RP-12-41.pdf

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Part III

Administrative, Procedural, and Miscellaneous

26 CFR 601.602: Tax forms and instructions.
(Also Part I, §§ 1, 42, 59, 62, 135, 146, 147, 148, 213, 220, 512, 513, 877, 877A, 911,
2032A, 2503, 2523, 4161, 4261, 6033, 6039F, 6323, 6334, 6601, 7430, 7702B; 1.148-
5.)

Rev. Proc. 2012-41

Table of Contents
SECTION 1. PURPOSE
SECTION 2. CHANGES
SECTION 3. 2013 ADJUSTED ITEMS
Code Section

.01 Unearned Income of Minor Children Taxed as if Parent’s 1(g)
Income ("Kiddie Tax")
.02 Rehabilitation Expenditures Treated as Separate New Building 42(e)
.03 Low-Income Housing Credit 42(h)
.04 Alternative Minimum Tax Exemption for a Child Subject to the 59(j)
“Kiddie Tax”
.05 Transportation Mainline Pipeline Construction Industry Optional 62(c)
Expense Substantiation Rules for Payments to Employees under
Accountable Plans

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.06 Income from United States Savings Bonds for Taxpayers Who 135
Pay Qualified Higher Education Expenses
.07 Private Activity Bonds Volume Cap 146(d)
.08 Loan Limits on Agricultural Bonds 147(c)(2)
.09 General Arbitrage Rebate Rules 148(f)
.10 Safe Harbor Rules for Broker Commissions on Guaranteed 148
Investment Contracts or Investments Purchased for a Yield
Restricted Defeasance Escrow
.11 Eligible Long-Term Care Premiums 213(d)(10)
.12 Medical Savings Accounts 220
.13 Treatment of Dues Paid to Agricultural or Horticultural 512(d)
Organizations

.14 Insubstantial Benefit Limitations for Contributions Associated 513(h)
With Charitable Fund-Raising Campaigns

.15 Expatriation to Avoid Tax 877
.16 Tax Responsibilities of Expatriation 877A
.17 Foreign Earned Income Exclusion 911
.18 Valuation of Qualified Real Property in Decedent's Gross Estate 2032A
.19 Annual Exclusion for Gifts 2503; 2523
.20 Tax on Arrow Shafts 4161
.21 Passenger Air Transportation Excise Tax 4261
.22 Reporting Exception for Certain Exempt Organizations with 6033(e)(3)
Nondeductible Lobbying Expenditures
.23 Notice of Large Gifts Received from Foreign Persons 6039F
.24 Persons Against Whom a Federal Tax Lien Is Not Valid 6323

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.25 Property Exempt from Levy 6334
.26 Interest on a Certain Portion of the Estate Tax Payable in 6601(j)
Installments
.27 Attorney Fee Awards 7430
.28 Periodic Payments Received under Qualified Long-Term Care 7702B(d)
Insurance Contracts or under Certain Life Insurance Contracts
SECTION 4. EFFECTIVE DATE
SECTION 5. DRAFTING INFORMATION

SECTION 1. PURPOSE
This revenue procedure sets forth inflation-adjusted items for 2013.
SECTION 2. CHANGES
This revenue procedure does not include the following items: the tax rate tables
under § 1 of the Internal Revenue Code (Code), the adoption credit under § 23, the
child tax credit under § 24, the Hope Scholarship and Lifetime Learning Credits under
§ 25A, the earned income credit under § 32, the standard deduction under § 63, the
overall limitation on itemized deductions under § 68, the qualified transportation fringe
benefit under § 132(f), the adoption assistance exclusion under § 137, the personal
exemption under § 151, the election to expense certain depreciable assets under § 179,
the interest on education loans under § 221, and the unified credit against estate tax for
estates of decedents under § 2010(c). Those items will be addressed in future
guidance.
SECTION 3. 2013 ADJUSTED ITEMS

