Internal Revenue Bulletin 2001-23 (PDF rendition): IRS Announcements

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.

INCOME TAX
Rev. Rul. 2001–26, page 1297.
Two-step stock acquisitions. Certain two-step stock
acquisitions comprised of a tender offer and a merger qual-
ify as reorganizations under sections 368(a)(1)(A) and
368(a)(2)(E) of the Code.
Rev. Rul. 2001–27, page 1298.
Federal rates; adjusted federal rates; adjusted feder-
al long-term rate, and the long-term exempt rate. For
purposes of sections 382, 1274, 1288, and other sections
of the Code, tables set forth the rates for June 2001.
Rev. Proc. 2001–37, page 1327.
This procedure provides guidance to taxpayers regarding
certain elections made pursuant to the FSC Repeal and
Extraterritorial Income Exclusion Act of 2000 (“the Act”).
Specifically, this revenue procedure includes guidance with
respect to the election to exclude gross receipts from for-
eign trading gross receipts under section 942(a)(3) of the
Code, the election (and revocation of such election) by a for-
eign corporation to be treated as a domestic corporation
under section 943(e)(1) of the Code, and the election (and
revocation of such election) by a taxpayer to apply the
extraterritorial income exclusion in lieu of the foreign sales
corporation (“FSC”) provisions to certain transactions under
section 5(c)(2) of the Act.
EXCISE TAX
T.D. 8945, page 1300.
Final regulations under section 4081 of the Code revise the
rules relating to taxable fuel measurement. Notice 2000–33
obsolete.
ADMINISTRATIVE
Notice 2001–34, page 1302.
Annual accounting periods; approval. This notice pro-
vides a proposed revenue procedure that, when finalized, will
provide the procedures under section 442 of the Code to
establish a business purpose and request the approval of the
Commissioner to adopt, change, or retain a taxpayer’s annu-
al accounting period.
Notice 2001–35, page 1314.
Annual accounting periods; automatic approval.This
notice provides a proposed revenue procedure that, when
finalized, will provide the procedures for certain partner-
ships, S corporations, electing S corporations, and person-
al service corporations to obtain automatic approval of the
Commissioner to adopt, change, or retain their annual
accounting periods.
Rev. Proc. 2001–33, page 1322.
Administrative appeal of dyed fuel and refusal penal-
ties. This procedure explains how to request an administra-
tive appeal of the penalties imposed by section 6715 of the
Code, relating to the misuse of dyed diesel fuel and
kerosene, and by sections 4083(c)(3) and 7342 of the
Code, relating to the refusal to admit entry for purposes of
inspecting facilities and equipment and taking and removing
fuel samples.
Rev. Proc. 2001–36, page 1326.
This procedure grants automatic permission for certain
securities partnerships to aggregate the built-in gains and
losses from contributed property for purposes of making
allocations under section 704(c) of the Code.
Announcement 2001–59, page 1331.
This document contains corrections to Rev. Proc. 2001–26
(2001–17 I.R.B. 1093) relating to the general rules and
specifications for the private printing of substitute Forms
W-2 and W-3.
Internal Revenue
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Bulletin No. 2001–23
June 4, 2001
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
Department of the Treasury
Internal Revenue Service
Finding Lists begin on page ii.
Index for January through May begins on page vi.

June 4, 20012001–23 I.R.B.
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly and may be obtained
from the Superintendent of Documents on a subscription
basis. Bulletin contents are consolidated semiannually into
Cumulative Bulletins, which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of in-
ternal management are not published; however, statements
of internal practices and procedures that affect the rights
and duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
revenue ruling. In those based on positions taken in rulings
to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature
are deleted to prevent unwarranted invasions of privacy and
to comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have
the force and effect of Treasury Department Regulations,
but they may be used as precedents. Unpublished rulings
will not be relied on, used, or cited as precedents by Service
personnel in the disposition of other cases. In applying pub-
lished rulings and procedures, the effect of subsequent leg-
islation, regulations, court decisions, rulings, and proce-
dures must be considered, and Service personnel and oth-
ers concerned are cautioned against reaching the same con-
clusions in other cases unless the facts and circumstances
are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part 1100.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions, and Subpart B, Legislation and Related
Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to
these subjects are contained in the other Parts and Sub-
parts. Also included in this part are Bank Secrecy Act Admin-
istrative Rulings. Bank Secrecy Act Administrative Rulings
are issued by the Department of the Treasury’s Office of the
Assistant Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The first Bulletin for each month includes a cumulative index
for the matters published during the preceding months.
These monthly indexes are cumulated on a semiannual basis,
and are published in the first Bulletin of the succeeding semi-
annual period, respectively.
The IRS Mission
Provide America’s taxpayers top quality service by help-
ing them understand and meet their tax responsibilities
and by applying the tax law with integrity and fairness to
all.
Introduction
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

2001–23 I.R.B.1297June 4, 2001
Section 42.—Low-Income
Housing Credit
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of June 2001. See Rev. Rul. 2001–27, page 1298.
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term
rates are set forth for the month of June 2001. See
Rev. Rul. 2001–27, page 1298.
Section 368.—Definitions
Relating to Corporate
Reorganizations
26 CFR 1.368–1: Purpose and scope of exception
of reorganization exchanges.
Two-step stock acquisitions. The rul-
ing holds that certain two-step stock ac-
quisitions comprised of a tender offer and
a merger quailify as reorganizations under
sections 368(a)(1)(A) and 368(a)(2)(E).
Rev. Rul. 2001–26
ISSUE
On the facts described below, is the
control-for-voting-stock requirement of
§ 368(a)(2)(E) of the Internal Revenue
Code satisfied, so that a series of inte-
grated steps constitutes a tax-free reorga-
nization under §§ 368(a)(1)(A) and
368(a)(2)(E) and § 354 or § 356 applies
to each exchanging shareholder?
FACTS
Situation 1. Corporation P and Corpo-
ration T are widely held, manufacturing
corporations organized under the laws of
state A. T has only voting common stock
outstanding, none of which is owned by P.
P seeks to acquire all of the outstanding
stock of T. For valid business reasons, the
acquisition will be effected by a tender
offer for at least 51 percent of the stock of
T, to be acquired solely for P voting stock,
followed by a merger of a subsidiary of P
into T. P initiates a tender offer for T stock
conditioned on the tender of at least 51
percent of the T shares. Pursuant to the
tender offer, P acquires 51 percent of the
T stock from T’s shareholders for P voting
stock. P forms S and S merges into T
under the merger laws of state A. In the
statutory merger, P’s S stock is converted
into T stock and each of the T sharehold-
ers holding the remaining 49 percent of
the outstanding T stock exchanges its
shares of T stock for a combination of
consideration, two-thirds of which is P
voting stock and one-third of which is
cash. Assume that under general princi-
ples of tax law, including the step transac-
tion doctrine, the tender offer and the
statutory merger are treated as an inte-
grated acquisition by P of all of the T
stock. Also assume that all nonstatutory
requirements for a reorganization under
§§ 368(a)(1)(A) and 368(a)(2)(E) and all
statutory requirements of § 368(a)(2)(E),
other than the requirement under
§ 368(a)(2)(E)(ii) that P acquire control of
T in exchange for its voting stock in the
transaction, are satisfied.
Situation 2. The facts are the same as
in Situation 1, except that S initiates the
tender offer for T stock and, in the tender
offer, acquires 51 percent of the T stock
for P stock provided by P.
LAW AND ANALYSIS
Section 368(a)(1)(A) states that the
term “reorganization” means a statutory
merger or consolidation. Section
368(a)(2)(E) provides that a transaction
otherwise qualifying under § 368(a)
(1)(A) will not be disqualified by reason
of the fact that stock of a corporation (the
“controlling corporation”) that before the
merger was in control of the merged cor-
poration is used in the transaction, if (1)
after the transaction, the corporation sur-
viving the merger holds substantially all
of its properties and of the properties of
the merged corporation (other than stock
of the controlling corporation distributed
in the transaction), and (2) in the transac-
tion, former shareholders of the surviving
corporation exchanged, for an amount of
voting stock of the controlling corpora-
tion, an amount of stock in the surviving
corporation that constitutes control of
such corporation (the “control-for-voting-
stock requirement”). For this purpose,
control is defined in § 368(c).
In King Enterprises, Inc. v. United
States, 418 F.2d 511 (Ct. Cl. 1969), as part
of an integrated plan, a corporation ac-
quired all of the stock of a target corpora-
tion from the target corporation’s share-
holders for consideration, in excess of 50
percent of which was acquiring corpora-
tion stock, and subsequently merged the
target corporation into the acquiring corpo-
ration. The court held that, because the
merger was the intended result of the stock
acquisition, the acquiring corporation’s ac-
quisition of the target corporation qualified
as a reorganization under § 368(a)(1)(A).
Section 354(a)(1) provides that no gain
or loss will be recognized if stock or secu-
rities in a corporation a party to a reorga-
nization are, in pursuance of the plan of
reorganization, exchanged solely for
stock or securities in another corporation
a party to the reorganization.
Section 356(a)(1) provides that, if
§ 354 would apply to the exchange except
for the receipt of money or property other
than stock or securities in a corporate
party to the reorganization, the recipient
shall recognize gain, but in an amount not
in excess of the sum of the money and the
fair market value of the other property.
Section 1.368–1(c) of the Income Tax
Regulations provides that a plan of reor-
ganization must contemplate the bona
fideexecution of one of the transactions
specifically described as a reorganization
in § 368(a) and the bona fideconsumma-
tion of each of the requisite acts under
which nonrecognition of gain is claimed.
Section 1.368–2(g) provides that the term
plan of reorganization is not to be con-
strued as broadening the definition of re-
organization as set forth in § 368(a), but is
to be taken as limiting the nonrecognition
of gain or loss to such exchanges or distri-
butions as are directly a part of the trans-
action specifically described as a reorga-
nization in § 368(a).
As assumed in the facts, under general
principles of tax law, including the step
transaction doctrine, the tender offer and
the statutory merger in both Situations 1
and 2are treated as an integrated acquisi-
tion by P of all of the T stock. The princi-
ples of King Enterprises support the con-
clusion that, because the tender offer is
integrated with the statutory merger in
Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

June 4, 200112982001–23 I.R.B.
both Situations 1 and 2, the tender offer
exchange is treated as part of the statutory
merger (hereinafter the “Transaction”) for
purposes of the reorganization provisions.
Cf. J.E. Seagram Corp. v. Commissioner,
104 T.C. 75 (1995) (treating a tender offer
that was an integrated step in a plan that
included a forward triangular merger as
part of the merger transaction). Conse-
quently, the integrated steps, which result
in P acquiring all of the stock of T, must be
examined together to determine whether
the requirements of § 368(a)(2)(E)
are satisfied. Cf. § 1.368–2(j)(3)(i);
§ 1.368–2(j)(6), Ex. 3 (suggesting that, ab-
sent a special exception, steps that are
prior to the merger, but are part of the
transaction intended to qualify as a reorga-
nization under §§ 368(a)(1)(A) and
368(a)(2)(E), should be considered for
purposes of determining whether the con-
trol-for-voting-stock requirement is satis-
fied).
In both situations, in the Transaction,
the shareholders of T exchange, for P
voting stock, an amount of T stock con-
stituting in excess of 80 percent of the
voting stock of T. Therefore, the con-
trol-for-voting-stock requirement is sat-
isfied. Accordingly, in both Situations 1
and 2, the Transaction qualifies as a reor-
ganization under §§ 368(a)(1)(A) and
368(a)(2)(E).
Under §§ 1.368–1(c) and 1.368–2(g),
all of the T shareholders that exchange
their T stock for P stock in the Transac-
tion will be treated as exchanging their T
stock for P stock in pursuance of a plan
of reorganization. Therefore, T share-
holders that exchange their T stock only
for P stock in the Transaction will recog-
nize no gain or loss under § 354. T
shareholders that exchange their T stock
for P stock and cash in the Transaction
will recognize gain to the extent pro-
vided in § 356. In both Situations 1 and
2, none of P, S, or T will recognize any
gain or loss in the Transaction, and P’s
basis in the T stock will be determined
under § 1.358–6(c)(2) by treating P as
acquiring all of the T stock in the Trans-
action and not acquiring any of the T
stock before the Transaction.
HOLDING
On the facts set forth in Situations 1
and 2, the control-for-voting-stock re-
quirement is satisfied in the Transaction,
the Transaction constitutes a tax-free reor-
ganization under §§ 368(a)(1)(A) and
368(a)(2)(E), and § 354 or § 356 applies
to each exchanging shareholder.
DRAFTING INFORMATION
The principal authors of this revenue
ruling are Marnie Rapaport and Joseph
M. Calianno of the Office of Associate
Chief Counsel (Corporate). For further
information regarding this revenue ruling,
contact Ms. Rapaport at (202) 622-7550
(not a toll-free call) or Mr. Calianno at
(202) 622-7930 (not a toll-free call).
Section 382.—Limitation on Net
Operating Loss Carryforwards
and Certain Built-In Losses
Following Ownership Change
The adjusted applicable federal long-term rate is
set forth for the month of June 2001. See Rev. Rul.
2001–27, beginning on this page.
Section 467.—Certain Payments
for the Use of Property or
Services
The adjusted applicable federal short-term, mid-term,
and long-term rates are set forth for the month of June
2001. See Rev. Rul. 2001–27, beginning on this page.
Section 468.—Special Rules for
Mining and Solid Waste
Reclamation and Closing Costs
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of June 2001. See Rev. Rul. 2001–27, beginning on
this page.
Section 482.—Allocation of
Income and Deductions Among
Taxpayers
Federal short-term, mid-term, and long-term
rates are set forth for the month of June 2001. See
Rev. Rul. 2001–27, beginning on this page.
Section 483.—Interest on
Certain Deferred Payments
The adjusted applicable federal short-term, mid-term,
and long-term rates are set forth for the month of June
2001. See Rev. Rul. 2001–27, beginning on this page.
Section 642.—Special Rules for
Credits and Deductions
Federal short-term, mid-term, and long-term
rates are set forth for the month of June 2001. See
Rev. Rul. 2001–27, beginning on this page.
Section 704(c).—Contributed
Property
26 CFR 1.704–3: Contributed property.
Can a Qualified Master Feeder-Structure aggre-
gate built-in gains and losses from contributed secu-
rities for purposes of making section 704(c) and re-
verse section 704(c) allocations? See Rev. Proc.
2001–36, page 1326.
Section 807.—Rules for Certain
Reserves
The adjusted applicable federal short-term, mid-term,
and long-term rates are set forth for the month of June
2001. See Rev. Rul. 2001–27, beginning on this page.
Section 846.—Discounted
Unpaid Losses Defined
The adjusted applicable federal short-term, mid-term,
and long-term rates are set forth for the month of June
2001. See Rev. Rul. 2001–27, beginning on this page.
Section 942.—Foreign Trading
Gross Receipts
This revenue procedure addresses elections under
sections 942 and 943 of the Internal Revenue Code
and under section 5(c)(2) of Pub. L. No. 106–519,
114 Stat. 2423. See Rev. Proc. 2001–37, page 1327.
Section 943.—Other Definitions
and Special Rules
This revenue procedure addresses elections under
sections 942 and 943 of the Internal Revenue Code
and under section 5(c)(2) of Pub. L. No. 106–519,
114 Stat. 2423. See Rev. Proc. 2001–37, page 1327.
Section 1274.—Determination
of Issue Price in the Case of
Certain Debt Instruments Issued
for Property
(Also Sections 42, 280G, 382, 412, 467, 468, 482,
483, 642, 807, 846, 1288, 7520, 7872.)
Federal rates; adjusted federal rates;
adjusted federal long-term rate, and

REV. RUL. 2001–27 TABLE 1
Applicable Federal Rates (AFR) for June 2001
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-Term
AFR4.15%4.11%4.09%4.08%
110% AFR4.57%4.52%4.49%4.48%
120% AFR4.99%4.93%4.90%4.88%
130% AFR5.41% 5.34%5.30%5.28%
Mid-Term
AFR5.02%4.96%4.93%4.91%
110% AFR5.53%5.46% 5.42%5.40%
120% AFR6.04%5.95%5.91%5.88%
130% AFR6.55%6.45%6.40%6.36%
150% AFR7.58%7.44%7.37%7.33%
175% AFR8.87%8.68%8.59%8.53%
Long-Term
AFR5.75%5.67%5.63%5.60%
110% AFR6.34%6.24%6.19%6.16%
120% AFR6.92%6.80%6.74%6.71%
130% AFR7.51%7.37%7.30%7.26%
2001–23 I.R.B.1299June 4, 2001
the long-term exempt rate. For pur-
poses of sections 382, 1274, 1288, and
other sections of the Code, tables set forth
the rates for June 2001.
Rev. Rul. 2001–27
This revenue ruling provides various
prescribed rates for federal income tax
purposes for June 2001 (the current
month). Table 1 contains the short-term,
mid-term, and long-term applicable fed-
eral rates (AFR) for the current month for
purposes of section 1274(d) of the Inter-
nal Revenue Code. Table 2 contains the
short-term, mid-term, and long-term ad-
justed applicable federal rates (adjusted
AFR) for the current month for purposes
of section 1288(b). Table 3 sets forth the
adjusted federal long-term rate and the
long-term tax-exempt rate described in
section 382(f). Table 4 contains the ap-
propriate percentages for determining the
low-income housing credit described in
section 42(b)(2) for buildings placed in
service during the current month. Finally,
Table 5 contains the federal rate for deter-
mining the present value of an annuity, an
interest for life or for a term of years, or a
remainder or a reversionary interest for
purposes of section 7520.
REV. RUL. 2001–27 TABLE 2
Adjusted AFR for June 2001
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
adjusted AFR3.46%3.43%3.42% 3.41%
Mid-term
adjusted AFR3.99%3.95%3.93%3.92%
Long-term
adjusted AFR5.01%4.95%4.92%4.90%
REV. RUL. 2001–27 TABLE 3
Rates Under Section 382 for June 2001
Adjusted federal long-term rate for the current month5.01%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the
adjusted federal long-term rates for the current month and the prior two months.)5.01%

June 4, 200113002001–23 I.R.B.
REV. RUL. 2001–27 TABLE 5
Rate Under Section 7520 for June 2001
Applicable federal rate for determining the present value of an annuity, an interest for
life or a term of years, or a remainder or reversionary interest 6.0%
REV. RUL. 2001–27 TABLE 4
Appropriate Percentages Under Section 42(b)(2) for June 2001
Appropriate percentage for the 70% present value low-income housing credit 8.26%
Appropriate percentage for the 30% present value low-income housing credit3.54%
Section 1288.—Treatment of
Original Issue Discounts of Tax-
Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of June 2001. See Rev. Rul. 2001–27, page 1298.
Section 4081.—Imposition of Tax
26 CFR 48.4081–8: Taxable fuel; measurement.
T.D. 8945
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 48
Taxable Fuel Measurement
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations relating to the measure-
ment of taxable fuel. The regulations af-
fect certain blenders, enterers, refiners,
terminal operators, and throughputters.
DATES: Effective Date: These regula-
tions are effective May 18, 2001.
Applicability Date: These regulations
are applicable January 1, 1994.
FOR FURTHER INFORMATION CON-
TACT: Frank Boland (202) 622-3130
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Section 4081 imposes a tax on certain
removals, entries, and sales of taxable
fuel. Section 4083 provides that taxable
fuel means gasoline, diesel fuel, and
kerosene.
Before July 1, 2000, regulations pro-
vided that gallons of taxable fuel could
be measured on the basis of actual volu-
metric gallons or gallons adjusted to 60
degrees Fahrenheit. However, regula-
tions that were published in the Federal
Registeron March 31, 2000 (T.D. 8879;
65 FR 17149), provide that beginning
July 1, 2000, for each period from July 1
through the following June 30 a person
liable for tax on a removal may use only
one of the two bases of measurement
with respect to taxable fuel removed
from any particular terminal, refinery, or
blending facility. This rule (the consis-
tency requirement) also applies to taxable
entries and sales.
After publication of T.D. 8879
(2000–16 I.R.B. 882), the IRS and the
Treasury Department determined that
many taxpayers would have had to
change their accounting systems to com-
ply with the consistency requirement and
would have been unable to complete the
necessary changes by July 1, 2000. Ac-
cordingly, Notice 2000–33 (2000–27
I.R.B. 97) provided that taxpayers would
not be required to comply with the consis-
tency requirement before July 1, 2001. In
the meantime, a taxpayer could use either
basis of measurement for each taxable re-
moval, entry, or sale of taxable fuel.
Explanation of Provisions
The IRS and the Treasury Department
have now determined that the consistency
requirement would force many taxpayers
to alter current standard business prac-
tices and potentially could make routine
IRS examinations more time consuming
and burdensome. To avoid these adverse
consequences, the final regulations in this
document remove the consistency re-
quirement and reinstate the provision that
was in effect before July 1, 2000.
Effect on Other Documents
Notice 2000–33 (2000–27 I.R.B. 97) is
obsolete as of May 18, 2001.
Special Analyses
This rule relieves taxpayer burden by
eliminating a requirement with respect to
the measurement of taxable fuel. There-
fore, it has been determined that notice and
public comment are unnecessary and con-
trary to the public interest. For the same
reason, a delayed effective date under 5
U.S.C. 553(d) is not required. Because no
preceding notice of proposed rulemaking
is required for this Treasury decision and
the rule does not impose on small entities a
collection of information requirement, the
provisions of the Regulatory Flexibility
Act do not apply. It also has been deter-
mined that this Treasury decision is not a
significant regulatory action as defined in
Executive Order 12866. Therefore, a regu-
latory assessment is not required. Pursuant
to section 7805(f) of the Code, these final
regulations were submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on their
impact on small business.
Drafting Information
The principal author of these regula-
tions is Frank Boland, Office of Associate
Chief Counsel (Passthroughs and Special
Industries). However, other personnel
from the IRS and Treasury Department
participated in their development.
* * * * *

2001–23 I.R.B.1301June 4, 2001
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 48 is
amended as follows:
PART 48–MANUFACTURERS AND
RETAILERS EXCISE TAXES
Paragraph 1. The authority citation for
part 48 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 48.4081–8 is revised to
read as follows:
§48.4081–8 Taxable fuel; measurement.
(a)In general. Volumes of taxable fuel
may be measured on the basis of actual
volumetric gallons or gallons adjusted to
60 degrees Fahrenheit.
(b) Effective date. This section is ap-
plicable January 1, 1994.
Robert E. Wenzel,
Deputy Commissioner
of Internal Revenue.
Approved May 10, 2001.
Mark A. Weinberger,
Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on May
17, 2001, 8:45 a.m., and published in the issue of the
Federal Register for May 18, 2001, 66 F.R. 27597)
Section 4083.—Definitions;
Special Rule; Administrative
Authority
26 CFR 48.4083–1: Taxable fuel: administrative
authority.
Administrative Appeal of Dyed Fuel and Refusal
Penalties.This revenue procedure explains how to re-
quest an administrative appeal of the penalties imposed
by § 6715, relating to the misuse of dyed diesel fuel
and kerosene, and §§ 4083(c)(3) and 7342, relating to
the refusal to admit entry for purposes of inspecting fa-
cilities and equipment and taking and removing fuel
samples. See Rev. Proc. 2001–33, page 1322.
Section 6715.—Dyed Fuel Sold
for Use or Used in Taxable Use
Administrative Appeal of Dyed Fuel and Refusal
Penalties.This revenue procedure explains how to re-
quest an administrative appeal of the penalties imposed
by § 6715, relating to the misuse of dyed diesel fuel
and kerosene, and §§ 4083(c)(3) and 7342, relating to
the refusal to admit entry for purposes of inspecting fa-
cilities and equipment and taking and removing fuel
samples. See Rev. Proc. 2001–33, page 1322.
Section 7520.—Valuation Tables
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of June 2001. See Rev. Rul. 2001–27, page 1298.
Section 7872.—Treatment of
Loans With Below-Market
Interest Rates
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of June 2001. See Rev. Rul. 2001–27, page 1298.

Procedures for Requesting an
Adoption, Change, or Retention
of Accounting Period
Notice 2001–34
This notice provides a proposed rev-
enue procedure that, when finalized, will
provide the procedures under § 442 of the
Internal Revenue Code, and the regula-
tions thereunder, to establish a business
purpose and request the approval of the
Commissioner to adopt, change, or retain
a taxpayer’s annual accounting period.
The proposed revenue procedure will
apply to taxpayers that are outside the
scope of the revenue procedures that pro-
vide for automatic approval to adopt,
change, or retain an annual accounting
period. See, e.g.,Rev. Proc. 2000–11,
2000–3, I.R.B. 309; Notice 2001–35,
2001–23 I.R.B 1314, and Rev. Proc.
66–50, 1966–2 C.B. 1260. This proposed
revenue procedure is being issued concur-
rently with new proposed regulations
under §§ 441, 442, 706 and 1378, and a
proposed revenue procedure (Notice
2001–35, 2001–23 I.R.B.) updating Rev.
Proc. 87–32, 1987–2 C.B. 396, which will
provide procedures under which a part-
nership, S corporation, electing S corpo-
ration, or PSC may obtain automatic ap-
proval to adopt, retain, or change its
annual accounting period. References in
this proposed revenue procedure to the
regulations under §§ 441, 442, 706, and
1378 are to the new proposed regulations,
and references to “Rev. Proc. 2001–XX”
are to the proposed revenue procedure up-
dating Rev. Proc. 87–32. All three docu-
ments are intended to be finalized concur-
rently.
Under its current ruling practice, the
Internal Revenue Service weighs the mer-
its of a taxpayer’s stated business purpose
for the requested annual accounting pe-
riod against the amount of distortion of
income or other tax consequences result-
ing from the adoption of, change to, or re-
tention of that annual accounting period.
In general, the only circumstance in
which the Service has determined that a
taxpayer’s business purpose overcomes
more than de minimisdistortion of in-
come is where the taxpayer is adopting,
changing to, or retaining, its natural busi-
ness year. In any other case, such as
where a taxpayer is requesting to change
its annual accounting period to conform
to its financial reporting period, the tax-
payer generally has been denied approval
to use an annual accounting period that
results in more than de minimisdistortion
of income.
Under the proposed revenue procedure,
the Service in its ruling practice would no
longer weigh the merit of a taxpayer’s
stated business purpose against the
amount of distortion of income. Taxpay-
ers wanting to adopt, change to, or retain
a natural business year generally would
be granted approval under the proposed
revenue procedure (provided they agree
to general terms and conditions) as under
the current IRS ruling practice. Also con-
sistent with the current IRS ruling prac-
tice, establishing a natural business year
generally will be the only circumstance
under which a partnership, S corporation,
electing S corporation, or PSC will be
granted approval. However, the IRS rul-
ing practice for other taxpayers generally
will be liberalized. These other taxpayers
that do not establish a natural business
year generally would be granted approval
under the proposed revenue procedure if
they agree to certain additional terms,
conditions, and adjustments designed to
neutralize the tax effects of substantial
distortion of income resulting from the
change. Under the Service’s current rul-
ing practice, these other taxpayers gener-
ally would have been denied approval to
change their annual accounting period if
the change would have resulted in more
than de minimisdistortion of income.
The proposed revenue procedure pro-
vides audit protection to taxpayers adopt-
ing, changing, or retaining an annual ac-
counting period under the revenue
procedure. In conjunction with the provi-
sion of audit protection, taxpayers under
examination that do not obtain consent of
the appropriate director are not within the
scope of the proposed revenue procedure.
The Service and Treasury Department
specifically request comments regarding
whether the benefits of providing audit
protection outweigh the burden on tax-
payers under examination of having to
obtain a director’s consent, particularly
with respect to C corporations which gen-
erally would not benefit from audit pro-
tection but still would be required to ob-
tain a director’s consent if under examina-
tion.
The Service also welcomes other com-
ments on the proposed revenue procedure
provided in this notice. Comments
should be submitted by September 11,
2001, either to:
Internal Revenue Service
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044
Attn: CC:PA:T:CRU (ITA)
Room 5228
or electronically via:
Notice.Comments@m1.irscounsel.treas.gov
(the Service Comments e-mail address).
Rev. Proc. 2001–XX
TABLE OF CONTENTSPAGE
SECTION 1. PURPOSE
SECTION 2. BACKGROUND
.01 Taxable year defined
(1) In general
(2) Annual accounting period
(3) Required taxable year
.02 Adoption of taxable year
.03 Change in taxable year
(1) In general
(2) Annualization of short period re-
turn
(3) No retroactive change in annual
accounting period
.04 Retention of taxable year
.05 Approval of an adoption, change,
or retention
(1) In general
(2) Automatic approval
.06 Business purpose
(1) In general
(2) Sufficient business purposes
(3) Insufficient business purposes
.07 Section 444 elections
SECTION 3. SCOPE
.01 Applicability
.02 Inapplicability
(1) Automatic approval
(2) Under examination
(3) Before an area office
(4) Before a federal court
June 4, 200113022001–23 I.R.B.
Part III. Administrative, Procedural, and Miscellanous

