Internal Revenue Bulletin 2003-34 (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.

Bulletin No. 2003-34
August 25, 2003
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 2003–96, page 386.
Lease stripping transaction.This ruling discusses whether
section 482 of the Code may apply to allow allocations of the
income and deductions arising from a lease stripping trans-
action entered into by parties that were unrelated at the time
the income is stripped from the lease, solely on the basis that
the parties were acting in concert or with a common goal or
purpose, to arbitrarily shift income or deductions among them-
selves.
Rev. Rul. 2003–97, page 380.
Deductibility of interest.This ru
ling provides guidance on
whether interest accruing on a note
is deductible under section
163(a) of the Code, and whether the
deduction is disallowed
under section 163(1), when a corp
oration issues units, each
consisting of instruments in th
e form of a note and a forward
contract to purchase a quanti
ty of the corporationÊs common
stock. The holding of this ru
ling is modified for units issued
on or before August 22, 2003
. This ruling also requests com-
ments concerning possible
regulations under section 163(1).
Rev. Rul. 2003–98, page 378.
Deduction rules; compensatory stock options.This ruling ad-
dresses the application of the deduction rules under section
83(h) of the Code with regard to the exercise or disposition of
compensatory stock options following certain corporate trans-
actions.
Rev. Rul. 2003–99, page 388.
Obsolete revenue rulings.This ruling publishes a list of previ-
ously published rulings that have been identified as no longer
determinative with respect to future transactions.
Rev. Rul. 2003–100, page 385.
LIFO; price indexes; department stores.The June 2003 Bu-
reau of Labor Statistics price indexes are accepted for use by
department stores employing the retail inventory and last-in,
first-out inventory methods for valuing inventories for tax years
ended on, or with reference to, June 30, 2003.
REG–132483–03, page 410.
Proposed regulations under section 141 of the Code revise the
definition of nonqualified bonds contained in regulations sec-
tion 1.141–12 by reducing the amount of outstanding bonds
that are nonqualified bonds. Second, the proposed regulations
simplify the rules for determining which bonds will be treated
as the nonqualified bonds for purposes of the remedial action
rules under sections 1.141–12 and 1.142–2. Finally, they clar-
ify the remedial action rules applicable to bonds issued prior to
May 16, 1997 (the effective date of the current private activity
bond regulations). A public hearing is scheduled for November
4, 2003. Rev. Proc. 93–17 obsolete for actions that occur on
or after May 16, 1997.
REG–141669–02, page 408.
Proposed regulations under s
ection 6724 of the Code provide
rules designed to determine
whether the correction of a failure
to file a correct informatio
nreturnisconsideredpromptfor
purposes of waiving info
rmation reporting penalties. A public
hearing is scheduled for
October 21, 2003.
Notice 2003–55, page 395.
This notice concerns the federal tax treatment of lease strips.
Notice 95–53 modified and superseded.
(Continued on the next page)
Anno
uncements of Disbarments and Suspensions begin on page 414.
Finding Lists begin on page ii.

Notice 2003–56, page 396.
Equity investment prior to allocation.The Treasury Depart-
ment and the Service announce that they will amend section
1.45D–1T(c)(3)(ii) of the temporary regulations to provide an
exception permitting certain equity investments made on or af-
ter the date the Community Development Financial Institutions
Fund publishes a Notice of Allocation Availability in the Federal
Register, and before the receipt of a new markets tax credit al-
location under section 45D(f)(2), to be designated as qualified
equity investments under section 45D(b)(1)(C) of the Code.
Rev. Proc. 2003–68, page 398.
This procedure restates and modifies Rev. Procs. 2002–13
and 2002–45. The modifications include permitting the use
of expected term in connection with the safe harbor valuation
method and the ability to recalculate the option value under
certain circumstances. Rev. Procs. 2002–13 and 2002–45
revoked.
Rev. Proc. 2003–70, page 406.
This procedure provides the domestic asset/liabi
lity percent-
ages and domestic investment yields needed by for
eign in-
surance companies to compute their minimum effe
ctively con-
nected net investment income for taxable years
beginning after
December 31, 2001.
EXCISE TAX
Rev. Proc. 2003–68, page 398.
This procedure restates and modifies Rev. Procs. 2002–13
and 2002–45. The modifications include permitting the use
of expected term in connection with the safe harbor valuation
method and the ability to recalculate the option value under
certain circumstances. Rev. Procs. 2002–13 and 2002–45
revoked.
TAX CONVENTIONS
Notice 2003–57, page 397.
This notice provides circumstances under which no Form
3520 or Form 3520–A with respect to certain Canadian
retirement plans is required with respect to the 2002 taxable
year, and guidance concerning compliance with Forms 3520
and 3520–A when required.
ADMINISTRATIVE
REG–141669–02, page 408.
Proposed regulations under section 6724 of the Code provide
rules designed to determine whether the correction of a failure
to file a correct information return is considered prompt for
purposes of waiving information reporting penalties. A public
hearing is scheduled for October 21, 2003.
Rev. Proc. 2003–67, page 397.
Low-income housing tax credit.This procedure publishes the
amounts of unused housing credit carryovers allocated to qual-
ified states under section 42(h)(3)(D) of the Code for calendar
year 2003.
Rev. Proc. 2003–69, page 403.
This procedure provides the requirements for completing and
submitting Form 8655,Reporting Agent Authorization for
Magnetic Tape/Electronic Filers. Rev. Proc. 96–17 modi-
fied and superseded.
August 25, 20032003-34 I.R.B.

The IRS Mission
Provide AmericaÊs taxpayers top quality service by helping
them understand and meet their tax responsibilities and by
applying the tax law with integrity and fairness to all.
Introduction
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rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
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upersede, revoke, mod-
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r, statements of internal
practices and procedures that af
fect the rights and duties of
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Revenue rulings represent the conclusions of the Service on the
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the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
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This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.
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This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
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To the extent practicable, pertinent cross references to these
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For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2003-34 I.R.B.August 25, 2003

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 83.—Property
Transferred in Connection
With Performance of Services
26 CFR 1.83–6: Deduction by employer.
Deduction rules; compensatory stock
options.This ruling addresses the appli-
cation of the deduction rules under section
83(h) of the Code with regard to the exer-
cise or disposition of compensatory stock
options following certain corporate trans-
actions.
Rev. Rul. 2003–98
ISSUE
Under § 83 of the Internal Revenue
Code, in the situations described below,
which corporation is entitled to deduct the
compensation income includible in Em-
ployee's gross income as a result of Em-
ployee's exercise or disposition of a non-
statutory option?
FACTS
Situation 1. On January 1, 2003, Em-
ployee begins employment with Company
M and is granted a nonstatutory option to
purchase a number of shares of M common
stock (“the M Option”). The M Option has
no readily ascertainable fair market value
when it is granted and is not exercisable
until January 1, 2006.
On November 15, 2006, Company N
acquires all of the outstanding shares of M
for cash. N does not make an election un-
der § 338(g) to treat its acquisition of M
as a deemed acquisition of the assets of
M, thus treating it instead as an acquisition
of the stock of M. Thereafter, M conducts
its business as a wholly owned subsidiary
of N. M and N are accrual basis taxpay-
ers, and each has a taxable year ending on
September 30.
On the acquisition date, either pursuant
to the terms of the M Option or in response
to an offer from N, Employee surrenders
the M Option to N, and, in exchange, N
grants an exercisable nonstatutory option
to acquire a number of shares of N com-
mon stock (“the N Option”) to Employee.
The N Option has no readily ascertainable
fair market value. On January 15, 2007,
while still employed by M, Employee ex-
ercises the N Option and receives substan-
tially vested N shares from N.
Situation 2. The facts are the same as
in Situation 1, except that, under the terms
of the N Option, N has the ability to can-
cel the option at any time in exchange for
a payment in cash or in value-equivalent
substantially vested N shares. On January
15, 2007, N cancels the N Option in ex-
change for a payment (in cash or shares)
to Employee.
Situation 3. The facts are the same as in
Situation 1, except that the M Option is not
exchanged for the N Option on the acqui-
sition date. Instead, the M Option remains
outstanding after the acquisition date un-
til January 15, 2007, when either pursuant
to the terms of the M Option or with Em-
ployee's agreement, N cancels the M Op-
tion and pays the excess of the fair mar-
ket value of the stock purchasable under
the option over the option's exercise price
in cash or in value-equivalent substantially
vested N shares to Employee.
Situation 4. The facts are the same as
in Situation 1, except that on November
15, 2006, M and N merge under state law,
with N as the surviving corporation. The
merger qualifies as a complete liquidation
within the meaning of § 332.
LAW AND ANALYSIS
Under § 83(a), when property is trans-
ferred to any person in connection with
the performance of services, the service
provider must include in gross income (as
compensation income) the excess of the
fair market value of the property, deter-
mined at the first time that the transferee's
rights in the property are either trans-
ferrable or not subject to a substantial risk
of forfeiture (“substantially vested”), over
the amount (if any) paid for the property.
Section 83(e)(3) provides that § 83
does not apply to the transfer of an op-
tion without a readily ascertainable fair
market value on the date of grant. Under
§ 1.83–7 of the Income Tax Regulations,
§ 83 applies at the time such an option is
exercised, or otherwise disposed of. If the
option is exercised, § 83(a) applies to the
transfer of property pursuant to the exer-
cise. Under § 1.83–7(a), if the option is
sold or otherwise disposed of in an arm's
length transaction, §§ 83(a) and 83(b)
apply to the transfer of money or other
property received in the same manner as
§§ 83(a) and 83(b) would have applied
to the transfer of property pursuant to an
exercise of the option. Under § 1.83–7T,
the preceding sentence does not apply to
a sale or other disposition of the option
to a person related to the service provider
that occurs on or after July 2, 2003. For
this purpose, a person is not related to the
service provider if the person is the service
recipient with respect to the option or the
grantor of the option.
Thus, in each of the above Situations,
because the M Option has no readily ascer-
tainable fair market value when granted,
§ 83 does not apply to the option at that
time. Rather, § 83(a) applies to the con-
sideration received by Employee upon the
disposition of the M Option in the case of
Situation 3 and the exercise or disposition
of the N Option in the case of Situations 1,
2, and 4.
Under § 83(h) and § 1.83–6(a)(1), the
service recipient is allowed a compen-
sation expense deduction, under § 162,
for the amount included in the service
provider's gross income under § 83(a).
Under the general timing rule of § 83(h),
the deduction is allowed for the service
recipient's taxableyear in which or with
which ends the service provider's taxable
year in which the amount is included in
gross income. Section 1.83–6(a)(3) pro-
vides an exception to that rule: in cases
where the property transferred is substan-
tially vested upon transfer, the deduction
is allowed to the service recipient under
its method of accounting.
Section 1.83–6(d)(1) generally pro-
vides that, if a shareholder of a corpora-
tion transfers property to an employee (or
independent contractor) of the corporation
in consideration for services performed
by the employee for the corporation, the
transaction is considered a contribution
of the property by the shareholder to the
corporation and, immediately thereafter, a
transfer of the propertybythecorporation
to the employee. The transfer of property
to the employee is considered to be in
consideration for services performed by
the employee for the corporation if either
the property is substantially nonvested
at the time of transfer or if an amount
2003-34 I.R.B.378August 25, 2003

is includible in the gross income of the
employee at the time of transfer under the
rules of § 83. See § 1.1032–3 for special
rules that may apply to a corporation's
transfer of its own stock to any person in
consideration of services performed for
another corporation or partnership.
Section 332(a) provides that no gain
or loss is recognized on the receipt by a
corporation (the acquiring corporation) of
property distributed in complete liquida-
tion of another corporation (the liquidating
corporation).
Section 381(a)(1) provides, in part, that,
where the assets of a liquidating corpora-
tion are distributed to the acquiring corpo-
ration in a transaction to which § 332 ap-
plies, the acquiringcorporation succeeds
to and takes into account, as of the close of
the day of distribution, the items described
in § 381(c) of the liquidating corporation,
subject to the conditions and limitations
described in §§ 381(b) and (c).
In a transaction to which § 381(a) ap-
plies, § 381(c)(16) permits the acquiring
corporation to deduct an assumed obliga-
tion of the liquidating corporation, as if it
were the liquidating corporation, when that
obligation is paid or accrued (1) if such
obligation gives rise to a liability after the
date of distribution and (2) if the liquidat-
ing corporation would have been entitled
to deduct that liability in computing tax-
able income were that liability paid or ac-
crued by the liquidating corporation. See
§ 1.381(c)(16)–1(a)(1).
Section 1.381(c)(16)–1(a)(4) provides
that an obligation of a liquidating corpora-
tion gives rise to a liability when the liabil-
ity would be accruable by a taxpayer using
the accrual method of accounting, notwith-
standing the fact that the liquidating cor-
poration is not using the accrual method of
accounting. See § 1.461–1(a)(2).
Section 1.461–1(a)(2)(i) provides that,
under an accrual method of accounting, a
liability is incurred, and generally is taken
into account for federal income tax pur-
poses, in the taxable year in which: (1) all
the events have occurred that establish the
fact of the liability, (2) the amount of the li-
ability can be determined with reasonable
accuracy, and (3) economic performance
has occurred with respect the liability. A
liability with respect to an option gener-
ally is incurred and taken into account in
the year in which the employee exercises
the option because thatis when the liability
becomes fixed and determinable with rea-
sonable accuracy. Therefore, for purposes
of § 381(c)(16), an option generally gives
rise to a liability when it is exercised.
In Situations 1, 2, and 4, the substitu-
tion of the M Option for the N Option does
not cause Employee to recognize compen-
sation income under § 83(a). In Situations
1 and 4, Employee recognizes compensa-
tion income under § 83(a) in 2007, which
is Employee's taxable year in which the N
Option is exercised. In Situations 2 and
3, Employee also recognizes compensa-
tion income under § 83(a) in 2007, which
is Employee's taxable year in which N can-
cels the substituted N Option or cancels the
M Option.
Applying § 83(h) and § 1.83–6 to Situ-
ations 1, 2, and 3, because M is the service
recipient with respect to either the M Op-
tion or the N Option, M, and only M, is
permitted to deduct the compensation in-
cludible in Employee's gross income as a
result of the disposition of the M Option
or the exercise or disposition of the N Op-
tion. Although N actually pays the cash
or transfers its stock directly to Employee,
such payment (or transfer) is treated as a
cash capital contribution by N to M (and
M is treated as purchasing the stock from
Ninthecaseofastocktransfertothe
Employee) and as a payment of cash (or
transfer of stock) by M to the Employee.
See §§ 1.83–6(d)(1), 1.1032–3(b)(1), and
1.1032–3(e), Example 8. Because the con-
sideration received by Employee upon the
disposition of the M Option or the exer-
cise or disposition of the N Option is ei-
ther cash or substantially vested N shares,
the § 1.83–6(a)(3) exception to the general
timing rule for deductions in § 83(h) ap-
plies. Accordingly, to the extent that the
compensation is otherwise deductible, M,
and only M, is entitled to deduct the com-
pensation, using its method of accounting,
for its taxable year ending September 30,
2007.
In Situation 4, because the merger of M
into N qualifies as a liquidation within the
meaning of § 332, under § 381, N succeeds
to and takes into account those tax items of
M described in § 381(c). Because (1) N as-
sumed the obligation of M pursuant to the
N Option, (2) after the date of the merger,
the N Option gives rise to a liability under
§ 1.461–1(a)(2) by reason of its exercise,
and (3) the liability, if paid or accrued by M
would have been deductible in computing
M's taxable income, N is entitled to deduct
that item when paid or accrued as if it were
M. See § 381(c)(16).
Under § 83(h) and § 1.83–6(a), N is
entitled to a deduction for the amount of
compensation income (if any) included
in the gross income of Employee under
§ 83(a). The amount of compensation in-
come (if any) included in the gross income
of Employee is determined on January
15, 2007, when the option is exercised
and the stock transferred to Employee.
Because the stock is substantially vested
when transferred to Employee, to the
extent that the compensation recognized
by Employee in Situation 4 is otherwise
deductible, the deduction is allowed in
accordance with N's method of account-
ing. Thus, the deduction is allowed for N's
taxable year ending September 30, 2007.
HOLDINGS
In Situations 1, 2, and 3, the compen-
sation attributable to Employee's disposi-
tion of the M Option or exercise or dispo-
sition of the N Option, if it is otherwise de-
ductible, is deductible by M. In Situation
4, the compensation, if it is otherwise de-
ductible, is deductible by N, as if it were
M.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Norm Paul of the Office of Di-
vision Counsel/Associate Chief Counsel
(Tax Exempt and Government Entities).
For further information regarding this rev-
enue ruling, contact Norm Paul or Robert
Misner at (202) 622–6030 (not a toll-free
number).
Section 162.—Trade or
Business Expenses
If one participant in a transaction claims to realize
rental or other income from property and another par-
ticipant claims the deductions related to that income,
will the separation of income from related deductions
be disallowed and will the transaction be a lease strip
that is a listed transaction subject to the requirements
of section 6111. See Notice 2003-55, page 395.
August 25, 20033792003-34 I.R.B.

Section 163.—Interest
26 CFR 1.163–1: Interest deduction in general.
(Also § 7805(b)(8); 301.7805–1.)
Deductibility of interest.This ruling
provides guidance on whether interest ac-
cruing on a note is deductible under section
163(a) of the Code, and whether the de-
duction is disallowed under section 163(1),
when a corporation issues units, each con-
sisting of instruments in the form of a note
and a forward contract to purchase a quan-
tity of the corporation’s common stock.
The holding of this ruling is modified for
units issued on or before August 22, 2003.
This ruling also requests comments con-
cerning possible regulations under section
163(1).
Rev. Rul. 2003–97
ISSUE
Under the facts presented below, if a
corporation issues units, each consisting of
instruments in the form of a 5-year note
and a 3-year forward contract to purchase
a quantity of the corporation's common
stock, is the “interest” accruing on the note
deductible under § 163(a) of the Internal
Revenue Code and not disallowed under
§ 163(l)?
FACTS
On August 18, 2003 (“Issue Date”),X,
a corporation, issues units, each consist-
ing of instruments in the form of a 3-year
forward contract to purchase a quantity of
X's common stock (“Purchase Contract”)
and a 5-year note issued byX(“Note”) (to-
gether, a “Purchase-Contract/Note unit”).
The Purchase Contract requires the holder
to purchase, andXto sell, on August 18,
2006 (“Settlement Date”), a quantity ofX's
common stock that is determined by ref-
erence to the market price of the stock on
the Settlement Date. The Note has a stated
maturity date of August 18, 2008 (“Matu-
rity Date").
Under the Purchase Contract, on the
Settlement Date the holder must pay an
amount (“Settlement Price”) that is equal
to the stated principal amount of the Note.
If the market price ofX's common stock
on the Settlement Date falls within a spe-
cific range of market prices (bounded by a
“lower limit” based on the market price on
the Issue Date and an “upper limit” equal
to approximately 120 percent of the lower
limit), the quantity of stock deliverable un-
der the Purchase Contract will have a mar-
ket value equal to the Settlement Price. If
the market price on the Settlement Date is
less than the lower limit or greater than the
upper limit, the quantity of stock that is
deliverable under the Purchase Contract is
the quantity that would be deliverable if the
market price on that date were equal to the
lower limit or the upper limit, respectively.
Xallocates the purchase price of a Pur-
chase-Contract/Note unit between the Pur-
chase Contract and the Note according to
their respective fair market values, as if the
Purchase Contract and the Note were sepa-
rate instruments. The amount allocated to
the Note is equal to the Note's stated prin-
cipal amount.
The Note contained in a Purchase-Con-
tract/Note unit is pledged to secure the
holder's obligation to pay the Settlement
Price under the Purchase Contract. As de-
scribed below, the holder, however, has the
legal right to separate the Note from the
Purchase-Contract/Note unit in either of
two ways (producing a “Separated Note”).
The holder is not economically compelled
to keep a unit unseparated.
The holder may separate the Note from
the Purchase-Contract/Note unit before
the Settlement Date without paying the
Settlement Price. To do so, the holder
must transfer the unit toX's agent (“Pur-
chase Contract Agent”) together with a
specific zero-coupon Treasury security
(“Strip”), and then the holder will receive
a “Purchase-Contract/Strip unit” together
with the Separated Note (a “conversion”).
The Strip contained in the Purchase-Con-
tract/Strip unit replaces the Note as collat-
eral. Once a holder has effected a conver-
sion, the holder may transfer the Note and
retain the Purchase-Contract/Strip unit or
transfer the Purchase-Contract/Strip unit
and retain the Note. The Strips mature
shortly before the Settlement Date and pay
an amount equal to the Settlement Price.
On the Settlement Date,Xwill apply the
proceeds from the Strip contained in any
Purchase-Contract/Strip unit to satisfy the
holder's obligation to pay the Settlement
Price under the associated Purchase Con-
tract.
In addition, before the completion of a
successful remarketing (described below),
the holder of a Purchase-Contract/Note
unit or a Purchase-Contract/Strip unit may
transfer the unit to the Purchase Contract
Agent together with cash in an amount
equal to the Settlement Price and receive
a quantity of shares ofX's common stock
together with the Separated Note or the
Strip (a “settlement with separate cash”).
The Note provides for quarterly pay-
ments of amounts denominated as inter-
est, including a payment on the Settlement
Date. This interest is payable at a single
fixed rate (“Initial Rate”). The Notes are
required to be remarketed on specific dates
before the Settlement Date, including May
15, 2006, and August 15, 2006 (“Final Re-
marketing Date”). A successful remarket-
ing of the Notes generally will result in the
sale of the Notes to new holders effective
on the next quarterly interest payment date
(for example, May 18, 2006, and August
18, 2006) and will establish a new interest
rate (“Reset Rate”), which will be effec-
tive after the remarketing for the remaining
term of the Notes.
The Note is not subject to optional re-
demption byXat any time. Neither the
written terms of the Note nor any other
understanding or agreement requires the
Note to be paid in, or converted into,X's
stock. Similarly, neither the written terms
of the Note nor any other understanding or
agreement grantsXan option to pay the
Note in, or convert the Note into,X's stock.
Xenters into a contract with an in-
vestment bank,Y, to serve as remarketing
agent.Ywill attempt to remarket the
Notes with a Reset Rate that will permit
the Notes to be sold for an amount equal
to at least 100 percent of, and up to a
target of 100
1
/2percent of, a specific price
(“Minimum Required Price”). There is
no upper limit on the Reset Rate. For
a remarketing on the Final Remarketing
Date, the Minimum Required Price is
the aggregate stated principal amount of
the remarketed Notes. For remarketings
before the Final Remarketing Date, the
Minimum Required Price is the amount
that could be invested in then-available
zero-coupon Treasury securities (“Trea-
sury Zeros”) that mature shortly before
the Settlement Date and pay an amount
equal to the sum of the aggregate stated
principal amount of the remarketed Notes,
plus the aggregate interest at the Initial
Rate that would have been payable on the
Notes on the Settlement Date if the Notes
had not been remarketed.
2003-34 I.R.B.380August 25, 2003