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.01 Unearned Income of Minor Children Taxed as if Parent's Income (the "Kiddie
Tax"). For taxable years beginning in 2013, the amount in § 1(g)(4)(A)(ii)(I), which is
used to reduce the net unearned income reported on the child's return that is subject to
the "kiddie tax," is $1,000. This $1,000 amount is the same as the amount provided in
§ 63(c)(5)(A), as adjusted for inflation. The same $1,000 amount is used for purposes
of § 1(g)(7) (that is, to determine whether a parent may elect to include a child's gross
income in the parent's gross income and to calculate the "kiddie tax"). For example,
one of the requirements for the parental election is that a child's gross income is more
than the amount referenced in § 1(g)(4)(A)(ii)(I) but less than 10 times that amount;
thus, a child's gross income for 2013 must be more than $1,000 but less than $10,000.
.02 Rehabilitation Expenditures Treated as Separate New Building
. For calendar year
2013, the per low-income unit qualified basis amount under § 42(e)(3)(A)(ii)(II) is
$6,400.
.03 Low-Income Housing Credit
. For calendar year 2013, the amount used under
§ 42(h)(3)(C)(ii) to calculate the State housing credit ceiling for the low-income housing
credit is the greater of (1) $2.25 multiplied by the State population, or (2) $2,590,000.
.04 Alternative Minimum Tax Exemption for a Child Subject to the "Kiddie Tax
." For
taxable years beginning in 2013, for a child to whom the § 1(g) "kiddie tax" applies, the
exemption amount under §§ 55 and 59(j) for purposes of the alternative minimum tax
under § 55 may not exceed the sum of (1) the child's earned income for the taxable
year, plus (2) $7,150.
.05 Transportation Mainline Pipeline Construction Industry Optional Expense

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Substantiation Rules for Payments to Employees under Accountable Plans
. For
calendar year 2013, an eligible employer may pay certain welders and heavy equipment
mechanics an amount of up to $17 per hour for rig-related expenses that is deemed
substantiated under an accountable plan if paid in accordance with Rev. Proc. 2002-41,
2002-1 C.B. 1098. If the employer provides fuel or otherwise reimburses fuel expenses,
up to $10 per hour is deemed substantiated if paid under Rev. Proc. 2002-41.
.06 Income from United States Savings Bonds for Taxpayers Who Pay Qualified
Higher Education Expenses. For taxable years beginning in 2013, the exclusion under
§ 135, regarding income from United States savings bonds for taxpayers who pay
qualified higher education expenses, begins to phase out for modified adjusted gross
income above $112,050 for joint returns and $74,700 for other returns. The exclusion is
completely phased out for modified adjusted gross income of $142,050 or more for joint
returns and $89,700 or more for other returns.
.07 Private Activity Bonds Volume Cap
. For calendar year 2013, the amounts used
under § 146(d)(1) to calculate the State ceiling for the volume cap for private activity
bonds is the greater of (1) $95 multiplied by the State population, or (2) $291,875,000.
.08 Loan Limits on Agricultural Bonds
. For calendar year 2013, the loan limit amount
on agricultural bonds under § 147(c)(2)(A) for first-time farmers is $501,100.
.09 General Arbitrage Rebate Rules
. For bond years ending in 2013, the amount of
the computation credit determined under the permission to rely on § 1.148-3(d)(4) of the
proposed Income Tax Regulations is $1,590.
.10 Safe Harbor Rules for Broker Commissions on Guaranteed Investment Contracts

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or Investments Purchased for a Yield Restricted Defeasance Escrow
. For calendar
year 2013, under § 1.148-5(e)(2)(iii)(B)(1), a broker’s commission or similar fee for the
acquisition of a guaranteed investment contract or investments purchased for a yield
restricted defeasance escrow is reasonable if (1) the amount of the fee that the issuer
treats as a qualified administrative cost does not exceed the lesser of (A) $37,000, and
(B) 0.2 percent of the computational base (as defined in § 1.148-5(e)(2)(iii)(B)(2)) or, if
more, $4,000; and (2) the issuer does not treat more than $106,000 in brokers’
commissions or similar fees as qualified administrative costs for all guaranteed
investment contracts and investments for yield restricted defeasance escrows
purchased with gross proceeds of the issue.
.11 Eligible Long-Term Care Premiums
. For taxable years beginning in 2013, the
limitations under § 213(d)(10), regarding eligible long-term care premiums includible in
the term "medical care," are as follows:
Attained Age Before the Close of the Taxable Year
Limitation on Premiums
40 or less $360
More than 40 but not more than 50 $680
More than 50 but not more than 60 $1,360
More than 60 but not more than 70 $3,640
More than 70 $4,550
.12 Medical Savings Accounts
.
(1) Self-only coverage
. For taxable years beginning in 2013, the term "high
deductible health plan" as defined in § 220(c)(2)(A) means, for self-only coverage, a