2001–23 I.R.B.1303June 4, 2001
(5) Consolidated group member
(6) Partnerships and S corpora-
tions
SECTION 4. DEFINITIONS
.01 Taxpayer
.02 Pass-through entity
.03 First effective year
.04 Short period
.05 Field Office, Area Office, Director
.06 Under examination
(1) In general
(2) Partnerships and S corporations
subject to TEFRA
.07 Issue under consideration
(1)During an examination
(2) Before an area office
(3) Before a federal court
SECTION 5. BUSINESS PURPOSE
AND TERMS, CONDITIONS, AND
ADJUSTMENTS
.01 In general
(1) Approval of requests
(2) Exceptions
.02 Business purpose
(1) Taxpayers that establish a busi-
ness purpose
(2) Taxpayers that are deemed to have
established a business purpose
.03 Natural business year
(1) Annual business cycle test
(2) Seasonal business test
(3) 25-percent gross receipts test
.04 General terms and conditions
(1)Short period tax return
(2) Subsequent year tax returns
(3) Book conformity
(4) Changes in natural business year
(5) 52-53-week taxable years
(6) Creation of net operating loss or
capital loss
(7) Creation of general business
credits
.05 Additional terms, conditions, and
adjustments
(1) Substantial distortion
(2) Deferral of substantial pass-
through income
(3) Special rule for certain pass-
through entities
(4) Use of expiring NOLs, CLs, and
credits
(5) Concurrent change for related
entities
(6) Other terms, conditions, and ad-
justments
.06 Examples
SECTION 6. GENERAL APPLICATION
PROCEDURES
.01 What to file
(1) Application
(2) Signature requirement
(3) Additional information regarding
prior applications
(4)Additional information for sec-
tion 5.03 (1) and (2)
(5) Additional information for sec-
tion 5.04
(6) Additional information for sec-
tion 5.05
.02 When to file
(1) In general
(2) Electing S corporations
.03 Where to file
(1) In general
(2) Electing S corporations
(3) Exempt organizations
.04 User fee
.05 Consolidated groups
.06 Additional procedures if under ex-
amination, before an area office, or
before a federal court
(1) Taxpayers under examination
(2) Taxpayers before an area office
(3) Taxpayers before a federal
court
SECTION 7. PROCESSING OF
APPLICATION
.01Service discretion
.02Applicability of Rev. Proc. 2001–1,
Rev. Proc. 2001–4, and any succes-
sor revenue procedures
.03 Incomplete application– 21 day
rule
.04 Conference in the national office
.05Letter ruling
.06 Effect of noncompliance
.07Effect on other offices of the Service
SECTION 8. EFFECT OF APPROVAL
.01 Audit protection
(1) In general
(2) Exceptions
.02 Subsequently required changes
(1) In general
(2) Retroactive change or modifica-
tion
SECTION 9. REVIEW BY DIRECTOR
.01 In general
.02 National office consideration
SECTION 10. EFFECTIVE DATE AND
TRANSITION RULE
.01 In general
.02 Transition rule for pending appli-
cations
SECTION 11. EFFECT ON OTHER
DOCUMENTS
SECTION 12. PAPERWORK REDUC-
TION ACT
DRAFTING INFORMATION
SECTION 1. PURPOSE
This revenue procedure provides the
general procedures under § 442 of the In-
ternal Revenue Code and § 1.442–1(b) of
the Income Tax Regulations for establish-
ing a business purpose and obtaining the
approval of the Commissioner of Internal
Revenue to adopt, change, or retain an an-
nual accounting period for federal income
tax purposes. This revenue procedure
also describes the terms, conditions, and
adjustments that the Commissioner may
deem necessary to effect the adoption,
change, or retention.
SECTION 2. BACKGROUND
.01 Taxable year defined.
(1) In general. Section 441(b) and
§ 1.441–1(b)(1) of the regulations provide
that the term “taxable year” generally
means the taxpayer’s annual accounting
period, if it is a calendar or fiscal year, or,
if applicable, the taxpayer’s required tax-
able year.
(2) Annual accounting period. Sec-
tion 441(c) and § 1.441–1(b)(3) provide
that the term “annual accounting period”
means the annual period (calendar year or
fiscal year) on the basis of which the tax-
payer regularly computes its income in
keeping its books.
(3) Required taxable years. Section
1.441–1(b)(2) provides that certain tax-
payers must use the particular taxable
year that is required under the Code and
the regulations thereunder (the “required
taxable year”). For example, a partner-
ship, S corporation, electing S corpora-
tion, or personal service corporation
(PSC) has a required taxable year that
generally conforms to the taxable years of
its partners, shareholders, or employee-
owners pursuant to §§ 706(b), 1378, and
441(i), respectively. Similarly, a specified

foreign corporation has a required taxable
year that generally represents the taxable
year of its majority U.S. shareholder pur-
suant to § 898. However, § 1.441–1
(b)(2)(ii) describes exceptions under
which certain taxpayers may use a taxable
year other than their required taxable
year. For example, a partnership, S cor-
poration, electing S corporation, or PSC
may have a taxable year other than its re-
quired taxable year if it elects to use a
52–53-week taxable year that references
its required taxable year, makes an elec-
tion under § 444, or establishes a business
purpose and obtains approval under § 442
for that taxable year. See also§§ 706(b),
1378, and 441(i).
.02 Adoption of taxable year. Gener-
ally, a taxpayer may adopt any taxable
year that satisfies § 441 and the regula-
tions thereunder without the approval of
the Commissioner. However, a partner-
ship, electing S corporation, or PSC that
wants to adopt a taxable year other than
its required taxable year, a 52–53-week
taxable year that references its required
taxable year, or a taxable year elected
under § 444, must establish a business
purpose and obtain approval under § 442.
See§ 1.441–1(c).
.03 Change in taxable year.
(1) In general. Section
1.442–1(a)(1) generally provides that a
taxpayer that wants to change its annual
accounting period and use a new taxable
year must obtain approval from the Com-
missioner.
(2) Annualization ofshort period re-
turn. Section 443(b) and § 1.443–1
(b)(1)(i) generally provide that if a return
is made for a short period resulting from a
change of an annual accounting period,
the taxable income for the short period
must be placed on an annual basis by mul-
tiplying the income by 12 and dividing
the result by the number of months in the
short period. Unless § 443(b)(2) and
§ 1.443–1(b)(2) apply, the tax for the
short period is the same part of the tax
computed on an annual basis as the num-
ber of months in the short period is of 12
months. See§ 1.706–1(b)(4)(i) for an ex-
ception for partnerships.
(3) No retroactive change in annual
accounting period. Unless specifically
authorized by the Commissioner, a tax-
payer may not request, or otherwise
make, a retroactive change in annual ac-
counting period, regardless of whether the
change is to a required taxable year.
.04 Retention of taxable year. In cer-
tain cases, a partnership, S corporation,
electing S corporation, or PSC will be re-
quired to change its taxable year unless it
establishes a business purpose and obtains
the approval of the Commissioner under
§ 442, or makes an election under § 444,
to retain its current taxable year. See
§ 1.441–1(d). For example, a corporation
with a June 30 fiscal year that either be-
comes a PSC or elects to be an S corpora-
tion, and as a result is required to use the
calendar year, must obtain the approval of
the Commissioner to retain its current fis-
cal year. Similarly, a partnership using a
taxable year that corresponds to its re-
quired taxable year generally must obtain
the approval of the Commissioner to re-
tain that taxable year if its required tax-
able year changes as a result of a change
in ownership. But see§ 706(b)(2)(B).
.05 Approval of an adoption,
change, or retention.
(1) In general. Section 1.442–1(b)
provides that in order to secure approval
to adopt, change, or retain an annual ac-
counting period, a taxpayer must file an
application generally on Form 1128, Ap-
plication to Adopt, Change, or Retain a
Tax Year, with the Commissioner no ear-
lier than the day following the close of the
first taxable year in which the taxpayer
wants the change to be effective (the first
effective year) and no later than the 15th
day of the third calendar month following
the close of the first effective year. In
general, an adoption, change, or retention
in annual accounting period will be ap-
proved where the taxpayer establishes a
business purpose for the requested annual
accounting period and agrees to the Com-
missioner’s prescribed terms, conditions,
and adjustments for effecting the adop-
tion, change, or retention.
(2) Automatic approval. Under the
Code and regulations, certain taxpayers
are allowed to change their annual ac-
counting periods without approval or with
automatic approval (see, e.g.,§ 859(b),
§ 1.442–1(c) and (d), and § 1.706–1T(c)).
In addition, the Service has issued rev-
enue procedures that enable certain tax-
payers to obtain automatic approval to
adopt, change, or retain their annual ac-
counting periods. See, for example, Rev.
Proc. 2000–11, 2000–3 I.R.B. 309 (or any
successor) for corporations; Rev. Proc.
2001– XX, [insert cite] (or any successor)
for partnerships, S corporations, electing
S corporations, and PSCs; and Rev. Proc.
66–50, 1966–2 C.B. 1260 (or any succes-
sor) for individuals.
.06 Business purpose.
(1) In general. Section 1.442–1(b)
provides that in determining whether a
taxpayer has established a business pur-
pose and which terms, conditions, and
adjustments will be required, considera-
tion will be given to all the facts and cir-
cumstances relating to the adoption,
change, or retention, including the tax
consequences resulting therefrom. See
alsoH.R. Rep. No. 99–841, 99th Cong.,
2d Sess., II–318, 1986–3 (Vol. 4) C.B.
319.
(2) Sufficient business purposes.
Section 1.442–1(b) provides that gener-
ally the requirement of a business purpose
will be satisfied, and adjustments to neu-
tralize any tax consequences will not be
required, if the requested annual account-
ing period coincides with the taxpayer’s
natural business year. A taxpayer gener-
ally is deemed to have established a nat-
ural business year if it satisfies the 25-per-
cent gross receipts test provided in section
5.04 of Rev. Proc. 2001–XX, [insert cite].
In Rev. Rul. 87–57, 1987–2 C.B. 117, the
Service determined that a partnership, S
corporation, or PSC established, to the
satisfaction of the Secretary, a business
purpose for adopting, retaining, or chang-
ing its taxable year in the following four
situations:
(a) the taxpayer established that
the taxable year satisfied the 25-percent
gross receipts test and resulted in less de-
ferral than its natural business year;
(b) the taxpayer would have estab-
lished a natural business year under the
25-percent gross receipts test, except that
a labor strike closed the taxpayer’s busi-
ness during a period that included its nor-
mal peak season;
(c) the taxpayer, for the past 10
years, had a three-month period of in-
significant gross receipts during which,
due to weather conditions, its business
was not operational; and
(d) the taxpayer, which previously
used the cash receipts and disbursements
method and changed to an accrual
method, would have established a natural
business year under the 25-percent gross
June 4, 200113042001–23 I.R.B.

receipts test if it had calculated its gross
receipts under an accrual method.
(3) Insufficient business purposes.
Section 1.442–1(b) provides that, in the
case of a partnership, S corporation, elect-
ing S corporation, or PSC, deferral of in-
come to partners, shareholders, or em-
ployee-owners will not be treated as a
business purpose for using a taxable year
other than its required taxable year. In ad-
dition, the legislative history to the Tax
Reform Act of 1986 provides that the fol-
lowing reasons ordinarily will not be suf-
ficient for a partnership, S corporation, or
PSC to establish that the business purpose
requirement for a particular taxable year
has been met:
(a) the use of a particular year for
regulatory or financial accounting pur-
poses;
(b) the hiring patterns of a particu-
lar business, e.g.,the fact that a firm typi-
cally hires staff during certain times of the
year;
(c) the use of a particular year for
administrative purposes, such as the ad-
mission or retirement of partners or share-
holders, promotion of staff, and compen-
sation or retirement arrangements with
staff, partners, or shareholders; and
(d) the fact that a particular busi-
ness involves the use of price lists, model
years, or other items that change on an an-
nual basis.
Although the above items are not them-
selves sufficient to establish a business
purpose, they may be considered in con-
nection with other items by the Commis-
sioner in determining whether a taxpayer
has a business purpose for a particular
taxable year. H.R. Rep. No. 99–841, 99
th
Cong., 2d Sess., II–318, 1986–3 (Vol. 4)
C.B. 319
.07 Section 444 elections. Section 444
generally allows certain partnerships, S
corporations, electing S corporations, and
PSCs to elect a taxable year other than
their required taxable year if the deferral
period of the new taxable year is three
months or less. Partnerships and S corpo-
rations with § 444 elections must make
required payments under § 7519 that ap-
proximate the amount of the deferral ben-
efit and PSCs with § 444 elections are
subject to the minimum distribution re-
quirements of § 280H. A taxpayer may
automatically adopt, change to, or retain a
taxable year permitted by § 444 by filing
a Form 8716, Election to Have a Taxable
Year Other Than a Required Taxable
Year. A taxpayer that wants to terminate
its § 444 election must follow the auto-
matic procedures under § 1.444–1T(a)(5)
to change to its required taxable year or
establish a business purpose for its tax-
able year pursuant to § 442 and this rev-
enue procedure.
SECTION 3. SCOPE
.01 Applicability. Except as provided
in section 3.02 of this revenue procedure,
this revenue procedure applies to any tax-
payer requesting the Commissioner’s ap-
proval to adopt, change, or retain an an-
nual accounting period for federal income
tax purposes.
.02 Inapplicability. This revenue proce-
dure does not apply to:
(1) Automatic approval.An adop-
tion, change, or retention in annual ac-
counting period that is permitted to be
made pursuant to a provision in the Code
or regulations or a published automatic
approval procedure. Before submitting
an application pursuant to this revenue
procedure, taxpayers are encouraged to
review the automatic approval procedures
referenced in § 1.442–1 and the following
revenue procedures: Rev. Proc. 2000–11
(for corporations); Rev. Proc. 2001–XX
(for partnerships, S corporations, electing
S corporations, and PSCs); Rev. Proc.
66–50, as modified by Rev. Proc. 81–40,
1981–2 C.B. 604 (for individuals); Rev.
Proc. 85–58, 1985–2 C.B. 740, and Rev.
Proc. 76–10, 1976–1 C.B. 548, as modi-
fied by Rev. Proc. 79–3, 1979–1 C.B. 483
(for exempt organizations); Rev. Proc.
87–27, 1987–1 C.B. 769 (for employee
retirement plans and employee trusts);
and Rev. Proc. 85–15, 1985–1 C.B. 516
(for changes to comply with § 441(g)).
(2) Under examination. A change or
retention of annual accounting period if
the taxpayer is under examination, unless
it obtains consent of the appropriate direc-
tor as provided in section 6.06(1).
(3) Before an area office. A change
or retention in annual accounting period if
the taxpayer is before an area office with
respect to any income tax issue and its an-
nual accounting period is an issue under
consideration by the area office.
(4) Before a federal court. A change
or retention in annual accounting period if
the taxpayer is before a federal court with
respect to any income tax issue and its an-
nual accounting period is an issue under
consideration by the federal court.
(5) Consolidated group member. A
change or retention in annual accounting
period by a taxpayer that is (or was for-
merly) a member of a consolidated group
that is: (a) under examination for a tax-
able year(s) that the taxpayer was a mem-
ber of the group, unless the taxpayer ob-
tains consent of the appropriate director
as provided in section 6.06(1); or (b) be-
fore an area office or before a federal
court for a taxable year(s) that the tax-
payer was a member of the group and the
annual accounting period is an issue
under consideration by the area office or
the federal court.
(6) Partnerships and S corporations.
A change or retention in annual account-
ing period by a partnership or S corpora-
tion if, on the date the entity would other-
wise file its application with the service
center, the entity’s annual accounting pe-
riod is an issue under consideration in the
examination of a partner’s or share-
holder’s federal income tax return or an
issue under consideration by an area of-
fice or by a federal court with respect to a
partner’s or shareholder’s federal income
tax return.
SECTION 4. DEFINITIONS
.01 Taxpayer. The term “taxpayer” has
the same meaning as the term “person” as
defined in § 7701(a)(1) (an individual,
trust, estate, partnership, association, or
corporation) rather than the meaning of
the term “taxpayer” as defined in
§ 7701(a)(14) (any person subject to tax).
.02 Pass-through entity.For purposes
of this revenue procedure, the term “pass-
through entity” means a partnership, S
corporation (as defined in § 1361), elect-
ing S corporation (i.e., a corporation at-
tempting to make an S election for the
first effective year), trust, estate, common
trust fund (as defined in § 584), controlled
foreign corporation (as defined in § 957),
foreign personal holding company (as de-
fined in § 552), passive foreign invest-
ment company that is a qualified electing
fund (as defined in § 1295), or any other
similar entity.
.03 First effective year. The first effec-
tive year is the first taxable year for which
an adoption, change, or retention in an-
nual accounting period is effective. Thus,
2001–23 I.R.B.1305June 4, 2001

in the case of a change, the first effective
year is the short period required to effect
the change. The first effective year is also
the first taxable year for complying with
all the terms and conditions set forth in
the letter ruling granting permission to ef-
fect the adoption, change, or retention of
the taxpayer’s annual accounting period.
.04 Short period. In the case of a
change in annual accounting period, a
taxpayer’s short period is the period be-
ginning with the day following the close
of the old taxable year and ending with
the day preceding the first day of the new
taxable year.
.05 Field Office, Area Office, Director.
The terms “field office,” “area office,”
and “director” have the same meaning as
those terms have in Rev. Proc. 2001–1,
2001–1 I.R.B. 1 (or any successor).
.06 Under examination.
(1) In general.
(a) Except as provided in section
4.06(2) of this revenue procedure, an exam-
ination of a taxpayer with respect to a fed-
eral income tax return begins on the date
the taxpayer is contacted in any manner by
a representative of the Service for the pur-
pose of scheduling any type of examination
of the return. An examination ends:
(i) in a case in which the
Service accepts the return as filed, on the
date of the “no change” letter sent to the
taxpayer;
(ii) in a fully agreed case, on the
earliest of the date the taxpayer executes a
waiver of restrictions on assessment or
acceptance of overassessment (for exam-
ple, a Form 870, 4549, or 4605), the date
the taxpayer makes a payment of tax that
equals or exceeds the proposed deficien-
cy, or the date of the “closing” letter (for
example, Letter 891 or 987) sent to the
taxpayer; or
(iii) in an unagreed or a partial-
ly agreed case, on the earliest of the date
the taxpayer (or its representative) is noti-
fied by an appeals officer that the case has
been referred to an area office from a field
office, the date the taxpayer files a peti-
tion in the Tax Court, the date on which
the period for filing a petition with the Tax
Court expires, or the date of the notice of
claim disallowance.
(b) An examination does not end
as a result of the early referral of an issue
to an area office under the provisions of
Rev. Proc. 96–9, 1996–1 C.B. 575.
(c) An examination resumes on
the date the taxpayer (or its representa-
tive) is notified by an appeals officer (or
otherwise) that the case has been referred
to a field office for reconsideration.
(2) Partnerships and S corporations
subject to TEFRA. For a partnership or an
S corporation that is subject to the
TEFRA unified audit and litigation provi-
sions (note that an S corporation is not
subject to the TEFRA unified audit and
litigation provisions for taxable years be-
ginning after December 31, 1996. See
Small Business Job Protection Act of
1996, Pub. L. No. 104–188, § 1317(a),
110 Stat. 1755, 1787 (1996)), an examina-
tion begins on the date of the notice of the
beginning of an administrative proceed-
ing sent to the Tax Matters Partner/Tax
Matters Person (TMP). An examination
ends:
(a) in the case in which the Ser-
vice accepts the partnership or S corpora-
tion return as filed, on the date of the “no
adjustments” letter or the “no change” no-
tice of the final administrative adjustment
sent to the TMP;
(b) in a fully agreed case, when all
the partners or shareholders execute a
Form 870–P, 870–L, or 870–S; or
(c) in an unagreed or a partially
agreed case, on the earliest of the date the
TMP (or its representative) is notified by
an appeals officer that the case has been
referred to an area office from a field of-
fice, the date the TMP (or a partner or
shareholder) requests judicial review, or
the date on which the period for request-
ing judicial review expires.
.07 Issue under consideration.
(1) During an examination. A tax-
payer’s annual accounting period is an
issue under consideration for the taxable
years under examination if the taxpayer
receives written notification (for example,
by examination plan, information docu-
ment request (IDR), or notification of
proposed adjustments or income tax ex-
amination changes) from the examining
officer(s) specifically citing the tax-
payer’s annual accounting period as an
issue under consideration. For example, a
taxpayer’s annual accounting period is an
issue under consideration as a result of an
examination plan that identifies the pro-
priety of the taxpayer’s annual accounting
period as a matter to be examined. The
question of whether the taxpayer’s annual
accounting period is an issue under con-
sideration may be referred to the national
office as a request for technical advice
under the provisions of Rev. Proc.
2001–2, 2001–1 I.R.B. 79 (or any succes-
sor), or, for exempt organizations, Rev.
Proc. 2001–5, 2001–1 I.R.B. 164 (or any
successor).
(2) Before an area office. A tax-
payer’s annual accounting period is an
issue under consideration for the taxable
years before an area office if the tax-
payer’s annual accounting period is in-
cluded as an item of adjustment in the ex-
amination report referred to an area office
or is specifically identified in writing to
the taxpayer by an area office.
(3) Before a federal court. A tax-
payer’s annual accounting period is an
issue under consideration for the taxable
years before a federal court if the tax-
payer’s annual accounting period is an
item included in the statutory notice of
deficiency, the notice of claim disal-
lowance, the notice of final administrative
adjustment, the pleadings (for example,
the petition, complaint, or answer) or
amendments thereto, or is specifically
identified in writing to the taxpayer by the
government counsel.
SECTION 5. BUSINESS PURPOSE
AND TERMS, CONDITIONS, AND
ADJUSTMENTS
.01 In General.
(1) Approval of requests. Except as
provided in section 5.01(2) of this rev-
enue procedure, a request to adopt,
change, or retain an annual accounting
period ordinarily will be approved if the
taxpayer:
(a) establishes a business purpose
(within the meaning of section 5.02 of
this revenue procedure) for the requested
annual accounting period; and
(b) agrees to the Commissioner’s
prescribed terms, conditions, and adjust-
ments (as described in sections 5.04 and
5.05 of this revenue procedure) under
which the adoption, change, or retention
will be effected.
(2) Exceptions. Notwithstanding the
general rule of section 5.01(1)(a) of this
revenue procedure, a taxpayer with a re-
quired taxable year (other than a partner-
ship, S corporation, electing S corporation,
or PSC) will not be granted approval under
this revenue procedure to adopt, change to,
June 4, 200113062001–23 I.R.B.

or retain a taxable year other than its re-
quired taxable year or, in appropriate cir-
cumstances, a 52–53-week taxable year
that ends with reference to its required tax-
able year. In addition, a partnership, S cor-
poration, electing S corporation, or PSC
will be granted approval to adopt, change
to, or retain an annual accounting period
only if they establish a business purpose
under section 5.02(1) for that annual ac-
counting period. Notwithstanding the gen-
eral rule of section 5.01(1)(b) of this rev-
enue procedure, the Service may determine
that, based on the unique facts of a particu-
lar case and in the interest of sound tax ad-
ministration, terms, conditions, and adjust-
ments that differ from those provided in
this revenue procedure are more appropri-
ate for an adoption, change, or retention
made under this revenue procedure.
.02 Business Purpose.
(1) Taxpayers that establish a busi-
ness purpose. Taxpayers that establish a
business purpose for the requested annual
accounting period under this section
5.02(1) ordinarily will be granted ap-
proval to adopt, change to, or retain that
annual accounting period under this rev-
enue procedure subject only to the general
terms and conditions described in section
5.04 of this revenue procedure.
(a) Natural business year. A tax-
payer (including a partnership, S corpora-
tion, electing S corporation, or PSC) re-
questing to adopt, change to, or retain an
annual accounting period that is the tax-
payer’s natural business year (as described
in section 5.03 of this revenue procedure)
has established a business purpose to the
satisfaction of the Commissioner.
(b) Facts and circumstances. A
taxpayer (including a partnership, S cor-
poration, electing S corporation, or PSC)
may establish a business purpose for the
requested taxable year based on all the
relevant facts and circumstances. For this
purpose, deferral of income to owners
will not be treated as a business purpose.
In addition, administrative and conve-
nience business reasons such as those de-
scribed in Rev. Rul. 87–57, 1987–2 C.B.
117, and the following will not be suffi-
cient to establish a business purpose
under this section:
(i) the use of a particular year for
regulatory or financial accounting purposes;
(ii) the hiring patterns of a par-
ticular business, e.g.,the fact that a firm
typically hires staff during certain times
of the year;
(iii) the use of a particular year
for administrative purposes, such as the
admission or retirement of partners or
shareholders, promotion of staff, and
compensation or retirement arrangements
with staff, partners, or shareholders;
(iv) the fact that a particular
business involves the use of price lists,
model years, or other items that change on
an annual basis;
(v) the use of a particular year
by related entities; and
(vi) the use of a particular year
by competitors.
(2)Taxpayers that are deemed to
have established a business purpose. A
taxpayer other than a partnership, S cor-
poration, electing S corporation, or PSC
that does not establish a business purpose
for the requested annual accounting pe-
riod under section 5.02(1) of this revenue
procedure generally will be deemed to
have established a business purpose if it
provides a non-tax reason for the re-
quested annual accounting period and
agrees to the additional terms, conditions,
and adjustments described in section 5.05
of this revenue procedure, which are in-
tended to neutralize the tax effects of any
resulting substantial distortion of income.
For this purpose, non-tax reasons for the
requested annual accounting period may
include administrative and convenience
business reasons such as those described
in section 5.02(1)(b) that Congress in-
tended, and the Service has held, to be in-
sufficient to satisfy the business purpose
requirement for a partnership, S corpora-
tion, electing S corporation, or PSC to
adopt, change to, or retain a taxable year
other than its required taxable year. The
Service anticipates that an individual tax-
payer that is not a sole proprietor will be
able to establish a non-tax reason for a fis-
cal year only in rare and unusual circum-
stances.
.03 Natural business year.A nat-
ural business year is the annual account-
ing period encompassing all related in-
come and expenses. The natural
business year of a taxpayer may be deter-
mined under any of the following tests
(taking into account the principles of
Rev. Rul. 87–57):
(1) Annual business cycle test. If the
taxpayers’s gross receipts from sales and
services for the short period and the three
immediately preceding taxable years indi-
cate that the taxpayer has a peak and a
non-peak period of business, the tax-
payer’s natural business year is deemed to
end at, or soon after, the close of the peak
period of business. A business whose in-
come is steady from month to month
throughout the year generally will not sat-
isfy this test.
(2) Seasonal business test. If a tax-
payer’s business is operational for only
part of the year (e.g., due to weather con-
ditions) and, as a result, the taxpayer has
insignificant gross receipts during the pe-
riod the business is not operational, the
taxpayer’s natural business year is
deemed to end at, or soon after, the opera-
tions end for the season.
(3) 25-percent gross receipts test. A
natural business year may be established
by any taxpayer other than a member of a
tiered structure (as defined in § 444 and
§ 1.444–2T) using the 25-percent gross
receipts test. The 25-percent gross re-
ceipts test is determined as follows:
(a)Prior three years’ gross re-
ceipts.
(i) Gross receipts from sales and
services for the most recent 12-month
period that ends with the last month of the
requested annual accounting period are
totaled and then divided into the amount
of gross receipts from sales and services
for the last two months of this 12-month
period.
(ii) The same computation as in
(a)(i) above is made for the two preceding
12-month periods ending with the last
month of the requested annual accounting
period.
(b) Natural business year.
(i) If each of the three results
described in (a)(i) and (ii) equals or
exceeds 25 percent, then the requested
annual accounting period is the taxpayer’s
natural business year.
(ii) Notwithstanding (b)(i), if
the taxpayer qualifies under (b)(i) for
more than one natural business year, the
annual accounting period producing the
highest average of the three percentages
(rounded to 1/100 of a percent) described
in (a)(i) and (ii) is the taxpayer’s natural
business year.
(c) Special rules.
(i) To apply the 25-percent
gross receipts test for any particular tax-
2001–23 I.R.B.1307June 4, 2001

able year, the taxpayer must compute its
gross receipts under the method of
accounting used to prepare its federal
income tax returns for such taxable year.
(ii) Regardless of the taxpayer’s
method of accounting, the taxpayer’s allo-
cable share of income from a pass-
through entity generally must be reported
as gross receipts in the month that the
pass-through entity’s taxable year ends.
(iii) If a taxpayer has a prede-
cessor organization and is continuing the
same business as its predecessor, the tax-
payer must use the gross receipts of its
predecessor for purposes of computing
the 25-percent gross receipts test.
(iv) If the taxpayer (including
any predecessor organization) does not
have a 47-month period of gross receipts
(36-month period for requested taxable
year plus additional 11-month period for
comparing requested taxable year with
other potential taxable years), then it can-
not establish a natural business year using
the 25-percent gross receipts test.
(v) If the requested taxable year
is a 52–53-week taxable year, the calendar
month ending nearest to the last day of the
52–53-week taxable year is treated as the
last month of the requested taxable year
for purposes of computing the 25-percent
gross receipts test.
.04 General terms and conditions. The
following general terms and conditions
apply to all taxpayers that obtain approval
under this revenue procedure to adopt,
change, or retain an annual accounting
period:
(1) Short period tax return. The tax-
payer must file a federal income tax re-
turn for the short period required to effect
a change in annual accounting period by
the due date of that return, including ex-
tensions pursuant to § 1.443–1(a). How-
ever, for changes to (or from) a 52–53-
week taxable year referencing the same
month as the current (or requested) tax-
able year, see special rules in § 1.441–2.
The taxpayer’s taxable income for the
short period must be annualized and the
tax must be computed in accordance with
the provisions of §§ 443(b) and
1.443–1(b). But see§ 1.706–1(b)(4)(i)
for an exception from this annualization
requirement for a partnership.
(2) Subsequent year tax returns. Re-
turns for subsequent taxable years gener-
ally must be made on the basis of a full 12
months (or on a 52–53-week basis) end-
ing on the last day of the requested tax-
able year, unless the taxpayer secures the
approval of the Commissioner to change
its requested taxable year.
(3) Book conformity. The books of
the taxpayer must be closed as of the last
day of the requested taxable year. The
taxpayer must compute its income and
keep its books (including financial state-
ments and reports to creditors) on the
basis of the requested taxable year.
(4) Changes in natural business
year.If a partnership, S corporation,
electing S corporation, or PSC changes to
or retains a natural business year under
this revenue procedure and that annual ac-
counting period no longer qualifies as a
permitted taxable year, the taxpayer is
using an impermissible annual accounting
period and should change to a permitted
taxable year. For this purpose, the term
“permitted taxable year” means the re-
quired taxable year, a natural business
year, the ownership taxable year, a tax-
able year elected under § 444, or any
other taxable year for which the taxpayer
establishes a business purpose to the satis-
faction of the Commissioner. Certain
partnerships, S corporations, electing S
corporations, and PSCs may qualify for
automatic approval to change their annual
accounting period under Rev. Proc.
2001–XX. Other taxpayers must request
approval under Rev. Proc. 2001–XX.
(5) 52–53-week taxable years. If ap-
plicable, the taxpayer must comply with
§ 1.441–2(e) (relating to the timing of tak-
ing items into account in those cases where
the taxable year of a pass-through entity or
PSC ends with reference to the same calen-
dar month as one or more of its partners,
shareholders, or employee-owners).
(6)Creation of net operating loss or
capital loss. If the taxpayer has a net op-
erating loss (NOL) or capital loss (CL) in
the short period required to effect a
change in annual accounting period, the
taxpayer may not carry the NOL or CL
back, but must carry it over in accordance
with the provisions of §§ 172 and 1212,
respectively, beginning with the first tax-
able year after the short period. However,
the short period NOL or CL is carried
back or carried over in accordance with
§§ 172 or 1212, respectively, if it is either:
(a) $50,000 or less, or (b) results from a
short period of 9 months or longer and is
less than the NOL or CL for a full 12-
month period beginning with the first day
of the short period.
(7) Creation of general business
credits. If there is an unused general busi-
ness credit or any other unused credit gen-
erated in the short period, the taxpayer
must carry that unused credit forward. An
unused credit from the short period may
not be carried back.
.05 Additional Terms, Conditions, and
Adjustments. The additional terms, con-
ditions, and adjustments described in this
section 5.05 apply to taxpayers that obtain
approval under this revenue procedure to
change an annual accounting period and
that establish a business purpose under
section 5.02(2) of this revenue procedure.
These additional terms, conditions, and
adjustments are necessary to neutralize
the tax effects of a substantial distortion
of income that otherwise would result
from the change, including: a deferral of a
substantial portion of the taxpayer’s in-
come, or shifting of a substantial portion
of deductions, from one taxable year to
another; a similar deferral or shifting in
the case of any other person, such as a
beneficiary in an estate; the creation of a
short period in which there is a substantial
NOL, CL, or credit (including a general
business credit), or the creation of a short
period in which there is a substantial
amount of income to offset an expiring
NOL, CL, or credit.
(1) Substantial distortion. Distortion
of income will not be considered substan-
tial and no adjustments under this section
5.05 will be required for such distortion if
the amount of the distortion is less than
both:
(i) five percent of the taxpayer’s
estimated gross receipts for its current
taxable year (computed as if the taxpayer
remained on its existing taxable year); and
(ii) $500,000.
(2) Deferral of substantial pass-
through income.
(a) In general. An adjustment
will be required under this section 5.05(2)
if the change creates a substantial distor-
tion of income as a result of increasing the
deferral of the taxpayer’s distributive
share of income from a pass-through enti-
ty between the taxable year of the pass-
through entity and the taxpayer’s taxable
year. For this purpose, if the pass-through
entity’s taxable year is determined based
June 4, 200113082001–23 I.R.B.

