Internal Revenue Bulletin 2001-50 (PDF rendition): IRS Revenue Rulings

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HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 2001–61, page 573.
Employer identification numbers.This ruling provides guid-
ance on the retention of an entity’s employer identification num-
ber upon changing under section 301.7701–3 of the regula-
tions from a partnership to a disregarded entity or from a
disregarded entity to a partnership.
Rev. Rul. 2001–58, page 570.
Federal rates; adjusted federal rates; adjusted federal
long-term rate and the long-term exempt rate.For pur-
poses of sections 382, 1274, 1288, and other sections of the
Code, tables set forth the rates for December 2001.
T.D. 8967, page 568
Final regulations under section 141 of the Code amend excep-
tions for tax-exempt bonds. Generally, interest on bonds issued
by state and local governments is excluded from gross
income. However, this exclusion does not apply to non-qualified
private activity bonds. A bond may be a non-qualified private
activity bond if a nongovernmental person has special legal
entitlements to use the financed property under an arrange-
ment with the issuer. The regulations contain special excep-
tions for arrangements of 30, 90, and 180 days, and these
final regulations amend those exceptions to permit arrange-
ments of 50, 100, and 200 days, respectively.
Notice 2001–79, page 576.
Rent holidays for commercial aircraft leases.In the case
of certain aircraft leases entered into or modified between Sep-
tember 11, 2001, and June 28, 2002, certain rent holidays will
be disregarded in applying the uneven rent test of section
1.467–3(c)(4) of the regulations.
EMPLOYEE PLANS
Announcement 2001–120, page 583.
Saver’s credit; employee plans and individual retirement
arrangements.This announcement repeats in Spanish the
notice to employees portion of Announcement 2001–106
(2001–44 I.R.B. 416), which pertains to the Saver’s Credit
described in section 25B of the Code and the eligibility for this
new nonrefundable credit.
EXEMPT ORGANIZATIONS
Notice 2001–78, page 576.
This document provides guidance to charities regarding pay-
ments made by reason of the death, injury, or wounding of an
individual incurred as a result of the September 11, 2001, ter-
rorist attacks against the United States.
EXCISE TAX
Notice 2001–77, page 576.
This notice relates to deposits of air transportation excise
taxes by eligible air carriers under section 6302 of the Code.
TAX CONVENTIONS
Announcement 2001–119, page 575.
Luxembourg Treaty election.The mutual agreement
between the United States and Luxembourg on the interpreta-
tion of the transition rules in the income tax treaty that entered
into force on December 20, 2000, is set forth.
(Continued on the next page)
Finding Lists begin on page ii.
Bulletin No. 2001–50
December 10, 2001

ADMINISTRATIVE
Rev. Proc. 2001–57, page 577.
This procedure provides guidance to a publicly offered regu-
lated investment company (RIC) that contributes substantially
all its assets to an investment partnership in a master-feeder
structure. A RIC meeting the requirements of this procedure is
treated as if it directly invested in the assets held by the part-
nership for purposes of qualifying as a RIC, for purposes of the
payment of exempt-interest dividends, and for purposes of the
passthrough of the foreign tax credit.
Rev. Proc. 2001–58, page 579.
This procedure provides guidance with respect to the failure-to-
deposit penalty provisions of section 6656 of the Code. The
procedure also describes how the Service will credit Federal
tax deposits to determine whether a failure-to-deposit penalty
should apply to deposit periods beginning after December 31,
2001. Rev. Procs. 90–58 and 91–52 obsoleted.
Announcement 2001–121, page 584.
This document withdraws proposed regulations (REG–
106186–98, 2000–23 I.R.B. 1226) relating to certain corpo-
rate reorganizations involving disregarded entities.
December 10, 20012001–50 I.R.B.

The IRS Mission
Provide America’s taxpayers top quality service by helping
them understand and meet their tax responsibilities and by
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Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are consolidated semiannually into Cumulative Bulle-
tins, which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the Bul-
letin. All published rulings apply retroactively unless otherwise
indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal practices and procedures that affect the rights and duties
of taxpayers are published.
Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the rev-
enue ruling. In those based on positions taken in rulings to tax-
payers or technical advice to Service field offices, identifying
details and information of a confidential nature are deleted to
prevent unwarranted invasions of privacy and to comply with
statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion and Related Committee Reports.
Part III.—Administrative, Procedural, and
Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The first Bulletin for each month includes a cumulative index for
the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the first Bulletin of the succeeding semiannual
period, respectively.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.
2001–50 I.R.B.December 10, 2001

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
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 2001. See Rev. Rul. 2001–58, page
570.
Section 141.—Private Activity
Bond; Qualified Bond
26 CFR 1.141–3: Definition of private business use.
T.D. 8967
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Definition of Private Business
Use
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document amends the
final regulations on the definition of pri-
vate business use applicable to tax-
exempt bonds issued by State and local
governments. The amendments provide
that certain arrangements do not result in
private business use if the term of the use
does not exceed 50, 100 or 200 days, as
applicable.
DATES:Effective Date:These regula-
tions are effective November 20, 2001.
Applicability Date:For dates of appli-
cability, see § 1.141–15.
FOR FURTHER INFORMATION
CONTACT: Michael P. Brewer at (202)
622–3980 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Section 103(a) of the Internal Revenue
Code (Code) provides that, generally,
interest on any State or local bond is not
included in gross income. However, this
exclusion does not apply to any private
activity bond that is not a qualified bond.
Under section 141, a bond is a private
activity bond if it is issued as part of an
issue that meets either the private busi-
ness use test and the private security or
payment test, or the private loan financ-
ing test.
The private business use test is met if
more than 10 percent of the proceeds of
an issue are to be used for any private
business use. Section 141(b)(6)(A)
defines the termprivate business useas
use (directly or indirectly) in a trade or
business carried on by any person other
than a governmental unit. For this pur-
pose, use as a member of the general pub-
lic is not taken into account.
Section 1.141–3 provides guidance
regarding the private business use test.
Generally, the private business use test is
met only if a nongovernmental person has
special legal entitlements to use the
financed property under an arrangement
with the issuer. The existing regulations
provide the following three special rules
for use by nongovernmental persons
under short-term arrangements:
1. Section 1.141–3(c)(3) states that an
arrangement is not treated as general pub-
lic use if the term of the use under the
arrangement, including all renewal
options, is greater than 180 days.
2. Section 1.141–3(d)(3)(i) provides
that certain arrangements are not private
business use if the term of the use under
the arrangement, including all renewal
options, is not longer than 90 days.
3. Section 1.141–3(d)(3)(ii) provides
that certain arrangements are not private
business use if the term of the use under
the arrangement, including all renewal
options, is not longer than 30 days.
Section 1.141–3(f) contains examples
that illustrate these special rules.
Explanation of Provisions
Comments have been received
requesting that the regulations provide for
additional flexibility in structuring short-
term arrangements with nongovernmental
persons. For example, commentators have
requested that the 180–day, 90–day, and
30–day rules of § 1.141–3 be changed to
accommodate six-month, three-month,
and one-month arrangements, respec-
tively (i.e., arrangements with terms of
use based on months that exceed 30
days). This Treasury decision adopts this
suggested modification by amending
§ 1.141–3(c)(3), (d)(3) and (f) to change
all references to 180 days, 90 days, and
30 days to 200 days, 100 days, and 50
days, respectively.
Effective Dates
The changes made by this Treasury
decision apply to any bond sold on or
after November 20, 2001. The changes
made by this Treasury decision may be
applied by issuers to any bond out-
standing on November 20, 2001, to which
§ 1.141–3 applies.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assess-
ment is not required. It has also been
determined that section 553(b) and (d) of
the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these
regulations, and, because no notice of
proposed rulemaking is required, the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to
section 7805(f) of the Code, this final
regulation was submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small business.
Drafting Information
The principal authors of these final
regulations are Bruce M. Serchuk and
Michael P. Brewer, Office of Chief Coun-
sel (TE/GE), IRS. However, other person-
nel from the IRS and Treasury Depart-
ment participated in their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
amended as follows:
2001–50 I.R.B568December 10, 2001

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***
§ 1.141–3 [Amended]
Par. 2. In the list below, for each para-
graph indicated in the left column,
remove the words indicated in the middle
column from wherever they appear in the
paragraph, and add the words indicated in
the right column:
ParagraphRemoveAdd
1.141–3(c)(3), first sentence
of introductory text
180 days200 days
1.141–3(d)(3)(i)(A)90 days100 days
1.141–3(d)(3)(ii)(A)30 days50 days
1.141–3(f)
Example 10,penultimate
sentence
180 days200 days
1.141–3(f)
Example 12,third sentence
(twice)
180 days200 days
1.141–3(f)
Example 13, fifth sentence
180 days200 days
1.141–3(f)
Example 15,fourth sentence
90 days100 days
1.141–3(f)
Example 16(i),last sentence
30 days50 days
Par. 3. Section 1.141–15 is amended as
follows:
1. Paragraph (b) is redesignated (b)(1).
2. A paragraph heading for newly des-
ignated paragraph (b)(1) is added.
3. Paragraph (b)(2) is added.
The additions read as follows:
§1.141–15 Effective dates.
*****
(b)Effective Dates—(1)In general.
***
(2)Certain short-term arrangements.
The provisions of§1.141–3 that refer to
arrangements for 200 days, 100 days, or
50 days apply to any bond sold on or
after November 20, 2001, and may be
applied to any bond outstanding on
November 20, 2001, to which§1.141–3
applies.
*****
David A. Mader,
Assistant Deputy Commissioner
of Internal Revenue.
Approved November 14, 2001.
Mark Weinberger,
Assistant Secretary
of the Treasury.
(Filed by the Office of the Federal Register on
November 19, 2001, 8:45 a.m., and published in the
issue of the Federal Register for November 20,
2001, 66 F.R. 58061)
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term
rates are set forth for the month of December 2001.
See Rev. Rul. 2001–58, page 570.
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 2001. See Rev.
Rul. 2001–58, page 570.
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 2001. See Rev. Rul. 2001–58, page
570.
December 10, 20015692001–50 I.R.B.

