us-irs-revenue-procedures-irb-2003-22-pdf•Internal Revenue Bulletin 2003-22 (PDF rendition): IRS Revenue Procedures
Internal Revenue Bulletin 2003-22 (PDF rendition): IRS Revenue Procedures
us-irs-revenue-procedures-irb-2003-22-pdfInternal Revenue Bulletin 2003-22 (PDF rendition): IRS Revenue ProceduresGuidance
Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.
HIGHLIGHTS OF THIS ISSUE These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations. INCOME TAX Rev. Rul. 2003–52, page 960. Spin off.In the described situation, the division of a farm busi- ness to permit the principal managing shareholders to go their separate ways, promote family harmony, and further the per- sonal estate planning of the principal managing shareholders’ par- ents satisfies the business purpose requirement of section 1.355– 2(b) of the regulations. Rev. Rul. 2003–53, page 969. Special use value; farms; interest rates.The 2003 inter- est rates to be used in computing the special use value of farm real property for which an election is made under section 2032A of the Code are listed for estates of decedents. Rev. Rul. 2003–55, page 961. Spin off.This ruling discusses whether the corporate busi- ness purpose requirement of section 1.355–2(b)(1) of the regu- lations is satisfied if, as a result of an unexpected deterioration of market conditions, the controlled corporation is unable to com- plete the stock offering that motivated the distribution. Rev. Rul. 2003–57, page 959. Medical expenses.This ruling holds that amounts paid by in- dividuals for procedures that are directed to improving appear- ance and do not promote the proper function of the body are not expenses for medical care deductible under section 213 of the Code unless the procedure is necessary to correct a deformity arising from a birth defect, disfiguring disease, or injury. Rev. Rul. 2003–58, page 959. Medical expenses.This ruling holds that amounts paid by an individual for medicines that may be purchased without a pre- scription of a physician are not deductible under section 213 of the Code, but amounts paid by an individual for equipment, sup- plies, or diagnostic devices that may be purchased without a pre- scription of a physician may be deductible under section 213. T.D. 9057, page 964. REG–152524–02, page 979. A corporation that files a consolidated return that acquires a sub- sidiary may elect to waive all or a portion of that subsidiary’s loss carryovers from a separate return limitation year. Waived loss car- ryovers are deemed to have expired. Generally, such an elec- tion is irrevocable. Temporary and proposed regulations under section 1502 of the Code provide guidance on when a corpo- ration may make a limited amendment to a previous election to waive these loss carryovers. In addition, these regulations per- mit a selling group to reapportion separate, subgroup, and con- solidated section 382 limitations so that an acquiring group may use the loss carryovers that are no longer subject to the previ- ous election. A public hearing on the proposed regulations is scheduled for August 6, 2003. T.D. 9058, page 962. Final regulations under section 817A of the Code affect insur- ance companies that define the interest rate to be used with re- spect to certain insurance contracts that guarantee higher returns for an initial, temporary period. Notice 97–32 revoked. (Continued on the next page) Bulletin No. 2003–22 June 2, 2003 Finding Lists begin on page ii. Index for January through May begins on page vi. REG–164754–01, page 975. Proposed regulations under section 61 of the Code provide guid- ance for federal income, gift, and employment tax purposes on the valuation of economic benefits provided under a split-dollar life insurance arrangement. The regulations supplement pro- posed regulations published in the Federal Register on July 9, 2002 (REG–164754–01, 2002–30 I.R.B. 212) that provide com- prehensive guidance on split-dollar life insurance arrangements for federal income, gift, and employment tax purposes. A pub- lic hearing is scheduled for July 29, 2003. Notice 2003–28, page 971. This notice clarifies that an Indian Tribal Government (ITG) or an organization an ITG has authorized to place Indian children is an authorized placement agency for purposes of section 32(c)(3)(B)(iii). Rev. Proc. 2003–39, page 971. Like-kind exchanges; LKE programs.Safe harbor rules are provided under section 1031 of the Code, which allows for de- ferral of gain realized on a like-kind exchange of property, with respect to programs involving ongoing exchanges of tangible per- sonal property using a single intermediary (“LKE Programs”). June 2, 20032003–22 I.R.B. The IRS Mission Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. Introduction The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rul- ings and procedures of the Internal Revenue Service and for pub- lishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general inter- est. It is published weekly and may be obtained from the Super- intendent of Documents on a subscription basis. Bulletin contents are consolidated semiannually into Cumulative Bulletins, which are sold on a single-copy basis. It is the policy of the Service to publish in the Bulletin all sub- stantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All pub- lished rulings apply retroactively unless otherwise indicated. Pro- cedures relating solely to matters of internal management are not published; however, statements of internal practices and pro- cedures that affect the rights and duties of taxpayers are pub- lished. 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 taxpay- ers or technical advice to Service field offices, identifying de- tails 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 re- lied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and pro- cedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Ser- vice personnel and others concerned are cautioned against reach- ing the same conclusions in other cases unless the facts and circumstances are substantially the same. The Bulletin is divided into four parts as follows: Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986. Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Legisla- tion and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these sub- jects are contained in the other Parts and Subparts. Also in- cluded in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the De- partment of the Treasury’s Office of the Assistant Secretary (En- forcement). Part IV.—Items of General Interest. This part includes notices of proposed rulemakings, disbar- ment and suspension lists, and announcements. The first Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the first Bulletin of the succeeding semiannual pe- riod, respectively. The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate. For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. 2003–22 I.R.B.June 2, 2003 Part I. Rulings and Decisions Under the Internal Revenue Code of 1986 Section 213.—Medical, Dental, etc., Expenses 26 CFR 1.213–1: Medical, dental, etc., expenses. Medical expenses.Amounts paid by in- dividuals for procedures that are directed to improving appearance and do not pro- mote the proper function of the body are not expenses for medical care deductible un- der section 213 of the Code unless the pro- cedure is necessary to correct a deformity arising from a birth defect, disfiguring dis- ease, or injury. Therefore, breast recon- struction surgery following a mastectomy for cancer and vision correction surgery such as LASIK are deductible under sec- tion 213, but teeth whitening procedures are not deductible under section 213. Rev. Rul. 2003–57 ISSUE Are amounts paid by individuals for breast reconstruction surgery, vision cor- rection surgery, and teeth whitening medi- cal care expenses within the meaning of § 213(d) and deductible under § 213 of the Internal Revenue Code? FACTS TaxpayerAundergoes mastectomy sur- gery that removes a breast as part of treat- ment for cancer and pays a surgeon to reconstruct the breast. TaxpayerBwears glasses to correct myopia and pays a doc- tor to perform laser eye surgery to cor- rect the myopia. TaxpayerC’s teeth are discolored as a result of age.Cpays a den- tist to perform a teeth-whitening proce- dure.A,B, andCare not compensated for their expenses by insurance or otherwise. LAW AND ANALYSIS Section 213(a) allows a deduction for ex- penses paid during the taxable year, not compensated for by insurance or other- wise, for medical care of the taxpayer, spouse, or dependent, to the extent the ex- penses exceed 7.5 percent of adjusted gross income. Under § 213(d)(1)(A), medical care includes amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. Medical care does not include cosmetic surgery or other similar procedures, un- less the surgery or procedure is necessary to ameliorate a deformity arising from, or directly related to, a congenital abnormal- ity, a personal injury resulting from an ac- cident or trauma, or a disfiguring disease. Section 213(d)(9)(A). Cosmetic surgery means any procedure that is directed at im- proving the patient’s appearance and does not meaningfully promote the proper func- tion of the body or prevent or treat ill- ness or disease. Section 213(d)(9)(B). A’s cancer is a disfiguring disease be- cause the treatment results in the loss ofA’s breast. Accordingly, the breast reconstruc- tion surgery ameliorates a deformity di- rectly related to a disease and the cost is an expense for medical care within the meaning of § 213(d) thatAmay deduct un- der § 213 (subject to the limitations of that section). The cost ofB’s laser eye surgery is al- lowed under § 213(d)(9) because the sur- gery is a procedure that meaningfully promotes the proper function of the body. Vision correction with eyeglasses or con- tact lenses qualifies as medical care. See Rev. Rul. 74–429, 1974–2 C.B. 83. Eye sur- gery to correct defective vision, including laser procedures such as LASIK and ra- dial keratotomy, corrects a dysfunction of the body. Accordingly, the cost of the la- ser eye surgery is an expense for medical care within the meaning of § 213(d) thatB may deduct under § 213 (subject to the limi- tations of that section). In contrast, the teeth-whitening proce- dure does not treat a physical or mental dis- ease or promote the proper function of the body, but is directed at improvingC’s ap- pearance. The discoloration is not a defor- mity and is not caused by a disfiguring disease or treatment. Accordingly,Cmay not deduct the cost of whitening teeth as an expense for medical care. HOLDING Amounts paid by individuals for breast reconstruction surgery following a mastec- tomy for cancer and for vision correction surgery are medical care expenses under § 213(d) and are deductible under § 213 (subject to the limitations of that section). Amounts paid by individuals to whiten teeth discolored as a result of age are not medi- cal care expenses under § 213(d) and are not deductible. DRAFTING INFORMATION The principal author of this revenue rul- ing is John T. Sapienza, Jr., of the Office of the Associate Chief Counsel (Income Tax and Accounting). For further information regarding this revenue ruling, contact Mr. Sapienza at (202) 622–7900 (not a toll- free call). Medical expenses.Uncompensated amounts paid by individuals for medicines or drugs that may be purchased without a prescription of a physician are not deduct- ible under section 213 of the Code. Amounts paid for equipment, supplies, or diagnostic devices may be expenses for medical care deductible under section 213. Rev. Rul. 2003–58 ISSUES (1) Are amounts paid by an individual for medicines that may be purchased with- out a prescription of a physician deduct- ible under § 213 of the Internal Revenue Code? (2) Are amounts paid by an individual for equipment, supplies, or diagnostic de- vices that may be purchased without a pre- scription of a physician deductible under § 213? FACTS TaxpayerAhas an injured leg and uses crutches to enhance mobility while the leg is healing.Auses bandages to cover torn skin on the leg.A’s physician recommends thatAtake aspirin to treat pain in the leg. Aalso has diabetes and uses a blood sugar test kit to monitorA’s blood sugar level.A is not compensated for these expenses by insurance or otherwise. LAW AND ANALYSIS Section 213(a) allows a deduction for ex- penses paid during the taxable year, not compensated for by insurance or other- 2003–22 I.R.B.959June 2, 2003 wise, for medical care of the taxpayer, spouse, or dependent, to the extent the ex- penses exceed 7.5 percent of adjusted gross income. Under § 213(d)(1), medical care in- cludes amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of dis- ease, or for the purpose of affecting any structure or function of the body. Section 213(b) permits an amount paid for a medicine or drug to be taken into ac- count for purposes of the § 213 deduc- tion for medical care expenses only if the medicine or drug is a prescribed drug or in- sulin. Section 213(d)(3) defines a prescribed drug as a drug or biological that requires a prescription of a physician for its use by an individual. Because aspirin is a drug and does not require a physician’s prescrip- tion for use by an individual, pursuant to § 213(b), its cost may not be taken into ac- count under § 213, even if a physician rec- ommends its use to a patient. Accordingly, Amay not deduct the cost of the aspirin un- der § 213. However, § 213(b) does not apply to items that are not medicines or drugs, in- cluding equipment such as crutches, sup- plies such as bandages, and diagnostic devices such as blood sugar test kits. Such items may qualify as medical care if they otherwise meet the definition in § 213(d)(1). In this case, the crutches and bandages miti- gate the effect ofA’s injured leg and the blood sugar test kit monitors and assists in treatingA’s diabetes. Therefore, the costs of these items are amounts paid for medi- cal care under § 213(d)(1) and are deduct- ible, subject to the limitations of § 213. HOLDINGS (1) Amounts paid by an individual for medicines or drugs that may be purchased without a prescription of a physician are not taken into account pursuant to § 213(b) and are not deductible under § 213. (2) Amounts paid by an individual for equipment, supplies, or diagnostic devices may be expenses for medical care deduct- ible under § 213 (subject to the other limi- tations of that section). DRAFTING INFORMATION The principal author of this revenue rul- ing is John T. Sapienza, Jr., of the Office of Associate Chief Counsel (Income Tax and Accounting). For further information regarding this revenue ruling, contact Mr. Sapienza at (202) 622–7900 (not a toll- free call). Section 355.—Distribution of Stock and Securities of a Controlled Corporation 26 CFR 1.355–2(b): Independent business purpose. Spin off.In the described situation, the division of a farm business to permit the principal managing shareholders to go their separate ways, promote family harmony, and further the personal estate planning of the principal managing shareholders’ par- ents satisfies the business purpose require- ment of section 1.355–2(b) of the regulations. Rev. Rul. 2003–52 ISSUE Whether, in the situation described be- low, the distribution of the stock of a con- trolled corporation satisfies the business purpose requirement of § 1.355–2(b) of the Income Tax Regulations. FACTS Corporation X is a domestic corpora- tion that has been engaged in the farming business for more than five years. The stock of X is owned 25 percent each by Father, age 68, Mother, age 67, Son, and Daugh- ter. Although Father and Mother partici- pate in some major management decisions, most of the management and all of the op- erational activities are performed by Son, Daughter, and several farmhands. The farm operation consists of breeding and raising livestock and growing grain. Son and Daughter disagree over the ap- propriate future direction of X’s farming business. Son wishes to expand the live- stock business, but Daughter is opposed be- cause this would require substantial borrowing by X. Daughter would prefer to sell the livestock business and concen- trate on the grain business. Despite the dis- agreement, the two siblings have cooperated on the operation of the farm in its histori- cal manner without disruption. Neverthe- less, it has prevented each sibling from developing, as he or she sees fit, the busi- ness in which he or she is most interested. Having transferred most of the respon- sibility for running the farm to the chil- dren, Father and Mother remain neutral on the disagreement between their children. However, because of the disagreement, Fa- ther and Mother would prefer to bequeath separate interests in the farm business to their children. For reasons unrelated to X’s farm busi- ness, Son and Daughter’s husband dislike each other. Although this has not impaired the farm’s operation to date, Father and Mother believe that requiring Son and Daughter to run a single business together is likely to cause family discord over the long run. To enable Son and Daughter each to de- vote his or her undivided attention to, and apply a consistent business strategy to, the farming business in which he or she is most interested, to further the estate planning goals of Father and Mother, and to pro- mote family harmony, X transfers the live- stock business to newly formed, wholly owned domestic corporation Y and distrib- utes 50 percent of the Y stock to Son in ex- change for all of his stock in X. X distributes the remaining Y stock equally to Father and Mother in exchange for half of their X stock. Going forward, Daugh- ter will manage and operate X and have no stock interest in Y, and Son will manage and operate Y and have no stock interest in X. Father and Mother will also amend their wills to provide that Son and Daughter will inherit stock only in Y and X, respectively. After the distribution, Father and Mother will still each own 25 percent of the out- standing stock of X and Y and will con- tinue to participate in some major management decisions related to the busi- ness of each corporation. Apart from the issue of whether the busi- ness purpose requirement of §1.355–2(b) is satisfied, the distribution meets all of the requirements of §§ 368(a)(1)(D) and 355 of the Internal Revenue Code. LAW Section 355 provides that if certain re- quirements are met, a corporation may dis- tribute stock and securities in a controlled corporation to its shareholders and secu- rity holders without causing the distribut- ing corporation or the distributees to recognize gain or loss. To qualify as a distribution described in § 355, a distribution must, in addition to sat- June 2, 20039602003–22 I.R.B. isfying the statutory requirements of § 355, satisfy certain requirements in the regulations, including the business pur- pose requirement. Section 1.355–2(b)(1) provides that a distribution must be moti- vated, in whole or substantial part, by one or more corporate business purposes. A cor- porate business purpose is a real and sub- stantial non-federal tax purpose germane to the business of the distributing corpora- tion, the controlled corporation, or the af- filiated group to which the distributing corporation belongs. Section 1.355–2(b)(2). A shareholder purpose (for example, the personal planning purposes of a share- holder) is not a corporate business pur- pose.Id. Depending upon the facts of a particular case, however, a shareholder pur- pose for a transaction may be so nearly co- extensive with a corporate business purpose as to preclude any distinction between them. Id. In such a case, the transaction is car- ried out for one or more corporate busi- ness purposes.Id. A transaction motivated in substantial part by a corporate busi- ness purpose does not fail the business pur- pose requirement merely because it is motivated in part by non-federal tax share- holder purposes. Preamble to the § 355 regulations, T.D. 8238, 1989–1 C.B. 92, 94. In Example (2) of § 1.355–2(b)(5), Cor- poration X is engaged in two businesses: the manufacture and sale of furniture and the sale of jewelry. The businesses are of equal value. The outstanding stock of X is owned equally by unrelated individuals A and B. A is more interested in the furni- ture business, while B is more interested in the jewelry business. A and B decide to split up the businesses and go their separate ways. A and B expect that the operations of each business will be enhanced by the separation because each shareholder will be able to devote his undivided attention to the business in which he is more interested and more proficient. Accordingly, X transfers the jewelry business to new corporation Y and distributes the stock of Y to B in exchange for all of B’s stock in X. The example con- cludes that the distribution is carried out for a corporate business purpose, notwithstand- ing that it is also carried out in part for shareholder purposes. ANALYSIS The disagreement of Son and Daugh- ter over the farm’s future direction has pre- vented each sibling from developing, as he or she sees fit, the business in which he or she is most interested. The distribution will eliminate this disagreement and allow each sibling to devote his or her undivided at- tention to, and apply a consistent busi- ness strategy to, the farming business in which he or she is most interested, with the expectation that each business will ben- efit. Therefore, although the distribution is intended, in part, to further the personal es- tate planning of Father and Mother and to promote family harmony, it is motivated in substantial part by a real and substantial non-federal tax purpose that is germane to the business of X. Hence, the business pur- pose requirement of § 1.355–2(b) is satis- fied. HOLDING In the situation described above, the dis- tribution of the stock of a controlled cor- poration satisfies the business purpose requirement of § 1.355–2(b). DRAFTING INFORMATION The principal author of this revenue rul- ing is Richard H. Cox of the Office of As- sociate Chief Counsel (Corporate). For further information regarding this revenue ruling, contact Mr. Cox at (202) 622–7790 (not a toll-free call). Spin off.If a stock offering business pur- pose motivates a distribution of controlled corporation stock by a distribution corpo- ration, the inability of the controlled cor- poration to complete the offering as a result of an unexpected deterioration in market conditions will not prevent the distribu- tion from having satisfied the corporate business purpose requirement of section 1.355–2(b)(1) of the regulations. Rev. Rul. 2003–55 ISSUE Is the business purpose requirement of § 1.355–2(b) of the Income Tax Regula- tions satisfied if the distribution of the stock of a controlled corporation is, at the time of the distribution, motivated, in whole or substantial part, by a corporate business pur- pose, but that purpose cannot be achieved as the result of an unexpected change in cir- cumstances following the distribution? FACTS D is a publicly traded corporation that conducts Business A and Business B di- rectly and Business C through its wholly owned subsidiary C. Business C needs to raise a substantial amount of capital in the near future to invest in plant and equip- ment and to make acquisitions. D has been advised by its investment banker that the best way to raise this capital is through an initial public offering of C stock after C has been separated