Internal Revenue Bulletin 2012-21 (PDF rendition): IRS Notices

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. 201
2-21
May 21, 2012
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
T.D. 9585, page 935.
Final regulations under section 1248 of the Code characterize
gain with respect to stock in certain foreign corporations upon
distributions.
REG–137589–07, page 942.
Proposed regulations under section 162 of the Code describe
the circumstances under which expenses paid or incurred for
lodging when not traveling away from home (local lodging) may
be deductible expenses. Proposed amendments to the regula-
tions under section 262 provide that expenses for local lodg-
ing are nondeductible personal expenses unless they qualify as
deductible expenses under section 162. Notice 2007–47 ob-
soleted.
REG–139991–08, page 945.
Proposed regulations under section 337(d) of the Code pro-
vide guidance concerning certain transfers of property from a
C corporation to a Regulated Investment Company (RIC) or a
Real Estate Investment Trust (REIT) and will affect the parties
to such transactions.
Notice 2012–34, page 937.
This notice provides that the Treasury Department and the Ser-
vice intend to delay the proposed effective dates for reporting
for debt instruments and options by brokers and others under
sections 6045(g), 6045(h), 6045A, and 6045B of the Code
from January 1, 2013, to January 1, 2014.
Notice 2012–35, page 937.
This notice provides inflation adjustment factors and reference
prices for purposes of computing the renewable electricity pro-
duction tax credit under section 45 of the Code for tax year
2012.
Rev. Proc. 2012–27, page 940.
Th procedure provides guidance on how a taxpayer may make
the notification required by section 42(j)(6)(B)(i) of the Code,
which was added by section 3004(c) of the Housing Assistance
Tax Act of 2008 (Pub. L. 110–289). The notification begins the
3-year statutory period for assessing a deficiency with respect
to the taxpayer resulting from a reduction in the qualified basis
of a low-income housing tax credit building that occurs after
the taxpayer disposes of the building (or an interest therein).
EXEMPT ORGANIZATIONS
REG–144267–11, page 949.
Proposed regulations under section 4944(c) of the Code pro-
vide guidance to private foundations on program-related invest-
ments. Private foundations generally are subject to excise
taxes on investments that jeopardize the carrying out of their
exempt purposes. However, program-related investments are
excepted from the tax on jeopardizing investments. The pro-
posed regulations add nine new examples that illustrate that
a wide range of investments qualify as program-related invest-
ments than the range currently presented in regulations section
53.4944–3(b).
Finding Lists begin on page ii.

The IRS Mission
Provide Americ
a’s taxpayers top-quality service by helping
them understa
nd and meet their tax responsibilities and en-
force the law wi
th integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
May 21, 20122012–21 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 1248.
—Gain from
Certain Sales
or Exchanges
of Stock in Certain Foreign
Corporations
26 CFR 1.1248–1: Treatment of gain from certain
sales or exchanges of stock in certain foreign corpo-
rations.
T.D. 9585
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Treatment of Gain Recognized
With Respect to Stock in
Certain Foreign Corporations
Upon Distributions
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains final
regulations relating to the characterization
of gain recognized with respect to stock in
certain foreign corporations upon distribu-
tions. The regulations finalize proposed
regulations and remove temporary regu-
lations that characterize gain recognized
with respect to stock in foreign corpora-
tions upon distributions as a deemed divi-
dend in certain situations. The regulations
affect certain persons that recognize gain
with respect to stock in connection with the
receipt of a distribution of property from a
foreign corporation.
DATES:Effective Date:These regulations
are effective on April 24, 2012.
Applicability Date:These regulations
applytodistributionsoccurringonorafter
February 10, 2009.
FOR FURTHER INFORMATION
CONTACT: Ryan A. Bowen, (202)
622–3860 (not a toll-free number).
SUPPLEMENTAR
Y INFORMATION:
Background
On February 11
, 2009, the IRS and the
Department of
the Treasury (the Treasury
Department) p
ublished temporary and pro-
posed regula
tions in theFederal Regis-
ter(REG–147
636–08, 74 FR 6824; T.D.
9444, 2009–9
I.R.B. 603) (the temporary
or proposed r
egulations, as applicable, and
collectivel
y, the 2009 regulations). The
2009 regula
tions, in part, provide that for
purposes of
section 1248(a), gain recog-
nized under
section 301(c)(3) in connec-
tion with th
e receipt of a distribution of
property f
rom a foreign corporation with
respect to
its stock shall be treated as gain
from the sa
le or exchange of the stock
of such for
eign corporation (2009 section
1248 regu
lations).
The 2009 re
gulations also addressed the
applicat
ion of section 367 to certain related
party sto
ck transactions that are recharac-
terized u
nder section 304. As described in
Notice 20
12–15, 2012–9 I.R.B. 495 (Feb-
ruary 27
, 2012) (see §601.601(d)(2)(ii)(b)
of this c
hapter), the IRS and the Trea-
sury Dep
artment intend to amend the reg-
ulation
s under section 367 to provide that
the sect
ion 351 exchange that is deemed
to occu
r in a section 304 transaction is
subjec
t to section 367(a) and (b), as ap-
plicab
le. Accordingly, this Treasury de-
cision
does not finalize the portions of
the 200
9 regulations that address the in-
teract
ion of sections 304 and 367. Those
porti
ons of the 2009 regulations will be
withd
rawn in separate published guidance
(REG–
104400–12).
No pub
lic hearing on the 2009 section
1248 r
egulations was requested or held and
no wri
tten comments were received. This
Treas
ury decision adopts the 2009 section
1248
regulations, with one modification to
remo
ve a deadwood provision, as final reg-
ulat
ions under section 1248(a). This Trea-
sury
decision also removes the temporary
regu
lations under section 1248(a).
Expl
anation of Provisions
The f
inal regulations provide that gain
rec
ognized under section 301(c)(3) on the
rec
eipt of a distribution of property from
a foreign corp
oration with respect to its
stock shall be
treated for purposes of sec-
tion 1248(a) a
s gain from the sale or ex-
change of the
stock of such corporation.
For purposes
of section 1248(a), a sale or
exchange als
o includes a distribution that
gives rise to
gain with respect to stock un-
der section
302(a) or 331(a). The final reg-
ulations en
sure that the earnings and prof-
its of lower
-tier foreign subsidiaries de-
scribedins
ection 1248(c)(2) are taken into
account whe
n gain is recognized with re-
spect to st
ock of a controlled foreign cor-
poration.
The 2009 se
ction 1248 regulations in-
corporate
d a provision from the prior final
regulatio
ns under section 1248 providing
that secti
on 1248(a) applies to gain recog-
nized wit
h respect to stock under section
331(a)(2
) by reason of a partial liquidation
of a corpo
ration. The final regulations re-
move the r
eference to partial liquidations
under sec
tion 331(a)(2) in order to reflect
amendme
nts made in 1982 by the Tax Eq-
uity and
Fiscal Responsibility Act of 1982
(Public
Law 97–248, 96 Stat. 324 (1982)),
which re
pealed section 331(a)(2) and pro-
vided n
ew rules regarding redemptions in
partia
l liquidation under section 302. See
sectio
n302(b)(4)and(e).
Special
Analyses
It has be
en determined that this Trea-
sury dec
ision is not a significant regula-
tory act
ion as defined in Executive Order
12866. T
herefore, a regulatory assessment
is not re
quired. It also has been determined
that 5 U
.S.C. 553(b) and (d) do not ap-
plytot
hese regulations. Pursuant to the
Regula
tory Flexibility Act (5 U.S.C. 601
et seq.
), it is hereby certified that this rule
will no
t have a significant economic im-
pact on
a substantial number of small en-
titie
s. These regulations primarily will af-
fect l
arge domestic corporations. Thus, the
numbe
r of affected small entities will not
be sub
stantial. Pursuant to section 7805(f)
of the
InternalRevenueCode,thenoticeof
prop
osed rulemaking preceding this regu-
lati
on was submitted to the Chief Counsel
for A
dvocacy of the Small Business Ad-
mini
stration for comments on its impact on
smal
l business.
2012–21 I.R.B.935May 21, 2012

Drafting Information
The principal author of these regula-
tions is Ryan A. Bowen of the Office of
Associate Chief Counsel (International).
However, other personnel from the IRS
and the Treasury Department participated
in their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read as follows:
Authority: 26 U.S.C. 7805* * *
Par. 2. Section 1.1248–1 is amended
by:
1. Revising paragraphs (b) and (g)(2).
2. Removing paragraph (h).
The revisions read as follows.
§1.1248–1 Treatment of gain from certain
sales or exchanges of stock in certain
foreign corporations.
*****
(b)Sale or exchange. For purposes of
section 1248(a), the term sale or exchange
includes the receipt of a distribution which
is treated as in exchange for stock under
section 302(a) (relating to distributions in
redemption of stock) or section 331(a) (re-
lating to distributions in complete liquida-
tion of a corporation). For purposes of sec-
tion 1248(a), gain recognized by a share-
holder under section 301(c)(3) in connec-
tion with a distribution of property by a
corporation with respect to its stock shall
be treated as gain from the sale or ex-
change of stock of such corporation.
*****
(g) * * *
(2) Paragraph (b) of this section applies
to distributions that occur on or after Feb-
ruary 10, 2009.
§1.1248–1T [Removed]
Par. 3. Section 1.1248–1T is removed.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved April 13, 2012.
Emily S. McMahon,
Acting Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on April 23, 2012,
8:45 a.m., and published in the issue of the Federal Register
for April 24, 2012, 77 F.R. 24380)
Section 6045A.—Informa-
tion Required in Connection
With Transfers of Covered
Securities to Brokers
The proposed effective date for reporting on trans-
fers of debt instruments and options is postponed to
January 1, 2014. See Notice 2012-34, page 937.
Section 6045B.—Returns
Relating to Actions Affecting
Basis of Specified Securities
Theproposedeffectivedateforreportingonac-
tions affecting the basis of debt instruments and op-
tions is postponed to January 1, 2014. See Notice
2012-34, page 937.
May 21, 20129362012–21 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Basis Reporting by
Securities Brokers and
Basis Determination for Debt
Instruments and Options
Notice 2012–34
PURPOSE
This notice provides that the Treasury
Department and the Internal Revenue Ser-
vice intend to delay the proposed effec-
tive dates for reporting for debt instru-
ments and options by brokers and others
under sections 6045(g), 6045(h), 6045A,
and 6045B of the Internal Revenue Code
from January 1, 2013, to January 1, 2014.
BACKGROUND
Section 403 of the Energy Improvement
and Extension Act of 2008, Div. B of Pub.
L. No. 110–343, 122 Stat. 3765, enacted
on October 3, 2008 (the “Act”), amended
the broker reporting rules in section 6045
for certain securities, including debt instru-
ments and options. For a debt instrument
acquired on or after January 1, 2013, or
such later date determined by the Secre-
tary, section 6045(g) generally requires a
broker, when reporting the sale of the debt
instrument to the Internal Revenue Ser-
vice, to report the customer’s adjusted ba-
sis for the debt instrument and whether any
gain or loss upon the sale of the debt in-
strument is long-term or short-term. For
certain options granted or acquired on or
after January 1, 2013, section 6045(h) gen-
erally requires a broker to report informa-
tion similar to that required under section
6045(g), as well as information on gross
proceeds. The Act also added two new
sections to the Internal Revenue Code: (1)
section 6045A, which requires a broker
transferring securities subject to basis re-
portingtoreportbasis and other informa-
tion to the receiving broker; and (2) sec-
tion 6045B, which requires an issuer of a
security subject to basis reporting to file a
return to describe the issuer’s actions that
affect the basis of the security.
On November 25, 2011, the Treasury
Department and the Internal Revenue
Service published in the Federal Reg-
ister a notice of proposed rulemaking
relating to the reporting requirements un-
der sections 6045, 6045A, and 6045B
for debt instruments and options.See
Basis Reporting by Securities Brokers
and Basis Determination for Debt Instru-
ments and Options (REG–102988–11,
2012–4 I.R.B. 326 [76 FR 72652]) (the
“proposed regulations”). A public hearing
on the proposed regulations was held on
March 16, 2012.
Under the proposed regulations, a bro-
ker is required to report the information
required under section 6045(g) for certain
debt instruments acquired on or after Jan-
uary 1, 2013, and the information required
under section 6045(h) for certain options
granted or acquired on or after January 1,
2013. The proposed regulations also re-
quire a broker to provide the information
required under section 6045A for a transfer
of certain debt instruments or options that
occurs on or after January 1, 2013, and the
information required under section 6045B
for an organizational action occurring on
or after January 1, 2013, that affects a debt
instrument or an option.
The Treasury Department and the Inter-
nal Revenue Service received numerous
requests to delay the proposed effective
dates for both debt instruments and op-
tions in the proposed regulations. Brokers
and other interested parties maintain that
the proposed effective date of January 1,
2013, does not provide them sufficient
time to build and test the systems required
to implement the reporting rules for debt
instruments and options.
DELAY OF THE PROPOSED
EFFECTIVE DATES
After consideration of the comments
and testimony received on the proposed ef-
fective dates, the Treasury Department and
the Internal Revenue Service intend to pro-
vide that the rules in the proposed regu-
lations when finalized will not apply un-
til January 1, 2014. For example, the final
regulations under section 6045(g) will not
apply to a debt instrument acquired before
January 1, 2014, and the final regulations
undersection6045willnotapplytoanop-
tion granted or acquired before January 1,
2014.
DRAFTING INFORMATION
The principal author of this notice is
Pamela Lew of the Office of Associate
Chief Counsel (Financial Institutions
& Products). For further information
regarding this notice, contact Pamela Lew
at (202) 622–3950 (not a toll-free call).
Credit for Renewable
Electricity Production,
Refined Coal Production,
and Indian Coal Production,
and Publication of Inflation
Adjustment Factors and
Reference Prices for Calendar
Year 2012
Notice 2012–35
This notice publishes the inflation ad-
justment factors and reference prices for
calendar year 2012 for the renewable elec-
tricity production credit, the refined coal
production credit, and the Indian coal pro-
duction credit under section 45 of the In-
ternal Revenue Code. The 2012 inflation
adjustment factors and reference prices are
used in determining the availability of the
credits. The 2012 inflation adjustment fac-
tors and reference prices apply to calendar
year 2012 sales of kilowatt-hours of elec-
tricity produced in the United States or a
possession thereof from qualified energy
resources and to calendar year 2012 sales
of refined coal and Indian coal produced in
the United States or a possession thereof.
BACKGROUND
Section 45(a) provides that the renew-
able electricity production credit for any
tax year is an amount equal to the prod-
uct of 1.5 cents multiplied by the kilowatt
hours of specified electricity produced by
the taxpayer and sold to an unrelated per-
son during the tax year. This electricity
must be produced from qualified energy
resources and at a qualified facility during
the 10-year period beginning on the date
the facility was originally placed in ser-
vice.
2012–21 I.R.B.937May 21, 2012