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 2001. See Rev. Rul. 2001–58, 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 2001. See Rev. Rul. 2001–58, 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 2001.
See Rev. Rul. 2001–58, 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 2001. See Rev. Rul. 2001–58, 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 2001.
See Rev. Rul. 2001–58, 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 2001. See Rev. Rul. 2001–58, 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 2001. See Rev. Rul. 2001–58, 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 382, 1274, 1288,
and other sections of the Code, tables set
forth the rates for December 2001.
Rev. Rul. 2001–58
This revenue ruling provides various
prescribed rates for federal income tax
purposes for December 2001 (the current
month). Table 1 contains the short-term,
mid-term, and long-term applicable fed-
eral rates (AFR) for the current month for
purposes of section 1274(d) of the Inter-
nal Revenue Code. Table 2 contains the
short-term, mid-term, and long-term
adjusted applicable 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 percentages for determining
the low-income housing credit described
in section 42(b)(2) for buildings placed in
service during the current month. Table 5
contains the federal rate for determining
the present value of an annuity, an inter-
est for life or for a term of years, or a
remainder or a reversionary interest for
purposes of section 7520. Finally, Table 6
contains the 2002 interest rate for pur-
poses of sections 846 and 807.
2001–50 I.R.B570December 10, 2001

REV. RUL. 2001–58 TABLE 1
Applicable Federal Rates (AFR) for December 2001
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-Term
AFR2.48%2.46%2.45%2.45%
110% AFR2.73%2.71%2.70%2.69%
120% AFR2.97%2.95%2.94%2.93%
130% AFR3.23%3.20%3.19%3.18%
Mid-Term
AFR3.97%3.93%3.91%3.90%
110% AFR4.37%4.32%4.30%4.28%
120% AFR4.78%4.72%4.69%4.67%
130% AFR5.18%5.11%5.08%5.06%
150% AFR5.99%5.90%5.86%5.83%
175% AFR7.00%6.88%6.82%6.78%
Long-Term
AFR5.05%4.99%4.96%4.94%
110% AFR5.57%5.49%5.45%5.43%
120% AFR6.08%5.99%5.95%5.92%
130% AFR6.60%6.49%6.44%6.40%
REV. RUL. 2001–58 TABLE 2
Adjusted AFR for December 2001
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
adjusted AFR2.30%2.29%2.28%2.28%
Mid-term
adjusted AFR3.27%3.24%3.23%3.22%
Long-term
adjusted AFR4.65%4.60%4.57%4.56%
December 10, 20015712001–50 I.R.B.

REV. RUL. 2001–58 TABLE 3
Rates Under Section 382 for December 2001
Adjusted federal long-term rate for the current month4.65%
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.)4.74%
REV. RUL. 2001–58 TABLE 4
Appropriate Percentages Under Section 42(b)(2) for December 2001
Appropriate percentage for the 70% present value low-income housing credit8.05%
Appropriate percentage for the 30% present value low-income housing credit3.45%
REV. RUL. 2001–58 TABLE 5
Rate Under Section 7520 for December 2001
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 interest4.8%
REV. RUL. 2001–58 TABLE 6
Rate under Sections 846 and 807
Applicable rate of interest for 2002 for purposes of sections 846 and 8075.71%
2001–50 I.R.B572December 10, 2001

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 2001. See Rev. Rul. 2001–58, page
570.
Section 6109.—Identifying
Numbers
26 CFR 301.6109–1: Identifying numbers.
(Also§301.7701–3.)
Employer Identification Numbers.
This ruling provides guidance on the
retention of an entity’s employer identifi-
cation number upon changing under
§301.7701–3 from a partnership to a dis-
regarded entity or from a disregarded
entity to a partnership.
Rev. Rul. 2001–61
ISSUES
(1) If an entity classified as a partner-
ship becomes disregarded as an entity
separate from its owner (disregarded
entity) for federal tax purposes and if the
disregarded entity chooses to calculate,
report, and pay its employment tax obli-
gations under its own name and employer
identification number (EIN) pursuant to
Notice 99–6 (1999–1 C.B. 321) does the
disregarded entity retain the same EIN it
used as a partnership?
(2) If an entity classified as a disre-
garded entity for federal tax purposes cal-
culates, reports, and pays its employment
tax obligations under its own name and
EIN pursuant to Notice 99–6 and if the
federal tax classification of that entity
changes to a partnership, does the part-
nership retain the same EIN it used as a
disregarded entity?
FACTS
In each of the following situations, the
eligible entity (as defined in§301.7701–
3(a) of the Procedure and Administra-
tion Regulations) does not elect under
§301.7701–3(c) to be treated as an asso-
ciation for federal tax purposes at any
time.
Situation 1.X, an eligible entity classi-
fied as a partnership, becomes a disre-
garded entity for federal tax purposes
when the entity’s ownership is reduced to
one member. (See, for example, Rev. Rul.
99–6 (1999–1 C.B. 432.)Xchooses to
calculate, report, and pay its employment
tax obligations under its own name and
EIN pursuant to Notice 99–6.
Situation 2.Yis a disregarded entity
for federal tax purposes. Pursuant to
Notice 99–6,Ycalculates, reports, and
pays its employment tax obligations
under its own name and EIN.Ybecomes
a partnership for federal tax purposes
when the entity’s ownership expands to
include more than one member. (See, for
example, Rev. Rul. 99–5 (1999–1 C.B.
434.)
LAW & ANALYSIS
Section 6109(a)(1) of the Internal Rev-
enue Code provides that any person
required to make a return, statement, or
other document shall include in the
return, statement, or other document the
identifying number as may be prescribed
for securing proper identification of the
person.
Section 301.6109–1(h)(1) provides
that any entity that has an EIN will retain
that EIN if its federal tax classification
changes under§301.7701–3.
Section 301.6109–1(h)(2)(i) provides
that except as otherwise provided in
regulations or other guidance, a single
owner entity that is disregarded as an
entity separate from its owner under
§301.7701–3 must use its owner’s tax-
payer identification number (TIN) for
federal tax purposes.
Section 301.6109–1(h)(2)(ii) provides
that if a single owner entity’s classifica-
tion changes so that it is recognized as a
separate entity for federal tax purposes,
and that entity had an EIN, then the entity
must use that EIN and not the TIN of the
single owner. If the entity did not already
have its own EIN, then the entity must
acquire an EIN and not use the TIN of the
single owner.
Section 301.7701–3(a) provides that a
business entity that is not classified as a
corporation under§301.7701–2(b)(1),
(3), (4), (5), (6), (7), or (8) (an eligible
entity) can elect its classification for fed-
eral tax purposes. An eligible entity with
at least two members can elect to be clas-
sified as either an association (and thus a
corporation under§301.7701–2(b)(2)) or
a partnership, and an eligible entity with
a single owner can elect to be classified
as an association or to be disregarded as
an entity separate from its owner.
Section 301.7701–3(f)(2) provides that
an eligible entity classified as a partner-
ship becomes a disregarded entity when
the entity’s membership is reduced to one
member. A disregarded entity becomes
classified as a partnership when the enti-
ty’s membership is increased to more
than one member.
Notice 99–6 provides that the Service
generally will accept reporting and pay-
ment of employment taxes with respect to
the employees of a disregarded entity if
made in one of two ways: (1) calculation,
reporting, and payment of all employment
tax obligations with respect to employees
of a disregarded entity by its owner (as
though the employees of the disregarded
entity are employed directly by the
owner) and under the owner’s name and
TIN; or (2) separate calculation, report-
ing, and payment of all employment tax
obligations by each state law entity with
respect to its employees under its own
name and TIN.
InSituation 1,X’s change in federal
tax classification from a partnership to a
disregarded entity is a change described
in§301.7701–3(f)(2). ThusXis required
to retain its EIN under§301.6109–
1(h)(1) if it chooses to calculate, report,
and pay its employment tax obligations
under its own name and EIN pursuant to
Notice 99–6 upon its federal tax classifi-
cation changing to a disregarded entity.
For all federal tax purposes other than
employment obligations or except as oth-
erwise provided in regulations or other
December 10, 20015732001–50 I.R.B.

guidance,Xmust use the TIN of its
owner pursuant to§301.6109–1(h)(2)(i).
InSituation 2, becauseYcalculates,
reports, and pays its employment tax obli-
gations under its own name and EIN prior
to its federal tax classification changing
from a disregarded entity to a partnership,
§301.6109–1(h)(2)(ii) requires thatY
retain its EIN for use for all federal tax
purposes as a partnership.
HOLDINGS
(1) If an entity classified as a partner-
ship becomes a disregarded entity for fed-
eral tax purposes and if the disregarded
entity chooses to calculate, report, and
pay its employment tax obligations under
its own name and EIN pursuant to Notice
99–6, the disregarded entity must retain
the same EIN for employment tax pur-
poses it used as a partnership. For all fed-
eral tax purposes other than employment
obligations or except as otherwise pro-
vided in regulations or other guidance, a
disregarded entity must use the TIN of its
owner.
(2) If an entity classified as a disre-
garded entity for federal tax purposes cal-
culates, reports, and pays its employment
tax obligations under its own name and
EIN pursuant to Notice 99–6 and if the
federal tax classification of that entity
changes to a partnership, the partnership
must retain the same EIN it used as a dis-
regarded entity.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Craig Gerson of the Office of
Associate Chief Counsel (Passthroughs
and Special Industries). For further infor-
mation regarding this revenue ruling, con-
tact Craig Gerson at (202) 622–3050 (not
a toll-free call).
Section 7520.—Valuation
Tables
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2001. See Rev. Rul. 2001–58, page
570.
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 2001. See Rev. Rul. 2001–58, page
570.
2001–50 I.R.B574December 10, 2001

