Internal Revenue Bulletin 1997-43 (PDF rendition): IRS Revenue Procedures

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

INCOME TAX
T.D. 8733, page 8.
Final regulations under section 6114 of the Code pro v i d e
that reporting is specifically required if the residency of an
individual is determined under a treaty and apart from the In-
ternal Revenue Code.
T.D. 8735, page 4.
Final regulations under section 861 of the Code relate to the
taxation of certain payments made pursuant to a cross-bor-
der securities lending transaction.
EMPLOYEE PLANS
Notice 97–56, page 19.
Weighted average interest rate update.Guidelines are
set forth for determining for October 1997, the weighted av-
erage interest rate and the resulting permissible range of in-
terest rates used to calculate current liability for purposes of
the full funding limitation of section 412(c)(7) of the Code as
amended by the Omnibus Budget Reconciliation Act of 1987
and by the Uruguay Round Agreements Act (GATT).
Notice 97–57, page 19.
Education individual retirement accounts.This notice
informs certain entities that they are approved to serve as
nonbank trustees and custodians of Education individual
retirement accounts. It also provides guidance on the pro-
cedures for being approved to be a nonbank trustee or cus-
todian of an Education IRA.
EXEMPT ORGANIZATIONS
Announcement 97–108, page 25.
A list is provided of organizations now classified as private
foundations.
EXCISE TAX
Announcement 97–107, page 25.
This announcement corrects Rev. Proc. 97–46, 1997–42
I.R.B. 10, which contains a list of “rural airports,” as defined
in section 4261(e)(1)(B), for purposes of computing the tax
on air transportation.
ADMINISTRATIVE
P.L. 105–35, page 13.
An Act to amend the Internal Revenue Code of 1986 to pre-
vent the unauthorized inspection of tax returns or tax return
information.
Rev. Proc. 97–48, page 19.
Automatic relief for S elections.Special procedures per-
mit taxpayers in certain situations to obtain automatic late S
corporation election relief instead of applying for a private
letter ruling.
Rev. Proc. 97–49, page 22.
Requests to re p o rt intercompany transactions on a
separate entity basis.Guidance is provided for requesting
consent under section 1.1502–13(e)(3) of the Code to treat
c e rtain intercompany transactions on a separate entity
basis, to revoke such consent, or to change from the unau-
thorized use of separate entity reporting to single entity re-
porting. This procedure cross-references Rev. Proc. 97–27.
Rev. Proc. 82–36 modified and superseded.
Internal Revenue
bulletin
Bulletin No. 1997–43
October 27, 1997
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.
D e p a rtment of the Tr e a s u ry
Internal Rev e nue Serv i c e
Finding Lists begin on page 31.
Announcement of Disbarments and Suspensions begins on page 27.

Mission of the Service
The purpose of the Internal Revenue Service is to collect
the proper amount of tax revenue at the least cost; serv e
the public by continually improving the quality of our prod-
ucts and services; and perf o rm in a manner warr a n t i n g
the highest degree of public confidence in our integrity, eff i-
c i e n c y, and fairn e s s .
2
Statement of Principles
of Internal Revenue
Tax Administration
The function of the Internal Revenue Service is to adm i n i s-
ter the Internal Revenue Code. Tax policy for raising re v e n u e
is determined by Congre s s .
With this in mind, it is the duty of the Service to carry out that
policy by correctly applying the laws enacted by Congress;
to determine the reasonable meaning of various Code provi-
sions in light of the Congressional purpose in enacting them;
and to perform this work in a fair and impartial manner, with
neither a government nor a taxpayer point of view.
At the heart of administration is interpretation of the Code. It
is the responsibility of each person in the Service, charged
with the duty of interpreting the law, to try to find the true
meaning of the statutory provision and not to adopt a
strained construction in the belief that he or she is “protect-
ing the revenue.” The revenue is properly protected only
when we ascertain and apply the true meaning of the statute.
The Service also has the responsibility of applying and
administering the law in a reasonable, practical manner.
Issues should only be raised by examining officers when
they have merit, never arbitrarily or for trading purposes.
At the same time, the examining officer should never hesi-
tate to raise a meritorious issue. It is also important that
c a re be exercised not to raise an issue or to ask a court to
adopt a position inconsistent with an established Serv i c e
p o s i t i o n .
Administration should be both reasonable and vigorous. It
should be conducted with as little delay as possible and
with great courtesy and considerateness. It should never
t ry to overreach, and should be reasonable within the
bounds of law and sound administration. It should, howev-
e r, be vigorous in requiring compliance with law and it
should be relentless in its attack on unreal tax devices and
f r a u d .

The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly and may be obtained
f rom the Superintendent of Documents on a subscription
basis. Bulletin contents of a permanent nature are consoli-
dated semiannually into Cumulative Bulletins, which are sold
on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of in-
ternal management are not published; however, statements
of internal practices and pro c e d u res 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 off i c e s ,
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 Tre a s u ry Department Regulations,
but they may be used as precedents. Unpublished ru l i n g s
will not be relied on, used, or cited as precedents by Service
personnel in the disposition of other cases. In applying pub-
lished rulings and procedures, the effect of subsequent leg-
islation, regulations, court decisions, rulings, and pro c e-
dures must be considered, and Service personnel and oth-
ers concerned are cautioned against reaching the same con-
clusions in other cases unless the facts and circumstances
are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions, and Subpart B, Legislation and Related
Committee Reports.
P a rt III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross re f e rences to
these subjects are contained in the other Parts and Sub-
parts. Also included in this part are Bank Secrecy Act Admin-
istrative Rulings. Bank Secrecy Act Administrative Rulings
are issued by the Department of the Treasury’s Office of the
Assistant Secretary (Enforcement).
Part IV.—Items of General Interest.
With the exception of the Notice of Proposed Rulemaking
and the disbarment and suspension list included in this part,
none of these announcements are consolidated in the Cumu-
lative Bulletins.
The first Bulletin for each month includes a cumulative index
for the matters published during the preceding months.
These monthly indexes are cumulated on a quarterly and
semiannual basis, and are published in the first Bulletin of the
succeeding quarterly and semiannual period, re s p e c t i v e l y.
3
Introduction
The contents of this publication are not copyrighted and may be reprinted freely.A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.

October 27, 199741997–43 I.R.B.
Section 861.—Income From
Sources Within the United
States
26 CFR 1.861–2: Interest.
T.D. 8735
D E PA RTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
Certain Payments Made
Pursuant to a Securities
Lending Transaction
A G E N C Y: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
S U M M A RY: This document contains
final Income Tax Regulations relating to
the taxation of certain payments made
pursuant to a cross-border securities lend-
ing transaction. These regulations pro-
vide guidance concerning the source,
character, and income tax treaty treatment
of such payments and affect United States
payors and recipients and foreign payors
and recipients.
D ATES: These regulations are eff e c t i v e
October 14, 1997.
Applicability: These regulations are ap-
plicable to payments made after Novem-
ber 13, 1997.
FOR FURTHER INFORMATION CON-
TACT: Ramon Camacho or Paul Epstein
at (202) 622-3870 (not a toll-free number)
of the Office of Associate Chief Counsel
(International), within the Office of Chief
Counsel, Internal Revenue Service, 1111
Constitution Avenue, NW., Wa s h i n g t o n ,
DC 20224.
SUPPLEMENTARYINFORMATION:
Background
On January 9, 1992, the IRS published
proposed amendments (INTL–106–89) to
the Income Tax Regulations (26 CFR part
1) under sections 861, 871, 881, 894, and
1441 of the Internal Revenue Code of
1986 (Code) in the Federal Register(57
FR 860). Apublic hearing was scheduled
but was subsequently cancelled because
no one requested to testify. However,
several written comments were received.
After consideration of all of the com-
ments, the regulations proposed by
INTL–106–89 are adopted by this Tr e a-
sury decision, as modified.
Explanation of Provisions
I. The 1992 Proposed Regulations
On January 9, 1992, the Internal Rev-
enue Service (IRS) issued proposed regu-
lations that provided guidance on the
source and character of substitute pay-
ments made in cross-border securities
lending transactions. In general, the regu-
lations proposed to source substitute pay-
ments by reference to the source of the
payments (dividend or interest) for which
they substitute. In addition, the regula-
tions proposed to characterize substitute
payments under a transparency rule.
Under the transparency rule, substitute
payments are treated as having the same
character as the dividend or interest in-
come for which they substitute.
Under the proposed regulations, the
source rule applies for all purposes of the
Code in cross-border securities lending
transactions. In contrast, the transparency
rule addressing the character of substitute
payments applies only for purposes of de-
termining the tax liability under sections
871 and 881 and nonresident alien with-
holding under chapter 3 of the Code and
for treaty purposes. Generally, public
comments welcomed the transparency
rule because it eliminated unjustifiable tax
biases between similar economic invest-
ments. After considering all the public
comments, the proposed regulations are
adopted as final regulations by this Tr e a-
sury decision, substantially as proposed.
II.The Final Regulations
1. General rule
The final regulations, like the proposed
regulations, provide that a substitute pay-
ment made with respect to a securities
lending or sale-repurchase transaction is
sourced using the general rules governing
the source of interest or dividend income
contained in sections 861 and 862. T h e
definitions of securities lending transac-
tions and sale-repurchase transactions are
provided in §§1.861–2(a)(7) and
1.861–3(a)(6) of the regulations. T h e s e
provisions define a substitute payment as
a payment made to the transferor of a se-
curity of an amount equal to any distribu-
tions of dividends or interest which the
owner of the transferred security would
normally receive. The regulations also
provide that substitute interest or dividend
payments have the same character as in-
terest or dividend income, respectively,
for purposes of applying sections
864(c)(4)(B), 871, 881, 894, 4948(a) and
the withholding provisions under chapter
3 of the Internal Revenue Code.
2. Scope of regulation
Some commentators questioned
whether a sale-repurchase transaction is
considered a transaction that is sub-
stantially similar to a securities lending
transaction for purposes of the proposed
regulations. They noted that most sale-re-
purchase transactions contractually permit
the purchaser to deal freely with the under-
lying securities, specifying only that sub-
stantially identical securities be returned
on the repurchase date. In such cases the
purchaser must also make substitute pay-
ments to the seller. The final regulations
clarify that substitute payments made in a
sale-repurchase transaction are sourced
and characterized in the same manner that
substitute payments are sourced and char-
acterized in securities lending transactions.
The final regulations only address the
tax treatment of substitute payments re-
ceived by the transferor in securities lend-
ing or sale-repurchase transactions. T h e
regulations do not address the treatment
of fees or interest paid to the transferee in
such transactions. For example, the trans-
parency rule does not extend to character-
ize the interest component of the repur-
chase price of a sale-repurchase
agreement, which is treated as interest
and sourced under the general source
rules for interest contained in sections 861
and 862. See Rev. Rul. 74-27 (1974–1
C.B. 24); Rev. Rul. 77–59 (1977–1 C.B.
196); Nebraska Department of Revenue
v. Loewenstein, 115 S. Ct. 557 (1994).
In response to comments, the final reg-
ulations apply for purposes of determin-
P a rt I. Rulings and Decisions Under the Internal Revenue Code of 1986

ing the source of substitute payments, re-
gardless of whether the recipient of the in-
come is U.S. or foreign. When source is
determined under these regulations, it ap-
plies for all purposes of the Code (e.g.,
foreign tax credit limitations under sec-
tions 904 and 906). However, with re-
spect to the characterization of substitute
payments, the IRS and Treasury believe
that it is appropriate, and more consistent
with existing guidance regarding the
treatment of substitute payments, to apply
the transparency rule only with respect to
foreign taxpayers and only for limited
purposes. A c c o r d i n g l y, the transparency
rule applies to determine character only
for certain purposes of sections 864, 871,
881, 894, 4948(a) and chapter 3 of the
Code. For example, under this rule, sub-
stitute payments to a foreign person with
respect to stocks and securities that, ab-
sent the securities lending transaction,
would give rise to foreign source eff e c-
tively connected income in the hands of
such person, will retain their character as
dividend or interest income for purposes
of determining whether the income is ef-
fectively connected to the U.S. trade or
business of such person.
The transparency rule does not apply,
h o w e v e r, to characterize the U.S. source
income of U.S. trades or businesses of
foreign taxpayers. A c c o r d i n g l y, U.S.
source effectively connected income of
foreign taxpayers and U.S. source income
of U.S. taxpayers will be treated the same.
In this regard, the final regulations do not
a ffect existing guidance applicable to
both U.S. and foreign taxpayers concern-
ing the characterization of substitute pay-
ments for purposes of other sections not
specifically identified in these final regu-
lations. See, e.g., Rev. Rul. 60–177
(1960–1 C.B. 9), (substitute payments are
ineligible for the dividends received de-
duction under section 243); Rev. Rul.
80–135 (1980–1 C.B. 18), (substitute
payments are ineligible for the tax-ex-
emption on state and local bonds under
section 103).
Because the transparency rule does not
apply for purposes of sections 901 and 903,
nothing in the final regulations affects the
determination required under §1.901–2(f)
concerning the identity of the person by
whom a foreign tax is considered paid for
purposes of sections 901 and 903.
3. Substitute payments on portfolio debt
instruments
Under the final regulations, substitute
interest payments made with respect to a
debt instrument, the interest on which
qualifies as portfolio interest under sec-
tion 871(h) or section 881(c) in the hands
of the lender, is characterized as portfolio
interest if, in the case of an obligation in
registered form, the lender provides the
withholding agent with a beneficial owner
withholding certificate or documentary
evidence in accordance with
§1.871–14(c) and no exception from the
portfolio interest exemption applies. For
example, if a bank lends securities in a
transaction that the facts and circum-
stances indicate in substance is an exten-
sion of credit pursuant to a loan agree-
ment in the ordinary course of the bank’s
trade or business, the substitute payment
may be characterized as interest which
would not qualify as portfolio interest
under section 881(c)(3)(A).
4. Tax treaties
Some commentators noted that the
transparency rule adversely affects for-
eign taxpayers that might otherwise rely
on a different characterization of substi-
tute payments in order to claim benefits
under certain income tax treaties. T h e
transparency rule would eliminate these
benefits in a number of cases. T h o s e
commentators questioned the govern-
ment’s authority to issue regulations that
would characterize substitute payments as
dividend or interest income in light of
U.S. income tax treaty provisions.
The IRS and Treasury believe that the
transparency rule in general is properly is-
sued pursuant to the general grant of au-
thority under section 7805 because it
eliminates opportunities for abuse that
arise from a rule that would characterize
substitute payments in a manner different
from the treatment of the underlying pay-
ment. Atransparency approach provides
uniform results for economically similar
investments.
M o r e o v e r, the IRS and Treasury be-
lieve that, in the absence of a trans-
parency rule, many taxpayers would use
securities lending transactions in order to
avoid tax under tax treaties or under the
Code. For this reason, authority to char-
acterize substitute payments for Code and
treaty purposes in the manner proposed in
1992 also is amply provided in section
7701(l), which was enacted after these
comments were received. Section 7701(l)
provides a broad grant of authority to
issue regulations recharacterizing multi-
ple party financing arrangements to pre-
vent the avoidance of any tax.
In this regard, the legislative history
provides that “the committee seeks to bol-
ster the Tr e a s u r y ’s ability to prevent un-
warranted avoidance of tax through multi-
ple-party financial engineering as well as
to provide a mechanism for issuing addi-
tional guidance to taxpayers entering into
financial transactions.” See H.R. Rep.
No. 103–111, 103rd Cong., 1st Sess. 729
(1993). The committee also made clear
that this authority was not limited to the
types of back-to-back loan transactions
addressed in prior rulings. See Rev. Rul.
84–152 (1984–2 C.B. 381); Rev. Rul.
84–153 (1984–2 C.B. 383); Rev. Rul.
87–89 (1987–2 C.B. 195). Section
7701(l) in fact has been applied to a broad
range of financial transactions. See, e.g.,
Prop. Regs. §1.7701(l)–2 (treatment of
obligation-shifting transactions); and No-
tice 97–21 (IRB 1997–11, March 17,
1997), (tax avoidance using self-amortizing
investments in conduit financing entities).
The 1992 proposed regulation under
section 894 provided that where an in-
come tax convention refers to United
States law, the relevant law is the section
or sections of the Internal Revenue Code
and regulations thereunder governing the
tax which is the subject of the provision.
Some commentators have suggested that
the proposed securities lending regula-
tions would be invalid for purposes of
characterizing dividends that are specifi-
cally defined by treaties. However, under
conduit principles and additional author-
ity to characterize payments pursuant to
section 7701(l), the regulations adopted
under §1.894–1(c) address the identity of
the owner of dividend and interest income
for treaty purposes as opposed to the char-
acter of the payments received under
varying treaty definitions. These regula-
tions therefore are consistent with the
g o v e r n m e n t ’s authority under treaties to
determine the identity of the beneficial
owner of income.
Special Analyses
It has been determined that this Tr e a-
1997–43 I.R.B.5October 27, 1997