from D. The investment banker believes, based on its analysis of comparable situations, and taking into ac- count the current market climate, that such an offering would be more efficient than a stock offering by C or D without first sepa- rating from the other because it would raise the needed capital with significantly less di- lution of the existing shareholders’ inter- ests in the combined enterprises. In reliance on the investment banker’s opinion, D distributes the stock of C to its shareholders, and C prepares to offer its stock to the public as soon as practicable but with a target date approximately six months after the distribution. Following the distribution and before the offering can be undertaken, market conditions unexpect- edly deteriorate to such an extent that, in the judgment of C and its advisors, the of- fering should be postponed. One year af- ter the distribution, conditions have not improved sufficiently to permit the offer- ing to go forward and C funds its capital needs through the sale of debentures. Apart from the issue of whether the busi- ness purpose requirement of § 1.355–2(b) is satisfied, the distribution meets all of the requirements of § 355 of the Internal Rev- enue Code. LAW Section 355 provides that if certain re- quirements are met, a corporation may dis- tribute stock and securities in a controlled corporation to its shareholders and secu- rity holders without causing the distribut- ing corporation or the distributees to recognize gain or loss. To qualify as a distribution described in § 355, a distribution must, in addition to sat- 2003–22 I.R.B.961June 2, 2003 isfying the statutory requirements of § 355, satisfy certain requirements in the regulations, including the business pur- pose requirement. Section 1.355–2(b)(1) provides that a distribution must be moti- vated, in whole or substantial part, by one or more corporate business purposes. A cor- porate business purpose is a real and sub- stantial non-federal tax purpose germane to the business of the distributing corpora- tion, the controlled corporation, or the af- filiated group to which the distributing corporation belongs. Section 1.355–2(b)(2). The principal reason for the business pur- pose requirement is to provide nonrecog- nition treatment only to distributions that are incident to readjustments of corporate structures required by business exigen- cies and that effect only readjustments of continuing interests in property under modi- fied corporate forms. Section 1.355–2(b)(1). ANALYSIS To satisfy the business purpose require- ment of § 1.355–2(b)(1), a distribution of controlled corporation stock must be mo- tivated, in whole or substantial part, by a corporate business purpose. A corporate business purpose is a real and substantial non-federal tax purpose germane to the business of the distributing corporation, the controlled corporation, or the affiliated group to which the distributing corpora- tion belongs. The regulations do not re- quire that the corporation in fact succeed in meeting its corporate business purpose, as long as, at the time of the distribution, such a purpose exists and motivates, in whole or substantial part, the distribution. An unexpected change in market or busi- ness conditions following a distribution that prevents achievement of the business pur- pose will not prevent satisfaction of the business purpose requirement. Hence, not- withstanding the fact that, as a result of the unexpected deterioration in market condi- tions, C does not complete the stock of- fering that motivated its separation from D, the business purpose requirement of § 1.355–2(b)(1) is satisfied. HOLDING The business purpose requirement of § 1.355–2(b) is satisfied if the distribu- tion of the stock of a controlled corpora- tion is, at the time of the distribution, motivated, in whole or substantial part, by a corporate business purpose, but that pur- pose cannot be achieved as the result of an unexpected change in circumstances fol- lowing the distribution. DRAFTING INFORMATION The principal author of this revenue rul- ing is Wayne T. Murray of the Office of As- sociate Chief Counsel (Corporate). For further information regarding this revenue ruling, contact Mr. Murray at (202) 622– 7700 (not a toll-free call). Section 817A.—Special Rules for Modified Guaranteed Contracts 26 CFR 1.817A–1: Certain modified guaranteed contracts. T.D. 9058 DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 Guidance Under Section 817A Regarding Modified Guaranteed Contracts AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final regulations. SUMMARY: This document contains fi- nal regulations affecting insurance compa- nies that define the interest rate to be used with respect to certain insurance contracts that guarantee higher returns for an ini- tial, temporary period. Specifically, the fi- nal regulations define the appropriate interest rate to be used in the determina- tion of tax reserves and required interest for certain modified guaranteed contracts. The final regulations also address how tempo- rary guarantee periods that extend past the end of a taxable year are to be taken into account. DATES:Effective Date:These regulations are effective as of May 7, 2003. Applicability Date:For dates of appli- cability, see §1.817A–1(d). FOR FURTHER INFORMATION CON- TACT: Concerning the regulations, Ann H. Logan, 202–622–3970 (not a toll-free num- ber). SUPPLEMENTARY INFORMATION: Background On June 3, 2002, the Treasury Depart- ment and the IRS published a notice of pro- posed rulemaking (REG–248110–96, 2002–26 I.R.B. 19 [67 FR 38214]) under section 817A of the Internal Revenue Code (Code) in theFederal Register. The no- tice was corrected in theFederal Regis- ter(67 FR 41653) on June 19, 2002. The proposed regulations were designed, in part, to reflect the addition of section 817A to the Code by section 1612 of the Small Business Job Protection Act of 1996, Pub- lic Law 104–188 (110 Stat. 1755). No one requested to speak at the public hearing scheduled for August 27, 2002. Accord- ingly, the public hearing was canceled on August 15, 2002 (67 FR 53327). Com- ments in response to the notice of pro- posed rulemaking were received and are addressed in the following Explanation and Summary of Comments. After consider- ation of all the comments, this document adopts the proposed regulations as revised by this Treasury decision. In addition, pre- vious guidance under section 817A is re- voked. Explanation and Summary of Com- ments Two comments were filed with the Of- fice of the Chief Counsel of the Internal Revenue Service. Both commentators gen- erally agreed with the decisions incorpo- rated in the proposed regulations. However, both commentators raised concern as to the interaction of the interest rates to be used for the reserve computations for modified guaranteed contracts (MGCs) with the re- serve computation rules of section 811(d). That provision imposes an additional re- serve computation rule for contracts that guarantee beyond the end of the taxable year payment or crediting of amounts in the nature of interest in excess of the greater of the prevailing state assumed interest rate or the applicable federal interest rate. In those circumstances, section 811(d) re- quires that the contract’s future guaran- teed benefits be determined as though the interest in excess of the greater of the pre- vailing state assumed interest rate or the ap- plicable federal rate were guaranteed only to the end of the taxable year. Material was submitted as to the pos- sible distortion of taxable income with re- June 2, 20039622003–22 I.R.B. spect to MGCs in declining interest rate environments. Notably, in cases where the interest rate required to be used under the regulations as proposed falls below the con- tract crediting rate during the guarantee pe- riod, section 811(d) will operate in a manner that does not match taxable income to ac- tual income. As section 811(d) precludes taking future guaranteed interest amounts into account, examples showed that in- come distortion could occur under this fact pattern. After review of the comments, the pro- posed regulations have been amended to waive section 811(d) throughout the guar- antee period of non-equity-indexed MGCs. Effect on Other Documents Notice 97–32, 1997–1 C.B. 420, is re- voked as of May 7, 2003. Accordingly, the notice may continue to be used by taxpay- ers if they wish through the effective date of these final regulations. 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, and because the regulations do not impose a collection of information on small entities, the Regula- tory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, the notice of proposed rule- making were submitted to the Small Busi- ness Administration for comment on the regulations’ impact on small business. Drafting Information The principal author of these proposed regulations is Ann H. Logan, Office of the Associate Chief Counsel (Financial Insti- tutions and Products), Office of Chief Coun- sel, Internal Revenue Service. However, personnel from other offices of 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 TAX Paragraph 1. The authority citation for part 1 is amended by adding entries in nu- merical order to read as follows: Authority: 26 U.S.C. 7805*** Section 1.807–2 also issued under 26 U.S.C. 817A(e)*** Section 1.811–3 also issued under 26 U.S.C. 817A(e)*** Section 1.812–9 also issued under 26 U.S.C. 817A(e)*** Section 1.817A–1 also issued under 26 U.S.C. 817A(e)*** Par. 2. Section 1.807–2 is added to read as follows: §1.807–2 Cross-Reference. For special rules regarding the treat- ment of modified guaranteed contracts (as defined in section 817A and §1.817A– 1(a)(1)), see §1.817A–1. Par. 3. Section 1.811–3 is added to read as follows: §1.811–3 Cross-Reference. For special rules regarding the treat- ment of modified guaranteed contracts (as defined in section 817A and §1.817A– 1(a)(1)), see §1.817A–1. Par. 4. Section §1.812–9 is added to read as follows: §1.812–9 Cross-Reference. For special rules regarding the treat- ment of modified guaranteed contracts (as defined in section 817A and §1.817A– 1(a)(1)), see §1.817A–1. Par. 5. Sections §1.817A–0 and §1.817A–1 are added to read as follows: §1.817A–0 Table of contents. This section lists the captions that ap- pear in section §1.817A–1: §1.817A–1 Certain modified guaranteed contracts. (a) Definitions. (1) Modified guaranteed contract. (2) Temporary guarantee period. (3) Equity-indexed modified guaran- teed contract. (4) Non-equity-indexed modified guar- anteed contract. (5) Current market rate for non-equity- indexed modified guaranteed contract. (6) Current market rate for equity- indexed modified guaranteed contract. [Re- served.] (b) Applicable interest rates for non- equity-indexed modified guaranteed con- tracts. (1) Tax reserves during temporary guar- antee period. (2) Required interest during temporary guarantee period. (3) Application of section 811(d). (4) Periods after the end of the tempo- rary guarantee period. (5) Examples. (c) Applicable interest rates for equity- indexed modified guaranteed contracts. [Re- served.] (d) Effective date. §1.817A–1 Certain modified guaranteed contracts. (a)Definitions—(1)Modified guaran- teed contract. The termmodified guaran- teed contract(MGC) is defined in section 817A(d) as an annuity, life insurance, or pension plan contract (other than a vari- able contract described in section 817) un- der which all or parts of the amounts received under the contract are allocated to a segregated account. Assets and reserves in this segregated account must be valued from time to time with reference to mar- ket values for annual statement purposes. Further, an MGC must provide either for a net surrender value or for a policyhold- er’s fund (as defined in section 807(e)(1)). If only a portion of a contract is not de- scribed in section 817, such portion is treated as a separate contract for purposes of applying section 817A. (2)Temporary guarantee period.An MGC may temporarily guarantee a return other than the permanently guaranteed cred- iting rate for a period specified in the con- tract (thetemporary guarantee period). During the temporary guarantee period, the amount paid to the policyholder upon sur- render is usually increased or decreased by a market value adjustment, which is deter- mined by a formula set forth under the terms of the MGC. (3)Equity-indexed modified guaran- teed contract. An equity-indexed MGC is an MGC, as defined in paragraph (a)(1) of this section, that provides a return during or at the end of the temporary guarantee pe- riod based on the performance of stocks, other equity instruments, or equity-based de- rivatives. (4)Non-equity-indexed modified guar- anteed contract. A non-equity-indexed MGC is an MGC, as defined in paragraph (a)(1) 2003–22 I.R.B.963June 2, 2003 of this section, that provides a return dur- ing or at the end of the temporary guaran- tee period not based on the performance of stocks, other equity instruments, or equity- based derivatives. (5)Current market rate for non-equity- indexed modified guaranteed contracts. The current market rate for a non-equity-indexed MGC issued by an insurer (whether is- sued in that tax year or a previous one) is the appropriate Treasury constant matu- rity interest rate published by the Board of Governors of the Federal Reserve System for the month containing the last day of the insurer’s taxable year. The appropriate rate is that rate published for Treasury securi- ties with the shortest published maturity that is greater than (or equal to) the remain- ing duration of the current temporary guar- antee period under the MGC. (6)Current market rate for equity- indexed modified guaranteed contracts. [Re- served] (b)Applicable interest rates for non- equity-indexed modified guaranteed contracts—(1)Tax reserves during tempo- rary guarantee period. An insurance com- pany is required to determine the tax reserves for an MGC under sections 807(c)(3) or (d)(2). During a non-equity- indexed MGC’s temporary guarantee pe- riod, the applicable interest rate to be used under sections 807(c)(3) and (d)(2)(B) is the current market rate, as defined in para- graph (a)(5) of this section. (2)Required interest during temporary guarantee period. During the temporary guarantee period of a non-equity-indexed MGC, the applicable interest rate to be used to determine required interest under sec- tion 812(b)(2)(A) is the same current mar- ket rate, defined in paragraph (a)(5) of this section, that applies for that period for pur- poses of sections 807(c)(3) or (d)(2)(B). (3)Application of section 811(d). An ad- ditional reserve computation rule applies un- der section 811(d) for contracts that guarantee certain interest payments be- yond the end of the taxable year. Section 811(d) is waived for non-equity-indexed MGCs. (4)Periods after the end of the tempo- rary guarantee period. For periods after the end of the temporary guarantee period, sec- tions 807(c)(3), 807(d)(2)(B), 811(d), and 812(b)(2)(A) are not modified when ap- plied to non-equity-indexed MGCs. None of these sections are affected by the defi- nition of current market rate contained in paragraph (a)(5) of this section once the temporary guarantee period has expired. (5)Examples. The following examples illustrate this paragraph (b): Example 1. (i)IC, a life insurance company as de- fined in section 816, issues a MGC (the Contract) on August 1 of 1996. The Contract is an annuity con- tract that gives rise to life insurance reserves, as de- fined in section 816(b).ICis a calendar year taxpayer. The Contract guarantees that interest will be cred- ited at 8 percent per year for the first 8 contract years and 4 percent per year thereafter. During the 8-year temporary guarantee period, the Contract provides for a market value adjustment based on changes in a pub- lished bond index and not on the performance of stocks, other equity instruments or equity based de- rivatives.IChas chosen to avail itself of the provi- sions of these regulations for 1996 and taxable years thereafter. The 10-year Treasury constant maturity in- terest rate published for December of 1996 was 6.30 percent. The next shortest maturity published for Trea- sury constant maturity interest rates is 7 years. As of the end of 1996, the remaining duration of the tem- porary guarantee period for the Contract was 7 years and 7 months. (ii) To determine under section 807(d)(2) the end of 1996 reserves for the Contract,ICmust use a dis- count interest rate of 6.30 percent for the temporary guarantee period. The interest rate to be used in com- puting required interest under section 812(b)(2)(A) for 1996 reserves is also 6.30 percent. (iii) The discount rate applicable to periods out- side the 8-year temporary guarantee period is deter- mined under sections 807(c)(3), 807(d)(2)(B), 811(d), and 812(b)(2)(A) without regard to the current mar- ket rate. Example 2. Assume the same facts as inExample 1except that it is now the last day of 1998. The re- maining duration of the temporary guarantee period under the Contract is now 5 years and 7 months. The 7-year Treasury constant maturity interest rate pub- lished for December of 1998 was 4.65 percent. The next shortest duration published for Treasury con- stant maturity interest rates is 5 years. A discount rate of 4.65 percent is used for the remaining duration of the temporary guarantee period for the purpose of de- termining a reserve under section 807(d) and for the purpose of determining required interest under sec- tion 812(b)(2)(A). Example 3. Assume the same facts as inExample 1except that it is now the last day of 2001. The re- maining duration of the temporary guarantee period under the Contract is now 2 years and 7 months. The 3-year Treasury constant maturity interest rate pub- lished for December of 2001 was 3.62 percent. The next shortest duration published for Treasury con- stant maturity interest rates is 2 years. A discount rate of 3.62 percent is used for the remaining duration of the temporary guarantee period for the purpose of de- termining a reserve under section 807(d) and for the purpose of determining required interest under sec- tion 812(b)(2)(A). (c)Applicable interest rates for equity- indexed modified guaranteed contracts.[Re- served.] (d)Effective date. Paragraphs (a), (b), and (d) of this section are effective on May 7, 2003. However, pursuant to section 7805(b)(7), taxpayers may elect to apply those paragraphs retroactively for all tax- able years beginning after December 31, 1995, the effective date of section 817A. David A. Mader, Assistant Deputy Commissioner of Internal Revenue. Approved April 25, 2003. Pamela F. Olson, Assistant Secretary of the Treasury. (Filed by the Office of the Federal Register on May 6, 2003, 8:45 a.m., and published in the issue of the Federal Regis- ter for May 7, 2003, 68 F.R. 24349) Section 1502.—Regulations 26 CFR 1.1502–20T: Disposition or deconsolidation of subsidiary stock (temporary). T.D. 9057 DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 Guidance Under Section 1502; Amendment of Waiver of Loss Carryovers From Separate Return Limitation Years AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Temporary regulations. SUMMARY: This document contains tem- porary regulations under section 1502 that permit the amendment of certain elections to waive the loss carryovers of an acquired subsidiary. The text of these temporary regulations also serves as the text of the pro- posed regulations set forth in the notice of proposed rulemaking (REG–152524–02) on this subject on page 979 of this Bulletin. These regulations apply to corporations fil- ing consolidated returns. This document also provides notice of a public hearing on these temporary and proposed regulations. DATES:Effective Date:These regulations are effective May 7, 2003. June 2, 20039642003–22 I.R.B. Applicability Date:For dates of appli- cability, see §1.1502–20T(i)(3)(viii)(C), §1.1502–20T(i)(5)(ii), and §1.1502– 32T(b)(4)(vii)(F). The applicability of these sections expires on May 2, 2006. FOR FURTHER INFORMATION CON- TACT: Alison G. Burns or Jeffrey B. Fienberg (202) 622–7930 (not a toll-free number). SUPPLEMENTARY INFORMATION: Paperwork Reduction Act The collection of information contained in these regulations has been previously re- viewed and approved by theOffice of Management and Budgetunder control number 1545–1774. Responses to this col- lection of information are required to ob- tain a benefit. This collection of information is revised by these regulations. These amended regulations are being issued with- out prior notice and public procedure pur- suant to the Administrative Procedure Act (5 U.S.C. 553). For this reason, the re- vised collection of information contained in these regulations has been reviewed and, pending receipt and evaluation of public comments, approved by theOffice of Man- agement and Budgetunder control num- ber 1545–1774. An agency may not conduct or spon- sor, and a person is not required to re- spond to, a collection of information unless it displays a valid control number assigned by theOffice of Management and Bud- get. For further information concerning this collection of information, and where to sub- mit comments on the collection of infor- mation and the accuracy of the estimated burden, and suggestions for reducing this burden, please refer to the preamble of the cross-referencing notice of proposed rule- making published in this issue of the Bul- letin. Books or records relating to a collec- tion of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. Background and Explanation of Provi- sions In 1991, the IRS and Treasury Depart- ment promulgated §1.1502–20 setting forth rules regarding the extent to which a loss recognized by a member of a consolidated group on the disposition of stock of a sub- sidiary member of the same group was al- lowed and the extent to which the basis of subsidiary member stock was required to be reduced prior to its deconsolidation. Sec- tion 1.1502–20 provides that a loss recog- nized by a group member on the disposition of subsidiary member stock is allowable only to the extent it exceeds the sum of “ex- traordinary gain dispositions,” “positive in- vestment adjustments,” and “duplicated loss.” In addition, it provides that the ba- sis of subsidiary member stock that is de- consolidated is reduced to its value to the extent of the sum of the same amounts im- mediately prior to its deconsolidation. The duplicated loss amount equals the sum of the aggregated adjusted basis of the as- sets of the subsidiary (other than any stock and securities that the subsidiary owns in another member), the losses attributable to the subsidiary that are carried forward to the subsidiary’s first taxable year follow- ing the disposition or deconsolidation, and any deferred deductions of the subsidiary, over the sum of the value of the subsid- iary’s stock and its liabilities. Section 1.1502–32(b)(4) provides that, if a subsidiary has a loss carryover from a separate return limitation year when it be- comes a member of a consolidated group, the group may make an election to treat all or any portion of the loss carryover as ex- piring immediately before the subsidiary be- comes a member of the consolidated group. This election allows an acquiring group to prevent the loss of stock basis that other- wise would result if the subsidiary’s loss carryovers were to expire before the group could absorb them. See §1.1502– 32(b)(2)(iii). Section 1.1502–32(b)(4) fur- ther provides that, if the subsidiary was a member of another group immediately be- fore it became a member of the consoli- dated group, the losses are treated as expiring immediately after the subsidiary ceases to be a member of the prior group. The election described in §1.1502–32(b)(4) may be made by identifying either the amount of each loss carryover deemed to expire or the amount of each loss carry- over deemed not to expire. If stock of a subsidiary with loss car- ryovers is sold by one consolidated group to another and the acquiring group waives all or a portion of the subsidiary’s loss car- ryovers pursuant to §1.1502–32(b)(4), the selling group can exclude the waived loss carryovers from its computation of dupli- cated loss. In certain cases, the waiver could have the effect of increasing the amount of stock loss allowed on the disposition of sub- sidiary stock or reducing the basis reduc- tion required on the deconsolidation of subsidiary stock. The IRS and Treasury un- derstand that certain waivers of loss car- ryovers that were made pursuant to §1.1502–32(b)(4) were made so as to in- crease the amount of allowed loss on a dis- position of subsidiary stock. InRite Aid Corp. v. United States, 255 F.3d 1357 (Fed. Cir. 2001), the United States Court of Appeals for the Federal Cir- cuit held that the duplicated loss compo- nent of §1.1502–20 was an invalid exercise of regulatory authority. In response to the Rite Aiddecision, on March 7, 2002, the IRS and Treasury Department filed with the Federal Registertemporary regulations (T.D. 8984, 2002–1 C.B. 668 [11034]) un- der sections 337(d) and 1502 governing the determination of a consolidated group’s al- lowable stock loss and basis reduction re- quired on a disposition or deconsolidation of subsidiary member stock. Under the tem- porary regulations, consolidated groups can compute the allowable loss or the basis re- duction required on dispositions and de- consolidations of subsidiary stock before March 7, 2002, and certain dispositions and deconsolidations of subsidiary stock on or after March 7, 2002, by applying §1.1502–20 in its entirety, by applying the provisions of §1.1502–20 without regard to the duplicated loss factor of the loss dis- allowance formula, or by applying the pro- visions of §1.337(d)–2T. See §1.1502– 20T(i)(2). The IRS and Treasury Department be- lieve that in certain cases in which a sell- ing group elects to compute the allowable loss or the basis reduction required on a dis- position or deconsolidation of subsidiary member stock by applying §1.1502–20 without regard to the duplicated loss fac- tor of the loss disallowance formula, or by applying the provisions of §1.337(d)–2T, it is appropriate to permit an acquiring group to amend certain prior waivers of loss car- ryovers. The following paragraphs describe these cases and the amendments that this document makes to §§1.1502–20T and 1.1502–32T to allow certain amendments to prior waivers of loss carryovers. 