidated returns, intercompany transactions (TD 9442) 6,
434; correction (Ann 13) 11,702; correction (Ann 20) 12,716
Corporations:
Creditor continuity of interest (TD 9434) 4,339
Foreign base company sales income (TD 9438) 5,387;cor-
rection(Ann30)15,794; (REG–150066–08) 5,423;cor-
rection (Ann 31) 15,798; hearing cancelled (Ann 36) 18,
927
Transaction of interest, controlled foreign corporation (CFC),
subpart F income partnership blocker (Notice 7) 3,312
Formless conversion of partnership to S corporation (RR 15)
21,1035
Transfers by U.S. persons of stock or securities to foreign
corporations (TD 9446) 9,607; correction (Ann 23) 13,
731; additional corrections (Ann 45) 21,1040
Transfers of stock or securitiesto foreign corporations under
section 304 (TD 9444) 9,603; (REG–147636–08) 9,641
Treatment of stock of a controlled corporation under section
355(a)(3)(B) (TD 9435) 4,333; (REG–150670–07) 4,378
Cost of living adjustments for inflation, recent statutory changes
(RP 21) 16,860
Credits:
Alternative motor vehicle credit, phase-out (Notice 37) 18,
898
First-time homebuyer credit, allocation between unmarried
co-purchasers (Notice 12) 6,446
Low-income housing credit:
Private activity bonds (Notice 21) 13,724
Utility allowances for sub-metered low-income units (No-
tice 44) 21,1037
New clean renewable energy bonds (Notice 33) 17,865
Nonconventional source fuel credit, inflation adjustment fac-
tor and phase-out amount for CY 2008 (Notice 32) 17,865
Qualifying advanced coal project credit (Notice 24) 16,817
Qualifying gasification project credit (Notice 23) 16,802
Rates for tax credit bonds (Notice 15) 6,449
Renewable electricity, refined coal, and Indian coal produc-
tion credit, 2009 inflation adjustment (Notice 40) 19,931
Residential energy efficient property credit (Notice 41) 19,
933
Declaratory judgment suits (Ann 33) 15,799
Depreciation:
2009, limitation on depreciation deductions for passenger au-
tomobiles (RP 24) 17,889
Election to forgo additional first year depreciation deduction
(RP 16) 6,449
Disciplinary actions involving attorneys, certified public accoun-
tants, enrolled agents, and enrolled actuaries (Ann 2) 5,424;
INCOME TAX—Cont.
(Ann 8) 8,598; (Ann 11) 10,663; (Ann 16) 11,708; (Ann 24)
13,732; (Ann 35) 17,896;(Ann46)21,1040
Disclosure:
Of return information to the Bureau of Economic Analysis
(TD 9439) 5,416; correction (Ann 12) 11,702
Or use of information by preparers of returns (TD 9437) 4,
341
Disguised sales, section 707, REG–149519–03 withdrawn (Ann
4) 8,575
Employer-provided vehicles, cents-per-mile valuation rule, max-
imum vehicle values, 2009 (RP 12) 3,321
Foreign earned income exclusion (RP 22) 16,862
Guidance priority list, recommendations for 2009–2010 (Notice
43) 21,1037
Guidance regarding treatment of certain obligations under sec-
tion 956(c) (Notice 10) 5,419
Home Affordable Modification Program (HAMP); payments
made to a REMIC (Notice 36) 17,886
Information reporting:
Deadline for brokers to furnish payee statements (Notice 11)
5,420
Payments made in settlement of payment card and third party
network transactions under section 6050W, request for
comments (Notice 19) 10,660
Requirements for brokers for sales and transfers of securities
and issuers of securities for corporation actions affecting
basis, request for comments (Notice 17) 8,575
Insurance companies, prevailing state assumed interest rate ta-
bles, 2009 (RR 3) 5,382
Insurance contracts:
Investors who purchase life insurance contracts (RR 14) 21,
1031
Sale or surrender (RR 13) 21,1029
Interest:
Investment:
Federal short-term, mid-term, and long-term rates for:
January 2009 (RR 1) 2,248
February 2009 (RR 5) 6,432
March 2009 (RR 8) 10,645
April 2009 (RR 10) 14,738
May 2009 (RR 12) 19,928
Rates, underpayments and overpayments, quarter beginning:
April 1, 2009 (RR 7) 13,717
Interim guidance under section 457A relating to deferred com-
pensation of nonqualified entities (Notice 8) 4,347
Interim standards under section 6694(a) (Notice 5) 3,309
Letter rulings:
And determination letters, areas which will not be issued
from:
Associates Chief Counsel and Division Counsel (TE/GE)
(RP 3) 1,107
Associate Chief Counsel (International) (RP 7) 1,226
And information letters issued byAssociate Offices, determi-
nation letters issued by Operating Divisions (RP 1) 1,1
May 26, 2009ix2009–21 I.R.B.