The remarketings will include all of
the Notes contained in Purchase-Con-
tract/Note units on the remarketing dates.
In addition, holders of Separated Notes
may elect to include those Notes in the
remarketings. If a remarketing succeeds,
the interest rate on all the Notes will be
changed from the Initial Rate to the Reset
Rate for the remaining term of the Notes,
whether or not they were included in the
remarketing.
A remarketing will not occur if a condi-
tion precedent to the remarketing (for ex-
ample, the existence of an effective regis-
tration statement for the Notes) is not ful-
filled. Moreover, even if all conditions
are satisfied and a remarketing does oc-
cur, the remarketing will not succeed ifY
is unable to obtain the Minimum Required
Price. (In either case, the remarketing is
said to “fail.”) On the Issue Date, it is sub-
stantially certain that a remarketing of the
Notes will succeed.
In the case of a Separated Note, if all
of the remarketings fail, then, on the Set-
tlement Date, the holder of the Note will
have the right to put the Note toXin ex-
change for cash equal to the Note's stated
principal amount plus any accrued but un-
paid interest. If such a Note is not put to
X, the Initial Rate will remain in effect for
that Note until the Maturity Date.
In the case of a Note contained in a Pur-
chase-Contract/Note unit, if all of the re-
marketings fail,Xwill exercise its rights
as a secured party to dispose of the Notes
in accordance with applicable law and sat-
isfy in full the holder's obligation to pur-
chaseX's common stock under the Pur-
chase Contract. As a result, the holder
will receive the interest payment due on
the Settlement Date and the amount ofX's
common stock deliverable under the Pur-
chase Contract.
If a remarketing succeeds, the remar-
keting proceeds (or the proceeds of the
Treasury Zeros in the case of a success-
ful remarketing before the Final Remarket-
ing Date) must be used byXin the fol-
lowing manner. If a Note was part of a
Purchase-Contract/Note unit on the date
of the successful remarketing,Xmust ap-
ply an amount equal to the stated principal
amount of the Note to satisfy the former
holder's obligation to pay the Settlement
Price under the associated Purchase Con-
tract.
In addition,Xmust pay the former
holder cash in an amount equal to the
interest (at the Initial Rate) that would
have been payable to the holder on the
Settlement Date had the Notes not been
remarketed. If the successful remarket-
ing occurs before the Final Remarketing
Date, this amount will be paid out of the
proceeds of the Treasury Zeros. If the
successful remarketing occurs on the Final
Remarketing Date, the amount will be
paid out ofX's own funds.Xwill make
similar payments to the former holders of
any participating Separated Notes.
Ywill receive a remarketing fee of one
quarter of one percent of the Minimum Re-
quired Price. This remarketing fee will be
paid first from the excess, if any, of the re-
marketing proceeds over the Minimum Re-
quired Price and then, if necessary, byX
from its own funds. If any proceeds in ex-
cess of the Minimum Required Price are
notappliedtotheremarketingfee(thatis,
if the proceeds are between 100
1
/4percent
and 100
1
/2percent of the Minimum Re-
quired Price), these excess proceeds will
be distributed to the former holders of the
remarketed Notes (including any partici-
pating Separated Notes).
Purchase-Contract/Note units are listed
on a national securities exchange. Pur-
chase-Contract/Strip units and Separated
Notes are not so listed but are freely assign-
able without restrictions on their transfer-
ability.
The Purchase Contract provides that,
in the event ofX's bankruptcy, the Pur-
chase Contract will terminate and the asso-
ciated Note or Strip will be released to the
holder. On the Issue Date,Xreasonably
believes, based on advice from counsel,
that this provision will be enforceable in
bankruptcy and will result in the holder of a
Purchase-Contract/Note unit being treated
as a creditor in any bankruptcy proceeding.
BasedonthetermsoftheNoteand
other facts and circumstances, if the Note
were issued independently of the Purchase
Contract in a transaction that did not link
the rights and obligations under the Note
with the rights and obligations under the
Purchase Contract, then the Note would
qualify as debt for federal income tax pur-
poses, interest accruing on the Note would
be deductible unless § 163(l) applies, and,
under § 1.1001–3 of the Income Tax Regu-
lations, the Note in existence before a suc-
cessful remarketing would continue to ex-
ist after the remarketing. That is, the Note
would not be treated as having been retired
in conjunction with the issuance of a new
debt instrument that bears an interest rate
equal to the Reset Rate.
LAW AND ANALYSIS
As stated above, the Note would qualify
as debt for federal income tax purposes if it
were issued independently of the Purchase
Contract in a transaction that did not link
the rights and obligations under the Note
with the rights and obligations under the
Purchase Contract. Upon the earlier of
a conversion, a settlement with separate
cash, or a successful remarketing of the
Note, the Note will no longer be linked
with the Purchase Contract. At that time,
the Note will qualify as debt for federal
income tax purposes. Interest accruing on
the Note after that time will be deductible
under § 163(a).
On the other hand, during the time that
the Note is contained in a Purchase-Con-
tract/Note unit, there is an issue of whether
the bundle of rights and obligations re-
sulting from the unit should be treated for
federal income tax purposes as consisting
of a debt instrument and a stock purchase
contract. An important initial inquiry bear-
ing on whether the Note may be separately
analyzed for federal income tax purposes
is whether the Note is separable from
the Purchase-Contract/Note unit. Even if
the Note is separable,however,various
features of the Note and Purchase Con-
tract raise the possibility that, for federal
income tax purposes, the Purchase-Con-
tract/Note unit nevertheless is treated as
some other combination of instruments.
For example, a Purchase-Contract/Note
unit could be treated as a prepaid forward
contract to purchase a variable quantity
ofX's stock together with options (1) to
acquire a Note by tendering a Strip to be
combined into a Purchase-Contract/Strip
unit or (2) to purchase a Note for cash
by settling the forward contract early,
together with a commitment byXto issue
new Notes in the context of a “remarket-
ing.”
The correct characterization for fed-
eral income tax purposes of a transaction
creating multiple rights and obligations
August 25, 20033812003-34 I.R.B.

depends on the facts and circumstances
of the particular transaction. In deciding
among multiple potential characteriza-
tions, the tax law seeks to find the best
match between the bundle of rights and
obligations and one or more categories
of widely recognized instruments. In the
instant case, the form chosen for the com-
ponents of the unit reflects one reasonable
division of the bundle of rights and obli-
gations in the unit. Consequently, it is
appropriate to begin the analysis of the
issuer's tax consequences with respect to
the unit by treating the unit as comprising
these two components—namely, the Note
and the Purchase Contract.
After the Note has been identified as
one of the components of the Purchase-
Contract/Note unit, determining whetherX
may deduct the amounts identified as in-
terest on the Note contained in the Pur-
chase-Contract/Note unit involves a multi-
step analysis:
•Is the Note separable from the associ-
ated Purchase Contract?
•If the Note is separable from the Pur-
chase Contract but is not in fact sepa-
rated from the Purchase Contract, does
the Note qualify as debt?
•If the Note qualifies as debt, does
§ 163(l)preventXfrom deducting the
interest that accrues on the Note?
Is the Note separable from the associated
Purchase Contract?
Two factors are particularly important
in analyzing whether the Note should be
treated as separable from the Purchase
Contract: whether the Purchase Contract
and Note are separately transferable, and
whether any factors (economic or other-
wise) prevent the holder from effecting
such a separate transfer.
Separate Transferability
Rev. Rul. 88–31, 1988–1 C.B. 302,
holds that a share of common stock and
a contingent payment right issued together
as an investment unit are separate items of
property for federal income tax purposes
because they are separately tradable on
a national securities exchange shortly af-
ter issuance. Similarly, in cases involving
bond-warrant investment units in which
the bond and warrant were separately trad-
able, several courts have stated indicta
that, because of the potential for separate
trading, the bond and warrant were prop-
erly treated as separate instruments.See
Chock Full O'Nuts Corp. v. United States,
453F.2d300(2dCir. 1971);Hunt Foods
and Industries, Inc. v. Commissioner,
57 T.C. 633 (1972). In contrast, when fi-
nancial instruments cannot be separately
traded, the courts have generally treated
them as a single instrument.See Univer-
sal Castings Corp. v. Commissioner,37
T.C. 107 (1961) (finding that a corpora-
tion's notes were “locked” to its stock by a
shareholders' agreement so that neither the
note nor the stock could be sold without the
other, and therefore holding that the notes
and stock constituted a“single investment”
and the notes did not qualify as debt),aff'd,
303 F.2d 620 (7th Cir. 1962).Cf. De
Coppet v. Commissioner, 38 B.T.A. 1381
(1938) (finding that an investment corpora-
tion's stock was “stapled” to a bank's stock
through a trust arrangement so that neither
could be sold without the other, and there-
fore holding that no part of the basis of
the taxpayer's stapled stock could be rec-
ognized as a loss when the stock of the in-
vestment corporation became worthless),
aff'd, 108 F.2d 787 (2d Cir.),cert. denied,
310 U.S. 646 (1940). These authorities in-
dicate that, unless a holder has a legal right
to separate linked instruments, they gener-
ally cannot be considered separable.
Economic Compulsion
The existence of a mere legal right to
separate is insufficient for the Note and
Purchase Contract to be considered sep-
arable. If the characterization of an in-
strument or a transaction for federal in-
come tax purposes either depends on, or
could be affected by, the existence of a per-
son's legal right or option to elect a cer-
tain course of action, the tax consequences
often depend on whether the exercise (or
nonexercise) of the right or option is eco-
nomically compelled based on all the facts
and circumstances.See American Realty
Trust v. United States, 498 F.2d 1194,
1199 (4th Cir. 1974) (upholding a ver-
dict that a transaction was a good-faith
sale and lease-back with a repurchase op-
tion, in part because the seller was not
under “economic compulsion” to exercise
the option);Roberts v. Commissioner,
71 T.C. 311, 323 (1978) (holding that a
trust was not a mere conduit used by the
taxpayer to obtain installment sale treat-
ment under § 453 for a stock sale, in part
because the trustees were under “no le-
gal commitment or economic compulsion”
to resell the stock when they did),aff'd,
643 F.2d 654 (9
th
Cir. 1981); Rev. Rul.
2003–7, 2003–5 I.R.B. 363 (holding that a
collateralized forward contract to sell stock
is not a current sale if the shareholder is
not economically compelled to deliver the
pledged shares);see also Comtel Corp. v.
Commissioner, 45 T.C. 294, 307 (1965)
(arrangement for stock purchase and sub-
sequent sale of stock pursuant to an “op-
tion” was characterized as in substance a
financing arrangement, in part because the
Court concluded, after evaluation of the
economic terms of the transaction, that tax-
payer was “practically compelled” to exer-
cise the option),aff'd, 376 F.2d 791, 796
(2d Cir.) (rejecting taxpayer's argument
that it was not “economically compelled”
to exercise the option),cert. denied,389
U.S. 929 (1967);cf. Rev. Rul. 82–150,
1982–2 C.B. 110 (treating the holder of
an option to purchase stock as the current
owner because the holder paid 70 percent
of the stock's value for the option and the
strike price of the option was 30 percent of
the stock's value).
For a Note to become separated from
the Purchase-Contract/Note unit and trans-
ferable separately, one of three events must
occur: (1) the holder effects a conversion,
(2) the holder effects a settlement with sep-
arate cash, or (3) a successful remarketing
occurs. If all of the remarketings fail, a
Note in a Purchase-Contract/Note unit in
effect will be exchanged on the Settlement
Date for theXstock that is due to the holder
under the Purchase Contract.
Notwithstanding these conditions and
possibilities, however, under the facts
stated in this ruling, the holder has the
unrestricted legal right to separate the
Note from the Purchase-Contract/Note
unit and transfer the Note separately, and
is not economically compelled to keep
the unit unseparated. The need to take
certain steps to effect a separation does
not contradict the separateness that can
ultimately be achieved. On the Issue Date,
it is substantially certain that the remarket-
ing will succeed; thus, the consequences
of a hypothetical remarketing failure are
not controlling. Accordingly, in light of
all the facts and circumstances, when the
2003-34 I.R.B.382August 25, 2003

Notes and Purchase Contracts were issued
they were separable instruments.
If the Note is separable from the
Purchase Contract but is not in fact
separated from the Purchase Contract,
doestheNotequalifyasdebt?
Whether an instrument is debt for fed-
eral income tax purposes depends on the
facts and circumstances of each case. No
particular fact is conclusive in making such
a determination.John Kelley Co. v. Com-
missioner, 326 U.S. 521 (1946). Among
the factors considered by the courts are (1)
whether there is an unconditional promise
topayasumcertaininmoneyonaspe-
cific date, (2) the intent of the parties, and
(3) the holder's right to enforce the pay-
ment of principal and interest.Bauer v.
Commissioner, 748 F.2d 1365, 1368 (9
th
Cir. 1984);Estate of Mixon v. United
States, 464 F.2d 394, 402 (5
th
Cir. 1972);
Gilbert v. Commissioner, 248 F.2d 399,
402 (2d Cir. 1957);Litton Business Sys-
tems, Inc. v. Commissioner, 61 T.C. 367,
377 (1973) (“Was there a genuine inten-
tion to create a debt, with a reasonable ex-
pectation of repayment, and did that inten-
tion comport with the economic reality of
creating a debtor-creditor relationship?”),
acq., 1974–2 C.B. 3.
In form, the transaction provides for
investors to make an initial payment of
moneythatwillberepaidtotheholder
of a Note upon the maturity of the Note.
Although the Note is pledged as collat-
eral for satisfaction of the separate Pur-
chase Contract, the payment obligation un-
der that contract is intended to be satisfied
out of the proceeds of the remarketing of
the Note. However, an initial holder is ob-
ligated in all events to acquireX's stock
and will not itself receive the principal pay-
ment on the Note unless the holder takes
action to separate the Note from the Pur-
chase Contract.
A question is thus presented whether
the amount paid by an initial holder should
be characterized as the purchase price for
the Note or as a prepayment on the Pur-
chase Contract, with the actual Notes be-
ing issued byXonly if and when there is a
conversion, a settlement for separate cash,
or a successful remarketing. An important
consideration in answering this question is
whether the issuance and acquisition of the
units create debt characteristics.
On the one hand, in addition to the con-
ditions necessary to cause a separation of
the Note from the Purchase-Contract/Note
unit as described above, the following fac-
tors suggest that the amount paid by a
holder to acquire a unit could be treated
simply as a prepayment of the Settlement
Price under the Purchase Contract:
1. Ownership of a Purchase-Con-
tract/Note unit exposes the holder
to no risk of loss from a decline in
the value of the Note because (i) if
the Note is sold through a successful
remarketing, the holder of a Pur-
chase-Contract/Note unit is assured
of having on the Settlement Date
the amount necessary to satisfy the
holder's obligation under the Purchase
Contract; and (ii) if all remarketings
fail, the holder of a Purchase-Con-
tract/Note unit nevertheless receives
the stock the acquisition of which
is provided for under the Purchase
Contract.
2. Ownership of a Purchase-Con-
tract/Note unit provides the holder
virtually no opportunity for gain from
an increase in the value of the Note
because the Initial Rate will be reset
and the gain to be received from a
remarketing is limited to 25 basis
points.
3. Absent bankruptcy or the holder's de-
cision to effect a conversion or a set-
tlement with separate cash, the holder
of a Purchase-Contract/Note unit will
receiveX'sstockinalleventsunder
the Purchase Contract and will not re-
ceive any payments on the Note other
than accrued interest and a distribu-
tion of excess proceeds in the event of
a successful remarketing.
4. Upon a successful remarketing of the
Note prior to the Final Remarketing
Date, the holder will receive on the
Settlement Date an amount equal to
interest at the Initial Rate rather than
the amount earned on the Treasury Ze-
ros purchased with the proceeds from
the remarketing.
On the other hand, the form in which
the transaction is cast is a debt instrument,
with a term that is substantially certain
to last 5 years, with current interest pay-
ments, and with a remarketing that is to
occur no later than 3 years after the Issue
Date and that is not considered to be a reis-
suance under § 1001.
In addition, the Note has a critical debt
characteristic even before the Note is sep-
arated from the Purchase Contract because
the Purchase Contract provides that, in
the event ofX's bankruptcy, the Purchase
Contract will terminate and the associ-
ated Note will be released to the holder;
and on the Issue Date,Xreasonably be-
lieves, based on the advice of counsel,
that the provision will be enforceable in
bankruptcy and will result in the holders
being treated as creditors in the bank-
ruptcy proceeding. The existence of these
bankruptcy rights is an important debt
characteristic.See P.M. Finance Corp. v.
Commissioner, 302 F.2d 786, 789–90 (3d
Cir. 1962) (describing the right to share
with general creditors in a corporation's
assets in the event of dissolution or liqui-
dation as “a most significant characteristic
of the creditor-debtor relationship”);
Nestlé Holdings, Inc. v. Commissioner,94
T.C. 803, 813–14 (1990) (distinguishing
mandatorily redeemable preferred stock
from debt in part because preferred stock-
holders are always subordinate to creditors
in liquidation).
In this context, the foregoing debt char-
acteristics are sufficient to cause a Note in-
cluded in a Purchase Contract/Note unit to
be treated as debt for federal income tax
purposes.
If the Note qualifies as debt, does § 163(l)
prevent X from deducting the interest
that accrues on the Note?
Section 163(l)(1) disallows a deduc-
tion for any interest paid or accrued on
a “disqualified debt instrument.” Section
163(l)(2) defines a “disqualified debt in-
strument” as indebtedness of a corporation
that is payable in equity of the issuer or
a related party. Section 163(l)(3) pro-
vides that indebtedness shall be treated
as “payable in equity” of the issuer or
a related party only if (A) a substantial
amount of the principal or interest is re-
quired to be paid in or converted into, or at
the option of the issuer or a related party is
payable in or convertible into, such equity;
(B) a substantial amount of the principal
or interest is required to be determined,
or at the option of the issuer or a related
party is determined, by reference to the
value of such equity; or (C) the indebt-
edness is part of an arrangement that is
August 25, 20033832003-34 I.R.B.

reasonably expected to result in a trans-
action described in (A) or (B). Section
163(l)(3) further provides that principal or
interest shall be treated as required to be
so paid, converted, or determined if it may
be required at the option of the holder or
a related party and there is a substantial
certainty the option will be exercised. The
legislative history of § 163(l)statesthatan
instrument is treated as payable in stock
if it is part of an arrangement designed
to result in payment with or by reference
to such stock, including certain issuances
of a forward contract in connection with
the issuance of debt, nonrecourse debt
that is secured principally by such stock,
or certain debt instruments that are con-
vertible at the holder's option when it is
substantially certain that the right will be
exercised.SeeH.R. Conf. Rep. No. 220,
105
th
Cong., 1
st
Sess. 523–24 (1997),
1997–4 (Vol. 2) C.B. 1993–94.
All of the interest payments on all of the
Notes will be made in cash. The princi-
pal payments on Separated Notes as well
as Notes that have been sold in a remarket-
ing will also be made in cash. Thus, if there
is a successful remarketing, the principal
payments on all of the Notes will be made
in cash at the end of the 5-year term. If all
of the remarketings fail, however,X's obli-
gation to pay the stated principal amount of
the Notes contained in the Purchase-Con-
tract/Note units will be offset against the
obligation of the holders to pay the Set-
tlement Price on the Purchase Contracts.
In that case, although the Note contained
in a Purchase-Contract/Note unit techni-
cally will be applied in satisfaction of the
holder's obligation to pay the Settlement
Price rather than paid in stock, the holder
will effectively receiveX'sstockinsatis-
faction of the stated principal amount of
the Note. Thus, the Note may be consid-
ered to be “paid in” or “converted into”X's
stock for purposes of § 163(l)(3).
Even without either a provision in the
written terms of the Notes or any other
understanding or agreement, in certain sit-
uations the facts and circumstances might
support a conclusion that the issuance
was part of an arrangement reasonably
expected, in effect, to giveXan option
either to repay the Note withX's stock
or to convert the Note intoX’s stock, or
otherwise to result in such a repayment or
conversion. For example, ifXdoes not use
its best efforts to make the remarketing
succeed and all of the remarketings fail,
the holder in effect will be compelled to
receiveX'sstockinsatisfactionofthe
stated principal amount of the Note.
In the instant transaction, however, sev-
eral critical facts and contractual provi-
sions support a contrary conclusion:
1.Xhas contracted to have the Notes re-
marketed and such an undertaking is
subject to the requirements and sanc-
tions of the Securities Act of 1933, 15
U.S.C. 77a–77aa (2000);
2. It is substantially certain that a remar-
keting of the Notes will succeed (in
which case the Notes will remain out-
standing until the Maturity Date and
consequently will not be paid in, or
converted into,X's stock);
3. The remarketing dates and the Matu-
rity Date are such that the Notes will
remain outstanding after the remar-
keting for a period that is significant
both absolutely and relative to the to-
tal term of the Notes; and
4. On the Maturity Date,Xwill have an
obligation to pay the principal amount
of the Notes.
Thus, absent specific evidence of bad
faith with respect toX's performance of
its obligation to remarket the Notes, these
critical facts and contractual provisions
support the conclusion that the transaction
is not reasonably expected to giveXan
option to pay the Notes in, or convert them
into,X's stock, or to otherwise result in
such a repayment or conversion.
Conclusion
The interest accruing on a Note con-
tained in a Purchase-Contract/Note unit is
deductible under § 163(a), and the deduc-
tion is not disallowed under § 163(l).
Four factors critical to this conclusion
are:
Critical Factor I. The holder has the
unrestricted legal right to convert the
Purchase-Contract/Note unit into a
Purchase-Contract/Strip unit or to
settle the Purchase Contract with sep-
arate cash and retain the Note, and the
holder is not economically compelled
to keep the unit unseparated.
Critical Factor II. The Purchase Con-
tract provides that, in the event ofX's
bankruptcy, the Purchase Contract will
terminate and the associated Note or
Strip will be released to the holder;
and, on the Issue Date,Xreasonably
believes, based on advice from coun-
sel, that the provision would be en-
forceable in bankruptcy and would re-
sult in the holder of a Purchase-Con-
tract/Note unit being treated as a cred-
itor in the bankruptcy proceeding.
Critical Factor III. The period the
Notes will remain outstanding after a
remarketing is significant, both abso-
lutely and relative to the total term of
the Notes. For purposes of this factor,
Notes are considered to remain out-
standing only during the period when
they are not subject to redemption at
the option of the issuer.
Critical Factor IV. On the Issue Date,
it is substantially certain that a remar-
keting of the Notes will succeed. For
purposes of this factor, a remarketing
of the Notes is not substantially certain
to succeed if the Reset Rate is capped.
HOLDING
Under the facts presented, the interest
accruing on a Note contained in a Pur-
chase-Contract/Note unit is deductible un-
der § 163(a), and the deduction is not dis-
allowed under § 163(l).
PROSPECTIVE APPLICATION
Under the authority of § 7805(b)(8), the
holding of this revenue ruling will not be
applied adversely with respect to a unit
that was issued on or before August 22,
2003, provided that interest accruing on
the unit would be deductible under this rev-
enue ruling if—
(1) Critical Factor II required only that,
under the transaction documents, in the
event of the issuer's bankruptcy, the Pur-
chase Contract will terminate and the as-
sociated Note or Treasury security will be
released to the holder; and
(2) Critical Factor IV required only that
the issuer of the unit undertook a legal obli-
gation to attempt to cause a remarketing to
succeed and reasonably believed that a re-
marketing would succeed.
REQUEST FOR COMMENTS
The Internal Revenue Service and
the Treasury Department are considering
whether to issue regulations under § 163(l)
2003-34 I.R.B.384August 25, 2003

to address the policy issues raised by the
transaction described in this ruling. The
Internal Revenue Service and the Trea-
sury Department request comments as to
whether regulations should be promul-
gated and, if so, what these regulations
should provide.
Comments should be submitted by
October 22, 2003. Comments may be
submitted to CC:PA:RU (Rev. Rul.
2003–97), room 5203, Internal Revenue
Service, POB 7604 Ben Franklin Station,
Washington, DC 20044. Comments may
be hand delivered between the hours of
8:00 a.m. and 4 p.m. Monday to Fri-
day to CC:PA:RU (Rev. Rul. 2003–97),
Courier's Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC. Alternatively, com-
ments may be submitted via the Internet at
Notice.Comments@irscounsel.treas.gov.
All comments will be available for public
inspection and copying.
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Charles Culmer of the Office of As-
sociate Chief Counsel (Financial Institu-
tions and Products). For further informa-
tion regarding this revenue ruling, contact
Mr. Culmer at (202) 622–3960 (not a
toll-free call).
Section 472.—Last-in,
First-out Inventories
26 CFR 1.472–1: Last-in, first-out inventories.
LIFO; price indexes; department
stores.The June 2003 Bureau of Labor
Statistics price indexes are accepted for
use by department stores employing the
retail inventory and last-in, first-out inven-
tory methods for valuing inventories for
tax years ended on, or with reference to,
June 30, 2003.
Rev. Rul. 2003–100
The following Department Store In-
ventory Price Indexes for June 2003 were
issued by the Bureau of Labor Statistics.
The indexes are accepted by the Internal
Revenue Service, under § 1.472–1(k) of
the Income Tax Regulations and Rev.
Proc. 86–46, 1986–2 C.B. 739, for ap-
propriate applicationtoinventoriesof
department stores employing the retail
inventory and last-in, first-out inventory
methods for tax years ended on, or with
reference to, June 30, 2003.
The Department Store Inventory Price
Indexes are prepared on a national basis
and include (a) 23 major groups of depart-
ments, (b) three special combinations of
the major groups — soft goods, durable
goods, and miscellaneous goods, and (c) a
store total, which covers all departments,
including some not listed separately, ex-
cept for the following: candy, food, liquor,
tobacco, and contract departments.
BUREAU OF LABOR STATISTICS, DEPARTMENT ST
ORE
INVENTORY PRICE INDEXES BY DEPARTMENT G
ROUPS
(January 1941 = 100, unless otherwise no
ted)
GroupsJune 2002June 2003
Percent Change
from June 2002
to June 2003
¹
1. PieceGoods .............................................494.9464.3-6.2
2. DomesticsandDraperies..................................577.6557.0-3.6
3. Women'sandChildren'sShoes.............................634.3629.1-0.8
4. Men'sShoes .............................................905.7849.5-6.2
5. Infants'Wear.............................................603.3588.9-2.4
6. Women'sUnderwear......................................525.1516.1-1.7
7. Women'sHosiery.........................................346.5348.90.7
8. Women's and Girls' Accessories............................537.2547.92.0
9. Women'sOuterwearandGirls'Wear........................369.7362.9-1.8
10. Men'sClothing...........................................580.7541.8-6.7
11. Men'sFurnishings........................................581.7570.2-2.0
12. Boys'ClothingandFurnishings ............................475.7449.6-5.5
13. Jewelry..................................................897.0877.8-2.1
14. Notions .................................................805.4791.4-1.7
15. ToiletArticlesandDrugs..................................981.0990.00.9
16. FurnitureandBedding ....................................626.2619.0-1.0
17. Floor Coveri
ngs..........................................
616.6586.6-4.9
18. Housewares..............................................756.2726.0-4.0
19. MajorAppliances.........................................221.0214.1-3.1
20. RadioandTelevision......................................49.445.4-8.1
21. Recreation and Education
2
.................................86.283.1-3.6
22. Home Improvements
2
.....................................125.5125.4-0.1
23. Aut
o Accessories
2
........................................
110.9111.50.5
August 25, 20033852003-34 I.R.B.

