Internal Revenue Bulletin 2011-11 (PDF rendition): IRS Revenue Procedures

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Bulletin No. 201
1-11
March 14, 2011
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
Notice 2011–14, page 544.
Guidance on mortgage assistance programs.This notice
provides guidance on the federal tax consequences of pay-
ments made to or on behalf of financially distressed home-
owners under programs established pursuant to the Treasury
Department’s Housing Finance Agency Innovative Fund for the
Hardest-Hit Housing Markets (HFA Hardest Hit Fund) and the
Department of Housing and Urban Development’s Emergency
Homeowners’ Loan Program (EHLP). This notice also provides
guidance on the information reporting requirements for these
payments.
Notice 2011–18, page 549.
This notice provides transitional relief from information report-
ing requirements in section 6045B of the Code that apply to
issuers of stock with respect to organizational actions that af-
fect the basis of the stock.
Rev. Proc. 2011–20, page 551.
Guidance is provided to individuals who fail to meet the eligi-
bility requirements of section 911(d)(1) of the Code because
adverse conditions in a foreign country preclude the individual
from meeting those requirements. A current list of countries
for tax year 2010 and the dates those countries are subject to
the section 911(d)(4) waiver is provided.
Announcement 2011–19, page 553.
This announcement provides conditions under which certain
issuers that have purchased their own bonds may enter into a
voluntary closing agreement with respect to the extinguishment
of such bonds.
EMPLOYEE PLANS
Notice 2011–19, page 550.
This notice provides guidance regarding when securities of the
employer arereadily tradable on an established securities mar-
ketorreadily tradable on an established marketfor purposes
of certain provisions of the Code relating to employer securi-
ties held by certain qualified retirement plans.
ADMINISTRATIVE
Notice 2011–14, page 544.
Guidance on mortgage assistance programs.This notice
provides guidance on the federal tax consequences of pay-
ments made to or on behalf of financially distressed home-
owners under programs established pursuant to the Treasury
Department’s Housing Finance Agency Innovative Fund for the
Hardest-Hit Housing Markets (HFA Hardest Hit Fund) and the
Department of Housing and Urban Development’s Emergency
Homeowners’ Loan Program (EHLP). This notice also provides
guidance on the information reporting requirements for these
payments.
Notice 2011–18, page 549.
This notice provides transitional relief from information report-
ing requirements in section 6045B of the Code that apply to
issuers of stock with respect to organizational actions that af-
fect the basis of the stock.
Finding Lists begin on page ii.

The IRS Mission
Provide Americ
a’s taxpayers top-quality service by helping
them understa
nd and meet their tax responsibilities and en-
force the law wi
th integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
March 14, 20112011–11 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 163.—
Interest
The Service pr
ovides guidance on the federal tax
consequences
of payments made to or on behalf of
financially d
istressed homeowners under programs
established p
ursuant to the Treasury Department’s
Housing Fina
nce Agency Innovative Fund for the
Hardest-Hit
Housing Markets and the Department
of Housing an
d Urban Development’s Emergency
Homeowners’
Loan Program. See Notice 2011-14,
page 544.
Section 164.—Taxes
The Service provides guidance on the federal tax
consequences of payments made to or on behalf of
financially distressed homeowners under programs
established pursuant to the Treasury Department’s
Housing Finance Agency Innovative Fund for the
Hardest-Hit Housing Markets and the Department
of Housing and Urban Development’s Emergency
Homeowners’ Loan Program. See Notice 2011-14,
page 544.
Section 6041.—Information
at Source
The Service provides guidance on the informa-
tion reporting requirements for payments made to or
on behalf of financially distressed homeowners un-
der programs e
stablished pursuant to the Treasury
Department’s
Housing Finance Agency Innovative
Fund for the Ha
rdest-Hit Housing Markets and the
Department of
Housing and Urban Development’s
Emergency Ho
meowners’ Loan Program. See No-
tice 2011-14
, page 544.
Section 6050H.—Returns
Relating to Mortgage
Interest Received in Trade
or Business From Individuals
The Service provides guidance on the informa-
tion reporting requirements for payments made to or
on behalf of financially distressed homeowners un-
der programs established pursuant to the Treasury
Department’s Housing Finance Agency Innovative
Fund for the Hardest-Hit Housing Markets and the
Department of Housing and Urban Development’s
Emergency Homeowners’ Loan Program. See No-
tice 2011-14, page 544.
Section 6721.—Failure to
File Correct Information
Returns
The Service provides guidance on the informa-
tion reporting requirements for payments made to or
on behalf of financially distressed homeowners un-
der programs e
stablished pursuant to the Treasury
Department’s
Housing Finance Agency Innovative
Fund for the Ha
rdest-Hit Housing Markets and the
Department of
Housing and Urban Development’s
Emergency Ho
meowners’ Loan Program. See No-
tice 2011-14
, page 544.
Section 6722.—Failure
to Furnish Correct Payee
Statements
The Service p
rovides guidance on the informa-
tion report
ing requirements for payments made to or
on behalf of
financially distressed homeowners un-
der program
s established pursuant to the Treasury
Department
’s Housing FinanceAgency Innovative
Fund for th
e Hardest-Hit Housing Markets and the
Departmen
t of Housing and Urban Development’s
Emergency
Homeowners’ Loan Program. See No-
tice 2011-
14, page 544.
2011–11 I.R.B.543March 14, 2011