INCOME TAX—Cont.
Losses:
Modification to 5-year carryback of net operating losses of
small businesses (RP 26) 19,935
Net operating losses (RP 19) 14,747
Tax treatment of losses from criminally fraudulent investment
arrangements (RR 9) 14,735
Theft losses deductions from a criminally fraudulent invest-
ment arrangements (RP 20) 14,749
Modifications for mortgage loans held by certain securitization
vehicles (RP 23) 17,887
Money market fund, certain payments received from its invest-
ment advisor to maintain per share net asset value of $1.00 (RP
10) 2,267
Partnerships:
Conversion of partnership items with respect to tax avoidance
transactions (REG–138326–07) 9,638
Determination of distributive share when a partner’s interest
changes (REG–144689–04) 18,906
Partner-level items in determining withholding tax, effec-
tively connected U.S. trade or business income allocated to
foreign partners, correction to TD 9394 (Ann 42) 20,1027
Penalties:
Categories of tax returns and claims for refund, tax return
preparer penalty under section 6694 (RP 11) 3,313
Tax return preparer (TD 9436) 3,268; correction (Ann 15) 11,
703
Postponement of certain tax-related deadlines by reason of a fed-
erally declared disaster or terroristic or military action (TD
9443) 8,564
Pre-Filing Agreement (PFA) program, extended (RP 14) 3,324
Private foundations, organizations now classified as (Ann 9) 9,
643; (Ann 22) 13,731; (Ann 38) 19,940
Procedures for administrative review of a determination that an
authorized recipient has failedto safeguard tax returns or re-
turn information (TD 9445) 9,635
Proposed Regulations:
26 CFR 1.170A–12, amended; 1.642(c)–6, amended;
1.664–4, amended; 1.7520–1, amended; use of actuarial ta-
bles in valuing annuities, interests for life or terms of years
and remainder or reversionary interests (REG–107845–08)
20,1014
26 CFR 1.301–2, added; 1.302–2(c), removed; 1.302–5,
added; 1.304–1, revised; 1.304–2, –3, –5, amended;
1.351–2, amended; 1.354–1, amended; 1.355–1, amended;
1.356–1, amended; 1.358–1, –2, revised; 1.358–6,
amended; 1.368–1, amended; 1.861–12, added; 1.1002–1,
redesignated as 1.1001–6, and amended; 1.1016–2,
amended; 1.1374–10, revised; the allocation of consider-
ation and allocation and recovery of basis in transactions
involving corporate stock or securities (REG–143686–07)
8,579; correction (Ann 40) 20,1023
26 CFR 1.355–2, amended; guidance regarding the treat-
ment of stock of a controlled corporation under section
355(a)(3)(B) (REG–150670–07) 4,378
26 CFR 1.367(a), revised; 1.482–0, –1, –2, –4, –8, amended;
1.482–7, revised; 1.482–9, added; section 482, methods to
INCOME TAX—Cont.