Part II. Treaties and Tax Legislation
Subpart A.—Tax Conventions
and Other Related Items
Luxembourg Treaty Election
Announcement 2001–119
Following is a copy of the News
Release issued by the Director Interna-
tional (U.S. Competent Authority) on
November 9, 2001 (IR–2001–108).
U.S., LUXEMBOURG AGREE
ON INTERPRETATION OF TAX
TREATY’S TRANSITION RULES
WASHINGTON—The competent
authorities of the United States and Lux-
embourg have entered into a mutual
agreement concerning the interpretation
of the transition rules set forth in Article
30 (Entry Into Force) of the Convention
Between the Government of the United
States of America and the Government of
the Grand Duchy of Luxembourg for the
Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with
Respect to Taxes on Income and Capital,
signed at Luxembourg on April 3, 1996,
and entered into force on December 20,
2000 (the“Treaty”or“1996 Treaty”).
Paragraph 2 of Article 30 provides that
in the case of taxes withheld at source,
the Treaty generally has effect for
amounts paid or credited on or after the
first day of January next following the
date on which the Treaty enters into
force,i.e., for amounts paid or credited on
or after January 1, 2001. In the case of
taxes on other income and on capital
(“other taxes”), paragraph 2 provides that
the Treaty generally has effect for fiscal
periods beginning on or after the first day
of January next following the date on
which the Treaty enters into force,i.e., for
fiscal periods beginning on or after Janu-
ary 1, 2001.
Paragraph 3 of Article 30 provides that
where any greater relief from tax would
have been afforded to a person entitled to
the benefits of the Convention between
the United States and Luxembourg with
respect to taxes on income and property,
signed in Washington on December 18,
1962 (the“1962 Treaty”), the 1962 Treaty
shall, at the election of such person, con-
tinue to have effect in its entirety for the
first assessment period or taxable year
following the date on which the 1996
Treaty would otherwise have effect under
the provisions of paragraph 2.
Paragraph 4 of Article 30 provides that
the 1962 Treaty shall cease to have effect
in respect of income and capital to which
the 1996 Treaty applies in accordance
with paragraphs 2 or 3 of Article 30.
Questions have arisen concerning the
application of paragraphs 3 and 4 of
Article 30 of the 1996 Treaty, regarding
fiscal year taxpayers receiving income
that is subject to tax withheld at source.
In order to resolve potential ambiguities
and to provide certainty to taxpayers, the
United States and Luxembourg have
agreed to the following application of the
transition rules:
Calendar year taxpayers. If a calen-
dar year taxpayer in existence on
December 19, 2000, makes the elec-
tion under paragraph 3 of Article 30 of
the 1996 Treaty, the 1962 Treaty will
continue to apply to the taxpayer
through December 31, 2001, with
respect to both taxes withheld at
source and taxes on other income and
on capital. The 1962 Treaty will cease
to have effect with respect to the tax-
payer beginning on January 1, 2002.
Fiscal year taxpayers.If a fiscal
year taxpayer in existence on Decem-
ber 19, 2000, makes the election under
paragraph 3 of Article 30 of the 1996
Treaty, the 1962 Treaty will continue
to apply to the taxpayer with respect to
both taxes withheld at source and taxes
on other income and on capital
through the last day of the taxpayer’s
first fiscal year beginning on or after
January 1, 2001. The 1962 Treaty will
cease to have effect with respect to the
taxpayer beginning on the first day of
the taxpayer’s second fiscal year
beginning on or after January 1, 2001.
Thus, for example, if a taxpayer in
existence on December 19, 2000, with
a fiscal year that terminates on
November 30, makes the election
under paragraph 3 of Article 30 of the
1996 Treaty, the 1962 Treaty will con-
tinue to apply to the taxpayer with
respect to both taxes withheld at
source and taxes on other income and
on capital through November 30,
2002, and the 1962 Treaty will cease
to have effect with respect to the tax-
payer beginning on December 1, 2002.
***
Taxpayers that did not exist prior to
the date of entry into force of the 1996
Treaty, and taxpayers that were in exist-
ence but did not qualify for benefits under
the 1962 Treaty, will not be entitled to
claim the benefits of the 1962 Treaty
under the grandfather rule of Article
30(3).
An election to apply the 1962 Treaty
means that the 1962 Treaty, and not the
1996 Treaty, will apply in all respects to
the electing taxpayer.
For further information in the United
States, please contact Lynn Bartlett, IRS
Large & Mid-Size Business, Office of the
Director, International, Tax Treaty, ((202)
874–1550 (not a toll-free number)). For
further information in Luxembourg,
please contact Guy Heintz, Head of the
Division international relations of the
Administration of Direct Taxes, 40800–
2204.
December 10, 20015752001–50 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Disaster Relief With Respect
to Air Transportation Excise
Taxes
Notice 2001–77
This notice provides additional tax
relief under section 301(a) of the Air
Transportation Safety and System Stabili-
zation Act (the Act), Pub. L. No. 107–42,
115 Stat. 236, and informs taxpayers of a
change that will be made to the regula-
tions under§6071 of the Internal Rev-
enue Code.
Section 301(a) of the Act provides
relief to eligible air carriers with respect
to the deposit of taxes imposed by sub-
chapter C of chapter 33 of the Code (the
air transportation excise taxes). Under
section 301(a) of the Act, any deposit of
those taxes required to be made by an eli-
gible air carrier after September 10, 2001,
and before November 15, 2001, shall be
treated for purposes of the Code as timely
made if the deposit is made on or before
November 15, 2001. Section 301(a) of the
Act also provides that the Secretary of the
Treasury may extend the November 15,
2001, date to January 15, 2002.
Section 6071 of the Code provides that
the Secretary may prescribe the time for
filing any return by regulations when that
time is not prescribed in the Code. Sec-
tion 40.6071(a)–2 of the Excise Tax Pro-
cedural Regulations, as in effect for cal-
endar quarters beginning before October
1, 2001, provides that returns of the air
transportation excise taxes for the third
calendar quarter of 2001 are due by
November 30, 2001. Under§6151 of the
Code, the tax shown or required to be
shown on the return must be paid by the
due date of the return.
Under the authority granted to the Sec-
retary of the Treasury in section 301(a) of
the Act, any deposit of air transportation
excise taxes required to be made by an
eligible air carrier after September 10,
2001, and before January 15, 2002, shall
be treated for purposes of the Code as
timely made if the deposit is made on or
before January 15, 2002.
In addition, under the authority
granted the Secretary in§6071 of the
Code, the Service and Treasury Depart-
ment will issue regulations changing the
due date of certain returns filed by eli-
gible air carriers. Under these regulations,
an eligible air carrier’s Form 720,Quar-
terly Federal Excise Tax Return, for the
third calendar quarter of 2001 will be due
by January 15, 2002. Consequently, the
time for paying the air transportation
excise taxes shown or required to be
shown on the return also will be deferred.
Under§6151 of the Code, an eligible air
carrier will be required to pay such taxes
for the third calendar quarter of 2001 by
January 15, 2002.
Eligible air carriers that believe that
they are entitled to relief under this notice
should mark“Notice 2001–77”in red ink
at the top of their return and other docu-
ments submitted to the IRS.
The principal author of this notice is
Susan Athy of the Office of Associate
Chief Counsel (Passthroughs and Special
Industries). For further information
regarding this notice, please contact Ms.
Athy at (202) 622–3130 (not a toll-free
call).
Disaster Relief Distributions
by Charities to Victims of
September 11, 2001,
Terrorist Attacks
Notice 2001–78
Several charities have raised questions
about the practical application of existing
legal standards for distributing funds to
victims of the September 11, 2001, terror-
ist attacks against the United States. The
Internal Revenue Service recognizes the
unique circumstances caused by this trag-
edy and wishes to alleviate concerns that
might otherwise delay relief to victims.
Congress is considering clarifying leg-
islation in this area. While Congress is
considering legislation, the Service recog-
nizes the need to provide interim guid-
ance to charities regarding payments
made by reason of the death, injury, or
wounding of an individual incurred as a
result of the September 11, 2001, terrorist
attacks against the United States. Accord-
ingly, the Service will treat such pay-
ments made by a charity to individuals
and their families as related to the chari-
ty’s exempt purpose provided that the
payments are made in good faith using
objective standards.
This administrative treatment will con-
tinue to apply to any payments made to
such individuals before the earlier of final
legislative action addressing these issues
or December 31, 2002. The Service will
consider what, if any, additional guidance
is needed in this area.
Organizations that have questions con-
cerning this notice may contact Marvin
Friedlander at (202) 283–2300 (not a toll-
free number).
Rent Holidays for Qualified
Aircraft Leases
Notice 2001–79
PURPOSE
This notice provides tax relief under
§467 of the Internal Revenue Code for
certain aircraft leases entered into or
modified during the period beginning on
September 11, 2001, and ending on June
28, 2002. On September 11, 2001, terror-
ists used commercial airliners to damage
the Pentagon and to destroy the two
World Trade Center towers and other
buildings in the World Trade Center com-
plex. They also caused the crash of a
commercial airliner in Pennsylvania. In
response to dislocations in the aviation
industry resulting from these attacks, the
Air Transportation Safety and System
Stabilization Act (the Act), Pub. L. No.
107–42, established a loan guarantee pro-
gram for air carriers. The purpose of the
program is to assist air carriers who suf-
fered losses due to the terrorist attacks
and to whom credit is not otherwise rea-
sonably available, in order to facilitate a
safe, efficient, and viable commercial
aviation system. Office of Management
and Budget regulations implementing the
loan guarantee program provide that
applications to be included in the program
must be received on or before June 28,
2002. The regulations specify a number
of factors to be considered in evaluating
applications, including whether the appli-
cant’s creditors have made concessions
2001–50 I.R.B576December 10, 2001