Part III. Administrative, Procedural, and Miscellaneous
Tax Consequences to
Homeowners, Mortgage
Servicers, and State
Housing Finance Agencies
of Participation in the HFA
Hardest Hit Fund and The
Emergency Homeowners’
Loan Program
Notice 2011–14
PURPOSE
This notice provides guidance on the
federal tax consequences of, and informa-
tion reporting requirements for, payments
made to or on behalf of financially dis-
tressed homeowners under programs de-
signed by state housing finance agencies
(State HFAs)
1
with funds allocated from
the Housing Finance Agency Innovative
Fund for the Hardest-Hit Housing Markets
(HFA Hardest Hit Fund). This notice ap-
plies to the programs designed by State
HFAs that are listed in the Appendix to this
notice (State Programs).
This notice also provides guidance
on the federal tax consequences of, and
information reporting requirements for,
payments made on behalf of financially
distressed homeowners under the Depart-
ment of Housing and Urban Develop-
ment’s Emergency Homeowners’ Loan
Program (EHLP) and any existing state
program receiving funding from the EHLP
(the substantially similar state programs
or SSSPs).
Specifically, this notice addresses
whether—
•Disbursements under a “Forgivable
Loan” (as defined below) or a HUD
Note (as defined below) are treated as
payments to homeowners and not as
disbursements of loan proceeds;
•Homeowners who receive or benefit
from payments made under the State
Programs, the EHLP, or the SSSPs ex-
clude the payments from gross income
under the general welfare exclusion
and deduct otherwise deductible ex-
penses (for example, mortgage interest
and real property taxes) paid from
those payments; and
•Payments to or on behalf of homeown-
ers made under the State Programs, the
EHLP, or the SSSPs are exempt from
the information reporting requirements
of §§ 6041 and 6050H of the Internal
Revenue Code.
THEHFAHARDESTHITFUND
PROGRAM
Overview
In February 2010, the United States
Department of the Treasury (Treasury De-
partment) established the HFA Hardest
Hit Fund, which is authorized by section
109 of the Emergency Economic Stabi-
lization Act (EESA), Division A of Pub.
L. 110–343, 112 Stat. 3774 (2008). The
purposes of the HFA Hardest Hit Fund
are to provide funds to the State Programs
(1) to assist homeowners in preventing
avoidable foreclosures, and (2) to stabilize
housing markets. The HFA Hardest Hit
Fund is designed to allow each State HFA
maximum flexibility in designing locally
focused programs to address the needs of
financially distressed homeowners within
the state or a specific region of the state.
Each of the State Programs that receives
funding from the HFA Hardest Hit Fund
has as its primary objective preventing
avoidable foreclosures of homeowners’
homes and stabilizing housing markets.
The HFA Hardest Hit Fund is available
in states where either housing prices have
declined more than20 percent from peak
prices or the unemployment rate equals or
exceeds the national average. The states
eligible for this funding are Alabama, Ari-
zona, California, the District of Columbia,
Florida, Georgia, Illinois, Indiana, Ken-
tucky, Michigan, Mississippi, Nevada,
New Jersey, North Carolina, Ohio, Ore-
gon, Rhode Island, South Carolina, and
Tennessee.
To receive funding from the HFA Hard-
est Hit Fund, each of these states sub-
mitted proposals describing its programs
and verifying that each of the programs
would meet the requirements of the EESA
and the purposes of the HFA Hardest Hit
Fund. Funding under the HFA Hardest Hit
Fund is available for, but not limited to,
programs involving the following transac-
tions: mortgage modifications, principal
forbearance to facilitate additional mort-
gage modifications, short sales and deeds-
in-lieu of foreclosure, unemployment pro-
grams, principal reductions for homeown-
ers with severe negative equity, and sec-
ond-lien reductions and modifications.
Approved State Programs and their
Common Elements
The Treasury Department has approved
all of the State Programs listed in the Ap-
pendix to this notice
2
and is distributing
funds from the HFA Hardest Hit Fund
for use by the State HFAs. Generally,
under the State Programs homeowners
must demonstrate that they have suf-
fered a financial hardship due to certain
events, such as unemployment, underem-
ployment, medical condition, death of a
spouse, or divorce, and as a result are in
danger of losing their homes in foreclosure
or need financial assistance to ensure that
their loans become or remain affordable.
Although most of the State Programs have
the goal of helping financially distressed
homeowners remain in their homes, some
State Programs also help homeowners
who can no longer afford their homes to
transition to more affordable homes. Some
states limit participation in their programs
to homeowners whose income does not
exceed certain limits.
In some cases, the State Programs assist
a homeowner by making cash payments
directly to or on behalf of the homeowner
without mentioning any repayment obliga-
tion. On the other hand, sometimes the
governing documents discuss repayment
and call the arrangement a “loan” or a “for-
givable loan.” Even in these cases, how-
ever, the terms of the arrangement gen-
erally operate to relieve the homeowner
of an obligation to make any repayments.
The terms achieve this end by reducing the
stated principal amount to zero over time if
the homeowner meets certain program re-
quirements. Though State Programs may
1
For purposes of this notice, the term “state housing finance agencies” includes other non-profit agencies organized and controlled by a state. In addition, the term “state” means the 50 states,
the District of Columbia, and the Commonwealth of Puerto Rico.
2
The Treasury Department may amend the list of State Programs in the Appendix to this notice through subsequent published guidance.
March 14, 20115442011–11 I.R.B.

vary, an arrangement like this is generally
secured by a subordinate lien on the home
and is documented as a zero-percent-inter-
est, nonrecourse, non-amortizing “loan” to
the homeowner with a term ranging from
3 to 10 years. (This notice calls these ar-
rangements “Forgivable Loans.”) For ex-
ample, under some programs the unpaid
stated principal of a Forgivable Loan de-
clines 20 percent each year for 5 years
if the homeowner remains current on the
homeowner’s mortgage loan payments and
continues to use the property as a principal
residence. In general, no payments are due
on a Forgivable Loan unless (1) the home-
owner sells, refinances, or transfers title to
the property before the term expires, and
(2) equity proceeds from the sale, refinanc-
ing, or title transfer are available to pay
some or all of the remaining unpaid stated
principal balance. As a result, the Treasury
Department and the State Programs do not
expect homeowners to make more than a
minimal amount of payments on Forgiv-
able Loans.
THE EMERGENCY HOMEOWNERS’
LOAN PROGRAM AND
SUBSTANTIALLY SIMILAR STATE
PROGRAMS
Overview
Section 1496 of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (Dodd-Frank Act), Pub. L. 111–203,
124 Stat. 2207 (2010), reauthorized
and revised the Emergency Homeown-
ers’ Loan Program (EHLP), 12 U.S.C.
§§ 2701–2712, and provided $1 billion
to the Department of Housing and Ur-
ban Development (HUD) to implement
the EHLP and existing state programs
that are substantially similar to the EHLP
(the substantially similar state programs
or SSSPs). The purpose of the EHLP
and the SSSPs is to provide assistance to
homeowners who are at risk of foreclosure
and have experienced a substantial reduc-
tion in income as a result of involuntary
unemployment or underemployment due
to adverse economic or medical condi-
tions.See12 U.S.C. § 2702(4). The $1
billion of funding is allocated based on a
state’s approximate share of unemployed
homeowners. The EHLP and the SSSPs
complement the HFA Hardest Hit Fund
by providing assistance to homeowners in
Puerto Rico and the 32 states that did not
receive funds from the HFA Hardest Hit
Fund.SeeEmergency Homeowners’ Loan
Program: Notice of Allocation of Funding
for Substantially Similar State Programs
(“Funding Notice”), 75 Fed. Reg. 69,454
(November 12, 2010).
Eligible Pre-Existing State Programs
The Dodd-Frank Act provides that a
state may administer EHLP funds if HUD
determines that the state program qualifies
as an SSSP. An SSSP is a state program
existing on July 21, 2010, that provides
substantially similar assistance to home-
owners. 12 U.S.C. § 2707(d). A state with
an SSSP may exercise greater flexibility
in program design and is not required to
modify its program to comply with Title
12 after HUD determines that the program
is an SSSP. 12 U.S.C. § 2707(d). To re-
ceive funding from the EHLP, State HFAs
submitted proposals describing how their
programs provide assistance to homeown-
ers that is substantially similar to that pro-
vided under the EHLP. Only SSSPs are el-
igible to administeran allocation from the
$1 billion provided to the EHLP under the
Dodd-Frank Act. Section III.B.2 of the
Funding Notice. If a state does not have
an SSSP, then HUD administers the state’s
allocation from the $1 billion of funding in
accordance with the EHLP.
Homeowners Eligible for Assistance and
Operation of the EHLP and SSSPs
To receive assistance from the EHLP
or an SSSP, a homeowner must meet cer-
tain eligibility requirements. The home-
owner must reside in the mortgaged prop-
erty as his or her principal residence at the
time of application and for the duration
of the assistance. The homeowner must
also be involuntarily unemployed or un-
deremployed because of adverse economic
or medical conditions. The homeowner
must have household income equal to or
less than 120% of the area median income
for the area in which the homeowner re-
sides, and have experienced a substantial
reduction in income as a result of involun-
tary unemployment or underemployment
due to adverse economic or medical condi-
tions.See12 U.S.C. § 2702(4). The home-
owneralsomustbeatleastthreemonths
delinquent on the homeowner’s first mort-
gage and provide evidence that foreclo-
sure on that mortgage is likely or immi-
nent. In addition, the homeowner must
have a reasonable likelihood of being able
to (1) resume repayments of the first mort-
gage obligation within two years, and (2)
meet other housing expenses and debt obli-
gations when the assistance ends.See12
U.S.C. § 2702.
Under the EHLP (but not an SSSP),
eligible homeowners must contribute the
greater of 31 percent of their monthly
gross income or $25 towards the monthly
payments on the first mortgage. Under
the EHLP, homeowner contributions will
be combined with the governmental funds
and forwarded to the servicer/lender as the
monthly payment on the first mortgage.
HUD expects the SSSPs to use their ex-
isting procedures forhandlingborrower
contributions.
The EHLP will provide a reasonably
necessary amount to assist an eligible
homeowner with (i) a maximum of 24
months of monthly payments of mortgage
principal, interest, mortgage insurance
premiums, taxes, and hazard insurance,
and (ii) payments of arrearages (mortgage
principal, interest, mortgage insurance
premiums, taxes, hazard insurance, late
fees, and certain foreclosure related legal
expenses). HUD prefers, but does not
require, the SSSPs to limit assistance to
a 24-month period. The EHLP and the
SSSPs must include assistance in mak-
ing monthly payments to the servicer of
the first mortgage and may not restrict
payments only to arrearages. If the house-
hold’s gross income increases to 85% or
more of the income prior to the unem-
ployment, underemployment, or medical
condition, then the assistance will be
phased out over a two-month period.
The assistance that the EHLP and the
SSSPs provide to a homeowner must be
pursuant to a note with terms and repay-
ment conditions that are similar to the
Forgivable Loan described above, except
that the homeowner is responsible for re-
payment of the applicable balance of the
note if the homeowner defaults on the
homeowner’s monthly mortgage payment
obligation during the five-year period af-
ter the assistance ends. (This notice calls
these arrangements “HUD Notes.”) As a
result, HUD and the SSSPs do not expect
homeowners to make more than a minimal
amount of payments on the HUD Notes.
2011–11 I.R.B.545March 14, 2011