on the taxable year of its owners, the tax-
payer must compare the existing deferral
period (i.e., between the pass-through
entity’s and the taxpayer’s current taxable
years) with the proposed deferral period
(i.e., between the taxable year of the pass-
through entity that would be required after
the requested change and the taxpayer’s
requested taxable year) to determine
whether the deferral period is increased.
If the taxpayer indirectly owns an interest
in a pass-through entity through one or
more other pass-through entities, the
existing and proposed deferral periods
generally must be determined by compar-
ing the taxable year of the directly-owned
pass-through entity with the taxpayer’s
taxable year. However, if the proposed
change does not increase the deferral peri-
od between the taxable year of the direct-
ly-owned pass-through entity and the tax-
payer’s taxable year, the existing and
proposed deferral periods must be deter-
mined by comparing the taxable year of
the next lower-tier indirectly-owned pass-
through entity with the taxpayer’s taxable
year until either: (1) an increase in the
deferral period is found, or (2) the next
lower-tier entity either does not exist or is
not a pass-through entity.
(b) Computing deferral. The
amount of deferral that results from the
change is the taxpayer’s allocable share of
income from each pass-through entity
described in (a), including ordinary
income or loss, rents, royalties, interest,
dividends, and the deduction equivalent
of credits that accrue during the taxpay-
er’s first effective year and, in the case of
a partnership, guaranteed payments to the
taxpayer that are both deductible by the
partnership under its method of account-
ing during the partnership’s first taxable
year ending after the taxpayer’s first
effective year and attributable (on a rat-
able basis) to the taxpayer’s first effective
year. A taxpayer may aggregate the defer-
ral of income from each pass-through
entity described in (a). However, if the
aggregate deferral of income from all
pass-through entities described in (a) is
negative (i.e., an aggregate loss), there is
no deferral of income. For this purpose,
the taxpayer may use reasonable estimates
to determine the income that accrues dur-
ing the first effective year. The Service
may, on examination, use any available
data, including information on previous
years’ Schedules K-1, to verify the rea-
sonableness of the taxpayer’s estimates.
(c)Adjustment.If the deferral
of income computed in section 5.05(2)(b)
represents a substantial distortion of
income (as defined in section 5.05(1)), the
taxpayer must include the entire amount
of the distortion (and not merely the
excess over the amounts specified in sec-
tion 5.05(1)) as ordinary income for the
first effective year. The taxpayer also
must report its allocable share of income
from the pass-through entity in the taxable
year following the first effective year in
accordance with general tax principles
(e.g., § 706). The taxpayer must establish
a suspense account for the amount includ-
ed in ordinary income for the first effec-
tive year and deduct this amount ratably
over the four taxable years immediately
succeeding the first effective year.
Notwithstanding the preceding sentence,
if all or a portion of the suspense account
is attributable to an interest in a pass-
through entity that is subsequently dis-
posed of, any amount so attributable that
remains in the suspense account in the
year of the disposition may be deducted in
that year. In all cases, the deduction under
this paragraph will be treated as an
ordinary deduction. The adjustments
described in this section do not affect the
taxpayer’s basis in the pass-through entity
(such as basis in a partnership determined
under § 705). SeeExamples 1, 2, and 3,
section 5.06 of this revenue procedure.
(3) Special rule for certain pass-
through entities. An adjustment similar to
that described in this paragraph 5.05(2)
will be required in the case of a deferral of
income or shifting of deductions to an-
other taxpayer, such as a beneficiary of an
estate.
(4) Use of expiring NOLs, CLs, and
credits.An adjustment will be required
under this section 5.05(4) if the change
creates a substantial distortion of income
as a result of the creation of income in the
short period to offset expiring NOLs,
CLs, or credits (including general busi-
ness credits). The amount of distortion
that results from a change is the amount
by which any NOL, CL, and credit that is
carried over to the first effective year and
that expires in that year exceeds the NOL,
CL, and credit that could have been used
to offset income in the taxpayer’s current
taxable year (computed as if the taxpayer
remained on its existing taxable year). If
this distortion is substantial (as defined in
section 5.05(1)), any NOL, CL, or credit
carried over to the first effective year will
be allowed to offset income in the first ef-
fective year only to the extent that such
NOL, CL, or credit could have been used
to offset income in the taxpayer’s current
taxable year. SeeExample 4, section 5.06
of this revenue procedure.
(5) Concurrent change for related
entities. In appropriate cases, if a tax-
payer owns a majority interest in a pass-
through entity, the entity will be required
to concurrently change its annual ac-
counting period as a term and condition of
the approval of the taxpayer’s request to
change its annual accounting period,
notwithstanding the testing date provi-
sions in § 706(b)(4)(A)(ii), § 898
(c)(1)(C)(ii), § 1.921–1T(b)(6), and the
special provision in § 706(b)(4)(B). If
this condition applies, the pass-through
entity must comply with the appropriate
procedures to obtain approval for the
change. See, e.g.,Rev. Proc. 2001–XX
and § 1.898–4(b) of the proposed regula-
tions.
(6) Other terms, conditions, and ad-
justments. In addition to the terms, condi-
tions, and adjustments described in this
section 5.05, the Service may impose any
other term, condition, or adjustment that it
deems appropriate under the circum-
stances.
.06 Examples. The following examples
illustrate the additional terms, conditions,
and adjustments that may be required
under section 5.05 of this revenue proce-
dure to obtain the Commissioner’s ap-
proval for a change of an annual account-
ing period. In all the examples, the
taxpayer is within the scope of this rev-
enue procedure, the taxpayer has estab-
lished a business purpose under section
5.02(2) of this revenue procedure, and a
substantial distortion of income will result
from a change to the requested taxable
year.
Example 1. P, a foreign corporation, maintains
its books and files its foreign country tax returns on
the basis of a taxable year ending on March 31. In
2001, P acquires all the stock of S, a domestic corpo-
ration, that maintains its books and files its tax re-
turns on the calendar year. S has a minority interest
in a partnership that uses the calendar year. In order
to facilitate the filing of consolidated financial state-
ments for P and S, S applies for approval to change
its taxable year to a taxable year ending on March 31
beginning on March 31, 2002. The change will cre-
2001–23 I.R.B.1309June 4, 2001

ate a substantial distortion of income as a result of in-
creasing the deferral of S’s distributive share of in-
come from its partnership interest. Consequently, S
will be required, under section 5.05(2) of this rev-
enue procedure, to report the partnership income that
accrues between January 1 and March 31, 2002, as
an ordinary income adjustment on its short period tax
return as a term, condition, and adjustment of the
change. Thereafter, on subsequent tax returns filed
for its taxable year ending on March 31 (beginning
March 31, 2003), S must report the partnership in-
come for the partnership’s taxable year ending De-
cember 31 based on the Schedule K-1 in accordance
with § 706. To take into account S’s double inclusion
of the three months of partnership income from Janu-
ary 1 to March 31, 2002, S must recognize an ordi-
nary deduction adjustment in each of the four taxable
years following the first effective year equal to one-
fourth of the ordinary income adjustment amount in-
cluded on S’s short period tax return. Neither adjust-
ment will affect S’s basis in the partnership.
Example 2.D is a domestic corporation that cur-
rently maintains its books and files its tax returns on
the calendar year, but applies in 2002 for approval to
change its taxable year to a year ending on March
31. D owns a majority interest in a partnership, PS1,
which in turn owns a minority interest in another
partnership, PS2. PS1 and PS2 have taxable years
ending on December 31 and June 30, respectively,
as required by the majority interest rule of
§ 706(b)(1)(b)(i). If D changes its annual account-
ing period to March 31, and the first effective year
ends on March 31, 2002, PS1 will be required to
conform its taxable year with D using a first effec-
tive year of March 31, 2002, as required under sec-
tion 5.05(5) of this revenue procedure. Accordingly,
D’s requested change in its taxable year would not
increase the deferral of D’s distributive share of in-
come or gain from PS1. However, PS2 will retain
its June 30 taxable year; thus, D’s requested change
will increase the deferral of D’s distributive share of
income and gain from PS2, which is passed through
to D from PS1. Assuming the deferral results in a
substantial distortion of income, D will be required,
under section 5.05(2) of this revenue procedure, to
report its distributive share of PS2’s income and
gain accruing between January 1, 2002, and March
31, 2002, as an ordinary income adjustment on its
tax return for the short period ending March 31 as a
term and condition of the change in D’s taxable year.
Example 3.The facts are the same as in Exam-
ple 2, except that PS2 owns a minority interest in
partnership PS3, which has a December 31 taxable
year. Because D will be required as a term and con-
dition of the change in D’s taxable year to report its
distributive share of PS2’s income and gain accruing
between January 1, 2002, and March 31, 2002, and
because that distributive share will include a portion
of PS2’s distributive share of income from PS3, D
does not need to make any additional ordinary in-
come adjustment to take account of any increased
deferral from PS3.
Example 4. Y, a domestic corporation that files its
tax returns on the calendar year, applies in 2002 for
consent to change its taxable year to a year ending
on March 31. Y has a general business credit carry-
over of $100x that will expire in the current taxable
year. Y reasonably expects to incur on April 30,
2002, a substantial amount that is deductible for fed-
eral income tax purposes. If Y changes its annual
accounting period to March 31, and the first effec-
tive year ends on March 31, 2002, Y reasonably ex-
pects it would be able to use $90x of the $100x
credit. However, if Y continues to use the calendar
year for 2002, Y reasonably estimates that it would
be able to use only $25x of the expiring credit.
Under section 5.05(4) of this revenue procedure, Y
will be allowed to use only $25x of the credit to off-
set income in the first effective year as a term, con-
dition, and adjustment of the change.
SECTION 6. GENERAL
APPLICATION PROCEDURES
.01 What to file.
(1)Application. To request the Com-
missioner’s approval to adopt, change, or
retain an annual accounting period under
this revenue procedure, a taxpayer (other
than an electing S corporation) must com-
plete, sign, and file a current Form 1128,
Application to Adopt, Change, or Retain a
Tax Year.An electing S corporation re-
questing to adopt, change, or retain an an-
nual accounting period must complete the
appropriate section of, and sign and file, a
current Form 2553, Election by a Small
Business Corporation.
(2) Signature requirement. The ap-
plication must be signed by, or on behalf
of, the taxpayer requesting the adoption,
change, or retention of annual accounting
period by an individual with authority to
bind the taxpayer in such matters. For ex-
ample, an officer must sign on behalf of a
corporation, a general partner on behalf of
a state law partnership, a member-man-
ager on behalf of a limited liability com-
pany, a trustee on behalf of a trust, or an
individual taxpayer on behalf of a sole
proprietorship. If the taxpayer is a mem-
ber of a consolidated group, a Form 1128
submitted on behalf of the taxpayer must
be signed by a duly authorized officer of
the common parent. If an agent is autho-
rized to represent the taxpayer before the
Service, receive the original or a copy of
the correspondence concerning the re-
quest, or perform any other act(s) regard-
ing the application filed on behalf of the
taxpayer, a power of attorney reflecting
such authorization(s) must be attached to
the application. A taxpayer’s representa-
tive without a power of attorney to repre-
sent the taxpayer as indicated in this sec-
tion will not be given any information
regarding the application.
(3)Additional information regarding
prior applications.
(a) Accounting period changed.
If a taxpayer changed its annual account-
ing period at any time within the most
recent 48-month period ending with the
last month of the requested taxable year
(under either an automatic change proce-
dure or a procedure requiring prior
approval), a copy of the application for
the previous change, the ruling letter, and
any other related correspondence from the
Service, must be attached to the applica-
tion filed for the requested taxable year.
(b) Accounting period not
changed. If a prior application (filed
under either an automatic change proce-
dure or a procedure requiring prior
approval) was withdrawn, not perfected,
or denied, or if the change in annual
accounting period was not made, and the
taxpayer files another application to
change its annual accounting period with-
in the most recent 48-month period end-
ing with the last month of the requested
taxable year, a copy of the earlier applica-
tion, together with any related correspon-
dence from the Service, must be attached
to the application filed for the requested
taxable year. An explanation must be fur-
nished stating why the earlier application
was withdrawn or not perfected, or why
the change in annual accounting period
was not made. The Service will consider
the explanation in determining whether
the subsequent request for a change in the
taxpayer’s annual accounting period will
be granted.
(4) Additional information for sec-
tion 5.03 (1) and (2).If the taxpayer re-
quests to establish a natural business year
under section 5.03(1) or (2) of this rev-
enue procedure, it must provide its gross
receipts from sales or services and ap-
proximate inventory costs (where applica-
ble) for each month in the requested short
period and for each month of the three im-
mediately preceding taxable years.
(5) Additional information for sec-
tion 5.04. The taxpayer must indicate
whether it has an NOL or CL in the short
period required to effect the change and
provide the type and amount of any cred-
its generated in the short period.
(6) Additional information for sec-
tion 5.05. If a taxpayer requests to change
an annual accounting period and estab-
lishes a business purpose under section
5.02(2) of this revenue procedure, the tax-
payer must provide the following addi-
tional information necessary to determine
whether a substantial distortion of income
June 4, 200113102001–23 I.R.B.

(within the meaning of section 5.05(1))
exists and, thus, whether the additional
terms, conditions, and adjustments of sec-
tion 5.05 apply:
(a) If the taxpayer has an interest in a
pass-through entity:
(i) Reasonable estimates of the
taxpayer’s gross receipts for its current
taxable year (computed as if the taxpayer
remained on its existing taxable year);
(ii) a comparison of the existing
deferral period of any pass-through entity
in which the taxpayer has a direct or, as
appropriate, indirect interest (i.e., the peri-
od between the pass-through entity’s and
the taxpayer’s current taxable years) with
the proposed deferral period for such
pass-through entity (i.e., the period
between the taxable year of the pass-
through entity that would be required after
the requested change and the taxpayer’s
requested taxable year); and
(iii) Reasonable estimates of the
aggregate deferral of income from all
pass-through entities described in section
5.05(1);
(b) the amount of any NOL, CL, or
credit carried over to the first effective
year and the taxable year in which such
NOL, CL, or credit was generated; and
(c) identification of any partnership,
specified foreign corporation (as defined
in § 898), foreign sales corporation (as
defined in former § 922), or domestic in-
ternational sales corporation (as defined
in § 992) in which the taxpayer has a ma-
jority interest.
.02 When to file.
(1) In general. Except as provided
in section 6.02(2) of this revenue proce-
dure, a taxpayer must file a Form 1128 no
earlier than the day following the end of
the first effective year and no later than
the 15
th
day of the third calendar month
following the end of the first effective
year. However, the Service recommends
that the Form 1128 be filed as early as
possible to provide the Service adequate
time to respond to the request prior to the
due date of the taxpayer’s return for the
first effective year. A taxpayer that fails
to file a Form 1128 within the time period
prescribed in this section 6.02(1) may re-
quest an extension of time to file
under § 301.9100 of the Procedure and
Administration Regulations. Under
§ 301.9100–3, a Form 1128 filed within
90 days after the time period prescribed in
this section 6.02(1) may be considered as
timely filed if the taxpayer establishes
that the taxpayer acted reasonably and in
good faith and that granting relief will not
prejudice the interests of the government.
If a Form 1128 is filed more than 90 days
after this period, prejudice to the interests
of the government will be presumed and
such requests will be approved only in un-
usual and compelling circumstances. See
§ 301.9100–3(c)(3).
(2) Electing S corporations.An
electing S corporation must file the Form
2553 when the election to be an S corpo-
ration is filed pursuant to § 1362(b) and
§ 1.1362–6. Generally, such election
must be filed at any time during (a) the
taxable year that immediately precedes
the taxable year for which the election is
to be effective, or (b) the taxable year for
which the election is to be effective, pro-
vided the election is made before the 16th
day of the third month of the taxable year.
.03 Where to file.
(1)In general. A taxpayer, other than
an electing S corporation or exempt orga-
nization, applying for an adoption,
change, or retention in annual accounting
period pursuant to this revenue procedure
must file its Form 1128, together with the
appropriate user fee, with the Service at
the following address: Internal Revenue
Service, Associate Chief Counsel (In-
come Tax & Accounting), Attention:
CC:PA:T:CRU, P.O. Box 7604, Ben
Franklin Station, Washington, DC 20044
(or, in the case of a designated private de-
livery service: Internal Revenue Service,
Associate Chief Counsel (Income Tax &
Accounting), Attention: CC:PA:T:CRU,
Room 6561, 1111 Constitution Avenue,
N.W., Washington, DC 20224).
(2) Electing S corporations. An
electing S corporation requesting to
adopt, change, or retain an annual ac-
counting period pursuant to this revenue
procedure must file its Form 2553 with
the appropriate service center designated
in the instructions to the Form 2553. The
taxpayer should not include the user fee
with the Form 2553 mailed to the service
center. The service center will send the
Form 2553 to the national office of the
Service, which will then notify the tax-
payer that the fee is due.
(3) Exempt organizations. An ex-
empt organization applying for a change
in annual accounting period pursuant to
this revenue procedure must file its Form
1128, together with the appropriate user
fee, with the Service at the following ad-
dress: Internal Revenue Service, Com-
missioner, TE/GE, Attention: T:EO:RA,
P.O. Box 27720, McPherson Station,
Washington, DC 20038.
.04 User fee. Taxpayers are required to
pay user fees for requests to adopt,
change, or retain an annual accounting
period under this revenue procedure.
Rev. Proc. 2001–1, 2001–1 I.R.B. 1 and,
for tax-exempt organizations, Rev. Proc.
2001–8, 2001–1 I.R.B. 239 (or any suc-
cessors) contain the schedule of user fees
and provide guidance for complying with
the user fee requirements.
.05 Consolidated groups– Separate
Forms 1128 not required. The common
parent of a consolidated group files a
Form 1128 on behalf of the consolidated
group and pays only a single user fee.
The common parent must indicate that the
Form 1128 is for the common parent and
all its subsidiaries and answer all relevant
questions on the application for each
member of the consolidated group. If one
or more of the members of the group is re-
questing to use a 52–53-week taxable
year that ends within the same 7-day pe-
riod of the other members requested tax-
able year, the parent must attach a state-
ment to its tax return for the first effective
year as required by Rev. Proc. 89–56,
1989–2 C.B. 643 (or any successor). The
consolidated group must also comply
with all of the provisions of Rev. Rul.
72–184, 1972–1 C.B. 289 (or any succes-
sor). See § 1.1502–76(a)(1).
.06 Additional procedures if under ex-
amination, before an area office, or be-
fore a federal court.
(1)Taxpayers under examination.
(a) A taxpayer under examination
may apply for approval to change or re-
tain its annual accounting period under
this revenue procedure only if the appro-
priate director consents to the change or
retention. The director will consent to
the change or retention unless, in the
opinion of the director, the taxpayer’s
annual accounting period would ordinar-
ily be included as an item of adjustment
in the year(s) for which the taxpayer is
under examination. For example, the di-
rector will consent to a change where
the taxpayer is using a clearly permissi-
ble annual accounting period. The di-
2001–23 I.R.B.1311June 4, 2001

rector also will consent to a change from
an impermissible annual accounting pe-
riod where the period became impermis-
sible (e.g., due to a change in ownership
or a change in the taxpayer’s business)
subsequent to the years under examina-
tion. The question of whether the tax-
payer’s annual accounting period from
which the taxpayer is changing is per-
missible or became impermissible sub-
sequent to the years under examination
may be referred to the national office as
a request for technical advice under the
provisions of Rev. Proc. 2001–2, or, for
tax-exempt organizations, Rev. Proc.
2001–5.
(b) A taxpayer changing or re-
taining an annual accounting period
under this revenue procedure with the
consent of the appropriate director must
attach to the application a statement
from the director consenting to the
change or retention. The taxpayer must
provide a copy of the application to the
director at the same time it files the ap-
plication with the national office. The
application must contain the name(s)
and telephone number(s) of the examin-
ing officer(s).
(2) Taxpayer before an area office.
A taxpayer that is before an area office
must attach to the application a separate
statement signed by the taxpayer certi-
fying that, to the best of the taxpayer’s
knowledge, the taxpayer’s annual ac-
counting period is not an issue under
consideration by the area office. The
taxpayer must provide a copy of the ap-
plication to the appeals officer at the
same time it files the application with
the national office. The application
must contain the name and telephone
number of the appeals officer.
(3) Taxpayer before a federal
court. A taxpayer that is before a fed-
eral court must attach to the application
a separate statement signed by the tax-
payer certifying that, to the best of the
taxpayer’s knowledge, the taxpayer’s
annual accounting period is not an issue
under consideration by the federal
court. The taxpayer must provide a copy
of the application to the government
counsel at the same time it files the ap-
plication with the national office. The
application must contain the name and
telephone number of the government
counsel.
SECTION 7. PROCESSING OF
APPLICATION
.01 Service discretion. Notwithstand-
ing any other provision of this revenue
procedure, the Service reserves the right
to decline to process any application filed
under this revenue procedure in situations
in which it would not be in the best inter-
est of sound tax administration to permit
the requested adoption, change, or reten-
tion. In this regard, the Service will con-
sider whether the adoption, change, or re-
tention in annual accounting period would
clearly and directly frustrate compliance
efforts of the Service in administering the
income tax laws.
.02 Applicability of Rev. Proc. 2001–1,
Rev. Proc. 2001–4, and any successor
revenue procedures. Rev. Proc. 2001–1
or, for tax-exempt organizations, Rev.
Proc. 2001–4, 2001–1 I.R.B. 121, (or any
successors) will apply to any annual ac-
counting period adoption, change, or re-
tention request made under the provisions
of this revenue procedure.
.03 Incomplete application– 21 day
rule. If the Service receives an applica-
tion that is not completed properly in ac-
cordance with the instructions on the
Form 1128 (or Form 2553) and the provi-
sions of this revenue procedure, or if sup-
plemental information is needed, the Ser-
vice will notify the taxpayer. The
notification will specify the information
that needs to be provided, and the tax-
payer will be permitted 21 days from the
date of the notification to furnish the nec-
essary information. The Service reserves
the right to impose shorter reply periods if
subsequent requests for additional infor-
mation are made. If the required informa-
tion is not submitted to the Service within
the reply period, the application will not
be processed. A reasonable additional pe-
riod to furnish information may be
granted to a taxpayer. Any request for an
extension of time to furnish necessary in-
formation must be made in writing and
submitted within the 21-day period. If the
extension request is denied, there is no
right of appeal.
.04 Conference in the national office.
The taxpayer must complete the appropri-
ate line on the Form 1128 or attach a
statement to the Form 2553, to request a
conference of right if an adverse response
is contemplated by the Service. If the tax-
payer does not complete the appropriate
line on the Form 1128, attach a statement
to the Form 2553, or request a conference
in a later written communication, the Ser-
vice will presume that the taxpayer does
not desire a conference. If requested, a
conference will be arranged in the na-
tional office prior to the Service’s formal
reply to the taxpayer’s application. For
taxpayers other than exempt organiza-
tions, see section 11 of Rev. Proc. 2001–1
(or any successor). For exempt organiza-
tions, see section 12 of Rev. Proc.
2001–4, 2001–1 I.R.B. 121 (or any suc-
cessor).
.05 Letter ruling. Unless otherwise
specifically provided, the Commis-
sioner’s approval to adopt, change, or re-
tain a taxpayer’s annual accounting pe-
riod will be set forth in a letter ruling from
the national office that identifies the tax-
payer’s former annual accounting period;
the annual accounting period the taxpayer
is adopting, changing to, or retaining; the
short period necessary to effect a change;
and the terms, conditions, and adjust-
ments under which the adoption, change,
or retention is to be effected. See
§ 1.442–1(b). A copy of the letter ruling
must be attached to the taxpayer’s federal
income tax return for the first effective
year.
.06 Effect of noncompliance. If a tax-
payer adopts, changes, or retains an an-
nual accounting period without authoriza-
tion or without complying with all of the
provisions of this revenue procedure and
the letter ruling granting permission for
the change, the taxpayer has initiated an
adoption, change, or retention in annual
accounting period without obtaining the
approval of the Commissioner as required
by §§ 441(i), 442, 706(b), and 1378.
Upon examination, a taxpayer that has
initiated an unauthorized adoption,
change, or retention of annual accounting
period may be denied the adoption,
change, or retention. For example, the
taxpayer may be required to recompute its
taxable income or loss in accordance with
its former (or required, if applicable) tax-
able year.
.07 Effect on other offices of the Service.
The provisions of this revenue procedure
are not intended to preclude an appropriate
representative of the Service (for example,
an appeals officer with delegated settle-
ment authority) from settling a particular
taxpayer’s case involving an accounting
June 4, 200113122001–23 I.R.B.

period issue by agreeing to terms, condi-
tions, and adjustments that differ from
those that might be provided under this
revenue procedure when it is in the best in-
terest of the government to do so.
SECTION 8. EFFECT OF APPROVAL
.01Audit Protection
(1) In general. Except as provided
in section 8.01(2) of this revenue proce-
dure, a taxpayer that files a Form 1128 in
compliance with all the applicable provi-
sions of this revenue procedure will not
be required by the Service to change its
annual accounting period for a taxable
year prior to the first effective year.
(2) Exceptions. The Service may
change a taxpayer’s annual accounting
period for a prior taxable year if:
(a) the taxpayer withdraws or does
not perfect its request;
(b) the national office denies the
request;
(c) the taxpayer declines to imple-
ment the change;
(d) the taxpayer implements the
change but does not comply with all the
applicable provisions of this revenue pro-
cedure and the letter ruling granting per-
mission for the change; or
(e) the national office modifies or
revokes the ruling because there has been a
misstatement or omission of material facts.
.02 Subsequently required changes.
(1) In general. A taxpayer that
adopts, changes, or retains its annual ac-
counting period pursuant to this revenue
procedure may be required thereafter to
change its annual accounting period for
the following reasons:
(a) the enactment of legislation;
(b) a decision of the United States
Supreme Court;
(c) the issuance of temporary or
final regulations;
(d) the issuance of a revenue rul-
ing, revenue procedure, notice, or other
statement published in the Internal Rev-
enue Bulletin;
(e) the issuance of written notice
to the taxpayer that the change in account-
ing period was granted in error or is not in
accord with the current views of the Ser-
vice; or
(f) a change in the material facts
on which the approval was based.
(2) Retroactive change or modifica-
tion. Except in rare or unusual circum-
stances, if a taxpayer that adopted,
changed, or retained its annual accounting
period under this revenue procedure is
subsequently required under section
8.02(1) of this revenue procedure to
change its annual accounting period, the
required change will not be applied
retroactively provided that:
(a) the taxpayer complied with all
the applicable provisions of the letter rul-
ing granting permission for the change
and this revenue procedure;
(b) there has been no misstatement
or omission of material facts;
(c) there has been no change in the
material facts on which the approval was
based;
(d) there has been no change in the
applicable law; and
(e) the taxpayer to whom approval
was granted acted in good faith in relying
on the approval and applying the change
retroactively would be to the taxpayer’s
detriment.
SECTION 9. REVIEW BY DIRECTOR
.01 In general. A director must apply a
ruling obtained under this revenue proce-
dure in determining the taxpayer’s tax lia-
bility unless the director recommends that
the ruling should be modified or revoked.
The director will ascertain if:
(1) the representations on which the
ruling was based reflect an accurate state-
ment of the material facts;
(2) the amount of the adjustments re-
quired to effect the change, if any, were
properly determined;
(3) the adoption, change, or retention
in annual accounting period was imple-
mented as proposed in accordance with
the terms and conditions of the letter rul-
ing and this revenue procedure;
(4) there has been any change in the
material facts on which the ruling was
based during the period that the new or re-
tained annual accounting period was
used; and
(5) there has been any change in the
applicable law during the period the new
or retained annual accounting period was
used.
.02 National office consideration. If a
director recommends that the ruling
(other than the amount of the adjustments
required to effect the change) should be
modified or revoked, the director will for-
ward the matter to the national office for
consideration before any further action is
taken. Such a referral to the national of-
fice will be treated as a request for techni-
cal advice, and the provisions of Rev.
Proc. 2001–2 or, for tax-exempt organiza-
tions, Rev. Proc. 2001–5, will be followed.
SECTION 10. EFFECTIVE DATE
.01 In general. Except as provided in
section 10.02 of this revenue procedure,
this revenue procedure is effective for ap-
plications filed on or after [INSERT
DATE THIS REVENUE PROCEDURE
IS PUBLISHED IN THE INTERNAL
REVENUE BULLETIN].
.02 Transition rule for pending appli-
cations. If a taxpayer filed an application
before [INSERT DATE THIS REVENUE
PROCEDURE IS PUBLISHED IN THE
INTERNAL REVENUE BULLETIN]
and the application is pending with the
national office on [INSERT DATE THIS
REVENUE PROCEDURE IS PUB-
LISHED IN THE INTERNAL REV-
ENUE BULLETIN],the taxpayer may re-
quest that the application be processed in
accordance with this revenue procedure.
However, the national office will process
applications filed before [INSERT DATE
THIS REVENUE PROCEDURE IS
PUBLISHED IN THE INTERNAL REV-
ENUE BULLETIN] in accordance with
prior authorities unless, prior to the later
of [INSERT DATE THAT IS 45 DAYS
AFTER THE DATE THIS REVENUE
PROCEDURE IS PUBLISHED IN THE
INTERNAL REVENUE BULLETIN] or
the issuance of the letter ruling granting
or denying consent to the adoption,
change, or retention, the taxpayer notifies
the national office that it requests that its
application be processed in accordance
with this revenue procedure.
SECTION 11. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 85–16 and Rev. Proc. 74–33
are superseded.
SECTION 12. PAPERWORK
REDUCTION ACT
The collections of information con-
tained in this revenue procedure have
been submitted to the Office of Manage-
ment and Budget for review and approval
in accordance with the Paperwork Reduc-
tion Act (44 U.S.C. 3507(c)) under con-
trol number _____.
2001–23 I.R.B.1313June 4, 2001