Section 45(b)(1) provides that the
amount of the credit determined under sec-
tion 45(a) is reduced by an amount which
bears the same ratio to the amount of the
credit as (A) the amount by which the ref-
erence price for the calendar year in which
the sale occurs exceeds 8 cents, bears to
(B) 3 cents. Under section 45(b)(2), the
1.5 cent amount in section 45(a), the 8 cent
amount in section 45(b)(1), the $4.375
amount in section 45(e)(8)(A), and in sec-
tion 45(e)(8)(B)(i), the $2.00 amount in
section 45(e)(8)(D)(ii)(I), the reference
price of fuel used as feedstock (within
the meaning of section 45(c)(7)(A)) in
2002 are each adjusted by multiplying the
amount by the inflation adjustment factor
for the calendar year in which the sale
occurs. If any amount as increased under
the preceding sentence is not a multiple
of 0.1 cent, the amount is rounded to the
nearest multiple of 0.1 cent.
Section 45(c)(1) defines qualified
energy resources as wind, closed-loop
biomass, open-loop biomass, geother-
mal energy, solar energy, small irrigation
power, municipal solid waste, qualified
hydropower production, marine and hy-
drokinetic renewable energy.
Section 45(d)(1) defines a qualified fa-
cility using wind to produce electricity as
any facility owned by the taxpayer that is
originally placed in service after Decem-
ber 31, 1993, and before January 1, 2013.
See section 45(e)(7) for rules relating to
the inapplicability of the credit to electric-
ity sold to utilities under certain contracts.
Section 45(d)(2)(A) defines a qualified
facility using closed-loop biomass to pro-
duce electricity as any facility (i) owned
by the taxpayer that is originally placed in
service after December 31, 1992, and be-
fore January 1, 2014, or (ii) owned by the
taxpayer which before January 1, 2014, is
originally placed in service and modified
to use closed-loop biomass to co-fire with
coal, with other biomass, or with both, but
only if the modification is approved un-
der the Biomass Power for Rural Develop-
ment Programs or is part of a pilot project
of the Commodity Credit Corporation as
described in 65 Fed. Reg. 63052. Sec-
tion 45(d)(2)(C) provides that in the case
of a qualified facility described in section
45(d)(2)(A)(ii), (i) the 10-year period re-
ferred to in section 45(a) is treated as be-
ginning no earlier than the date of enact-
ment of section 45(d)(2)(B)(i); and (ii) if
the owner of the facility is not the producer
of the electricity, the person eligible for the
credit allowable under section 45(a) is the
lessee or the operator of the facility.
Section 45(d)(3)(A) defines a quali-
fied facility using open-loop biomass to
produce electricityas any facility owned
by the taxpayer which (i) in the case of a
facility using agricultural livestock waste
nutrients, (I) is originally placed in ser-
vice after the date of enactment of section
45(d)(3)(A)(i)(I) and before January 1,
2014, and (II) the nameplate capacity rat-
ing of which is not less than 150 kilowatts;
and (ii) in the case of any other facil-
ity, is originally placed in service before
January 1, 2014. In the case of any facility
describedinsection45(d)(3)(A),ifthe
owner of the facility is not the producer
of the electricity, section 45(d)(3)(C)
provides that the person eligible for the
credit allowable under section 45(a) is the
lessee or the operator of the facility.
Section 45(d)(4) defines a qualified fa-
cility using geothermal or solar energy to
produce electricityas any facility owned
by the taxpayer which is originally placed
in service after the date of enactment of
section 45(d)(4) and before January 1,
2014 (January 1, 2006, in the case of a
facility using solar energy). A qualified
facility using geothermal or solar energy
does not include any property described in
section 48(a)(3) the basis of which is taken
into account by the taxpayer for purposes
of determining the energy credit under
section 48.
Section 45(d)(5) defines a qualified fa-
cility using small irrigation power to pro-
duce electricity as any facility owned by
the taxpayer which is originally placed in
service after the date of enactment of sec-
tion 45(d)(5) and before October 3, 2008.
Section 45(d)(6) defines a qualified fa-
cility using gas derived from the biodegra-
dation of municipal solid waste to produce
electricity as any facility owned by the tax-
payer which is originally placed in ser-
vice after the date of enactment of section
45(d)(6) and before January 1, 2014.
Section 45(d)(7) defines a qualified fa-
cility (other than a facility described in
paragraph (6)) that burns municipal solid
waste to produce electricity as any facil-
ity owned by the taxpayer which is orig-
inally placed in service after the date of
enactment of section 45(d)(7) and before
January 1, 2014. A qualified facility burn-
ing municipal solid waste includes a new
unit placed in service in connection with a
facility placed in service on or before the
date of enactment of section 45(d)(7), but
only to the extent of the increased amount
of electricity produced at the facility by
reason of such new unit.
Section 45(d)(8) provides in the case
of a facility that produces refined coal,
the term “refined coal production facility”
means (i) with respect to a facility produc-
ing steel industry fuel, any facility (or any
modification to a facility) which is placed
in service before January 1, 2010, and (ii)
with respect to any other facility producing
refined coal, and facility placed in service
after the date of the enactment of the Amer-
ican Jobs Creation Act of 2004 and before
January 1, 2012.
Section 45(d)(9) defines a qualified
facility producing qualified hydroelectric
production described in section 45(c)(8)
as (A) any facility producing incremen-
tal hydropower production, but only to
the extent of its incremental hydropower
production attributable to efficiency im-
provements or additions to capacity de-
scribed in section 45(c)(8)(B) placed in
service after the date of enactment of sec-
tion 45(d)(9) and before January 1, 2014,
and (B) any other facility placed in ser-
vice after the date of enactment of section
45(d)(9) and before January 1, 2014. Sec-
tion 45(d)(9)(C) provides that in the case
of a qualified facility described in section
45(d)(9)(A), the 10-year period referred to
in section 45(a) is treated as beginning on
the date the efficiency improvements or
additions to capacity are placed in service.
Section 45(d)(10) provides in the case
of a facility that produces Indian coal,
the term “Indian coalproduction facility”
means a facility which is placed in service
before January 1, 2009.
Section 45(d)(11) provides in the case
of a facility producing electricity from ma-
rine and hydrokinetic renewable energy,
the term “qualified facility” means any
facility owned by the taxpayer which (i)
has a nameplate capacity rating of at least
150 kilowatts, and (ii) which is originally
placed in service on or after the date of
the enactment of this paragraph and before
January 1, 2012.
Section 45(e)(8)(A) provides that the
refined coal production credit is an amount
equal to $4.375 per ton of qualified re-
fined coal (i) produced by the taxpayer at a
May 21, 20129382012–21 I.R.B.

refined coal production facility during the
10-year period beginning on the date the
facility was originally placed in service,
and (ii) sold by the taxpayer (I) to an unre-
lated person and (II) during the 10-year pe-
riod and the tax year. Section 45(e)(8)(B)
provides that the amount of credit deter-
mined under section 45(e)(8)(A) is re-
duced by an amount which bears the same
ratio to the amount of the increase as (i)
the amount by which the reference price of
fuel used as feedstock (within the meaning
of section 45(c)(7)(A)) for the calendar
year in which the sale occurs exceeds an
amount equal to 1.7 multiplied by the ref-
erence price for such fuel in 2002, bears
to (ii) $8.75. Section 45(e)(8)(D)(ii)(I)
provides that in the case of a taxpayer who
produces steel industry fuel, subparagraph
(A) shall be applied by substituting “2.00
per barrel-of-oil equivalent” for $4.375
per ton.” Section 45(e)(8)(D)(ii)(II) pro-
vides that in lieu of the 10-year period
referred to in clauses (i) and (ii)(II) of sub-
paragraph (A), the credit period shall be
the period beginning in the later of the date
such facility was originally placed-in-ser-
vice, or October 1, 2008, and ending on
the later of December 31, 2009, or the
date which is 1 year after the date such
facility or the modifications described in
clause (iii) were placed in service. Section
45(e)(8)(D)(ii)(III) provides that subpara-
graph (B) (dealing with the phaseout of
the credit) will not apply.
Section 45(e)(10)(A) provides in the
case of a producer of Indian coal, the credit
determined under section 45 for any tax-
able year shall be increased by an amount
equal to the applicable dollar amount per
ton of Indian coal (i) produced by the tax-
payer at an Indian coal production facility
during the 7-year period beginning on Jan-
uary 1, 2006, and (ii) sold by the taxpayer
(I) to an unrelated person, and (II) during
such 7-year period and such taxable year.
Section 45(e)(10)(B)(i) defines “ap-
plicable dollar amount” for any taxable
year as (I) $1.50 in the case of calendar
years 2006 through 2009, and (II) $2.00 in
the case of calendar years beginning after
2009.
Section 45(e)(2)(A) requires the Secre-
tary to determine and publish in the Fed-
eral Register each calendar year the infla-
tion adjustment factor and the reference
price for the calendar year. The inflation
adjustment factors and the reference prices
for the 2012 calendar year were published
in the Federal Register on April 11, 2012
(77 Fed. Reg. 21835). Corrections were
published on April 30, 2012 (77 Fed. Reg.
25538).
Section 45(e)(2)(B) defines the infla-
tion adjustment factor for a calendar year
as the fraction the numerator of which is
the GDP implicit price deflator for the pre-
ceding calendar year and the denominator
of which is the GDP implicit price defla-
tor for the calendar year 1992. The term
“GDP implicit price deflator” means the
most recent revision of the implicit price
deflator for the gross domestic product as
computed and published by the Depart-
ment of Commerce before March 15 of the
calendar year.
Section 45(e)(2)(C) provides that the
reference price is the Secretary’s determi-
nation of the annual average contract price
per kilowatt hour of electricity generated
from the same qualified energy resource
and sold in the previous year in the United
States. Only contracts entered into af-
ter December 31, 1989, are taken into ac-
count.
Under section 45(e)(8)(C), the deter-
mination of the reference price for fuel
used as feedstock within the meaning of
section 45(c)(7)(A) is made according to
rules similar to the rules under section
45(e)(2)(C).
Under section 45(e)(10)(B)(ii), in the
case of any calendar year after 2006,
each of the dollar amounts under section
45(e)(10)(B)(i) shall be equal to the prod-
uct of such dollar amount and the inflation
adjustment factor determined under sec-
tion 45(e)(2)(B) for the calendar year,
except that section 45(e)(2)(B) shall be
applied by substituting 2005 for 1992.
INFLATION ADJUSTMENT FACTORS
AND REFERENCE PRICES
The inflation adjustment factor for
calendar year 2012 for qualified energy
resources and refined coal is 1.4799. The
inflation adjustment factor for Indian coal
is 1.1336. The reference price for calendar
year 2012 for facilities producing elec-
tricity from wind (based upon information
provided by the Department of Energy)
is 5.31 cents per kilowatt hour. The ref-
erence prices for fuel used as feedstock
within the meaning of section 45(c)(7)(A),
relating to refined coal production (based
upon information provided by the Depart-
ment of Energy) are $31.90 per ton for
calendar year 2002 and $58.49 per ton for
calendar year 2012. The reference prices
for facilities producing electricity from
closed-loop biomass, open-loop biomass,
geothermal energy, solar energy, small
irrigation power, municipal solid waste,
qualified hydropower production, marine
and hydrokinetic energy have not been
determined for calendar year 2012.
PHASE-OUT CALCULATION
Because the 2012 reference price for
electricity producedfrom wind does not
exceed 8 cents multiplied by the infla-
tion adjustment factor, the phaseout of the
credit provided in section 45(b)(1) does
not apply to such electricity sold during
calendar year 2012. Because the 2012 ref-
erence price of fuel used as feedstock for
refined coal does not exceed the $31.90
reference price of such fuel in 2002 mul-
tiplied by the inflation adjustment factor
and 1.7, the phaseout of credit provided in
section 45(e)(8)(B) does not apply to re-
fined coal sold during calendar year 2012.
Further, for electricity produced from
closed-loop biomass, open-loop biomass,
geothermal energy, solar energy, small
irrigation power, municipal solid waste,
qualified hydropower production, marine
and hydrokinetic energy, the phaseout of
credit provided in section 45(b)(1) does
not apply to such electricity sold during
calendar year 2012.
CREDIT AMOUNT BY QUALIFIED
ENERGY RESOURCE AND FACILITY,
REFINED COAL, AND INDIAN COAL
As required by section 45(b)(2), the
1.5 cent amount in section 45(a)(1), the
8 cent amount in section 45(b)(1), the
$4.375 amount in section 45(e)(8)(A) and
the $2.00 amount in section 45(e)(8)(D)
are each adjusted by multiplying such
amount by the inflation adjustment factor
for the calendar year in which the sale
occurs. If any amount as increased under
the preceding sentence is not a multiple
of 0.1 cent, such amount is rounded to
the nearest multiple of 0.1 cent. In the
case of electricity produced in open-loop
biomass facilities, small irrigation power
facilities, landfill gas facilities, trash com-
bustion facilities, qualified hydropower
2012–21 I.R.B.939May 21, 2012