BUREAU OF LABOR STATISTICS, DEPARTMENT STORE
INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS
(January 1941 = 100, unless otherwise noted)
GroupsJune 2002June 2003
Percent Change
from June 2002
to June 2003
¹
Groups1–15:SoftGoods........................................571.9559.5-2.2
Groups16–20:DurableGoods...................................411.5395.6-3.9
Groups 21–23: Misc. Goods
2
....................................96.494.4-2.1
Store Total
3
..............................................512.9500.1-2.5
1
Absence of a minus sign before the percentage change in this column signifies a price increase.
2
Indexes on a January 1986 = 100 base.
3
The store total index covers all departments, including some not listed separately, except for the following: candy, food, liquor,
tobacco and contract departments.
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Michael Burkom Office of Associate
Chief Counsel (Income Tax and Account-
ing). For further information regarding
this revenue ruling, contact Mr. Burkom
at (202) 622–7924 (not a toll-free call).
Section 482.—Allocation
of Income and Deductions
Among Taxpayers
26 CFR 1.482–1: Reallocation of income and deduc-
tions among unrelated parties to a lease strip.
Lease stripping transaction.This rul-
ing discusses whether section 482 of the
Code may apply to allow allocations of
the income and deductions arising from a
lease stripping transaction entered into by
parties that were unrelated at the time the
income is stripped from the lease, solely
on the basis that the parties were acting
in concert or with a common goal or pur-
pose, to arbitrarily shift income or deduc-
tions among themselves.
Rev. Rul. 2003–96
ISSUE
Whether section 482 may apply to al-
low allocations of the income and deduc-
tions arising from the property that is the
subject of a lease stripping transaction en-
tered into and effected among parties that
wereunrelateduptoandincludingthetime
income is stripped from the lease pursuant
to a plan promoted to realize tax benefits
for one or more of the parties, solely on the
basis that at such time the parties were act-
inginconcertorwithacommongoalor
purpose to arbitrarily shift income or de-
ductions among themselves.
FACTS
A, a foreign corporation, purchases
property from B, an equipment leasing
company. At the time of the purchase, the
property was subjectto pre-existing end
user leases with varying terms extending
over future years. A is not engaged in a
trade or business within the United States
and is exempt from U.S. taxation on U.S.
source income, if any, from the end user
leases under an applicable income tax
treaty. A sells the right to all future rental
income attributable to the end user leases
to C.
D, a domestic corporation, is the parent
of an affiliated group of corporations that
files a U.S. consolidated income tax return.
After the rights to the future rental income
have been sold to C, A transfers the leased
property subject to the end user leases to
E, a domestic corporation, in a purported
section 351 transaction entered into with
D where immediately after the transaction,
A has non-voting preferred stock in E and
D has 100% of the voting stock of E. E
is a member of the D consolidated group
(the “D group”) after the purported section
351 transaction. Subsequent depreciation
deductions from the leased property are
reflected on the consolidated return for the
D group.
The foregoing steps were undertaken
pursuant to a plan promoted by P to A, B,
C, and the D group to achieve U.S. income
tax benefits for one or more of the parties.
A, B, C, the D group, and P were unre-
latedtooneanotheratalltimesuptoand
including the time the income is stripped
from the leases in the transaction between
A and C, and A and D also were unre-
lated to one another throughout the period
in which tax benefits are claimed with re-
spect to the lease stripping transaction.
LAW AND ANALYSIS
Section 482 provides, in part:
In the case of two or more organiza-
tions, trades, or businesses (whether or
not incorporated, whether or not orga-
nized in the United States, and whether
or not affiliated) owned or controlled
directly or indirectly by the same in-
terests, the Secretary may distribute,
apportion, or allocate gross income,
deductions, credits, or allowances be-
tween or among such organizations,
trades, or businesses, if he determines
that such distribution, apportionment,
or allocation is necessary in order to
prevent evasion of taxes or clearly to
reflect the income of any of such orga-
nizations.
In determining whether or not two or
more organizations, trades, or businesses
are controlled directly or indirectly by the
2003-34 I.R.B.386August 25, 2003

same interests, control is defined to in-
clude any kind of control, direct or indi-
rect, whether legally enforceable or not,
and however exercisable or exercised, in-
cluding control resulting from the actions
of two or more taxpayers acting in concert
or with a common goal or purpose. Treas.
Reg. § 1.482–1(i)(4). It is the reality of
control that is decisive, not its form or the
mode of its exercise.Id.; Ach v. Commis-
sioner, 42 T.C. 114 (1964),aff'd, 358 F.2d
342 (6th Cir.),cert. denied,385U.S.899
(1966). A presumption of control arises if
income or deductions have been arbitrarily
shifted. Treas. Reg. § 1.482–1(i)(4).
Theissueundersection482iswhether
an allocation between or among organiza-
tions, trades, or businesses owned or con-
trolled by the same interests is necessary
to prevent the evasion of taxes or clearly
to reflect the income of any of such orga-
nizations, trades or businesses. Therefore,
situations in which two or more taxpay-
ers act in concert to control another organ-
ization, trade or business with a common
goal or purpose to arbitrarily shift income
or deductions between one or more of such
taxpayers and the controlled organization,
trade or business are brought within the ap-
plication of section 482 by the reference in
section 1.482–1(i)(4) to “control resulting
from the actions of two or more taxpayers
acting in concert or with a common goal or
purpose.”
An example would be three equal and
otherwise unrelated shareholders in a
corporation that, acting in concert, indi-
vidually purchase from or sell items to
the corporation at prices that differ from
those that would be charged by unrelated
parties in similar circumstances. Even
though none of the shareholders individ-
ually has actual or effective control of the
corporation, where the shareholders act in
concert with a common goal of shifting
income or deductions from or to the cor-
poration, section 1.482–1(i)(4) provides
that each shareholder is considered to
control the corporation for purposes of
the application of section 482.See, e.g.,
B. Forman Co., Inc. v. Commissioner,453
F.2d 1144 (2d Cir. 1972),cert. denied,
407 U.S. 934,rehearing denied,409U.S.
899 (1972),aff'g in part,andrev'ginpart,
54 T.C. 912 (1970);South Texas Rice
Warehouse Co. v. Commissioner,366
F.2d 890 (5th Cir. 1966),aff'g43 T.C.
540 (1965),cert. denied, 386 U.S. 1016
(1967).
By contrast, the fact that unrelated
parties engage in a transaction does not
by itself evidence the type of control nec-
essary to satisfy the “acting in concert or
with a common goal or purpose” require-
ment of section 1.482–1(i)(4), regardless
of whether such transaction may be viewed
as having arbitrarily shifted income be-
tween the otherwise unrelated parties. An
application of section 1.482–1(i)(4) to this
type of situation would be inconsistent
with the policies underlying section 482,
which provides for allocations between or
among organizations, trades or businesses
“owned or controlled directly or indirectly
by the same interests.”
Under the facts, the lease stripping
transaction occurred among parties that
themselves were unrelated to one another
up to and including the time the income is
stripped from the leases. Up to and includ-
ing the time the income is stripped from
the leases, there were not two or more
of such parties and another organization,
trade or business which such parties acted
in concert to control.Accordingly, at that
time, the parties did not “act in concert or
with a common goal or purpose” within
the meaning of section 1.482–1(i)(4).
HOLDING
The facts described up to and includ-
ing the time the income is stripped from
the leases do not support the application of
section 482 to allow the allocation among
the parties of the income and deductions
arising from the property that is the sub-
ject of the lease stripping transaction. The
fact that parties that were unrelated up to
and including the time of a transaction
engage in that transaction in an attempt
to arbitrarily shiftincome or deductions
among themselves does not by itself evi-
dence the type of control necessary to sat-
isfy the “acting in concert or with a com-
mon goal or purpose” requirement of sec-
tion 1.482–1(i)(4). This ruling does not ad-
dress whether A is considered to control E
for purposes of the application of section
482 by reason of A and D entering into the
purported section 351 transaction with E.
No inference is intended concerning
the treatment of lease stripping transac-
tions for federal income tax purposes. The
Internal Revenue Service will challenge
lease stripping transactions on other legal
grounds.SeeNotice 2003–55, 2003–34
I.R.B. 395, August 25, 2003.
DRAFTING INFORMATION
The principal authors of this revenue
ruling are Sheila Ramaswamy and J. Peter
Luedtke of the Office of Associate Chief
Counsel (International). For further infor-
mation regarding this revenue ruling, con-
tact Sheila Ramaswamy at 202–622–3870
or J. Peter Luedtke at 202–435–5265 (not
toll-free calls).
Section 6011.—General
Requirement of Return,
Statement, or List
26 CFR 1.6011–4(b)(2)
If one participant in a transaction claims to real-
ize rental or other income from property and another
participant claims the deductions related to that in-
come, will the separation of income from related de-
ductions be disallowed and will the transaction be a
lease strip that is a listed transaction subject to the re-
quirements of sections 6011 and 1.6011-4(b)(2). See
Notice 2003-55, page 395.
Section 6111.—Registration
of Tax Shelters
If one participant in a transaction claims to realize
rental or other income from property and another par-
ticipant claims the deductions related to that income,
will the separation of income from related deductions
be disallowed and will the transaction be a lease strip
that is a listed transaction subject to the requirements
of section 6111. See Notice 2003-55, page 395.
Section 6112.—Organizers
and Sellers of Potentially
Abusive Tax Shelters Must
Keep Lists of Investors
If one participant in a transact
ion claims to realize
rental or other income from prop
erty and another par-
ticipant claims the deducti
ons related to that income,
will the separation of incom
e from related deductions
be disallowed and will the t
ransaction be a lease strip
that is a listed transactio
n subject to the requirements
of section 6112. See Notic
e 2003-55, page 395.
Section 7805.—Rules and
Regulations
26 CFR 301.7805–1: Rules and regulations.
Rev. Rul. 2003-97 provides guidance on whether
interest accruing on a note is deductible under section
August 25, 20033872003-34 I.R.B.

163(a), and whether the deduction is disallowed un-
der section 163(1), when a corporation issues units,
each consisting of instruments in the form of a note
and a forward contract to purchase a quantity of the
corporation’s common stock. The holding of the rev-
enue ruling is modified for units issued on or before
August 22, 2003. See Rev. Rul. 2003-97, page 380.
Obsolete revenue rulings.This ruling
publishes a list of previously published rul-
ings that have been identified as no longer
determinative with respect to future trans-
actions.
Rev. Rul. 2003–99
The Internal Revenue Service is con-
tinuing its program of reviewing rulings
(including revenue rulings, revenue proce-
dures, and notices) published in the Inter-
nal Revenue Bulletin to identify and pub-
lish lists of those rulings that, although not
specifically revoked or superseded, are no
longer considered determinative because
(1) the applicable statutory provisions or
regulations have been changed or repealed;
(2) the ruling position is specifically cov-
ered by statute, regulations, or subsequent
published position; or (3) the facts set forth
no longer exist or are not sufficiently de-
scribed to permit clear application of the
current statute and regulations.
This revenue ruling publishes a list of
rulings that have been identified under the
Service's review program as no longer be-
ing determinative. The rulings are catego-
rized by the Associate Chief Counsel of-
fices that have primary jurisdiction over
the subject matter of the rulings being ob-
soleted.
Accordingly, the rulings listed below
are hereby declared obsolete.
Associate Chief Counsel (Income Tax and Accounting)
Ruling No.C.B. Citation
Rev. Rul. 70–2861970–1 C.B. 113
Rev. Proc. 68–411968–2 C.B. 943
Notice 95–501995–2 C.B. 333
Associate Chief Counsel (Passthroughs and Special Industries)
Ruling No.C.B. Citation
Rev. Rul. 77–4051977–2 C.B. 381
Rev. Rul. 79–291979–1 C.B. 358
Rev. Proc. 89–121989–1 C.B. 798
Rev. Proc. 91–131991–1 C.B. 477
Rev. Proc. 92–331992–1 C.B. 782
Rev. Proc. 92–351992–1 C.B. 790
Rev. Proc. 92–881992–1 C.B. 496
Rev. Proc. 94–461994–2 C.B. 688
Rev. Proc. 95–101995–1 C.B. 501
Associate Chief Counsel (Corporate)
Ruling No.C.B. Citation
Rev. Rul. 54–1391954–1 C.B. 105
Rev. Rul. 54–396
1
1954–2 C.B. 147
Rev. Rul. 56–1281956–1 C.B. 442
Rev. Rul. 56–1601956–1 C.B. 633
Rev. Rul. 56–2121956–1 C.B. 170
Rev. Rul. 56–2201956–1 C.B. 191
Rev. Rul. 56–2711956–1 C.B. 440
1
Rev. Rul. 54–396 was declared obsolete by T.D. 8885, 2000–1 C.B. 1260, 1261, and is included in this ruling to allow easier confirmation of its obsoletestatus.
2003-34 I.R.B.388August 25, 2003

Associate Chief Counsel (Corporate)
Ruling No.C.B. Citation
Rev. Rul. 56–3441956–2 C.B. 195
Rev. Rul. 56–4481956–2 C.B. 130
Rev. Rul. 56–4511956–2 C.B. 208
Rev. Rul. 56–5861956–2 C.B. 214
Rev. Rul. 56–6801956–2 C.B. 597
Rev. Rul. 56–6811956–2 C.B. 597
Rev. Rul. 57–2961957–2 C.B. 234
Rev. Rul. 58–921958–1 C.B. 174
Rev. Rul. 59–1081959–1 C.B. 72
Rev. Rul. 59–1201959–1 C.B. 74
Rev. Rul. 59–1221959–1 C.B. 230
Rev. Rul. 59–2331959–2 C.B. 106
Rev. Rul. 59–3261959–2 C.B. 197
Rev. Rul. 59–4001959–2 C.B. 114
Rev. Rul. 59–4121959–2 C.B. 108
Rev. Rul. 60–491960–1 C.B. 148
Rev. Rul. 60–2461960–2 C.B. 462
Rev. Rul. 60–2621960–2 C.B. 114
Rev. Rul. 61–961961–1 C.B. 68
Rev. Rul. 64–1471964–1 C.B. 136
Rev. Rul. 64–1771964–1 C.B. 141
Rev. Rul. 65–1101965–1 C.B. 438
Rev. Rul. 66–23
2
1966–1 C.B. 67
Rev. Rul. 66–2901966–2 C.B. 112
Rev. Rul. 67–1861967–1 C.B. 81
Rev. Rul. 67–1891967–1 C.B. 255
Rev. Rul. 67–3261967–2 C.B. 143
Rev. Rul. 68–3881968–2 C.B. 122
Rev. Rul. 68–4341968–2 C.B. 137
Rev. Rul. 69–181969–1 C.B. 188
Rev. Rul. 69–201969–1 C.B. 202
Rev. Rul. 69–2411969–1 C.B. 200
Rev. Rul. 69–4261969–2 C.B. 48
Rev. Rul. 70–61970–1 C.B. 172
Rev. Rul. 70–1111970–1 C.B. 184
Rev. Rul. 70–3781970–2 C.B. 178
2
Rev. Rul. 66–23 was declared obsolete by T.D. 8760, 1998–1 C.B. 803, 805, and is included in this ruling to allow easier confirmation of its obsolete status.
August 25, 20033892003-34 I.R.B.

Associate Chief Counsel (Corporate)
Ruling No.C.B. Citation
Rev. Rul. 70–4091970–2 C.B. 79
Rev. Rul. 70–4961970–2 C.B. 74
Rev. Rul. 71–3841971–2 C.B. 181
Rev. Rul. 71–4401971–2 C.B. 326
Rev. Rul. 72–611972–1 C.B. 281
Rev. Rul. 72–2121972–1 C.B. 291
Rev. Rul. 72–4721972–2 C.B. 202
Rev. Rul. 72–6031972–2 C.B. 517
Rev. Rul. 73–2571973–1 C.B. 189
Rev. Rul. 73–2771973–1 C.B. 296
Rev. Rul. 73–4731973–2 C.B. 115
Rev. Rul. 73–4901973–2 C.B. 110
Rev. Rul. 73–4981973–2 C.B. 316
Rev. Rul. 74–731974–1 C.B. 254
Rev. Rul. 74–871974–1 C.B. 72
Rev. Rul. 74–2111974–1 C.B. 76
Rev. Rul. 74–4761974–2 C.B. 104
Rev. Rul. 74–6101974–2 C.B. 288
Rev. Rul. 75–541975–1 C.B. 293
Rev. Rul. 75–1601975–1 C.B. 112
Rev. Rul. 75–1741975–1 C.B. 252
Rev. Rul. 75–1791975–1 C.B. 103
Rev. Rul. 75–2121975–1 C.B. 107
Rev. Rul. 75–2481975–1 C.B. 125
Rev. Rul. 75–4681975–2 C.B. 115
Rev. Rul. 75–5151975–2 C.B. 117
Rev. Rul. 75–5611975–2 C.B. 129
Rev. Rul. 76–901976–1 C.B. 101
Rev. Rul. 76–2391976–1 C.B. 90
Rev. Rul. 76–3471976–2 C.B. 253
Rev. Rul. 77–811977–1 C.B. 97
Rev. Rul. 77–1501977–1 C.B. 88
Rev. Rul. 77–2561977–2 C.B. 96
Rev. Rul. 77–2841977–2 C.B. 97
Rev. Rul. 77–3211977–2 C.B. 98
Rev. Rul. 77–4561977–2 C.B. 102
Rev. Rul. 77–4831977–2 C.B. 244
2003-34 I.R.B.390August 25, 2003

Associate Chief Counsel (Corporate)
Ruling No.C.B. Citation
Rev. Rul. 78–891978–1 C.B. 272
Rev. Rul. 78–2871978–2 C.B. 146
Rev. Rul. 78–4411978–2 C.B. 152
Rev. Rul. 79–711979–1 C.B. 151
Rev. Rul. 79–821979–1 C.B. 141
Rev. Rul. 79–1041979–1 C.B. 263
Rev. Rul. 79–3141979–2 C.B. 132
Rev. Rul. 80–791980–1 C.B. 191
Rev. Rul. 80–1011980–1 C.B. 70
Rev. Rul. 80–3581980–2 C.B. 110
Rev. Rul. 81–1901981–2 C.B. 84
Rev. Rul. 81–2471981–2 C.B. 87
Rev. Rul. 82–1641982–2 C.B. 77
Rev. Rul. 83–1191983–2 C.B. 57
Rev. Rul. 84–301984–1 C.B. 114
Rev. Rul. 85–551985–1 C.B. 323
Rev. Rul. 85–1361985–2 C.B. 194
Rev. Rul. 86–521986–1 C.B. 204
Rev. Rul. 87–11987–1 C.B. 132
Rev. Proc. 91–111991–1 C.B. 470
Rev. Proc. 91–391991–2 C.B. 694
Rev. Proc. 95–111995–1 C.B. 505
Rev. Proc. 95–391995–2 C.B. 399
Associate Chief Counsel (International)
Ruling No.C.B. Citation
Rev. Rul. 561953–1 C.B. 303
Rev. Rul. 55–1051955–1 C.B. 94
Rev. Rul. 55–3721955–1 C.B. 339
Rev. Rul. 57–1161957–1 C.B. 245
Rev. Rul. 57–5421957–2 C.B. 462
Rev. Rul. 58–6181958–2 C.B. 430
Rev. Rul. 59–3561959–2 C.B. 177
Rev. Rul. 60–3071960–2 C.B. 214
Rev. Rul. 63–1571963–2 C.B. 296
Rev. Rul. 63–2241963–2 C.B. 297
Rev. Rul. 63–2481963–2 C.B. 623
August 25, 20033912003-34 I.R.B.

