Internal Revenue Bulletin 2012-6 (PDF rendition): IRS Announcements

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Bulletin No. 201
2-6
February 6, 2012
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. 2012–6, page 349.
Insurance companies; interest rate tables.Prevailing
state assumed interest rates are provided for the determina-
tion of reserves under section 807 of the Code for contracts
issued in 2011 and 2012. Rev. Rul. 92–19 supplemented in
part.
Rev. Rul. 2012–7, page 362.
Federal rates; adjusted federal rates; adjusted federal
long-term rate and the long-term exempt rate.For pur-
poses of sections 382, 642, 1274, 1288, and other sections
of the Code, tables set forth the rates for February 2012.
T.D. 9563, page 354.
Final regulations under section 954 of the Code provide guid-
ance relating to foreign base company sales income in cases
in which personal property sold by a controlled foreign corpo-
ration is purchased, sold, manufactured, produced, grown or
extracted by one or more branches of the controlled foreign
corporations.
Announcement 2012–6, page 366.
This document contains changes to Publication 1220,Spec-
ifications for Filing Forms 1097, 1098, 1099, 3921, 3922,
5498, and W-2G Electronically(Rev. 9–2011), Publication
1187,Specification for Filing Form 1042-S, Foreign Person’s
U.S. Source Income Subject to Withholding, Electronically
(Rev. 10–2011), and Publication 1239,Specifications for
Filing Form 8027, Employer’s Annual Information Return of Tip
Income and Allocated Tips, Electronically(Rev. 10–2011).
Rev. Procs. 2011–40, 2011–50, and 2011–51 corrected.
EMPLOYEE PLANS
Announcement 2012–7, page 367.
This document contains a correction to Rev. Proc. 2012–8,
2012–1 I.R.B. 235, which contains a typographical error in
section 6.07(5). This announcement corrects that error. Rev.
Proc. 2012–8 corrected.
ADMINISTRATIVE
Notice 2012–12, page 365.
Restitution payments to victims of human trafficking.
This notice advises taxpayers that mandatory restitution pay-
ments awarded to victims of human trafficking under 18 U.S.C.
section 1593 are excluded from gross income under section
61 of the Code for federal income tax purposes.
Announcement 2012–6, page 366.
This document contains changes to Publication 1220,Spec-
ifications for Filing Forms 1097, 1098, 1099, 3921, 3922,
5498, and W-2G Electronically(Rev. 9–2011), Publication
1187,Specification for Filing Form 1042-S, Foreign Person’s
U.S. Source Income Subject to Withholding, Electronically
(Rev. 10–2011), and Publication 1239,Specifications for
Filing Form 8027, Employer’s Annual Information Return of Tip
Income and Allocated Tips, Electronically(Rev. 10–2011).
Rev. Procs. 2011–40, 2011–50, and 2011–51 corrected.
Finding Lists begin on page ii.

The IRS Mission
Provide Americ
a’s taxpayers top-quality service by helping
them understa
nd and meet their tax responsibilities and en-
force the law wi
th integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
February 6, 20122012–6 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 42.—L
ow-Income
Housing Credi
t
The adjusted a
pplicable federal short-term, mid-
term, and long
-term rates are set forth for the month
of February 20
12. See Rev. Rul. 2012-7, page 362.
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term rates
are set forth for the month of February 2012. See Rev.
Rul. 2012-7, page 362.
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 February 2012. See Rev.
Rul. 2012-7, page 362.
Section 412.—Minimum
Funding Standards
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2012. See Rev. Rul. 2012-7, page 362.
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 February 2012. See Rev. Rul. 2012-7, page 362.
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 February 2012. See Rev. Rul. 2012-7, page 362.
Section 482.—
Allocation
of Income and D
eductions
Among Taxpaye
rs
Federal short
-term, mid-term, and long-term rates
are set forth f
or the month of February 2012. See Rev.
Rul. 2012-7,
page 362.
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 February 2012. See Rev. Rul. 2012-7, page 362.
Section 642.—Special
Rules for Credits and
Deductions
Federal short-term, mid-term, and long-term rates
are set forth for the month of February 2012. See Rev.
Rul. 2012-7, page 362.
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 February 2012. See Rev. Rul. 2012-7, page 362.
Insurance companies; interest rate
tables.Prevailing state assumed interest
rates are provided for the determination of
reserves under section 807 of the Code for
contracts issued in 2011 and 2012. Rev.
Rul. 92–19 supplemented in part.
Rev. Rul. 2012–6
For
purposes of § 807(d)(4) of the In-
ter
nal Revenue Code, for taxable years be-
gin
ning after December 31, 2010, this rul-
ing
supplements the schedules of prevail-
ing
state assumed interest rates set forth
in
Rev. Rul. 92–19, 1992–1 C.B. 227.
Th
is information is to be used by insurance
co
mpanies in computing their reserves for
(1
) life insurance and supplementary total
an
d permanent disability benefits, (2) in-
dividual annu
ities and pure endowments,
and (3) group a
nnuities and pure endow-
ments. As § 807
(d)(2)(B) requires that the
interest rat
e used to compute these reserves
be the greate
r of (1) the applicable federal
interest rat
e, or (2) the prevailing state as-
sumed intere
st rate, the table of applicable
federal int
erest rates in Rev. Rul. 92–19 is
also supple
mented.
Following a
re supplements to schedules
A, B, C, and D
to Part III of Rev. Rul.
92–19, prov
iding prevailing state assumed
interest ra
tes for insurance products with
different
features issued in 2011 and 2012,
and a suppl
ement to the table in Part IV of
Rev. Rul. 9
2–19, providing the applica-
ble federa
l interest rates under § 807(d) for
2011 and 20
12. This ruling does not sup-
plement P
arts I and II of Rev. Rul. 92–19.
This is th
e twentieth supplement to the
interest
rates provided in Rev. Rul. 92–19.
Earlier s
upplements were published in
Rev. Rul.
93–58, 1993–2 C.B. 241 (inter-
est rates
for insurance products issued in
1992 and 1
993); Rev. Rul. 94–11, 1994–1
C.B. 196
(1993 and 1994); Rev. Rul.
95–4, 19
95–1 C.B. 141 (1994 and 1995);
Rev. Rul
. 96–2, 1996–1 C.B. 141 (1995
and 1996
); Rev. Rul. 97–2, 1997–1 C.B.
134 (19
96 and 1997); Rev. Rul. 98–2,
1998–1
C.B. 259 (1997 and 1998); Rev.
Rul. 99
–10, 1999–1 C.B. 671 (1998 and
1999);
Rev. Rul. 2000–17, 2000–1 C.B.
842 (19
99 and 2000); Rev. Rul. 2001–11,
2001–
1 C.B. 780 (2000 and 2001); Rev.
Rul. 2
002–12, 2002–1 C.B. 624 (2001 and
2002)
; Rev. Rul. 2003–24, 2003–1 C.B.
557 (2
002 and 2003); Rev. Rul. 2004–14,
2004–
1 C.B. 511 (2003 and 2004); Rev.
Rul.
2005–29, 2005–1 C.B. 1080 (2004
and 2
005); Rev. Rul. 2006–25, 2006–1
C.B.
882 (2005 and 2006); Rev. Rul.
2007
–10, 2007–1 C.B. 660 (2006 and
2007
); Rev. Rul. 2008–19, 2008–1 C.B.
669 (
2007 and 2008); Rev. Rul. 2009–3,
200
9–5 I.R.B. 382 (2008 and 2009); Rev.
Rul
. 2010–7, 2010–8 I.R.B. 417 (2009 and
201
0); and Rev. Rul. 2011–23, 2011–43
I.R
.B. 585 (2010 and 2011).
2012–6 I.R.B.349February 6, 2012

Part III. Prevailing State Assumed Interest Rates — Products Issued in Years After 1982*
Schedule A
STATUTORY VALUATION INTEREST RATES
BASED ON THE 1980 AMENDMENTS TO THE
N
AICSTANDARDVALUATIONLAW
A. Life insurance valuation:
Guarantee Duration (
years)
Calendar Year of Issue
2
012
10 or fewer
4.50**
More than 10
but not more than 204.25**
More than 204.00**
Source: Rates calculated from the monthly averages, ending June 30, 2011, of Moody’s Composite Yield on Seasoned Corporate
Bonds.
*The terms used in the schedules in this ruling and in Part III of Rev. Rul. 92–19 are those used in the Standard Valuation
Law; the terms are defined in Rev. Rul. 92–19.
**As these rates exceed the applicable federal interest rate for 2012of 2.89 percent, the valuation interest rate to be used for this
product under § 807 is the applicable rate specified in this table.
February 6, 20123502012–6 I.R.B.

Part III. Schedule B
STATUTORY VALUATION INTEREST RATES
BASED ON THE 1980 AMENDMENTS TO THE
N
AICSTANDARDVALUATIONLAW
B. Single premium immediate annuities and annuity benefits involving life contingencies arising from other annuities with cash
settlement options and from guaranteed interest contracts with cash settlement options:
C
alendarYearofIssueValuationInterestRate
2011
5.00*
Source: Rates calculated from the monthly averages, ending June 30, 2011, of Moody’s Composite Yield on Seasoned Corporate
Bonds (formerly known as Moody’s Corporate Bond Yield Average — Monthly Average Corporates). The terms used in this
schedule are those used in the Standard Valuation Law as defined in Rev. Rul. 92–19.
*As this prevailing state assumed interest rate exceeds the applicable federal interest rate for 2011 of 3.46 percent, the valuation
interest rate of 5.00 percent is to be used for this product under § 807.
2012–6 I.R.B.351February 6, 2012

Part III. Schedule C24 — 2011
STATUTORY VALUATION INTEREST RATES
BASED ON NAIC STANDARD VALUATION LAW
FOR 2011 CALENDAR YEAR BUSINESS
G
OVERNEDBYTHE1980AMENDMENTS
C. Valuation interest rates for other annuities and guaranteed interest contracts that are valued on an issue year basis:
Valuation Interest Rate (%)
For Plan Type
Cash
Settlement
O
ptions?
Future
Interest
G
uarantee?
Guarantee Duration
(
years)ABC
YesYes
5 or fewer5.00*4.50*4.25*
More than 5, but not
more than 10
4.75*4.50*4.25*
More than 10, but not
more than 20
4.50*4.25*
4.00*
More than 204.00*
3.75*3.75*
YesNo
5 or fewer5.00*4.50*4.25*
More than 5, but not
more than 10
5.00*4.50*4.25*
More than 10, but not
more than 20
4.75*4.25*4.25*
More than 20
4.25*
4.00*4.00*
NoYes or No
5 or fewer5.00*
More than 5, but not
more than 10
4.75*
NOT
APPLICABLE
More than 10, but not
more than 20
4.50*
More than 204.00*
Source: Rates calculated from the monthly averages, ending June 30, 2011, of Moody’s Composite Yield on Seasoned Corporate
Bonds.
*As these rates exceed the applicable federal interest rate for 2011 of 3.46 percent, the valuation interest rate to be used for this
product under § 807 is the applicable rate specified in the above table.
February 6, 20123522012–6 I.R.B.