facilities, marine andhydrokinetic renew-
able energy, section45(b)(4)(A) requires
the amount in effect under section 45(a)(1)
(before rounding to the nearest 0.1 cent)
to be reduced by one-half. Under the cal-
culation required by section 45(b)(2), the
credit for renewable electricity production
for calendar year 2012 under section 45(a)
is 2.2 cents per kilowatt hour on the sale
of electricity producedfrom the qualified
energy resources of wind, closed-loop
biomass, geothermal energy, and solar en-
ergy, and 1.1 cent per kilowatt hour on the
sale of electricity produced in open-loop
biomass facilities, small irrigation power
facilities, landfill gas facilities, trash com-
bustion facilities, qualified hydropower
facilities, marine and hydrokinetic energy
facilities. Under thecalculation required
by section 45(b)(2), the credit for refined
coal production for calendar year 2012 un-
der section 45(e)(8)(A) is $6.475 per ton
on the sale of qualified refined coal. The
credit for Indian coal production for calen-
dar year 2012 under section 45(e)(10)(B)
is $2.267 per ton on the sale of Indian coal.
DRAFTING AND CONTACT
INFORMATION
The principal author of this notice
is Philip Tiegerman of the Office of
Associate Chief Counsel (Passthroughs
and Special Industries). For further
information regarding this notice, contact
Mr. Tiegerman at (202) 622–3110 (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.)
Rev. Proc. 2012–27
SECTION 1. PURPOSE
This revenue procedure provides the
manner under § 42(j)(6)(B)(i) of the Inter-
nal Revenue Code (the Code) by which a
taxpayer may notify the Internal Revenue
Service of any increase in tax resulting
from a reduction in the qualified basis of a
low-income housing tax credit building in
order to begin the 3-year statutory period
for assessing a deficiency with respect to
that taxpayer.
SECTION 2. BACKGROUND
.01 Section 42 of the Code allows
a 10-year tax credit for investment in
qualified low-income buildings placed in
service after December 31, 1986. If, as
of the close of any taxable year in the
15-year compliance period (defined under
§ 42(i)(1) of the Code), the amount of the
qualified basis of any building with respect
to the taxpayer is less than the amount of
such basis as of the close of the preceding
taxable year, § 42(j)(1) provides that the
taxpayer’s tax for the taxable year shall be
increased by the credit recapture amount.
.02 Section 42(j)(6)(A) of the Code, as
amended by section 3004(c) of the Hous-
ing Assistance Tax Act of 2008 (Pub. L.
110–289) (the Act), provides that, in gen-
eral, an increase in tax under § 42(j) shall
not apply solely by reason of a disposi-
tion of a building (or an interest therein) if
it is reasonably expected that such build-
ing will continue to be operated as a qual-
ified low-income building for the remain-
ing compliance period with respect to such
building. A building’s compliance period
is defined in § 42(i)(1).
.03 Section 42(j)(6)(B) of the Code, as
amended by section 3004(c) of the Act,
provides that if a building (or interest
therein) is disposed of during any taxable
year and there is any reduction in the qual-
ified basis of such building which results
in an increase in tax for such taxable or
any subsequent taxable year, then (i) the
statutory period for the assessment of any
deficiency with respect to such increase in
tax shall not expire before the expiration
of 3 years from the date the Secretary is
notified by the taxpayer (in such manner
as the Secretary may prescribe) of such
reduction in qualified basis, and (ii) such
deficiency may be assessed before the
expiration of such 3-year period notwith-
standing the provisions of any other law or
rule of law which would otherwise prevent
such assessment.
.04 Under section 3004(i) of the Act,
the amendments made to § 42(j)(6) of
the Code by section 3004(c) of the Act
apply to buildings (or interests therein)
disposed of after July 30, 2008, the date
of enactment of the Act. In addition, the
amendments apply to buildings (or in-
terests therein) disposed of on or before
July 30, 2008, if (i) it is reasonably ex-
pected that such building(s) will continue
to be operated as qualified low-income
building(s) (within the meaning of § 42)
fortheremainderofthecompliancepe-
riod with respect to such building(s), and
(ii) the taxpayer elects the application of
these rules to such disposition. Rev. Proc.
2008–60, 2008–2 C.B. 1006, provides
taxpayers with the procedures for making
the election to apply these rules to disposi-
tions of buildings (or interests therein) on
or before July 30, 2008.
SECTION 3. S
COPE
This revenue procedure applies to tax-
payers that—
.01 Dispose of a low-income housing
building (or interest therein) in a transac-
tion to which the amendments made by
section 3004(c) of the Act apply; and
.02 Seek to make the notification pre-
scribed by § 42(j)(6)(B)(i) of the Code.
SECTION 4. NOTIFICATION
PROCEDURES
.01 To make the notification prescribed
by § 42(j)(6)(B)(i) of the Code a taxpayer
that disposed of a low-income building (or
interest therein) must submit a letter to the
Internal Revenue Service, signed by the
taxpayer, containing the following:
(1) A lead-in declaration stating: “By
this letter I am making the notification pre-
scribed by § 42(j)(6)(B)(i) of the Internal
Revenue Code.”;
(2) The taxpayer’s name, address, and
taxpayer identification number;
(3) The name (if any), address, and
Building Identification Number of each
building to which the taxpayer’s dispo-
sition relates. If a taxpayer received a
credit from a pass-through entity but does
not know the information required by the
preceding sentence, the taxpayer must pro-
vide the name and employer identification
number of the pass-through entity from
which the taxpayer received the credit;
(4) To the extent known, the name, ad-
dress, and taxpayer identification number
of any person(s) to whom the increase in
tax under § 42(j)(6)(B) applies as a result
of a reduction in the qualified basis of any
building to which the taxpayer’s disposi-
tion relates; and
(5) A concluding declaration stating:
“Under penalties of perjury, I declare that I
have examined this letter and the represen-
May 21, 20129402012–21 I.R.B.

tations made therein, and to the best of my
knowledge and belief, they are true, cor-
rect, and complete.”
.02 The taxpayer must mail the letter to
the address where the most current Form
8609,Low-Income Housing Credit Allo-
cation and Certification, would be filed.
For purposes of determining the 3-year
period described in § 42(j)(6)(B)(i), the
Secretary is deemed to be notified as of the
postmark date of the letter. The instruc-
tions to Form 8609 contain the address
for filing the most current Form 8609
and may be accessed electronically at:
http://www.irs.gov/app/picklist/list/form-
slnstructions.html.
SECTION 5. EFFECTIVE DATE
.01 This revenue procedure is effective
for notifications under § 42(j)(6)(B)(i) of
the Code made on or after May 2, 2012.
.02 Except to the extent provided
in section 5.03 of this revenue proce-
dure, a notification sent by a taxpayer
to the Internal Revenue Service prior to
May 2, 2012, is not effective to begin
the 3-year statutory period for assessing
a deficiency with respect to that taxpayer
under § 42(j)(6)(B)(i).
.03 A notification received from a
taxpayer by the Internal Revenue Ser-
vice prior to May 2, 2012, is effective
to begin the 3-year statutory period
if it complies with the substance of
this revenue procedure. A notification
complies with the substance of this
revenue procedure only if it provides the
information described in section 4.01(2)
and (3) of this revenue procedure, and
it contains a declaration under penalties
of perjury substantially similar to that
described in section 4.05 of this revenue
procedure.
SECTION 6. PAPERWORK
REDUCTION ACT
The collection of information con-
tained in this revenue procedure has been
reviewed and approved by the Office
of Management and Budget in accor-
dance with the Paperwork Reduction Act
(44 U.S.C. 3507) under control number
1545–2120.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
OMB control number.
The reporting requirement is contained
in section 4 of this revenue procedure. The
information is required so that taxpayers
may notify the Service of any increase in
tax resulting from a reduction in the qual-
ified basis of a low-income housing tax
credit building in order to begin the 3-year
statutory period for assessing a deficiency
with respect to that taxpayer pursuant to
§ 42(j)(6)(B)(i) of the Code.
The likely respondents are taxpayers
that have disposed of a low-income build-
ing (or interest therein). The estimated to-
tal annual reporting burden is 10 hours.
The estimated annual burden per respon-
dent is 1 hour, depending on the individual
circumstances. The estimated total num-
ber of respondents is 10.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
SECTION 7. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Julie Hanlon-Bolton of
the Office of Associate Chief Counsel
(Passthroughs and Special Industries). For
further information regarding this revenue
procedure, contact Ms. Hanlon-Bolton at
(202) 622–3040 (not a toll-free call).
2012–21 I.R.B.941May 21, 2012

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking
Local Lodging
Expenses
REG–137589–0
7
AGENCY: Inter
nal Revenue Service
(IRS), Treasu
ry.
ACTION: Notic
e of proposed rulemaking.
SUMMARY: This
document contains
proposed reg
ulations relating to the de-
ductibility
of expenses for lodging when
not travelin
gawayfromhome(locallodg-
ing). The reg
ulations affect taxpayers who
pay or incur
expenses for local lodging.
DATES: Comm
ents or a request for a pub-
lic hearing
must be received by July 24,
2012.
ADDRESSES:
Send submissions to
CC:PA:LPD:
PR (REG–137589–07), room
5203, Inter
nal Revenue Service, P.O. Box
7604, Ben F
ranklin Station, Washing-
ton, DC 200
44. Submissions may be
hand deliv
ered Monday through Friday
between th
e hours of 8 a.m. and 4 p.m.
to CC:PA:
LPD:PR (REG–137589–07),
Courier’
s Desk, Internal Revenue
Service,
1111 Constitution Avenue, NW,
Washingt
on, DC. Alternatively, taxpayers
may submi
t comments electronically
via the F
ederal eRulemaking Portal
athttp:
//www.regulations.gov(IRS
REG–137
589–07).
FOR FURT
HER INFORMATION
CONTACT
: Concerning the proposed
regulat
ions, R. Matthew Kelley, (202)
622–79
00; concerning submission of
commen
ts or a request for a hearing,
Funmi T
aylor, (202) 622–7180 (not
toll-f
ree numbers).
SUPPLE
MENTARY INFORMATION:
Backgr
ound
This do
cument contains proposed
amendm
ents to 26 CFR part 1 relating to
the ded
uction of local lodging expenses.
Sectio
n 1.262–1 of the Income Tax
Regul
ations generally disallows a de-
ducti
on for local lodging expenses. The
proposed regu
lations allow taxpayers to
deduct local l
odging expenses as ordinary
and necessary
business expenses in appro-
priate circum
stances.
Business Expe
nses Generally
Section 162(a
)oftheInternalRevenue
Code (Code) al
lows a deduction for all of
the ordinary a
nd necessary expenses paid
or incurred du
ring the taxable year in car-
rying on any t
rade or business. Whether
an expense is
ordinary and necessary is a
question of f
act. In general, a trade or busi-
ness expense
is ordinary if it is normal,
usual, or cu
stomary in the taxpayer’s type
of business
. An expense is necessary if it
is appropri
ate and helpful for the develop-
ment of the t
axpayer’s business. See Com-
missioner v
. Heininger, 320 U.S. 467, 475
(1943). An
expense that serves primarily
to furnish
the taxpayer with a social or per-
sonal bene
fit, and is only secondarily re-
latedtobu
siness, is not a necessary busi-
ness expen
se under section 162(a).
Employee E
xpenses
An expense
that an employee must
bear as a co
ndition of employment may
beadeduct
ible employee business ex-
pense. Se
e Sibla v. Commissioner, 611
F.2d 1260
(9
th
Cir. 1980), acq. (1985–2
C.B. viii
) (contributions to firemen’s mess
required
as a condition of employment
are deduc
tible business expenses).
However
, expenses that primarily are
for the e
mployee’s personal benefit or
conveni
ence are not deductible employee
busines
s expenses. See Commissioner v.
Flowers
, 326 U.S. 465 (1946) (a taxpayer’s
expens
es for lodging near his principal
work lo
cation, to avoid a long commute
to and f
rom his primary residence, were
nonded
uctible personal expenses incurred
solely
because of the taxpayer’s decision
to mai
ntain his primary residence far from
his wo
rk location).
Deduct
ible Employee Expenses
The tax
consequences to an employee
who is r
eimbursed by an employer for an
expen
se, or who receives property or ser-
vices
resulting from an employer’s pay-
ment o
f an expense, depend on whether the
expense is one
that would have been de-
ductible if pa
id directly by the employee.
For example, i
f an employee pays
an expense and
an employer reimburses
the employee u
nder a reimbursement or
other expense
allowance arrangement, the
reimbursemen
t is not includible in the
employee’s i
ncome if it is made under
an accountab
le plan. A reimbursement
is treated as
made under an accountable
plan only if i
t is made for an expense that
would be ded
uctible by the employee un-
der section
s 161 through 199. See sections
62(a)(2)(A
)and62(c).
Similarly,
if an employer provides
property or
services to an employee in
the course o
f business, the value of the
benefit to
the employee is excludable from
the employ
ee’s income if the benefit con-
stitutes a
working condition fringe under
section 13
2(a)(3). A working condition
fringe is
defined as property or services
provided
to an employee to the extent that,
if the emp
loyeepaidforthepropertyor
services
, the payment would be allowable
as a deduc
tion to the employee under sec-
tion 162
or 167.
Nondedu
ctible Personal Expenses
Section
262(a) provides that, except as
otherwi
se provided in Chapter 1 of the
Code, no
deduction is allowed for per-
sonal, l
iving, or family expenses.
Section
1.262–1(b)(5) provides, as ex-
amples o
f personal, living, and family
expense
s, that the costs of a taxpayer’s
meals i
ncurred when not traveling away
from ho
me (local meals) are generally
nonded
uctible personal expenses. Local
meal ex
penses may be deducted, however,
if they
otherwise qualify as ordinary and
neces
sary business expenses under section
162 or
as expenses for the production of
incom
e under section 212. In contrast,
lodgi
ng expenses incurred when not trav-
eling
away from home (local lodging) are
nond
eductible personal expenses. Thus,
loca
l lodging expenses that would other-
wise
qualify as trade or business expenses
unde
r section 162 or as production of in-
come
expenses under section 212 are not
ded
uctible under the current general rule.
May 21, 20129422012–21 I.R.B.