Associate Chief Counsel (International)
Ruling No.C.B. Citation
Rev. Rul. 64–2851964–2 C.B. 184
Rev. Rul. 65–2601965–2 C.B. 243
Rev. Rul. 65–2731965–2 C.B. 240
Rev. Rul. 66–41966–1 C.B. 177
Rev. Rul. 68–3091968–1 C.B. 338
Rev. Rul. 68–4771968–2 C.B. 317
Rev. Rul. 68–5221968–2 C.B. 320
Rev. Rul. 68–6081968–2 C.B. 309
Rev. Rul. 68–6401968–2 C.B. 321
Rev. Rul. 68–6411968–2 C.B. 325
Rev. Rul. 69–3611969–1 C.B. 193
Rev. Rul. 69–4851969–2 C.B. 158
Rev. Rul. 69–5171969–2 C.B. 149
Rev. Rul. 70–2291970–1 C.B. 164
Rev. Rul. 70–2301970–1 C.B. 166
Rev. Rul. 70–2641970–1 C.B. 165
Rev. Rul. 71–131971–1 C.B. 217
Rev. Rul. 71–4531971–2 C.B. 292
Rev. Rul. 71–4541971–2 C.B. 294
Rev. Rul. 71–4951971–2 C.B. 311
Rev. Rul. 71–5181971–2 C.B. 293
Rev. Rul. 71–5651971–2 C.B. 266
Rev. Rul. 71–5821971–2 C.B. 274
Rev. Rul. 72–1161972–1 C.B. 220
Rev. Rul. 72–3571972–2 C.B. 456
Rev. Rul. 72–5261972–2 C.B. 450
Rev. Rul. 72–5991972–2 C.B. 458
Rev. Rul. 73–461973–1 C.B. 342
Rev. Rul. 73–1191973–1 C.B. 348
Rev. Rul. 73–1821973–1 C.B. 350
Rev. Rul. 74–61974–1 C.B. 191
Rev. Rul. 74–59
3
1974–1 C.B. 183
Rev. Rul. 74–831974–1 C.B. 184
Rev. Rul. 74–3761974–2 C.B. 215
Rev. Rul. 74–5211974–2 C.B. 208
Rev. Rul. 75–531975–1 C.B. 234
3
Rev. Rul. 74–59 was declared obsolete by T.D. 8708, 1997–1 C.B. 137, 139, and is included in this ruling to allow easier confirmation of its obsolete status.
2003-34 I.R.B.392August 25, 2003

Associate Chief Counsel (International)
Ruling No.C.B. Citation
Rev. Rul. 75–1051975–1 C.B. 29
Rev. Rul. 75–1061975–1 C.B. 31
Rev. Rul. 75–1071975–1 C.B. 32
Rev. Rul. 75–1111975–1 C.B. 251
Rev. Rul. 75–1341975–1 C.B. 33
Rev. Rul. 75–2981975–2 C.B. 290
Rev. Rul. 75–3411975–2 C.B. 308
Rev. Rul. 75–4261975–2 C.B. 292
Rev. Rul. 76–441976–1 C.B. 127
Rev. Rul. 76–671976–1 C.B. 208
Rev. Rul. 76–3291976–2 C.B. 223
Rev. Rul. 76–5351976–2 C.B. 219
Rev. Rul. 77–411977–1 C.B. 226
Rev. Rul. 77–3431977–2 C.B. 255
Rev. Rul. 77–4821977–2 C.B. 242
Rev. Rul. 79–1161979–1 C.B. 213
Rev. Rul. 79–4241979–2 C.B. 405
Rev. Rul. 80–781980–1 C.B. 171
Rev. Rul. 80–1671980–1 C.B. 176
Rev. Rul. 80–1701980–1 C.B. 285
Rev. Rul. 82–2261982–2 C.B. 156
Rev. Rul. 83–1011983–2 C.B. 147
Rev. Rul. 84–281984–1 C.B. 177
Rev. Rul. 88–71988–1 C.B. 269
Rev. Rul. 89–721989–1 C.B. 257
Rev. Proc. 68–231968–1 C.B. 821
Rev. Proc. 90–191990–1 C.B. 495
Notice 87–51987–1 C.B. 416
Notice 87–661987–2 C.B. 376
Notice 94–461994–1 C.B. 356
The Service will continue to review
other rulings to ascertain those that, for
the reasons stated above, are inapplicable
to future transactions. Therefore, failure
to include any particular ruling in the
above list should not be construed as an
indication that the ruling necessarily is
determinative with respect to future trans-
actions.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Marnette Myers of the Office
of Associate Chief Counsel (Income Tax
and Accounting). For further information
regarding the rulings obsoleted in this
revenue ruling, contact the following per-
sons from the appropriate Associate Chief
Counsel offices (not a toll-free call):
August 25, 20033932003-34 I.R.B.

NameAssociate Chief CounselTelephone No.
Marnette MyersIncome Tax and Accounting(202) 622–4920
Louis SolomonPassthroughs and Special Industries(202) 622–3010
Wayne MurrayCorporate(202) 622–7700
Kelly Myers KoganInternational(202) 622–3810
2003-34 I.R.B.394August 25, 2003

Part III. Administrative, Procedural, and Miscellaneous
Accounting for Lease Strips and
Other Stripping Transactions
Notice 2003–55
Notice 95–53, 1995–2 C.B. 334, ad-
dresses certain tax consequences of lease
strips or stripping transactions. Lease
strips are transactions in which one par-
ticipant claims to realize rental or other
income from property and another par-
ticipant claims the deductions related to
that income (for example, depreciation or
rental expenses). Lease strips may take a
variety of forms, including, but not limited
to, those in the following examples.
(a)A lease strip effected through a
transferred basis transaction. In exchange
for consideration, one participant sells,
assigns, or otherwise transfers (“assigns”)
the right to receive future payments under
a lease of tangible property, and treats the
amount realized from the assignment as
its current income. The participant later
transfers the property (subject to the lease)
in a transaction intended to qualify as a
transferred basis transaction, such as a
transaction described in § 351 of the Inter-
nal Revenue Code. The transferee often is
not identified until after the transferor has
assigned the future payments. Typically,
the transferor (or a partner in a partnership
that is a transferor) is generally not subject
to U.S. federal income tax or has available
net operating losses, and the equity of
the transferee is owned predominantly by
persons other than the transferor.
(b)A lease strip effected through a
transfer of an interest in a partnership (or
other pass-through entity). In exchange
for consideration, the partnership assigns
its right to receive future payments under
a lease of tangible property and allocates
the amount realized from the assignment
to its current partners (many of whom are
generally not subject to federal income
tax or have available net operating losses).
The partnership retains the underlying
property, and thereafter, there is a transfer
or redemption of a partnership interest by
one or more partners to whom the partner-
ship allocated the income that it reported
from the assignment. The transfer or re-
demption is structured to avoid a reduction
in the basis of partnership property.
(c)A lease strip effected by a single par-
ticipant. A participant assigns its right to
receive future payments under a lease of
tangible property at a time when that par-
ticipant is not subject to U.S. federal in-
cometaxorinamannerinwhichthere-
alized amount is not includible in comput-
ing the participant's U.S. federal income
tax and that same participant or a successor
claims deductions related to that income
for purposes of U.S. federal income tax.
In addition to transactions described
above, this notice applies to lease strips
involving licenses of intangible property,
service contracts, leaseholds or other
non-fee interests in property, and the
prepayment, front-loading, or retention
(rather than assignment) of rights to re-
ceive future payments.
DISCUSSION
The Internal Revenue Service has con-
cluded that lease strips improperly sepa-
rate income from related deductions and
generally do not produce the tax conse-
quences desired by the participants. De-
pending on the facts of a particular case,
the Service may apply one or more Code
sections or theories to challenge a lease
strip. For example, the Service may ap-
ply §§ 165, 269, 382, 446(b), 701, or 704.
The Service also may challenge certain as-
signments or accelerations of future pay-
ments as financings. Finally, the Service,
as appropriate, may assert that there is no
valid partnership or may apply various ju-
dicial doctrines, such as the doctrines of
assignment-of-income, business purpose,
substance-over-form, step transaction, or
sham.
Recently, the Court of Appeals for the
District of Columbia Circuit held that the
partnershipusedinaleasestripwasnot
a valid partnership because the partici-
pants did not join together for a non-tax
business purpose.Andantech L.L.C. v.
Commissioner, Nos. 02–1213; 02–1215,
(D.C. Cir. June 17, 2003), 2003 U.S. App.
LEXIS 11908,aff'g in part and remanding
for reconsideration of other issuesT.C.
Memo 2002–97 (2002). Also, inNicole
Rose v. Commissioner, 320 F.3d 282 (2d
Cir. 2002),aff’g per curiam117 T.C.
328 (2001), the United States Court of
Appeals for the Second Circuit upheld
the Tax Court’s determination that a lease
transfer did not have economic substance.
Transactions that are the same as, or
substantially similar to, the lease strips
described in this notice are identified
as “listed transactions” for purposes of
§ 1.6011–4(b)(2) of the Income Tax
Regulations and §§ 301.6111–2(b)(2)
and 301.6112–1(b)(2) of the Proce-
dure and Administration Regulations.
Independent of their classification as
“listed transactions” for purposes of
§§ 1.6011–4(b)(2), 301.6111–2(b)(2), and
301.6112–1(b)(2), transactions that are
the same as, or substantially similar to,
the transaction described in this notice
may already be subject to the disclosure
requirements of § 6011, the tax shelter
registration requirements of § 6111, or the
list maintenance requirements of § 6112
(§§ 1.6011–4, 301.6111–1T, 301.6111–2,
and 301.6112–1). Persons required to
register these tax shelters who have failed
to register the shelters may be subject to
the penalty under § 6707(a). Persons re-
quired to maintain a list of investors under
§ 6112 may be subject to the penalty under
§ 6708(a) if the requirements of § 6112
are not satisfied.
Finally, the Service may impose penal-
ties on participants in lease strip transac-
tions or, as applicable, on persons who par-
ticipate in the promotion or reporting of
lease strips, including the accuracy-related
penalty under § 6662 and the return pre-
parer penalty under § 6694.
In addition, the Service is currently
evaluating other situations in which tax
benefits are claimed as a result of transac-
tions in which the ownership of property
has been separated from the right to in-
come from the property. For example,
the Service is evaluating situations in
which, in exchange for consideration, one
participant assigns its interest in property
but retains the right to income from the
property, and, by allocating all of its basis
to the transferred property and none to the
retained future payments, the transferor
claims a loss on the transfer.
This Notice 2003–55 modifies and su-
persedes Notice 95–53.
August 25, 20033952003-34 I.R.B.

DRAFTING INFORMATION
The principal author of this notice is
Pamela Lew of the Office of Assistant
Chief Counsel (Financial Institutions and
Products). For further information regard-
ing this notice, contact Ms. Lew at (202)
622–3950 (not a toll-free call).
Section 45D.—New Markets Tax
Credit
Notice 2003–56
PURPOSE
The purpose of this notice is to an-
nounce that the Treasury Department and
the Internal Revenue Service will amend
§ 1.45D–1T(c)(3)(ii) of the temporary In-
come Tax Regulations to provide an ad-
ditional exception permitting certain eq-
uity investments made before the receipt of
a new markets tax credit allocation under
§ 45D(f)(2) of the Internal Revenue Code
to be designated as qualified equity invest-
ments under § 45D(b)(1)(C).
BACKGROUND
Section 45D(a)(1) provides a new mar-
kets tax credit on certain credit allowance
dates described in § 45D(a)(3) with re-
spect to a qualified equity investment in
a qualified community development entity
(CDE).
Section 45D(b)(1)(C) provides that an
equity investment in a CDE is a qualified
equity investment only if the CDE desig-
nates the investment as a qualified equity
investment.
Section 45D(c)(1) provides that an en-
tity is a CDE only if, among other require-
ments, the entity is certified by the Secre-
tary of the Treasury Department as a CDE.
Section 45D(b)(2) provides that the
maximum amount of equity investments
issued by a CDE that may be designated
by the CDE as qualified equity invest-
ments shall not exceed the portion of the
new markets tax credit limitation set forth
in § 45D(f)(1) that is allocated to the CDE
by the Secretary under § 45D(f)(2).
Section 1.45D–1T(c)(3)(i) pro-
vides that, except as provided in
§ 1.45D–1T(c)(3)(ii), an equity invest-
ment in an entity is not eligible to be
designated as a qualified equity invest-
ment if it is made before the entity enters
into an allocation agreement with the Sec-
retary. An “allocation agreement” is an
agreement between the Secretary and a
CDE relating to a new markets tax credit
allocation under § 45D(f)(2).
Section 1.45D–1T(c)(3)(ii) provides
that, notwithstanding § 1.45D–1T(c)(3)(i),
an equity investment in an entity is eligi-
ble to be designated as a qualified equity
investment if — (A) the equity investment
is made on or after April 20, 2001; (B)
the entity in which the equity investment
is made is certified by the Secretary as a
CDE under § 45D(c) before January 1,
2003; (C) the entity in which the equity
investment is made receives notification
of the credit allocation (with the actual
receipt of such creditallocation contin-
gent upon subsequently entering into an
allocation agreement)from the Secretary
before January 1, 2003; and (D) the equity
investment otherwise satisfies the require-
ments of § 45D and § 1.45D–1T.
The Secretary has delegated certain
administrative functions relating to the
new markets tax credit program to the
Under Secretary (Domestic Finance), who
in turn has delegated those functions to
the Community Development Financial
Institutions Fund (CDFI Fund). The del-
egated administrative functions include
CDE certifications and new markets tax
credit allocations.
Notice 2003–9, 2003–5 I.R.B. 369,
announces that the Treasury Depart-
ment and the Service will amend
§ 1.45D–1T(c)(3)(ii) to provide that,
notwithstanding § 1.45D–1T(c)(3)(i), an
equity investment in an entity is eligible
to be designated as a qualified equity in-
vestment under § 1.45D–1T(c)(1)(iii) if—
(1) the equity investment is made on or
after April 20, 2001; (2) the designation
of the equity investment as a qualified
equity investment is made for a credit al-
location received pursuant to an allocation
application submitted to the CDFI Fund
no later than August 29, 2002; and (3) the
equity investment otherwise satisfies the
requirements of § 45D and § 1.45D–1T.
DISCUSSION
In order to encourage equity in-
vestments in CDEs, the Treasury De-
partment and the Service will amend
§ 1.45D–1T(c)(3)(ii) to provide an ad-
ditional exception permitting an equity
investment made on or after the date
the CDFI Fund publishes a Notice of
Allocation of Availability (NOAA) in
theFederal Registerto be designated
as a qualified equity investment. Ac-
cordingly, § 1.45D–1T(c)(3)(ii) will be
revised to provide that, notwithstanding
§ 1.45D–1T(c)(3)(i), an equity investment
in an entity is eligible to be designated
as a qualified equity investment under
§ 1.45D–1T(c)(1)(iii) if:
1. The equity investment is made on or
after the date the CDFI Fund publishes a
NOAA in theFederal Register;
2. The designation of the equity invest-
ment as a qualified equity investment is
made for a credit allocation received pur-
suant to an allocation application submit-
ted to the CDFI Fund under that NOAA;
and
3. The equity investment otherwise
satisfies the requirements of § 45D and
§1.45D–1T.
If the entity in which the equity invest-
ment is made does not receive an alloca-
tion under that NOAA, the equity invest-
ment will not be eligible to be designated
as a qualified equity investment under fu-
ture NOAAs.
The temporary regulations will be re-
vised to incorporate the guidance set forth
in this notice and Notice 2003–9. The re-
vision to the temporary regulations reflect-
ing the additional exception under this no-
tice will be effective for equity investments
made on or after July 18, 2003.
DRAFTING INFORMATION
The principal author of this notice is
Paul Handleman of the Office of Asso-
ciate Chief Counsel (Passthroughs and
Special Industries). For further infor-
mation regarding this notice, contact
Mr. Handleman at (202) 622–3040 (not a
toll-free call)
2003-34 I.R.B.396August 25, 2003

Canadian Retirement Plan Trust
Reporting
Notice 2003–57
Section 1. General Foreign Trust
Reporting Requirements for Certain
Canadian Retirement Plans
Internal Revenue Code section 6048 re-
quires information reporting with respect
to certain foreign trusts. Persons sub-
ject to these information reporting rules
must file Form 3520 (Annual Return to
Report Transactions With Foreign Trusts
and Receipt of Certain Foreign Gifts)or
Form 3520–A (Annual Information Return
ofForeignTrustWithaU.S.Owner), as ap-
plicable.
In Notice 2003–25, 2003–18 I.R.B.
855, Treasury and the Internal Revenue
Service recognized that some taxpay-
ers with interests in certain Canadian
retirement savings plans, as well as the
custodians of such plans, were unfamiliar
with the requirements for filing Forms
3520 and 3520–A. Accordingly, Notice
2003–25 provides an automatic extension
until August 15, 2003, for any person who
is required to file a 2002 Form 3520 or
Form 3520–A with respect to a Registered
Retirement Savings Plan (“RRSP”), Reg-
istered Retirement Income Fund (“RRIF”)
or other eligible plan within the meaning of
section 3 of Revenue Procedure 2002–23,
2002–1 C.B. 744. Notice 2003–25 further
provides that Treasury and the IRS are
considering establishing for future tax-
able years a simplified reporting regime
for RRSPs and persons with interests in
RRSPs and coordinating the reporting re-
quirements with the election described in
section 4 of Revenue Procedure 2002–23.
Section 2. Relief from 2002 Foreign
Trust Reporting Requirements for
Certain Canadian Retirement Plans
Treasury and the IRS are cont
inuing
to work toward implementat
ion of an al-
ternative, simplified re
porting regime for
Canadian retirement plan
s for future tax-
able years. Treasury an
dtheIRShave
concluded, however, t
hat additional relief
with respect to 2002 Fo
rm 3520 and Form
3520–A reporting req
uirements should be
provided to RRSPs and
RRIFs and their
beneficiaries.
First, with respect to the 2002 taxable
year, if the beneficiary of an RRSP or
RRIF (a) makes or has made an election
with respect to the plan in accordance with
section 4 of Revenue Procedure 2002–23
or section 3 of this notice, (b) complies
or has complied with the annual report-
ing requirements of Revenue Procedure
2002–23 for the taxable year, and (c) re-
ceived no distributions from the plan dur-
ing his or her 2002 taxable year, then no
Form 3520 or Form 3520–A with respect
to the plan is required.
Second, an individual, RRSP or RRIF
that has filed or files a Form 3520 or Form
3520–A for the 2002 taxable year that does
not provide all appropriate information
may be requested by the IRS to provide
such information. Unless the IRS re-
quests such information and the individual
or plan fails to provide the IRS with the
informationidentifiedinsuchrequest,no
individual or plan that has filed or files a
Form 3520 or Form 3520–A with respect
to the 2002 taxable year will be subject to
failure to file penalties. The individual
or plan should write the following on the
top of the first page of the Form 3520 or
Form 3520–A: “CANADIAN RRSP” OR
“CANADIAN RRIF” as the case may be.
Section 3. Automatic Extension of Time
to Make Election Described in Section
4 of Revenue Procedure 2002–23
Section 4 of Revenue Procedure
2002–23 provides procedures under which
a beneficiary of an RRSP or RRIF may
elect to defer U.S. income tax on the
beneficiary's share of income accru
ed in
the plan until that income is distri
buted
to the beneficiary. A beneficiary m
akes
this election by attaching to his o
rher
timely filed (including extensio
ns) United
States federal income tax return
for the
current year the statement desc
ribed in
section 4.01. The election ap
plies to the
beneficiary’s current taxa
ble year and all
subsequent taxable years. P
ursuant to
section 301.9100–2(b) thr
ough (d) of the
Procedure and Administrat
ion Regula-
tions, an individual who t
imely filed his
or her United States fed
eral income tax
return for the 2002 taxa
ble year without
making the election de
scribed in section
4 of Revenue Procedur
e 2002–23 with
respect to an RRSP or R
RIF, and who
wouldliketomaketh
e election for the
2002 taxable year, may make the elec-
tion by filing an amended 2002 federal
income tax return by the date that is 6
months after the due date of the return,
excluding extensions, and attaching to the
amended return the statement described
in section 4.01 of Revenue Procedure
2002–23. The individual must provide
the following statement at the top of the
amended return: “FILED PURSUANT
TO SECTION 301.9100–2.”
The principal author of this notice is
Amanda A. Ehrlich of the Office of As-
sociate Chief Counsel (International). For
further information regarding this notice,
contact Amanda A. Ehrlich or Willard W.
Yates at (202) 622–3880 (not a toll-free
call).
26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also Part I, § 42; 1.42–14.)
Rev. Proc. 2003–67
SECTION 1. PURPOSE
This revenue procedure publishes the
amounts of unused housing credit carry-
overs allocated to qualified states under
§ 42(h)(3)(D) of the Internal Revenue
Code for calendar year 2003.
SECTION 2. BACKGROUND
Rev. Proc. 92–31, 1992–1 C.B. 775,
provides guidance to state housing credit
agencies of qualified states on the pro-
cedure for requesting an allocation of
unused housing credit carryovers under
§42(h)(3)(D).Section4.06ofRev. Proc.
92–31 provides that the Internal Rev-
enue Service will publish in the Internal
Revenue Bulletin the amount of unused
housing credit carryovers allocated to
qualified states for a calendar year from
a national pool of unused credit authority
(the National Pool). This revenue proce-
dure publishes these amounts for calendar
year 2003.
SECTION 3. PROCEDURE
The unused housing cr
edit carryover
amount allocated fr
om the National Pool
by the Secretary to
each qualified state for
calendar year 2003
is as follows:
August 25, 20033972003-34 I.R.B.

Qualified StateAmount Allocated
Alabama
$133,549
California1,045,289
Connecticut103,008
Florida497,496
Indiana183,335
Kentucky121,832
Maine38,532
Maryland162,471
Massachusetts191,335
Michigan299,169
Minnesota149,421
Mississippi85,484
Missouri168,854
Nebraska51,472
New Hampshire37,954
New Jersey255,705
New York570,257
Ohio339,974
Oregon104,824
Rhode Island31,842
South Carolina122,257
Tennessee172,566
Texas648,316
Utah68,947
Vermont18,354
Virginia217,105
Washington180,654
SECTION 4. EFFECTIVE DATE
This revenue procedure is effective
for allocations of housing credit dollar
amounts attributable to the National Pool
component of a qualified state’s housing
credit ceiling for calendar year 2003.
DRAFTING INFORMATION
The principal author of this procedure is
Christopher J. Wilson of the Office of As-
sociate Chief Counsel (Passthroughs and
Special Industries). For further informa-
tion regarding this revenue procedure, con-
tact Mr. Wilson at (808) 539–2874 or
Susan Reaman at (202) 622–3040 (not toll-
free calls).
26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also, Part 1, 280G.)
Rev. Proc. 2003–68
SECTION 1. PURPOSE
This revenue procedure provides guid-
ance on the valuation of stock options
solely for purposes of §§ 280G and 4999
of the Internal Revenue Code. This
revenue procedure restates and modifies
Revenue Procedure 2002–13, 2002–1 C.B.
549, as modified by Revenue Procedure,
2002–45, 2002–27 I.R.B 40.
SECTION 2. BACKGROUND
Section 280G denies a deduction for
any excess parachute payment. Section
4999 imposes a nondeductible 20-percent
excise tax on the recipient of any excess
parachute payment, within the meaning of
§280G(b).
An excess parachute payment is defined
in § 280G(b)(1) as an amount equal to
the excess of any parachute payment over
the portion of the disqualified individual’s
base amount that is allocated to such pay-
ment.
Section 280G(b)(2)(A) defines a
parachute payment as any payment in
the nature of compensation to (or for the
benefit of) a disqualified individual if (i)
such payment is contingent on a change
in the ownership of a corporation, the
effective control of a corporation, or the
ownership of a substantial portion of the
assets of a corporation (a change in own-
ership or control), and (ii) the aggregate
present value of the payments in the nature
of compensation which are contingent
on such change equals or exceeds an
amount equal to 3 times the base amount.
A parachute payment also includes any
payment in the nature of compensation
to, or for the benefit of, a disqualified
individual if the payment is pursuant to
an agreement that violates any generally
enforced securities laws or regulations.
A payment in the nature of compen-
sation for purposes of § 280G includes
thetransferofanoption(includinganop-
tion to which § 421 applies), without re-
gard to whether the option has a readily
ascertainable fair market value within the
meaning of § 83. An option is consid-
ered transferred when the option becomes
substantially vested (within the meaning of
§ 1.83–3(b) and (j) of the Income Tax Reg-
ulations). Thus, for purposes of § 280G,
stock options must be valued when a pay-
ment in the nature of compensation in-
cludes the transfer of a stock option, such
as the grant or vesting of a stock option, in
connection with a change in ownership or
control. This revenue procedure provides
guidance on the valuation of a stock option
for this purpose. However, this revenue
procedure does not apply for purposes of
valuing a payment in cash (or property),
even though the amount of the payment
is determined by reference to the cancel-
lation of a stock option.
Pursuant to §1.280G–1, Q/A–13, the
value of an option is determined under all
the facts and circumstances in the partic-
ular case. Factors relevant to such a de-
termination include, but are not limited to:
the difference between the option’s exer-
cise price and the value of the property sub-
ject to the option at the time of vesting; the
probability of the value of such property
increasing or decreasing; and the length of
the period during which the option can be
exercised. For purposes of Q/A–13, val-
uation may be determined by any method
prescribed by the Commissioner in pub-
lished guidance of general applicability.
The determination of when there has
been a change in ownership or control for
purposes of section 280G is made under
§ 1.280G–1, Q/A–27 through Q/A–29.
Section 1.280G–1, Q/A–33, provides
that, to the extent provided in published
guidance of general applicability, an ini-
tial estimate of the value of an option is
permitted to be made, with the valuation
subsequently re-determined, and the base
amount reallocated.
Rev. Proc. 98–34, 1998–1 C.B. 983,
provides a methodology for the valuation
of certain stock options for purposes of
gift, estate, and generation-skipping trans-
fer taxes. The methodology described in
Rev. Proc. 98–34 is an option pricing
model that takes into account factors sim-
ilar to those established by the Financial
2003-34 I.R.B.398August 25, 2003