that will improve the financial condition
of the applicant in a manner that will
enable the applicant to repay its Federally
guaranteed loan and provide commercial
air service on a financially sound basis
after repayment.
The Internal Revenue Service has
determined that it is appropriate, for the
period beginning on September 11, 2001,
and ending on June 28, 2002, to modify
the manner in which the regulations under
§467 are applied so as not to inhibit the
ability of lessors to provide favorable
financing terms to air carriers.
BACKGROUND
Section 467(a) provides that in the
case of a lessor or lessee under any§467
rental agreement, there shall be taken into
account for any taxable year the sum of
(1) the amount of rent that accrues dur-
ing such taxable year as determined under
§467(b), and (2) the interest for the year
on unpaid amounts taken into account as
rent or interest on rent for prior taxable
years. Under§467(b)(2), constant rental
accrual applies in the case of any rental
agreement that is a disqualified leaseback
or long-term agreement. Section
467(b)(4) provides that an agreement is a
leaseback if it is part of a leaseback trans-
action, or a long-term agreement if it is
for a term in excess of 75 percent of the
statutory recovery period for the property.
Section 1.467–3 of the Income Tax
Regulations provides that a leaseback or
long-term agreement will not be subject
to constant rental accrual unless (1) a
principal purpose for providing increasing
or decreasing rents is the avoidance of tax
and (2) the Commissioner determines
that, because of the tax avoidance pur-
pose, the agreement should be treated as
a disqualified leaseback or long-term
agreement. Under§1.467–3(a), the Com-
missioner has the authority to determine,
either on a case-by-case basis or in pub-
lished guidance relating to a certain type
or class of agreements, whether an agree-
ment is disqualified and thus subject to
constant rental accrual.
Under§1.467–3(c)(4), tax avoidance
will not be considered to be a principal
purpose for providing increasing or
decreasing rents if the annualized rents
allocable to each calendar year of the
rental agreement do not vary from the
average annual rents over the entire lease
term by more than 10 percent (the uneven
rent test). If this test is met, the leaseback
or long-term agreement will not be con-
sidered disqualified and will not be sub-
ject to constant rental accrual. In applying
the uneven rent test, certain rent holiday
periods are ignored.
GRANT OF RELIEF
In the case of a qualified aircraft lease
that does not meet the uneven rent test
and is entered into after September 10,
2001, and before June 29, 2002, the Com-
missioner, under the authority set forth in
§1.467–3(a), will not treat the agreement
as a disqualified leaseback or long-term
agreement if, disregarding one aviation
stabilization rent holiday period and any
rent allocated to such period, the agree-
ment meets the test set forth in§1.467–
3(c)(4). For purposes of this notice—
A rental agreement is a qualified air-
craft lease if the lessee is an air car-
rier (within the meaning of 49 U.S.C.
§40102(a)(2)) and at least 90 percent
of the property subject to the agree-
ment (determined on the basis of fair
market value as of the agreement
date) consists of aircraft (within the
meaning of 49 U.S.C.§40102(a)(6))
and replacement components; and
An aviation stabilization rent holiday
period is a consecutive period that
meets the following conditions: (1)
the period does not exceed six
months; (2) the period ends before
January 1, 2003; and (3) annualized
fixed rent during the period (deter-
mined by treating such period as a
rental period for purposes of§1.467–
1(j)(3)) is less than the average rent
allocated to all calendar years in the
lease term (determined by taking into
account the rent allocated to the rent
holiday period).
If a substantial modification of a rental
agreement occurs after September 10,
2001, and before June 29, 2002, and the
post-modification agreement is a quali-
fied aircraft lease, the relief granted in
this notice applies to the post-
modification agreement. For this purpose,
a modification is treated as a substantial
modification if the agreement (as in effect
before its modification) meets the test set
forth in§1.467–3(c)(4) and the entire
agreement (as modified) does not meet
that test.
The relief granted in this notice does
not affect whether an agreement (as in
effect before its modification) is a dis-
qualified leaseback or long-term agree-
ment, and, if so, whether the carryover
rule set forth in§1.467–1(f)(4)(iii)
applies.
The principal author of this notice is
Forest Boone of the Office of Associate
Chief Counsel (Income Tax & Account-
ing). For further information regarding
this notice, contact Mr. Boone at 202-
622-4960 (not a toll-free call).
26 CFR 601.201: Rulings and determination letters.
(Also Part I,§§851(b)(3), 852(b)(5), 853(a);
1.851–2, 1.853–1)
Rev. Proc. 2001–57
SECTION 1. PURPOSE
This revenue procedure sets forth con-
ditions under which a regulated invest-
ment company (RIC) that holds a partner-
ship interest is treated for certain
purposes as if it directly invested in the
assets held by the partnership. This rev-
enue procedure applies to an affected tax-
payer for purposes of qualifying as a RIC
under section 851(b)(3), for purposes of
the payment of exempt-interest dividends
under section 852(b)(5), and for purposes
of the passthrough of the foreign tax
credit under section 853.
SECTION 2. BACKGROUND
.01 The Internal Revenue Service
responds to a large number of letter ruling
requests from RICs that hold partnership
interests in master-feeder structures. In
order to save these taxpayers the time and
expense involved in obtaining a ruling,
the Service is issuing this revenue proce-
dure.
.02 In a typical master-feeder struc-
ture, a domestic corporation (Feeder
Fund) invests substantially all its assets in
an investment partnership (Master Part-
nership). Some Feeder Funds may invest
in more than one Master Partnership. A
Feeder Fund is registered as an open-end
management investment company under
the Investment Company Act of 1940 (the
December 10, 20015772001–50 I.R.B.

1940 Act), 15 U.S.C. 80a–1et seq., and
elects to be treated as a RIC under sub-
chapter M, part I, of the Code. A Master
Partnership is registered as a management
company under the 1940 Act.
.03. For purposes of determining its
required distribution under§4982(a) of
the Code, a Feeder Fund accounts for its
share of items of income, gain, loss, and
deduction of the Master Partnership as
they are taken into account by the Master
Partnership.SeeRev. Rul. 94–40 (1994–1
C.B. 274) modified by Rev. Rul. 94–40A
(1994–1 C.B. 276) (requiring a RIC to
include its share of partnership income on
a current basis in calculating the required
distribution to avoid excise tax liability
under§4982(a)(1) of the Code).See also
Rev. Proc. 94–71 (1994–2 C.B. 810)
(defining circumstances in which a RIC
may apply the income inclusion timing
rule of§706 rather than the current inclu-
sion rule of Rev. Rul. 94–40).
.04 A Feeder Fund commonly requests
that the Internal Revenue Service rule that
it will be deemed to own a proportionate
share of each asset of the Master Part-
nership for purposesof determining
whether it satisfies the requirements of
§§851(b)(3), 852(b)(5), and 853 of the
Code.
.05 Section 851(b) provides that cer-
tain requirements must be satisfied in
order for a domestic corporation to be
taxed as a RIC under subchapter M, part
I, of the Code.
.06 Section 851(b)(2) provides that, in
order to qualify as a RIC, at least 90 per-
cent of a corporation’s gross income must
be derived from dividends, interest, pay-
ments with respect to securities loans (as
defined in§512(a)(5)), gains from the
sale or other disposition of stocks, securi-
ties, foreign currencies, or other income
derived with respect to its business of
investing in such stocks, securities, or
currencies.
.07 Section 851(b)(3)(A) requires that,
in order for a corporation to qualify as a
RIC, at the close of each quarter of the
taxable year, at least 50 percent of the
value of the corporation’s total assets
must be represented by cash and cash
items (including receivables), Govern-
ment securities, securities of other RICs,
and other securities generally limited in
respect of any one issuer to an amount
not greater in value than 5 percent of the
value of the total assets of the corporation
and to not more than 10 percent of the
outstanding voting securities of such
issuer.
.08 Section 851(b)(3)(B) provides that,
in order for a corporation to qualify as a
RIC, not more than 25 percent of the cor-
poration’s total assets may be invested in
the securities (other than Government
securities and the securities of other
RICs) of any one issuer, or of two or
more issuers that the corporation controls
and which are determined, under regula-
tions, to be engaged in the same or simi-
lar trades or businesses or related trades
or businesses.
.09 Section 852(b)(5) provides that, if
at least 50 percent of the value (as
defined in§851(c)(4)) of a RIC’s total
assets at the close of each calendar quar-
ter consists of obligations described in
§103(a), the RIC is eligible to pay
exempt-interest dividends, which are
treated by the RIC’s shareholders as inter-
est excludable from gross income pursu-
ant to§103(a).
.10 Section 853(a) provides that, if
more than 50 percent of the value (as
defined in§851(c)(4)) of a RIC’s total
assets at the close of the taxable year con-
sists of stock or securities in foreign cor-
porations and if the RIC meets the
requirements of§852(a) for the taxable
year, then, for purposes of determining a
shareholder’s foreign tax credit under
§901, the RIC may elect to treat its
shareholders as if they had paid certain
foreign taxes paid by the RIC.
.11 A RIC’s allocable share of items of
income, gain, loss, deduction, and credit
of a partnership in which it holds an inter-
est is determined under subchapter K of
the Code. Section 702(a) provides that a
partner, in determining his income tax,
shall take into account separately his dis-
tributive share of such items as are set
forth in that section. Section 702(b) pro-
vides that the character of items stated in
§702(a) that are included in a partner’s
distributive share shall be determined as
if such items were realized directly from
the source from which they were realized
by the partnership, or incurred in the
same manner as incurred by the partner-
ship. Section 702(c) provides that, where
it is necessary to determine the gross
income of a partner, such amount shall
include that partner’s distributive share of
the gross income of the partnership. A
partner’s distributive share of income,
gain, loss, deduction, or credit is deter-
mined in accordance with the rules set
forth in section 704.
.12 The flush language of§851(b)
states that income derived from a partner-
ship or trust shall be treated as satisfying
the 90 percent requirement of§851(b)(2)
only to the extent that such income is
attributable to items of income of the
partnership or trust which would be
described in§851(b)(2) if earned directly
by the RIC. The legislative history of that
sentence indicates that it was intended to
clarify the general rule used to character-
ize items of income, gain, loss, deduction,
or credit includable in a partner’s dis-
tributive share, as applied to RICs that are
partners. It therefore explains the relation-
ship of§702 to the 90 percent test under
§851(b)(2).SeeS. Rep. No. 445, 100th
Cong., 2d Sess. 93 (1988).
SECTION 3. SCOPE
This revenue procedure applies to a
domestic corporation that meets the fol-
lowing requirements:
.01Itisregisteredasanopen-end
management investment company under
the 1940 Act and elects to be treated as a
RIC under subchapter M, part I, of the
Code.
.02 It is a publicly offered RIC as
defined in§67(c)(2)(B) of the Code and
§1.67–2T(g)(3)(iii) of the regulations.
.03 It invests substantially all its assets
in one or more Master Partnerships that
are registered as management companies
under the 1940 Act.
.04 Except as required by§1.704–3of
the regulations, its allocable share of each
item of the Master Partnership’s income,
gain, loss, deduction, and credit is propor-
tionate to its percentage of ownership of
the capital interests in the Master Partner-
ship.
SECTION 4. PROCEDURE
For purposes of qualifying as a RIC
under section 851(b)(3), for purposes of
the payment of exempt-interest dividends
under section 852(b)(5), and for purposes
of the passthrough of the foreign tax
credit under section 853, a domestic cor-
poration meeting the requirements of Sec-
tion 3 of this procedure is treated as if it
2001–50 I.R.B578December 10, 2001