Part III. Schedule D24 — 2011
STATUTORY VALUATION INTEREST RATES
BASED ON NAIC STANDARD VALUATION LAW
FOR 2011 CALENDAR YEAR BUSINESS
G
OVERNEDBYTHE1980AMENDMENTS
D. Valuation interest rates for other annuities and guaranteed interest contracts that are contracts with cash settlement options
and that are valued on a change in fund basis:
Valuation Interest Rate
For Plan Type
Cash
Settlement
O
ptions?
Future
Interest
G
uarantee?
Guarantee Duration
(
years)ABC
YesYes
5 or fewer5.25*5.00*4.25*
More than 5, but not
more than 10
5.25*5.00*4.25*
More than 10, but not
more than 20
5.00*4.75*4.25*
More than 20
4.50*4.50*
4.00*
YesNo
5 or fewer5.25*5.25*4.50*
More than 5, but not
more than 10
5.25*5.25*4.50*
More than 10, but not
more than 20
5.00*5.00*4.25*
More than 20
4.50*4.50*
4.00*
Source: Rates calculated from the monthly averages, ending June 30, 2011, of Moody’s Composite Yield on Seasoned Corporate
Bonds.
*As these rates exceed the applicable federal interest rate for 2011 of 3.46 percent, the valuation interest rate to be used for this
product under § 807 is the applicable rate specified in the above table.
2012–6 I.R.B.353February 6, 2012

Part IV. Applicable Federal Interest Rates
TABLE OF
APPLICABLE FEDERAL INTEREST RATES
F
ORPURPOSESOF§807
YearInterestRate
20113.46
20122.89
Sources: Rev. Rul. 2004–106, 2004–2 C.B. 893, for the 2005 rate; Rev. Rul. 2005–77, 2005–2 C.B. 1071, for the 2006 rate; Rev.
Rul. 2006–61, 2006–2 C.B 1028 for the 2007 rate; Rev. Rul. 2007–70, 2007–2 C.B. 1158 for the 2008 rate; Rev. Rul. 2008–53,
2008–2 C.B. 1231 for the 2009 rate; Rev. Rul. 2009–38, 2009–49 I.R.B. 736 for the 2010 rate; Rev. Rul. 2010–29, 2010–50
I.R.B. 818 for the 2011 rate; and Rev. Rul. 2011–31, 2011–49 I.R.B. 829 for the 2012 rate.
EFFECT ON OTHER REVENUE
RULINGS
Rev. Rul. 92–19 is supplemented by
the addition to Part III of that ruling of pre-
vailing state assumed interest rates under
§ 807 for certain insurance products issued
in 2011 and 2012 and is further supple-
mented by an addition to the table in Part
IV of Rev. Rul. 92–19 listing applicable
federal interest rates. Parts I and II of Rev.
Rul. 92–19 are not affected by this ruling.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Linda K. Boyd of the Office
of Associate Chief Counsel (Financial
Institutions and Products). For further
information regarding this revenue ruling,
contact her at (202) 622–3970 (not a
toll-free call).
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 February 2012. See Rev. Rul. 2012-7, page 362.
Section 954.—Foreign Base
Comp
any Income
26 CFR 1.954–3: Foreign base company sales in-
come.
T.D. 9563
Guidance Regarding Foreign
Base Company Sales Income
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains
final regulations that provide guidance
relating to foreign base company sales
income when personal property sold by
a controlled foreign corporation (CFC) is
purchased, sold, manufactured, produced,
constructed, grown or extracted by one
or more branches of the CFC. The regu-
lations finalize proposed regulations and
withdraw temporary regulations published
on December 29, 2008. These regula-
tions, in general, affect controlled foreign
corporations and their United States share-
holders.
DATES:Effective Date:These regulations
are effective on December 19, 2011.
Applicability Date:These regulations
apply to taxable years of CFCs beginning
after June 30, 2009, and for taxable years
of United States shareholders in which or
with which such taxable years of the CFCs
end.
FOR FURTHER INFORMATION
CONTACT: Barbara E. Rasch, (202)
622–3840 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On February 28, 2008, the IRS and
the Treasury Department published a
notice of proposed rulemaking in theFed-
eral Register(REG–124590–07, 2008–1
C.B. 801 [73 FR 10716], as corrected at
73 FR 20201), which proposed amend-
ments to §1.954–3, including rules that
addressed the application of the section
954(d)(2) branch rules under the foreign
base company sales income (FBCSI)
rules. Written comments were received
in response to the notice of proposed
rulemaking, and a public hearing on the
proposed regulations was held on July 29,
2008. On December 29, 2008, the IRS
and the Treasury Department published
final and temporary regulations under
section 954(d) (T.D. 9438, 2009–5 I.R.B.
387 [73 FR 79334–01], as corrected at
74 FR 11843–01) in theFederal Register.
On the same date, the IRS and the Treasury
Department published a notice of proposed
rulemaking (REG–150066–08, 2009–5
I.R.B. 423 [73 FR 79421–01]) in the
Federal Registercross-referencing the
temporary regulations. The temporary
and proposed regulations address the
treatment under the FBCSI rules of the
sale by a CFC of personal property that is
purchased, sold, manufactured, produced,
constructed, grown or extracted by one
or more branches of the CFC. Written
February 6, 20123542012–6 I.R.B.

comments were received, and are available
atwww.regulations.govor upon request. A
public hearing was not requested and none
was held. This Treasury decision adopts
the proposed regulation with the changes
described below as a final regulation and
removes the corresponding temporary
regulations.
Explanation of Provisions
These regulations amend the provisions
of §1.954–3(b) that address the application
of the FBCSI rules to CFCs with branches
or similar establishments (branches), and,
in particular manufacturing branches.
A.Branch Rule
Section 954(d)(1) defines FBCSI to
meanincomederivedbyaCFCincon-
nection with: (i) the purchase of personal
property from a related person and its sale
to any person; (ii) the sale of personal
property to any person on behalf of a re-
lated person; (iii) the purchase of personal
property from any person and its sale to a
related person; or (iv) the purchase of per-
sonal property from any person on behalf
of a related person, provided (in all of these
cases) that the property is manufactured,
produced, grown or extracted outside of
the CFC’s country of organization and is
sold for use, consumption or disposition
outside of such country. There are certain
exceptions to the FBCSI rules, including
an exception that applies if a CFC sells
personal property that it manufactured,
produced, constructed, grew or extracted.
See section 954(d)(1)(A), §1.954–3(a)(4).
Section 954(d)(2) applies the FBCSI
rules to a CFC that has a branch outside the
CFC’s country of incorporation (branch
rule). The branch rule applies if the CFC
carries on purchasing, selling, manufac-
turing, producing, constructing, growing
or extracting activities by or through the
branch, and the carrying on of such activ-
ities has substantially the same tax effect
as if the branch were a wholly-owned sub-
sidiary of the CFC, as provided in regu-
lations. If so, the branch and the remain-
der of the CFC will be treated as separate
corporations for purposes of determining
FBCSI of such CFC.
The “substantially same tax ef-
fect” determination is made pur-
suant to a tax rate disparity test
set forth in §1.954–3(b)(1)(i)(b)and
§1.954–3(b)(1)(ii)(b). With respect to a
sales or purchase branch, the tax rate dis-
parity test is applied by comparing the
rate of tax imposed on the income derived
from the purchasing or selling activities
of the branch with the rate of tax that
would apply if the income were earned by
the remainder of the CFC. With respect
to a manufacturing branch, the tax rate
disparity test is applied by comparing the
rate of tax imposed on the income derived
from the purchasing and selling activities
oftheCFCwiththerateoftaxthatwould
apply to such income under the laws of
the country in which the manufacturing
branch is located.
These final regulations provide guid-
ance on the application of the branch rule,
in particular with respect to a CFC that has
multiple branches. For example, the regu-
lations set forth rules on how to determine
whether a CFC earns FBCSI if purchase
and sales activities are conducted by mul-
tiple branches and if multiple branches are
involved in the manufacture of either a sin-
gle or multiple items of personal property
that is sold by the CFC.
B.Summary of Comments
1. Demonstrably greater contribution
Section 1.954–3T(b)(1)(ii)(c)(3)(iii)
provides that if none of the branches or
the remainder of a CFC independently sat-
isfies the substantial contribution test, but
the CFC as a whole made a substantial con-
tribution, then for purposes of applying the
tax rate disparity test, the location of man-
ufacture, production or construction is the
“tested manufacturing location” unless the
“tested sales location” provided a “demon-
strably greater” contribution. Comments
were received seeking clarification on
the meaning of the word “demonstrably”
and expressing concern that it could be
interpreted to provide an evidentiary rule
regarding the standard of proof required
with respect to the determination of the
location of manufacture of an item pur-
suant to §1.954–3T(b)(1)(ii)(c)(3)(iii).
The IRS and the Treasury Department did
not intend the word “demonstrably” to
refer to an elevated standard of proof. In
order to eliminate uncertainty, the word
“demonstrably” has been deleted from
§1.954–3(b)(1)(ii)(c)(3)(iii).
2. Grouping of branches
Comments sought clarification of the
rule in §1.954–3T(b)(2)(ii)(a) that gener-
ally provides for the grouping of branches
that do not have tax rate disparity with a
purchasing or selling branch, or with the
remainder of the CFC treated as purchas-
ing or selling on behalf of a manufacturing
branch. This grouping rule applies for pur-
poses of §1.954–3T(b)(2)(ii), which sets
forth the rules that apply after it has been
determined that a branch and the remain-
der of a CFC will be treated as separate cor-
porations. Comments suggested that this
grouping rule could be interpreted to group
not only the activities of the branches but
also the income of those branches and rec-
ommended that the rule be clarified by
specifically stating that the rule groups the
“activities” of the relevant branches.
The rules in §1.954–3T(b)(2)(ii) ap-
ply to determine whether the income of a
branch or remainder of a CFC is FBCSI
rather than to determine the amount of
the income of the branch or remainder of
the CFC. The purpose of this grouping
rule is to allow a CFC to aggregate the
activities of branches that do not have
tax rate disparity with a sales or purchas-
ing branch (or remainder) when applying
the separate corporation analysis to de-
termine whether the sales income of the
sales or purchase branch (or remainder)
is FBCSI. §1.954–3(b)(1)(ii)(c)(3)(v),
Example 1. The IRS and the Treasury
Department believe that the grouping rule
in §1.954–3T(b)(2)(ii)(a) properly aggre-
gates the activities of the relevant branches
(or remainder). However, for clarity, the
phrase “the activities of” was added to
§1.954–3(b)(2)(ii)(a).
C.Deletion of §1.954–3(b)(2)(ii)(d)
The final regulations delete paragraph
(d) of §1.954–3(b)(2)(ii), which provided
that income that is FBCSI as a result of
the application of §1.954–3(b)(1)(i) (pur-
chasing or selling branch rules) is not again
classified as FBCSI as a result of the ap-
plication of §1.954–3(b)(1)(ii) (manufac-
turing branch rules). This paragraph is no
longer needed as a result of the addition of
the rule in §1.954–3(b)(1)(ii)(c)(1), which
provides that if one or more sales or pur-
chasing branches are used in addition to a
2012–6 I.R.B.355February 6, 2012