Accounting Standards Board in Account-
ing for Stock-Based Compensation, State-
ment of Financial Accounting Standards
No. 123 (Fin. Accounting Standards Bd.
1995) (FAS 123). The methodology in
Rev. Proc. 98–34 applies only to the val-
uation of a nonpublicly traded stock op-
tion for stock that, on the valuation date,
is publicly traded on an established securi-
ties market.
Concurrently with the issuance of pro-
posed regulations under section 280G (see
§ 1.280G–1 of the Proposed Income Tax
Regulations at 67 Fed. Reg. 7630), Rev.
Proc. 2002–13 was issued concerning the
valuation of stock options (including a safe
harbor valuation method) for purposes of
§§ 280G and 4999. Rev. Proc. 2002–45
modified various portions of Rev. Proc.
2002–13.
This revenue procedure restates and fur-
ther modifies Rev. Proc. 2002–13 and
Rev. Proc. 2002–45 to address additional
issues regarding the valuation of stock op-
tions in connection with a change in own-
ership or control under §§ 280G and 4999.
SECTION 3. STOCK OPTION
VALUATION
.01General rule.A taxpayer may
value a stock option, without regar
dto
whether the option is on publicly o
r non-
publicly traded stock, using a
ny valuation
method that (i) is consistent w
ith generally
accepted accounting princip
les (such as
FAS 123 or a successor standa
rd) and
(ii) takes into account the f
actors pro-
vided in § 1.280G–1, Q/A 13.
The safe
harbor method provided in
section 4 of
this revenue procedure
and Rev. Proc.
98–34 are considered c
onsistent with
generally accepted ac
counting principles
and take into account
the factors provided
in § 1.280G–1, Q/A 13.
For purposes
of §§ 280G and 4999 an
d this revenue
procedure, the va
lueofastockoptionwill
not be considered
properly determined if
the option is val
ued solely by reference
to the spread be
tween the exercise price
of the option an
d the value of the stock
atthetimeoft
he change in ownership or
control.
.02Payment da
te.For purposes of this
revenue proc
edure, the valuation date is the
payment dat
e as determined in accordance
with§280G.
Thus, the valuation of a stock
option is determined based on the spread,
the volatility of the underlying stock, the
option term, and any other relevant factors
as of that date.
.03Substitution of an option.If, in ad-
dition to vesting, there is, contingent on the
change in ownership or control, a substitu-
tion of an option on different stock for the
option, the valuation is based on the sub-
stituted option.
.04Recalculation.Pursuant to
§ 1.280G–1, Q/A–33, for purposes of
§§ 280G and 4999, the payor is permitted
to re-determine the value of an option,
during the 18-month period beginning on
the date of the change in ownership or
control (the re-determination period), in
accordance with thisrevenue procedure.
Recalculation is permitted if, during the
re-determination period, either of the fol-
lowing occurs: (1) there is a change in the
term of the option due to a termination of
employment, or (2) there is a change in
the volatility of the stock.
Without regard to whether the value of
the option will be re-determined, an initial
determination of the value of the option
must be made in accordance with this
revenue procedure. This initial valuation
is the amount of the payment, subject to
adjustment as otherwise applicable (e.g.,
pursuant to § 1.280G–1, Q/A–24). This
amount is used both to determine whether
there are parachute payments and to cal-
culate excess parachute payments and
any excise tax liability associated with the
transfer of the option.
A recalculation under this revenue
procedure must be determined as of the
date of payment used in the initial calcula-
tion (i.e., the valuation date). Thus, while
the term assumption and the volatility
assumption are permitted to be re-deter-
mined, the spread and the interest rate
assumptions continue to be determined as
of the valuation date.
Forpurposesofre-determiningthe
value of the option, an employer is permit-
ted to use a method other than the method
used in making the initial determination,
provided that both methods are otherwise
permitted under this revenue procedure.
If the value of an option is recalculated
under this revenue procedure, parachute
payments and excess parachute payments
must be recalculated using the re-de-
termined valuation. However, the base
amount does not have to be re-appor-
tioned; instead, the base amount allocated
to the parachute payment is permitted to
remain the same, with any adjustment to
the excise tax made with respect to the
option. This adjustment may be claimed
only by filing an amended return for the
taxable year that includes the payment
date.
SECTION 4. VALUATION SAFE
HARBOR
.01In general.The safe harbor val-
uation method provided by this revenue
procedure is based on the Black-Scholes
model and takes into account, as of the
valuation date, the following factors: (1)
the volatility of the underlying stock, (2)
the exercise price of the option, (3) the
value of the stock at the time of the val-
uation (the “spot price”), and (4) the term
of the option on the valuation date. The
safe harbor value of the option equals (i)
the number of shares covered by the op-
tions multiplied by (ii) the spot price of
the
stock,andthenmultipliedby(iii)aval
u-
ation factor determined using the f
actors
described above and reflected in t
he Ta-
ble at the end of this revenue proce
dure.
Other relevant factors, includi
ng risk-free
rate of interest and assumption
s related to
dividend yields, are included
in the Table.
To determine the valuation f
actor, the tax-
payer must determine the vo
latility, spread,
and option term factors, a
s described be-
low. To rely on this revenu
e procedure, as-
sumptions made for purpo
sesofthisrev-
enue procedure and the d
etermination of
each factor must be reas
onable and consis-
tent with assumption
s made with respect to
other options that m
ay be valued in con-
nection with the ch
ange in ownership or
control.
.02Volatility.Th
e taxpayer must deter-
mine whether the vo
latility of the under-
lying stock is lo
w, medium, or high. If
the valuation i
s based on a substituted op-
tion pursuant t
o section 3.03, volatility is
determined ba
sed on the stock under the
substituted o
ption. For this purpose, a low
volatility s
tock has an annual standard de-
viation of 3
0 percent or less. A medium
volatilit
y stock has an annual standard de-
viation gr
eater than 30 percent but less than
70 percen
t. A high volatility stock has an
annual st
andard deviation of 70 percent or
greater
. If the stock is publicly traded on
August 25, 20033992003-34 I.R.B.

an established securities market (or other-
wise), the expected volatility of the under-
lying stock used for purposes of volatility
under this revenue procedure must be the
volatility for the most recent year disclosed
in the most recent financial statements of
the corporation. If the stock is not publicly
traded on an established securities market
or otherwise, but the stock is required to be
registered under the Securities Exchange
Act of 1934, the volatility for such stock is
assumed to be the same as the volatility for
a comparable corporation that is publicly
traded. For this purpose, whether a corpo-
ration is considered comparable is deter-
mined by comparing relevant characteris-
tics such as industry, corporate size, earn-
ings, market capitalization, and debt-eq-
uity structure. If the stock is not publicly
traded and the corporation is not required
to register under the Securities Exchange
Act of 1934, the taxpayer must assume
medium volatility. If the stock is not re-
quired to be registered under the Securities
Exchange Act of 1934, but the corporation
voluntarily registers its stock and its stock
is publicly traded, the corporation must use
the volatility of the underlying stock.
.03Spread between exercise price
and spot price.The factor based on the
spread between the exercise price and
the spot price is calculated by dividing
thespotpricebytheexercisepriceand
subtracting 1. If the stock is not publicly
traded, the determination of the spot price
for this purpose must be reasonable and
consistent with the price, if any, otherwise
determined for the stock in connection
with the transaction giving rise to the
change in ownership or control under
§ 280G(b)(2)(A). For purposes of deter-
mining the factor based on the spread
between the exercise price and the spot
price under the Table, the resulting per-
centage may be rounded down to the next
lowest interval. If this factor exceeds
220%, this safe harbor valuation method
cannot be used to value the stock option.
.04Term of the option.The term of the
option is the number of full months be-
tween the valuation date and the latest date
on which the option will expire. For pur-
poses of determining the term factor un-
der the table, the number of full months
may be rounded down to the next lowest
12-month interval. If the term of the op-
tion exceeds 10 years (120 months), then
this safe harbor valuation method cannot
be used to value the stock option. If the re-
maining term of the option is less than 12
months, the taxpayer may round down to
the 3-month interval. For purposes of this
paragraph, the taxpayer is permitted to use
the expected term of the option calculated
in accordance with Rev. Proc. 98–34.
SECTION 5. EXAMPLE
E is an employee of Corporation A, a
publicly traded corporation. On Septem-
ber 1, 2004, in connection with E’s perfor-
mance of services, A grants E options to
purchase 100,000 shares of A stock at $10
per share. The options are exercisable for
10 years. The options will vest on Septem-
ber 1, 2007, if E continues to be employed
by A through that date, or on a change in
ownership or control, if earlier. Under the
terms of the option, if E’s employment is
terminated after the option is vested, the
option must be exercised on or before the
date that is 3 months after the termination
of employment.
On September 15, 2005, Corporation B
acquires all of the stock of A, and A is
merged into B. Contingent on the change
in ownership, E’s options become fully
vested and are converted into B options
with the same aggregate spread and the
same ratio between the exercise price and
the value of the stock (determined imme-
diately before the conversion). At the time
of the vesting, A stock has a fair market
value of $20, and B stock has a fair mar-
ket value of $50. Thus, in connection with
the change in ownership, E receives fully
vested options for 40,000 shares of B stock
with an exercise price of $25. The date of
the vesting and substitution is the payment
date and, therefore, the valuation date.
Using a valuation method that complies
with this revenue procedure, B determines
that, as of the valuation date, it is reason-
able to assume that the volatility of B stock
is .25, that the remaining expected term
of the option is 36 months, and that the
risk-free interest rate is 5%. B determines
that the value of the option is $1,096,000
(or $27.40 per share).
Without regard to the change in own-
ership, this payment was contingent only
on continued performance of services for
Corporation A for a specified period of
time and the payment is attributable, in
part, to the performance of services before
the date the payment was made. Therefore,
the portion of the payment that is contin-
gent on the change in ownership is deter-
mined under § 1.280G–1, Q/A–24(c). The
acceleration of the vesting of a stock option
is considered to significantly increase the
value of the payment. Therefore, the fu-
ture value of the payment is assumed to be
equal to the payment. Under § 1.280G–1,
Q/A–31 and 32, the present value of the
option is determined to be $975,000. The
vesting of the option has been acceler-
ated by 23 full months. Therefore, the
portion of the payment that is contingent
on the change in ownership is $373,080,
the sum of (1) $121,000 (the amount by
which $1,096,000, exceeds $975,000), and
(2) $252,080 (23 months times 1% times
$1,096,000).
The value of the payment related to the
options, $373,080, is taken into account
for purposes of determining whether A has
received parachute payments and, if so, the
portion of the parachute payments that are
excess parachute payments. For purposes
of this example, assume E is receiving
parachute payments and that $50,000 in
base amount is allocated to this payment.
In that case, $323,080 of the payment is
an excess parachute payment, and the ex-
cise tax under section 4999 is $64,616. B
must satisfy its obligations under section
4999(c) with respect to this amount, and
E is responsible for the excise tax related
to this payment for E’s 2005 taxable year.
B cannot claim the amount of the excess
parachute payment as a deduction.
On July 1, 2006, E’s employment is ter-
minated, shortening the term of the option.
As a result, the actual term of the option,
measured from the date of the change in
ownership, is 12 months (the 9 full months
that E was employed following the change
in ownership plus the 3 months following
a termination of employment during which
E can exercise the option). B decides to
recalculate the value of the options as of
the valuation date inaccordance with sec-
tion 3.04 of this revenue procedure, using
the value of B stock at the change of own-
ership, $50, and the exercise price of $25
a share. In addition, B uses the same 5%
risk-free assumption rate used in the ini-
tial valuation. Finally, B determines that
.25 continues to be a reasonable assump-
tion for volatility. The value of the option,
as recalculated, is $1,030,000 (or $25.75 a
share).
2003-34 I.R.B.400August 25, 2003

This value is then used to re-determine
the portion of the payment that is contin-
gent on the change in ownership under
§ 1.280G–1, Q/A–24(c). This amount is
$350,800, the sum of (1) $113,900 (the
amount by which the value of the pay-
ment, $1,030,000, exceeds the present
value of the payment, determined to be
$916,100), and (2) $236,900 (23 times
1% times $1,030,000). Using the base
amount initially allocated to this payment,
$50,000, the portion of the payment that is
an excess parachute payment is $300,800,
and the excise tax is $60,160. E is per-
mitted to file an amended return for 2005
using the revised calculations as a basis
for claiming a refund of $4,456.
SECTION 6. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2002–13, 2002–1 C.B. 549,
and Rev. Proc. 2002–45, 2002–27 I.R.B.
40, are revoked as of January 1, 2004.
SECTION 7. EFFECTIVE DATE
This revenue procedure is effective Jan-
uary 1, 2004. Taxpayers are permitted to
apply this revenue procedure with respect
to a change in ownership or control occur-
ring prior to such date.
SECTION 8. DRAFTING
INFORMATION
The principal author of this procedure
is Erinn Madden of the Office of Chief
Counsel of the Division Counsel/Asso-
ciate Chief Counsel (Tax Exempt and
Government Entities. However, other
personnel from the IRS and Treasury De-
partment participated in its development.
For further information regarding this
revenue procedure, contact Ms. Madden
(202) 622–6030 (not a toll-free call).
TABLE
Term (months)31224364860728496108120
VolatilitySpread Factor*
200%66.8%67.3%67.9%68.4%69.0%69.5%69.9%70.3%70.7%71.0%71.2%
180%64.5%65.0%65.7%66.4%67.1%67.7%68.3%68.8%69.3%69.6%69.9%
160%61.8%62.4%63.3%64.1%65.0%65.8%66.5%67.1%67.7%68.1%68.5%
140%58.6%59.4%60.4%61.5%62.5%63.5%64.4%65.1%65.8%66.4%66.9%
120%54.9%55.8%57.1%58.4%59.7%60.9%62.0%62.9%63.7%64.5%65.1%
100%50.4%51.5%53.2%54.8%56.4%57.9%59.1%60.3%61.3%62.2%63.0%
80%44.9%46.3%48.5%50.6%52.6%54.3%55.9%57.3%58.5%59.6%60.5%
60%38.0%40.0%42.9%45.6%48.0%50.1%52.0%53.7%55.2%56.5%57.6%
40%29.3%32.3%36.3%39.7%42.6%45.2%47.4%49.4%51.2%52.7%54.1%
20%18.1%23.3%28.5%32.7%36.2%39.3%41.9%44.3%46.4%48.2%49.9%
0%6.4%13.6%19.9%24.7%28.8%32.3%35.4%38.1%40.5%42.7%44.7%
-20%0.6%5.4%11.2%16.1%20.4%24.2%27.6%30.6%33.4%35.9%38.1%
-40%0%0.9%4.1%7.9%11.6%15.2%18.5%21.7%24.6%27.3%29.9%
Low
-60%0%0.0%0.6%2.0%4.0%6.4%9.0%11.6%14.3%16.8%19.3%
August 25, 20034012003-34 I.R.B.

Term (months)31224364860728496108120
VolatilitySpread Factor*
200%66.8%67.4%68.6%69.9%71.1%72.2%73.1%73.9%74.5%75.0%75.4%
180%64.5%65.2%66.7%68.2%69.6%70.9%71.9%72.8%73.5%74.1%74.6%
160%61.8%62.7%64.5%66.3%68.0%69.4%70.6%71.6%72.5%73.2%73.7%
140%58.6%59.8%62.0%64.2%66.1%67.7%69.1%70.3%71.2%72.0%72.7%
120%54.9%56.4%59.2%61.7%63.9%65.8%67.4%68.8%69.9%70.8%71.6%
100%50.4%52.5%55.9%58.9%61.5%63.7%65.5%67.0%68.3%69.4%70.3%
80%44.9%47.9%52.2%55.7%58.7%61.2%63.2%65.0%66.5%67.7%68.8%
60%38.2%42.6%47.8%52.0%55.4%58.3%60.6%62.7%64.3%65.8%67.0%
40%30.0%36.3%42.7%47.6%51.6%54.8%57.6%59.9%61.8%63.5%64.9%
20%20.3%29.1%36.8%42.5%47.0%50.8%53.9%56.5%58.8%60.7%62.3%
0%10.4%21.2%30.0%36.4%41.6%45.8%49.4%52.4%55.0%57.2%59.1%
-20%3.0%13.0%22.2%29.2%34.9%39.7%43.7%47.2%50.2%52.8%55.0%
-40%0.3%5.7%13.8%20.8%26.8%32.0%36.4%40.4%43.8%46.8%49.5%
Medium
-60%0%1.2%5.9%11.4%16.9%22.1%26.7%31.0%34.8%38.3%41.4%
200%66.8%68.1%70.7%73.1%75.0%76.6%77.8%78.8%79.5%80.0%80.4%
180%64.5%66.1%69.1%71.7%73.9%75.6%77.0%78.1%78.9%79.5%79.9%
160%61.8%63.8%67.3%70.3%72.7%74.6%76.1%77.3%78.2%78.9%79.4%
140%58.6%61.3%65.3%68.6%71.3%73.4%75.1%76.4%77.4%78.2%78.8%
120%54.9%58.3%63.0%66.8%69.7%72.1%73.9%75.4%76.6%77.4%78.1%
100%50.6%55.0%60.4%64.6%67.9%70.6%72.6%74.3%75.6%76.6%77.3%
80%45.3%51.1%57.4%62.2%65.9%68.8%71.1%73.0%74.4%75.6%76.5%
60%39.1%46.6%54.0%59.4%63.5%66.8%69.4%71.4%73.1%74.4%75.4%
40%31.7%41.4%50.0%56.1%60.7%64.4%67.3%69.6%71.5%73.0%74.2%
20%23.2%35.4%45.3%52.1%57.4%61.5%64.8%67.4%69.6%71.3%72.7%
0%14.3%28.5%39.6%47.4%53.3%57.9%61.6%64.7%67.1%69.1%70.8%
-20%6.4%20.8%32.9%41.5%48.1%53.4%57.6%61.1%64.0%66.4%68.3%
-40%1.5%12.7%24.8%34.0%41.4%47.3%52.2%56.3%59.7%62.5%64.8%
High
-60%0.1%5.2%15.2%24.3%32.1%38.8%44.4%49.1%53.2%56.6%59.5%
*Spot (market) Price/Exercise Price — 1 or (S/X–1)
2003-34 I.R.B.402August 25, 2003

26 CFR 601.602: Tax forms and instructions.
(Also Part 1, §§ 3504, 6011, 6061, 6302; 31.3504–1, 31.6011(a)–7, 31.6061–1, 31.6302–1.)
Rev. Proc. 2003–69
TABLE OF CONTENTS
SECTION 1. PURPOSE
............................................................................................ 403
SECTION 2. BACKGROUND....................................................................................... 403
SECTION 3. SIGNIFICANT CHANGES TO REV. PROC. 96–17.......................................................... 404
SECTION 4. DEFINITIONS......................................................................................... 404
SECTION 5. SCOPE OF REPORTING AGENT AUTHORIZATION...................................................... 404
SECTION 6. COMPLETING A REPORTING AGENT AUTHORIZATION................................................ 406
SECTION 7. SUBMITTING A REPORTING AGENT AUTHORIZATION................................................. 406
SECTION 8. INTERNAL REVENUE SERVICE CONTACTS............................................................ 406
SECTION 9. OTHER RELATED DOCUMENTS....................................................................... 406
SECTION 10. EFFECT ON OTHER DOCUMENTS.................................................................... 406
SECTION 11. EFFECTIVE DATE.................................................................................... 406
SECTION 1. PURPOSE
.01 This revenue procedure provides the
requirements for completing and submit-
ting Form 8655,Reporting Agent Autho-
rization for Magnetic Tape/Electronic Fil-
ers (“Authorization”). An Authorization
allows a taxpayer to designate a Reporting
Agent (“Agent”) to perform the following
acts on behalf of the taxpayer:
(1) Sign and file on magnetic tape or
electronically Form 940,Employer’s An-
nual Federal Unemployment (FUTA) Tax
Return; and Form 941,Employer’s Quar-
terly Federal Tax Return.
(2) Sign and file on paper Form
940–PR,Planilla Para La Declaración
Anual Del Patrono — La Contribución
Federal Para El Desempleo (FUTA);Form
941–PR,Planilla Para La Declaracion
Trimestral Del Patrono — La Contribu-
cion Federal Al Seguro Social Y Al Seguro
Medicare; Form 941–SS,Employer’s
Quarterly Federal Tax Return (American
Samoa, Guam, the Commonwealth of the
Northern Mariana Islands, and the U.S.
Virgin Islands); Form 943,Employer’s
Annual Tax Return for Agricultural Em-
ployees; Form 943–PR,Planilla Para La
Declaración Anual De La Contribución
Del Patrono De Empleados Agrícolas;
Form 945,Annual Return of Withheld
Federal Income Tax; Form 1042,Annual
Withholding Tax Return For U.S. Source
Income of Foreign Persons;andForm
CT–1,Employer’s Annual Railroad Re-
tirement Tax Return.
(3) Make federal tax deposits
(“FTDs”) and other federal tax payments
(“FTPs”) and submit FTD information
and FTP information electronically for
the taxes deposited and payments reported
on Form 720,Quarterly Federal Excise
Tax Return; Form 940,Employer’s An-
nual Federal Unemployment (FUTA) Tax
Return; Form 941,Employer’s Quar-
terly Federal Tax Return; Form 943,
Employer’s Annual Tax Return for Agri-
cultural Employees; Form 945,Annual
Return of Withheld Federal Income Tax;
Form 990–C,Farmer’s Cooperative Asso-
ciation Income Tax Return; Form 990–PF,
Return of Private Foundation or Section
4947(a)(1) Nonexempt Charitable Trust
Treated as a Private Foundation;Form
990–T,Exempt Organization Business In-
come Tax Return; Form 1041,U.S. Income
Tax Return for Estates and Trusts;Form
1042,Annual Withholding Tax Return For
U.S. Source Income of Foreign Persons;
Form 1120,U.S. Corporation Income
Tax Return;andFormCT–1,Employer’s
Annual Railroad Retirement Tax Return.
(4) Receive duplicate copies of official
notices, correspondence, deposit require-
ments, tax rates, transcripts, or other infor-
mation with respect to the tax returns de-
scribed in section 1.01(1) or (2) of this rev-
enue procedure.
(5) Receive duplicate copies of official
notices, correspondence, deposit require-
ments, tax rates, transcripts, or other infor-
mation with respect to FTDs and FTPs.
.02 The technical specifications for
filing Authorization information are pub-
lished separately in Publication 1474,
Technical Specifications Guide For Re-
porting Agent Authorization For Magnetic
Tape/Electronic Filers And Federal Tax
Depositors.
SECTION 2. BACKGROUND
.01 Section 1.6011–1 of the Income Tax
Regulations and section 31.6011(a)–7 of
the Employment Taxes and Collection of
Income Tax at Source Regulations (“Em-
ployment Tax Regulations”) provide that
each return required under the regulations,
together with any prescribed copies or sup-
porting data, must be filled in and dis-
posed of in accordance with the applicable
August 25, 20034032003-34 I.R.B.

