Internal Revenue Bulletin 1996-11 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 1996–11
March 11, 1996
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 96–15, page 9.
Federal rates; adjusted federal rates; adjusted federal
long-term rate, and the long-term exempt rate. For
purposes of sections 1274, 1288, 382, and other
sections of the Code, tables set forth for March 1996.
Rev. Rul. 96–16, page 4.
Low-income housing credit; satisfactory bond; ‘‘bond
factor’’ amounts for the period January through March
1996. This ruling announces the monthly bond factor
amounts to be used by taxpayers who dispose of
qualified low-income buildings or interests therein
during the period January through March 1996.
T.D. 8643, page 4.
Final regulations under section 305(c) of the Code
relate to constructive distributions on preferred stock.
T.D. 8652, page 11.
Final regulations under section 6050I(g) of the Code
provide information reporting requirements of Federal
and state court clerks who receive more than $10,000
in cash as bail for any individual charged with a
specified criminal offense.
T.D. 8654, page 14.
Final regulations under section 6050P of the Code
relate to the information reporting requirements of
applicable financial entities for discharges of
indebtedness.
EE–148–81, page 29.
Proposed regulations under section 1.409–1(b)(2)(i) of
the Code relating to retirement bonds as part of the
President’s Regulatory Reinvention Initiative are
withdrawn.
ADMINISTRATIVE
Rev. Proc. 96–27, page 27.
Low-income housing tax credit. Resident populations of
the various states for determining the 1996 calendar
year (1) state housing credit ceiling under section
42(h) of the Code, and (2) private activity bond volume
cap under section 146 are reproduced.
T.D. 8651, page 27.
IA–41–93, page 29.
Temporary and proposed regulations provide new
simpler procedures for an individual to obtain an
automatic extension of time to file an individual income
tax return.
Announcement 96–12, page 30.
The United States recently exchanged instruments of
ratification for new income tax treaties with Canada,
France, Mexico, Portugal, and Sweden. This announce-
ment provides supplemental tables of income rates and
exempt personal service income under these treaties.
Finding Lists begin on page 34.

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Mission of the Service
The purpose of the Internal Revenue Service is to
collect the proper amount of tax revenue at the least
cost; serve the public by continually improving the
quality of our products and services; and perform in a
manner warranting the highest degree of public
confidence in our integrity, efficiency and fairness.
Statement of Principles
of Internal Revenue
Tax Administration
The function of the Internal Revenue Service is to
administer the Internal Revenue Code. Tax policy
for raising revenue is determined by Congress.
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 provisions 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 ‘‘protecting the revenue.’’
The revenue is properly protected only when we as-
certain 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 hesitate
to raise a meritorious issue. It is also important
that care be exercised not to raise an issue or to
ask a court to adopt a position inconsistent with
an established Service position.
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 try to overreach,
and should be reasonable within the bounds of law
and sound administration. It should, however, be
vigorous in requiring compliance with law and it
should be relentless in its attack on unreal tax
devices and fraud.

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Introduction
The Internal Revenue Bulletin is the authoritative
instrument of the Commissioner of Internal Revenue for
announcing official rulings and procedures of the
Internal Revenue Service and for publishing Treasury
Decisions, Executive Orders, Tax Conventions, legisla-
tion, court decisions, and other items of general
interest. It is published weekly and may be obtained
from the Superintendent of Documents on a subscrip-
tion basis. Bulletin contents of a permanent nature are
consolidated semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin
all substantive 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 otherwise indicated.
Procedures relating solely to matters of internal
management are not published; however, statements of
internal practices and procedures that affect the rights
and duties of taxpayers are published.
Revenue rulings represent the conclusions of the
Service on the application of the law to the pivotal facts
stated in the revenue ruling. In those based on
positions taken in rulings to taxpayers or technical
advice to Service field offices, identifying details and
information of a confidential nature are deleted to
prevent unwarranted invasions of privacy and to comply
with statutory requirements.
Rulings and procedures reported in the Bulletin do not
have the force and effect of Treasury Department
Regulations, but they may be used as precedents.
Unpublished rulings will not be relied on, used, or cited
as precedents by Service personnel in the disposition of
other cases. In applying published rulings and proce-
dures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be
considered, and Service personnel and others con-
cerned are cautioned against reaching the same
conclusions in other cases unless the facts and
circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—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.
Part III.—Administrative, Procedural, and Miscellanous.
To the extent practicable, pertinent cross references to
these subjects are contained in the other Parts and
Subparts. Also included in this part are Bank Secrecy
Act Administrative Rulings. Bank Secrecy Act Admin-
istrative 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 Rulemak-
ing and the disbarment and suspension list included in
this part, none of these announcements are consoli-
dated in the Cumulative Bulletins.
The first Bulletin for each month includes an index for
the matters published during the preceding month.
These monthly indexes are cumulated on a quarterly
and semiannual basis, and are published in the first
Bulletin of the succeeding quarterly and semi-annual
period, respectively.
The Bulletin Index-Digest System, a research and
reference service supplementing the Bulletin, may be
obtained from the Superintendent of Documents on a
subscription basis. It consists of four Services: Service
No. 1, Income Tax; Service No. 2, Estate and Gift
Taxes; Service No. 3, Employment Taxes; Service No.
4, Excise Taxes. Each Service consists of a basic
volume and a cumulative supplement that provides (1)
finding lists of items published in the Bulletin, (2)
digests of revenue rulings, revenue procedures, and
other published items, and (3) indexes of Public Laws,
Treasury Decisions, and Tax Conventions.
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, D.C. 20402.

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Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 42.—Low-Income Housing
Credit
Low-income housing credit; satisfac-
tory bond; ‘‘bond factor’’ amounts for
the period January through March
1996. This ruling announces the
monthly bond factor amounts to be
used by taxpayers who dispose of
qualified low-income buildings or inter-
ests therein during the period January
through March 1996.
Rev. Rul. 96–16
In Rev. Rul. 90–60, 1990–2 C.B. 3,
the Internal Revenue Service provided
guidance to taxpayers concerning the
general methodology used by the
Treasury Department in computing the
bond factor amounts used in calculating
the amount of bond considered satisfac-
tory by the Secretary under §42(j)(6)
of the Internal Revenue Code. It further
announced that the Secretary would
publish in the Internal Revenue Bul-
letin a table of ‘‘bond factor’’ amounts
for dispositions occurring during each
calendar month.
This revenue ruling provides in
Table 1 the bond factor amounts for
calculating the amount of bond consid-
ered satisfactory under §42(j)(6) for
dispositions of qualified low-income
buildings or interests therein during the
period January through March 1996.
Table 1
Rev. Rul. 96–16
Monthly Bond Factor Amounts for Dispositions Expressed
As a Percentage of Total Credits
Month of
Disposition
Calendar Year Building Placed in Service
or, if Section 42(f)(1) Election Was
Made, the Succeeding Calendar Year
1987198819891990199119921993199419951996
Jan ’9682.7285.1887.8591.0094.7399.06103.57107.87111.88112.52
Feb ’9682.4784.9287.5890.7194.4298.71103.18107.41111.30112.52
Mar ’9682.2284.6687.3190.4394.1198.38102.80106.98110.81112.52
For a list of bond factor amounts
applicable to dispositions occurring
during other calendar years, see the
following revenue rulings: Rev. Rul.
90–60, 1990–2 C.B. 3, for dispositions
occurring during calendar years 1987,
1988, and 1989; Rev. Rul. 90–88,
1990–2 C.B. 7, for dispositions occur-
ring during calendar year 1990; Rev.
Rul. 91–67, 1991–2 C.B. 13, for
dispositions occurring during calendar
year 1991; Rev. Rul. 92–101, 1992–2
C.B. 9, for dispositions occurring dur-
ing calendar year 1992; Rev. Rul 93–
83, 1993–2 C.B. 6, for dispositions
occurring during calendar year 1993;
Rev. Rul. 94–71, 1994–2 C.B. 4, for
dispositions occurring during calendar
year 1994; and Rev. Rul. 95–83, 1995–
52 I.R.B. 5, for dispositions occurring
during calendar year 1995.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Jack Malgeri of the Office of
Assistant Chief Counsel (Passthroughs
and Special Industries). For further
information regarding this revenue rul-
ing, contact Mr. Malgeri at (202)
622-3040 (not a toll-free call).
The adjusted applicable federal short-term,
mid-term, and long-term rates are set forth for
the month of March 1996. See Rev. Rul. 96–15,
page 9.
Section 280G.—Golden Parachute
Payments
Federal short-term, mid-term, and long-term
rates are set forth for the month of March 1996.
See Rev. Rul. 96–15, page 9.
Section 305.—Distributions of Stock
and Stock Rights
26 CFR 1.305–5: Distributions on preferred
stock.
T.D. 8643
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Distributions of Stock and Stock
Rights
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations amending regulations
under section 305(c) of the Internal
Revenue Code relating to constructive
distributions on preferred stock. The
final regulations concern the treatment
of stock redeemable at a premium by
the issuer. The regulations generally
treat a call premium as giving rise to a
constructive distribution only if re-
demption pursuant to the call provision
is more likely than not to occur. The
final regulations also reflect 1990
amendments to section 305(c).
DATES: These regulations are effective
December 20, 1995.
For dates of applicability of these
regulations, see Effective dates under
SUPPLEMENTARY INFORMATION.
FOR FURTHER INFORMATION
CONTACT: Kirsten L. Simpson, (202)
622-7790 (not a toll-free number).

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SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in these final regulations has
been reviewed and approved by the
Office of Management and Budget in
accordance with the Paperwork Reduc-
tion Act (44 U.S.C. 3507) under con-
trol number 1545–1438. Responses to
this collection of information are re-
quired to comply with the consistency
requirements of the regulation.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless the collection of information
displays a valid control number. The
estimated annual burden per respondent
varies from 5 minutes to 15 minutes,
depending on individual circumstances,
with an estimated average of 10
minutes.
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 Officer, T:FP,
Washington, DC 20224, and to the Of-
fice of Management and Budget, Attn:
Desk Officer for the Department of the
Treasury, Office of Information and
Regulatory Affairs, Washington, DC
20503.
Books or records relating to this
collection of information must be re-
tained as long as their contents may
become material in the administration
of any internal revenue law. Generally,
tax returns and tax return information
are confidential, as required by 26
U.S.C. 6103.
Background
On June 22, 1994, a notice of
proposed rulemaking (CO–8–91 [1994–
2 C.B. 844]), amending regulations
under section 305(c) of the Internal
Revenue Code relating to constructive
distributions on preferred stock, was
published in the Federal Register (59
FR 32160). No public hearing was
requested and none was held.
Written comments responding to the
notice were received. After considera-
tion of all the comments, the regula-
tions proposed by CO–8–91 are
adopted as revised by this Treasury
decision. The principal revisions are
discussed below.
Explanation of Provisions
The primary focus of the final regu-
lations is on preferred stock callable at
a premium at the option of the issuer.
The final regulations retain the ap-
proach of the proposed regulations and
require constructive distribution treat-
ment with respect to an issuer call only
if, based on all of the facts and
circumstances as of the issue date,
redemption pursuant to the call right is
more likely than not to occur.
Safe harbor rule. The proposed
regulations provided a safe harbor,
under which constructive distribution
treatment does not result from an issuer
call if the issuer and holder are
unrelated, there are no arrangements
that effectively require the issuer to
redeem the stock, and exercise of the
option to redeem would not reduce the
yield of the stock. In response to
comments, the final regulations make
certain modifications to the safe harbor
to clarify its scope.
Commentators suggested that the
exclusion from the safe harbor where
there are ‘‘arrangements that effectively
require the issuer to redeem’’ is too
narrow and will permit taxpayers who
issue stock with ‘‘understandings’’ con-
cerning redemption, whether or not
legally enforceable, to qualify for the
safe harbor. Commentators recom-
mended safeguarding against abuse by
changing the effectively requires re-
demption test to one that requires a
lesser degree of probability. The IRS
and Treasury intend that the safe
harbor not be available where an issuer
and a holder have an underlying under-
standing. Although the IRS and Treas-
ury believe that the word ‘‘arrange-
ment’’ is broad enough to include such
understandings, in response to these
comments, this prong of the safe harbor
has been clarified.
To retain greater certainty for non-
abusive transactions, however, the
effectively requires redemption test has
not been substantially modified. In-
stead, the final regulations safeguard
against abuse by lowering the threshold
for determining whether an issuer and a
holder are related. The proposed reg-
ulations adopted a 50-percent threshold
for determining whether an issuer and a
holder are related. The final regulations
lower this threshold to 20 percent. This
threshold relates only to eligibility for
the safe harbor, and not to the applica-
tion of the general ‘‘more likely than
not’’ test. When a holder’s ownership
interest exceeds this threshold, the IRS
and Treasury believe it is appropriate
to determine whether redemption is
more likely than not to occur based on
all of the facts and circumstances.
Commentators also suggested that
the IRS and Treasury except preferred
stock within the meaning of section
1504(a)(4) in determining whether the
issuer and holder are related. The
regulations do not adopt this sugges-
tion. As noted above, the determination
of whether the issuer and holder are
related only governs eligibility for the
safe harbor. The IRS and Treasury
believe that when a holder’s ownership
interest in an issuer exceeds the thresh-
old, even if all that the holder owns is
preferred stock within the meaning of
section 1504(a)(4), it is appropriate to
determine whether redemption is more
likely than not to occur based on all of
the facts and circumstances.
In response to comments, the final
regulations clarify that the ‘‘arrange-
ments’’ that effectively require or are
intended to compel the issuer to
redeem the stock relate to the issuer
call right, and not to a later mandatory
redemption feature.
In testing whether a call right meets
the yield prong of the safe harbor, the
final regulations clarify that principles
similar to the principles of section
1272(a) and the original issue discount
regulations apply to determine whether
exercise of the right to redeem would
reduce the yield of the stock.
Miscellaneous. The final regulations
expand the definition of issuer in
certain circumstances. In particular, the
regulations provide that if preferred
stock may be acquired by a person
other than the issuer (a third person),
the term issuer includes such third
person if the regulations would apply
to the stock if the third person were the
issuer, and acquisition of the stock by
the third person would be treated as a
redemption for federal income tax
purposes (under section 304 or other-
wise). In addition, if the issuer and the
third person are members of the same
affiliated group, the term issuer in-
cludes the third person if a principal
purpose of the arrangement is to avoid
the application of section 305 and the
final regulations. Furthermore, an
agreement or other arrangement for a
person other than the issuer of the
stock to acquire the stock may create a
conversion transaction within the mean-
ing of section 1258.

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The final regulations provide rules for
the treatment of mandatory redemption
obligations and put options that are
subject to contingencies. Generally, pre-
miums on such stock are not subject to
constructive distribution treatment if the
contingency renders remote the likeli-
hood of redemption. For example, where
an issuer issues stock that is mandatorily
redeemable in the event of an initial
public offering, the regulations require
evaluation of the likelihood of the
occurrence of the initial public offering.
The regulations provide, however, that a
contingency does not include the pos-
sibility of default, insolvency, or similar
circumstances, or that a redemption may
be precluded by applicable law due to
insufficient capital.
The preamble to the proposed regula-
tions requested comments on the appro-
priate treatment of unpaid cumulative
dividends. Because of the complexity of
this issue, the final regulations do not
provide rules for those dividends. The
IRS and Treasury will continue to
consider the issue, as well as other
issues involving the implementation of
the amendments to section 305(c) made
by the Revenue Reconciliation Act of
1990. The IRS and Treasury continue to
invite public comments on these issues.
Effective dates. The regulations apply
to stock issued on or after December
20, 1995. Although the regulations do
not apply to stock issued before De-
cember 20, 1995, the rules of sections
305(c)(1), (2), and (3) apply to stock
described therein issued on or after
October 10, 1990, except as provided
in section 11322(b)(2) of the Revenue
Reconciliation Act of 1990 (Public
Law 101–508 Stat.). Moreover, except
as provided in section 11322(b)(2) of
the Revenue Reconciliation Act of
1990 (Public Law 101–508 Stat.), with
respect to stock issued on or after
October 10, 1990, and issued before
December 20, 1995, the economic
accrual rule of section 305(c)(3) will
apply to the entire call premium on
stock that is not described in paragraph
(b)(2) of this section if the premium is
considered to be unreasonable under
the principles of §1.305–5(b) (as con-
tained in the 26 CFR part 1 edition
revised April 1, 1995). A call premium
described in the preceding sentence
will be accrued over the period of time
during which the preferred stock cannot
be called for redemption.
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in EO
12866. Therefore, a regulatory assess-
ment is not required. It has also been
determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) and the Regulatory Flex-
ibility Act (5 U.S.C. chapter 6) do not
apply to these regulations, and, there-
fore, a Regulatory Flexibility Analysis
is not required. Pursuant to section
7805(f) of the Internal Revenue Code,
the notice of proposed rulemaking pre-
ceding these regulations 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 Kirsten L. Simpson of the
Office of Assistant Chief Counsel
(Corporate), IRS. However, other per-
sonnel of the IRS and Treasury Depart-
ment participated in their development.
******
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and
602 are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding the
following entries in numerical order to
read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.305–3 also issued under 26
U.S.C. 305.
Section 1.305–5 also issued under 26
U.S.C. 305.
Section 1.305–7 also issued under 26
U.S.C. 305. * * *
Par. 2. Section 1.305–3 is amended
as follows:
1.In paragraph (e), remove the
parentheses from the numbers in the
headings for Examples (1) through
(15).
2.In paragraph (e), Example 15 is
revised to read as follows:
§1.305–3 Disproportionate
distributions.
******
(e)* * *
Example 15. (i) Facts. Corporation V is
organized with two classes of stock, class A
common and class B convertible preferred. The
class B stock is issued for $100 per share and is
convertible at the holder’s option into class A at
a fixed ratio that is not subject to full adjustment
in the event stock dividends or rights are dis-
tributed to the class A shareholders. The class B
stock pays no dividends but it is mandatorily
redeemable in 10 years for $200. Under sections
305(c) and 305(b)(4), the entire redemption
premium (i.e., the excess of the redemption price
over the issue price) is deemed to be a dis-
tribution of preferred stock on preferred stock
which is taxable as a distribution of property
under section 301. This amount is considered to
be distributed over the 10-year period under
principles similar to the principles of section
1272(a). During the year, the corporation de-
clares a dividend on the class A stock payable in
additional shares of class A stock.
(ii)Analysis. The distribution on the class A
stock is a distribution to which sections
305(b)(2) and 301 apply since it increases the
proportionate interests of the class A share-
holders in the assets and earnings and profits of
the corporation and the class B shareholders have
received property (i.e., the constructive distribu-
tion described above). If, however, the conver-
sion ratio of the class B stock were subject to
full adjustment to reflect the distribution of stock
to class A shareholders, the distribution of stock
dividends on the class A stock would not in-
crease the proportionate interest of the class A
shareholders in the assets and earnings and pro-
fits of the corporation and such distribution
would not be a distribution to which section 301
applies.
(iii)Effective date. This Example 15 applies to
stock issued on or after December 20, 1995. For
previously issued stock, see §1.305–3(e) Example
(15) (as contained in the 26 CFR part 1 edition
revised April 1, 1995).
Par. 3. Section 1.305–5 is amended
as follows:
1.Paragraph (b) is revised.
2.In paragraph (d), remove the
parentheses from the numbers in the
headings for Examples (1) through (9),
redesignate Examples 8 and 9 as
Examples 9 and 10, respectively.
3.In paragraph (d), Examples 4, 5,
and 7 are revised, and Example 8 is
added.
4.Paragraph (e) is added.
The revisions read as follows:
§1.305–5 Distributions on preferred
stock.
******
(b)Redemption premium—(1) In
general. If a corporation issues pre-
ferred stock that may be redeemed
under the circumstances described in
this paragraph (b) at a price higher than
the issue price, the difference (the
redemption premium) is treated under
section 305(c) as a constructive dis-
tribution (or series of constructive
distributions) of additional stock on

