Internal Revenue Bulletin 2000-49 (PDF rendition): IRS Notices

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INCOME TAX
Rev. Rul. 2000–54, page 566.
Federal rates; adjusted federal rates; adjusted feder-
al long-term rate, and the long-term exempt rate. For
purposes of sections 1274, 1288, 382, and other sections
of the Code, tables set forth the rates for December 2000.
T.D. 8907, page 558.
Final regulations clarify the tax consequences for the amor-
tization of intangibles under section 197 of the Code in the
context of partnership basis adjustments.
Notice 2000–60, page 568.
Stock compensation corporate tax shelter. This notice
alerts taxpayers and their representatives that losses generat-
ed by transactions involving the purchase of a parent corpora-
tion’s stock by a subsidiary, a subsequent transfer of the pur-
chased parent stock from the subsidiary to the parent’s
employees, and the eventual liquidation or sale of the subsidiary
are not properly allowable for federal income tax purposes. This
notice also alerts taxpayers and their representatives of certain
responsibilities that may arise from participation in such trans-
actions.
Notice 2000–61, page 569.
This notice clarifies that section 935 of the Code applies only to
individuals and, therefore, does not relieve a trust from any oblig-
ation it may have to file an income tax return for the taxable year
with the United States. The notice also provides that transac-
tions entered into by taxpayers who claim that section 935
applies to trusts as part of a scheme to avoid both U.S. and
Guamanian tax liability are designated as “listed transactions” for
purposes of sections 6011, 6111, and 6112 of the Code.
ADMINISTRATIVE
Rev. Proc. 2000–48, page 570.
Optional standard mileage rates. This procedure
announces 34.5 cents as the optional rate for deducting or
accounting for expenses for business use of an automobile,
14 cents for use of an automobile as a charitable contribu-
tion, and 12 cents for use of an automobile as a medical or
moving expense for 2001. It provides rules for substantiat-
ing the deductible expenses of using an automobile for busi-
ness, moving, medical, or charitable purposes. Rev. Proc.
99–38 superseded.
Internal Revenue
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Bulletin No. 2000–49
December 4, 2000
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
Department of the Treasury
Internal Revenue Service
Finding Lists begin on page ii.
Index for July through November begins on page iv.

December 4, 20002000–49 I.R.B.
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly and may be obtained
from the Superintendent of Documents on a subscription
basis. Bulletin contents are consolidated semiannually into
Cumulative Bulletins, which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of in-
ternal management are not published; however, statements
of internal practices and procedures that affect the rights
and duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
revenue ruling. In those based on positions taken in rulings
to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature
are deleted to prevent unwarranted invasions of privacy and
to comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have
the force and effect of Treasury Department Regulations,
but they may be used as precedents. Unpublished rulings
will not be relied on, used, or cited as precedents by Service
personnel in the disposition of other cases. In applying pub-
lished rulings and procedures, the effect of subsequent leg-
islation, regulations, court decisions, rulings, and proce-
dures must be considered, and Service personnel and oth-
ers concerned are cautioned against reaching the same con-
clusions in other cases unless the facts and circumstances
are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions, and Subpart B, Legislation and Related
Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to
these subjects are contained in the other Parts and Sub-
parts. Also included in this part are Bank Secrecy Act Admin-
istrative Rulings. Bank Secrecy Act Administrative Rulings
are issued by the Department of the Treasury’s Office of the
Assistant Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The first Bulletin for each month includes a cumulative index
for the matters published during the preceding months.
These monthly indexes are cumulated on a semiannual basis,
and are published in the first Bulletin of the succeeding semi-
annual period, respectively.
The IRS Mission
Provide America’s taxpayers top quality service by help-
ing them understand and meet their tax responsibilities
and by applying the tax law with integrity and fairness to
all.
Introduction
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

Section 42.—Low-Income
Housing Credit
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2000. See Rev. Rul. 2000–54, page
566.
Section 62.—Adjusted Gross
Income Defined
26 CFR 1.62–2: Reimbursements and other expense
allowance arrangements.
Rules under which a reimbursement or other ex-
pense allowance arrangement for the cost of operat-
ing an automobile for business purposes will satisfy
the requirements of section 62(c) of the Code as to
business connection, substantiation, and returning
amounts in excess of expenses. See Rev. Proc.
2000–48, page 570.
Section 162.—Trade or Business
Expenses
26 CFR 1.162–17: Reporting and substantiation of
certain business expenses of employees.
Rules are set forth for substantiating the amount
of a deduction or an expense for business use of an
automobile that most nearly represents current costs.
See Rev. Proc. 2000–48, page 570.
Section 170.—Charitable, etc.,
Contributions and Gifts
26 CFR 1.170A–1: Charitable, etc., contributions
and gifts; allowance of deduction.
Rules are set forth for substantiating the amount
of a deduction or an expense for charitable use of an
automobile. See Rev. Proc. 2000–48, page 570.
Section 197.—Amortization of
Goodwill and Certain Other
Intangibles
26 CFR 1.197–2: Amortization of goodwill and
certain other intangibles.
T.D. 8907
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
Application of the Anti-Churning
Rules for Amortization of
Intangibles in Partnerships
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains final
regulations relating to the amortization of
certain intangible property under section
197. Specifically, the regulations apply the
anti-churning rules under section 197(f)(9)
to partnership distributions resulting in
basis adjustments under sections 732(b)
and 734(b). This document also amends
certain parts of the previously issued final
regulations (TD 8865), including those
parts that relate to the amount of a basis ad-
justment under sections 732(d) and 743(b)
that is subject to the anti-churning rules
under section 197(f)(9). The final regula-
tions interpret the provisions of section
197(f)(9), reflecting changes to the law
made by the Omnibus Budget Reconcilia-
tion Act of 1993 (OBRA ’93), and affect
taxpayers who acquired intangible property
after August 10, 1993, or made a retroac-
tive election to apply OBRA ’93 to intangi-
bles acquired after July 25, 1991.
DATES: Effective Date: These regula-
tions are effective November 20, 2000.
Applicability Date: These regulations
apply to distributions or transfers occurring
on or after November 20, 2000. However,
a taxpayer may choose, on a transaction-
by-transaction basis, to apply these regula-
tions to property acquired (or partnership
transactions occurring) after August 10,
1993 (or July 25, 1991, if a valid retroactive
election has been made under §1.197–1T)
and before November 20, 2000.
FOR FURTHER INFORMATION CON-
TACT: David J. Sotos or Robert G.
Honigman at (202) 622-3050 (not a toll-
free number).
SUPPLEMENTARY INFORMATION:
Background
This document amends §1.197–2 of the
Income Tax Regulations (26 CFR Part 1) to
provide additional rules regarding the ap-
plication of section 197(f)(9) to partnership
transactions under sections 732(b) and
734(b). This document also amends certain
provisions of the final regulations under
section 197 issued on January 25, 2000,
(TD 8865, 2000–7 I.R.B. 589 [65 F.R.
3820]).
On January 16, 1997, the IRS published
proposed regulations (REG–209709–94,
1997–1 C.B. 731) in the Federal Register
(62 F.R. 2336) under sections 167(f) and
197, including the anti-churning rules in
section 197(f)(9). In commenting on the
proposed regulations, some practitioners
noted that additional guidance was needed
regarding how the special anti-churning
rule of section 197(f)(9)(E) should apply to
increases in the basis of partnership prop-
erty under sections 732, 734, and 743. In
response to these comments, the IRS pub-
lished proposed regulations (REG–
100163–00, 2000–7 I.R.B. 633) in the Fed-
eral Register(65 F.R. 3903) on January 25,
2000, providing rules for determining the
portion of a basis adjustment under sections
732(b) and 734(b) that will be subject to the
anti-churning rules. Final regulations (TD
8865, 65 F.R. 3820) (referred to herein as
the “existing regulations”) were issued at
the same time as the proposed regulations.
The existing regulations provide guidance
regarding the application of the anti-churn-
ing rules to basis adjustments under sec-
tions 732(d) and 743(b) and to remedial al-
locations of deductions for amortization of
section 197(f)(9) intangibles (i.e., goodwill
and going concern value that was held or
used at any time during the period begin-
ning on July 25, 1991, and ending on Au-
gust 10, 1993 (unless an election was made
under §1.197–1T) and any other section
197 intangible that was held or used during
such period and was not depreciable or
amortizable under prior law).
The IRS received no requests to speak at
a public hearing that was scheduled for
May 24, 2000, and consequently the IRS
canceled the hearing. Written comments
were received in response to the notice of
proposed rulemaking. The comments re-
ceived and revisions made are discussed
below.
December 4, 20005582000–49 I.R.B.
Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

Explanation of Provisions and
Summary of Comments
A. In General
Section 197(f)(9)(E) provides that, in
applying the anti-churning rules for basis
adjustments under sections 732, 734, and
743, determinations are made at the part-
ner level, and each partner is treated as
having owned and used such partner’s
proportionate share of the partnership’s
assets. With respect to basis adjustments
under sections 732(b) and 734(b), this
rule requires taxpayers and the IRS to an-
alyze transactions that actually involve a
distribution of property from the partner-
ship to a partner as deemed transactions
involving transfers of property directly
among the partners. In applying the anti-
churning rules to basis adjustments under
section 732(b), the distributee partner is
deemed to acquire the distributed intangi-
ble directly from the continuing partners
of the distributing partnership. Similarly,
in applying the anti-churning rules to
basis adjustments under section 734(b),
the continuing partners are deemed to ac-
quire interests in the intangible that re-
mains in the partnership from the partner
who received a distribution (giving rise to
the section 734(b) basis adjustment) of
property other than the intangible.
Consistent with this view of the trans-
actions, §1.197–2(g)(3) of the existing
regulations provides that the increase in
the basis of a distributed section 197(f)(9)
intangible under section 732(b) or the in-
crease in the partnership’s basis of an
undistributed section 197(f)(9) intangible
under section 734(b) is treated as a new
intangible acquired as a result of the dis-
tribution. The rules for determining
whether such basis adjustments are sub-
ject to the anti-churning rules under sec-
tion 197(f)(9) operate by reference to the
facts surrounding each partner’s acquisi-
tion of its interest in the partnership, the
relation of the distributee partner and the
continuing partners, and the portion of the
intangible that is allocable to such part-
ners. Although the specific rules are not
phrased in terms of analyzing a deemed
transfer of a portion of an intangible be-
tween the distributee partner and the con-
tinuing partners, the effect of the rules is
to analyze such a deemed transfer.
Under the proposed regulations, it first
is necessary to determine whether the por-
tion of an intangible that a partner is
deemed to acquire as a result of the distri-
bution was subject to the anti-churning
rules immediately prior to the deemed
transfer. Even if the intangible is a sec-
tion 197(f)(9) intangible with respect to
the partnership, for purposes of analyzing
a deemed transfer, the partner’s share of
the intangible is treated as not being sub-
ject to the anti-churning rules if the intan-
gible was held by the partnership at the
time that the partner (or predecessor part-
ner) acquired the partnership interest, and
the partner (or predecessor partner) would
have been able to amortize the intangible
had the partner (or predecessor partner)
directly acquired the intangible under the
same circumstances that the partner (or
predecessor partner) acquired the partner-
ship interest. If a partner’s share of the
intangible is treated as not being subject
to the anti-churning rules for this purpose,
then the anti-churning rules would not
apply to the portion of the basis adjust-
ment that is attributable to the deemed
transfer.
If the partner’s share of the intangible
was treated as being subject to the anti-
churning rules immediately prior to the
deemed transfer, it is necessary, as a fur-
ther step, to determine whether the
deemed transferor and transferee are re-
lated. If the partners are not related, the
anti-churning rules would not apply to the
basis adjustment that gives rise to the
deemed transfer.
The proposed regulations also contain
rules for measuring the portion of the in-
tangible that is deemed to be transferred
by the relevant partners in the deemed
transactions together with certain addi-
tional rules designed to prevent circum-
vention of the anti-churning rules through
the use of partnerships.
B.Continuing Partner’s Share of Basis
Adjustment Under Section 734(b)
The proposed regulations provide that,
for purposes of analyzing basis adjust-
ments under section 734(b), a continuing
partner’s share of a basis increase is equal
to (1) the total basis increase allocable to
the intangible; multiplied by (2) a fraction
equal to (A) the unrealized appreciation
from the intangible that would have been
allocated to the continuing partner if the
partnership had sold the intangible imme-
diately before the distribution for its fair
market value in a fully taxable transac-
tion; over (B) the total unrealized appreci-
ation from the intangible that would have
been realized by the partnership if the
partnership had sold the intangible imme-
diately before the distribution for its fair
market value in a fully taxable transac-
tion.
One commentator stated that, under the
proposed regulations, the fraction for de-
termining a continuing partner’s share of
the basis adjustment under section 734(b)
could lead to inappropriate results in
some circumstances. For example, if a
partner contributes to a partnership a sec-
tion 197(f)(9) intangible which has a fair
market value that exceeds its tax basis at
the time of the contribution, and, at some
later date, in an unrelated transaction, the
contributing partner is redeemed from the
partnership resulting in a section 734(b)
adjustment to the intangible, the proposed
regulations could determine that the entire
adjustment under section 734(b) is alloca-
ble to the contributing partner (assuming
that the basis adjustment does not exceed
the section 704(c) gain attributable to the
property), even though the contributing
partner is no longer a partner in the part-
nership.
Treasury and the IRS agree that the
fraction used in the proposed regulations
can lead to inappropriate results. Further-
more, as discussed below, particularly in
situations involving intangibles with
built-in gain that are contributed to a part-
nership, an approach relying on a part-
ner’s share of appreciation in an intangi-
ble (whether measured before or after a
distribution) to determine the partner’s
share of a basis increase under section
734(b) appears to be inconsistent with the
purpose of section 197(f)(9)(E).
Positive basis adjustments under sec-
tion 734(b) can be analyzed from two dif-
ferent perspectives: gain eliminated or de-
ductions created. Under §1.755–
1(c)(2)(i), positive section 734(b) basis
adjustments are allocated first to appreci-
ated properties within a class so as to
eliminate the built-in gain (and hence sec-
tion 704(c) gain) with respect to such
properties. In analyzing gain on disposi-
tion of the asset, the basis adjustment in-
ures first to the benefit of the contributing
partner since it will reduce the section
704(c) gain recognized by the partner
upon the disposition of the asset by the
2000–49 I.R.B.559December 4, 2000

December 4, 20005602000–49 I.R.B.
partnership. However, in analyzing de-
preciation or amortization deductions at-
tributable to the asset, the basis will inure
first to the non-contributing partners to
the extent that they were being denied
such deductions as a result of the ceiling
rule. In determining the portion of an in-
tangible that a partner is deemed to re-
ceive from the distributee partner for pur-
poses of applying the anti-churning rules,
it seems that a rule focused on who would
receive a deduction as a result of a section
734(b) basis adjustment, rather than who
would avoid gain, is more appropriate.
A partner’s proportionate share of part-
nership capital generally serves as a good
proxy for estimating a partner’s share of de-
ductions. Accordingly, for purposes of de-
termining a continuing partner’s share of a
section 734(b) basis adjustment, the frac-
tion utilized in the final regulations com-
pares a continuing partner’s post-distribu-
tion capital account as determined under
section 704(b) and §1.704–1(b)(2)(iv) to
the aggregate of all of the continuing part-
ners’ post-distribution capital accounts (or
if the partnership does not maintain capital
accounts in accordance with
§1.704–1(b)(2)(iv), the fraction is deter-
mined by reference to the partner’s overall
interest in the partnership under
§1.704–1(b)(3)). Treasury and the IRS be-
lieve this change best reflects how deduc-
tions are likely to flow from the intangible
asset in a typical partnership arrangement.
C. Amortization of Section 197(f)(9)
Intangible Where Some But Not All of the
Basis Adjustment Under Section 734(b) is
Amortizable
The proposed regulations provide that
taxpayers may use any reasonable method
to determine amortization of a section
734(b) adjustment with respect to an in-
tangible for book purposes, provided that
the method does not permit any portion of
the tax deduction for amortization attrib-
utable to the adjustment to be allocated to
a partner who is subject to the anti-churn-
ing rules. Several commentators re-
quested guidance as to what methods
would be considered reasonable in situa-
tions where part, but not all, of a section
734(b) basis adjustment is attributable to
an intangible that is subject to the anti-
churning rules.
In response to the comments, the final
regulations contain an example illustrat-
ing one method for determining book
amortization that will be considered rea-
sonable under the regulations.
D.Adjustments Under Sections 743(b)
and 732(d) Where the Transferor of the
Partnership Interest is Related to the
Transferee
The existing regulations provide that
the anti-churning rules apply with respect
to positive basis adjustments under sec-
tion 743(b) only if the person acquiring
the partnership interest is related to the
person transferring the partnership inter-
est. One commentator pointed out that,
even if the transferor partner is related to
the transferee partner, there still may be
situations where the section 743(b) ad-
justment should be amortizable by the
transferee.
To illustrate the commentator’s point,
consider the following example: A part-
nership (PRS) with two partners, A and B,
held an intangible subject to the anti-
churning rules on August 10, 1993. The
partnership has made a section 754 elec-
tion. On June 1, 1995, A transfers his en-
tire interest in PRS to C, an unrelated per-
son. C has a positive section 743(b) basis
adjustment with respect to the intangible
that is not subject to the anti-churning
rules. On April 30, 2000, C transfers his
entire interest in PRS to D, a person re-
lated to C. C’s section 743(b) basis ad-
justment disappears as a result of the
transfer, and D obtains a new section
743(b) basis adjustment with respect to
the intangible. According to the commen-
tator, the ownership of the interest in PRS
by C (a party unrelated to A) should per-
manently purge any taint with respect to a
section 743(b) basis adjustment attribut-
able to C’s interest. The fact that D is re-
lated to C should not prevent D from
amortizing the basis adjustment.
The commentator’s suggestion is con-
sistent with the aggregate approach in the
regulations for adjustments under sections
732(b) and 734(b). Under
§1.197–2(h)(12)(ii) and (iv) of these final
regulations, if a partner acquires an inter-
est in a partnership from an unrelated
partner after August 10, 1993, and after
the partnership has acquired the section
197(f)(9) intangible, the partner will be
treated as holding a portion of the intangi-
ble that is not subject to the anti-churning
rules for purposes of analyzing subse-
quent deemed transfers relating to basis
adjustments under sections 732(b) and
734(b). The existing regulations are
amended to include similar provisions for
purposes of analyzing the application of
the anti-churning rules with respect to
basis adjustments under section 743(b).
The existing regulations pertaining to
section 732(d) adjustments also are
amended to coordinate those provisions
with the change discussed above for sec-
tion 743(b) adjustments. The amendment
provides that the anti-churning rules do
not apply to an increase in the basis of a
section 197(f)(9) intangible under section
732(d) if, had an election been in effect
under section 754 at the time of the trans-
fer of the partnership interest, the distrib-
utee partner would have been able to
amortize the basis adjustment made pur-
suant to section 743(b).
E.Modification of Rule Where a Partner
is or Becomes a User of a Partnership
Intangible
Section 1.197–2(h)(12)(vi) of the pro-
posed regulations provides a rule to pre-
vent avoidance of the anti-churning rules
where a partner subject to the anti-churn-
ing rules becomes or remains a user of the
intangible after the basis of the intangible
is adjusted with respect to another partner
under section 732, 734, or 743. One com-
mentator noted that §1.197–2(h)(12)(vi)
could apply if the partnership itself con-
tinues to use the intangible, at least where
the deemed transferor of the intangible
continues to own more than a 20 percent
interest in the partnership, because the
partner would be treated under the attribu-
tion rules as continuing to use the intangi-
ble by virtue of the partnership’s use of
the intangible. The commentator stated
that such a result appears inconsistent
with the policies underlying section
197(f)(9)(E), which ignore the existence
of the partnership for purposes of anti-
churning determinations with respect to
basis adjustments under sections 732,
734, and 743. The commentator re-
quested that the final regulations make
clear that a partnership’s continued use of
an intangible would not invoke the rule of
§1.197–2(h)(12)(vi).
Consistent with this comment,
§1.197–2(h)(12)(vi) of these final regula-
tions makes clear that the proscribed use
must be by an anti-churning partner or re-