forms, instructions, and regulations. Sec-
tion 31.6011(a)–7 provides that the return
may be made by an agent authorized by the
person required to make the return.
.02 Section 31.6061–1 of the Employ-
ment Tax Regulations provides that a re-
turn may be signed for the taxpayer by an
agent who is duly authorized in accordance
withsection31.6011(a)–7tomakethere-
turn. Section 1.6061–1 provides that a re-
turnmaybesignedbyanagentwhoisduly
authorized under section 1.6012–1(a)(5) or
(b) to make the return.
.03 Section 31.6302–1 of the Employ-
ment Tax Regulations provides the rules
for depositing employment taxes. Sec-
tion 31.6302–1(h) implements section
6302(h) of the Internal Revenue Code,
which requires the use of an electronic
fund transfer system for the collection of
federal depository taxes. The Electronic
Federal Tax Payment System (“EFTPS”)
is the electronic fund transfer system de-
veloped to collect these taxes. Rev. Proc.
97–33, 1997–2 C.B. 371, provides gen-
eral information about EFTPS, and Rev.
Proc. 98–32, 1998–1 C.B. 935, provides
information about EFTPS programs for
Agents making FTDs and FTPs on behalf
of multiple taxpayers.
.04 The Service has prescribed Form
8655 as the appropriate authorization form
for a taxpayer to use to designate an Agent
to perform the following acts on behalf of
the taxpayer:
(1) Sign and file Form 940 and Form
941 on magnetic tape or electronically.
(2) Sign and file certain tax returns on
paper.
(3) Make FTDs and FTPs and submit
FTD information and FTP information
electronically for certain tax returns.
(4) Receive duplicate copies of official
notices, correspondence, deposit require-
ments, tax rates, transcripts, or other infor-
mation with respect to the returns filed by
the Agent.
(5) Receive duplicate copies of official
notices, correspondence, deposit require-
ments, tax rates, transcripts, or other in-
formation with respect to FTDs and FTPs
submitted or to be submitted by the Agent.
SECTION 3. SIGNIFICANT CHANGES
TO REV. PROC. 96–17
.01 This revenue p
rocedure modi-
fies and supersed
es Rev. Proc. 96–17,
1996–1 C.B. 633, by making the follow-
ing changes to Rev. Proc. 96–17:
(1) Form 945,Annual Return of With-
held Federal Income Tax, can no longer be
filedonmagnetictape or electronically.
(2) AnAuthorizationmaynowbeused
to allow an Agent to sign and file on pa-
per Form 940–PR, Form 941–PR, Form
941–SS, Form 943, Form 943–PR, Form
945, Form 1042, and Form CT–1.
(3) AnAuthorizationmaynowbeused
to allow an Agent to make FTDs and FTPs
for the taxes reported on Form 720, Form
940, Form 941, Form 943, Form 945, Form
990–C, Form 990–PF, Form 990–T, Form
1041, Form 1042, Form 1120, and Form
CT–1.
(4) All references to submitting FTD
information on magnetic tape are removed
because the magnetic tape FTD program
was terminated by Notice 99–42, 1999–2
C.B. 325.
(5) The procedures in section 2.05 of
Rev. Proc. 96–17 are removed to eliminate
the references to an election box that is no
longer on Form 8655.
(6) Sections 5.01 and 5.02 clarify
that an Agent may provide information
that will assist the Service in determining
whether it is appropriate to grant relief
from penalties that may arise from returns
filedandFTDsandFTPsmadebythe
Agent.
(7) Section 5.04 clarifies the effect of
submitting a new Authorization.
(8) Section 6.05 updates the informa-
tion regarding the requirement to replace a
previously submitted Authorization.
(9) Section 7.02 adds a requirement
that an Agent must submit an Agent’s List
on magnetic tape if the number of tax-
payer/clients exceeds 100.
(10) Section 8 updates the contact infor-
mation.
(11) Section 9 updates the list of other
related documents.
SECTION 4. DEFINITIONS
.01Reporting Agent. A Repor
ting
Agent (“Agent”) is an accou
nting service,
franchiser, bank, service
bureau, or other
entity authorized to per
form one or more
of the following acts on
behalf of a tax-
payer:
(1) Sign and file on magneti
ctapeor
electronically Form 94
0 and Form 941.
(2) Sign and file on paper Form
940–PR, Form 941–PR, Form 941–SS,
Form 943, Form 943–PR, Form 945, Form
1042, and Form CT–1.
(3) Make FTDs and FTPs and submit
FTD information and FTP information
electronically for the taxes reported on
Form 720, Form 940, Form 941, Form
943, Form 945, Form 990–C, Form
990–PF, Form 990–T, Form 1041, Form
1042, Form 1120, and Form CT–1.
.02Reporting Agent Authorization.A
Reporting Agent Authorization (“Autho-
rization”) allows a taxpayer to designate
an Agent to sign and to file on mag-
netic tape or electronically Form 940 and
Form 941; to sign and file on paper Form
940–PR, Form 941–PR, Form 941–SS,
Form 943, Form 943–PR, Form 945, Form
1042, and Form CT–1; and to make FTDs
and FTPs and submit FTD information
and FTP information electronically for the
taxes deposited and reported on the forms
listed in section 1.01 of this revenue proce-
dure. The Authorization may also permit
the Agent to receive duplicate copies of
official notices, correspondence, deposit
requirements, tax rates, transcripts, or
other information with respect to these
tax returns. In addition, an Authorization
may permit the Agent to receive duplicate
copies of official notices, correspondence,
deposit requirements, tax rates, transcripts,
or other information with respect to FTDs
and FTPs. The Service has prescribed
Form 8655 as the appropriate authoriza-
tion form for a taxpayer to use to designate
an Agent.
.03Reporting Agent’s List.AReport-
ing Agent’s List (“Agent’s List”) identi-
fies all taxpayers for whom an Agent will
file tax returns, make FTDs and FTPs, or
submit FTD information and FTP informa-
tion electronically. Aseparate Authoriza-
tion must be submitted for each taxpayer
on the Agent’s List.
SECTION 5. SCOPE OF REPORTING
AGENT AUTHORIZATION
.01 The scope of a
n Authorization for
the filing of fo
rms listed on Form 8655 is
as follows:
(1) A taxpayer may a
uthorize an Agent
to sign and fil
e on the taxpayer’s behalf all
or any of the fo
rms listed on Form 8655.
2003-34 I.R.B.404August 25, 2003

(2) A taxpayer may authorize an Agent
to receive duplicate copies of notices, cor-
respondence, deposit requirements, tax
rates, transcripts or other information with
respect to the returns filed by the Agent.
(3) An Authorization that permits an
Agent to make returns also permits an
Agent to request information or submit
informationonthereturnsfiledbythe
Agent, including any information con-
cerning penalties that may arise from the
returns. It further permits the Agent to
provide information that will assist the
Service in determining whether it would
be appropriate to grant relief from any
penalties that may arise from the returns.
(4) An Authorization does not permit
the Agent to request the abatement of any
penalties that may arise from the returns
filedbytheAgentorinanyotherwayto
perform any acts that constitute represen-
tation of the taxpayer as set forth in section
601.501(b)(13) of the Statement of Proce-
dural Rules.
.02ThescopeofanAuthorizationfor
making FTDs and FTPs and submitting
FTD information and FTP information
electronically is as follows:
(1) A taxpayer may authorize an Agent
to prepare and make FTDs and FTPs for
any taxes reported on any of the forms
listed on Form 8655 and submit FTD in-
formation and FTP information electroni-
cally on the taxpayer’s behalf.
(2) Regardless of the taxpayer’s desig-
nated method, an Agent must make FTD
payments and submit payment information
through the EFTPS system for a taxpayer
that is required to make FTD payments
and submit FTD information through the
EFTPS system pursuant to section 6302(h)
of the Code.
(3) A taxpayer may authorize an Agent
to receive duplicate copies of notices and
correspondence for FTDs and FTPs made
by the Agent for the taxpayer.
(4) An Authorization that permits an
Agent to make FTDs and FTPs also per-
mits the Agent to request information or
submit information on the FTDs and FTPs
submitted by the Agent, including any in-
formation concerning penalties that may
arise from the FTDs and FTPs. It further
permits the Agent to provide information
that will assist the Service in determining
whether it would be appropriate to grant re-
lief from any penalties that may arise from
the FTDs or FTPs.
(5) An Authorization does not permit
the Agent to request the abatement of any
penalties that may arise from the FTDs or
FTPs submitted by the Agent or in any
other way to perform any acts that con-
stitute representation of the taxpayer as
set forth in section 601.501(b)(13) of the
Statement of Procedural Rules.
.03 An Authorization becomes effective
forthetaxperioddesignatedbytheAgent
and taxpayer and remains in effect for sub-
sequent periods until revoked by the tax-
payer, terminated by the Agent, or termi-
nated by the Service, subject to the follow-
ing:
(1) In the case of an Agent filing a re-
turn on behalf of a taxpayer, the Service
must accept the Authorization and Agent's
List before the Agent may file the return.
(2) In the case of an Agent using
EFTPS to make a FTD or FTP on behalf
of a taxpayer, the Agent must comply with
the requirements of Rev. Proc. 98–32,
1998–1 C.B. 935, before the Agent may
make the FTD or FTP and submit the FTD
information or FTP information electron-
ically.
(3) See section 9 of this revenue proce-
dure for a list of other applicable revenue
procedures.
.04 A new Authorization must be sub-
mitted for any increase or decrease in the
scope of the authority of an Agent to act
on behalf of the taxpayer, or if the taxpayer
appoints a new Agent. Receipt by the Ser-
vice of a new Authorization terminates the
authority of the prior Agent to file tax re-
turns and make FTDs or FTPs for tax peri-
ods beginning on or after the effective date
of the new Authorization. A new Autho-
rization also terminates the authority of the
prior Agent to receive duplicate copies of
notices. The prior Agent, however, may
present information regarding taxpayer ac-
counts for the tax periods beginning before
the effective date of the new Authoriza-
tion, and the Service may disclose other-
wise confidential tax information relating
to the returns filed by the Agent or relating
to FTDs and FTPs made by the Agent, un-
less the taxpayer specifically revokes the
prior Agent's authorization to present in-
formation and receive otherwise confiden-
tial tax information relating to the returns
filedbytheAgentorrelatingtotheFTDs
and FTPs made by the Agent.
.05AnAuthorizationfiledunderthis
revenue procedure does not constitute the
appointment of a recognized representa-
tive as described in section 601.502 of the
Statement of Procedural Rules.
.06 An Authorization does not relieve
the taxpayer of the responsibility to ensure
that all tax returns are filed timely; all FTPs
are made timely; and any taxes, required to
be deposited, are deposited timely.
.07AnAgentmayuseanAuthorization
to file paper forms listed on Form 8655 on
behalf of a taxpayer only if—
(1) The late receipt of payroll informa-
tion from a taxpayer has jeopardized the
timely submission of the taxpayer’s return;
(2) The paper forms amend returns
filed under the magnetic tape or electronic
filing programs referenced in section 9 of
this revenue procedure;
(3) The rejection of a magnetic
tape/electronic filing has jeopardized
the timely submission of the taxpayer’s
return;
(4) The forms are listed in section
4.01(2) of this revenue procedure; or
(5) The magnetic tape/electronic filing
coordinator for an Agent participating in
a magnetic tape/electronic filing program
referenced in section 9 of this revenue pro-
cedure has requested paper returns.
.08AnAgentcoveredbyForm8655
may prepare a paper tax return for the
taxpayer’s signature. A taxpayer’s autho-
rized representative that is not an Agent
covered by Form 8655 must have a valid
power of attorney in accordance with sec-
tion 601.504(6) of the Statement of Pro-
cedural Rules (usually Form 2848,Power
of Attorney and Declaration of Represen-
tative) to sign and file a paper tax return
on behalf of the taxpayer.
.09 Each paper tax return must be
signed by the taxpayer, by the taxpayer’s
authorized representative, or by an Agent
permitted in section 5.07 of this revenue
procedure to file returns on behalf of the
taxpayer.
.10 The Agent must keep a copy of
each Authorization at the Agent’s princi-
pal place of business for examination by
the Service until the period of limitations
for assessment for the last return filed un-
der that Authorization expires.
August 25, 20034052003-34 I.R.B.

SECTION 6. COMPLETING
A REPORTING AGENT
AUTHORIZATION
.01 An Authorization may be submitted
on Form 8655 or any other document that
clearly contains the same information re-
quired to be provided on Form 8655. The
taxpayer may strike out the nonapplicable
portions of the Form 8655. An Agent may
fax the Authorization to the Service.
.02 An Authorization must be signed by
the taxpayer, an authorized representative
holding a power of attorney that specifi-
cally authorizes the representative to sign
returns on behalf of the taxpayer, or a per-
son who is duly authorized in accordance
with section 31.6011(a)–7 of the Employ-
ment Tax Regulations. If the Authoriza-
tion provides that the Agent is authorized
to receive tax return notices, correspon-
dence, deposit requirements, tax rates and
transcripts from the Service, or discuss
taxpayer account information with Servic
e
representatives and is signed by a person
other than the taxpayer, the authorized
rep-
resentative or other duly authorize
dperson
signing the Authorization must be a
utho-
rized both to receive, and to desig
nate oth-
ers to receive, tax return inform
ation (as
definedinsection6103(b)(2))o
fthetax-
payer.
.03AnAuthorizationexecutedaf
ter
December 31, 2001, must be mad
eon
Form 8655 (with a revision da
te of July
2000 or later) or its equiva
lent.
.04 Except to the extent prov
ided in sec-
tion 6.05 of this revenue pr
ocedure, an Au-
thorization will remain in
effect until the
Service receives a new A
uthorization.
.05 A revised Authorizat
ion is not re-
quired to replace an Aut
horization made
on Form 8655 with a revis
ion date before
October 1995 (or its eq
uivalent) that was
previously submitted
to the Service by an
Agent if the Authoriz
ation places no re-
striction on the me
dium for filing Forms
941 and 940, and the
Agent advises the
taxpayer/client
that its Forms 941 and/or
940maybefilede
lectronically and that
the taxpayer/cl
ient has the option to re-
ject electroni
c filing for Forms 941 and
940. An Agent m
ay use the most effi-
cient and tim
ely method of clearly provid-
ing this noti
fication to the taxpayer/client.
A taxpayer/
client’s rejection of electronic
filing for F
orm 941 or 940 must be sub-
mitted in w
riting to the Agent, and the
Agent must immediately remove any tax-
payer/client that rejects electronic filing
for Form 941 or 940 from its electronic fil-
ing taxpayer/client base.
SECTION 7. SUBMITTING
A REPORTING AGENT
AUTHORIZATION
.01 An Agent that wishes to use an
Authorization to file on magnetic tape or
electronically Form 940 and Form 941, or
make FTDs or FTPs, and submit FTD in-
formation or FTP information electroni-
cally,mustformallyapplytotheService
for these privileges. Currently, the re-
quired information for the applications for
magnetic tape or electronic filing of Form
940 and Form 941 and participation in
EFTPS are contained in the documents
listed in section 9 of this revenue proce-
dure. The applications covered in these
documents must be accompanied by the
individual Authorizations, signed as pro-
vided in section 6.02 of this revenue pro-
cedure, and an Agent’s List (if required by
the applicable revenue procedure).
.02 The Agent’s List must contain each
taxpayer’s employer identification num-
ber. Agent’s Lists may be filed on mag-
netic tape or electronically, if appropriate,
but if the number of taxpayer/clients ex-
ceeds 100, the Agent’s List must be filed
on magnetic tape. For specific information
concerning the requirements for submit-
ting and updating Agent’s Lists, see Publi-
cation 1474, the Service contacts listed in
section 8 of this revenue procedure, and the
documents listed in section 9 of this rev-
enue procedure.
SECTION 8. INTERNA
LREVENUE
SERVICE CONTACTS
.01Publication1474maybeobtained
electronically via the Internal Revenue
Service Internet web site (IRS web site) at
http://www.irs.gov. In addition, requests
for Publication 1474 and questions re-
garding this revenue procedure may be
addressed to the Service at the following
address:
Interna
l Revenue Service
Accounts
Management Service Center
MS 6748 RA
F Team
1973 N Rulo
n White Blvd
Ogden, UT 8
4201
.02 The principal author of this rev-
enue procedure is Michael Hara of the
Office of Associate Chief Counsel (Pro-
cedure and Administration), Administra-
tive Provisions and Judicial Practice Divi-
sion. Mr. Hara may be contacted at (202)
622–4910 (not a toll-free number).
SECTION 9. OTHER RELATED
DOCUMENTS
The programs requiring an Authoriza-
tion as a prerequisite to participation are
described in the following documents:
(1) For magnetic tape filing of Forms
940 and/or 941, see Rev. Proc. 96–18,
1996–1 C.B. 637.
(2) For electronic filing of Form 941,
see Rev. Proc. 99–39, 1999–2 C.B. 532.
(3) For electronic filing of Form 940,
see Rev. Proc. 2001–9, 2001–1 C.B. 328.
(4) For participation in EFTPS, see
Rev. Proc. 98–32, 1998–1 C.B. 935.
SECTION 10. EFFECT ON OTHER
DOCUMENTS
This revenue procedure modifies and
supersedes Rev. Proc. 96–17, 1996–1
C.B. 633.
SECTION 11. EFFECTIVE DATE
This revenue procedure is effective Au-
gust 25, 2003.
26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
Rev. Proc. 2003–70
SECTION 1. PURPOSE
This revenue procedure
provides the
domestic asset/liab
ility percentages and
domestic investment
yields needed by for-
eign life insurance
companies and foreign
property and liabil
ity insurance compa-
nies to compute the
ir minimum effectively
connected net inv
estment income under
section 842(b) o
f the Internal Revenue
Code for taxabl
e years beginning after
December 31, 20
01. Instructions are pro-
vided for comp
uting foreign insurance
companies' li
abilities for the estimated
tax and insta
llment payments of estimated
2003-34 I.R.B.406August 25, 2003

tax for taxable years beginning after
December 31, 2001. For more specific
guidance regarding the computation of the
amount of net investment income to be
included by a foreign insurance company
on its U.S. income tax return, see Notice
89–96, 1989–2 C.B. 417. For the domestic
asset/liability percentage and domestic in-
vestment yield, as well as instructions for
computing foreign insurance companies'
liabilities for estimated tax and installment
payments of estimated tax for taxable
years beginning after December 31, 2000,
see Rev. Proc. 2002–58, 2002–40 I.R.B.
644.
SECTION 2. CHANGES
.01 DOMESTIC ASSET/LIABILITY
PERCENTAGES FOR 2002. The Secre-
tary determines the domestic asset/liabilit
y
percentage separately for life insurance
companies and property and liability in-
surance companies. For the first taxable
year beginning after December 31, 2001,
the relevant domestic asset/liability p
er-
centages are:
123.3 percent for foreign life insura
nce
companies, and
171.9 percent for foreign property an
d
liability insurance companies.
.02 DOMESTIC INVESTMENT
YIELDS FOR 2002. The Secretary is
required to prescribe separate d
omestic in-
vestment yields for foreign lif
e insurance
companies and for foreign prop
erty and
liability insurance companie
s. For the first
taxable year beginning after December 31,
2001, the relevant domestic investment
yields are:
7.0 percent for foreign life insurance
companies, and
5.7 percent for foreign property and li-
ability insurance companies.
.03 SOURCE OF DATA FOR 2002.
The section 842(b) percentages to be used
for the 2002 tax year are based on tax re-
turn data following the same methodology
used for the 2001 year.
SECTION 3. APPLICATION —
ESTIMATED TAXES
To compute estimated tax and the in-
stallment payments of estimated tax due
for taxable years beginning after Decem-
ber 31, 2001, a foreign insurance com-
pany must compute its estimated tax pay-
ments by adding to its income other than
net investment income the greater of (i) its
net investment income as determined un-
der section 842(b)(5), that is actually ef-
fectively connectedwith the conduct of a
trade or business within the United States
for the relevant period, or (ii) the mini
-
mum effectively connected net investme
nt
income under section 842(b) that would
re-
sult from using the most recently avai
lable
domestic asset/liability percentag
e and do-
mestic investment yield. Thus, for i
nstall-
ment payments due after the publi
cation of
this revenue procedure, the dom
estic as-
set/liability percentages an
dthedomestic
investment yields provided in
this revenue
procedure must be used to compute the
minimum effectively connected net invest-
ment income. However, if the due date of
an installment is less than 20 days after the
date this revenue procedure is published
in the Internal Revenue Bulletin, the as-
set/liability percentages and domestic in-
vestment yields provided in Rev. Proc.
2002–58 may be used to compute the mini-
mum effectively connected net investment
income for such installment. For further
guidance in computing estimated tax, see
Notice 89–96.
SECTION 4. EFFECTIVE DATE
This revenue procedure is effective for
taxable years beginning after December
31, 2001.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Garrett D. Gregory of the
Office of the Associate Chief Counsel
(International). For further information
regarding this revenue procedure, please
contact Mr. Gregory at (202) 622–4461
(not a toll-free call), or write to the Internal
Revenue Service, Office of the Associate
Chief Counsel (International), 1111 Con-
stitution Avenue, NW, Washington, DC
20224, Attention: CC:INTL:Br5, Room
4554.
August 25, 20034072003-34 I.R.B.