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preferred stock that is taken into
account under principles similar to the
principles of section 1272(a). However,
constructive distribution treatment does
not result under this paragraph (b) if
the redemption premium does not ex-
ceed a de minimis amount, as deter-
mined under the principles of section
1273(a)(3). For purposes of this para-
graph (b), preferred stock that may be
acquired by a person other than the
issuer (the third person) is deemed to
be redeemable under the circumstances
described in this paragraph (b), and
references to the issuer include the
third person, if—
(i)this paragraph (b) would apply to
the stock if the third person were the
issuer; and
(ii)either—
(A)the acquisition of the stock by
the third person would be treated as a
redemption for federal income tax
purposes (under section 304 or other-
wise); or
(B)the third person and the issuer
are members of the same affiliated
group (having the meaning for this
purpose given the term by section
1504(a), except that section 1504(b)
shall not apply) and a principal purpose
of the arrangement for the third person
to acquire the stock is to avoid the
application of section 305 and para-
graph (b)(1) of this section.
(2)Mandatory redemption or holder
put. Paragraph (b)(1) of this section
applies to stock if the issuer is required
to redeem the stock at a specified time
or the holder has the option (whether
or not currently exercisable) to require
the issuer to redeem the stock. How-
ever, paragraph (b)(1) of this section
will not apply if the issuer’s obligation
to redeem or the holder’s ability to
require the issuer to redeem is subject
to a contingency that is beyond the
legal or practical control of either the
holder or the holders as a group (or
through a related party within the
meaning of section 267(b) or 707(b)),
and that, based on all of the facts and
circumstances as of the issue date,
renders remote the likelihood of re-
demption. For purposes of this para-
graph, a contingency does not include
the possibility of default, insolvency, or
similar circumstances, or that a re-
demption may be precluded by applica-
ble law which requires that the issuer
have a particular level of capital,
surplus, or similar items. A con-
tingency also does not include an
issuer’s option to require earlier re-
demption of the stock. For rules
applicable if stock may be redeemed at
more than one time, see paragraph
(b)(4) of this section.
(3)Issuer call—(i) In general. Para-
graph (b)(1) of this section applies to
stock by reason of the issuer’s right to
redeem the stock (even if the right is
immediately exercisable), but only if,
based on all of the facts and circum-
stances as of the issue date, redemption
pursuant to that right is more likely
than not to occur. However, even if
redemption is more likely than not to
occur, paragraph (b)(1) of this section
does not apply if the redemption pre-
mium is solely in the nature of a
penalty for premature redemption. A
redemption premium is not a penalty
for premature redemption unless it is a
premium paid as a result of changes in
economic or market conditions over
which neither the issuer nor the holder
has legal or practical control.
(ii)Safe harbor. For purposes of this
paragraph (b)(3), redemption pursuant
to an issuer’s right to redeem is not
treated as more likely than not to occur
if—
(A)The issuer and the holder are
not related within the meaning of sec-
tion 267(b) or 707(b) (for purposes of
applying sections 267(b) and 707(b)
(including section 267(f)(1)), the phrase
‘‘20 percent’’ shall be substituted for
the phrase ‘‘50 percent’’);
(B)There are no plans, arrange-
ments, or agreements that effectively
require or are intended to compel the
issuer to redeem the stock (disregard-
ing, for this purpose, a separate manda-
tory redemption obligation described in
paragraph (b)(2) of this section); and
(C)Exercise of the right to redeem
would not reduce the yield of the stock,
as determined under principles similar
to the principles of section 1272(a) and
the regulations under sections 1271
through 1275.
(iii)Effect of not satisfying safe
harbor. The fact that a redemption
right is not described in paragraph
(b)(3)(ii) of this section does not affect
the determination of whether a redemp-
tion pursuant to the right to redeem is
more likely than not to occur.
(4)Coordination of multiple redemp-
tion provisions. If stock may be re-
deemed at more than one time, the time
and price at which redemption is most
likely to occur must be determined
based on all of the facts and circum-
stances as of the issue date. Any con-
structive distribution under paragraph
(b)(1) of this section will result only
with respect to the time and price
identified in the preceding sentence.
However, if redemption does not occur
at that identified time, the amount of
any additional premium payable on any
later redemption date, to the extent not
previously treated as distributed, is
treated as a constructive distribution
over the period from the missed call or
put date to that later date, to the extent
required under the principles of this
paragraph (b).
(5)Consistency. The issuer’s deter-
mination as to whether there is a
constructive distribution under this
paragraph (b) is binding on all holders
of the stock, other than a holder that
explicitly discloses that its determina-
tion as to whether there is a con-
structive distribution under this para-
graph (b) differs from that of the
issuer. Unless otherwise prescribed by
the Commissioner, the disclosure must
be made on a statement attached to the
holder’s timely filed federal income tax
return for the taxable year that includes
the date the holder acquired the stock.
The issuer must provide the relevant
information to the holder in a reason-
able manner. For example, the issuer
may provide the name or title and
either the address or telephone number
of a representative of the issuer who
will make available to holders upon
request the information required for
holders to comply with this provision
of this paragraph (b).
******
(d)* * *
Example 4—(i) Facts. Corporation X is a
domestic corporation with only common stock
outstanding. In connection with its acquisition of
Corporation T, X issues 100 shares of its 4%
preferred stock to the shareholders of T, who are
unrelated to X both before and after the trans-
action. The issue price of the preferred stock is
$40 per share. Each share of preferred stock is
convertible at the shareholder’s election into
three shares of X common stock. At the time the
preferred stock is issued, the X common stock
has a value of $10 per share. The preferred stock
does not provide for its mandatory redemption or
for redemption at the option of the holder. It is
callable at the option of X at any time beginning
three years from the date of issuance for $100
per share. There are no other plans, arrange-
ments, or agreements that effectively require or
are intended to compel X to redeem the stock.
(ii)Analysis. The preferred stock is described
in the safe harbor rule of paragraph (b)(3)(ii) of
this section because X and the former share-
holders of T are unrelated, there are no plans,
arrangements, or agreements that effectively

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require or are intended to compel X to redeem
the stock, and calling the stock for $100 per
share would not reduce the yield of the preferred
stock. Therefore, the $60 per share call premium
is not treated as a constructive distribution to the
shareholders of the preferred stock under para-
graph (b) of this section.
Example 5—(i) Facts—(A) Corporation Y is a
domestic corporation with only common stock
outstanding. On January 1, 1996, Y issues 100
shares of its 10% preferred stock to a holder.
The holder is unrelated to Y both before and
after the stock issuance. The issue price of the
preferred stock is $100 per share. The preferred
stock is—
(1)Callable at the option of Y on or before
January 1, 2001, at a price of $105 per share
plus any accrued but unpaid dividends; and
(2) Mandatorily redeemable on January 1,
2006, at a price of $100 per share plus any
accrued but unpaid dividends.
(B)The preferred stock provides that if Y
fails to exercise its option to call the preferred
stock on or before January 1, 2001, the holder
will be entitled to appoint a majority of Y’s
directors. Based on all of the facts and cir-
cumstances as of the issue date, Y is likely to
have the legal and financial capacity to exercise
its right to redeem. There are no other facts and
circumstances as of the issue date that would
affect whether Y will call the preferred stock on
or before January 1, 2001.
(ii)Analysis. Under paragraph (b)(3)(i) of this
section, paragraph (b)(1) of this section applies
because, by virtue of the change of control pro-
vision and the absence of any contrary facts, it is
more likely than not that Y will exercise its
option to call the preferred stock on or before
January 1, 2001. The safe harbor rule of para-
graph (b)(3)(ii) of this section does not apply
because the provision that failure to call will
cause the holder to gain control of the corpora-
tion is a plan, arrangement, or agreement that
effectively requires or is intended to compel Y to
redeem the preferred stock. Under paragraph
(b)(4) of this section, the constructive distribu-
tion occurs over the period ending on January 1,
2001. Redemption is most likely to occur on that
date, because that is the date on which the
corporation minimizes the rate of return to the
holder while preventing the holder from gaining
control. The de minimis exception of paragraph
(b)(1) of this section does not apply because the
$5 per share difference between the redemption
price and the issue price exceeds the amount
determined under the principles of section
1273(a)(3) (5 3 .0025 3 $105 = $1.31).
Accordingly, $5 per share, the difference be-
tween the redemption price and the issue price, is
treated as a constructive distribution received by
the holder on an economic accrual basis over the
five-year period ending on January 1, 2001,
under principles similar to the principles of
section 1272(a).
******
Example 7—(i) Facts—(A) Corporation Z is a
domestic corporation with only common stock
outstanding. On January 1, 1996, Z issues 100
shares of its 10% preferred stock to C, an
individual unrelated to Z both before and after
the stock issuance. The issue price of the
preferred stock is $100 per share. The preferred
stock is—
(1)Not callable for a period of 5 years from
the issue date;
(2)Callable at the option of Z on January 1,
2001, at a price of $110 per share plus any
accrued but unpaid dividends;
(3)Callable at the option of Z on July 1,
2002, at a price of $120 per share plus any
accrued but unpaid dividends; and
(4)Mandatorily redeemable on January 1,
2004, at a price of $150 per share plus any
accrued but unpaid dividends.
(B)There are no other plans, arrangements, or
agreements between Z and C concerning redemp-
tion of the stock. Moreover, there are no other
facts and circumstances as of the issue date that
would affect whether Z will call the preferred
stock on either January 1, 2001, or July 1, 2002.
(ii)Analysis. This stock is described in
paragraph (b)(2) of this section because it is
mandatorily redeemable. It is also potentially
described in paragraph (b)(3)(i) of this section
because it is callable at the option of the issuer.
The safe harbor rule of paragraph (b)(3)(ii) of
this section does not apply to the option to call
on January 1, 2001, because the call would re-
duce the yield of the stock when compared to the
yield produced by the January 1, 2004, manda-
tory redemption feature. Moreover, absent any
other facts indicating a contrary result, the fact
that redemption on January 1, 2001, would
produce the lowest yield indicates that redemp-
tion is most likely to occur on that date. Under
paragraph (b)(4) of this section, paragraph (b)(1)
of this section applies with respect to the issuer’s
right to call on January 1, 2001, because re-
demption is most likely to occur on January 1,
2001, for $110 per share. The de minimis excep-
tion of paragraph (b)(1) of this section does not
apply because the $10 per share difference
between the redemption price payable in 2001
and the issue price exceeds the amount deter-
mined under the principles of section 1273(a)(3)
(5 3 .0025 3 $110 = $1.38). Accordingly, $10
per share, the difference between the redemption
price and the issue price, is treated as a
constructive distribution received by the holder
on an economic accrual basis over the five-year
period ending January 1, 2001, under principles
similar to the principles of section 1272(a).
(iii)Coordination rules—(A) If Z does not
exercise its option to call the preferred stock on
January 1, 2001, paragraph (b)(4) of this section
provides that the principles of paragraph (b) of
this section must be applied to determine if any
remaining constructive distribution occurs. Under
paragraphs (b)(3)(i) and (b)(4) of this section,
paragraph (b)(1) of this section applies because,
absent any other facts indicating a contrary
result, the fact that redemption on July 1, 2002,
would produce a lower yield than the yield
produced by the mandatory redemption feature
indicates that redemption on that date is most
likely to occur. The safe harbor rule of paragraph
(b)(3)(ii) of this section does not apply to the
option to call on July 1, 2002, because, as of
January 1, 2001, a call by Z on July 1, 2002, for
$120 would reduce the yield of the stock. The de
minimis exception of paragraph (b)(1) of this
section does not apply because the $10 per share
difference between the redemption price and the
issue price (revised as of the missed call date as
provided by paragraph (b)(4) of this section)
exceeds the amount determined under the princi-
ples of section 1273(a)(3) (1 3 .0025 3 $120 =
$.30). Accordingly, the $10 per share of addi-
tional redemption premium that is payable on
July 1, 2002, is treated as a constructive
distribution received by the holder on an
economic accrual basis over the period between
January 1, 2001, and July 1, 2002, under
principles similar to the principles of section
1272(a).
(B)If Z does not exercise its second option to
call the preferred stock on July 1, 2002, then the
$30 additional redemption premium that is
payable on January 1, 2004, is treated as a
constructive distribution under paragraphs (b)(2)
and (b)(1) of this section. The de minimis
exception of paragraph (b)(1) of this section does
not apply because the $30 per share difference
between the redemption price and the issue price
(revised as of the second missed call date)
exceeds the amount determined under the princi-
ples of section 1273(a)(3) (1 3 .0025 3 $150 =
$.38). The holder is treated as receiving the
constructive distribution on an economic accrual
basis over the period between July 1, 2002, and
January 1, 2004, under principles similar to the
principles of section 1272(a).
Example 8—(i) Facts. The facts are the same
as in paragraph (i) of Example 7, except that,
based on all of the facts and circumstances as of
the issue date (including an expected lack of
funds on the part of Z), it is unlikely that Z will
exercise the right to redeem on either January 1,
2001, or July 1, 2002.
(ii)Analysis. The safe harbor rule of para-
graph (b)(3)(ii) of this section does not apply to
the option to call on either January 1, 2001, or
July 1, 2002, because each call would reduce the
yield of the stock. Under paragraph (b)(3)(i) of
this section, neither option to call is more likely
than not to occur, because, based on all of the
facts and circumstances as of the issue date
(including an expected lack of funds on the part
of Z), it is not more likely than not that Z will
exercise either option. However, the $50 per
share redemption premium that is payable on
January 1, 2004, is treated as a constructive
distribution under paragraphs (b)(1) and (2) of
this section, regardless of whether Z is antici-
pated to have sufficient funds to redeem on that
date, because Z is required to redeem the stock
on that date. The de minimis exception of
paragraph (b)(1) of this section does not apply
because the $50 per share difference between the
redemption price and the issue price exceeds the
amount determined under the principles of
section 1273(a)(3) (8 3 .0025 3 $150 = $3).
******
(e)Effective date. The rules of para-
graph (b) of this section and Examples
4, 5, 7, and 8 of paragraph (d) of this
section apply to stock issued on or
after December 20, 1995. For rules
applicable to previously issued stock,
see §1.305–5(b) and (d) Examples (4),
(5), and (7) (as contained in the 26
CFR part 1 edition revised April 1,
1995). Although the rules of paragraph
(b) of this section and the revised
examples do not apply to stock issued
before December 20, 1995, the rules of
sections 305(c)(1), (2), and (3) apply to
stock described therein issued on or
after October 10, 1990, except as
provided in section 11322(b)(2) of the
Revenue Reconciliation Act of 1990
(Public Law 101–508 Stat.). Moreover,
except as provided in section 11322(b)-