directly invested in the assets held by the
Master Partnership in which it invests.
For these purposes, its interest in Master
Partnership assets is determined in accor-
dance with its percentage of ownership of
the capital interests in the Master Partner-
ship.
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective for
asset determinations that are made as of
dates after December 10, 2001.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Susan Thompson Baker of
the Office of the Associate Chief Counsel
(Financial Institutions & Products). For
further information regarding this revenue
procedure, contact her at (202) 622–3940
(not a toll-free call).
26 CFR 601.104: Collection functions.
(Also Part I, sections 6302, 6656; 31.6302–1,
1.6302–2, 31.6302–2, 40.6302(c)–1, 40.6302(c)–2,
31.6302(c)–3, 40.6302(c)–3, 40.6302(c)–4)
Rev. Proc. 2001–58
SECTION 1. PURPOSE
This revenue procedure provides guid-
ance with respect to the failure-to-deposit
penalty provisions of section 6656 of the
Internal Revenue Code (Code), as
amended by section 3304(c) of the Inter-
nal Revenue Service Restructuring and
Reform Act of 1998, Pub. L. No. 105–
206, 112 Stat. 742 (1998) (RRA). This
revenue procedure describes how the Ser-
vice will credit Federal tax deposits to
determine whether a failure-to-deposit
penalty under section 6656 should apply
to deposit periods beginning after Decem-
ber 31, 2001. This revenue procedure
applies only with respect to situations in
which deposits have not been made in
sufficient amounts to satisfy the cumula-
tive deposit obligations as of at least one
deposit due date.
SECTION 2. BACKGROUND
.01 Section 6656 of the Code provides
that in the case of any failure by any per-
son to deposit (as required by the Code or
regulations) on the date prescribed any
amount of tax in a government deposi-
tory, there will be imposed upon such per-
son a penalty equal to the applicable per-
centage of the amount of the
underpayment, unless it is shown that
such failure is due to reasonable cause
and not due to willful neglect. The appli-
cable percentage ranges from 2 to 15 per-
cent depending upon the lateness of the
deposit.
.02 Rev. Proc. 90–58 (1990–2 C.B.
642) effective for deposit periods begin-
ning after March 31, 1991, provided that
the Service will apply deposits for a
specified tax period in a date-made order
against deposit liabilities in a due-date
order. Thus, the Service applies a deposit
first to satisfy the oldest past due deposit
liability within the specified tax period.
The Service applies other credits to the
taxpayer’s account, such as overpayments
from previous tax periods, in a similar
fashion. Rev. Proc. 91–52 (1991–2 C.B
781) clarified and amplified the provi-
sions relating to the application of other
credits to taxpayer accounts.
.03 Under Rev. Proc. 90–58, the oldest
deposit liability in the specified tax period
is satisfied first, thus preventing the pen-
alty rate on that liability from escalating.
If, however, a depositor inadvertently
missed a single deposit early in a speci-
fied tax period, multiple cascading penal-
ties could result as payments that would
otherwise be sufficient to satisfy current
liabilities were applied to satisfy earlier
shortfalls.
.04 Notice 98–14 (1998–1 C.B. 585)
provided interim procedures that deposi-
tors may use to request abatement of the
failure-to-deposit penalty imposed by sec-
tion 6656 when the order in which the
Service applies deposits against deposit
liabilities, as set forth in Rev. Proc.
90–58, produces multiple failure-to-
deposit penalties as a result of a single
failure to deposit. Under that Notice,
depositors that wish to request relief are
instructed to call the toll-free number
shown on the penalty notice. Notice
98–14 applies to return periods beginning
after December 31, 1997.
.05 Section 3304(a) of RRA added
subsection (e) to section 6656 of the
Code, which permits a depositor receiv-
ing a penalty notice (with respect to any
deposit of tax made for a specific tax
return period) to designate, during the
90–day period beginning on the date of
the penalty notice, the deposit period or
periods within the specified tax period to
which a deposit of tax shall apply. Section
3304(d)(1) of RRA provides that section
6656(e) is effective for Federal tax depos-
its required to be made after January 18,
1999 (180 days after the July 22, 1998,
enactment of RRA).
.06 Rev. Proc. 99–10 (1999–1 C.B.
272) provided procedures for implement-
ing section 6656(e) of the Code as added
by RRA section 3304(a). In particular,
Rev. Proc. 99–10 provided guidance on
how a depositor may designate the appli-
cation of its Federal tax deposits for a
specified tax period to minimize the
failure-to-deposit penalty under section
6656 with respect to deposits required to
be made after January 18, 1999.
.07 Section 6656(e)(1) of the Code (as
added by section 3304(a) of RRA) was
amended by section 3304(c) of RRA to
provide that a deposit shall be applied to
the most recent period or periods within
the specified tax period to which the
deposit relates, unless the person making
such deposit designates a different period
or periods to which such deposit is to be
applied. Section 3304(d)(2) of RRA pro-
vides that this amendment is effective for
Federal tax deposits required to be made
after December 31, 2001.
SECTION 3. SCOPE
This procedure will apply with respect
to all taxes required to be deposited under
section 6302 of the Code and underlying
regulations that are reported on the fol-
lowing Internal Revenue Service forms:
Form 720,Quarterly Federal Excise Tax
Return
Form 940,Employer’s Annual Federal
Unemployment (FUTA) Tax Return
Form 941,Employer’s Quarterly Federal
Tax Return
Form 943,Employer’s Annual Tax Return
for Agricultural Employees
Form 945,Annual Return of Withheld
Federal Income Tax
Form CT-1,Employer’s Annual Railroad
Retirement Tax Return
December 10, 20015792001–50 I.R.B.

Form 1042,Annual Withholding Tax
Return for U.S. Source Income of Foreign
Persons
SECTION 4. APPLICATION
.01 Except as otherwise provided in
this revenue procedure, the Service will
apply Federal tax deposits for deposit
periods beginning after December 31,
2001, to the most recently ended deposit
period or periods within the specified tax
period to which the deposit relates and
will apply any excess to deposit periods
ending on or after the date of the deposit
in period-ending-date order. The applica-
tion of deposits to the most recently
ended deposit period will, in some cases,
prevent the cascading of penalties where
a depositor either fails to make deposits
or makes late deposits.
.02 Any depositor to whom the Service
mails a penalty notice for a specified tax
period beginning after December 31,
2001, may, within 90 days of the date of
the penalty notice, contact the Service
and designate the deposit period, or peri-
ods, within such specified tax period to
which the deposit(s) of, or credit(s)
against, the tax for the tax period are to
be applied. The depositor may either call
the toll-free number shown on the penalty
notice or write (including a revised sched-
ule of deposits) to the Accounts Manage-
ment Unit at the address of the IRS’s
Account Management site shown on the
penalty notice. The Service will adjust the
penalty amount to reflect the revised
schedule of deposits and notify the tax-
payer of the adjustment in writing.
.03 Under certain circumstances,
employers may deposit employment taxes
under the“safe harbor”rule of section
31.6302–1(f) of the Employment Taxes
and Collection of Income Tax at the
Source Regulations. Under circumstances
in which this rule applies, the Service
considers a depositor to have satisfied its
deposit obligations even if there is a
shortfall in the amount of taxes required
to be deposited for a deposit period. For
purposes of this revenue procedure, a
shortfall will be treated as a liability for a
deposit period (the make-up period) end-
ing immediately before the shortfall
make-up date and after the end of any
other deposit period ending before the
shortfall make-up date. Thus, if a shortfall
make-up date falls on the same date a
deposit is due for another deposit period,
the Service will apply a deposit made on
the shortfall make-up date to the shortfall
liability first. Any excess will then be
applied to deposit periods other than the
make-up period beginning with the most
recently ended of such other periods. If a
deposit is made before the shortfall
make-up date but after the end of a
deposit period for which the deposit obli-
gation has not been satisfied, the Service
will apply the deposit to the liability for
that deposit period first before applying
any excess to the shortfall. Similar
rules apply with regard to withheld
income taxes by agents withholding from
nonresident aliens and foreign corpora-
tions under section 1.6302–2(a)(1)(ii) of
the Income Tax Regulations. Under sec-
tions 40.6302(c)–1, 40.6302(c)–2,
40.6302(c)–3, and 40.6302(c)–4ofthe
Excise Tax Procedural Regulations,
depositors of excise taxes reportable on
Form 720 also are eligible to use certain
safe harbor rules. Because the safe harbor
underdeposits are satisfied by later pay-
ments, rather than later deposits, no spe-
cial rule regarding the application of
deposits is needed with respect to satis-
faction of the safe harbor underdeposits.
The rule for employment taxes is illus-
trated in section 5.04 of this revenue pro-
cedure.
.04 Under section 31.6302–1(c)(3) of
the regulations, a depositor that has accu-
mulated $100,000 or more of employ-
ment taxes must deposit those taxes by
the close of the next banking day. For
purposes of applying the rules of this rev-
enue procedure, the deposit required by
section 31.6302–1(c)(3) is treated as a
liability for a deposit period ending on the
day in which the depositor accumulates in
excess of $100,000 in employment taxes.
SECTION 5. EXAMPLES
.01Example 1—Elimination of Cas-
cading Penalty for Insufficient Timely
Deposit.
The following employment tax
example illustrates how the Service will
apply deposits to the most recently ended
deposit period. This ordering rule is simi-
larly applicable to deposits under section
6302 of railroad retirement taxes, FUTA
taxes, excise taxes, and income tax with-
held from nonresident aliens and foreign
corporations.
For the second calendar quarter of
2002, A, a semi-weekly employment tax
depositor within the meaning of section
31.6302–1 of the regulations, accumu-
lates the following employment tax
deposit liabilities for its bi-weekly pay
dates, and makes the following deposits
on the deposit due dates:
Deposit Due DateRequired DepositActual Deposit
04/17/02$ 8,000$ 6,000
05/01/02$ 6,000$ 6,000
05/15/02$ 5,000$ 5,000
05/30/02$ 7,000$ 7,000
06/12/02$ 8,000$ 7,000
06/26/02$ 9,000$ 9,000
During July 2002, A completes its
Form 941 for the second quarter and dis-
covers the April 17, 2002, and June 12,
2002, underdeposits. On July 31, 2002,
the due date for the Form 941, A files the
Form 941 and deposits $3,000. The Ser-
vice applies the deposits actually made to
the most recently ended deposit periods.
The Service then mails a notice to A
dated October 21, 2002, advising that A is
subject to the failure-to-deposit penalty in
the amount of $300. The penalty is calcu-
lated as follows:
2001–50 I.R.B580December 10, 2001