Local Lodging Expenses
The cost of local lodging that a tax-
payer pays or incurs primarily for the
taxpayer’s convenience or personal benefit
is not an ordinary and necessary expense
of a business or income-producing activ-
ity. Similarly, the cost of local lodging
provided to an employee by an employer
for the employee’s convenience or per-
sonal benefit would not be deductible by
the employee if the employee paid the
cost directly. Therefore, the value of the
lodging under those circumstances is not
excludible from the gross income of an
employee as a working condition fringe
under section 132(a)(3), and reimburse-
ment for the cost of the lodging under
those circumstances is not a payment un-
der an accountable plan under §1.62–2(c).
Consequently, unless excludible on an-
other basis, the value of the lodging or the
amount of reimbursement under those cir-
cumstances is includible in the employee’s
income under section 61 as compensation
for services.See§§1.61–21(a)(3), 1.62–2,
and 1.132–1.
The cost of local lodging is for the
convenience or personal benefit of an em-
ployee (or other recipient) if, for example,
the lodging is provided to the employee
(1) as additional compensation, such as
to provide a weekend at a luxury hotel or
resort; (2) to enable the employee to avoid
a long-distance commute (Commissioner
v. Flowers); (3) because the employee
is required to work overtime (Coombs v.
Commissioner, 608 F.2d 1269, 1273 (9
th
Cir. 1979)); (4) as housing for a recently
relocated employee while the employee
searches for permanent housing; or (5)
for the employee’s indefinite personal use
(International Artists, Ltd, v. Commis-
sioner, 55 T.C. 94 (1970)). An employer
may deduct the costs the employer incurs
in providing the lodging in each of these
cases under section 162(a) as compensa-
tion for services. See §§1.162–7(a) and
1.162–25T. However, because the primary
purpose of the lodging is to provide the
employee with a personal benefit, if the
employee pays the cost of the lodging
directly, the employee may not deduct
the expense as an ordinary and necessary
business expense under section 162(a).
Therefore, a cash reimbursement of the
cost is not excludible from the employee’s
gross income under section 62(c) and the
value of the lodging is not excludible from
the employee’s gross income under sec-
tion 132(d) as a working condition fringe.
Expenditures for local lodging may
qualify as deductible ordinary and neces-
sary expenses under appropriate circum-
stances if all other requirements of section
162aremet. Forexample,anemployer
may require its employees to stay at a local
hotel for thebona fidepurpose of facil-
itating training or team building directly
connected with the employer’s trade or
business. Similarly, a professional sports
team may require its employees (players
and coaches) to stay at a local hotel the
night before a home game to ensure physi-
cal preparedness and allow for last minute
training. Under these circumstances, the
cost of the lodging is primarily for the
business purposes of the employer and not
to provide a personal benefit to the em-
ployees. The cost of the lodging would be
deductible by an employee under section
162 if the employee paid the cost directly,
and thus the value of the lodging may
be excluded from the employee’s gross
income as a working condition fringe if
other requirements are satisfied. Similarly,
a payment from the employer reimbursing
the employee for the cost of the lodging
may be excluded from the employee’s
gross income as a payment under an ac-
countable plan if all the requirements of
an accountable plan are met.
Notice 2007–47, 2007–1 C.B. 1393
(see §601.601(d)(2) of this chapter) ad-
vises taxpayers that the IRS and the
Treasury Department intend to amend the
treatment of the costs of a taxpayer’s local
lodging under §1.262–1(b)(5). The notice
provides that, pending issuance of addi-
tional published guidance, the IRS will not
apply §1.262–1(b)(5) to expenses for local
lodging of an employee that an employer
provides to the employee or requires the
employee to obtain, if: (1) the lodging
is provided on a temporary basis; (2) the
lodging is necessary for the employee to
participate in or be available for abona
fidebusiness meeting or function of the
employer; and (3) the expenses are other-
wise deductible by the employee, or would
be deductible if paid by the employee,
under section 162(a).
Explanation of Provisions
These regulations propose to amend the
regulations under sections 162 and 262.
The proposed regulations under section
162 provide that expenses paid or incurred
for local lodging may be deductible as
ordinary and necessary expenses of a tax-
payer’s trade or business, including the
trade or business of being an employee.
The proposed regulations provide a safe
harbor for certain local lodging at a busi-
ness meeting, conference, or other activity
or function. Other local lodging expenses
may be deductible as business expenses
depending on the facts and circumstances.
The proposed regulations under sec-
tion 262 provide that a taxpayer’s costs
incurred for local lodging are personal ex-
penses unless the expenses are deductible
under section 162. Comments are specif-
ically requested on whether the section
262 regulations should be amended to pro-
vide that local lodging expenses are not
personal expenses if they are deductible
under section 212.
The proposed regulations also amend
the regulations under section 262 to re-
move references to section 217 that are ob-
solete. Section 217 was amended by the
Revenue Reconciliation Act of 1993, Pub-
lic Law 103–66 (107 Stat. 417). Under
the amendments, lodging when not travel-
ing away from home and meals are not de-
ductible as moving expenses.
Effective/Applicability Date
The regulations are proposed to apply
to expenses paid or incurred on or after
the date these regulations are published as
final regulations in theFederal Register.
However, until these regulations are pub-
lished as final regulations in theFederal
Register, taxpayers may apply the pro-
posed regulations to expenses paid or in-
curred in taxable years for which the pe-
riod of limitation on credit or refund under
section 6511 has not expired.
Effect on Other Documents
Notice 2007–47 is obsoleted as of
April 25, 2012.
Special Analyses
This notice of proposed rulemaking is
not a significant regulatory action as de-
2012–21 I.R.B.943May 21, 2012

fined in Executive Order 12866, as supple-
mented by Executive Order 13563. There-
fore, a regulatory assessment is not re-
quired. It also has been determined that
section 553(b) of the Administrative Pro-
cedure Act (5 U.S.C. chapter 5) does not
apply to these regulations and, because the
regulations do not impose a collection of
information on small entities, the Regula-
tory Flexibility Act (5 U.S.C. chapter 6)
does not apply. Pursuant to section 7805(f)
of the Code, this notice of proposed rule-
making has been submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are
submitted timely to the IRS as prescribed
in this preamble under the “Addresses”
heading. The Treasury Department and
the IRS invite comments on all aspects of
the proposed rules. All comments will be
available for public inspection and copy-
ing. A public hearing may be scheduled
if requested in writing by any person who
timely submits comments. If a public hear-
ing is scheduled, notice of the date, time,
and place for the public hearing will be
published in theFederal Register.
Drafting Information
The principal author of these regula-
tions is R. Matthew Kelley of the Office of
Associate Chief Counsel (Income Tax and
Accounting). However, other personnel
from the IRS and Treasury Department
participated in their development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.162–31 is added to
read as follows:
§1.162–31 Expenses paid or incurred for
lodging when not traveling away from
home.
(a)In general. Expenses paid or in-
curred for lodgingwhen not traveling
away from home (local lodging) gen-
erally are personal, living, or family
expenses that are nondeductible under sec-
tion 262(a). Under certain circumstances,
however, expenses for local lodging may
be deductible under section 162(a) as or-
dinary and necessary expenses paid or
incurred in connection with carrying on a
taxpayer’s trade or business, including a
trade or business as an employee. Whether
local lodging expenses are paid or incurred
in carrying on a taxpayer’s trade or busi-
ness is determined under all the facts and
circumstances. One factor is whether the
taxpayer incurs the expense because of
abona fidecondition or requirement of
employment imposed by the taxpayer’s
employer. Expenses paid or incurred for
local lodging that is lavish or extravagant
under the circumstances or that primarily
provides an individual with a social or per-
sonal benefit are notincurred in carrying
on a taxpayer’s trade or business.
(b)Safe harbor for local lodging at
business meetings and conferences.Anin-
dividual’s expenses for local lodging will
be treated as ordinary and necessary busi-
ness expenses if—
(1) The lodging is necessary for the in-
dividual to participate fully in or be avail-
able for abona fidebusiness meeting, con-
ference, training activity, or other business
function;
(2) The lodging is for a period that does
not exceed five calendar days and does not
recur more frequently than once per calen-
dar quarter;
(3) If the individual is an employee,
the employee’s employer requires the em-
ployee to remain at the activity or function
overnight; and
(4) The lodging is not lavish or extrav-
agant under the circumstances and does
not provide any significant element of per-
sonal pleasure, recreation, or benefit.
(c)Examples. The provisions of this
section are illustrated by the following ex-
amples. In each example the employer and
the employees meet all other requirements
(such as substantiation) for deductibility of
the expense and for exclusion from income
as a working condition fringe or payment
under an accountable plan.
Example 1. (i) Employer conducts training for
its employees at a hotel near Employer’s main of-
fice. The training is directly connected with Em-
ployer’s trade or business. Some employees attend-
ing the training are traveling away from home and
some employees are not traveling away from home.
Employer requires all employees attending the train-
ing to remain at the hotel overnight for thebona fide
purpose of facilitating the training. Employer pays
the costs of the lodging at the hotel directly to the ho-
tel and does not treat the value as compensation to the
employees.
(ii) Employer has a noncompensatory business
purpose for paying the lodging expenses. Employer
is not paying the expenses primarily to provide a
social or personal benefit to the employees. If the em-
ployees who are not traveling away from home had
paid for their own lodging, the expenses would have
been deductible under section 162(a) as ordinary
and necessary business expenses of the employees.
Therefore, the value of the lodging is excluded from
the employees’ income as a working condition fringe
under section 132(a) and (d).
(iii) Employer may deduct the lodging expenses,
including lodging for employees who are not travel-
ing away from home, as ordinary and necessary busi-
ness expenses under section 162(a).
Example 2. (i) The facts are the same as inEx-
ample 1, except that the employees pay the cost of
their lodging at the hotel directly to the hotel, Em-
ployer reimburses the employees for the cost of the
lodging, and Employer does not treat the reimburse-
ment as compensation to the employees.
(ii) Employer is reimbursing the lodging expenses
for a noncompensatory business purpose and not pri-
marily to provide a social or personal benefit to the
employees. The employeesincur the expenses in per-
forming services for the employer. If Employer had
not reimbursed the employees who are not travel-
ing away from home for the cost of the lodging, the
expenses would have been deductible under section
162(a) as ordinary and necessary business expenses
of the employees. Therefore, the reimbursements to
the employees are made under an accountable plan
and are excluded from the employees’ gross income.
(iii) Employer may deduct the lodging expense
reimbursements, including reimbursements for em-
ployees who are not traveling away from home, as
ordinary and necessary business expenses under sec-
tion 162(a).
Example 3. (i) Employer is a professional sports
team. Employer requires its employees (players and
coaches) to stay at a local hotel the night before a
home game to conduct last minute training and en-
sure the physical preparedness of the players. Em-
ployer pays the lodging expenses directly to the hotel
and does not treat the value as compensation to the
employees.
(ii) Employer has a noncompensatory business
purpose for paying the lodging expenses. Employer
is not paying the lodging expenses primarily to pro-
vide a social or personal benefit to the employees. If
May 21, 20129442012–21 I.R.B.

the employees had paid for their own lodging, the ex-
penses would have been deductible by the employees
under section 162(a) as ordinary and necessary busi-
ness expenses. Therefore, the value of the lodging is
excluded from the employees’ income as a working
condition fringe.
(iii) Employer may deduct the expenses for
lodging the players and coaches at the hotel as ordi-
nary and necessary business expenses under section
162(a).
Example 4. (i) Employer hires Employee, who
currently resides 500 miles from Employer’s business
premises. Employer pays for temporary lodging for
Employee near Employer’s business premises while
Employee searches for a residence.
(ii) Employer is paying the temporary lodging
expense primarily to provide a personal benefit to
Employee by providing housing while Employee
searches for a residence. Employer incurs the ex-
pense only as additional compensation and not for
a noncompensatory business purpose. If Employee
paid the temporary lodging expense, the expense
would not be an ordinary and necessary employee
business expense under section 162(a) because the
lodging primarily provides a personal benefit to
Employee. Therefore, the value of the lodging is
includible in Employee’s gross income as additional
compensation.
(iii) Employer may deduct the lodging expenses
as ordinary and necessary business expenses under
section 162(a) and §1.162–25T.
Example 5. (i) Employee normally travels two
hours each way between her home and her office.
Employee is working on a project that requires Em-
ployee to work late hours. In order to maximize Em-
ployee’s availability to work on the project, Employer
provides Employee with lodging at a hotel near the
office.
(ii) Employer is paying the temporary lodging ex-
pense primarily to provide a personal benefit to Em-
ployee by relieving her of the daily commute to her
residence. Employer incurs the expense only as addi-
tional compensation and not for a noncompensatory
business purpose. If Employee paid the temporary
lodging expense, the expense would not be an ordi-
nary and necessary business expense under section
162(a) because the lodgingprimarily provides a per-
sonal benefit to Employee. Therefore, the value of
the lodging is includible in Employee’s gross income
as additional compensation.
(iii) Employer may deduct the lodging expenses
as ordinary and necessary business expenses under
section 162(a) and §1.162–25T.
Example 6. (i) Employer requires an employee to
be “on duty” each night to respond quickly to emer-
gencies that may occur outside of normal working
hours. Employees who work daytime hours each
serve a “duty shift” once each month in addition to
their normal work schedule. Emergencies that require
the duty shift employee to respond occur regularly.
Employer has no sleeping facilities on its business
premises and pays for a hotel room nearby where the
duty shift employee stays until called to respond to an
emergency.
(ii) Employer has a noncompensatory business
purpose for paying the lodging expenses. Employer
is not providing the lodging to duty shift employees
primarily to provide a social or personal benefit to the
employees. If the employees had paid for their lodg-
ing, the expenses would have been deductible by the
employees under section 162(a) as ordinary and nec-
essary business expenses. Therefore, the value of the
lodging is excluded from the employees’ income as a
working condition fringe.
(iii) Employer may deduct the lodging expenses
as ordinary and necessary business expenses under
section 162(a).
(d)Effective/applicability date.This
section applies to expenses paid or in-
curred on or after the date these regulations
are published as final regulations in the
Federal Register. However, until these
proposed regulations are published as fi-
nal regulations in theFederal Register,
taxpayers may apply the proposed regu-
lations to local lodging expenses that are
paid or incurred in taxable years for which
the period of limitation on credit or refund
under section 6511 has not expired.
Par. 3. In §1.262–1, paragraph (b)(5) is
amended to read as follows:
§1.262–1 Personal, living, and family
expenses.
*****
(b) * * *
(5) Expenses incurred in traveling away
from home (which include transportation
expenses, meals, and lodging) and any
other transportation expenses are not de-
ductible unless they qualify as expenses
deductible under section 162 (relating to
trade or business expenses), section 170
(relating to charitable contributions), sec-
tion 212 (relating to expenses for produc-
tion of income), section 213 (relating to
medical expenses), or section 217 (relating
to moving expenses), and the regulations
under those sections. The taxpayer’s costs
of commuting to his place of business or
employment are personal expenses and do
not qualify as deductible expenses. For
expenses paid or incurred before the date
these regulations are published as final
regulations in theFederal Register,a
taxpayer’s expenses for lodging when not
traveling away from home (local lodging)
are nondeductible personal expenses. For
expenses paid or incurred on or after the
date these regulations are published as
final regulations in theFederal Register,
a taxpayer’s expenses for local lodging are
personal expenses and are not deductible
unless they qualify as deductible expenses
under section 162. However, until these
regulations are published as final regula-
tions in theFederal Register, taxpayers
may deduct local lodging expenses that
qualify under section 162 and are paid or
incurred in taxable years for which the pe-
riod of limitation on credit or refund under
section 6511 has not expired. Except as
permitted under section 162 or 212, the
costs of a taxpayer’s meals not incurred
in traveling away from home are nonde-
ductible personal expenses.
*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on April 24, 2012,
8:45 a.m., and published in the issue of the Federal Register
for April 25, 2012, 77 F.R. 24657)
Notice of Proposed
Rulemaking
Certain Transfers of Property
to Regulated Investment
Companies (RICs) and Real
Estate Investment Trusts
(REITs)
REG–139991–08
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains pro-
posed amendments to regulations under
section 337(d) of the Internal Revenue
Code. The proposed regulations provide
guidance concerning certain transfers of
property from a C corporation to a Reg-
ulated Investment Company (RIC) or a
Real Estate Investment Trust (REIT) and
will affect the parties to such transactions.
This document also invites comments
from the public regarding these proposed
regulations.
DATES: Written or electronic comments
and requests for a public hearing must be
received by July 16, 2012.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–139991–08), room
5205, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand-delivered Monday through Friday
2012–21 I.R.B.945May 21, 2012