APPLICABLE PROVISIONS OF LAW
Characterization of Forgivable Loans and
the HUD Notes
If assistance to a homeowner under a
State Program is structured as a Forgivable
Loan, the Internal Revenue Service will
treat the disbursements to or on behalf of
the homeowner as payments to the home-
owner rather than as disbursements of loan
proceeds, and those payments are treated
as occurring at the time the disbursements
are made. Similarly, if assistance to a
homeowner under the EHLP or an SSSP
is pursuant to a HUD Note, the IRS will
treat the disbursements to or on behalf of
the homeowner as payments to the home-
owner rather than as disbursements of loan
proceeds, and those payments are treated
as occurring at the time the disbursements
are made.
Income Tax Consequences to Homeowners
Section 61(a) of the Code provides
that, except as otherwise provided by
law, gross income means all income from
whatever source derived. The Service has
consistently held, however, that payments
made under governmental programs for
the promotion of the general welfare are
not includible in an individual recipient’s
gross income (general welfare exclusion).
SeeRev. Rul. 2009–19, 2009–28 I.R.B.
111, holding that Pay-for-Performance
Success Payments made under the Home
Affordable Modification Program to help
homeowners who are at risk of losing their
homes pay their mortgage loans on their
principal residences are excluded from in-
come under the general welfare exclusion.
See alsoRev. Rul. 76–373, 1976–2 C.B.
16.
Similar to the payments in Rev. Rul.
2009–19, the payments made under the
State Programs with funds from the HFA
Hardest Hit Fund and the payments made
under the EHLP and the SSSPs with
funds authorized by the Dodd-Frank Act
promote the general welfare by helping
homeowners who are at risk of losing their
homes either pay their mortgage loans or
transition to more affordable housing and
do not involve the performance of ser-
vices. Therefore, payments made under
the State Programs, the EHLP, and the
SSSPs to or on behalf of a homeowner
are excluded from gross income under the
general welfare exclusion.
For taxable years 2010, 2011, and
2012, this notice provides a safe harbor
method pursuant to which a homeowner
may deduct on his or her federal income
tax return an amount equal to the sum
of all payments the homeowner actually
makes during that year to the mortgage
servicer, HUD, or the State HFA on the
home mortgage, but not in excess of the
sum of the amounts shown on Form 1098,
Mortgage Interest Statement,inbox1
(mortgage interest received), box 4 (mort-
gage insurance premiums) for years 2010
and 2011 only, and box 5 (real property
taxes). This safe harbor method of com-
puting the homeowner’s deduction applies
for a taxable year if (1) the homeowner
meets the requirements of §§ 163 and
164 to deduct all of the mortgage interest
on the loan and all of the real property
taxes on the principal residence; and (2)
the homeowner participates in the EHLP,
an SSSP, or a State Program described in
the Appendix to this notice in which the
program payments could be used to pay
interestonthehomemortgage.
Information Reporting Obligations
Section 6041 of the Code requires every
person engaged in a trade or business (in-
cluding state governments and their agen-
cies) to (1) file an information return for
each calendar year in which the person
makes in the course of its trade or business
payments to another person of fixed and
determinable incomeaggregating $600 or
more, and (2) furnish a copy of the infor-
mation return to that person.See§ 6041(a)
and (d) and § 1.6041–1(a)(1) and (b) of the
Income Tax Regulations.
Because the payments made under the
State Programs, the EHLP, and the SSSPs
are excluded from the gross income of the
homeowners, they are not fixed or deter-
minable income under § 6041. Thus, under
§ 6041 payors do not file information re-
turns or furnish copies to homeowners for
payments made under the State Programs,
the EHLP, or the SSSPs.
Section 6050H of the Code requires
every person engaged in a trade or busi-
ness (including state governments and
their agencies) to (1) file an information
return for each calendar year in which the
person receives in the course of its trade or
business payments from an individual of
interest on a mortgage aggregating $600
or more, and (2) furnish a copy of the
information return to that individual. See
§ 6050H(a) and (d) and § 1.6050H–1(a) of
the regulations.
For purposes of § 6050H, interest re-
ceived from a governmental unit or its
agency or instrumentality is not interest re-
ceived on a mortgage, and thus should not
be reported as interest received on a mort-
gage. See § 1.6050H–1(e)(3)(ii) of the reg-
ulations.
Accordingly, if a person receives pay-
ments under a State Program, the EHLP,
or an SSSP from a governmental unit or
its agency or instrumentality of interest
on the homeowner’s mortgage, that person
should not include those payments in the
amount reported as interest received on a
mortgage on Form 1098.
Section 6721 of the Code imposes
penalties on a person for failing to in-
clude all required information or including
incorrect information on an information
return. Section 6722 imposes penalties on
a person for failing to include all required
information or including incorrect infor-
mation on a payee statement. However,
the Service will not assert penalties under
§§ 6721 and 6722 against a mortgage ser-
vicer that reports on Forms 1098 payments
received under a State Program, the EHLP,
or an SSSP during calendar year 2010.
Additionally, the Service will not assert
penalties under §§ 6721 and 6722 against
a mortgage servicer that reports on Forms
1098 payments received under a State
Program, the EHLP, or an SSSP during
calendar years 2011 or 2012 if the servicer
notifies homeowners that the amounts re-
ported on the Form 1098 are overstated
because they include government subsidy
payments. The Service will not assert
penalties under §§ 6721 and 6722 against
any State HFA for failing to file and fur-
nish Forms 1098 for calendar year 2010.
Furthermore, the Service will not assert
penalties under §§ 6721 and 6722 against
any State HFA for failing to file and fur-
nish Forms 1098 for calendar years 2011
and 2012 if the State HFA provides each
homeowner and the IRS a statement set-
ting forth (1) the homeowner’s name and
TIN, and (2) the amount of payments the
State HFA made to the mortgage servicer
under the State Program or the SSSP dur-
ing that year (separately stating the amount
March 14, 20115462011–11 I.R.B.