Part IV. Items of General Interest
Notice of Proposed Rulemaking
and Notice of Public Hearing
Waiver of Information Reporting
Penalties – Determining Whether
Correction is Prompt
REG–141669–02
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains pro-
posed regulations relating to waiver un-
der section 6724 of the Internal Revenue
Code (Code) of a penalty imposed by sec-
tion 6721 for failure to file a correct in-
formation return. The proposed regula-
tions provide guidance on the requirement
of prompt correction of the failure to file
or file correctly. The proposed regula-
tions provide that the IRS will deem infor-
mation returns promptly corrected if cor-
rected within 30 days of the required fil-
ing date, or by August 1 following that re-
quired filing date. After August 1, a cor-
rection is prompt if made by the time an-
nounced by the IRS in published guidance.
The proposed regulations do not change
the rules for determining reasonable cause
for waiving the penalty for failure to fur-
nish correct payee statements under sec-
tion 6722 or the time to comply with other
information reporting requirements under
section 6723.
DATES: Written and electronic comments
are due by October 7, 2003. Requests to
speak (with outlines of topics to be dis-
cussed) at the public hearing scheduled for
October 21, 2003, are due by September
30, 2003.
ADDRESSES: Send submissions to:
CC:PA:RU (REG–141669–02), Room
5526, Internal Revenue Service, POB
7604, Ben Franklin Station, Washington,
DC 20044. Commenters may hand deliver
submissions Monday through Friday be-
tween the hours of 8 a.m. and 4 p.m. to:
CC:PA:RU (REG–141669–02), Courier's
Desk, Internal Revenue Service, 1111
Constitution Avenue, NW, Washington,
DC. Alternatively, commenters may sub-
mit comments electronically to the IRS
Internet site atwww.irs.gov/regs.The
publichearingwillbeheldintheIRSAu-
ditorium, Internal Revenue Building, 1111
Constitution Avenue, NW, Washington,
DC.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, contact Robert A. Desilets,
Jr. at (202) 622–4910; concerning sub-
missions of comments, the hearing, and/or
to be placed on the building access list to
attend the hearing, Treena Garrett at (202)
622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Procedure and Ad-
ministration Regulations (26 CFR part
301) under section 6724(a) of the Code.
Section 301.6724–1(d)(1)(ii)(D) of the
proposed regulations will clarify when
a correction of an information return
is prompt for purposes of establishing
reasonable cause to waive the penalty
under section 6721 of the Code. Existing
§301.6724–1(d)(1)(ii)(D), adopted on De-
cember 31, 1991 (56 FR 67178), provides
in pertinent part that a correction is prompt
if it occurs on the earliest date of a regular
submission of corrections, defining regu-
lar submissions as occurring at intervals
of 30 or fewer days. Many information
return filers have urged the IRS to replace
the 30-day correction interval with an
interval corresponding to the schedule for
tiered penalties.
Explanation of Provisions
I. Section 6721
Section 6721 imposes penalties on fail-
ures to file, or file correct, information re-
turns. Section 6721 creates a three-tiered
penalty structure to encourage timely fil-
ing and prompt correction of errors in pre-
viously filed returns. Congress enacted the
three-tiered penalty structure in the Om-
nibus Budget Reconciliation Act of 1989
(Public Law 101–239, 103 Stat. 2388,
2389). Section 6721 generally imposes a
penalty in the amount of $50 for each re-
turn with respect to which a failure occurs,
but not to exceed $250,000 per person per
calendar year. However, if a filer corrects
a failure within 30 days after the required
filing date, the penalty with respect to such
return shall be $15 in lieu of $50, but not
to exceed $75,000 per filer per calendar
year. Moreover, if a filer corrects a failure
more than 30 days after the required filing
date, but before August 1 of the calendar
year in which the required filing date oc-
curs, the penalty with respect to each return
shall be $30 in lieu of $50, but not to ex-
ceed $150,000 per filer per calendar year.
Section 6721 provides these penalties to
encourage prompt corrections of failures
to file, or file correct, information returns.
H.R. Rep. 101–386, at 648–649 (1989).
II. Section 6724
Section 6724(a) provides for a waiver of
information reporting penalties under sec-
tions 6721 through 6723 if the failure giv-
ing rise to such penalties was due to rea-
sonable cause and not willful neglect. Un-
der §301.6724–1(a) of the regulations, to
prove reasonable cause for a failure, the
filer must establish either that there are sig-
nificant mitigating factors with respect to
the failure or that the failure arose from
an event beyond the filer's control (an im-
pediment). In addition, the filer must have
acted in a responsible manner both before
and after the failure.
Under §301.6724–1(d) of the regula-
tions, a filer is considered as acting in a
responsible manner if the filer exercises
reasonable care,i.e., the care that a rea-
sonably prudent person would use under
the circumstances in the course of busi-
ness in determining filing obligations and
in handling account information such as
account numbers and balances. Section
301.6724–1(d) of the regulations also
refers to the promptness of correction,i.e.,
when the filer undertook significant steps
to avoid or mitigate the failure.
Section 301.6724–1(d)(1)(ii)(D) cur-
rently provides, in part, that a correction
is considered prompt if it is made within
30 days after the date of removal of an
impediment or discovery of a failure, or
on the earliest date thereafter on which a
regular submission of corrections occurs.
2003-34 I.R.B.408August 25, 2003

Submissions are regular only if they occur
at intervals of 30 days or fewer. Under the
30-day rule, a filer of a large number of
information returns that discovers errors
over a period of several months would be
required to submit multiple corrections
in a series of filings. Information return
filers have urged the IRS to allow filers
to “bundle” their corrections,i.e.,submit
the corrected information returns less fre-
quently according to a defined timetable.
The IRS agrees that the current rule may
be burdensome and that bundling should
be permitted.
The proposed regulations provide that
a correction of an information return is
prompt if the filer makes the correction
within 30 days of the required filing date,
or by August 1 following that required fil-
ing date. After August 1, a correction is
prompt if the filer makes the correction by
the date or dates announced in guidance
governing the electronic or magnetic fil-
ing of information returns, or in other guid-
ance including forms and instructions. It
is anticipated that the date or dates will
be in November and/or December of the
calendar year in which the required filing
date occurs. After the dates announced
in the guidance, the proposed regulations
provide that a correction is prompt if it is
made within 30 days after the date the im-
pediment is removed or the failure is dis-
covered.
The proposed regulations apply solely
for the purpose of determining whether
there is reasonable cause for waiving the
penalty for failure to file correct informa-
tion returns imposed by section 6721. The
proposed regulations do not apply for the
purpose of determining whether there is
reasonable cause for waiving the penal-
ties imposed by sections 6722 and 6723.
The IRS and Treasury Department believe
that a filer should correct promptly a fail-
ure to furnish a correct payee statement or
a failure to satisfy the reporting require-
ments described in section 6724(d)(2) and
(3) with regard to sections 6722 and 6723,
respectively. Therefore, the proposed reg-
ulations retain the 30-day correction pe-
riod for waiving the penalties imposed by
sections 6722 and 6723.
The proposed regulations do not affect
or alter the tiered penalty rate schedule of
section 6721. To ensure that a reduced
penalty amount under section 6721 will
apply, in the event that the IRS does not
grant a reasonable cause waiver, a filer
should file correct information returns with
the IRS within 30 days after the required
filing date, or before August 1 of the cal-
endar year in which the required filing date
occurs.
Proposed Effective Date
The proposed regulations apply to cor-
rections of information returns made after
the date of publication of a Treasury deci-
sion adopting the proposed regulations as
final regulations in theFederal Register.
However, filers may cite these rules for
purposes of requesting a reasonable cause
waiver prior to the date that the proposed
regulations become final.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory as-
sessment is not required. It has also been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C. chap-
ter 5) does not apply to these proposed reg-
ulations, and because the proposed regu-
lations do not impose a collection of in-
formation on small entities, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does
not apply. Pursuant to section 7805(f) of
the Code, this notice of proposed rulemak-
ing will be submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on its impact on
small business.
Comments and Publ
ic Hearing
Before adoption of these proposed
regulations as final regulations, the IRS
will consider any electronic or written
comments (a signed original and eight
(8) copies) that a commenter submits
timely (in the manner described in the
ADDRESSESportion of this preamble)
to the IRS. The IRS and the Treasury De-
partment request comments on the clarity
of the proposed regulations and how they
can be easier to understand. All comments
will be available for public inspection
and copying. Written comments on the
proposed regulations are due by October
7, 2003.
A public hearing has been scheduled for
October 21, 2003, beginning at 10 a.m.
in the IRS Auditorium, Internal Revenue
Building, 1111 Constitution Avenue, NW,
Washington, DC. All visitors must present
photo identification to enter the building.
Because of access restrictions, visitors will
not be admitted beyond the immediate en-
trance area more than 30 minutes before
the hearing starts. For information about
having your name placed on the build-
ing access list to attend the hearing, see
theFOR FURTHER INFORMATION
CONTACTportion of this preamble.
The rules of 26 CFR 601.601(a)(3) ap-
ply to the hearing. Persons who wish to
present oral comments must submit elec-
tronic or written comments and an outline
of the topics for discussion and the time for
each topic (a signed original and eight (8)
copies) by September 30, 2003. Each per-
sonmakingcommentswillhave10min-
utes to present comments. The IRS will
prepare an agenda showing the scheduling
of the speakers after the deadline for re-
viewing outlines has passed. Copies of the
agendawillbeavailablefreeofchargeat
the hearing.
Drafting Information
The principal author of thes
e proposed
regulations is Robert A. De
silets, Jr., Of-
fice of the Associate Chief
Counsel (Pro-
cedure and Administratio
n), Administra-
tive Provisions and Ju
dicial Practice Divi-
sion. However, other p
ersonnel from the
IRS and the Treasury D
epartment partici-
patedintheirdevel
opment.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 301 is pro-
posed to be amended as follows:
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 301.6724–1 is amended
by:
1. Revising paragraph (d)(1)(ii)(D).
2. Adding paragraph (d)(3).
The revision and addition read as fol-
lows:
§301.6724–1 Reasonable cause.
*****
(d) * * *
(1) * * *
August 25, 20034092003-34 I.R.B.

(ii) * * *
(D) Correcting the failure as promptly
as possible upon removal of the impedi-
ment or discovery of the failure. A person
may correct a failure by filing or correct-
ing the information return, by furnishing
or correcting the payee statement, or by
providing or correcting the information to
satisfy the specified information reporting
requirement with respect to which the fail-
ure occurs. This paragraph (d)(1)(ii)(D)
does not apply with respect to informa-
tion that specific information reporting
rules prohibit the filer from altering. See
§1.6045–4(i)(5) of this chapter. In the
case of a waiver of a penalty imposed
by section 6722 or 6723 of the Internal
Revenue Code, correction is prompt if it
is made within 30 days after the date of
removal of the impediment or discovery of
the failure. For purposes of section 6721
of the Internal Revenue Code, a correction
is prompt if the Internal Revenue Service
receives the correction—
(i) On or before 30 days after the re-
quired filing date;
(ii) On or before August 1 following
that required filing date;
(iii) On or before the date or dates an-
nounced in guidance governing the elec-
tronic or magnetic filing of information re-
turns;
(iv) On or before the date or dates an-
nounced in other guidance including forms
and instructions; or
(v) Within 30 days after the date the im-
pediment is removed or the failure is dis-
covered if the correction is not submitted
within the time frames set forth in para-
graphs (d)(1)(ii)(D)(i) through (iv).
*****
(3) [Reserved] For further guidance, see
§301.6724–1T(d)(3).
*****
Robert E. Wenzel,
Deputy Commissioner for S
er-
vices and Enforcement.
(Filed by the Office of the Federal Register on July 8, 2003,
8:45 a.m., and published in the issue of the Federal Register
for July 9, 2003, 68 F.R. 4
0857)
Notice of Proposed Rulemaking
and Notice of Public Hearing
Remedial Actions for Tax-Exempt
Bonds
REG–132483–03
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains pro-
posed regulations that amend the final reg-
ulations that provide certain permitted re-
medial actions for tax-exempt bonds is-
sued by state and local governments. This
document also contains a notice of public
hearing on these proposed regulations.
DATES: Written or electronic comments
must be received by October 14, 2003.
Outlines of topics to be discussed at the
public hearing scheduled for November 4,
2003, at 10 a.m., must be received by Oc-
tober 14, 2003.
ADDRESSES: Send submissions to
CC:PA:RU (REG–132483–03), room
5226, Internal Revenue Service, POB
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand
delivered Monday through Friday be-
tween the hours of 8 a.m. and 4 p.m. to
CC:PA:RU (REG–132483–03), Courier’s
Desk, Internal Revenue Service, 1111
Constitution Avenue, NW, Washington,
DC. Alternatively, taxpayers may submit
comments electronically to the IRS Inter-
net site atwww.irs.gov/regs. The public
hearing will be held in the Auditorium,
Internal Revenue Building, 1111 Consti-
tution Avenue, NW, Washington, DC.
FOR FURTHER INFORMATION
CONTACT: Concerning the regulations,
Gary W. Bornholdt, (202) 622–3980; con-
cerning submissions of comments, the
hearing, and requests to be placed on the
building access list to attend the meeting,
Sonya M. Cruse, (202) 622–7180 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
Section 103(a) of the Internal Revenue
Code (Code) provides that, generally, in-
terest on any State or local bond is not in-
cluded in gross income. However, this ex-
clusion does not apply to any private activ-
ity bond that is not a qualified bond.
A. Governmental Bonds
Under section 141, a bond is a private
activity bond if the bond is issued as part
of an issue that meets either (1) the private
business use test and the private security or
payment test (the private business tests), or
(2) the private loan financing test.
The private business use test is met if
more than 10 percent of the proceeds of an
issue are to be used for any private busi-
ness use. Section 141(b)(6) defines private
business use as use directly or indirectly in
a trade or business that is carried on by any
person other than a governmental unit.
The private security or payment test is
met if the payment of the principal of, or
the interest on, more than 10 percent of
the proceeds of an issue is directly or in-
directly (1) secured by an interest in prop-
erty used or to be used for a private busi-
ness use, (2) secured by an interest in pay-
ments in respect of such property, or (3) to
be derived from payments, whether or not
to the issuer, in respect of property, or bor-
rowed money, used or to be used for a pri-
vate business use.
The private loan financing test is satis-
fied if more than the lesser of $5 million or
5 percent of the proceeds of an issue are to
be used to make or finance loans to persons
other than governmental units.
Under §1.141–2(d) of the Income Tax
Regulations, an issue is an issue of private
activity bonds if the issuer reasonably ex-
pects, as of the issue date, that the issue
will meet either the private business tests
or the private loan financing test. Under
§1.141–2(d), an issue is also an issue of
private activity bonds if the issuer takes a
deliberate action, subsequent to the issue
date, that causes the conditions of either
the private business tests or the private loan
financing test to be met.
Section 1.141–12 sets forth certain re-
medial actions that prevent a deliberate ac-
tion with respect to property financed by
an issue from causing that issue to meet the
private business use test or the private loan
2003-34 I.R.B.410August 25, 2003

financing test. Specifically, if an issuer
satisfies certain conditions, an issuer may
take one of the following three remedial
actions to cure a deliberate action. First,
the issuer may redeem or defease the non-
qualified bonds. However, a defeasance is
not a permitted remedial action if the pe-
riod between the issue date and the first
call date of the bonds is more than 10
1
/2
years (the 10
1
/2year limitation). Second,
if the deliberate action is a disposition of
the bond-financed property for which the
consideration is exclusively cash, and cer-
tain other requirements are met, the issuer
may use the cash for an alternative quali-
fying use. Third, in certain cases, the fa-
cility with respect to which the deliberate
actionoccursmaybeusedinanalterna-
tive qualifying manner (for example, the
facility may be used for a qualifying pur-
pose by a nongovernmental person or used
by a 501(c)(3) organization rather than a
governmental person). The second and
third types of remedial action may cause
a deemed reissuance of the nonqualified
bonds (that is, a deemed issuance of new
bonds to refund the nonqualified bonds)
for certain purposes of the Code.
Section 1.141–12(j) provides that the
percentage of outstanding bonds that are
nonqualified bonds equals the highest
percentage of private business use in any
1-year period commencing with the de-
liberate action. In addition, §1.141–12(j)
provides that the determination of the
bonds of an issue that are treated as the
nonqualified bonds must be made on a
pro ratabasis, except that, for purposes
of the remedial action that involves the
redemption or defeasance of the nonqual-
ified bonds, an issuer may treat bonds
with longer maturities (determined on a
bond-by-bond basis) as the nonqualified
bonds.
In general, §1.141–15 provides that
§1.141–12 applies to bonds issued on or
after May 16, 1997, that are subject to
section 1301 of the Tax Reform Act of
1986. However, issuers may apply the
remedial action provisions in §1.141–12
to any bonds to which §1.141–12 does not
otherwise apply.
B. Qualified 501(c)(3) Bonds
Under section 141(e), a qualified
501(c)(3) bond issued under section 145
may be a qualified bond. Section 145(a)
provides that, in general, a qualified
501(c)(3) bond is any private activity bond
issued as part of an issue if: (1) all of
the property that is to be provided by the
net proceeds of the issue is to be owned
by a 501(c)(3) organization or a govern-
mental unit; and (2) such bond would
not be a private activity bond if section
501(c)(3) organizations were treated as
governmental units with respect to their
activities that do not constitute unrelated
trades or businesses, determined by ap-
plying section 513(a). For this purpose,
the private business tests are applied by
using “5 percent” instead of “10 percent”
each place it appears and “net proceeds”
for “proceeds” each place it appears. Sec-
tion 1.145–2 provides, in general, that
§§1.141–0 through 1.141–15 apply to
section 145(a).
C. Exempt Facility Bonds
Under section 141(e), an exempt facil-
itybondissuedundersection142maybe
a qualified bond. Under section 142(a), an
exempt facility bond is any bond issued as
part of an issue if 95 percent or more of the
net proceeds are to be used to provide cer-
tain exempt facilities.
Under §1.142–2, if less than 95 percent
of the net proceeds of an exempt facility
bond are actually used to provide an ex-
empt facility, and for no other purpose, the
issue will be treated as meeting the use of
proceeds requirement of section 142(a) if
the issue meets a reasonable expectations
test, and the issuer takes the remedial ac-
tion described §1.142–2. The reasonable
expectations test requires that the issuer
must have reasonably expected on the is-
sue date of the bonds that at least 95 per-
cent of the net proceeds of the issue would
be used to provide an exempt facility and
for no other purpose for the entire term
of the bonds (disregarding any redemption
provisions). The remedial action provided
in §1.142–2 requires that the issuer redeem
or defease the nonqualified bonds of the is-
sue. However, a defeasance is not a per-
mitted remedial action if it does not satisfy
the 10
1
/2year limitation on defeasances.
For purposes of §1.142–2, the nonqual-
ified bonds are a portion of the outstand-
ingbondsinanamountthat,ifthere-
maining bonds were issued on the date on
which the failure to properly use the pro-
ceeds occurs, at least 95 percent of the net
proceeds of the remaining bonds would be
used to provide an exempt facility. If no
proceeds have been spent to provide an ex-
empt facility, all of the outstanding bonds
are nonqualified bonds. The nonqualified
bonds must be determined on apro rataba-
sis, except that an issuer may treat bonds
with longer maturities (determined on a
bond-by-bond basis) as the nonqualified
bonds.
In general, §1.141–16 provides that
§1.142–2 applies to bonds issued on or
after May 16, 1997. However, §1.142–2,
together with certain other regulations,
may be applied in whole, but not in part,
to bonds outstanding on May 16, 1997.
D. Prior Remedial Action Rules
Prior to the release of §§1.141–12 and
1.142–2, Rev. Proc. 93–17 (1993–1 C.B.
507), provided remedial action rules. Rev.
Proc. 93–17 does not contain the 10
1
/2year
limitation on defeasances. The preamble
to the regulations that include §§1.141–12
and 1.142–2 providesthat for actions that
occur on or after May 16, 1997, Rev. Proc.
93–17 is obsolete.
Explanation of Provisions
Comments have been received suggest-
ing that the definition of the amount
of nonqualified bonds contained in
§1.141–12 be limited to the excess of
the actual amount of the private business
use or private loans over the permitted
amount of private business use or private
loans under section 141. The comments
note that this approach is consistent with
the statutory language of section 141,
which permits certainde minimisamounts
of private business use and private loans
without jeopardizing the tax-exempt status
of bonds, and with the definition of the
amount of nonqualified bonds contained
in §1.142–2.
The comments also suggest simplify-
ing the rules for determining the bonds to
be treated as the nonqualified bonds. The
comments recommend granting an issuer
greater discretion in its selection of bonds,
to the extent that the issuer, through such
selection, does not effectively extend the
remaining weighted average maturity of
the bond issue with respect to which the
deliberate action occurred.
Finally, the comments request clarifica-
tion of the remedial action rules applicable
August 25, 20034112003-34 I.R.B.

to bonds issued prior to May 16, 1997.
In particular, the comments request that
issuers be permitted to apply §§1.141–12
and 1.142–2 to bonds issued before May
16, 1997, without regard to the 10
1
/2year
limitation on defeasances contained in
those regulations. The comments indicate
that it is unfair to require issuers to comply
with the 10
1
/2year limitation for bonds
issued prior to the release of §§1.141–12
and 1.142–2 because issuers could not
have known about the limitation when
structuring those bonds.
The proposed regulations generally
adopt these suggestions.
First, the proposed regulations reduce
the amount of outstanding bonds that are
nonqualified bonds under §1.141–12. The
proposed regulations provide that the non-
qualified bonds are a portion of the out-
standing bonds in an amount that, if the re-
maining bonds were issued on the date on
which the deliberate action occurs, the re-
maining bonds would not satisfy the pri-
vate business use test or private loan fi-
nancing test, as applicable. For this pur-
pose, the amount of private business use
is the greatest percentage of private busi-
ness use in any one-year period commenc-
ing with the deliberate action.
Second, the proposed regulations
amend the provisions of §1.141–12 re-
lating to redemption or defeasance and
the provisions of §1.142–2 relating to
allocations of nonqualified bonds. Under
the proposed regulations, allocations of
nonqualified bonds must be made on a
pro ratabasis, except that an issuer may
treat any bonds of an issue as the nonqual-
ified bonds so long as (i) the remaining
weighted average maturity of the issue,
determined as of the date on which the
nonqualified bonds are redeemed or de-
feased (determination date), and excluding
from the determination the nonqualified
bonds redeemed or defeased by the is-
suer, is not greater than (ii) the remaining
weighted average maturity of the issue,
determined as of the determination date,
but without regard to the redemption or
defeasance of any bonds (including the
nonqualified bonds) occurring on the de-
termination date.
Finally, the proposed regulations
amend §§1.141–15(e) and 1.141–16(c) to
provide that for bonds issued before May
16, 1997, issuers may apply §§1.141–12
and 1.142–2 without regard to the 10
1
/2
year limitation on defeasances contained
in those regulations.
Proposed Effective Dates
The proposed regulations that amend
§§1.141–12 and 1.142–2 will apply to de-
liberate actions or failures to properly use
proceeds, as applicable, that occur on or
after the date of publication of final reg-
ulations in theFederal Register,tothe
extent §1.141–12 or 1.142–2, as applica-
ble, applies to the bonds. The proposed
regulations that amend §§1.141–15(e) and
1.141–16(c) will apply to bonds issued be-
fore May 16, 1997, that are subject to
§§1.141–12 or 1.142–2, as applicable, for
purposes of deliberate actions or failures
to properly use proceeds, as applicable,
that occur on or after April 21, 2003. Is-
suers may apply the proposed regulations
to deliberate actions or failures to prop-
erly use proceeds, as applicable, that oc-
cur on or after April 21, 2003 and be-
fore the date of publication of final regu
la-
tions in theFederal Register,totheexte
nt
(1) §1.141–12 or §1.142–2, as applicabl
e,
applies to the bonds, and (2) with re
spect
to the amendments to §§1.141–15(e
)and
1.141–16(c), the bonds were issue
dbefore
May 16, 1997.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory as-
sessment is not required. It has also been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C. chap-
ter 5) does not apply to these regulations,
and because the regulations do not im-
pose a collection of information on small
entities, the Regulatory Flexibility Act (5
U.S.C. chapter 6) does not apply. Pursuant
to section 7805(f) of the Code, this notice
of proposed rulemaking will be submitted
to the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on its impact on small business.
Comments and Pu
blic Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments that
are submitted timely (preferably a signed
original and eight (8) copies) to the IRS.
The IRS and Treasury request comments
on the clarity of the proposed regulations
and how they may be made easier to un-
derstand. All comments will be available
for public inspection and copying.
A public hearing has been scheduled
for November 4, 2003, at 10 a.m. in the
Auditorium, Internal Revenue Building,
1111 Constitution Avenue, NW, Washing-
ton, DC. Because of access restrictions,
visitors will not be admitted beyond the
lobby more than 30 minutes before the
hearing starts. For information about
having your name placed on the building
access list to attend the hearing, see the
“FOR FURTHER INFORMATION CON-
TACT” section of this preamble.
The rules of 26 CFR 601.601(a)(3) ap-
ply to the hearing.
Persons who wish to present oral com-
ments at the hearing must submit written
comments by October 14, 2003, and sub-
mit an outline of the topics to be discussed
and the amount of time to be devoted to
each topic by October 14, 2003.
A period of 10 minutes will be allotted
to each person for making comments.
An agenda showing the scheduling of
the speakers will be prepared after the
deadline for receiving outlines has passed.
Copies of the agenda will be available free
of charge at the hearing.
Comments are requested on all aspects
of the proposed regulations.
Drafting Information
The principal authors of these
regula-
tions are Rebecca L. Harrigal a
nd Gary
W. Bornholdt, Office of Assoc
iate Chief
Counsel (Tax-Exempt and G
overnment
Entities), IRS, and Bruce
M. Serchuk, Of-
fice of Tax Policy, Treas
ury Department.
However, other personne
lfromtheIRS
and Treasury Departmen
t participated in
their development.
*****
Proposed Adoption of Amendments to
the Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
2003-34 I.R.B.412August 25, 2003