lated person other than the partnership.
Attributed use of the intangible from the
partnership to a partner will not cause this
rule to apply.
F.Clarification With Respect to
Remedial Allocations
Section 1.197–2(g)(4)(ii) of the exist-
ing regulations provides that “if a partner
contributes a section 197 intangible to a
partnership and the partnership adopts the
remedial allocation method for making
section 704(c) allocations of amortization
deductions, the partnership generally may
make remedial allocations of amortization
deductions with respect to the contributed
section 197 intangible in accordance with
§1.704–3(d).” Comments have been re-
ceived expressing concern that, because
no similar affirmative rule is contained in
the anti-churning section of the regula-
tions, if a contributing partner owns a
greater than 20 percent interest in the
partnership (and thus is considered related
to the partnership), the rule allowing re-
medial allocations will not be available.
While Treasury and the IRS believe that it
was clear under the existing regulations
that remedial allocations of amortization
deductions could be made where the con-
tributing partner is related to the partner-
ship (as opposed to the non-contributing
partners), an affirmative rule has been
added to the anti-churning rules at
§1.197–2(h)(12)(vii)(B) in order to elimi-
nate any doubt with respect to this issue.
In addition, the rule regarding the disal-
lowance of remedials where a non-con-
tributing partner is related to the con-
tributing partner is amended in these final
regulations to also cover situations where,
as part of a series of related transactions
that includes the contribution of the sec-
tion 197(f)(9) intangible to the partner-
ship, the contributing partner (or a related
person) becomes or remains a direct user
of the contributed intangible. Consistent
with the analysis of remedials as being
akin to a section 743(b) basis adjustment
for the non-contributing partners, Trea-
sury and the IRS believe that it is inappro-
priate for a non-contributing partner to
obtain amortization deductions with re-
spect to a portion of a contributed section
197(f)(9) intangible where the prior
owner of the intangible becomes or re-
mains a direct user of the intangible in
connection with the contribution. See
also section 197(f)(9)(A)(iii) and
§1.197–2(h)(12)(vi).
G. Rules for Determining When a
Partnership Interest is Treated as Being
Acquired From a Related Person for
Purposes of Analyzing Basis Adjustments
Under Sections 732(b) and 734(b)
For purposes of analyzing deemed trans-
fers resulting from basis adjustments under
sections 732(b) and 734(b) in applying the
anti-churning rules, the proposed regulations
provide that if a partner contributed the dis-
tributed section 197(f)(9) intangible to the
partnership, the partnership interest acquired
by such partner is treated as not being de-
scribed in §1.197–2(h)(12)
(ii)(A)(2) and (3) (for section 732(b) adjust-
ments) or 1.197–2(h)(12)(iv)(A)(2) and (3)
(for section 734(b) adjustments) (i.e., the
rules that allow a prior purchase of a partner-
ship interest from an unrelated person to
purge the partner’s anti-churning taint in an-
alyzing subsequent deemed transfers relat-
ing to basis adjustments). Accordingly, in
order for a basis adjustment to a section
197(f)(9) intangible under section 732(b) or
734(b) to be amortizable, the deemed trans-
fer (as a result of the basis adjustment) from
the contributing partner must be to an unre-
lated partner.
Commentators indicated that this rule
is unnecessary. According to the com-
mentators, §§1.197–2(h)(12)(ii)(A)(2)
and (3) and 1.197–2(h)(12)(iv)(A)(2) and
(3), by their terms, cannot apply where
the deemed transferor contributed the sec-
tion 197(f)(9) intangible to the partner-
ship. Treasury and the IRS agree with
this comment. Accordingly, the final reg-
ulations omit the rule regarding a partner
who contributes the distributed section
197(f)(9) intangible.
Special Analyses
It has been determined that the final
regulations are not a significant regula-
tory action as defined in Executive Order
12866. It also has been determined that
section 533(b) of the Administrative Pro-
cedures Act (5 U.S.C. chapter 5) does not
apply to these regulations, and because
these regulations do not impose a collec-
tion of information on small entities, the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to
section 7805(f) of the Internal Revenue
Code, the final regulations will be submit-
ted to the Chief Counsel for Advocacy of
the Small Business Administration for
comment on its impact on small business.
Drafting Information
The principal authors of these regula-
tions are David J. Sotos and Robert G.
Honigman of Associate Chief Counsel
(Passthroughs & Special Industries).
However, other personnel from the Trea-
sury Department and IRS participated in
their development.
* * * * *
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
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 1.197–2 is amended by:
1. Revising paragraphs (h)(12)(ii),
(h)(12)(iii), (h)(12)(iv), (h)(12)(v), and
paragraph (h)(12)(vi)(A).
2. Removing “, and” at the end of para-
graph (h)(12)(vi)(B)(2)(ii) and adding a
period in its place.
3. Removing paragraph (h)(12)(vi)(B)(3).
4. Removing the first sentence of para-
graph (h)(12)(vii)(B) and adding two new
sentences in its place.
5. Removing the last two sentences of
paragraph (iii) of Example 27in para-
graph (k) and adding three sentences in
their place.
6. Adding Examples 28, 29, 30, and 31
to paragraph (k).
7. Revising paragraphs (l)(1) and (l)(2).
The additions and revisions read as fol-
lows:
§1.197–2 Amortization of goodwill and
certain other intangibles.
* * * * *
(h) * * *
(12) * * *
(ii) Section 732(b) adjustments—(A) In
general. The anti-churning rules of this
paragraph (h) apply to any increase in the
adjusted basis of a section 197(f)(9) intan-
gible under section 732(b) to the extent
that the basis increase exceeds the total
unrealized appreciation from the intangi-
ble allocable to—
2000–49 I.R.B.561December 4, 2000

(1) Partners other than the distributee
partner or persons related to the distribu-
tee partner;
(2) The distributee partner and persons
related to the distributee partner if the dis-
tributed intangible is a section 197(f)(9)
intangible acquired by the partnership on
or before August 10, 1993, to the extent
that—
(i) The distributee partner and related
persons acquired an interest or interests in
the partnership after August 10, 1993;
(ii) Such interest or interests were held
after August 10, 1993, by a person or per-
sons other than either the distributee part-
ner or persons who were related to the
distributee partner; and
(iii) The acquisition of such interest or
interests by such person or persons was
not part of a transaction or series of re-
lated transactions in which the distributee
partner (or persons related to the distribu-
tee partner) subsequently acquired such
interest or interests; and
(3) The distributee partner and persons
related to the distributee partner if the dis-
tributed intangible is a section 197(f)(9)
intangible acquired by the partnership
after August 10, 1993, that is not amortiz-
able with respect to the partnership, to the
extent that—
(i) The distributee partner and persons
related to the distributee partner acquired
an interest or interests in the partnership
after the partnership acquired the distrib-
uted intangible;
(ii) Such interest or interests were held
after the partnership acquired the distrib-
uted intangible, by a person or persons
other than either the distributee partner or
persons who were related to the distribu-
tee partner; and
(iii) The acquisition of such interest or
interests by such person or persons was
not part of a transaction or series of re-
lated transactions in which the distributee
partner (or persons related to the distribu-
tee partner) subsequently acquired such
interest or interests.
(B) Effect of retroactive elections. For
purposes of paragraph (h)(12)(ii)(A) of
this section, references to August 10,
1993, are treated as references to July 25,
1991, if the relevant party made a valid
retroactive election under §1.197–1T.
(C) Intangible still subject to anti-
churning rules. Notwithstanding para-
graph (h)(12)(ii) of this section, in apply-
ing the provisions of this paragraph (h)
with respect to subsequent transfers, the
distributed intangible remains subject to
the provisions of this paragraph (h) in
proportion to a fraction (determined at the
time of the distribution), as follows—
(1) The numerator of which is equal to
the sum of—
(i) The amount of the distributed intan-
gible’s basis that is nonamortizable under
paragraph (g)(2)(ii)(B) of this section;
and
(ii) The total unrealized appreciation
inherent in the intangible reduced by the
amount of the increase in the adjusted
basis of the distributed intangible under
section 732(b) to which the anti-churning
rules do not apply; and
(2) The denominator of which is the
fair market value of such intangible.
(D) Partner’s allocable share of unre-
alized appreciation from the intangible.
The amount of unrealized appreciation
from an intangible that is allocable to a
partner is the amount of taxable gain that
would have been allocated to that partner
if the partnership had sold the intangible
immediately before the distribution for
its fair market value in a fully taxable
transaction.
(E) Acquisition of partnership interest
by contribution. Solely for purposes of
paragraphs (h)(12)(ii)(A)(2) and (3) of
this section, a partner who acquires an in-
terest in a partnership in exchange for a
contribution of property to the partnership
is deemed to acquire a pro rata portion of
that interest in the partnership from each
person who is a partner in the partnership
at the time of the contribution based on
each partner’s respective proportionate
interest in the partnership.
(iii) Section 732(d) adjustments. The
anti-churning rules of this paragraph (h)
do not apply to an increase in the basis of
a section 197(f)(9) intangible under sec-
tion 732(d) if, had an election been in ef-
fect under section 754 at the time of the
transfer of the partnership interest, the
distributee partner would have been able
to amortize the basis adjustment made
pursuant to section 743(b).
(iv) Section 734(b) adjustments—(A)
In general. The anti- churning rules of
this paragraph (h) do not apply to a con-
tinuing partner’s share of an increase in
the basis of a section 197(f)(9) intangible
held by a partnership under section 734(b)
to the extent that the continuing partner is
an eligible partner.
(B) Eligible partner. For purposes of
this paragraph (h)(12)(iv), eligible partner
means—
(1) A continuing partner that is not the
distributee partner or a person related to
the distributee partner;
(2) A continuing partner that is the dis-
tributee partner or a person related to the
distributee partner, with respect to any
section 197(f)(9) intangible acquired by
the partnership on or before August 10,
1993, to the extent that—
(i) The distributee partner’s interest in
the partnership was acquired after August
10, 1993;
(ii) Such interest was held after August
10, 1993 by a person or persons who were
not related to the distributee partner; and
(iii) The acquisition of such interest by
such person or persons was not part of a
transaction or series of related transac-
tions in which the distributee partner or
persons related to the distributee partner
subsequently acquired such interest; or
(3) A continuing partner that is the dis-
tributee partner or a person related to the
distributee partner, with respect to any
section 197(f)(9) intangible acquired by
the partnership after August 10, 1993, that
is not amortizable with respect to the part-
nership, to the extent that—
(i) The distributee partner’s interest in
the partnership was acquired after the
partnership acquired the relevant intangi-
ble;
(ii) Such interest was held after the
partnership acquired the relevant intangi-
ble by a person or persons who were not
related to the distributee partner; and
(iii) The acquisition of such interest by
such person or persons was not part of a
transaction or series of related transac-
tions in which the distributee partner or
persons related to the distributee partner
subsequently acquired such interest.
(C) Effect of retroactive elections. For
purposes of paragraph (h)(12)(iv)(A) of
this section, references to August 10,
1993, are treated as references to July 25,
1991, if the distributee partner made a
valid retroactive election under
§1.197–1T.
(D) Partner’s share of basis increase—
(1) In general. Except as provided in
paragraph (h)(12)(iv)(D)(2) of this sec-
tion, for purposes of this paragraph
December 4, 20005622000–49 I.R.B.

(h)(12)(iv), a continuing partner’s share
of a basis increase under section 734(b) is
equal to—
(i) The total basis increase allocable to
the intangible; multiplied by
(ii) A fraction the numerator of which is
the amount of the continuing partner’s
post-distribution capital account (deter-
mined immediately after the distribution
in accordance with the capital accounting
rules of §1.704–1(b)(2)(iv)), and the de-
nominator of which is the total amount of
the post-distribution capital accounts (de-
termined immediately after the distribu-
tion in accordance with the capital ac-
counting rules of §1.704–1(b)(2)(iv)) of
all continuing partners.
(2) Exception where partnership does
not maintain capital accounts. If a partner-
ship does not maintain capital accounts in
accordance with §1.704–1(b)(2)(iv), then
for purposes of this paragraph (h)(12)(iv), a
continuing partner’s share of a basis in-
crease is equal to—
(i) The total basis increase allocable to
the intangible; multiplied by
(ii) The partner’s overall interest in the
partnership as determined under §1.704–
1(b)(3) immediately after the distribution.
(E) Interests acquired by
contribution—(1) Application of para-
graphs (h)(12)(iv)(B)(2) and (3) of this
section. Solely for purposes of paragraphs
(h)(12)(iv)(B)(2) and (3) of this section, a
partner who acquires an interest in a part-
nership in exchange for a contribution of
property to the partnership is deemed to
acquire a pro rata portion of that interest
in the partnership from each person who
is a partner in the partnership at the time
of the contribution based on each such
partner’s proportionate interest in the
partnership.
(2) Special rule with respect to para-
graph (h)(12)(iv)(B)(1) of this section.
Solely for purposes of paragraph
(h)(12)(iv)(B)(1) of this section, if a dis-
tribution that gives rise to an increase in
the basis under section 734(b) of a section
197(f)(9) intangible held by the partner-
ship is undertaken as part of a series of re-
lated transactions that include a contribu-
tion of the intangible to the partnership by
a continuing partner, the continuing part-
ner is treated as related to the distributee
partner in analyzing the basis adjustment
with respect to the contributed section
197(f)(9) intangible.
(F) Effect of section 734(b) adjustments
on partners’ capital accounts. If one or
more partners are subject to the anti-
churning rules under this paragraph (h)
with respect to a section 734(b) adjust-
ment allocable to an intangible asset, tax-
payers may use any reasonable method to
determine amortization of the asset for
book purposes, provided that the method
used does not contravene the purposes of
the anti-churning rules under section 197
and this paragraph (h). A method will be
considered to contravene the purposes of
the anti-churning rules if the effect of the
book adjustments resulting from the
method is such that any portion of the tax
deduction for amortization attributable to
the section 734 adjustment is allocated,
directly or indirectly, to a partner who is
subject to the anti-churning rules with re-
spect to such adjustment.
(v) Section 743(b) adjustments—(A)
General Rule. The anti-churning rules of
this paragraph (h) do not apply to an in-
crease in the basis of a section 197 intan-
gible under section 743(b) if the person
acquiring the partnership interest is not
related to the person transferring the part-
nership interest. In addition, the anti-
churning rules of this paragraph (h) do not
apply to an increase in the basis of a sec-
tion 197 intangible under section 743(b)
to the extent that—
(1) The partnership interest being
transferred was acquired after August 10,
1993, provided—
(i) The section 197(f)(9) intangible was
acquired by the partnership on or before
August 10, 1993;
(ii) The partnership interest being
transferred was held after August 10,
1993, by a person or persons (the post-
1993 person or persons) other than the
person transferring the partnership inter-
est or persons who were related to the per-
son transferring the partnership interest;
and
(iii) The acquisition of such interest by
the post-1993 person or persons was not
part of a transaction or series of related
transactions in which the person transfer-
ring the partnership interest or persons re-
lated to the person transferring the part-
nership interest acquired such interest; or
(2) The partnership interest being trans-
ferred was acquired after the partnership
acquired the section 197(f)(9) intangible,
provided—
(i) The section 197(f)(9) intangible was
acquired by the partnership after August
10, 1993, and is not amortizable with re-
spect to the partnership;
(ii) The partnership interest being
transferred was held after the partnership
acquired the section 197(f)(9) intangible
by a person or persons (the post-contribu-
tion person or persons) other than the per-
son transferring the partnership interest or
persons who were related to the person
transferring the partnership interest; and
(iii) The acquisition of such interest by
the post-contribution person or persons
was not part of a transaction or series of
related transactions in which the person
transferring the partnership interest or
persons related to the person transferring
the partnership interest acquired such in-
terest.
(B) Acquisition of partnership interest
by contribution. Solely for purposes of
paragraph (h)(12)(v)(A)(1) and (2) of this
section, a partner who acquires an interest
in a partnership in exchange for a contri-
bution of property to the partnership is
deemed to acquire a pro rata portion of
that interest in the partnership from each
person who is a partner in the partnership
at the time of the contribution based on
each such partner’s proportionate interest
in the partnership.
(C) Effect of retroactive elections. For
purposes of paragraph (h)(12)(v)(A) of
this section, references to August 10,
1993, are treated as references to July 25,
1991, if the transferee partner made a
valid retroactive election under
§1.197–1T.
(vi) Partner is or becomes a user of
partnership intangible—(A) General
rule. If, as part of a series of related trans-
actions that includes a transaction de-
scribed in paragraph (h)(12)(ii), (iii), (iv),
or (v) of this section, an anti-churning
partner or related person (other than the
partnership) becomes (or remains) a di-
rect user of an intangible that is treated as
transferred in the transaction (as a result
of the partners being treated as having
owned their proportionate share of part-
nership assets), the anti-churning rules of
this paragraph (h) apply to the proportion-
ate share of such intangible that is treated
as transferred by such anti-churning part-
ner, notwithstanding the application of
paragraph (h)(12)(ii), (iii), (iv), or (v) of
this section.
2000–49 I.R.B.563December 4, 2000