Deposit Due DateUnderdepositsDays LatePenalty RatePenalty Amount
04/17/02$ 2,00010510%$ 200
05/01/02$ 00N/A$ 0
05/15/02$ 00N/A$ 0
05/30/02$ 00N/A$ 0
06/12/02$ 1,0004910%$ 100
06/26/02$ 00N/A$ 0
TOTAL$ 300
A would have 90 days from October
21, 2002, in which to call the toll-free
number on the notice, or write the
Accounts Management Unit at the appro-
priate IRS Service Center, and designate
the deposit period, or periods, within the
specified tax period to which the deposits
are to be applied. In this case, however,
the manner in which the Service applied
the deposits avoids cascading penalties
and minimizes the failure-to-deposit pen-
alty for the quarter.
.02Example 2—Cascading Penalty
Under Section 6656(e).
This example will show how the appli-
cation of deposits to the most recently
ended deposit period will not always
eliminate cascading penalties. For the
second calendar quarter of 2002, B, a
monthly employment tax depositor within
the meaning of section 31.6302–1ofthe
regulations, pays its employees on the
first of every month. Instead of waiting
until the 15th day of the following month
to make its deposits, B normally makes
deposits on the 25th (or next banking day
thereafter) of each month in which the
liability is incurred. B pays its employees
on April 1, 2002. For some reason, B fails
to make the deposit on April 25, 2002.
For May, B pays its employees on May 1,
2002. On May 28, 2002 (the first banking
day after Saturday, May 25, 2002),
unaware of the underdeposit for April, B
makes a deposit to cover its May liability.
The Service applies this deposit to the
most recently ended deposit period,
which in this case is April 2002, instead
of the May 2002 liability as intended by
B. This cycle of deposits continues until
the end of the quarter. Instead of having a
failure-to-deposit penalty only for April,
B will be subject to a penalty for every
month in the quarter. B can, however,
minimize cascading penalties and reduce
the penalty amount by timely following
the procedures in section 4.02 of this rev-
enue procedure and designating May and
June as the deposit periods to which the
deposits are to be applied.
.03Example 3—Elimination of Cas-
cading Penalty for Late Deposits.
This example will show how the appli-
cation of deposits to the most recently
ended deposit period or periods will
affect the calculation of the failure-to-
deposit penalty in situations where the
depositor is late in making some or all of
its deposits. For the second calendar quar-
ter of 2002, C, a semi-weekly employ-
ment tax depositor, pays its employees
every Friday. C accumulates $10,000 in
employment tax deposit liability for each
of its weekly pay dates.
The table below shows the deposit
period ending date and due date for C’s
deposits. It also shows the date of each
deposit and the deposit period to which it
is applied under section 6656(e) of the
Code. The table shows how, under section
6656(e) and this revenue procedure, the
Service applies C’s deposits to the most
recently ended deposit period. Accord-
ingly, under section 6656(e), the Service
applies C’s deposit of April 22, 2002, and
subsequent deposits through June 24,
2002, to deposit liabilities for periods
which have ended, but for which the due
dates have not occurred. Applying depos-
its in this manner, C’s deposit liability for
the period ending April 12, 2002, is not
satisfied until C makes its deposit of June
26, 2002. Nonetheless, applying the
deposits to the most recently ended
deposit period avoids cascading penalties
and minimizes the failure-to-deposit pen-
alty for the quarter.
Deposit Period Ending DateDue Date of DepositDate of Deposit that Service Applies to Deposit Period and
Applicable Penalty under Section 6656(e)
04/05/0204/10/0204/10/02$ 0
04/12/0204/17/0206/26/02$ 1,000
04/19/0204/24/0204/22/02$ 0
04/26/0205/01/0204/29/02$ 0
05/03/0205/08/0205/06/02$ 0
05/10/0205/15/0205/13/02$ 0
05/17/0205/22/0205/20/02$ 0
05/24/0205/30/0205/27/02$ 0
05/31/0206/05/0206/03/02$ 0
06/07/0206/12/0206/10/02$ 0
06/14/0206/19/0206/17/02$ 0
December 10, 20015812001–50 I.R.B.

Deposit Period Ending DateDue Date of DepositDate of Deposit that Service Applies to Deposit Period and
Applicable Penalty under Section 6656(e)
06/21/0206/26/0206/24/02$ 0
06/28/0207/03/0207/03/02$ 0
TOTALPENALTY$ 1,000
.04Example 4—Safe Harbor Deposits.
(1)Facts.This example will show how
the application of employment tax depos-
its to the most recently ended deposit
period or periods will be accomplished in
situations where the depositor is also
making a deposit by the shortfall make-up
date in order to qualify for the safe harbor
in section 31.6302–1(f) of the regulations.
For the second calendar quarter of 2002,
D, a semi-weekly employment tax
depositor, pays its employees every Fri-
day. D accumulates $10,000 in employ-
ment tax deposit liability for each of its
weekly pay dates. D makes timely depos-
its of employment taxes in the amount of
$9,800 on April 10, 17, and 24, 2002.
Under section 31.6302–1(f), D must
make a deposit of $600 by the shortfall
make-up date, May 15, 2002. D also must
make a deposit of employment taxes for
the deposit period May 8–10, 2002, on or
before May 15, 2002.
(2)Deposit made on shortfall make-up
date.D deposits $9,800 on May 1 and
May 8, 2002, and $10,200 on May 15,
2002. The May 1 deposit is applied to the
deposit period April 24–26, 2002, and the
May 8 deposit is applied to the deposit
period May 1–3, 2002. Because the May
15 deposit is made on the shortfall
make-up date, under section 4.03 of this
revenue procedure, the Service first
applies $600 to the shortfall liability for
April. Accordingly, D has satisfied sec-
tion 31.6302–1(f) of the regulations for
the three deposits in April and owes no
penalty with respect to those deposits.
The Service applies the remaining $9,600
to the deposit period ending May 10,
2002, leaving an underdeposit of $400.
As this amount is greater than 2 percent
of the deposit liability, D will not satisfy
section 31.6302–1(f), and will be subject
to the failure-to-deposit penalty. The
amount of the penalty will depend on
when D satisfies the underdeposit.
(3)Deposit made prior to shortfall
make-up date.Instead of making the
deposit on May 15, 2002, as in (2) above,
D makes the $10,200 deposit on May 14,
2002. Because the deposit is made prior
to the shortfall make-up date, under sec-
tion 4.03 of this revenue procedure, the
Service first applies $10,000 to the
deposit liability for the deposit period
ending May 10, 2002. This liability is
fully satisfied. The Service applies the
remaining $200 to satisfy the remainder
of the deposit liability for the deposit
period ending May 3, 2002. D will not
satisfy section 31.6302–1(f) of the regula-
tions for the three deposits in April, and
will be subject to the failure-to-deposit
penalty. The amount of the penalty will
depend on when D satisfies the underde-
posits.
(4)Designation.In either situation
described in this example, D may timely
contact the Service under the procedures
in section 4.02 of this revenue procedure
and designate the deposit periods (includ-
ing the make-up period) to which the
deposits are to be applied.
.05Example 5—Deposits Made Under
the One-Day Rule.
This example will show how the appli-
cation of deposits to the most recently
ended deposit period or periods will be
accomplished in situations where the
depositor becomes subject to the one-day
rule of section 31.6302–1(c)(3) of the
regulations. For the second calendar quar-
ter of 2002, E, a semi-weekly employ-
ment tax depositor, makes a timely
deposit of employment taxes on April 10,
2002, for the deposit period April 3,
2002, through April 5, 2002. On Monday,
April 8, 2002, E accumulates $110,000 in
employment taxes with respect to wages
paid on that date. Under section 31.6302–
1(c)(3), E deposits those taxes by the end
of the next business day, April 9, 2002.
Under this revenue procedure, the deposit
required by section 31.6302–1(c)(3) is
treated as a liability for a deposit period
ending on the day in which E accumu-
lates in excess of $100,000 in employ-
ment taxes. Accordingly, the Service
applies E’s deposit on April 9, 2002, to
the one-day deposit liability for the
deposit period ending April 8, 2002. E’s
deposit on April 10, 2002, is then applied
to the liability for the deposit period end-
ing April 5, 2002.
SECTION 6. EFFECT ON OTHER
DOCUMENTS
.01 Rev. Proc. 99–10 is obsoleted with
respect to federal tax deposit periods
beginning after December 31, 2001. Rev.
Proc. 99–10 continues to apply to depos-
its that are required to be made after
January 18, 1999, and relate to deposit
periods ending on and before December
31, 2001.
.02 Notice 98–14 continues to apply to
deposits required to be made on or before
January 18, 1999, with respect to return
periods beginning after December 31,
1997.
.03 Rev. Proc. 90–58 and Rev. Proc.
91–52 are obsoleted.
SECTION 7. EFFECTIVE DATE
This revenue procedure is effective for
federal tax deposit periods beginning
after December 31, 2001.
SECTION 8. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Charles A. Hall of the Office
of Associate Chief Counsel, Procedure
and Administration (Administrative Pro-
visions and Judicial Practice Division).
For further information regarding this
revenue procedure, contact Charles A.
Hall at (202) 622–4940 (not a toll-free
call).
2001–50 I.R.B582December 10, 2001