sury decision is not a significant regula-
tory action as defined in EO 12866.
Therefore, a regulatory assessment is not
required. It is hereby certified that these
regulations will not have a significant
economic impact on a substantial number
of small entities. A c c o r d i n g l y, a regula-
tory flexibility analysis is not required.
This certification is based on the informa-
tion that follows. These regulations affect
entities engaged in cross-border multiple-
party financing arrangements. These reg-
ulations affect the tax treatment of substi-
tute payments made with respect to stocks
and debt securities. The primary partici-
pants who engage in cross-border multi-
ple party financing arrangements of this
type are large regulated commercial
banks and brokerage firms. In addition,
comments received in response to the no-
tice of proposed rulemaking were from
law associations, other associations that
represent large regulated financial compa-
nies or from individuals. A c c o r d i n g l y,
Treasury and IRS do not believe that a
substantial number of small entities en-
gages in cross-border multiple party fi-
nancing arrangements of the type covered
by these regulations. Pursuant to section
7805(f) of the Code, the notice of pro-
posed rulemaking preceding these regula-
tions was submitted to the Small Business
Administration for comment on its impact
on small business.
Drafting Information
The principal author of these regula-
tions is Ramon Camacho of the Office of
the Associate Chief Counsel (Interna-
tional). However, other personnel from
the IRS and Treasury Department partici-
pated in their development.
* * * * *
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding entries in nu-
merical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.861–2 also issued under 26
U.S.C. 863(a).
Section 1.861–3 also issued under 26
U.S.C. 863(a). * * *
Section 1.864–5 also issued under 26
U.S.C. 7701(l). * * *
Section 1.871–7 also issued under 26
U.S.C. 7701(l). * * *
Section 1.881–2 also issued under 26
U.S.C. 7701(l). * * *
Section 1.894–1 also issued under 26
U.S.C. 7701(l). * * *
Par. 2. Section 1.861–2 is amended by
adding a sentence at the end of paragraph
(a)(1); adding paragraph (a)(7); and revis-
ing paragraph (e) to read as follows:
§1.861–2 Interest.
(a) * * * (1) * * * See paragraph (a)(7)
of this section for special rules concerning
substitute interest paid or accrued pur-
suant to a securities lending transaction.
* * * * *
(7) Asubstitute interest payment is a
payment, made to the transferor of a secu-
rity in a securities lending transaction or a
sale-repurchase transaction, of an amount
equivalent to an interest payment which
the owner of the transferred security is en-
titled to receive during the term of the
transaction. Asecurities lending transac-
tion is a transfer of one or more securities
that is described in section 1058(a) or a
substantially similar transaction. As a l e -
repurchase transaction is an agreement
under which a person transfers a security
in exchange for cash and simultaneously
agrees to receive substantially identical se-
curities from the transferee in the future in
exchange for cash. Asubstitute interest
payment shall be sourced in the same
manner as the interest accruing on the
transferred security for purposes of this
section and §1.862–1. See also
§§1.864–5(b)(2)(iii), 1.871–7(b)(2),
1.881–2(b)(2) and for the character of
such payments and §1.894–1(c) for the ap-
plication tax treaties to these transactions.
* * * * *
(e) Effective dates.Except as other-
wise provided, this section applies with
respect to taxable years beginning after
December 31, 1966. For corresponding
rules applicable to taxable years begin-
ning before January 1, 1967, (see 26 CFR
part 1 revised April 1, 1971). Paragraph
(a)(7) of this section is applicable to pay-
ments made after November 13, 1997.
Par. 3. Section 1.861–3 is amended by
adding a sentence at the end of paragraph
(a)(1); adding paragraph (a)(6); and re-
moving the first sentence of paragraph (d)
and adding three sentences in its place to
read as follows:
§1.861–3 Dividends.
(a) * * * (1) * * * See also paragraph
(a)(6) of this section for special rules con-
cerning substitute dividend payments re-
ceived pursuant to a securities lending
transaction.
* * * * *
(6) Substitute dividend payments.A
substitute dividend payment is a pay-
ment, made to the transferor of a security
in a securities lending transaction or a
sale-repurchase transaction, of an amount
equivalent to a dividend distribution
which the owner of the transferred secu-
rity is entitled to receive during the term
of the transaction. Asecurities lending
transaction is a transfer of one or more
securities that is described in section
1058(a) or a substantially similar transac-
tion. Asale-repurchase transaction is an
agreement under which a person transfers
a security in exchange for cash and si-
multaneously agrees to receive substan-
tially identical securities from the trans-
feree in the future in exchange for cash.
Asubstitute dividend payment shall be
sourced in the same manner as the distri-
butions with respect to the transferred se-
curity for purposes of this section and
§1.862–1. See also §§1.864–5(b)(2)(iii),
1.871–7(b)(2) and 1.881–2(b)(2) for the
character of such payments and
§1.894–1(c) for the application of tax
treaties to these transactions.
* * * * *
(d) * * * Except as otherwise provided
in this paragraph this section applies with
respect to dividends received or accrued
after December 31, 1966. Paragraph
(a)(5) of this section applies to certain
dividends from a DISC or former DISC in
taxable years ending after December 31,
1971. Paragraph (a)(6) of this section is
applicable to payments made after No-
vember 13, 1997. * * *
Par. 4. Section 1.864–5 is amended by
redesignating paragraph (b)(2)(ii) as para-
graph (b)(2)(iii) and adding new para-
graph (b)(2)(ii) to read as follows:
October 27, 199761997–43 I.R.B.

§1.864–5 Foreign source income
effectively connected with U.S. business.
* * * * *
(b) * * *
(2) * * *
(ii) Substitute payments.For purposes
of this paragraph (b)(2), a substitute
interest payment (as defined in
§1.861–2(a)(7)) received by a foreign
person subject to tax under this paragraph
(b) pursuant to a securities lending trans-
action or a sale-repurchase transaction
(as defined in §1.861–2(a)(7)) with
respect to a security (as defined in
§1.864–6(b)(2)(ii)(c)) shall have the same
character as interest income paid or ac-
crued with respect to the terms of the
transferred security. Similarly, for pur-
poses of this paragraph (b)(2), a substitute
dividend payment (as defined in
§1.861–3(a)(6)) received by a foreign
person pursuant to a securities lending
transaction or a sale-repurchase transac-
tion (as defined in §1.861–3(a)(6)) with
respect to a stock shall have the same
character as a distribution received with
respect to the transferred security. T h i s
paragraph (b)(2)(ii) is applicable to pay-
ments made after November 13, 1997.
* * * * *
Par. 5. Section 1.871–7 is amended by
redesignating the text of paragraph (b) as
paragraph (b)(1); adding a paragraph
heading for newly designated paragraph
(b)(1); adding paragraph (b)(2); and re-
moving the first sentence of paragraph (f)
and adding two sentences in its place to
read as follows:
§1.871–7 Taxation of nonresident alien
individuals not engaged in U.S. business.
* * * * *
(b) Fixed or determinable annual or pe-
riodical income—(1) General rule. * * *
(2) Substitute payments.For purposes
of this section, a substitute interest pay-
ment (as defined in §1.861–2(a)(7)) re-
ceived by a foreign person pursuant to a
securities lending transaction or a sale-re-
purchase transaction (as defined in
§1.861–2(a)(7)) shall have the same char-
acter as interest income paid or accrued
with respect to the terms of the transferred
s e c u r i t y. Similarly, for purposes of this
section, a substitute dividend payment (as
defined in §1.861–3(a)(6)) received by a
foreign person pursuant to a securities
lending transaction or a sale-repurchase
transaction (as defined in §1.861–3(a)(6))
shall have the same character as a distrib-
ution received with respect to the trans-
ferred security.Where, pursuant to a se-
curities lending transaction or a
sale-repurchase transaction, a foreign per-
son transfers to another person a security
the interest on which would qualify as
portfolio interest under section 871(h) in
the hands of the lender, substitute interest
payments made with respect to the trans-
ferred security will be treated as portfolio
interest, provided that in the case of inter-
est on an obligation in registered form (as
defined in §1.871–14(c)(1)(i)), the trans-
feror complies with the documentation re-
quirement described in §1.871–14(c)
(1)(ii)(C) with respect to the payment of
the substitute interest and none of the ex-
ceptions to the portfolio interest exemp-
tion in sections 871(h)(3) and (4) apply.
See also §§1.861–2(b)(2) and 1.894–1(c).
* * * * *
(f) * * * Except as otherwise provided
in this paragraph, this section shall apply
for taxable years beginning after Decem-
ber 31, 1966. Paragraph (b)(2) of this
section is applicable to payments made
after November 13, 1997. * * *
Par. 6. Section 1.881–2 is amended by
redesignating the text of paragraph (b) as
paragraph (b)(1); adding a paragraph
heading for newly designated paragraph
(b)(1); adding a paragraph (b)(2); and re-
moving the first sentence of paragraph (e)
and adding two sentences in its place to
read as follows:
§1.881–2 Taxation of foreign
corporations not engaged in U.S.
business.
* * * * *
(b) Fixed or determinable annual or pe-
riodical income—(1) General ru l e .* * *
(2) Substitute payments.For purposes
of this section, a substitute interest pay-
ment (as defined in §1.861–2(a)(7)) re-
ceived by a foreign person pursuant to a
securities lending transaction or a sale-re-
purchase transaction (as defined in
§1.861–2(a)(7)) shall have the same char-
acter as interest income received pursuant
to the terms of the transferred security.
S i m i l a r l y, for purposes of this section, a
substitute dividend payment (as defined
in §1.861–3(a)(6)) received by a foreign
person pursuant to a securities lending
transaction or a sale-repurchase transac-
tion (as defined in §1.861–2(a)(7)) shall
have the same character as a distribution
received with respect to the transferred
security.Where, pursuant to a securities
lending transaction or a sale-repurchase
transaction, a foreign person transfers to
another person a security the interest on
which would qualify as portfolio interest
under section 881(c) in the hands of the
lender, substitute interest payments made
with respect to the transferred security
will be treated as portfolio interest, pro-
vided that in the case of interest on an
obligation in registered form (as defined
in §1.871–14(c)(1)(i)), the transferor
complies with the documentation require-
ment described in §1.871–14(c)(1)(ii)(C)
with respect to the payment of substitute
interest and none of the exceptions to the
portfolio interest exemption in sections
881(c)(3) and (4) apply. See also
§§1.871–7(b)(2) and 1.894–1(c).
* * * * *
(e) * * * Except as otherwise provide
in this paragraph, this section applies for
taxable years beginning after December
31, 1966. Paragraph (b)(2) of this section
is applicable to payments made after No-
vember 13, 1997. * * *
Par. 7. Section 1.894–1 is amended by
revising paragraph (c) and adding para-
graph (d) to read as follows:
§1.894–1 Income affected by treaty.
* * * * *
(c) Substitute interest and dividend
p a y m e n t s .The provisions of an income
tax convention dealing with interest or
dividends paid to or derived by a foreign
person include substitute interest or divi-
dend payments that have the same charac-
ter as interest or dividends under
§1.864–5(b)(2)(ii), 1.871–7(b)(2) or
1.881–2(b)(2). The provisions of this
paragraph (c) shall apply for purposes of
securities lending transactions or sale-re-
purchase transactions as defined in
§1.861–2(a)(7) and §1.861–3(a)(6).
(d) Effective dates. Paragraphs (a) and
(b) of this section apply for taxable years
1997–43 I.R.B.7October 27, 1997

beginning after December 31, 1966. For
corresponding rules applicable to taxable
years beginning before January 1, 1967,
(see 26 CFR part 1 revised April 1, 1971).
Paragraph (c) of this section is applicable
to payments made after November 13,
1997.
§1.7701(l)–1 [Amended]
P a r. 10. Section 1.7701(l)–1 is
amended as follows:
1. Paragraph (a) is amended by remov-
ing the paragraph designation (a) and the
heading.
2. Paragraph (b) is removed.
Michael P. Dolan,
Acting Commissioner of
Internal Revenue.
Approved August 28, 1997.
Donald C. Lubick,
Acting Assistant Secretary
of the Treasury.
(Filed by the Office of the Federal Register on Octo-
ber 6, 1997, 8:45 a.m., and published in the issue of
the Federal Register for October 14, 1997, 62 F.R.
53498)
Section 1362.—Election;
Revocation; Termination.
26 CFR 1.1362–6: Elections and consents.
If a taxpayer applies for late S corporation elec-
tion relief under §1362(b)(5) of the Internal Rev-
enue Code under Rev. Proc. 97–48, who must file
the consent to apply for late S corporation election
relief? See Rev. Proc. 97–48, page 19.
Section 1502.—Regulations
26 CFR 1.1502–13: Intercompany transactions.
This revenue procedure provides guidance for re-
questing consent under §1.1502–13(e)(3) to treat
certain intercompany transactions on a separate en-
tity basis, to revoke such consent, or to change from
the unauthorized use of separate entity reporting to
single entity reporting. This revenue procedure
cross-references Rev. Proc. 97–27 and modifies and
supersedes Rev. Proc. 82–36. SeeRev. Proc. 97–49,
page 22.
Section 4261.—Imposition of
Tax
26 CFR 49.4261–1: Imposition of tax; in general.
This announcement corrects Rev. Proc. 97–46,
which provides a list of “rural airports” as that term
is defined in § 4261(e)(1)(B) of the Internal Rev-
enue Code, for purposes of computing the tax on air
transportation. See Announcement 97–107, page 25.
Section 6114.—Tre a t y - B a s e d
R e t u rn Positions
26 CFR 301.6114–1: Treaty-based return positions.
T.D. 8733
D E PA RTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 301 and 602
Treaty-Based Return Positions
A G E N C Y: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
S U M M A RY: This document contains
final regulations under section 6114 of the
Internal Revenue Code of 1986 providing
that reporting is specifically required if
the residency of an individual is deter-
mined under a treaty and apart from the
Code. The IRS concluded, in the process
of completing the regulations under sec-
tion 7701(b), that the rules of section
6 114 should apply to individuals deter-
mining their residency under a treaty.
These final regulations are necessary to
implement the section 6114 rules to indi-
viduals determining their residency under
a treaty.Also contained in this document
are final regulations relating to section
7701(b) and conforming changes to regu-
lations under sections 6038 and 6046.
EFFECTIVE DATE: These regulations
are effective December 15, 1997.
FOR FURTHER INFORMATION CON-
TACT: David A. Juster, telephone (202-
622-3850) (not a toll-free number), re-
garding sections 6114 and 7701(b) and
Carl M. Cooper, telephone (202-622-
3840) (not a toll-free number) regarding
sections 6038 and 6046, both of the Of-
fice of Associate Chief Counsel (Interna-
tional), within the Office of Chief Coun-
sel, IRS.
SUPPLEMENTARYINFORMATION:
Paperwork Reduction Act
The collections of information con-
tained in these final regulations have been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act (44
U.S.C. 3507) under control number
1 5 4 5 – 1126. Responses to these collec-
tions of information are mandatory.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless the col-
lection of information displays a valid
OMB control number.
The estimated annual burden per re-
spondent varies from 1/2 hour to 3 hours,
depending on individual circumstances,
with an estimated average of 1 hour.
Comments concerning the accuracy of
this burden estimate and suggestions for
reducing this burden should be sent to the
Internal Revenue Service, Attn: IRS
Reports Clearance Off i c e r, T: F P, Wa s h-
ington, DC 20224, and to the Office of
Management and Budget, Attn: Desk
O fficer for the Department of the Tr e a-
s u r y, Office of Information and Regula-
tory Affairs, Washington, DC 20503.
Books or records relating to this collec-
tion of information must be retained as
long as their contents may become mater-
ial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.
Background
On April 27, 1992, a notice of proposed
rulemaking was published in the Federal
R e g i s t e r(57 F.R. 15272) proposing
amendments to the final Regulations on
Procedure and Administration (26 CFR
3 0 1 . 6 114–1), published in the F e d e r a l
R e g i s t e ron March 14, 1990 (55 F. R .
9438) and on July 12, 1990 (55 F. R .
28608). The proposed amendments re-
lated to §301.6114–1(b) and (c) and
§301.7701(b)–7(c)(2). No written com-
ments responding to the notice were re-
ceived. No public hearing was requested
or held. The proposed amendments are
adopted without change by this Treasury
decision. This Treasury decision also in-
cludes modifications to §§1.6038–2(j),
1.6046–1(g), 301.6114–1(d), 301.7701
(b)–3(b)(3) and (4), 301.7701(b)–7(c)(1)
and 301.7701(b)–8(b)(1) and (2).
Explanation of Provisions
Section 301.6114–1(b) is amended by
adding paragraph (b)(8) to provide that
October 27, 199781997–43 I.R.B.

reporting is required under section 611 4
where residency of an individual is deter-
mined under a treaty and apart from the
Internal Revenue Code (Code). The regu-
lations provide, however, that reporting is
waived for an individual if payments or
income items reportable by reason of
paragraph (b)(8) do not exceed $100,000
in the aggregate. Section 301.6114–1(d)
currently provides that when reporting is
required under section 6114, a taxpayer
must furnish as an attachment to his or her
return a written statement with the infor-
mation as set forth in paragraph (d). Sec-
tion 301.7701(b)–7(b) currently provides
that a dual resident taxpayer who claims a
treaty benefit as a nonresident of the
United States must file a statement in the
form required by paragraph (c) of that
section. Section 301.6114–1(d) is now
amended to provide that, when reporting
is required under section 6114, a taxpayer
must furnish, as an attachment to his or
her return, a fully completed Form 8833
(Treaty-Based Return Position Disclosure
Under Section 6114 or 7701(b)) or appro-
priate successor form. Section
301.7701(b)–7(c)(1) is amended to pro-
vide that the written statement required to
be furnished under paragraph (b) of that
section, as an attachment to a dual resi-
dent taxpayer’s return, must be in the
form of a fully completed Form 8833
(Treaty-Based Return Position Disclosure
Under Section 6114 or 7701(b)) or appro-
priate successor form. Form 8833 was
developed to provide standardized report-
ing of the information currently
required by §§301.6114–1(d) and
301.7701(b)–7(c).
In an effort to provide standardized re-
porting of the information currently
required to be reported, under §301.7701-
(b)–8(b), by taxpayers claiming the closer
connection exception and exempt individ-
uals and individuals with a medical condi-
tion, the Service has developed Form
8840 (Closer Connection Exception
Statement) and Form 8843 (Statement for
Exempt Individuals and Individuals with
a Medical Condition). A c c o r d i n g l y,
§301.7701(b)–8(b)(1) is amended to pro-
vide that the statement filed by alien indi-
viduals claiming the closer connection ex-
ception, described in §301.7701(b)–2,
must be in the form of a fully completed
Form 8840 or appropriate successor
form. Section 301.7701(b)–8(b)(2) is
amended to provide that the statement
filed by exempt individuals and individu-
als with a medical condition, described in
§301.7701(b)–3, must be in the form of a
fully completed Form 8843 or appropriate
successor form.
Sections 3121(b)(19), 3306(c)(19) and
3231(e)(1) of the Code provide that “J”
class visa holders (teachers and trainees)
are exempt from FICA, FUTAand Rail-
road Retirement Act taxes, respectively.
Section 320 of the Social Security Inde-
pendence and Program Improvements Act
of 1994, Public Law 103–296 (108 Stat.
1464), extends the FICA, FUTAand Rail-
road Retirement Act tax exemptions and
certain other tax rules to “Q” class visa
holders (participants in international cul-
tural exchange programs). A c c o r d i n g l y,
conforming changes have been made to
§301.7701(b)–3(b)(3) and (4) to reflect
the revisions in the Code to the definitions
of a teacher or traineeand s t u d e n tc o n-
tained in section 7701(b)(5).
Section 301.7701(b)–7(c)(2), adopted
as proposed, provides that, for purposes
of stating the approximate amount of
subpart F income to be included in the
statement required to be furnished under
paragraph (b) of that section by a dual
resident taxpayer who is a shareholder in
a c o n t rolled foreign corporation(as de-
fined in section 957 or section 953(c)),
the approximate amount of income may
be based on the audited foreign financial
statements of the CFC if there are no
other United States shareholders in that
CFC. Parallel rules with respect to infor-
mation reporting under sections 6038 and
6046 are added in §§1.6038–2(j)(2)(ii)
and 1.6046–1(g). Under these rules, a
taxpayer who claims a treaty benefit as a
nonresident of the United States, but who
is a United States person for purposes of
the information reporting requirements of
sections 6038 or 6046, may satisfy cer-
tain information reporting requirements
by filing the audited foreign financial
statements of the foreign corporation
with respect to which the information re-
porting is required. However, these rules
apply only if the taxpayer is the sole
United States person for purposes of the
information reporting requirements with
respect to the foreign corporation. If
there are other United States persons for
those purposes, then the taxpayer must
report the information required by the
regulations in the form and manner gener-
ally prescribed.
Special Analyses
It has been determined that this Tr e a-
sury decision is not a significant regula-
tory action as defined in EO 12866.
Therefore, a regulatory assessment is not
required. It has also 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 notice of proposed rulemaking pre-
ceding the regulations was issued prior to
March 29, 1996, the Regulatory Flexibil-
ity Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the
Code, the notice of proposed rulemaking
preceding these regulations was submit-
ted to the Chief Counsel for Advocacy of
the Small Business Administration for
comment on its impact on small business.
Drafting Information
Various personnel from the Office of
Associate Chief Counsel (International),
within the Office of Chief Counsel, IRS
and the Treasury Department participated
in developing the regulations.
* * * * *
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1, 301 and
602 are amended as follows:
PART1—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 1.6038-2 is amended by:
1. Redesignating paragraph (j)(2)(ii) as
paragraph (j)(2)(iii).
2. Adding new paragraph (j)(2)(ii) to
read as follows:
§1.6038–2 Information returns required
of United States persons with respect to
annual accounting periods of certain
foreign corporations beginning after
December 31, 1962.
* * * * *
(j) * * *
(2) * * *
1997–43 I.R.B.9October 27, 1997