* * * * *
(vii)* * *
(B) Allocations where the intangible is
not amortizable by the contributor. If a
section 197(f)(9) intangible was not an
amortizable section 197 intangible in the
hands of the contributing partner, a non-
contributing partner generally may re-
ceive remedial allocations of amortization
under section 704(c) that are deductible
for Federal income tax purposes. How-
ever, such a partner may not receive re-
medial allocations of amortization under
section 704(c) if that partner is related to
the partner that contributed the intangible
or if, as part of a series of related transac-
tions that includes the contribution of the
section 197(f)(9) intangible to the partner-
ship, the contributing partner or related
person (other than the partnership) be-
comes (or remains) a direct user of the
contributed intangible.* * *
* * * * *
(k) * * *
Example 27. * * *
(iii) * * * However, A is an anti-churning partner
under paragraph (h)(12)(vi)(B)(2)(i) of this section.
As a result of the license agreement, A remains a di-
rect user of the section 197(f)(9) intangible after the
transfer to C. Accordingly, paragraph (h)(12)(vi)(A)
of this section will cause the anti-churning rules to
apply to the entire basis adjustment under section
743(b).
Example 28. Distribution of section 197(f)(9) in-
tangible to partner who acquired partnership inter-
est prior to the effective date. (i) In 1990, A, B, and
C each contribute $150 cash to form general partner-
ship ABC for the purpose of engaging in a consult-
ing business and a software manufacturing business.
The partners agree to share partnership profits and
losses equally. In 2000, the partnership distributes
the consulting business to A in liquidation of A’s en-
tire interest in ABC. The only asset of the consult-
ing business is a nonamortizable intangible, which
has a fair market value of $180 and a basis of $0. At
the time of the distribution, the adjusted basis of A’s
interest in ABC is $150. A is not related to B or C.
ABC does not have a section 754 election in effect.
(ii) Under section 732(b), A’s adjusted basis in
the intangible distributed by ABC is $150, a $150 in-
crease over the basis of the intangible in ABC’s
hands. In determining whether the anti-churning
rules apply to any portion of the basis increase, A is
treated as having owned and used A’s proportionate
share of partnership property. Thus, A is treated as
holding an interest in the intangible during the tran-
sition period. Because the intangible was not amor-
tizable prior to the enactment of section 197, the sec-
tion 732(b) increase in the basis of the intangible
may be subject to the anti-churning provisions.
Paragraph (h)(12)(ii) of this section provides that the
anti-churning provisions apply to the extent that the
section 732(b) adjustment exceeds the total unreal-
ized appreciation from the intangible allocable to
partners other than A or persons related to A, as well
as certain other partners whose purchase of their in-
terests meet certain criteria. Because B and C are
not related to A, and A’s acquisition of its partner-
ship interest does not satisfy the necessary criteria,
the section 732(b) basis increase is subject to the
anti-churning provisions to the extent that it exceeds
B and C’s proportionate share of the unrealized ap-
preciation from the intangible. B and C’s propor-
tionate share of the unrealized appreciation from the
intangible is $120 (2/3 of $180). This is the amount
of gain that would be allocated to B and C if the
partnership sold the intangible immediately before
the distribution for its fair market value of $180.
Therefore, $120 of the section 732(b) basis increase
is not subject to the anti-churning rules. The re-
maining $30 of the section 732(b) basis increase is
subject to the anti-churning rules. Accordingly, A is
treated as having two intangibles, an amortizable
section 197 intangible with an adjusted basis of
$120 and a new amortization period of 15 years and
a nonamortizable intangible with an adjusted basis
of $30.
(iii) In applying the anti-churning rules to future
transfers of the distributed intangible, under para-
graph (h)(12)(ii)(C) of this section, one-third of the
intangible will continue to be subject to the anti-
churning rules, determined as follows: The sum of
the amount of the distributed intangible’s basis that
is nonamortizable under paragraph (g)(2)(ii)(B) of
this section ($0) and the total unrealized apprecia-
tion inherent in the intangible reduced by the
amount of the increase in the adjusted basis of the
distributed intangible under section 732(b) to which
the anti-churning rules do not apply ($180 - $120 =
$60), over the fair market value of the distributed in-
tangible ($180).
Example 29. Distribution of section 197(f)(9) in-
tangible to partner who acquired partnership inter-
est after the effective date. (i) The facts are the same
as in Example 28, except that B and C form ABC in
1990. A does not acquire an interest in ABC until
1995. In 1995, A contributes $150 to ABC in ex-
change for a one-third interest in ABC. At the time
of the distribution, the adjusted basis of A’s interest
in ABC is $150.
(ii) As in Example 28, the anti-churning rules do
not apply to the increase in the basis of the intangi-
ble distributed to A under section 732(b) to the ex-
tent that it does not exceed the unrealized apprecia-
tion from the intangible allocable to B and C. Under
paragraph (h)(12)(ii) of this section, the anti-churn-
ing provisions also do not apply to the section
732(b) basis increase to the extent of A’s allocable
share of the unrealized appreciation from the intan-
gible because A acquired the ABC interest from an
unrelated person after August 10, 1993, and the in-
tangible was acquired by the partnership before A
acquired the ABC interest. Under paragraph
(h)(12)(ii)(E) of this section, A is deemed to acquire
the ABC partnership interest from an unrelated per-
son because A acquired the ABC partnership interest
in exchange for a contribution to the partnership of
property other than the distributed intangible and, at
the time of the contribution, no partner in the part-
nership was related to A. Consequently, the increase
in the basis of the intangible under section 732(b) is
not subject to the anti-churning rules to the extent of
the total unrealized appreciation from the intangible
allocable to A, B, and C. The total unrealized appre-
ciation from the intangible allocable to A, B, and C
is $180 (the gain the partnership would have recog-
nized if it had sold the intangible for its fair market
value immediately before the distribution). Because
this amount exceeds the section 732(b) basis in-
crease of $150, the entire section 732(b) basis in-
crease is amortizable.
(iii) In applying the anti-churning rules to future
transfers of the distributed intangible, under para-
graph (h)(12)(ii)(C) of this section, one-sixth of the
intangible will continue to be subject to the anti-
churning rules, determined as follows: The sum of
the amount of the distributed intangible’s basis that
is nonamortizable under paragraph (g)(2)(ii)(B) of
this section ($0) and the total unrealized apprecia-
tion inherent in the intangible reduced by the
amount of the increase in the adjusted basis of the
distributed intangible under section 732(b) to which
the anti-churning rules do not apply ($180 - $150 =
$30), over the fair market value of the distributed in-
tangible ($180).
Example 30. Distribution of section 197(f)(9) in-
tangible contributed to the partnership by a partner.
(i) The facts are the same as in Example 29, except
that C purchased the intangible used in the consult-
ing business in 1988 for $60 and contributed the in-
tangible to ABC in 1990. At that time, the intangible
had a fair market value of $150 and an adjusted tax
basis of $60. When ABC distributes the intangible
to A in 2000, the intangible has a fair market value
of $180 and a basis of $60.
(ii) As in Examples 28and 29, the adjusted basis
of the intangible in A’s hands is $150 under section
732(b). However, the increase in the adjusted basis
of the intangible under section 732(b) is only $90
($150 adjusted basis after the distribution compared
to $60 basis before the distribution). Pursuant to
paragraph (g)(2)(ii)(B) of this section, A steps into
the shoes of ABC with respect to the $60 of A’s ad-
justed basis in the intangible that corresponds to
ABC’s basis in the intangible and this portion of the
basis is nonamortizable. B and C are not related to
A, A acquired the ABC interest from an unrelated
person after August 10, 1993, and the intangible was
acquired by ABC before A acquired the ABC inter-
est. Therefore, under paragraph (h)(12)(ii) of this
section, the section 732(b) basis increase is amortiz-
able to the extent of A, B, and C’s allocable share of
the unrealized appreciation from the intangible. The
total unrealized appreciation from the intangible that
is allocable to A, B, and C is $120. If ABC had sold
the intangible immediately before the distribution to
A for its fair market value of $180, it would have
recognized gain of $120, which would have been al-
located $10 to A, $10 to B, and $100 to C under sec-
tion 704(c). Because A, B, and C’s allocable share
of the unrealized appreciation from the intangible
exceeds the section 732(b) basis increase in the in-
tangible, the entire $90 of basis increase is amortiz-
able by A. Accordingly, after the distribution, A will
be treated as having two intangibles, an amortizable
section 197 intangible with an adjusted basis of $90
and a new amortization period of 15 years and a
nonamortizable intangible with an adjusted basis of
$60.
(iii) In applying the anti-churning rules to future
transfers of the distributed intangible, under para-
graph (h)(12)(ii)(C) of this section, one-half of the
intangible will continue to be subject to the anti-
churning rules, determined as follows: The sum of
the amount of the distributed intangible’s basis that
December 4, 20005642000–49 I.R.B.

is nonamortizable under paragraph (g)(2)(ii)(B) of
this section ($60) and the total unrealized apprecia-
tion inherent in the intangible reduced by the
amount of the increase in the adjusted basis of the
distributed intangible under section 732(b) to which
the anti-churning rules do not apply ($120 - $90 =
$30), over the fair market value of the distributed in-
tangible ($180).
Example 31. Partnership distribution causing
section 734(b) basis adjustment to section 197(f)(9)
intangible. (i) On January 1, 2001, A, B, and C
form a partnership (ABC) in which each partner
shares equally in capital and income, gain, loss, and
deductions. On that date, A contributes a section
197(f)(9) intangible with a zero basis and a value of
$150, and B and C each contribute $150 cash. A
and B are related, but neither A nor B is related to
C. ABC does not adopt the remedial allocation
method for making section 704(c) allocations of
amortization expenses with respect to the intangi-
ble. On December 1, 2004, when the value of the
intangible has increased to $600, ABC distributes
$300 to B in complete redemption of B’s interest in
the partnership. ABC has an election under section
754 in effect for the taxable year that includes De-
cember 1, 2004. (Assume that, at the time of the
distribution, the basis of A’s partnership interest re-
mains zero, and the basis of each of B’s and C’s
partnership interest remains $150.)
(ii) Immediately prior to the distribution, the as-
sets of the partnership are revalued pursuant to
§1.704–1(b)(2)(iv)(f), so that the section 197(f)(9)
intangible is reflected on the books of the partner-
ship at a value of $600. B recognizes $150 of gain
under section 731(a)(1) upon the distribution of
$300 in redemption of B’s partnership interest. As a
result, the adjusted basis of the intangible held by
ABC increases by $150 under section 734(b). A
does not satisfy any of the tests set forth under para-
graph (h)(12)(iv)(B) and thus is not an eligible part-
ner. C is not related to B and thus is an eligible
partner under paragraph (h)(12)(iv)(B)(1) of this
section. The capital accounts of A and C are equal
immediately after the distribution, so, pursuant to
paragraph (h)(12)(iv)(D)(1) of this section, each
partner’s share of the basis increase is equal to $75.
Because A is not an eligible partner, the anti-churn-
ing rules apply to A’s share of the basis increase.
The anti-churning rules do not apply to C’s share of
the basis increase.
(iii) For book purposes, ABC determines the
amortization of the asset as follows: First, the in-
tangible that is subject to adjustment under section
734(b) will be divided into three assets: the first,
with a basis and value of $75 will be amortizable
for both book and tax purposes; the second, with a
basis and value of $75 will be amortizable for
book, but not tax purposes; and a third asset with a
basis of zero and a value of $450 will not be amor-
tizable for book or tax purposes. Any subsequent
revaluation of the intangible pursuant to
§1.704–1(b)(2)(iv)(f) will be made solely with re-
spect to the third asset (which is not amortizable
for book purposes). The book and tax attributes
from the first asset (i.e., book and tax amortization)
will be specially allocated to C. The book and tax
attributes from the second asset (i.e., book amorti-
zation and non-amortizable tax basis) will be spe-
cially allocated to A. Upon disposition of the in-
tangible, each partner’s share of gain or loss will be
determined first by allocating among the partners
an amount realized equal to the book value of the
intangible attributable to such partner, with any re-
maining amount realized being allocated in accor-
dance with the partnership agreement. Each part-
ner then will compare its share of the amount
realized with its remaining basis in the intangible
to arrive at the gain or loss to be allocated to such
partner. This is a reasonable method for amortizing
the intangible for book purposes, and the results in
allocating the income, gain, loss, and deductions
attributable to the intangible do not contravene the
purposes of the anti-churning rules under section
197 or paragraph (h) of this section.
(l) * * *(1) In general. This section
applies to property acquired after Janu-
ary 25, 2000, except that paragraph
(c)(13) of this section (exception from
section 197 for separately acquired
rights of fixed duration or amount) ap-
plies to property acquired after August
10, 1993 (or July 25, 1991, if a valid
retroactive election has been made under
§1.197–1T), and paragraphs (h)(12)(ii),
(iii), (iv), (v), (vi)(A), and (vii)(B) of this
section (anti-churning rules applicable to
partnerships) apply to partnership trans-
actions occurring on or after November
20, 2000.
(2) Application to pre-effective date
acquisitions. A taxpayer may choose, on
a transaction-by-transaction basis, to
apply the provisions of this section and
§1.167(a)–14 to property acquired (or
partnership transactions occurring) after
August 10, 1993 (or July 25, 1991, if a
valid retroactive election has been made
under §1.197–1T) and—
(i) On or before January 25, 2000; or
(ii) With respect to paragraphs
(h)(12)(ii), (iii), (iv), (v), (vi)(A), and
(vii)(B) of this section, before November
20, 2000.
* * * * *
Robert E. Wenzel,
Deputy Commissioner
of Internal Revenue Service.
Approved November 9, 2000.
Jonathan Talisman,
Acting Assistant Secretary
of the Treasury.
(Filed by the Office of the Federal Register on No-
vember 17, 2000, 8:45 a.m., and published in the
issue of the Federal Register for November 20,
2000, 65 F.R. 69667)
Section 213.—Medical, Dental,
etc., Expenses
26 CFR 1.213–1: Medical, dental, etc., expenses.
Rules are set forth for substantiating the amount
of a deduction or an expense for use of an automo-
bile to obtain medical services. See Rev. Proc.
2000–48, page 570.
Section 217.—Moving Expenses
26 CFR 1.217–2: Moving expenses.
Rules are set forth for substantiating the amount
of a deduction or an expense for use of an automo-
bile as part of a move. See Rev. Proc. 2000–48, page
570.
Section 274.—Disallowance of
Certain Entertainment, etc.,
Expenses
26 CFR 1.274–5: Substantiation requirements.
Rules are set forth for an optional method for
substantiating the amount of ordinary and necessary
business expenses of an employee for automobile
expenses when a payor provides a mileage al-
lowance for such expenses. Rules are also set forth
for an optional method for employees and self-em-
ployed individuals to use in substantiating a trade or
business deduction for automobile expenses. See
Rev. Proc. 2000–48, page 570.
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term
rates are set forth for the month of December 2000.
See Rev. Rul. 2000–54, page 566.
Section 382.—Limitation on Net
Operating Loss Carryforwards
and Certain Built-In Losses
Following Ownership Change
The adjusted applicable federal long-term rate is
set forth for the month of December 2000. See Rev.
Rul. 2000–54, page 566.
Section 412.—Minimum Funding
Standards
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
December 2000. See Rev. Rul. 2000–54, page 566.
2000–49 I.R.B.565December 4, 2000

Section 467.—Certain Payments
for the Use of Property or
Services
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
December 2000. See Rev. Rul. 2000–54, on this page.
Section 468.—Special Rules for
Mining and Solid Waste
Reclamation and Closing Costs
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
December 2000. See Rev. Rul. 2000–54, on this page.
Section 482.—Allocation of
Income and Deductions Among
Taxpayers
Federal short-term, mid-term, and long-term
rates are set forth for the month of December 2000.
See Rev. Rul. 2000–54, on this page.
Section 483.—Interest on
Certain Deferred Payments
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
December 2000. See Rev. Rul. 2000–54, on this page.
Section 642.—Special Rules for
Credits and Deductions
Federal short-term, mid-term, and long-term
rates are set forth for the month of December 2000.
See Rev. Rul. 2000–54, on this page.
Section 807.—Rules for Certain
Reserves
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
December 2000. See Rev. Rul. 2000–54, on this page.
Section 846.—Discounted
Unpaid Losses Defined
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
December 2000. See Rev. Rul. 2000–54, on this page.
Section 1274.—Determination
of Issue Price in the Case of
Certain Debt Instruments Issued
for Property
(Also sections 42, 280G, 382, 412, 467, 468, 482,
483, 642, 807, 846, 1288, 7520, 7872.)
Federal rates; adjusted federal rates;
adjusted federal long-term rate, and
the long term exempt rate.For purposes
of sections 1274, 1288, 382, and other
sections of the Code, tables set forth the
rates for December 2000.
Rev. Rul. 2000-54
This revenue ruling provides various
prescribed rates for federal income tax pur-
poses for December 2000 (the current
month). Table 1 contains the short-term,
mid-term, and long-term applicable federal
rates (AFR) for the current month for pur-
poses of section 1274(d) of the Internal
Revenue Code. Table 2 contains the short-
term, mid-term, and long-term adjusted ap-
plicable federal rates (adjusted AFR) for the
current month for purposes of section
1288(b). Table 3 sets forth the adjusted
federal long-term rate and the long-term
tax-exempt rate described in section 382(f).
Table 4 contains the appropriate percent-
ages for determining the low-income hous-
ing credit described in section 42(b)(2) for
buildings placed in service during the cur-
rent month. Table 5 contains the federal
rate for determining the present value of an
annuity, an interest for life or for a term of
years, or a remainder or a reversionary in-
terest for purposes of section 7520. Finally,
Table 6 contains the 2001 interest rate for
purposes of sections 846 and 807.
December 4, 20005662000–49 I.R.B.
REV. RUL. 2000–54 TABLE 1
Applicable Federal Rates (AFR) for December 2000
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-Term
AFR6.10%6.01%5.97%5.94%
110% AFR6.72%6.61%6.56%6.52%
120% AFR7.34%7.21%7.15%7.10%
130% AFR7.96%7.81%7.74%7.69%
Mid-Term
AFR5.87%5.79%5.75%5.72%
110% AFR6.47%6.37%6.32%6.29%
120% AFR7.07%6.95%6.89%6.85%
130% AFR7.67%7.53%7.46%7.41%
150% AFR8.88%8.69%8.60%8.54%
175% AFR10.39%10.13%10.00%9.92%
Long-Term
AFR5.98%5.89%5.85%5.82%
110% AFR6.58%6.48%6.43%6.39%
120% AFR7.19%7.07%7.01%6.97%
130% AFR7.81%7.66%7.59%7.54%

REV. RUL. 2000–54 TABLE 2
Adjusted AFR for December 2000
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
adjusted AFR4.30%4.25%4.23%4.21%
Mid-term
adjusted AFR4.58%4.53%4.50%4.49%
Long-term
adjusted AFR5.31%5.24%5.21%5.18%
2000–49 I.R.B.567December 4, 2000
REV. RUL. 2000–54 TABLE 3
Rates Under Section 382 for December 2000
Adjusted federal long-term rate for the current month5.31%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted
federal long-term rates for the current month and the prior two months.)5.39%
REV. RUL. 2000–54 TABLE 4
Appropriate Percentages Under Section 42(b)(2)
for December 2000
Appropriate percentage for the 70% present value low-income housing credit8.39%
Appropriate percentage for the 30% present value low-income housing credit3.59%
REV. RUL. 2000–54 TABLE 5
Rate Under Section 7520 for December 2000
Applicable federal rate for determining the present value of an annuity, an interest
for life or a term of years, or a remainder or reversionary interest7.0%
REV. RUL. 2000–54 TABLE 6
Rate Under Sections 846 and 807
Applicable rate of interest for 2001 for purposes of sections 846 and 8076.00%
Section 1288.—Treatment of
Original Issue Discounts on Tax-
Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
December 2000. See Rev. Rul. 2000–54, page 566.
Section 7520.—Valuation Tables
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
December 2000. See Rev. Rul. 2000–54, page 566.
Section 7872.—Treatment of
Loans With Below-Market
Interest Rates
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
December 2000. See Rev. Rul. 2000–54, page 566.