manufacturing branch, then only the man-
ufacturing branch rules apply.
D.Future Guidance
The IRS and the Treasury Department
continue to study additional FBCSI is-
sues, and are considering whether to issue
additional guidance, including guidance
regarding when a branch should be treated
as a separate corporation under section
954(d)(2), and the scope of, and relation-
ship between, FBCSI and foreign base
company services income. The IRS and
the Treasury Department welcome com-
ments on these issues.
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 assessment
is not required. It also has been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations. In addition,
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply because the reg-
ulations do not impose a collection of in-
formation on small entities. Pursuant to
section 7805(f) of the Code, the notice of
proposed rulemaking that preceded these
final and temporary regulations was sub-
mitted to the Chief Counsel for Advocacy
of the Small BusinessAdministration for
comment on its impact on small business.
Drafting Information
The principal author of these regula-
tions is Barbara E. Rasch of the Office of
Associate Chief Counsel (International).
However, other personnel from the IRS
and the Treasury Department participated
in their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
26 CFR part 1 continues to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.954–3 is amended by:
1. Revising paragraphs (b)(1)(i)(c),
(b)(1)(ii)(a), and (b)(1)(ii)(c).
2. Revising paragraphs (b)(2)(i)(b),
(b)(2)(ii)(a), and (b)(2)(ii)(b).
3. Removing and reserving paragraph
(b)(2)(ii)(d).
4. Revising paragraph (b)(2)(ii)(e).
5. Revising paragraph (b)(4) introduc-
tory text.
6. RevisingExample 3in paragraph
(b)(4).
7. AddingExamples 8and9in para-
graph (b)(4).
8. Revising paragraphs (c) and (d).
The revisions and additions read as fol-
lows:
§1.954–3 Foreign base company sales
income.
*****
(b) * * *
(1) * * *
(i) * * *
(c)Use of more than one branch.If
a controlled foreign corporation carries
on purchasing or selling activities by or
through more than one branch or similar
establishment located outside the country
under the laws of which such corporation
is created or organized, then paragraph
(b)(1)(i)(b) of this section shall be applied
separately to the income derived by each
such branch or similar establishment (by
treating such purchasing or selling branch
or similar establishment as if it were the
only branch or similar establishment of
the controlled foreign corporation and as
if any such other branches or similar es-
tablishments were separate corporations)
in determining whether the use of such
branch or similar establishment has sub-
stantially the same tax effect as if such
branch or similar establishment were a
wholly owned subsidiary corporation of
the controlled foreign corporation. See
paragraph (b)(1)(ii)(c)(1)ofthissection
for rules applicable to a controlled for-
eign corporation that carries on purchase
or sales activities by or through one or
more branches or similar establishments
in addition to carrying on manufactur-
ing activities by or through one or more
branches or similar establishments.
(ii)Manufacturing branch—(a)In gen-
eral. If a controlled foreign corporation
carries on manufacturing, producing, con-
structing, growing, orextracting activities
by or through a branch or similar estab-
lishment located outside the country un-
der the laws of which such corporation is
created or organized and the use of the
branch or similar establishment for such
activities with respect to personal property
purchased or sold by or through the re-
mainder of the controlled foreign corpora-
tion has substantially the same tax effect
as if the branch or similar establishment
were a wholly owned subsidiary corpora-
tion of such controlled foreign corporation,
the branch or similar establishment and the
remainder of the controlled foreign corpo-
ration will be treated as separate corpora-
tions for purposes of determining the for-
eign base company sales income of such
corporation. See section 954(d)(2). The
provisions of this paragraph (b)(1)(ii) will
apply only if the controlled foreign corpo-
ration (including any branches or similar
establishments of suchcontrolled foreign
corporation) manufactures, produces, or
constructs such personal property within
the meaning of paragraph (a)(4)(i) of this
section, or carries on growing or extract-
ing activities with respect to such personal
property.
*****
(c)Use of more than one branch—(1)
Use of one or more sales or purchase
branches in addition to a manufacturing
branch. If, with respect to personal prop-
erty manufactured, produced, constructed,
grown, or extracted by or through a branch
or similar establishment located outside
the country under the laws of which the
controlled foreign corporation is created
or organized, purchasing or selling activi-
ties are carried on by or through more than
one branch or similar establishment, or by
or through one or more branches or sim-
ilar establishments located outside such
country, of such corporation, then para-
graph (b)(1)(ii)(b) of this section shall be
applied separately to the income derived
by each such purchasing or selling branch
or similar establishment (by treating such
purchasing or selling branch or similar
establishment as though it alone were
the remainder of the controlled foreign
corporation) for purposes of determining
whether the use of such manufacturing,
producing, constructing, growing, or ex-
tracting branch or similar establishment
February 6, 20123562012–6 I.R.B.

has substantially the same tax effect as if
such branch or similar establishment were
a wholly owned subsidiary corporation of
the controlled foreign corporation. If this
rule applies, the sales or purchase branch
rules contained in paragraph (b)(1)(i) of
this section do not apply. The application
of this paragraph (b)(1)(ii)(c)(1) is illus-
trated by the following example:
Example.All activities of controlled foreign cor-
poration conducted through sales branches and man-
ufacturing branch.(i)Facts. FS, a controlled foreign
corporation organized under the laws of country M,
operates three branches. Branch A, located in coun-
try A, manufactures Product X under the principles
of paragraph (a)(4)(i) of this section. Branch B, lo-
cated in Country B, sells Product X manufactured by
Branch A to customers for use outside of Country B.
Branch C, located in Country C sells Product X man-
ufactured by Branch A to customers for use outside of
Country C. FS does not conduct any manufacturing or
selling activities apart from the activities of Branches
A, B and C. Country M imposes an effective rate of
tax on sales income of 0%. Country A imposes an ef-
fective rate of tax on sales income of 20%. Country
B imposes an effective rate of tax on sales income of
20%. Country C imposes an effective rate of tax on
sales income of 18%.
(ii)Result.Pursuant to this paragraph
(b)(1)(ii)(c)(1), paragraph (b)(1)(ii)(b)ofthissection
is applied to the sales income derived by Branch B
by treating Branch B as though it alone were the
remainder of the controlled foreign corporation. The
use of Branch B does not have the same tax effect
as if Branch B were a wholly owned subsidiary of
FS because the tax rate applicable to the income
allocated to Branch B under paragraph (b)(1)(ii)(b)
of this section (20%) is not less than 90% of, and
at least 5 percentage points less than, the effective
rate of tax which would apply to such income un-
der the laws of Country A (20%), the country in
which Branch A is located. In addition, paragraph
(b)(1)(ii)(b) of this section is applied separately to
the sales income derived by Branch C by treating
Branch C as though it alone were the remainder of the
controlled foreign corporation. The use of Branch
C does not have the same tax effect as if Branch C
were a wholly owned subsidiary of FS because the
tax rate applicable to the income allocated to Branch
C under paragraph (b)(1)(ii)(b)ofthissection(18%)
is not less than 90% of, and at least 5 percentage
points less than, the effective rate of tax which would
apply to such income under the laws of Country A
(20%), the country in which Branch A is located.
Pursuant to this paragraph (b)(1)(ii)(c)(1), the rules
under paragraph (b)(1)(i) of this section for deter-
mining whether a sales or purchase branch is treated
as a separate corporation from the remainder of the
controlled foreign corporation do not apply.
(2)Use of more than one branch to
manufacture, produce, construct, grow, or
extract separate items of personal prop-
erty. If a controlled foreign corporation
carries on manufacturing, producing, con-
structing, growing, or extracting activi-
ties with respect to separate items of per-
sonal property by or through more than
one branch or similar establishment lo-
cated outside the country under the laws of
which such corporation is created or orga-
nized, then paragraphs (b)(1)(ii)(b)and(c)
of this section will be applied separately to
each such branch or similar establishment
(by treating such manufacturing branch or
similar establishment as if it were the only
such branch or similar establishment of
the controlled foreign corporation and as
if any other such branches or similar es-
tablishments were separate corporations)
for purposes of determining whether the
use of such branch or similar establishment
has substantially the same tax effect as if
such branch or similar establishment were
a wholly owned subsidiary corporation of
the controlled foreign corporation. The ap-
plication of this paragraph (b)(1)(ii)(c)(2)
is illustrated by the following example:
Example.Multiple branches that satisfy para-
graph (a)(4)(i).(i)Facts. FS is a controlled foreign
corporation organized in Country M. FS operates two
branches, Branch A and Branch B located in Country
A and Country B, respectively. Branch A and Branch
B each manufacture separate items of personal prop-
erty (Product X and Product Y, respectively) within
the meaning of paragraph (a)(4)(ii) or (iii) of this sec-
tion. Raw materials used in the manufacture of Prod-
uct X and Product Y are purchased by FS from an
unrelated person. FS engages in activities in Coun-
try M to sell Product X and Product Y to a related
person for use, disposition or consumption outside of
Country M. Employees of FS located in Country M
perform only sales functions. The effective rate of tax
imposed in Country M on the income from the sales
of Product X and Product Y is 10%. Country A im-
poses an effective rate of tax on sales income of 20%.
Country B imposes an effective rate of tax on sales
income of 12%.
(ii)Result.Pursuant to this paragraph
(b)(1)(ii)(c)(2), paragraph (b)(1)(ii)(b) of this section
is applied separately to Branch A and Branch B
with respect to the sales income of FS attributable to
Product X (manufactured by Branch A) and Product
Y (manufactured by Branch B). Because the effec-
tive rate of tax on FS’s sales income from the sale
of Product X in Country M (10%) is less than 90%
of, and at least 5 percentage points less than, the
effective rate of tax that would apply to such income
in the country in which Branch A is located (20%),
the use of Branch A to manufacture Product X has
substantially the same tax effect as if Branch A were
a wholly owned subsidiary corporation of FS. Be-
cause the effective rate of tax on FS’s sales income
from the sale of Product Y in Country M (10%) is
not less than 90% of, and at least 5 percentage points
less than, the effective rate of tax that would apply
to such income in the country in which Branch B is
located (12%), the use of Branch B to manufacture
Product Y does not have substantially the same tax
effect as if Branch B were a wholly owned subsidiary
corporation of FS. Consequently, only Branch A
is treated as a separate corporation apart from the
remainder of FS for purposes of determining foreign
base company sales income from the sales of Product
X.
(3)Use of more than one manufactur-
ing branch, or one or more manufactur-
ing branches and the remainder of the
controlled foreign corporation, to man-
ufacture, produce, or construct the same
item of personal property—(i)In general.
This paragraph (b)(1)(ii)(c)(3) applies to
determine the location of manufacture,
production, or construction of personal
property for purposes of applying para-
graph (b)(1)(i)(b) or (b)(1)(ii)(b)ofthis
section where more than one branch or
similar establishment of a controlled for-
eign corporation, or one or more branches
or similar establishments of a controlled
foreign corporation and the remainder of
the controlled foreign corporation, each
engage in manufacturing, producing, or
constructing activities with respect to the
same item of personal property which is
then sold by the controlled foreign cor-
poration. This paragraph (b)(1)(ii)(c)(3)
is applied separately with respect to the
income derived by each purchasing or
selling branch or similar establishment
or purchasing or selling remainder of the
controlled foreign corporation as provided
under paragraphs (b)(1)(i) and (b)(1)(ii) of
this section. The location of manufacture,
production, or construction is determined
under paragraph (b)(1)(ii)(c)(3)(ii)ofthis
section if one or more branches or similar
establishments or the remainder of the
controlled foreign corporation indepen-
dently satisfies paragraph (a)(4)(i) of this
section with respect to an item of personal
property. The location of manufacture,
production, or construction is determined
under paragraph (b)(1)(ii)(c)(3)(iii)ofthis
section if none of the branches or similar
establishments or the remainder of the
controlled foreign corporation indepen-
dently satisfies paragraph (a)(4)(i) of this
section with respect to an item of personal
property, but the controlled foreign cor-
poration as a whole makes a substantial
contribution to the manufacture, produc-
tion or construction of that property within
the meaning of paragraph (a)(4)(iv) of this
section. For purposes of this paragraph
(b)(1)(ii)(c)(3), the location of any activity
with respect to the manufacture, produc-
tion, or construction of an item of personal
property is determined under paragraph
(b)(1)(ii)(c)(3)(iv)ofthissection. For
2012–6 I.R.B.357February 6, 2012