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(2) of the Revenue Reconciliation Act
of 1990 (Public Law 101–508 Stat.),
with respect to stock issued on or after
October 10, 1990, and issued before
December 20, 1995, the economic ac-
crual rule of section 305(c)(3) will
apply to the entire call premium on
stock that is not described in paragraph
(b)(2) of this section if the premium is
considered to be unreasonable under
the principles of §1.305–5(b) (as con-
tained in the 26 CFR part 1 edition
revised April 1, 1995). A call premium
described in the preceding sentence
will be accrued over the period of time
during which the preferred stock cannot
be called for redemption.
Par. 4. Section 1.305–7 is amended
by revising the fourth sentence in the
concluding text of paragraph (a) to read
as follows:
§1.305–7 Certain transactions treated
as distributions.
(a)* * *
* * * For example, where a redemption
premium exists with respect to a class
of preferred stock under the circum-
stances described in §1.305–5(b) and
the other requirements of this section
are also met, the distribution will be
deemed made with respect to such pre-
ferred stock, in stock of the same class.
* * *
******
PART 602—OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION ACT
Par. 5. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 6. In §602.101, paragraph (c) is
amended in the table by adding the
entry ‘‘1.305–5.. 1545–1438’’ in nu-
merical order.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved December 11, 1995.
Leslie Samuels,
Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on
December 20, 1995, 8:45 a.m., and published
in the issue of the Federal Register for
December 21, 1995, 60 F.R. 66134)
Section 382.—Limitation on Net
Operating Loss Carryforwards and
Certain Built-In Losses Following
Ownership Change
The adjusted federal long-term rate is set forth
for the month of March 1996. See Rev. Rul. 96–
15, on this page.
Section 412.—Minimum Funding
Standards
The adjusted applicable federal short-term,
mid-term, and long-term rates are set forth for
the month of March 1996. See Rev. Rul. 96–15,
on this page.
Section 467.—Certain Payments for
the Use of Property or Services
The adjusted applicable federal short-term,
mid-term, and long-term rates are set forth for
the month of March 1996. See Rev. Rul. 96–15,
on this page.
Section 468.—Special Rules for
Mining and Solid Waste Reclamation
and Closing Costs
The adjusted applicable federal short-term,
mid-term, and long-term rates are set forth for
the month of March 1996. See Rev. Rul. 96–15,
on this page.
Section 483.—Interest on Certain
Deferred Payments
The adjusted applicable federal short-term,
mid-term, and long-term rates are set forth for
the month of March 1996. See Rev. Rul. 96–15,
on this page.
Section 807.—Rules for Certain
Reserves
The adjusted applicable federal short-term,
mid-term, and long-term rates are set forth for
the month of March 1996. See Rev. Rul. 96–15,
on this page.
Section 846.—Discounted Unpaid
Losses Defined
The adjusted applicable federal short-term,
mid-term, and long-term rates are set forth for
the month of March 1996. See Rev. Rul. 96–15,
on this page.
Section 1274.—Determination of
Issue Price in the Case of Certain
Debt Instruments Issued for Property
(Also Sections 42, 280G, 382, 412, 467, 468,
483, 807, 846, 1288, 7520, 7872.)
Federal rates; adjusted federal
rates; adjusted federal long-term rate,
and the long-term exempt rate. For
purposes of sections 1274, 1288, 382,
and other sections of the Code, tables
set forth for March 1996.
Rev. Rul. 96–15
This revenue ruling provides various
prescribed rates for federal income tax
purposes for March 1996 (the current
month.) Table 1 contains the short-
term, mid-term, and long-term applica-
ble federal rates (AFR) for the current
month for purposes of section 1274(d)
of the Internal Revenue Code. Table 2
contains the short-term, mid-term, and
long-term adjusted applicable federal
rates (adjusted AFR) for the current
month for purposes of section 1288(b).
Table 3 sets forth the adjusted federal
long-term rate and the long-term tax-
exempt rate described in section 382(f).
Table 4 contains the appropriate per-
centages for determining the low-
income housing credit described in
section 42(b)(2) for buildings placed in
service during the current month. Fi-
nally, Table 5 contains the federal rate
for determining the present value of an
annuity, an interest for life or for a
term of years, or a remainder or a
reversionary interest for purposes of
section 7520.

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REV. RUL. 96–15 TABLE 1
Applicable Federal Rates (AFR) for March 1996
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-Term
AFR5.05%4.99%4.96%4.94%
110% AFR5.57%5.49%5.45%5.43%
120% AFR6.08%5.99%5.95%5.92%
Mid-Term
AFR5.45%5.38%5.34%5.32%
110% AFR6.01%5.92%5.88%5.85%
120% AFR6.56%6.46%6.41%6.37%
150% AFR8.23%8.07%7.99%7.94%
175% AFR9.64%9.42%9.31%9.24%
Long-Term
AFR6.07%5.98%5.94%5.91%
110% AFR6.69%6.58%6.53%6.49%
120% AFR7.31%7.18%7.12%7.07%
REV. RUL. 96–15 TABLE 2
Adjusted AFR for March 1996
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
adjusted AFR3.46%3.43%3.42%3.41%
Mid-term
adjusted AFR4.26%4.22%4.20%4.18%
Long-term
adjusted AFR5.19%5.12%5.09%5.07%
REV. RUL. 96–15 TABLE 3
Rates Under Section 382 for March 1996
Adjusted federal long-term rate for the current month5.19%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the
adjusted federal long-term rates for the current month and the prior two months).5.31%
REV. RUL. 96–15 TABLE 4
Appropriate Percentages Under Section 42(b)(2)
for March 1996
Appropriate percentage for the 70% present value low-income housing credit8.35%
Appropriate percentage for the 30% present value low-income housing credit3.58%

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REV. RUL. 96–15 TABLE 5
Rate Under Section 7520 for March 1996
Applicable federal rate for determining the present value of an annuity, an interest for life or a term
of years, or a remainder or reversionary interest6.6%
Section 1288.—Treatment of Original
Issue Discount on Tax-Exempt
Obligations
The adjusted applicable federal short-term,
mid-term, and long-term rates are set forth for
the month of March 1996. See Rev. Rul. 96–15,
page 9.
Section 6050I.—Returns Relating to
Cash Received in Trade or Business,
Etc.
26 CFR 1.6050I–1: Returns relating to cash in
excess of $10,000 received in a trade or
business.
T.D. 8652
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Cash Reporting by Court Clerks
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations concerning the infor-
mation reporting requirements of Fed-
eral and State court clerks upon receipt
of more than $10,000 in cash as bail
for any individual charged with a
specified criminal offense. The final
regulations reflect changes to the law
made by the Violent Crime Control and
Law Enforcement Act of 1994, and
affect court clerks who receive more
than $10,000 in cash as bail.
EFFECTIVE DATE: These regulations
are effective February 13, 1995.
FOR FURTHER INFORMATION
CONTACT: Susie K. Bird, (202)
622-4960 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in these final regulations has
been reviewed and approved by the
Office of Management and Budget in
accordance with the Paperwork Reduc-
tion Act (44 U.S.C. 3507) under
control number 1545–1449. Responses
to this collection of information are
required to implement the statutory
requirements of section 6050I(g).
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless the collection of information
displays a valid control number.
The time estimates for the reporting
requirements contained in this regula-
tion are reflected in the burden esti-
mates for Form 8300.
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 Officer, T:FP,
Washington, DC 20224, and to the
Office of Management and Budget,
Attn: Desk Officer for the Department
of the Treasury, Office of Information
and Regulatory Affairs, Washington,
DC 20503.
Books and records relating to this
collection of information must be re-
tained as long as their contents may
become material in the administration
of any internal revenue law. Generally,
tax returns and tax return information
are confidential, as required by 26
U.S.C. 6103.
Background
This document provides final Income
Tax Regulations (26 CFR parts 1 and
602) under section 6050I(g) of the
Internal Revenue Code of 1986 (Code).
This provision was added by section
20415 of the Violent Crime Control
and Law Enforcement Act of 1994 (the
Act)(Public Law 103–322).
On December 15, 1994, the IRS
published in the Federal Register tem-
porary regulations (TD 8572, 59 FR
64572 [1995–1 C.B. 200]) with a cross-
reference to a notice of proposed
rulemaking (IA–57–94, 59 FR 64635
[1995–1, C.B. 952]).
Written comments responding to the
notice were received. No public hearing
was requested or held. After considera-
tion of all comments, the proposed
regulations are adopted as revised by
this Treasury decision, and the corre-
sponding temporary regulations are re-
moved.
Explanation of Revisions and
Summary of Comments
Under the temporary and proposed
regulations, reporting may be required
when more than $10,000 in cash is
received as bail by a clerk of a Federal
or State court. The temporary and
proposed regulations provide that a
clerk is the clerk’s office or the office,
department, division, branch, or unit of
the court that is authorized to receive
bail. One commentator suggested that
the regulations clarify whether report-
ing under section 6050I(g) is required
by a clerk if an entity that is not a part
of the court receives bail. In some
jurisdictions, for example, a sheriff
receives bail. The final regulations
provide that if someone other than a
clerk receives bail on behalf of a clerk,
the clerk is treated as receiving the
bail. Thus, the clerk must make the
return of information if the other
requirements of section 6050I(g) are
satisfied.
Under the temporary and proposed
regulations, a statement must be sent to
each payor of bail reporting certain
information, including the ‘‘aggregate
amount of reportable cash received
during the calendar year by the clerk

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who made the information return re-
quired by [section 6050I(g)] in all cash
transactions relating to the payor of
bail.’’ The temporary and proposed
regulations reflect the statutory require-
ment in section 6050I(g)(5)(B) that
clerks provide the aggregate amount of
reportable cash. A commentator asked
whether separately reported amounts
satisfy this aggregate amount require-
ment. The final regulations clarify that
the aggregate amount requirement can
be satisfied either by sending a single
written statement with an aggregate
amount listed or by furnishing a copy
of each Form 8300 relating to that
payor of bail.
In addition, the final regulations
clarify that, if multiple payments are
made to satisfy bail reportable under
this section and the initial payment
does not exceed $10,000, the initial
payment and subsequent payments must
be aggregated and the information
return required by section 6050I(g)
must be filed by the 15th day after
receipt of the payment that causes the
aggregate amount to exceed $10,000.
However, payments made to satisfy
separate bail requirements are not
required to be aggregated.
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in EO
12866. Therefore, a regulatory assess-
ment is not required. It has also been
determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) and the Regulatory Flexibility
Act (5 U.S.C. chapter 6) do not apply to
these regulations, and, therefore, a Reg-
ulatory Flexibility Analysis is not re-
quired. Pursuant to section 7805(f) of
the Internal Revenue Code, the notice of
proposed rulemaking preceding these
regulations was submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comment
on their impact on small businesses.
Drafting Information
The principal author of these regula-
tions is Susie K. Bird, Office of
Assistant Chief Counsel (Income Tax
and Accounting). However, other per-
sonnel from the IRS and Treasury
Department participated in their
development.
******
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and
602 are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by removing the
entry for §1.6050I–2T and adding an
entry in numerical order to read as
follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6050I–2 also issued under 26
U.S.C. 6050I. * * *
§§1.6050I–OT and 1.6050I–2T
[Removed]
Par. 2. Sections 1.6050I–0T and
1.6050I–2T are removed.
Par. 3. Sections 1.6050I–0 and
1.6050I–2 are added to read as follows:
§1.6050I–0 Table of contents.
This section lists the major captions
that appear in §§1.6050I–1 and
1.6050I–2.
§1.6050I–1 Returns relating to cash
in excess of $10,000 received in a
trade or business.
(a)Reporting requirement.
(1)In general.
(2)Cash received for the ac-
count of another.
(3)Cash received by agents.
(i)General rule.
(ii)Exception.
(iii)Example.
(b)Multiple payments.
(1)Initial payment in excess of
$10,000.
(2)Initial payment of $10,000
or less.
(3)Subsequent payments.
(4)Example.
(c)Meaning of terms.
(1)Cash.
(i)Amounts received prior
to February 3, 1992.
(ii)Amounts received on or
after February 3, 1992.
(iii)D e s i g n a t e d r e p o r t i n g
transaction.
(iv) Exception for certain
loans.
(v)Exception for certain in-
stallment sales.
(vi) Exception for certain
down payment plans.
(vii)Examples.
(2)Consumer durable.
(3)Collectible.
(4)Travel or entertainment
activity.
(5)Retail sale.
(6)Trade or business.
(7)Transaction.
(8)Recipient.
(d)Exceptions to the reporting re-
quirements of section 6050I.
(1)Receipt of cash by certain
financial institutions.
(2)Receipt of cash by certain
casinos having gross annual
gaming revenue in excess of
$1,000,000.
(i)In general.
(ii)Casinos exempt under
31 CFR 103.45(c).
(iii)Reporting of cash re-
ceived in a nongaming
business.
(iv)Example.
(3)Receipt of cash not in the
course of the recipient’s
trade or business.
(4)Receipt is made with respect
to a foreign cash transaction.
(i)In general.
(ii)Example.
(e)Time, manner, and form of
reporting.
(1)Time of reporting.
(2)Form of reporting.
(3)Manner of reporting.
(i)Where to file.
(ii)Verification.
(iii)Retention of returns.
(f)Requirement of furnishing
statements.
(1)In general.
(2)Form of statement.
(3)When statement is to be
furnished.
(g)Cross-reference to penalty
provisions.
(1)Failure to file correct infor-
mation return.
(2)Failure to furnish correct
statement.
(3)Criminal penalties.
§1.6050I–2 Returns relating to cash
in excess of $10,000 received as bail
by court clerks.
(a)Reporting requirement.
(b)Meaning of terms.
(c)Time, form, and manner of
reporting.

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(1)Time of reporting.
(i)In general.
(ii)Multiple payments.
(2)Form of reporting.
(3)Manner of reporting.
(i)Where to file.
(ii)Verification of identity.
(d)Requirement to furnish
statements.
(1)Information to Federal
prosecutors.
(i)In general.
(ii)Form of statement.
(2)Information to payors of
bail.
(i)In general.
(ii)Form of statement.
(iii)Aggregate amount.
(e)Cross-reference to penalty
provisions.
(f)Effective date.
§1.6050I–2 Returns relating to cash
in excess of $10,000 received as bail
by court clerks.
(a)Reporting requirement. Any
clerk of a Federal or State court who
receives more than $10,000 in cash as
bail for any individual charged with a
specified criminal offense must make a
return of information with respect to
that cash receipt. For purposes of this
section, a clerk is the clerk’s office or
the office, department, division, branch,
or unit of the court that is authorized to
receive bail. If someone other than a
clerk receives bail on behalf of a clerk,
the clerk is treated as receiving the bail
for purposes of this paragraph (a).
(b)Meaning of terms. The following
definitions apply for purposes of this
section—
Cash means—
(1)The coin and currency of the
United States, or of any other country,
that circulate in and are customarily
used and accepted as money in the
country in which issued; and
(2)A cashier’s check (by whatever
name called, including treasurer’s
check and bank check), bank draft,
traveler’s check, or money order having
a face amount of not more than
$10,000.
Specified criminal offense means—
(1)A Federal criminal offense in-
volving a controlled substance (as
defined in section 802 of title 21 of the
United States Code), provided the
offense is described in Part D of
Subchapter I or Subchapter II of title
21 of the United States Code;
(2)Racketeering (as defined in sec-
tion 1951, 1952, or 1955 of title 18 of
the United States Code);
(3)Money laundering (as defined in
section 1956 or 1957 of title 18 of the
United States Code); and
(4)Any State criminal offense sub-
stantially similar to an offense de-
scribed in this paragraph (b).
(c)Time, form, and manner of re-
porting—(1) Time of reporting—(i) In
general. The information return re-
quired by this section must be filed
with the Internal Revenue Service by
the 15th day after the date the cash bail
is received.
(ii)Multiple payments. If multiple
payments are made to satisfy bail
reportable under this section and the
initial payment does not exceed
$10,000, the initial payment and subse-
quent payments must be aggregated and
the information return required by this
section must be filed with the Internal
Revenue Service by the 15th day after
receipt of the payment that causes the
aggregate amount to exceed $10,000.
However, if payments are made to
satisfy separate bail requirements, no
aggregation is required. Thus, if in
Month 1 a clerk receives $6,000 in bail
for an individual charged with a
specified criminal offense and later, in
Month 2, receives $7,000 in bail for
that same individual charged with
another specified criminal offense, no
aggregation is required.
(2)Form of reporting. The return of
information required by paragraph (a)
of this section must be made on Form
8300 and must contain the following
information—
(i)The name, address, and taxpayer
identification number (TIN) of the
individual charged with the specified
criminal offense;
(ii)The name, address, and TIN of
each person posting the bail (payor of
bail), other than a person posting bail
who is licensed as a bail bondsman in
the jurisdiction in which the bail is
received;
(iii)The amount of cash received;
(iv)The date the cash was received;
and
(v)Any other information required
by Form 8300 or its instructions.
(3)Manner of reporting—(i) Where
to file. Returns required by this section
must be filed with the Internal Revenue
Service office designated in the instruc-
tions for Form 8300. A copy of the in-
formation return required to be filed
under this section must be retained for
five years from the date of filing.
(ii)Verification of identity. A clerk
required to make an information return
under this section must, in accordance
with §1.6050I–1(e)(3)(ii), verify the
identity of each payor of bail listed in
the return.
(d)Requirement to furnish state-
ments—(1) Information to Federal
prosecutors—(i) In general. A clerk
required to make an information return
under this section must furnish a
written statement to the United States
Attorney for the jurisdiction in which
the individual charged with the spec-
ified crime resides and the United
States Attorney for the jurisdiction in
which the specified criminal offense
occurred (applicable United States At-
torney(s)). The written statement must
be filed with the applicable United
States Attorney(s) by the 15th day after
the date the cash bail is received.
(ii)Form of statement. The written
statement must include the information
required by paragraph (c)(2) of this
section. The requirement of this para-
graph (d)(1)(ii) will be satisfied if the
clerk provides to the applicable United
States Attorney(s) a copy of the Form
8300 that is filed with the Internal
Revenue Service pursuant to this
section.
(2)Information to payors of bail—
(i) In general. A clerk required to make
an information return under this section
must furnish a written statement to
each payor of bail whose name is set
forth in a return required by this
section. A statement required under this
paragraph (d)(2) must be furnished to a
payor of bail on or before January 31
of the year following the calendar year
in which the cash is received. A
statement will be considered furnished
to a payor of bail if it is mailed to the
payor’s last known address.
(ii)Form of statement. The state-
ment required by this paragraph (d)(2)
need not follow any particular format,
but must contain the following
information—
(A)The name and address of the
clerk’s office making the return;
(B)The aggregate amount of report-
able cash received during the calendar
year by the clerk who made the in-
formation return required by this sec-
tion in all cash transactions relating to
the payor of bail; and