Stock Compensation Corporate
Tax Shelter
Notice 2000–60
The Internal Revenue Service and the
Treasury Department have become aware
of certain types of transactions, as de-
scribed below, that are being marketed to
taxpayers for the avoidance of federal in-
come taxes. The IRS and Treasury are is-
suing this notice to alert taxpayers and
their representatives that the losses gener-
ated by such transactions are not properly
allowable for federal income tax purposes
and also to alert them of certain responsi-
bilities that may arise from participation
in such transactions.
FACTS
These transactions generally involve
three parties: a domestic corporation (P)
that is the common parent of a consoli-
dated group, a domestic subsidiary (S),
and a third party (X) that either is unre-
lated to P or is related but is not an in-
cludible corporation within the meaning
of § 1504(b) of the Internal Revenue
Code. P and X transfer cash to S in ex-
change for S’s stock. After this exchange,
P owns stock representing less than 80
percent of the voting power of S’s stock,
thus preventing S from being a member of
P’s consolidated group. X owns preferred
stock of S. P’s and X’s basis in their S
stock reflects the amount of cash they
contributed to S. S uses the cash to pur-
chase stock of P from P’s shareholders.
From time to time, S transfers P shares to
P employees in satisfaction of P’s stock-
based employee compensation obliga-
tions (e.g., upon the exercise by an em-
ployee of a non-statutory option to
purchase P stock). In a few years, S will
sell any remaining P stock, and then S
will liquidate or P will sell its S stock.
Notwithstanding that P is the majority
shareholder of S, P and S take the position
that S’s transfers of P stock to P’s employ-
ees must be treated, under § 1.83–6(d) of
the Income Tax Regulations, as deemed
capital contributions by S to P followed
by transfers by P to the P employees. P
does not reduce its basis in its S stock as a
result of S’s deemed transfers to P. S in-
creases its basis in its remaining P stock
by the amount of the basis of the P shares
S transferred in the deemed capital contri-
butions to P. Under § 1032, P reports no
gain or loss from the deemed transfers of
P stock to P’s employees. P takes deduc-
tions under § 83(h) in the amount that the
P employees include in income under
§ 83(a) from their receipt of the P stock.
When S liquidates or P sells its S stock,
P claims a capital loss under § 331 or
§ 1001 because S has already transferred
most of its P stock to the P employees,
which has substantially reduced the value
of S without a corresponding downward
adjustment in P’s basis in its S stock. Be-
cause S claims to have shifted all of its
basis in the P stock to S’s shares of P
stock remaining after the transfers to the P
employees, S also reports a capital loss on
the sale of its remaining P stock immedi-
ately before S’s liquidation or sale.
ANALYSIS
When a corporation makes a payment
that discharges a liability of its shareholder,
the discharge of the liability is treated as a
distribution to the shareholder with respect
to the shareholder’s stock. See, e.g., Ten-
nessee Securities Inc. v. Commissioner, 674
F.2d 570, 573 (6th Cir. 1982), citing Old
Colony Trust Co. v. Commissioner, 279
U.S. 716 (1929). To permit a controlled
subsidiary to avoid distribution treatment
for transfers made on behalf of a parent cor-
poration merely by purchasing some shares
of the parent corporation’s stock would
contravene the framework governing distri-
butions under § 301. Moreover, to charac-
terize such transfers as capital contributions
made by the subsidiary in its capacity as a
shareholder of the parent corporation
would be inconsistent with the substance of
these transactions. The characterization in
§ 1.83– 6(d) of a shareholder’s transfer of
property to a corporation’s employees as a
deemed capital contribution only applies
when the transferor is acting in its capacity
as a shareholder. That characterization is
inapposite when the transferee is a control-
ling corporate shareholder of the transferor,
and the transferor subsidiary has no plausi-
ble investment motive for making such
transfers.
The transfers by S to the P employees
are properly characterized as distributions
by S to P with respect to P’s S stock, sub-
ject to the rules of §§ 301 and 311, fol-
lowed by compensatory transfers by P to
P’s employees. Distributions to the extent
of earnings and profits result in dividend
treatment under § 301(c)(1). To the ex-
tent that the amount of the distributions
exceeds the earnings and profits of S, the
distributions reduce P’s basis in its S
stock under § 301(c)(2), thus reducing or
eliminating P’s purported loss with re-
spect to the S stock upon S’s liquidation
or sale. In addition, because the transfers
of P stock by S to P are distributions and
not capital contributions, S is not permit-
ted to shift basis from the transferred P
stock to S’s remaining P stock and, there-
fore, S does not have a capital loss on the
sale of its remaining P stock immediately
before S’s liquidation or sale.
Alternatively, the IRS may disregard
the described steps and treat the transac-
tion as a redemption by P. It is a well-es-
tablished principle of tax law that when
transactions lack a legitimate business
purpose and are undertaken solely for tax
avoidance purposes, their tax conse-
quences will be determined based on sub-
stance and not form. Gregory v. Helver-
ing, 293 U.S. 465 (1935). The transfer of
cash from P to S, the purchase by S of P
stock from P shareholders, the transfers
by S of P stock to P’s employees, and the
ultimate liquidation or sale of S, all pur-
suant to the same arrangement, may be
disregarded for tax purposes and, instead,
be treated as a redemption by P of its
stock followed by compensatory trans-
fers of treasury stock by P to its employ-
ees. No deduction is permitted for
amounts paid to redeem stock. See
§ 162(k).
It is also well-established that, to be al-
lowable, a loss must be bona fide and must
reflect actual economic consequences in
order to be sustained. An artificial loss
lacking economic substance is not allow-
able. See§ 165(a); ACM Partnership v.
Commissioner, 157 F.3d 231, 252 (3d Cir.
1998), cert. denied, 526 U.S. 1017 (1999)
(“Tax losses such as these . . . which do
not correspond to any actual economic
losses, do not constitute the type of ‘bona
fide’ losses that are deductible under the
Internal Revenue Code and regulations.”);
Treas. Reg. § 1.165-1(b) (“Only a bona
December 4, 20005682000–49 I.R.B.
Part III. Administrative, Procedural, and Miscellaneous

2000–49 I.R.B.569December 4, 2000
fide loss is allowable. Substance and not
mere form shall govern in determining a
deductible loss.”). This transaction is no
more than a series of contrived steps that
effect an artificial loss on P’s disposition
of S stock. Consequently, the arrangement
described above, or any similar arrange-
ment, does not produce an allowable loss.
The purported tax benefits from these
transactions may also be subject to chal-
lenge for other reasons, including other
provisions of the Code and the regula-
tions, such as § 269.
Additionally, the Service may impose
penalties on participants in these transac-
tions, or, as applicable, on persons who
participate in the promotion or reporting
of these transactions, including the accu-
racy-related penalty under § 6662, the re-
turn preparer penalty under § 6694, the
promoter penalty under § 6700, and the
aiding and abetting penalty under § 6701.
Transactions that are the same as or
substantially similar to those described in
this Notice 2000–60 are identified as
“listed transactions” for the purposes of
§ 1.6011–4T(b)(2) of the Temporary In-
come Tax Regulations and
§ 301.6111–2T(b)(2) of the Temporary
Procedure and Administration Regula-
tions. See also§ 301.6112–1T, A–4. It
should be noted that independent of their
classification as “listed transactions” for
purposes of §§ 1.6011–4T(b)(2) and
301.6111–2T(b)(2), such transactions
may already be subject to the tax shelter
registration and list maintenance require-
ments of §§ 6111 and 6112 under the reg-
ulations issued in February 2000
(§§ 301.6111–2T and 301.6112–1T,
A-4), as well as the regulations issued in
1984 and amended in 1986
(§§ 301.6111–1T and 301.6112–1T,
A-3). Persons required to register these
tax shelters who have failed to register
the shelters may be subject to the penalty
under § 6707(a) and to the penalty under
§ 6708(a) if the requirements of § 6112
are not satisfied.
The principal author of this notice is
Megan Fitzsimmons of the Office of the
Associate Chief Counsel (Corporate).
For further information regarding this
notice, contact Ms. Fitzsimmons at 202-
622-7790 (not a toll-free call).
Trusts Not Considered
Individuals for Purposes of
Section 935
Notice 2000–61
The Internal Revenue Service and the
Treasury Department have become aware
of certain types of transactions that are
being marketed to taxpayers for the
avoidance of federal income taxes. The
promoters of these transactions claim that
section 935 applies to a trust as part of a
scheme in which the trust seeks effec-
tively to avoid both U.S. and Guamanian
tax liability. As explained below, section
935 applies to individuals only and not to
trusts. These transactions may also be
subject to challenge on other grounds. In
addition, such transactions are hereby
designated as “listed transactions” for
purposes of sections 6011, 6111 and 6112.
Prior to 1973, U.S. citizens who were
residents of Guam, and whose citizen sta-
tus did not derive from birth or naturaliza-
tion in Guam, were required to file both
U.S. and Guamanian tax returns. H.R.
Rep. No. 92–1479, 92d Cong., 2d Sess. 1
(1972); see alsoSection 31 of the Organic
Act of Guam, 48 U.S.C. § 1421 et seq. In
addition, most other individuals who de-
rived income from both Guam and the
United States had to file tax returns with
both jurisdictions. Id.
Section 935 was enacted, effective for
tax years beginning after 1972, to permit
such individuals to file a single income tax
return, in Guam, thus eliminating the ad-
ministrative burdens associated with the
filing of two income tax returns. It was
recognized that the foreign tax credit gen-
erally eliminated the tax liability to one of
the jurisdictions and, therefore, that section
935 generally would not affect the amount
of tax ultimately due. SeeH.R. Rep. No.
92–1479, 92d Cong., 2d Sess. 1 (1972).
Section 935 was repealed by P.L. 99–514,
sec. 1272(d)(2) (1986), but the repeal takes
effect only if (and for so long as) an imple-
menting agreement under P.L. 99–514,
section 1271, is in force between the
United States and Guam. No such imple-
menting agreement is in force, and thus
section 935 remains in effect.
The single filing rule contained in sec-
tion 935 applies solely to individuals who
are resident in Guam, individuals who are
citizens of Guam and are not otherwise
citizens of the United States, individuals
who are U.S. citizens or residents and
have income derived from Guam, and in-
dividuals who file joint returns with any
of these persons.
Nothing in the language of section 935,
its legislative history, or the policy behind
its enactment indicates that a trust is to be
considered an individual for purposes of
section 935. The fact that under section
641(b) the taxable income of a trust is
generally determined in the same manner
as the taxable income of an individual has
no bearing on whether a trust is an indi-
vidual for purposes of section 935. Sec-
tion 935 does not relieve a trust from any
obligation it may have to file an income
tax return for the taxable year with the
United States and to pay to the United
States any tax due.
Transactions in which it is claimed that
section 935 applies to a trust as part of a
scheme in which the trust seeks effec-
tively to avoid both U.S. and Guamanian
tax liability may also be subject to chal-
lenge on other grounds.
The Service may impose penalties on
participants in transactions subject to this
Notice, or, as applicable, on persons who
participate in the promotion or reporting
of these transactions, including the accu-
racy-related penalty under section 6662,
the return preparer penalty under section
6694, the promoter penalty under section
6700, and the aiding and abetting penalty
under section 6701. Failure to file penal-
ties under section 6651 on the trust may
also be appropriate.
In addition, transactions subject to this
Notice are hereby identified as “listed
transactions” for the purposes of
§ 1.6011–4T(b)(2) of the Temporary In-
come Tax Regulations, to the extent ap-
plicable, and § 301.6111–2T(b)(2) of the
Temporary Procedure and Administration
Regulations. Seealso § 301.6112–1T,
A-4. It should be noted that independent
of their classification as “listed transac-
tions” for purposes of §§ 1.6011–4T(b)(2)
and 301.6111–2T(b)(2), such transactions
may already be subject to the tax shelter
registration and list maintenance require-
ments of sections 6111 and 6112 under
the regulations issued in February 2000

(§§ 301.6111–2T and 301.6112–1T, A-4).
Persons required to register these tax shel-
ters who have failed to register the shel-
ters may be subject to the penalty under
section 6707(a) and to the penalty under
section 6708(a) if the requirements of sec-
tion 6112 are not satisfied.
The principal author of this notice is
Karen A. Rennie-Quarrie of the Office of
Associate Chief Counsel (International).
For further information regarding this no-
tice contact Ms. Rennie-Quarrie at (202)
622-3880 (not a toll-free call).
26 CFR 601.105: Examination of returns and
claims for refund, credit, or abatement;
determination of correct tax liability. (Also Part I,
Sections 62, 162, 170, 213, 217, 274, 1016; 1.62–2,
1.162–17, 1.170A–1, 1.213–1, 1.217–2, 1.274–5,
1.1016–3.)
Rev. Proc. 2000–48
SECTION 1. PURPOSE
This revenue procedure updates Rev.
Proc. 99–38, 1999–43 I.R.B. 525, by pro-
viding optional standard mileage rates for
employees, self-employed individuals, or
other taxpayers to use in computing the de-
ductible costs of operating an automobile
for business, charitable, medical, or moving
expense purposes. This revenue procedure
also provides rules under which the amount
of ordinary and necessary expenses of local
travel or transportation away from home
that are paid or incurred by an employee
will be deemed substantiated under
§ 1.274–5 of the Income Tax Regulations
when a payor (the employer, its agent, or a
third party) provides a mileage allowance
under a reimbursement or other expense al-
lowance arrangement to pay for such ex-
penses. Use of a method of substantiation
described in this revenue procedure is not
mandatory and a taxpayer may use actual
allowable expenses if the taxpayer main-
tains adequate records or other sufficient
evidence for proper substantiation.
SECTION 2. SUMMARY OF
STANDARD MILEAGE RATES
.01 Standard mileage rates.
(1) Business (section 5
below)34.5 cents per mile
(2) Charitable (section 7
below)14 cents per mile
(3) Medical and Moving
(section 7 below)12 cents per
mile
.02 Determination of standard mileage
rates. The business, medical, and moving
standard mileage rates reflected in this
revenue procedure are based on an annual
study of the fixed and variable costs of
operating an automobile conducted on be-
half of the Service by an independent con-
tractor, and the charitable standard
mileage rate is provided in § 170(i) of the
Internal Revenue Code.
SECTION 3. BACKGROUND
.01 Section 162(a) allows a deduction
for all the ordinary and necessary ex-
penses paid or incurred during the taxable
year in carrying on any trade or business.
Under that provision, an employee or
self-employed individual may deduct the
cost of operating an automobile to the ex-
tent that it is used in a trade or business.
However, under § 262, no portion of the
cost of operating an automobile that is at-
tributable to personal use is deductible.
.02 Section 274(d) provides, in part,
that no deduction shall be allowed under
§ 162 with respect to any listed property
(as defined in § 280F(d)(4) to include pas-
senger automobiles and any other prop-
erty used as a means of transportation)
unless the taxpayer complies with certain
substantiation requirements. The section
further provides that regulations may pre-
scribe that some or all of the substantia-
tion requirements do not apply to an ex-
pense that does not exceed an amount
prescribed by such regulations.
.03 Section 1.274–5(j), in part, grants
the Commissioner the authority to estab-
lish a method under which a taxpayer may
use mileage rates to substantiate, for pur-
poses of § 274(d), the amount of the ordi-
nary and necessary expenses of using a
vehicle for local transportation and trans-
portation to, from, and at the destination
while traveling away from home.
.04 Section 1.274–5(g), in part, grants
the Commissioner the authority to pre-
scribe rules relating to mileage al-
lowances for ordinary and necessary ex-
penses of using a vehicle for local
transportation and transportation to, from,
and at the destination while traveling
away from home. Pursuant to this grant
of authority, the Commissioner may pre-
scribe rules under which such allowances,
if in accordance with reasonable business
practice, will be regarded as (1) equiva-
lent to substantiation, by adequate records
or other sufficient evidence, of the
amount of such travel and transportation
expenses for purposes of § 1.274–5(c),
and (2) satisfying the requirements of an
adequate accounting to the employer of
the amount of such expenses for purposes
of § 1.274–5(f).
.05 Section 62(a)(2)(A) allows an em-
ployee, in determining adjusted gross in-
come, a deduction for the expenses al-
lowed by Part VI (§ 161 and following),
subchapter B, chapter 1 of the Code, paid
or incurred by the employee in connection
with the performance of services as an
employee under a reimbursement or other
expense allowance arrangement with a
payor.
.06 Section 62(c) provides that an
arrangement will not be treated as a reim-
bursement or other expense allowance
arrangement for purposes of § 62(a)(2)(A)
if it—
(1) does not require the employee to
substantiate the expenses covered by the
arrangement to the payor, or
(2) provides the employee with the
right to retain any amount in excess of the
substantiated expenses covered under the
arrangement. Section 62(c) further pro-
vides that the substantiation requirements
described therein shall not apply to any
expense to the extent that, under the grant
of regulatory authority prescribed in
§ 274(d), the Commissioner has provided
that substantiation is not required for such
expense.
.07 Under § 1.62–2(c)(1), a reimburse-
ment or other expense allowance arrange-
ment satisfies the requirements of § 62(c) if
it meets the requirements of business con-
nection, substantiation, and returning
amounts in excess of expenses as specified
in the regulations. Section 1.62–2(e)(2)
specifically provides that substantiation of
certain business expenses in accordance
with rules prescribed under the authority of
§ 1.274–5(g) will be treated as substantia-
tion of the amount of such expenses for
purposes of § 1.62–2. Under § 1.62–
2(f)(2), the Commissioner may prescribe
rules under which an arrangement provid-
ing mileage allowances will be treated as
satisfying the requirement of returning
amounts in excess of expenses, even
though the arrangement does not require
the employee to return the portion of such
an allowance that relates to miles of travel
substantiated and that exceeds the amount
December 4, 20005702000–49 I.R.B.