purposes of this paragraph (b)(1)(ii)(c)(3),
if multiple branches or similar establish-
ments are located in a single jurisdiction,
then the activities of those branches will
be aggregated for purposes of determin-
ing whether a branch or remainder of the
controlled foreign corporation satisfies
paragraph (a)(4)(i) of this section.
(ii)Manufacture, production, or con-
struction in one or more locations.Ifonly
one branch or similar establishment or
only the remainder of a controlled for-
eign corporation independently satisfies
paragraph (a)(4)(i) of this section with
respect to an item of personal property,
then that branch or similar establishment
or the remainder of the controlled foreign
corporation will be the location of manu-
facture, production, or construction of that
property for purposes of applying para-
graph (b)(1)(i)(b)or(b)(1)(ii)(b)ofthis
section to the income from the sale of that
property. See paragraph (b)(1)(ii)(c)(3)(v)
Example 1of this section. If more than
one branch or similar establishment or
one or more branches or similar establish-
ments and the remainder of the controlled
foreign corporation, each independently
satisfy paragraph (a)(4)(i)ofthissection
with respect to an item of personal prop-
erty, then the location of manufacture,
production, or construction of that prop-
erty for purposes of applying paragraph
(b)(1)(i)(b)or(b)(1)(ii)(b)ofthissection
will be the location of that branch or simi-
lar establishment or the jurisdiction under
the laws of which the remainder of the
controlled foreign corporation is orga-
nized that satisfies paragraph (a)(4)(i) of
this section and that would, after applying
paragraph (b)(1)(ii)(b)ofthissectionto
such branch or similar establishment or
paragraph (b)(1)(i)(b) of this section to
the remainder of the controlled foreign
corporation, imposethe lowest effective
rate of tax on the income allocated to such
branch or the remainder of the controlled
foreign corporation under such section
(that is, either paragraph (b)(1)(i)(b)or
(b)(1)(ii)(b) of this section). See para-
graph (b)(1)(ii)(c)(3)(v)Example 2of this
section.
(iii)No location independently satisfies
manufacturing test.Ifnobranchorsimilar
establishment or the remainder of the con-
trolled foreign corporation independently
satisfies paragraph (a)(4)(i) of this section
with respect to an item of personal prop-
erty but the controlled foreign corporation
as a whole makes a substantial contribu-
tion to the manufacture, production, or
construction of that property within the
meaning of paragraph (a)(4)(iv) of this
section, then for purposes of applying
paragraph (b)(1)(i)(b)or(b)(1)(ii)(b)of
this section, the location of manufacture,
production, or construction with respect
to the income derived by a purchasing or
selling branch or similar establishment
or the purchasing or selling remainder of
the controlled foreign corporation in con-
nection with the purchase or sale of that
property will be the “tested manufacturing
location” unless the “tested sales loca-
tion” provides a greater contribution to the
manufacture, production, or construction
of the property. The tested manufacturing
location is the location of any branch or
similar establishment or remainder of the
controlled foreign corporation that con-
tributes to the manufacture, production, or
construction of the personal property, if
any, that would, after applying paragraph
(b)(1)(ii)(b)ofthissectiontosuchbranch
or similar establishment or paragraph
(b)(1)(i)(b) of this section to the remain-
der of the controlled foreign corporation,
be treated as a separate corporation and
would impose the lowest effective rate of
tax on the income allocated to such branch
or similar establishment or to the remain-
der of the controlled foreign corporation
under such section (that is, either para-
graph (b)(1)(i)(b)or(b)(1)(ii)(b)ofthis
section). The tested sales location is the lo-
cation of the purchasing or selling branch
or similar establishment or the remainder
of the controlled foreign corporation by or
through which the purchasing or selling
activities are carried on with respect to the
personal property. For purposes of this
paragraph (b)(1)(ii)(c)(3)(iii), the contri-
bution to the manufacture, production, or
construction of the personal property by
the tested sales location will be deemed
to include the activities of any branch or
similar establishment or remainder of the
controlled foreign corporation that would
not be treated as a corporation separate
from the tested sales location after the
application of paragraph (b)(1)(i)(b)or
(b)(1)(ii)(b) of this section. For purposes
of this paragraph (b)(1)(ii)(c)(3)(iii), the
contribution of the tested manufacturing
location to the manufacture, production,
or construction of the personal property
will be deemed to include any activities
of any branch or similar establishment
or remainder of the controlled foreign
corporation that would be treated as a
corporation separate from the tested sales
location after the application of paragraph
(b)(1)(i)(b)or(b)(1)(ii)(b) of this section.
Whether the tested sales location provides
a greater contribution to the manufacture,
production, or construction of the personal
property is determined by weighing the
relative contributions to the manufacture,
production, or construction of that prop-
erty by the tested sales location and the
tested manufacturing location under the
facts and circumstances test provided in
paragraph (a)(4)(iv) of this section. See
paragraph (b)(1)(ii)(c)(3)(v)Examples 3,
4,5,and6of this section. If the tested
sales location provides a greater contri-
bution to the manufacture, production,
or construction of the personal property
than the tested manufacturing location or
if there is no tested manufacturing loca-
tion, then the tested sales location is the
location of manufacture, production, or
construction of that property and the rules
of paragraphs (b)(1)(i)(a) and (b)(1)(ii)(a)
of this section will not apply with respect
to the income derived by the tested sales
location in connection with the purchase
or sale of that property and the use of that
purchasing or selling branch or similar
establishment or thepurchasing or selling
remainder will not result in a branch be-
ing treated as a separate corporation for
purposes of paragraph (b)(2)(ii) of this
section.
(iv)Location of activity. For purposes
of paragraph (b)(1)(ii)(c)(3) of this section,
the location of any activity with respect to
the manufacture, production, or construc-
tion of an item of personal property is the
location where the employees of the con-
trolled foreign corporation perform such
activity. For example, the location of any
activity concerning intellectual property is
determined based on where employees of
the controlled foreign corporation develop
or direct the use or development of the in-
tellectual property, not on the formal as-
signment of that intellectual property.
(v)Examples. The following examples
illustrate the application of this paragraph
(b)(1)(ii)(c)(3):
Example 1.Multiple branches contribute to the
manufacture of a single product, only one branch sat-
isfies paragraph (a)(4)(i).(i)Facts. FS is a con-
February 6, 20123582012–6 I.R.B.

trolled foreign corporation organized in Country M.
FS operates three branches, Branch A, Branch B, and
Branch C, located respectively in Country A, Country
B, and Country C. Branch A, Branch B, and Branch C
each performs different manufacturing activities with
respect to the manufacture of Product X. Branch A,
through the activities of employees of FS located in
Country A, designs Product X. Branch B, through
the activities of employees of FS located in Coun-
try B, provides quality control and oversight and di-
rection. Branch C, through the activities of employ-
ees of FS located in Country C, manufactures Prod-
uct X (within the meaning of paragraph (a)(4)(ii) or
(a)(4)(iii of this section) using the designs developed
by Branch A and under the oversight of the qual-
ity control personnel of Branch B. The activities of
Branch A and Branch B do not independently satisfy
paragraph (a)(4)(i) of this section. Employees of FS
located in Country M purchase the raw materials used
in the manufacture of Product X from a related person
and control the work-in-process and finished goods
throughout the manufacturing process. Employees of
FS located in Country M also manage the manufac-
turing costs and capacities related to Product X. Fur-
ther, employees of FS located in Country M oversee
the coordination between the branches. The activities
of the remainder of FS in Country M do not indepen-
dently satisfy paragraph (a)(4)(i) of this section. Em-
ployees of FS located in Country M sell Product X to
unrelated persons for use outside of Country M. The
sales income from the sale of Product X is taxed in
Country M at an effective rate of tax of 10%. Coun-
try C imposes an effective rate of tax of 20% on sales
income.
(ii)Result. Country C is the location of manufac-
ture for purposes of applying paragraph (b)(1)(ii)(b)
of this section because only the activities of Branch C
independently satisfy paragraph (a)(4)(i) of this sec-
tion. The use of Branch C has substantially the same
tax effect as if Branch C were a wholly owned sub-
sidiary corporation of FS because the effective rate
of tax on the sales income (10%) is less than 90% of,
and at least 5 percentage points less than, the effec-
tive rate of tax that would apply to such income in the
country in which Branch C is located (20%). There-
fore, sales of Product X by the remainder of FS are
treated as sales on behalf of Branch C. In determin-
ing whether the remainder of FS will qualify for the
manufacturing exception under paragraph (a)(4)(iv)
of this section, the activities of FS will include the
activities of Branch A or Branch B, respectively, if
each of those branches would not be treated as a sep-
arate corporation under paragraph (b)(1)(ii)(b) of this
section, if that paragraph were applied independently
to each of Branch A and Branch B. See paragraph
(b)(2)(ii)(a)ofthissection.
Example 2.Multiple branches satisfy paragraph
(a)(4)(i) with respect to the same product sold by the
controlled foreign corporation.(i)Facts. Assume the
samefactsasinExample 1, except for the follow-
ing. In addition to the design of Product X, Branch
A also performs in Country A other manufacturing
activities, including those ascribed to FS inExample
1, that are sufficient to qualify as manufacturing un-
der paragraph (a)(4)(iv) of this section with respect
to Product X. Country A imposes an effective rate of
tax of 12% on sales income.
(ii)Result.BranchAandBranchCthroughtheir
activities each independently satisfy the requirements
of paragraph (a)(4)(i) of this section. Therefore, para-
graph (b)(1)(ii)(b) of this section is applied by com-
paring the effective rate of tax imposed on the income
from the sales of Product X against the lowest ef-
fective rate of tax that would apply to the sales in-
come in either Country A or Country C if paragraph
(b)(1)(ii)(b) of this section were applied separately
to Branch A and Branch C. Country A imposes the
lower effective rate of tax, and therefore, Branch A is
treated as the location of manufacture for purposes of
applying paragraph (b)(1)(ii)(b)ofthissection. The
effective rate of tax in Country B is not considered be-
cause Branch B does not satisfy paragraph (a)(4)(i) of
this section. Neither Branch A nor Branch C is treated
as a separate corporation because the effective rate of
tax on the sales income of FS from the sale of Product
X (10%) is not less than 90% of, and at least 5 per-
centage points less than, the effective rate of tax that
would apply to such income in the country in which
Branch A is located (12%). Sales of Product X by
the remainder of the controlled foreign corporation
are not treated as made on behalf of any branch.
Example 3.Determining the location of man-
ufacture when manufacturing activities performed
by multiple branches and no branch independently
satisfies paragraph (a)(4)(i).(i)Facts. FS, a con-
trolled foreign corporation organized in Country M,
purchases raw materials from a related person. The
raw materials are manufactured (under the principles
of paragraph (a)(4)(ii) or (a)(4)(iii) of this section)
into Product X by CM, an unrelated corporation, pur-
suant to a contract manufacturing arrangement. CM
physically performs the substantial transformation,
assembly, or conversion of the raw materials in Coun-
try C. FS has two branches, Branch A and Branch
B, located in Country A and Country B respectively.
Branch A, through the activities of employees of FS
located in Country A, designs Product X. Branch B,
through the activities of employees of FS located in
Country B, controls manufacturing related logistics,
provides oversight and direction during the manu-
facturing process, and controls the raw materials and
work-in-process. FS manages the manufacturing
costs and capacities related to the manufacture of
Product X through employees located in Country
M. Further, employees of FS located in Country M
oversee the coordination between the branches. Em-
ployees of FS located in Country M also sell Product
X to unrelated persons for use outside of Country M.
Country M imposes an effective rate of tax on sales
income of 10%. Country A imposes an effective
rate of tax on sales income of 20%, and Country B
imposes an effective rate of tax on sales income of
24%. Neither the remainder of FS, nor any branch of
FS independently satisfies paragraph (a)(4)(i) of this
section. However, under the facts and circumstances
of the business, FS as a whole provides a substantial
contribution to the manufacture of Product X within
the meaning of paragraph (a)(4)(iv) of this section.
(ii)Result. Based on the facts, neither the remain-
der of FS (through the activities of its employees in
Country M) nor any branch of FS independently sat-
isfies paragraph (a)(4)(i) of this section with respect
to Product X, but FS, as a whole, provides a substan-
tial contribution through the activities of its employ-
ees to the manufacture of Product X. The remainder
of FS, Branch A, and Branch B each provides a con-
tribution through the activities of employees to the
manufacture of Product X. Therefore, FS must de-
termine the location of manufacture under paragraph
(b)(1)(ii)(c)(3)(iii) of this section. The tested sales lo-
cation is Country M because the selling activities with
respect to Product X are carried on by the remainder
of FS. The location of Branch A is the tested man-
ufacturing location because the effective rate of tax
imposed on FS’s sales income by Country M (10%)
is less than 90% of, and at least 5 percentage points
less than, the effective rate of tax that would apply to
such income in Country A (20%), and Country A has
the lowest effective rate of tax among the manufac-
turing branches that would,after applying paragraph
(b)(1)(ii)(b) of this section, be treated as a separate
corporation. The activities of Branch B will be in-
cluded in the contribution of Branch A for purposes
of determining the location of manufacture of Prod-
uct X because the effective rate of tax imposed on the
sales income by Country M (10%) is less than 90%
of, and at least 5 percentage points less than, the ef-
fective rate of tax that would apply to such income in
Country B (24%). Under the facts and circumstances
of the business, the activities of the remainder of FS
would not provide a greater contribution to the man-
ufacture of Product X than the activities of Branch
A and Branch B, considered together. Therefore, the
location of manufacture is Country A, the location of
Branch A.
Example 4.Manufacturing activities performed
by multiple branches, no branch independently satis-
fies paragraph (a)(4)(i), selling activities carried on
by remainder of the controlled foreign corporation,
remainder contribution includes branch manufactur-
ing activities.(i)Facts. The facts are the same asEx-
ample 3, except that the effective rate of tax on sales
income in Country B is 12%. In addition, under the
facts of the particular business, the activities of em-
ployees of FS located in Country B and Country M,
if considered together, would provide a greater con-
tribution to the manufacture of Product X than the ac-
tivities of employees of FS located in Country A.
(ii)Result. Based on the facts, neither the re-
mainder of FS (through activities of its employees in
Country M) nor any branch of FS independently sat-
isfies paragraph (a)(4)(i) of this section with respect
to Product X, but FS, as a whole, provides a substan-
tial contribution through the activities of its employ-
ees to the manufacture of Product X. The remainder
of FS, Branch A, and Branch B each provide a con-
tribution through the activities of their employees to
the manufacture of Product X. Therefore, FS must de-
termine the location of manufacture under paragraph
(b)(1)(ii)(c)(3)(iii) of this section. The tested sales lo-
cation is Country M because the selling activities with
respect to Product X are carried on by the remainder
of FS. The location of Branch A is the tested man-
ufacturing location because the effective rate of tax
imposed on FS’s sales income by Country M (10%)
is less than 90% of, and at least 5 percentage points
less than, the effective rate of tax that would apply to
such income in Country A (20%), and Branch A is
the only branch that would, after applying paragraph
(b)(1)(ii)(b) of this section, be treated as a separate
corporation. The activities of Branch B will be in-
cluded in the contribution of the remainder of FS for
purposes of determining the location of manufacture
of Product X because the effective rate of tax imposed
on the sales income by Country M (10%) is not less
than 90% of, and at least 5 percentage points less than,
the effective rate of tax that would apply to such in-
2012–6 I.R.B.359February 6, 2012