(ii) If an individual who is a United
States person required to furnish informa-
tion with respect to a foreign corporation
under section 6038 is entitled under a
treaty to be treated as a nonresident of the
United States, and if the individual claims
this treaty benefit, and if there are no
other United States persons that are re-
quired to furnish information under sec-
tion 6038 with respect to the foreign cor-
poration, then the individual may satisfy
the requirements of paragraphs (f)(10),
( f ) ( 11), (g), and (h) of this section by filing
the audited foreign financial statements of
the foreign corporation with the individ-
u a l ’s return required under section 6038.
* * * * *
P a r. 3. In §1.6046–1, paragraph (g) is
amended by adding a sentence at the end
to read as follows:
§1.6046–1 Returns as to organization
or reorganization of foreign corporations
and as to acquisitions of their stock, on or
after January 1, 1963.
* * * * *
(g) * * * If an individual who is a
United States person required to make a
return with respect to a foreign corpora-
tion under section 6046 is entitled under a
treaty to be treated as a nonresident of the
United States, and if the individual claims
this treaty benefit, and if there are no
other United States persons that are re-
quired to furnish information under sec-
tion 6046 with respect to the foreign cor-
poration, then the individual may satisfy
the requirements of paragraphs (b)(10),
(11) and (12), (c)(3)(ii)(d), and (g) of this
section by filing the audited foreign finan-
cial statements of the foreign corporation
with the individual’s return required
under section 6046.
* * * * *
PART301—PROCEDURE AND
ADMINISTRATION
P a r. 4. The authority citation for part
301 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.6114–1 also issued under 26
U.S.C. 6114; * * *
Par. 5. Section 301.6114–1 is amended
by:
1. Removing the language “(c)(1)” in
paragraph (b)(4) introductory text and
adding “(c)(1)(i)” in its place.
2. Removing the language “(c)(1)” in
paragraph (b)(5) introductory text and
adding “(c)(1)(i)” in its place.
3. Removing the language”(c)(4)” in
paragraph (b)(6) and adding “(c)(1)(iv)”
in its place.
4. Removing the language “or” at the
end of paragraph (b)(6).
5. Removing the period at the end of
paragraph (b)(7) and adding “; or” in its
place.
6. Adding a paragraph (b)(8).
7. Paragraphs (c)(1) through (c)(6) are
redesignated as paragraphs (c)(1)(i)
through (c)(1)(vi), respectively.
8. Paragraphs (c)(7) introductory text,
(c)(7)(i), (c)(7)(ii), and (c)(7)(iii) are re-
designated as paragraphs (c)(1)(vii) intro-
ductory text, (c)(1)(vii)(A), (c)(1)(vii)(B)
and (c)(1)(vii)(C), respectively.
9. The introductory text of paragraph
(c) is redesignated as the introductory text
of paragraph (c)(1).
10. Revising newly designated para-
graph (c)(1)(ii).
11. Removing the concluding text im-
mediately following newly designated
paragraph (c)(1)(vii)(C).
12. Adding paragraphs (c)(2), (c)(3),
(c)(4) and (c)(5).
13. Revising paragraph (d).
The additions and revisions read as fol-
lows:
§301.6114–1 Treaty-based return
positions.
* * * * *
(b) * * *
(8) For returns relating to taxable years
for which the due date for filing returns
(without extensions) is after December
15, 1997, that residency of an individual
is determined under a treaty and apart
from the Internal Revenue Code.
(c) R e p o rting re q u i rement waived.
(1) * * *
(ii) For returns relating to taxable years
for which the due date for filing returns
(without extensions) is on or before De-
cember 15, 1997, that residency of an in-
dividual is determined under a treaty and
apart from the Internal Revenue Code.
* * * * *
(2) Reporting is waived for an individ-
ual if payments or income items other-
wise reportable under this section (other
than by reason of paragraph (b)(8) of this
section), received by the individual dur-
ing the course of the taxable year do not
exceed $10,000 in the aggregate or, in the
case of payments or income items re-
portable only by reason of paragraph
(b)(8) of this section, do not exceed
$100,000 in the aggregate.
(3) Reporting with respect to payments
or income items the treatment of which is
mandated by the terms of a closing agree-
ment with the Internal Revenue Service,
and that would otherwise be subject to the
reporting requirements of this section, is
also waived.
(4) If a partnership, trust, or estate that
has the taxpayer as a partner or benefi-
ciary discloses on its information return a
position for which reporting is otherwise
required by the taxpayer, the taxpayer
(partner or beneficiary) is then excused
from disclosing that position on a return.
(5) This section does not apply to a
withholding agent with respect to the per-
formance of its withholding functions.
(d) Information to be re p o rt e d— ( 1 )
Returns due after December 15, 1997.
When reporting is required under this sec-
tion for a return relating to a taxable year
for which the due date (without exten-
sions) is after December 15 1997, the tax-
payer must furnish, in accordance with
paragraph (a) of this section, as an attach-
ment to the return, a fully completed
Form 8833 (Treaty-Based Return Position
Disclosure Under Section 6114 or
7701(b)) or appropriate successor form.
(2) Earlier returns. For returns relat-
ing to taxable years for which the due date
for filing returns (without extensions) is
on or before December 15, 1997, the tax-
payer must furnish information in accor-
dance with paragraph (d) of this section in
e ffect prior to December 15, 1997 (see
§ 3 0 1 . 6 114–1(d) as contained in 26 CFR
part 301, revised April 1, 1997).
(3) In general—(i) Permanent estab-
l i s h m e n t .For purposes of determining
the nature and amount (or reasonable esti-
mate thereof) of gross receipts, if a tax-
payer takes a position that it does not have
a permanent establishment or a fixed base
in the United States and properly dis-
closes that position, it need not separately
report its payment of actual or deemed
dividends or interest exempt from tax by
October 27, 1997101997–43 I.R.B.

reason of a treaty (or any liability for tax
imposed by reason of section 884).
(ii) Single income item. For purposes
of the statement of facts relied upon to
support each separate Treaty-Based Re-
turn Position taken, a taxpayer may treat
payments or income items of the same
type (e.g., interest items) received from
the same ultimate payor (e.g., the obligor
on a note) as a single separate payment or
income item.
(iii) F o reign source effectively con-
nected income. If a taxpayer takes the re-
turn position that, under the treaty, in-
come that would be income eff e c t i v e l y
connected with a U.S. trade or business is
not subject to U.S. taxation because it is
income treated as derived from sources
outside the United States, the taxpayer
may treat payments or income items of
the same type (e.g., interest items) as a
single separate payment or income item.
(iv) Sales or services income. Income
from separate sales or services, whether
or not made or preformed by an agent (in-
dependent or dependent), to different U.S.
customers on behalf of a foreign corpora-
tion not having a permanent establish-
ment in the United States may be treated
as a single payment or income item.
(v) Foreign insurers or reinsurers.For
purposes of reporting by foreign insurers
or reinsurers, as described in paragraph
(c)(1)(vii)(B) of this section, such report-
ing must separately set forth premiums
paid with respect to casualty insurance
and indemnity bonds (subject to section
4371(1)); life insurance, sickness and ac-
cident policies, and annuity contracts
(subject to section 4371(2)); and reinsur-
ance (subject to section 4371(3)). All pre-
miums paid with respect to each of these
three categories may be treated as a single
payment or income item within that cate-
gory. For reports first due before May 1,
1991, the report may disclose, for each of
the three categories, the total amount of
premiums derived by the foreign insurer
or reinsurer in U.S. dollars (even if a por-
tion of these premiums relate to risks that
are not U.S. situs). Reasonable estimates
of the amounts required to be disclosed
will satisfy these reporting requirements.
* * * * *
P a r. 6. Section 301.7701(b)–0 is
amended in the contents listing by:
1. Adding entries for §301.7701(b)–7,
paragraphs (c)(1)(i) and (c)(1)(ii).
2. Removing the language “[Re-
served]” in the entry for §301.7701(b)–7,
paragraph (c)(2).
3. Adding entries for §301.7701(b)–8,
paragraphs (b)(1)(i), (b)(1)(ii), (b)(2)(i)
and (b)(2)(ii).
The additions read as follows:
§301.7701(b)–0 Outline of regulation
provision for section 7701(b)–1 through
(b)–9.
* * * * *
§301.7701(b)–7 Coordination with
income tax treaties.
* * * * *
(c) * * *
(1) * * *
(i) Returns due after December 15,
1997.
(ii) Earlier returns.
* * * * *
§301.7701(b)–8 Procedural rules.
* * * * *
(b) * * *
(1) * * *
(i) Returns due after December 15,
1997.
(ii) Earlier returns.
(2) * * *
(i) Returns due after December 15,
1997.
(ii) Earlier returns.
* * * * *
P a r. 7. Section 301.7701(b)3 is
amended by revising paragraphs (b)(3)
and (b)(4) to read as follows:
§301.7701(b)–3 Days of presence in the
United States that are excluded for
purposes of section 7701(b).
* * * * *
(b) * * *
(3) Teacher or trainee. Ateacher or
trainee includes any individual (and that
i n d i v i d u a l ’s immediate family), other
than a student, who is admitted temporar-
ily to the United States as a nonimmigrant
under section 101(a)(15)(J) (relating to
the admission of teachers and trainees
into the United States) or section
101(a)(15)(Q) (relating to the admission
of participants in international cultural ex-
change programs) of the Immigration and
Nationality Act (8 U.S.C. 1101(a)(15)(J),
(Q)) and who substantially complies with
the requirements of being admitted.
(4) Student.Astudent is any individ-
ual (and that individual’s immediate fam-
ily) who is admitted temporarily to the
United States as a nonimmigrant under
section 101(a)(15)(F) or (M) (relating to
the admission of students into the United
States) or as a student under section
101(a)(15)(J) (relating to the admission of
teachers and trainees into the United
States) or section 101(a)(15)(Q) (relating
to the admission of participants in interna-
tional cultural exchange programs) of the
Immigration and Nationality Act (8
U.S.C. 1101(a)(15)(F), (J), (M), (Q)) who
substantially complies with the require-
ments of being admitted. For rules con-
cerning taxation of certain nonresident
students or trainees, see section 871 (c)
and §1.871–9(a) of this chapter.
* * * * *
P a r. 8. Section 301.7701(b)–7 is
amended by:
1. Revising paragraph (c)(1).
2. Adding text for paragraph (c)(2).
The revision and addition read as fol-
lows:
§301.7701(b)–7 Coordination with
income tax treaties.
* * * * *
(c) * * * (1) In general—(i) Returns
due after December 15, 1997.The state-
ment filed by an individual described in
paragraph (a)(1) of this section, for a re-
turn relating to a taxable year for which
the due date (without extensions) is after
December 15, 1997, must be in the form
of a fully completed Form 8833 (Treaty-
Based Return Position Disclosure Under
Section 6114 or 7701(b)) or appropriate
successor form. See section 6114 and
§ 3 0 1 . 6 114–1 for rules relating to other
treaty-based return positions taken by the
same taxpayer.
(ii) Earlier returns.For returns relat-
ing to taxable years for which the due date
for filing returns (without extensions) is
on or before December 15, 1997, the
1997–43 I.R.B.11October 27, 1997

statement filed by the individual de-
scribed in paragraph (a)(1) of this section
must contain the information in accor-
dance with paragraph (c)(1) of this sec-
tion in effect prior to December 15, 1997
(see §301.7701(b)–7(c)(1) as contained in
26 CFR part 301, revised April 1, 1997).
(2) C o n t rolled foreign corporation
shareholders. If the taxpayer who claims
a treaty benefit as a nonresident of the
United States is a United States share-
holder in a controlled foreign corporation
(CFC), as defined in section 957 or sec-
tion 953(c), and there are no other United
States shareholders in that CFC, then for
purposes of paragraph (c)(1) of this sec-
tion, the approximate amount of subpart F
income (as defined in section 952) that
would have been included in the tax-
payer’s income may be determined based
on the audited foreign financial state-
ments of the CFC.
* * * * *
P a r. 9. Section 301.7701(b)–8 is
amended by revising paragraphs (b)(1)
and (b)(2) to read as follows:
§301.7701(b)–8 Procedural rules.
* * * * *
(b) * * *
(1) Closer connection exception— ( i )
Returns due after December 15, 1997.
The statement filed by an individual de-
scribed in paragraph (a)(1) of this section,
for a return relating to a taxable year for
which the due date (without extensions) is
after December 15, 1997, must be in the
form of a fully completed Form 8840
(Closer Connection Exception Statement)
or appropriate successor form.
(ii) Earlier returns. For returns relat-
ing to taxable years for which the due date
for filing returns (without extensions) is
on or before December 15, 1997, the
statement filed by the individual de-
scribed in paragraph (a)(1) of this section
must contain the information in accor-
dance with paragraph (b)(1) of this sec-
tion in effect prior to December 15, 1997
(see §301.7701(b)–8(b)(1) as contained in
26 CFR Part 301, revised April 1, 1997).
(2) Exempt individuals and individuals
with a medical condition—(i) R e t u r n s
due after December 15, 1997.The state-
ment filed by an individual described in
paragraph (a)(2) of this section, for a re-
turn relating to a taxable year for which
the due date (without extensions) is after
December 15, 1997, must be in the form
of a fully completed Form 8843 (State-
ment for Exempt Individuals and Individ-
uals with a Medical Condition) or appro-
priate successor form.
(ii) Earlier returns. For returns relat-
ing to taxable years for which the due date
for filing returns (without extensions) is
on or before December 15, 1997, the
statement filed by the individual de-
scribed in paragraph (a)(2) of this section
must contain the information in accor-
dance with paragraph (b)(2) of this sec-
tion in effect prior to December 15, 1997
(see §301.7701(b)–8(b)(2) as contained in
26 CFR Part 301, revised April 1, 1997).
PART602—OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION ACT
Par. 10. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 11. In §602.101, paragraph (c) is
amended by adding an entry in numerical
order to the table and revising the entry
for 301.7701(b)–7 to read as follows:
§602.101 OMB Control numbers.
* * * * *
(c) * * *
CFR part or section Current OMB
where identified andcontrol No.
described
* * * * *
301.6114–11545–1126
* * * * *
301.7701(b)–71545–0089
1545–1126
* * * * *
Michael P. Dolan,
Acting Commissioner of
Internal Revenue.
Approved August 28, 1997.
Donald C. Lubick,
Acting Assistant Secretary of
the Treasury.
(Filed by the Office of the Federal Register on Octo-
ber 6, 1997, 8:45 a.m., and published in the issue of
the Federal Register for October 14, 1997, 62 F.R.
53384)
October 27, 1997121997–43 I.R.B.