2003–22 I.R.B.965June 2, 2003 Prior Waivers of Loss Carryovers Made to Increase Allowable Loss or Reduce Basis Reduction Required If a selling group elects to compute the allowable loss or the basis reduction re- quired on a disposition or deconsolida- tion of subsidiary stock by applying the provisions of §1.1502–20 without regard to the duplicated loss factor of the loss dis- allowance formula, or by applying the pro- visions of §1.337(d)–2T, the acquiring group’s prior waiver of loss carryovers of the subsidiary or lower-tier corporation of such subsidiary will have no effect on the selling group’s allowable loss or the basis reduction required with respect to the dis- posed of or deconsolidated subsidiary stock. To the extent, therefore, that an acquiring group made an election to waive loss car- ryovers to increase the allowable loss or to reduce the basis reduction required with re- spect to the disposed of or deconsolidated subsidiary stock, the IRS and Treasury De- partment believe that the acquiring group should be permitted to amend such waiv- ers to decrease, to a limited extent, the amounts of loss carryovers deemed to ex- pire. Accordingly, the regulations contained in this document provide that, if the ac- quiring group made an election pursuant to §1.1502–32(b)(4) to waive a subsidiary’s loss carryovers, that election increased the amount of the allowable loss or reduced the basis reduction required with respect to the disposed of or deconsolidated subsidiary stock, and the selling group elects to com- pute the allowable loss or the basis reduc- tion required with respect to the disposed of or deconsolidated subsidiary stock by ap- plying the provisions of §1.1502–20 with- out regard to the duplicated loss factor of the loss disallowance formula, or by ap- plying the provisions of §1.337(d)–2T, then the acquiring group may reduce the amount of any loss carryover deemed to expire (or increase the amount of any loss carryover deemed not to expire) as a result of the election made pursuant to §1.1502–32(b)(4). The aggregate amount of loss carryovers that may be treated as not expiring as a re- sult of such an amendment of a waiver of a loss carryover of the subsidiary the stock of which is disposed of or deconsolidated and any lower-tier corporation of such sub- sidiary, however, may not exceed the du- plicated loss with respect to the disposed of or deconsolidated subsidiary stock. This limitation is intended to ensure that all of the loss carryovers that do not expire as a result of the amendment did, in fact, in- crease the amount of the allowable loss or reduce the basis reduction required with re- spect to the disposed of or deconsolidated subsidiary stock. In addition, to enable the acquiring group’s use of loss carryovers that are not deemed to expire as a result of such an amendment, these regulations permit a selling group to reapportion separate, sub- group, and consolidated section 382 limi- tations. Inadvertent Waivers of Loss Carryovers A selling group’s election to compute the allowable loss or the basis reduction re- quired on a disposition or deconsolida- tion of subsidiary stock by applying the provisions of §1.1502–20 without regard to the duplicated loss factor of the loss dis- allowance formula, or by applying the pro- visions of §1.337(d)–2T, may result in a reduction of the amount of losses treated as reattributed to the selling group pursu- ant to an election described in §1.1502– 20(g). To the extent that losses treated as reattributed to the selling group are re- duced, the losses of a subsidiary are in- creased. In this case, if the acquiring group made an election to waive certain loss car- ryovers of the subsidiary by identifying those losses that were deemed not to ex- pire, it may have inadvertently waived those losses that are treated as losses of the sub- sidiary as a result of the election by the sell- ing group. The IRS and Treasury Department believe that such acquiring groups should be permitted to make cer- tain amendments of such waivers. Accordingly, these regulations permit ac- quiring groups to amend an election made pursuant to §1.1502–32(b)(4) where the group of which the subsidiary was a mem- ber immediately before the acquisition (the prior group) elected to determine the amount of the allowable loss or the basis reduction required with respect to the stock of the subsidiary or a higher-tier corpora- tion of the subsidiary by applying §1.1502–20 without regard to the dupli- cated loss factor of the loss disallowance formula, or by applying the provisions of §1.337(d)–2T, the subsidiary’s loss carry- overs are increased by such election by the prior group, and the acquiring group made an election pursuant to §1.1502–32(b)(4) by identifying those losses that would be deemed not to expire. In this case, pursu- ant to these regulations, the acquiring group may amend its election made pursuant to §1.1502–32(b)(4) to provide that all or a portion of the loss carryovers of the sub- sidiary that are treated as loss carryovers of the subsidiary as a result of the prior group’s election are deemed not to ex- pire. The regulations contained in this docu- ment only permit acquiring groups to re- duce the amount of loss carryovers deemed to expire, or increase the amount of loss car- ryovers deemed not to expire, as a result of an election under §1.1502–32(b)(4). The regulations, however, do not permit acquir- ing groups to increase the amount of loss carryovers deemed to expire, or reduce the amount of loss carryovers deemed not to expire, as a result of such an election. The regulations, therefore, permit increases, but not decreases, of the amount of loss car- ryovers available to acquiring groups. Limited Extension of Time to Apply Alternative Regime In addition to the provisions described above, the regulations include a limited ex- tension of time for selling groups to make an election to compute the allowable loss or the basis reduction required on a dispo- sition or deconsolidation of subsidiary stock by applying the provisions of §1.1502–20 without regard to the duplicated loss fac- tor of the loss disallowance formula, or by applying the provisions of §1.337(d)–2T, if the acquiring group is otherwise eligible to amend an election under §1.1502–32(b)(4) pursuant to these regulations, but the time period during which the selling group could make its election has or has almost ex- pired. Additional Adjustments In promulgating §1.1502–20T and re- lated provisions, the IRS and Treasury have attempted to ameliorate where possible the situation of groups that relied on the pro- visions of §1.1502–20 in prior periods. The IRS and Treasury recognize that the loss disallowance rule in §1.1502–20 affected the manner in which some transactions were structured. For example, some groups caused subsidiaries to sell their assets rather than engage in stock sales subject to loss disallowance under §1.1502–20. Alterna- tively, groups may have engaged in deemed asset sales under §338(h)(10). The IRS and Treasury believe that transactions cast in the June 2, 20039662003–22 I.R.B. form of actual or deemed asset sales should not be undone, notwithstanding the pos- sible role of §1.1502–20 in their planning. However, as was the case with the relief provided earlier in §1.1502–20T and its re- lated amendments, the IRS and Treasury have concluded that relief is appropriate and administrable in the situation that is the sub- ject of these temporary regulations. Special Analyses In light of the Federal Circuit’s deci- sion inRite Aid Corp. v. United States, 255 F.3d 1357 (Fed. Cir. 2001), these tempo- rary regulations are necessary to provide taxpayers with immediate guidance regard- ing the amendment of certain elections to waive the loss carryovers of an acquired subsidiary. Without such immediate guid- ance, taxpayers may not be able to avail themselves of the relief provided for in these regulations. Accordingly, good cause is found for dispensing with notice and pub- lic procedure pursuant to 5 U.S.C. 553(b)(B) and with a delayed effective date pursu- ant to 5 U.S.C. 553(d)(1) and (3). For ap- plicability of the Regulatory Flexibility Act, please refer to the cross-reference notice of proposed rulemaking published elsewhere in this issue of the Bulletin. Pursuant to §7805(f) of the Internal Revenue Code, these temporary regulations will be sub- mitted to the Chief Counsel of Advocacy of the Small Business Administration for comment on their impact. Drafting Information The principal author of these regula- tions is Jeffrey B. Fienberg, Office of As- sociate Chief Counsel (Corporate). However, other personnel from the IRS and Trea- sury Department participated in their de- velopment. ***** Amendments to the Regulations Accordingly, 26 CFR part 1 is amended as follows: PART 1—INCOME TAXES Paragraph 1. The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805*** Section 1.1502–20T also issued under 26 U.S.C. 1502.*** Section 1.1502–32T also issued under 26 U.S.C. 1502.*** Par. 2. In §1.1502–20T, paragraph (i)(5) is redesignated as (i)(6). Par. 3. Section 1.1502–20T is amended by adding paragraphs (i)(3)(viii) and (i)(5) to read as follows: §1.1502–20T — Disposition or deconsoli- dation of subsidiary stock (temporary). ***** (i)*** (3)*** (viii)Apportionment of section 382 limi- tation in the case of an amendment of an election made pursuant to §1.1502–32(b)(4). (A)In general. If, in connection with a dis- position or deconsolidation of subsidiary stock, the subsidiary the stock of which was disposed of or deconsolidated became a member of another consolidated group (the acquiring group), and, pursuant to §1.1502– 32T(b)(4)(vii), the acquiring group amends an election made pursuant to §1.1502– 32(b)(4) to treat all or a portion of the loss carryovers of such subsidiary (or a lower- tier corporation of such subsidiary) as ex- piring for all federal income tax purposes, then the common parent may reapportion a separate, subgroup, or consolidated sec- tion 382 limitation with respect to such sub- sidiary or lower-tier corporation in a manner consistent with the principles of paragraph (i)(3)(iii)(A) through (D) of this section. Any reapportionment of a section 382 limita- tion made pursuant to the previous sen- tence shall have the effects described in paragraph (i)(3)(iii)(D)(ii) and (iii) of this section. For purposes of this section, a lower-tier corporation is a corporation that was a member of the group of which the subsidiary was a member immediately be- fore becoming a member of the acquiring group and that became a member of the ac- quiring group as a result of the subsid- iary becoming a member of the acquiring group. (B)Time and manner of adjustment of apportionment of section 382 limitation. The common parent must include a statement entitledAdjustment of Apportionment of Section 382 Limitation in Connection with Amendment of Election under §1.1502– 32(b)(4)with or as part of any timely filed (including any extensions) original return for a taxable year that includes any date on or before May 7, 2003, or with or as part of an amended return filed before the date the original return for the taxable year that includes May 7, 2003, is due (with re- gard to extensions). The statement must set forth the name and employer identifica- tion number (E.I.N.) of the subsidiary and both the original and the adjusted appor- tionment of a separate section 382 limita- tion, a subgroup section 382 limitation, and a consolidated section 382 limitation, as ap- plicable. The requirements of this para- graph (i)(3)(viii)(B) will be treated as satisfied if the information required by this paragraph (i)(3)(viii)(B) is included in the statement required by paragraph (i)(4) of this section rather than in a separate state- ment. (C)Effective date. This paragraph (i)(3)(viii) is applicable on and after May 7, 2003. ***** (5)Special time for filing election in the case of a waiver under §1.1502–32(b)(4). (i)In general. Notwithstanding the provi- sions of paragraph (i)(4) of this section, the election to determine allowable loss or ba- sis reduction provided in this paragraph (i) may be made by including the statement re- quired by paragraph (i)(4) of this section with or as part of an original or amended return that is filed on or before June 15, 2003, if— (A) the group that includes the acquirer of the subsidiary stock made an election pursuant to §1.1502–32(b)(4) to treat all or a portion of the loss carryovers of the sub- sidiary (or a lower-tier corporation of such subsidiary) as expiring for all federal in- come tax purposes; (B) the timely filing of an election to de- termine allowable loss or basis reduction by applying the provisions described in para- graph (i)(2)(i) or (ii) of this section would permit the acquiring group to amend its election under §1.1502–32(b)(4) pursuant to §1.1502–32T(b)(4)(vii); (C) June 6, 2003, is after the date the original return of the consolidated group for the taxable year that includes March 7, 2002, is due (including extensions); and (D) the statement required by paragraph (i)(4) of this section specifies that the fil- ing of the election is permitted under this paragraph (i)(5). (ii) Effective date. This paragraph (i)(5) is applicable on and after May 7, 2003. ***** Par. 4. Section 1.1502–32T is amended by adding paragraph (b)(4)(vii) to read as follows: 2003–22 I.R.B.967June 2, 2003 §1.1502–32T — Investment adjustments (temporary). ***** (b)*** (4)*** (vii)Special rules for amending waiver of loss carryovers from separate return limi- tation year—(A)Waivers that increased al- lowable loss or reduced basis reduction required. If, in connection with the acqui- sition of S, the group made an election pur- suant to §1.1502–32(b)(4) to treat all or any portion of S’s loss carryovers as expiring, and the prior group elected to determine the amount of the allowable loss or the basis reduction required with respect to the stock of S or a higher-tier corporation of S by ap- plying the provisions described in §1.1502– 20T(i)(2)(i) or (ii), then the group may reduce the amount of any loss carryover deemed to expire (or increase the amount of any loss carryover deemed not to ex- pire) as a result of the election made pur- suant to §1.1502–32(b)(4). The aggregate amount of loss carryovers that may be treated as not expiring as a result of amend- ments made pursuant to this paragraph (b)(4)(vii)(A) with respect to S and any higher- and lower-tier corporation of S may not exceed the amount described in §1.1502–20(c)(1)(iii) with respect to the ac- quired stock (computed without regard to the effect of the group’s election or elec- tions pursuant to §1.1502–32(b)(4), but with regard to the effect of the prior group’s elec- tion pursuant to §1.1502–20(g), if any, prior to the application of §1.1502–20T(i)(3)). For purposes of determining the aggregate amount of loss carryovers that may be treated as not expiring as a result of amend- ments made pursuant to this paragraph (b)(4)(vii)(A) with respect to S and any higher- and lower-tier corporation of S, the group may rely on a written notification provided by the prior group. Nothing in this paragraph shall be construed as permit- ting a group to increase the amount of any loss carryover deemed to expire (or re- duce the amount of any loss carryover deemed not to expire) as a result of the election made pursuant to §1.1502–32(b)(4). (B)Inadvertent waivers of loss carry- overs previously subject to an election de- scribed in §1.1502–20(g). If, in connection with the acquisition of S, the group made an election pursuant to §1.1502–32(b)(4) to waive loss carryovers of S by identifying the amount of each loss carryover deemed not to expire, the prior group elected to de- termine the amount of the allowable loss or the basis reduction required with re- spect to the stock of S or a higher-tier cor- poration of S by applying the provisions described in §1.1502–20T(i)(2)(i) or (ii), and the amount of S’s loss carryovers treated as reattributed to the prior group pursuant to the election described in §1.1502–20(g) is reduced pursuant to §1.1502–20T(i)(3), then the group may amend its election made pursuant to §1.1502–32(b)(4) to provide that all or a portion of the loss carryovers of S that are treated as loss carryovers of S as a result of the prior group’s election to ap- ply the provisions described in §1.1502– 20T(i)(2)(i) or (ii) are deemed not to expire. This paragraph (b)(4)(vii)(B), however, does not permit a group to reduce the amount of any loss carryover deemed not to expire as a result of the election made pursuant to §1.1502–32(b)(4). (C)Time and manner of amending an election under §1.1502–32(b)(4). The amendment of an election made pursuant to §1.1502–32(b)(4) must be made in a statement entitledAmendment of Election to Treat Loss Carryover as Expiring Un- der §1.1502–32(b)(4) Pursuant to §1.1502– 32T(b)(4)(vii). The statement must be filed with or as part of any timely filed (includ- ing extensions) original return for the tax- able year that includes May 7, 2003, or with or as part of an amended return filed be- fore the date the original return for the tax- able year that includes May 7, 2003, is due (with regard to extensions). A separate state- ment shall be filed for each election made pursuant to §1.1502–32(b)(4) that is be- ing amended pursuant to this paragraph (b)(4)(vii). For purposes of making this statement, the group may rely on the state- ments set forth in a written notification pro- vided by the prior group. The statement filed under this paragraph must include the following— (1) The name and employer identifica- tion number (E.I.N.) of S; (2) In the case of an amendment made pursuant to paragraph (b)(4)(vii)(A), a state- ment that the group has received a writ- ten notification from the prior group confirming that the group’s prior election or elections pursuant to §1.1502–32(b)(4) had the effect of either increasing the prior group’s allowable loss on the disposition of subsidiary stock or reducing the prior group’s amount of basis reduction required; (3) The amount of each loss carryover of S deemed to expire (or the amount of loss carryover deemed not to expire) as set forth in the election made pursuant to §1.1502–32(b)(4); (4) The amended amount of each loss carryover of S deemed to expire (or the amended amount of loss carryover deemed not to expire); and (5) In the case of an amendment made pursuant to paragraph (b)(4)(vii)(A) of this section, a statement that the aggregate amount of loss carryovers of S and any higher- and lower-tier corporation of S that will be treated as not expiring as a result of amendments made pursuant to para- graph (b)(4)(vii)(A) of this section will not exceed the amount described in §1.1502– 20(c)(1)(iii) with respect to the acquired stock (computed without regard to the ef- fect of the group’s election or elections pur- suant to §1.1502–32(b)(4), but with regard to the effect of the prior group’s election pursuant to §1.1502–20(g), if any, prior to the application of §1.1502–20T(i)(3)). (D)Items taken into account in open years. An amendment to an election made pursuant to §1.1502–32(b)(4) affects the group’s items of income, gain, deduction or loss only to the extent that the amend- ment gives rise, directly or indirectly, to items or amounts that would properly be taken into account in a year for which an assessment of deficiency or a refund for overpayment, as the case may be, is not pre- vented by any law or rule of law. Under this paragraph, if the year to which a loss pre- viously deemed to expire as a result of an election made pursuant to §1.1502–32(b)(4) is deemed not to expire as a result of an election made pursuant to this paragraph would have been carried back or carried for- ward is a year for which a refund of over- payment is prevented by law, then to the extent that the absorption of such loss in such year would have affected the tax treat- ment of another item (e.g., another loss that was absorbed in such year) that has an ef- fect in a year for which a refund of over- payment is not prevented by any law or rule of law, the amendment to the election made pursuant to §1.1502–32(b)(4) will affect the treatment of such other item. Therefore, if the absorption of such loss (the first loss) in a year for which a refund of overpay- ment is prevented by law would have pre- vented the absorption of another loss (the second loss) in such year and such sec- June 2, 20039682003–22 I.R.B. ond loss would have been carried to and used in a year for which a refund of over- payment is not prevented by any law or rule of law (the other year), the amendment of the election makes the second loss avail- able for use in the other year. (E)Higher- and lower-tier corpora- tions of S. A higher-tier corporation of S is a corporation that was a member of the prior group and, as a result of such higher- tier corporation becoming a member of the group, S became a member of the group. A lower-tier corporation of S is a corpo- ration that was a member of the prior group and became a member of the group as a re- sult of S becoming a member of the group. (F)Effective date. This paragraph (b)(4)(vii) is applicable on and after May 7, 2003. ***** David A. Mader, Assistant Deputy Commissioner of Internal Revenue. Approved April 25, 2003. Pamela F. Olson, Assistant Secretary of the Treasury. (Filed by the Office of the Federal Register on May 6, 2003, 8:45 a.m., and published in the issue of the Federal Regis- ter for May 7, 2003, 68 F.R. 24351) Section 2032A.