come in Country B (12%). Under a facts and circum-
stances analysis, considered together, the activities of
Branch B and the remainder of FS would provide a
greater contribution to the manufacture of Product X
than the activities of Branch A. Therefore, the rules
of paragraph (b)(1)(ii)(a) of this section will not ap-
ply with respect to the income derived by the remain-
der of FS in connection with the sale of Product X,
and neither Branch A nor Branch B will be treated
as a separate corporation for purposes of paragraph
(b)(2)(ii) of this section.
Example 5.Manufacturing activities performed
by multiple branches, no branch independently satis-
fies paragraph (a)(4)(i), sales carried on by remain-
der of the controlled foreign corporation and a sales
branch.(i)Facts. The facts are the same asExam-
ple 3, except that sales of Product X are also carried
on through Branch D in Country D, and Country D
imposes a 16% effective rate of tax on sales income.
In addition, under the facts and circumstances of the
business, the activities of employees of FS located
in Country A and Country M, considered together,
would provide a greater contribution to the manufac-
ture of Product X than the activities of employees of
FS located in Country B.
(ii)Result. Based on the facts, neither the re-
mainder of FS nor any branch of FS independently
satisfies paragraph (a)(4)(i) of this section with re-
spect to Product X, but FS, as a whole, provides a
substantial contribution through the activities of its
employees to the manufacture of Product X. The re-
mainder of FS, Branch A, and Branch B each pro-
vide a contribution through the activities of their em-
ployees to the manufacture of Product X. Therefore,
FS must determine the location of manufacture under
paragraph (b)(1)(ii)(c)(3)(iii) of this section. Further,
pursuant to paragraph (b)(1)(ii)(c)(1)ofthissection,
paragraph (b)(1)(ii)(c)(3)(iii) of this section must be
applied separately to the sales income derived by the
remainder of FS and Branch D respectively. The re-
sults with respect to the income derived by the re-
mainder of FS in connection with the sale of Prod-
uct X in thisExample 5are the same as inExample
3. However, paragraph (b)(1)(ii)(c)(3)(iii)ofthissec-
tion must also be applied with respect to Branch D be-
cause the sale of Product X is also carried on through
Branch D. Thus, for purposes of that sales income,
the location of Branch D is the tested sales location.
The location of Branch B is the tested manufactur-
ing location because the effective rate of tax imposed
on Branch D’s sales income by Country D (16%) is
less than 90% of, and at least 5 percentage points
less than, the effective rate of tax that would apply
to such income in Country B (24%), and Branch B
is the only branch that would, after applying para-
graph (b)(1)(ii)(b) of this section, be treated as a sep-
arate corporation. The manufacturing activities per-
formed in Country M by the remainder of FS and the
manufacturing activities performed in Country A by
Branch A will be included in Branch D’s contribu-
tion to the manufacture of Product X for purposes
of determining the location of manufacture of Prod-
uct X with respect to Branch D’s sales income be-
cause the effective rate of tax imposed on the sales
income by Country D (16%) is not less than 90% of,
and at least 5 percentage points less than, the effec-
tive rate of tax that would apply to such income in
Country M (10%) and Country A (20%). Under the
facts and circumstances ofthe business, the activi-
ties of Branch D, Branch A, and the remainder of FS,
considered together, would provide a greater contri-
bution to the manufacture of Product X than the ac-
tivities of Branch B. Therefore, the rules of paragraph
(b)(1)(ii)(a) of this section will not apply with respect
to the income derived by Branch D in connection with
the sale of Product X and the use of Branch D to sell
Product X will not result in a branch being treated
as a separate corporation for purposes of paragraph
(b)(2)(ii) of this section.
Example 6.Determining the location of manufac-
ture when employees of remainder of controlled for-
eign corporation travel to location of unrelated con-
tract manufacturer to perform manufacturing activ-
ities.(i)Facts. FS, a controlled foreign corpora-
tion organized in Country M, purchases raw materials
from a related person. The raw materials are manu-
factured (under the principles of paragraph (a)(4)(ii)
or (a)(4)(iii) of this section) into Product X by CM,
an unrelated corporation, pursuant to a contract man-
ufacturing arrangement. CM physically performs the
substantial transformation, assembly, or conversion
of the raw materials in Country C. Employees of FS
located in Country M sell Product X to unrelated per-
sons for use outside of Country M. Employees of FS
located in Country M engage in product design, man-
age the manufacturing costs and capacities with re-
spect to Product X, and direct the use of intellectual
property for the purpose of manufacturing Product
X. Quality control and oversight and direction of the
manufacturing process are conducted in Country C
by employees of FS who are employed in Country
M but who regularly travel to Country C. Branch A,
located in Country A, is the only branch of FS. Prod-
uct design with respect to Product X conducted by
employees of FS located in Country A is supplemen-
tal to the bulk of the design work, which is done by
employees of FS located in Country M. At all times,
employees of Branch A control the raw materials,
work-in-process and finished goods. Employees of
FS located in Country A also control manufacturing
related logistics with respect to Product X. Country
M imposes an effective rate of tax on sales income
of 10%. Country A imposes an effective rate of tax
on sales income of 20%. Neither the remainder of
FS nor Branch A independently satisfies paragraph
(a)(4)(i) of this section. However, under the facts and
circumstance of the business, FS as a whole (includ-
ing Branch A) provides a substantial contribution to
the manufacture of Product X within the meaning of
paragraph (a)(4)(iv) of this section.
(ii)Result. Based on the facts, neither the re-
mainder of FS nor Branch A independently satisfies
paragraph (a)(4)(i) of this section with respect to
Product X, but FS, as a whole, provides a substantial
contribution through the activities of its employees to
the manufacture of Product X. The remainder of FS
and Branch A each provide a contribution through the
activities of employees to the manufacture of Product
X. Therefore, FS must determine the location of
manufacture under paragraph (b)(1)(ii)(c)(3)(iii)of
this section. The tested sales location is Country M
because the selling activities with respect to Product
X are carried on by the remainder of FS. The tested
manufacturing location is the location of Branch
A because the effective rate of tax imposed on the
remainder of FS’s sales income by Country M (10%)
is less than 90% of, and at least 5 percentage points
less than, the effective rate of tax that would apply to
such income in Country A (20%), and Branch A is
the only branch that would, after applying paragraph
(b)(1)(ii)(b) of this section, be treated as a separate
corporation. Although the activities of traveling em-
ployees are considered in determining whether FS,
as a whole, makes a substantial contribution to the
manufacture of Product X under paragraph (a)(4)(iv)
of this section, the activities of the employees of
FS that are performed in Country C are not taken
into consideration in determining whether Country
M, the jurisdiction under the laws of which FS is
organized, is the location of manufacture under para-
graph (b)(1)(ii)(c)(3)(iii) of this section. Activities
of employees performed outside the jurisdiction in
which the controlled foreigncorporation is organized
and outside a location in which the controlled foreign
corporation maintains a branch or similar establish-
ment, are not considered in determining the location
of manufacture. Under the facts and circumstances
of the business, the activities of employees of FS
performed in Country M do not provide a greater
contribution to the manufacture of Product X than the
activities of employees of FS performed in Country
A. Therefore, the location of manufacture is Country
A, the location of Branch A.
(4)Use of more than one branch to
manufacture, produce, construct, grow,
or extract separate items of personal
property. For purposes of paragraphs
(b)(1)(ii)(c)(2) and (b)(1)(ii)(c)(3)ofthis
section, anitemof personal property refers
to an individual unit of personal property
rather than a type or class of personal
property.
(2) * * *
(i) * * *
(b)Activities treated as performed on
behalf of the remainder of corporation.(1)
With respect to purchasing or selling activ-
ities performed by or through the branch
or similar establishment, such purchas-
ing or selling activities will, with respect
to personal property manufactured, pro-
duced, constructed, grown, or extracted
by the remainder of the controlled foreign
corporation, be treated as performed on
behalf of the remainder of the controlled
foreign corporation.
(2) With respect to purchasing or sell-
ing activities performed by or through
the branch or similar establishment,
such purchasing or selling activities will,
with respect to personal property (other
than property described in paragraph
(b)(2)(i)(b)(1) of this section) purchased
or sold, or purchased and sold, by the
remainder of the controlled foreign cor-
poration (or any branch treated as the
remainder of the controlled foreign corpo-
ration), be treated as performed on behalf
of the remainder of the controlled foreign
corporation.
February 6, 20123602012–6 I.R.B.