the State HFA paid and the amount the
homeowner paid). The statement the State
HFA provides to the IRS must be a single
statement that separately lists the names,
TINs, and relevant payment amounts for
each homeowner. In addition, for calendar
years 2011 and 2012, HUD should provide
each homeowner and the IRS a statement
setting forth (1) the homeowner’s name
and TIN, and (2) the amount of payments
HUD made to the mortgage servicer under
the EHLP during that year (separately stat-
ing the amount HUD paid and the amount
the homeowner paid). The statement HUD
provides to the IRS should be a single
statement that separately lists the names,
TINs, and relevant payment amounts for
each homeowner. The IRS intends to issue
future published guidance specifying the
IRS office where the State HFAs and HUD
should send the single statements.
SUMMARY OF FEDERAL TAX
CONSEQUENCES OF PAYMENTS
UNDER THE STATE PROGRAMS,
THE EHLP, OR THE SSSPS TO
ASSIST FINANCIALLY DISTRESSED
HOMEOWNERS
Disbursements under a Forgivable
Loan or a HUD Note are treated as pay-
ments to a homeowner and not as dis-
bursements of loan proceeds.
A homeowner who receives or bene-
fits from payments made under the State
Programs, the EHLP, or an SSSP excludes
the payments from gross income under the
general welfare exclusion.
Payments to or on behalf of a home-
owner made under the State Programs, the
EHLP,andtheSSSParenotsubjectto
the information reporting requirements of
§ 6041.
The Service will not assert penalties
under §§ 6721 and 6722 against a mort-
gage servicer that reports on Forms 1098
payments received under a State Program,
the EHLP or an SSSP during calendar year
2010. Additionally, the Service will not
assert penalties under §§ 6721 and 6722
against a mortgage servicer that reports
on Forms 1098 payments received under
a State Program, the EHLP, or an SSSP
during calendar years 2011 or 2012 if
the servicer notifies homeowners that the
amounts reported on the Form 1098 are
overstated because they include govern-
ment subsidy payments.
The Service will not assert penalties
under §§ 6721 and 6722 against any State
HFA for failing to file and furnish Forms
1098 for calendar year 2010. In addition,
the Service will not assert penalties under
§§ 6721 and 6722 for calendar years 2011
and2012againstanyStateHFAifthe
State HFA provides each homeowner and
the IRS a statement setting forth (1) the
homeowner’s name and TIN, and (2) the
amount of payments the State HFA made
to a mortgage servicer under the State
Program or the SSSP during that year
(separately stating the amount the State
HFA paid and the amount the homeowner
paid). The statement the State HFA pro-
vides to the IRS must be a single statement
that separately lists the names, TINs, and
relevant payment amounts for each home-
owner. For calendar years 2011 and 2012,
HUD should provide each homeowner
and the IRS a statement setting forth (1)
the homeowner’s name and TIN, and (2)
the amount of payments HUD made to the
mortgage servicer under the EHLP during
that year (separately stating the amount
HUD paid and the amount the homeowner
paid). The statement HUD provides to the
IRS should be a single statement that sep-
arately lists the names, TINs, and relevant
payment amounts for each homeowner.
The IRS intends to issue future published
guidance specifying the IRS office where
the State HFAs and HUD should send the
single statements.
For taxable years 2010, 2011, and
2012, this notice provides a safe harbor
method pursuant to which a homeowner
may deduct on his or her federal income
tax return an amount equal to the sum
of all payments the homeowner actually
makes during that year to the mortgage
servicer, HUD, or the State HFA on the
home mortgage, but not in excess of the
sum of the amounts shown on Form 1098,
Mortgage Interest Statement, in box 1
(mortgage interest received), box 4 (mort-
gage insurance premiums) for years 2010
and 2011 only, and box 5 (real property
taxes). This safe harbor method of com-
puting the homeowner’s deduction applies
for a taxable year if (1) the homeowner
meets the requirements of §§ 163 and
164 to deduct all of the mortgage interest
on the loan and all of the real property
taxes on the principal residence, and (2)
the homeowner participates in the EHLP,
an SSSP, or a State Program described in
the Appendix to this notice in which the
program payments could be used to pay
interest on the home mortgage.
PERSON TO CONTACT
The principal author of this notice is
Shareen S. Pflanz of the Office of Asso-
ciate Chief Counsel (Income Tax & Ac-
counting). For further information regard-
ing this notice, contact Shareen S. Pflanz
at (202) 622–4920 (not a toll-free call).
Appendix
Alabama
Hardest Hit for Alabama’s Unemployed Homeowners
Arizona
Save My Home AZ Program:
Permanent Modifications Component
Second Mortgage Assistance Component
Temporary Modification Component
2011–11 I.R.B.547March 14, 2011

California
Unemployment Mortgage Assistance Program
Mortgage Reinstatement Assistance Program
Principal Reduction Program
The Transition Assistance Program
District of Columbia
Homesaver Program
Florida
Unemployment Mortgage Assistance Program
Mortgage Loan Reinstatement Program
Georgia
Mortgage Payment Assistance (MPA)
Illinois
Hardest Hit Fund Homeowner Emergency Loan Program (HHF HELP)
Indiana
Hardest Hit Fund Unemployment Bridge Program
Kentucky
Kentucky Unemployment Bridge Program
Michigan
Principal Curtailment Program
Loan Rescue Program
Unemployment Mortgage Subsidy Program
Mississippi
Home Saver Program
Nevada
Principal Reduction Program
Second Mortgage Reduction Plan
Short-Sale Acceleration Program
Mortgage Assistance Program (MAP)
New Jersey
New Jersey Homekeeper Program (NJHK)
North Carolina
Mortgage Payment Program (MPP–1)
Mortgage Payment Program (MPP–2)
Second Mortgage Refinance Program (SMRP)
Permanent Loan Modification Program (PLMP)
March 14, 20115482011–11 I.R.B.

Ohio
Rescue Payment Assistance Program
Partial Mortgage Payment Assistance Program
Mortgage Modification with Principal Reduction Program
Transition Assistance Program
Short Refinance Program
Oregon
Loan Modification Assistance Program
Mortgage Payment Assistance Program
Loan Preservation Assistance Program
Transition Assistance Program
Rhode Island
Loan Modification Assistance for HAMP Customers (LMA-HAMP)
Loan Modification Assistance for Non-HAMP Customers (LMA-Non-HAMP)
Temporary and Immediate Homeowner Assistance (TIHA)
Moving Forward Assistance
Mortgage Payment Assistance — Unemployment Program
South Carolina
Monthly Payment Assistance Program
Direct Loan Assistance Program
HAMP Assistance Program
Second Mortgage Assistance Program
Property Disposition Assistance Program
Tennessee
Hardest Hit Fund Program (HHFP)
Postponing Filing Date for
Section 6045B Issuer Return
Notice 2011–18
PURPOSE
This notice provides transitional relief
from information reporting requirements
in section 6045B of the Internal Revenue
Code (“Code”) that apply to issuers of
stock with respect to organizational ac-
tions that affect the basis of the stock.
This notice provides that, for organiza-
tional actions occurring in 2011, the In-
ternal Revenue Service will not impose
penalties against issuers for missing the
deadline to file a return reporting the action
or make the return publicly available pro-
vided that the issuer files the return with
the Service or makes it publicly available
by January 17, 2012. This notice does not
apply to an issuer’s requirement to furnish
the same information to the issuer’s stock-
holders and nominees of its stockholders.
BACKGROUND
Section 403 of the Energy Improvement
and Extension Act of 2008, Div. B of
Pub. L. No. 110–343, 122 Stat. 3765,
enacted on October 3, 2008, added section
6045B to the Code. Section 6045B pro-
vides that, for organizational actions be-
ginning in 2011, an issuer of stock must
file a return with the Service to describe
any organizationalaction (such as a stock
split, merger, or acquisition) that affects
the basis of a specified security. Under sec-
tion 6045B(d) and section 6045(g)(3)(B),
in 2011 a specified security is limited to
stock in a corporation. The issuer gener-
ally must file the return within 45 days af-
ter the organizational action. The issuer
must also furnish a corresponding state-
ment to each nominee of the stockholder
(or to each stockholder if there is no nomi-
nee) by January 15th of the year following
the calendar year of the organizational ac-
tion.
Alternately, the issuer is not required
to file an issuer return with the Ser-
vice if it posts the return on its primary
public Web site in a readily accessible
format by the filing date. Treas. Reg.
§ 1.6045B–1(a)(3).
The requirements under section 6045B
do not apply to issuers of stock in a regu-
lated investment company until 2012.
Under the 45-day deadline, the earliest
date that an issuer must file a return is Feb-
ruary 15, 2011, for an organizational action
that took place on January 1, 2011.
2011–11 I.R.B.549March 14, 2011