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(C)A legend stating that the infor-
mation contained in the statement has
been reported to the Internal Revenue
Service and the applicable United
States Attorney(s).
(iii)Aggregate amount. The require-
ment of furnishing the aggregate
amount in paragraph (d)(2)(ii)(B) of
this section will be satisfied if the clerk
provides to the payor of bail either a
single written statement listing the
aggregate amount, or a copy of each
Form 8300 relating to that payor of
bail.
(e)Cross-reference to penalty pro-
visions. See sections 6721 through
6724 for penalties relating to the failure
to comply with the provisions of this
section.
(f)Effective date. This section ap-
plies to cash received by court clerks
on or after February 13, 1995.
PART 602—OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION ACT
Par. 4. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
§602.101 [Amended]
Par. 5. In §602.101, paragraph(c) is
amended by removing the entry
‘‘1.6050I–2T’’ from the table and
adding the entry ‘‘1.6050I–2. . . . . . .
1545–1449’’ in numerical order in the
table.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved December 12, 1995.
Leslie Samuels,
Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on
December 29, 1995, 8:45 a.m., and published
in the issue of the Federal Register for January
2, 1996, 61 F.R. 6)
Section 6050P.—Returns Relating to
the Cancellation of Indebtedness by
Certain Entities
26 CFR 1.6050P–1: Information reporting for
discharges of indebtedness by certain financial
entities.
T.D. 8654
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Information Reporting for Discharges
of Indebtedness
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations relating to the infor-
mation reporting requirements of appli-
cable financial entities for discharges of
indebtedness. The final regulations re-
flect changes to the Internal Revenue
Code of 1986 (Code) made by section
13252 of the Omnibus Budget Recon-
ciliation Act of 1993 (the Act). The
final regulations affect certain financial
institutions and federal executive
agencies.
DATES: These regulations are effective
December 22, 1996.
For dates of applicability, see
§1.6050P–1(h).
FOR FURTHER INFORMATION
CONTACT: Sharon L. Hall (timing
and amount of discharge) at (202)
622-4930 or Michael F. Schmit (other
issues) at (202) 622-4960, both of the
Office of Assistant Chief Counsel
(Income Tax and Accounting). Neither
telephone number is toll-free.
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in these final regulations has
been reviewed and approved by the
Office of Management and Budget in
accordance with the Paperwork Reduc-
tion Act (44 U.S.C. 3507) under
control number 1545–1419. Responses
to this collection of information are
required for the IRS to monitor
whether discharged debtors are prop-
erly complying with tax laws respect-
ing cancellations of indebtedness.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless the collection of information
displays a valid control number.
The time estimates for the reporting
requirements contained in these final
regulations are reflected in the burden
estimates for Form 1099–C.
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 Officer, T:FP,
Washington, DC 20224, and to the
Office of Management and Budget,
Attn: Desk Officer for the Department
of Treasury, Office of Information and
Regulatory Affairs, Washington, DC
20503.
Books or records relating to this
collection of information must be re-
tained as long as their contents may
become material in the administration
of any internal revenue law. Generally,
tax returns and tax information are
confidential, as required by 26 U.S.C.
6103.
Background
Section 6050P was added to the
Code by section 13252 of the Act.
Section 6050P requires certain financial
entities to report discharges of in-
debtedness of $600 or more during any
calendar year, and requires reporting
entities to make a return at such time
and in such form as the Secretary may
by regulations prescribe.
On December 27, 1993, temporary
regulations (TD 8506 [1994–1 C.B.
286]) relating to the reporting of
discharge of indebtedness under section
6050P were published in the Federal
Register (58 FR 68301). A notice of
p r o p o s e d r u l e m a k i n g ( I A – 6 3 – 9 3
[1994–1 C.B. 803]) cross-referencing
the temporary regulations was pub-
lished in the Federal Register for the
same day (58 FR 68337).
Written comments were received in
response to the notice of proposed
rulemaking. Fourteen speakers provided
testimony at a public hearing held on
March 30, 1994. In response to the
comments and testimony, the IRS and
Treasury issued Notice 94–73 (1994–2
C.B. 553), providing interim relief from
penalties for failure to comply with
certain of the reporting requirements of
the temporary regulations. The Notice
provided that, with respect to a dis-
charge of indebtedness occurring before
the later of January 1, 1995, or the
effective date of the final regulations
under section 6050P, no penalties
would be imposed for the failure to
report a discharge of indebtedness:

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(a)Under title 11 of the United
States Code;
(b)Resulting from the expiration of
the statute of limitations for collection
of an indebtedness;
(c)For an amount other than princi-
pal in the case of indebtedness arising
in connection with a lending transac-
tion; or
(d)For a person other than the
primary (or first-named) debtor in the
case of indebtedness incurred before
January 1, 1995, that involves multiple
debtors.
After consideration of all the com-
ments, the proposed regulations under
section 6050P are adopted, as revised
by this Treasury decision, effective for
discharges of indebtedness occurring
after December 21, 1996. The tempo-
rary regulations and interim relief from
penalties provided in Notice 94–73
remain in effect through December 21,
1996, at which time the temporary
regulations are removed. However, no
penalties will be imposed for the
failure to report a discharge of in-
debtedness occurring after December
21, 1996, and before January 1, 1997,
if the failure to report would have
qualified for penalty relief under Notice
94–73 had the discharge occurred prior
to December 22, 1996. Additionally,
the final regulations provide that a
financial entity subject to section
6050P may, at its discretion, apply any
of the provisions of the final regula-
tions to any discharge of indebtedness
occurring on or after January 1, 1996,
and before December 22, 1996. The
comments and revisions to the pro-
posed regulations are discussed below.
At the request of commentators, the
IRS and Treasury are considering the
issuance of guidance providing uniform
procedures for requesting extensions of
time within which to file information
returns with the IRS and related
statements to taxpayers. This guidance,
if issued, would apply to the informa-
tion reporting requirements set forth in
this Treasury decision.
Explanation of Revisions and
Summary of Comments
1.Identifiable events
Comments were received relating to
the issue of when an indebtedness is
discharged for purposes of section
6050P. Under the temporary and pro-
posed regulations, indebtedness is con-
sidered discharged, and reporting is
required, upon the occurrence of an
identifiable event indicating that the
indebtedness will never have to be
repaid by the debtor, taking into
account all of the facts and circum-
stances. The temporary and proposed
regulations list three identifiable events,
but make clear that the three items do
not represent an exclusive list of events
requiring reporting.
Commentators objected to this facts
and circumstances test, and stated that
the final regulations should instead
provide an exclusive list of reporting
events. The comments indicated that
creditors do not have the resources to
weigh all the facts and circumstances
in order to determine whether a debt
will never have to be repaid by the
debtor.
In response to these comments, the
final regulations provide that, for pur-
poses of section 6050P, indebtedness is
considered discharged, and reporting is
required, only upon the occurrence of
certain identifiable events. The regula-
tions contain an exclusive list of eight
identifiable events, and provide that, in
the absence of the occurrence of one of
these events, a Form 1099–C is not
required to be filed.
A.Discharges of indebtedness in
bankruptcy
Commentators objected to the re-
quirement in the temporary and pro-
posed regulations relating to the report-
ing of a discharge of indebtedness in
bankruptcy. The commentators stated
that the obligation to report debts
discharged in bankruptcy was ex-
tremely burdensome due to the large
number of information returns that
these bankruptcies would generate.
These commentators also stated that
some lenders do not receive informa-
tion regarding a debtor’s bankruptcy
discharge in the normal course of
business.
Commentators also objected to the
requirement to report debts discharged
in bankruptcy because income from a
discharge in bankruptcy is excludable
under section 108(a)(1)(A). Addi-
tionally, while acknowledging that sec-
tion 108(b) generally requires the re-
duction of tax attributes for amounts of
cancellation of indebtedness income
excluded under section 108(a), these
commentators indicated that the major-
ity of bankruptcies involve consumer
debt, the discharge of which is unlikely
to give rise to attribute reduction. Thus,
they contended that the reporting of
consumer debts discharged in bank-
ruptcy will not further the purposes of
section 6050P.
Finally, based on language in section
6050P, commentators contended that
the IRS and Treasury lacked authority
to require reporting in bankruptcy.
Under section 6050P(a), ‘‘any applica-
ble financial entity which discharges .. .
the indebtedness of any person’’ is
subject to the rules of section 6050P.
Commentators argued that creditors
should not be subject to the rules of
section 6050P for debts discharged in
bankruptcy because it is the bankruptcy
court, not the creditor, that discharges
the debt.
In promulgating the temporary reg-
ulations, the IRS and Treasury fully
considered the issue of whether bank-
ruptcy discharges could be excluded
from the reporting requirement. The
legislative history to section 6050P
states that ‘‘information returns are
required regardless of whether the
debtor is subject to tax on the dis-
charged debt. For example, Congress
does not expect reporting financial
institutions and agencies to determine
whether the debtor qualifies for an
exclusion under section 108.’’ H.R.
Conf. Rep. No. 213, 103d Cong., 1st
Sess. 1, 671 (1993). This language
indicates that Congress intended that
discharges resulting in excluded income
(such as bankruptcy discharges) be
reported.
Accordingly, the IRS and Treasury
do not believe that a requirement to
report debts discharged in bankruptcy
is outside the scope of section 6050P.
In enacting section 6050P, Congress
intended to increase debtor compliance
in reporting discharges of indebtedness.
With respect to the tax consequences to
the debtor, it generally makes no
difference whether the debt is volun-
tarily discharged by the financial entity,
or discharged by a court order. Further,
the creditor is receiving an amount that
is less than the amount of the outstand-
ing indebtedness whether the debt is
voluntarily discharged or ordered to be
discharged by a court. Thus, the
language ‘‘any applicable financial en-
tity which discharges .. . indebtedness’’
should not be narrowly construed to
exclude instances in which a debt is
ordered to be discharged or is dis-
charged by operation of law.

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The IRS and Treasury believe that an
objective of the legislative history
quoted above is that information report-
ing under section 6050P not impose an
undue burden on filers by requiring
determinations regarding whether dis-
charges result in income to debtors.
However, the legislative history does
not preclude an exception for certain
discharges in appropriate circum-
stances. Accordingly, in response to the
above concerns of the commentators,
the final regulations provide an excep-
tion from reporting in the case of
certain bankruptcy discharges. Under
the final regulations, indebtedness dis-
charged in bankruptcy is required to be
reported only if the creditor knows that
the debtor incurred the indebtedness for
business or investment purposes.
Therefore, reporting is not required for
consumer debts discharged in bank-
ruptcy or in cases in which the creditor
is not aware of the purpose for the
borrowing or that purpose is not clear.
Information relating to whether a debt
was incurred for business or investment
purposes will be available to a creditor
in some cases, such as those in which
loan documents require the borrower to
state the purpose of the loan. This
limited reporting of debts discharged in
bankruptcy will exclude information
returns relating to consumer debt, while
retaining reporting for those discharges
most likely to involve the reduction of
tax attributes under section 108(b).
Pursuant to Notice 94–73, no penalties
will be imposed for the failure to report
any indebtedness discharged before
December 22, 1996, in bankruptcy.
Additionally, no penalties will be im-
posed for the failure to report any
indebtedness discharged after Decem-
ber 21, 1996, and before January 1,
1997, in bankruptcy, since the failure
to report would have qualified for
penalty relief under Notice 94-73 had
the discharge occurred prior to Decem-
ber 22, 1996.
B.Expiration of statute of
limitations for collection
Under the temporary and proposed
regulations, an identifiable event in-
cludes a cancellation or extinguishment
by operation of law that renders a debt
unenforceable, such as the expiration of
the statute of limitations for collection
of an indebtedness.
Comments were received relating to
the requirement to report indebtedness
discharged as a result of the expiration
of the statute of limitations. Commen-
tators argued that expiration of the
statute of limitations should not be an
identifiable event because of the rec-
ordkeeping and other administrative
burdens that are created by such a rule.
Commentators noted that the statute of
limitations for collection of debt varies
from state to state, and that debtors
may relocate and be subject to the rules
of multiple jurisdictions. Further, they
contended, an isolated payment by a
debtor will frequently restart the run-
ning of the statute of limitations.
According to the commentators, mak-
ing lenders track the expiration of the
statute of limitations for reporting
purposes would require special com-
puter applications not needed for any
other creditor function, require legal
expertise in the collection department,
and be very costly.
As a legal matter, commentators
argued that the statute of limitations is
an affirmative defense, and affects only
judicial enforceability of the obligation.
Most commentators indicated that col-
lection activity routinely continues after
the expiration of the statute of limita-
tions. The temporary and proposed
regulations list collection activity on
the part of the creditor as a factor to be
considered in determining whether debt
has been discharged. Thus, even under
the temporary and proposed regula-
tions, expiration of the statute of
limitations would rarely mark the date
on which debt is considered discharged,
because collection activity routinely
continues after that date.
In response to these comments, the
final regulations provide that expiration
of the statute of limitations for collec-
tion of an indebtedness is an identifia-
ble event for which a Form 1099–C is
required to be filed only if, and at such
time as, a debtor’s affirmative defense
of the expiration of the statute of
limitations is upheld in a final judg-
ment or decision of a judicial proceed-
ing, and the period for appealing the
judgment or decision has expired.
C.Other discharges by operation
of law
As stated above, the temporary and
proposed regulations provide that an
identifiable event includes a cancella-
tion or extinguishment by operation of
law that renders a debt unenforceable
(such as the expiration of the statute of
limitations for collection of the in-
debtedness). The temporary and pro-
posed regulations do not specify all of
the circumstances requiring reporting
under this identifiable event.
In order to further the goal of
providing an exclusive list of reporting
events, the final regulations specify
those discharges occurring by operation
of law that are required to be reported
under section 6050P. In addition to the
statute of limitations identifiable event
previously discussed, the events relat-
ing to operation of law that must be
reported are (i) a cancellation or
extinguishment of an indebtedness that
renders a debt unenforceable in a
receivership, foreclosure, or similar
proceeding in a federal or State court,
as described in section 368(a)(3)(A)(ii);
(ii) a cancellation or extinguishment of
an indebtedness upon the expiration of
a statutory period for filing a claim or
commencing a deficiency judgment
proceeding; (iii) a cancellation or ex-
tinguishment of an indebtedness that
renders a debt unenforceable pursuant
to a probate or similar proceeding; and
(iv) a cancellation or extinguishment of
an indebtedness pursuant to an election
of foreclosure remedies by a creditor
that statutorily extinguishes or bars the
creditor’s right to pursue collection of
the indebtedness. This final event relat-
ing to an election of foreclosure
remedies will require reporting only
where a mortgage lender or holder is
barred by local law from pursuing a
deficiency judgment or note collection
proceeding following exercise of a
power of sale contained in a mortgage
or deed of trust.
A discharge of indebtedness oc-
curring by operation of law not enume-
rated above is not required to be
reported under the final regulations.
D.Collection activity
Commentators indicated that the tem-
porary and proposed regulations were
unclear regarding the effect of continu-
ing collection activity on the require-
ment to report under section 6050P.
The temporary and proposed regula-
tions provide that collection activity is
one of the facts and circumstances to
be taken into account in determining
whether a discharge of indebtedness
has occurred. The commentators argued
that the final regulations should clarify
that reporting is not required prior to
termination of collection efforts on the
part of the creditor.