of the employee’s expenses deemed sub-
stantiated pursuant to rules prescribed
under § 274(d), provided the allowance is
reasonably calculated not to exceed the
amount of the employee’s expenses or an-
ticipated expenses and the employee is re-
quired to return any portion of such an al-
lowance that relates to miles of travel not
substantiated.
.08 Section 1.62–2(h)(2)(i)(B) provides
that if a payor pays a mileage allowance
under an arrangement that meets the re-
quirements of § 1.62–2(c)(1), the portion,
if any, of the allowance that relates to
miles of travel substantiated in accor-
dance with § 1.62–2(e), that exceeds the
amount of the employee’s expenses
deemed substantiated for such travel pur-
suant to rules prescribed under § 274(d)
and § 1.274–5(g), and that the employee
is not required to return, is subject to
withholding and payment of employment
taxes. See§§ 31.3121(a)–3,
31.3231(e)–1(a)(5), 31.3306(b)–2, and
31.3401(a)–4 of the Employment Tax
Regulations. Because the employee is not
required to return this excess portion, the
reasonable period of time provisions of
§ 1.62–2(g) (relating to the return of ex-
cess amounts) do not apply to this excess
portion.
.09 Under § 1.62–2(h)(2)(i)(B)(4), the
Commissioner may, in his or her discre-
tion, prescribe special rules regarding the
timing of withholding and payment of
employment taxes on mileage al-
lowances.
SECTION 4. DEFINITIONS
.01 Standard mileage rate. The term
“standard mileage rate” means the applic-
able amount provided by the Service for
optional use by employees or self-em-
ployed individuals in computing the de-
ductible costs of operating automobiles
(including vans, pickups, or panel trucks)
owned or leased for business purposes, or
by taxpayers in computing the deductible
costs of operating automobiles for chari-
table, medical, or moving expense pur-
poses.
.02 Transportation expenses. The term
“transportation expenses” means the ex-
penses of operating an automobile for
local travel or transportation away from
home.
.03 Mileage allowance. The term
“mileage allowance” means a payment
under a reimbursement or other expense
allowance arrangement that meets the re-
quirements specified in § 1.62–2(c)(1)
and that is
(1) paid with respect to the ordinary
and necessary business expenses in-
curred, or which the payor reasonably an-
ticipates will be incurred, by an employee
for transportation expenses in connection
with the performance of services as an
employee of the employer,
(2) reasonably calculated not to ex-
ceed the amount of the expenses or the
anticipated expenses, and
(3) paid at the applicable standard
mileage rate, a flat rate or stated schedule,
or in accordance with any other Service-
specified rate or schedule.
.04 Flat rate or stated schedule. A
mileage allowance is paid at a flat rate or
stated schedule if it is provided on a uni-
form and objective basis with respect to
the expenses described in section 4.03 of
this revenue procedure. Such allowance
may be paid periodically at a fixed rate, at
a cents-per-mile rate, at a variable rate
based on a stated schedule, at a rate that
combines any of these rates, or on any
other basis that is consistently applied and
in accordance with reasonable business
practice. Thus, for example, a periodic
payment at a fixed rate to cover the fixed
costs (including depreciation (or lease
payments), insurance, registration and li-
cense fees, and personal property taxes)
of driving an automobile in connection
with the performance of services as an
employee of the employer, coupled with a
periodic payment at a cents-per-mile rate
to cover the operating costs (including
gasoline and all taxes thereon, oil, tires,
and routine maintenance and repairs) of
using an automobile for such purposes, is
an allowance paid at a flat rate or stated
schedule. Likewise, a periodic payment
at a variable rate based on a stated sched-
ule for different locales to cover the costs
of driving an automobile in connection
with the performance of services as an
employee is an allowance paid at a flat
rate or stated schedule.
SECTION 5. BUSINESS STANDARD
MILEAGE RATE
.01 In general. The standard mileage
rate for transportation expenses is 34.5
cents per mile for all miles of use for busi-
ness purposes. This business standard
mileage rate will be adjusted annually (to
the extent warranted) by the Service, and
any such adjustment will be applied
prospectively.
.02 Use of the business standard
mileage rate. A taxpayer may use the
business standard mileage rate with re-
spect to an automobile that is either
owned or leased by the taxpayer. A tax-
payer generally may deduct an amount
equal to either the business standard
mileage rate times the number of business
miles traveled or the actual costs (both
operating and fixed) paid or incurred by
the taxpayer that are allocable to traveling
those business miles.
.03 Business standard mileage rate in
lieu of operating and fixed costs. A de-
duction using the standard mileage rate
for business miles is computed on a
yearly basis and is in lieu of all operating
and fixed costs of the automobile alloca-
ble to business purposes (except as pro-
vided in section 9.06 of this revenue pro-
cedure). Such items as depreciation (or
lease payments), maintenance and repairs,
tires, gasoline (including all taxes
thereon), oil, insurance, and license and
registration fees are included in operating
and fixed costs for this purpose.
.04 Parking fees, tolls, interest, and
taxes. Parking fees and tolls attributable
to use of the automobile for business pur-
poses may be deducted as separate items.
Likewise, interest relating to the purchase
of the automobile as well as state and
local personal property taxes may be de-
ducted as separate items, but only to the
extent allowable under § 163 or 164, re-
spectively. If the automobile is operated
less than 100 percent for business pur-
poses, an allocation is required to deter-
mine the business and nonbusiness por-
tion of the taxes and interest deduction
allowable. However, § 163(h)(2)(A) ex-
pressly provides that interest is nonde-
ductible personal interest when it is paid
or accrued on indebtedness properly allo-
cable to the trade or business of perform-
ing services as an employee. Section 164
also expressly provides that state and
local taxes that are paid or accrued by a
taxpayer in connection with an acquisi-
tion or disposition of property will be
treated as part of the cost of the acquired
property or as a reduction in the amount
realized on the disposition of such prop-
erty.
2000–49 I.R.B.571December 4, 2000

.05 Depreciation. For owned automo-
biles placed in service for business pur-
poses, and for which the business stan-
dard mileage rate has been used for any
year, depreciation will be considered to
have been allowed at the rate of 12 cents
per mile for 1997, 1998, and 1999; 14
cents per mile for 2000; and 15 cents per
mile for 2001, for those years in which
the business standard mileage rate was
used. If actual costs were used for one or
more of those years, the rates above will
not apply to any year in which such costs
were used. The depreciation described
above will reduce the basis of the automo-
bile (but not below zero) in determining
adjusted basis as required by § 1016.
.06 Limitations.
(1) The business standard mileage
rate may not be used to compute the de-
ductible expenses of (a) automobiles used
for hire, such as taxicabs, or (b) two or
more automobiles used simultaneously
(such as in fleet operations).
(2) The business standard mileage
rate may not be used to compute the de-
ductible business expenses of an automo-
bile leased by a taxpayer unless the tax-
payer uses either the business standard
mileage rate or a FAVR allowance (as
provided in section 8 of this revenue pro-
cedure) to compute the deductible busi-
ness expenses of the automobile for the
entire lease period (including renewals).
For a lease commencing on or before De-
cember 31, 1997, the “entire lease period”
means the portion of the lease period (in-
cluding renewals) remaining after that
date.
(3) The business standard mileage
rate may not be used to compute the de-
ductible expenses of an automobile for
which the taxpayer has (a) claimed depre-
ciation using a method other than straight-
line for its estimated useful life, (b)
claimed a § 179 deduction, or (c) used the
Accelerated Cost Recovery System
(ACRS) under former § 168 or the Modi-
fied Accelerated Cost Recovery System
(MACRS) under current § 168. By using
the business standard mileage rate, the
taxpayer has elected to exclude the auto-
mobile (if owned) from MACRS pursuant
to § 168(f)(1). If, after using the business
standard mileage rate, the taxpayer uses
actual costs, the taxpayer must use
straight-line depreciation for the automo-
bile’s remaining estimated useful life
(subject to the applicable depreciation de-
duction limitations under § 280F).
(4) The business standard mileage
rate and this revenue procedure may not
be used to compute the amount of the de-
ductible automobile expenses of an em-
ployee of the United States Postal Service
incurred in performing services involving
the collection and delivery of mail on a
rural route if the employee receives quali-
fied reimbursements (as defined in
§ 162(o)) for such expenses. See § 162(o)
for the rules that apply to these qualified
reimbursements.
SECTION 6. RESERVED
SECTION 7. CHARITABLE,
MEDICAL, AND MOVING
STANDARD MILEAGE RATE
.01 Charitable. Section 170(i) pro-
vides a standard mileage rate of 14 cents
per mile for purposes of computing the
charitable deduction for use of an auto-
mobile in connection with rendering gra-
tuitous services to a charitable organiza-
tion under § 170.
.02 Medical and moving. The standard
mileage rate is 12 cents per mile for use of
an automobile (a) to obtain medical care
described in § 213, or (b) as part of a
move for which the expenses are de-
ductible under § 217. The standard
mileage rates for medical and moving
transportation expenses will be adjusted
annually (to the extent warranted) by the
Service, and any such adjustment will be
applied prospectively.
.03 Charitable, medical, or moving ex-
pense standard mileage rate in lieu of op-
erating expenses. A deduction computed
using the applicable standard mileage rate
for charitable, medical, or moving ex-
pense miles is in lieu of all operating ex-
penses (including gasoline and oil) of the
automobile allocable to such purposes.
Costs for such items as depreciation (or
lease payments), insurance, and license
and registration fees are not deductible,
and are not included in such standard
mileage rates.
.04 Parking fees, tolls, interest, and
taxes. Parking fees and tolls attributable
to the use of the automobile for charita-
ble, medical, or moving expense purposes
may be deducted as separate items. Inter-
est relating to the purchase of the automo-
bile and state and local personal property
taxes are not deductible as charitable,
medical, or moving expenses, but they
may be deducted as separate items to the
extent allowable under § 163 or 164, re-
spectively.
SECTION 8. FIXED AND VARIABLE
RATE ALLOWANCE
.01 In general.
(1) The ordinary and necessary ex-
penses paid or incurred by an employee in
driving an automobile owned or leased by
the employee in connection with the per-
formance of services as an employee of
the employer will be deemed substanti-
ated (in an amount determined under sec-
tion 9 of this revenue procedure) when a
payor reimburses such expenses with a
mileage allowance using a flat rate or
stated schedule that combines periodic
fixed and variable rate payments that
meet all the requirements of section 8 of
this revenue procedure (a FAVR al-
lowance).
(2) The amount of a FAVR al-
lowance must be based on data that (a) is
derived from the base locality, (b) reflects
retail prices paid by consumers, and (c) is
reasonable and statistically defensible in
approximating the actual expenses em-
ployees receiving the allowance would
incur as owners of the standard automo-
bile.
.02 Definitions.
(1) FAVR allowance. A FAVR al-
lowance includes periodic fixed payments
and periodic variable payments. A payor
may maintain more than one FAVR al-
lowance. A FAVR allowance that uses the
same payor, standard automobile (or an
automobile of the same make and model
that is comparably equipped), retention
period, and business use percentage is
considered one FAVR allowance, even
though other features of the allowance
may vary. A FAVR allowance also in-
cludes any optional high mileage pay-
ments; however, such optional high
mileage payments are included in the em-
ployee’s gross income, are reported as
wages or other compensation on the em-
ployee’s Form W-2, and are subject to
withholding and payment of employment
taxes when paid. See section 9.05 of this
revenue procedure. An optional high
mileage payment covers the additional
depreciation for a standard automobile at-
tributable to business miles driven and
December 4, 20005722000–49 I.R.B.

substantiated by the employee for a calen-
dar year in excess of the annual business
mileage for that year. If an employee is
covered by the FAVR allowance for less
than the entire calendar year, the annual
business mileage may be prorated on a
monthly basis for purposes of the preced-
ing sentence.
(2) Periodic fixed payment. A peri-
odic fixed payment covers the projected
fixed costs (including depreciation (or
lease payments), insurance, registration
and license fees, and personal property
taxes) of driving the standard automobile
in connection with the performance of
services as an employee of the employer
in a base locality, and must be paid at
least quarterly. A periodic fixed payment
may be computed by (a) dividing the total
projected fixed costs of the standard auto-
mobile for all years of the retention pe-
riod, determined at the beginning of the
retention period, by the number of peri-
odic fixed payments in the retention pe-
riod, and (b) multiplying the resulting
amount by the business use percentage.
(3) Periodic variable payment. A
periodic variable payment covers the pro-
jected operating costs (including gasoline
and all taxes thereon, oil, tires, and rou-
tine maintenance and repairs) of driving a
standard automobile in connection with
the performance of services as an em-
ployee of the employer in a base locality,
and must be paid at least quarterly. The
rate of a periodic variable payment for a
computation period may be computed by
dividing the total projected operating
costs for the standard automobile for the
computation period, determined at the be-
ginning of the computation period, by the
computation period mileage. A computa-
tion period can be any period of a year or
less. Computation period mileage is the
total mileage (business and personal) a
payor reasonably projects a standard auto-
mobile will be driven during a computa-
tion period and equals the retention
mileage divided by the number of compu-
tation periods in the retention period. For
each business mile substantiated by the
employee for the computation period, the
periodic variable payment must be paid at
a rate that does not exceed the rate for that
computation period.
(4) Base locality. A base locality is
the particular geographic locality or re-
gion of the United States in which the
costs of driving an automobile in connec-
tion with the performance of services as
an employee of the employer are gener-
ally paid or incurred by the employee.
Thus, for purposes of determining the
amount of fixed costs, the base locality is
generally the geographic locality or re-
gion in which the employee resides. For
purposes of determining the amount of
operating costs, the base locality is gener-
ally the geographic locality or region in
which the employee drives the automo-
bile in connection with the performance
of services as an employee of the em-
ployer.
(5) Standard automobile. A standard
automobile is the automobile selected by
the payor on which a specific FAVR al-
lowance is based.
(6) Standard automobile cost. The
standard automobile cost for a calendar
year may not exceed 95 percent of the
sum of (a) the retail dealer invoice cost of
the standard automobile in the base local-
ity, and (b) state and local sales or use
taxes applicable on the purchase of such
an automobile. Further, the standard au-
tomobile cost may not exceed $27,100.
(7) Annual mileage. Annual mileage
is the total mileage (business and per-
sonal) a payor reasonably projects a stan-
dard automobile will be driven during a
calendar year. Annual mileage equals the
annual business mileage divided by the
business use percentage.
(8) Annual business mileage. An-
nual business mileage is the mileage a
payor reasonably projects a standard auto-
mobile will be driven by an employee in
connection with the performance of ser-
vices as an employee of the employer dur-
ing the calendar year, but may not be less
than 6,250 miles for a calendar year. An-
nual business mileage equals the annual
mileage multiplied by the business use
percentage.
(9) Business use percentage. A busi-
ness use percentage is determined by di-
viding the annual business mileage by the
annual mileage. The business use per-
centage may not exceed 75 percent. In
lieu of demonstrating the reasonableness
of the business use percentage based on
records of total mileage and business
mileage driven by the employees annu-
ally, a payor may use a business use per-
centage that is less than or equal to the
following percentages for a FAVR al-
lowance that is paid for the following an-
nual business mileage:
2000–49 I.R.B.573December 4, 2000
Annual business mileageBusiness use percentage
6,250 or more but less than 10,00045 percent
10,000 or more but less than 15,00055 percent
15,000 or more but less than 20,00065 percent
20,000 or more75 percent
(10) Retention period. A retention
period is the period in calendar years se-
lected by the payor during which the
payor expects an employee to drive a
standard automobile in connection with
the performance of services as an em-
ployee of the employer before the auto-
mobile is replaced. Such period may not
be less than two calendar years.
(11) Retention mileage. Retention
mileage is the annual mileage multiplied
by the number of calendar years in the re-
tention period.
(12) Residual value. The residual
value of a standard automobile is the pro-
jected amount for which it could be sold
at the end of the retention period after
being driven the retention mileage. The
Service will accept the following safe har-
bor residual values for a standard automo-
bile computed as a percentage of the stan-
dard automobile cost:
Retention periodResidual value
2-year70 percent
3-year60 percent
4-year50 percent
.03 FAVR allowance in lieu of operat-
ing and fixed costs.
(1) A reimbursement computed using
a FAVR allowance is in lieu of the em-
ployee’s deduction of all the operating
and fixed costs paid or incurred by an em-