between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–139991–08),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW,
Washington, DC, or sent electronically,
via the Federal eRulemaking Portal
athttp://www.regulations.gov(IRS
REG–139991–08).
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Grid Glyer (202) 622–7930
or Maury Passman (202) 622–7750
with respect to the corporate issues,
and David H. Kirk (202) 622–3060
with respect to the partnership issues;
concerning submissions of comments,
Oluwafunmilayo Taylor (202) 622–7180
(not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
Congress repealed theGeneral Utilities
doctrine in the Tax Reform Act of 1986
(Public Law 99–514, 100 Stat. 2085), as
amended by the Technical and Miscella-
neous Revenue Act of 1988 (Public Law
100–647, 102 Stat. 3342), when sections
336 and 337 of the Internal Revenue Code
were amended to require corporations to
recognize gain or loss on the distribution
of property in connection with complete
liquidations other than certain subsidiary
liquidations. Section 337(d)(1) directs the
Secretary to prescribe regulations as may
be necessary to carry out the purposes of
General Utilitiesrepeal, including rules to
“ensure that such purposes may not be cir-
cumvented***throughtheuseofaregu-
lated investment company, a real estate in-
vestmenttrust,ortax-exemptentity***.”
On March 18, 2003, regulations under
§1.337(d)–7 (the regulations) were pub-
lished in theFederal Register(T.D. 9047,
2003–1 C.B. 676 [68 Fed. Reg. 12817]).
The regulations generally provide (in
paragraphs (a) and (b)(1)) that if prop-
erty of a C corporation (the C corporation
transferor) becomes the property of a
RIC or REIT by the qualification of that
C corporation as a RIC or REIT or by the
transfer of assets of that C corporation to
a RIC or REIT (a conversion transaction),
then the RIC or REIT will be subject to tax
on the net built-in gain in the converted
property under the rules of section 1374
and the underlying regulations. This
treatment, however, does not apply if
the C corporation transferor elects to
recognize gain and loss as if it sold the
converted property to an unrelated party at
fair market value (deemed sale treatment).
Explanation and Summary of
Comments
This preamble first discusses the pro-
posal as it relates to net built-in gain prop-
erty acquired by a RIC or REIT either in
a like-kind exchange (where the C corpo-
ration transferor’s gain is not recognized
by reason of section 1031) or in an in-
voluntary conversion (where such gain is
not recognized by reason of section 1033).
This preamble then discusses a proposed
revision to the definition of a C corpora-
tion in the regulations, which provides that
a transfer of property by a tax-exempt en-
tity to a RIC or REIT is not treated as a con-
version transaction unless the tax-exempt
entity would have been subject to tax if a
deemed sale election had been made.
In addition, the proposed regulations
also add definitions for the terms RIC,
REIT, and S corporation. While these
terms are not explicitly defined in the reg-
ulations, their meanings are both self-ev-
ident and unambiguous in that context.
Nonetheless, for clarification and ease of
use, the proposed regulations add explicit
definitions.
A.Like-Kind Exchanges and Involuntary
Conversions.
The current regulations generally pro-
vide that if property of a C corporation
becomes the property of a RIC or REIT
in a conversion transaction, then, absent a
deemed sale election, the RIC or REIT will
be subject to tax on the net built-in gain
in the converted property under the rules
of section 1374 and the underlying regula-
tions (as modified in paragraph (b) of the
regulations), as if the RIC or REIT were an
S corporation.
Commentators have expressed concern
that the general rule may inappropriately
expose property transferred in certain ex-
changed basis transactions – specifically,
like-kind exchanges and involuntary con-
versions – to this treatment. In these trans-
actions, the C corporation transferor re-
places property it transferred to a RIC or
REIT with property that has an equivalent
basis and built-in gain, and as a result, the
built-in gain remainssubject to corporate
tax in the hands of the transferor. There-
fore, there would not be any circumvention
of the purposes ofGeneral Utilitiesrepeal.
Section 1.337(d)–4(b)(3) provides an ex-
ception in an analogous context (where a
C corporation transfers all or substantially
all of its assets to a tax-exempt entity) to
the extent the transaction qualifies for non-
recognition treatment under section 1031
or section 1033.
Accordingly, the proposed regulations
provide an exceptionfrom the general rule
of the current regulations for a transfer of
property by a C corporation to a RIC or
REIT to the extent that the transfer qual-
ifies for non-recognition treatment under
either section 1031 or 1033. In such a
transaction, the C corporation transferor’s
basis in the property it receives is derived
from its basis in the transferred property,
and thus reflects the built-in gain. At the
same time, the basis of the transferee RIC
or REIT in the converted property has no
relation to the C corporation transferor’s
basis therein.
Treasury and the IRS are not proposing
to extend this treatment to all exchanged
basis transactions, such as exchanges that
would otherwise qualify for nonrecogni-
tion treatment under section 351 of the
Code, out of a concern that such an exemp-
tion could create opportunities to avoid
corporate-level tax on built-in gains and
would give rise to administrative difficul-
ties that could be addressed only through
extensive rulemaking.
B.Transfers by Tax-Exempt Entities.
The regulations apply to property trans-
ferred by a C corporation directly to a RIC
or REIT, and indirectly through a part-
nership to the extent of any C corpora-
tion partner’s proportionate share of the
transferred property (the partnership rule).
The regulations state that if the partnership
elects deemed sale treatment with respect
to such transfer, then any net gain recog-
nized by the partnership on the deemed
sale must be allocated to the C corporation
partner.
Commentators have expressed concern
that the partnership rule presents unin-
tended effects when the partnership has
multiple C corporation partners including
both taxable and tax-exempt entities. If
such a partnership transfers built-in gain
May 21, 20129462012–21 I.R.B.

property to a RIC or REIT in a conver-
sion transaction without making a deemed
sale election (that is, section 1374 treat-
ment applies), and if the transferee RIC or
REIT sells the converted property during
the recognition period, then the RIC or
REIT is subject to a corporate-level tax
on the net built-in gain, including the por-
tion of the net built-in gain that otherwise
would have been allocated to tax-exempt
C corporation partners had a deemed sale
election been made. This is because the
net recognized built-in gain is determined
with reference to the amount of gain that
would have been allocated to all C corpo-
ration partners, regardless of their taxable
or tax-exempt status. In contrast, if the
transferring partnershipweretomakea
deemed sale election, the taxable C cor-
poration partners would recognize gain
that otherwise could have been deferred if
section 1374 treatment had applied.
Treasury and the IRS believe that the
inclusion of direct or indirect transfers by
tax-exempt entities in the scope of the fi-
nal regulations furthers the purposes of
General Utilitiesrepeal only to the ex-
tent that those entities would have been
subject to tax had a deemed sale election
been made (for example, if a deemed sale
election would have generated unrelated
business taxable income or would have
adversely affected the entity’s tax-exempt
status). Accordingly, the proposed regu-
lations would amend the final regulations
to provide that the definition of a C corpo-
ration excludes tax-exempt entities within
the meaning of §1.337(d)–4(c)(2). As a re-
sult, transfers of property by a tax-exempt
entity to a RIC or REIT (or by a partner-
ship to a RIC or REIT to the extent of a
tax-exempt partner’s distributive share of
thegaininthetransferred property) gen-
erally will not be subject to section 1374
treatment. For this purpose, however, an
entity will not be considered to be tax-ex-
empt to the extent it would be subject to tax
(such as under section 511) under Title 26
of the United States Code with respect to
gain (if any) resulting from a deemed sale
election if such an election were made un-
der §1.337(d)–7(c)(5) with respect to the
transfer. Thus, for example, if a partner-
ship in which a tax-exempt C corporation
described in §1.337(d)–4(c)(2) is a part-
ner transfers property to a RIC or REIT in
a conversion transaction, and the tax-ex-
empt entity would not have been subject to
unrelated business income tax under sec-
tion 511 or to tax under any other provi-
sionoftheCodehadthepartnershipmade
a deemed sale election in connection with
the transfer, the transfer would be excluded
from the scope of the final regulations (and
the transferee RIC or REIT will not be sub-
ject to section 1374 treatment) to the ex-
tent of the tax-exempt entity’s distributive
share of the built-in gain or loss in the con-
verted property. However, to the extent the
tax-exempt partner would have been sub-
ject to unrelated business income tax un-
der section 511 or to tax under any other
provision of the Code with respect to its
distributive share of the built-in gain on
the property, the transferee RIC or REIT
would be subject to tax on the built-in
gain on the property under the rules of
section 1374 as if the RIC or REIT were
an S corporation unless the transferring
partnership elects deemed sale treatment.
Section 1.337(d)–7(e) provides that the
principles of §1.337(d)–7 apply to prop-
ertytransferredbyapartnershiptoaRIC
or REIT to the extent of any C corpo-
ration partner’s distributive share of the
gain or loss in the transferred property.
The proposed regulations provide that
§1.337(d)–7(e) also applies to determine
the distributive share of the gain or loss
in the transferred property of a C corpo-
ration partner of a higher-tier partnership
in a tiered partnership structure in which
the transferor partnership is a lower-tier
partnership.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866, as supplemented by Exec-
utive Order 13565. Therefore, a regula-
tory assessment is not required. Pursuant
to the Regulatory Flexibility Act (5 U.S.C.
chapter 6), it is hereby certified that these
proposed regulations would not have a sig-
nificant economic impact on a substantial
number of small entities because the pro-
posed regulations limit the situations in
which these regulations apply to all busi-
nesses, including small businesses. This
certification is based on the fact that these
proposed regulations do not create addi-
tional obligations for, or impose an eco-
nomic impact on, small entities. There-
fore, a regulatory flexibility analysis is not
required. Pursuant to section 7805(f) of
the Code, these proposed regulations will
be submitted to the Chief Counsel for Ad-
vocacy of the Small Business Administra-
tion for comment on their impact on small
business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (a signed origi-
nal and eight (8) copies)orelectroniccom-
ments that are submitted timely to the IRS.
Treasury and the IRS request comments on
all aspects of the proposed rules. All com-
ments will be available for public inspec-
tion and copying. A public hearing may
bescheduledifrequestedinwritingbyany
person that timely submits written or elec-
tronic comments. If a public hearing is
scheduled, notice of the date, time, and
place for the public hearing will be pub-
lished in theFederal Register.
Drafting Information
The principal authors of these regula-
tions are Grid Glyer and Maury Passman
of the Office of Associate Chief Counsel
(Corporate).Other personnel from
Treasury Department and the IRS
participated in their development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.337(d)–7 is also issued under
26 U.S.C. 337(d) * * *
Par. 2. Section 1.337(d)–7 is amended
by:
1. Revising paragraphs (a)(2), (d)(1),
(e) and (f).
2. Adding paragraph (d)(3).
The revisions and addition read as fol-
lows:
2012–21 I.R.B.947May 21, 2012