An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless the col-
lection of information displays a valid
OMB control number.
The collections of information in this
revenue procedure are set forth in section
6.01. The information is required to deter-
mine whether the taxpayer’s requested an-
nual accounting period will result in a dis-
tortion of income. This information will
be used by the Service to determine which
terms, conditions, and adjustments will be
necessary to effect the adoption, change,
or retention in annual accounting period.
The collections of information are re-
quired to obtain the Service’s approval for
the adoption, change, or retention. The
likely respondents are the following: indi-
viduals, farms, business or other for-profit
organizations, non-profit organizations,
and small businesses or organizations.
The estimated total annual reporting
burden is 2,000 hours.
The estimated annual burden per re-
spondent varies from .5 of an hour to 5
hours, depending on the individual cir-
cumstances, with an estimated average of
2 hours.
The estimated number of respondents
is 1,000.
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 mater-
ial 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.
DRAFTING INFORMATION
The author of this revenue procedure is
Martin Scully, Jr. of the Office of Associate
Chief Counsel (Income Tax and Account-
ing). For further information regarding
this revenue procedure, contact Mr. Scully
at (202) 622-4960 (not a toll-free call).
Procedures for Requesting an
Adoption, Change, or Retention
of Accounting Period
Notice 2001–35
This notice provides a proposed rev-
enue procedure that, when finalized, will
provide the procedures under § 442 of the
Internal Revenue Code, and the regula-
tions thereunder, for certain partnerships,
S corporations, electing S corporations,
and personal service corporations (PSCs)
to obtain automatic approval of the Com-
missioner to adopt, change, or retain their
annual accounting periods.
This proposed revenue procedure is
being issued concurrently with new pro-
posed regulations under §§ 441, 442, 706,
and 1378, and a proposed revenue proce-
dure (Notice 2001–34, 2001–23 I.R.B.
1302) providing the procedures for any
taxpayer outside the scope of the auto-
matic approval revenue procedures to es-
tablish a business purpose and request the
prior approval of the Commissioner to
adopt, change, or retain an annual ac-
counting period. References in this pro-
posed revenue procedure to the regula-
tions under §§ 441, 442, 706, and 1378
are to the new proposed regulations, and
references to “Rev. Proc. 2001–XX” are
to the proposed prior approval revenue
procedure. All three documents are in-
tended to be finalized concurrently.
The proposed revenue procedure modi-
fies, amplifies, and supersedes Rev. Proc.
87–32, 1987–2 C.B. 396. In general, the
proposed revenue procedure provides ad-
ditional circumstances under which the
Internal Revenue Service will grant auto-
matic approval for an adoption, change,
or retention in annual accounting period
based on requests that the Service has
granted under its current ruling practice.
In addition, the proposed revenue proce-
dure provides audit protection to taxpay-
ers adopting, changing, or retaining an an-
nual accounting period under the revenue
procedure. In conjunction with the provi-
sion of audit protection, taxpayers under
examination that do not obtain consent of
the appropriate director are not within the
scope of the proposed revenue procedure.
The Service welcomes comments on
the proposed revenue procedure provided
in this notice. Comments should be sub-
mitted by September 11, 2001, either to:
Internal Revenue Service
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044
Attn: CC:PA:T:CRU (ITA)
Room 5228
or electronically via:
Notice.Comments@m1.irscounsel.treas.
gov(the Service comments e-mail ad-
dress).
Rev. Proc. 2001–XX
CONTENTS
SECTION 1. PURPOSE
SECTION 2. BACKGROUND
.01 Taxable Year Defined
(1)In general
(2)Annual accounting period
(3) Required taxable year
.02 Adoption of a Taxable Year
.03 Change in Taxable Year
(1) In general
(2) Annualization of short period re-
turn
(3)No retroactive change in annual
accounting period
.04 Retention of a Taxable Year
.05 Approval of an adoption, change,
or retention
.06 Business Purpose
.07 Section 444 Elections
.08 Rev. Proc. 87–32
SECTION 3. SIGNIFICANT CHANGES
SECTION 4. SCOPE
.01 Applicability
(1) Required taxable year
(2) Natural business year
(3) Ownership taxable year
(4) 52–53-week taxable year
.02 Inapplicability
(1) Under examination
(2) Before an area office
(3) Before a federal court
(4)Partnerships and S corporations
(5) Prior change
.03 Nonautomatic Changes
SECTION 5. DEFINITIONS
.01 Electing S Corporations
.02 Required Taxable Year
.03 Permitted Taxable Year
.04 Natural Business Year
(1)Prior three years gross receipts
(2)Natural business year
(3)Special rules
.05 Ownership Taxable Year
.06 Grandfathered Fiscal Year
.07 First Effective Year
.08 Short Period
.09 Field Office, Area Office, Director
.10 Under Examination
June 4, 200113142001–23 I.R.B.

(1) In general
(2) Partnerships and S corporations
subject to TEFRA
.11 Issue Under Consideration
(1) During an examination
(2) Before an area office
(3) Before a federal court
SECTION 6. TERMS AND
CONDITIONS
.01 In General
.02 Short Period Tax Return
.03 Subsequent Year Tax Returns
.04 Record Keeping/Book Conformity
.05 Changes in Natural Business Year
.06 Changes in Ownership Taxable
Year
.0752–53-week Taxable Years
.08 Net Operating Losses
.09 General Business Credits
SECTION 7. GENERAL APPLICATION
PROCEDURES
.01Approval
.02 Filing Requirements
(1) Where to file
(2) When to file
(3) Label
(4) Signature requirements
(5) No user fee
(6) Additional information
.03 Additional Procedures If Under ex-
amination, Before an Area office,
or Before a Federal Court
(1) Taxpayers under examination
(2) Taxpayers before an area office
(3) Taxpayers before a federal court
SECTION 8. EFFECT OF APPROVAL
.01 Audit Protection
(1) In general
(2) Exceptions
.02 Subsequently Required Changes
(1) In general
(2) Retroactive change or modifica-
tion
SECTION 9. REVIEW OF
APPLICATION
.01 Service Center Review
.02 Review of Director
SECTION 10. EFFECTIVE DATE AND
TRANSITION RULE
.01 Effective Date
.02 Transition Rule
SECTION 11. EFFECT ON OTHER
DOCUMENTS
DRAFTING INFORMATION
SECTION 1. PURPOSE
This revenue procedure provides pro-
cedures for certain partnerships, S corpo-
rations, electing S corporations (as de-
fined in section 5.01), and personal
service corporations (PSCs) to obtain au-
tomatic approval to adopt, change, or re-
tain their annual accounting period under
§ 442 of the Internal Revenue Code. This
revenue procedure modifies, amplifies,
and supersedes Rev. Proc. 87–32, 1987–2
C.B. 396. Any partnership, S corporation,
electing S corporation, or PSC complying
with the applicable provisions of this rev-
enue procedure has established a business
purpose and obtained the approval of the
Commissioner of the Internal Revenue
Service to adopt, change, or retain its an-
nual accounting period under § 442 and
the Income Tax Regulations thereunder.
SECTION 2. BACKGROUND
.01 Taxable Year Defined.
(1) In general. Section 441(b) and
§ 1.441–1(b)(1) of the regulations provide
that the term “taxable year” generally
means the taxpayer’s annual accounting
period, if it is a calendar year or fiscal
year, or, if applicable, the taxpayer’s re-
quired taxable year.
(2) Annual accounting period. Sec-
tion 441(c) and § 1.441–1(b)(3) provide
that the term “annual accounting period”
means the annual period (calendar year or
fiscal year) on the basis of which the tax-
payer regularly computes its income in
keeping its books.
(3) Required taxable year.
(a) In general. Section 1.441
–1(b)(2) provides that certain taxpayers
must use the particular taxable year that is
required under the Code and the regula-
tions thereunder (the “required taxable
year). For example, as described below, a
partnership, S corporation, or PSC gener-
ally is required to conform its taxable year
to the taxable year of its owners. H.R.
Rep. No. 99–841 (Conf. Rep.), 99th
Cong., 2d Sess., II–318 (1986), 1986–3
(Vol. 4) C.B. 319. Exceptions are pro-
vided for certain taxpayers, including a
partnership, S corporation, or PSC that
elects to use a 52–53-week taxable year
that ends with reference to its required
taxable year, makes an election under
§ 444, or establishes a business purpose
for having a different taxable year and ob-
tains approval under § 442.
(b) Partnerships. Section 706(b)
and the regulations thereunder generally
provide that a partnership’s taxable year
must be its required taxable year. How-
ever, a partnership may have a taxable
year other than its required taxable year
if it elects to use a 52–53-week taxable
year that ends with reference to its re-
quired taxable year, makes an election
under § 444, or establishes a business
purpose for having a different taxable
year and obtains approval under § 442.
The required taxable year for a partner-
ship is:
(i) the taxable year of one or
more of its partners who have an aggre-
gate interest in partnership profits and
capital of greater than 50 percent;
(ii) if there is no taxable year
described in clause (i), the taxable year of
all the principal partners of the partner-
ship (i.e.,all the partners having an inter-
est of 5-percent or more in partnership
profits or capital); or
(iii) if there is no taxable year
described in clause (i) or (ii), the taxable
year that results in the least aggregate
deferral of income to the partners.
(c) S corporations. Section 1378
and § 1.1378–1(a) provide that the taxable
year of an S corporation must be a permit-
ted year or a taxable year elected under
§ 444. The term “permitted year” means
(1) the required taxable year (i.e., a tax-
able year ending on December 31), (2) a
52–53-week taxable year ending with ref-
erence to the required taxable year, or (3)
any other accounting period for which the
corporation establishes a business purpose
to the satisfaction of the Commissioner.
(d) PSCs. Section 441(i)(1) and
§ 1.441–3 provide that the taxable year of
a PSC must be the calendar year unless
the PSC elects to use a 52–53-week tax-
able year that ends with reference to the
calendar year, makes an election under
§ 444, or establishes, to the satisfaction of
the Commissioner, a business purpose for
having a different period for its taxable
year.
.02 Adoption of a Taxable Year. A
newly-formed partnership, S corporation,
or PSC may adopt its required taxable
2001–23 I.R.B.1315June 4, 2001

year, a 52–53-week taxable year ending
with reference to its required taxable year,
or a taxable year elected under § 444
without the approval of the Commissioner
pursuant to § 441. If, however, a partner-
ship, S corporation, or PSC wants to
adopt any other taxable year, it must es-
tablish a business purpose and obtain ap-
proval under § 442. See §1.441–1(c).
.03 Change in Taxable Year.
(1) In general. Section 1.442–1(a)(1)
generally provides that a taxpayer that
wants to change its annual accounting pe-
riod and use a new taxable year must ob-
tain approval from the Commissioner.
(2) Annualization of short period re-
turn.Section 1.443–1(b)(1)(i) provides
that if a return is made for a short period
resulting from a change of an annual ac-
counting period, the taxable income for
the short period must be placed on an an-
nual basis by multiplying the income by
12 and dividing the result by the number
of months in the short period. Unless
§ 443(b)(2) and § 1.443–1(b)(2) apply, the
tax for the short period is the same part of
the tax computed on an annual basis as the
number of months in the short period is of
12 months. See § 1.706–1(b)(4)(i) for an
exception for partnerships.
(3) No retroactive change in annual
accounting period. Unless specifically
authorized by the Commissioner, a tax-
payer may not request, or otherwise
make, a retroactive change in annual ac-
counting period, regardless of whether the
change is to a required taxable year.
.04 Retention of a Taxable Year. In cer-
tain cases, a partnership, S corporation, or
PSC will be required to change its taxable
year unless it establishes a business pur-
pose and obtains the approval of the Com-
missioner under § 442, or makes an elec-
tion under § 444, to retain its current
taxable year. See § 1.441–1(d). For ex-
ample, a corporation on a June 30 fiscal
year that either becomes a PSC or elects
to be an S corporation, and as a result is
required to use the calendar year, must
obtain the approval of the Commissioner
to retain its current fiscal year. Similarly,
a partnership using a taxable year that
corresponds to its required taxable year
generally must obtain the approval of the
Commissioner to retain that taxable year
if its required taxable year changes as a
result of a change in ownership. But see
§ 706(b)(4)(B). However, a partnership
that has previously established a business
purpose to the satisfaction of the Com-
missioner to use a June 30 fiscal year is
not required to obtain the approval of the
Commissioner to retain its June 30 fiscal
year if its required taxable year changes
from September 30 to November 30.
.05 Approval of an adoption, change,
or retention. Section 1.442–1(b) provides
that in order to secure approval to adopt,
change, or retain an annual accounting
period, a taxpayer must file an application
generally on Form 1128,Application to
Adopt, Change, or Retain a Tax Year,
with the Commissioner no earlier than the
day following the close of the first taxable
year in which the taxpayer wants the
adoption, change, or retention to be effec-
tive (the “first effective year”) and no
later than the 15
th
day of the third calen-
dar month following the close of the first
effective year. In general, an adoption,
change, or retention in annual accounting
period will be approved where the tax-
payer establishes a business purpose for
the requested annual accounting period
and agrees to the Commissioner’s pre-
scribed terms, conditions, and adjust-
ments for effecting the adoption, change,
or retention.
.06 Business purpose.
(1) Section 1.442–1(b) provides that
generally the requirement of a business
purpose will be satisfied, and adjustments
to neutralize any tax consequences will
not be required, if the requested annual
accounting period coincides with the tax-
payer’s required taxable year, ownership
taxable year, or natural business year.
Section 1.442–1(b) also provides that, in
the case of a partnership, S corporation,
electing S corporation, or PSC, deferral of
income to partners, shareholders, or em-
ployee-owners, will not be treated as a
business purpose.
(2) A taxpayer is deemed to have es-
tablished a natural business year if it satis-
fies the “25-percent gross receipts test.”
See Rev. Proc. 87–32, superseding Rev.
Proc. 83–25, 1983–1 C.B. 689. The Con-
ference Report to the Tax Reform Act of
1986 states that the Secretary may pre-
scribe other tests in addition to the 25-per-
cent gross receipts test to be used to estab-
lish the existence of a business purpose if,
in the discretion of the Secretary, such
tests are desirable and expedient towards
the efficient administration of the tax
laws. SeeH.R. Rep. No. 99– 841 (Conf.
Rep.), 99th Cong., 2d Sess., II–318
(1986), 1986–3 (Vol. 4) C.B. 319.
.07 Section 444 Elections. A partner-
ship, S corporation, electing S corpora-
tion, or PSC generally can elect under
§ 444 to use a taxable year other than its
required taxable year if the deferral period
of the new taxable year is three months or
less. A partnership and an S corporation
with a § 444 election must make required
payments under § 7519 that approximate
the amount of deferral benefit and a PSC
with a § 444 election is subject to the min-
imum distribution requirements of
§ 280H. A taxpayer may automatically
adopt, change to, or retain a taxable year
permitted under § 444 by filing a Form
8716, Election to Have a Tax Year Other
Than a Required Tax Year. A taxpayer
that wants to terminate its § 444 election
must follow the automatic procedures
under § 1.444–1T(a)(5) to change to its
required taxable year or establish a busi-
ness purpose for its taxable year pursuant
to § 442 and Rev. Proc. 2001–XX [insert
cite].
.08 Rev. Proc. 87–32.Rev. Proc. 87–32
generally provided automatic approval
provisions for a partnership, S corpora-
tion, electing S corporation, or PSC to re-
tain or change to a natural business year
and for an S corporation or electing S cor-
poration to adopt, change to, or retain an
ownership taxable year. In addition, spe-
cial notification procedures were pro-
vided for a partnership, S corporation,
electing S corporation, or PSC to adopt,
change to, or retain a required taxable
year.
SECTION 3. SIGNIFICANT CHANGES
Significant changes to Rev. Proc.
87–32 made by this revenue procedure in-
clude:
.01 Section 4.01(1) of this revenue pro-
cedure clarifies that a partnership, S cor-
poration, electing S corporation, or PSC
may change automatically to its required
taxable year.
.02 Section 4.01(2) of this revenue pro-
cedure allows a partnership, S corpora-
tion, electing S corporation, or PSC to
change automatically to a natural business
year that satisfies the 25-percent gross re-
ceipts test, regardless of whether such
year results in more deferral of income
than its present taxable year.
June 4, 200113162001–23 I.R.B.

.03 Section 4 of this revenue procedure
allows a PSC to automatically change its
taxable year even if the taxpayer makes an
S corporation election for the taxable year
immediately following the short period.
.04 Sections 4.01(1), (2), and (3) of this
revenue procedure allow, in appropriate
circumstances, a partnership, S corpora-
tion, electing S corporation, or PSC to
adopt, change to, or retain a 52–53-week
taxable year ending with reference to the
required taxable year, natural business
year, or ownership taxable year.
.05 Section 4.01(4) of this revenue pro-
cedure allows any partnership, S corpora-
tion, electing S corporation, or PSC to au-
tomatically change from a 52–53-week
taxable year to a non-52–53-week taxable
year that ends on the last day of the same
calendar month, and vice versa.
.06 Section 4.02 of this revenue proce-
dure generally prevents a partnership, S
corporation, electing S corporation, or
PSC from using this revenue procedure to
change its annual accounting period if the
taxpayer is under examination and does
not obtain consent from the appropriate
director, or is before an area office or be-
fore a federal court and its annual ac-
counting period is an issue under consid-
eration.
.07 Section 4.02(2) of this revenue pro-
cedure reduces the waiting time between
changes from six to four years and pro-
vides that a change to a required or own-
ership taxable year, and a change to or
from a 52–53-week taxable year referenc-
ing the same month, will not be consid-
ered changes within four years.
.08 Section 5.05 of this revenue proce-
dure disregards certain tax-exempt enti-
ties for purposes of determining the own-
ership taxable year of an S corporation or
electing S corporation.
.09 Section 7.02(2) of this revenue proce-
dure extends the filing requirements for fil-
ing a Form 1128 to the due date of the tax-
payer’s federal income tax return (including
extensions) for the first effective year.
.10 Section 8.01 provides audit protec-
tion for partnerships, S corporations,
electing S corporations, or PSCs that
change their annual accounting period
under this revenue procedure.
SECTION 4. SCOPE
.01 Applicability. This revenue proce-
dure, which is the exclusive procedure for
taxpayers within its scope to secure the
Commissioner’s approval, applies to:
(1) Required taxable year. A partner-
ship, S corporation, electing S corpora-
tion, or PSC that wants to change to its re-
quired taxable year (as defined in section
5.02 of this revenue procedure), or to a
52–53-week taxable year ending with ref-
erence to such taxable year;
(2) Natural business year. A partner-
ship, S corporation, electing S corpora-
tion, or PSC (other than a member of a
tiered structure as defined in § 444 and
1.444–2T) that wants to change to or re-
tain a natural business year that satisfies
the 25-percent gross receipts test de-
scribed in section 5.04 of this revenue
procedure, or to a 52–53-week taxable
year ending with reference to such taxable
year;
(3) Ownership taxable year. An S
corporation or electing S corporation that
wants to adopt, change to, or retain its
ownership taxable year (as defined in sec-
tion 5.05 of this revenue procedure), or a
52–53-week taxable year ending with ref-
erence to such taxable year; or
(4) 52–53-week taxable year. A part-
nership, S corporation, electing S corpo-
ration, or PSC that wants to change from
a 52–53-week taxable year to a non-
52–53-week taxable year that ends on the
last day of the same calendar month, and
vice versa.
.02 Inapplicability. This revenue proce-
dure does not apply to:
(1) Under examination. A change or
retention in annual accounting period if
the partnership, S corporation, electing S
corporation, or PSC is under examina-
tion, unless it obtains consent of the ap-
propriate director as provided in section
7.03(1).
(2) Before an area office. A change
or retention in annual accounting period if
the partnership, S corporation, electing S
corporation, or PSC is before an area of-
fice with respect to any income tax issue
and its annual accounting period is an
issue under consideration by the area of-
fice;
(3) Before a federal court. A change
or retention in annual accounting period if
the partnership, S corporation, electing S
corporation, or PSC is before a federal
court with respect to any income tax issue
and its annual accounting period is an issue
under consideration by the federal court;
(4) Partnerships and S corporations.
A change or retention in annual account-
ing period by a partnership or S corpora-
tion if, on the date the entity would other-
wise file its application with the service
center, the entity’s annual accounting pe-
riod is an issue under consideration in the
examination of a partner or shareholder’s
federal income tax return or an issue
under consideration by an area office or
by a federal court with respect to a partner
or shareholder’s federal income tax re-
turn.
(5) Prior change. A change to, or re-
tention of, a natural business year as de-
scribed in section 4.01(2) of this revenue
procedure if the partnership, S corpora-
tion, electing S corporation, or PSC has
changed its annual accounting period at
any time within the most recent 48-month
period ending with the last month of the
requested taxable year. For this purpose,
the following changes are not considered
changes in annual accounting period:
(a) a change to a required taxable
year or ownership taxable year, as de-
scribed in section 4.01(1) or (3) of this
revenue procedure, respectively,
(b) a change to or from a 52–53-
week taxable year as described in section
4.01(4) of this revenue procedure, or
(c) a change by a former sub-
sidiary to its former common parent’s tax-
able year in order to comply with the
common taxable year requirement of sec-
tion 1.1502–76(a)(1).
.03 Nonautomatic Changes. Any part-
nership, S corporation, electing S corpo-
ration, or PSC that wants to adopt, change
to, or retain an annual accounting period
not described in section 4.01 of this rev-
enue procedure, or that cannot make a
change under this revenue procedure be-
cause of a prior change as described in
section 4.02(5) of this revenue procedure,
must obtain the approval of the Commis-
sioner. See § 1.442–1(b) and Rev. Proc.
2001–XX, for rules relating to nonauto-
matic changes of annual accounting peri-
ods by partnerships, S corporations, elect-
ing S corporations, and PSCs.
SECTION 5. DEFINITIONS
The following definitions apply solely
for purposes of this revenue procedure:
.01 Electing S Corporations. “Electing
S corporations” are corporations attempt-
ing to make an S election for the short pe-
2001–23 I.R.B.1317June 4, 2001

riod described in section 6.02 of this rev-
enue procedure. See Rev. Proc. 2000–11,
2000–3 I.R.B. 309, for procedures for au-
tomatic approval to change an annual ac-
counting period by corporations attempt-
ing to make an S election for the taxable
year immediately following the short pe-
riod.
.02 Required Taxable Year.The “re-
quired taxable year” is the taxable year
determined under § 706(b) in the case of a
partnership, § 1378 in the case of an S
corporation or an electing S corporation,
or § 441(i) in the case of a PSC, without
taking into account any taxable year that
is allowable by reason of a business pur-
pose (including a grandfathered fiscal
year) or a § 444 election.
.03 Permitted Taxable Year. A “permit-
ted taxable year” is the required taxable
year, a natural business year, the owner-
ship taxable year, a § 444 taxable year, or
any other taxable year for which the tax-
payer establishes a business purpose to
the satisfaction of the Commissioner.
.04 Natural Business Year. A partner-
ship, S corporation, electing S corpora-
tion, or PSC establishes a “natural busi-
ness year” under this revenue procedure
by satisfying the following “25-percent
gross receipts test”:
(1) Prior three years gross receipts.
(a) Gross receipts from sales and
services for the most recent 12-month pe-
riod that ends with the last month of the
requested annual accounting period are
totaled and then divided into the amount
of gross receipts from sales and services
for the last two months of this 12-month
period.
(b) The same computation as in
(1)(a) above is made for the two preced-
ing 12-month periods ending with the last
month of the requested annual accounting
period.
(2)Natural business year.
(a) If each of the three results de-
scribed in (1) equals or exceeds 25 per-
cent, then the requested annual account-
ing period is deemed to be the taxpayer’s
natural business year.
(b) Notwithstanding paragraph
(2)(a), if the taxpayer qualifies under (2)(a)
for more than one natural business year,
the taxable year producing the highest av-
erage of the three percentages (rounded to
1/100 of a percent) described in (1) is the
taxpayer’s natural business year.
(3) Special rules. (a) To apply the
25-percent gross receipts test described in
(1) for any particular year, the taxpayer
must compute its gross receipts under the
method of accounting used to prepare its
federal income tax returns for such tax-
able year.
(b) Regardless of the taxpayer’s
method of accounting, the taxpayer’s allo-
cable share of income from a pass-
through entity (e.g.,an estate, common
trust fund (as defined in § 584), controlled
foreign corporation (as defined in § 957),
foreign personal holding company (as de-
fined in § 552), or passive foreign invest-
ment company that is a qualified electing
fund (as defined in § 1295)), generally
must be reported as gross receipts in the
month that the pass-through entity’s tax-
able year ends.
(c) If a taxpayer has a predecessor
organization and is continuing the same
business as its predecessor, the taxpayer
must use the gross receipts of its prede-
cessor for purposes of computing the 25-
percent gross receipts test.
(d) If the taxpayer (including any
predecessor organization) does not have a
47-month period of gross receipts (36-
month period for requested taxable year
plus additional 11-month period for com-
paring requested taxable year with other
potential taxable years), then it cannot es-
tablish a natural business year under this
revenue procedure.
(e) If the requested taxable year is
a 52–53-week taxable year, the calendar
month ending nearest to the last day of the
52–53-week taxable year is treated as the
last month of the requested taxable year
for purposes of computing the 25-percent
gross receipts test.
.05 Ownership Taxable Year. For an S
corporation or electing S corporation, an
“ownership taxable year” is the taxable
year (if any) that, as of the first day of the
first effective year, constitutes the taxable
year of one or more shareholders (includ-
ing any shareholder that concurrently
changes to such taxable year) holding
more than 50-percent of the corporation’s
issued and outstanding shares of stock. A
shareholder in an S corporation or elect-
ing S corporation that wants to concur-
rently change its taxable year must follow
the instructions generally applicable to
taxpayers changing their taxable years
contained in § 1.442–1(b) and Rev. Proc.
2001–XX. For this purpose, under princi-
ples similar to § 1.706–3T for determin-
ing the taxable year of a partnership, a
shareholder that is tax-exempt under
§ 501(a) is disregarded if such share-
holder is not subject to tax on any income
attributable to the S corporation.
.06 Grandfathered Fiscal Year. A
grandfathered fiscal year is a fiscal year
(other than a year that resulted in a three-
month or less deferral of income) that a
partnership or an S corporation received
permission to use on or after July 1, 1974,
by a letter ruling (i.e.,not by automatic
approval).
.07 First Effective Year. The first effec-
tive year is the first taxable year for which
an adoption, change, or retention in an-
nual accounting period is effective. Thus,
in the case of a change, the first effective
year is the short period required to effect
the change.
.08 Short Period. In the case of a change
in annual accounting period, a taxpayer’s
short period is the period beginning with
the day following the close of the old tax-
able year and ending with the day preced-
ing the first day of the new taxable year.
.09 Field Office, Area Office, Director.
The terms “field office,” “area office,”
and “director” have the same meaning as
those terms have in Rev. Proc. 2001–1,
2001–1 I.R.B 1 (or any successor).
.10 Under Examination.
(1) In general.
(a) Except as provided in section
5.10(2) of this revenue procedure, an ex-
amination of a taxpayer with respect to a
federal income tax return begins on the
date the taxpayer is contacted in any man-
ner by a representative of the Service for
the purpose of scheduling any type of ex-
amination of the return. An examination
ends:
(i) in a case in which the
Service accepts the return as filed, on the
date of the “no change” letter sent to the
taxpayer;
(ii) in a fully agreed case, on the
earliest of the date the taxpayer executes a
waiver of restrictions on assessment or
acceptance of overassessment (for exam-
ple, Form 870, 4549, or 4605), the date
the taxpayer makes a payment of tax that
equals or exceeds the proposed deficien-
cy, or the date of the “closing” letter (for
example, Letter 891 or 987) sent to the
taxpayer; or
June 4, 200113182001–23 I.R.B.