ployee in driving the automobile in con-
nection with the performance of services
as an employee of the employer, except as
provided in section 9.06 of this revenue
procedure. Such items as depreciation (or
lease payments), maintenance and repairs,
tires, gasoline (including all taxes
thereon), oil, insurance, license and regis-
tration fees, and personal property taxes
are included in operating and fixed costs
for this purpose.
(2) Parking fees and tolls attributable
to an employee driving the standard auto-
mobile in connection with the perfor-
mance of services as an employee of the
employer are not included in fixed and
operating costs and may be deducted as
separate items. Similarly, interest relating
to the purchase of the standard automo-
bile may be deducted as a separate item,
but only to the extent that the interest is an
allowable deduction under § 163.
.04 Depreciation.
(1) A FAVR allowance may not be
paid with respect to an automobile for
which the employee has (a) claimed de-
preciation using a method other than
straight-line for its estimated useful life,
(b) claimed a § 179 deduction, or (c) used
the Accelerated Cost Recovery System
(ACRS) under former § 168 or the Modi-
fied Accelerated Cost Recovery System
(MACRS) under current § 168. If an em-
ployee uses actual costs for an owned au-
tomobile that has been covered by a
FAVR allowance, the employee must use
straight-line depreciation for the automo-
bile’s remaining estimated useful life
(subject to the applicable depreciation de-
duction limitations under § 280F).
(2) Except as provided in section
8.04(3) of this revenue procedure, the
total amount of the depreciation compo-
nent for the retention period taken into ac-
count in computing the periodic fixed
payments for that retention period may
not exceed the excess of the standard au-
tomobile cost over the residual value of
the standard automobile. In addition, the
total amount of such depreciation compo-
nent may not exceed the sum of the an-
nual § 280F limitations on depreciation
(in effect at the beginning of the retention
period) that apply to the standard automo-
bile during the retention period.
(3) If the depreciation component of
periodic fixed payments exceeds the limi-
tations in section 8.04(2) of this revenue
procedure, that section will be treated as
satisfied in any year during which the
total annual amount of the periodic fixed
payments and the periodic variable pay-
ments made to an employee driving 80
percent of the annual business mileage of
the standard automobile does not exceed
the amount obtained by multiplying 80
percent of the annual business mileage of
the standard automobile by the applicable
business standard mileage rate for that
year (see, e.g., section 5.01 of this rev-
enue procedure).
(4) The depreciation included in
each periodic fixed payment portion of a
FAVR allowance paid with respect to an
automobile will reduce the basis of the
automobile (but not below zero) in deter-
mining adjusted basis as required by
§ 1016. See section 8.07(2) of this rev-
enue procedure for the requirement that
the employer report the depreciation com-
ponent of a periodic fixed payment to the
employee.
.05 FAVR allowance limitations.
(1) A FAVR allowance may be paid
only to an employee who substantiates to
the payor for a calendar year at least
5,000 miles driven in connection with the
performance of services as an employee
of the employer or, if greater, 80 percent
of the annual business mileage of that
FAVR allowance. If the employee is cov-
ered by the FAVR allowance for less than
the entire calendar year, these limits may
be prorated on a monthly basis.
(2) A FAVR allowance may not be
paid to a control employee (as defined in
§ 1.61–21(f)(5) and (6), excluding the
$100,000 limitation in paragraph
(f)(5)(iii)).
(3) At no time during a calendar year
may a majority of the employees covered
by a FAVR allowance be management
employees.
(4) At all times during a calendar
year at least five employees of an em-
ployer must be covered by one or more
FAVR allowances.
(5) A FAVR allowance may be paid
only with respect to an automobile (a)
owned or leased by the employee receiv-
ing the payment, (b) the cost of which,
when new, is at least 90 percent of the
standard automobile cost taken into ac-
count for purposes of determining the
FAVR allowance for the first calendar
year the employee receives the allowance
with respect to that automobile, and (c)
the model year of which does not differ
from the current calendar year by more
than the number of years in the retention
period.
(6) A FAVR allowance may not be
paid with respect to an automobile leased
by an employee for which the employee
has used actual expenses to compute the
deductible business expenses of the auto-
mobile for any year during the entire lease
period. For a lease commencing on or be-
fore December 31, 1997, the “entire lease
period” means the portion of the lease pe-
riod (including renewals) remaining after
that date.
(7) The insurance cost component of
a FAVR allowance must be based on the
rates charged in the base locality for in-
surance coverage on the standard automo-
bile during the current calendar year with-
out taking into account such
rate-increasing factors as poor driving
records or young drivers.
(8) A FAVR allowance may be paid
only to an employee whose insurance
coverage limits on the automobile with
respect to which the FAVR allowance is
paid are at least equal to the insurance
coverage limits used to compute the peri-
odic fixed payment under that FAVR al-
lowance.
.06 Employee reporting. Within 30
days after an employee’s automobile is
initially covered by a FAVR allowance, or
is again covered by a FAVR allowance if
such coverage has lapsed, the employee
by written declaration must provide the
payor with the following information: (a)
the make, model, and year of the em-
ployee’s automobile, (b) written proof of
the insurance coverage limits on the auto-
mobile, (c) the odometer reading of the
automobile, (d) if owned, the purchase
price of the automobile or, if leased, the
price at which the automobile is ordinar-
ily sold by retailers (the gross capitalized
cost of the automobile), and (e) if owned,
whether the employee has claimed depre-
ciation with respect to the automobile
using any of the depreciation methods
prohibited by section 8.04(1) of this rev-
enue procedure or, if leased, whether the
employee has computed deductible busi-
ness expenses with respect to the automo-
bile using actual expenses. The informa-
tion described in (a), (b), and (c) of the
preceding sentence also must be supplied
December 4, 20005742000–49 I.R.B.

by the employee to the payor within 30
days after the beginning of each calendar
year that the employee’s automobile is
covered by a FAVR allowance.
.07 Payor recordkeeping and reporting.
(1) The payor or its agent must main-
tain written records setting forth (a) the
statistical data and projections on which
the FAVR allowance payments are based,
and (b) the information provided by the
employees pursuant to section 8.06 of this
revenue procedure.
(2) Within 30 days of the end of each
calendar year, the employer must provide
each employee covered by a FAVR al-
lowance during that year with a statement
that, for automobile owners, lists the
amount of depreciation included in each
periodic fixed payment portion of the
FAVR allowance paid during that calendar
year and explains that by receiving a
FAVR allowance the employee has elected
to exclude the automobile from MACRS
pursuant to § 168(f)(1). For automobile
lessees, the statement must explain that by
receiving the FAVR allowance the em-
ployee may not compute the deductible
business expenses of the automobile using
actual expenses for the entire lease period
(including renewals). For a lease com-
mencing on or before December 31, 1997,
the “entire lease period” means the portion
of the lease period (including renewals)
remaining after that date.
.08 Failure to meet section 8 require-
ments. If an employee receives a mileage
allowance that fails to meet one or more
of the requirements of section 8 of this
revenue procedure, the employee may not
be treated as covered by any FAVR al-
lowance of the payor during the period of
such failure. Nevertheless, the expenses
to which that mileage allowance relates
may be deemed substantiated using the
method described in sections 5, 9.01(1),
and 9.02 of this revenue procedure to the
extent the requirements of those sections
are met.
SECTION 9. APPLICATION
.01 If a payor pays a mileage allowance
in lieu of reimbursing actual transporta-
tion expenses incurred or to be incurred
by an employee, the amount of the ex-
penses that is deemed substantiated to the
payor is either:
(1) for any mileage allowance other
than a FAVR allowance, the lesser of the
amount paid under the mileage allowance
or the applicable standard mileage rate in
section 5.01 of this revenue procedure
multiplied by the number of business
miles substantiated by the employee; or
(2) for a FAVR allowance, the
amount paid under the FAVR allowance
less the sum of (a) any periodic variable
rate payment that relates to miles in ex-
cess of the business miles substantiated
by the employee and that the employee
fails to return to the payor although re-
quired to do so, (b) any portion of a peri-
odic fixed payment that relates to a period
during which the employee is treated as
not covered by the FAVR allowance and
that the employee fails to return to the
payor although required to do so, and (c)
any optional high mileage payments.
.02 If the amount of transportation ex-
penses is deemed substantiated under the
rules provided in section 9.01 of this rev-
enue procedure, and the employee actu-
ally substantiates to the payor the ele-
ments of time, place (or use), and
business purpose of the transportation ex-
penses in accordance with paragraphs
(b)(2) (travel away from home), (b)(6)
(listed property, which includes passenger
automobiles and any other property used
as a means of transportation), and (c) of
§ 1.274–5, the employee is deemed to sat-
isfy the adequate accounting requirements
of § 1.274–5(f), as well as the require-
ment to substantiate by adequate records
or other sufficient evidence for purposes
of § 1.274–5(c). See § 1.62–2(e)(1) for
the rule that an arrangement must require
business expenses to be substantiated to
the payor within a reasonable period of
time.
.03 An arrangement providing mileage
allowances will be treated as satisfying
the requirement of § 1.62–2(f)(2) with re-
spect to returning amounts in excess of
expenses as follows:
(1) For a mileage allowance other
than a FAVR allowance, the requirement
to return excess amounts will be treated as
satisfied if the employee is required to re-
turn within a reasonable period of time (as
defined in § 1.62–2(g)) any portion of
such an allowance that relates to miles of
travel not substantiated by the employee,
even though the arrangement does not re-
quire the employee to return the portion
of such an allowance that relates to the
miles of travel substantiated and that ex-
ceeds the amount of the employee’s ex-
penses deemed substantiated. For exam-
ple, assume a payor provides an employee
an advance mileage allowance of $80
based on an anticipated 200 business
miles at 40 cents per mile (at a time when
the applicable business standard mileage
rate is 34.5 cents per mile), and the em-
ployee substantiates 120 business miles.
The requirement to return excess amounts
will be treated as satisfied if the employee
is required to return the portion of the al-
lowance that relates to the 80 unsubstanti-
ated business miles ($32) even though the
employee is not required to return the por-
tion of the allowance ($6.60) that exceeds
the amount of the employee’s expenses
deemed substantiated under section 9.01
of this revenue procedure ($41.40) for the
120 substantiated business miles. How-
ever, the $6.60 excess portion of the al-
lowance is treated as paid under a nonac-
countable plan as discussed in section
9.05.
(2) For a FAVR allowance, the re-
quirement to return excess amounts will
be treated as satisfied if the employee is
required to return within a reasonable pe-
riod of time (as defined in § 1.62–2(g)),
(a) the portion (if any) of the periodic
variable payment received that relates to
miles in excess of the business miles sub-
stantiated by the employee, and (b) the
portion (if any) of a periodic fixed pay-
ment that relates to a period during which
the employee was not covered by the
FAVR allowance.
.04 An employee is not required to in-
clude in gross income the portion of a
mileage allowance received from a payor
that is less than or equal to the amount
deemed substantiated under section 9.01
of this revenue procedure, provided the
employee substantiates in accordance
with section 9.02. See§ 1.274–5(f)(2)(i).
In addition, such portion of the allowance
is treated as paid under an accountable
plan, is not reported as wages or other
compensation on the employee’s
Form W-2, and is exempt from the with-
holding and payment of employment
taxes. See§§ 1.62–2(c)(2) and (c)(4).
.05 An employee is required to include
in gross income only the portion of a
mileage allowance received from a payor
that exceeds the amount deemed substan-
tiated under section 9.01 of this revenue
procedure, provided the employee sub-
2000–49 I.R.B.575December 4, 2000

stantiates in accordance with section 9.02
of this revenue procedure. See§ 1.274–
5(f)(2)(ii). In addition, the excess portion
of the allowance is treated as paid under a
nonaccountable plan, is reported as wages
or other compensation on the employee’s
Form W-2, and is subject to withholding
and payment of employment taxes. See
§§ 1.62–2(c)(3)(ii), (c)(5), and
(h)(2)(i)(B).
.06
(1) Except as otherwise provided in
section 9.06(2) of this revenue procedure
with respect to leased automobiles, if the
amount of the expenses deemed substanti-
ated under the rules provided in section
9.01 of this revenue procedure is less than
the amount of the employee’s business
transportation expenses, the employee
may claim an itemized deduction for the
amount by which the business transporta-
tion expenses exceed the amount that is
deemed substantiated, provided the em-
ployee substantiates all the business trans-
portation expenses, includes on
Form 2106, Employee Business Expenses,
the deemed substantiated portion of the
mileage allowance received from the
payor, and includes in gross income the
portion (if any) of the mileage allowance
received from the payor that exceeds the
amount deemed substantiated. See
§ 1.274–5(f)(2)(iii). However, for pur-
poses of claiming this itemized deduction,
substantiation of the amount of the ex-
penses is not required if the employee is
claiming a deduction that is equal to or
less than the applicable standard mileage
rate multiplied by the number of business
miles substantiated by the employee
minus the amount deemed substantiated
under section 9.01 of this revenue proce-
dure. The itemized deduction is subject to
the 2-percent floor on miscellaneous item-
ized deductions provided in § 67.
(2) An employee whose business
transportation expenses with respect to a
leased automobile are deemed substanti-
ated under section 9.01(1) of this revenue
procedure (relating to an allowance other
than a FAVR allowance) may not claim a
deduction based on actual expenses un-
less the employee does so consistently be-
ginning with the first business use of the
automobile after December 31, 1997.
However, an employee whose business
transportation expenses with respect to a
leased automobile are deemed substanti-
ated under section 9.01(2) of this revenue
procedure (relating to a FAVR allowance)
may not claim a deduction based on ac-
tual expenses.
.07 An employee may deduct an
amount computed pursuant to section
5.01 of this revenue procedure only as an
itemized deduction. This itemized deduc-
tion is subject to the 2-percent floor on
miscellaneous itemized deductions pro-
vided in § 67.
.08 A self-employed individual may
deduct an amount computed pursuant to
section 5.01 of this revenue procedure in
determining adjusted gross income under
§ 62(a)(1).
.09 If a payor’s reimbursement or other
expense allowance arrangement evi-
dences a pattern of abuse of the rules of
§ 62(c) and the regulations thereunder, all
payments under the arrangement will be
treated as made under a nonaccountable
plan. Thus, such payments are included
in the employee’s gross income, are re-
ported as wages or other compensation on
the employee’s Form W-2, and are subject
to withholding and payment of employ-
ment taxes. See§§ 1.62–2(c)(3), (c)(5),
and (h)(2).
SECTION 10. WITHHOLDING AND
PAYMENT OF EMPLOYMENT
TAXES.
.01 The portion of a mileage allowance
(other than a FAVR allowance), if any,
that relates to the miles of business travel
substantiated and that exceeds the amount
deemed substantiated for those miles
under section 9.01(1) of this revenue pro-
cedure is subject to withholding and pay-
ment of employment taxes. See§ 1.62–2
(h)(2)(i)(B).
(1) In the case of a mileage al-
lowance paid as a reimbursement, the ex-
cess described in section 10.01 of this
revenue procedure is subject to withhold-
ing and payment of employment taxes in
the payroll period in which the payor re-
imburses the expenses for the business
miles substantiated. See§ 1.62–2
(h)(2)(i)(B)(2).
(2) In the case of a mileage allowance
paid as an advance, the excess described in
section 10.01 of this revenue procedure is
subject to withholding and payment of em-
ployment taxes no later than the first pay-
roll period following the payroll period in
which the business miles with respect to
which the advance was paid are substanti-
ated. See§ 1.62–2(h)(2)(i)(B)(3). If some
or all of the business miles with respect to
which the advance was paid are not sub-
stantiated within a reasonable period of
time and the employee does not return the
portion of the allowance that relates to
those miles within a reasonable period of
time, the portion of the allowance that re-
lates to those miles is subject to withhold-
ing and payment of employment taxes no
later than the first payroll period following
the end of the reasonable period. See
§ 1.62–2(h)(2)(i)(A).
(3) In the case of a mileage allowance
that is not computed on the basis of a fixed
amount per mile of travel (e.g., a mileage
allowance that combines periodic fixed and
variable rate payments, but that does not
satisfy the requirements of section 8 of this
revenue procedure), the payor must com-
pute periodically (no less frequently than
quarterly) the amount, if any, that exceeds
the amount deemed substantiated under
section 9.01(1) of this revenue procedure
by comparing the total mileage allowance
paid for the period to the applicable stan-
dard mileage rate in section 5.01 of this
revenue procedure multiplied by the num-
ber of business miles substantiated by the
employee for the period. Any excess is
subject to withholding and payment of em-
ployment taxes no later than the first pay-
roll period following the payroll period in
which the excess is computed. See
§ 1.62–2(h)(2)(i)(B)(4).
(4) For example, assume an em-
ployer pays its employees a mileage al-
lowance at a rate of 40 cents per mile
(when the business standard mileage rate
is 34.5 cents per mile). The employer
does not require the return of the portion
of the allowance that exceeds the business
standard mileage rate for the business
miles substantiated (5.5 cents). In June,
the employer advances an employee $200
for 500 miles to be traveled during the
month. In July, the employee substanti-
ates to the employer 400 business miles
traveled in June and returns $40 to the
employer for the 100 business miles not
traveled. The amount deemed substanti-
ated for the 400 miles traveled is $138
and the employee is not required to return
the remaining $22. No later than the first
payroll period following the payroll pe-
riod in which the 400 business miles trav-
eled are substantiated, the employer must
December 4, 20005762000–49 I.R.B.

withhold and pay employment taxes on
$22.
.02 The portion of a FAVR allowance, if
any, that exceeds the amount deemed sub-
stantiated for those miles under section
9.01(2) of this revenue procedure is subject
to withholding and payment of employ-
ment taxes. See§ 1.62–2(h)(2)(i)(B).
(1) Any periodic variable rate pay-
ment that relates to miles in excess of the
business miles substantiated by the em-
ployee and that the employee fails to return
within a reasonable period, or any portion
of a periodic fixed payment that relates to a
period during which the employee is
treated as not covered by the FAVR al-
lowance and that the employee fails to re-
turn within a reasonable period, is subject
to withholding and payment of employ-
ment taxes no later than the first payroll pe-
riod following the end of the reasonable pe-
riod. See§ 1.62–2(h)(2)(i)(A).
(2) Any optional high mileage pay-
ment is subject to withholding and pay-
ment of employment taxes when paid.
SECTION 11. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 99–38, 1999–43 I.R.B. 525,
is hereby superseded for mileage al-
lowances that are paid both (1) to an em-
ployee on or after January 1, 2001, and
(2) with respect to transportation ex-
penses paid or incurred by the employee
on or after January 1, 2001. Rev. Proc.
99–38 is also hereby superseded for pur-
poses of computing the amount allowable
as a deduction for transportation expenses
paid or incurred on or after January 1,
2001.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Edwin B. Cleverdon of the
Office of Associate Chief Counsel (In-
come Tax and Accounting). For further
information regarding this revenue proce-
dure, contact Mr. Cleverdon at (202) 622-
4920 (not a toll-free call).
2000–49 I.R.B.577December 4, 2000