The Service is developing the form and
manner of an issuer return contemplated
by section 6045B(a), as well as consider-
ing what additional information, if any, to
be provided on such return.
TRANSITIONAL INFORMATION
REPORTING REQUIREMENTS FOR
ISSUERSOFSTOCKREPORTING
ORGANIZATIONAL ACTIONS TAKEN
IN 2011
Section 6721 imposes a penalty on any
issuer of stock that does not timely file a
correct issuer return with the Service as re-
quired by section 6045B(a). The Service
expects issuers to make a good-faith effort
to comply with the requirements of sec-
tion 6045B(a); however, until an alterna-
tive form is developed and made available
by the Service, issuer compliance with sec-
tion 6045B(a) may be currently satisfied
only through public reporting of informa-
tion, as contemplated by section 6045B(e).
Accordingly, the Service will not impose
penalties under section 6721 for a failure to
file an issuer return with the Service within
45 days of an organizational action taken in
2011, provided that the issuer files the is-
suer return with the Internal Revenue Ser-
vice (or posts the return on its Web site as
provided in the regulations) by January 17,
2012. This transitional relief does not ap-
ply to issuers of stock in a regulated invest-
ment company, which are not subject to the
issuer reporting requirements for 2011 or-
ganizational actions.
DRAFTING INFORMATION
The principal author of this notice is
Carlton King of the Office of Associate
Chief Counsel (Procedure & Administra-
tion). For further information regarding
this notice, please contact Carlton King at
(202) 622–4910 (not a toll-free call).
Definition of Readily Tradable
On An Established Securities
Market
Notice 2011–19
Purpose
This notice provides guidance regard-
ing when securities of the employer are
readily tradable on an established securi-
ties market or readily tradable on an estab-
lished marketfor purposes of certain pro-
visions of the Internal Revenue Code relat-
ing to employer securities held by certain
qualified retirement plans.
Background
Section 4975(e)(7) defines an em-
ployee stock ownership plan (ESOP) as a
defined contribution plan (1) which is a
stock bonus plan which is qualified under
§ 401(a), or a stock bonus and a money
purchase plan both of which are qualified
under § 401(a), and which are designed
to invest primarily in qualifying employer
securities as defined in § 4975(e)(8), and
(2) which is otherwise defined in regula-
tions prescribed by the Secretary. Section
4975(e)(7) also states that an employee
stock ownership plan must satisfy cer-
tain requirements in § 409, including the
requirements of § 409(h). In addition,
§ 401(a)(23) generally provides that a
stock bonus plan is not a qualified plan un-
der § 401(a) unless the plan meets certain
requirements, including the requirements
of § 409(h).
Section 401(a)(22) generally provides
that a defined contribution plan (other than
a profit sharing plan) must meet the re-
quirements of § 409(e) (which relates to
passthrough of voting rights) if it is estab-
lished by an employer whose stock is not
readily tradable on an established market,
and after acquiring securities of the em-
ployer, more than 10 percent of the total
assets of the plan are securities of the em-
ployer.
Section 409(h) provides generally that a
plan satisfies the requirements of § 409(h)
if the plan offers a participant who is en-
titled to a distribution the right to demand
payment in the form of employer securi-
ties and, if the employer securities are not
readily tradable on an established market,
the participant must also have the right to
require that the employer repurchase the
employer securities under a fair valuation
formula (put option).
Section 401(a)(35)(A) provides that a
trust which is part of an applicable defined
contribution plan is not a qualified trust un-
der § 401(a) unless the plan satisfies cer-
tain diversification requirements set forth
in § 401(a)(35)(B), (C), and (D). Subject
to certain exceptions, an applicable de-
fined contribution plan under § 401(a)(35)
is a defined contribution plan that holds
any publicly traded employer securities. A
publicly traded employer security is de-
fined in § 401(a)(35)(G)(v) as an employer
security under section 407(d)(1) of ERISA
which isreadily tradable on an established
securities market.
Section 401(a)(28) provides that an
ESOP, and a tax credit employee stock
ownership plan under § 409(a), is not
a qualified plan under § 401(a) un-
less the plan meets the requirements
of § 401(a)(28)(B) and (C). Section
401(a)(28)(B) imposes certain diversifica-
tion requirements with respect to certain
participants. Section 401(a)(28)(B) was
amended by the Pension Protection Act
of 2006, Pub. L. 109–280, 120 Stat.
780(PPA’06)tonotapplytoaplan
to which § 401(a)(35) applies. For em-
ployer securities that are notreadily trad-
able on an established securities market,
§ 401(a)(28)(C) requires all valuations
with respect to activities carried on by
theplantobemadebyanindependent
appraiser that meets requirements similar
to the requirements of regulations under
§ 170(a)(1).
Section 404(k) generally permits an
income tax deduction for the amount
of any applicable dividend paid in cash
by a C corporation with respect to
applicable employersecurities. For this
purpose, applicableemployer securities
are generally defined to mean employer
securities as defined in § 409(l) held by an
ESOP.
Section 4975(e)(8), as amended by the
Technical Corrections Act of 1979, P.L.
96–22 (1980), provides that qualifying
employer securities must meet the defini-
tion set forth in § 409(l). Section 409(l)(1)
defines employer securities as common
stock issued by the employer (or by a
corporation that is a member of the same
controlled group) which isreadily trad-
able on an established securities market
and provides special rules for an employer
that has no class of stock which isread-
ily tradable on an established securities
market. In the absence of any guidance
of general applicability, some plans may
have applied the definition of “publicly
traded” at § 54.4975–7(b)(1)(iv) of the
Excise Tax Regulations (issued before
enactment of the Technical Corrections
Act of 1979) to determine whether em-
ployer securities are readily tradable on
March 14, 20115502011–11 I.R.B.