—Valuation of Certain Farm, etc., Real Property 26 CFR 20.2032A–4: Method of valuing farm real property. Special use value; farms; interest rates. The 2003 interest rates to be used in com- puting the special use value of farm real property for which an election is made un- der section 203A of the Code are listed for estates of decedents. Rev. Rul. 2003–53 This revenue ruling contains a list of the average annual effective interest rates on new loans under the Farm Credit Bank sys- tem. This revenue ruling also contains a list of the states within each Farm Credit Bank District. Under § 2032A(e)(7)(A)(ii) of the In- ternal Revenue Code, rates on new Farm Credit Bank loans are used in computing the special use value of real property used as a farm for which an election is made un- der § 2032A. The rates in this revenue rul- ing may be used by estates that value farmland under § 2032A as of a date in 2003. Average annual effective interest rates, calculated in accordance with § 2032A(e)(7)(A) and § 20.2032A–4(e) of the Estate Tax Regulations, to be used un- der § 2032A(e)(7)(A)(ii), are set forth in the accompanying Table of Interest Rates (Table 1). The states within each Farm Credit Bank District are set forth in the accompanying Table of Farm Credit Bank Districts (Table 2). Rev. Rul. 81–170, 1981–1 C.B. 454, contains an illustrative computation of an average annual effective interest rate. The rates applicable for valuation in 2002 are in Rev. Rul. 2002–26, 2002–1 C.B. 906. For rate information for years prior to 2002, see Rev. Rul. 2001–21, 2001–1 C.B. 1144, and other revenue rulings that are referenced therein. DRAFTING INFORMATION The principal author of this revenue rul- ing is Lane Damazo of the Office of the As- sociate Chief Counsel (Passthroughs and Special Industries). For further informa- tion regarding this revenue ruling, con- tact Lane Damazo at (202) 622–3090 (not a toll-free call). REV. RUL. 2003–53 TABLE 1 TABLE OF INTEREST RATES (Year of Valuation 2003) Farm Credit Bank District in Which Property Is Located Interest Rate Columbia ..................................................................................................................................................9.18 Omaha/Spokane........................................................................................................................................7.23 Sacramento ...............................................................................................................................................6.92 St. Paul .....................................................................................................................................................7.36 Springfield................................................................................................................................................7.26 Texas.........................................................................................................................................................7.19 Wichita......................................................................................................................................................7.44 2003–22 I.R.B.969June 2, 2003 REV. RUL. 2003–53 TABLE 2 TABLE OF FARM CREDIT BANK DISTRICTS DistrictStates Columbia....................................................................................... Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, Pennsylvania, South Carolina, Virginia, West Virginia. Omaha/Spokane............................................................................ Alaska, Idaho, Iowa, Montana, Nebraska, Oregon, South Dakota, Washington, Wyoming. Sacramento ................................................................................... Arizona, California, Hawaii, Nevada, Utah. St. Paul.......................................................................................... Arkansas, Illinois, Indiana, Kentucky, Michigan, Minnesota, Missouri, North Dakota, Ohio, Tennessee, Wisconsin. Springfield .................................................................................... Connecticut, Maine, Massachusetts,New Hampshire, New Jersey, New York, Rhode Island, Vermont. Texas............................................................................................. Alabama, Louisiana, Mississippi, Texas. Wichita.......................................................................................... Colorado, Kansas, New Mexico, Oklahoma. June 2, 20039702003–22 I.R.B. Part III. Administrative, Procedural, and Miscellaneous Earned Income Credit and Tribal Child Placements Notice 2003–28 This notice clarifies the application of the earned income credit for a taxpayer car- ing for a child placed with the taxpayer by an Indian tribal government (ITG) or an or- ganization an ITG has authorized to place Indian children. Section 32(a)(1) provides for an earned income credit in the case of an eligible individual. Section 32(c)(1)(A)(i) defines an eligible individual as an indi- vidual who has a qualifying child for the taxable year. Section 32(c)(3) defines a qualifying child as one who satisfies a re- lationship test, a residency test, and an age test. Under § 32(c)(3)(B)(i)(III), an eli- gible foster child satisfies the relationship test. Pursuant to § 32(c)(3)(B)(iii), for tax- able years beginning after December 31, 1999, an eligible foster child includes a child placed with the taxpayer by an au- thorized placement agency whom the tax- payer cares for as the taxpayer’s own child (and, for taxable years beginning before January 1, 2002, who has the same prin- cipal place of abode as the taxpayer for the taxpayer’s entire taxable year). For pur- poses of § 32(c)(3)(B)(iii), an authorized placement agency includes an ITG and also includes an organization an ITG has au- thorized to place Indian children (Indian tribal organization). Thus, for taxable years beginning after December 31, 1999, a child placed with a taxpayer by an ITG or an In- dian tribal organization qualifies as an eli- gible foster child, provided the taxpayer cares for the child as his or her own, and, for taxable years beginning before Janu- ary 1, 2002, the child has the same prin- cipal place of abode as the taxpayer for the taxpayer’s entire taxable year. The principal author of this notice is Sylvia F. Hunt of the Office of the Divi- sion Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). For fur- ther information regarding this notice, con- tact Ms. Hunt at (202) 622–6080 (not a toll- free call). 26 CFR 1.1031(a)–1: Property held for productive use in trade or business or for investment; 1.1031(k)–1: Treatment of deferred exchanges. Rev. Proc. 2003–39 SECTION 1. PURPOSE This revenue procedure provides safe harbors with respect to programs involv- ing ongoing exchanges of tangible per- sonal property using a single intermediary, as described in section 3.02 of this rev- enue procedure (an “LKE Program”). SECTION 2. BACKGROUND .01 Section 1031(a)(1) provides that no gain or loss is recognized on the exchange of property held for productive use in a trade or business or for investment (“re- linquished property”) if the property is ex- changed solely for property of like kind that is to be held either for productive use in a trade or business or for investment (“re- placement property”). .02 Section 1031(a)(3) provides that re- placement property received by the tax- payer is not treated as like-kind property if it: (a) is not identified as property to be re- ceived in the exchange on or before the day that is 45 days after the date on which the taxpayer transfers the relinquished prop- erty (the “45-day identification period”); or (b) is received after the earlier of the date that is 180 days after the date on which the taxpayer transfers the relinquished prop- erty, or the due date (determined with re- gard to extensions) for the transferor’s federal income tax return for the year in which the transfer of the relinquished prop- erty occurs. .03 Section 1.1031(k)–1(a) defines a de- ferred exchange as an exchange in which, pursuant to an agreement, the taxpayer transfers relinquished property and subse- quently receives replacement property. In order to constitute a deferred exchange, the transaction must be an exchange (i.e.,a transfer of property for property, as distin- guished from a transfer of property for money). .04 Section 1.1031(k)–1(c)(1) provides that any replacement property that is re- ceived by the taxpayer before the end of the 45-day identification period will be treated in all events as identified before the end of the 45-day identification period. .05 Section 1.1031(k)–1(f)(1) provides that if a taxpayer actually or construc- tively receives money or other property in the full amount of the consideration for the relinquished property before the taxpayer actually receives the replacement prop- erty, the transaction will constitute a sale and not a deferred exchange, even though the taxpayer may ultimately receive re- placement property. .06 Section 1.1031(k)–1(g) sets forth safe harbors involving a qualified escrow ac- count, a qualified trust, or a qualified in- termediary, the use of which will result in a determination that the taxpayer is not in actual or constructive receipt of money or other property for purposes of § 1031 and the regulations. .07 Section 1.1031(k)–1(g)(4)(iii) re- quires that, for an intermediary to be a qualified intermediary, the intermediary must enter into a written “exchange” agreement with the taxpayer and, as required by the exchange agreement, acquire the relin- quished property from the taxpayer, trans- fer the relinquished property, acquire the replacement property, and transfer the re- placement property to the taxpayer. .08 Section 1.1031(k)–1(g)(4)(iv) pro- vides that the intermediary will be treated as acquiring or transferring property, as the case may be, if the intermediary (either on its own behalf or as the agent of any party to the transaction) enters into an agree- ment for the acquisition or transfer of prop- erty and, pursuant to that agreement, the property is transferred. .09 Section 1.1031(k)–1(g)(4)(v) pro- vides that an intermediary will be treated as entering into an agreement for the ac- quisition or transfer of property if the tax- payer’s rights in the agreement are assigned to the intermediary, and the other parties to the acquisition or transfer agreement are no- tified in writing of the assignment on or be- fore the date of the relevant transfer of property (the “Assignment Safe Harbor”). Under the Assignment Safe Harbor, there is no requirement that the taxpayer also as- sign or delegate its obligations arising un- der the agreement. .10 Section 1.1031(k)–1(g)(6) provides that an agreement with an escrow holder, trustee or qualified intermediary must ex- pressly limit the taxpayer’s rights to re- ceive, pledge, borrow, or otherwise obtain the benefits of money or other property held in the qualified escrow or trust or by the qualified intermediary. 2003–22 I.R.B.971June 2, 2003 .11 Sections 1.1031(k)–1(g)(3) and (4) provide that the application of the safe har- bor requires that in the case of a quali- fied escrow account, a qualified trust, or a qualified intermediary, the escrow holder, trustee, or intermediary must not be a “dis- qualified person.” .12 Section 1.1031(k)–1(k)(2) provides that a person that is the agent of the tax- payer at the time of the transaction is a dis- qualified person. For this purpose, a person who has acted as the taxpayer’s employee, attorney, accountant, investment banker or broker, or real estate agent or broker within the two-year period ending on the date of the transfer of the first of the relinquished properties is treated as an agent of the tax- payer at the time of the transaction. Solely for purposes of §1.1031–1(k)(2), perfor- mance of the following services will not be taken into account: (a) services for the tax- payer with respect to exchanges of prop- erty intended to qualify for nonrecognition of gain or loss under § 1031; and (b) rou- tine financial, title insurance, escrow, or trust services for the taxpayer by a financial in- stitution, title insurance company, or es- crow company. .13 The Service and Treasury Depart- ment have determined that it is in the best interest of sound tax administration to pro- vide taxpayers with guidance regarding the qualification of LKE Programs under § 1031. Accordingly, this revenue proce- dure provides safe harbors that clarify the application of § 1031 and the regulations thereunder to LKE Programs. SECTION 3. SCOPE AND DEFINITIONS .01Exclusivity. This revenue proce- dure provides safe harbors for certain as- pects of the qualification under § 1031 of certain exchanges of property pursuant to LKE Programs. The principles set forth in sections 4 through 6 of this revenue pro- cedure have no application to any federal income tax determinations other than de- terminations that involve LKE Programs qualifying for one or more of the safe har- bors. For a transaction to qualify under § 1031, it must also satisfy the require- ments of § 1031 for which safe harbors are not provided in this revenue procedure (e.g., whether property involved in an exchange is considered like-kind property within the meaning of § 1031). .02LKE Program. For purposes of this revenue procedure, an “LKE Program” is an ongoing program involving multiple ex- changes of 100 or more properties. Al- though LKE Programs may differ in various ways, an LKE Program must have all of the following characteristics: (1) The taxpayer regularly and routinely enters into agreements to sell tangible per- sonal property as well as agreements to buy tangible personal property; (2) The taxpayer uses a single, unre- lated intermediary to accomplish the ex- changes in the LKE Program; (3) The taxpayer and the intermediary enter into a written agreement (“master ex- change agreement”); (4) The master exchange agreement ex- pressly limits the taxpayer’s rights to re- ceive, pledge, borrow, or otherwise obtain the benefits of money or other property held by the intermediary as provided in § 1.1031(k)–1(g)(6); (5) In the master exchange agreement, the taxpayer assigns to the intermediary the taxpayer’s rights (but not necessarily its ob- ligations) in some or all of its existing and future agreements to sell relinquished prop- erty and/or to purchase replacement prop- erty; (6) The taxpayer provides written no- tice of the assignment to the other party to each existing and future agreement to sell relinquished property and/or to purchase re- placement property; (7) The taxpayer (a) implements a process that identi- fies potential replacement property or prop- erties before the end of the identification period for the relinquished property or group of relinquished properties of which it is dis- posing in each exchange, (b) complies with the identification re- quirement by receiving replacement prop- erty or properties before the end of the 45- day identification period, or (c) satisfies the identification require- ments by a combination of the approaches in (a) and (b); (8) The taxpayer implements a process for collecting, holding, and disbursing funds (which may include the use of joint tax- payer and intermediary bank accounts, or accounts in the name of a third party for the benefit of both the taxpayer and the in- termediary) that ensures that the interme- diary controls the receipt, holding, and disbursement of all funds to which the in- termediary is entitled (i.e., proceeds from the sale of relinquished properties); (9) Relinquished property or proper- ties that are transferred are matched with replacement property or properties that are received in order to determine the gain, if any, recognized on the disposition of the re- linquished property and to determine the ba- sis of the replacement property; and (10) The taxpayer recognizes gain or loss on the disposition of relinquished proper- ties that are not matched with replace- ment properties, and the taxpayer takes a cost basis in replacement properties that are received but not matched with relinquished properties. A taxpayer may conduct more than one LKE Program simultaneously. In such a case, each LKE Program is evaluated sepa- rately for purposes of determining whether that LKE Program qualifies for the safe har- bors of this revenue procedure. .03No Inference. The Service recog- nizes that exchanges of property pursuant to LKE Programs may qualify for nonrec- ognition treatment under § 1031 although they fall outside the safe harbors provided in this revenue procedure. No inference is intended with respect to the federal in- come tax treatment of transfers of relin- quished property and acquisitions of replacement property that do not satisfy the terms of the safe harbors provided in this revenue procedure. .04Scope of Safe Harbors. Each of the paragraphs under sections 4, 5, and 6 of this revenue procedure is considered a sepa- rate and distinct safe harbor. Therefore, a taxpayer who fails to qualify for the ben- efits of one safe harbor may nevertheless qualify for the benefits of another safe har- bor. SECTION 4. EXCHANGES OF RELINQUISHED PROPERTY AND REPLACEMENT PROPERTY .01Separate and Distinct Exchanges.In the case of an LKE Program, the taxpay- er’s transfer of each relinquished prop- erty or group of relinquished properties and the taxpayer’s corresponding receipt of each replacement property or group of replace- ment properties with which the relinquished property or group of relinquished proper- ties has been matched by the taxpayer is treated as a separate and distinct exchange for purposes of § 1031. The determina- tion of whether a particular exchange quali- June 2, 20039722003–22 I.R.B. fies under § 1031 is made without regard to any other exchange. Thus, if a particu- lar exchange of a relinquished property or group of relinquished properties for a re- placement property or group of replace- ment properties pursuant to an LKE Program fails to qualify under § 1031, such failure will not affect the application of § 1031 to any other exchange pursuant to the LKE Program. .0245-day Identification Period. Re- placement property that is received within the 45-day identification period or that is otherwise properly identified as provided in § 1.1031(k)–1(c) is treated as satisfying the requirement of § 1031(a)(3) that replace- ment property be identified, notwithstand- ing that it may not be matched with relinquished property until after the end of the 45-day identification period. The re- placement property must, however, be matched no later than the due date (deter- mined with regard to extensions) of the tax- payer’s return. SECTION 5. ACTUAL OR CONSTRUCTIVE RECEIPT OF MONEY OR OTHER PROPERTY For purposes of this section, any re- quirement that the taxpayer transfer money or other property to the qualified interme- diary will be deemed to be satisfied if the amount of money held by the qualified in- termediary and the amount of money in any joint account (as described in § 5.02 of this revenue procedure) equals or exceeds the amount of proceeds from the sale of relin- quished property (including the amount that is required to be transferred by the tax- payer) that has not yet been used to ac- quire replacement property. .01Receipt of Checks and Other Nego- tiable Instruments. A taxpayer engaged in an LKE Program will not be considered to be in actual or constructive receipt of money or other property as a result of process- ing a check or other negotiable instru- ment made payable to a person other than the taxpayer if: (1) The check or other negotiable in- strument has not been endorsed by the per- son to whom the check or other negotiable instrument is made payable; (2) The person to whom the check or other negotiable instrument is made pay- able is not a disqualified person as de- fined in § 1.1031(k)–1(k); and (3) The check or other negotiable in- strument is forwarded to or for the ben- efit of a qualified intermediary or deposited into an account in the name of the quali- fied intermediary, a joint account, or an ac- count in the name of a third party (other than a disqualified person as defined in § 1.1031(k)–1(k)) for the benefit of both the taxpayer and the qualified intermediary. .02Joint Accounts. A taxpayer engaged in an LKE Program will not be consid- ered to be in actual or constructive re- ceipt of proceeds from the sale of relinquished property deposited into or held in a joint bank, trust, escrow, or similar ac- count in the name of the taxpayer and the qualified intermediary, or in an account in the name of a third party (other than a dis- qualified person as defined in § 1.1031(k)– 1(k)) for the benefit of both the taxpayer and the qualified intermediary, if: (1) The account is used to collect, hold, and/or disburse proceeds arising from the sale of relinquished property for the ben- efit of the qualified intermediary; (2) The agreement setting forth the terms and conditions with respect to the account requires authorization from the qualified in- termediary to transfer proceeds from the sale of relinquished properties out of the ac- count; and (3) The agreement setting forth the terms of the taxpayer’s and qualified intermedi- ary’s rights with respect to, or beneficial in- terest in, the account expressly limits the taxpayer’s rights to receive, pledge, bor- row, or otherwise obtain the benefits of pro- ceeds from the sale of relinquished property held in the joint account as provided in § 1.1031(k)–1(g)(6). The account may also be used by the parties for other purposes provided that such use does not undermine the qualified in- termediary’s right to control the proceeds from the sale of relinquished property. .03Funds Netting. A taxpayer engaged in an LKE Program will not be consid- ered to be in actual or constructive re- ceipt of money or other property as a result of transferring relinquished property solely because an amount owed by the taxpayer to the buyer (other than a lease security de- posit) is netted against the sales price of the relinquished property, provided that, as re- quired by the master exchange agreement, funds equal to the full amount of sales pro- ceeds from the relinquished property are transferred to or for the benefit of the quali- fied intermediary by the opening of the next day’s business. Likewise, a taxpayer ac- quiring replacement property in a like- kind exchange will not be considered to be in actual or constructive receipt of money or other property solely because an amount owed by the seller to the taxpayer is net- ted against the purchase price of the prop- erty and the qualified intermediary transfers to the taxpayer funds in an amount equal to the amount owed by the seller to the tax- payer so that the qualified intermediary ex- pends the full amount of the purchase price obligation for the replacement property. .04Taxpayer As Lender to Purchaser.If a taxpayer that is engaged in an LKE Pro- gram lends money to the buyer for the pur- chase of the taxpayer’s relinquished property, the taxpayer’s receipt of the buy- er’s promissory note or other evidence of indebtedness will not be considered ac- tual or constructive receipt of money or other property if: (1) The taxpayer makes similar loans in the ordinary course of its business opera- tions; (2) The buyer is not obligated to ob- tain financing from the taxpayer for the pur- chase of the relinquished property, but rather is free to borrow the funds from another lender; (3) The taxpayer’s loan to the buyer is an arm’s-length transaction at the prevail- ing market terms; and (4) As required by the master exchange agreement, the taxpayer promptly trans- fers funds equal to the loan proceeds (plus a market rate of interest on such amount for the period between the date of the sale of the relinquished property and the date of the transfer of the loan proceeds to the quali- fied intermediary) to or for the benefit of the qualified intermediary. 