*****
(ii) * * *
(a)Treatment as separate corporations.
The branch or similar establishment will
be treated as a wholly owned subsidiary
corporation of the controlled foreign cor-
poration,andsuchbranchorsimilarestab-
lishment will be deemed to be incorporated
in the country in which it is located. For
purposes of applying the rules of this para-
graph (b)(2)(ii), a branch or similar estab-
lishment of a controlled foreign corpora-
tion treated as a separate corporation pur-
chasing or selling on behalf of the remain-
der of the controlled foreign corporation
under paragraph (b)(2)(ii)(b)ofthissec-
tion, or the remainder of the controlled for-
eign corporation treated as a separate cor-
poration purchasing or selling on behalf of
a branch or similar establishment of the
controlled foreign corporation under para-
graph (b)(2)(ii)(c) of this section, will in-
clude the activities of any other branch or
similar establishment or remainder of the
controlled foreign corporation that would
not be treated as a separate corporation
(apart from the branch or similar establish-
ment of a controlled foreign corporation
that is treated as performing purchasing or
selling activities on behalf of the remain-
der of the controlled foreign corporation
under paragraph (b)(2)(ii)(b)ofthissec-
tion or the remainder of the controlled for-
eign corporation that is treated as perform-
ing purchasing or selling activities on be-
half of the branch or similar establishment
under paragraph (b)(2)(ii)(c)ofthissec-
tion) if the effective rate of tax imposed
on the income of the purchasing or sell-
ing branch or similar establishment, or pur-
chasing or selling remainder of the con-
trolled foreign corporation, were tested un-
der the principles of paragraph (b)(1)(i)(b)
or (b)(1)(ii)(b) of this section against the
effective rate of tax that would apply to
such income if it wereconsidered derived
by such other branch or similar establish-
ment or the remainder of the controlled for-
eign corporation.
(b)Activities treated as performed on
behalf of the remainder of corporation.(1)
With respect to purchasing or selling activ-
ities performed by or through the branch
or similar establishment, such purchas-
ing or selling activities will, with respect
to personal propertymanufactured, pro-
duced, constructed, grown, or extracted
by the remainder of the controlled foreign
corporation, be treated as performed on
behalf of the remainder of the controlled
foreign corporation.
(2) With respect to purchasing or sell-
ing activities performed by or through
the branch or similar establishment,
such purchasing or selling activities will,
with respect to personal property (other
than property described in paragraph
(b)(2)(ii)(b)(1)ofthissection)purchased
or sold, or purchased and sold, by the
remainder of the controlled foreign cor-
poration (or any branch treated as the
remainder of the controlled foreign corpo-
ration), be treated as performed on behalf
of the remainder of the controlled foreign
corporation.
*****
(d) [Reserved].
(e)Comparison with ordinary treat-
ment. Income derived by a branch or
similar establishment, or by the remainder
of the controlled foreign corporation, will
not be foreign base company sales income
under paragraph (b) of this section if the
income would not be foreign base com-
pany sales income if it were derived by
a separate controlled foreign corporation
under like circumstances.
*****
(4)Illustrations. The application of this
paragraph (b) may be illustrated by the fol-
lowing examples:
*****
Example 3.(i)Facts. Corporation E, a controlled
foreign corporation incorporated under the laws of
foreign Country X, is a wholly owned subsidiary of
Corporation D, also a controlled foreign corporation
incorporated under the laws of Country X. Corpo-
ration E maintains Branch B in foreign Country Y.
Both corporations use the calendar year as the taxable
year. In 1964, Corporation E’s sole activity, carried
on through Branch B, consists of the purchase of ar-
ticles manufactured in Country X by Corporation D,
a related person, and the sale of the articles through
Branch B to unrelated persons. One hundred percent
of the articles sold through Branch B are sold for use
outside Country X and 90% are also sold for use out-
side of Country Y. The income of Corporation E de-
rived by Branch B from such transactions is taxed to
Corporation E by Country X only at the time Cor-
poration E distributes such income to Corporation D
and is taxed on the basis of what the tax (a 40% ef-
fective rate) would have been if the income had been
derived in 1964 by Corporation E from sources within
Country X from doing business through a permanent
establishment therein. Country Y levies an income
tax at an effective rate of 50% on income derived
from sources within such country, but the income of
Branch B for 1964 is effectively taxed by Country Y
at a 5% rate since under the laws of such country, only
10% of Branch B’s income is derived from sources
within such country. Corporation E makes no distri-
butions to Corporation D in 1964.
(ii)Result. In determining foreign base company
sales income of Corporation E for 1964, Branch B
is treated as a separate wholly owned subsidiary cor-
poration of Corporation E, the 5% rate of tax being
less than 90% of, and at least 5 percentage points
less than the 40% rate. Income derived by Branch B,
treated as a separate corporation, from the purchase
from a related person (Corporation D), of personal
property manufactured outside of Country Y and sold
for use, disposition, or consumption outside of Coun-
try Y constitutes foreign base company sales income.
If, instead, Corporation D were unrelated to Corpo-
ration E, none of the income would be foreign base
company sales income because Corporation E would
be purchasing from and selling to unrelated persons
andifBranchBweretreatedasaseparatecorpora-
tion it would likewise be purchasing from and selling
to unrelated persons. Alternatively, if Corporation D
were related to Corporation E, but Branch B manufac-
tured the articles prior to sale under the principles of
paragraph (a)(4)(iv) of this section, the income would
not be foreign base company sales income because
Branch B, treated as a separate corporation, would
qualify for the manufacturing exception under para-
graph (a)(4) of this section.
*****
Example 8.Uniformly applicable incentive tax
rate in one country.(i)Facts. FS is a controlled
foreign corporation organized in Country M. FS op-
erates one branch, Branch A, located in Country A.
Branch A manufactures Product X within the mean-
ing of paragraph (a)(4)(ii) or (a)(4)(iii) of this sec-
tion. Raw materials used in the manufacture of Prod-
uct X are purchased by FS from an unrelated person.
FS engages in activities in Country M to sell Product
X to a related person for use outside of Country M.
Employees of FS located in Country M carry on only
sales functions. The effective rate imposed in Coun-
try M on the income from the sale of Product X is
10%. Country A generally imposes an effective rate
of tax on income of 20%, but imposes a uniformly
applicable incentive rate of tax of 10% on manufac-
turing income and related sales income.
(ii)Result. The use of Branch A to manufacture
Product X does not have substantially the same tax ef-
fect as if Branch A were a wholly owned subsidiary
corporation of FS because the effective rate of tax on
FS’s sales income from the sale of Product X in Coun-
try M (10%) is not less than 90% of, and at least 5 per-
centage points less than, the effective rate of tax that
would apply to such income in the country in which
Branch A is located (10%). Consequently, pursuant
to paragraph (b)(1)(ii)(b)ofthissection,BranchAis
not treated as a separate corporation apart from the
remainder of FS for purposes of determining foreign
base company sales income.
Example 9.Manufacturing activities performed
by multiple branches, no branch independently satis-
fies paragraph (a)(4)(i), selling activities carried on
by remainder of the controlled foreign corporation,
some branch manufacturing activities included in re-
mainder contribution.(i)Facts. FS, a controlled for-
eign corporation organized in Country M, has three
branches, Branch A, Branch B, and Branch C, located
in Country A, Country B, and Country C respectively.
FS purchases raw materials from a related person.
2012–6 I.R.B.361February 6, 2012

The raw materials are manufactured (under the prin-
ciples of paragraph (a)(4)(ii) or (a)(4)(iii) of this sec-
tion) into Product X by CM, an unrelated corporation,
pursuant to a contract manufacturing arrangement.
CM physically performs the substantial transforma-
tion, assembly, or conversion required to manufacture
Product X outside of FS’s country of organization.
FS manages the manufacturing costs and capacities
with respect to the manufacture of Product X through
employees located in CountryM.Further,employees
of FS located in Country M oversee the coordination
between the branches. Branch A, through the activi-
ties of employees of FS located in Country A, designs
Product X, controls manufacturing related logistics,
and controls the raw materials and work-in-process
during the manufacturing process. Branch B, through
the activities of employees of FS located in Country
B, provides quality control. Branch C, through the
activities of employees of FS located in Country C,
provides oversight and direction during the manufac-
turing process. Employees of FS located in Country
M sell Product X to unrelated persons for use outside
of Country M. Country M imposes an effective rate
of tax on sales income of 10%. Country A imposes an
effective rate of tax on sales income of 12%, Country
B imposes an effective rate of tax on sales income of
24%, and Country C imposes an effective rate of tax
on sales income of 25%. None of the remainder of
FS,BranchA,BranchB,orBranchCindependently
satisfies paragraph (a)(4)(i) of this section. However,
under the facts and circumstances of the business,
FS, as a whole, provides a substantial contribution to
the manufacture of Product X within the meaning of
paragraph (a)(4)(iv) of this section. Under the facts
and circumstances of the business, the activities of the
remainder of FS and Branch A,if considered together,
would not provide a greater contribution to the man-
ufacture of Product X than the activities of Branch B
and Branch C, if considered together. Under the facts
and circumstances of the business, however, the ac-
tivities of the employees of the remainder of FS and
Branch A, if considered together, would constitute a
substantial contribution to the manufacture of Prod-
uct X.
(ii)Result. Based on the facts, neither the re-
mainder of FS (through activities of its employees in
Country M) nor any branch of FS independently satis-
fies paragraph (a)(4)(i) of this section with respect to
Product X, but FS, as a whole, provides a substantial
contribution through the activities of its employees
to the manufacture of Product X. The remainder of
FS, Branch A, Branch B, and Branch C each provide
a contribution through the activities of employees to
the manufacture of ProductX. Therefore, FS must de-
termine the location of manufacture under paragraph
(b)(1)(ii)(c)(3)(iii) of this section. The tested sales lo-
cation is Country M because the selling activities with
respect to Product X are carried on by the remainder
of FS. The location of Branch B is the tested man-
ufacturing location because the effective rate of tax
imposed on FS’s sales income by Country M (10%)
is less than 90% of, and at least 5 percentage points
less than, the effective rate of tax that would apply
to such income in Country B (24%), and Country B
has the lowest effective rate of tax among the man-
ufacturing branches that would, after applying para-
graph (b)(1)(ii)(b) of this section, be treated as a sep-
arate corporation. The manufacturing activities per-
formed in Country A by Branch A will be included
in the contribution of the remainder of FS for pur-
poses of determining the location of manufacture of
Product X because the effective rate of tax imposed
on the sales income by Country M (10%) is not less
than 90% of, and at least 5 percentage points less than,
the effective rate of tax that would apply to such in-
come in Country A (12%).The manufacturing ac-
tivities performed in Country C by Branch C will be
included in the contribution of Branch B for purposes
of determining the location of manufacture of Prod-
uct X because the effective rate of tax imposed on the
sales income by Country M (10%) is less than 90%
of, and at least 5 percentage points less than, the ef-
fective rate of tax that would apply to such income
in Country C (25%). Under the facts and circum-
stances of the business, the manufacturing activities
of the remainder of FS and Branch A, considered to-
gether, would not provide a greater contribution to
the manufacture of Product X than the activities of
Branch B and Branch C, considered together. There-
fore, the location of manufacture is Country B, the
locationofBranchB.IndeterminingthatCountryB
is the location of manufacture, it was determined that
after applying paragraph (b)(1)(ii)(b)ofthissection
Branch B would be treated asa separate corporation
under paragraph (b)(1)(ii)(a)ofthissectionforpur-
poses of determining foreign base company sales in-
come. To determine whether income from the sale
of Product X is foreign base company sales income,
the remainder of FS takes into account the activities
of Branch A because, under paragraph (b)(2)(ii)(a)
of this section, Branch A would not be treated as a
separate corporation apart from FS. The remainder
of FS is considered to have manufactured Product X
under paragraph (a)(4)(i)of this section because the
manufacturing activities of the remainder of FS and
Branch A, considered together, would make a sub-
stantial contribution to the manufacture of Product
X within the meaning of paragraph (a)(4)(iv) of this
section. Therefore, income derived from the sale of
Product X by the remainder of FS does not constitute
foreign base company sales income.
(c)Effective/applicability date. Para-
graphs (a)(1)(i), (a)(1)(iii)Example 1,
(a)(1)(iii)Example 2, (a)(2), (a)(4)(i),
(a)(4)(ii), (a)(4)(iii), (a)(4)(iv), (a)(6)(i),
(b)(1)(i)(c), (b)(1)(ii)(a), (b)(1)(ii)(c),
(b)(2)(i)(b), (b)(2)(ii)(a), (b)(2)(ii)(b),
(b)(2)(ii)(e), and (b)(4)Example 3,(b)(4)
Example 8, and (b)(4)Example 9of this
section shall apply to taxable years of
controlled foreign corporations beginning
after June 30, 2009, and for taxable years
of United States shareholders in which
or with which such taxable years of the
controlled foreign corporations end.
(d)Application of regulations to earlier
taxable years. A taxpayer may choose to
apply these regulations retroactively with
respect to its open taxable years that began
prior to July 1, 2009. The taxpayer may so
choose if and only if the taxpayer and all
members of the taxpayer’s affiliated group
(within the meaning of section 1504(a))
apply these regulations, in their entirety,
to the earliest taxable year of each con-
trolled foreign corporation that ends with
or within an open taxable year of the tax-
payer and to all subsequent taxable years.
§1.954–3T [Removed]
Par. 3. Section 1.954–3T is removed.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved December 6, 2011.
Emily S. McMahon,
Acting Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on December 15,
2011, 11:15 a.m., and published in the issue of the Federal
Register for December 19,2011, 76 F.R. 78545)
Section 1274.—Determi-
nation of Issue Price in the
Case of Certain Debt Instru-
ments 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, 642, 1274, 1288, and other
sections of the Code, tables set forth the
rates for February 2012.
Rev. Rul. 2012–7
This revenue ruling provides various
prescribed rates for federal income tax
purposes for February 2012 (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
Internal Revenue Code. Table 2 contains
the short-term, mid-term, and long-term
adjusted applicable federal rates (ad-
justed 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 de-
scribed in section 382(f). Table 4 contains
the appropriate percentages for deter-
mining the low-income housing credit
described in section 42(b)(1) for build-
ings placed in service during the current
month. However, under section 42(b)(2),
February 6, 20123622012–6 I.R.B.