Par. 2. Section 1.141–0 is amended
by adding an entry to the table for
§1.141–16(d) to read as follows:
§1.141–0 Table of contents.
*****
§1.141–16 Effective dates for qualified
private activity bond provisions.
*****
(d) Certain remedial actions.
*****
Par. 3. In §1.141–12, paragraphs (j)
and (k)Example 8are revised to read as
follows:
§1.141–12 Remedial Actions.
*****
(j)Nonqualified bonds—(1)Amount
of nonqualified bonds. The nonqualified
bonds are a portion of the outstanding
bonds in an amount that, if the remaining
bonds were issued on the date on which
the deliberate action occurs, the remain-
ing bonds would not satisfy the private
business use test or private loan financ-
ing test, as applicable. For this purpose,
the amount of private business use is the
greatest percentage of private business use
in any one-year period commencing with
the deliberate action.
(2)Allocation of nonqualified bonds.
Allocations of nonqualified bonds must be
made on apro ratabasis, except that, for
purposes of paragraph (d) of this section
(relating to redemption or defeasance), an
issuer may treat any bonds of an issue as
the nonqualified bonds so long as—
(i) The remaining weighted average
maturity of the issue, determined as of
the date on which the nonqualified bonds
are redeemed or defeased (determination
date), and excluding from the determina-
tion the nonqualified bonds redeemed or
defeased by the issuer in accordance with
this section, is not greater than
(ii) The remaining weighted average
maturity of the issue, determined as of
the determination date, but without regard
to the redemption or defeasance of any
bonds (including the nonqualified bonds)
occurring on the determination date.
(k) * * *
Example 8.Comp
liance after remedial action.
In 2000, City G issues bonds with proceeds of $10
million to finance a courthouse. The bonds have a
weighted average maturity that does not exceed 120
percent of the reasonablyexpected economic life of
the courthouse. G uses $1 million of the proceeds for
a private business use and more than 10 percent of the
debtserviceontheissueissecuredbyprivatesecurity
or payments. In 2004, in abona fideand arm’s length
arrangement, G enters into a management contract
with a nongovernmental person that results in private
business use of 40 percent of the courthouse per year
during the remaining term of the bonds. G immedi-
ately redeems the nonqualified bonds, or 44.44 per-
cent of the outstanding bonds. This is the portion
of the outstanding bonds that, if the remaining bonds
were issued on the date on which the deliberate ac-
tion occurs, the remaining bonds would not satisfy
the private business use test, if the amount of private
business use is the greatest percentage of private b
usi-
ness use in any one-year period commencing with
the deliberate action (50 percent). This percentage
is computed by dividing the percentage of the faci
lity
used for a government use (50 percent) by the min-
imum amount of government use required (90 per-
cent), and subtracting the resulting percenta
ge (55.56
percent) from 100 percent (44.44 percent). For pur-
poses of subsequently applying section 141 to the is-
sue, G may continue to use all of the proce
eds of the
outstanding bonds in the same manner (that is, for
the courthouse and the private business use) without
causing the issue to meet the private b
usiness use test.
The issue, however, continues to meet the private se-
curity or payment test. The result would be the same
if G, instead of redeeming the bo
nds, established a
defeasance escrow for those bonds, provided that the
requirement of paragraph(d)(4)ofthissectionwas
met.
Par. 4. Section 1.141–15 is ame
nded as
follows:
1. Paragraph (b)(4) is added.
2. Paragraph (e) is revised.
The amendments read as follow
s:
§1.141–15 Effective dates.
*****
(b)Effective dates.***
(4)Certain remedial actions
. For bonds
subject to §1.141–12, the pr
ovisions of
§§1.141–12(j) and 1.141–12
(k),Example
8, apply to deliberate acti
ons that occur on
or after the date of public
ation of final reg-
ulations in theFederal Re
gisterand may
be applied by issuers to
deliberate actions
that occur on or after A
pril 21, 2003, and
beforethedateofpubl
ication of final reg-
ulations in theFeder
al Register.
*****
(e)Permissive application of certain
sections—(1)In general. Except as
otherwise provided in paragraph (b)(4)
of this section and this paragraph (e), the
following sections may each be applied by
issuers to any bonds—
(i) Section 1.141–3(b)(4);
(ii) Section 1.141–3(b)(6); and
(iii) Section 1.141–12.
(2)Transition rule for pre-effective date
bonds. For purposes of paragraphs (e)(1)
and (h) of this section, issuers may apply
§1.141–12 to bonds issued before May 16,
1997, without regard to paragraph (d)(4)
thereof with respectto deliberate actions
that occur on or after April 21, 2003.
*****
Par. 5. Section 1.141–16 is amended
by revising paragraph (c) and adding para-
graph (d) to read as follows:
§1.141–16 Effective dates for qualified
private activity bond provisions.
*****
(c)Permissive application. The regu-
lations designated in paragraph (a) of this
section may be applied by issuers in whole,
but not in part, to bonds outstanding on
the effective date. For this purpose, is-
suers may apply §1.142–2 without regard
to paragraph (c)(3) thereof to failures to
properly use proceeds that occur on or af-
ter April 21, 2003.
(d)Certain remedial actions.For
bonds subject to §1.142–2, the provisions
of §1.142–2(e) apply to failures to prop-
erly use proceeds that occur on or after
the date of publication of final regulations
in theFederal Registerand may be ap-
pliedbyissuerstofailurestoproperlyuse
proceeds that occur on or after April 21,
2003, and before the date of publication of
final regulations in theFederal Register.
Par. 6. Section 1.142–0 is amended
by revising the entries to the table for
§1.142–2 paragraph (d), (d)(1) and (d)(2)
to read as follows:
§1.142–0 Table of contents.
*****
§1.142–2 Remedial actions.
*****
(d)*****
(1) Amount of nonqualified bonds.
(2) Allocation of nonqualified bonds.
*****
Par. 7. Section 1.142–2 is amended by
revising paragraph (e) to read as follows:
§1.142–2 Remedial actions.
August 25, 20034132003-34 I.R.B.

*****
(e)Nonqualified bonds—(1)Amount
of nonqualified bonds. The nonqualified
bonds are a portion of the outstanding
bonds in an amount that, if the remaining
bonds were issued on the date on which
the failure to properly use the proceeds
occurs, at least 95 percent of the net pro-
ceeds of the remaining bonds would be
used to provide an exempt facility. If
no proceeds have been spent to provide
an exempt facility, all of the outstanding
bonds are nonqualified bonds.
(2)Allocation of nonqualified bonds.
Allocations of nonqualified bonds must be
made on apro ratabasis, except that an is-
suer may treat any bonds of an issue as the
nonqualified bonds so long as—
(i) The remaining weighted average
maturity of the issue, determined as of
the date on which the nonqualified bonds
are redeemed or defeased (determination
date), and excluding from the determina-
tion the nonqualified bonds redeemed or
defeased by the issuer in accordance with
this section, is not greater than
(ii) The remaining weighted average
maturity of the issue, determined as of
the determination date, but without regard
to the redemption or defeasance of any
bonds (including the nonqualified bonds)
occurring on the determination date.
Robert E. Wenzel,
Deputy Commissioner for Ser-
vices and Enforcement.
(Filed by the Office of the Federal Register on July 18, 2003,
8:45 a.m., and published in the issue of the Federal Register
for July 21, 2003, 68 F.R. 43059)
Announcement of Disciplinary Actions Involving Attorneys,
Certified Public Accountants, Enrolled Agents, and Enrolled
Actuaries — Suspensions, Censures, Disbarments, and
Resignations
Announcement 2003-50
Under Title 31, Code of Federal Regu-
lations, Part 10, attorneys, certified public
accountants, enrolled agents, and enrolled
actuaries may not accept assistance from,
or assist, any person who is under disbar-
ment or suspension from practice before
the Internal Revenue Service if the assis-
tance relates to a matter constituting prac-
tice before the Internal Revenue Service
and may not knowingly aid or abet another
person to practice before the Internal Rev-
enue Service during a period of suspen-
sion, disbarment, or ineligibility of such
other person.
To enable attorneys, certified public
accountants, enrolled agents, and enrolled
actuaries to identify persons to whom
these restrictions apply, the Director, Of-
fice of Professional Responsibility will
announce in the Internal Revenue Bulletin
their names, their city and state, their pro-
fessional designation, the effective date
of disciplinary action, and the period of
suspension. This announcement will ap-
pear in the weekly Bulletin at the earliest
practicable date after such action and will
continue to appear in the weekly Bulletins
for five successive weeks.
Suspensions From Practice Before the Internal Revenue
Service After Notice and an Opportunity for a Proceeding
Under Title 31, Code of Federal Regu-
lations, Part 10, after notice and an oppor-
tunity for a proceeding before an adminis-
trative law judge, the following individuals
have been placed under suspension from
practice before the Internal Revenue Ser-
vice:
NameAddressDesignationEffective Date
Arnold, JohnClovis, CAEnrolled AgentFebruary 13, 2003
to
August 12, 2003
2003-34 I.R.B.414August 25, 2003

Disbarments From Practice Before the Internal Revenue
Service After Notice and an Opportunity for a Proceeding
Under Title 31, Code of Federal Regu-
lations, Part 10, after notice and an oppor-
tunity for a proceeding before an adminis-
trative law judge, the following individuals
have been disbarred from practice before
the Internal Revenue Service:
NameAddressDesignationEffective Date
Kalajian, ThomasLaguna Hills, CACPAOctober 2, 2002
Messman, CarlaOuting, MNEnrolled AgentJanuary 9, 2003
Consent Suspensions From Practice Before the Internal
Revenue Service
Under Title 31, Code of Federal Regu-
lations, Part 10, an attorney, certified pub-
lic accountant, enrolled agent, or enrolled
actuary, in order to avoid institution or con-
clusion of a proceeding for his or her dis-
barment or suspension from practice be-
fore the Internal Revenue Service, may of-
fer his or her consent to suspension from
such practice. The Director, Office of Pro-
fessional Responsibility, in his discretion,
may suspend an attorney, certified public
accountant, enrolled agent or enrolled ac-
tuary in accordance with the consent of-
fered.
The following individuals have been
placed under consent suspension from
practice before the Internal Revenue Ser-
vice:
NameAddressDesignationDate of Suspension
Kemp, BartSonoma, CAAttorneyMarch 15, 2003
to
November 15, 2003
Marks, GaryHewlett, NYCPAMarch 24, 2003
to
March 23, 2004
Fehl, KennethPalo Alto, CAAttorneyApril 1, 2003
to
March 31, 2004
Cohen, PeterEdison, NJCPAApril 3, 2003
to
May 2, 2005
Kohn, MichaelSt. Louis, MOAttorneyIndefinite
from
April 30, 2003
Sogamoso, CarlosBellflower,CAEnrolled AgentIndefinite
from
May 1, 2003
Huston, JamesKingman, AZCPAMay 1, 2003
to
April 30, 2006
Halleran, EdwardCarle Place, NYEnrolled AgentIndefinite
from
May 1, 2003
August 25, 20034152003-34 I.R.B.

NameAddressDesignationDate of Suspension
Marshall, E. PeterGlens Falls, NYCPAMay 1, 2003
to
April 30, 2006
Bell, RosannaIrvington, NYCPAIndefinite
from
May 8, 2003
Kingsley, StevenWeston, CTCPAIndefinite
from
May 15, 2003
Schawe, RudolphBrenham, TXEnrolled AgentMay 22, 2003
to
October 21, 2004
Scheve, MichaelBaltimore, MDCPAIndefinite
from
May 27, 2003
McKenzie, DawnaFort Smith, AREnrolled AgentIndefinite
from
June 2, 2003
Suen, MingSan Francisco, CAEnrolled AgentIndefinite
from
June 3, 2003
Reyes, RupertoPlacentia, CAEnrolled AgentJune 10, 2003
to
December 9, 2005
Garmo, GeorgisW. Bloomfield, MICPAIndefinite
from
June 10, 2003
Holmes, James L.Burlington, NCEnrolled AgentIndefinite
from
June 18, 2003
Brooks, SandraSan Diego, CAEnrolled AgentIndefinite
from
June 20, 2003
Malley, WayneCupertino, CAEnrolled AgentIndefinite
from
June 27, 2003
Leininger, BarbaraLutz, FLEnrolled AgentIndefinite
from
June 27, 2003
2003-34 I.R.B.416August 25, 2003

Expedited Suspensions From Practice Before the Internal
Revenue Service
Under Title 31, Code of Federal Regu-
lations, Part 10, the Director, Office of Pro-
fessional Responsibility, is authorized to
immediately suspend from practice before
the Internal Revenue Service any practi-
tioner who, within five years from the date
the expedited proceeding is instituted (1)
has had a license to practice as an attorney,
certified public accountant, or actuary sus-
pended or revoked for cause or (2) has been
convicted of certain crimes.
The following individuals have been
placed under suspension from practice
before the Internal Revenue Service by
virtue of the expedited proceeding provi-
sions:
NameAddressDesignationDate of Suspension
Radwick, PeterWoodinville, WACPAIndefinite
from
March 10, 2003
Jellinger, RichardAnoka, MNAttorneyIndefinite
from
March 10, 2003
Deen, BillyMansfield, TXCPAIndefinite
from
March 10, 2003
Dougherty Jr, WilliamNewport News, VAAttorneyIndefinite
from
March 10, 2003
Abood, NormanOregon, OHAttorneyIndefinite
from
March 10, 2003
Matis, VendelRedlands, CAAttorneyIndefinite
from
March 31, 2003
Workman, AndrewPanama City, FLCPAIndefinite
from
March 31, 2003
Bagwell, Jr., NoelCunningham, TNAttorneyIndefinite
from
March 31, 2003
O’Brien, BrienSioux City, IAAttorneyIndefinite
from
March 31, 2003
Boykoff, FranklinPleasantville, NYAttorneyIndefinite
from
March 31, 2003
McKinnon, MarvaStatesville, NCAttorneyIndefinite
from
March 31, 2003
Bailey, Scott K.Eden Prairie, MNAttorneyIndefinite
from
March 31, 2003
August 25, 20034172003-34 I.R.B.

NameAddressDesignationDate of Suspension
Kim, KunAtlanta, GACPAIndefinite
from
March 31, 2003
Massari III, DomenicTampa, FLAttorneyIndefinite
from
May 12, 2003
Haugabrook II, TyroneValdosta, GAAttorneyIndefinite
from
May 19, 2003
Wester, JosephMontgomery, ALCPAIndefinite
from
May 19, 2003
Smercina, DavidSolon, OHCPAIndefinite
from
May 19, 2003
Pullings, RetnaWashington, DCAttorneyIndefinite
from
May 19, 2003
Boyd, JamesMendota Heights, MNAttorneyIndefinite
from
May 20, 2003
Spindler, JudithOmaha, NEAttorneyIndefinite
from
May 20, 2003
Wintroub, EdwardOmaha, NEAttorneyIndefinite
from
May 20, 2003
Brinker, PeterOmaha, NEAttorneyIndefinite
from
May 21, 2003
Valdes, AlfredoOld Greenwich, CTCPAIndefinite
from
May 21, 2003
Cruise, MichaelLincoln, NEAttorneyIndefinite
from
May 22, 2003
Schoppert, ThomasMinot, NDAttorneyIndefinite
from
June 2, 2003
White, PaulSmithfield, NCEnrolled AgentIndefinite
from
June 2, 2003
Brier, MichaelProvidence, RICPAIndefinite
from
June 16, 2003
2003-34 I.R.B.418August 25, 2003

Resignations of Enrolled Agents
Under Title 31, Code of Federal Regu-
lations, Part 10, an enrolled agent, in or-
der to avoid the institution or conclusion
of a proceeding for his or her disbarment
or suspension from practice before the In-
ternal Revenue Service, may offer his or
her resignation as an enrolled agent. The
Director, Office of Professional Responsi-
bility, in his discretion, may accept the of-
fered resignation.
The Director, Office of Professional
Responsibility, has accepted offers of
resignation as an enrolled agent from the
following individuals:
NameAddressDate of Designation
Evans, CarolineTiverton, RIMay 7, 2003
Censure Issued by Consent
Under Title 31, Code of Federal Reg-
ulations, Part 10, in lieu of a proceeding
being instituted or continued, an attorney,
certified public accountant, enrolled agent,
or enrolled actuary, may offer his or her
consent to the issuance of a censure. Cen-
sure is a public reprimand.
The following individuals have con-
sented to the issuance of a Censure:
NameAddressDesignationDate of Censure
Pargas, Carlos B.Miami, FLCPAMarch 19, 2003
Malkasian, GarySacramento, CACPAMarch 27, 2003
Wilcox, Ronald E.Mt. Carmel, ILCPAApril 29, 2003
Wood, David T.Shawneetown, ILCPAMay 27, 2003
August 25, 20034192003-34 I.R.B.

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified,above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations
to show that the previous published rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current use
and formerly used will appear in material
published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement 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.
2003-34 I.R.B.iAugust 25, 2003

Numerical Finding List
1
Bulletins 2003–27 through 2003–33
Announcements:
2003-45, 2003-28 I.R.B.73
2003-46, 2003-30 I.R.B.222
2003-47, 2003-29 I.R.B.124
2003-48, 2003-28 I.R.B.73
2003-49, 2003-32 I.R.B.339
2003-50, 2003-30 I.R.B.222
2003-52, 2003-32 I.R.B.345
2003-53, 2003-32 I.R.B.345
Notices:
2003-38, 2003-27 I.R.B.9
2003-39, 2003-27 I.R.B.10
2003-40, 2003-27 I.R.B.10
2003-41, 2003-28 I.R.B.49
2003-42, 2003-28 I.R.B.49
2003-43, 2003-28 I.R.B.50
2003-44, 2003-28 I.R.B.52
2003-45, 2003-29 I.R.B.86
2003-46, 2003-28 I.R.B.53
2003-47, 2003-30 I.R.B.132
2003-48, 2003-30 I.R.B.133
2003-49, 2003-32 I.R.B.294
2003-50, 2003-32 I.R.B.295
2003-51, 2003-33 I.R.B.361
2003-52, 2003-32 I.R.B.296
2003-53, 2003-33 I.R.B.362
2003-54, 2003-33 I.R.B.363
Proposed Regulations:
REG-106736-00, 2003-28 I.R.B.60
REG-107618-02, 2003-27 I.R.B.13
REG-122917-02, 2003-27 I.R.B.15
REG-131997-02, 2003-33 I.R.B.366
REG-116914-03, 2003-32 I.R.B.338
Revenue Procedures:
2003-45, 2003-27 I.R.B.11
2003-46, 2003-28 I.R.B.54
2003-47, 2003-28 I.R.B.55
2003-48, 2003-29 I.R.B.86
2003-49, 2003-29 I.R.B.89
2003-50, 2003-29 I.R.B.119
2003-51, 2003-29 I.R.B.121
2003-52, 2003-30 I.R.B.134
2003-53, 2003-31 I.R.B.230
2003-54, 2003-31 I.R.B.236
2003-55, 2003-31 I.R.B.242
2003-56, 2003-31 I.R.B.249
2003-57, 2003-31 I.R.B.257
2003-58, 2003-31 I.R.B.262
2003-59, 2003-31 I.R.B.268
Revenue Procedures— Continued:
2003-60, 2003-31 I.R.B.274
2003-61, 2003-32 I.R.B.296
2003-62, 2003-32 I.R.B.299
2003-63, 2003-32 I.R.B.304
2003-64, 2003-32 I.R.B.306
2003-65, 2003-32 I.R.B.336
2003-66, 2003-33 I.R.B.364
Revenue Rulings:
2003-70, 2003-27 I.R.B.3
2003-71, 2003-27 I.R.B.1
2003-72, 2003-33 I.R.B.346
2003-73, 2003-28 I.R.B.44
2003-74, 2003-29 I.R.B.77
2003-75, 2003-29 I.R.B.79
2003-76, 2003-33 I.R.B.355
2003-77, 2003-29 I.R.B.75
2003-78, 2003-29 I.R.B.76
2003-79, 2003-29 I.R.B.80
2003-80, 2003-29 I.R.B.83
2003-81, 2003-30 I.R.B.126
2003-82, 2003-30 I.R.B.125
2003-83, 2003-30 I.R.B.128
2003-84, 2003-32 I.R.B.289
2003-85, 2003-32 I.R.B.291
2003-86, 2003-32 I.R.B.290
2003-87, 2003-29 I.R.B.82
2003-88, 2003-32 I.R.B.292
2003-90, 2003-33 I.R.B.353
2003-91, 2003-33 I.R.B.347
2003-92, 2003-33 I.R.B.350
2003-93, 2003-33 I.R.B.346
2003-94, 2003-33 I.R.B.357
2003-95, 2003-33 I.R.B.358
Treasury Decisions:
9061, 2003-27 I.R.B.5
9062, 2003-28 I.R.B.46
9067, 2003-32 I.R.B.287
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2003-1 through 2003-26 is in Internal Revenue Bulletin 2003-27,
dated July 7, 2003.
August 25, 2003ii2003-34 I.R.B.

Findings List of Current Actions on
Previously Published Items
1
Bulletins 2003–27 through 2003–33
Notices:
89-79
Modified and superseded by
Rev. Proc. 2003-47, 2003-28 I.R.B.55
89-94
Modified by
Notice 2003-50, 2003-32 I.R.B.295
2001-4
Section III.C. superseded for 2004 and subsequent
calendar years by
Rev. Proc. 2003-64, 2003-32 I.R.B.306
2001–70
Amplified by
Notice 2003-45, 2003-29 I.R.B.86
2001–74
Amplified by
Notice 2003-45, 2003-29 I.R.B.86
2002-1
Amplified by
Notice 2003-49, 2003-32 I.R.B.294
Proposed Regulations:
EE-86-88 (LR-279-81)
Withdrawn by
REG-122917-02, 2003-27 I.R.B.15
Revenue Procedures:
66-50
Modified,amplified,andsupersededby
Rev. Proc. 2003-62, 2003-32 I.R.B.299
77-12
Amplified, modified, and superseded by
Rev. Proc. 2003-51, 2003-29 I.R.B.121
81-40
Modified and superseded by
Rev. Proc. 2003-62, 2003-32 I.R.B.299
89-21
Superseded by
Rev. Proc. 2003-53, 2003-31 I.R.B.230
90-32
Section 4 superseded by
Rev. Proc. 2003-55, 2003-31 I.R.B.242
Section 5 superseded by
Rev. Proc. 2003-56, 2003-31 I.R.B.249
Section 6 superseded by
Rev. Proc. 2003-57, 2003-31 I.R.B.257
Section 7 superseded by
Rev. Proc. 2003-59, 2003-31 I.R.B.268
Revenue Procedures— Continued:
Section8supersededby
Rev. Proc. 2003-60, 2003-31 I.R.B.274
96-30
Modified and amplified by
Rev. Proc. 2003-48, 2003-29 I.R.B.86
2000-12
Modified by
Rev. Proc. 2003-64, 2003-32 I.R.B.306
2000–15
Superseded by
Rev. Proc. 2003-61, 2003-32 I.R.B.296
2002-9
Modified by
Rev. Proc. 2003-45, 2003-27 I.R.B.11
Amplified and modified by
Rev. Proc. 2003-50, 2003-29 I.R.B.119
Modified and amplified by
Rev. Proc. 2003-63, 2003-32 I.R.B.304
Rev. Rul. 2003-81, 2003-30 I.R.B.126
2002-33
Amplified and modified by
Rev. Proc. 2003-50, 2003-29 I.R.B.119
2002-34
Superseded by
Rev. Proc. 2003-52, 2003-30 I.R.B.134
2003-3
Modified by
Rev. Proc. 2003-48, 2003-29 I.R.B.86
2003-15
Modified and superseded by
Rev. Proc. 2003-49, 2003-29 I.R.B.89
Revenue Rulings:
79-410
Amplified by
Rev. Rul. 2003-90, 2003-33 I.R.B.353
81-225
Clarified and amplified by
Rev. Rul. 2003-92, 2003-33 I.R.B.350
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2003-1 through 2003-26 is in Internal Revenue Bulletin 2003-27, dated July 7, 2003.
2003-34 I.R.B.iiiAugust 25, 2003
*U.S. Government Printing Office:2003—496–919/60097