an established securities market within the
meaning of § 409(l)(1).
Section 1042 generally provides that, if
the taxpayer or executor so elects, gain on
the sale of qualified employer securities
which would be recognized as long-term
capital gain is recognized only to the extent
the gain exceeds the cost of qualified re-
placement property acquired within the re-
placement period. This treatment applies
only if the sale is to an ESOP or eligible
worker-owned cooperative that holds at
least 30 percent of the corporation’s stock
after the sale, and various other conditions
in § 1042(b) are satisfied. In addition, un-
der § 1042(c), the only securities eligible
for this treatment are employer securities
defined under § 409(l) and issued by a do-
mestic C corporation that has no stock out-
standing that isreadily tradable on an es-
tablished securities market.
Final regulations under § 401(a)(35)
were issued on May 18, 2010 (75 FR
27927). Under § 1.401(a)(35)–1(f)(5), a
security isreadily tradable on an estab-
lished securities marketif the security is
traded on a national securities exchange
that is registered under section 6 of the Se-
curities Exchange Act of 1934 (15 U.S.C.
78f). The regulations also treat a secu-
rity asreadily tradable on an established
securities marketif the security is traded
on a foreign national securities exchange
that is officially recognized, sanctioned,
or supervised by a governmental author-
ity and where the security is deemed by
the Securities and Exchange Commission
(SEC) as having a ready market under SEC
Rule 15c3–1 (17 CFR 240.15c3–1). Un-
der the current SEC rules, a security that
is included on the FTSE Group (FTSE)
All-World Index is deemed to have a ready
market. Section 1.401(a)(35)–1 is effec-
tive for plan years beginning on or after
January 1, 2011.
Readily tradable on an established
securities market or established market
Under this notice, the termsreadily
tradable on an established securities mar-
ketandreadily tradable on an established
market, with respect to employer securi-
ties, each mean employer securities that
are readily tradable on an established se-
curities market within the meaning of
§ 1.401(a)(35)–1(f)(5) for purposes of the
following provisions: (1) § 401(a)(22);
(2) § 401(a)(28)(C); (3) § 409(h)(1)(B);
(4) § 409(l); and (5) § 1042(c)(1)(A).
Effective Date
This notice is effective for plan years
beginning on or after January 1, 2012.
However, this notice is not effective un-
til plan years beginning on or after Jan-
uary 1, 2013 for any plan that is sponsored
by an employer with respect to which, on
March 14, 2011, neither the employer nor
any member of its controlled group (within
the meaning of § 409(l)) has any common
stockthatisreadilytradableonanestab-
lished securities market within the mean-
ing of § 1.401(a)(35)-(1)(f)(5)(A) (relating
to securities that are traded on a national
securities exchange that is registered un-
der section 6 of the Securities Exchange
Act of 1934), but the employer or a mem-
ber of its controlled group has common
stockthatisreadilytradableonanestab-
lished securities market within the mean-
ing of § 1.401(a)(35)-(1)(f)(5)(B) (relating
to securities that are traded on a foreign na-
tional securities exchange that is officially
recognized, sanctioned, or supervised by a
governmental authority and is deemed by
the SEC as having a “ready market” un-
der SEC Rule 15c3–1, within the mean-
ing of § 1.401(a)(35)-(1)(f)(5)(B)). Tax-
payers (including any employer sponsor-
ing a plan described in the preceding sen-
tence) can rely on this notice for periods
after March 14, 2011.
Drafting Information:
The principal author of this notice is
Robert Gertner of the Employee Plans,
Tax Exempt and Government Entities
Division. For further information re-
garding this notice, please contact the
Employee Plans taxpayer assistance an-
swering service at 1–877–829–5500 (a
toll-free number) or e-mail Mr. Gertner at
RetirementPlanQuestions@irs.gov.
26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also: Part I, § 911, 1.911–1.)
Rev. Proc. 2011–20
SECTION 1. PURPOSE
.01 This revenue procedure provides in-
formation to any individual who failed to
meet the eligibility requirements of section
911(d)(1) of the Internal Revenue Code be-
cause adverse conditions in a foreign coun-
try precluded the individual from meeting
those requirements for taxable year 2010.
.02 This revenue procedure lists the
countries for which the eligibility require-
ments of section 911(d)(1) are waived for
taxable year 2010.
SECTION 2. BACKGROUND
.01 Section 911(a) of the Code al-
lows a “qualified individual,” as defined
in section 911(d)(1), to exclude foreign
earned income and housing cost amounts
from gross income. Section 911(c)(4) of
the Code allows a qualified individual to
deduct housing cost amounts from gross
income.
.02 Section 911(d)(1) of the Code de-
fines the term “qualified individual” as an
individual whose tax home is in a foreign
country and who is (A) a citizen of the
United States and establishes to the satis-
faction of the Secretary of the Treasury that
the individual has been abona fideresident
of a foreign country or countries for an un-
interrupted period that includes an entire
taxable year, or (B) a citizen or resident of
the United States who, during any period
of 12 consecutive months, is present in a
foreign country or countries during at least
330 full days.
.03 Section 911(d)(4) of the Code pro-
vides an exception to the eligibility re-
quirements of section 911(d)(1). An in-
dividual will be treated as a qualified in-
dividual with respect to a period in which
the individual was abona fideresident of,
or was present in, a foreign country, if the
individual left the country during a period
for which the Secretary of the Treasury, af-
ter consultation with the Secretary of State,
determines that individuals were required
to leave because of war, civil unrest, or
similar adverse conditions that precluded
the normal conduct of business. An in-
dividual must establish that but for those
conditions the individual could reasonably
2011–11 I.R.B.551March 14, 2011

have been expected to meet the eligibility
requirements.
.04 For 2010, the Secretary of the Trea-
sury, in consultation with the Secretary of
State, has determined that war, civil unrest,
or similar adverse conditions precluded the
normal conduct of business in the follow-
ing countries beginning on the specified
date:
Date of Departure
CountryOn or after
Cote d’IvoireDecember 19, 2010
HaitiJanuary 13, 2010
Accordingly, for purposes of section
911 of the Code, an individual who left one
of the foregoing countries on or after the
specified departure date during 2010 shall
be treated as a qualified individual with re-
spect to the period during which that indi-
vidual was present in, or was abona fide
resident of, such foreign country, if the in-
dividual establishes a reasonable expecta-
tion of meeting the requirements of section
911(d) but for those conditions.
.06 To qualify for relief under section
911(d)(4) of the Code, an individual must
have established residency, or have been
physically present, in the foreign country
on or prior to the date that the Secretary
of the Treasury determines that individuals
were required to leave the foreign coun-
try. Individuals who establish residency,
or are first physicallypresent, in the for-
eign country after the date that the Secre-
tary prescribes shall not be treated as quali-
fied individuals under section 911(d)(4) of
the Code. For example, individuals who
are first physically present or establish res-
idency in Cote d’Ivoire after December 19,
2010, are not eligible to qualify for the ex-
ception provided in section 911(d)(4) of
the Code for taxable year 2010.
SECTION 3. INQUIRIES
A taxpayer who needs assistance on
how to claim this exclusion, or on how to
file an amended return, should contact a lo-
cal IRS Office or, for a taxpayer residing
or traveling outside the United States, the
nearest overseas IRS office.
SECTION 4. DRAFTING
INFORMATION
The principal author of this revenue
procedureisKateY.HwaoftheOfficeof
Associate Chief Counsel (International).
For further information regarding this rev-
enue procedure, contact Ms. Hwa at (202)
622–3840 (not a toll-free call).
March 14, 20115522011–11 I.R.B.