(iii) in an unagreed or a partial-
ly agreed case, on the earliest of the date
the taxpayer (or its representative) is noti-
fied by an appeals officer that the case has
been referred to an area office from a field
office, the date the taxpayer files a peti-
tion in the Tax Court, the date on which
the period for filing a petition with the Tax
Court expires, or the date of the notice of
claim disallowance.
(b) An examination does not end
as a result of the early referral of an issue
to an area office under the provisions of
Rev. Proc. 96–9, 1996–1 C.B. 575.
(c) An examination resumes on
the date the taxpayer (or its representa-
tive) is notified by an appeals officer (or
otherwise) that the case has been referred
to a field office for reconsideration.
(2) Partnerships and S corporations
subject to TEFRA. For a partnership or S
corporation that is subject to the TEFRA
unified audit and litigation provisions
(note that an S corporation is not subject
to the TEFRA unified audit and litigation
provisions for taxable years beginning
after December 31, 1996. See Small
Business Job Protection Act of 1996, Pub.
L. No. 104–188, § 1317(a), 110 Stat.
1755, 1787 (1996)), an examination be-
gins on the date that the notice of the be-
ginning of an administrative proceeding is
sent to the Tax Matters Partner/Tax Mat-
ters Person (TMP). An examination ends:
(a) in a case in which the Service
accepts the partnership or S corporation
return as filed, on the date of the “no ad-
justments” letter or the “no change” no-
tice of final administrative adjustment
sent to the TMP;
(b) in a fully agreed case, when all
the partners or shareholders execute a
Form 870–P, 870–L, or 870–S; or
(c) in an unagreed or a partially
agreed case, on the earliest of the date the
TMP (or its representative) is notified by
an appeals officer that the case has been
referred to the area office from a field of-
fice, the date the TMP (or a partner or
shareholder) requests judicial review, or
the date on which the period for request-
ing judicial review expires.
.11 Issue Under Consideration.
(1) During an examination. A tax-
payer’s annual accounting period is an
issue under consideration for the taxable
years under examination if the taxpayer
receives written notification (for example,
by examination plan, information docu-
ment request (IDR), or notification of
proposed adjustments or income tax ex-
amination changes) from the examining
officer(s) specifically citing the tax-
payer’s annual accounting period as an
issue under consideration. For example, a
taxpayer’s annual accounting period is an
issue under consideration as a result of an
examination plan that identifies the pro-
priety of the taxpayer’s annual accounting
period as a matter to be examined. The
question of whether the taxpayer’s annual
accounting period is an issue under con-
sideration may be referred to the national
office as a request for technical advice
under the provisions of Rev. Proc.
2001–2, 2001–1 I.R.B. 79 (or any succes-
sor).
(2) Before an area office. A tax-
payer’s annual accounting period is an
issue under consideration for the taxable
years before an area office if the tax-
payer’s annual accounting period is in-
cluded as an item of adjustment in the ex-
amination report referred to the area
office or is specifically identified in writ-
ing to the taxpayer by the area office.
(3) Before a federal court. A tax-
payer’s annual accounting period is an
issue under consideration for the taxable
years before a federal court if the tax-
payer’s annual accounting period is an
item included in the statutory notice of
deficiency, the notice of claim disal-
lowance, the notice of final administrative
adjustment, the pleadings (for example,
the petition, complaint, or answer) or
amendments thereto, or is specifically
identified in writing to the taxpayer by the
government counsel.
SECTION 6. TERMS AND
CONDITIONS
.01 In General.An adoption, change,
or retention in annual accounting period
filed under this revenue procedure must
be made pursuant to the terms and condi-
tions provided in this revenue procedure.
.02 Short Period Tax Return.The tax-
payer generally must file a federal income
tax return for the short period required to
effect a change by the due date of that re-
turn, including extensions, in accordance
with § 1.443–1. For a change to or from a
52–53-week taxable year that results in a
short period of 359 days or more, or six
days or less, the tax computation under
§ 443(b) does not apply. If the short pe-
riod is 359 days or more, it is treated as a
full taxable year. If the short period is six
days or less, such short period is not a
separate taxable year but is added to and
deemed a part of the following taxable
year. (In the case of a change to or from a
52–53-week taxable year not involving a
change of the month with reference to
which the taxable year ends, the tax com-
putation under § 443(b) does not apply
because the short period will always be
359 days or more, or six days or less.) In
the case of a PSC with a short period that
is more than six days, but less than 359
days, taxable income for the short period
must be placed on an annual basis for the
purpose of § 443(b) by multiplying such
income by 365 and dividing the result by
the number of days in the short period. In
such case, the tax for the short period is
the same part of the tax computed on such
income placed on an annual basis as the
number of days in the short period is of
365 days (unless § 443(b)(2) and para-
graph (b)(2) of § 1.443–1, relating to the
alternative tax computation, apply). But
see § 1.706–1(b)(4)(i) for an exception
from this annualization requirement for a
partnership.
.03 Subsequent Year Tax Returns.Re-
turns for subsequent taxable years gener-
ally must be made on the basis of a full 12
months (or on a 52–53-week taxable year)
ending on the last day of the requested
taxable year, unless the taxpayer secures
the approval of the Commissioner to
change that taxable year.
.04 Record Keeping/Book Conformity.
The books of the taxpayer must be closed
as of the last day of the requested taxable
year. Except for changes described in sec-
tions 4.01(1) or 4.01(3) of this revenue
procedure to the taxpayer’s required tax-
able year or ownership taxable year, re-
spectively, the taxpayer must compute its
income and keep its books (including fi-
nancial statements and reports to credi-
tors) on the basis of the requested taxable
year.
.05 Changes in Natural Business Year.
If a partnership, S corporation, electing S
corporation, or PSC changes to or retains
a natural business year under this revenue
procedure and that year no longer quali-
fies as a permitted taxable year, the tax-
payer is using an impermissible annual
accounting period and should change to a
2001–23 I.R.B.1319June 4, 2001

permitted taxable year. Taxpayers quali-
fying under section 4 of this revenue pro-
cedure may request automatic approval
for the change under the provisions of this
revenue procedure. Other taxpayers must
request approval under Rev. Proc.
2001–XX.
.06 Changes in Ownership Taxable
Year.An S corporation or electing S cor-
poration that adopts, changes to, or retains
an ownership taxable year under this rev-
enue procedure must change to a permit-
ted taxable year, or request approval to re-
tain its current taxable year, if, as of the
first day of any taxable year, its owner-
ship taxable year changes. S corporations
qualifying under section 4 of this revenue
procedure may request automatic ap-
proval for the change or retention under
the provisions of this revenue procedure.
Other taxpayers must request approval
under Rev. Proc. 2001–XX.
.07 52–53-week Taxable Years. If ap-
plicable, the taxpayer must comply with
§ 1.441–2(e) (relating to the timing of tak-
ing items into account in those cases where
the taxable year of a pass-through entity or
PSC ends with reference to the same calen-
dar month as one or more of its partners or
shareholders or employee-owners).
.08 Net Operating Losses (NOLs). Solely
in the case of a PSC changing to a natural
business year, if the PSC has an NOL in the
short period required to effect the change,
the PSC may not carry the NOL back but
must carry it over in accordance with the
provisions of § 172 beginning with the first
taxable year following the short period.
However, the short period NOL is carried
back or carried over in accordance with
§ 172 if it is either (a) $50,000 or less, or (b)
results from a short period of 9 months or
longer and is less than the NOL for a full
12-month period beginning with the first
day of the short period.
.09 General Business Credits. Solely
in the case of a PSC changing to a natural
business year, if there is an unused gen-
eral business credit or any other unused
credit generated in the short period, the
PSC must carry that unused credit for-
ward. An unused credit from the short pe-
riod may not be carried back.
SECTION 7. GENERAL
APPLICATION PROCEDURES
.01Approval. Approval is hereby
granted to any partnership, S corporation,
electing S corporation, or PSC within the
scope of this revenue procedure to adopt,
change, or retain its annual accounting
period, provided the taxpayer complies
with all the applicable provisions of this
revenue procedure. Approval is granted
beginning with the first effective year. A
partnership, S corporation, electing S cor-
poration, or PSC granted approval under
this revenue procedure to adopt, change
to, or retain an annual accounting period
other than its required year is deemed to
have established a business purpose for
the adoption, change, or retention to the
satisfaction of the Commissioner.
.02 Filing Requirements.
(1) Where to file. A taxpayer within
the scope of this revenue procedure that
wants to adopt, change, or retain its an-
nual accounting period under this revenue
procedure must complete and file an ap-
plication (i.e., a current Form 1128 or
Form 2553, Election by a Small Business
Corporation, in the case of an electing S
corporation) with the Director, Internal
Revenue Service Center, Attention: EN-
TITY CONTROL, where the taxpayer
files its income tax returns. No copies of
Form 1128 (or Form 2553) are required to
be sent to the National Office. The tax-
payer also must attach a copy of the Form
1128 (or Form 2553) to the federal in-
come tax return filed for the first effective
year.
(2) When to file. The Form 1128
must be filed no earlier than the day fol-
lowing the end of the first effective year
and no later than the due date (including
extensions) for filing the federal income
tax return for the first effective year. For
electing S corporations, the Form 2553
must be filed when the election to be an S
corporation is filed pursuant to § 1362(b)
and § 1.1362–6. Generally, such election
must be filed at any time during (a) the
taxable year that immediately precedes
the taxable year for which the election is
to be effective, or (b) the taxable year for
which the election is to be effective, pro-
vided the election is made before the 16th
day of the third month of the taxable year.
(3) Label. In order to assist in the
processing of the adoption, change, or re-
tention in annual accounting period, tax-
payers should write at the top of page 1 of
the Form 1128 (Form 2553): “FILED
UNDER REV. PROC. 2001–[INSERT
NUMBER]”.
(4) Signature requirements. In the
case of a partnership, the Form 1128 must
be signed on behalf of the partnership by
a general partner. In the case of an Lim-
ited Liability Company (LLC) that elects
to be treated as a partnership, the Form
1128 must be signed by a member-man-
ager who has personal knowledge of the
facts. In all other cases, the Form 1128
(Form 2553) must be signed by an autho-
rized corporate officer.
(5) No user fee. No user fee is re-
quired for applications filed under this
revenue procedure and, except as pro-
vided in section 9.01 of this revenue pro-
cedure, the receipt of an application filed
under this revenue procedure may not be
acknowledged.
(6) Additional information. In the
case of a taxpayer changing to a natural
business year that satisfies the 25-percent
gross receipts test described in section
5.04 of this revenue procedure, the tax-
payer must supply the gross receipts for
the most recent 47 months for itself (or
any predecessor) in compliance with the
instructions to Form 1128 (or Form
2553).
.03 Additional Procedures If Under Ex-
amination, Before an Area Office, or Be-
fore a Federal Court.
(1)Taxpayers under examination.
(a) A taxpayer under examination
may request approval to change or retain
its annual accounting period under this
revenue procedure only if the appropriate
director consents to the change or reten-
tion. The director will consent to the
change or retention unless, in the opinion
of the director, the taxpayer’s annual ac-
counting period would ordinarily be in-
cluded as an item of adjustment in the
year(s) for which the taxpayer is under ex-
amination. For example, the director will
consent to a change where the taxpayer is
using a clearly permissible annual ac-
counting period. The director also will
consent to a change from an impermissi-
ble annual accounting period where the
period became impermissible (e.g., due to
a change in ownership or a change in the
taxpayer’s business) subsequent to the
years under examination. The question of
whether the taxpayer’s annual accounting
period from which the taxpayer is chang-
ing is permissible or became impermissi-
ble subsequent to the years under exami-
nation may be referred to the national
June 4, 200113202001–23 I.R.B.

office as a request for technical advice
under the provisions of Rev. Proc. 2001–2,
2001–1 I.R.B. 79 (or any successor).
(b) A taxpayer changing or retain-
ing an annual accounting period under
this revenue procedure with the consent
of the appropriate director must attach to
the application a statement from the direc-
tor consenting to the change or retention.
The taxpayer must provide a copy of the
application to the director at the same
time it files the application with the ser-
vice center. The application must contain
the name(s) and telephone number(s) of
the examining officer(s).
(2) Taxpayer before an area office.
A taxpayer that is before an area office
must attach to the application a separate
statement signed by the taxpayer certify-
ing that, to the best of the taxpayer’s
knowledge, the taxpayer’s annual ac-
counting period is not an issue under con-
sideration by the area office. The tax-
payer must provide a copy of the
application to the appeals officer at the
same time it files the application with the
service center. The application must con-
tain the name and telephone number of
the appeals officer.
(3) Taxpayer before a federal court.
A taxpayer that is before a federal court
must attach to the application a separate
statement signed by the taxpayer certify-
ing that, to the best of the taxpayer’s
knowledge, the taxpayer’s annual ac-
counting period is not an issue under con-
sideration by the federal court. The tax-
payer must provide a copy of the
application to the government counsel at
the same time it files the application with
the service center. The application must
contain the name and telephone number
of the government counsel.
SECTION 8. EFFECT OF APPROVAL
.01 Audit Protection.
(1) In general. Except as provided
in section 8.01(2) of this revenue proce-
dure, a taxpayer that files an application
in compliance with all the applicable
provisions of this revenue procedure
will not be required by the Service to
change its annual accounting period for
a taxable year prior to the first effective
year.
(2) Exceptions. The Service may
change a taxpayer’s annual accounting
period for a prior taxable year if:
(a) the taxpayer fails to implement
the change,
(b) the taxpayer implements the
change but does not comply with all the
applicable provisions of this revenue pro-
cedure, or
(c) there was a misstatement or
omission of material facts.
.02 Subsequently Required Changes.
(1) In general. A taxpayer that
adopts, changes, or retains its annual ac-
counting period pursuant to this revenue
procedure may be required to subse-
quently change its annual accounting pe-
riod for the following reasons:
(a) the enactment of legislation;
(b) a decision of the United States
Supreme Court;
(c) the issuance of temporary or
final regulations;
(d) the issuance of a revenue rul-
ing, revenue procedure, notice, or other
statement published in the Internal Rev-
enue Bulletin;
(e) the issuance of written notice
to the taxpayer that the change in annual
accounting period was not in compli-
ance with all the applicable provisions
of this revenue procedure or is not in ac-
cord with the current view of the Ser-
vice; or
(f) a change in the material facts
on which the approval was granted.
(2)Retroactive Change or Modifica-
tion. Except in rare circumstances, if a
taxpayer that adopts, changes, or retains
its annual accounting period under this
revenue procedure is subsequently re-
quired under section 8.02(1) of this rev-
enue procedure to change or modify that
annual accounting period, the required
change or modification will not be ap-
plied retroactively, provided that:
(a) the taxpayer complied with the
applicable provisions of this revenue pro-
cedure;
(b) there has been no misstatement
or omission of material facts;
(c) there has been no change in the
material facts on which the consent was
based;
(d) there has been no change in the
applicable law; and
(e) the taxpayer to which the ap-
proval was granted acted in good faith in
relying on the approval, and applying the
change retroactively would be to the tax-
payer’s detriment.
SECTION 9. REVIEW OF
APPLICATION
.01 Service Center Review.A Service
Center may deny an application to adopt,
change, or retain an annual accounting
period under this revenue procedure only
if: (1) the Form 1128 (or Form 2553) is
not filed timely, or (2) the taxpayer fails
to meet the scope or terms and conditions
of this revenue procedure. If the applica-
tion is denied, the Service Center will re-
turn the application with an explanation
for the denial. In the case of a denial of
an accounting period request filed on
Form 2553, the corporation will be re-
quired to use the calendar year or, if ap-
plicable, make a § 444 election, if it
chooses to be an S corporation.
.02 Review of Director.The director
may ascertain if the adoption, change, or
retention in annual accounting period was
made in compliance with all the applica-
ble provisions of this revenue procedure.
Taxpayers adopting, changing, or retain-
ing their annual accounting period pur-
suant to this revenue procedure without
complying with all the provisions (includ-
ing the terms and conditions) of this rev-
enue procedure ordinarily will be deemed
to have initiated the adoption, change, or
retention in annual accounting period
without the approval of the Commis-
sioner. Upon examination, a taxpayer that
has initiated an unauthorized adoption,
change, or retention of annual accounting
period may be denied the adoption,
change, or retention. For example, the
taxpayer may be required to recompute its
taxable income or loss in accordance with
its former (or required, if applicable) tax-
able year.
SECTION 10. EFFECTIVE DATE AND
TRANSITION RULE
.01 Effective Date.This revenue proce-
dure generally is effective for adoptions,
changes, or retentions of annual account-
ing periods for which the first effective
year ends on or after [INSERT DATE
THIS REVENUE PROCEDURE IS
PUBLISHED IN THE I.R.B.]. However,
if the time period for filing Form 1128 (or
Form 2553) with respect to a year set
forth in section 7.02(2) of this revenue
procedure has not yet expired, a taxpayer
within the scope of this revenue proce-
dure may elect early application of the
2001–23 I.R.B.1321June 4, 2001

revenue procedure by providing the noti-
fication set forth in section 7.02(3) on the
top of page 1 of Form 1128 (or Form
2553) and by satisfying the other proce-
dural requirements of section 7.
.02Transition Rule.If a taxpayer de-
scribed in section 4 of this revenue proce-
dure filed an application with the national
office and the application is pending with
the national office on [INSERT DATE
THIS REVENUE PROCEDURE IS PUB-
LISHED IN THE I.R.B.], the taxpayer
may obtain approval under this revenue
procedure. However, the national office
will process the application in accordance
with the authority under which it was filed,
unless by the later of [INSERT DATE
THAT IS 45 DAYS FROM THE DATE
THIS REVENUE PROCEDURE IS PUB-
LISHED IN THE I.R.B.]or the issuance of
the letter ruling granting or denying ap-
proval for the adoption, change, or reten-
tion, the taxpayer notifies the national of-
fice that it wants to use this revenue
procedure. If the taxpayer timely notifies
the national office that it wants to use this
revenue procedure, the national office will
require the taxpayer to make appropriate
modifications to the application to comply
with the applicable provisions of this rev-
enue procedure. In addition, any user fee
that was submitted with the application
will be refunded to the taxpayer.
SECTION 11. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 87–32 is modified, ampli-
fied, and superseded.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Roy A. Hirschhorn of the Of-
fice of Associate Chief Counsel (Income
Tax and Accounting). For further infor-
mation regarding this revenue procedure,
contact Roy A. Hirschhorn at (202) 622-
4960 (not a toll-free call).
26 CFR 601.106: Appeals functions.
(Also Part I, §§ 4083, 6715; 48.4083–1.)
Rev. Proc. 2001–33
SECTION 1. PURPOSE AND SCOPE
.01 This revenue procedure informs
taxpayers how to request an administra-
tive appeal of the penalties imposed by
§ 6715 of the Internal Revenue Code re-
lating to the misuse of dyed diesel fuel
and kerosene (the Dyed Fuel Penalty) and
§§ 4083(c)(3) and 7342 relating to the re-
fusal to admit entry for purposes of in-
specting facilities and equipment and tak-
ing and removing fuel samples (the
Refusal Penalty). This revenue procedure
also explains how the Office of Appeals
(Appeals) resolves these appeals.
.02 An appeal request may be made to
Appeals before payment of the Dyed Fuel
Penalty or the Refusal Penalty according
to the provisions of this revenue proce-
dure. Special rules, which are described
in section 7 of this revenue procedure,
apply to taxpayers that paid a penalty be-
fore June 4, 2001, the date this revenue
procedure is published in the Internal
Revenue Bulletin.
.03 In all cases, an appeal request
made under this revenue procedure is:
(1) Optional, and
(2) Initiated by the taxpayer.
SECTION 2. BACKGROUND
.01 Section 6715.
(1) Section 6715(a) provides that if
any dyed fuel is sold or held for sale by
any person for any use which such person
knows or has reason to know is not a non-
taxable use of such fuel; any dyed fuel is
held for use or used by any person for a
use other than a nontaxable use and such
person knew, or had reason to know, that
such fuel was so dyed; or any person will-
fully alters, or attempts to alter, the
strength or composition of any dye or
marking done pursuant to § 4082 in any
dyed fuel, then such person shall pay a
penalty in addition to the tax (if any).
(2) Section 6715(b)(1) provides that
the amount of the penalty under § 6715(a)
on each act shall be the greater of $10 for
each gallon of dyed fuel involved or
$1,000.
(3) Section 6715(b)(2) provides that
in determining the penalty under
§ 6715(a) on any person, § 6715(b)(1) is
applied by increasing the amount in
§ 6715(b)(1)(A) by the product of the
amount and the number of prior penalties
(if any) imposed by § 6715 on the person
(or a related person or any predecessor of
the person or related person).
(4) Section 6715(c) provides that
“dyed fuel” means any dyed diesel fuel or
kerosene, whether or not the fuel was
dyed pursuant to § 4082. Also, “nontax-
able use” has the same meaning given the
term by § 4082(b).
(5) Section 6715(d) provides that if a
penalty is imposed under § 6715 on any
business entity, each officer, employee, or
agent of the entity who willfully partici-
pated in any act giving rise to the penalty
shall be jointly and severally liable with
the entity for the penalty.
.02Sections 4083, 7606, and 7342.
(1) Section 4083(a)(1) provides that
“taxable fuel” means gasoline, diesel fuel,
and kerosene.
(2) Section 4083(c)(1) provides that
the Secretary may, in administering com-
pliance with the tax on taxable fuel, enter
any place at which taxable fuel is pro-
duced or is stored (or may be stored) for
purposes of examining the equipment
used to determine the amount or composi-
tion of such fuel and the equipment used
to store such fuel, and taking and remov-
ing samples of such fuel; and detain, for
those purposes, any container which con-
tains or may contain any taxable fuel.
(3) Section 7606 provides that the
Secretary may enter any building or place
where any articles subject to tax are
made, produced, or kept so far as may be
necessary for the purpose of examining
the articles.
(4) Section 7342 provides that any
owner of a building or place, or person
having agency or superintendence of the
same, who refuses to admit any officer
or employee of the United States Trea-
sury Department acting under authority
of § 7606 or refuses to permit the officer
or employee to examine the article or ar-
ticles, shall, for every refusal, forfeit
$500.
(5) Section 4083(c)(3) provides that
the Refusal Penalty provided by § 7342
shall apply to any refusal to admit entry or
other refusal to permit an action by the
Secretary authorized by § 4083(c)(1), ex-
cept that § 7342 is applied by substituting
“$1,000” for “$500” for each refusal.
SECTION 3. ACTION BEFORE
APPEALS CONSIDERATION
.01 If the Internal Revenue Service
(IRS) proposes to assert either the Dyed
Fuel Penalty or the Refusal Penalty
against a taxpayer, the IRS will notify the
taxpayer in writing. If the taxpayer does
June 4, 200113222001–23 I.R.B.

not agree with the proposed penalty, the
taxpayer will be asked to complete Form
12009, Request for an Informal Confer-
ence and Appeals Review, and submit it,
within 30 days from the date of this notifi-
cation, to the IRS supervisor responsible
for the taxpayer’s case. Form 12009 is in-
cluded as an Appendix to this Revenue
Procedure. If the taxpayer does not sub-
mit this form to the IRS within this 30 day
period, the IRS will, in the case of the
Dyed Fuel Penalty, assess the penalty or,
in the case of the Refusal Penalty, take ap-
propriate legal action to collect the
penalty.
.02 If the taxpayer submits Form 12009
on a timely basis, the IRS supervisor re-
sponsible for the case will review the in-
formation submitted by the taxpayer on
the taxpayer’s Form 12009 and will con-
tact the taxpayer to arrange a conference.
If, after this conference, the IRS still pro-
poses to assert the penalty, the IRS super-
visor will so notify the taxpayer. The tax-
payer then has 30 days from the date of
this notification to request that the case be
reviewed by Appeals. The taxpayer
makes this request by contacting the IRS
supervisor who will then forward the case
to Appeals. An Appeals Officer will then
contact the taxpayer and, if necessary,
arrange for a conference in Appeals.
SECTION 4. ISSUES FOR APPEALS
CONSIDERATION
.01 All issues that remain in dispute be-
tween a taxpayer and the IRS involving
either the Dyed Fuel Penalty or the Re-
fusal Penalty are appropriate for an ad-
ministrative appeal.
.02 With respect to the Dyed Fuel
Penalty, issues in dispute may include
whether (1) the fuel involved in an alleged
violation was dyed; (2) the taxpayer knew
or had reason to know that the fuel was
sold or held for sale for other than a non-
taxable use (in a case involving
§ 6715(a)(1)); (3) the taxpayer knew or
had reason to know that the fuel was dyed
(in a case involving § 6715(a)(2)); (4) the
taxpayer acted willfully (in a case involv-
ing § 6715(a)(3)); (5) the officer, em-
ployee, or agent of a business entity will-
fully participated in any act giving rise to
the Dyed Fuel Penalty under § 6715(d); or
(6) the IRS correctly determined the
amount of fuel subject to the Dyed Fuel
Penalty.
.03 With respect to the Refusal Penalty,
issues in dispute may include whether the
IRS had authority to make the inspection
in question.
SECTION 5. RESOLVING THE
PENALTY
.01In general. Case files transferred to
Appeals should include the computation
of the penalty; date, location, and type of
violation; results of laboratory and field
testing of fuel (if applicable); prior warn-
ings and offenses; and statements made
by the investigating official, the IRS su-
pervisor, and the taxpayer.
.02 Collection activity. Since Appeals
jurisdiction and consideration will be af-
forded to the taxpayer before the final de-
termination of the penalty, collection ac-
tivity will be suspended until Appeals has
determined the penalty amount.
.03 Appeals determination.Each case
will be reviewed under established Ap-
peals procedures and decided on its own
merits.
.04 New information submitted.
(1) The IRS should be given the op-
portunity to timely review and comment
on any significant new information or evi-
dence presented by the taxpayer. “Signif-
icant new information” is information of a
non-routine nature that, in the judgement
of the appeals officer, would have had an
effect on the IRS’s findings or that
changes the appeals officer’s evaluation
of the litigating hazards. If it appears the
significant new information or evidence
was purposely withheld from the IRS, the
entire case should be returned to the IRS
and jurisdiction relinquished. See Inter-
nal Revenue Manual 8.2.1.2.2.
(2) If evidence submitted in Appeals
conflicts with evidence originally submit-
ted to the IRS or shifts responsibility to
another taxpayer, and this new evidence
was not purposely withheld from the IRS,
consideration should be given to retaining
jurisdiction but referring the new issues or
information to the IRS for timely review
and comment.
.05 If the Dyed Fuel Penalty is upheld.
If the Dyed Fuel Penalty is upheld, Ap-
peals will prepare an Appeals Case Mem-
orandum and forward it along with the
case file to the IRS office that proposed
the Dyed Fuel Penalty so that the Dyed
Fuel Penalty may be assessed and col-
lected.
.06 If the Dyed Fuel Penalty is not up-
held. If the Dyed Fuel Penalty is not up-
held, Appeals will prepare an Appeals
Case Memorandum and forward it along
with the case file to the IRS office that
proposed the penalty to close the Dyed
Fuel Penalty case without assessing a
penalty.
.07 If the Refusal Penalty is upheld. If
the Refusal Penalty is upheld, Appeals
will forward the case file to District
Counsel for advice and direction on
penalty enforcement.
.08 If the Refusal Penalty is not upheld.
If the Refusal Penalty is not upheld, Ap-
peals will prepare an Appeals Case Mem-
orandum and forward it along with the
case file to the IRS office that proposed
the penalty to close the Refusal Penalty
case.
.09 Subsequent events. If an excise tax
assessment is made in conjunction with
the Dyed Fuel Penalty, a copy of the Ap-
peals Case Memorandum on the Dyed
Fuel Penalty should be included in the
case file. Any redeterminations of the ex-
cise tax issue and the Dyed Fuel Penalty
will be based on the respective merits of
each case.
SECTION 6. USER FEE
There is no user fee for an administra-
tive appeal of the Dyed Fuel Penalty or
the Refusal Penalty.
SECTION 7. TAXPAYERS THAT
PAID A PENALTY BEFORE JUNE 4,
2001, THE DATE THIS REVENUE
PROCEDURE IS PUBLISHED IN THE
INTERNAL REVENUE BULLETIN
.01 For purposes of this section, a
“prior taxpayer” is a taxpayer that paid
the Dyed Fuel Penalty or the Refusal
Penalty before June 4, 2001 (the date this
revenue procedure is published in the In-
ternal Revenue Bulletin), was denied an
administrative appeal, and has not signed
a closing agreement with respect to the
penalty.
.02 A prior taxpayer that files a timely
claim for a refund of a penalty may re-
quest an administrative appeal. The re-
fund claim should state that the prior tax-
payer desires an administrative appeal
under this revenue procedure. Appeals
will process this request under the provi-
sions of sections 4, 5.01, 5.03, and 5.04 of
this revenue procedure.
2001–23 I.R.B.1323June 4, 2001

SECTION 8. EFFECTIVE DATE
This revenue procedure applies to re-
quests for appeal of the Dyed Fuel
Penalty or the Refusal Penalty made on or
after June 4, 2001, the date this revenue
procedure is published in the Internal
Revenue Bulletin.
DRAFTING INFORMATION
The principal authors of this revenue
procedure are Theodore J. Cichaski of the
National Office of Appeals, Office of Al-
ternative Dispute Resolution and Customer
Service Programs, and Mary Burwell of
the National Office (Examination) Excise
Tax Program. For further information re-
garding this revenue procedure, contact
Theodore J. Cichaski at (703) 756-6697,
extension 18, Mary Burwell at (202) 622-
4379, or Thomas Carter Louthan, Director,
Office of Alternative Dispute Resolution
and Customer Service Programs, at (202)
694-1842 (not toll-free numbers).
June 4, 200113242001–23 I.R.B.