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In response to these comments, the
final regulations address the effect of
collection efforts on the requirement to
report under section 6050P. Under the
final regulations, an identifiable event
occurs and reporting is required upon a
decision by the creditor, or the applica-
tion of a defined policy of the creditor,
to discontinue collection activity and
discharge indebtedness. For this pur-
pose, a defined policy may be either a
w r i t t e n p o l i c y o r a c r e d i t o r ’ s
established business practice.
Additionally, under the final regula-
tions, there is a rebuttable presumption
that an identifiable event has occurred
during a calendar year if a creditor has
not received a payment on an indebted-
ness at any time during a 36-month
testing period ending at the close of the
year. This presumption is rebutted by
the creditor if the creditor (or a third-
party collection agency on behalf of the
creditor) has engaged in significant,
bona fide collection activity at any time
during the 12-month period ending at
the close of the calendar year, or if
facts and circumstances existing as of
January 31 of the calendar year follow-
ing expiration of the 36-month testing
period indicate that the indebtedness
has not been discharged. Under the
final regulations, significant, bona fide
collection activity does not include
merely nominal or ministerial collec-
tion action, such as an automated
mailing. Further, facts and circum-
stances indicating that an indebtedness
has not been discharged include the
existence of a lien relating to the
indebtedness against the debtor (to the
extent of the value of the security), or
the sale or packaging for sale of the
indebtedness by the creditor.
E.Other reportable discharges
Under the temporary and proposed
regulations, an identifiable event in-
cludes an agreement between the appli-
cable financial entity and the debtor to
discharge an indebtedness, provided
that the last event necessary to effectu-
ate the discharge has occurred. The
final regulations retain this reporting
requirement, restating that an identifia-
ble event includes a discharge of in-
debtedness pursuant to an agreement
between an applicable financial entity
and a debtor to discharge indebtedness
at less than full consideration. As under
the temporary regulations, this identi-
fiable event will not occur until the last
event necessary to effectuate the dis-
charge has occurred.
The final regulations also provide
that a discharge of indebtedness occur-
ring before the date on which an
identifiable event occurs may, at the
creditor’s discretion, be reported under
section 6050P.
2.Definition of indebtedness
Commentators objected to the broad
definition of indebtedness provided in
the temporary and proposed regula-
tions. The temporary and proposed
regulations provide that, for purposes
of reporting the amount of indebtedness
discharged, an indebtedness is any
amount owed to the creditor including
principal, interest, penalties, fees, ad-
ministrative costs, and fines, to the
extent the amount constitutes an in-
debtedness under section 61(a)(12).
Commentators argued that this defini-
tion is overly broad and should be
amended to include principal only (or
the primary indebtedness in the case of
a non-lending transaction). In response
to these comments, the final regulations
provide certain exceptions relating to
the reporting of amounts other than
stated principal.
A.Reporting of interest
Commentators offered two main ob-
jections to the reporting of interest.
First, commentators stated that report-
ing interest was burdensome because
interest is not tracked by lenders once
indebtedness is written off or placed on
nonaccrual status on the lender’s
books. Second, commentators sug-
gested that reporting of interest would
be of marginal benefit to the IRS
because in many cases discharged
interest may be excluded from gross
income under sections 108(e)(2) and
111.
In response to these comments, and
in an effort to reduce the information
reporting burden on affected filers, the
final regulations do not require the
reporting of amounts of discharged
interest (whether or not arising in
connection with a lending transaction),
despite the fact that some discharged
interest will give rise to gross income.
However, at the option of the applica-
ble financial entity, interest may be
included in the amount reported. Addi-
tionally, as provided in Notice 94–73,
in the case of a discharge of indebted-
ness before December 22, 1996, no
penalties will be imposed for failure to
report an amount other than principal
in the case of indebtedness arising in
connection with a lending transaction.
B.Penalties, fees, administrative
costs, and fines
Commentators also argued that, like
interest, penalties, fees, administrative
costs, and fines are not tracked by
lenders once an indebtedness is written
off on the books of the lender. Thus,
they contended, tracking these amounts
would require additional computer pro-
gramming and recordkeeping, and
would be very costly. With respect to
lending transactions, the IRS and
Treasury have concluded that the bene-
fits that would be derived from requir-
ing the reporting of penalties, fees,
administrative costs, and fines are
outweighed by the burden associated
with the requirement. Accordingly, the
final regulations provide that, in the
case of a lending transaction, only
discharged amounts of stated principal
are required to be reported. In the case
of non-lending transactions, the amount
owed, such as a fee, fine, or penalty, is
reportable if discharged.
3.Reporting for multiple debtors
Commentators recommended that the
multiple debtor rules of the temporary
and proposed regulations be amended
so that reporting is required only with
respect to the primary or first-named
debtor on the lender’s account. The
rationale for this approach is that, in
general, lenders track loans involving
multiple debtors only by the name of
the borrower of record, and thus, the
information required to be reported
under section 6050P (e.g., the name,
address, and taxpayer identification
number (TIN)) for debtors other than
the primary debtor is generally not
available to lenders. In addition, the
commentators pointed out that most
other information return regulations
require reporting only with respect to a
single taxpayer (e.g., §1.6050H–1 re-
quires reporting only with respect to
one designated interest payor even if
multiple debtors are liable on a mort-
gage). Finally, these commentators
stated that the majority of multiple
debtor situations involve a husband and
wife who will likely file a joint return,
and therefore, requiring reporting for
each debtor is not necessary.
The IRS and Treasury believe, how-
ever, that requiring reporting for multi-

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ple debtors is consistent with section
6050P(a)(1), which provides that the
reporting of a name, address, and TIN
is required for each person whose
indebtedness was discharged. Further,
while reporting with respect to only
one taxpayer is required under many
information reporting sections of the
Code, section 6050J, which is compar-
able to section 6050P in that it relates
to the reporting of acquisitions and
abandonments of property securing in-
debtedness, requires reporting for each
person who is a borrower with respect
to the secured indebtedness. Moreover,
in Notice 94–73, the IRS addressed the
concerns of commentators by providing
that no penalties would be imposed for
failure to report a discharge of in-
debtedness for other than the primary
(or first-named) debtor in the case of
indebtedness incurred before January 1,
1995, thus allowing creditors time to
begin collecting the necessary informa-
tion for all debtors in the case of
indebtedness incurred after December
31, 1994. The final regulations incorpo-
rate this relief.
In order to reduce the information
reporting burden on applicable financial
entities, the final regulations contain
two exceptions relating to multiple
debtor reporting. In the case of in-
debtedness of less than $10,000 in-
curred on or after January 1, 1995, that
involves multiple debtors, reporting is
required only for the primary (or first-
named) debtor. Additionally, to avoid
duplication, the final regulations
provide a husband/wife exception to
the requirement for reporting in the
case of multiple debtors. Under this
exception, only one Form 1099–C must
be prepared if the creditor knows, or
has reason to know, that the co-
obligors were husband and wife living
at the same address when the indebted-
ness was incurred, and does not know
or have reason to know that such
circumstances have changed at the time
of the discharge. These two exceptions
apply to discharges of indebtedness
after December 31, 1994.
The final regulations retain the rule
of the temporary and proposed regula-
tions relating to the amount to be
reported with respect to each joint and
several debtor.
4.Multiple creditors/lending pools/
REMICs
Commentators indicated that further
guidance should be provided in the
final regulations regarding section
6050P reporting obligations in the case
of participation loans, lending pools,
and other multiple-creditor situations.
In response to these comments, the
final regulations provide a general rule
that, in the case of an indebtedness
owned (or treated as owned for federal
income tax purposes) by more than one
creditor, each creditor that is an appli-
cable financial entity must comply with
the reporting requirements of this sec-
tion with respect to any discharge of
indebtedness of $600 or more allocable
to such creditor. A creditor will be
considered to have complied with the
requirements of this section if a lead
bank or other designee of the creditor
complies on its behalf.
Comments were received advocating
an exception from reporting for dis-
charges of certain widely-owned se-
curitized indebtedness. The commenta-
tors reasoned that the owners of
widely-held securitized indebtedness
will generally have no knowledge
regarding when a discharge occurs, or
the amount of discharged debt allocable
to each owner. Further, commentators
suggested that it is likely that a
significant portion of such securitized
indebtedness may be owned by persons
that are not applicable financial entities
and, therefore, are not subject to
section 6050P.
The IRS and Treasury believe, how-
ever, that it would be inconsistent with
the purpose of section 6050P to
provide a general exception from re-
porting for such securitized indebted-
ness. Section 6050P is intended to
increase the likelihood that a debtor
will comply with the tax laws relating
to discharge of indebtedness by requir-
ing the reporting of that event to the
IRS. The fact that indebtedness has
been securitized and sold to numerous
owners generally does not affect the
tax consequences to the debtor upon a
discharge of that indebtedness. Thus,
the IRS and Treasury do not believe
that a discharge of indebtedness should
be excepted from section 6050P report-
ing simply because that indebtedness
w a s p a r t o f a s e c u r i t i z a t i o n
arrangement.
Commentators also argued that the
discharge of an indebtedness held by a
real estate mortgage investment conduit
(REMIC) should not be required to be
reported under section 6050P. Because
a REMIC is not an applicable financial
entity, commentators contended that
section 6050P should not apply upon a
discharge of indebtedness held by a
REMIC.
However, section 860F(e) provides
that, for purposes of subtitle F of the
Code (Procedure and Administration,
including section 6050P), a REMIC is
treated as a partnership and holders of
residual interests in the REMIC are
treated as partners. Under the final
regulations, indebtedness owned by a
partnership is treated as owned by the
partners. Thus, arguably a discharge of
REMIC indebtedness should be treated
similar to partnership indebtedness and
thus should be reported to the extent
the residual owners of the REMIC are
applicable financial entities.
Because the IRS and Treasury be-
lieve that further study of these issues
is warranted, the final regulations re-
serve on the application of section
6050P to discharges of indebtedness
held (1) in a pass-through securitized
indebtedness arrangement, or (2) by a
REMIC. For this purpose, a pass-
through securitized indebtedness ar-
rangement is any arrangement whereby
one or more debt obligations are
pooled and held for twenty or more
persons whose interests in the debt
obligations are undivided co-ownership
interests that are freely transferrable.
Co-ownership interests that are actively
traded personal property (as defined in
§1.1092(d)–1) are presumed to be
freely transferrable and held by twenty
or more persons. Pending issuance of
further guidance, no penalties will be
imposed for failure to report a dis-
charge of indebtedness held under these
circumstances. This relief from penal-
ties does not extend to arrangements
formed for a principal purpose of
avoiding the reporting requirements of
this section. The IRS and Treasury
welcome comments regarding com-
pliance with section 6050P in the case
of pass-through securitized indebted-
ness arrangements and REMICs.
5.Coordination of Form 1099–A and
Form 1099–C
The legislative history to section
6050P indicates that Congress intended
that the IRS and Treasury coordinate
reporting under section 6050P with the
reporting required under section 6050J.
Section 6050J requires information relat-
ing to foreclosures and abandonments of
secured property to be reported on Form
1099–A.
The final regulations provide that if,
in the same calendar year, a discharge

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of indebtedness reportable under sec-
tion 6050P occurs in connection with a
foreclosure or abandonment of secured
property reportable under section
6050J, it is not necessary to file both a
Form 1099–A and a Form 1099–C for
the same debtor. Under the final
regulations, the filing requirements of
section 6050J will be satisfied with
respect to a debtor if, in lieu of filing a
Form 1099–A, a Form 1099–C is filed
in accordance with the instructions for
the filing of that form. This coordi-
nated filing provision applies to dis-
charges of indebtedness after December
31, 1994.
6.Direct or indirect subsidiary
Commentators requested that the fi-
nal regulations include a definition of a
direct or indirect subsidiary for pur-
poses of section 6050P. Section
6050P(c)(1)(C) provides that the defini-
tion of applicable financial entity in-
cludes a direct or indirect subsidiary of
an entity described in section 6050P(c)-
(1)(A). In response to these comments,
the final regulations provide that, for
purposes of section 6050P(c)(1)(C), the
term direct or indirect subsidiary means
a corporation in a chain of corporations
beginning with the entity described in
section 6050P(c)(1)(A), if at least 50
percent of the total combined voting
power of all classes of stock entitled to
vote, or at least 50 percent of the total
value of all classes of stock, of such
corporation is directly owned by the
entity described in section 6050P(c)-
(1)(A), or by one or more other
corporations in the chain.
7.Other exceptions from reporting
The IRS and Treasury received nu-
merous comments advocating that the
final regulations include exceptions
from reporting with respect to certain
discharges of indebtedness.
A.Reporting for non-U.S. debtors
Comments were received relating to
the inclusion in final regulations of an
exception for reporting discharges of
indebtedness of certain foreign debtors.
These comments noted that, in some
cases, discharges of indebtedness that
involve such debtors will not result in
income that is taxable in the United
States.
On the other hand, there clearly are
cases in which a foreign person may be
subject to U.S. tax with respect to a
discharge of indebtedness. Because
there is no clear guidance on which
financial institutions may rely for pur-
poses of determining whether a foreign
person would be subject to U.S. tax
with respect to cancellation of in-
debtedness income, it is not appropriate
to provide a general exception for
foreign persons. However, the IRS and
Treasury are continuing to study the
issue of whether reporting is necessary
in the case of foreign debtors whose
debt is discharged by foreign branches
of U.S. financial institutions. Accord-
ingly, pending the issuance of further
guidance, no penalties will be imposed
if an applicable financial entity fails to
report a discharge of indebtedness of a
foreign debtor by a foreign branch of
the entity.
B.Reporting where debt is
acquired by related persons
Comments were received requesting
that the final regulations clarify
whether reporting is required in cir-
cumstances in which there is a deemed
discharge of indebtedness pursuant to
the regulations under section 108(e)(4).
Section 108(e)(4) and implementing
regulations (see §1.108–2) provide that
the acquisition of outstanding indebted-
ness by a person related to the debtor
from a person who is not related to the
debtor is treated as if the debtor had
acquired the indebtedness and may
result in a realization by the debtor of
income from discharge of indebtedness.
Commentators indicated that applicable
financial entities often will be unaware
that the conditions of section 108(e)(4)
have been satisfied and that the
debtor’s indebtedness is considered to
have been discharged. In response to
these comments, the final regulations
provide that no reporting is required
under section 6050P in the case of a
discharge of indebtedness under section
108(e)(4) unless the disposition of the
indebtedness by the creditor was made
with a view to avoiding the reporting
requirements of this section.
C.Reporting for guarantors of
indebtedness
Commentators also requested guid-
ance on whether, and under what
circumstances, a Form 1099–C must be
filed for a guarantor of an indebtedness
when the underlying indebtedness is
discharged. The final regulations pro-
vide that, in the case of guaranteed
debt, a guarantor is not treated as a
debtor for purposes of reporting under
section 6050P. Thus, reporting for
guarantors is not required.
D.Reporting for non-lending
transactions
A number of comments were re-
ceived advocating an exception in the
final regulations for discharges of
indebtedness where the indebtedness is
incurred in a non-lending transaction.
Advocates of this exception argued that
the primary reason applicable financial
entities, and not all trade or businesses,
were made subject to section 6050P is
that financial entities have extensive
involvement in lending transactions
where the majority of discharges of
indebtedness will occur. Commentators
argued that when an applicable finan-
cial entity is a creditor as a result of a
non-lending transaction, it should be
treated in the same manner as a non-
applicable financial entity with respect
to that indebtedness, and not be subject
to section 6050P if a discharge occurs.
Neither the language of section
6050P nor its legislative history
provides any indication that Congress
intended for discharges of non-lending
indebtedness to be excluded from re-
porting. Moreover, it makes no dif-
ference in determining whether a
debtor has income under section
61(a)(12) that the indebtedness was
incurred in a non-lending transaction.
Accordingly, the final regulations do
not adopt this suggestion.
E.Reporting of disputed liabilities
The temporary and proposed regula-
tions do not address the reporting
requirements under section 6050P in
the case of the settlement of a disputed
liability. The preamble to the tempo-
rary regulations solicited public com-
ment relating to this issue. Several
commentators urged that the final
regulations include an exception from
reporting for settlements of bona fide
disputed liabilities.
The determination regarding whether
the settlement of a disputed liability
results in discharge of indebtedness
income under section 61(a)(12) is
inherently factual. Thus, it continues to
be the position of the IRS and Treasury
that this issue should be addressed on a

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case-by-case basis, rather than by these
final regulations. Therefore, the final
regulations do not provide an exception
from reporting for disputed liabilities.
Instead, resolution of the question of
whether there may have been a dis-
charge of indebtedness reportable under
this section remains the obligation of
the applicable financial entity. The IRS
and Treasury recognize that a creditor
and debtor may take inconsistent posi-
tions on this issue. The IRS does not
intend to impose penalties for good
faith failures to report settlements that
constitute discharges of indebtedness.
8.Miscellaneous comments
Comments were also received relat-
ing to whether applicable financial
entities have any information reporting
obligations in instances where pay-
ments are received on previously dis-
charged debts. In response to those
inquiries, the final regulations clarify
that no additional reporting or Form
1099–C correction is required if a
creditor receives a payment of all or a
portion of a discharged debt that has
been reported to the IRS for a prior
calendar year.
Comments were received respecting
the TIN solicitation requirements of the
temporary and proposed regulations. In
response to those comments, the final
regulations provide that a reasonable
effort (rather than all reasonable
efforts) must be made to obtain the
correct name/TIN combination of the
person whose indebtedness is dis-
charged.
The IRS and Treasury received a
number of other comments in addition
to those summarized above. Some of
the suggestions contained in the com-
ments have been adopted in the final
regulations. Other suggested changes
were not adopted primarily because
those suggestions were inconsistent
with the purpose of the statute and its
legislative history.
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in EO
12866. Therefore, a regulatory assess-
ment is not required. It also has been
determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) and the Regulatory Flex-
ibility Act (5 U.S.C. chapter 6) do not
apply to these regulations, and, there-
fore, a Regulatory Flexibility Analysis
is not required. Pursuant to section
7805(f) of the Internal Revenue 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
The principal authors of these reg-
ulations are Sharon L. Hall and Mi-
chael F. Schmit, Office of the Assistant
Chief Counsel (Income Tax and Ac-
counting), IRS. However, other person-
nel from the IRS and Treasury De-
p a r t m e n t p a r t i c i p a t e d i n t h e i r
development.
******
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR Parts 1 and
602 are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by removing the
entry for §1.6050P–1T and adding an
entry in numerical order to read as
follows:
Authority: 26 U.S.C. 7805. * * *
Section 1.6050P–1 also issued under 26
U.S.C. 6050P. * * *
Par. 2. Sections 1.6050P–0 and
1.6050P–1 are added to read as
follows:
§1.6050P–0 Table of contents.
This section lists the major captions
that appear in §1.6050P–1.
§1.6050P–1 Information reporting for
discharges of indebtedness by certain
financial entities.
(a)Reporting requirement.
(1)In general.
(2)No aggregation.
(3)Amounts not includible in
income.
(4)Time and place for
reporting.
(i)In general.
(ii)Indebtedness discharged
in bankruptcy.
(b)Date of discharge.
(1)In general.
(2)Identifiable events.
(i)In general.
(ii)Statute of limitations.
(iii)Decision to discontinue
collection activity;
creditor’s defined
policy.
(iv)Expiration of non-
payment testing period.
(3)Permitted reporting.
(c)Indebtedness.
(d)Exceptions from reporting
requirement.
(1)Certain bankruptcy
discharges.
(i)In general.
(ii)Business or investment
debt.
(2)Interest.
(3)Non-principal amounts in
lending transactions.
(4)Indebtedness of foreign per-
sons held by foreign
branches of U.S. financial
institutions.
(i)Reporting requirements.
(ii)Definition.
(5)Acquisition of indebtedness
by related party.
(6)Releases.
(7)Guarantors and sureties.
(e)Additional rules.
(1)Multiple debtors.
(i)In general.
(ii)Amount to be reported.
(2)Multiple creditors.
(i)In general.
(ii)Partnerships.
(iii)Pass-through securitized
indebtedness
arrangement.
(A) R e p o r t i n g r e -
quirements.
(B)Definition.
(iv)REMICs.
(3)Coordination with reporting
under section 6050J.
(4)Direct or indirect subsidiary.
(5)Use of magnetic media.
(6)TIN solicitation requirement.
(i)In general.
(ii)Manner of soliciting
TIN.
(7)Recordkeeping requirements.
(8)No multiple reporting.
(f)Requirement to furnish statement.
(1)In general.
(2)Furnishing copy of Form
1099–C.
(3)Time and place for furnish-
ing statement.