05.Application of Lease Security De- posit To Purchase Price. In the case of a taxpayer that engages in an LKE Program and is the lessor of the property being pur- chased by the buyer-lessee, the buyer- lessee’s application of its lease security deposit to the purchase price of the relin- quished property will not be considered ac- tual or constructive receipt of money or other property provided that, as required by the master exchange agreement, the tax- payer promptly transfers funds equal to the lease security deposit (plus a market rate of interest on such amount for the period between the date of the sale of the relin- 2003–22 I.R.B.973June 2, 2003 quished property and the date of the trans- fer of the security deposit to the qualified intermediary) to or for the benefit of the qualified intermediary. SECTION 6. DEFINITION OF QUALIFIED INTERMEDIARY .01In General. For purposes of deter- mining whether an intermediary is a dis- qualified person in the context of an LKE Program, the intermediary will not fail to be a qualified intermediary merely be- cause the intermediary: (1) is assigned the taxpayer’s rights in its agreements to sell relinquished proper- ties that ultimately are not matched with re- placement properties under the taxpayer’s LKE Program; (2) is assigned the taxpayer’s rights in its agreements to buy replacement proper- ties that ultimately are not matched with re- linquished properties under the taxpayer’s LKE Program; (3) receives funds with respect to the transfer of relinquished property that ulti- mately is not matched with replacement property under the taxpayer’s LKE Pro- gram; or (4) pays funds with respect to the ac- quisition of replacement property that ul- timately is not matched with relinquished property under the taxpayer’s LKE Pro- gram. .02Assignment Safe Harbor. The tax- payer’s assignment in the master exchange agreement to the intermediary of the tax- payer’s rights (but not necessarily its ob- ligations) in some or all of its existing and future agreements to sell relinquished prop- erty and/or to purchase replacement prop- erty, and the taxpayer’s written notice of the assignment to the other party to each agree- ment to sell relinquished property and/or to purchase replacement property on or be- fore the date of the relevant transfer of prop- erty, will be effective to satisfy the Assignment Safe Harbor and notice re- quirement under § 1.1031(k)–1(g)(4)(v). SECTION 7. PAPERWORK REDUCTION ACT The collections of information contained in this revenue procedure have been re- viewed and approved by the Office of Man- agement and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–1834. An agency may not conduct or spon- sor, and a person is not required to re- spond to, a collection of information unless the collection of information displays a valid control number. The collections of information in this revenue procedure are in sections 5 and 6. This information is required by the Ser- vice to provide safe harbors under § 1031 to taxpayers participating in LKE Pro- grams for federal income tax purposes. The likely respondents are finance companies; subsidiaries of manufacturers; or banks that purchases retail leases and retail install- ment sale contracts from dealers of auto- mobiles or other types of equipment. The estimated total annual reporting and recordkeeping burden is 8,600 hours. The estimated annual burden per respondent/recordkeeper varies from 45 minutes to 75 minutes, depending on in- dividual circumstances, with an estimated average of 60 minutes. The estimated num- ber of respondents and recordkeepers is 8,600. The estimated annual frequency of re- sponses is on occasion. Books or records relating to a collec- tion of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. SECTION 8. DRAFTING INFORMATION The principal author of this revenue pro- cedure is Elizabeth Kaye of the Office of Associate Chief Counsel (Income Tax and Accounting). For further information re- garding this revenue procedure, contact Ms. Kaye at (202) 622–4920 (not a toll- free call). June 2, 20039742003–22 I.R.B. Part IV. Items of General Interest Notice of Proposed Rulemak- ing and Notice of Public Hear- ing Split-Dollar Life Insurance Arrangements REG–164754–01 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemak- ing and notice of public hearing. SUMMARY: This document contains pro- posed regulations relating to the valua- tion of economic benefits under certain equity split-dollar life insurance arrange- ments. The proposed regulations will pro- vide needed guidance to persons who enter into split-dollar life insurance arrange- ments. This document also provides no- tice of a public hearing on the proposed regulations. DATES: Written or electronic comments must be received by July 8, 2003. Requests to speak and outlines of topics to be dis- cussed at the public hearing scheduled for July 29, 2003, must be received by July 8, 2003. ADDRESSES: Send submissions to CC:PA:RU (REG–164754–01), room 5226, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Mon- day through Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:RU (REG– 164754–01), Courier’s Desk, Internal Rev- enue Service,1111Constitution Avenue, NW, Washington, DC or sent electroni- cally, via the IRS Internet site at www.irs.gov/regs. The public hearing will be held in the IRS Auditorium, Internal Revenue Building,1111Constitution Av- enue, NW, Washington, DC. FOR FURTHER INFORMATION CON- TACT: Concerning the regulations, please contact Elizabeth Kaye at (202) 622–4920. To be placed on the attendance list for the hearing, please contact LaNita M. Van Dyke at (202) 622–7180. SUPPLEMENTARY INFORMATION: Background and Overview of Notice of Proposed Rulemaking 1.Summary of the Prior Notice of Proposed Rulemaking On July 9, 2002, a notice of proposed rulemaking (REG–164754–01, 2002–30 I.R.B. 212 [67 FR 45414]) was published in theFederal Registerproposing com- prehensive rules for the income, gift, and employment taxation of equity and non- equity split-dollar life insurance arrange- ments (the 2002 proposed regulations). The 2002 proposed regulations will apply to split-dollar life insurance arrangements en- tered into after the date final regulations are published in theFederal Registerand to arrangements entered into on or before that date that are materially modified after that date. Under certain conditions, taxpayers may rely on the 2002 proposed regula- tions for split-dollar life insurance arrange- ments entered into on or before the date final regulations are published in theFed- eral Register. In general, a split-dollar life insurance arrangement is an arrangement between two or more parties to allocate the policy ben- efits and, in some cases, the costs of a life insurance contract. Under a so-called eq- uity split-dollar life insurance arrange- ment, one party to the arrangement typically receives an interest in the policy cash value (or equity) of the life insurance policy dis- proportionate to that party’s share of policy premiums. That party also typically re- ceives the benefit of current life insur- ance protection under the arrangement. Under a so-called non-equity split-dollar life insurance arrangement, one party typi- cally provides the other party with cur- rent life insurance protection but not any interest in the policy cash value. The 2002 proposed regulations provide two mutually exclusive regimes for taxa- tion of split-dollar life insurance arrangements—a loan regime and an eco- nomic benefit regime. Under the loan re- gime (which is set forth in §1.7872–15 of the 2002 proposed regulations), the non- owner of the life insurance contract is treated as loaning the amount of its pre- mium payments to the owner of the con- tract. The loan regime generally will govern the taxation of collateral assignment ar- rangements. Under the economic benefit re- gime (which is set forth in §1.61–22(d) through (g) of the 2002 proposed regula- tions), the owner of the life insurance con- tract is treated as providing economic benefits to the non-owner of the contract. The economic benefit regime generally will govern the taxation of endorsement ar- rangements. The 2002 proposed regulations reserved on the rules for valuing economic ben- efits provided to the non-owner under an equity split-dollar life insurance arrange- ment governed by the economic benefit re- gime, pending receipt of comments from interested parties. The preamble to the 2002 proposed regulations notes that any pro- posal “for a specific methodology should be objective and administrable” and de- scribes a potential approach under which the non-owner would include in income the dif- ference between current premium pay- ments and the net present value of the amount to be repaid to the owner in the fu- ture. A public hearing on the 2002 proposed regulations was held on October 23, 2002. In addition, interested parties have submit- ted detailed comments on the 2002 pro- posed regulations, including comments on the valuation of economic benefits pro- vided to a non-owner under an equity split- dollar life insurance arrangement governed by the economic benefit regime. 2.Explanation of Provisions and Summary of Comments a.Overview These proposed regulations, which supplement the 2002 proposed regulations, provide guidance on the valuation of eco- nomic benefits (including the valuation of an interest in policy cash value) under an equity split-dollar life insurance arrange- ment governed by the economic benefit re- gime. These proposed regulations apply for purposes of federal income, employment, and gift taxes. These proposed regulations address only those comments received by the IRS and the Treasury Department on the valuation of economic benefits under an equity split- dollar life insurance arrangement governed 2003–22 I.R.B.975June 2, 2003 by the economic benefit regime. Com- ments received on other issues regarding the 2002 proposed regulations and comments on these proposed regulations will be ad- dressed when both sets of proposed regu- lations are finalized. These proposed regulations provide that in the case of an equity split-dollar life in- surance arrangement, the value of the eco- nomic benefits provided to the non-owner under the arrangement for a taxable year equals the cost of any current life insur- ance protection provided to the non-owner, the amount of policy cash value to which the non-owner has current access (to the ex- tent that such amount was not actually taken into account for a prior taxable year), and the value of any other economic benefits provided to the non-owner (to the extent not actually taken into account for a prior tax- able year). The termsownerandnon-owner are defined in §1.61–22(c)(1) and (2) of the 2002 proposed regulations. b.Current access to policy cash value Generally, under an equity split-dollar life insurance arrangement governed by the economic benefit regime, the owner of the life insurance contract pays policy premi- ums, thereby establishing a pool of assets with respect to which the non-owner has certain rights under the arrangement (for ex- ample, rights of withdrawal, borrowing, sur- render, or assignment). Additionally, the pool of assets is held by a third party, the life insurance company, effectively plac- ing the cash value beyond the reach of the employer or the employer’s general credi- tors in many cases. Thus, an equity split- dollar life insurance arrangement confers on the non-owner rights to direct or indirect economic enjoyment of policy cash value, making current taxation of the non-owner’s interest in the cash value appropriate un- der the doctrines of constructive receipt, economic benefit, and cash equivalence. These proposed regulations provide that the non-owner has current access to any portion of the policy cash value that is di- rectly or indirectly accessible by the non- owner, inaccessible to the owner, or inaccessible to the owner’s general credi- tors. For this purpose, “access” is to be con- strued broadly and includes any direct or indirect right under the arrangement of the non-owner to obtain, use, or realize poten- tial economic value from the policy cash value. Thus, for example, a non-owner has current access to policy cash value if the non-owner can directly or indirectly make a withdrawal from the policy, borrow from the policy, or effect a total or partial sur- render of the policy. Similarly, for example, the non-owner has current access if the non- owner can anticipate, assign (either at law or in equity), alienate, pledge, or encum- ber the policy cash value or if the policy cash value is available to the non-owner’s creditors by attachment, garnishment, levy, execution, or other legal or equitable pro- cess. Policy cash value is inaccessible to the owner if the owner does not have the full rights to policy cash value normally held by an owner of a life insurance contract. Policy cash value is inaccessible to the own- er’s general creditors if, under the terms of the split-dollar life insurance arrangement or by operation of law or any contractual undertaking, the creditors cannot, for any reason, effectively reach the full policy cash value in the event of the owner’s insol- vency. In a typical equity split-dollar life in- surance arrangement, the non-owner has current access to all portions of the policy cash value in excess of the amount pay- able to the owner. In many arrangements, the non-owner may also have current ac- cess to the portion of the cash value pay- able to the owner if, for example, that portion of the policy cash value is for any reason not accessible to the owner or the owner’s general creditors. Under these proposed regulations, policy cash value is determined without regard to surrender charges or other similar charges or reductions. To provide uniformity, cer- tainty, and administrative ease, policy cash value generally is determined on the last day of the non-owner’s taxable year. In addi- tion, solely for purposes of employment tax (as defined in §1.61–22(c)(5) of the 2002 proposed regulations) and the penalty for failure to pay estimated income taxes, the portion of the policy cash value that is treated as provided by the owner to the non- owner during the non-owner’s taxable year is treated as so provided on the last day of that taxable year. The IRS and the Trea- sury Department request comments regard- ing circumstances in which it might be appropriate to use a different date for em- ployment tax withholding purposes. Several commentators on the 2002 pro- posed regulations asserted that those regu- lations were contrary to the intention, announced by the IRS and the Treasury De- partment in Notice 2002–8, 2002–1 C.B. 398, to publish proposed regulations that will not treat an owner as having made a transfer of a portion of the cash surrender value of a life insurance contract to a non- owner for purposes of section 83 solely be- cause interest or other earnings credited to the cash surrender value of the contract cause the cash surrender value to exceed the portion thereof payable to the owner. The valuation methodology described in these proposed regulations, however, does not treat an owner as having made a transfer under section 83 solely because of growth in policy cash value. Rather, this approach, consistent with the doctrines of construc- tive receipt, economic benefit, and cash equivalence, treats the non-owner as hav- ing a taxable interest in policy cash value only to the extent that the non-owner has current access to the policy cash value. Several commentators stated that a non- owner who includes in income a portion of the policy cash value should be credited with “inside build-up” on that portion of the policy cash value. This result might be ap- propriate if there were actual transfers of ownership of the underlying life insur- ance contract (or a portion thereof) from the owner to the non-owner. Here, by con- trast to transfers described in §1.61–22(g) of the 2002 proposed regulations, no part of the life insurance contract is actually transferred from the owner to the non- owner by reason of the non-owner’s tak- ing policy cash value into account. In addition, some commentators ex- pressed the view that, under the economic benefit regime, if the policy cash value in one year is less than the policy cash value in a prior year, the non-owner should be al- lowed a loss to the extent this difference was included in income in the prior year. Consistent with the underlying doctrines of constructive receipt, economic benefit, and cash equivalence, a loss should not be al- lowed in this situation. Note, however, that under §1.61–22(g)(4)(ii)(A) of the 2002 pro- posed regulations, if a life insurance con- tract is transferred from an owner to a non- owner (the transferee), the transferee’s investment in the contract under section 72(e) will include the amount of economic benefits previously taken into account by the transferee prior to the transfer. June 2, 20039762003–22 I.R.B. c.Current term life insurance protection These proposed regulations provide that, in the case of an equity split-dollar life in- surance arrangement governed by the eco- nomic benefit regime, the value of the economic benefits provided to a non-owner for a taxable year also includes the cost of current life insurance protection provided to the non-owner. The cost of current life insurance protection provided to the non- owner in any year equals the amount of the current life insurance protection provided to the non-owner multiplied by the life in- surance premium factor designated or per- mitted in guidance published in the Internal Revenue Bulletin. The amount of the cur- rent life insurance protection (including paid-up additions thereto) provided to the non-owner for a taxable year equals the ex- cess of the average death benefit of the life insurance contract over the sum of the to- tal amount payable to the owner (includ- ing any outstanding policy loans that offset amounts otherwise payable to the owner) under the split-dollar life insurance arrange- ment and the portion of the policy cash value actually taken into account for the current taxable year or for any prior tax- able year. This subtraction of the portion of the policy cash value actually taken into ac- count by the non-owner prevents the non- owner from being taxed twice on the same amount, once as part of the policy cash value to which the non-owner has current access and again as an amount provided to the non-owner in the form of death ben- efit protection. d.Other economic benefits These proposed regulations provide that, in the case of an equity split-dollar life in- surance arrangement governed by the eco- nomic benefit regime, the value of all other economic benefits provided to the non- owner must be taken into account (to the extent not actually taken into account for a prior taxable year). For this purpose, the term “other economic benefits” should be construed broadly to include any benefit, right, or feature of the life insurance con- tract (other than current life insurance pro- tection and policy cash value) provided to the non-owner under the arrangement. Proposed Effective Date These proposed regulations will have the same applicability date as that set forth in §1.61–22(j) of the 2002 proposed regula- tions. Thus, these proposed regulations will apply to split-dollar life insurance arrange- ments entered into after the date final regu- lations are published in theFederal Registerand to arrangements entered into on or before that date that are materially modified after that date. In addition, taxpayers may rely on these proposed regulations for equity split-dollar life insurance arrangements entered into on or before the date final regulations are pub- lished in theFederal Registerif the con- ditions in §1.61–22(j)(2)(i) of the 2002 proposed regulations are met. For taxable years beginning after December 31, 2002, however, parties to an equity split-dollar life insurance arrangement may rely on these proposed regulations only if the value of all economic benefits taken into account by the parties is determined in accordance with these proposed regulations. These pro- posed regulations also conform the early re- liance rules in §1.83–6(a)(5)(ii)(B) and §1.301–1(q)(4)(ii) of the 2002 proposed regulations to that set forth in the preced- ing sentence. Special Analyses It has been determined that this notice of proposed rulemaking is not a signifi- cant regulatory action as defined in Ex- ecutive Order 12866. Therefore, a regulatory flexibility assessment is not required. It has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. Chapter 5) does not apply to these regu- lations, and because these regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursu- ant to section 7805(f) of the Internal Rev- enue Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Busi- ness Administration for comment on its im- pact on small business. Comments and Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any written or electronic comments (a signed original and eight (8) copies) that are submitted timely to the IRS. The Treasury Department and IRS specifi- cally request comments on the clarity of the proposed rules and how they may be made easier to understand. All comments will be available for public inspection and copy- ing. A public hearing has been scheduled for July 29, 2003, beginning at 10 a.m. in the IRS Auditorium in the Internal Revenue Building,1111Constitution Avenue, NW, Washington, DC. Thus, the public hear- ing concerning these proposed regulations will be held on a date sooner than the usual 120 days after the date of publication of proposed regulations in theFederal Reg- ister. The IRS and the Treasury Depart- ment believe that this shorter period is sufficient for taxpayers to comment on these proposed regulations because the issue ad- dressed by these proposed regulations is nar- rowly focused and taxpayers have already submitted comments on this issue in con- nection with the 2002 proposed regula- tions. All visitors must present photo identi- fication to enter the building. Because of access restrictions, visitors will not be ad- mitted beyond the immediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the “FOR FUR- THER INFORMATION CONTACT” sec- tion of this preamble. The rules of 26 CFR 601.601(a)(3) ap- ply to the hearing. Persons who wish to present oral comments at the hearing must submit written comments and an outline of the topics to be discussed and the time to be devoted to each topic (signed original and eight (8) copies) by July 8, 2003. A pe- riod of 10 minutes will be allotted to each person for making comments. An agenda showing the schedule of speakers will be prepared after the deadline for receiving out- lines has passed. Copies of the agenda will be available free of charge at the hearing. Drafting Information The principal author of these proposed regulations is Elizabeth Kaye of the Of- fice of Associate Chief Counsel (Income Tax and Accounting). However, other per- sonnel from the IRS and Treasury Depart- ment participated in their development. ***** Proposed Amendments to the Regulations Accordingly, 26 CFR part 1 is proposed to be amended as follows: 2003–22 I.R.B.977June 2, 2003 PART 1—INCOME TAXES Paragraph 1. The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805*** Par. 2. Section 1.61–22, as proposed on July 9, 2002, at 67 FR 45423, is amended as follows: 1. The text of paragraph (d)(3)(ii) is added. 