2001–23 I.R.B.1325June 4, 2001

June 4, 200113262001–23 I.R.B.
26 CFR 601.105: Examination of returns and
claims for refund, credit, or abatement;
determination of correct tax liability.
(Also Part I, sections 704; 1.704–1, 1.704–3.)
Rev. Proc. 2001–36
SECTION 1. PURPOSE
This revenue procedure grants auto-
matic permission for certain securities
partnerships to aggregate contributed
property for purposes of making § 704(c)
allocations. This revenue procedure also
describes the information that must be in-
cluded with ruling requests for permission
to aggregate contributed property for pur-
poses of making § 704(c) allocations sub-
mitted by partnerships that do not qualify
for automatic permission.
SECTION 2. BACKGROUND
.01 To prevent the shifting of tax conse-
quences among partners with respect to
precontribution gain or loss, § 704(c) re-
quires partnerships to allocate income,
gain, loss, and deductions with respect to
property contributed by a partner so as to
take into account any variation between
the adjusted tax basis of the property and
its fair market value at the time of the
contribution. These allocations must be
made using a reasonable method that is
consistent with the purpose of § 704(c).
Similar rules apply to differences between
book value and tax basis that are created
by a revaluation of partnership assets pur-
suant to § 1.704–1(b)(2)(iv)(f) (reverse
§ 704(c) allocations).
.02 Section 1.704–3(a)(10) provides that
an allocation method (or combination of
methods) is not reasonable if the contribu-
tion of property (or event that results in re-
verse § 704(c) allocations) and the corre-
sponding allocation of tax items with
respect to the property are made with a view
to shifting the tax consequences of built-in
gain or loss among the partners in a manner
that substantially reduces the present value
of the partners’ aggregate tax liability.
.03 Section 1.704–3(a)(2) provides that
§ 704(c) allocations are generally made
on a property-by-property basis. There-
fore, built-in gains and losses from differ-
ent items of contributed or revalued prop-
erty generally cannot be aggregated.
.04 Section 1.704–3(e)(3) provides a
special rule that allows securities partner-
ships (as defined in § 1.704–3(e)(3)(iii))
to make reverse § 704(c) allocations on an
aggregate basis. Specifically, § 1.704–3
(e)(3)(i) provides that, for purposes of
making reverse § 704(c) allocations, a se-
curities partnership may aggregate built-
in gains and losses from qualified finan-
cial assets (as defined in § 1.704–3
(e)(3)(ii)) using any reasonable approach
that is consistent with the purpose of
§ 704(c). This rule, however, only applies
to built-in gains and losses from revalua-
tions of partnership property; aggregation
of built-in gains and losses from con-
tributed property is only permitted pur-
suant to published guidance or by letter
ruling. Section 1.704–3(e)(4)(iii).
.05 Section 1.704–3(e)(3)(iv) and (v)
describe two methods of making § 704(c)
allocations on an aggregate basis that are
generally reasonable, the partial netting
and the full netting approaches, respec-
tively.
.06 Since the regulations under
§ 704(c) were issued, the Service has re-
ceived and responded to numerous ruling
requests from securities partnerships or-
ganized as part of a “Master-Feeder
Structure” for permission to aggregate
contributed property for purposes of mak-
ing § 704(c) and reverse § 704(c) alloca-
tions.
.07 In a typical Master-Feeder Struc-
ture, two or more Feeder Funds or one or
more Feeder Funds and an investment ad-
visor, principal underwriter, or manager
contribute their assets, consisting primar-
ily of cash or financial investments, to a
single Master Portfolio in exchange for
beneficial interests in the Master Portfo-
lio. In these cases, each Feeder Fund and
the Master Portfolio is registered with the
Securities and Exchange Commission
under the Investment Company Act of
1940 (1940 Act). The shares of these
Feeder Funds are typically publicly of-
fered and widely held by individuals, cor-
porations, and institutional investors.
Generally, each Feeder Fund is an open-
end mutual fund, which continuously of-
fers to sell new shares or redeem existing
shares for a price equal to the net asset
value of their proportionate interest in the
portfolio.
.08 The IRS and Treasury Department
have determined that it is in the best inter-
est of sound tax administration to reduce
the burden on taxpayers of submitting rul-
ing requests by granting to certain Mas-
ter-Feeder Structures automatic permis-
sion to aggregate built-in gains and losses
from contributed securities.
SECTION 3. SCOPE
.01 Automatic Permission. This rev-
enue procedure provides automatic per-
mission to Qualified Master-Feeder
Structures (QMFSs), as described in sec-
tion 4 of this revenue procedure, to aggre-
gate built-in gains and losses from con-
tributed securities for purposes of making
§ 704(c) and reverse § 704(c) allocations.
The Service will no longer issue letter rul-
ings to QMFSs allowing this type of ag-
gregation. But see section 6.02 of this rev-
enue procedure.
.02 Securities Partnerships That Do
Not Qualify for Automatic Permission.
The Service recognizes that there may
be securities partnerships not described
in section 4 of this revenue procedure
that should be allowed to aggregate
built-in gains and losses from con-
tributed property where the burden of
making § 704(c) allocations is great and
the likelihood of character and timing
distortions is minimal. Therefore, the
Service will continue to consider ruling
requests from these partnerships. Sec-
tion 5 of this revenue procedure de-
scribes the information to be submitted
in such a ruling request.
SECTION 4. AUTOMATIC
PERMISSION FOR QUALIFIED
MASTER-FEEDER STRUCTURES TO
AGGREGATE CONTRIBUTED
PROPERTIES
.01 In general. Permission is hereby
granted for any QMFS, as defined in sec-
tion 4.02 of this revenue procedure, to ag-
gregate built-in gains and losses from
contributed qualified financial assets for
purposes of making § 704(c) and reverse
§ 704(c) allocations.
.02 Qualified Master-Feeder
Structure. A QMFS is created where two
or more investors contribute cash or
qualified financial assets to a Master
Portfolio in exchange for beneficial in-
terests in the Master Portfolio. To qual-
ify as a QMFS, the following require-
ments must be met:
(1) Each partner in the Master Port-
folio is a Feeder Fund, or an investment
advisor, principal underwriter, or manager
of the Master Portfolio;

2001–23 I.R.B.1327June 4, 2001
(2) Each Feeder Fund contributes
only cash and/or a portfolio of diversified
stocks and securities that satisfies the 25
and 50 percent tests of § 368(a)(2)(F)(ii)
in exchange for beneficial interests in the
Master Portfolio;
(3) Each partner in the Master Portfo-
lio that is an investment advisor, principal
underwriter, or manager, contributes only
cash and/or services in exchange for bene-
ficial interests in the Master Portfolio;
(4) The Master Portfolio is treated as
a partnership for federal tax purposes and
qualifies as a securities partnership under
§ 1.704–3(e)(3)(iii);
(5) Each Feeder Fund is a publicly
offered regulated investment company, as
defined in § 67(c)(2)(B) and § 1.67–2T
(g)(3)(iii);
(6) The Master Portfolio is registered
as an investment company under the 1940
Act.
(7) The Master Portfolio makes
§ 704(c) and reverse § 704(c) allocations
under the partial netting approach or the
full netting approach as described in
§ 1.704–3(e)(3)(iv) or § 1.704–3(e)(3)(v),
respectively, and;
(8) The contributions to the Master
Portfolio and the corresponding alloca-
tions of tax items with respect to the prop-
erty contributed to the Master Portfolio
are not made with a view to shifting the
tax consequences of built-in gain or loss
among the partners in a manner that sub-
stantially reduces the present value of the
partners’ aggregate tax liability.
SECTION 5. INFORMATION
REQUIRED FOR RULING REQUESTS
BY SECURITIES PARTNERSHIPS
THAT DO NOT QUALIFY FOR
AUTOMATIC PERMISSION
.01 In general.This section describes
the information and representations that a
securities partnership not described in
section 4 of this revenue procedure must
submit when requesting a ruling permit-
ting the aggregation of built-in gains and
losses from contributed property for pur-
poses of making § 704(c) and reverse
§ 704(c) allocations. Taxpayers should be
aware that additional information may be
required. See also section 8 of Rev. Proc.
2001–1, 2001–1 I.R.B. 1 (or its succes-
sor), which outlines the general require-
ments concerning the information to be
submitted as part of a ruling request.
.02 Representations. The ruling request
must include the following representa-
tions:
(1) The partnership qualifies as a
“securities partnership” as defined in
§ 1.704–3(e)(3)(iii);
(2) The partnership will make reval-
uations at least annually in accordance
with § 1.704–3(e)(3)(iii)(B)(2)(ii);
(3) The burden of making § 704(c)
allocations separately from reverse
§ 704(c) allocations is substantial; and
(4) The partnership’s contributions,
revaluations, and the corresponding allo-
cations of tax items are not made with a
view to shifting the tax consequences of
built-in gain or loss among the partners in
a manner that would substantially reduce
the present value of the partners’ aggre-
gate tax liability.
.03 Information. The following infor-
mation must be submitted with the ruling
request:
(1) An explanation of the business
and tax reasons for the formation of the
partnership;
(2) A detailed description of each
partner;
(3) A detailed description of each
type of property to be contributed includ-
ing its fair market value and adjusted
basis;
(4) The aggregate fair market value
and adjusted basis of the property to be
contributed;
(5) The aggregate gross built-in
gains and aggregate gross built-in losses
in the property to be contributed;
(6) A representation that the partner
is contributing all of its assets to the part-
nership or an explanation as to how the
assets to be contributed to the partnership
were chosen;
(7) A description of the aggregation
method that the partnership will use;
(8) Copies of the partnership’s orga-
nizational documents, if available; and
(9) Copies of any proxy statements,
information statements, marketing mate-
rials, or prospectuses filed, distributed, or
prepared by the partnership or any of its
partners in connection with the formation
of, or contribution of property to, the part-
nership.
SECTION 6. EFFECTIVE DATE
.01 In general. Section 4 of this rev-
enue procedure applies to all contribu-
tions of property as part of a QMFS on or
after June 4, 2001. Section 5 of this rev-
enue procedure applies to all ruling re-
quests pending in the National Office on
June 4, 2001, and to requests received
thereafter.
.02 Transition rule for pending ruling
requests.If a QMFS has filed a request
for a ruling allowing it to aggregate con-
tributed securities for purposes of making
§ 704(c) and reverse § 704(c) allocations
and that ruling request is pending in the
national office on June 4, 2001, the
QMFS may withdraw that ruling request
and receive a refund of its user fee. How-
ever, the national office will process rul-
ing requests pending on June 4, 2001, un-
less, prior to the earlier of July 19, 2001,
or the issuance of the letter ruling, the
QMFS notifies the national office that it
will withdraw its ruling request.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Horace Howells of the Of-
fice of Associate Chief Counsel
(Passthroughs and Special Industries).
For further information regarding this
revenue procedure, contact Horace How-
ells at (202) 622-3050 (not a toll-free
call).
26 CFR 601.105: Examination of returns and
claims for refund; determination of cor rect tax
liability.
(Also Par t I, sections 942, 943.)
Rev. Proc. 2001–37
SECTION 1. PURPOSE
This revenue procedure provides guid-
ance to taxpayers regarding certain elec-
tions made pursuant to the FSC Repeal
and Extraterritorial Income Exclusion Act
of 2000 (the “Act”). Pub. L. No.
106–519, 114 Stat. 2423 (Nov. 15, 2000).
Specifically, this revenue procedure in-
cludes guidance with respect to the elec-
tion to exclude gross receipts from for-
eign trading gross receipts under
§ 942(a)(3) of the Internal Revenue Code
(“Code”), the election (and revocation of
such election) by a foreign corporation to
be treated as a domestic corporation under
§ 943(e)(1), and the election (and revoca-
tion of such election) by a taxpayer to
apply the extraterritorial income exclu-

June 4, 200113282001–23 I.R.B.
sion (the “ETI exclusion”) in lieu of the
foreign sales corporation (“FSC”) provi-
sions to certain transactions under
§ 5(c)(2) of the Act.
SEC. 2. BACKGROUND
.01 On November 15, 2000, the Act
was signed into law, repealing the FSC
provisions of §§ 921 through 927 effec-
tive October 1, 2000, and amending the
definition of gross income to exclude cer-
tain extraterritorial income.
.02 The amendments to the Code made
by the Act apply to all transactions en-
tered into after September 30, 2000. Sec-
tion 943(b)(1) defines the term “transac-
tion” as “any sale, exchange, or other
disposition . . . any lease or rental, and . . .
any furnishing of services.”
.03 Section 5(c)(1) of the Act provides
a transition rule for FSCs in existence on
September 30, 2000, whereby the FSC
provisions remain applicable to FSC
transactions for a limited transition pe-
riod.
.04 The Act contains several taxpayer
elections. First, a taxpayer may elect to
exclude the gross receipts from a transac-
tion or transactions from its “foreign trad-
ing gross receipts” in any taxable year
under § 942(a)(3). Second, certain for-
eign corporations may elect to be treated
as domestic corporations under § 943
(e)(1). Third, a taxpayer may elect under
§ 5(c)(2) of the Act to apply the ETI ex-
clusion provisions in lieu of the FSC pro-
visions to certain transactions otherwise
covered by the transition rules.
SEC. 3. FORM 8873
(“EXTRATERRITORIAL INCOME
EXCLUSION”)
A taxpayer that reports extraterritorial
income on its income tax return calculates
its ETI exclusion with respect to that in-
come on Form 8873 (“Extraterritorial In-
come Exclusion”). Such taxpayer must
attach a completed Form 8873 to its in-
come tax return.
SEC. 4. ELECTION TO EXCLUDE
CERTAIN GROSS RECEIPTS FROM
FOREIGN TRADING GROSS
RECEIPT
A taxpayer may elect to exclude gross
receipts from its “foreign trading gross re-
ceipts” in any taxable year under
§ 942(a)(3). A taxpayer makes a § 942
(a)(3) election on a transaction-by-trans-
action basis. A taxpayer makes such elec-
tion by checking the box on line 1 in Part
I of Form 8873 and attaching the com-
pleted form to its income tax return. In
the case of a partnership, each partner
may make this election with respect to
any transaction for which the partnership
maintains separate accounts. A taxpayer
that excludes some, but not all, of its
gross receipts from foreign trading gross
receipts must attach to its Form 8873 a
tabular schedule that identifies the gross
receipts that are excluded from foreign
trading gross receipts.
SEC. 5. ELECTION BY A FOREIGN
CORPORATION TO BE TREATED AS
A DOMESTIC CORPORATION
.01 Generally. Section 943(e)(1) al-
lows an “applicable foreign corporation”
to elect to be treated as a domestic corpo-
ration for all purposes of the Code if that
corporation waives all benefits granted to
it by the United States under any treaty.
Making the election is a prerequisite to
the ETI exclusion under § 943(a)(2) with
respect to property manufactured, pro-
duced, grown, or extracted outside the
United States by a foreign corporation. A
corporation that makes a § 943(e)(1) elec-
tion may not elect to be an S corporation
under § 1362(a).
.02 Who may elect. Pursuant to
§ 943(e)(2), an applicable foreign corpo-
ration is any foreign corporation if either:
(1) it manufactures, produces,
grows, or extracts property in the ordinary
course of the corporation’s trade or busi-
ness, or
(2) substantially all of its gross re-
ceipts are foreign trading gross receipts.
03 Period of election. A § 943(e)(1)
election applies to the taxable year for
which made and to all subsequent years
unless revoked by the taxpayer pursuant
to § 943(e)(3)(A) or terminated pursuant
to § 943(e)(3)(B). A § 943(e)(1) election
may be filed after September 30, 2000,
but cannot be effective for any taxable
year beginning before October 1, 2000.
.04 Method of election. A corporation
makes a § 943(e)(1) election by checking
the box on line 3 in Part I of Form 8873
and attaching the completed form to a
timely filed Form 1120 (“U.S. Corpora-
tion Income Tax Return”) (including ex-
tensions) for the first taxable year of the
election.
.05 Where return is filed. A foreign
corporation that makes a § 943(e)(1) elec-
tion but does not become a member of a
consolidated group under § 1501 as a re-
sult of such election shall file its Form
1120 at the applicable Service Center ad-
dress listed in the “Where To File” section
of the instructions for Form 1120. If a
foreign corporation makes a § 943(e)(1)
election and becomes a member of a con-
solidated group under § 1501 as a result
of such election, the common parent of
such group shall include the corporation
that made the § 943(e)(1) election in its
consolidated return (Form 1120) for the
group.
.06 Revocation of election.A corpora-
tion may revoke a § 943(e)(1) election by
filing a statement that the election is re-
voked. The revocation statement shall be
entitled “Revocation of Election under
Section 943(e)(1) to be Treated as a Do-
mestic Corporation – Filed Pursuant to
[citation of this revenue procedure]”
and shall include the corporation’s name,
address, employer identification number,
and contact phone number, and a state-
ment that the taxpayer revokes its election
under § 943(e)(1). The revocation state-
ment shall be signed by any person autho-
rized to sign a corporate return under
§ 6062. The corporation shall file such
revocation statement with the same Ser-
vice Center (“Attn: Entity Control”) with
which the corporation files its income tax
return as determined under § 5.05 of this
revenue procedure. Once properly filed,
the revocation of a § 943(e)(1) election is
automatic and applies to taxable years be-
ginning on or after the date the revocation
statement is filed.
.07 Termination of election. If a corpo-
ration that made a § 943(e)(1) election in
any taxable year meets neither of the re-
quirements described in § 5.02 of this rev-
enue procedure for any subsequent tax-
able year, the election will not apply to
taxable years beginning after such subse-
quent taxable year.
.08 Effect of termination or revocation.
If a corporation that made a § 943(e)(1)
election revokes the election or the elec-
tion is terminated, that corporation (and
any successor corporation) may not make
another § 943(e)(1) election for five tax-
able years beginning with the first taxable

2001–23 I.R.B.1329June 4, 2001
year for which the original election is not
in effect as a result of the revocation or
termination.
.09Effect of election by FSCs. A FSC
that elects to be treated as a domestic cor-
poration under § 943(e)(1) is not treated
as a FSC for any year for which such elec-
tion applies and for all subsequent years.
.10 Effect of election for purposes of
section 367.
(1) Except as provided in § 5.10(2)
of this revenue procedure, a foreign cor-
poration that makes a § 943(e)(1) election
is treated, for purposes of § 367, as trans-
ferring, on the first day of the first taxable
year to which the election applies, all of
its assets to a domestic corporation in
connection with an exchange described in
§ 354.
(2) In the case of a foreign corpora-
tion described in § 5(c)(3) of the Act that
makes a § 943(e)(1) election, earnings
and profits (“E&P”) accumulated in tax-
able years ending before October 1, 2000,
are not included in the gross income of its
shareholders by reason of such election.
This rule does not apply to E&P acquired
by the foreign corporation in a transaction
after September 30, 2000, that is subject
to § 381, unless the E&P would have
qualified for the exclusion under § 5(c)(3)
of the Act in the hands of the transferor or
distributor. Rules similar to rules under
§ 953(d)(4)(B)(ii) through (iv) shall apply
to E&P not included in gross income
under § 5(c)(3) of the Act.
.11Effect of revocation or termination
for purpose of section 367. If a corpora-
tion’s § 943(e)(1) election ceases to apply
because it is revoked or terminated, then,
for purposes of § 367, such corporation
shall be treated as a domestic corporation
transferring all of its assets to a foreign
corporation in connection with an ex-
change to which § 354 applies on the first
day of the first taxable year to which the
election ceases to apply.
SEC. 6. TRANSITION RULES;
ELECTION TO APPLY
EXTRATERRITORIAL INCOME
EXCLUSION PROVISIONS IN LIEU
OF FSC PROVISIONS
.01 FSC elections. After September 30,
2000, no corporation may elect to be a
FSC under § 922(a)(2). For purposes of
the transition rule, a FSC election is
deemed to occur upon the formation of an
otherwise eligible electing corporation,
provided that the corporation makes the
election within 90 days of formation pur-
suant to the requirements of § 1.921–1T
(b)(1) of the Income Tax Regulations.
.02 Termination of inactive FSCs. If a
FSC has no foreign trade income (as de-
fined in former § 923(b)) for any period
of five consecutive taxable years begin-
ning after December 31, 2001, such FSC
will no longer be treated as a FSC for any
taxable year beginning after such five-
year period.
.03 Transition period for existing
FSCs. In general, the Act repeals the
FSC provisions for transactions entered
into after September 30, 2000. However,
§ 5(c)(1) of the Act provides that the
FSC provisions continue to apply for a
limited time period with respect to cer-
tain transactions entered into in the ordi-
nary course of business involving a FSC
in existence on September 30, 2000.
Specifically, the FSC provisions con-
tinue to apply to transactions involving a
FSC and occurring:
(1) before January 1, 2002, or
(2) after December 31, 2001, pur-
suant to a binding contract which is in ef-
fect on September 30, 2000, and there-
after, and which is between the FSC (or a
person related to the FSC) and a person
other than a related person.
.04 Election to apply extraterritorial
income provisions. In the case of transac-
tions occurring after September 30, 2000,
for which the FSC provisions continue to
apply pursuant to § 5(c)(1) of the Act, a
taxpayer may elect under § 5(c)(2) of the
Act to apply the ETI exclusion provisions
in lieu of the FSC provisions. A taxpayer
makes a § 5(c)(2) election on a transac-
tion-by-transaction basis. Such election
with respect to a transaction is effective
for the taxable year for which made and
all subsequent taxable years.
.05 Method of election. A § 5(c)(2)
election is made by checking the box on
line 2 in Part I of Form 8873 on which the
taxpayer determines its ETI exclusion and
attaching the completed form to the tax-
payer’s timely filed income tax return (in-
cluding extensions) for the first taxable
year of the election. As set forth in Form
8873 and the accompanying instructions,
the taxpayer shall attach to Form 8873 a
tabular schedule that identifies the trans-
actions for which the taxpayer has elected
ETI exclusion treatment pursuant to
§ 5(c)(2) of the Act.
.06 Method of revocation. A taxpayer
may revoke a § 5(c)(2) election with re-
spect to a transaction only with the con-
sent of the Secretary of the Treasury. To
request consent for a § 5(c)(2) revocation,
the taxpayer shall file a statement entitled
“Revocation of Election under Section
5(c)(2) of the FSC Repeal and Extraterri-
torial Income Exclusion Act of 2000 –
Filed Pursuant to[citation of this rev-
enue procedure]” requesting revocation
of the § 5(c)(2) election. Until regula-
tions are issued, such statement shall in-
clude the name, address, taxpayer identi-
fication number, and contact phone
number of the taxpayer, the Service Cen-
ter with which the taxpayer filed its last
income tax return, the first taxable year of
the taxpayer for which the revocation is to
be effective, and reasons justifying the
granting of consent for the § 5(c)(2) revo-
cation. In addition, the statement shall in-
dicate the transactions to which the re-
quest for consent to revoke the § 5(c)(2)
election applies. The statement shall be
signed by, or on behalf of, the taxpayer re-
questing consent by an individual with
authority to bind the taxpayer in such
matters. The taxpayer shall file such
statement with Internal Revenue Service,
1111 Constitution Ave. NW, LMSB Mint
Bldg., Room M3-333 LM:PFT:I, Wash-
ington, DC 20224. A § 5(c)(2) revocation
applies to taxable years beginning after
the year in which such revocation is re-
quested.
SEC. 7. EFFECTIVE DATE
This revenue procedure is effective Oc-
tober 1, 2000.
SEC. 8. DRAFTING INFORMATION
The principal author of this revenue
procedure is Christopher J. Bello of the
Office of Associate Chief Counsel (Inter-
national). For further information regard-
ing this revenue procedure, contact Mr.
Bello at (202) 874-1490 (not a toll-free
call).
SEC. 9. PAPERWORK REDUCTION
ACT
The collections of information con-
tained in this revenue procedure have
been reviewed and approved by the Of-

June 4, 200113302001–23 I.R.B.
fice of Management and Budget in accor-
dance with the Paperwork Reduction Act
(44 U.S.C. 3507) under control number
1545–1731.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless the col-
lection of information displays a valid
OMB control number.
The collections of information in this
revenue procedure are in §§ 3, 4, 5, and 6.
The collections in §§ 4, 5 and 6 are re-
quired for a taxpayer that elects to ex-
clude some, but not all, of its gross re-
ceipts from foreign trading gross receipts
for purposes of the ETI exclusion provi-
sions; for a corporation subject to an elec-
tion to be treated as a domestic corpora-
tion to revoke such election; for a tax-
payer that elects to apply the ETI exclu-
sion provisions to its transactions in lieu
of the FSC provisions; and for a taxpayer
subject to an election to apply the ETI ex-
clusion provisions, in lieu of the FSC pro-
visions, to revoke such election. The
likely respondents are businesses.
The estimated total annual reporting
burden in §§ 5.06 and 6.06 with respect to
the revocation of the above elections is 19
hours. The estimated annual burden per
respondent is 20 minutes. The estimated
number of respondents is 56. The esti-
mated annual frequency of responses is
once.
The estimated average annual burden
per respondent required in §§ 3, 4, 5.04,
and 6.05 is reflected in the burden of
Form 8873.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mater-
ial 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.

2001–23 I.R.B.1331June 4, 2001
General Rules and
Specifications for Private
Printing of Substitute Forms W-2
and W-3; Correction
Announcement 2001–59
The document contains corrections to
Rev. Proc. 2001–26 (2001–17 I.R.B.
1093).
Need for Correction
As published, Rev. Proc. 2001–26 con-
tains the following errors that may prove
to be misleading and are in need of clarifi-
cation.
1. On page 1096, PART A, SEC. 4, para-
graph #.08; the language “If employers
submit MMREF–1 file on magnetic tape
cartridge, a Form 6559 is required.” is
corrected to read: “If employers submit
MMREF–1 file on magnetic tape or tape
cartridge, a Form 6559 is required.
2. On page 1100, PART B, SEC. 2, Para-
graph #.05, #4; the language “Also, if an
employer will only be reporting amounts
for a 401(k) plan in box 13, those instruc-
tions may be modified to cover only Code
D and its instructions.” is corrected to
read: “Also, if an employer will only be
reporting amounts for a 401(k) plan in
box 12, those instructions may be modi-
fied to cover only Code D and its instruc-
tions.”
Part IV. Items of General Interest

June 4, 2001i2001–23 I.R.B.
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”)
that have an effect on previous rulings
use the following defined terms to de-
scribe the effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds
that the same principle also applies to B,
the earlier ruling is amplified. (Compare
with modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial difference between them.
Modified is used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but not
to B, and the new ruling holds that it ap-
plies to both A and B, the prior ruling is
modified because it corrects a published
position. (Compare with amplified and
clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used
in a ruling that lists previously published
rulings that are obsoleted because of
changes in law or regulations. A ruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revoked describes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the
new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example, modified
and superseded describes a situation
where the substance of a previously pub-
lished ruling is being changed in part and
is continued without change in part and it
is desired to restate the valid portion of
the previously published ruling in a new
ruling that is self contained. In this case
the previously published ruling is first
modified and then, as modified, is super-
seded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and
that list is expanded by adding further
names in subsequent rulings. After the
original ruling has been supplemented
several times, a new ruling may be pub-
lished that includes the list in the original
ruling and the additions, and supersedes
all prior rulings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current use and for-
merly used will appear in material published in the
Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security
Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Definition of Terms