determine taxable income in connection with a cost sharing
arrangement (CSA) (REG–144615–02) 7,561; correction
(Ann 19) 12,715
26 CFR 1.367(a)–9, added; 1.367(b)–4, amended; 1.1248–1,
amended; application of section 367 to section 351 ex-
change resulting from a transaction described in section
304(a)(1); treatment of gain recognized under section
301(c)(3) for purposes of section 1248 (REG–147636–08)
9,641
26 CFR 1.706–0, –2 thru –5, added; 1.706–1, amended; de-
termination of distributive share when a partner’s interest
changes (REG–144689–04) 18,906
26 CFR 1.707–0, –3, –5, thru –9, amended; 1.752–3,
amended; section 707 regarding disguised sales, generally,
REG–149519–03 withdrawn (Ann 4) 8,597
26 CFR 1.881–3, amended; conduit financing arrangements
(REG–113462–08) 4,379
26 CFR 1.954–3, amended; guidance regarding foreign base
company sales income(REG–150066–08) 5,423; correc-
tions (Ann 31) 15,798; hearing cancelled (Ann 36) 18,927
26 CFR 301.6231(c)–3, amended; 301.6231(c)–9, added; tax
avoidance transactions (REG–138326–07) 9,638
26 CFR 301.6707–1, added; section 6707 and the failure
to furnish information regarding reportable transactions
(REG–160872–04) 4,358
Publications:
1167, General Rules and Specifications for Substitute Forms
and Schedules (RP 17) 7,517
1220, additional changes affecting tax year 2008 filing of in-
formation returns (Ann 7) 10,663
Qualified board or exchange under section 1256(g)(7)(C), Dubai
Mercantile Exchange (RR 4) 5,408
Qualified mortgage bonds (QMBs) and mortgage credit certifi-
cates (MCCs), average area housing purchase prices for 2009
(RP 18) 11,686
Regulated investment companies (RICs) and real estate invest-
ment trusts (REITs), self-determination of deficiency dividend
under section 860(e)(4) (RP 28) 20,1011
Regulations:
26 CFR 1.170A–12, amended; 1.170A–12T, added; 1.642(c),
amended; 1.664–2, –4, amended; 1.664–4T, added;
1.664–4A, amended; 1.7520–1T, added; 1.7520–1,
amended; use of actuarial tables in valuaing annuities,
interests for life or terms of years and remainder or rever-
sionary interests (TD 9448) 20,942
26 CFR 1.338–1, amended; 1.367(a)–3, amended;
1.367(a)–3T, –8T, removed; 1.367(a)–8, revised; 602.101,
amended; transfers by U.S. persons of stock or securities
to foreign corporations (TD 9446) 9,607; correction (Ann
23) 13,731; additional corrections (Ann 45) 21,1040
26 CFR 1.355–0 thru –2, amended; 1.355–0T, –2T, added;
guidance regarding the treatment of stock of a controlled
corporation under section 355(a)(3)(B) (TD 9435) 4,333
26 CFR 1.367(a)–1, added; 1.367(a)–1T, amended; 1.482–0,
–0T, –1, –1T, –2T. –4T, –5, amended; 1.482–7, redes-
ignated as 1.482–7A; 1.482–7T, added, 1.482–8, –8T,
2009–21 I.R.B.xMay 26, 2009

INCOME TAX—Cont.