Part IV. Items o
fGeneralInterest
TEB Voluntary
Closing
Agreement Pro
gram: Relief
from Debt Exti
nguishment for
Certain Issu
ers Purchasing
and Holding T
heir Own
Tax-Exempt
Bonds
Announcement 2011–19
SECTION 1. BACKGROUND
The Treasury D
epartment and the
Internal Reve
nue Service (“IRS”) is-
sued Notice 2
008–41, 2008–1 C.B.
742 (April 14
, 2008), as modified by
Notice 2008–
88, 2008–42 I.R.B. 933
(October 20,
2008), and Notice 2010–7,
2010–3 I.R.B
. 296 (January 19, 2010), to
provide reli
ef from liquidity constraints
in the tax-e
xempt bond market during
the financi
al crisis. The notices provided
certain tem
porary rules that allowed state
and local go
vernmental issuers to purchase
and hold th
eir own tax-exempt bonds
for tempor
ary holding periods without
resulting
in a retirement of the purchased
tax-exemp
t bonds solely for the purposes
of § 103 an
d §§ 141–150 of the Internal
Revenue C
ode, as amended (“Code”).
Section 3
.2 of Notice 2010–7 provides in
relevant
part that the permitted holding
period du
ring which a state or local
governm
ental issuer may hold its own
tax-exe
mpt bonds under the special rules
in § 3.1 o
f Notice 2008–88 expires on
Decembe
r 31, 2010. Separately, certain
special
rules of continuing application
allow s
tate and local governmental issuers
to hold
their own “qualified tender bonds”
for a te
mporary period pursuant to the
exerci
se of a “qualified tender right”
(as def
ined in § 3.2 of Notice 2008–41)
witho
ut causing a reissuance or retirement
of tho
se bonds. After December 31,
2010,
except for tax-exempt bonds held
pursu
ant to rules of continuing application
for qu
alified tender bonds, a state or local
gover
nmental issuer generally may not
purc
haseandholditsowntax-exempt
bond
s without causing a retirement
or ex
tinguishment of such bonds (any
such
bonds so held are referred to as
“ext
inguished bonds”).
For various re
asons beyond their con-
trol, some iss
uers that previously pur-
chased their o
wn tax-exempt bonds in
the financial
crisis pursuant to Notices
2008–41, 2008
–88, and 2010–7 were un-
able to resel
l the bonds by December 31,
2010. In addi
tion, other issuers may cur-
rently need t
o purchase and hold their
own tax-exem
pt bonds due to certain cur-
rent market
challenges. Some of these
issuers hav
e approached the IRS about
the possibi
lity of entering into a voluntary
closing agr
eement that would allow them
to continu
e to purchase or hold their own
tax-exemp
t bonds under § 103 of the Code
after Dece
mber 31, 2010.
SECTION 2.
TAX EXEMPT
BONDS VOLU
NTARY CLOSING
AGREEMENT
PROGRAM (TEB
VCAP)
.01 Pursu
ant to the TEB VCAP pro-
gram set f
orth in Notice 2008–31, 2008–1
C.B. 592 (
March 17, 2008), the IRS will
consider
requests from issuers of extin-
guished b
onds for a voluntary closing
agreeme
nt.
.02 The c
losing agreement will pro-
vide tha
t the extinguished bonds will
be treat
ed as remaining outstanding for
purpose
s of § 103 and §§ 141–150 dur-
ing the p
eriod beginning on the later of
Januar
y 1, 2011 or the date the issuer
purcha
ses its own bonds and ending on
the ear
lier of: (1) the date that is 180
days af
ter the execution of the closing
agreem
ent by the IRS and the issuer or
such e
arlier date as requested by the issuer
(the “
Closing Date”); (2) the date that
the bo
nds are successfully resold to a
third
party; (3) the date that the bonds
are su
ccessfully currently refunded for
purp
oses of §§ 103 and 141–150; or (4)
the d
ate that the bonds are cancelled on
the b
ooks and records of the issuer.
.03 T
he closing agreement will be con-
diti
oned on:
(A) T
he authorizing body of the issuer
subm
itting its adopted resolution (the “Au-
thor
izing Resolution”) of its intent to resell
or cu
rrently refund the extinguished bonds
as t
ax-exempt bonds within the relevant
per
iod described in section 2.02 above.
Such resoluti
on shall be based on the opin-
ion of its fina
ncial advisor or other expert
that the resal
e or refunding of the bonds is
likely to be su
ccessful within such period.
(B) The issuer
’s representations that the
bonds to be res
old or currently refunded by
the issuer: (1
) are outstanding for purposes
of State law a
nd constitute legal, valid,
and binding o
bligations of the issuer un-
der applicab
le State law; and (2) assum-
ing that the b
onds are treated as remain-
ing outstan
ding for purposes of § 103 and
§§ 141–150,
qualify as tax-exempt obli-
gations of t
he issuer under § 103 of the
Code. The is
suer may make these repre-
sentation
s itself or the issuer may satisfy
the requir
ement for these representations
through su
bmission of an unqualified bond
counsel op
inion from a nationally recog-
nized publ
ic finance attorney or law firm
that addr
esses these representations.
(C) The pa
yment of a fee by the issuer
equal to t
he par value of the outstanding
bonds to b
eheldbytheissuermultiplied
by one thi
rty-fifth of one percent (.029%)
for each m
onth from the later of January 1,
2011 or t
he date of purchase of the extin-
guished
bonds and continuing through the
Closing
Date.
.04 The T
EB VCAP request must be
submitt
ed no later than December 31, 2012
under th
e operating procedures described
in sect
ion 7.2.3 of the Internal Revenue
Manual
.
.05 Gen
erally, a complete VCAP re-
quest w
ill be processed and a closing
agreem
ent will be sent to the issuer for its
execut
ion within 45 days of the receipt of
the com
plete submission. An issuer must
submi
t payment, in accordance with the
closi
ng agreement, prior to returning the
execu
ted closing agreement to the IRS for
its su
bsequent execution.
SECTI
ON 3. DRAFTING
INFOR
MATION
The pr
incipal author of this announce-
ment i
s Sandra H. Westin of the IRS Office
of Ta
x Exempt Bonds. For further infor-
mati
on regarding this announcement, con-
tact
Sandra Westin at (415) 522–6065 (not
atol
l-free call).
2011–11 I.R.B.553March 14, 2011

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
March 14, 2011i2011–11 I.R.B.