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health plan that has an annual deductible that is not less than $2,150 and not more than
$3,200, and under which the annual out-of-pocket expenses required to be paid (other
than for premiums) for covered benefits do not exceed $4,300.
(2) Family coverage. For taxable years beginning in 2013, the term "high deductible
health plan" means, for family coverage, a health plan that has an annual deductible
that is not less than $4,300 and not more than $6,450, and under which the annual out-
of-pocket expenses required to be paid (other than for premiums) for covered benefits
do not exceed $7,850.
.13 Treatment of Dues Paid to Agricultural or Horticultural Organizations
. For taxable
years beginning in 2013, the limitation under § 512(d)(1), regarding the exemption of
annual dues required to be paid by a member to an agricultural or horticultural
organization, is $155.
.14 Insubstantial Benefit Limitations for Contributions Associated with Charitable
Fund-Raising Campaigns.
(1) Low cost article
. For taxable years beginning in 2013, for purposes of defining
the term “unrelated trade or business” for certain exempt organizations under
§ 513(h)(2), “low cost articles” are articles costing $10.20 or less.
(2) Other insubstantial benefits
. For taxable years beginning in 2013, under § 170,
the $5, $25, and $50 guidelines in section 3 of Rev. Proc. 90-12, 1990-1 C.B. 471 (as
amplified by Rev. Proc. 92-49, 1992-1 C.B. 987, and modified by Rev. Proc. 92-102,
1992-2 C.B. 579), for the value of insubstantial benefits that may be received by a donor
in return for a contribution, without causing the contribution to fail to be fully deductible,

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are $10.20, $51, and $102, respectively.
.15 Expatriation to Avoid Tax
. For calendar year 2013, an individual with “average
annual net income tax” of more than $155,000 for the five taxable years ending before
the date of the loss of United States citizenship under § 877(a)(2)(A) is a covered
expatriate for purposes of § 877A(g)(1).
.16 Tax Responsibilities of Expatriation
. For taxable years beginning in 2013, the
amount that would be includible in the gross income of a covered expatriate by reason
of § 877A(a)(1) is reduced (but not below zero) by $668,000.
.17 Foreign Earned Income Exclusion
. For taxable years beginning in 2013, the
foreign earned income exclusion amount under § 911(b)(2)(D)(i) is $97,600.
.18 Valuation of Qualified Real Property in Decedent's Gross Estate
. For an estate of
a decedent dying in calendar year 2013, if the executor elects to use the special use
valuation method under § 2032A for qualified real property, the aggregate decrease in
the value of qualified real property resulting from electing to use § 2032A for purposes
of the estate tax cannot exceed $1,070,000.
.19 Annual Exclusion for Gifts
.
(1) For calendar year 2013, the first $14,000 of gifts to any person (other than gifts
of future interests in property) are not included in the total amount of taxable gifts under
§ 2503 made during that year.
(2) For calendar year 2013, the first $143,000 of gifts to a spouse who is not a
citizen of the United States (other than gifts of future interests in property) are not
included in the total amount of taxable gifts under §§ 2503 and 2523(i)(2) made during