§1.337(d)–7 Tax on property owned by a
C corporation that becomes property of
a RIC or REIT.
(a) * * *
(2)Definitions. For purposes of this
section:
(i)C corporation.ThetermC corpo-
rationhasthemeaningprovidedinsection
1361(a)(2) except that the term does not in-
clude a RIC, a REIT, or a tax-exempt entity
within the meaning of paragraph (a)(2)(vi)
of this section.
(ii)Conversion transaction.Theterm
conversion transactionmeans the quali-
fication of a C corporation as a RIC or
REIT or the transfer of property owned by
a C corporation to a RIC or REIT.
(iii)RIC.ThetermRICmeans a reg-
ulated investment company within the
meaning of section 851(a).
(iv)REIT.ThetermREITmeans a real
estate investment trust within the meaning
of section 856(a).
(v)S corporation.ThetermS corpo-
rationhasthemeaningprovidedinsection
1361(a)(1).
(vi)Tax-exempt entity.Thetermtax-
exempt entity, with respect to a conversion
transaction, means an entity—
(A) Described in §1.337(d)–4(c)(2),
and
(B) That would not be subject to tax
under Title 26 of the United States Code
with respect to gain (if any) resulting from
a deemed sale election if such an elec-
tion were made under paragraph (c)(5) of
this section with respect to the conversion
transaction.
*****
(d)Exceptions.—
(1)Gain otherwise recognized. Para-
graph (a) of this section does not apply
to any conversion transaction to the extent
that gain or loss otherwise is recognized on
such conversion transaction by the C cor-
poration that either qualifies as a RIC or a
REIT or that transfers property to a RIC or
REIT. See, for example, sections 311(b),
336(a), 351(b), 351(e), 356, 357(c), 367,
368(a)(2)(F), 1001, 1031(b), and 1033(b).
*****
(3)Special rules for like-kind ex-
changes and involuntary conversions.—(i)
In general. Paragraph (a) of this section
does not apply to a conversion transaction
to the extent that a C corporation transfers
property with a built-in gain to a RIC or
REIT and the C corporation’s gain is not
recognized by reason of either section
1031 or 1033.
(ii)Clarification regarding exchanged
property previously subject to section 1374
treatment. Notwithstanding paragraph
(d)(3)(i) of this section, if, in a transac-
tion described in paragraph (d)(3)(i) of
this section, a RIC or REIT surrenders
property that was subject to section 1374
treatment immediately prior to the trans-
action, the rules of section 1374(d)(6) will
apply to continue section 1374 treatment
to the replacement property acquired by
the RIC or REIT in the transaction.
(iii)Examples. The rules of this para-
graph (d)(3) are illustrated by the follow-
ing examples. In each of the examples, X
is a REIT, Y is a C corporation, and X and
Y are not related.
Example 1.Section 1031(a) exchange.(i)Facts.
X owned a building that it leased for commercial use
(PropertyA).Yownedabuildingleasedforcom-
mercial use (Property B). On January 1, Year 3, Y
transferred Property B to X in exchange for Property
A in a transaction that qualified for nonrecognition
treatment under section 1031(a). Immediately before
the exchange, Properties A and B each had a value of
$100, X had an adjusted basis of $60 in Property A, Y
hadanadjustedbasisof$70inPropertyB,andXwas
not subject to section 1374 treatment with respect to
Property A.
(ii)Analysis. The transfer of property (Property
B) by Y (a C corporation) to X (a REIT) is a con-
version transaction within the meaning of paragraph
(a)(2)(ii) of this section. The conversion transaction
qualified for nonrecognition treatment under section
1031(a) as to Y; thus, Y did not recognize any of its
$30 gain. Therefore, the conversion transaction is not
subject to paragraph (a) of this section by reason of
paragraph (d)(3)(i) of this section.
Example 2.Section 1031(a) exchange of section
1374 property.(i)Facts. The facts are the same as in
Example 1, except that X had acquired Property A in
a conversion transaction in Year 2, and immediately
before the Year 3 exchange X was subject to section
1374 treatment with respect to $25 of net built-in gain
in Property A.
(ii)Analysis. The Year 3 transfer of Property B by
Y to X is a conversion transaction within the mean-
ing of paragraph (a)(2)(ii) of this section. The con-
version transaction qualified for nonrecognition treat-
ment under section 1031(a) as to Y; thus, Y did not
recognize any of its $30 gain. Therefore, the Year 3
transfer is not subject to paragraph (a) of this section
by reason of paragraph (d)(3)(i) of this section. How-
ever, X had been subject to section 1374 treatment
with respect to $25 of net built-in gain in Property A
immediately before the Year 3 transfer, and X’s basis
in Property B is determined (in whole or in part) by
reference to its adjusted basis in Property A. Accord-
ingly, the rules of section 1374(d)(6) apply and X is
subject to section 1374 treatment on Property B with
respect to the $25 net built-in gain. See paragraph
(d)(3)(ii) of this section.
Example 3.Section 1031(b) exchange.(i)Facts.
The facts are the same as inExample 1, except that
immediately before the Year 3 exchange Property A
had a value of $92, and X transferred Property A and
$8 to Y in exchange for Property B in a transaction
that qualified for nonrecognition treatment under sec-
tion 1031(b).
(ii)Analysis. The transfer of Property B by Y to
X is a conversion transaction within the meaning of
paragraph (a)(2)(ii) of this section. The conversion
transaction qualified for nonrecognition treatment as
to Y under section 1031(b) (resulting from the receipt
of $8 in money or other property in addition to the
replacement property); as a result, Y recognized $8
of its $30 gain, and did not recognize the remaining
$22 of gain. Paragraph (a) of this section does not
apply to the transaction to the extent of the $8 gain
recognized by Y by reason of paragraph (d)(1) of this
section, or to the extent of the $22 gain realized but
not recognized by Y by reason of paragraph (d)(3)(i)
of this section.
Example 4.Section 1033(a) involuntary conver-
sion of property held by a C corporation transferor.
(i)Facts. Y owned uninsured, improved property
(Property 1) that was involuntarily converted (within
the meaning of section 1033(a)) in a fire. Y sold Prop-
erty 1 for $100 to X, which owned an adjacent prop-
erty and wanted Property 1 for use as a parking lot.
Y had a $70 basis in Property 1 immediately before
the sale. Y elected to defer gain recognition under
section 1033(a)(2), and purchased qualifying replace-
ment property (Property 2) for $100 from an unre-
lated party prior to the expiration of the period de-
scribedinsection1033(a)(2)(B).
(ii)Analysis. ThetransferofProperty1byYto
X is a conversion transaction within the meaning of
paragraph (a)(2)(ii) of this section. The conversion
transaction (combined with Y’s purchase of Property
2) qualified for nonrecognition treatment under sec-
tion 1033(a) as to Y; thus, Y did not recognize any of
its $30 gain. Therefore, the conversion transaction is
not subject to paragraph (a) of this section by reason
of paragraph (d)(3)(i) of this section.
Example 5.Section 1033(a) involuntary conver-
sion of property held by a REIT.(i)Facts. X owned
property (Property 1). On January 1, Year 2, Prop-
erty 1 had a fair market value of $100 and a basis of
$70, and X was not subject to section 1374 treatment
with respect to Property 1. On that date, when Prop-
erty 1 was under a threat of condemnation, X sold
Property 1 to an unrelated party for $100 (First Trans-
action). X elected to defer gain recognition under
section 1033(a)(2), and purchased qualifying replace-
ment property (Property 2) for $100 from Y (Second
Transaction) prior to the expiration of the period de-
scribedinsection1033(a)(2)(B).
(ii)Analysis. ThetransferofProperty2byYto
X in the Second Transaction is a conversion transac-
tion within the meaning of paragraph (a)(2)(ii) of this
section. The Second Transaction (combined with the
First Transaction) qualified for nonrecognition treat-
ment under section 1033(a) as to X, but not as to Y.
Assume no nonrecognition provision applied to Y;
thus, Y recognized gain or loss on its sale of Property
2 in the Second Transaction, and the Second Transac-
tion is not subject to paragraph (a) of this section by
reason of paragraph (d)(3)(i) of this section.
May 21, 20129482012–21 I.R.B.

(e)Special rule for partnerships—(1)
In general. The principles of this section
apply to property transferred by a part-
nership to a RIC or REIT to the extent of
any gain or loss in the converted property
that would be allocated directly or indi-
rectly, through one or more partnerships,
to a C corporation if the partnership sold
the converted property to an unrelated
party at fair market value on the deemed
sale date (as defined in paragraph (c)(3)
of this section). If the partnership were
to elect deemed sale treatment under
paragraph (c) of this section in lieu of
section 1374 treatment under paragraph
(b) of this section with respect to such
transfer, then any net gain recognized by
the partnership on the deemed sale must
be allocated to the C corporation partner,
but does not increase the capital account
of any partner. Any adjustment to the
partnership’s basis in the RIC or REIT
stock as a result of deemed sale treatment
under paragraph (c) of this section shall
constitute an adjustment to the basis of
that stock with respect to the C corporation
partner only. The principles of section 743
apply to such basis adjustment.
(2)Example.Transfer by partnership of prop-
erty to REIT.(i)Facts. PRS, a partnership for
Federal income tax purposes, has three partners:
TE, a tax-exempt entity (within the meaning of
§1.337(d)–7(a)(2)(vi)), owns 50 percent of the capital
and profits of PRS; A, an individual, owns 30 percent
of the capital and profits of PRS; and Y, a C corpo-
ration (within the meaning of §1.337(d)–7(a)(2)(i)),
owns the remaining 20 percent. PRS owns a building
that it leases for commercial use (Property 1). On
January 1, Year 2, when PRS has an adjusted basis in
Property 1 of $100 and Property 1 has a fair market
value of $500, PRS transfers Property 1 to X, a REIT,
in exchange for stock of X in an exchange described
in section 351. PRS does not elect deemed sale
treatment under paragraph (c) of this section.
(ii)Analysis. The transfer of Property 1 by PRS
to X is a conversion transaction within the meaning
of paragraph (a)(2)(ii) of this section to the extent
of any gain or loss that would be allocated to any
C corporation partner if PRS sold Property 1 at fair
marketvaluetoanunrelatedpartyonthedeemed
sale date. Y is a C corporation, but neither TE nor A
is a C corporation within the meaning of paragraph
(a)(2)(i) of this section. Therefore, the transfer of
Property 1 by PRS to X is a conversion transaction
within the meaning of paragraph (a)(2)(ii) of this
section to the extent of Y’s share of any such gain of
PRSinProperty1. IfPRSweretosellProperty1to
an unrelated party at fair market value on the deemed
sale date, PRS would allocate $80 of built-in gain to
Y. Thus, X is subject to section 1374 treatment on
Property 1 with respect to $80 of built-in gain.
(f)Effective/Applicability date—(1)In
general. Except as provided in paragraph
(f)(2) of this section, this section applies to
conversion transactions that occur on or af-
ter January 2, 2002. For conversion trans-
actions that occurred on or after June 10,
1987, and before January 2, 2002, see
§§1.337(d)–5 and 1.337(d)–6.
(2)Special rule. Paragraphs (a)(2),
(d)(1), (d)(3) and (e) of this section apply
to conversion transactions that occur on
or after[INSERTDATEOFPUBLI-
CATION OF THE TREASURY DECI-
SION ADOPTING THESE RULES AS
FINAL REGULATIONS IN THE FED-
ERAL REGISTER]. However, taxpayers
may apply paragraphs (a)(2), (d)(1), (d)(3)
and (e) of this section to conversion trans-
actions that occurred before[INSERT
DATE OF PUBLICATION OF THE
TREASURY DECISION ADOPTING
THESE RULES AS FINAL REGULA-
TIONS IN THE FEDERAL REGIS-
TER]. For conversion transactions that
occurred on or after January 2, 2002 and
before[INSERT DATE OF PUBLICA-
TION OF THE TREASURY DECI-
SION ADOPTING THESE RULES AS
FINAL REGULATIONS IN THE FED-
ERAL REGISTER], see §1.337(d)–7 as
contained in 26 CFR part 1 in effect on
April 1, 2011.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on April 13, 2012,
8:45 a.m., and published in the issue of the Federal Register
for April 16, 2012, 77 F.R. 22516)
Notice of Proposed
Rulemaking
Examples of Program-Related
Investments
REG–144267–11
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains pro-
posed regulations that provide guidance
to private foundations on program-related
investments. These proposed regulations
provide a series of new examples illustrat-
ing investments that qualify as program-
related investments. In addition to pri-
vate foundations, these proposed regula-
tions affect foundation managers who par-
ticipate in the making of program-related
investments.
DATES: Comments and requests for a
public hearing must be received by July 18,
2012.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–144267–11), room
5205, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–144267–11),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW,
Washington, DC, or sent electronically
via the Federal eRulemaking Portal
athttp://www.regulations.gov/(IRS
REG–144267–11).
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Courtney D. Jones at (202)
622–6070; concerning submissions of
comments and requests for a public
hearing, Oluwafunmilayo Taylor, (202)
622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
Section 4944(a) of the Internal Revenue
Code (Code) imposes an excise tax on a
private foundation that makes an invest-
ment that jeopardizes the carrying out of
any of the private foundation’s exempt pur-
poses (a “jeopardizing investment”). Sec-
tion 4944(a) also imposes an excise tax
on foundation managers who knowingly
participate in the making of a jeopardiz-
ing investment. Section 4944(b) imposes
additional excise taxes on private founda-
tions and foundation managers when in-
vestments are not timely removed from
jeopardy.
Generally, under §53.4944–1(a)(2),
a jeopardizing investment occurs when,
based on the facts and circumstances at the
time the investment is made, foundation
managers fail to exercise ordinary busi-
ness care and prudence in providing for the
long- and short-term financial needs of the
foundation. The determination of whether
2012–21 I.R.B.949May 21, 2012