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(g)Penalties.
(h)Effective dates.
(1)In general.
(2)Earlier application.
§1.6050P–1 Information reporting for
discharges of indebtedness by certain
financial entities.
(a)Reporting requirement—(1) In
general. Except as provided in para-
graph (d) of this section, any applicable
financial entity (as defined in section
6050P(c)(1)) that discharges an in-
debtedness of any person (within the
meaning of section 7701(a)(1)) of at
least $600 during a calendar year must
file an information return on Form
1099–C with the Internal Revenue
Service. Solely for purposes of the
reporting requirements of section
6050P and this section, a discharge of
indebtedness is deemed to have oc-
curred, except as provided in paragraph
(b)(3) of this section, if and only if
there has occurred an identifiable event
described in paragraph (b)(2) of this
section, whether or not an actual
discharge of indebtedness has occurred
on or before the date on which the
identifiable event has occurred. The
return must include the following
information—
(i)The name, address, and taxpayer
identification number (TIN), as defined
in section 7701(a)(41), of each person
for which there was an identifiable
event during the calendar year;
(ii)The date on which the identifia-
ble event occurred, as described in
paragraph (b) of this section;
(iii)The amount of indebtedness
discharged, as described in paragraph
(c) of this section;
(iv)An indication whether the iden-
tifiable event was a discharge of
indebtedness in a bankruptcy, if known;
and
(v)Any other information required
by Form 1099–C or its instructions, or
current revenue procedures.
(2)No aggregation. For purposes of
reporting under this section, multiple
discharges of indebtedness of less than
$600 are not required to be aggregated
unless such separate discharges are
pursuant to a plan to evade the
reporting requirements of this section.
(3)Amounts not includible in in-
come. Except as otherwise provided in
this section, discharged indebtedness
must be reported regardless of whether
the debtor is subject to tax on the
discharged debt under sections 61 and
108 or otherwise by applicable law.
(4)Time and place for reporting—
(i) In general. Except as provided in
paragraph (a)(4)(ii) of this section,
returns required by this section must be
filed with the Internal Revenue Service
office designated in the instructions for
Form 1099–C on or before February 28
of the year following the calendar year
in which the identifiable event occurs.
(ii)Indebtedness discharged in
bankruptcy. Indebtedness discharged in
bankruptcy that is required to be
reported under this section must be
reported for the later of the calendar
year in which the amount of discharged
indebtedness first becomes ascertain-
able, or the calendar year in which the
identifiable event occurs.
(b)Date of discharge—(1) In gen-
eral. Solely for purposes of this sec-
tion, except as provided in paragraph
(b)(3) of this section, indebtedness is
discharged on the date of the occur-
rence of an identifiable event specified
in paragraph (b)(2) of this section.
(2)Identifiable events—(i) In gen-
eral. An identifiable event is—
(A)A discharge of indebtedness un-
der title 11 of the United States Code
(bankruptcy);
(B)A cancellation or extinguishment
of an indebtedness that renders a debt
unenforceable in a receivership, fore-
closure, or similar proceeding in a
federal or State court, as described in
section 368(a)(3)(A)(ii) (other than a
discharge described in paragraph
(b)(2)(i)(A) of this section);
(C)A cancellation or extinguishment
of an indebtedness upon the expiration
of the statute of limitations for collec-
tion of an indebtedness, subject to the
limitations described in paragraph
(b)(2)(ii) of this section, or upon the
expiration of a statutory period for
filing a claim or commencing a defi-
ciency judgment proceeding;
(D)A cancellation or extinguishment
of an indebtedness pursuant to an
election of foreclosure remedies by a
creditor that statutorily extinguishes or
bars the creditor’s right to pursue
collection of the indebtedness;
(E)A cancellation or extinguishment
of an indebtedness that renders a debt
unenforceable pursuant to a probate or
similar proceeding;
(F)A discharge of indebtedness pur-
suant to an agreement between an
applicable financial entity and a debtor
to discharge indebtedness at less than
full consideration;
(G)A discharge of indebtedness pur-
suant to a decision by the creditor, or
the application of a defined policy of
the creditor, to discontinue collection
activity and discharge debt; or
(H) The expiration of the non-
payment testing period, as described in
paragraph (b)(2)(iv) of this section.
(ii)Statute of limitations. In the case
of an expiration of the statute of
limitations for collection of an in-
debtedness, an identifiable event occurs
under paragraph (b)(2)(i)(C) of this
section only if, and at such time as, a
debtor’s affirmative statute of limita-
tions defense is upheld in a final
judgment or decision of a judicial pro-
ceeding, and the period for appealing
the judgment or decision has expired.
(iii)Decision to discontinue collec-
tion activity; creditor’s defined policy.
For purposes of the identifiable event
described in paragraph (b)(2)(i)(G) of
this section, a creditor’s defined policy
includes both a written policy of the
creditor and the creditor’s established
business practice. Thus, for example, a
creditor’s established practice to dis-
continue collection activity and aban-
don debts upon expiration of a particu-
lar non-payment period is considered a
defined policy for purposes of para-
graph (b)(2)(i)(G) of this section.
(iv)Expiration of non-payment test-
ing period. There is a rebuttable
presumption that an identifiable event
under paragraph (b)(2)(i)(H) of this
section has occurred during a calendar
year if a creditor has not received a
payment on an indebtedness at any
time during a testing period (as defined
in this paragraph (b)(2)(iv)) ending at
the close of the year. The testing period
is a 36-month period increased by the
number of calendar months during all
or part of which the creditor was
precluded from engaging in collection
activity by a stay in bankruptcy or
similar bar under state or local law.
The presumption that an identifiable
event has occurred may be rebutted by
the creditor if the creditor (or a third-
party collection agency on behalf of the
creditor) has engaged in significant,
bona fide collection activity at any time
during the 12-month period ending at
the close of the calendar year, or if
facts and circumstances existing as of
January 31 of the calendar year follow-
ing expiration of the 36-month period
indicate that the indebtedness has not

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been discharged. For purposes of this
paragraph (b)(2)(iv)—
(A)Significant, bona fide collection
activity does not include merely nomi-
nal or ministerial collection action,
such as an automated mailing;
(B)Facts and circumstances indicat-
ing that an indebtedness has not been
discharged include the existence of a
lien relating to the indebtedness against
the debtor (to the extent of the value of
the security), or the sale or packaging
for sale of the indebtedness by the
creditor; and
(C)In no event will an identifiable
event described in paragraph (b)(2)(i)-
(H) of this section occur prior to
December 31, 1997.
(3)Permitted reporting. If a dis-
charge of indebtedness occurs before
the date on which an identifiable event
occurs, the discharge may, at the
creditor’s discretion, be reported under
this section.
(c)Indebtedness. For purposes of
this section, indebtedness means any
amount owed to an applicable financial
entity, including stated principal, fees,
stated interest, penalties, administrative
costs and fines. The amount of in-
debtedness discharged may represent
all, or only a part, of the total amount
owed to the applicable financial entity.
(d)Exceptions from reporting re-
quirement—(1) Certain bankruptcy
discharges—(i) In general. Reporting
is required under this section in the
case of a discharge of indebtedness in
bankruptcy only if the creditor knows
from information included in the re-
porting entity’s books and records
pertaining to the indebtedness that the
debt was incurred for business or in-
vestment purposes as defined in para-
graph (d)(1)(ii) of this section.
(ii)Business or investment debt. In-
debtedness is considered incurred for
business purposes if it is incurred in
connection with the conduct of any
trade or business other than the trade or
business of performing services as an
employee. Indebtedness is considered
incurred for investment purposes if it is
incurred to purchase property held for
investment, as defined in section
163(d)(5).
(2)Interest. The discharge of an
amount of indebtedness that is interest
is not required to be reported under this
section.
(3)Non-principal amounts in lend-
ing transactions. In the case of a
lending transaction, the discharge of an
amount other than stated principal is
not required to be reported under this
section. For this purpose, a lending
transaction is any transaction in which
a lender loans money to, or makes
advances on behalf of, a borrower
(including revolving credits and lines
of credit).
(4)Indebtedness of foreign debtors
held by foreign branches of U.S. finan-
cial institutions—(i) Reporting require-
ments. [Reserved]
(ii)Definition. An indebtedness held
by a foreign branch of a U.S. financial
institution is described in this para-
graph (d)(4) only if—
(A) The financial institution is
engaged through a branch or office in
the active conduct of a banking or
similar business outside the United
States;
(B)The branch or office is a perma-
nent place of business that is regularly
maintained, occupied, and used to carry
on a banking or similar financial
business;
(C)The business is conducted by at
least one employee of the branch or
office who is regularly in attendance at
such place of business during normal
working hours;
(D)The indebtedness is extended
outside of the United States by the
branch or office in connection with that
trade or business; and
(E)The financial institution does not
know or have reason to know that the
debtor is a United States person.
(5)Acquisition of indebtedness by
related party. No reporting is required
under this section in the case of a
deemed discharge of indebtedness un-
der section 108(e)(4) (relating to the
acquisition of an indebtedness by a
person related to the debtor), unless the
disposition of the indebtedness by the
creditor was made with a view to
avoiding the reporting requirements of
this section.
(6)Releases. The release of a co-
obligor is not required to be reported
under this section if the remaining
debtors remain liable for the full
amount of any unpaid indebtedness.
(7)Guarantors and sureties. Solely
for purposes of the reporting require-
ments of this section, a guarantor is not
a debtor. Thus, in the case of guaran-
teed indebtedness, reporting under this
section is not required with respect to a
guarantor, whether or not there has
been a default and demand for payment
made upon the guarantor.
(e)Additional rules—(1) Multiple
debtors—(i) In general. In the case of
indebtedness of $10,000 or more in-
curred on or after January 1, 1995, that
involves more than one debtor, a re-
porting entity is subject to the require-
ments of paragraph (a) of this section
for each debtor discharged from such
indebtedness. In the case of in-
debtedness incurred prior to January 1,
1995, and indebtedness of less than
$10,000 incurred on or after January 1,
1995, involving multiple debtors, re-
porting under this section is required
only with respect to the primary (or
first-named) debtor. Additionally, only
one return of information is required
under this section if the reporting entity
knows, or has reason to know, that co-
obligors were husband and wife living
at the same address when an indebted-
ness was incurred, and does not know
or have reason to know that such cir-
cumstances have changed at the date of
a discharge of the indebtedness. This
paragraph (e)(1) applies to discharges
of indebtedness after December 31,
1994.
(ii)Amount to be reported. In the
case of multiple debtors jointly and
severally liable on an indebtedness, the
amount of discharged indebtedness re-
quired to be reported under this section
with respect to each debtor is the total
amount of indebtedness discharged. For
this purpose, multiple debtors are pre-
sumed to be jointly and severally liable
on an indebtedness in the absence of
clear and convincing evidence to the
contrary.
(2)Multiple creditors—(i) In gen-
eral. Except as otherwise provided in
this paragraph (e)(2), if indebtedness is
owned (or treated as owned for federal
income tax purposes) by more than one
creditor, each creditor that is an appli-
cable financial entity must comply with
the reporting requirements of this sec-
tion with respect to any discharge of
indebtedness of $600 or more allocable
to such creditor. A creditor will be
considered to have complied with the
requirements of this section if a lead
bank, fund administrator, or other
designee of the creditor complies on its
behalf in any reasonable manner, such
as by filing a single return reporting
the aggregate amount of indebtedness
discharged, or by filing a return with
respect to the portion of the discharged
indebtedness allocable to the creditor.
For purposes of this paragraph (e)(2)(i),

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any reasonable method may be used to
determine the portion of discharged
indebtedness allocable to each creditor.
(ii)Partnerships. For purposes of
paragraph (e)(2)(i) of this section,
indebtedness owned by a partnership is
treated as owned by the partners.
(iii)Pass-through securitized in-
debtedness arrangement—(A) Report-
ing requirements. [Reserved]
(B)Definition. For purposes of this
paragraph (e)(2)(iii), a pass-through
securitized indebtedness arrangement is
any arrangement whereby one or more
debt obligations are pooled and held
for twenty or more persons whose
interests in the debt obligations are
undivided co-ownership interests that
are freely transferrable. Co-ownership
interests that are actively traded per-
sonal property (as defined in §1.1092-
(d)–1) are presumed to be freely
transferrable and held by twenty or
more persons.
(iv)REMICs. [Reserved]
(3)Coordination with reporting un-
der section 6050J. If, in the same
calendar year, a discharge of indebted-
ness reportable under section 6050P
occurs in connection with a transaction
also reportable under section 6050J
(relating to foreclosures and abandon-
ments of secured property), an applica-
ble financial entity need not file both a
Form 1099–A and a Form 1099–C with
respect to the same debtor. The filing
requirements of section 6050J will be
satisfied with respect to a borrower if,
in lieu of filing Form 1099–A, a Form
1099–C is filed in accordance with the
instructions for the filing of that form.
This paragraph (e)(3) applies to dis-
charges of indebtedness after December
31, 1994.
(4)Direct or indirect subsidiary. For
purposes of section 6050P(c)(1)(C), the
term direct or indirect subsidiary means
a corporation in a chain of corporations
beginning with an entity described in
section 6050P(c)(1)(A), if at least 50
percent of the total combined voting
power of all classes of stock entitled to
vote, or at least 50 percent of the total
value of all classes of stock, of such
corporation is directly owned by the
entity described in section 6050P(c)-
(1)(A), or by one or more other
corporations in the chain.
(5)Use of magnetic media. Any
return required under this section must
be filed on magnetic media to the
extent required by section 6011(e) and
the regulations thereunder. A failure to
file on magnetic media when required
constitutes a failure to file an informa-
tion return under section 6721. Any
person not required by section 6011(e)
to file returns on magnetic media may
request permission to do so under
applicable regulations and revenue
procedures.
(6)TIN solicitation requirement—(i)
In general. For purposes of reporting
under this section, a reasonable effort
must be made to obtain the correct
name/taxpayer identification number
(TIN) combination of a person whose
indebtedness is discharged. A TIN
obtained at the time an indebtedness is
incurred satisfies the requirement of
this section, unless the entity required
to file knows that such TIN is incor-
rect. If the TIN is not obtained prior to
the occurrence of an identifiable event,
it must be requested of the debtor for
purposes of satisfying the requirement
of this paragraph (e)(6).
(ii)Manner of soliciting TIN. Solic-
itations made in the manner described
in §301.6724–1(e)(1)(i) and (2) of this
chapter will be deemed to have satis-
fied the reasonable effort requirement
set forth in paragraph (e)(6)(i) of this
section. A TIN solicitation made after
the occurrence of an identifiable event
must clearly notify the debtor that the
Internal Revenue Service requires the
debtor to furnish its TIN, and that
failure to furnish such TIN may subject
the debtor to a $50 penalty imposed by
the Internal Revenue Service. A TIN
provided under this section is not re-
quired to be certified under penalties of
perjury.
(7)Recordkeeping requirements.
Any applicable financial entity required
to file a return with the Internal
Revenue Service under this section
must also retain a copy of the return, or
have the ability to reconstruct the data
required to be included on the return
under paragraph (a)(1) of this section,
for at least four years from the date
such return is required to be filed under
paragraph (a)(4) of this section.
(8)No multiple reporting. If dis-
charged indebtedness is reported under
this section, no further reporting under
this section is required for the amount
so reported, notwithstanding that a
subsequent identifiable event occurs
with respect to the same amount.
Further, no additional reporting or
Form 1099–C correction is required if
a creditor receives a payment of all or
a portion of a discharged indebtedness
reported under this section for a prior
calendar year.
(f)Requirement to furnish state-
ment—(1) In general. Any applicable
financial entity required to file a return
under this section must furnish to each
person whose name is shown on such
return a written statement that includes
the following information—
(i)The information required by para-
graph (a)(1) of this section;
(ii)The name, address, and TIN of
the applicable financial entity required
to file a return under paragraph (a) of
this section;
(iii)A legend identifying the state-
ment as important tax information that
is being furnished to the Internal
Revenue Service; and
(iv)Any other information required
by Form 1099–C or its instructions, or
current revenue procedures.
(2)Furnishing copy of Form 1099–
C. The requirement to provide a state-
ment to the debtor will be satisfied if
the applicable financial entity furnishes
copy B of the Form 1099–C or a sub-
stitute statement that complies with the
requirements of the current revenue
procedure for substitute Forms 1099.
(3)Time and place for furnishing
statement. The statement required by
this paragraph (f) must be furnished to
the debtor on or before January 31 of
the year following the calendar year in
which the identifiable event occurs.
The statement will be considered fur-
nished to the debtor if it is mailed to
the debtor’s last known address.
(g)Penalties. For penalties for
failure to comply with the requirements
of this section, see sections 6721
through 6724.
(h)Effective dates—(1) In general.
The rules in this section apply to dis-
charges of indebtedness after December
21, 1996, except paragraphs (e)(1) and
(e)(3) of this section, which apply to
discharges of indebtedness after De-
cember 31, 1994.
(2)Earlier application. Notwith-
standing the provisions of paragraph
(h)(1) of this section, an applicable
financial entity may, at its discretion,
apply any of the provisions of this
section to any discharge of indebted-
ness occurring on or after January 1,
1996, and before December 22, 1996.
§§1.6050P–0T and 1.6050P–1T
[Removed]
Par. 3. Sections 1.6050P–0T and
1.6050P–1T are removed.