–9T, amended; 1.861–17, amended; 1.6662–6, amended;
301.7701–1, amended; 602.101, amended; section 482,
methods to determine taxable income in connection with
a cost sharing arrangement (CSA) (TD 9441) 7,460;cor-
rection(Ann18)12,714; additional corrections (Ann 39)
20,1022
26 CFR 1.367(a)–(3), amended; 1.367(a)–9T, added
1.367(b)–4, amended; 1.367(b)–4T, added; 1.1248–1,
amended; 1.248–1T, added; application of section 367
to section 351 exchange resulting from a transaction de-
scribed in section 304(a)(1); treatment of gain recognized
under section 301(c)(3) for purposes of section 1248 (TD
9444) 9,603
26 CFR 1.368–1, amended; creditor continuity of interest (TD
9434) 4,339
26 CFR 1.954–3, amended; 1.954–3T, added; guidance re-
garding foreign base company sales income (TD 9438) 5,
387; corrections (Ann 30) 15,794
26 CFR 1.1446–6, amended; 1.1464–1, amended; 1.6151–1,
amended; special rules to reduce section 1446 withholding,
correctiontoTD9394(Ann42)20,1027
26 CFR 1.1502–13, –28, amended; consolidated returns, in-
tercompany obligations (TD 9442) 6,434; correction (Ann
13) 11,702; correction (Ann 20) 12,716
26 CFR 1.6060–1, amended; 1.6107–1, revised; 1.6109–2,
amended; 1.6694–0 thru –4, revised; 1.6695–1, –2, re-
vised; 1.6696–1, revised; 301.7701–15, amended; 602.101,
amended; tax return preparer penalties under sections 6694
and 6695 (TD 9436) 3,268; correction (Ann 15) 11,703
26 CFR 301.6103(j)(1)–1, amended; 301.6103(j)(1)–1T, re-
moved; disclosure of return information to the Bureau of
Economic Analysis (TD 9439) 5,416; correction (Ann 12)
11,686
26 CFR 301.6103(j)(1)–1T, added; disclosure of return infor-
mation to the Bureau of Economic Analysis, correction to
TD 9439 (Ann 12) 11,686
26 CFR 301.6103(p)(4)–1, added; 301.6103(p)(4)–1T, re-
moved; 301.6103(p)(7)–1, added; 301.6103(p)(7)–1T,
removed; procedures for administrative review of a deter-
mination that an authorized recipient has failed to safeguard
tax returns or return information (TD 9445) 9,635
26 CFR 301.7216–3, amended; 301.7216–3T, removed;
amendments to the section 7216 regulations - disclosure or
use of information by preparers of returns (TD 9437) 4,341
26 CFR 301.7508A–1, amended; postponement of certain
tax-related deadlines by reason of a federally declared dis-
aster or terroristic or military action (TD 9443) 8,564
Revocations, exempt organizations (Ann 3) 6,459; (Ann 10) 9,
644; (Ann 21) 13,730; (Ann 27) 14,756; (Ann 32) 15,799;
(Ann 37) 19,940; (Ann 41) 20,1026
Section 382:
Emergency Economic Stabilization Act of 2008 (EESA), ad-
ditional guidance (Notice 38) 18,901
Limitation, ownership changes, pre-change losses (Notice 14)
7,516
INCOME TAX—Cont.
Section 482, methods to determine taxable income in connection
with a cost sharing arrangement (CSA) (TD 9441) 7,460;cor-
rection(Ann18)12,714; additional corrections (Ann 39) 20,
1022; (REG–144615–02) 7,561; correction (Ann 19) 12,715
Section 6707 and the failure to furnish information regarding re-
portable transactions (REG–160872–04) 4,358
Standard Industry Fare Level (SIFL) formula (RR 6) 12,694
Stocks:
Section 305 REIT distributions of stock (RP 15) 4,356
Treatment of stock of a controlled corporation under section
355(a)(3)(B) (TD 9435) 4,333; (REG–150670–07) 4,378
Substitute forms and schedules, general rules and specifications
(RP 17) 7,517
Tax conventions:
Publication 515, Withholding of Tax on Nonresident Aliens
and Foreign Entities (For Withholding in 2008), and Publi-
cation 901, U.S. Tax Treaties (Rev. April 2008), changes in
tables 1 and 2 for Bulgaria, Canada, and Iceland (Ann 5) 8,
575
Taxpayer identification number (TIN), matching program and
new section 6050W (Ann 6) 9,643
Technical Advice Memoranda (TAMs) (RP 2) 1,87
Transferred basis, reorganization acquisition (Notice 4) 2,251
Update to Publication 1220, additional changes affecting tax year
2008 filing of information returns (Ann 7) 10,663
Uniform capitalization regulations under section 263A, property
acquired for resale, request for public comments (Notice 25)
15,758
SELF-EMPLOYMENT TAX
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions (RP
1) 1,1
Technical Advice Memoranda (TAMs) (RP 2) 1,87
May 26, 2009xi2009–21 I.R.B.

2009–21 I.R.B.May 26, 2009

May 26, 20092009–21 I.R.B.

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