Part IV. Items of General Interest
Additional Notice Explaining
the Saver’s Tax Credit for
Contributions by Individuals to
Employer Retirement Plans
and IRAs
Announcement 2001–120
This announcement provides a notice
in Spanish that employers can use to
inform Spanish-speaking employees of
the new saver’s credit available to eligible
employees beginning next year. Previ-
ously, in Announcement 2001–106
(2001–44 I.R.B. 416) the Internal Rev-
enue Service published a series of ques-
tions and answers concerning the saver’s
credit. That announcement also provided
a notice to employees in English.
Employers are encouraged to tell their
employees about the credit. Employers
can inform employees in any way they
choose, including use of the notice set out
below.
Notificación para los empleados sobre
el Crédito de Ahorro
En esta notificación se le explica cómo
podría usted pagar menos impuestos con-
tribuyendo a [insert name of employer’s
plan/inserte el nombre del plan proporcio-
nado por el empleador o patrono] (en
adelante denominado el“Plan”)oaun
plan de ahorro para la jubilación (en
adelante denominado“IRA”).
A partir del 2002, si usted hace con-
tribuciones al Plan o a una cuenta IRA,
podráreclamar un crédito tributario lla-
mado“crédito de ahorro”. Este crédito
podría reducir el impuesto federal sobre
el ingreso que usted paga dólar por dólar.
La cuantía del crédito que usted puede
obtener se basaráen las contribuciones
que haga y en su tasa de crédito corre-
spondiente. Esta tasa puede variar desde
un mínimo del 10% hasta un máximo del
50%, dependiendo de su ingreso bruto
ajustado, o sea, que cuanto más bajo sea
su ingreso tanto más alta serásu tasa de
crédito. La tasa de crédito depende tam-
bién de su estado civil para efectos de la
declaración. Véase la tabla que aparece al
final de esta notificación para calcular su
tasa de crédito.
La contribuciónmáxima que se puede
hacer para el crédito para un individuo es
de $2,000. Si usted es casado que pre-
senta una declaración conjunta, la con-
tribuciónmáxima que usted y su cónyuge
pueden hacer para el crédito es de $2,000
cada uno.
Usted puede obtener este crédito si
reúne los requisitos siguientes:
•Ha cumplido los 18 años de edad.
•No es un estudiante a tiempo
completo.
•No es reclamado como dependiente
en la declaración de otro.
•Tiene un ingreso bruto ajustado
(indicado en su declaraciónde
impuesto para el año del crédito) que
no excede de:
$50,000, si es casado que presenta una
declaración conjunta;
$37,500 si es cabeza de familia con
una persona calificada;
$25,000 si es soltero o casado que
presenta una declaración separada.
Ejemplo:Susana y Juan están casados
y presentan una declaración conjunta del
impuesto federal sobre el ingreso. Para el
2002, su ingreso bruto ajustado habría
sido $34,000 si no hubieran hecho nin-
guna contribución para su jubilación. En
el año 2002, Susana decidióhacer una
contribución de $2,000 a su plan 401(k).
Juan hizo una contribución deducible de
$2,000 a una cuenta IRA para el año
2002. Debido a estas contribuciones su
ingreso bruto ajustado para el 2002 será
de $30,000. Si su impuesto federal sobre
el ingreso hubiera sido $3,000 (después
de aplicar cualquier otro crédito al que
tuvieran derecho) sin haber hecho nin-
guna contribución para la jubilación,
entonces su impuesto federal sobre el
ingreso como resultado de haber hecho
contribuciones a la jubilación por un total
de $4,000 sería solamente de $400
después de aplicar el crédito de ahorro y
otros beneficios tributarios aplicables a
las contribuciones para la jubilación. Por
lo tanto, al poner $4,000 para su jubi-
lación, Susana y Juan han reducido tam-
bién su impuesto en $2,600.
De la contribución anual que puede
hacerse para el crédito habráque deducir
cualquier distribución tributable de un
plan de jubilación o de una cuenta IRA
que usted o su cónyuge reciba durante el
año en que usted reclame el crédito,
durante los 2 años precedentes o durante
el período después de finalizar el año para
el que usted reclame el crédito o antes del
plazo establecido para presentar su
declaración para ese año. Una dis-
tribución de una cuenta IRA Roth que no
sea una reinversión se tendráen cuenta
para esta deducción, aunque la dis-
tribución no sea tributable. Despuésde
estas deducciones, la contribución anual
máxima que puede hacerse para el crédito
por persona es de $2,000.
Ejemplo:El ingreso bruto ajustado de
Marco para el 2002 es lo suficientemente
bajo como para poder reclamar el crédito
ese añoyél difiere $3,000 de su paga
para su plan 401(k) en el 2002. En el año
2001, Marco hizo un retiro por dificulta-
des excepcionales de $400 de su plan
patronal y en el 2002 hace un retiro de
$800 de su cuenta IRA. El crédito de
ahorro para el 2002 de Marco se basará
en las contribuciones de $1,800 ($3,000–
$400–$800).
La cantidad de su crédito de ahorro no
cambiarála cantidad de sus créditos tribu-
tarios reembolsables. Un crédito tributario
reembolsable, como el crédito por ingreso
del trabajo o la cantidad reembolsable de
su crédito tributario por hijos, es una can-
tidad que usted recibiría como un reem-
bolso, aún en el caso de que no debiera
ningún impuesto.
La cantidad de su crédito de ahorro en
cualquier año no puede exceder de la can-
tidad del impuesto que de otro modo
usted tendría que pagar (sin incluir cual-
quier otro crédito reembolsable o el
crédito por gastos de adopción) en cual-
quier año. Si su impuesto debido se
reduce a cero debido a otros créditos
reembolsables, tales como el Crédito
Hope, entonces usted no tendráderecho
al crédito de ahorro.
December 10, 20015832001–50 I.R.B.

TASAS DE CRÉDITO
Si su estado civil para efectos de la declaraciónes
“casado que presenta una declaración conjunta”y
su ingreso bruto ajustado es:Su tasa de crédito será:
$0–$30,00050% de la contribución
$30,001–$32,50020% de la contribución
$32,501–$50,00010% de la contribución
Más de $50,000Crédito no disponible
Si su estado civil para efectos de la declaraciónes
“cabeza de familia”y su ingreso bruto ajustado es:Su tasa de crédito será:
$0–$22,50050% de la contribución
$22,501–$24,37520% de la contribución
$24,376–$37,50010% de la contribución
Más de $37,500Crédito no disponible
Si su estado civil para efectos de la declaraciónes
“soltero”,“casado que presenta una declaración separada”
o“viudo(a) calificado(a) y su ingreso bruto ajustado es:Su tasa de crédito será:
$0–$15,00050% de la contribución
$15,001–$16,25020% de la contribución
$16,251–$25,00010% de la contribución
Más de $25,000Crédito no disponible
Withdrawal of Proposed
Regulations Relating to
Certain Corporate
Reorganizations Involving
Disregarded Entities
Announcement 2001–121
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Withdrawal of notice of pro-
posed rulemaking.
SUMMARY: This document withdraws a
notice of proposed rulemaking (REG–
106186–98, 2000–23 I.R.B. 1226) relat-
ing to certain corporate reorganizations
involving disregarded entities. The pro-
posed regulations were published in the
Federal Registeron May 16, 2000. After
consideration of the comments received,
the IRS and Treasury have decided to
withdraw the proposed regulations and
issue new proposed regulations.
DATES: These proposed regulations are
withdrawn November 15, 2001.
FOR FURTHER INFORMATION CON-
TACT: Reginald Mombrun (202) 622–
7750 (not a toll-free call).
SUPPLEMENTARY INFORMATION:
Background
On May 16, 2000, the IRS issued pro-
posed regulations relating to certain cor-
porate reorganizations involving disre-
garded entities (65 FR 31115). After
consideration of comments received on
the proposed regulations, the IRS and
Treasury have decided to issue new pro-
posed regulations on this matter. Accord-
ingly, the proposed regulations published
on May 16, 2000, are withdrawn.
Drafting Information
The principal author of this withdrawal
announcement is Reginald Mombrun of
the Office of the Associate Chief Counsel
(Corporate).
*****
Withdrawal of Notices of Proposed
Rulemaking
Accordingly, under the authority of 26
U.S.C. 7805, the notice of proposed rule-
making published in theFederal Regis-
teron May 16, 2000 (65 FR 31115), is
hereby withdrawn.
Robert E. Wenzel,
Deputy Commissioner of
Internal Revenue.
(Filed by the Office of the Federal Register on
November 14, 2001, 8:45 a.m., and published in the
issue of the Federal Register for November 15,
2001, 66 F.R. 57400)
2001–50 I.R.B584December 10, 2001

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as“rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle
applied to A, and the new ruling holds
that the same principle also applies to B,
the earlier ruling is amplified. (Compare
withmodified, below).
Clarifiedis used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial difference between them.
Modifiedis used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but not
to B, and the new ruling holds that it
applies to both A and B, the prior ruling
is modified because it corrects a pub-
lished position. (Compare withamplified
andclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used
in a ruling that lists previously published
rulings that are obsoleted because of
changes in law or regulations. A ruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revokeddescribes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.
Supersededdescribes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example,modified
andsupersededdescribes a situation
where the substance of a previously pub-
lished ruling is being changed in part and
is continued without change in part and it
is desired to restate the valid portion of
the previously published ruling in a new
ruling that is self contained. In this case,
the previously published ruling is first
modified and then, as modified, is super-
seded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security
Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Intemal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
December 10, 2001i2001–50 I.R.B.