December 4, 2000i2000–49 I.R.B.
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds
that the same principle also applies to B,
the earlier ruling is amplified. (Compare
with modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial difference between them.
Modified is used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but not
to B, and the new ruling holds that it ap-
plies to both A and B, the prior ruling is
modified because it corrects a published
position. (Compare with amplified and
clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used
in a ruling that lists previously published
rulings that are obsoleted because of
changes in law or regulations. A ruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revoked describes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the
new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example, modified
and superseded describes a situation
where the substance of a previously pub-
lished ruling is being changed in part and
is continued without change in part and it
is desired to restate the valid portion of
the previously published ruling in a new
ruling that is self contained. In this case
the previously published ruling is first
modified and then, as modified, is super-
seded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and
that list is expanded by adding further
names in subsequent rulings. After the
original ruling has been supplemented
several times, a new ruling may be pub-
lished that includes the list in the original
ruling and the additions, and supersedes
all prior rulings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current use and for-
merly used will appear in material published in the
Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Definition of Terms

2000–49 I.R.B.iiDecember 4, 2000
Numerical Finding List
1
Bulletins 2000–27 through 2000–48
Announcements:
2000–57, 2000–28 I.R.B. 115
2000–58, 2000–30 I.R.B. 135
2000–59, 2000–29 I.R.B. 120
2000–60, 2000–31 I.R.B. 149
2000–61, 2000–30 I.R.B. 136
2000–62, 2000–30 I.R.B. 137
2000–63, 2000–31 I.R.B. 149
2000–64, 2000–31 I.R.B. 149
2000–65, 2000–31 I.R.B. 150
2000–66, 2000–32 I.R.B. 160
2000–67, 2000–32 I.R.B. 160
2000–68, 2000–32 I.R.B. 161
2000–69, 2000–33 I.R.B. 183
2000–70, 2000–34 I.R.B. 204
2000–71, 2000–44 I.R.B. 456
2000–72, 2000–35 I.R.B. 226
2000–73, 2000–35 I.R.B. 230
2000–74, 2000–35 I.R.B. 230
2000–75, 2000–37 I.R.B. 268
2000–76, 2000–36 I.R.B. 260
2000–77, 2000–36 I.R.B. 260
2000–78, 2000–43 I.R.B. 428
2000–79, 2000–39 I.R.B. 303
2000–80, 2000–40 I.R.B. 320
2000–81, 2000–41 I.R.B. 348
2000–82, 2000–42 I.R.B. 385
2000–83, 2000–41 I.R.B. 348
2000–84, 2000–42 I.R.B. 385
2000–85, 2000–43 I.R.B. 429
2000–86, 2000–44 I.R.B. 456
2000–87, 2000–44 I.R.B. 457
2000–88, 2000–44 I.R.B. 460
2000–89, 2000–45 I.R.B. 467
2000–90, 2000–47 I.R.B. 515
2000–91, 2000–46 I.R.B. 484
2000–92, 2000–46 I.R.B.486
2000–93, 2000–46 I.R.B.487
2000–94, 2000–47 I.R.B.515
2000–95, 2000–48 I.R.B.556
2000–96, 2000–48 I.R.B.556
2000–97, 2000–48 I.R.B.557
Court Decisions:
2068, 2000–28 I.R.B. 109
Notices:
2000–33, 2000–27 I.R.B. 97
2000–34, 2000–33 I.R.B. 172
2000–35, 2000–29 I.R.B. 118
2000–36, 2000–33 I.R.B. 173
2000–37, 2000–29 I.R.B. 118
2000–38, 2000–33 I.R.B. 174
2000–39, 2000–30 I.R.B. 132
2000–40, 2000–30 I.R.B. 134
2000–41, 2000–33 I.R.B. 177
2000–42, 2000–39 I.R.B. 302
2000–43, 2000–35 I.R.B. 209
2000–44, 2000–36 I.R.B. 255
2000–45, 2000–36 I.R.B. 256
2000–46, 2000–37 I.R.B. 265
2000–47, 2000–46 I.R.B. 480
2000–48, 2000–37 I.R.B. 265
2000–49, 2000–37 I.R.B. 266
2000–50, 2000–38 I.R.B. 291
Notices—Continued:
2000–51, 2000–38 I.R.B. 291
2000–52, 2000–38 I.R.B. 292
2000–53, 2000–38 I.R.B. 293
2000–54, 2000–42 I.R.B. 356
2000–55, 2000–43 I.R.B. 393
2000–56, 2000–43 I.R.B. 393
2000–57, 2000–43 I.R.B. 389
2000–58, 2000–47 I.R.B. 491
2000–59, 2000–48 I.R.B. 519
Proposed Regulations:
REG–209038–89, 2000–34 I.R.B. 191
REG–246249–96, 2000–44 I.R.B. 439
REG–105316–98, 2000–27 I.R.B. 98
REG–110311–98, 2000–36 I.R.B. 258
REG–103805–99, 2000–42 I.R.B. 376
REG–105235–99, 2000–44 I.R.B. 447
REG–116050–99, 2000–48 I.R.B. 520
REG–116495–99, 2000–33 I.R.B. 179
REG–103735–00, 2000–36 I.R.B. 258
REG–103736–00, 2000–36 I.R.B. 258
REG–106511–00, 2000–45 I.R.B. 465
REG–108522–00, 2000–34 I.R.B. 187
REG–108553–00, 2000–44 I.R.B. 452
REG–112502–00, 2000–40 I.R.B. 316
REG–114697–00, 2000–43 I.R.B. 421
Railroad Retirement Quarterly Rate:
2000–28, I.R.B. 112
2000–29, I.R.B. 117
2000–42, I.R.B. 354
Revenue Procedures:
2000–28, 2000–27 I.R.B. 60
2000–29, 2000–28 I.R.B. 113
2000–30, 2000–28 I.R.B. 113
2000–31, 2000–31 I.R.B. 146
2000–32, 2000–33 I.R.B. 172
2000–33, 2000–36 I.R.B. 257
2000–34, 2000–34 I.R.B. 186
2000–35, 2000–35 I.R.B. 211
2000–36, 2000–37 I.R.B. 267
2000–37, 2000–40 I.R.B. 308
2000–38, 2000–40 I.R.B. 310
2000–39, 2000–41 I.R.B. 340
2000–40, 2000–42 I.R.B. 357
2000–41, 2000–42 I.R.B. 371
2000–42, 2000–43 I.R.B. 394
2000–43, 2000–43 I.R.B. 404
2000–44, 2000–43 I.R.B. 409
2000–45, 2000–43 I.R.B. 417
2000–46, 2000–44 I.R.B. 438
2000–47, 2000–46 I.R.B.482
2000–49, 2000–47 I.R.B.491
Revenue Rulings:
2000–32, 2000–27 I.R.B. 1
2000–33, 2000–31 I.R.B. 142
2000–34, 2000–29 I.R.B. 116
2000–35, 2000–31 I.R.B. 138
2000–36, 2000–31 I.R.B. 140
2000–37, 2000–32 I.R.B. 156
2000–38, 2000–32 I.R.B. 157
2000–39, 2000–34 I.R.B. 184
2000–40, 2000–35 I.R.B. 208
2000–41, 2000–36 I.R.B. 248
2000–42, 2000–39 I.R.B. 297
2000–43, 2000–41 I.R.B. 333
Revenue Rulings—Continued:
2000–44, 2000–41 I.R.B. 336
2000–45, 2000–41 I.R.B. 337
2000–46, 2000–41 I.R.B. 334
2000–47, 2000–37 I.R.B. 264
2000–48, 2000–42 I.R.B. 349
2000–49, 2000–44 I.R.B. 430
2000–50, 2000–45 I.R.B. 462
2000–51, 2000–46 I.R.B.469
2000–52, 2000–48 I.R.B.516
2000–53, 2000–47 I.R.B.488
Tax Conventions:
2000–46 I.R.B. 475
Treasury Decisions:
8886, 2000–27 I.R.B. 3
8888, 2000–27 I.R.B. 3
8889, 2000–30 I.R.B. 124
8890, 2000–30 I.R.B. 122
8891, 2000–32 I.R.B. 152
8892, 2000–32 I.R.B. 158
8893, 2000–31 I.R.B. 143
8894, 2000–33 I.R.B. 162
8895, 2000–40 I.R.B. 304
8896, 2000–36 I.R.B. 249
8897, 2000–36 I.R.B. 234
8898, 2000–38 I.R.B. 276
8899, 2000–38 I.R.B. 288
8900, 2000–38 I.R.B. 279
8901, 2000–38 I.R.B. 272
8902, 2000–41 I.R.B. 323
8903, 2000–42 I.R.B. 352
8904, 2000–42 I.R.B. 350
8905, 2000–44 I.R.B. 435
8906, 2000–46 I.R.B.470
1
A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 2000–1 through 2000–26
is in Internal Revenue Bulletin 2000–27, dated July
3, 2000.

December 4, 2000iii2000–49 I.R.B.
Finding List of Current Actions on
Previously Published Items
1
Bulletins 2000–27 through 2000–48
Notices:
87–76
Obsoleted by
T.D. 8897, 2000–36 I.R.B. 234
88–24
Obsoleted by
T.D. 8897, 2000–36 I.R.B. 234
88–86
Obsoleted by
T.D. 8897 (section V), 2000–36 I.R.B. 234
97–4
Superseded by
Notice 2000–58, 2000–47 I.R.B. 491
2000–48
Superseded by
Rev. Proc. 2000–39, 2000–41 I.R.B. 340
Proposed Regulations:
LR–97–79
Partial withdrawal by
REG–103805–99, 2000–42 I.R.B. 376
FI–42–90
Withdrawn by
Announcement 2000–63, 2000–31 I.R.B. 149
IA–38–93
Withdrawn by
Announcement 2000–68, 2000–32 I.R.B. 161
REG–107644–98
Corrected by
Announcement 2000–66, 2000–32 I.R.B. 160
REG–117162–99
Corrected by
Announcement 2000–92, 2000–46 I.R.B. 486
REG–108522–00
Corrected by
Announcement 2000–85, 2000–43 I.R.B. 428
Revenue Procedures:
88–23
Superseded by
Rev. Proc. 2000–35, 2000–35 I.R.B. 211
98–50
Modified and superseded by
Rev. Proc. 2000–31, 2000–31 I.R.B. 146
98–51
Modified and superseded by
Rev. Proc. 2000–31, 2000–31 I.R.B. 146
99–18
Modified by
Rev. Proc. 2000–29, 2000–28 I.R.B. 113
99–34
Superseded by
Rev. Proc. 2000–28, 2000–27 I.R.B. 60
99–49
Modified and amplified by
Rev. Proc. 2000–38, 2000–40 I.R.B. 310
Revenue Procedures—Continued:
2000–3
Amplified by
Rev. Proc. 2000–46, 2000–44 I.R.B. 438
Rev. Proc. 2000–47, 2000–46 I.R.B.482
2000–9
Superseded by
Rev. Proc. 2000–39, 2000–41 I.R.B. 340
Treasury Decisions:
8873
Corrected by
Announcement 2000–74, 2000–35 I.R.B. 230
8883
Corrected by
Announcement 2000–57, 2000–28 I.R.B. 115
8884
Corrected by
Announcement 2000–73, 2000–35 I.R.B. 230
8892
Corrected by
Announcement 2000–81, 2000–41 I.R.B. 348
1
A cumulative list of current actions on previously
published items in Internal Revenue Bulletins
2000–1 through 2000–26 is in Internal Revenue
Bulletin 2000–27, dated July 3, 2000.

Index
Internal Revenue Bulletins
2000–27 Through 2000–48
The abbreviation and number in paren-
thesis following the index entry refer to
the specific item; numbers in roman and
italic type following the parenthesis refer
to the Internal Revenue Bulletin in which
the item may be found and the page
number on which it appears.
Key to Abbreviations:
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
Accrued benefits, involuntary cash-out of
(TD 8891) 32, 152
Cafeteria plans, treatment of (Ann 65)
31, 150; (Ann 92) 46, 486
Covered compensation tables, permitted
disparity (RR 53) 47, 488
Defined contribution retirement plans,
nondiscrimination requirements
(REG–114697–00) 43, 421
Determination letters:
Amendments by plan sponsors
(Ann 71) 44, 456
Volume submitter plans (Ann 77) 36,
260
Elective deferrals, section 403(b) plans
(RR 35) 31, 138
Form 1099–R, 2001, distribution codes
for IRAs (Ann 86) 44, 456
Full funding limitations, weighted aver-
age interest rate for:
July 2000 (Notice 40) 30, 134
August 2000 (Notice 46) 37, 265
September 2000 (Notice 42) 39, 302
October 2000 (Notice 55) 43, 393
November 2000 (Notice 59) 48,519
Letter rulings, determination letters, and
information letters issued by the Office
of Chief Counsel (Notice 35) 29, 118
Loans to plan participants (TD 8894) 33,
162; (REG–116495–99) 33, 179
Minimum funding standards:
Change in funding method, by plan
administrators, approval
procedures (RP 41) 42, 371
Selected funding methods, changes to,
approved (RP 40) 42, 357
New technologies in retirement plans,
notices and consents (Ann 74)
35, 230
Nonqualified deferred compensation:
Cash or deferred arrangements (RR
33) 31, 142
State and local governments or tax-
exempt organizations (Notice 38)
33, 174
Proposed Regulations:
26 CFR 1.72(p)–1, amended; loans to
plan participants (REG–116495–99)
33, 179
26 CFR 1.125–1, –2, –4, corrected; tax
treatment of cafeteria plans (Ann
92) 46, 486
26 CFR 1.401(a)(4)–8, revised;
1.401(a)(4)–9, amended; defined
contribution retirement plans,
nondiscrimination requirements
(REG–114697–00) 43, 421
Protected benefits, direct rollover (RR
36) 31, 140
Prototype plans, automatic enrollment
features (Ann 60) 31, 149
Qualified retirement plans, optional
forms of benefit (TD 8900) 38, 279
Regulations:
26 CFR 1.72–17A, amended;
1.72(p)–1, added; loans to plan par-
ticipants (TD 8894) 33, 162
26 CFR 1.411(d)–4, amended; quali-
fied retirement plans, optional forms
of benefit (TD 8900) 38, 279
26 CFR 31.3121(b)(7)–2, amended;
accrued benefits, involuntary cash-
out of (TD 8891) 32, 152
26 CFR 35.3405–1, correction; new
technologies in retirement plans
(Ann 74) 35, 230
EMPLOYMENT TAX
Comprehensive case resolution program
(Notice 43) 35, 209
Delinquent tax, levy on wages, salary,
and other income, exempt amount
tables (Notice 47) 46, 480
Electronic filing, magnetic media, Form
8027, Employer’s Annual Information
Return of Tip Income and Allocated
Tips, specifications (RP 49) 47, 491
Electronically filed information returns,
due dates of (TD 8895) 40, 304
Form W-2, new code V for box 12 for
2001 (Ann 97) 48, 557
Information reporting, payments on
behalf of another person, to joint pay-
ees, and payments of gross proceeds
from sales involving investment advis-
ers (REG–246249–96) 44, 439
Nonqualified deferred compensation, state
and local governments or tax-exempt
organizations (Notice 38) 33, 174
Proposed Regulations:
26 CFR 31.3406–0, amended;
31.3406(a)–2, revised; 31.3406(a)–4,
amended; 31.3406(b)(3)–2, amended;
31.3406(d)–4, amended;
31.3406(h)–1, –2, amended; pay-
ments on behalf of another person, to
joint payees, and payments of gross
proceeds from sales involving invest-
ment advisers (REG–246249–96) 44,
439
Railroad retirement, rate determination,
quarterly:
April 1, 2000, 28, 112
July 1, 2000, 29, 117
October 1, 2000, 42, 354
Regulations:
26 CFR 31.3402(q)–1, revised;
31.6053–3, revised; 31.6071(a)–1,
revised; electronically filed informa-
tion returns, due dates of (TD 8895)
40, 304
ESTATE TAX
Actuarial tables for valuation of annu-
ities, interests for life or term of years,
and remainder or reversionary interests
(TD 8886) 27, 3
Charitable remainder trusts sample
forms, revision (Notice 37) 29, 118
Form 706, estate tax return, automatic
6-month extension of time to file
(REG–106511–00) 45, 465
2000–49 I.R.B.ivDecember 4, 2000
EMPLOYEE PLANS—
cont.
EMPLOYMENT TAX—
cont.