2. Paragraph (j)(2)(iii) is added. The additions read as follows: §1.61–22 Taxation of split-dollar life in- surance arrangements. ***** (d)*** (3)*** (ii)Valuation of economic benefits— (A)In general. In the case of a split-dollar life insurance arrangement described in paragraph (d)(3)(i) of this section, the value of the economic benefits provided to a non- owner for a taxable year under the arrange- ment equals— (1) The cost of current life insurance pro- tection provided to the non-owner as de- termined under paragraph (d)(3)(ii)(B) of this section; (2) The amount of policy cash value to which the non-owner has current access within the meaning of paragraph (d)(3)(ii)(C) of this section (to the extent that such amount was not actually taken into account for a prior taxable year); and (3) The value of any economic ben- efits not described in paragraph (d)(3)(ii)(A)(1)or(2) of this section pro- vided to the non-owner (to the extent not actually taken into account for a prior tax- able year). (B)Valuation of current term life insur- ance protection. In the case of a split- dollar life insurance arrangement described in paragraph (d)(3)(i) of this section, the amount of the current life insurance pro- tection (including paid-up additions thereto) provided to the non-owner for a taxable year equals the excess of the average death benefit of the life insurance contract over the sum of the total amount payable to the owner under the split-dollar life insur- ance arrangement and the portion of the policy cash value actually taken into ac- count for the current taxable year or for any prior taxable year. The total amount pay- able to the owner is increased by the amount of any outstanding policy loan. The cost of current life insurance protection pro- vided to the non-owner in any year equals the amount of the current life insurance pro- tection provided to the non-owner multi- plied by the life insurance premium factor designated or permitted in guidance pub- lished in the Internal Revenue Bulletin (see §601.601(d)(2)(ii) of this chapter). (C)Current access. For purposes of this paragraph (d)(3), a non-owner has cur- rent access to that portion of the policy cash value that is directly or indirectly acces- sible by the non-owner, inaccessible to the owner, or inaccessible to the owner’s gen- eral creditors. (D)Valuation date—(1)General rules. For purposes of paragraph (d)(3)(ii)(A) of this section, the policy cash value is de- termined on the last day of the taxable year of the non-owner. Notwithstanding the pre- vious sentence, if the split-dollar life in- surance arrangement terminates during the taxable year of the non-owner, the policy cash value is determined on the day that the arrangement terminates. (2)Artifice or device. Notwithstanding paragraph (d)(3)(ii)(D)(1) of this section, if any artifice or device is used to under- state the amount of policy cash value to which the non-owner has current access on the valuation date in paragraph (d)(3)(ii)(D)(1) of this section, then, for pur- poses of paragraph (d)(3)(ii)(A) of this sec- tion, the date on which the amount of policy cash value is determined is the date on which the amount of policy cash value is greatest during that taxable year. (E)Policy cash value. For purposes of this paragraph (d)(3), policy cash value is determined without regard to surrender charges or other similar charges or reduc- tions. (F)Special rule for certain taxes. For purposes of employment tax (as defined in paragraph (c)(5) of this section), and sec- tions 6654 and 6655 (relating to the fail- ure to pay estimated income tax), that portion of the policy cash value (as deter- mined under paragraph (d)(3)(ii)(A)(2)of this section) that is treated as provided by the owner to the non-owner under para- graph (d)(1) of this section shall be treated as so provided on the last day of the tax- able year of the non-owner. Notwithstand- ing the previous sentence, if the split-dollar life insurance arrangement terminates dur- ing the taxable year of the non-owner, such portion of the policy cash value shall be treated as so provided on the day that the arrangement terminates. (G)Examples. The following examples illustrate the rules of this paragraph (d)(3)(ii). Except as otherwise provided, both examples assume the following facts: employer (R) is the owner (as defined in paragraph (c)(1) of this section) and em- ployee (E) is the non-owner (as defined in paragraph (c)(2) of this section) of a life in- surance contract that is part of an equity split-dollar life insurance arrangement that is subject to the provisions of paragraphs (d) through (g) of this section; the con- tract is a life insurance contract as de- fined in section 7702 and not a modified endowment contract as defined in section 7702A; R does not withdraw or obtain a loan of any portion of the policy cash value and does not surrender any portion of the life insurance contract; the compensation paid to E is reasonable; E is not provided any economic benefits described in para- graph (d)(3)(ii)(A)(3) of this section; E does not make any premium payments; E’s tax- able year is the calendar year; and E re- ports on E’s federal income tax return for each year that the equity split-dollar life in- surance arrangement is in effect the amount of income required to be reported under paragraph (d) of this section. The examples are as follows: Example 1. (i)Facts. In year 1, R and E enter into the equity split-dollar life insurance arrangement. Un- der the arrangement R pays all of the premiums on the life insurance contract until the termination of the arrangement or E’s death. The arrangement also pro- vides that upon termination of the arrangement or E’s death, R is entitled to receive the lesser of the ag- gregate premiums paid or the policy cash value of the contract and E is entitled to receive any remaining amounts. Under the terms of the arrangement and ap- plicable state law, the policy cash value is fully ac- cessible by R and R’s creditors but E has the right to borrow or withdraw the portion of the policy cash value exceeding the amount payable to R upon ter- mination of the arrangement or E’s death. To fund the arrangement, R purchases a life insurance contract with constant death benefit protection equal to $1,500,000. As of December 31 of year 1, the policy cash value equals $55,000 and R has paid $60,000 of premi- ums on the life insurance contract. As of December 31 of year 2, the policy cash value equals $140,000 and R has paid aggregate premiums of $120,000 on the life insurance contract. As of December 31 of year 3, the policy cash value equals $240,000 and R has paid $180,000 of premiums on the life insurance con- tract. (ii)Analysis. Under the terms of the equity split- dollar life insurance arrangement, E has the right for year 1 and all subsequent years to borrow or with- draw the portion of the policy cash value exceeding the amount payable to R. Thus, under paragraph (d)(3)(ii)(C) of this section, E has current access to June 2, 20039782003–22 I.R.B. such portion of the policy cash value for each year that the arrangement is in effect. In addition, be- cause R pays all of the premiums on the life insur- ance contract, R provides to E all of the economic benefits that E receives under the arrangement. There- fore, under paragraph (d)(1) of this section, E in- cludes in gross income the value of all economic benefits described in paragraphs (d)(3)(ii)(A)(1) and (2) of this section provided to E under the arrange- ment. (iii)Results for year 1. For year 1, E is pro- vided, under paragraph (d)(3)(ii)(A)(2) of this sec- tion, $0 of policy cash value (excess of $55,000 policy cash value determined as of December 31 of year 1 over $55,000 payable to R). For year 1, E is also pro- vided, under paragraph (d)(3)(ii)(A)(1) of this sec- tion, current life insurance protection of $1,445,000 ($1,500,000 minus $55,000 payable to R). Thus, E in- cludes in gross income for year 1 the cost of $1,445,000 of current life insurance protection. (iv)Results for year 2. For year 2, E is provided, under paragraph (d)(3)(ii)(A)(2) of this section, $20,000 of policy cash value ($140,000 policy cash value de- termined as of December 31 of year 2 minus $120,000 payable to R). For year 2, E is also provided, under paragraph (d)(3)(ii)(A)(1) of this section, current life insurance protection of $1,360,000 ($1,500,000 mi- nus the sum of $120,000 payable to R and the ag- gregate of $20,000 of policy cash value that E actually includes in income on E’s year 1 and year 2 income tax returns). Thus, E includes in gross income for year 2 the sum of $20,000 of policy cash value and the cost of $1,360,000 of current life insurance protection. (v)Results for year 3. For year 3, E is provided, under paragraph (d)(3)(ii)(A)(2) of this section, $40,000 of policy cash value ($240,000 policy cash value de- termined as of December 31 of year 3 minus the sum of $180,000 payable to R and $20,000 of aggregate policy cash value that E actually included in gross in- come on E’s year 1 and year 2 federal income tax re- turns). For year 3, E is also provided, under paragraph (d)(3)(ii)(A)(1) of this section, current life insur- ance protection of $1,260,000 ($1,500,000 minus the sum of $180,000 payable to R and $60,000 of ag- gregate policy cash value that E actually includes in gross income on E’s year 1, year 2, and year 3 fed- eral income tax returns). Thus, E includes in gross in- come for year 3 the sum of $40,000 of policy cash value and the cost of $1,260,000 of current life in- surance protection. Example 2. (i)Facts. The facts are the same as inExample 1except that E cannot directly or indi- rectly access any portion of the policy cash value, but the terms of the equity split-dollar life insurance ar- rangement or applicable state law provide that the policy cash value in excess of the amount payable to R upon termination of the arrangement or E’s death is inaccessible to R’s general creditors. (ii)Analysis. Under the terms of the equity split- dollar life insurance arrangement or applicable state law, the portion of the policy cash value exceeding the amount payable to R is inaccessible to R’s gen- eral creditors. Thus, under paragraph (d)(3)(ii)(C) of this section, E has current access to such portion of the policy cash value for each year that the arrange- ment is in effect. In addition, because R pays all of the premiums on the life insurance contract, R pro- vides to E all of the economic benefits that E re- ceives under the arrangement. Therefore, under paragraph (d)(1) of this section, E includes in gross income the value of all economic benefits described in paragraphs (d)(3)(ii)(A)(1) and (2) of this section provided to E under the arrangement. (iii)Results for years 1, 2, and 3. The results for this example are the same as the results inExample 1. ***** (j)*** (2)*** (iii)Valuation of economic benefits. Not- withstanding paragraph (j)(2)(ii) of this sec- tion, for taxable years beginning after December 31, 2002, parties to an arrange- ment described in paragraph (d)(3) of this section may rely on this section only if the value of all economic benefits taken into account by the parties is determined in ac- cordance with paragraph (d)(3)(ii) of this section. ***** Par. 3. Section 1.83–6, as proposed on July 9, 2002, at 67 FR 45428, is amended by adding paragraph (a)(5)(ii)(B)(3) to read as follows: §1.83–6 Deduction by employer. (a)*** (5)*** (ii)*** (B)*** (3)Valuation of economic benefits. Not- withstanding paragraph (a)(5)(ii)(B)(2)of this section, for taxable years beginning af- ter December 31, 2002, parties to an ar- rangement described in §1.61–22(d)(3) may rely on this section only if the value of all economic benefits taken into account by the parties is determined in accordance with §1.61–22(d)(3)(ii). ***** Par. 4. Section 1.301–1, as proposed on July 9, 2002, at 67 FR 45428, is amended by adding paragraph (q)(4)(ii)(C) to read as follows: §1.301–1 Rules applicable with respect to distributions of money and other prop- erty. ***** (q)*** (4)*** (ii)*** (C)Valuation of economic benefits. Not- withstanding paragraph (q)(4)(ii)(B) of this section, for taxable years beginning after December 31, 2002, parties to an arrange- ment described in §1.61–22(d)(3) may rely on this section only if the value of all eco- nomic benefits taken into account by the parties is determined in accordance with §1.61–22(d)(3)(ii). ***** David A. Mader, Assistant Deputy Commissioner of Internal Revenue. (Filed by the Office of the Federal Register on May 8, 2003, 8:45 a.m., and published in the issue of the Federal Regis- ter for May 9, 2003, 68 F.R. 24898) Notice of Proposed Rulemak- ing by Cross-Reference to Temporary Regulations and Notice of Public Hearing Guidance Under Section 1502; Amendment of Waiver of Loss Carryovers from Separate Return Limitation Years REG–152524–02 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemak- ing by cross-reference to temporary regu- lations and notice of public hearing. SUMMARY: In this issue of the Bulletin, the IRS is issuing temporary regulations (T.D. 9057) under section 1502 that per- mit the amendment of certain elections to waive the loss carryovers of an acquired subsidiary. The text of the temporary regu- lations published in this issue of the Bul- letin also serves as the text of these proposed regulations. This document also provides notice of a public hearing on these proposed regulations. DATES: Written or electronic comments must be received by August 5, 2003. Out- lines of topics to be discussed at the pub- lic hearing scheduled for August 6, 2003, at 10 a.m., must be received by July 16, 2003. ADDRESSES: Send submissions to: CC:ITA:RU (REG–152524–02), room 5226, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Mon- day through Friday between the hours of 8 a.m. and 5 p.m. to CC:ITA:RU (REG– 2003–22 I.R.B.979June 2, 2003 152524–02), Courier’s Desk, Internal Rev- enue Service,1111Constitution Avenue, NW, Washington, DC 20044. Alternatively, taxpayers may submit comments electroni- cally directly to the IRS Internet site at www.irs.gov/regs. The public hearing will be held in room 6718, Internal Revenue Service Building,1111 Constitution Av- enue, NW, Washington, DC. FOR FURTHER INFORMATION CON- TACT: Concerning the proposed regula- tions, Alison G. Burns or Jeffrey B. Fienberg, (202) 622–7930; concerning sub- mission of comments, the hearing, and/or to be placed on the building access list to attend the hearing, Sonya Cruse, (202) 622– 7180 (not toll-free numbers). SUPPLEMENTARY INFORMATION: Paperwork Reduction Act The collection of information contained in this notice of proposed rulemaking has been submitted to theOffice of Manage- ment and Budgetfor review in accor- dance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection of information should be sent to theOffice of Management and Bud- get, Attn: Desk Officer for the Depart- ment of Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, with copies to theInternal Revenue Ser- vice, Attn: IRS Reports Clearance Officer, W:CAR:MP:T:T:SP, Washington, DC 20224. Comments on the collection of in- formation should be received by July 7, 2003. Comments are specifically requested concerning: Whether the proposed collection of in- formation is necessary for the proper per- formance of the functions of the IRS, including whether the information will have practical utility; The accuracy of the estimated burden as- sociated with the proposed collection of in- formation (see below); How the quality, utility, and clarity of the information to be collected may be en- hanced; How the burden of complying with the proposed collection of information may be minimized, including through the applica- tion of automated collection techniques or other forms of information technology; and Estimates of capital or start-up costs and costs of operation, maintenance, and pur- chase of services to provide information. The collection of information in this pro- posed regulation was previously approved and reviewed by theOffice of Manage- ment and Budgetunder control number 1545–1774. The collection of informa- tion is required to allow the taxpayer to make certain elections to determine the amount of allowable loss under §1.337(d)– 2T, §1.1502–20 as currently in effect, or un- der §1.1502–20 modified so that the amount of allowable loss determined pursuant to §1.1502–20(c)(1) is computed by taking into account only the amounts computed un- der §1.1502–20(c)(1)(i) and (ii); to allow the taxpayer to reapportion a section 382 limitation in certain cases; to allow the tax- payer to waive certain loss carryovers; and to ensure that loss is not disallowed un- der §1.337–2T and basis is not reduced un- der §1.337(d)–2T to the extent that the taxpayer establishes that the loss or basis is not attributable to the recognition of built-in gain on the disposition of an as- set. This collection of information is modi- fied with respect to §§1.1502–20T and 1.1502–32T. Regarding §1.1502–20T, the collection of information also is neces- sary to allow the common parent of the sell- ing group to reapportion a separate, subgroup or consolidated section 382 limi- tation when the acquiring group amends its §1.1502–32(b)(4) election. With respect to §1.1502–32T, the collection of informa- tion also is necessary to allow the acquir- ing group to amend its previous §1.1502– 32(b)(4) election, so that it may use previously waived losses of its subsid- iary. The collection of information is required to obtain a benefit. The likely respondents are corporations that file consolidated in- come tax returns. Estimated total annual reporting and/or recordkeeping burden: 30,400 hours. Estimated average annual burden per respondent: 2 hours. Estimated number of respondents: 15,200. Estimated annual frequency of responses: once. An agency may not conduct or spon- sor, and a person is not required to re- spond to, a collection of information unless it displays a valid control number assigned by theOffice of Management and Bud- get. Books or records relating to a collec- tion of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. Background and Explanation of Provi- sions Temporary regulations (T.D. 9057) on page 964 of this issue of the Bulletin amend the Income Tax Regulations (26 CFR part 1) relating to section 1502. The text of those regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations contains a full ex- planation of the reasons underlying the is- sues of the proposed regulations. Proposed Effective Date These proposed regulations will be ef- fective on the date they are published as fi- nal regulations in theFederal Register. 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 is hereby certified that these regulations do not have a signifi- cant economic impact on a substantial num- ber of small entities. This certification is based on the fact that these regulations pri- marily will affect affiliated groups of cor- porations that have elected to file consolidated returns, which tend to be larger businesses, and, moreover, that any bur- den on taxpayers is minimal. Therefore, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chap- ter 6) is not required. Pursuant to §7805(f) of the Internal Revenue Code, these regu- lations will be submitted to the Chief Coun- sel for Advocacy of the Small Business Administration for comment on their im- pact on small business. Comments and Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed origi- nal and eight (8) copies) or electronic com- ments that are submitted timely to the IRS. June 2, 20039802003–22 I.R.B. All comments will be available for public inspection and copying. A public hearing has been scheduled for August 6, 2003, beginning at 10 a.m. in room 6718, Internal Revenue Building,1111 Constitution Avenue, NW, Washington, DC. Due to building security procedures, visi- tors must enter at the Constitution Av- enue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visi- tors will not be admitted beyond the im- mediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the “FOR FURTHER INFORMATION CONTACT” portion of this preamble. The rules of 26 CFR 601.601(a)(3) ap- ply to the hearing. Persons who wish to present oral comments must submit writ- ten or electronic comments and an out- line of the topics to be discussed and the time to be devoted to each topic (a signed original and eight (8) copies) by July 16, 2003. A period of 10 minutes will be al- lotted to each person for making com- ments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing. Drafting Information The principal author of these regula- tions is Jeffrey B. Fienberg, Office of As- sociate Chief Counsel (Corporate). However, other personnel from the IRS and Trea- sury Department participated in their de- velopment. ***** Proposed Amendments to the Regulations Accordingly, 26 CFR part 1 is proposed to be amended as follows: PART 1 — INCOME TAXES Paragraph 1. The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805*** Par. 2. Section 1.1502–20 is amended by redesignating paragraph (i)(5) as (i)(6) and by adding paragraphs (i)(3)(viii) and (i)(5) to read as follows: §1.1502–20 — Disposition or deconsoli- dation of subsidiary stock. [The text of this proposed section is the same as the text of §1.1502–20T(i)(3)(viii) and (i)(5) published elsewhere in this is- sue of the Bulletin]. Par. 3. Section 1.1502–32 is amended by adding paragraph (b)(4)(vii) to read as follows: §1.1502–32 — Investment adjustments. [The text of this proposed section is the same as the text of §1.1502–32T(b)(4)(vii) published elsewhere in this issue of the Bul- letin]. ***** David A. Mader, Assistant Deputy Commissioner of Internal Revenue. (Filed by the Office of the Federal Register on May 6, 2003, 8:45 a.m., and published in the issue of the Federal Regis- ter for May 7, 2003, 68 F.R. 24404) 2003–22 I.R.B.981June 2, 2003 Definition of Terms Revenue rulings and revenue procedures (hereinafter referred to as“rulings”) that have an effect on previous rulings use the following defined terms to describe the effect: Amplifieddescribes a situation where no change is being made in a prior pub- lished position, but the prior position is being extended to apply to a variation of the fact situation set forth therein. Thus, if an earlier ruling held that a principle applied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare withmodified, below). Clarifiedis used in those instances where the language in a prior ruling is being made clear because the language has caused, or may cause, some confu- sion. It is not used where a position in a prior ruling is being changed. Distinguisheddescribes a situation where a ruling mentions a previously published ruling and points out an essen- tial difference between them. Modifiedis used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a pub- lished position. (Compare withamplified andclarified, above). Obsoleteddescribes a previously pub- lished ruling that is not considered deter- minative with respect to future transac- tions. This term is most commonly used in a ruling that lists previously published rulings that are obsoleted because of changes in law or regulations. A ruling may also be obsoleted because the sub- stance has been included in regulations subsequently adopted. Revokeddescribes situations where the position in the previously published rul- ing is not correct and the correct position is being stated in the new ruling. Supersededdescribes a situation where the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same position published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new ruling does more than restate the substance of a prior ruling, a combination of terms is used. For example,modified andsupersededdescribes a situation where the substance of a previously pub- lished ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously published ruling is first modified and then, as modified, is super- seded. Supplementedis used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original ruling has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the additions, and supersedes all prior rul- ings in the series. Suspendedis used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study. Abbreviations The following abbreviations in current use and formerly used will appear in material published in the Bulletin. A—Individual. Acq.