an investment is a jeopardizing investment
is made on an investment-by-investment
basis, taking into account the private foun-
dation’s entire portfolio. In exercising
the requisite standard of care and pru-
dence, foundation managers may take into
account the expected investment return,
price volatility, and the need for portfolio
diversification.
Section 4944(c) excepts program-re-
lated investments (“PRIs”) from treatment
as jeopardizing investments. The reg-
ulations under section 4944(c) define a
PRI as an investment: (1) the primary
purpose of which is to accomplish one or
more of the purposes described in section
170(c)(2)(B); (2) no significant purpose
of which is the production of income or
the appreciation of property; and (3) no
purpose of which is to accomplish one or
more of the purposes described in section
170(c)(2)(D) (attemptingtoinfluenceleg-
islation or participating in or intervening
in any political campaign).
An investment is made primarily to ac-
complish one or more of the purposes de-
scribed in section 170(c)(2)(B) (referred to
as “charitable purposes”) if it significantly
furthers the accomplishment of the private
foundation’s exempt activities and would
not have been made but for the relation-
ship between the investment and the ac-
complishment of thoseexempt activities.
In determining whether a significant pur-
pose of an investment is the production
of income or the appreciation of property,
§53.4944–3(a)(2)(iii) provides that it shall
be relevant whether investors who are en-
gaged in the investment solely for the pro-
duction of income would be likely to make
the investment on the same terms as the
private foundation.
The regulations under other Code
sections in Chapter 42 accord special
tax treatment to PRIs. For example,
§53.4942(a)–2(c)(3)(ii)(d) excludes PRIs
from the assets a private foundation takes
into account when determining how much
it must distribute under section 4942 as
a “distributable amount” for the taxable
year. In addition, §53.4942(a)–3(a)(2)(i)
generally includes distributions that qual-
ify as PRIs as “qualifying distributions”
for purposes of meeting the distribution
requirements under section 4942. Sec-
tion 53.4943–10(b) excludes PRIs from
being treated as business holdings for the
purpose of calculating excess business
holdings subject to excise tax under sec-
tion 4943. Sections 53.4945–5(b)(4) and
53.4945–6(c)(1)(i) also make clear that
PRIs will not constitute taxable expen-
ditures under section 4945, provided the
private foundation exercises “expenditure
responsibility” in circumstances in which
it is required to do so. Among other ex-
penditure responsibility requirements, a
private foundation must require a written
commitment from the recipient of the PRI
that the funds received will be used only
for the purposes of the program-related in-
vestment. As noted, the primary purpose
of a program-related investment must be
the accomplishment of a charitable pur-
pose.
Section 53.4944–3(b) contains nine ex-
amples illustrating investments that qual-
ify as PRIs and one example of an in-
vestment that does not qualify as a PRI.
The existing examples focus on domestic
situations principally involving economi-
cally disadvantaged individuals and dete-
riorated urban areas.
The Treasury Department and the IRS
are aware that the private foundation
community would find it helpful if the
regulations could include additional PRI
examples that reflect current investment
practices and illustrate certain principles,
including that: (1) an activity conducted
in a foreign country furthers a charita-
ble purpose if the same activity would
further a charitable purpose if conducted
in the United States; (2) the charitable
purposes served by a PRI are not limited
to situations involving economically dis-
advantaged individuals and deteriorated
urban areas; (3) the recipients of PRIs need
not be within a charitable class if they are
the instruments for furthering a charita-
ble purpose; (4) a potentially high rate of
return does not automatically prevent an
investment from qualifying as program-re-
lated; (5) PRIs can be achieved through
a variety of investments, including loans
to individuals, tax-exempt organizations
and for-profit organizations, and equity
investments in for-profit organizations;
(6) a credit enhancement arrangement may
qualify as a PRI; and (7) a private founda-
tion’s acceptance of an equity position in
conjunction with making a loan does not
necessarily prevent the investment from
qualifying as a PRI.
Explanation of Provisions
The proposed regulations add nine
new examples that illustrate that a wider
range of investments qualify as PRIs
than the range currently presented in
§53.4944–3(b). The proposed regulations
do not modify the existing regulations;
rather, they provide additional examples
that illustrate the application of the exist-
ing regulations. Generally, the charitable
activities illustrated in the new examples
are based on published guidance and on
financial structures described in private
letter rulings.
The new examples demonstrate that a
PRI may accomplish a variety of charita-
ble purposes, such as advancing science,
combating environmental deterioration,
and promoting the arts. Several examples
also demonstrate that an investment that
funds activities in one or more foreign
countries, including investments that al-
leviate the impact of a natural disaster or
that fund educational programs for poor
individuals, may further the accomplish-
ment of charitable purposes and qualify
as a PRI. One example illustrates that the
existence of a high potential rate of re-
turn on an investment does not, by itself,
prevent the investment from qualifying as
a PRI. Another example illustrates that a
private foundation’s acceptance of an eq-
uity position in conjunction with making
a loan does not necessarily prevent the
investment from qualifying as a PRI, and
two examples illustrate that a private foun-
dation’s provision of credit enhancement
can qualify as a PRI.
The last example demonstrates that a
guarantee arrangement may qualify as a
PRI. The proposed regulations address
solely the impact of section 4944 on the
facts described and do not address whether
there is a qualifying distribution under
section 4942. However, the Treasury De-
partment and the IRS conclude that, based
on the facts described in the last example,
there would be no qualifying distribution
under section 4942 at the time the founda-
tion enters into the guarantee arrangement.
Under certain circumstances, a private
foundation may treat payments made un-
der a guarantee arrangement as qualifying
distributions.
Finally, the proposed regulations in-
clude examples illustrating that loans and
capital may be provided to individuals
May 21, 20129502012–21 I.R.B.

or entities that are not within a charita-
ble class themselves, if the recipients are
the instruments through which the private
foundation accomplishes its exempt activ-
ities.
Proposed Effective/Applicability Date
Paragraph (b),Examples 11through19
of this section will be effective on the
date of publication of the Treasury deci-
sion adopting these examples as final reg-
ulations in theFederal Register. Taxpay-
ers may rely on paragraph (b),Examples
11through19of this section before these
proposed regulations are finalized.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866, as supplemented by Execu-
tive Order 13563. Therefore, a regulatory
assessment 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 this regulation, and
because the regulation does not impose a
collection of information on small entities,
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to sec-
tion 7805(f) of the Code, this regulation
has been submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on its impact on
business.
Comments and Requests for Public
Hearing
Before these proposed regulations
are adopted as final regulations, con-
sideration will be given to any com-
ments that are submitted timely to the
IRS as prescribed in this preamble un-
der the “Addresses” heading. The IRS
and the Treasury Department request
comments on all aspects of the proposed
rules. All comments will be available
atwww.regulations.govor upon request.
A public hearing will be scheduled if
requested in writing by any person that
timely submits written comments. If a
public hearing is scheduled, notice of the
date, time, and place for the public hearing
will be published in theFederal Register.
Drafting Information
The principal author of these pro-
posed regulations is Courtney D. Jones,
Office of the Chief Counsel (Tax Exempt
and Government Entities). However,
other personnel from the Treasury
Department and the IRS participated in
their development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 53 is pro-
posed to be amended as follows:
Part 53—FOUNDATION AND SIMILAR
EXCISE TAXES
Par. 1. The authority citation for part
53 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 53.4944–3 is amended
by addingExamples 11,12,13,14,15,16,
17,18,and19to paragraph (b) and adding
paragraph (c) to read as follows:
§53.4944–3.Exception for
program-related investments.
*****
(b) * * *
Example 11. X is a business enterprise that
researches and develops new drugs. X’s research
demonstrates that a vaccine can be developed within
ten years to prevent a disease that predominantly
affects poor individuals in developing countries.
However, neither X nor other commercial enterprises
like X will devote their resources to develop the
vaccine because the potential return on investment is
significantly less than required by X or other com-
mercial enterprises to undertake a project to develop
new drugs. Y, a private foundation, enters into an
investment agreement with X in order to induce X
to develop the vaccine. Pursuant to the investment
agreement, Y purchases shares of the common stock
of S, a subsidiary corporation that X establishes to
research and develop the vaccine. The agreement re-
quires S to distribute the vaccine to poor individuals
in developing countries at a price that is affordable to
the affected population. The agreement also requires
S to publish the research results, disclosing substan-
tially all information about the results that would
be useful to the interested public. S agrees that the
publication of its research results will be made as
promptly after the completion of the research as is
reasonably possible without jeopardizing S’s right to
secure patents necessary toprotect its ownership or
control of the results of the research. The expected
rate of return on Y’s investment in S is less than
the expected market rate of return for an investment
of similar risk. Y’s primary purpose in making the
investment is to advance science. No significant
purpose of the investment involves the production of
income or the appreciation of property. The invest-
ment significantly furthers the accomplishment of
Y’s exempt activities and would not have been made
but for such relationship between the investment and
Y’s exempt activities. Accordingly, the purchase of
the common stock of S is a program-related invest-
ment.
Example 12. Q, a developing country, produces
a substantial amount of recyclable solid waste ma-
terials that are currently disposed of in landfills and
by incineration, contributing significantly to environ-
mental deterioration in Q. X is a new business enter-
prise located in Q. X’s only activity will be collecting
recyclable solid waste materials in Q and delivering
those materials to recycling centers that are inacces-
sible to a majority of the population. If successful,
the recycling collection business would prevent pol-
lution in Q caused by the usual disposition of solid
waste materials. X has obtained funding from only
a few commercial investors who are concerned about
the environmental impact of solid waste disposal. Al-
though X made substantial efforts to procure addi-
tional funding, X has not been able to obtain suffi-
cient funding because the expected rate of return is
significantly less than the acceptable rate of return on
an investment of this type. Because X has been un-
able to attract additional investors on the same terms
as the initial investors, Y, a private foundation, en-
ters into an investment agreement with X to purchase
shares of X’s common stock on the same terms as X’s
initial investors. Although there is a high risk asso-
ciated with the investment in X, there is also the po-
tential for a high rate of return if X is successful in
the recycling business in Q. Y’s primary purpose in
making the investment is to combat environmental
deterioration. No significant purpose of the invest-
ment involves the production of income or the ap-
preciation of property. The investment significantly
furthers the accomplishment of Y’s exempt activities
and would not have been made but for such relation-
ship between the investment and Y’s exempt activi-
ties. Accordingly, the purchase of the common stock
is a program-related investment.
Example 13. Assume the facts as stated inExam-
ple 12, except that X offers Y shares of X’s common
stock in order to induce Y to make a below-market
rate loan to X. X previously made the same offer to
a number of commercial investors. These investors
were unwilling to provide loans to X on such terms
because the expected return on the combined pack-
age of stock and debt was below the expected market
return for such an investment based on the level of
risk involved, and they were also unwilling to pro-
vide loans on other terms X considers economically
feasible. Y accepts the stock and makes the loan on
the same terms that X offered to the commercial in-
vestors. Y plans to liquidate its stock in X as soon
as the recycling collection business in Q is profitable
or it is established that the business will never be-
come profitable. Y’s primary purpose in making the
investment is to combat environmental deterioration.
No significant purpose of the investment involves the
production of income or the appreciation of prop-
erty. The investment significantly furthers the ac-
complishment of Y’s exempt activities and would not
have been made but for such relationship between the
2012–21 I.R.B.951May 21, 2012

investment and Y’s exempt activities. Accordingly,
the loan accompanied by the acceptance of common
stock is a program-related investment.
Example 14. X is a business enterprise located in
V, a rural area in State Z. X employs a large number
of poor individuals in V. A natural disaster occurs in
V, causing significant damage to the area. The busi-
ness operations of X are harmed because of damage
to X’s equipment and buildings. X has insufficient
funds to continue its business operations and conven-
tional sources of funds are unwilling or unable to pro-
vide loans to X on terms it considers economically
feasible. In order to enable X to continue its business
operations, Y, a private foundation, makes a loan to
X bearing interest below the market rate for commer-
cial loans of comparable risk. Y’s primary purpose
in making the loan is to provide relief to the poor
and distressed. No significant purpose of the loan in-
volves the production of income or the appreciation
of property. The loan significantly furthers the ac-
complishment of Y’s exempt activities and would not
have been made but for such relationship between the
loan and Y’s exempt activities. Accordingly, the loan
is a program-related investment.
Example 15. A natural disaster occurs in W, a de-
veloping country, causing significant damage to W’s
infrastructure. Y, a private foundation, makes loans
bearing interest below the market rate for commercial
loans of comparable risk to H and K, poor individu-
alswholiveinW,toenableeachofthemtostarta
small business. H will open a roadside fruit stand. K
will start a weaving business. Conventional sources
of funds were unwilling or unable to provide loans to
H or K on terms they consider economically feasible.
Y’s primary purpose in making the loans is to provide
relief to the poor and distressed. No significant pur-
pose of the loans involves the production of income or
the appreciation of property. The loans significantly
further the accomplishment of Y’s exempt activities
and would not have been made but for such relation-
ship between the loans and Y’s exempt activities. Ac-
cordingly, the loans to H and K are program-related
investments.
Example 16. X is a limited liability company
treated as a partnership for federal income tax pur-
poses. X purchases coffee from poor farmers resid-
ing in a developing country, either directly or through
farmer-owned cooperatives. To fund the provision
of efficient water management, crop cultivation, pest
management, and farm management training to the
poor farmers by X, Y, a private foundation, makes
a loan to X bearing interest below the market rate
for commercial loans of comparable risk. The loan
agreement requires X to use the proceeds from the
loan to provide the training to the poor farmers. X
would not provide such training to the poor farmers
absent the loan. Y’s primary purpose in making the
loan is to educate poor farmers about advanced agri-
cultural methods. No significant purpose of the loan
involves the production of income or the apprecia-
tion of property. The loan significantly furthers the
accomplishment of Y’s exempt activities and would
not have been made but for such relationship between
the loan and Y’s exempt activities. Accordingly, the
loan is a program-related investment.
Example 17. X is a social welfare organization
that is recognized as an organization described in sec-
tion 501(c)(4). X was formed to develop and encour-
age interest in painting, sculpture and other art forms
by, among other things, conducting weekly commu-
nity art exhibits. X needs to purchase a large exhibi-
tion space to accommodate the demand for exhibition
space within the community. Conventional sources
of funds are unwilling or unable to provide funds to
X on terms it considers economically feasible. Y, a
private foundation, makes a loan to X at an inter-
est rate below the market rate for commercial loans
of comparable risk to fund the purchase of the new
space. Y’s primary purpose in making the loan is to
promote the arts. No significant purpose of the loan
involves the production of income or the apprecia-
tion of property. The loan significantly furthers the
accomplishment of Y’s exempt activities and would
not have been made but for such relationship between
the loan and Y’s exempt activities. Accordingly, the
loan is a program-related investment.
Example 18. X is a non-profit corporation that
provides child care services in a low-income neigh-
borhood, enabling many residents of the neighbor-
hood to be gainfully employed. X meets the require-
ments of section 501(k) and is recognized as an or-
ganization described in section 501(c)(3). X’s current
child care facility has reached capacity and has a long
waiting list. X has determined that the demand for its
services warrants the construction of a new child care
facility in the same neighborhood. X is unable to ob-
tain a loan from conventional sources of funds includ-
ing B, a commercial bank, because X lacks sufficient
credit to support the financing of a new facility. Pur-
suant to a deposit agreement, Y, a private foundation,
deposits $h in B, and B lends an identical amount to X
to construct the new child care facility. The deposit
agreement requires Y to keep $h on deposit with B
during the term of X’s loan and provides that if X de-
faults on the loan, B may deduct the amount of the de-
fault from the deposit. To facilitate B’s access to the
funds in the event of default, the agreement requires
that the funds be invested in instruments that allow B
to access them readily. The deposit agreement also
provides that Y will earn interest at a rate of t% on
the deposit. The t% rate is substantially less than Y
could otherwise earn on this sum of money, if Y in-
vested it elsewhere. The loan agreement between B
and X requires X to use the proceeds from the loan to
construct the new child care facility. Y’s primary pur-
pose in making the deposit is to further its educational
purposes by enabling X to provide child care services
within the meaning of section 501(k). No significant
purpose of the deposit involves the production of in-
come or the appreciation of property. The deposit sig-
nificantly furthers the accomplishment of Y’s exempt
activities and would not have been made but for such
relationship between the deposit and Y’s exempt ac-
tivities. Accordingly, the deposit is a program-related
investment.
Example 19. Assume the same facts as stated in
Example 18, except that instead of making a deposit
of $h into B, Y enters into a guarantee agreement with
B. The guarantee agreement provides that if X de-
faults on the loan, Y will repay the balance due on
the loan to B. B was unwilling to make the loan to X
in the absence of Y’s guarantee. X must use the pro-
ceeds from the loan to construct the new child care
facility. At the same time, X and Y enter into a re-
imbursement agreement whereby X agrees to reim-
burse Y for any and all amounts paid to B under the
guarantee agreement. The signed guarantee and re-
imbursement agreements together constitute a “guar-
antee and reimbursement arrangement.” Y’s primary
purpose in entering into the guarantee and reimburse-
ment arrangement is to further Y’s educational pur-
poses. No significant purpose of the guarantee and
reimbursement arrangement involves the production
of income or the appreciation of property. The guar-
antee and reimbursement arrangement significantly
furthers the accomplishment of Y’s exempt activi-
ties and would not have been made but for such re-
lationship between the guarantee and reimbursement
arrangement and Y’s exempt activities. Accordingly,
the guarantee and reimbursement arrangement is a
program-related investment.
(c)Effective/applicability date. Para-
graph (b),Examples 11through19of this
section will be effective on the date of pub-
lication of the Treasury decision adopting
these examples as final regulations in the
Federal Register. Taxpayers may rely on
paragraph (b),Examples 11through19of
this section before these proposed regula-
tions are finalized.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on April 18, 2012,
8:45 a.m., and published in the issue of the Federal Register
for April 19, 2012, 77 F.R. 23429)
May 21, 20129522012–21 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 be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
2012–21 I.R.B.iMay 21, 2012