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PART 602—OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION ACT
Par. 4. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
§602.101 [Amended]
Par. 5. In §602.101, paragraph (c) is
amended by removing the entry for
1.6050P–1T and adding an entry in
numerical order in the table to read
‘‘1.6050P–1........... 1545–1419’’.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved December 12, 1995.
Leslie Samuels,
Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on
January 3, 1996, 8:45 a.m., and published in
the issue of the Federal Register for January 4,
1996, 61 F.R. 262)
Section 6081.—Extensions of Time
for Filing Returns
26 CFR 1.6081–4: Automatic extension of time
for filing individual income tax returns.
T.D. 8651
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 301, and 602
Automatic Extension of Time for
Filing Individual Income Tax Returns
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Temporary regulations.
SUMMARY: This document contains
temporary regulations that reflect new
simpler procedures for an individual to
obtain an automatic extension of time
to file an individual income tax return.
The text of the temporary regulations
also serves as the text of the cross
reference notice of proposed rulemak-
ing on this subject in the Proposed
Rules section of this issue of the
Federal Register.
DATES: These regulations are effective
January 4, 1996.
For dates of applicability, see
§1.6081–4T and §301.6651–1T.
FOR FURTHER INFORMATION
CONTACT: Margaret A. Owens, (202)
622-6232 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
These regulations are being issued
without prior notice and public proce-
dure pursuant to the Administrative
Procedure Act (5 U.S.C. 553). For this
reason, the collection of information
contained in these regulations has been
reviewed and, pending receipt and
evaluation of public comments, ap-
proved by the Office of Management
and Budget under control number
1545–1479. Responses to this collec-
tion of information are required to
obtain a benefit (an automatic 4-month
extension of time to file an individual
income tax return).
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless the collection of information
displays a valid control number.
For further information concerning
the collection of information, and
where to submit comments on the col-
lection of information and the accuracy
of the estimated burden, and sugges-
tions for reducing this burden, please
refer to the preamble to the cross-
r e f e r e n c i n g n o t i c e o f p r o p o s e d
rulemaking published in the Proposed
Rules section of this issue of the
Federal Register.
Books or records relating to a
collection of information must be re-
tained as long as their contents may
become material in the administration
of any internal revenue law. Generally,
tax returns and tax return information
are confidential, as required by 26
U.S.C. 6103.
Background
This document amends the Income
Tax Regulations (26 CFR Part 1) under
section 6081 of the Internal Revenue
Code of 1986 to implement Notice 93–
22 (1993–1 C.B. 305). Notice 93–22,
released April 7, 1993, grants relief to
individuals who want an automatic
4-month extension of time to file an
individual income tax return but who
are unable to pay by the due date for
the return the tax properly estimated to
be due. The notice allows these indi-
viduals to obtain an automatic 4-month
extension of time to file their individ-
ual income tax returns for taxable years
ending on or after December 31, 1992,
by filing Form 4868, Application for
Automatic Extension of Time to File
U.S. Individual Income Tax Return,
without an accompanying remittance.
Individuals may rely on Notice 93–22
for taxable years ending on or after
December 31, 1992 and before Decem-
ber 31, 1995. Notice 93–22 also ad-
vised taxpayers that the regulations
under section 6081 will be amended to
reflect this change in the procedure for
an individual to obtain an automatic
4-month extension of time to file. In
addition, this document amends the
Regulations on Procedure and Admin-
istration (26 CFR Part 301) (relating to
an automatic extension of time for
filing an individual income tax return).
Explanation of Provisions
Under §1.6081–4, an individual re-
quired to file an income tax return is
allowed an automatic 4-month exten-
sion of time to file if (a) an application
is prepared on Form 4868, (b) the ap-
plication is signed by the individual or
a person duly authorized by the in-
dividual, (c) the application is filed on
or before the date the return is due, (d)
the application shows the full amount
properly estimated as tax, and (e) the
application is accompanied by full
remittance of the amount properly
estimated as tax that is unpaid as of the
date prescribed for the filing of the
return.
These temporary regulations provide
that individuals may obtain an auto-
matic 4-month extension of time to file
an individual income tax return without
remitting the unpaid amount of any tax
properly estimated to be due with the
application for extension of time to
file. Under these temporary regulations,
an individual’s inability to pay is not a
condition for obtaining an automatic
4-month extension. However, taxpayers
are encouraged to make payments, as
large as possible, in order to reduce
interest and penalties required by law.
In addition, these temporary regula-
tions provide that the IRS may pre-
scribe other manners for submitting an
application in lieu of a paper applica-
tion on Form 4868.

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The temporary regulations remove
the regulatory requirement that applica-
tions for an automatic 4-month exten-
sion be signed. Thus, notwithstanding
the 1995 Form 4868 instructions, an
unsigned application will be processed.
In addition, the Commissioner may
prescribe additional methods of obtain-
ing an extension of time to file that do
not require a signature.
Special Analyses
It has been determined that these
temporary regulations are not a signifi-
cant regulatory action as defined in EO
12866. Therefore, a regulatory assess-
ment is not required. It has also been
determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) and the Regulatory Flex-
ibility Act (5 U.S.C. chapter 6) do not
apply to these regulations and, there-
fore, a Regulatory Flexibility Analysis
is not required. Pursuant to section
7805(f) of the Internal Revenue Code,
a copy of these regulations will be
submitted to the Chief Counsel for
Advocacy of the Small Business Ad-
ministration for comment on their
impact on small business.
Drafting Information
The principal author of these regula-
tions is Margaret A. Owens, Office of
the Assistant Chief Counsel (Income
Tax & Accounting), IRS. However,
other personnel from the IRS and the
Treasury Department participated in
their development.
******
26 CFR Part 301
Employment taxes, Estate taxes, Ex-
cise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.
26 CFR Part 602
R e p o r t i n g a n d r e c o r d k e e p i n g
requirements.
Amendments to the Regulations
Accordingly, 26 CFR parts 1, 301,
and 602 are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:
Authority: 26 U.S.C. 7805. * * *
Par. 2. Section 1.6081–4 is amended
by revising paragraph (a) to read as
follows:
§1.6081–4 Automatic extension of
time for filing individual income tax
returns.
(a)[Reserved] For further guidance
see §1.6081–4T(a).
******
Par. 3. Section 1.6081–4T is added
to read as follows:
§1.6081–4T Automatic extension of
time for filing individual income tax
returns—taxable years ending on or
after December 31, 1995 (temporary).
(a)In general—(1) Period of exten-
sion. An individual who is required to
file an individual income tax return for
any taxable year ending on or after
December 31, 1995, will be allowed an
automatic 4-month extension of time to
file the return after the date prescribed
for filing the return provided the
requirements contained in paragraphs
(a)(2), (3), and (4) of this section are
met. In the case of an individual
described in §1.6081–5(a)(5) or (6), the
automatic 4-month extension will run
concurrently with the extension of time
to file granted pursuant to §1.6081–5.
(2)Manner for submitting an ap-
plication. An application must be
submitted—
(i)On Form 4868, Application for
Automatic Extension of Time to File
U.S. Individual Income Tax Return; or
(ii)In any other manner as may be
prescribed by the Commissioner.
(3)Time and place for filing ap-
plication. Except in the case of an
individual described in §1.6081–5(a)(5)
or (6), the application must be filed on
or before the date prescribed for filing
the individual income tax return. In the
case of an individual described in
§1.6081–5(a)(5) or (6), the application
must be filed on or before the expira-
tion of the extension of time to file
granted pursuant to §1.6081–5. The
application must be filed with the IRS
office designated in the application’s
instructions.
(4)Proper estimate of tax. An ap-
plication for extension must show the
full amount properly estimated as tax
for the taxable year.
(5)Allowance of extension. Upon
properly preparing and timely filing an
application, the 4-month extension will
be considered as allowed. Except in
undue hardship cases, no extension of
time for filing an individual income tax
return will be granted under §1.6081-1
until an automatic extension has been
allowed pursuant to the provisions of
this paragraph (a).
(b)and (c) [Reserved].
(d)Penalties. See section 6651 and
the regulations under that section for
the additions to tax for failure to file an
individual income tax return or failure
to pay the amount shown as tax on the
return. In particular, see §301.6651–1-
(c)(3) of this chapter (relating to a
presumption of reasonable cause in
certain circumstances involving an au-
tomatic extension of time for filing an
individual income tax return).
PART 301—PROCEDURE AND
ADMINISTRATION
Par. 4. The authority citation for part
301 continues to read in part as
follows:
Authority: 26 U.S.C. 7805. * * *
Par. 5. Section 301.6651–1 is
amended by revising paragraph (c)(3)
to read as follows:
§301.6651–1 Failure to file tax
return or to pay tax.
******
(c)(3) [Reserved] For further guid-
ance see §301.6651–1T (c)(3).
******
Par. 6. Section 301.6651–1T is added
to read as follows:
§301.6651–1T Failure to file tax
return or to pay tax—taxable years
ending on or after December 31,
1995 (temporary).
(a)through (c)(2) [Reserved].
(c)(3) If, for a taxable year ending
on or after December 31, 1995, an
individual taxpayer satisfies the re-
quirements of §1.6081–4T(a) of this
chapter (relating to an automatic exten-
sion of time for filing an individual
income tax return), reasonable cause
shall be presumed, for the period of the
extension of time to file, with respect
to any underpayment of tax if—

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(i)The excess of the amount of tax
shown on the individual income tax
return over the amount of tax paid on
or before the regular due date of the
return (by virtue of taxes withheld by
the employer, estimated tax payments,
and any payment with an application
for extension of time to file pursuant to
§1.6081–4T of this chapter) is no
greater than 10 percent of the amount
of tax shown on the individual income
tax return; and
(ii)Any balance due shown on the
individual income tax return is remitted
with the return.
PART 602—OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION ACT
Par. 7. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
§602.101 [Amended]
Par. 8. In §602.101, paragraph (c) is
amended by adding an entry in numeri-
cal order to the table to read ‘‘1.6081–
4T.................. 1545–1479’’.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved December 20, 1995.
Leslie Samuels,
Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on
January 3, 1996, 8:45 a.m., and published in
the issue of the Federal Register for January 4,
1996, 61 F.R. 260)
Section 7520.—Valuation Tables
The adjusted applicable federal short-term,
mid-term, and long-term rates are set forth for
the month of March 1996. See Rev. Rul. 96–15,
page 9.
Section 7872.—Treatment of Loans
with Below-Market Interest Rates
The adjusted applicable federal short-term,
mid-term, and long-term rates are set forth for
the month of March 1996. See Rev. Rul. 96–15,
page 9.

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Part III.Administrative, Procedural, and Miscellaneous
26 CFR 601.105: Examination of returns and
claims for refund, Credit, or abatement;
determination of correct tax liability.
Rev. Proc. 96–27
SECTION 1. PURPOSE
This revenue procedure publishes the
population figures for states and the
District of Columbia for use in deter-
mining the 1996 calendar year (1)
population-based component of the
state housing credit ceiling under
§ 42(h)(3)(C)(i) of the Internal Reve-
nue Code, and (2) volume cap under
§ 146.
SECTION 2. BACKGROUND
.01State Housing Credit Ceiling
(1)Section 42(h)(1) provides gen-
erally that any building (other than a
building a certain percentage of which
is financed with proceeds of tax-
exempt private activity bonds) is
eligible for the low-income housing
credit under §42 only if it receives an
allocation of a housing credit dollar
amount from the state or local housing
credit agency (state agency) of the
jurisdiction in which the building is
located.
(2)Section 42(h)(3)(A) provides
that the aggregate housing credit dollar
amount that a state agency may allo-
cate for any calendar year is the
portion of the state housing credit
ceiling (credit ceiling) allocated to the
state agency for the calendar year.
(3)Section 42(h)(3)(C) defines the
credit ceiling as an amount equal to the
sum of four components. One compo-
nent, the ‘‘population component,’’
equals $1.25 multiplied by the state
population.
(4)Section 42(h)(3)(G) provides
that for purposes of §42(h), population
is determined in accordance with
§ 146(j).
.02 Volume Cap
(1)Section 103(a) provides that
gross income does not include interest
on any state or local bond. However,
§ 103(b) provides that §103(a) does
not apply to any private activity bond
that is not a qualified bond within the
meaning of §141.
(2)Section 141(e)(2) provides that
one requirement that must be met in
order for a private activity bond to be a
‘‘qualified bond’’ is that the issue of
which the bond is a part must meet the
applicable requirements of §146.
(3)Section 146(a) provides that a
private activity bond meets the require-
ments of §146 if the aggregate face
amount of the issue of private activity
bonds of which it is a part, when added
to the aggregate face amount of tax-
exempt private activity bonds pre-
viously issued by the issuing authority
(issuing authority) during the calendar
year, does not exceed the issuing
authority’s volume cap for the calendar
year.
(4)The volume cap for any issu-
ing authority is defined by §146(b) as
a percentage of the state ceiling for the
calendar year.
(5) Section 146(d) defines the
state ceiling applicable to any state for
any calendar year after 1987 as the
greater of $50 multiplied by the state
population or $150,000,000.
(6)Section 146(j) provides that
population determinations of any state
(or issuing authority) are made with
respect to any calendar year on the
basis of the most recent census esti-
mate of the resident population of the
state (or issuing authority) released by
the Bureau of the Census before the
beginning of that calendar year.
.03 Population Figures
(1)On January 26, 1996, in press
release CB96–10, the Bureau of the
Census released resident population
estimates for the 50 states and the
District of Columbia as of July 1,
1995.
(2)The estimates released in press
release CB96–10 were not released
before the beginning of calendar year
1996. Accordingly, the estimates do not
meet the statutory requirements of
§ 146(j), and may not be used by state
agencies, states, or issuing authorities
for purposes of determining the 1996
calendar year credit ceiling or volume
cap.
(3)The most recent census esti-
mates of the resident population of the
states (or issuing authorities) released
by the Bureau of the Census before the
beginning of calendar year 1996 are
those contained in CB94–204, which
are estimates as of July 1, 1994. These
population estimates are the same
estimates published in Notice 95–8,
1995–1 C.B. 293, for use by state
agencies, states, and issuing authorities
in determining the 1995 calendar year
credit ceiling and volume cap.
SECTION 3. SCOPE
The state population figures pub-
lished in this revenue procedure are to
be used by state agencies, states, and
issuing authorities in determining the
1996 calendar year credit ceiling and
volume cap.
SECTION 4. PROCEDURE
.01For purposes of §146(j), the
state population figures to be used by
state agencies, states, and issuing au-
thorities for the 1996 calendar year are
the estimates of the resident population
of states for July 1, 1994, released by
the Bureau of the Census on December
28, 1994, in press release CB94-204.
For convenience, these estimates are
reprinted below.
Resident Population Estimates for
July 1, 1994
StatePopulation
Alabama4,219,000
Alaska606,000
Arizona4,075,000
Arkansas2,453,000
California31,431,000
Colorado3,656,000
Connecticut3,275,000
Delaware706,000
D.C.570,000
Florida13,953,000
Georgia7,055,000
Hawaii1,179,000
Idaho1,133,000
Illinois11,752,000
Indiana5,752,000
Iowa2,829,000
Kansas2,554,000
Kentucky3,827,000
Louisiana4,315,000
Maine1,240,000
Maryland5,006,000
Massachusetts6,041,000
Michigan9,496,000
Minnesota4,567,000
Mississippi2,669,000
Missouri5,278,000
Montana856,000
Nebraska1,623,000
Nevada1,457,000

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StatePopulation
New Hampshire 1,137,000
New Jersey 7,904,000
New Mexico 1,654,000
New York 18,169,000
North Carolina7,070,000
North Dakota638,000
Ohio11,102,000
Oklahoma3,258,000
Oregon3,086,000
Pennsylvania12,052,000
Rhode Island997,000
South Carolina3,664,000
South Dakota721,000
StatePopulation
Tennessee5,175,000
Texas18,378,000
Utah1,908,000
Vermont580,000
Virginia6,552,000
Washington5,343,000
West Virginia1,822,000
Wisconsin5,082,000
Wyoming476,000
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective
for determinations of population under
§ 146(j) for the 1996 calendar year.
DRAFTING INFORMATION
The principal authors of this revenue
procedure are Christopher J. Wilson of
the Office of Assistant Chief Counsel
(Passthroughs and Special Industries)
and Timothy L. Jones of the Office of
Assistant Chief Counsel (Financial In-
stitutions and Products). For further
information regarding this notice con-
tact Mr. Wilson on (202) 622-3040 (not
a toll-free call).