2001–23 I.R.B.iiJune 4, 2001
Numerical Finding List
1
Bulletins 2001–1 through 2001–22
Announcements:
2001–1, 2001–2 I.R.B. 277
2001–2, 2001–2 I.R.B. 277
2001–3, 2001–2 I.R.B. 278
2001–4, 2001–2 I.R.B. 286
2001–5, 2001–2 I.R.B. 286
2001–6, 2001–3 I.R.B. 357
2001–7, 2001–3 I.R.B. 357
2001–8, 2001–3 I.R.B. 357
2001–9, 2001–3 I.R.B. 357
2001–10, 2001–4 I.R.B. 431
2001–11, 2001–4 I.R.B. 432
2001–12, 2001–6 I.R.B. 526
2001–13, 2001–9 I.R.B. 752
2001–14, 2001–7 I.R.B. 648
2001–15, 2001–8 I.R.B. 715
2001–16, 2001–8 I.R.B. 715
2001–17, 2001–8 I.R.B. 716
2001–18, 2001–10 I.R.B. 791
2001–19, 2001–10 I.R.B. 791
2001–20, 2001–8 I.R.B. 716
2001–21, 2001–9 I.R.B. 752
2001–22, 2001–11 I.R.B. 895
2001–23, 2001–10 I.R.B. 791
2001–24, 2001–10 I.R.B. 793
2001–25, 2001–11 I.R.B. 895
2001–26, 2001–11 I.R.B. 896
2001–27, 2001–11 I.R.B. 897
2001–28, 2001–13 I.R.B. 975
2001–29, 2001–14 I.R.B. 1014
2001–30, 2001–15 I.R.B. 1065
2001–31, 2001–17 I.R.B. 1113
2001–32, 2001–17 I.R.B. 1113
2001–33, 2001–17 I.R.B. 1137
2001–34, 2001–16 I.R.B. 1087
2001–35, 2001–16 I.R.B. 1087
2001–36, 2001–16 I.R.B. 1089
2001–37, 2001–16 I.R.B. 1090
2001–38, 2001–17 I.R.B. 1138
2001–39, 2001–17 I.R.B. 1141
2001–40, 2001–17 I.R.B. 1141
2001–41, 2001–18 I.R.B. 1147
2001–42, 2001–18 I.R.B. 1147
2001–43, 2001–18 I.R.B. 1147
2001–44, 2001–18 I.R.B. 1148
2001–45, 2001–18 I.R.B. 1148
2001–46, 2001–19 I.R.B. 1165
2001–47, 2001–19 I.R.B. 1165
2001–48, 2001–19 I.R.B. 1168
2001–49, 2001–20 I.R.B. 1183
2001–50, 2001–20 I.R.B. 1184
2001–51, 2001–20 I.R.B. 1185
2001–52, 2001–20 I.R.B. 1186
2001–53, 2001–20 I.R.B. 1186
2001–54, 2001–21 I.R.B. 1284
2001–55, 2001–21 I.R.B. 1284
2001–56, 2001–21 I.R.B. 1286
2001–57, 2001–20 I.R.B. 1187
2001–58, 2001–22 I.R.B. 1295
2001–60, 2001–21 I.R.B. 1287
2001–61, 2001–22 I.R.B. 1296
Court Decisions:
2069, 2001–21 I.R.B. 1191
Notices:
2001–1, 2001–2 I.R.B. 261
Notices—Continued:
2001–2, 2001–2 I.R.B. 265
2001–3, 2001–2 I.R.B. 267
2001–4, 2001–2 I.R.B. 267
2001–5, 2001–3 I.R.B. 327
2001–6, 2001–3 I.R.B. 327
2001–7, 2001–4 I.R.B. 374
2001–8, 2001–4 I.R.B. 374
2001–9, 2001–4 I.R.B. 375
2001–10, 2001–5 I.R.B. 459
2001–11, 2001–5 I.R.B. 464
2001–12, 2001–3 I.R.B. 328
2001–13, 2001–6 I.R.B. 514
2001–14, 2001–6 I.R.B. 516
2001–15, 2001–7 I.R.B. 589
2001–16, 2001–9 I.R.B. 730
2001–17, 2001–9 I.R.B. 730
2001–18, 2001–9 I.R.B. 731
2001–19, 2001–10 I.R.B. 784
2001–20, 2001–11 I.R.B. 818
2001–21, 2001–11 I.R.B. 818
2001–22, 2001–12 I.R.B. 911
2001–23, 2001–12 I.R.B. 911
2001–24, 2001–12 I.R.B. 912
2001–25, 2001–13 I.R.B. 941
2001–26, 2001–13 I.R.B. 942
2001–27, 2001–13 I.R.B. 942
2001–28, 2001–13 I.R.B. 944
2001–29, 2001–14 I.R.B. 989
2001–30, 2001–14 I.R.B. 989
2001–31, 2001–17 I.R.B. 1093
2001–32, 2001–18 I.R.B. 1146
2001–33, 2001–19 I.R.B. 1155
Proposed Regulations:
LR–230–76, 2001–13 I.R.B. 945
REG–209461–79, 2001–8 I.R.B. 712
REG–246256–96, 2001–8 I.R.B. 713
REG–251701–96, 2001–4 I.R.B. 396
REG–101520–97, 2001–15 I.R.B. 1057
REG–106030–98, 2001–11 I.R.B. 820
REG–106446–98, 2001–13 I.R.B. 945
REG–106542–98, 2001–5 I.R.B. 473
REG–121928–98, 2001–6 I.R.B. 520
REG–109481–99, 2001–13 I.R.B. 961
REG–111835–99, 2001–11 I.R.B. 834
REG–114998–99, 2001–14 I.R.B. 992
REG–115560–99, 2001–14 I.R.B. 993
REG–101739–00, 2001–14 I.R.B. 996
REG–103320–00, 2001–8 I.R.B. 714
REG–104683–00, 2001–4 I.R.B. 407
REG–104876–00, 2001–14 I.R.B. 998
REG–105801–00, 2001–13 I.R.B. 965
REG–105946–00, 2001–16 I.R.B. 1069
REG–106513–00, 2001–16 I.R.B. 1076
REG–106702–00, 2001–4 I.R.B. 424
REG–106791–00, 2001–6 I.R.B. 521
REG–106892–00, 2001–15 I.R.B. 1060
REG–107047–00, 2001–14 I.R.B. 1002
REG–107101–00, 2001–16 I.R.B. 1083
REG–107175–00, 2001–13 I.R.B. 971
REG–107176–00, 2001–4 I.R.B. 428
REG–107186–00, 2001–13 I.R.B. 973
REG–107566–00, 2001–3 I.R.B. 346
REG–110374–00, 2001–12 I.R.B. 915
REG–110659–00, 2001–12 I.R.B. 917
REG–114082–00, 2001–7 I.R.B. 629
REG–114083–00, 2001–7 I.R.B. 630
REG–114084–00, 2001–7 I.R.B. 633
REG–116468–00, 2001–6 I.R.B. 522
REG–119352–00, 2001–6 I.R.B. 525
REG–121109–00, 2001–15 I.R.B. 1064
Proposed Regulations—Continued:
REG–125237–00, 2001–12 I.R.B. 919
REG–126100–00, 2001–11 I.R.B. 862
REG–129608–00, 2001–14 I.R.B. 1011
REG–130477–00, 2001–11 I.R.B. 865
REG–130481–00, 2001–11 I.R.B. 865
REG–119436–01, 2001–20 I.R.B. 1183
Railroad Retirement Quarterly Rates:
2001–2, I.R.B. 258
2001–15, I.R.B. 1054
Revenue Procedures:
2001–1, 2001–1 I.R.B. 1
2001–2, 2001–1 I.R.B. 79
2001–3, 2001–1 I.R.B. 111
2001–4, 2001–1 I.R.B. 121
2001–5, 2001–1 I.R.B. 164
2001–6, 2001–1 I.R.B. 194
2001–7, 2001–1 I.R.B. 236
2001–8, 2001–1 I.R.B. 239
2001–9, 2001–3 I.R.B. 328
2001–10, 2001–2 I.R.B. 272
2001–11, 2001–2 I.R.B. 275
2001–12, 2001–3 I.R.B. 335
2001–13, 2001–3 I.R.B. 337
2001–14, 2001–3 I.R.B. 343
2001–15, 2001–5 I.R.B. 465
2001–16, 2001–4 I.R.B. 376
2001–17, 2001–7 I.R.B. 589
2001–18, 2001–8 I.R.B. 708
2001–19, 2001–9 I.R.B. 732
2001–20, 2001–9 I.R.B. 738
2001–21, 2001–9 I.R.B. 742
2001–22, 2001–9 I.R.B. 745
2001–23, 2001–10 I.R.B. 784
2001–24, 2001–10 I.R.B. 788
2001–25, 2001–12 I.R.B. 913
2001–26, 2001–17 I.R.B. 1093
2001–27, 2001–19 I.R.B. 1155
2001–28, 2001–19 I.R.B. 1156
2001–29, 2001–19 I.R.B. 1160
2001–30, 2001–19 I.R.B. 1163
2001–31, 2001–20 I.R.B. 1170
2001–32, 2001–21 I.R.B. 1197
2001–34, 2001–22 I.R.B. 1293
2001–35, 2001–22 I.R.B. 1293
Revenue Rulings:
2001–1, 2001–9 I.R.B. 726
2001–2, 2001–2 I.R.B. 255
2001–3, 2001–3 I.R.B. 319
2001–4, 2001–3 I.R.B. 295
2001–5, 2001–5 I.R.B. 451
2001–6, 2001–6 I.R.B. 491
2001–7, 2001–7 I.R.B. 541
2001–8, 2001–9 I.R.B. 726
2001–9, 2001–8 I.R.B. 652
2001–10, 2001–10 I.R.B. 755
2001–11, 2001–10 I.R.B. 780
2001–12, 2001–11 I.R.B. 811
2001–13, 2001–12 I.R.B. 898
2001–14, 2001–12 I.R.B. 898
2001–15, 2001–13 I.R.B. 922
2001–16, 2001–13 I.R.B. 936
2001–17, 2001–15 I.R.B. 1052
2001–18, 2001–17 I.R.B. 1092
2001–19, 2001–18 I.R.B. 1143
2001–20, 2001–18 I.R.B. 1143
2001–21, 2001–18 I.R.B. 1144
2001–22, 2001–19 I.R.B. 1152
2001–23, 2001–20 I.R.B. 1169
1
A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 2000–27 through
2000–52 is in Internal Revenue Bulletin 2001–1,
dated January 2, 2001.

June 4, 2001iii2001–23 I.R.B.
Revenue Rulings—Continued:
2001–24, 2001–22 I.R.B. 1290
2001–25, 2001–22 I.R.B. 1291
Treasury Decisions:
8910, 2001–2 I.R.B. 258
8911, 2001–3 I.R.B. 321
8912, 2001–5 I.R.B. 452
8913, 2001–3 I.R.B. 300
8914, 2001–8 I.R.B. 653
8915, 2001–4 I.R.B. 359
8916, 2001–4 I.R.B. 360
8917, 2001–7 I.R.B. 538
8918, 2001–4 I.R.B. 372
8919, 2001–6 I.R.B. 505
8920, 2001–8 I.R.B. 654
8921, 2001–7 I.R.B. 532
8922, 2001–6 I.R.B. 508
8923, 2001–6 I.R.B. 485
8924, 2001–6 I.R.B. 489
8925, 2001–6 I.R.B. 496
8926, 2001–6 I.R.B. 492
8927, 2001–11 I.R.B. 807
8928, 2001–8 I.R.B. 685
8929, 2001–10 I.R.B. 756
8930, 2001–5 I.R.B. 433
8931, 2001–7 I.R.B. 542
8932, 2001–11 I.R.B. 813
8933, 2001–11 I.R.B. 794
8934, 2001–12 I.R.B. 904
8935, 2001–8 I.R.B. 702
8936, 2001–9 I.R.B. 720
8937, 2001–11 I.R.B. 806
8938, 2001–13 I.R.B. 929
8939, 2001–12 I.R.B. 899
8940, 2001–15 I.R.B. 1016
8941, 2001–14 I.R.B. 977
8942, 2001–13 I.R.B. 929
8943, 2001–15 I.R.B. 1054
8944, 2001–16 I.R.B. 1067

2001–23 I.R.B.ivJune 4, 2001
Finding List of Current Actions on
Previously Published Items
1
Bulletins 2001–1 through 2001–22
Announcements:
98–99
Modified by
Ann. 2001–9, 2001–3 I.R.B. 357
99–79
Superseded by
Ann. 2001–3, 2001–2 I.R.B. 278
2000–78
Obsoleted by
T.D. 8933, 2001–11 I.R.B. 794
2000–97
Corrected by
Ann. 2001–7, 2001–3 I.R.B. 357
Cumulative Bulletin:
1998–2
Corrected by
Ann. 2001–5, 2001–2 I.R.B. 286
Notices:
94–3
Modified by
T.D. 8933, 2001–11 I.R.B. 794
98–39
Modified by
Notice 2001–9, 2001–4 I.R.B. 375
98–40
Modified by
Notice 2001–9, 2001–4 I.R.B. 375
99–53
Modified and superseded by
Notice 2001–7, 2001–4 I.R.B. 374
2000–21
Superseded by
Notice 2001–1, 2001–2 I.R.B. 261
2000–22
Modified and superseded by
Notice 2001–8, 2001–4 I.R.B. 374
2000–26
Modified by
Notice 2001–22, 2001–12 I.R.B. 911
2000–43
Extended by
Notice 2001–13, 2001–6 I.R.B. 514
Proposed Regulations:
EE–130–86
Partially withdrawn by
REG–209461–79, 2001–8 I.R.B. 712
REG–106030–98
Corrected by
Ann. 2001–30, 2001–15 I.R.B. 1065
REG–106542–98
Corrected by
Ann. 2001–24, 2001–13 I.R.B. 793
REG–116733–98
Withdrawn by
Ann. 2001–11, 2001–4 I.R.B. 432
Proposed Regulations—Continued:
REG–105235–99
Corrected by
Ann. 2001–52, 2001–20 I.R.B. 1186
REG–116048–99
Withdrawn by
Ann. 2001–27, 2001–11 I.R.B. 897
REG–116050–99
Corrected by
Ann. 2001–51, 2001–20 I.R.B. 1185
REG–104683–00
Corrected by
Ann. 2001–42, 2001–18 I.R.B. 1147
REG–106702–00
Corrected by
Ann. 2001–28, 2001–13 I.R.B. 975
REG–110374–00
Corrected by
Ann. 2001–44, 2001–18 I.R.B. 1148
REG–126100–00
Corrected by
Ann. 2001–50, 2001–20 I.R.B. 1184
Revenue Procedures:
75–21
Modified and superseded by
Rev. Proc. 2001–28, 2001–19 I.R.B. 1156
75–28
Modified and superseded by
Rev. Proc. 2001–29, 2001–19 I.R.B. 1160
76–30
Modified and superseded by
Rev. Proc. 2001–28, 2001–19 I.R.B. 1156
79–48
Modified and superseded by
Rev. Proc. 2001–28, 2001–19 I.R.B. 1156
Rev. Proc. 2001–29, 2001–19 I.R.B. 1160
83–87
Superseded by
Rev. Proc. 2001–15, 2001–5 I.R.B. 465
90–18
Amplified and superseded by
Rev. Proc. 2001–18, 2001–8 I.R.B. 708
92–19
Superseded by
Rev. Proc. 2001–15, 2001–5 I.R.B. 465
96–15
Modified by
Ann. 2001–22, 2001–11 I.R.B. 895
96–17
Modified by
Rev. Proc. 2001–9, 2001–3 I.R.B. 328
97–25
Superseded by
Rev. Proc. 2001–31, 2001–20 I.R.B. 1170
99–18
Modified and superseded by
Rev. Proc. 2001–21, 2001–9 I.R.B. 742
99–47
Superseded by
Rev. Proc. 2001–16, 2001–4 I.R.B. 376
Revenue Procedures—Continued:
99–49
Modified and amplified by
Notice 2001–23, 2001–12 I.R.B. 911
Rev. Proc. 2001–10, 2001–2 I.R.B. 272
Rev. Proc. 2001–23, 2001–10 I.R.B. 784
Rev. Proc. 2001–24, 2001–10 I.R.B. 788
Rev. Proc. 2001–25, 2001–12 I.R.B. 913
Rev. Rul. 2001–8, 2001–9 I.R.B. 762
2000–1
Superseded by
Rev. Proc. 2001–1, 2001–1 I.R.B. 1
2000–2
Superseded by
Rev. Proc. 2001–2, 2001–1 I.R.B. 79
2000–3
Superseded by
Rev. Proc. 2001–3, 2001–1 I.R.B. 111
2000–4
Superseded by
Rev. Proc. 2001–4, 2001–1 I.R.B. 121
2000–5
Superseded by
Rev. Proc. 2001–5, 2001–1 I.R.B. 164
2000–6
Superseded by
Rev. Proc. 2001–6, 2001–1 I.R.B. 194
2000–7
Superseded by
Rev. Proc. 2001–7, 2001–1 I.R.B. 236
2000–8
Superseded by
Rev. Proc. 2001–8, 2001–1 I.R.B. 239
2000–14
Supplemented by
Rev. Proc. 2001–27, 2001–19 I.R.B. 1155
2000–16
Modified and superseded by
Rev. Proc. 2001–17, 2001–7 I.R.B. 589
2000–21
Obsoleted by
Rev. Proc. 2001–35, 2001–22 I.R.B. 1293
2000–22
Modified and superseded by
Rev. Proc. 2001–10, 2001–2 I.R.B. 272
2000–23
Superseded by
Rev. Proc. 2001–26, 2001–17 I.R.B. 1093
2001–3
Corrected by
Ann. 2001–25, 2001–11 I.R.B. 895
Section 5.01 revoked by
Rev. Proc. 2001–30, 2001–19 I.R.B. 1163
2001–13
Clarified by
Notice 2001–12, 2001–3 I.R.B. 328
2001–30
Modified by
Rev. Proc. 2001–34, 2001–22 I.R.B. 1293
1
A cumulative list of current actions on previously
published items in Internal Revenue Bulletins
2000–27 through 2000–52 is in Internal Revenue
Bulletin 2001–1, dated January 2, 2001.

June 4, 2001v2001–23 I.R.B.
Revenue Rulings:
64–328
Modified by
Notice 2001–10, 2001–5 I.R.B. 459
66–110
Modified by
Notice 2001–10, 2001–5 I.R.B. 459
85–30
Clarified by
Rev. Rul. 2001–8, 2001–9 I.R.B. 762
88–95
Clarified by
Rev. Rul. 2001–8, 2001–9 I.R.B. 762
92–19
Supplemented in part by
Rev. Rul. 2001–11, 2001–10 I.R.B. 780
2000–56
Corrected by
Ann. 2001–19, 2001–10 I.R.B. 791
2001–4
Modified by
Notice 2001–23, 2001–12 I.R.B. 911
Treasury Decisions:
7530
Removed by
T.D. 8938, 2001–13 I.R.B. 929
8757
Revised by
T.D. 8941, 2001–14 I.R.B. 977
8881
Corrected by
Ann. 2001–55, 2001–21 I.R.B. 1284
8889
Corrected by
Ann. 2001–14, 2001–21 I.R.B. 286
8913
Corrected by
Ann. 2001–26, 2001–11 I.R.B. 896
8916
Corrected by
Ann. 2001–41, 2001–18 I.R.B. 1147
8921
Corrected by
Ann. 2001–43, 2001–18 I.R.B. 1147
8929
Corrected by
Ann. 2001–56, 2001–21 I.R.B. 1286
8931
Technically amended by
Ann. 2001–37, 2001–16 I.R.B. 1090
8940
Corrected by
Ann. 2001–53, 2001–20 I.R.B. 1186

2001–23 I.R.B.viJune 4, 2001
INDEX
Internal Revenue Bulletins
2001–1 through 2001–22
The abbreviation and number in paren-
thesis following the index entry refer to
the specific item; numbers in roman and
italic type following the paranthesis
refer to the Internal Revenue Bulletin in
which the item may be found and the
page number on which it appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction
Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural
Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Advance letter rulings and determination
letters, areas which will not be issued
from:
Associates Chief Counsel & Division
Counsel/Associate Chief Counsel
(TE/GE) (RP 3) 1, 111; correction
(Ann 25) 11, 895
Associate Chief Counsel International
(RP 7) 1, 236
Cafeteria plans, tax treatment of (TD 8921)
7, 532; correction (Ann 43) 18, 1147;
(REG–209461–79) 8, 712
Defined benefit pension plan, transfer of
excess assets (REG–116468–00) 6,
522
Determination letters:
Issuing procedures (RP 6) 1, 194
Notice to interested parties requirement
(REG–129608–00) 14, 1011
Employee Plans Compliance Resolution
System (EPCRS), updated (RP 17) 7,
589
Employee stock ownership plans,
deductibility of redemption proceeds
(RR 6) 6, 491
Full funding limitations:
Weighted average interest rate for:
December 2000 (Notice 3) 2, 267
January 2001 (Notice 15) 7, 589
February 2001 (Notice 20) 11, 818
March 2001 (Notice 28) 13, 944
April 2001 (Notice 32) 18, 1146
Group health plans:
Continuation coverage requirements
(TD 8928) 8, 685
HIPAA nondiscrimination:
Bona fide wellness programs
(REG–114084–00) 7, 633
Certain grandfathered church plans,
exception (REG–114083–00) 7,
630
Eligibility not limited by certain
health factors (TD 8931) 7, 542;
(REG–114082–00) 7, 629; correc-
tion to TD 8931 (Ann 37) 16, 1090
GUST remedial amendment period, M&P
plans and volume submitter plans (Ann
12) 6, 526
Letter rulings:
Determination letters and information
letters issued by Associates Chief
Counsel (RP 1) 1, 1
Information letters, etc. (RP 4) 1, 121
Life insurance contracts, “split-dollar”
arrangements (Notice 10) 5, 459
Nondiscrimination rules, governmental and
church plans, relief from (Notice 9) 4, 375
Practice before the Internal Revenue
Service; Circular 230 (REG–111835–
99) 11, 834
Proposed Regulations:
26 CFR 1.125–1 Q&A–8, amended;
1.125–2 Q&A–6(a), amended;
1.125–2 Q&A–6(b), (c), and (d),
withdrawn; 1.125–2 Q&A–6(e),
redesignated as (b); tax treatment of
cafeteria plans (REG–209461–79) 8,
712
26 CFR 1.401(a)(9)–0 through –8, added;
1.403(b)–2, added; 1.408–8, added;
54.4974–2, added; required minimum
distributions (REG–130477–00 and
REG–130481–00) 11, 865
26 CFR 1.417(e)–1, amended; special
rule for written explanation by quali-
fied retirement plans provided after
annuity starting date (REG–109481–
99) 13, 961
26 CFR 1.420–1, added; defined bene-
fit pension plan, transfer of excess
assets (REG–116468–00) 6, 522
26 CFR 1.7476–2, amended; 601.201,
amended; advance determination let-
ter, notice to interested parties
requirement (REG–129608–00) 14,
1011
26 CFR 54.9802–1, amended; group
health plans, HIPAA nondiscrimina-
tion requirements, eligibility not lim-
ited by certain health factors
(REG–114082–00) 7, 629
26 CFR 54.9802–1(f), amended; group
health plans, HIPAA nondiscrimina-
tion requirements, bona fide well-
ness programs (REG–114084–00) 7,
633
26 CFR 54.9802–2, added; group
health plans, HIPAA nondiscrimina-
tion requirements for certain grand-
fathered church plans, exception
(REG–114083–00) 7, 630
31 CFR Part 10, amended; practice
before the Internal Revenue Service;
Circular 230 (REG–111835–99) 11,
834
Qualified retirement plans:
Required minimum distributions (Ann
18) 10, 791
Written explanation provided after
annuity starting date (REG–109481–
99) 13, 961
Regulations:
26 CFR 1.125–4, amended; 1.125–4T,
removed; tax treatment of cafeteria
plans (TD 8921) 7, 532; correction
(Ann 43) 18,1147
26 CFR 54.4980B–0 through –8,
amended; 54.4980B–9, –10, added;
group health plans, continuation
coverage requirements (TD 8928) 8,
685
26 CFR 54.9802–1, added; 54.9802–1T,
removed; group health plans, HIPAA
nondiscrimination requirements, eli-
gibility not limited by certain health
factors (TD 8931) 7, 542; correction
(Ann 37) 16, 1090
Required minimum distributions (REG–
130477–00 and REG–130481–00) 11, 865
Technical advice to:
Directors and chiefs, appeals offices,
from Associates Chief Counsel
& Division Counsel/Associate Chief
Counsel (TE/GE) (RP 2) 1, 79
IRS employees (RP 5) 1, 164
EMPLOYEE PLANS—
Cont.
EMPLOYEE PLANS—
Cont.

User fees, request for letter rulings (RP 8)
1, 239
EMPLOYMENT TAX
Electronic filing, Form 940 (RP 9) 3, 328
Electronic furnishing of payee statements,
voluntary (TD 8942) 13, 929;
(REG–107186–00) 13, 973
Federal tax deposits, removal of Federal
Reserve banks as depositaries (TD
8918) 4, 372; (REG–107176–00) 4,
428
Forms:
W-2, new code (Ann 7) 3,357
W-2, voluntary electronic furnishing of
payee statements (TD 8942) 13, 929;
(REG–107186–00) 13, 973
940, electronic filing (RP 9) 3, 328
1098-E, voluntary electronic furnishing
of payee statements (TD 8942) 13,
929; (REG–107186–00) 13, 973
1098-T, voluntary electronic furnishing
of payee statements (TD 8942) 13,
929; (REG–107186–00) 13, 973
Indian tribal governments under FUTA,
treatment of (Ann 16) 8, 715
Interest-free adjustments (REG–110374–
00) 12, 915; correction (Ann 44) 18,
1148
Practice before the Internal Revenue
Service; Circular 230 (REG–111835–
99) 11, 834
Proposed Regulations:
26 CFR 31.3406(g)–1(d), revised;
reporting requirements for interest
on deposits paid to nonresident
aliens (REG–126100–00) 11, 862
26 CFR 31.6051–1, amended; electron-
ic payee statements, voluntary
(REG–107186–00) 13, 973
26 CFR 31.6205–1, revised; interest-
free adjustments (REG–110374–00)
12, 915; correction (Ann 44) 18,
1148
26 CFR 31.6302–1, amended;
31.6302(c)–3, amended; removal of
Federal Reserve banks as federal
depositaries (REG–107176–00) 4,
428
31 CFR Part 10, amended; practice
before the Internal Revenue Service;
Circular 230 (REG–111835–99) 11,
834
Railroad retirement, rate determination,
quarterly:
January 1, 2001, 2, 258
April 1, 2001, 15, 1054
Regulations:
26 CFR 31.6051–1T, added; electronic
payee statements, voluntary (TD
8942) 13, 929
26 CFR 31.6053–1, –4, amended;
tips, tip reporting, employer estab-
lished electronic systems (TD
8910) 2, 258
26 CFR 301.6302–1T, added; removal
of Federal Reserve banks as deposi-
taries (TD 8918) 4,372
Reporting requirements for interest on
deposits paid to nonresident aliens
(REG–126100–00) 11, 862
Statutory stock options (Notice 14) 6, 516
Tips:
Tips reporting:
Employer-designed tip reporting,
food and beverage industry
(EmTRAC) programs (Notice 1)
2, 261
Employer established electronic sys-
tems (TD 8910) 2, 258
Voluntary tip reporting agreements
proformas(TRDA and TRAC)
(Ann 1) 2, 277
ESTATE TAX
Art valuation requests, change of address
for submissions (Ann 22) 11, 895
Charitable deductions, guaranteed annuity
and unitrust interest (TD 8923) 6, 485
Definition of income, total return, equitable
adjustments (REG–106513–00) 16, 1076
Generation-skipping transfer tax and reten-
tion of exempt status (TD 8912) 5, 452;
correction (Ann 40) 17, 1141
Interest:
Rates:
Farm real property, special use value
(RR 21) 18, 1144
Practice before the Internal Revenue
Service; Circular 230 (REG–111835–99)
11, 834
Proposed Regulations:
26 CFR 1.641(b)–3, amended;
1.642(c)–1, revised; 1.645–1, added;
1.671–4, amended; 1.6072–1, amend-
ed; 301.6109–1, amended; election to
treat trust as part of an estate
(REG–106542–98) 5, 473; correction
(Ann 24) 10, 793
26 CFR 20.2056(b)–5, –7, –10, amened;
20.2056A–5, amended; 20.2056A–13,
revised; definition of income for trust
purposes (REG–106513–00) 16, 1076
31 CFR Part 10, amended; practice
before the Internal Revenue Service;
Circular 230 (REG–111835–99) 11,
834
Regulations:
26 CFR 20.2055–2, amended; charitable
deductions, guaranteed annuity and
unitrust interest (TD 8923) 6, 485
26 CFR 26.2601–1, amended; genera-
tion-skipping transfer issues (TD
8912) 5,452; correction (Ann 40) 17,
1141
Trusts, election to treat trust as part of an
estate (REG–106542–98) 5, 472; correc-
tion (Ann 24) 10,793
Valuation of art requests, change of address
for submissions (Ann 22) 11, 895
EXCISE TAX
Air transportation, mileage awards
(Notice 6) 3, 327
Deposits of excise taxes (REG–106892–
00) 15, 1060
Excess benefit transactions (TD 8920) 8,
654; (REG–246256–96) 8, 713; hear-
ing scheduled (Ann 61) 22, 1296
Forms:
720-CS, Carrier Summary Report (Ann
48) 19, 1168
720-TO, Terminal Operator Report
(Ann 48) 19,1168
Nonconventional source fuel, inflation
adjustment factor, reference price, CY
2000 (Notice 31) 17, 1093
Practice before the Internal Revenue
Service; Circular 230 (REG–111835–
99) 11, 834
Proposed Regulations:
26 CFR 40.0–1, amended; 40.6011(a)
–1, –2, amended; 40.6071(a)–1,
amended; 40.6071(a)–2, removed;
40.6091–1, amended; 40.6101–1,
revised; 40.6109(a)–1, revised;
40.6151(a)–1, revised; 40.6302(c)
–1, –2, revised; 40.6302(c)–3,
amended; 40.6302(c)–4, removed;
June 4, 2001vii2001–23 I.R.B.
ESTATE TAX—Cont.EMPLOYMENT TAX—
Cont.
EMPLOYEE PLANS—
Cont.