Subpart B.—Legislation and
Related Committee Reports
Public Law 105–35
105th Congress, H.R. 1226
August 5, 1997
An Act to amend the Internal Revenue
Code of 1986 to prevent the unauthorized
inspection of tax returns or tax returns in-
formation.
Be it enacted by the Senate and House
of Representatives of the United States of
America in Congress assembled,
SECTION1. SHORTTITLE.
This Act may be cited as the “Ta x p a y e r
Browsing Protection A c t . ”
SEC. 2. PENALTYFOR
UNAUTHORIZED INSPECTION OF
TAX RETURNS OR TAX RETURN
INFORMATION.
(a) I
NGENERAL.—Part I of subchapter
Aof chapter 75 of the Internal Revenue
Code of 1986 (relating to crimes, other
o ffenses, and forfeitures) is amended by
adding after section 7213 the following
new section:
“SEC. 7213A. UNAUTHORIZED
INSPECTION OFRETURNS OR RE-
TURN INFORMATION.
“(a) P
ROHIBITIONS.—
“(1) F
E D E R A LEM P L O Y E E SA N D
O T H E RP E R S O N S.—It shall be unlawful
for—
“(A) any officer or employee
of the United States, or
“(B) any person described in
section 6103(n) or an officer or
employee of any such person,
willfully to inspect, except as authorized
in this title, any return or return informa-
tion.
“(2) S
TAT EA N DO T H E R
E M P L O Y E E S.—It shall be unlawful for
any person (not described in paragraph
(1)) willfully to inspect, except as au-
thorized in this title, any return or re-
turn information acquired by such per-
son or another person under a provision
of section 6103 referred to in section
7213(a)(2).
“(b) P
ENALTY.—
“(1) INGENERAL.—Any vi-
olation of subsection (a) shall be
punishable upon conviction by a
fine in any amount not exceeding
$1,000, or imprisonment of not
more than 1 year, or both, together
with the costs of prosecution.
“(2) F
E D E R A LO F F I C E R SO R
E M P L O Y E E S
.—An officer or em-
ployee of the United States who is
convicted of any violation of sub-
section (a) shall, in addition to any
other punishment, be dismissed
from office or discharged from
employment.
“(c) D
EFINITIONS.—For purposes of this
section, the terms ‘inspect’, ‘return’, and
‘return information’have the respective
meanings given such terms by section
6103(b).”.
(b) T
ECHNICALAMENDMENTS.—
(1) Paragraph (2) of section
7213(a) of such Code is amended by
inserting “(5),” after “(m)(2), (4),”.
(2) The table of sections for part
I of subchapter Aof chapter 75 of such
Code 1986 is amended by inserting
after the item relating to section 7213
the following new item:
“Sec. 7213A. Unauthorized inspection of returns or
return information.”.
(c) E
F F E C T I V EDAT E.—The amend-
ments made by this section shall apply to
violations occurring on and after the date
of the enactment of this Act.
SEC. 3. CIVILDAMAGES FOR
UNAUTHORIZED INSPECTION OF
RETURNS AND RETURN
INFORMATION; NOTIFICATION
OFUNLAWFULINSPECTION OR
DISCLOSURE.
(a) C
IVILDAMAGESFORUNAUTHORIZED
IN S P E C T I O N.—Subsection (a) of section
7431 of the Internal Revenue Code of
1986 is amended—
(1) by striking “DISCLOSURE” in
the headings for paragraphs (1) and (2)
and inserting “I
N S P E C T I O NO RD I S C L O-
SURE”, and
(2) by striking “discloses” in
paragraphs (1) and (2) and inserting
“inspects or discloses”.
(b) N
OTIFICATIONOFUNLAWFULINSPEC-
T I O NO RDI S C L O S U R E.—Section 7431 of
such Code is amended by redesignating
subsections (e) and (f) as subsections (f)
and (g), respectively, and by inserting
after subsection (d) the following new
subsection:
“(e) N
O T I F I C AT I O NO FUN L AW F U LIN-
S P E C T I O NA N DDI S C L O S U R E.—If any per-
son is criminally charged by indictment or
information with inspection or disclosure
of a taxpayer’s return or return informa-
tion in violation of—
“(1) paragraph (1) or (2) of section
7213(a),
“(2) section 7213A(a), or
“(3) subparagraph (B) of section
1030(a)(2) of title 18, United States
Code,
the Secretary shall notify such taxpayer as
soon as practicable of such inspection or
disclosure.”.
(c) N
ODA M A G E SF O RIN S P E C T I O NRE-
Q U E S T E DB YTA X PAY E R.—Subsection (b)
of section 7431 of such Code is amended
to read as follows:
“(b) E
X C E P T I O N S.—No liability shall
arise under this section with respect to
any inspection or disclosure—
“(1) which results from a good
faith, but erroneous, interpretation of
section 6103, or
“(2) which is requested by the tax-
payer.”.
(d) C
ONFORMINGAMENDMENTS.—
(1) Subsections (c)(1)(A),
(c)(1)(B)(i), and (d) of section 7431 of
such Code are each amended by insert-
ing “inspection or” before “disclosure”.
(2) Clause (ii) of section 7431(c)-
(1)(B) of such Code is amended by
striking “willful disclosure or a disclo-
sure” and inserting “willful inspection
or disclosure or an inspection or disclo-
sure”.
(3) Subsection (f) of section 7431
of such Code, as redesignated by sub-
section (b), is amended to read as fol-
lows:
“(f) D
EFINITIONS.—For purposes of this
section, the terms ‘inspect’, ‘inspection’,
‘return’, and ‘return information’have the
respective meanings given such terms by
section 6103(b).”.
(4) The section heading for sec-
tion 7431 of such Code is amended by
inserting “
INSPECTIONOR” before “DIS-
CLOSURE”.
1997–43 I.R.B.13October 27, 1997
Part II. Treaties and Tax Legislation

(5) The table of sections for sub-
chapter B of chapter 76 of such Code is
amended by inserting “inspection or”
before “disclosure” in the item relating
to section 7431.
(6) Paragraph (2) of section
7431(g) of such Code, as redesignated
by subsection (b), is amended by strik-
ing “any use” and inserting “any in-
spection or use”.
(e) E
F F E C T I V EDAT E.—The amend-
ments made by this section shall apply to
inspections and disclosures occurring on
and after the date of the enactment of this
Act.
Approved August 5, 1997.
105th HOUSEReport
CongressOF REPRE- 105–51
1st SessionSENTATIVES
TAXPAYER BROWSING
PROTECTION ACT
A
PRIL14, 1997.—Committed to the Com-
mittee of the Whole House on the State of
the Union and ordered to be printed
M r. AR C H E R, from the Committee on
Ways and Means, submitted the following
REPORT
[To accompany H.R. 1226]
[Including cost estimate of the Congres-
sional Budget Office]
The Committee on Ways and Means, to
whom was referred the bill (H.R. 1226) to
amend the Internal Revenue Code of 1986
to prevent the unauthorized inspection of
tax returns or tax return information, hav-
ing considered the same, report favorably
thereon with an amendment and recom-
mend that the bill as amended do pass.
CONTENTS
Page
I. Summary and Background . . . . . . . . . . .14
A. Summary . . . . . . . . . . . . . . . . . . . . . .14
B. Background and Reasons for
Legislation . . . . . . . . . . . . . . . . . . . . .15
C. Legislative History . . . . . . . . . . . . . . .15
II. Explanation of the Bill . . . . . . . . . . . . . .15
III. Vote of the Committee . . . . . . . . . . . . .15
IV. Budget Effects of the Bill . . . . . . . . . . .15
A. Committee Estimates of
Budgetary Effects . . . . . . . . . . . . . .15
B. Budget Authority and Tax
Expenditures . . . . . . . . . . . . . . . . . .15
C. Cost Estimate Prepared by the
Congressional Budget Office . . . . . .16
V. Other Matters To Be Discussed Under
the Rules of the House . . . . . . . . . . . . . .16
A. Committee Oversight Findings and
Recommendations . . . . . . . . . . . . . . .16
B. Summary of Findings and Recom-
mendations of the Committee on
Government Reform and Oversight .16
C. Constitutional Authority Statement . .16
D. Information Relating to Unfunded
Mandates . . . . . . . . . . . . . . . . . . . . . .16
E. Applicability of House Rule XXI
clause 5(c) . . . . . . . . . . . . . . . . . . . . .16
VI. Changes in Existing Law Made by the
Bill, as Reported . . . . . . . . . . . . . . . . . .16
The amendment is as follows:
At the end of the bill insert the follow-
ing new section:
SEC. 3. CIVILDAMAGES FOR
UNAUTHORIZED INSPECTION OF
RETURNS AND RETURN
INFORMATION; NOTIFICATION
OFUNLAWFULINSPECTION OR
DISCLOSURE.
(a) C
IVILDAMAGESFORUNAUTHORIZED
IN S P E C T I O N.—Subsection (a) of section
7431 of the Internal Revenue Code of
1986 is amended—
(1) by striking “DISCLOSURE” in
the headings for paragraphs (1) and (2)
and inserting “I
N S P E C T I O NO RD I S C L O-
SURE”, and
(2) by striking “discloses” in
paragraphs (1) and (2) and inserting
“inspects or discloses”.
(b) N
OTIFICATIONOFUNLAWFULINSPEC-
T I O NO RDI S C L O S U R E.—Section 7431 of
such Code is amended by redesignating
subsections (e) and (f) as subsections (f)
and (g), respectively, and by inserting
after subsection (d) the following new
subsection:
“(e) N
O T I F I C AT I O NO FUN L AW F U LIN-
S P E C T I O NA N DDI S C L O S U R E.—If any per-
son is criminally charged by indictment or
information with inspection or disclosure
of a taxpayer’s return or return informa-
tion in violation of—
“(1) paragraph (1) or (2) of section
7213(a),
“(2) section 7213A(a), or
“(3) subparagraph (B) of section
1030(a)(2) of title 18, United States
Code,
the Secretary shall notify such taxpayer as
soon as practicable of such inspection or
disclosure.”.
(c) N
ODA M A G E SF O RIN S P E C T I O NRE-
Q U E S T E DB YTA X PAY E R.—Subsection (b)
of section 7431 of such Code is amended
to read as follows:
“(b) E
X C E P T I O N S.—No liability shall
arise under this section with respect to
any inspection or disclosure—
“(1) which results from a good
faith, but erroneous, interpretation of
section 6103, or
“(2) which is requested by the tax-
payer.”.
(d) C
ONFORMINGAMENDMENTS.—
(1) Subsections (c)(1)(A), (c)(1)-
(B)(i), and (d) of section 7431 of such
Code are each amended by inserting
“inspection or” before “disclosure”.
(2) Clause (ii) of section 7431(c)-
(1)(B) of such Code is amended by
striking “willful disclosure or a disclo-
sure” and inserting “willful inspection
or disclosure or an inspection or disclo-
sure”.
(3) Subsection (f) of section 7431
of such Code, as redesignated by sub-
section (b), is amended to read as fol-
lows:
“(f) D
EFINITIONS.—For purposes of this
section, the terms ‘inspect’, ‘inspection’,
‘return’, and ‘return information’have the
respective meanings given such terms by
section 6103(b).”.
(4) The section heading for sec-
tion 7431 of such Code is amended by
inserting “INSPECTION OR” before
“DISCLOSURE”.
(5) The table of sections for sub-
chapter B of chapter 76 of such Code is
amended by inserting “inspection or”
before “disclosure” in the item relating
to section 7431.
(6) Paragraph (2) of section
7431(g) of such Code, as redesignated
by subsection (b), is amended by strik-
ing “any use” and inserting “any in-
spection or use”.
(e) E
F F E C T I V EDAT E.—The amendments
made by this section shall apply to inspec-
tions and disclosures occurring on and after
the date of the enactment of this A c t .
I. SUMMARYAND BACKGROUND
A. S
U M M A RY
H.R. 1226, as reported by the Commit-
October 27, 1997141997–43 I.R.B.

tee on Ways and Means, provides for a
criminal penalty for unauthorized willful
inspection (“browsing”) of tax returns and
return information. The billprovides for
civil damages for unauthorized inspec-
tion, and also contains a notification re-
quirement.
B. B
ACKGROUNDANDREASONSFOR
LEGISLATION
Widespread indications of browsing
have made it imperative that Congress
create a criminal penalty in the Internal
Revenue Code to penalize this behavior.
C. L
EGISLATIVEHISTORY
Committee bill
H.R. 1226 was introduced by Chairman
Archer (for himself, Ms. Dunn, Mr.
Rangel, Mrs. Johnson of Connecticut, Mr.
Coyne, Mr. Thomas, Mr. Herg e r, Mr.
Camp, Mr. Ensign, Mr. Hayworth, Mr.
We l l e r, Mrs. Kennelly of Connecticut,
M r. Levin, Mr. Kleczka, Mr. Lewis of
Georgia, Mr. Neal of Massachusetts, Mr.
Jefferson, Mr.Tanner, Mrs. Thurman, and
M r. Portman) on April 8, 1997. The bill
was considered in a Committee on Ways
and Means markup on April 9, 1997, and
was ordered favorably reported, with an
amendment, by voice vote.
II. EXPLANATION OFTHE BILL
PRESENTLAW
The Internal Revenue Code prohibits
disclosure of tax returns and return infor-
mation, except to the extent specifically
authorized by the Internal Revenue Code
(sec. 6103). Unauthorized willful disclo-
sure is a felony punishable by a fine not
exceeding $5,000 or imprisonment of not
more than five years, or both (sec. 7213).
An action for civil damages also may be
brought for unauthorized disclosure (sec.
7431).
There is no explicit criminal penalty in
the Internal Revenue Code for unautho-
rized inspection (absent subsequent dis-
closure) of tax returns and return informa-
tion. Such inspection is, however,
explicitly prohibited by the Internal Rev-
enue Service (“IRS”).
1
In a recent case, an
individual was convicted of violating the
Federal wire fraud statute (18 U.S.C.
1343 and 1346) and a Federal computer
fraud statute (18 U.S.C. 1030) for unau-
thorized inspection. However, the U.S.
First Circuit Court of Appeals overturned
this conviction.
2
Unauthorized inspection
of information of any department or
agency of the United States (including the
IRS) via computer was made a crime
under 18 U.S.C. 1030 by the Economic
Espionage Act of 1996.
3
This provision
does not apply to unauthorized inspection
of paper documents.
REASONSFORCHANGE
The Committee believes that it is im-
portant to have a criminal penalty in the
Internal Revenue Code to punish this type
of behavior.The Committee also believes
that it is appropriate to provide for civil
damages for unauthorized inspection par-
allel to civil damages for unauthorized
disclosure.
EXPLANATIONOFPROVISIONS
Criminal penalties (sec. 2 of the bill and
new sec. 7213Aof the Code)
The bill creates a new criminal penalty
in the Internal Revenue Code. The penalty
is imposed for willful inspection (except
as authorized by the Code) of any tax re-
turn or return information by any Federal
employee or IRS contractor.The penalty
also applies to willful inspection (except
as authorized) by any State employee or
other person who acquired the tax return
or return information under specific pro-
visions of section 6103. Upon conviction,
the penalty is a fine in any amount not ex-
ceeding $1,000,
4
or imprisonment of not
more than 1 year, or both, together with
the costs of prosecution. In addition, upon
conviction, an officer or employee of the
United States would be dismissed from
office or discharged from employment.
The Congress views any unauthorized
inspection of tax return information as a
very serious offense; this new criminal
penalty reflects that view. The Congress
also believes that unauthorized inspection
warrants very serious personnel sanctions
against IRS employees who engage in
unauthorized inspection, and that it is ap-
propriate to fire employees who do this.
Civil damages (sec. 3 of the bill and sec.
7431 of the Code)
The bill amends the provision providing
for civil damages for unauthorized disclo-
sure by also providing for civil damages
for unauthorized inspection. Damages are
available for unauthorized inspection that
occurs either knowingly or by reason of
negligence. Accidental or inadvertent in-
spection that may occur (such as, for ex-
ample, by making an error in typing in a
TIN) would not be subject to damages be-
cause it would not meet this standard. T h e
bill also provides that no damages are
available to a taxpayer if that taxpayer re-
quested the inspection or disclosure.
The bill also requires that, if any person
is criminally charged by indictment or in-
formation with inspection or disclosure of
a taxpayer’s return or return information
in violation of section 7213(a) or (b), sec-
tion 7213A(as added by the bill), or 18
U.S.C. section 1030 (a)(2)(B), the Secre-
tary notify that taxpayer as soon as practi-
cable of the inspection or disclosure.
EFFECTIVEDATE
The bill is effective for violations oc-
curring on or after the date of enactment.
III. VOTE OFTHE COMMITTEE
In compliance with clause 2(l)(2)(B) of
rule XI of the Rules of the House of Rep-
resentatives, the following statement is
made concerning the vote on the motion
to report the bill. The bill (H.R. 1226) was
ordered favorably reported, as amended
by voice vote on April 9, 1997, with a
quorum present.
I V. BUDGETEFFECTS OFTHE BILL
A. C
OMMITTEEESTIMATES
In compliance with clause 7(a) of rule
XIII of the Rules of the House of Repre-
sentatives, the following statement is
made concerning the estimated budget ef-
fects of the bill as reported.
The bill, as reported, is estimated to
have an indeterminate revenue effect.
B. BUDGETAUTHORITYANDTAX
EXPENDITURES
Budget authority
In compliance with subdivision (B) of
clause 2(l)(3) of rule XI of the Rules of
1
IRS Declaration of Privacy Principles, May 9, 1994.
2
U.S. v. Czubinski,DTR 2/25/97, p. K–2.
3
P.L. 104–294, sec. 201 (October 11, 1996).
4
Pursuant to 18 U.S.C. sec. 3571 (added by the
Sentencing Reform Act of 1984), the amount of the
fine is not more than the greater of the amount spec-
ified in this new Code section or $100,000.
1997–43 I.R.B.15October 27, 1997