Proposed Regulations:
26 CFR 20.6075–1, revised;
20.6081–1, revised; Form 706,
estate tax return, automatic 6-month
extension of time to file
(REG–106511–00) 45, 465
Regulations:
26 CFR 20.2031–0, –7, amended;
20.2031–7T, removed; 20.7520–1,
amended; 20.7520–1T, removed;
actuarial tables for valuation of
annuities, interests for life or term
of years, and remainder or rever-
sionary interests (TD 8886) 27, 3
EXCISE TAX
Taxable fuel, measurement of
(Notice 33) 27, 97
Taxable substances, polyether polyol,
determinations (Notice 54) 42, 356
EXEMPT
ORGANIZATIONS
Forms:
8870, Information Return for Transfers
Associated With Certain Personal
Benefit Contracts (Ann 82) 42, 385
8871, Political Organization Notice of
Section 527 Status (Notice 36) 33, 173
8872, Political Organization Report of
Contributions and Expenditures
(Notice 41) 33, 177
Internet usage (Ann 84) 42, 385
Letter rulings, determination letters, and
information letters issued by the Office
of Chief Counsel (Notice 35) 29, 118
List of organizations classified as private
foundations (Ann 61) 30, 136; (Ann
67) 32,160; (Ann 70) 34,204; (Ann
75) 37, 268; (Ann 79) 39, 303; (Ann
87) 44,457; (Ann 91) 46,484
Political organizations:
Contributions and expenditures, Form
8872 (Notice 41) 33, 177
Disclosure, notice, and reporting
requirements (RR 49) 44, 430
Notice of section 527 status, Form
8871 (Notice 36) 33, 173
Proposed revenue ruling on reporting
requirements (Ann 72) 35, 226
Revocations (Ann 62) 30, 137; (Ann 69)
33,183; (Ann 94) 47, 515
GIFT TAX
Actuarial tables for valuation of annu-
ities, interests for life or term of years,
and remainder or reversionary interests
(TD 8886) 27, 3
Adequate disclosure, status of limitations
(RP 34) 34, 186
Regulations:
26 CFR 25.2512–0, –5, amended;
25.2512–5T, removed; 25.7520–1,
amended; 25.7520–1T, removed;
actuarial tables for valuation of annu-
ities, interests for life or term of years,
and remainder or reversionary inter-
ests (TD 8886) 27, 3
26 CFR 25.2702–3, amended; special
valuation rules, grantor retained
annuity trust (GRAT) and unitrust
(GRUT) (TD 8899) 38,288
Special valuation rules, grantor retained
annuity trust (GRAT) and unitrust
(GRUT) (TD 8899) 38, 288
INCOME TAX
Acquisition of corporate indebtedness
(RP 33) 36, 257
Actuarial tables for valuation of annu-
ities, interests for life or term of years,
and remainder or reversionary interests
(TD 8886) 27, 3
Appeals:
Ex partecommunication prohibition
(RP 43) 43, 404
Toll-free numbers (Ann 80) 40, 320
Bad debt reserves of thrift institutions
(Ann 63) 31, 149
Base period T-bill rate, 2000 (RR 52) 48,
516
Business expenses, traveling expenses,
per diemallowances (RP 39) 41, 340
Capital gains look-thru provisions for the
sale or exchange of interest in a pass-
thru entity; rules for dividing the hold-
ing period of a partnership interest
(TD 8902) 41, 323
Capitalization, business expenses, farm-
ing (Notice 45) 36, 256
Charitable remainder trusts sample
forms, revision (Notice 37) 29, 118
Claims for certain income tax convention
benefits, guidance on (TD 8889) 30,
124
Collateralized debt obligations (CDOs),
reporting requirements (TD 8888) 27, 3
Comprehensive case resolution program
(Notice 43) 35, 209
Consolidated returns:
Common parent, agent for sub-
sidiaries, tentative carryback adjust-
ments (REG–103805–99) 42, 376
Limitations on the use of certain cred-
its (Ann 73) 35, 230
Controlled foreign corporations
(REG–112502–00) 40, 316
Corporate reorganizations, continuity of
interest (TD 8898) 38, 276
Corporations, disposition of stock in a
taxable transaction (Ann 57) 28, 115
Credits:
Earned income; preparer due diligence
(TD 8905) 44, 435
Enhanced oil recovery credit, 2000
inflation adjustment (Notice 51) 38,
291
Low-income housing credit:
Carryovers to qualified states, 2000
National Pool (RP 36) 37, 267
Satisfactory bond; “bond factor”
amounts for the period July
through September 2000 (RR 48)
42,349
Qualified fuel under section
29(c)(1)(C), solid synthetic fuel
from coal (RP 47) 46, 482
Renewable electricity production cred-
it, 2000 inflation adjustment (Notice
52) 38, 292
Targeted Jobs Tax Credit, settlement
initiative (Ann 58) 30, 135
Debt roll-ups, election to treat certain
debt substitutions as realization events
(RP 29) 28, 113
Deductions, travel expenses, per diem
rates (Notice 48) 37, 265
Depletion, applicable percentages, oil
and gas production (Notice 50) 38,
291
Distributor commissions (RP 38) 40, 310
Dual consolidated loss, dual resident cor-
poration (RP 42) 43, 404
Earned income credit, preparer due dili-
gence requirements (TD 8905) 44, 435
Electronically filed information returns,
due dates of (TD 8895) 40, 304
Exclusion of gain from the sale or
exchange of a taxpayer’s principal res-
idence (REG–105235–99) 44, 447
Foreign sales corporations, Form 1120-
FSC, Schedule P (Notice 49) 37, 266
December 4, 2000v2000–49 I.R.B.
ESTATE TAX—cont.INCOME TAX—cont.

Foreign trusts:
Transfers of:
Appreciated property to certain for-
eign trusts (REG–108522–00) 34,
187; correction (Ann 85) 43,429
Property to trusts with U.S. benefi-
ciaries (REG–209038–89) 34,
191; (Ann 96) 48, 556
Forms:
1040, e-fileprogram (RP 31) 31, 146
1096, 1098, 1099, 5498, and W-2G,
substitute forms specifications (RP
28) 27, 60
1099-R, 2001, distribution codes for
IRAs (Ann 86) 44,456
1120-FSC, Schedule P, foreign sales
corporations (Notice 49) 37, 266
8869, Qualified Subchapter S
Subsidiary Election, new form
available (Ann 83) 41, 348
8870, Information Return for Transfers
Associated With Certain Personal
Benefit Contracts (Ann 82) 42, 385
8871, Political Organization Notice of
Section 527 Status (Notice 36) 33,
173
8872, Political Organization Report of
Contributions and Expenditures
(Notice 41) 33, 177
W-2, new code V for box 12 for 2001
(Ann 97) 48, 557
W-2, W-3; planned changes to (Ann
76) 36, 260
Fringe benefits, aircraft valuation formu-
la (RR 40) 35, 208
Gross income, de minimispremiums,
treatment of (RP 30) 28, 113
Individual retirement arrangements,
returned or recharacterized contribu-
tions, net income calculation (Notice
39) 30, 132
Information reporting:
Payments and reimbursements of qual-
ified tuition and related expenses
(REG–105316–98) 27, 98
Payments on behalf of another person,
to joint payees, and payments of
gross proceeds from sales involving
investment advisers
(REG–246249–96) 44, 439
Information returns, magnetic media fil-
ing requirements (REG–105316–98)
27, 98
Institute on International Tax (Ann 93)
46, 487; (Ann 90) 47, 515; (Ann 95)
48, 556
Insurance companies:
Differential earnings rate and recom-
puted differential earnings rate for
mutual life insurance companies
(RR 37) 32, 156
Foreign companies, minimum effec-
tively connected net investment
income (RP 32) 33, 172
Loss payment patterns and discount
factors for the 2000 accident year
(RP 44) 43, 409
Salvage discount factors for the 2000
accident year (RP 45) 43, 417
Interest:
Investment:
Federal short-term, mid-term, and
long-term rates for:
July 2000 (RR 32) 27, 1
August 2000 (RR 38) 32,157
September 2000 (RR 41) 36, 248
October 2000 (RR 45) 41, 337
November 2000 (RR 50) 46, 462
Rates:
Underpayments and overpay-
ments, quarter beginning October
1, 2000 (RR 42) 39, 297
Inventory:
Dollar-value LIFO and inventory price
index computation (IPIC) methods
(Ann 66) 32, 160
LIFO:
Price indexes, department stores,
for:
May 2000 (RR 34) 29, 116
June 2000 (RR 39) 34,184
July 2000 (RR 47) 37, 264
August 2000 (RR 46) 41, 334
September 2000 (RR 51) 46, 469
Letter rulings, determination letters, and
information letters issued by the Office
of Chief Counsel (Notice 35) 29, 118
Like-kind exchanges, “parking” arrange-
ments (RP 37) 40, 308
Loss deductions, challenge of, Blue
Cross Blue Shield organizations
(Notice 34) 33, 172
Marginal properties, oil and gas produc-
tion, depletion, applicable percentages
(Notice 50) 38, 291
Model rabbi trust, contribution of parent
stock (Notice 56) 43, 393
Nonqualified perferred stock, exchanges
and distributions (TD 8904) 42, 350
Partnerships:
Addition to no-rule list (RP 46) 44,
438
Allocation of nonrecourse liabilities by
a partnership (TD 8906) 46, 470
Transactions between partner and part-
nership (RR 44) 41,336
Private foundations, organizations now
classified as (Ann 61) 30, 136; (Ann
67) 32,160; (Ann 70) 34,204; (Ann
75) 37,268; (Ann 79) 39,303; (Ann
87) 44, 457; (Ann 91) 46, 484
Proposed Regulations:
26 CFR 1.121–1, –2, –3, –4, revised;
1.121–5, removed; 1.1398–3, added;
exclusion of gain from the sale or
exchange of a taxpayer’s principal
residence (REG–105235–99) 44,
447
26 CFR 1.312–10, amended;
1.367(b)–0, –1, –2, –3, –5, amend-
ed; 1.367(b)–6, revised; 1.367(b)–7,
–8, –9, added; 1.367(e)–1, amend-
ed; 1.381(a)–1, revised; stock trans-
fer rules, carryover of earnings and
taxes (REG–116050–99) 48, 520
26 CFR 1.679–1, –2, –3, –4, –5, –6,
–7, added; 1.958–1, –2, amended;
foreign trusts with U.S. beneficia-
ries (REG–209038–89) 34, 191;
correction (Ann 96) 48, 556
26 CFR 1.684–1, –2, –3, –4, –5,
added; tax on transfers of appreciat-
ed property to foreign trusts and
foreign estates (REG–108522–00)
34, 187; correction (Ann 85) 43,
429
26 CFR 1.702–1, amended; 1.952–1,
added; 1.954–1, –2, –3, –4, added;
1.956–2, added; controlled foreign
corporations (REG–112502–00) 40,
316
26 CFR 1.1502–77 redesignated as
1.1502–77A; 1.1502–77, added;
1.1502–77T(a) redesignated as
1.1502–77A(e); 1.1502–77T,
removed; 1.1502–78, amended; con-
solidated returns, common parent,
agent for subsidiaries, tentative car-
ryback adjustments
(REG–103805–99) 42, 376
26 CFR 1.6011–4, amended;
301–6111–2, amended;
301–6112–1, amended; tax shelters,
disclosure rules, registration and list
maintenance requirements, addi-
tional guidance of
(REG–110311–98,
REG–103735–00,
2000–49 I.R.B.viDecember 4, 2000
INCOME TAX—cont.INCOME TAX—cont.INCOME TAX—cont.

REG–103736–00) 36, 258
26 CFR 1.6041–1, –3, amended;
1.6045–1, –2, amended; 1.6049–4,
revised; 5f.6045–1, removed; pay-
ments on behalf of another person,
to joint payees, and payments of
gross proceeds from sales involving
investment advisers
(REG–246249–96) 44, 439
26 CFR 1.6050S–0, –1, –2, added;
301.6011–2, amended; information
reporting, payments and reimburse-
ments of qualified tuition and relat-
ed expenses (REG–105316–98) 27,
98
26 CFR 301.7701–7, amended; cer-
tain pension, employee benefit, and
certain investment trusts classified
as domestic trusts
(REG–108553–00) 44, 452
Publications:
515, changes in tables 1 and 2 for
Denmark treaty (Ann 59) 29, 120
901, changes in tables 1 and 2 for
Denmark treaty (Ann 59) 29, 120
1212, supplemental information on
short-term Treasury bills (Ann 64)
31, 149
Qualified subchapter S subsidiaries, elec-
tion procedures (Notice 58) 47, 491
Qualified transportation fringes, distrib-
ution of transit passes (Ann 78) 43,
428
Qualified zone academy bonds, guid-
ance (TD 8903) 42, 352
Real estate mortgage investment con-
duits (REMICs), reporting require-
ments (TD 8888) 27, 3
Regulations:
26 CFR 1.1(h)–1, added; 1.741–1,
amended; 1.1223–3, added; capital
gains look-thru provisons for the
sale or exchange of interest in a
pass-thru entity; rules for dividing
the holding period of a partnership
interest (TD 8902) 41, 323
26 CFR 1.110–1, added; 1.602.101,
amended; short-term leases, quali-
fied lessee construction allowances
for (TD 8901) 38, 272
26 CFR 1.162–12, amended;
1.263A–0, –1, amended;
1.263A–0T, removed; 1.263A–4,
revised; 1.263A–4T, removed;
1.471–6, amended; uniform capital-
ization applied to farming business
(TD 8897) 36, 234; correction (Ann
88) 44, 460
26 CFR 1.170A–12, amended;
1.170A–12T, removed; 1.642(c)–6,
amended; 1.642(c)–6T, removed;
1.664–4, amended; 1.664–4T,
removed; 1.7520–1, amended;
1.7520–1T, removed; actuarial
tables for valuation of annuities,
interests for life or term of years,
and remainder or reversionary inter-
ests (TD 8886) 27, 3
26 CFR 1.351–2, amended; 1.354–1,
amended; 1.355–1, amended;
1.356–7, added; 1.1036–1, amend-
ed; nonqualified preferred stock,
exchanges and distributions (TD
8904) 42, 350
26 CFR 1.368–1, amended; 1.368–1T,
removed; corporate reorganizations;
continuity of interest (TD 8898) 38,
276
26 CFR 1.401(a)–20, amended;
1.401(a)(4)–4, amended; 1.401(a)
(26)–4, –6, amended; 1.411(a)–7,
–11, amended; 1.411(a)–7T, –11T,
removed; 1.411(d)–4, amended;
1.417(e)–1, amended; accrued bene-
fits, involuntary cash-out of (TD
8891) 32, 152
26 CFR 1.472–8, correction; dollar-
value LIFO regulations, inventory
price index computation (IPIC)
method (Ann 66) 32, 160
26 CFR 1.643(h)–1, amended;
1.671–2(e), revised; 1.671–2T,
removed; 1.672(f)–2, –3, –4, –5,
amended; definition of grantor (TD
8890) 30, 122
26 CFR 1.752–3, –5, amended; alloca-
tion of nonrecourse liabilities by a
partnership (TD 8906) 46, 470
26 CFR 1.894–1, revised; guidance
regarding claims for certain income
tax convention benefits (TD 8889)
30, 124
26 CFR 1.1032–3, correction; disposi-
tion of stock in a taxable transaction
(Ann 57) 28, 115
26 CFR 1.1397E–1T redesignated as
1.1397E–1; 1.1397E–1, amended;
qualified zone academy bonds,
guidance (TD 8903) 42, 352
26 CFR 1.1502–3, correction; consoli-
dated returns, limitations on the use
of certain credits (Ann 73) 35, 230
26 CFR 1.6011–4T, amended; 301–
6111–2T, amended; 301–6112–1T,
amended; tax shelters, disclosure
rules, registration and list mainte-
nance requirements, additional guid-
ance on (TD 8896) 36, 249
26 CFR 1.6012–7T, removed;
1.6061–2T, removed; 1.6065–2T,
removed; 602.101(c), amended;
telefile voice signature test (TD
8892) 32, 158; correction (Ann 81)
41,348
26 CFR 1.6041–2, –6, revised;
1.6042–2, revised; 1.6043–2,
revised; 1.6044–2, revised;
1.6045–1, amended; 1.6045–2, –4,
revised; 1.6047–1, revised;
1.6049–4, amended; 1.6049–7,
revised; 1.6050A–1, revised;
1.6050D–1, revised; 1.6050E–1,
revised; 1.6050H–2, revised;
1.6050J–1T, revised; 1.6050P–1,
revised; 1.6052–1, revised; electron-
ically filed information returns, due
dates of (TD 8895) 40, 304
26 CFR 1.6049–7, amended; real
estate mortgage investment con-
duits; reporting requirements and
other administrative matters (TD
8888) 27, 3
26 CFR 1.6695–1, amended;
1.6695–1T, removed; requirement to
retain copy of return or claim signed
by preparer (TD 8893) 31, 143
26 CFR 1.6695–2, added; 1.6695–2T,
removed; earned income credit, pre-
parer due diligence requirements
(TD 8905) 44, 435
26 CFR 301.6651–1, amended; elec-
tronically filed information returns,
due date of (TD 8895) 40, 304
26 CFR 602.101, amended; capital
gains look-thru provisions for the
sale or exchange of interest in a
pass-thru entity; rules for dividing
the holding period of a partnership
interest (TD 8902) 41, 323
26 CFR 602.101, amended; earned
income credit, preparer due diligence
requirements (TD 8905) 44, 435
Retention of return or claim signed by
tax preparer (TD 8893) 31, 143
Revocations, exempt organizations (Ann
December 4, 2000vii2000–49 I.R.B.
INCOME TAX—cont.INCOME TAX—cont.INCOME TAX—cont.

62) 30, 137; (Ann 69) 33,183
S corporations:
Charitable contributions, section
170(a)(2) (RR 43) 41, 333
Qualified Subchapter S Subsidiary
Election, new Form 8869 available
(Ann 83) 41, 348
Schedule P (Form 1120-FSC), foreign
sales corporations (Notice 49) 37, 266
Separate return limitation year (SRLY)
losses (Notice 53) 38, 293
Short-term leases, qualified lessee construc-
tion allowances for (TD 8901) 38, 272
Stock transfer rules, carryover of earnings
and taxes (REG–116050–99) 48, 520
Substitute forms, 1096, 1098, 1099,
5498, and W-2G, rules and specifica-
tions (RP 28) 27, 60
Tax claims in bankruptcy court (CD
2068) 28, 109
Tax conventions:
Dutch pension plans, tax treaty bene-
fits, Netherlands (Notice 57) 43, 389
Shipping and aircraft agreement, State
of Bahrain, 46, 475
Tax shelters:
Avoidance using artificially high basis
(Notice 44) 36, 255
Disclosure rules, registration and list
maintenance requirements, addition-
al guidance on (TD 8896) 36, 249;
(REG–110311–98,
REG–103735–00,
REG–103736–00) 36, 258
Telefile voice signature test:
Notice of proposed rulemaking with-
drawn (Ann 68) 32, 161
Temporary regulations removed (TD
8892) 32, 158; correction (Ann 81)
41, 348
Treaties:
Denmark, Publications 515 and 901
(Ann 59) 29, 120
Ukraine, Publications 515 and 901
(Ann 89) 45, 467
Withholding rates, tax treaty benefits
(TD 8889) 30, 124
Trusts:
Certain pension, employee benefit, and
certain investment trusts classified
as domestic trusts
(REG–108553–00) 44, 452
Definition of grantor (TD 8890) 30,
122
Uniform captialization applied to farm-
ing business (TD 8897) 36, 234; cor-
rection (Ann 88) 44, 460
Withholding certificate, guidance for
obtaining (RP 35) 35, 211
2000–49 I.R.B.viiiDecember 4, 2000
INCOME TAX—cont.INCOME TAX—cont.INCOME TAX—cont.

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