40.9999–1, removed; deposits of
excise taxes (REG–106892–00) 15,
1060
26 CFR 53.4958–0 through –8, added;
excise taxes on excess benefit trans-
actions (REG–246256–96) 8, 713;
hearing scheduled (Ann 61) 22, 1296
31 CFR Part 10, amended; practice
before the Internal Revenue Service;
Circular 230 (REG–111835–99) 11,
834
Publication: 3536, Excise Tax EDI Guide
(Ann 48) 19, 1168
Regulations:
26 CFR 53.4958–0T through –8T,
added; 53.4963–1, amended;
301.6213–1, amended; 301.6501(e)
–1, amended; 301.6501(n)–1,
amended; 301.7422–1, amended;
301.7454–2, amended; 301.7611–1,
amended; 602.101, amended; excise
taxes on excess benefit transactions
(TD 8920) 8, 654
EXEMPT ORGANIZA-
TIONS
Advance letter rulings and determination
letters, areas which will not be issued
from Associates Chief Counsel &
Division Counsel/Associate Chief
Counsel (TE/GE) (RP 3) 1, 111; correc-
tion (Ann 25) 11, 895
Excise taxes on excess benefit transactions
(TD 8920) 8, 654; (REG–246256–96) 8,
713; public hearing (Ann 61) 22, 1296
Forms:
990, request for comments (Ann 33)
17, 1137
990–EZ, request for comments (Ann
33) 17, 1137
990–PF, request for comments (Ann
33) 17, 1137
Indian tribal governments treated as
states, list (RP 15) 5, 465
Letter rulings, information letters, etc.
(RP 4) 1, 121
List of organizations classified as private
foundations (Ann 35) 16, 1087; (Ann
45) 18, 1148; (Ann 47) 19, 1165; (Ann
57) 20, 1187
Plain language publications and voluntary
compliance programs (Ann 14) 7, 648
Practice before the Internal Revenue
Service; Circular 230 (REG–111835–
99) 11, 834
Proposed Regulations:
26 CFR 53.4958–0 through –8, added;
excise taxes on excess benefit trans-
actions (REG–246256–96) 8, 713;
public hearing (Ann 61) 22, 1296
31 CFR Part 10, amended; practice before
the Internal Revenue Service; Circular
230 (REG–111835–99) 11, 834
Regulations:
26 CFR 53.4958–0T through –8T,
added; 53.4963–1, amended;
301.6213–1, amended; 301.6501(e)
–1, amended; 301.6501(n)–1,
amended; 301.7422–1, amended;
301.7454–2, amended; 301.7611–1,
amended; 602.101, amended; excise
taxes on excess benefit transactions
(TD 8920) 8, 654
Revocations (Ann 20) 8,716; (Ann 36)
16, 1089; (Ann 46) 19, 1165
Technical advice to:
Directors and chiefs, appeals offices,
from Associates Chief Counsel &
Division Counsel/Associate Chief
Counsel (TE/GE) (RP 2) 1, 79
IRS employees (RP 5) 1, 164
User fees, request for letter rulings (RP 8)
1, 239
Withholding, Voluntary Compliance on
Alien Withholding Program (VCAP)
(RP 20) 9,738
GIFT TAX
Art valuation requests, change of
address for submissions (Ann 22) 11,
895
Charitable deductions, transfers to char-
itable lead trust (TD 8923) 6, 485
Definition of income, total return, equi-
table adjustments (REG–106513–00)
16, 1076
Practice before the Internal Revenue
Service; Circular 230 (REG–111835–
99) 11, 834
Proposed Regulations:
26 CFR 25.2523(e)–1, amended;
25.2523(h)–2, amended; 26.2601–1,
amended; definition of income for
trust purposes (REG–106513–00)
16, 1076
31 CFR Part 10, amended; practice
before the Internal Revenue Service;
Circular 230 (REG–111835–99) 11,
834
Regulations:
26 CFR 25.2522(c)–3, amended; chari-
table deductions, lifetime charitable
lead trust (TD 8923) 6, 485
Valuation of art requests, change of
address for submissions (Ann 22) 11,
895
INCOME TAX
Advance letter rulings and determination let-
ters, areas which will not be issued from:
Associates Chief Counsel & Division
Counsel/Associate Chief Counsel
(TE/GE) (RP 3) 1, 111; correction
(Ann 25) 11, 895
Associate Chief Counsel International
(RP 7) 1, 236
Advance Pricing Agreement program
(APA) (Ann 32) 17, 1113
Aircraft maintenance costs (RR 4) 3, 295
Appeals, extension of test of mediation
procedure (Ann 9) 3, 357
Archer MSA (Ann 21) 9, 752
Art valuation requests, change of address
for submissions (Ann 22) 11, 895
Asset acquisitions, deemed and actual,
purchase price allocations (TD 8940)
15, 1016; correction (Ann 53) 20, 1186
Attorney’s fees, recovery of (TD 8922) 6,
508; (REG–121928–98) 6, 520
Automobile owners and lessees, determi-
nation of correct tax liability, 2001
inflation adjustment (RP 19) 9, 732
Bureau of the Census, disclosure of return
information (TD 8943) 15, 1054;
REG–121109–00) 15, 1064
Business expenses, changes in method of
accounting (Notice 23) 12, 911
Case Resolution Pilot Program, extension
(Notice 13) 6, 514
Charitable deductions, transfers to chari-
table lead trust (TD 8923) 6, 485
Classification of certain business enti-
ties, check-the-box regulations
(REG–110659–00) 12, 917
Consumer Price Index (CPI) adjustments,
below-market loans (Ann 19) 10, 791
Contribution in aid of construction
(CIAC), regulated public utilities,
2001–23 I.R.B.viiiJune 4, 2001
EXEMPT ORGANIZA-
TIONS—Cont.
EXCISE TAX—Cont.
GIFT TAX—Cont.

water or sewerage disposal (TD 8936)
9, 720
Conversion to the euro (TD 8927) 11, 807
Corporate reorganizations; mergers and
acquisitions:
Forward triangular merger (RR
24) 22, 1290
Reverse triangular merger (RR
25) 22, 1291
Corporations:
Assumed liabilities (TD 8924) 6, 489;
(REG–106791–00) 6, 521
Consolidated groups, tentative carry-
back adjustments (TD 8919) 6, 505;
(REG–119352–00) 6,525
Distributions of stock or securities in
connection with an acquisition:
Purchase of 50% or greater inter-
est in the corporation making
the distribution or being dis-
tributed (REG–107566–00) 3,
346
Withdrawal of REG–116733–98
(Ann 11) 4, 432
Recognition of gain on certain distrib-
utions of stock or securities (TD
8913) 3, 300; correction (Ann 26)
11, 896
Tax shelter:
Contingent liability (Notice 17) 9, 730
Intermediary transactions (Notice
16) 9, 730
Cost-of-living adjustments for inflation,
2001 (RP 13) 3, 337; clarified (Notice
12) 3, 328
Credits:
Deemed-paid credit computations
(REG–104683–00) 4, 407; correc-
tion (Ann 42) 18, 1147
Foreign tax credit limitations:
Affiliated groups and interest expense
allocations (TD 8916) 4, 360; cor-
rection (Ann 41) 18, 1147
Income subject to separate limita-
tions (REG–104683–00) 4, 407
Increasing research activities, definition
of qualified research (TD 8930) 5, 433
Low-income housing credit:
Resident population estimates, 2001
(Notice 21) 11, 818
Satisfactory bond; “bond factor”
amounts for the period:
October through December 2000
(RR 2) 2, 225;
January through March 2001 (RR
10) 10, 755
April through June 2001 (RR 19)
18, 1143
New markets tax (Ann 49) 20, 1183
Nonconventional source fuel credit,
qualified fuels under section 29
(c)(1)(C), solid fuel from coal, pri-
vate letter rulings (RP 30) 19, 1163;
modified (RP 34) 22,1293
Renewable electricity production cred-
it, 2001 inflation adjustment (Notice
33) 19, 1155
Research credits:
Comments requested on final regu-
lations (Notice 19) 10, 784
Computing for increasing research
activities that include suspension
periods (Notice 2) 2, 265
Extension of time to file, with
expired suspension periods
(Notice 29) 14, 989
Cumulative Bulletin 1998–2, numerical
finding list, finding list of current
actions on previously published items
and index; corrections (Ann 5) 2, 286
Dealers in securities futures contracts
(Notice 27) 13, 942
Debt instrument, annuity issued by insur-
ance company (REG–125237–00) 12,
919
Debt substitution, election to treat as real-
ization event (RP 21) 9, 742
Definition of income, total return, equi-
table adjustments (REG–106513–00)
16, 1076
Disclosure of returns or return informa-
tion to:
Bureau of the Census (TD 8943) 15,
1054; (REG–121109–00) 15, 1064
Designee of taxpayer (TD 8935) 8,
702; (REG–103320–00) 8, 714
Disqualified person, definition of
(REG–107175–00) 13, 971
Earnings and profits adjustments, exercise
of stock option (RR 1) 9, 726
Electing small business trusts; ESBT:
Qualifications and treatments (REG–
251701–96) 4, 396
Tiered structures (TD 8915) 4, 359
Electronic and magnetic filing, specifica-
tions for Forms:
W-4, Employee’s Withholding Al-
lowance Certificate (RP 16) 4, 376
1042-S, Foreign Person’s U.S.
Source Income Subject to
Withholding (Ann 3) 2, 278
8851, Summary of Archer MSAs
(RP 31) 20, 1170
Electronic furnishing of payee statements,
voluntary (TD 8942) 13, 929;
(REG–107186–00) 13, 973
Employee stock ownership plans, deduc-
tibility of redemption proceeds (RR 6)
6, 491
Entity classification rules, clarification of
(REG–101739–00) 14, 996
Equity options, qualified covered call
treatment (REG–115560–99) 14, 993
Exclusion of gain from the sale or exchange
of a taxpayer’s principal residence (Ann
52) 20, 1186
Exempt organization revocations (Ann 20)
8, 716; (Ann 36) 16, 1089; (Ann 46) 19,
1165
Federal tax deposits, removal of Federal
Reserve banks as depositaries (TD 8918)
4, 372; (REG–107176–00) 4, 428
Financial asset securitization investment
trusts (FASITs) (RP 12) 3, 335
FOIA administrative appeals, authority
transferred to Chief, Appeals (Ann 58)
22, 1295
Foreign corporations, requirements relat-
ing to certain exchanges (TD 8938) 13,
929; (LR–230–76) 13, 945
Foreign sales corporation transfer pricing,
grouping rules (TD 8944) 16, 1067
Forms:
W-2:
New code (Ann 7) 3, 357
Voluntary electronic furnishing of
payee statements (TD 8942) 13,
929; (REG–107186–00) 13, 973
W-2 and W-3, specifications for private
printing of paper substitutes (RP 26)
17, 1093
W-4, Employee’s Withholding Allow-
ance Certificate, specifications for
filing magnetically or electronically
(RP 16) 4, 376
W-9, Request for Taxpayer Identifi-
cation Number and Certification
(Ann 15) 8, 715
990, request for comments (Ann 33)
17, 1137
990–EZ, request for comments (Ann
33) 17, 1137
June 4, 2001ix2001–23 I.R.B.
INCOME TAX—Cont.INCOME TAX—Cont.INCOME TAX—Cont.

990–PF, request for comments (Ann
33) 17, 1137
1042S, specifications for filing magnet-
ically or electronically (Ann 3) 2,
278
1098-E, voluntary electronic furnishing
of payee statements (TD 8942) 13,
929; (REG–107186–00) 13, 973
1098-T, voluntary electronic furnishing
of payee statements (TD 8942) 13,
929; (REG–107186–00) 13, 973
1120, Schedule N, Foreign Operations
of U.S. Corporations (Ann 13) 9, 752
7004, Application for Automatic Exten-
sion of Time to File Corporation Income
Tax Return, new (Notice 29) 14, 989
8851, Summary of Archer MSAs, spec-
ifications for filing magnetically or
electronically (RP 31) 20, 1170
8875, Taxable REIT Subsidiary Elec-
tion, revised (Ann 17) 8,716
Hedging transactions (REG–107047–00)
14, 1002
Hyperinflationary currency, definition of
(TD 8914) 8, 653
Information reporting:
Discharges of indebtedness (Notice 8)
4, 374
Payments of qualified tuition and pay-
ments of interest on qualified educa-
tion loans, magnetic media filing
requirements (Ann 10) 4,431
Payments to attorneys (Notice 7) 4, 374
Installment sales; changes in method of
accounting (Notice 22) 12, 911
Insurance companies:
Interest rate tables (RR 11) 10, 780
Tentative differential earnings rate
and tentative recomputed differen-
tial earnings rate (Notice 24) 12,
912
Interest:
Investment:
Federal short-term, mid-term, and
long-term rates for:
January 2001 (RR 3) 3, 319
February 2001 (RR 7) 7, 541
March 2001 (RR 12) 11, 811
April 2001 (RR 17) 15, 1052
May 2001 (RR 22) 19, 1152
Rates:
Farm real property, special use value
(RR 21) 18, 1144
Reserve rate tables, insurance com-
panies (RR 11) 10, 780
Underpayments and overpayments,
quarter beginning April 1, 2001
(RR 16) 13, 936
Interest on deposits paid to nonresident
aliens reporting requirements (REG–
126100–00) 11, 862; correction (Ann
50) 20, 1184
Inventory:
Floor stocks payments (RR 8) 9, 726
LIFO:
Optional dollar-value LIFO invento-
ry computation method for used
vehicle dealers (RP 23) 10, 784
Price indexes used by department
stores for:
November 2000 (RR 5) 5, 451
December 2000 (RR 9) 8, 652
January 2001 (RR 14) 12, 898
February 2001 (RR 18) 17, 1092
March 2001 (RR 23) 20, 1169
Joint and several liability, relief from
(REG–106446–98) 13, 945
Korean mutual agreement (Ann 34) 16, 1087
Last known address:
Change of address, how to notify the
IRS (RP 18) 8, 708
Definition; use of U.S. Postal Service
database (TD 8939) 12, 899
Letter rulings, determination letters, and
information letters issued by Associates
Chief Counsel (RP 1) 1, 1
Levied upon property; return of
(REG–101520–97) 15, 1057
Life insurance contracts, “split-dollar”
arrangements (Notice 10) 5, 459
Long-term contracts:
Accounting for (TD 8929) 10, 756; cor-
rection (Ann 56) 21, 1286
Mid-contract change in taxpayer
(REG–105946–00) 16, 1069
Methods of accounting:
General rule for 2001 (RP 24) 10, 788
Inventories, small taxpayers (RP 10) 2,
272
Short-term loans, stated interest, cash
method banks, automatic change (RP
25) 12, 913
Mortgage bonds and credit certificates,
median income figures – 2001 (RP 35)
22, 1293
Nonconventional source fuel credit:
Inflation adjustment factor, reference
price, CY 2000 (Notice 31) 17, 1093
Qualified fuels under section 29(c)
(1)(C), solid fuel from coal, private
letter rulings (RP 30) 19, 1163
Partnerships:
Corporate partner’s stock, partnership
termination (REG–106702–00) 4,
424; correction (Ann 28) 13, 975
Final short-year tax return, determina-
tion of basis (Notice 5) 3, 327
Mergers and divisions (TD 8925) 6,
496
Taxable year, partner and partnership,
foreign partners (REG–104876–00)
14, 998
Practice before the Internal Revenue
Service; Circular 230 (REG–111835–
99) 11, 834
Pre-filing agreement program:
Annual report, Large and Mid-Size
Business Division (Ann 38) 17, 1138
Pre-filing examinations (RP 22) 9, 745
Presidentially declared disaster areas:
Disaster and combat zone, tax-related
deadlines (TD 8911) 3, 321
Major disaster and emergency areas
(RR 15) 13, 922
Taxpayers affected by the Cerro Grande
Fire (Notice 30) 14, 989
Private foundations, organizations now
classified as (Ann 35) 16, 1087; (Ann
45) 18, 1148; (Ann 47) 19, 1165; (Ann
57) 20, 1187; (Ann 60) 21, 1287
Proposed Regulations:
26 CFR 1.121–1, –2, corrected; exclu-
sion of gain from sale or exchange of
a taxpayer’s principal residence
(Ann 52) 20, 1186
26 CFR 1.141–7, –8, added; 1.141–15,
amended; obligations of states
and political subdivisions (REG–
114998–99) 14, 992
26 CFR 1.263(g)–1 through –5, added;
1.1092(d)–1, amended; capitaliza-
tion of interest and carrying charges
properly allocable to straddles
(REG–105801–00) 13, 965
26 CFR 1.301–1, amended; liabilities
assumed in certain corporate transac-
tions (REG–106791–00) 6, 521
26 CFR 1.355–0, amended; 1.355–7,
added; recognition of gain on certain
distributions of stock or securities in
connection with an acquisition
(REG–107566–00) 3, 346
2001–23 I.R.B.xJune 4, 2001
INCOME TAX—Cont.INCOME TAX—Cont.INCOME TAX—Cont.

26 CFR 1.367(b)–3, –8, corrected;
stock transfer rules, carryover of
earnings and taxes (Ann 51) 20, 1185
26 CFR 1.381(c)(4)–1, revised;
1.460–0, –4, amended; 1.460–6(g),
revised; long-term contracts, mid-
contract change in taxpayer
(REG–105946–00) 16, 1069
26 CFR 1.444–4, added; 1.641(c)–0,
–1, added; 1.1361–0, –1, amended;
1.1362–6, –7, amended; 1.1377–1,
–3, amended; electing small business
trusts (REG–251701–96) 4, 396
26 CFR 1.642(c)–2, amended;
1.643(a)–3, revised; 1.643(b)–1,
revised; 1.651(a)–2, added;
1.661(a)–2, revised; 1.664–3, revised;
definition of income for trust purpos-
es (REG–106513–00) 16, 1076
26 CFR 1.705–1, amended; 1.705–2,
added; basis adjustments upon the
sale of a corporate partner’s stock
(REG–106702–00) 4, 424; correc-
tion (Ann 28) 13, 975
26 CFR 1.706–4, added; tax-
able years of partner and
partnership, foreign partners
(REG–104876–00) 14, 998
26 CFR 1.863–3, amended; 1.863–8,
–9, added; source of income from
space and ocean activities, commu-
nications activities (REG–106030–
98) 11, 820
26 CFR 1.892–5, added; 1.892–5T,
amended; 301.7701–2, amended; clar-
ification of entity classification rules
(REG–101739–00) 14, 996
26 CFR 1.894–1, revised; treaty guid-
ance regarding payments with respect
to domestic reverse hybrid entities
(REG–107101–00) 16, 1083
26 CFR 1.902–0, –1, amended;
1.904–0, –4, –6, amended; 1.904–5,
revised; 1.904(b)–1, –2, revised;
1.904(b)–3, –4, removed; 1.904(j)–1,
added; application of section 904 to
income subject to separate limita-
tions and computations of deemed-
paid credit under section 902
(REG–104683–00) 4, 407; correc-
tion (Ann 42) 18, 1147
26 CFR 1.1031(k)–1, amended; defini-
tion of disqualified person
(REG–107175–00) 13, 971
26 CFR 1.1092(c)–1, amended;
1.1092(c)–2, –3, added; equity
options with flexible terms, qualified
covered call treatment (REG–
115560–99) 14, 993
26 CFR 1.1221–2, revised; 1.1256
(e)–1, revised; hedging transac-
tions (REG–107047–00) 14, 1002
26 CFR 1.1271–0, amended; 1.1275–1,
amended; debt instruments with
original issue discount, annuity con-
tracts (REG–125237–00) 12, 919
26 CFR 1.1502–78, amended; corpora-
tions, consolidated groups, tentative
carryback adjustments (REG–
119352–00) 6, 525
26 CFR 1.6013–4, added; 1.6015–0
through –9, added; relief from joint
and several liability (REG–106446–
98) 13, 945
26 CFR 1.6041–2, amended; 1.6050S–1,
–2, added; 301.6724–1, amended;
electronic payee statements, voluntary
(REG–107186–00) 13, 973
26 CFR 1.6049–4(b)(5), revised;
1.6049–6, amended; 1.6049–8,
revised; reporting requirements for
interest on deposits paid to nonresi-
dent aliens (REG–126100–00) 11,
862; correction (Ann 50) 20, 1184
26 CFR 1.6302–1, –2, amended;
removal of Federal Reserve banks as
federal depositaries (REG–107176–
00) 4, 428
26 CFR 7.367(c)–1, –2, withdrawn;
requirements relating to certain
exchanges involving a foreign corpo-
ration (LR–230–76) 13, 945
26 CFR 301.6103(c)–1, added; disclo-
sure of return and return infor-
mation to designee of taxpayer
(REG–103320–00) 8, 714
26 CFR 301.6103(j)(1)–1, amended;
disclosure of return information to the
Bureau of the Census (REG–121109–
00) 15, 1064
26 CFR 301.6343–3, added; levied upon
property, return of property in certain
cases (REG–101520–97) 15, 1057
26 CFR 301.7430–0, removed;
301.7430–7, added; attorney’s fees,
recovery of (REG–121928–98) 6, 520
26 CFR 301.7701–3, amended; clas-
sification of certain business enti-
ties, check-the-box regulations
(REG–110659–00) 12, 917
31 CFR Part 10, amended; practice before
the Internal Revenue Service; Circular
230 (REG–111835–99) 11, 834
Publications:
538, Accounting Periods and Methods,
revised (Ann 54) 21, 1284
547, Casualties, Disasters, and Thefts,
revised (Ann 6) 3, 357
551, Basis of Assets, revised 2000 (Ann
2) 2, 277
575, changes in minimum required dis-
tributions (Ann 23) 10, 791
583, Starting a Businesss and Keeping
Records, revised (Ann 8) 3, 357
584-B, Business Casualty, Disaster, and
Theft Loss Workbook, new (Ann 39)
17, 1141
590, changes in minimum required dis-
tributions (Ann 23) 10, 791
1212, supplemental information on
short-term Treasury bills (2000 edi-
tion) (Ann 29) 14, 1014
1245, Specifications for Filing Form
W-4, Employee’s Withholding
Allowance Certificate, magnetically
or electronically (RP 6) 4, 376
Qualified transportation fringe benefits
(TD 8933) 11, 794; correction (Ann 31)
17, 1113
Qualified zone academy bonds, limitation
for 2001 (RP 14) 3, 343
Real estate mortgage investment con-
duits (REMICs), safe harbor (RP 12)
3, 335
Regulations:
26 CFR 1.41–0, –1, –4, revised;
1.41–2, amended; 1.41–3, redesig-
nated as 1.41–3A; 1.41–3, added;
1.41–5, redesignated as 1.41–4A,
amended; 1.41–6, redesignated as
1.41–5, amended; 1.41–7, redesig-
nated as 1.41–5A, amended; 1.41–8,
redesignated as 1.41–6, amended;
1.41–9, redesignated as 1.41–7;
1.41–8, added; 1.41–0A through
–8A, removed; 1.41–0A, added;
1.218–0, removed; 1.482–7, amend-
ed; credit for increasing research
activities (TD 8930) 5, 433
26 CFR 1.118–2, added; contribution
in aid of construction (CIAC), reg-
ulated public utilities, water or
June 4, 2001xi2001–23 I.R.B.
INCOME TAX—Cont.INCOME TAX—Cont.INCOME TAX—Cont.

sewerage disposal (TD 8936) 9,
720
26 CFR 1.132–0, –5, amended;
1.132–9, added; 602.101, amended;
qualified transportation fringe bene-
fits (TD 8933) 11, 794: correction
(Ann 31) 17, 1113
26 CFR 1.141–0, amended; 1.141–7T,
–8T, –15T, revised; 1.141–15, amended;
1.142(f)(4)–1, added; 1.142(f)(4)–1T,
removed; 1.150–5, added; 1.150–5T,
removed; 601.101, amended; obliga-
tions of states and political subdivisions
(TD 8941) 14, 977
26 CFR 1.163–7, amended; 1.1271–0,
amended; 1.1275–1(f), –2, revised;
1.1275–2T, removed; 1.1275–7,
added; reopenings of Treasury secu-
rities and other debt instruments,
original issue discount (TD 8934)
12, 904
26 CFR 1.170A–6, amended; lifetime
charitable lead trust (TD 8923) 6, 485
26 CFR 1.301–1, amended; 1.301–1T,
added; assumed liabilities (TD
8924) 6, 489
26 CFR 1.338–0 through –7, –10,
added; 1.338(h)(10)–1, added;
1.338(i)–1, added; 1.338–0T through
–7T, –10T, removed; 1.338(h)(10)
–1T, removed; 1.338(i)–1T, removed;
1.1060–1T, removed; 1.1060–1,
added; 1.1361–1, –4, amended;
1.1502–76, amended; 602.101,
amended; purchase price allocations
in deemed and actual asset acquisi-
tions (TD 8940) 15, 1016; correction
(Ann 53) 20, 1186
26 CFR 1.355–0, amended; 1.355–6,
revised; recognition of gain on cer-
tain distributions of stock or securi-
ties (TD 8913) 3,300; correction
(Ann 26) 11, 896
26 CFR 1.367(b)–0, amended;
1.367(b)–12, added; 7.367(b)–12,
removed; stock transfer rules, transi-
tion rules (TD 8937) 11, 806
26 CFR 1.367(b)–3(b)(4), withdrawn;
stock transfer rules (Ann 27) 11, 897
26 CFR 1.444–4T, added; ESBT, elect-
ing small business trusts, tiered
structures (TD 8915) 4, 359
26 CFR 1.446–1, amended; 1.451–3,
removed; 1.451–5, amended;
1.460–0, –4, –6, amended; 1.460–1
through –3, revised; 1.460–5, added;
1.460–7, –8, removed; 1.471–10,
amended; 602.101, amended;
accounting for long-term contracts
(TD 8929) 10, 756; correction (Ann
56) 21, 1286
26 CFR 1.467–0, –1, amended;
1.467–2, added; 1.467–3, revised;
rental agreements involving pay-
ments of $2,000,000 or less (TD
8917) 7,538
26 CFR 1.468A–5, amended;
1.503(a)–1, amended; 1.547–2,
amended; 1.856–6, amended;
1.860–2, amended; 1.963–6, amend-
ed; 1.992–3, amended; 1.6081–2, –3,
–4, –6, –7, amended; 301.6110–4, –5,
–6, amended; 301.6212–2, added;
301.6301–1, amended; 301.6305–1,
revised; 301.6320–1T, amended;
301.6325–1, revised; 301.6330–1T,
amended; 301.6331–2, amended;
301.6332–2, amended; 301.6335–1,
amended; 301.6503(c)–1, amended;
301.6672–1, amended; 301.6903–1,
amended; last known address, defini-
tion of (TD 8939) 12, 899
26 CFR 1.643(a)–8, added; 1.664–1, –2,
–3, amended; charitable remainder
trusts, deemed sale, trust distributions,
abusive transactions (TD 8926) 6, 492
26 CFR 1.708–1, amended; 1.752–1,
–5, amended; partnership mergers
and divisions (TD 8925) 6, 496
26 CFR 1.861–9, –11, –14, added;
1.861–9T, –11T, –14T, revised;
1.902–1, amended; 1.904–0, –4,
–5, amended; application of sec-
tion 904 to income subject to sepa-
rate limitations and section 864(e)
affiliated group expense allocation
and apportionment rules (TD
8916) 4, 360; correction (Ann 41)
18, 1147
26 CFR 1.894–1, amended; 1.894–1T,
removed; guidance regarding claims
for certain income tax convention
benefits (Ann 4) 2, 286
26 CFR 1.925(a)–1, added;
1.925(a)–1T, amended; 1.925(b)–1T,
amended; foreign sales corporation
transfer pricing, grouping rules (TD
8944) 16, 1067
26 CFR 1.985–1, –4, amended;
1.985–8, added; 1.985–8T, removed;
1.1001–5, added; 1.1001–5T,
removed; conversion to the euro (TD
8927) 11, 807
26 CFR 1.988–1, revised; hyperinfla-
tionary currency (TD 8914) 8, 653
26 CFR 1.1441–1, –5, –7, corrected;
1.1461–1, corrected; 1.6045–1, cor-
rected; 1.6049–5, corrected; U.S.
source income paid to foreign per-
sons; reporting and recordkeeping
requirements (Ann 55) 21, 1284
26 CFR 1.1502–78T, added; corporations,
consolidated groups, tentative carry-
back adjustments (TD 8919) 6, 505
26 CFR 1.6041–2T, added; 1.6050S–
1T, –2T, added; 301.6724–1T, added;
602.101, amended; electronic payee
statements, voluntary (TD 8942) 13,
929
26 CFR 7.367(c)–1, –2, removed;
requirements relating to certain
exchanges involving a foreign corpo-
ration (TD 8938) 13, 929
26 CFR 301.6103(c)–1, removed;
301.6103(c)–1T, added; disclosure
of returns or return information to
designee of taxpayer (TD 8935) 8,
702
26 CFR 301.6103(j)(1)(1)–1T, added;
disclosure of return information to
the Bureau of the Census (TD 8943)
15, 1054
26 CFR 301.6302–1T, added; removal
of Federal Reserve banks as deposi-
taries (TD 8918) 4,372
26 CFR 301.7430–7T, added; attorney’s
fees, recovery of (TD 8922) 6, 508
26 CFR 301.7502–1, revised;
301.7502–1T, removed; 301.7502
–2, added; timely mailing treated as
timely filing (TD 8932) 11, 813
26 CFR 301.7508–1, added; 301.7508
A–1, added; for combat zone service
or Presidentially declared disasters,
tax related deadlines (TD 8911) 3, 321
Rental agreements (TD 8917) 7, 538
Reopenings, debt instruments, Treasury
securities, original issue discount (TD
8934) 12, 904
Reporting requirements for interest on
deposits paid to nonresident aliens
(REG–126100–00) 11, 862
2001–23 I.R.B.xiiJune 4, 2001
INCOME TAX—Cont.INCOME TAX—Cont.INCOME TAX—Cont.

Ruling guidelines, leveraged leasing
transactions (RP 28) 19, 1156; (RP 29)
19, 1160
S Corporations, pass-through items, dis-
charge of indebtedness (CD 2069) 21,
1191
Section 911(d)(4) waiver, 2000 update
(RP 27) 19, 1155
Short-term leases, qualified lessee con-
struction allowances for (RR 20) 18,
1144
Short-term loans, stated interest, cash
method banks, automatic change (RP
25) 12, 913
Source of income from space and ocean
activities, communications activities
(REG–106030–98) 11, 820; correction
(Ann 30) 15, 1065
Specifications for filing Form 8851,
Summary of Archer MSAs magnetical-
ly or electronically (RP 31) 20, 1170
Standard Industry Fare Level (SIFL) for-
mula (RR 13) 12, 898
States and political subdivisions, obliga-
tions of (TD 8941) 14, 977;
(REG–114998–99) 14, 992
Stock transfer rules:
Carryover of earnings and taxes (Ann
51) 20, 1185
Supplemental rules (Ann 27) 11, 897
Transition rules (TD 8937) 11, 806
Straddles; capitalization of interest and
carrying charges (REG–105801–00)
13, 965
Substantial understatement penalty, ade-
quate disclosure (RP 11) 2, 275
Substitute forms, W-2 and W-3, specifica-
tions for private printing (RP 26) 17, 1093
Tax convention, claims for benefits (Ann 4)
2,286
Tax shelters, leasing transactions, excep-
tions (Notice 18) 9, 731
Technical advice to directors and chiefs,
appeals offices, from Associates Chief
Counsel and Division Counsel/ Associate
Chief Counsel (TE/GE) (RP 2) 1, 79
Timely mailing treated as timely filing
(TD 8932) 11, 813
Treaty benefits, eligibility of items of
income paid by a domestic reverse
hybrid entity (REG–107101–00) 16,
1083
Trusts:
Charitable remainder trusts, deemed
sale, trust distributions, abusive
transactions (TD 8926) 6, 492
Election to treat trust as part of an
estate (REG–106542–98) 5, 473;
correction (Ann 24) 10, 793
ESBTs, electing small business trusts,
estimated tax payments (Notice 25)
13, 941
Qualified revocable trust treated as
part of an estate (Notice 26) 13,
942
U.S. source income paid to foreign persons,
reporting and recordkeeping require-
ments (Ann 55) 21, 1284
Valuation of art requests, change of address
for submissions (Ann 22) 11, 895
Withholdings:
Payments to financial institutions in
U.S. possessions (Notice 11) 5, 464
Qualified intermediary agreements,
clarifications (Notice 4) 2, 267
Voluntary Compliance on Alien
Withholding Program (VCAP) (RP
20) 9, 738
SELF-EMPLOYMENT
TAX
Practice before the Internal Revenue
Service; Circular 230 (REG–111835–
99) 11, 834
Proposed Regulations:
31 CFR Part 10, amended; practice
before the Internal Revenue Service;
Circular 230 (REG–111835–99) 11,
834
June 4, 2001xiii2001–23 I.R.B.
INCOME TAX—Cont.INCOME TAX—Cont.INCOME TAX—Cont.

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