the applicable percentage for non-feder-
ally subsidized new buildings placed in
service after July 30, 2008, and before
December 31, 2013, shall not be less than
9%. Finally, Table 5 contains the federal
rate for determining the present value of
an annuity, an interest for life or for a term
of years, or a remainder or a reversionary
interest for purposes of section 7520.
REV. RUL. 2012–7 TABLE 1
Applicable Federal Rates (AFR) for February 2012
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
AFR.19%.19%.19%.19%
110% AFR.21%.21%.21%.21%
120% AFR.23%.23%.23%.23%
130% AFR
.25%.25%.25%.25%
Mid-term
AFR1.12%1.12%1.12%1.12%
110% AFR1.23%1.23%1.23%1.23%
120% AFR1.34%1.34%1.34%1.34%
130% AFR1.47%1.46%1.46%1.46%
150% AFR
1.69%1.68%1.68%1.67%
175% AFR
1.97%1.96%1.96%
1.95%
Long-term
AFR
2.58%2.56%2.55%2.55%
110% AFR2.84%2.82%2.81%2.80%
120% AFR3.09%3.07%3.06%
3.05%
130% AFR3.36%3.33%3.32%3.31%
REV. RUL. 2
012–7 TABLE 2
Adjusted AFR for February 2012
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term adjusted
AFR
.35%.35%.35%.35%
Mid-term adjusted AFR1.24%1.24%1.24%1.24%
Long-te
rm adjusted
AFR
3.26%3.23%3.22%3.21%
REV. RUL. 2012–7 TABLE 3
Rates Under Section 382 for February 2012
Adjuste
d federal long-term rate for the current month
3.26%
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.)3.55%
2012–6 I.R.B.363February 6, 2012

REV. RUL. 2012–7 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for February 2012
Note: Under Section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after
July 30, 2008, and before December 31, 2013, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit7.42%
Appropriate percentage for the 30% present value low-income housing credit3.18%
REV. RUL. 2012–7 TABLE 5
Rate Under Sec
tion 7520 for February 2012
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 interest1.4%
Section 1288.
—Treatment
of Original Is
sue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2012. See Rev. Rul. 2012-7, page 362.
Section 7520.—Valuation
Tables
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2012. See Rev. Rul. 2012-7, page 362.
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 February 2012. See Rev. Rul. 2012-7, page 362.
February 6, 20123642012–6 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Restitution Payments Under
the Trafficking Victims
Protection Act of 2000
Notice 2012–12
PURPOSE
This notice provides guidance on the
federal income tax treatment of manda-
tory restitution payments awarded under
18 U.S.C. § 1593, as added by § 112(a)
of the Trafficking Victims Protection Act
of 2000 (the Act), Division A of Pub. L.
106–386, 114 Stat. 1488–89 (2000).
BACKGROUND
Congress enacted the Act “to combat
trafficking of persons, a contemporary
manifestation of slavery whose victims
are predominantly women and children,
to ensure just and effective punishment of
traffickers, and to protect their victims.”
Section 102(a) of the Act. Congress found
that “[v]ictims are often forced through
physical violence to engage in sex acts
or perform slavery-like labor” and that
“[s]uch force includes rape and other
forms of sexual abuse, torture, starva-
tion, imprisonment, threats, psychological
abuse, and coercion.” Section 102(b)(6) of
the Act.
Under 18 U.S.C. §§ 1581 through 1594,
as amended, Congress has defined crimi-
nal acts relating to peonage, slavery, and
trafficking in persons and established the
fines and terms of imprisonment for per-
sons convicted of the criminal acts. The
criminal acts include (i) holding a person
to a condition of peonage; (ii) kidnapping
or carrying away a person to sell the person
into involuntary servitude or to be held as
a slave, (iii) providing or obtaining a per-
son’s services or labor by actual or threat-
ened use of certain means including force,
physical restraint, serious harm, and abuse
of legal process, and (iv) sex trafficking
of children or by force, fraud, or coercion.
See18 U.S.C. §§ 1581, 1583, 1589, and
1591.
Under 18 U.S.C. § 1593, a court must
order restitution to a victim for any of-
fense committed under 18 U.S.C. §§ 1581
through 1594, directing a defendant to pay
the victim the full amount of the victim’s
losses. 18 U.S.C. § 1593(b)(1).
The full amount of a victim’s losses in-
cludes costs for medical services relating
to physical, psychiatric, or psychological
care; costs for physical and occupational
therapy or rehabilitation; necessary trans-
portation, temporary housing, and child
care expenses; lost income; attorneys’ fees
and other costs; and other losses the vic-
tim suffers as a proximate result of the of-
fense.See18 U.S.C. §§ 1593(b)(3) and
2259(b)(3). Under 18 U.S.C. § 1593(b)(3),
a victim’s losses also include the greater
of the gross income or value to the defen-
dant of the victim’s services or labor or
the value of the victim’s labor as guaran-
teed under the minimum wage and over-
time guarantees of the Fair Labor Stan-
dards Act (29 U.S.C. § 201et seq.).
FEDERAL TAX TREATMENT OF
BENEFITS
Mandatory restitution payments
awarded under 18 U.S.C. § 1593 are ex-
cluded from gross income for federal
income tax purposes.
DRAFTING INFORMATION
The principal author of this notice is
Sheldon Iskow of the Office of Associate
Chief Counsel (Income Tax & Account-
ing). For further information regarding
this notice, contact Mr. Iskow at (202)
622–4920 (not a toll-free call).
2012–6 I.R.B.365February 6, 2012

Part IV. Items o
fGeneralInterest
Revisions to P
ublications
1187, 1220, an
d 1239
Announcement 2012–6
Changes to:
•Publication 1220,Specifications for
Filing Forms 1097, 1098, 1099, 3921,
3922, 5498, and W–2G Electronically
(Rev. 9–2011)
•Publication 1187,Specification for
Filing Form 1042-S, Foreign Per-
son’s U.S. Source Income Subject
to Withholding, Electronically(Rev.
10–2011)
•Publication 1239,Specifications for
Filing Form 8027, Employer’s Annual
Information Return of Tip Income and
Allocated Tips, Electronically(Rev.
10–2011)
The following PartD., Extensions of
Time and Waivers, Sec. 1, General-Exten-
sion and Sec. 2, Specifications for Filing
Extensions of Time Electronically, super-
sedes the previously printed Part D., Ex-
tensions of Time and Waivers, Sec. 1,
General-Extension and Sec. 2, Specifica-
tions for Filing Extensions of Time Elec-
tronically in the above listed publications.
Part D. Extensions of Time and Waivers
Sec. 1. General — Extensions
.01An extension of time to file may be
requested for Forms 1042-S, 1097, 1098,
1099, 3921, 3922, 5498, 8027 and W-2G.
Note:
IRS encourages the payer/trans-
mitte
r community to utilize the online
fill-
in form in lieu of the paper Form
8809.
Requests for more than one payer
must b
e filed through the Filing Infor-
matio
n Returns Electronically (FIRE)
syst
em using the Fill-in option. No TCC
requ
ired.
.02T
he Fill-in Form 8809 may be
comp
leted online via the FIRE System.
(See
Part B, Sec. 7, for instructions on
conn
ecting to the FIRE System.) At the
Main
Menu, click “Extension of Time
Requ
est”andthenclick“Fill-inExtension
For
m”. This option is only used to request
an a
utomatic 30-day extension. Extension
requests comp
leted online via the FIRE
System receiv
e an instant response if com-
pleted proper
ly and timely. If you are
requesting an
additional extension, you
must submit a p
aper Form 8809.Requests
for an additi
onal extension of time to file
information
returns are not automatically
granted. Req
uests for additional time are
granted only
in cases of extreme hardship
or catastro
phic event. The IRS will only
send a lette
r of explanation approving or
denying you
r additional extension request.
(Refer to .1
1 of this Section.)
.03A paper F
orm 8809,Application
for Extensi
on of Time to File Information
Returns,m
ay be submitted to IRS/IRB at
the addres
s listed below. This form may
be used to r
equest an extension of time
to file inf
ormation returns submitted on
paper. A si
gnature is not required when
requesti
ng an automatic 30-day extension.
Form 8809
may be obtained by calling
1–800–TA
X–Form (1–800–829–3676).
The form i
s also available atIRS.gov.
These re
quests must be sent using the fol-
lowing a
ddress:
Interna
l Revenue Service
Informa
tion Returns Branch
Attn: Ex
tension of Time Coordinator
240 Mura
ll Drive, Mail Stop 4360
Kearne
ysville, WV 25430
Note: D
ue to the large volume of mail
receiv
ed by IRS/IRB and the time fac-
tor inv
olvedinprocessingExtensionof
Time (E
OT) requests, it is imperative
that t
heattentionlinebepresentonall
envel
opes or packages containing Form
8809.
.04Re
quests for extensions of time
to fil
e postmarked by the United States
Posta
l Service on or before the due date
of the
returns, and delivered by United
State
s mail to IRS/IRB after the due date,
are t
reated as timely under the “timely
mail
ing as timely filing” rule. A similar
rule
applies to designated private delivery
serv
ices (PDSs). Notice 97–26, 1997–17
I.R.
B. 6, provides rules for determining
the
date that is treated as the postmark
dat
e. For items delivered by a non-desig-
nat
ed Private Delivery Service (PDS), the
act
ual date of receipt by IRS/IRB will be
used as the fil
ing date. For items delivered
by a designate
d PDS, but through a type of
service not de
signated in Notice 2004–83,
2004–52 I.R.B
. 1030, the actual date of re-
ceipt by IRS/I
RB will be used as the filing
date. The tim
ely mailing rule also applies
to furnishin
g statements to recipients and
participant
s.
.05To be cons
idered, an extension re-
questmustbe
postmarked, transmitted or
completed on
line by the due date of the
returns; ot
herwise, the request will be de-
nied. (See P
art A, Sec. 7, for due dates.) If
requesting
an extension of time to file sev-
eral types o
f forms, use one Form 8809;
however, F
orm 8809 or an extension file
must be sub
mitted no later than the ear-
liest due d
ate. For example, if request-
inganexte
nsionoftimetofilebothForms
1099–INT a
nd 5498, submit Form 8809 on
or before
February 28.
.06 As soo
nasitisapparentthat a
30-day ex
tension of time to file is needed,
an extens
ion request should be submitted.
IRS/IRB d
oes not begin processing exten-
sion requ
ests until January. It may take up
to 30 day
s for IRS/IRB to respond to a pa-
per exte
nsion request.Extensions com-
pleted o
nlineviatheFIRESystemre-
ceive in
stant results.
.07Unde
r certain circumstances, a re-
quest fo
r an extension of time may be de-
nied. W
hen a denial letter is received, any
additi
onal or necessary information must
be resu
bmitted within 20 calendar days.
.08Req
uesting an extension of time for
multip
le payers should be done by com-
pletin
g the online fill-in form via the FIRE
System
. A separate Form 8809 must be
compl
eted online for each payer.
.09Tra
nsmitters requesting an exten-
sion o
f time via an electronic file (see Sec.
3fort
he record layout) will receive the file
statu
s results online.
.10If
an extension request is approved,
the ap
proval notification should be kept on
file.
DO NOTsend the approval notifica-
tion o
r copy of the approval notification to
IRS/
IRB or to the service center where the
pape
r returns are filed.
.11I
f an additional extension of time
is ne
eded, a Form 8809 and/or extension
file
must be sent by the initial extended
due d
ate. Check line 3 on the form to in-
dica
te that an additional extension is be-
February 6, 20123662012–6 I.R.B.