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that year.
.20 Tax on Arrow Shafts
. For calendar year 2013, the tax imposed under
§ 4161(b)(2)(A) on the first sale by the manufacturer, producer, or importer of any shaft
of a type used in the manufacture of certain arrows is $0.48 per shaft.
.21 Passenger Air Transportation Excise Tax
. For calendar year 2013, the tax under
§ 4261(b)(1) on the amount paid for each domestic segment of taxable air
transportation is $3.90. For calendar year 2013, the tax under § 4261(c)(1) on any
amount paid (whether within or without the United States) for any international air
transportation, if the transportation begins or ends in the United States, generally is
$17.20. Under § 4261(c)(3), however, a lower amount applies under § 4261(c)(1) to a
domestic segment beginning or ending in Alaska or Hawaii, and the tax applies only to
departures. For calendar year 2013, the rate is $8.60.
.22 Reporting Exception for Certain Exempt Organizations with Nondeductible
Lobbying Expenditures. For taxable years beginning in 2013, the annual per person,
family, or entity dues limitation to qualify for the reporting exception under § 6033(e)(3)
(and section 5.05 of Rev. Proc. 98-19, 1998-1 C.B. 547), regarding certain exempt
organizations with nondeductible lobbying expenditures, is $108 or less.
.23 Notice of Large Gifts Received from Foreign Persons
. For taxable years
beginning in 2013, § 6039F authorizes the Treasury Department and the Internal
Revenue Service to require recipients of gifts from certain foreign persons to report
these gifts if the aggregate value of gifts received in the taxable year exceeds $15,102.
.24 Persons Against Whom a Federal Tax Lien Is Not Valid
. For calendar year 2013, a

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federal tax lien is not valid against (1) certain purchasers under § 6323(b)(4) who
purchased personal property in a casual sale for less than $1,470, or (2) a mechanic's
lienor under § 6323(b)(7) who repaired or improved certain residential property if the
contract price with the owner is not more than $7,350.
.25 Property Exempt from Levy. For calendar year 2013, the value of property
exempt from levy under § 6334(a)(2) (fuel, provisions, furniture, and other household
personal effects, as well as arms for personal use, livestock, and poultry) cannot exceed
$8,790. The value of property exempt from levy under § 6334(a)(3) (books and tools
necessary for the trade, business, or profession of the taxpayer) cannot exceed $4,400.
.26 Interest on a Certain Portion of the Estate Tax Payable in Installments
. For an
estate of a decedent dying in calendar year 2013, the dollar amount used to determine
the "2-percent portion" (for purposes of calculating interest under § 6601(j)) of the estate
tax extended as provided in § 6166 is $1,430,000.
.27 Attorney Fee Awards
. For fees incurred in calendar year 2013, the attorney fee
award limitation under § 7430(c)(1)(B)(iii) is $190 per hour.
.28 Periodic Payments Received under Qualified Long-Term Care Insurance
Contracts or under Certain Life Insurance Contracts. For calendar year 2013, the
stated dollar amount of the per diem limitation under § 7702B(d)(4), regarding periodic
payments received under a qualified long-term care insurance contract or periodic
payments received under a life insurance contract that are treated as paid by reason of
the death of a chronically ill individual, is $320.

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SECTION 4. EFFECTIVE DATE
.01 General Rule
. Except as provided in section 4.02, this revenue procedure applies
to taxable years beginning in 2013.
.02 Calendar Year Rule
. This revenue procedure applies to transactions or events
occurring in calendar year 2013 for purposes of sections 3.02 (rehabilitation
expenditures treated as separate new building), 3.03 (low-income housing credit), 3.05
(transportation mainline pipeline construction industry optional expense substantiation
rules for payments to employees under accountable plans), 3.07 (private activity bonds
volume cap), 3.08 (loan limits on agricultural bonds), 3.09 (general arbitrage rebate
rules), 3.10 (safe harbor rules for broker commissions on guaranteed investment
contracts or investments purchased for a yield restricted defeasance escrow), 3.15
(expatriation to avoid tax), 3.18 (valuation of qualified real property in decedent's gross
estate), 3.19 (annual exclusion for gifts), 3.20 (tax on arrow shafts), 3.21 (passenger air
transportation excise tax), 3.24 (persons against whom a federal tax lien is not valid),
3.25 (property exempt from levy), 3.26 (interest on a certain portion of the estate tax
payable in installments), 3.27 (attorney fee awards), and 3.28 (periodic payments
received under qualified long-term care insurance contracts or under certain life
insurance contracts).
SECTION 5. DRAFTING INFORMATION
The principal author of this revenue procedure is William Ruane of the Office of
Associate Chief Counsel (Income Tax & Accounting). For further information regarding
this revenue procedure, contact Mr. Ruane at (202) 622-4920 (not a toll-free call).