Numerical Finding List
1
Bulletin 2011–1 through 2011–11
Announcements:
2011-1, 2011-2 I.R.B.304
2011-2, 2011-3 I.R.B.324
2011-3, 2011-3 I.R.B.324
2011-4, 2011-4 I.R.B.424
2011-5, 2011-4 I.R.B.430
2011-6, 2011-4 I.R.B.433
2011-7, 2011-5 I.R.B.446
2011-8, 2011-5 I.R.B.446
2011-9, 2011-7 I.R.B.499
2011-10, 2011-7 I.R.B.499
2011-11, 2011-7 I.R.B.500
2011-12, 2011-9 I.R.B.532
2011-13, 2011-8 I.R.B.525
2011-14, 2011-9 I.R.B.532
2011-15, 2011-8 I.R.B.526
2011-16, 2011-7 I.R.B.500
2011-17, 2011-9 I.R.B.532
2011-19, 2011-11 I.R.B.553
2011-20, 2011-10 I.R.B.542
Notices:
2011-1, 2011-2 I.R.B.259
2011-2, 2011-2 I.R.B.260
2011-3, 2011-2 I.R.B.263
2011-4, 2011-2 I.R.B.282
2011-5, 2011-3 I.R.B.314
2011-6, 2011-3 I.R.B.315
2011-7, 2011-5 I.R.B.437
2011-8, 2011-8 I.R.B.503
2011-9, 2011-6 I.R.B.459
2011-10, 2011-6 I.R.B.463
2011-11, 2011-7 I.R.B.497
2011-12, 2011-8 I.R.B.514
2011-13, 2011-9 I.R.B.529
2011-14, 2011-11 I.R.B.544
2011-15, 2011-10 I.R.B.539
2011-17, 2011-10 I.R.B.540
2011-18, 2011-11 I.R.B.549
2011-19, 2011-11 I.R.B.550
Proposed Regulations:
REG-149335-08, 2011-6 I.R.B.468
REG-146097-09, 2011-8 I.R.B.516
REG-124018-10, 2011-2 I.R.B.301
REG-131151-10, 2011-8 I.R.B.519
REG-131947-10, 2011-8 I.R.B.521
REG-132724-10, 2011-7 I.R.B.498
Revenue Procedures:
2011-1, 2011-1 I.R.B.1
2011-2, 2011-1 I.R.B.90
Revenue Procedures— Continued:
2011-3, 2011-1 I.R.B.111
2011-4, 2011-1 I.R.B.123
2011-5, 2011-1 I.R.B.167
2011-6, 2011-1 I.R.B.195
2011-7, 2011-1 I.R.B.233
2011-8, 2011-1 I.R.B.237
2011-9, 2011-2 I.R.B.283
2011-10, 2011-2 I.R.B.294
2011-11, 2011-4 I.R.B.329
2011-12, 2011-2 I.R.B.297
2011-13, 2011-3 I.R.B.318
2011-14, 2011-4 I.R.B.330
2011-15, 2011-3 I.R.B.322
2011-16, 2011-5 I.R.B.440
2011-17, 2011-5 I.R.B.441
2011-18, 2011-5 I.R.B.443
2011-19, 2011-6 I.R.B.465
2011-20, 2011-11 I.R.B.551
Revenue Rulings:
2011-1, 2011-2 I.R.B.251
2011-2, 2011-2 I.R.B.256
2011-3, 2011-4 I.R.B.326
2011-4, 2011-6 I.R.B.448
2011-6, 2011-10 I.R.B.537
2011-7, 2011-10 I.R.B.534
Treasury Decisions:
9507, 2011-3 I.R.B.305
9508, 2011-7 I.R.B.495
9509, 2011-6 I.R.B.450
9510, 2011-6 I.R.B.453
9511, 2011-6 I.R.B.455
9512, 2011-7 I.R.B.473
9513, 2011-8 I.R.B.501
9514, 2011-9 I.R.B.527
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2010–27 through 2010–52 is in Internal Revenue Bulletin
2010–52, dated December 27, 2010.
2011–11 I.R.B.iiMarch 14, 2011

Finding List of Current Actions on
Previously Published Items
1
Bulletin 2011–1 through 2011–11
Announcements:
85-88
Obsoleted by
Rev. Proc. 2011-10, 2011-2 I.R.B.294
2008-11
Modified by
Ann. 2011-6, 2011-4 I.R.B.433
2009-62
Obsoleted by
Rev. Proc. 2011-10, 2011-2 I.R.B.294
Notices:
2006-87
Superseded by
Notice 2011-8, 2011-8 I.R.B.503
2007-25
Superseded by
Notice 2011-8, 2011-8 I.R.B.503
2007-77
Superseded by
Notice 2011-8, 2011-8 I.R.B.503
2008-107
Superseded by
Notice 2011-8, 2011-8 I.R.B.503
2010-27
Superseded by
Notice 2011-8, 2011-8 I.R.B.503
2010-59
Modified by
Notice 2011-5, 2011-3 I.R.B.314
2010-71
Modified and superseded by
Notice 2011-9, 2011-6 I.R.B.459
2010-79
Clarified and modified by
Notice 2011-4, 2011-2 I.R.B.282
Proposed Regulations:
REG-132554-08
Corrected by
Ann. 2011-11, 2011-7 I.R.B.500
Revenue Procedures:
72-50
Modified and superseded by
Rev. Proc. 2011-10, 2011-2 I.R.B.294
Revenue Procedures— Continued:
76-34
Modified and supersed by
Rev. Proc. 2011-10, 2011-2 I.R.B.294
83-23
Modified and superseded by
Rev. Proc. 2011-15, 2011-3 I.R.B.322
94-17
Modified and superseded by
Rev. Proc. 2011-15, 2011-3 I.R.B.322
97-27
Clarified and modified by
Rev. Proc. 2011-4, 2011-1 I.R.B.330
2001-10
Modified by
Rev. Proc. 2011-4, 2011-4 I.R.B.330
2002-28
Modified by
Rev. Proc. 2011-4, 2011-4 I.R.B.330
2003-21
Modified and superseded by
Rev. Proc. 2011-15, 2011-3 I.R.B.322
2004-34
Modified by
Rev. Proc. 2011-14, 2011-4 I.R.B.330
Modified and clarified by
Rev. Proc. 2011-18, 2011-5 I.R.B.443
2006-44
Modified by
Ann. 2011-6, 2011-4 I.R.B.433
2006-56
Modified by
Rev. Proc. 2011-14, 2011-4 I.R.B.330
2008-52
Modified by
Notice 2011-4, 2011-2 I.R.B.282
Rev. Proc. 2011-17, 2011-5 I.R.B.441
Superseded in part by
Rev. Proc. 2011-14, 2011-4 I.R.B.330
2009-39
Superseded in part by
Rev. Proc. 2011-14, 2011-4 I.R.B.330
2009-44
Modified by
Ann. 2011-6, 2011-4 I.R.B.433
2010-1
Superseded by
Rev. Proc. 2011-1, 2011-1 I.R.B.1
2010-2
Superseded by
Rev. Proc. 2011-2, 2011-1 I.R.B.283
Revenue Procedures— Continued:
2010-3
Superseded by
Rev. Proc. 2011-3, 2011-1 I.R.B.111
2010-4
Superseded by
Rev. Proc. 2011-4, 2011-1 I.R.B.123
2010-5
Superseded by
Rev. Proc. 2011-5, 2011-1 I.R.B.167
2010-6
Superseded by
Rev. Proc. 2011-6, 2011-1 I.R.B.195
2010-7
Superseded by
Rev. Proc. 2011-7, 2011-1 I.R.B.233
2010-8
Superseded by
Rev. Proc. 2011-8, 2011-1 I.R.B.237
2010-9
Superseded by
Rev. Proc. 2011-9, 2011-2 I.R.B.283
2010-15
Updated by
Rev. Proc. 2011-13, 2011-3 I.R.B.318
2011-1
Corrected by
Ann. 2011-7, 2011-5 I.R.B.446
2011-8
Corrected by
Ann. 2011-8, 2011-5 I.R.B.446
2011-11
Corrected by
Ann. 2011-9, 2011-7 I.R.B.499
Revenue Rulings:
81-100
Modified by
Rev. Rul. 2011-1, 2011-2 I.R.B.251
2004-67
Modified by
Rev. Rul. 2011-1, 2011-2 I.R.B.251
2008-40
Modified by
Rev. Rul. 2011-1, 2011-2 I.R.B.251
2011-3
Corrected by
Ann. 2011-16, 2011-7 I.R.B.500
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2010–27 through 2010–52 is in Internal Revenue Bulletin 2010–52, dated December 27,
2010.
March 14, 2011iii2011–11 I.R.B.

Treasury Decisions:
9391
Corrected by
Ann. 2011-12, 2011-9 I.R.B.532
9505
Corrected by
Ann. 2011-10, 2011-7 I.R.B.499
2011–11 I.R.B.ivMarch 14, 2011

March 14, 20112011–11 I.R.B.

INTERNAL REVENUE BULLETIN
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