Numerical Finding List
1
Bulletins 2012–1 through 2012–21
Announcements:
2012-1, 2012-1 I.R.B.249
2012-2, 2012-2 I.R.B.285
2012-3, 2012-4 I.R.B.335
2012-4, 2012-4 I.R.B.335
2012-5, 2012-5 I.R.B.348
2012-6, 2012-6 I.R.B.366
2012-7, 2012-6 I.R.B.367
2012-8, 2012-7 I.R.B.373
2012-9, 2012-7 I.R.B.377
2012-11, 2012-13 I.R.B.611
2012-12, 2012-12 I.R.B.562
2012-13, 2012-16 I.R.B.805
2012-14, 2012-14 I.R.B.721
2012-15, 2012-15 I.R.B.794
2012-16, 2012-18 I.R.B.876
2012-17, 2012-18 I.R.B.876
2012-18, 2012-16 I.R.B.845
2012-19, 2012-20 I.R.B.934
2012-20, 2012-18 I.R.B.876
2012-21, 2012-19 I.R.B.898
2012-22, 2012-19 I.R.B.899
Notices:
2012-1, 2012-2 I.R.B.260
2012-3, 2012-3 I.R.B.289
2012-4, 2012-3 I.R.B.290
2012-5, 2012-3 I.R.B.291
2012-6, 2012-3 I.R.B.293
2012-7, 2012-4 I.R.B.308
2012-8, 2012-4 I.R.B.309
2012-9, 2012-4 I.R.B.315
2012-10, 2012-5 I.R.B.343
2012-11, 2012-5 I.R.B.346
2012-12, 2012-6 I.R.B.365
2012-13, 2012-9 I.R.B.421
2012-14, 2012-8 I.R.B.411
2012-15, 2012-9 I.R.B.424
2012-16, 2012-9 I.R.B.427
2012-17, 2012-9 I.R.B.430
2012-18, 2012-10 I.R.B.438
2012-19, 2012-10 I.R.B.440
2012-20, 2012-13 I.R.B.574
2012-21, 2012-10 I.R.B.450
2012-22, 2012-13 I.R.B.576
2012-23, 2012-11 I.R.B.483
2012-24, 2012-13 I.R.B.578
2012-25, 2012-15 I.R.B.789
2012-26, 2012-17 I.R.B.847
2012-27, 2012-17 I.R.B.849
2012-28, 2012-17 I.R.B.850
2012-29, 2012-18 I.R.B.872
Notices— Continued:
2012-30, 2012-18 I.R.B.874
2012-31, 2012-20 I.R.B.906
2012-32, 2012-20 I.R.B.910
2012-33, 2012-20 I.R.B.912
2012-34, 2012-21 I.R.B.937
2012-35, 2012-21 I.R.B.937
Proposed Regulations:
REG-168745-03, 2012-14 I.R.B.718
REG-137589-07, 2012-21 I.R.B.942
REG-139991-08, 2012-21 I.R.B.945
REG-109369-10, 2012-9 I.R.B.434
REG-110980-10, 2012-13 I.R.B.581
REG-113770-10, 2012-13 I.R.B.587
REG-113903-10, 2012-11 I.R.B.486
REG-120282-10, 2012-11 I.R.B.487
REG-130302-10, 2012-8 I.R.B.412
REG-135491-10, 2012-16 I.R.B.803
REG-149625-10, 2012-2 I.R.B.279
REG-102988-11, 2012-4 I.R.B.326
REG-115809-11, 2012-13 I.R.B.598
REG-124627-11, 2012-8 I.R.B.417
REG-124791-11, 2012-15 I.R.B.791
REG-130777-11, 2012-5 I.R.B.347
REG-132736-11, 2012-15 I.R.B.793
REG-135071-11, 2012-12 I.R.B.561
REG-136008-11, 2012-19 I.R.B.881
REG-141268-11, 2012-19 I.R.B.896
REG-144267-11, 2012-21 I.R.B.949
REG-145474-11, 2012-11 I.R.B.495
Revenue Procedures:
2012-1, 2012-1 I.R.B.1
2012-2, 2012-1 I.R.B.92
2012-3, 2012-1 I.R.B.113
2012-4, 2012-1 I.R.B.125
2012-5, 2012-1 I.R.B.169
2012-6, 2012-1 I.R.B.197
2012-7, 2012-1 I.R.B.232
2012-8, 2012-1 I.R.B.235
2012-9, 2012-2 I.R.B.261
2012-10, 2012-2 I.R.B.273
2012-11, 2012-7 I.R.B.368
2012-12, 2012-2 I.R.B.275
2012-13, 2012-3 I.R.B.295
2012-14, 2012-3 I.R.B.296
2012-15, 2012-7 I.R.B.369
2012-16, 2012-10 I.R.B.452
2012-17, 2012-10 I.R.B.453
2012-18, 2012-10 I.R.B.455
2012-19, 2012-14 I.R.B.689
2012-20, 2012-14 I.R.B.700
2012-21, 2012-11 I.R.B.484
2012-22, 2012-17 I.R.B.853
2012-23, 2012-14 I.R.B.712
Revenue Procedures— Continued:
2012-24, 2012-20 I.R.B.913
2012-25, 2012-20 I.R.B.914
2012-26, 2012-20 I.R.B.933
2012-27, 2012-21 I.R.B.940
Revenue Rulings:
2012-1, 2012-2 I.R.B.255
2012-2, 2012-3 I.R.B.286
2012-3, 2012-8 I.R.B.383
2012-4, 2012-8 I.R.B.386
2012-5, 2012-5 I.R.B.337
2012-6, 2012-6 I.R.B.349
2012-7, 2012-6 I.R.B.362
2012-8, 2012-13 I.R.B.563
2012-9, 2012-11 I.R.B.475
2012-10, 2012-14 I.R.B.614
2012-11, 2012-14 I.R.B.686
2012-12, 2012-15 I.R.B.748
2012-13, 2012-19 I.R.B.878
Treasury Decisions:
9559, 2012-2 I.R.B.252
9560, 2012-4 I.R.B.299
9561, 2012-5 I.R.B.341
9562, 2012-5 I.R.B.339
9563, 2012-6 I.R.B.354
9564, 2012-14 I.R.B.614
9565, 2012-8 I.R.B.378
9566, 2012-8 I.R.B.389
9567, 2012-8 I.R.B.395
9568, 2012-12 I.R.B.499
9569, 2012-11 I.R.B.465
9570, 2012-11 I.R.B.477
9571, 2012-11 I.R.B.468
9572, 2012-11 I.R.B.471
9573, 2012-12 I.R.B.498
9574, 2012-12 I.R.B.559
9575, 2012-15 I.R.B.749
9576, 2012-15 I.R.B.723
9577, 2012-15 I.R.B.730
9579, 2012-16 I.R.B.796
9580, 2012-16 I.R.B.801
9581, 2012-16 I.R.B.798
9582, 2012-18 I.R.B.868
9583, 2012-18 I.R.B.866
9584, 2012-20 I.R.B.900
9585, 2012-21 I.R.B.935
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2011–27 through 2011–52 is in Internal Revenue Bulletin
2011–52, dated December 27, 2011.
May 21, 2012ii2012–21 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2012–1 through 2012–21
Announcements:
2002-44
Supplemented by
Notice 2012-13, 2012-9 I.R.B.421
2010-19
Obsoleted by
Ann. 2012-12, 2012-12 I.R.B.562
2011-63
Corrected by
Ann. 2012-9, 2012-7 I.R.B.377
Notices:
2006-52
As clarified and amplified by Notice 2008-40, is
modified by
Notice 2012-26, 2012-17 I.R.B.847
2006-87
Superseded by
Notice 2012-19, 2012-10 I.R.B.440
2006-99
Superseded in part by
Notice 2012-20, 2012-13 I.R.B.574
2007-25
Superseded by
Notice 2012-19, 2012-10 I.R.B.440
2007-47
Obsoleted by
REG-137589-07, 2012-21 I.R.B.942
2007-77
Superseded by
Notice 2012-19, 2012-10 I.R.B.440
2007-95
Obsoleted in part by
T.D. 9576, 2012-15 I.R.B.723
2008-98
Modified by
Notice 2012-29, 2012-18 I.R.B.872
2008-107
Superseded by
Notice 2012-19, 2012-10 I.R.B.440
2009-86
Modified by
Notice 2012-29, 2012-18 I.R.B.872
2010-27
Superseded by
Notice 2012-19, 2012-10 I.R.B.440
Notices— Continued:
2010-88
As modified by Ann. 2011-40, is superseded by
Notice 2012-1, 2012-2 I.R.B.260
2010-92
Obsoleted by
T.D. 9577, 2012-15 I.R.B.730
2011-8
Superseded by
Notice 2012-19, 2012-10 I.R.B.440
2011-28
Superseded by
Notice 2012-9, 2012-4 I.R.B.315
Proposed Regulations:
REG-208274-86
Withdrawn by
Ann. 2012-11, 2012-13 I.R.B.611
Revenue Procedures:
2000-43
Amplified, modified and superseded by
Rev. Proc. 2012-18, 2012-10 I.R.B.455
2003-61
Superseded by
Notice 2012-8, 2012-4 I.R.B.309
2007-44
Modified by
Ann. 2012-3, 2012-4 I.R.B.335
2010-43
Superseded by
Rev. Proc. 2012-22, 2012-17 I.R.B.853
2011-1
Superseded by
Rev. Proc. 2012-1, 2012-1 I.R.B.1
2011-2
Superseded by
Rev. Proc. 2012-2, 2012-1 I.R.B.92
2011-3
Superseded by
Rev. Proc. 2012-3, 2012-1 I.R.B.113
2011-4
Superseded by
Rev. Proc. 2012-4, 2012-1 I.R.B.125
2011-5
Superseded by
Rev. Proc. 2012-5, 2012-1 I.R.B.169
2011-6
Superseded by
Rev. Proc. 2012-6, 2012-1 I.R.B.197
Revenue Procedures— Continued:
2011-7
Superseded by
Rev. Proc. 2012-7, 2012-1 I.R.B.232
2011-8
Superseded by
Rev. Proc. 2012-8, 2012-1 I.R.B.235
2011-9
Superseded by
Rev. Proc. 2012-9, 2012-2 I.R.B.261
2011-10
Superseded by
Rev. Proc. 2012-10, 2012-2 I.R.B.273
2011-14
Modified and clarified by
Rev. Proc. 2012-19, 2012-14 I.R.B.689
Rev. Proc. 2012-20, 2012-14 I.R.B.700
2011-23
Obsoleted in part by
Rev. Proc. 2012-25, 2012-20 I.R.B.914
2011-37
Obsoleted in part by
Rev. Proc. 2012-16, 2012-10 I.R.B.452
2011-40
Corrected by
Ann. 2012-6, 2012-6 I.R.B.366
2011-49
Modified by
Ann. 2012-3, 2012-4 I.R.B.335
2011-50
Corrected by
Ann. 2012-6, 2012-6 I.R.B.366
2011-51
Corrected by
Ann. 2012-6, 2012-6 I.R.B.366
2011-62
Corrected by
Ann. 2012-17, 2012-18 I.R.B.876
2012-8
Corrected by
Ann. 2012-7, 2012-6 I.R.B.367
Revenue Rulings:
92-19
Supplemented in part by
Rev. Rul. 2012-6, 2012-6 I.R.B.349
2008-40
Modified by
Notice 2012-6, 2012-3 I.R.B.293
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2011–27 through 2011–52 is in Internal Revenue Bulletin 2011–52, dated December 27,
2011.
2012–21 I.R.B.iiiMay 21, 2012

Revenue Rulings— Continued:
2011-1
Modified by
Notice 2012-6, 2012-3 I.R.B.293
2012-9
Modified by
Rev. Rul. 2012-12, 2012-15 I.R.B.748
Treasury Decision:
9517
Corrected by
Ann. 2012-4, 2012-4 I.R.B.335
Ann. 2012-5, 2012-5 I.R.B.348
May 21, 2012iv2012–21 I.R.B.

2012–21 I.R.B.May 21, 2012

May 21, 20122012–21 I.R.B.

Internal Revenue Service
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ashington,DC20224
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INTERNAL REVENUE BULLETIN
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