the House of Representatives, the Com-
mittee states that the provisions of the bill
as reported involve no new or increased
budget authority.
Tax expenditures
In compliance with subdivision (B) of
clause 2(l)(3) of rule XI of the Rules of
the House of Representatives, the Com-
mittee states that the provisions of the bill
as reported involve no new or increased
tax expenditures.
C. C
OSTESTIMATEPREPAREDBYTHECON-
GRESSIONALBUDGETOFFICE
In compliance with subdivision (C) of
clause 2(l)(3) of rule XI of the Rules of
the House of Representatives, requiring
cost estimate prepared by the Congres-
sional Budget Office, the Committee ad-
vises that the Congressional Budget Of-
fice has submitted the following
Statement on this bill.
U.S. C
ONGRESS,
CONGRESSIONALBUDGETOFFICE,
Washington, DC, April 11, 1997.
Hon. BILLARCHER,
Chairman, Committee on Ways and
Means, House of Representatives,
Washington, DC.
D
E A RMR. CH A I R M A N: The Congres-
sional Budget Office has prepared the en-
closed cost estimate for H.R. 1226, the
Taxpayer Browsing Protection Act.
If you wish further details on this esti-
mate, we will be pleased to provide them.
The CBO staff contact is Mark Grabow-
icz.
Sincerely,
J
UNEE. O’NEILL,Director.
Enclosure.
H.R. 1226—Taxpayer Browsing
Protection Act
H.R. 1226 would ban the authorized in-
spection of federal tax returns or tax re-
turn information. Violators of the bill’s
provisions would be subject to a criminal
fine and imprisonment. In addition, H.R.
1226 would permit taxpayers whose re-
turns are unlawfully inspected to bring a
civil action against the United States.
CBO estimates that enacting this legis-
lation would have no significant impact
on the federal budget. While the bill could
lead to increases in both direct spending
and receipts, the amounts involved would
be less than $500,000 a year. Because
H.R. 1226 could affect direct spending
and receipts, pay-as-you-go procedures
would apply.
Enacting H.R. 1226 could increase
government receipts from criminal fines.
Such fines would be deposited in the
Crime Victims Fund and would be spent
in the following year.Thus, direct spend-
ing from the fund would match the in-
crease in revenues with a one-year lag. In
any case, CBO estimates that the criminal
fines would likely total less than
$500,000 a year.
Enacting this legislation also could in-
crease civil actions by taxpayers against
the Internal Revenue Service. Successful
litigants would be paid from a permanent,
indefinite appropriation for Claims, Judg-
ments, and Relief Acts. CBO estimates
that any increase in direct spending from
such payments also would total less than
$500,000 annually.
H.R. 1226 contains no intergovernmen-
tal or private-sector mandates as defined
in the Unfunded Mandates Reform Act of
1995 and would not impose costs on state,
local, or tribal governments.
The CBO staff contact for this estimate
is Mark Grabowicz. This estimate was ap-
proved by Robert A. Sunshine, Deputy
Assistant Director for Budget Analysis.
V. OTHER MATTERS TO BE
DISCUSSED UNDER THE
RULES OFTHE HOUSE
A. C
OMMITTEEOVERSIGHTFINDINGS
AND
RECOMMENDATIONS
With respect to subdivision (A) of
clause 2(l)(3) of rule XI of the Rules of
the House of Representatives (relatingto
oversight findings), the Committee ad-
vises that it was the result of the Commit-
t e e ’s oversight activities concerning re-
ports of unauthorized “browsing” of
taxpayer’s returns and return information
by Internal Revenue Service personnel
that the Committee concluded that it is
appropriate to enact the provisions con-
tained in the bill as reported.
B. S
UMMARYOFFINDINGSAND
RECOMMENDATIONSOFTHECOMMITTEE
ONGOVERNMENTREFORM
ANDOVERSIGHT
With respect to subdivision (D) of
clause 2(l)(3) of rule XI of the Rules of
the House of Representatives, the Com-
mittee advises that no oversight findings
or recommendations have been submitted
to this Committee by the Committee on
Government Reform and Oversight with
respect to the provisions contained in the
bill.
C. C
ONSTITUTIONALAUTHORITY
STATEMENT
With respect to clause 2(l)(4) of Rule XI
of the Rules of the House of Representa-
tives (relating to Constitutional A u t h o r i t y ) ,
the Committee states that the Committee’s
action in reporting this bill is derived from
Article I of the Constitution, Section 7
(“All bills for raising revenue shall origi-
nate in the House of Representatives”) and
Section 8 (“The Congress shall have power
to lay and collect taxes, duties, imposts and
excises, to pay the debts * * * of the United
S t a t e s ” ) .
D. I
NFORMATIONRELATINGTO
UNFUNDEDMANDATES
This information is provided in accor-
dance with section 423 of the Unfunded
Mandates Act of 1995 (P.L. 104–4).
The Committee has determined that the
provisions of the bill do not impose a Fed-
eral mandate on the private sector nor a
Federal intergovernmental mandate.
Thus, the provisions of the bill do not af-
fect the competitive balance between the
private sector and State, local, and tribal
government.
E. A
P P L I C A B I L I T YO FHO U S ERU L E
X X I 5 (C)
Rule XXI5(c) of the Rules of the House
of Representatives provides, in part, that
“No bill or joint resolution, amendment,
or conference report carrying a Federal
income tax rate increase shall be consid-
ered as passed or agreed to unless so de-
termined by a vote of not less than three-
fifths of the Members.” The Committee
has carefully reviewed the provisions of
the bill, and states that the provisions of
the bill do not involve any Federal income
tax rate increase within the meaning of
the rule.
VI. CHANGES IN EXISTING
LAWMADE BYTHE BILL,
AS REPORTED
In compliance with clause 3 of Rule
XIII of the Rules of the House of Repre-
sentatives, changes in existing law made
October 27, 1997161997–43 I.R.B.

by the bill, as reported, are shown as fol-
lows (existing law proposed to be omitted
is enclosed in black brackets, new matter
is printed in italic, existing law in which
no change is proposed is shown in roman).
INTERNALREVENUE
CODE OF1986
* * * * * * *
Subtitle F–Procedure
and Administration
* * * * * * *
CHAPTER 75—CRIMES,
OTHER OFFENSES, AND
FORFEITURES
SubchapterA—Crimes
PA RTI — G E N E R A LP R O V I S I O N S
Sec. 7201. Attempt to evade or defeat tax.
* * * * * * *
Sec. 7213A. Unauthorized inspection of
returns or return information.
* * * * * * *
SEC. 7213. UNAUTHORIZED
DISCLOSURE OFINFORMATION.
(a) R
ETURNSANDRETURNINFORMA-
TION.—
(1) * * *
(2) STATEANDOTHEREMPLOYEES.—It
shall be unlawful for any person (not de-
scribed in paragraph (1)) willfully to dis-
close to any person, except as authorized
in this title, any return or return informa-
tion (as defined in section 6103(b)) ac-
quired by him or another person under
subsection (d), (i)(3)(B)(i), (l)(6), (7), (8),
(9), (10), (12), or (15) or (m)(2), (4), (5),
(6), or (7) of section 6103. Any violation
of this paragraph shall be a felony punish-
able by a fine in any amount not exceed-
ing $5,000, or imprisonment of not more
than 5 years, or both, together with the
costs of prosecution.
* * * * * * *
SEC. 7213A. UNAUTHORIZED
INSPECTION OFRETURNS OR
RETURN INFORMATION.
(a)P
ROHIBITIONS.—
(1)FEDERALEMPLOYEESANDOTHER
PERSONS.—It shall be unlawful for—
(A) any officer or employee
of the United States, or
(B) any person described in
section 6103(n) or an officer or em-
ployee of any such person,
willfully to inspect, except as authorized
in this title, any return or return informa-
tion.
(2) STATEANDOTHEREMPLOYEES.—
It shall be unlawful for any person (not
described in paragraph (1)) willfully to
inspect, except as authorized in this
title, any return or return information
a c q u i red by such person or another
person under a provision of section
6103 referred to in section 7213(a)(2).
(b) P
ENALTY.—
(1)INGENERAL.—Any violation of
subsection (a) shall be punishable upon
conviction by a fine in any amount not
exceeding $1,000, or imprisonment of
not more than 1 year, or both, together
with the costs of prosecution.
(2) F
EDERALOFFICERSOREMPLOY-
E E S. — An officer or employee of the
United States who is convicted of any
violation of subsection (a) shall, in ad-
dition to any other punishment, be dis-
missed from office or discharged from
employment.
(c) D
EFINITIONS.—For purposes of this
section, the terms “inspect”, “re t u r n ” ,
and “return information” have the re-
spective meanings given such terms by
section 6103(b).
* * * * * * *
CHAPTER 76—JUDICIALPRO-
CEEDINGS
* * * * * * *
SubchapterB—Proceedings by Tax-
payers and Third Parties
Sec. 7421. Prohibition of suits to restrain assessment
or collection.
* * * * * * *
Sec. 7431. Civil damages for unauthorized i n s p e c t i o n
or disclosure of returns and return information.
* * * * * * *
SEC. 7431. CIVILDAMAGES FOR
U N A U T H O R I Z E D
INSPECTION OR D I S C L O S U R E
O FRETURNS AND RETURN
I N F O R M AT I O N .
(a) I
NGENERAL.—
(1) [D
I S C L O S U R E] IN S P E C T I O NO R
D I S C L O S U R EB YE M P L O Y E EO F
UN I T E D
STATES.— If any officer or employee of
the United States knowingly, or by rea-
son of negligence, inspects or discloses
any return or return information with
respect to a taxpayer in violation of any
provision of section 6103, such tax-
payer may bring a civil action for dam-
ages against the United States in a dis-
trict court of the United States.
(2) [D
I S C L O S U R E] IN S P E C T I O NO R
DISCLOSUREBYAPERSONWHOISNOTAN
E M P L O Y E EO F
UN I T E DSTAT E S.— If any
person who is not an officer or em-
ployee of the United States knowingly,
or by reason of negligence, inspects or
discloses any return or return informa-
tion with respect to a taxpayer in viola-
tion of any provision of section 6103,
such taxpayer may bring a civil action
for damages against such person in a
district court of the United States.
[(b) NOLIABILITYFORGOODFAITHBUT
ERRONEOUSINTERPRETATION
.—No liability
shall arise under this section with respect
to any disclosure which results from a
good faith, but erroneous, interpretation
of section 6103.]
(b) E
X C E P T I O N S. —No liability shall
arise under this section with respect to
any inspection or disclosure—
(1) which results from a good
faith, but erroneous, interpretation of
section 6103, or
(2) which is requested by the tax-
payer.
(c) D
A M A G E S. —In any action brought
under subsection (a), upon a finding of li-
ability on the part of the defendant, the
defendant shall be liable to the plaintiff in
an amount equal to the sum of—
(1) the greater of—
(A) $1,000 for each act of unau-
thorized inspection ordisclosure of a
return or return information with re-
spect to which such defendant is
found liable, or
(B) the sum of—
(i) the actual damages sus-
tained by the plaintiff as a result of
such unauthorized inspection or
disclosure, plus
(ii) in the case of a [willful dis-
closure or a disclosure]willful in-
spection or disclosure or an in-
spection or disclosurewhich is the
result of gross negligence, puni-
tive damages, plus
(2) the costs of the action.
(d) P
E R I O DF O RB R I N G I N GA C T I O N. —
1997–43 I.R.B.17October 27, 1997

Notwithstanding any other provision of
law, an action to enforce any liability cre-
ated under this section may be brought,
without regard to the amount in contro-
versy, at any time within 2 years after the
date of discovery by the plaintiff of the
unauthorized inspection or disclosure.
[(e) R
E T U R N; R E T U R NI N F O R M AT I O N. —
For purposes of this section, the terms
“return” and “return information” have
the respective meanings given such terms
in section 6103(b).]
(e) N
OTIFICATIONOFUNLAWFULINSPEC-
T I O NA N DDI S C L O S U R E.— If any person is
criminally charged by indictment or in-
formation with inspection or disclosure of
a taxpayer’s return or return information
in violation of—
(1) paragraph (1) or (2) of section
7213(a),
(2) section 7213A(a), or
(3) subparagraph (B) of section
1030(a)(2) of title 18, United States
Code,
the Secre t a ry shall notify such taxpayer
as soon as practicable of such inspection
or disclosure.
(f) D
E F I N I T I O N S. — For purposes of this
section, the terms “inspect”, “inspec-
tion”, “return”, and “return informa-
tion” have the respective meanings given
such terms by section 6103(b).
[( f )] (g) E
X T E N S I O NTOI N F O R M AT I O N
OBTAINEDUNDERSECTION3406.—For pur-
poses of this section—
(1) any information obtained under
section 3406 (including information
with respect to any payee certification
failure under subsection (d) thereof)
shall be treated as return information,
and
(2) any inspection oruse of such in-
formation other than for purposes of
meeting any requirement under section
3406 or (subject to the safeguards set
forth in section 6103) for purposes per-
mitted under section 6103 shall be
treated as a violation of section 6103.
For purposes of subsection (b), the refer-
ence to section 6103 shall be treated as in-
cluding a reference to section 3406.
* * * * * * *
October 27, 1997181997–43 I.R.B.

1997–43 I.R.B.19October 27, 1997
Weighted Average Interest Rate
Update
Notice 97–56
Notice 88–73 provides guidelines for de-
termining the weighted average interest
rate and the resulting permissible range of
interest rates used to calculate current lia-
bility for the purpose of the full funding
limitation of § 412(c)(7) of the Internal
Revenue Code as amended by the Omnibus
Budget Reconciliation Act of 1987 and as
further amended by the Uruguay Round
Agreements Act, Pub. L. 103–465 (GAT T ) .
The average yield on the 30-year Tr e a-
sury Constant Maturities for September
1997 is 6.50 percent.
The following rates were determined for
the plan years beginning in the month
shown below.
Part III. Administrative, Procedural, and Miscellaneous
Drafting Information
The principal author of this notice is
Donna Prestia of the Employee Plans Di-
vision. For further information regarding
this notice, call (202) 622-6076 between
2:30 and 3:30 p.m. Eastern time (not a
toll-free number). Ms. Prestia’s number
is (202) 622-7377 (also not a toll-free
number).
Nonbank Trustees and
Custodians for Education
Individual Retirement Accounts
Notice 97–57
(1) Purpose
This notice informs entities already ap-
proved to serve as nonbank trustees and
custodians of individual retirement ac-
counts (IRAs) that they are also approved
to serve as nonbank trustees and custodi-
ans of Education IRAs and provides guid-
ance on the procedures for being ap-
proved to be a nonbank trustee or
custodian of an Education IRA.
(2) Education IRAs
Section 530 of the Internal Revenue
Code, added by section 213 of the Ta x-
payer Relief Act of 1997, Pub. L. 105–34,
provides a new type of tax-free savings
vehicle for higher education expenses,
called an Education Individual Retire-
ment Account (Education IRA). At o t a l
amount of $500 per year may be con-
tributed to Education IRAs for any bene-
ficiary under the age of 18 years. To con-
tribute the maximum of $500 for a
b e n e f i c i a r y, a contributor must have ad-
justed gross income for the year not ex-
ceeding $95,000 ($150,000 for joint re-
turns). The $500 maximum permitted
contribution is phased out for contributors
with adjusted gross income between
$95,000 and $110,000 ($150,000 and
$160,000 for joint returns). Education
IRAs may be established in taxable years
beginning after 1997.
(3) Approval of nonbank trustees and
custodians
Under section 530 of the Code, the
trustee or custodian of an Education IRA
must be a bank (as defined in section
408(n) of the Code) or another person ap-
proved by the Internal Revenue Service.
Section 1.408–2(e) of the Income Ta x
Regulations sets forth the rules which an
entity must meet to be approved by the
Service as a nonbank trustee or custodian
of an individual retirement account
(IRA). Pursuant to this notice, any entity
already approved by the Service to be a
nonbank trustee or custodian of an IRAi s
automatically approved by the Service to
be a nonbank trustee or custodian of an
Education IRA. In addition, entities other
than banks or previously approved non-
bank IRAtrustees or custodians may re-
quest approval to be a trustee or custo-
dian of an Education IRAin accordance
with the procedures set forth in section
1.408–2(e) and section 3.10 of Rev. Proc.
97-4, 1997–1 I.R.B. 97, dated January 6,
1 9 9 7.
(4) Drafting information
The principal author of this notice is
William Gibbs of the Office of the Asso-
ciate Chief Counsel (Employee Benefits
and Exempt Organizations). For further
information concerning who may be a
nonbank trustee for Education IRAs, con-
tact Mr. Gibbs at (202) 622-6030 (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, § 1362; 1.1362–6.)
Rev. Proc. 97–48
SECTION 1. PURPOSE
This revenue procedure grants auto-
matic relief under § 1362(b)(5) of the In-
ternal Revenue Code for certain late S
corporation elections.
SECTION 2. BACKGROUND
Section 1361(a)(1) defines an “S corpo-
ration,” with respect to any taxable year,
as a small business corporation for which
an S election is in effect for that year.
Section 1362(a)(1) provides that, ex-
cept in a situation described in § 1362(g),
a small business corporation may elect to
be treated as an S corporation.
Section 1362(b)(1) provides that the
corporation may make an election to be
treated as an S corporation (A) at any time
during the preceding taxable year, or (B)
at any time during the taxable year and on
or before the 15th day of the 3rd month of
the taxable year. Under § 1362(b)(3), if
an S corporation election is made for a
taxable year after the 15th day of the 3rd
month of that taxable year and on or be-
fore the 15th day of the 3rd month of the
following taxable year, then the S corpo-
ration election is treated as made for the
following taxable year.
Section 1362(b)(5) provides that if (A)
an election under § 1362(a) is made for
90% to 107%90% to 110%
WeightedPermissiblePermissible
MonthYearAverageRangeRange
October19976.836.14 to 7.306.14 to 7.51