Numerical Finding List
1
Bulletins 2001–27 through 2001–49
Announcements:
2001–69, 2001–27 I.R.B.23
2001–70, 2001–27 I.R.B.23
2001–71, 2001–27 I.R.B.26
2001–72, 2001–28 I.R.B.39
2001–73, 2001–28 I.R.B.40
2001–74, 2001–28 I.R.B.40
2001–75, 2001–28 I.R.B.42
2001–76, 2001–29 I.R.B.67
2001–77, 2001–30 I.R.B.83
2001–78, 2001–30 I.R.B.87
2001–79, 2001–31 I.R.B.97
2001–80, 2001–31 I.R.B.98
2001–81, 2001–33 I.R.B.175
2001–82, 2001–32 I.R.B.123
2001–83, 2001–35 I.R.B.205
2001–84, 2001–35 I.R.B.206
2001–85, 2001–36 I.R.B.219
2001–86, 2001–35 I.R.B.207
2001–87, 2001–35 I.R.B.208
2001–88, 2001–36 I.R.B.220
2001–89, 2001–38 I.R.B.291
2001–90, 2001–35 I.R.B.208
2001–91, 2001–36 I.R.B.221
2001–92, 2001–39 I.R.B.301
2001–93, 2001–44 I.R.B.416
2001–94, 2001–39 I.R.B.303
2001–95, 2001–39 I.R.B.303
2001–96, 2001–41 I.R.B.317
2001–97, 2001–40 I.R.B.310
2001–98 2001–41 I.R.B.317
2001–99 2001–42 I.R.B.340
2001–100, 2001–41 I.R.B.317
2001–101, 2001–43 I.R.B.374
2001–102, 2001–42 I.R.B.340
2001–103, 2001–43 I.R.B.375
2001–104, 2001–43 I.R.B.376
2001–105, 2001–43 I.R.B.376
2001–106, 2001–44 I.R.B.416
2001–107, 2001–44 I.R.B.419
2001–108, 2001–44 I.R.B.419
2001–109, 2001–45 I.R.B.485
2001–110, 2001–45 I.R.B.486
2001–111, 2001–45 I.R.B.486
2001–112, 2001–46 I.R.B.494
2001–113, 2001–46 I.R.B.494
2001–114, 2001–47 I.R.B.528
2001–115, 2001–48 I.R.B.539
2001–116, 2001–48 I.R.B.539
2001–117, 2001–49 I.R.B.567
2001–118, 2001–48 I.R.B.540
Court Decisions:
2070, 2001–31 I.R.B.90
2071, 2001–44 I.R.B.385
2072, 2001–44 I.R.B.379
Notices:
2001–39, 2001–27 I.R.B.3
2001–41, 2001–27 I.R.B.2
2001–42, 2001–30 I.R.B.70
2001–43, 2001–30 I.R.B.72
2001–44, 2001–30 I.R.B.77
2001–45, 2001–33 I.R.B.129
2001–46, 2001–32 I.R.B.122
2001–47, 2001–36 I.R.B.212
2001–48, 2001–33 I.R.B.130
2001–49, 2001–34 I.R.B.188
2001–50, 2001–34 I.R.B.189
2001–51, 2001–34 I.R.B.190
2001–52, 2001–35 I.R.B.203
2001–53, 2001–37 I.R.B.225
2001–54, 2001–37 I.R.B.225
2001–55, 2001–39 I.R.B.299
2001–56, 2001–38 I.R.B.277
2001–57, 2001–38 I.R.B.279
2001–58, 2001–39 I.R.B.299
2001–59, 2001–41 I.R.B.315
2001–60, 2001–40 I.R.B.304
2001–61, 2001–40 I.R.B.305
2001–62, 2001–40 I.R.B.307
2001–63, 2001–40 I.R.B.308
2001–64, 2001–41 I.R.B.316
2001–65, 2001–43 I.R.B.369
2001–66, 2001–44 I.R.B.396
2001–67, 2001–49 I.R.B.544
2001–68, 2001–47 I.R.B.504
2001–69, 2001–46 I.R.B.491
2001–70, 2001–45 I.R.B.437
2001–71, 2001–48 I.R.B.530
2001–72, 2001–49 I.R.B.548
2001–73, 2001–49 I.R.B.549
2001–74, 2001–49 I.R.B.551
Proposed Regulations:
REG–110311–98, 2001–35 I.R.B.204
REG–106917–99, 2001–27 I.R.B.4
REG–103735–00, 2001–35 I.R.B.204
REG–103736–00, 2001–35 I.R.B.204
REG–107151–00, 2001–43 I.R.B.370
REG–100548–01, 2001–29 I.R.B.67
REG–106431–01, 2001–37 I.R.B.272
REG–125161–01, 2001–48 I.R.B.538
REG–126485–01, 2001–49 I.R.B.555
REG–137519–01, 2001–49 I.R.B.559
REG–142686–01, 2001–49 I.R.B.561
REG–142499–01, 2001–45 I.R.B.476
Railroad Retirement Quarterly Rates:
2001–27, I.R.B.1
2001–41, I.R.B.314
Revenue Procedures:
2001–39, 2001–28 I.R.B.38
2001–40, 2001–33 I.R.B.130
2001–41, 2001–33 I.R.B.173
2001–42, 2001–36 I.R.B.212
2001–43, 2001–34 I.R.B.191
2001–44, 2001–35 I.R.B.203
Revenue Procedures—Continued
2001–45, 2001–37 I.R.B.227
2001–46, 2001–37 I.R.B.263
2001–47, 2001–42 I.R.B.332
2001–48, 2001–40 I.R.B.308
2001–49, 2001–39 I.R.B.300
2001–50, 2001–45 I.R.B.437
2001–51, 2001–43 I.R.B.369
2001–52, 2001–46 I.R.B.491
2001–53, 2001–47 I.R.B.506
2001–54, 2001–48 I.R.B.530
2001–55, 2001–49 I.R.B.552
Revenue Rulings:
2001–30, 2001–29 I.R.B.46
2001–33, 2001–32 I.R.B.118
2001–34, 2001–28 I.R.B.31
2001–35, 2001–29 I.R.B.59
2001–36, 2001–32 I.R.B.119
2001–37, 2001–32 I.R.B.100
2001–38, 2001–33 I.R.B.124
2001–39, 2001–33 I.R.B.125
2001–40, 2001–38 I.R.B.276
2001–41, 2001–35 I.R.B.193
2001–42, 2001–37 I.R.B.223
2001–43, 2001–36 I.R.B.209
2001–44, 2001–37 I.R.B.223
2001–45, 2001–42 I.R.B.323
2001–46, 2001–42 I.R.B.321
2001–47, 2001–39 I.R.B.293
2001–48, 2001–42 I.R.B.324
2001–49, 2001–41 I.R.B.312
2001–50, 2001–43 I.R.B.343
2001–51, 2001–45 I.R.B.427
2001–52, 2001–45 I.R.B.434
2001–53, 2001–46 I.R.B.489
2001–54, 2001–46 I.R.B.490
2001–55, 2001–47 I.R.B.497
2001–56, 2001–47 I.R.B.500
2001–57, 2001–46 I.R.B.488
Treasury Decisions:
8947, 2001–28 I.R.B.36
8948, 2001–28 I.R.B.27
8949, 2001–28 I.R.B.33
8950, 2001–28 I.R.B.34
8951, 2001–29 I.R.B.63
8952, 2001–29 I.R.B.60
8953, 2001–29 I.R.B.44
8954, 2001–29 I.R.B.47
8955, 2001–32 I.R.B.101
8956, 2001–32 I.R.B.112
8957, 2001–33 I.R.B.125
8958, 2001–34 I.R.B.183
8959, 2001–34 I.R.B.185
8960, 2001–34 I.R.B.176
8961, 2001–35 I.R.B.194
8962, 2001–35 I.R.B.201
8963, 2001–35 I.R.B.197
8964, 2001–42 I.R.B.320
8965, 2001–43 I.R.B.344
8966, 2001–45 I.R.B.422
1
A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 2001–1 through 2001–26 is
in Internal Revenue Bulletin 2001–27, dated July 2, 2001.
2001–50 I.R.BiiDecember 10, 2001

Finding List of Current Actions
on Previously Published Items
1
Bulletins 2001–27 through 2001–49
Announcements:
2000–48
Modified by
Notice 2001–43, 2001–30 I.R.B.72
Notices:
98–52
Modified by
Notice 2001–56, 2001–38 I.R.B.277
99–41
Modified and superseded by
Notice 2001–62, 2001–38 I.R.B.307
2001–4
Modified by
Notice 2001–43, 2001–30 I.R.B.72
2001–9
Modified by
Notice 2001–46, 2001–32 I.R.B.122
2001–15
Supplemented by
Notice 2001–51, 2001–34 I.R.B.190
2001–42
Modified by
Notice 2001–57, 2001–38 I.R.B.279
2001–70
Clarified and supplemented by
Notice 2001–74, 2001–49 I.R.B.551
Proposed Regulations:
LR–97–79
Withdrawn by
REG–100548–01, 2001–29 I.R.B.67
LR–107–84
Withdrawn by
REG–100548–01, 2001–29 I.R.B.67
REG–110311–98
Supplemented by
T.D. 8961, 2001–35 I.R.B.194
REG–106917–99
Corrected by
Ann. 2001–86, 2001–35 I.R.B.207
REG–103735–00
Supplemented by
T.D. 8961, 2001–35 I.R.B.194
REG–103736–00
Supplemented by
T.D. 8961, 2001–35 I.R.B.194
REG–107186–00
Corrected by
Ann. 2001–71, 2001–27 I.R.B.26
Proposed Regulations—Continued
REG–130477–00
Supplemented by
Ann. 2001–82, 2001–32 I.R.B.123
REG–130481–00
Supplemented by
Ann. 2001–82, 2001–32 I.R.B.123
Revenue Procedures:
83–74
Revoked by
Rev. Proc. 2001–49, 2001–39 I.R.B.300
84–84
Revoked by
Rev. Proc. 2001–49, 2001–39 I.R.B.300
93–27
Clarified by
Rev. Proc. 2001–43, 2001–34 I.R.B.191
97–13
Modified by
Rev. Proc. 2001–39, 2001–28 I.R.B.38
97–19
Modified by
Notice 2001–62, 2001–40 I.R.B.307
98–44
Superseded by
Rev. Proc. 2001–40, 2001–33 I.R.B.130
99–27
Superseded by
Rev. Proc. 2001–42, 2001–36 I.R.B.212
99–49
Modified and amplified by
Rev. Proc. 2001–46, 2001–37 I.R.B.263
2000–20
Modified by
Notice 2001–42, 2001–30 I.R.B.70
Rev. Proc. 2001–55, 2001–49 I.R.B.552
2000–27
Modified by
Rev. Proc. 2001–55, 2001–49 I.R.B.552
2000–28
Superseded by
Rev. Proc. 2001–50, 2001–45 I.R.B.437
2000–39
Corrected by
Ann. 2001–73, 2001–28 I.R.B.40
Superseded by
Rev. Proc. 2001–47, 2001–42 I.R.B.332
2000–48
Superseded by
Rev. Proc. 2001–54, 2001-48 I.R.B.530
2001–2
Modified by
Rev. Proc. 2001–41, 2001–33 I.R.B.173
Revenue Procedures—Continued
2001–3
Modified by
Rev. Proc. 2001–51, 2001–43 I.R.B.369
2001–6
Modified by
Notice 2001–42, 2001–30 I.R.B.70
Rev. Proc. 2001–55, 2001–49 I.R.B.552
Revenue Rulings:
57–589
Obsoleted by
REG–106917–99, 2001–27 I.R.B.4
65–316
Obsoleted by
REG–106917–99, 2001–27 I.R.B.4
67–274
Amplified by
Rev. Rul. 2001–46, 2001–42 I.R.B.321
68–125
Obsoleted by
REG–106917–99, 2001–27 I.R.B.4
69–563
Obsoleted by
REG–106917–99, 2001–27 I.R.B.4
70–379
Obsoleted by
Rev. Rul. 2001–39, 2001–33 I.R.B.125
74–326
Obsoleted by
REG–106917–99, 2001–27 I.R.B.4
78–127
Modified by
Rev. Rul. 2001–40, 2001–38 I.R.B.276
78–179
Obsoleted by
REG–106917–99, 2001–27 I.R.B.4
89–42
Modified and superseded by
Rev. Rul. 2001–48, 2001–42 I.R.B.324
90–95
Distinguished by
Rev. Rul. 2001–42, 2001–42 I.R.B.321
92–19
Supplemented by
Rev. Rul. 2001–38, 2001–33 I.R.B.124
97–31
Modified and superseded by
Rev. Rul. 2001–48, 2001–42 I.R.B.324
Treasury Decisions:
8948
Corrected by
Ann. 2001–90, 2001–35 I.R.B.208
1
A cumulative list of current actions on previously published
items in Internal Revenue Bulletins 2001–1 through 2001–26 is
in Internal Revenue Bulletin 2001–27, dated July 2, 2001.
December 10, 2001iii2001–50 I.R.B.