—Acquiescence. B—Individual. BE—Beneficiary. BK—Bank. B.T.A.—Board of Tax Appeals. C—Individual. C.B.—Cumulative Bulletin. CFR—Code of Federal Regulations. CI—City. COOP—Cooperative. Ct.D.—Court Decision. CY—County. D—Decedent. DC—Dummy Corporation. DE—Donee. Del. Order—Delegation Order. DISC—Domestic International Sales Corporation. DR—Donor. E—Estate. EE—Employee. E.O.—Executive Order. ER—Employer. ERISA—Employee Retirement Income Security Act. EX—Executor. F—Fiduciary. FC—Foreign Country. FICA—Federal Insurance Contributions Act. FISC—Foreign International Sales Company. FPH—Foreign Personal Holding Company. F.R.—Federal Register. FUTA—Federal Unemployment Tax Act. FX—Foreign Corporation. G.C.M.—Chief Counsel’s Memorandum. GE—Grantee. GP—General Partner. GR—Grantor. IC—Insurance Company. I.R.B.—Internal Revenue Bulletin. LE—Lessee. LP—Limited Partner. LR—Lessor. M—Minor. Nonacq.—Nonacquiescence. O—Organization. P—Parent Corporation. PHC—Personal Holding Company. PO—Possession of the U.S. PR—Partner. PRS—Partnership. PTE—Prohibited Transaction Exemption. Pub. L.—Public Law. REIT—Real Estate Investment Trust. Rev. Proc.—Revenue Procedure. Rev. Rul.—Revenue Ruling. S—Subsidiary. S.P.R.—Statements of Procedural Rules. Stat.—Statutes at Large. T—Target Corporation. T.C.—Tax Court. T.D.—Treasury Decision. TFE—Transferee. TFR—Transferor. T.I.R.—Technical Information Release. TP—Taxpayer. TR—Trust. TT—Trustee. U.S.C.—United States Code. X—Corporation. Y—Corporation. Z—Corporation. June 2, 2003i2003–22 I.R.B. Numerical Finding List 1 Bulletins 2003–1 through 2003–21 Announcements: 2003–1, 2003–2 I.R.B.281 2003–2, 2003–3 I.R.B.301 2003–3, 2003–4 I.R.B.361 2003–4, 2003–5 I.R.B.396 2003–5, 2003–5 I.R.B.397 2003–6, 2003–6 I.R.B.450 2003–7, 2003–6 I.R.B.450 2003–8, 2003–6 I.R.B.451 2003–9, 2003–7 I.R.B.490 2003–10, 2003–7 I.R.B.490 2003–11, 2003–10 I.R.B.585 2003–12, 2003–10 I.R.B.585 2003–13, 2003–11 I.R.B.603 2003–14, 2003–11 I.R.B.603 2003–15, 2003–11 I.R.B.605 2003–16, 2003–12 I.R.B.641 2003–17, 2003–15 I.R.B.722 2003–18, 2003–13 I.R.B.675 2003–19, 2003–15 I.R.B.723 2003–20, 2003–15 I.R.B.750 2003–21, 2003–17 I.R.B.846 2003–22, 2003–17 I.R.B.846 2003–23, 2003–16 I.R.B.808 2003–24, 2003–16 I.R.B.810 2003–25, 2003–17 I.R.B.846 2003–26, 2003–18 I.R.B.862 2003–27, 2003–18 I.R.B.862 2003–28, 2003–19 I.R.B.899 2003–29, 2003–20 I.R.B.928 2003–30, 2003–20 I.R.B.929 2003–31, 2003–20 I.R.B.930 2003–32, 2003–20 I.R.B.933 2003–33, 2003–21 I.R.B.953 2003–34, 2003–21 I.R.B.953 2003–35, 2003–21 I.R.B.956 Court Decisions: 2077, 2003–19 I.R.B.868 Notices: 2003–1, 2003–2 I.R.B.257 2003–2, 2003–2 I.R.B.257 2003–3, 2003–2 I.R.B.258 2003–4, 2003–3 I.R.B.294 2003–5, 2003–3 I.R.B.294 2003–6, 2003–3 I.R.B.298 2003–7, 2003–4 I.R.B.310 2003–8, 2003–4 I.R.B.310 2003–9, 2003–5 I.R.B.369 2003–10, 2003–5 I.R.B.369 2003–11, 2003–6 I.R.B.422 2003–12, 2003–6 I.R.B.422 2003–13, 2003–8 I.R.B.513 2003–14, 2003–8 I.R.B.515 2003–15, 2003–9 I.R.B.540 2003–16, 2003–10 I.R.B.575 2003–17, 2003–12 I.R.B.633 2003–18, 2003–14 I.R.B.699 2003–19, 2003–14 I.R.B.703 Notices—Continued: 2003–20, 2003–19 I.R.B.894 2003–21, 2003–17 I.R.B.817 2003–22, 2003–18 I.R.B.851 2003–23, 2003–17 I.R.B.821 2003–24, 2003–18 I.R.B.853 2003–25, 2003–18 I.R.B.855 2003–26, 2003–18 I.R.B.855 2003–27, 2003–19 I.R.B.898 2003–29, 2003–20 I.R.B.917 2003–31, 2003–21 I.R.B.948 2003–32, 2003–21 I.R.B.949 Proposed Regulations: REG–209500–86, 2003–2 I.R.B.262 REG–104385–01, 2003–12 I.R.B.634 REG–116641–01, 2003–8 I.R.B.518 REG–125638–01, 2003–5 I.R.B.373 REG–126016–01, 2003–7 I.R.B.486 REG–126485–01, 2003–9 I.R.B.542 REG–103580–02, 2003–9 I.R.B.543 REG–124069–02, 2003–7 I.R.B.488 REG–131478–02, 2003–13 I.R.B.669 REG–138882–02, 2003–8 I.R.B.522 REG–139768–02, 2003–10 I.R.B.583 REG–141097–02, 2003–16 I.R.B.807 REG–141659–02, 2003–20 I.R.B.927 REG–151043–02, 2003–3 I.R.B.300 REG–164464–02, 2003–2 I.R.B.262 Revenue Procedures: 2003–1, 2003–1 I.R.B.1 2003–2, 2003–1 I.R.B.76 2003–3, 2003–1 I.R.B.113 2003–4, 2003–1 I.R.B.123 2003–5, 2003–1 I.R.B.163 2003–6, 2003–1 I.R.B.191 2003–7, 2003–1 I.R.B.233 2003–8, 2003–1 I.R.B.236 2003–9, 2003–8 I.R.B.516 2003–10, 2003–2 I.R.B.259 2003–11, 2003–4 I.R.B.311 2003–12, 2003–4 I.R.B.316 2003–13, 2003–4 I.R.B.317 2003–14, 2003–4 I.R.B.319 2003–15, 2003–4 I.R.B.321 2003–16, 2003–4 I.R.B.359 2003–17, 2003–6 I.R.B.427 2003–18, 2003–6 I.R.B.439 2003–19, 2003–5 I.R.B.371 2003–20, 2003–6 I.R.B.445 2003–21, 2003–6 I.R.B.448 2003–22, 2003–10 I.R.B.577 2003–23, 2003–11 I.R.B.599 2003–24, 2003–11 I.R.B.599 2003–25, 2003–11 I.R.B.601 2003–26, 2003–13 I.R.B.666 2003–27, 2003–13 I.R.B.667 2003–28, 2003–16 I.R.B.759 2003–29, 2003–20 I.R.B.917 2003–30, 2003–17 I.R.B.822 2003–31, 2003–17 I.R.B.838 2003–32, 2003–16 I.R.B.803 2003–33, 2003–16 I.R.B.803 Revenue Procedures—Continued: 2003–34, 2003–18 I.R.B.856 2003–35, 2003–20 I.R.B.919 2003–36, 2003–18 I.R.B.859 2003–37, 2003–21 I.R.B.950 Revenue Rulings: 2003–1, 2003–3 I.R.B.291 2003–2, 2003–2 I.R.B.251 2003–3, 2003–2 I.R.B.252 2003–4, 2003–2 I.R.B.253 2003–5, 2003–2 I.R.B.254 2003–6, 2003–3 I.R.B.286 2003–7, 2003–5 I.R.B.363 2003–8, 2003–3 I.R.B.290 2003–9, 2003–4 I.R.B.303 2003–10, 2003–3 I.R.B.288 2003–11, 2003–3 I.R.B.285 2003–12, 2003–3 I.R.B.283 2003–13, 2003–4 I.R.B.305 2003–14, 2003–4 I.R.B.302 2003–15, 2003–4 I.R.B.302 2003–16, 2003–6 I.R.B.401 2003–17, 2003–6 I.R.B.400 2003–18, 2003–7 I.R.B.467 2003–19, 2003–7 I.R.B.468 2003–20, 2003–7 I.R.B.465 2003–21, 2003–8 I.R.B.509 2003–22, 2003–8 I.R.B.494 2003–23, 2003–8 I.R.B.511 2003–24, 2003–10 I.R.B.557 2003–25, 2003–13 I.R.B.642 2003–26, 2003–10 I.R.B.563 2003–27, 2003–11 I.R.B.597 2003–28, 2003–11 I.R.B.594 2003–29, 2003–11 I.R.B.587 2003–30, 2003–13 I.R.B.659 2003–31, 2003–13 I.R.B.643 2003–32, 2003–14 I.R.B.689 2003–33, 2003–13 I.R.B.642 2003–34, 2003–17 I.R.B.813 2003–35, 2003–14 I.R.B.687 2003–36, 2003–18 I.R.B.849 2003–37, 2003–15 I.R.B.717 2003–38, 2003–17 I.R.B.811 2003–39, 2003–17 I.R.B.811 2003–40, 2003–17 I.R.B.813 2003–41, 2003–17 I.R.B.814 2003–42, 2003–16 I.R.B.754 2003–43, 2003–21 I.R.B.935 2003–44, 2003–18 I.R.B.848 2003–45, 2003–19 I.R.B.876 2003–46, 2003–19 I.R.B.878 2003–47, 2003–19 I.R.B.866 2003–48, 2003–19 I.R.B.863 2003–49, 2003–20 I.R.B.903 2003–50, 2003–21 I.R.B.944 2003–51, 2003–21 I.R.B.938 Tax Conventions: Ann. 2003–21, 2003–17 I.R.B.846 1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2002–26 through 2002–52 is in Internal Revenue Bulletin 2003–1, dated January 6, 2003. 2003–22 I.R.B.iiJune 2, 2003 Treasury Decisions: 9024, 2003–5 I.R.B.365 9025, 2003–5 I.R.B.362 9026, 2003–5 I.R.B.366 9027, 2003–6 I.R.B.413 9028, 2003–6 I.R.B.415 9029, 2003–6 I.R.B.403 9030, 2003–8 I.R.B.495 9031, 2003–8 I.R.B.504 9032, 2003–7 I.R.B.471 9033, 2003–7 I.R.B.483 9034, 2003–7 I.R.B.453 9035, 2003–9 I.R.B.528 9036, 2003–9 I.R.B.533 9037, 2003–9 I.R.B.535 9038, 2003–9 I.R.B.524 9039, 2003–10 I.R.B.561 9040, 2003–10 I.R.B.568 9041, 2003–8 I.R.B.510 9042, 2003–10 I.R.B.564 9043, 2003–12 I.R.B.611 9044, 2003–14 I.R.B.690 9045, 2003–12 I.R.B.610 9046, 2003–12 I.R.B.614 9047, 2003–14 I.R.B.676 9048, 2003–13 I.R.B.644 9049, 2003–14 I.R.B.685 9050, 2003–14 I.R.B.693 9051, 2003–16 I.R.B.755 9052, 2003–19 I.R.B.879 9053, 2003–20 I.R.B.914 9054, 2003–20 I.R.B.909 9055, 2003–21 I.R.B.945 9056, 2003–21 I.R.B940 June 2, 2003iii2003–22 I.R.B. Finding List of Current Actions on Previously Published Items 2 Bulletins 2003–1 through 2003–21 Notices: 97–19 Modified by Rev. Proc. 2003–1, 2003–1 I.R.B.1 2000–38 Modified by Notice 2003–20, 2003–19 I.R.B.894 2001–26 Obsoleted by T.D. 9032, 2003–7 I.R.B.471 2001–46 Modified by Notice 2003–6, 2003–3 I.R.B.298 2001–69 Modified and superseded by Notice 2003–1, 2003–2 I.R.B.257 2002–20 Superseded by Rev. Proc. 2003–36, 2003–18 I.R.B.859 2002–27 Clarified by Notice 2003–3, 2003–2 I.R.B.258 2002–40 Modified by Ann. 2003–18, 2003–13 I.R.B.675 2002–46 Modified by Notice 2003–10, 2003–5 I.R.B.369 Proposed Regulations: REG–209500–86 Corrected by Ann. 2003–6, 2003–6 I.R.B.450 REG–103829–99 Corrected by Ann. 2003–12, 2003–10 I.R.B.585 REG–126485–01 Withdrawn by REG–126485–01, 2003–9 I.R.B.542 Corrected by Ann. 2003–25, 2003–17 I.R.B.846 REG–131478–02 Corrected by Ann. 2003–24, 2003–16 I.R.B.810 REG–143321–02 Corrected by Ann. 2003–12, 2003–10 I.R.B.585 REG–164464–02 Corrected by Ann. 2003–6, 2003–6 I.R.B.450 Revenue Procedures: 83–23 Supplemented by Rev. Proc. 2003–21, 2003–6 I.R.B.448 84–37 Modified by Rev. Proc. 2003–1, 2003–1 I.R.B.1 93–38 Obsoleted by Rev. Proc. 2003–15, 2003–4 I.R.B.321 97–31 Modified by Rev. Proc. 2003–9, 2003–8 I.R.B.516 98–13 Obsoleted by T.D. 9032, 2003–7 I.R.B.471 2002–1 Superseded by Rev. Proc. 2003–1, 2003–1 I.R.B.1 2002–2 Superseded by Rev. Proc. 2003–2, 2003–1 I.R.B.76 2002–3 Superseded by Rev. Proc. 2003–3, 2003–1 I.R.B.113 2002–4 Superseded by Rev. Proc. 2003–4, 2003–1 I.R.B.123 2002–5 Superseded by Rev. Proc. 2003–5, 2003–1 I.R.B.163 2002–6 Superseded by Rev. Proc. 2003–6, 2003–1 I.R.B.191 2002–7 Superseded by Rev. Proc. 2003–7, 2003–1 I.R.B.233 2002–8 Superseded by Rev. Proc. 2003–8, 2003–1 I.R.B.236 2002–9 Modified and amplified by Rev. Proc. 2003–20, 2003–6 I.R.B.445 Rev. Rul. 2003–3, 2003–2 I.R.B.252 2002–20 Supplemented by Rev. Proc. 2003–26, 2003–13 I.R.B.666 2002–22 Modified by Rev. Proc. 2003–3, 2003–1 I.R.B.113 2002–29 Modified by Rev. Proc. 2003–10, 2003–2 I.R.B.259 2002–37 Modified by Rev. Proc. 2002–34, 2002–18 I.R.B.856 Revenue Procedures—Continued: 2002–39 Modified by Rev. Proc. 2002–34, 2002–18 I.R.B.856 2002–51 Superseded by Rev. Proc. 2003–31, 2003–17 I.R.B.838 2002–52 Modified by Rev. Proc. 2003–1, 2003–1 I.R.B.1 2002–53 Superseded by Rev. Proc. 2003–30, 2003–17 I.R.B.822 2002–57 Superseded by Rev. Proc. 2003–28, 2003–16 I.R.B.759 2002–67 Supplemented by Ann. 2003–3, 2003–4 I.R.B.361 2002–75 Superseded by Rev. Proc. 2003–3, 2003–1 I.R.B.113 2003–3 Amplified by Rev. Proc. 2003–14, 2003–4 I.R.B.319 2003–7 Corrected by Ann. 2003–4, 2003–5 I.R.B396 Revenue Rulings: 53–131 Modified by Rev. Rul. 2003–12, 2003–3 I.R.B.283 57–190 Obsoleted by Rev. Rul. 2003–18, 2003–7 I.R.B.467 65–190 Revoked by Rev. Rul. 2003–3, 2003–2 I.R.B.252 66–118 Distinguished by Rev. Rul. 2003–41, 2003–17 I.R.B.814 69–372 Revoked by Rev. Rul. 2003–3, 2003–2 I.R.B.252 70–140 Distinguished by Rev. Rul. 2003–51, 2003–21 I.R.B.938 70–522 Distinguished by Rev. Rul. 2003–51, 2003–21 I.R.B.938 79–70 Distinguished by Rev. Rul. 2003–51, 2003–21 I.R.B.938 2 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2002–26 through 2002–52 is in Internal Revenue Bulletin 2003–1, dated January 6, 2003. 2003–22 I.R.B.ivJune 2, 2003 Revenue Rulings—Continued: 79–194 Distinguished by Rev. Rul. 2003–51, 2003–21 I.R.B.938 86–88 Supplemented by Rev. Rul. 2003–46, 2003–19 I.R.B.878 88–36 Supplemented by Rev. Rul. 2003–46, 2003–19 I.R.B.878 92–19 Supplemented in part by Rev. Rul. 2003–24, 2003–10 I.R.B.557 2000–49 Modified and superseded by Rev. Rul. 2003–49, 2003–20 I.R.B.903 2002–80 Distinguished by Rev. Rul. 2003–43, 2003–21 I.R.B.935 2003–2 Revoked by Rev. Rul. 2003–22, 2003–8 I.R.B.494 Treasury Decisions: 9002 Corrected by Ann. 2003–8, 2003–6 I.R.B.451 9021 Corrected by Ann. 2003–16, 2003–12 I.R.B.641 9022 Supplemented by Ann. 2003–7, 2003–6 I.R.B.450 Corrected by Ann. 2003–11, 2003–10 I.R.B.585 9048 Corrected by Ann. 2003–23, 2003–16 I.R.B.808 June 2, 2003v2003–22 I.R.B. INDEX Internal Revenue Bulletins 2003–1 through 2003–21 The abbreviation and number in paren- thesis following the index entry refer to the specific item; numbers in roman and italic type following the parenthesis refer to the Internal Revenue Bulletin in which the item may be found and the page num- ber on which it appears. Key to Abbreviations: AnnAnnouncement CDCourt Decision DODelegation Order EOExecutive Order PLPublic Law PTEProhibited Transaction Exemption RPRevenue Procedure RRRevenue Ruling SPRStatement of Procedural Rules TCTax Convention TDTreasury Decision TDOTreasury Department Order EMPLOYEE PLANS Address for filing certain elections, state- ments, returns and other documents (Notice 19) 14,703 Advance letter rulings and determination letters, areas which will not be issued from: Associate Chief Counsel (Interna- tional) (RP 7) 1,233; correction (Ann 4) 5,396 Associates Chief Counsel and Division Counsel/Associate Chief Counsel (TE/GE) (RP 3) 1,113 Collective-bargained welfare plans, listed transactions (Notice 24) 18,853 Contacts with third parties for determina- tion or collection of taxes (TD 9028) 6,415 Deferred compensation plan, withholding and reporting requirements of eligible plans (Notice 20) 19,894 Defined benefit plans, required minimum distributions (Notice 2) 2,257 Determination letters: Form 5310 revised (Ann 13) 11,603 Future of the determination letter pro- gram (Ann 32) 20,933 EMPLOYEE PLANS— Cont. Issuing procedures (RP 6) 1,191 Employee stock ownership plans, delayed effective date, abuse (RR 6) 3,286 Form 5310, Application for Determina- tion for Terminating Plan, revised (Ann 13) 11,603 Full funding limitations, weighted aver- age interest rate for: January 2003 (Notice 7) 4,310 February 2003 (Notice 14) 8,515 March 2003 (Notice 17) 12,633 April 2003 (Notice 23) 17,821 May 2003 (Notice 32) 21,949 Guidance Priority List, recommendations for 2003–2004 (Notice 26) 18,855 Individual retirement arrangements: Deemed IRAs (RP 13) 4,317 Required minimum distributions (Notice 3) 2,258 Returned or recharacterized contribu- tions, net income calculation for (TD 9056) 21,940 Length-of-service award program (RR 47) 19,866 Letter rulings: Determination letters and information letters issued by Associates Chief Counsel and Division Counsel/ Associate Chief Counsel (TE/GE) (RP 1) 1,1 Information letters, etc. (RP 4) 1,123 Limitation on annual compensation, non- discrimination (RR 11) 3,285 Nondiscrimination: Cash balance plans (Ann 22) 17,846 Governmental plans (Notice 6) 3,298 Practice before the Internal Revenue Ser- vice (Ann 5) 5,397 Proposed Regulations: 26 CFR 1.401(a)(4)–3, –9, revised; 1.411(b)–2, revised; reductions of accruals and allocations because of the attainment of any age; applica- tion of nondiscrimination cross- testing rules to cash balance plans (REG–209500–86, REG–164464– 02) 2,262; correction (Ann 6) 6,450 Qualified retirement plans: Age discrimination (REG–209500–86, REG–164464–02) 2,262; correc- tion (Ann 6) 6,450 Definition of early retirement benefits and retirement-type subsidies, con- tingent benefits (Notice 10) 5,369 EMPLOYEE PLANS— Cont. Distributions, rollover, waiver of 60-day requirement (RP 16) 4,359 Loans to participants or beneficiaries under section 72(p) (Ann 16) 12, 641 Minimum distributions, delayed amendment date (RP 10) 2,259 Rate of future benefit accrual, significant reduction (TD 9052) 19,879 Regulations: 26 CFR 1.72(p)–1; loans from a quali- fied employer plan to plan partici- pants or beneficiaries (TD 9021); correction (Ann 16) 12,641 26 CFR 1.408–4, amended; 1.408–11, added; 1.408A–5, revised; earnings calculation for returned or recharac- terized IRA contributions (TD 9056) 21,940 26 CFR 1.411(d)–6, removed; 54.4980F–1, added; 602.101, amended; notice of significant reduction in the rate of future benefit accrual (TD 9052) 19,879 26 CFR 301.7602–2, added; third party contacts (TD 9028) 6,415 Technical advice: Proposed cash balance regulations, age discrimination issues (Ann 1) 2,281 To directors and chiefs, appeals offices, from Associates Chief Counsel and Division Counsel/ Associate Chief Counsel (TE/GE) (RP 2) 1,76 To IRS employees (RP 5) 1,163 Time for performance of acts when last day falls on Saturday, Sunday, or legal holiday (RR 41) 17,814 User fees, request for letter rulings (RP 8) 1,236 EMPLOYMENT TAX Address for filing certain elections, state- ments, returns and other documents (Notice 19) 14,703 Contacts with third parties for determina- tion or collection of taxes (TD 9028) 6,415 Corporations, employee leasing (Notice 22) 18,851 2003–22 I.R.B.viJune 2, 2003 EMPLOYMENT TAX— Cont. Deferred compensation plan, withholding and reporting requirements of eligible plans (Notice 20) 19,894 Disclosure of returns and return informa- tion by other agencies (TD 9036) 9, 533 Federal Insurance Contributions Act (FICA), retirement system membership, continuing employment exception (RR 46) 19,878 Gaming Industry Tipping Agreement Pro- gram (RP 35) 20,919 Guidance Priority List, recommendations for 2003–2004 (Notice 26) 18,855 Length-of-service award program (RR 47) 19,866 Levy restrictions during installment agreements (TD 9027) 6,413 Practice before the Internal Revenue Ser- vice (Ann 5) 5,397 Publications: 1223, General Rules and Specifica- tions for Substitute Forms W–2c and W–3c, revised (RP 31) 17,838 1441, General Rules and Specifica- tions for Substitute Forms W–2 and W–3, revised (RP 30) 17,822 Regulations: 26 CFR 31.6011–4, added; 31.6011– 4T, removed; tax shelter regulations (TD 9046) 12,614 26 CFR 301.6103(p)(2)(B)–1, added; 301.6103(p)(2)(B)–1T, removed; 602.101, amended; disclosure of returns and return information by other agencies (TD 9036) 9,533 26 CFR 301.6331–3, –4, added; levy restrictions during installment agree- ments (TD 9027) 6,413 26 CFR 301.7602–2, added; third party contacts (TD 9028) 6,415 Reporting of tip income by gaming indus- try employees, gaming industry tipping agreement (RP 35) 20,919 Substitute forms: W–2 and W–3, general rules and specifications (RP 30) 17,822 W–2c and W–3c, general rules and specifications (RP 31) 17,838 Tax shelter regulations (TD 9046) 12, 614 Time for performance of acts when last day falls on Saturday, Sunday, or legal holiday (RR 41) 17,814 ESTATE TAX Address for filing certain elections, state- ments, returns and other documents (Notice 19) 14,703 Contacts with third parties for determina- tion or collection of taxes (TD 9028) 6,415 Disclosure of returns and return informa- tion by other agencies (TD 9036) 9, 533 Guidance Priority List, recommendation for 2003–2004 (Notice 26) 18,855 Levy restrictions during installment agreements (TD 9027) 6,413 Life insurance, taxation for Louisiana decedents (RR 40) 17,813 Practice before the Internal Revenue Ser- vice (Ann 5) 5,397 Regulations: 26 CFR 20.6011–4, added; 20.6011– 4T, removed; tax shelter regulations (TD 9046) 12,614 26 CFR 301.6103(p)(2)(B)–1, added; 301.6103(p)(2)(B)–1T, removed; 602.101, amended; disclosure of returns and return information by other agencies (TD 9036) 9,533 26 CFR 301.6331–3, –4, added; levy restrictions during installment agree- ments (TD 9027) 6,413 26 CFR 301.7602–2, added; third party contacts (TD 9028) 6,415 Tax shelter regulations (TD 9046) 12, 614 Time for performance of acts when last day falls on Saturday, Sunday, or legal holiday (RR 41) 17,814 EXCISE TAX Address for filing certain elections, state- ments, returns and other documents (Notice 19) 14,703 Communication services, distance sensi- tivity (REG–141097–02) 16,807 Contacts with third parties for determina- tion or collection of taxes (TD 9028) 6,415 Diesel fuel, blended taxable fuel (TD 9051) 16,755 Disclosure of returns and return informa- tion by other agencies (TD 9036) 9, 533 Factoring discount of a structured settle- ment factoring transaction, new form to pay excise tax (Ann 33) 21,953 EXCISE TAX—Cont. Forms: 8876, Excise Tax on Structured Settle- ment Factoring Transactions (Ann 33) 21,953 Guidance Priority List, recommendations for 2003–2004 (Notice 26) 18,855 Highway vehicle, definition; correction (Ann 12) 10,585 Insurance premium excise tax, liability for (TD 9024) 5,365 Levy restrictions during installment agreements (TD 9027) 6,413 Practice before the Internal Revenue Ser- vice (Ann 5) 5,397 Proposed Regulations: 26 CFR 41.4482(a)–1; 48.4041–8; 48.4051–1; 48.4072–1; 48.4081–1; 48.6421–4; 145.4051–1; definition of highway vehicle (REG–103829– 99); correction (Ann 12) 10,585 26 CFR 49.4252–0, added; communi- cations services, distance sensitivity (REG–141097–02) 16,807 26 CFR Part 157, added; excise tax on structured settlement factoring trans- actions (REG–139768–02) 10,583 Regulations: 26 CFR 40.6302(c)–3, amended; 48.4041–21, amended; 48.4081–1, –3, amended; 48.6427–8(d), amended; 49.4291–1, amended; die- sel fuel, blended taxable fuel (TD 9051) 16,755 26 CFR 46.4374–1, revised; liability for insurance premium excise tax (TD 9024) 5,365 26 CFR 53.6011–4, added; 53.6011– 4T, removed; 54.6011–4, added; 54.6011–4T, removed; 56.6011–4, added; 56.6011–4T, removed; tax shelter regulations (TD 9046) 12, 614 26 CFR 301.6103(p)(2)(B)–1, added; 301.6103(p)(2)(B)–1T, removed; 602.101, amended; disclosure of returns and return information by other agencies (TD 9036) 9,533 26 CFR 301.6331–3, –4, added; levy restrictions during installment agree- ments (TD 9027) 6,413 26 CFR 301.7602–2, added; third party contacts (TD 9028) 6,415 26 CFR Part 157, added; 602.101, amended; excise tax on structured settlement factoring transactions (TD 9042) 10,564 June 2, 2003vii2003–22 I.R.B. EXCISE TAX—Cont. Scholarship grants by employer-related private