October 27, 1997201997–43 I.R.B.
any taxable year (determined without re-
gard to § 1362(b)(3)) after the date pre-
scribed by § 1362(b) for making the elec-
tion for the taxable year or no election is
made for any taxable year, and (B) the
Secretary determines that there was rea-
sonable cause for the failure to timely
make the election, the Secretary may treat
the election as timely made for the taxable
year (and § 1362(b)(3) shall not apply).
SECTION 3. SCOPE
This revenue procedure provides spe-
cial procedures to obtain relief for certain
late S corporation elections. The revenue
procedure only applies to the following
two situations:
(1) Acorporation intends to be an S
corporation, the corporation and its share-
holders reported their income consistent
with S corporation status for the taxable
year the S corporation election should
have been made and for every subsequent
year, and the corporation did not receive
notification from the Service regarding
any problem with the S corporation status
within 6 months of the date on which the
Form 1120S for the first year was timely
filed; and
(2) For periods prior to January 1,
1997, a corporation intends to be an S
corporation; however, due to a late S cor-
poration election the corporation was not
permitted to be an S corporation for the
first taxable year specified in the election
(because late S corporation election relief
was not available during this period), the
corporation and the shareholders treated
the corporation as an S corporation for all
succeeding years, and all relevant taxable
years for both the corporation and all of
its shareholders are open.
This revenue procedure does not pro-
vide relief for late shareholder elections
including a qualified subchapter S trust
(QSST) election or electing small busi-
ness trust (ESBT) election.
The procedures in this revenue proce-
dure are in lieu of the letter ruling proce-
dure that is used to obtain relief for
a late S corporation election under
§ 1362(b)(5). A c c o r d i n g l y, user fees do
not apply to corrective action under this
revenue procedure.
Acorporation that is not eligible for re-
lief under this revenue procedure may re-
quest relief by applying for a private letter
ruling. The Service will not ordinarily
issue a private letter ruling under
§ 1362(b)(5) if the period of limitations
on assessment under § 6501(a) has lapsed
for any taxable year in which an election
should have been made or any taxable
year that would have been affected by the
election had it been timely made. T h e
procedural requirements for requesting a
private letter ruling are described in Rev.
Proc. 97–1, 1997–1 I.R.B. 11 (or its suc-
cessor). See, also, Rev. Proc. 97–40,
1997–33 I.R.B. 50, for the special proce-
dure to request relief for late S corpora-
tion elections that are filed within 6
months of the original due date of the
election.
SECTION 4. AUTOMATIC RELIEF
FOR LATE S CORPORATION
ELECTIONS UNDER THIS
REVENUE PROCEDURE
.01 Situation 1: Automatic Relief
Where Return Filed as an S Corporation.
(1) Eligibility for Automatic Relief.
Automatic relief is available in situation 1
if all of the following conditions are met:
(a) The corporation fails to qualify
as an S corporation solely because the
Form 2553 (Election by a Small Business
Corporation) was not filed timely;
(b) The corporation and all of its
shareholders reported their income con-
sistent with S corporation status for the
year the S corporation election should
have been made, and for every subse-
quent taxable year (if any);
(c) At least 6 months have elapsed
since the date on which the corporation
filed its tax return for the first year the
corporation intended to be an S corpora-
tion; and
(d) Neither the corporation nor any
of its shareholders was notified by the In-
ternal Revenue Service of any problem
regarding the S corporation status within
6 months of the date on which the Form
1120S for the first year was timely filed.
(2) Procedural Requirements for Auto-
matic Relief. The corporation must file
with the applicable service center (or dis-
trict director if under examination) a com-
pleted Form 2553, signed by an officer of
the corporation authorized to sign and all
persons who were shareholders at any
time during the period that the corpora-
tion intended to be an S corporation. The
Form 2553 must state at the top of the
document “FILED PURSUANTTO REV.
PROC. 97–48.” Attached to the Form
2553 must be a dated declaration signed
by an officer of the corporation autho-
rized to sign and all persons who were
shareholders at any time during the period
that the corporation intended to be an S
corporation, attesting (but, in the case of a
s h a r e h o l d e r, only with respect to that
shareholder) that:
(a) the corporation and the share-
holder reported their income (on all af-
fected returns) consistent with S corpora-
tion status for the year the S corporation
election should have been made, and for
every subsequent taxable year; and
(b) “Under penalties of perjury, to
the best of my knowledge and belief, the
facts presented in support of this election
are true, correct, and complete.”
.02 Situation 2: Automatic Relief
Where First Intended S Corporation Year
Filed as a C Corporation.
(1) Eligibility for Automatic Relief.
Automatic relief is available in situation 2
if all of the following conditions are met:
(a) The corporation fails to qualify as
an S corporation solely because the Form
2553 (Election by a Small Business Cor-
poration) was not filed timely for a tax-
able year that began prior to January 1,
1997;
(b) The corporation received notifi-
cation from the Service that the Form
2553 was not filed timely, that the corpo-
ration must file as a C corporation for the
first taxable year the corporation intended
to be an S corporation, and that the elec-
tion would be treated as an S corporation
election for the following taxable year;
(c) The corporation and all of its
shareholders reported their income (if any)
properly treating the corporation as a C cor-
poration for the first taxable year the corpo-
ration intended to be an S corporation;
(d) The corporation and all of its
shareholders reported their income con-
sistent with S corporation status for all
subsequent years;
(e) The period of limitations on as-
sessment under § 6501(a) has not lapsed
for any of the taxable years of the corpo-
ration beginning on or after the date the
corporation intended to be taxable as an S
corporation; and
(f) The period of limitations on as-
sessment under § 6501(a) has not lapsed
for any taxable year of any of the corpora-
t i o n ’s shareholders in which any taxable

1997–43 I.R.B.21October 27, 1997
year described in paragraph (e) above
ends.
(2) Procedural Requirements for Auto-
matic Relief. The corporation must file
with the applicable service center (or dis-
trict director if under examination) a com-
pleted Form 2553, signed by an officer of
the corporation authorized to sign and all
persons who were shareholders at any
time during the period that the corpora-
tion intended to be an S corporation. The
Form 2553 must state at the top of the
document “FILED PURSUANTTO REV.
PROC. 97–48.” Attached to the Form
2553 must be a dated declaration signed
by an officer of the corporation autho-
rized to sign and all persons who were
shareholders at any time during the period
that the corporation intended to be an S
corporation, attesting (but, in the case of a
s h a r e h o l d e r, only with respect to that
shareholder) that:
(a) the corporation and the share-
holder reported their income (on all af-
fected returns) consistent with the re-
quirements for automatic relief under
section 4.02 of this revenue procedure;
(b) the corporation and the share-
holder agree to amend their tax returns for
the first year and any other affected re-
turns to reflect S corporation status; and
(c) “Under penalties of perjury, to
the best of my knowledge and belief, the
facts presented in support of this election
are true, correct, and complete.”
.03 Relief for Late S Corporation Elec-
tions.Acorporation that satisfies the re-
quirements of either section 4.01 or 4.02
of this revenue procedure will be deemed
to have reasonable cause for the failure to
file a timely S corporation election and
will automatically be granted relief to file
the election for S corporation status to
commence on the date that it intended to
have the S corporation election become
effective. The Service will notify the cor-
poration of the acceptance of its untimely
filed S corporation election under this
revenue procedure, or the denial of a re-
quest that fails to satisfy the requirements
of this revenue procedure.
.04 Deemed Shareholders.Any refer-
ence in this revenue procedure to a share-
holder of an S corporation shall be treated
as including a reference to those persons
whose consent is required under
§ 1.1362–6(b) of the Income Tax Regula-
tions.
SECTION 5. EXAMPLES
.01 S corporation return filed and no
notification from the Service.A,B, and C
formed Xcorporation on January 1, 1996.
Xintended to file an S corporation elec-
tion; however, Xdid not file a timely
Form 2553 (Election by a Small Business
Corporation). On March 13, 1997, Xfiles
a Form 1120S (S corporation income tax
return) for the 1996 taxable year, and A,
B, and Cfile their individual tax returns
as if Xwere an S corporation. In Novem-
ber 1997, Xrealizes that an S corporation
election was not timely filed. Neither X
nor its shareholders received any notifica-
tion from the Service of any problem re-
garding the S corporation status of X. In
this case, the shareholders and Xmeet the
requirements of section 4.01 of this rev-
enue procedure. Consequently,Xwill be
granted automatic late S corporation elec-
tion relief if A,B,C, and Xfile a request
for relief in accordance with the proce-
dures described in this revenue procedure.
.02 C corporation return for first year.
Aformed Xcorporation on January 1,
1990. Xintended to file an S corporation
election effective as of January 1, 1995;
h o w e v e r, Xdid not file a Form 2553
(Election by a Small Business Corpora-
tion) until May 5, 1995. On June 15,
1995, Xreceived a letter from the Service
notifying Xthat its S corporation election
was denied for the 1995 taxable year be-
cause the S corporation election was not
timely filed, and that the election would
be treated as effective for the 1996 tax-
able year.Xfiled a Form 1120 (C corpo-
ration income tax return) for the 1995 tax-
able year and Afiled the individual tax
return for 1995 as if Xwere a C corpora-
tion. For the 1996 taxable year,Xfiled a
Form 1120S (S corporation income tax
return) and Afiled the individual tax re-
turn as if Xwere an S corporation. The
period of limitations on assessment under
§ 6501(a) has not lapsed for either the
1995 or the 1996 taxable years for either
Xor for A. In this case, Aand Xmeet the
requirements of section 4.02 of this rev-
enue procedure. Consequently,Xwill be
granted automatic late S corporation elec-
tion relief if Xand Afile a request for re-
lief in accordance with the procedures de-
scribed in this revenue procedure.
SECTION 7. EFFECTIVE DATE
This revenue procedure is effective for
all applications for relief satisfying the re-
quirements of section 4 of this revenue
procedure, including those applications
now being considered by the Service.
SECTION 8. 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 accordance
with the Paperwork Reduction Act (44
U.S.C. 3507) under control number
1545–1562.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless the col-
lection of information displays a valid
control number.
The collection of information in this
revenue procedure is in Sections 4.01(2)
and 4.02(2). This information is required
to be submitted to the applicable service
center in order to obtain relief for late S
corporation elections. This information
will be used to satisfy the reasonable
cause requirement in § 1362(b)(5). T h e
collection of information is required to ob-
tain a benefit. The likely respondents are
business or other for-profit institutions.
The estimated total annual reporting
burden is 100 hours.
The estimated annual burden per re-
spondent varies from .5 hours to 1.5
hours, depending on individual circum-
stances, with an estimated average of 1
h o u r. The estimated number of respon-
dents is 100.
The estimated annual frequency of re-
sponses is once.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mater-
ial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Mark D. Harris of the Office
of Assistant Chief Counsel (Passthroughs
and Special Industries). For further infor-
mation regarding this revenue procedure
contact Mr. Harris at (202) 622-3050 (not
a toll-free call).

October 27, 1997221997–43 I.R.B.
26 CFR 601.201: Rulings and determination letters.
(Also §§ 1502; 1.1502–13.)
Rev. Proc. 97–49
SECTION 1. PURPOSE
This revenue procedure provides the
procedures by which a taxpayer may (1)
obtain the consent of the Internal Revenue
Service (the “Service”) to treat some or
all intercompany transactions on a sepa-
rate entity basis under § 1.1502–13(e)(3)
of the Income Tax Regulations, (2) revoke
such consent, or have such consent re-
voked by the Service, and (3) obtain the
Service’s consent to change from separate
entity reporting to single entity reporting
where a valid consent from the Service to
report intercompany transactions on a
separate entity basis was not previously
obtained.
This revenue procedure modifies and
supersedes Rev. Proc. 82–36, 1982–1
C.B. 490.
SECTION 2. BACKGROUND
.01 The consolidated return regulations
generally require that intercompany trans-
actions be treated in a manner that pro-
duces the effect of transactions between
divisions of a single corporation (that is,
the regulations treat intercompany trans-
actions on a “single entity basis”). T h e
single entity approach for intercompany
transactions is an integral part of the over-
all tax treatment of affiliated groups filing
consolidated returns (“consolidated
groups”) under § 1502 of the Internal
Revenue Code. Treating intercompany
transactions on a single entity basis is re-
quired to clearly reflect consolidated tax-
able income (“CTI”). However, in certain
circumstances, the Service may exercise
discretion and grant consent, under
§ 1.1502–13(e)(3), to a consolidated
group to treat some or all intercompany
transactions (other than intercompany
transactions with respect to stock or
obligations of members of a consolidated
group) on a separate entity basis (that is,
without the application of § 1.1502–13).
Consent under § 1.1502–13(e)(3) may re-
quire changes in the methods of account-
ing for intercompany transactions of
members of a consolidated group.
.02 Section 4 sets forth the time and
manner in which requests for consent
under § 1.1502–13(e)(3) must be filed.
.03 Section 5 provides a checklist
which is similar to the checklist set forth
in Rev. Proc. 82–36 to facilitate the filing
and handling of requests under
§ 1.1502–13(e)(3) by specifying the in-
formation that should be included so that
applications will be as complete as possi-
ble when originally filed. However, be-
cause the information necessary to rule on
a particular case depends upon all the
facts and circumstances, information in
addition to that listed in this revenue pro-
cedure may be requested by the Service
prior to determining whether consent will
be granted.
.04 Section 6 sets forth certain factors
and guidelines used by the Service in con-
sidering requests for consent under
§ 1.1502–13(e)(3).
.05 Section 7 sets forth the effect of re-
ceiving the Service’s consent under
§ 1.1502–13(e)(3).
.06 Section 8 describes the procedures
applicable to the revocation of consent
under § 1.1502–13(e)(3). Section 8 pro-
vides that consent will generally not be
revoked simply because the effect of the
consent causes a substantial increase or
decrease in CTI in any one taxable year.
When consent was granted under Rev.
Proc. 82–36, the Service typically stated
in the ruling letter that the consent would
be revoked whenever the effect of the
consent would cause a substantial in-
crease or decrease in CTI.
.07 Section 9 sets forth the manner in
which requests for consent to change from
separate entity reporting to single entity
reporting must be filed in cases where a
valid consent from the Service to report
intercompany transactions on a separate
entity basis was not previously obtained.
.08 The authority and general proce-
dures with respect to the issuance of ad-
vance rulings are set forth in Rev. Proc.
97–1, 1997–1 I.R.B. 11, or its successor,
and are applicable to requests under
§ 1.1502–13(e)(3).
SECTION 3. APPLICABILITY
This revenue procedure applies to (1)
all requests to obtain the Service’s con-
sent to treat some or all intercompany
transactions on a separate entity basis
under § 1.1502–13(e)(3), (2) all revoca-
tions of such consent, whether the revoca-
tion is made by the consolidated group or
by the Service, and (3) all requests to ob-
tain the Service’s consent to change from
separate entity reporting to single entity
reporting in cases where a valid consent
from the Service to report intercompany
transactions on a separate entity basis was
not previously obtained.
SECTION 4. TIME AND MANNER IN
WHICH REQUESTS FOR CONSENT
UNDER § 1.1502–13(e)(3)
MUSTBE FILED
.01 Requests for consent under
§ 1.1502–13(e)(3) must be filed with the
Service on or before the due date of the
consolidated return (not including exten-
sions of time) for the first taxable year for
which the consent would apply (the “con-
sent year”). These requests for consent
must be submitted as a private letter rul-
ing request pursuant to Rev. Proc. 97–1,
or its successor. All applicable items of
information listed in Section 5 must be in-
cluded in the request.
.02 The filing requirement of
§ 1.1502–13(e)(3) will be deemed satis-
fied where the request for consent is
timely filed with the Service and contains
all available information. The request
must provide an explanation of any omit-
ted information, and state that the omitted
information will be submitted not later
than the earlier of the following two dates:
(1) 90 days after the original due date of
the return, or (2) the date the consolidated
return is filed with the Service Center.
SECTION 5. INFORMATION TO BE
INCLUDED IN REQUESTS FOR
CONSENTUNDER § 1.1502–13(e)(3)
.01 Each of the items of information re-
quested in this Section 5 must be ad-
dressed in the request for consent under
§ 1.1502–13(e)(3). If an item is not ap-
plicable, the letters “N.A.” should be in-
serted after that item. The presentation of
the information should follow the format
of this revenue procedure as closely as
possible.
.02 Information needed in order to make
a determination regarding a request for
consent to treat some or all intercompany
transactions on a separate entity basis:
1. The date the consolidated group
elected to file consolidated returns.
2. The taxable year used by the consol-
idated group.
3. Acalculation of the difference, for
the consent year and for each of the two

1997–43 I.R.B.23October 27, 1997
taxable years preceding the consent year,
between (a) CTI computed by treating all
intercompany transactions on a single en-
tity basis and (b) CTI computed by treat-
ing those intercompany transactions for
which consent is requested, and those in-
tercompany transactions for which con-
sent has previously been obtained, on a
separate entity basis. For any taxable year,
the percentage difference between (a) and
(b) in the preceding sentence is hereinafter
referred to as the “Effect on CTI.”
4. An analysis of all intercompany
transactions for the consent year and for
each of the two taxable years preceding
the consent year.This analysis must in-
clude the number and a description of all
intercompany transactions and the dollar
amounts thereof.
5. An analysis of the effect of treating
those intercompany transactions for
which consent is requested on a separate
entity basis on the following items for the
consent year:
(a) Net operating loss carryovers.
(b) Capital loss carryovers.
(c) Tax credits (for example, foreign
tax credits) in the consent year as well as
carryovers to the consent year.
With respect to any carryovers referred
to in items (a) through (c) above, the
analysis should include amounts for each
of the carryover years and the date the
losses or credits expire.
6. An analysis of whether any sales of
property for which consent is requested
between members of the consolidated
group that would be depreciable or de-
pletable property in the hands of the buy-
ing member would result in long-term
capital gain to the selling member, taking
into account the provisions of §§ 1239,
1245, and 1250, relating to gain from dis-
positions of certain depreciable property
or certain depreciable realty.
7. An analysis of whether any of the
members involved in those intercompany
transactions for which consent is re-
quested are subject to the separate return
limitation year rules or the change of
ownership rules under §§ 382 or 383, and
a calculation of any amounts subject to
limitation under those rules.
8. Adescription of the type or types of
property to which the consent would apply.
9. An analysis of the frequency of
those intercompany transactions for
which consent is requested, whether they
occur in the ordinary course of the consol-
idated group’s business, and whether the
amounts or prices charged in connection
with these intercompany transactions are
for fair market value based on arm’s -
length bargaining, providing examples
thereof. Also include a discussion of
whether gains from these intercompany
transactions have resulted from arm’s
length charges or prices.
10. An explanation as to why the con-
sent is being requested, why the consoli-
dated group believes it should not be re-
quired to treat these intercompany
transactions on a single entity basis, and
how treating such transactions on a sepa-
rate entity basis will clearly reflect CTI
under § 446.
SECTION 6. FACTORS AND
GUIDELINES USED BYTHE
SERVICE IN CONSIDERING
REQUESTS FOR CONSENT
UNDER § 1.1502–13(e)(3)
.01 Whether it is difficult for the con-
solidated group to account for those inter-
company transactions for which consent
is requested when they are treated on a
single entity basis and, if so, why it is dif-
ficult to do so.
.02 Whether the Effect on CTI for the
consent year or the average of the Effect
on CTI for the consent year and each of
the preceding two taxable years is greater
than 10 percent. Consent under
§ 1.1502–13(e)(3) will not be granted in
cases where either (a) the Effect on CTI is
greater than 10 percent for the consent
year or (b) the average of the Effect on
CTI for the consent year and each of the
two preceding taxable years is greater
than 10 percent. However, consent will
generally be granted in cases where (a)
the Effect on CTI is less than 10 percent
for the consent year and (b) the average of
the Effect on CTI for the consent year and
each of the two preceding taxable years is
less than 10 percent.
.03 Whether the consolidated group
will secure the benefit of any deduction,
credit, or other allowance that it would
not otherwise secure if consent to treat
those intercompany transactions for
which consent is requested on a separate
entity basis were not granted.
.04 Whether the gains that are the sub-
ject of the consent to treat intercompany
transactions on a separate entity basis
have resulted from arm’s-length charg e s
or prices.
SECTION 7. EFFECTOF THE
CONSENTUNDER § 1.1502–13(e)(3)
.01 Aconsent under § 1.1502–13(e)(3)
shall, unless revoked pursuant to Section
8, apply to all members of the consoli-
dated group for the consent year and all
subsequent taxable years ending prior to
the first taxable year for which the group
does not file a consolidated return.
.02 Section 446(e) consent is granted
under § 1.1502–13(e)(3)(iii) for any
changes in methods of accounting for in-
tercompany transactions that are neces-
sary solely to conform a member’s meth-
ods to a consent obtained pursuant to this
revenue procedure, provided the changes
are made in the consent year.Any such
changes in methods are effected on a cut-
off basis (that is, no § 481(a) adjustment
will be made). For any subsequent tax-
able year, § 446(e) consent must be sepa-
rately requested under applicable admin-
istrative procedures if a member has
failed to conform its accounting practices
to the treatment of intercompany transac-
tions required as a result of obtaining a
consent pursuant to this revenue proce-
dure. S e eR e v. Proc. 97–27, 1997–21
I.R.B. 10, or its successor. Any such
changes in methods are effected on a cut-
off basis (that is, no § 481(a) adjustment
will be made).
.03 Aconsent shall not preclude the ap-
plication of § 482 to members of a consol-
idated group.
.04 Aconsent granted under
§ 1.1502–13(e)(3) to treat intercompany
transactions on a separate entity basis
does not apply for purposes of taking into
account losses and deductions deferred
under § 267(f).
SECTION 8. REVOCATION OF
CONSENTUNDER § 1.1502–13(e)(3)
.01 Consent to treat intercompany
transactions on a separate entity basis
under § 1.1502–13(e)(3) is revoked auto-
matically for any taxable year in which
the Effect on CTI, when averaged with
the Effect on CTI for each of the two pre-
ceding taxable years, is greater than 10
percent. The consolidated group must at-
tach a statement to its original return for
the taxable year in which the consent is
revoked, indicating that the consent under