ing requested. Failure to properly com-
plete andsignForm 8809 may cause de-
lays in processing the request or result in
a denial. Carefully read and follow the in-
structions on the back of Form 8809. A
second 30-day extension will be approved
only in cases of extreme hardship or cata-
strophic event. Be sure to include the rea-
son an additional extension is needed.If
requesting a second 30-day extension of
time, submit the information return files
as soon as prepared. Do not wait for
IRS/IRB’s response to your second ex-
tension request.
Sec. 2. Specifications for Filing
Extensions of Time Electronically
.01The specificationsin Sec. 3 include
the required 200-byte record layout for ex-
tensions of time to file requests submitted
electronically. Also included are the in-
structions for the information that is to be
entered in the record.Filers are advised
to read this section in its entirety to en-
sure proper filing.
.02If a filer does not have an IRS/IRB
assigned Transmitter Control Code (TCC),
Form 4419,Application for Filing In-
formation Returns Electronically (FIRE)
mustbe submitted to obtain a TCC. This
numbermustbe used to submit an exten-
sion request electronically. (See Part A,
Sec. 6.)
.03If you are requesting an additional
extension, you must fax a signed Form
8809 the same day as the transmission. Be
sure to include the reason an additional ex-
tension is needed.
.04Do not submit tax year 2011 ex-
tension requests filed electronically before
January 4, 2012.
Changes to :
Publication 1220,Specifications for
Filing Forms 1097, 1098, 1099, 3921,
3922, 5498, and W–2G Electronically
(Rev. 9–2011)
Part C, Section 7 for Form 3921 & Form
3922:
•Payee “B” Record for Form 3921,Ex-
ercise of an Incentive Stock Option Un-
der Section 422(b),
•Field Positions 547–554, Date Op-
tion Granted, is a Required Field
•Field Positions 555–562, Date Op-
tion Exercised, is a Required Field
•Field Positions 563–570, Number
of Shares Transferred, is a Re-
quired Field
•Payee “B” Record for Form 3922,
Transfer of Stock Acquired Through an
Employee Stock Purchase Plan Under
Section 423(c),
•Field Position 547–554. Date Op-
tion Granted to Transferor, is a Re-
quired Field
•Field Position 555–562, Date Op-
tion Exercised by Transferor, is a
Required Field
•Field Position 563–570, Number
of Shares Transferred, is a Re-
quired Field
•Field Position 571–578, Date Le-
gal Title Transferred by Transferor,
is a Required Field
Correction to Revenue
Procedure 2012–8
Announcement 2012–7
Revenue Procedure 2012–8 as pub-
lished on January 3, 2012 (2012–1 I.R.B.
235) contains a typographical error in
section 6.07(5). The error is that section
6.07(5) refers to Notice 2011–34. The
correct Notice is Notice 2011–43. Sec-
tion 6.07(5) is amended to delete “Notice
2011–34” and replace it with “Notice
2011–43.”
2012–6 I.R.B.367February 6, 2012

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
February 6, 2012i2012–6 I.R.B.

Numerical Finding List
1
Bulletins 2012–1 through 2012–6
Announcements:
2012-1, 2012-1 I.R.B.249
2012-2, 2012-2 I.R.B.285
2012-3, 2012-4 I.R.B.335
2012-4, 2012-4 I.R.B.335
2012-5, 2012-5 I.R.B.348
2012-6, 2012-6 I.R.B.366
2012-7, 2012-6 I.R.B.367
Notices:
2012-1, 2012-2 I.R.B.260
2012-3, 2012-3 I.R.B.289
2012-4, 2012-3 I.R.B.290
2012-5, 2012-3 I.R.B.291
2012-6, 2012-3 I.R.B.293
2012-7, 2012-4 I.R.B.308
2012-8, 2012-4 I.R.B.309
2012-9, 2012-4 I.R.B.315
2012-10, 2012-5 I.R.B.343
2012-11, 2012-5 I.R.B.346
2012-12, 2012-6 I.R.B.365
Proposed Regulations:
REG-149625-10, 2012-2 I.R.B.279
REG-102988-11, 2012-4 I.R.B.326
REG-130777-11, 2012-5 I.R.B.347
Revenue Procedures:
2012-1, 2012-1 I.R.B.1
2012-2, 2012-1 I.R.B.92
2012-3, 2012-1 I.R.B.113
2012-4, 2012-1 I.R.B.125
2012-5, 2012-1 I.R.B.169
2012-6, 2012-1 I.R.B.197
2012-7, 2012-1 I.R.B.232
2012-8, 2012-1 I.R.B.235
2012-9, 2012-2 I.R.B.261
2012-10, 2012-2 I.R.B.273
2012-12, 2012-2 I.R.B.275
2012-13, 2012-3 I.R.B.295
2012-14, 2012-3 I.R.B.296
Revenue Rulings:
2012-1, 2012-2 I.R.B.255
2012-2, 2012-3 I.R.B.286
2012-5, 2012-5 I.R.B.337
2012-6, 2012-6 I.R.B.349
2012-7, 2012-6 I.R.B.362
Treasury Decisions:
9559, 2012-2 I.R.B.252
9560, 2012-4 I.R.B.299
Treasury Decisions— Continued:
9561, 2012-5 I.R.B.341
9562, 2012-5 I.R.B.339
9563, 2012-6 I.R.B.354
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2011–27 through 2011–52 is in Internal Revenue Bulletin
2011–52, dated December 27, 2011.
2012–6 I.R.B.iiFebruary 6, 2012

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2012–1 through 2012–6
Notices:
2010-88
As modified by Ann. 2011-40, is superseded by
Notice 2012-1, 2012-2 I.R.B.260
2011-28
Superseded by
Notice 2012-9, 2012-4 I.R.B.315
Revenue Procedures:
2003-61
Superseded by
Notice 2012-8, 2012-4 I.R.B.309
2007-44
Modified by
Ann. 2012-3, 2012-4 I.R.B.335
2011-1
Superseded by
Rev. Proc. 2012-1, 2012-1 I.R.B.1
2011-2
Superseded by
Rev. Proc. 2012-2, 2012-1 I.R.B.92
2011-3
Superseded by
Rev. Proc. 2012-3, 2012-1 I.R.B.113
2011-4
Superseded by
Rev. Proc. 2012-4, 2012-1 I.R.B.125
2011-5
Superseded by
Rev. Proc. 2012-5, 2012-1 I.R.B.169
2011-6
Superseded by
Rev. Proc. 2012-6, 2012-1 I.R.B.197
2011-7
Superseded by
Rev. Proc. 2012-7, 2012-1 I.R.B.232
2011-8
Superseded by
Rev. Proc. 2012-8, 2012-1 I.R.B.235
2011-9
Superseded by
Rev. Proc. 2012-9, 2012-2 I.R.B.261
2011-10
Superseded by
Rev. Proc. 2012-10, 2012-2 I.R.B.273
Revenue Procedures— Continued:
2011-40
Corrected by
Ann. 2012-6, 2012-6 I.R.B.366
2011-49
Modified by
Ann. 2012-3, 2012-4 I.R.B.335
2011-50
Corrected by
Ann. 2012-6, 2012-6 I.R.B.366
2011-51
Corrected by
Ann. 2012-6, 2012-6 I.R.B.366
2012-8
Corrected by
Ann. 2012-7, 2012-6 I.R.B.367
Revenue Rulings:
92-19
Supplemented in part by
Rev. Rul. 2012-6, 2012-6 I.R.B.349
2008-40
Modified by
Notice 2012-6, 2012-3 I.R.B.293
2011-1
Modified by
Notice 2012-6, 2012-3 I.R.B.293
Treasury Decision:
9517
Corrected by
Ann. 2012-4, 2012-4 I.R.B.335
Ann. 2012-5, 2012-5 I.R.B.348
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2011–27 through 2011–52 is in Internal Revenue Bulletin 2011–52, dated December 27,
2011.
February 6, 2012iii2012–6 I.R.B.

2012–6 I.R.B.February 6, 2012

February 6, 20122012–6 I.R.B.

INTERNAL REVENUE BULLETIN
The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superin-
tendent of Documents when their subscriptions must be renewed.
CUMULATIVE BULLETINS
The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are
sold on a single copy basis andare notincluded as part of the subscription to the Internal Revenue Bulletin. Subscribers to the weekly
Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print
and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the
Superintendent of Documents.
ACCESS THE INTERNAL REVENUE BULLETIN ON THE INTERNET
You may view the Internal Revenue Bulletin on the Internet at www.irs.gov. Select Businesses. Under Businesses Topics, select
More Topics. Then select Internal Revenue Bulletins.
INTERNAL REVENUE BULLETINS ON CD-ROM
Internal Revenue Bulletins are available annually as part ofPublication 1796 (Tax Products CD-ROM). The CD-ROM can be
purchased from National Technical Information Service (NTIS) on the Internet at www.irs.gov/cdorders (discount for online orders)
or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January.
HOW TO ORDER
Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance,
detach entire page, and mail to the Superintendent of Documents, P.O. Box 979050, St. Louis, MO 63197–9000. Please allow two to
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WE WELCOME COMMENTS ABOUT THE INTERNAL
REVENUE BULLETIN
If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page (www.irs.gov)
or write to the IRS Bulletin Unit, SE:W:CAR:MP:T:T:SP, Washington, DC 20224.
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