foundations, victim of qualified disaster (RR 32) 14,689 Structured settlement factoring transac- tions (TD 9042) 10,564; (REG– 139768–02) 10,583 Tax shelter regulations (TD 9046) 12, 614 Time for performance of acts when last day falls on Saturday, Sunday, or legal holiday (RR 41) 17,814 EXEMPT ORGANIZATIONS Address for filing certain elections, state- ments, returns and other documents (Notice 19) 14,703 Advance letter rulings and determination letters, areas which will not be issued from Associates Chief Counsel and Division Counsel/Associate Chief Counsel (TE/GE) (RP 3) 1,113 Contacts with third parties for determina- tion or collection of taxes (TD 9028) 6,415 Declaratory judgment under section 7428(c) (Ann 27) 18,862 Disclosure, political organizations (RR 49) 20,903 Dissolution clause requirements for sec- tion 501(c)(3) entities seeking a section 115(1) letter ruling (RP 12) 4,316 Form 990, Return of Organization Exempt From Income Tax, U.S. posses- sions, relief from filing (RP 21) 6,448 Guidance Priority List, recommendations for 2003–2004 (Notice 26) 18,855 Insurance, commercial-type insurance activities of certain exempt organiza- tions (Notice 31) 21,948 International grant-making and activities of 501(c)(3) organizations (Ann 29) 20, 928 Letter rulings: Determination letters and information letters issued by Associates Chief Counsel and Division Counsel/ Associate Chief Counsel (TE/GE) (RP 1) 1,1 Information letters, etc. (RP 4) 1,123 List of organizations classified as private foundations (Ann 10) 7,490; (Ann 14) 11,603; (Ann 20) 15,750; (Ann 28) 19,899; (Ann 31) 20,930; (Ann 34) 21,953 EXEMPT ORGANIZATIONS— Cont. Political organizations, disclosure and reporting requirements (RR 49) 20, 903 Practice before the Internal Revenue Ser- vice (Ann 5) 5,397 Private foundations, termination, transfer of assets (RR 13) 4,305 Regulations: 26 CFR 301.7602–2, added; third party contacts (TD 9028) 6,415 Reporting requirements, political organi- zations (RR 49) 20,903 Restoration of organization, withdrawal of Announcement 99–45 (Ann 30) 20, 929 Revocations, exempt organizations (Ann 26) 18,862 Scholarship grants by employer-related private foundations, victim of qualified disaster (RR 32) 14,689 Tax shelter regulations (TD 9046) 12, 614 Technical advice to: Directors and chiefs, appeals offices, from Associates Chief Counsel and Division Counsel/Associate Chief Counsel (TE/GE) (RP 2) 1,76 IRS employees (RP 5) 1,163 Time for performance of acts when last day falls on Saturday, Sunday, or legal holiday (RR 41) 17,814 U.S. possessions, relief from filing Form 990 (RP 21) 6,448 User fees, request for letter rulings (RP 8) 1,236 GIFT TAX Address for filing certain elections, state- ments, returns and other documents (Notice 19) 14,703 Contacts with third parties for determina- tion or collection of taxes (TD 9028) 6, 415 Disclosure of returns and return informa- tion by other agencies (TD 9036) 9, 533 Guidance Priority List, recommendations for 2003–2004 (Notice 26) 18,855 Practice before the Internal Revenue Ser- vice (Ann 5) 5,397 GIFT TAX—Cont. Regulations: 26 CFR 25.6011–4, added; 25.6011– 4T, removed; tax shelter regulations (TD 9046) 12,614 26 CFR 301.6103(p)(2)(B)–1, added; 301.6103(p)(2)(B)–1T, removed; 602.101, amended; disclosure of returns and return information by other agencies (TD 9036) 9,533 26 CFR 301.7602–2, added; third party contacts (TD 9028) 6,415 Tax shelter regulations (TD 9046) 12, 614 Time for performance of acts when last day falls on Saturday, Sunday, or legal holiday (RR 41) 17,814 INCOME TAX Accident and health plans, amounts received under (RR 43) 21,935 Accounting: Application of normalization account- ing rules to balances of excess deferred income taxes and accumu- lated deferred investment tax credits (REG–104385–01) 12,634 Changes in accounting periods (RP 34) 18,856 Research and development expenses (CD 2077) 19,868 Accrual of income (RR 10) 3,288 Accuracy-related penalty, defenses avail- able to the imposition (REG–126016– 01) 7,486 Address for filing certain elections, state- ments, returns and other documents (Notice 19) 14,703 Advance letter rulings and determination letters, areas which will not be issued from: Associate Chief Counsel (Interna- tional) (RP 7) 1,233; correction (Ann 4) 5,396 Associates Chief Counsel and Division Counsel/Associate Chief Counsel (TE/GE) (RP 3) 1,113 Advance Pricing Agreement (APA) pro- gram for 2002 (Ann 19) 15,723 Backup withholding, taxpayer identifica- tion numbers (TIN) (TD 9055) 21,945 Basis of redeemed stock when a distribu- tion in redemption of stock is treated as a dividend (Ann 9) 7,490 Capital expenditures, rotable spare parts, depreciable assets (RR 37) 15,717 2003–22 I.R.B.viiiJune 2, 2003 INCOME TAX—Cont. Capitalization of amounts paid to acquire, create, or enhance intangible assets (REG–125638–01) 5,373 Census Bureau, disclosure of tax informa- tion (TD 9037) 9,535 Charitable contributions; patents (RR 28) 11,594 Combat zone personnel, tax relief (Notice 21) 17,817 Consolidated income tax return, common parent as agent for consolidated group, substitute agent, tentative carryback adjustments (Ann 8) 6,451 Constructive sales: Short sales, transition rule (RR 31) 13, 643 Treatment for appreciated financial positions (RR 1) 3,291 Contacts with third parties for determina- tion or collection of taxes (TD 9028) 6,415 Contingent liability transaction cases, list of arbitrators (Ann 3) 4,361 Corporations: Acquisitions: Auto dealer expansion (RR 18) 7, 467 Employee leasing (Notice 22) 18, 851 Retail shoe store expansion (RR 38) 17,811 Transfer to controlled corporation, successive transfers of property and stock (RR 51) 21,938 Foreign tax credit limitation, dividends from a noncontrolled section 902 corporation (Notice 5) 3,294 S corporation, employee stock owner- ship plan (ESOP): Basis (RR 27) 11,597 IRA rollovers and S corporation election (RP 23) 11,599 Statutory mergers and consolidations (TD 9038) 9,524; (REG–126485– 01) 9,542; correction (Ann 25) 17, 846 Transactions involving deemed sale of corporate assets under section 338, new Form 8883 (Ann 2) 3,301 Cost-share payments, Agricultural Man- agement Assistance Program (AMA) (RR 15) 4,302 Costa Rican withholding taxes, noncredit- ability (RR 8) 3,290 INCOME TAX—Cont. Credits: Adoption credit (Notice 15) 9,540 Earned income credit, update (TD 9045) 12,610 Education tax credit (TD 9034) 7, 453 Foreign taxpayers, disallowance of deductions and credits for failure to file timely return (TD 9043) 12, 611 Low-income housing credit: 2003 population figures used for calculation (Notice 16) 10,575 Satisfactory bond, “bond factor” amounts for the period: January through March 2003 (RR 2) 2,251; correction (RR 22) 8,494 April through June 2003 (RR 44) 18,848 New markets tax credit (RR 20) 7, 465; extension of deadline (Notice 9) 5,369 Nonconventional source fuel credit, inflation adjustment factor, reference price for CY 2002 (Notice 27) 19, 898 Renewable electricity production credit, 2003 inflation adjustment (Notice 29) 20,917 Damages for willful violations of the sec- tion 363 automatic stay or the section 524 discharge provisions of the Bank- ruptcy Code (TD 9050) 14,693 Declaratory judgment under section 7428(c) (Ann 27) 18,862 Deferred compensation plan, withholding and reporting requirements of eligible plans (Notice 20) 19,894 Demutualization: Corporate reorganization and mergers: Insurance companies (RR 19) 7, 468 Savings banks (RR 48) 19,863 Disaster relief: For taxpayers affected by the Septem- ber 11, 2001, terrorist attack, exten- sion for estates (Ann 18) 13,675 Payments, businesses (Notice 18) 14, 699 Disciplinary actions involving attorneys, certified public accountants, enrolled agents, and enrolled actuaries (Ann 15) 11,605 INCOME TAX—Cont. Disclosure of returns and return informa- tion: By other agencies (TD 9036) 9,533 To designee of the taxpayer (TD 9054) 20,909 Election to treat trust as part of an estate (TD 9032) 7,471 Electronic filing, furnishing and retaining of returns filed by tax preparer (TD 9053) 20,914; (REG–141659–02) 20, 927 Electronic tax administration, guidance to facilitate (TD 9040) 10,568 Estimated tax, application of the addition to the tax for underpayment (RR 23) 8, 511 Exclusion of gain from the sale or exchange of a principal residence (TD 9030) 8,495 Executor, relief from joint and several liability (RR 36) 18,849 Family day care, deduction of business expenses, standard meal rates (RP 22) 10,577 Foreign personal holding company income, commodities hedging and interest-bearing liabilities (TD 9039) 10,561 Foreign trusts, retirement savings plans (Notice 25) 18,855 Forms: 1096, 1098, 1099, 5498, W–2G, and 1042S, substitute form specifica- tions (RP 28) 16,759 8023, extension to file election under section 338 for certain acquisitions (RP 33) 16,803 8883, Asset Allocation Statement Under Section 338, new (Ann 2) 3, 301 Fuel costs, overrecovered (RR 39) 17, 811 Guidance Priority List, recommendations for 2003–2004 (Notice 26) 18,855 Industry Issue Resolution (IIR) program (RP 36) 18,859 Information reporting: On Form 1099–B for securities futures contracts (Notice 8) 4,310 Payment card transactions, information reporting and backup withholding (REG–116641–01) 8,518 Penalties, incorrect taxpayer identifica- tion number (TIN), backup with- holding (TD 9055) 21,945 June 2, 2003ix2003–22 I.R.B. INCOME TAX—Cont. Requirements for qualified tuition and related expenses under section 6059S, filing information returns on magnetic media (TD 9029) 6,403 Taxable stock transactions, corporate reorganizations, brokers (Ann 11) 10,585 Transition rules for acquisitions of control and substantial changes in capital structure (Ann 7) 6,450 Innocent spouse relief, nonrequesting spouse administrative appeal rights (RP 19) 5,371 Insurance companies: Corporate reorganization and mergers, demutualization (RR 19) 7,468 Determination of effectively connected income of foreign insurance compa- nies (RR 17) 6,400 Interest rate tables (RR 24) 10,557 Loss payment patterns and discount factors for the 2002 accident year (RP 17) 6,427 Recomputed differential earnings rate for 2000 and the differential earn- ings rate for 2001 for mutual life insurance companies (RR 4) 2,253 Salvage discount factors for the 2002 accident year (RP 18) 6,439 Interest: Fair market value method of appor- tionment of interest expense, docu- mentation and information for using (RP 37) 21,950 Investment: Federal short-term, mid-term, and long-term rates for: January 2003 (RR 5) 2,254 February 2003 (RR 16) 6,401 March 2003 (RR 26) 10,563 April 2003 (RR 35) 14,687 May 2003 (RR 45) 19,876 Rates: Underpayments and overpayments, quarter beginning: April 1, 2003 (RR 30) 13,659 Inventory: LIFO, price indexes used by depart- ment stores for: November 2002 (RR 9) 4,303 December 2002 (RR 21) 8,509 January 2003 (RR 33) 13,642 February 2003 (RR 42) 16,754 March 2003 (RR 50) 21,944 INCOME TAX—Cont. Valuation of vehicle parts cores (RP 20) 6,445 Leave-based donation programs (Notice 1) 2,257 Length-of-service award program (RR 47) 19,866 Letter rulings, determination letters and information letters issued by Associates Chief Counsel and Division Counsel/ Associate Chief Counsel (TE/GE) (RP 1) 1,1 Levy restrictions during installment agreements (TD 9027) 6,413 LIFO recapture installment payments (Notice 4) 3,294 Loss transactions, exceptions (RP 24) 11, 599 Low-income taxpayer clinics, income tax return preparer (TD 9026) 5,366 Methods of accounting, nonaccrual expe- rience (NAE) method (Notice 12) 6, 422 Mortgage bonds and credit certificates, median income figures—2003 (RP 29) 20,917 Noncompensatory partnership options (REG–103580–02) 9,543 Offshore Voluntary Compliance Initiative (RP 11) 4,311 Partnerships: Basis adjustments upon the sale of a corporate partner’s stock (TD 9049) 14,685 Regulated investment companies (RP 32) 16,803 Section 6038, returns required with respect to controlled foreign partner- ships (TD 9033) 7,483; (REG– 124069–02) 7,488 Practice before the Internal Revenue Ser- vice (Ann 5) 5,397 Presidentially declared disaster or combat zone: Combat zone personnel, tax relief (Notice 21) 17,817 Gross income, disaster relief payments (RR 12) 3,283 Major disaster and emergency areas list (RR 29) 11,587 Private activity bonds, 2003 population figures used for calculation (Notice 16) 10,575 INCOME TAX—Cont. Private foundations, organizations now classified as (Ann 10) 7,490; (Ann 14) 11,603; (Ann 20) 15,750; (Ann 28) 19,899; (Ann 31) 20,930; (Ann 34) 21,953 Proposed Regulations: 26 CFR 1.46–6, amended; 1.168(i)–3 added; application of normalization accounting rules to balances of excess deferred income taxes and accumulated deferred investment tax credits of public utilities whose gen- eration assets cease to be public util- ity property (REG–104385–01) 12, 634 26 CFR 1.61–8, revised; rents and roy- alties (REG–151043–02) 3,300 26 CFR 1.121–3, amended; reduced maximum exclusion of gain from sale or exchange of principal resi- dence (REG–138882–02) 8,522 26 CFR 1.167(a)–3, amended; 1.263(a)–4, added; 1.446–5, added; guidance regarding deduction and capitalization of expenditures (REG–125638–01) 5,373 26 CFR 1.302–5, 1.304–3; redemp- tions taxable as dividends (REG– 150313–01); correction (Ann 9) 7, 490 26 CFR 1.368–2, revised; statutory mergers and consolidations (REG– 126485–01) 9,542; correction (Ann 25) 17,846 26 CFR 1.704–1, –3, amended; 1.721–2, added; 1.761–3, added; 1.1272–1, amended; 1.1273–2, amended; 1.1275–4, amended; non- compensatory partnership options (REG–103580–02) 9,543 26 CFR 1.1502–21, –32, amended; 1.1502–35, added; guidance under section 1502, suspension of losses on certain stock dispositions (REG– 131478–02) 13,669; correction (Ann 24) 16,810 26 CFR 1.6038–3, amended; returns required with respect to controlled foreign partnerships (REG–124069– 02) 7,488 26 CFR 1.6043–4; 1.6045–3; informa- tion reporting relating to taxable stock transactions (REG–143321– 02); correction (Ann 12) 10,585 2003–22 I.R.B.xJune 2, 2003 INCOME TAX—Cont. 26 CFR 1.6107–2, added; 1.6695–1, amended; tax return preparers, elec- tronic filing (REG–141659–02) 20, 927 26 CFR 1.6662–3, amended; 1.6664–0, –4, amended; establishing defenses to the imposition of the accuracy-related penalty (REG– 126016–01) 7,486 26 CFR 31.3406(g)–1, (j)–1, amended; 301.6724–1, amended; information reporting and backup withholding for payment card transactions (REG–116641–01) 8,518 Publications: 538, Accounting Periods and Methods, revised (Ann 17) 15,722 1179, General Rules and Specifica- tions for Substitute Forms 1096, 1098, 1099, 5498, W–2G, and 1042–S (RP 28) 16,759 1223, General Rules and Specifica- tions for Substitute Forms W–2c and W–3c, revised (RP 31) 17,838 1441, General Rules and Specifica- tions for Substitute Forms W–2 and W–3, revised (RP 30) 17,822 Qualified census tracts, issuers of quali- fied mortgage bonds and mortgage credit certificates (RP 15) 4,321 Qualified Payment Card Agent (QPCA), proposed revenue procedure to request a determination (Notice 13) 8,513 Regulations: 26 CFR 1.25A–0 through –5, added; 602.101, revised; education tax credit (TD 9034) 7,453 26 CFR 1.32–2, amended; earned income credit for taxable years beginning after December 31, 1978 (TD 9045) 12,610 26 CFR 1.48–12, amended; 1.48–12T, removed; 1.152–3, amended; 1.152– 3T, removed; 1.611–3, amended; 1.611–3T, removed; 1.852–9, amended; 1.852–9T, removed; 301.6011–1, added; 301.6011–1T, removed; 301.6903–1, amended; 301.6903–1T, removed; 602.101, amended; guidance necessary to facilitate electronic tax administra- tion (TD 9040) 10,568 INCOME TAX—Cont. 26 CFR 1.121–1 through –4, amended; 1.121–5, removed; 1.1398–3, added; exclusion of gain from sale or exchange of principal residence (TD 9030) 8,495 26 CFR 1.121–3T, added; reduced maximum exclusion of gain from sale or exchange of principal resi- dence (TD 9031) 8,504 26 CFR 1.337(d)–5T, redesignated; newly designated 1.337(d)–5, amended; 1.337(d)–6, added; 1.337(d)–6T, removed; 1.337(d)–7, added; 1.337(d)–7T, removed; 1.514(c)–2, amended; 602.101, amended; certain transfers of prop- erty to regulated investment compa- nies (RICs) and real estate invest- ment trusts (REITs) (TD 9047) 14, 676 26 CFR 1.368–2, revised; 1.368–2T, added; statutory mergers and con- solidations (TD 9038) 9,524 26 CFR 1.446–1, amended; 1.1502– 13, revised; intercompany transac- tions: conforming amendments to section 446 (TD 9025) 5,362 26 CFR 1.641(b)–3, amended; 1.642(c)–1, –6A, revised; 1.645–1, added; 1.671–4, amended; 1.6012–3, amended; 1.6072–1, amended; 301.6109–1, amended; 602.101, amended; election to treat trust as part of an estate (TD 9032) 7,471 26 CFR 1.705–1, –2, amended; deter- mination of basis of partner’s inter- est, special rules (TD 9049) 14,685 26 CFR 1.874–1, revised; 1.874–1T, removed; 1.882–4, revised; 1.882– 4T, removed; disallowance of deductions and credits for failure to file timely return (TD 9043) 12, 611 26 CFR 1.954–0, –2, amended; guid- ance regarding the definition of for- eign personal holding company income (TD 9039) 10,561 26 CFR 1.1041–1T, amended; 1.1041–2, added; 602.101, amended; constructive transfers and transfers of property to a third party on behalf of a spouse (TD 9035) 9,528 INCOME TAX—Cont. 26 CFR 1.1502–21, amended; 1.1502– 21T, revised; 1.1502–32, amended; 1.1502–32T, revised; 1.1502–35T, added; 602.101, amended; guidance under section 1502; suspension of losses on certain stock dispositions (TD 9048) 13,644 26 CFR 1.1502–21T, –32T, –35T, cor- rected; suspension of losses on cer- tain stock dispositions (TD 9048) 13,644; correction (Ann 23) 16, 808 26 CFR 1.1502–77T, 602.101; agent for consolidated group (TD 9002); correction (Ann 8) 6,451 26 CFR 1.6011–4. added; 1.6011–4T, removed; 301.6111–2, added; 301.6111–2T, removed; 301.6112–1, added; 301.6112–1T, removed; 602.101, amended; tax shelter regu- lations (TD 9046) 12,614 26 CFR 1.6038–3, amended; 1.6038– 3T, added; 602.101, amended; returns required with respect to con- trolled foreign partnerships (TD 9033) 7,483 26 CFR 1.6043–4T; information reporting relating to taxable stock transactions (TD 9022); correction (Ann 11) 10,585 26 CFR 1.6050S–0, amended; 1.6050S–1, added; 301.6011–2, amended; 602.101, amended; infor- mation reporting for qualified tuition and related expenses; magnetic media filing requirements for infor- mation returns (TD 9029) 6,403 26 CFR 1.6107–2T, added; 1.6695–1, amended; 1.6695–1T, added; tax return preparers, electronic filing (TD 9053) 20,914 26 CFR 31.3406(d)–5, amended; 301.6724–1, amended, receipt of multiple notices with respect to incorrect taxpayer identification numbers (TD 9055) 21,945 26 CFR 31.3406(j)–1, amended; 31.3406(j)–1T, added; Taxpayer Identification Number (TIN) Match- ing Program (TD 9041) 8,510 26 CFR 301.6103(c)–1, added; 301.6103(c)–1T, removed; 602.101, revised; disclosure of returns and return information to designee of taxpayer (TD 9054) 20,909 June 2, 2003xi2003–22 I.R.B. INCOME TAX—Cont. 26 CFR 301.6103(j)(1)–1, revised; 301.6103(j)(1)–1T, removed; disclo- sure of return information to the Bureau of the Census (TD 9037) 9, 535 26 CFR 301.6103(n)–1, revised; 602.101, amended; amendment to incorporate Taxpayer Browsing Pro- tection Act (TD 9044) 14,690 26 CFR 301.6103(p)(2)(B)–1, added; 301.6103(p)(2)(B)–1T, removed; 602.101, amended; disclosure of returns and return information by other agencies (TD 9036) 9,533 26 CFR 301.6331–3, –4, added; levy restrictions during installment agree- ments (TD 9027) 6,413 26 CFR 301.7426–2, added; 301.7430–1, –2, –3, –6, amended; 301.7430–8, added; 301.7433–1, amended; 301.7433–2, added; civil cause of action for damages caused by unlawful tax collection actions, including actions taken in violation of section 362 or 524 of the Bank- ruptcy Code (TD 9050) 14,693 26 CFR 301.7602–2, added; third party contacts (TD 9028) 6,415 26 CFR 301.7701–15, amended; low- income taxpayer clinics-definition of income tax return preparer (TD 9026) 5,366 Rents and royalties, inclusion of advance rentals in gross income (REG–151043– 02) 3,300 Reportable transactions, book-tax differ- ences, exceptions (RP 25) 11,601 Restoration of organization, withdrawal of Announcement 99–45 (Ann 30) 20, 929 Revocations, exempt organizations (Ann 26) 18862 Safe harbor for valuation of certain secu- rities and commodities subject to fair market valuation at year end under sec- tion 475 (Ann 35) 21,956 Sale or exchange of a principal residence, reduced maximum exclusion of gain (TD 9031) 8,504;REG–138882–02, 8,522 INCOME TAX—Cont. Scholarship grants by employer-related private foundations, victim of qualified disaster (RR 32) 14,689 Section 911(d)(4) waiver, 2002 update (RP 26) 13,666 Soil and Water Conservation Assistance Program (SWCA) (RR 14) 4,302 Special estimated tax payments, guidance for discontinuing the deduction (RR 34) 17,813 Standard Industry Fare Level (SIFL) for- mula (RR 25) 13,642 State tax refunds, accrual of income (RR 3) 2,252 Stocks: Determination and recognition of gain or loss (RR 7) 5,363 Guidance under section 1502, suspen- sion of losses on certain stock dispo- sitions (TD 9048) 13,644; correc- tion (Ann 23) 16,808; (REG– 131478–02) 13,669; correction (Ann 24) 16,810 Redemptions by a spouse or former spouse during marriage or incident to divorce (TD 9035) 9,528 Substitute forms: W–2 and W–3, general rules and specifications (RP 30) 17,822 W–2c and W–3c, general rules and specifications (RP 31) 17,838 1096, 1098, 1099, 5498, W–2G, and 1042S, rules and specifications (RP 28) 16,759 Tax conventions, Netherlands, treaty, pen- sions (Ann 21) 17,846 Tax shelter registrations, effective date (Notice 11) 6,422 Tax shelter regulations (TD 9046) 12, 614 Taxable stock transactions, corporate reorganizations, brokers; correction (Ann 12) 10,585 Taxicabs, information reporting for small cash transactions (RP 27) 13,667 Taxpayer Browsing Protection Act, incor- porated in amendment of 26 CFR 301.6103(n)(1) (TD 9044) 14,690 INCOME TAX—Cont. Taxpayer Indentification Number (TIN) Matching Program: Expanded to online matching for all payors and authorized agents (RP 9) 8,516 Expansion (TD 9041) 8,510 Technical advice to: Directors and chiefs, appeals offices, from Associates Chief Counsel and Divison Counsel/Associate Chief Counsel (TE/GE) (RP 2) 1,76 IRS employees (RP 5) 1,163 Time for performance of acts when last day falls on Saturday, Sunday, or legal holiday (RR 41) 17,814 Timing rules of intercompany transaction (TD 9025) 5,362 Transfers of property, regulated invest- ment companies (RICs) and real estate investment trusts (REITs) (TD 9047) 14,676 Trusts for minors, Indian Gaming Regula- tory Act (IGRA) (RP 14) 4,319 SELF-EMPLOYMENT TAX Address for filing certain elections, state- ments, returns and other documents (Notice 19) 14,703 Contacts with third parties for determina- tion or collection of taxes (TD 9028) 6, 415 Guidance Priority List, recommendations for 2003–2004 (Notice 26) 18,855 Levy restrictions during installment agreements (TD 9027) 6,413 Practice before the Internal Revenue Ser- vice (Ann 5) 5,397 Regulations: 26 CFR 301.6331–3, –4, added; levy restrictions during installment agree- ments (TD 9027) 6,413 26 CFR 301.7602–2, added; third party contacts (TD 9028) 6,415 Time for performance of acts when last day falls on Saturday, Sunday, or legal holiday (RR 41) 17,814 2003–22 I.R.B.xii*U.S. Government Printing Office: 2003—496–919/60085June 2, 2003
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