October 27, 1997241997–43 I.R.B.
§ 1.1502–13(e)(3) has been revoked pur-
suant to this Section 8.01.
.02 The Service’s consent under
§ 1.1502–13(e)(3) is granted for any con-
solidated group to revoke a valid consent
received from the Service under
§ 1.1502–13(e)(3) to treat intercompany
transactions on a separate entity basis,
and thus treat intercompany transactions
on a single entity basis, provided a state-
ment is attached to the consolidated
g r o u p ’s original return for the taxable
year in which the revocation is to be ef-
fective indicating its revocation of the
consent pursuant to this Section 8.02. In
cases where a valid consent from the Ser-
vice to report intercompany transactions
on a separate entity basis was not previ-
ously obtained and the consolidated group
wants to change from separate entity re-
porting to single entity reporting, see
Section 9.
.03 Notwithstanding that the Service
has granted consent under § 1.1502–
13(e)(3) and that such consent has not
been revoked pursuant to Section 8.01 or
8.02, the district director may, upon ex-
amination of tax returns for years subse-
quent to the consent year, recommend that
the ruling granting such consent be modi-
fied or revoked if the conditions and cir-
cumstances under which the ruling was
granted have changed substantially and it
is determined that single entity reporting
is necessary in order to clearly reflect CTI
under § 446. If the district director recom-
mends that the ruling granting such con-
sent be modified or revoked, the district di-
rector will forward the matter to the
national office for consideration before any
further action is taken. Such a referral to
the national office will be treated as a re-
quest for technical advice, and the provi-
sions of Rev. Proc. 97–2, 1997–1 I.R.B.
64, or its successor, will be followed.
.04 When consent under § 1.1502–13
(e)(3) is revoked pursuant to Section 8.01,
8.02 or 8.03, each member of the consoli-
dated group must report those intercom-
pany transactions for which consent has
been revoked on a single entity basis for
the taxable year of the revocation and all
subsequent taxable years (ending prior to
the first taxable year for which the group
does not file a consolidated return) unless
consent is received pursuant to a new re-
quest submitted under Section 4.
.05 Section 446(e) consent is granted
under § 1.1502–13(e)(3)(iii) for any
changes in methods of accounting for in-
tercompany transactions that are neces-
sary solely to conform a member’s meth-
ods to a revocation of consent made
pursuant to this revenue procedure, pro-
vided the changes are made in the taxable
year for which the revocation is made.
Any such changes in methods are effected
on a cut-off basis (that is, no § 481(a) ad-
justment will be made). For any subse-
quent taxable year, § 446(e) consent must
be separately requested under applicable
administrative procedures if a member
has failed to conform its accounting prac-
tices to the treatment of intercompany
transactions required as a result of a revo-
cation made pursuant to this revenue pro-
cedure. SeeRev. Proc. 97–27, or its suc-
cessor.Any such changes in methods are
e ffected on a cut-off basis (that is, no
§ 481(a) adjustment will be made).
SECTION 9. REQUESTS FOR
CONSENTTO CHANGE FROM
SEPARATE ENTITYREPORTING TO
SINGLE ENTITYREPORTING IN
CASES WHERE AVALID CONSENT
FROM THE SERVICE TO REPORT
INTERCOMPANYTRANSACTIONS
ON ASEPARATE ENTITYBASIS WAS
NOTPREVIOUSLYOBTAINED
The Service’s consent under § 446(e) to
change from separate entity reporting to
single entity reporting must be separately
requested under applicable administrative
procedures in cases where a valid consent
from the Service to report intercompany
transactions on a separate entity basis was
not previously obtained. S e eR e v. Proc.
97–27, or its successor. Any such
changes in methods of accounting are ef-
fected on a cut-off basis (that is, no
§ 481(a) adjustment will be made).
SECTION 10. EFFECTON OTHER
DOCUMENTS
R e v. Proc. 82–36 is modified and su-
perseded.
SECTION 11. EFFECTIVE DATE
This revenue procedure is eff e c t i v e
October 27, 1997, the date it is published
in the Internal Revenue Bulletin.
DRAFTING INFORMATION
The principal authors of this revenue
procedure are Jeffrey L. Vogel and
Michael J. Wilder of the Office of Assis-
tant Chief Counsel (Corporate). For fur-
ther information regarding this revenue
procedure, contact Jeffrey L. Vogel or
Michael J. Wilder at (202) 622-7770 (not
a toll-free call).

1997–43 I.R.B.25October 27, 1997
Rev. Proc. 97–46, Correction
Announcement 97–107
On September 30, 1997, the Internal
Revenue Service released Rev. Proc.
97–46, which sets forth a list of “rural air-
ports” as that term is defined in
§ 4261(e)(1)(B) of the Internal Revenue
Code. This list was based on information
provided by the Office of Airline Informa-
tion at the Department of Tr a n s p o r t a t i o n
(DOT). Subsequent to that time, DOTd e-
termined that Mitchell Municipal A i r p o r t
(MHE), located in Mitchell, South
Dakota, does not qualify as a rural airport.
Rev. Proc. 97–46 will be published on
October 20, 1997, in Internal Revenue
Bulletin 1997–42. The list of rural air-
ports contained in the Bulletin will not in-
clude Mitchell Municipal Airport (MHE).
For amounts paid for transportation
segments beginning or ending at Mitchell
Municipal Airport (MHE), taxpayers may
rely on Rev. Proc. 97–46 as released to
the tax services by the Service on
September 30, 1997. Thus, amounts paid
between October 1, 1997, and October
20, 1997, for transportation segments be-
ginning or ending at Mitchell Municipal
Airport (MHE) are subject to tax at the
7.5 percent rate and are not subject to the
segment tax.
The principal author of this announce-
ment is Patrick S. Kirwan of the Office of
Assistant Chief Counsel (Passthroughs
and Special Industries). For further infor-
mation regarding this announcement con-
tact Mr. Kirwan at 202-622-3130 (not a
toll-free call).
Foundations Status of Certain
Organizations
Announcement 97–108
The following organizations have
failed to establish or have been unable to
maintain their status as public charities or
as operating foundations. A c c o r d i n g l y,
grantors and contributors may not, after
this date, rely on previous rulings or des-
ignations in the Cumulative List of Orga-
nizations (Publication 78), or on the pre-
sumption arising from the filing of notices
under section 508(b) of the Code. T h i s
listing does notindicate that the organiza-
tions have lost their status as org a n i z a-
tions described in section 501(c)(3), eligi-
ble to receive deductible contributions.
Former Public Charities.The following
o rganizations (which have been treated as
o rganizations that are not private founda-
tions described in section 509(a) of the
Code) are now classified as private foun-
d a t i o n s :
Aleut Foundation, Anchorage, AK
American Friends of Beth Asher,
Brooklyn, NY
American Friends of Children, Inc., New
York, NY
American Friends of Mesorot Yisroel of
Haifa, Inc., Brooklyn, NY
American Graphic Arts Museum, Inc.,
Pittsfield, MA
Andover Foundation Inc., Andover, OH
Arthur M. Handy Scholarship Fund,
Catumet, MA
Blessings, Schenectady, NY
Camp Phoenix Partnership, Inc.,
Providence, RI
Caroling Angels, Inc., Charlestown, RI
Changing Our Minds, Inc.,
New York, NY
Chester Housing, Inc., Chester, CT
Children Afflicted by Toxic Substances
Foundation, Inc., Hauppauge, NY
Christian Computer Community
Corporation, Glen Burnie, MD
Cranford Housing II Inc., Cranford, NJ
Crime Victims Assistance Center of New
York, Inc., New York, NY
David Prouty H.S. Permanent
Scholarship Fund, Spenser, MA
Delta Epsilon Kappa, Inc. Accounting
Honor Society, Montgomery, AL
Dreamers, Inc., Cambridge, MA
Echo Lake Wild Life Rehab, Inc.,
Presque Isle, ME
Enchanted Rain Forest Inc., Lavernia, TX
Fond du Lac Area Congregations United
and Strong, Fond du Lac, WI
Friends of Chosen Mishpat, Inc.,
Brooklyn, NY
Friends of Cranberry Lake Preserve, Inc.,
Rye, NY
Friends of Douai, Haverford, PA
Hamptons International Film Festival,
Inc., East Hampton, NY
Impact 90s, Inc., Memphis, TN
Institution of Torah & Charity of Haifa,
Inc., Brooklyn, NY
Margalit Chana Rappaport Childrens
Library, New Hempstead, NY
Marthas Vineyards Pop Warner Football,
Edgartown, MA
Martin House Restoration Corporation,
Buffalo, NY
Mascom Express, Lebanon, NH
Massachusetts Toxics Campaign Fund,
Inc., Cambridge, MA
Matt Talbot Retreat Movement Group 20,
Inc., Forest Hills, NY
Maynard Food Pantry, Inc.,
Maynard, MA
Mechtech of New Hampshire, Inc.,
Nashua, NH
Metropolitan Black Bar Association
Scholarship Fund, Inc., Brooklyn, NY
Mianus River Historical Society, Inc.,
Stamford, CT
Minority Parents Organization,
Bayshore, NY
Mitch Nathanson Classic Memorial
Scholarship Fund Charitable Trust,
Manchester, NH
Monrovia Resources Development
Corporation, Pasadena, CA
Mount Alverno Residence Corporation,
Warwick, NY
Mt. Greylock Babe Ruth League, Inc.,
Williamstown, MA
Mt. Tom School, Woodstock, VT
Musical Explorations Society, Inc.,
New York, NY
Musical Reflections of America, Inc.,
Syracuse, NY
Narragansett Housing Development
Fund, Corp., New York, NY
National Coalition for Child Protection
Reform, Cambridge, MA
National Progressive Institute for
Community Development Inc.,
Chicago, IL
New Hampshire Peer Helpers
Association, Goffstown, NH
New World Media Alliance, Inc.,
New York, NY
Nihon Ki-In America, Inc., New York, NY
Nokomis Rainbow Services Inc.,
Ukiah, CA
Pathfinders for Positive Parenting and
Nurturing of the Black Family,
Birmingham, AL
Police Athletic League of Newark and
Licking County Ohio Inc., Newark, OH
Prison Life Foundation, Inc.,
New York, NY
Ronald O. Rogers, Jamaica, NY
Part IV. Items of General Interest

October 27, 1997261997–43 I.R.B.
Shrewsbury Boosters Association, Inc.,
Shrewsbury, MA
The Stewardship Community Fund Inc.,
Boston, MA
Stillhouse Trestle Corporation,
Danville, VA
Tov Lakol, Inc., Brooklyn, NY
Training Connecticut, Inc., Needham, MA
21st Century Networking,
Greensburg, PA
Vermont Entological Society, South
Burlington, VT
Women and Family Counseling Services
Inc., E. Lansing, MI
If an organization listed above submits
information that warrants the renewal of its
classification as a public charity or as a pri-
vate operating foundation, the Internal
Revenue Service will issue a ruling or de-
termination letter with the revised classifi-
cation as to foundation status. Grantors and
contributors may thereafter rely upon such
ruling or determination letter as provided
in section 1.509(a)–7 of the Income Ta x
Regulations. It is not the practice of the
Service to announce such revised classifi-
cation of foundation status in the Internal
Revenue Bulletin.

1997–43 I.R.B.27October 27, 1997
Under title 31 of the Code of Federal
Regulations, section 10.76, the Director
of Practice is authorized to immediately
suspend from practice before the Internal
Revenue Service any practitioner who,
within five years, from the date the expe-
dited proceeding is instituted, (1) has had
a license to practice as an attorney, certi-
fied public accountant, or actuary sus-
pended or revoked for cause; or (2) has
been convicted of any crime under title 26
of the United States Code or, of a felony
under title 18 of the United States Code
involving dishonesty or breach of trust.
Attorneys, certified public accountants,
enrolled agents, and enrolled actuaries are
prohibited in any Internal Revenue Service
matter from directly or indirectly employ-
ing, accepting assistance from, being em-
ployed by, or sharing fees with, any practi-
tioner disbarred or suspended from practice
before the Internal Revenue Service.
To enable attorneys, certified public ac-
countants, enrolled agents, and enrolled ac-
tuaries to identify practitioners under expe-
dited suspension from practice before the
Internal Revenue Service, the Director of
Practice will announce in the Internal Rev-
enue Bulletin the names and addresses of
practitioners who have been suspended
from such practice, their designation as at-
t o r n e y, certified public accountant, en-
rolled agent, or enrolled actuary, and date
or period of suspension. This announce-
ment will appear in the weekly Bulletin at
the earliest practicable date after such ac-
tion and will continue to appear in the
weekly Bulletins for five successive weeks
or for as many weeks as is practicable for
each attorney, certified public accountant,
enrolled agent, or enrolled actuary so sus-
pended and will be consolidated and pub-
lished in the Cumulative Bulletin.
The following individuals have been
placed under suspension from practice be-
fore the Internal Revenue Service by virtue
of the expedited proceeding provisions of
the applicable regulations:
Announcement of the Expedited Suspension of Attorneys, Certified Public
Accountants, Enrolled Agents, and Enrolled Actuaries From Practice
B e f o re the Internal Revenue Serv i c e
NameAddressDesignationDate of Suspension
Booker,William G.Winston-Salem, NCCPAIndefinite from June 12, 1997
Acevado, GustavoLaredo, TXAttorneyIndefinite from July 23, 1997
Piotti, Wayne H.Homer, NYCPAIndefinite from July 23, 1997
Burley, Franklin R.Monroe, LACPAIndefinite from July 23, 1997
Kent, William F.Winston-Salem, NCCPAIndefinite from July 23, 1997
Levine, JackPhoenix, AZAttorneyIndefinite from July 23, 1997
Kapral, Stephen M.Richmond, VAAttorneyIndefinite from July 23, 1997
Bell, Abraham E.St. Louis, MOCPAIndefinite from July 30, 1997
Jackson, PaulBurley, IDCPAIndefinite from September 11, 1997
Clay, HenryNew York, NYAttorneyIndefinite from September 11, 1997
Cooley, DonaldSpringfield, MOAttorneyIndefinite from September 11, 1997
Duke, Charla R.Oakland, CAAttorneyIndefinite from September 11, 1997
Devins, GeorgeMunsey Park, NYCPAIndefinite from September 11, 1997
Williams, Ronald A.Doylestown, PAEnrolled AgentIndefinite from September 11, 1997
Under 31 Code of Federal Regulations,
Part 10, an attorney, certified public ac-
countant, enrolled agent, or enrolled ac-
t u a r y, in order to avoid the institution or
conclusion of a proceeding for his disbar-
ment or suspension from practice before
the Internal Revenue Service, may off e r
his consent to suspension from such prac-
tice. The Director of Practice, in his dis-
cretion, may suspend an attorney, certi-
fied public accountant, enrolled agent, or
enrolled actuary in accordance with the
consent off e r e d .
Attorneys, certified public accountants,
enrolled agents, and enrolled actuaries are
prohibited in any Internal Revenue Ser-
vice matter from directly or indirectly em-
ploying, accepting assistance from, being
employed by, or sharing fees with, any
practitioner disbarred or suspended from
practice before the Internal Revenue Ser-
vice.
To enable attorneys, certified public ac-
countants, enrolled agents, and enrolled
actuaries to identify practitioners under
consent suspension from practice before the
Internal Revenue Service, the Director
of Practice will announce in the Internal
Revenue Bulletin the names and ad-
dresses of practitioners who have been
Announcement of the Consent Vo l u n t a ry Suspension of Attorn e y s ,
C e rtified Public Accountants, Enrolled Agents, and Enrolled Actuaries
F rom Practice Before the Internal Revenue Serv i c e

October 27, 1997281997–43 I.R.B.
NameAddressDesignationDate of Suspension
Weksler, Mark R.Arlington Heights, ILCPAJune 16, 1997 to June 15, 2000
Womble, Bill R. Dallas, TXAttorneyIndefinite from June 19, 1997
Robinson II, VaughnMidland, TXCPAIndefinite from June 19, 1997
Kim, Kwang W.Schaumburg, ILCPAJune 30, 1997 to December 29, 1997
Tymas, George M.Russellton, PACPAJuly 1, 1997 to February 28, 1999
Rattet, Robert L.New Rochelle, NYAttorneyJuly 26, 1997 to June 25, 1998
Noles, R. LeonN. Little Rock, ARCPAJuly 30, 1997 to October 29, 1997
Harbin, Glenn E.Bakersfield, CACPAJuly 31, 1997 to December 30, 1998
Harms, John G.Lemont, PACPAAugust 1, 1997 to November 30, 1997
Lewis, Craig S.Savannah, GACPAAugust 1, 1997 to July 31, 1998
Terranova, Michael P.Lake Charles, LACPAAugust 7, 1997 to May 6, 1998
Frantz, Barbara A. Pontiac, ILAttorneyAugust 8, 1997 to July 31, 1999
Smith, Glen L.Edina, MNAttorneyAugust 9, 1997 to November 8, 1997
Bayus Sr., Gerald A.Hubbard, OHCPAAugust 11, 1997 to July 10, 1998
Winton, D. MichaelClovis, NMEnrolled AgentAugust 15, 1997 to November 14, 1997
McNabb, GeraldWhite Bear, MNAttorneyAugust 22, 1997 to January 21, 2000
Ness, Stanley L.Minneapolis, MNCPAAugust 25, 1997 to February 24, 1998
Culmer,Thomas A.Devils Lake, NDCPASeptember 1, 1997 to November 30, 1997
Ziskind, ShermanDunlevy, PACPASeptember 1, 1997 to February 28, 1999
Huston, James L.Kingman, AZCPASeptember 1, 1997 to December 31, 1997
Fulthorpe, Douglas R.St. Petersburg, FLCPASeptember 1, 1997 to August 30, 1998
Suszko, Richard J.La Mesa, CAEnrolled AgentSeptember 1, 1997 to August 31, 1999
Bromagen, Kent E.Dayton, OHCPASeptember 1, 1997 to February 28, 2000
Shawhan, David W.Xenia, OHCPASeptember 1, 1997 to August 31, 1999
Kennedy Jr., JosephSanta Barbara, CAEnrolled AgentSeptember 1, 1997 to May 31, 1998
Brummet, Richard E.Hinsdale, ILCPASeptember 3, 1997 to January 2, 1998
Pollard, E. DwainIdabell, OKCPASeptember 4, 1997 to August 3, 1999
Tamminga, Roland R.Belmont, NHAttorneySeptember 5, 1997 to December 4, 1997
Ayala, SimonOxnard, CAEnrolled AgentIndefinite from September 19, 1997
Balmer,Alan J.Fairfield, IACPASeptember 30, 1997 to August 29, 1999
Fox, EugeneRockville Centre, NYCPAOctober 1, 1997 to March 31, 1998
Sanford, Paul L.Avon, CTCPANovember 1, 1997 to July 31, 1997
Glemann, Richard P.Jacksonville Beach, FLCPANovember 1, 1997 to October 31, 1999
Rubey, Patrick J.Chicago, ILCPANovember 1, 1997 to January 31, 1999
Coverdale Jr., AlphonsoPhiladelphia, PAEnrolled AgentDecember 1, 1997 to November 30, 2000
suspended from such practice, their desig-
nation as attorney, certified public ac-
countant, enrolled agent, or enrolled actu-
ary, and date or period of suspension. This
announcement will appear in the weekly
Bulletin at the earliest practicable date
after such action and will continue to ap-
pear in the weekly Bulletins for five suc-
cessive weeks or for as many weeks as is
practicable for each attorney, certified
public accountant, enrolled agent, or en-
rolled actuary so suspended and will be
consolidated and published in the Cumu-
lative Bulletin.
The following individuals have been
placed under consent suspension from
practice before the Internal Revenue Ser-
v i c e :

1997–43 I.R.B.29October 27, 1997
Under Section 330, Title 31 of the United
States Code, the Secretary of the Tr e a s u r y,
after due notice and opportunity for hearing,
is authorized to suspend or disbar from prac-
tice before the Internal Revenue Service any
person who has violated the rules and regu-
lations governing the recognition of attor-
neys, certified public accountants, enrolled
agents, or enrolled actuaries to practice be-
fore the Internal Revenue Service.
Attorneys, certified public accountants,
enrolled agents, and enrolled actuaries are
prohibited in any Internal Revenue Service
matter from directly or indirectly employ-
ing, accepting assistance from, being em-
ployed by, or sharing fees with, any practi-
tioner disbarred or under suspension from
practice before the Internal Revenue Ser-
v i c e .
To enable attorneys, certified public ac-
countants, enrolled agents, and enrolled ac-
tuaries to identify such disbarred or sus-
pended practitioners, the Director of
Practice will announce in the Internal Rev-
enue Bulletin the names and addresses of
practitioners who have been disbarred or
suspended from such practice, their desig-
nation as attorney, certified public accoun-
tant, enrolled agent, or enrolled actuary, and
date of disbarment or period of suspension.
This announcement will appear in the
weekly Bulletin for five successive weeks
or for as many weeks as is practicable for
each attorney, certified public accountant,
enrolled agent, or enrolled actuary so sus-
pended and will be consolidated and pub-
lished in the Cumulative Bulletin.
After due notice and opportunity for
hearing before an administrative law judge,
the following individuals have been sus-
pended from further practice before the In-
ternal Revenue Service:
Announcement of the Suspension of Attorneys, Certified Public
Accountants, Enrolled Agents, and Enrolled Actuaries From Practice
B e f o re the Internal Revenue Serv i c e
NameAddressDesignationDate of Suspension
Makos, DeborahGreen Bay,WIEnrolled AgentJune 20, 1997 to May 19, 2000
Friberg, John P.Milwaukee, WICPAJuly 20, 1997 to June 19, 2001
Under Section 330, Title 31 of the United
States Code, the Secretary of the Tr e a s u r y,
after due notice and opportunity for hearing,
is authorized to suspend or disbar from prac-
tice before the Internal Revenue Service any
person who has violated the rules and regu-
lations governing the recognition of attor-
neys, certified public accountants, enrolled
agents, or enrolled actuaries to practice be-
fore the Internal Revenue Service.
Attorneys, certified public accountants,
enrolled agents, and enrolled actuaries are
prohibited in any Internal Revenue Service
matter from directly or indirectly employ-
ing, accepting assistance from, being em-
ployed by, or sharing fees with, any practi-
tioner disbarred or under suspension from
practice before the Internal Revenue Ser-
v i c e .
To enable attorneys, certified public ac-
countants, enrolled agents, and enrolled ac-
tuaries to identify such disbarred or sus-
pended practitioners, the Director of
Practice will announce in the Internal Rev-
enue Bulletin the names and addresses of
practitioners who have been disbarred or
suspended from such practice, their desig-
nation as attorney, certified public accoun-
tant, enrolled agent, or enrolled actuary, and
the date of disbarment or period of suspen-
sion. This announcement will appear in the
weekly Bulletin for five successive weeks
or for as many weeks as is practicable for
each attorney, certified public accountant,
enrolled agent, or enrolled actuary so sus-
pended and will be consolidated and pub-
lished in the Cumulative Bulletin.
After due notice and opportunity for
hearing before an administrative law judge,
the following individuals have been dis-
barred from further practice before the In-
ternal Revenue Service:
Announcement of the Disbarment of Attorneys, Certified Public
Accountants, Enrolled Agents, and Enrolled Actuaries From Practice
B e f o re the Internal Revenue Serv i c e
NameAddressDesignationEffective Date
Hoyt III, Walter J.Burns, OREnrolled AgentJuly 13, 1997
Lu, John S.New York, NYEnrolled AgentJuly 21, 1997
McCue, William T.Glen Rock, NJAttorneyJuly 21, 1997
Foster, Dennis S.Pittsburgh, PACPASeptember 8, 1997

October 27, 1997301997–43 I.R.B.
Revenue rulings and revenue pro c e d u re s
( h e reinafter re f e rred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
e f f e c t :
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. T h u s ,
if an earlier ruling held that a principle
applied to A, and the new ruling holds
that the same principle also applies to B,
the earlier ruling is amplified. (Compare
with m o d i f i e d, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
D i s t i n g u i s h e ddescribes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial difference between them.
Modified is used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to Abut not
to B, and the new ruling holds that it ap-
plies to both Aand B, the prior ruling is
modified because it corrects a published
position. (Compare with amplified a n d
c l a r i f i e d, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used
in a ruling that lists previously published
rulings that are obsoleted because of
changes in law or regulations. Ar u l i n g
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revoked describes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the
new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example, m o d i f i e d
and superseded describes a situation
where the substance of a previously pub-
lished ruling is being changed in part and
is continued without change in part and it
is desired to restate the valid portion of
the previously published ruling in a new
ruling that is self contained. In this case
the previously published ruling is first
modified and then, as modified, is super-
s e d e d .
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and
that list is expanded by adding further
names in subsequent rulings. After the
original ruling has been supplemented
several times, a new ruling may be pub-
lished that includes the list in the original
ruling and the additions, and supersedes
all prior rulings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current use and for-
merly used will appear in material published in the
Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C.—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contribution Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedral Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Definition of Terms

1997–43 I.R.B.31October 27, 1997
Numerical Finding List
1
Bulletins 1997–27 through 1997–42
Announcements:
97–61, 1997–29 I.R.B. 13
97–67, 1997–27 I.R.B. 37
97–68, 1997–28 I.R.B. 13
97–69, 1997–28 I.R.B. 13
97–70, 1997–29 I.R.B. 14
97–71, 1997–29 I.R.B. 15
97–72, 1997–29 I.R.B. 15
97–73, 1997–30 I.R.B. 86
97–74, 1997–31 I.R.B.16
97–75, 1997–32 I.R.B. 28
97–76, 1997–32 I.R.B. 28
97–77, 1997–33 I.R.B. 58
97–78, 1997–34 I.R.B. 11
97–79, 1997–35 I.R.B. 8
97–80, 1997–34 I.R.B. 12
97–81, 1997–34 I.R.B. 12
97–82, 1997–34 I.R.B. 12
97–83, 1997–34 I.R.B. 13
97–84, 1997–34 I.R.B. 13
97–85, 1997–35 I.R.B. 8
97–86, 1997–35 I.R.B. 9
97–87, 1997–35 I.R.B. 9
97–88, 1997–35 I.R.B. 9
97–89, 1997–36 I.R.B. 10
97–90, 1997–36 I.R.B. 10
97–91, 1997–37 I.R.B. 25
97–92, 1997–37 I.R.B. 26
97–93, 1997–36 I.R.B. 11
97–94, 1997–36 I.R.B. 12
97–95, 1997–36 I.R.B. 12
97–96, 1997–39 I.R.B.15
97–97, 1997–38 I.R.B. 22
97–98, 1997–39 I.R.B. 15
97–99, 1997–40 I.R.B. 7
97–100, 1997–40 I.R.B. 8
97–101, 1997–41 I.R.B. 13
97–102, 1997–41 I.R.B. 15
97–103, 1997–41 I.R.B. 16
97–104, 1997–42 I.R.B. 39
97–105, 1997–42 I.R.B. 40
Court Decisions:
2061, 1997–31 I.R.B. 5
2062, 1997–32 I.R.B. 8
Delegation Orders:
97 (Rev. 34), 1997–41 I.R.B. 14
172 (Rev. 5), 1997–28 I.R.B. 6
Notices:
97–37, 1997–27 I.R.B. 4
97–38, 1997–27 I.R.B. 8
97–39, 1997–27 I.R.B. 8
97–40, 1997–28 I.R.B. 6
97–41, 1997–28 I.R.B. 6
97–42, 1997–29 I.R.B. 12
97–43, 1997–30 I.R.B. 9
97–44, 1997–31 I.R.B. 15
97–45, 1997–33 I.R.B. 7
97–46, 1997–34 I.R.B. 10
97–47, 1997–35 I.R.B. 5
97–48, 1997–35 I.R.B. 5
97–49, 1997–36 I.R.B. 8
97–50, 1997–37 I.R.B. 21
97–51, 1997–38 I.R.B. 20
Notices–Continued
97–52, 1997–38 I.R.B. 20
97–53, 1997–40 I.R.B. 6
97–54, 1997–41 I.R.B. 7
97–55, 1997–40 I.R.B. 6
Railroad Retirement Quarterly Rate:
1997–28 I.R.B. 5
Proposed Regulations:
REG–104893–97, 1997–29 I.R.B. 13
REG–105160–97, 1997–37 I.R.B. 22
REG–106043–97, 1997–37 I.R.B. 24
REG–107644–97, 1997–32 I.R.B. 24
REG–208151–91, 1997–38 I.R.B. 21
REG–246250–96, 1997–42 I.R.B. 30
Revenue Procedures:
97–32, 1997–27 I.R.B. 9
97–32A, 1997–34 I.R.B. 10
97–33, 1997–30 I.R.B. 10
97–34, 1997–30 I.R.B.14
97–35, 1997–33 I.R.B. 11
97–36, 1997–33 I.R.B. 14
97–37, 1997–33 I.R.B. 18
97–38, 1997–33 I.R.B. 43
97–39, 1997–33 I.R.B. 48
97–40, 1997–33 I.R.B. 50
97–41, 1997–33 I.R.B. 5
97–42, 1997–33 I.R.B. 57
97–43, 1997–39 I.R.B. 12
97–44, 1997–41 I.R.B. 8
97–45, 1997–41 I.R.B. 10
97–46, 1997–42 I.R.B. 10
97–47, 1997–42 I.R.B. 19
Revenue Rulings:
97–27, 1997–27 I.R.B. 4
97–28, 1997–28 I.R.B. 4
97–29, 1997–28 I.R.B. 4
97–30, 1997–31 I.R.B.12
97–31, 1997–32 I.R.B.4
97–32, 1997–33 I.R.B. 4
97–33, 1997–34 I.R.B. 4
97–34, 1997–34 I.R.B. 14
97–35, 1997–35 I.R.B. 4
97–36, 1997–36 I.R.B. 5
97–37, 1997–37 I.R.B.15
97–38, 1997–38 I.R.B.14
97–39, 1997–39 I.R.B. 4
97–40, 1997–39 I.R.B. 8
97–41, 1997–40 I.R.B. 4
97–42, 1997–41 I.R.B. 4
97–43, 1997–42 I.R.B. 8
Treasury Decisions:
8722, 1997–29 I.R.B. 4
8723, 1997–30 I.R.B. 4
8724, 1997–36 I.R.B. 4
8725, 1997–37 I.R.B. 16
8726, 1997–34 I.R.B. 7
8727, 1997–34 I.R.B. 5
8728, 1997–37 I.R.B. 4
8729, 1997–38 I.R.B. 4
8730, 1997–38 I.R.B. 16
8731, 1997–42 I.R.B. 6
8732, 1997–42 I.R.B. 4
1
Acumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 1997–1 through 1997–26
will be found in Internal Revenue Bulletin 1997–27,
dated July 7, 1997.

October 27, 1997321997–43 I.R.B.
Finding List of Current Action on
Previously Published Items
1
Bulletins 1997–27 through 1997–42
*Denotes entry since last publication
Revenue Procedures:
96–36
Superseded by
97–34, 1997–30 I.R.B. 14
96–42
Superseded by
97–27, 1997–27 I.R.B. 9
97–32
Modified and amplified by
97–32A, 1997–34 I.R.B. 10
Revenue Rulings:
89–42
Supplemented by
97–31, 1997–32 I.R.B. 4
93–76
Clarified, modified, partially
obsoleted, and superceded by
97–39, 1997–39 I.R.B 4
94–7
Clarified, modified, partially
obsoleted, and superceded by
97–39, 1997–39 I.R.B 4
1
Acumulative finding list for previously published
items mentioned in Internal Revenue Bulletins
1997–1 through 1997–26 will be found in Internal
Revenue Bulletin 1997–27, dated July 7, 1997.

Notes
1997–43 I.R.B.33October 27, 1997

Notes
October 27, 1997341997–43 I.R.B.

INTERNAL REVENUE BULLETIN
The Introduction on page 3 describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold
on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superintendent of
Documents when their subscriptions must be renewed.
CUMULATIVE BULLETINS
The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are
sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the week-
ly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print
and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the
Superintendent of Documents.
HOW TO ORDER
Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance,
detach entire page, and mail to the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. Please
allow two to six weeks, plus mailing time, for delivery.
WE WELCOME COMMENTS ABOUT THE
INTERNAL REVENUE BULLETIN
If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page
(www.irs.ustreas.gov) or write to the IRS Bulletin Unit, T:FP:F:CD, Room 5560, 1111 Constitution Avenue NW,Washington, DC
20224. You can also leave a recorded message 24 hours a day, 7 days a week at 1–800–829–9043.
Superintendent of Documents
U.S. Government Printing Office
Washington, DC 20402
Official Business
Penalty for Private Use, $300
First Class Mail
Postage and Fees Paid
GPO
Permit No. G–26

INTERNAL REVENUE BULLETIN
The Introduction on page 3 describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold
on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superintendent of
Documents when their subscriptions must be renewed.
CUMULATIVE BULLETINS
The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are
sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the week-
ly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print
and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the
Superintendent of Documents.
HOW TO ORDER
Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance,
detach entire page, and mail to the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. Please
allow two to six weeks, plus mailing time, for delivery.
WE WELCOME COMMENTS ABOUT THE
INTERNAL REVENUE BULLETIN
If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page
(www.irs.ustreas.gov) or write to the IRS Bulletin Unit, T:FP:F:CD, Room 5560, 1111 Constitution Avenue NW,Washington, DC
20224. You can also leave a recorded message 24 hours a day, 7 days a week at 1–800–829–9043.
Internal Revenue Service
Washington, DC 20224
Official Business
Penalty for Private Use, $300
First Class Mail
Postage and Fees Paid
IRS
Permit No. G–48