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291996 –23 I.R.B.
Part IV. Items of General Interest
Notice of Proposed Rulemaking
Retirement Bonds
EE–148–81
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Withdrawal of proposed
regulations.
SUMMARY: This document withdraws
proposed regulations relating to retire-
ment bonds as part of the President’s
Regulatory Reinvention Initiative.
DATES: The proposed regulations are
withdrawn January 8, 1996.
FOR FURTHER INFORMATION
CONTACT: Philip Bennet, (202)
622-3926.
SUPPLEMENTARY INFORMATION:
Background
As part of the President’s Regulatory
Reinvention Initiative, the Treasury
Department and the IRS identified
obsolete regulations that relate to prior
law, provide elections for prior years,
or are otherwise outdated due to
changes in the underlying statutory
provisions.
******
Withdrawal of Proposed Amendments
to the Regulations
Accordingly, under the authority of
26 U.S.C. 7805, proposed regulations
§1.409–1(b)(2)(i) that were published
in the Federal Register on January 23,
1984 (49 FR 2794 [EE–148–81, 1984–
1, C.B. 580]) are withdrawn.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
(Filed by the Office of the Federal Register on
January 5, 1996, 8:45 a.m., and published in
the issue of the Federal Register for January 8,
1996, 61 F.R. 552)
Notice of Proposed Rulemaking and
Notice of Public Hearing
Automatic Extension of Time for
Filing Individual Income Tax Returns
IA–41–93
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing by cross reference to temporary
regulations and notice of public
hearing.
SUMMARY: In the Rules and Regula-
tions section of this issue of the
Federal Register, the IRS is issuing
temporary regulations that reflect the
new procedures for obtaining an auto-
matic extension of time to file an
individual income tax return. The text
of the temporary regulations also serves
as the comment document for this
notice of proposed rulemaking. This
document also provides notice of a
public hearing on these proposed
regulations.
DATES: Written comments must be
received by April 1, 1996. Outlines of
topics to be discussed at the public
hearing scheduled for May 8, 1996,
beginning at 10:00 a.m. must be
received by April 1, 1996.
ADDRESSES: Send submissions to:
CC:DOM:CORP:R (IA–41–93), Room
5228, Internal Revenue Service, POB
7604, Ben Franklin Station, Wash-
ington, DC 20044. In the alternative,
submissions may be hand delivered
between the hours of 8 a.m. and 5 p.m.
to: CC:DOM:CORP:R (IA–41–93),
Courier’s Desk, Internal Revenue Serv-
ice, 1111 Constitution Avenue, NW.,
Washington, DC. The public hearing
will be held in the IRS Auditorium.
FOR FURTHER INFORMATION
CONTACT: Concerning the regula-
tions, Margaret A. Owens, 202-
622-6232 (not a toll-free number). Con-
cerning submissions and the public
hearing, Michael Slaughter, 202-
622-7190 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in this notice of proposed
rulemaking has been submitted to the
Office of Management and Budget for
review in accordance with the Paper-
work Reduction Act of 1995 (44
U.S.C. 3507).
Comments on the collection of infor-
mation should be sent to the Office of
Management and Budget, Attn: Desk
Officer for the Department of the
Treasury, Office of Information and
Regulatory Affairs, Washington, DC
20503, with copies to the Internal
Revenue Service, Attn: IRS Reports
Clearance Officer, T:FP, Washington,
DC 20224. Comments on the collection
of information should be received by
March 4, 1996.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless the collection of information
displays a valid control number.
The collection of information is in
§1.6081–4T(a). This information is re-
quired by the IRS to monitor the filing
of individual income tax returns. This
information will be used to determine
which individuals need automatic
4-month extensions of time to file. The
likely respondents are individuals or
households. Responses to this collec-
tion of information are required to
obtain a benefit (an automatic 4-month
extension of time to file an individual
income tax return).
Books or records relating to a
collection of information must be re-
tained as long as their contents may
become material in the administration
of any internal revenue law. Generally,
tax returns and tax return information
are confidential, as required by 26
U.S.C. 6103.
Estimates of the reporting burden in
this Notice of Proposed Rulemaking
will be reflected in the burden of Form
4868.
Background
The temporary regulations published
in the Rules and Regulations section of
this issue of the Federal Register

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contain amendments to the Income Tax
Regulations (26 CFR part 1) and the
Regulations on Procedure and Admin-
istration (26 CFR part 301). The
temporary regulations provide rules
relating to obtaining an automatic
4-month extension of time to file an
individual income tax return. The text
of the temporary regulations also serves
as the text of these proposed regula-
tions. The preamble to the temporary
regulations explains these proposed
regulations.
Special Analyses
It has been determined that this
notice of proposed rulemaking is not a
significant regulatory action as defined
in EO 12866. Therefore, a regulatory
assessment is not required. It also has
been determined that section 553(b) of
the Administrative Procedure Act (5
U.S.C. chapter 5) and the Regulatory
Flexibility Act (5 U.S.C. chapter 6) do
not apply to these rules, and therefore,
a Regulatory Flexibility Analysis is not
required. Pursuant to section 7805(f) of
the Internal Revenue Code, a copy of
this notice of proposed rulemaking will
be submitted to the Chief Counsel for
Advocacy of the Small Business Ad-
ministration for comment on its impact
on small business.
Comments and Public Hearing
Before these proposed regulations
are adopted as final regulations, consid-
eration will be given to any written
comments (a signed original and eight
(8) copies) that are submitted timely to
the IRS. All comments will be avail-
able for public inspection and copying.
A public hearing has been scheduled
for May 8, 1996, at 10:00 a.m., at the
IRS Auditorium. Because of access
restrictions, visitors will not be admit-
ted beyond the building lobby more
than 15 minutes before the hearing
starts.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing.
Persons who wish to present oral
comments at the hearing must submit
written comments by April 1, 1996,
and submit an outline of the topics to
be discussed and the time to be devoted
to each topic (signed original and eight
(8) copies) by April 1, 1996.
A period of 10 minutes will be
allotted to each person for making
comments.
An agenda showing the scheduling
of the speakers will be prepared after
the deadline for receiving comments
has passed. Copies of the agenda will
be available free of charge at the
hearing.
Drafting Information
The principal author of these regula-
tions is Margaret A. Owens, Office of
the Assistant Chief Counsel (Income
Tax & Accounting), IRS. However,
other personnel from the IRS and
Treasury Department participated in
their development.
******
Proposed Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and
301 are proposed to be amended as
follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:
Authority: 26 U.S.C. 7805. * * *
Par. 2. Section 1.6081-4 is amended
by:
1.Revising paragraph (a).
2.Adding paragraph (d).
The revised and added provisions
read as follows:
§1.6081–4 Automatic extension of
time for filing individual income tax
returns.
[The text of proposed paragraphs (a)
and (d) are the same as the text of
§1.6081–4T(a) and (d) published else-
where in this issue of the Federal
Register].
PART 301—PROCEDURE AND
ADMINISTRATION
Par. 3. The authority citation for
part 301 continues to read in part as
follows:
Authority: 26 U.S.C. 7805. * * *
Par. 4. In §301.6651–1, paragraph
(c)(3) is revised to read as follows:
§301.6651–1 Failure to file tax
return or to pay tax.
******
(c)(3) [The text of this proposed
paragraph (c)(3) is the same as the text
of §301.6651–1T(c)(3) published else-
where in this issue of the Federal
Register].
******
Margaret Milner Richardson,
Commissioner of Internal Revenue.
(Filed by the Office of the Federal Register on
January 3, 1996, 8:45 a.m., and published in
the issue of the Federal Register for January 4,
1996, 61 F.R. 338)
Supplemental Tables of Income Tax
Rates and Exempt Personal Service
Income Under New Income Tax
Treaties and Protocols
Announcement 96–12
The United States recently ex-
changed instruments of ratification for
new income tax treaties with France,
Portugal, and Sweden. The United
States also exchanged instruments of
ratification for new protocols with
Canada and Mexico. The effective
dates are as follows:
Canada. The provisions for taxes
withheld on interest, dividends, royal-
ties, and pensions and annuities (other
than social security benefits) are effec-
tive for amounts paid or credited after
December 31, 1995. For other taxes,
and for taxes withheld on social
security benefits, the provisions are
effective for tax years beginning after
1995.
France. The provisions for taxes
withheld on interest, dividends, and
royalties are effective for amounts paid
or credited after February 1, 1996. For
other taxes, the provisions are effective
for tax periods beginning on and after
January 1, 1996.
Mexico. The provisions under the
new protocol are effective October 26,
1995.
Portugal. The provisions of the new
treaty for taxes withheld at source are
effective for amounts paid or credited
on or after January 1, 1996. For other
taxes, the new treaty is effective for
taxable years beginning on or after
January 1, 1996.
Sweden. The provisions of the new
treaty for taxes withheld at source are
effective for amounts paid or credited
on or after January 1, 1996. For other

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taxes, the new treaty is effective for
taxable years beginning on or after
January 1, 1996.
The Internal Revenue Service pre-
pared Tables 1 and 2 below, as an aid
in determining the taxability of certain
types of income. Table 1 lists tax rates
for investment income such as divi-
dends, interest, and royalties. Table 2
lists the different kinds of personal
service income that may be fully or
partially exempt from U.S. tax. Mexico
is not included because the protocol
does not change any income tax
provisions.
These tables are similar in format to
Tables 1 and 2 in the 1995 editions of
Publication 515, Withholding of Tax on
Nonresident Aliens and Foreign Corpo-
rations, and Publication 901, U.S. Tax
Treaties. Taxpayers and withholding
agents may use these tables until the
Service revises Publications 515 and
901.
Table 1.Tax Rates for 1996 on Income Other Than Personal Service Income Under Chapter 3, Internal Revenue Code, and Income Tax Treaties
Income Code
Number123679101112131421
Country of
Residence
of PayeeDividends Paid by:
Copyright
Royalties
a
NameCode
Interest
Paid by
U.S.
Obligors
General
a,d
Interest on
Real
Property
Mortgages
a,d
Interest Paid
to a
Controlling
Foreign
Corporation
a,d
U.S.
Corpo-
ration
General
a,b,d
U.S.
Subsidiary
to Foreign
Parent
Corpora-
tion
a,b,d
Capital
Gains
a
Industrial
Royalties
a,d
Motion
Pictures
and
Television
d
Oth-
er
d
Real
Property
Income and
Natural
Resources
Royalties
c
Pensions
and
An-
nuities
Social
Secuity
Payment
l
CanadaCA1010
j
1015
e
6
e
30
k
0100301530
FranceFR00
j
015
e
5
e
0
d,g
500300
f,h
30
PortugalPO1010
j
1015
e
15
e
0
d,g
101010300
h,i
30
SwedenSW00
j
015
e
15
e
0
d,g
000300
h
30
a
Under some treaties, the reduced rates of withholding may not apply
to a foreign corporation unless a minimum percentage of its owners
are citizens or residents of the United States or the treaty country.
b
No U.S. tax is imposed on a percentage of any dividend paid by a
U.S. corporation that received at least 80% of its gross income from
an active foreign business for the 3-year period before the dividend is
declared. (See sections 871(i)(2)(B) and 881(d) of the Internal
Revenue Code.)
c
Withholding at a different rate may be required on the disposition of
a U.S. real property interest. See Publication 515.
d
The exemption or reduction in rate does not apply if the recipient has
a permanent establishment in the United States and the property
giving rise to the income is effectively connected with this permanent
establishment. The exemption or reduction in rate also does not apply
if the property giving rise to the income is effectively connected with
a fixed base in the United States from which the recipient performs
independent personal services. Even with the treaty, if the income is
not effectively connected with a trade or business in the United States,
the recipient will be considered as not having a permanent
establishment in the United States under section 894(b) of the Internal
Revenue Code.
e
The rate in column 6 applies to dividends paid by a regulated
investment company (RIC) or real estate investment trust (REIT).
However, the reduced rate applies to dividends paid by a REIT only if
the beneficial owner of the dividends is an individual holding less
than a 10% interest (25% in the case of Portugal) in the REIT.
f
A U.S. government pension paid to an individual who is a resident
and a national of France and who is not a U.S. national is exempt
from tax.
g
Exemption does not apply to gains from the sale of U.S. real
property. For the withholding tax rate on the sale of U.S. real
property, see Publication 515.
h
Exemption does not apply to U.S. government (federal, state, or
local) pensions and annuities; a 30% rate applies to these pensions and
annuities. A U.S. government pension paid to an individual who is
either (a) a resident and national of Portugal, or (b) a resident and
citizen of Sweden is exempt from tax.
i
Includes alimony.
j
Exemption or reduced rate does not apply to an excess inclusion for a
residual interest in a real estate mortgage investment conduit
(REMIC).
k
Generally, if the property was owned by the Canadian resident on
September 26, 1980, not as part of the business property of a
permanent establishment or fixed base in the U.S., the taxable gain is
limited to the appreciation after 1984. Capital gains on personal
property not belonging to a permanent establishment or fixed base of
the taxpayer in the U.S. are exempt.
l
Applies to 85% of the social security payments received from the
U.S. government. The effective rate on the total social security
payments received is 85% of the rate shown in the table. These rates
also apply to the social security equivalent portion of tier 1 railroad
retirement benefits (income code 22) received from the U.S. The
remainder of tier 1, all of tier 2, dual, and supplemental railroad
retirement benefits (income code 23) are taxed as shown in column 14
of this table.

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Table 2.Compensation for Personal Services Performed in United States Exempt from Withholding and U.S. Income Tax Under Income Tax Treaties
Country
(1)
Code
(2)
Category of Personal Services
Purpose
(3)
Maximum
Presence in U.S.
(4)
Required Employer or Payer
(5)
Maximum
Amount of
Compensation
(6)
Treaty
Article
Citation
(7)
Canada16
17
19
Independent personal services
2
Dependent personal services
Studying and training:
Remittance or allowances
15
No limit
No limit
183 days
No limit
Any contractor
Any U.S. or foreign resident
Any foreign resident
5
Any foreign resident
No limit
3
$10,000
No limit
3
No limit
XIV
XV
XV
XX
France15
16
20
17
20
18
19
Scholarship or fellowship grant
11
Independent personal services
2
Public entertainment
Dependent personal services
5,9
Public entertainment
Teaching
6,13
Studying and training:
6
Remittances or allowances
Compensation during study
or training
Compensation while gaining
experience
5 yrs.
12
No limit
No limit
183 days
No limit
2 yrs.
12
5 yrs.
12
12 consec. mos.
5 yrs.
12
12 consec. mos.
Any U.S. or foreign resident
7
Any contractor
Any contractor
Any foreign resident
Any U.S. or foreign resident
U.S. educat’l or research inst.
Any foreign resident
French resident
Other foreign or U.S. resident
French resident
10
No limit
No limit
$10,000
8
No limit
$10,000
8
No limit
No limit
$8,000
$5,000 p.a.
$8,000
21(1)
14
17
15
17
20
21(1)
21(2)
21(1)
21(2)
Portugal15
16
20
17
20
18
19
Scholarship or fellowship grant
11
Independent personal services
2
Public entertainment
Dependent personal services
5,9
Public entertainment
Teaching
6,14
Studying and training:
6
Remittances or allowances
Compensation during study or
training
Compensation while gaining
experience
5 yrs.
182 days
No limit
182 days
No limit
2 yrs.
5 yrs
12 consec. mos.
5 yrs.
12 consec. mos.
Any U.S. or foreign resident
7
Any contractor
Any contractor
Any foreign resident
Any U.S. or foreign resident
U.S. educational institution
Any foreign resident
Portuguese resident
Other foreign or U.S. resident
Portuguese resident
10
No limit
No limit
$10,000 p.a.
8
No limit
$10,000 p.a.
8
No limit
No limit
$8,000
$5,000 p.a.
$8,000
23(1)
15
19
16
19
22
23(1)
23(2)
23(1)
23(2)
Sweden16
20
17
20
19
Independent personal services
2
Public entertainment
Dependent personal services
5,9
Public entertainment
Studying and training:
Remittance or allowances
15
No limit
No limit
183 days
No limit
No limit
Any contractor
Any contractor
Any foreign resident
Any U.S. or foreign resident
Any foreign resident
No limit
$6,000
4
No limit
$6,000
4
No limit
14
18
15
18
21
1
Refers to income codes described in Publication 515 and to be
reported on Forms 1042–S.
2
Exemption does not apply to the extent income is attributable to the
recipient’s fixed U.S. base.
3
For public entertainers, the exemption does not apply if the gross
receipts, including reimbursement, are more than $15,000 for the
calendar year.
4
Exemption does not apply if gross receipts (including reimburse-
ments) exceed this amount during any 12-month period.
5
Exemption does not apply if the employee’s compensation is borne
by a permanent establishment or a fixed base that the employer has in
the United States.
6
Does not apply to compensation for research work primarily for
private benefit.
7
Grant must be from a nonprofit organization.
8
Exemption does not apply if gross receipts (or compensation for
Portugal), including reimbursements, exceed this amount. Income is
fully exempt if visit to the United States is substantially supported by
public funds of the treaty country or its political subdivisions or local
authorities.
9
Does not apply to fees of a foreign director of a U.S. corporation.
10
Applies only if training or experience is received from a person
other than alien’s employer.
11
Does not apply to payments from the National Institutes of Health
(NIH) under its Visiting Associate Program and Visiting Scientist
Program.
12
The combined period of benefits under Articles 20 and 21(1) cannot
exceed 5 years.
13
Exemption does not apply if the individual previously claimed the
benefit of this Article.
14
Exemption does not apply if the individual either (a) previously
claimed the benefit of this Article, or (b) during the immediately
preceding period, claimed the benefit of Article 23. The benefits under
Articles 22 and 23 cannot be claimed at the same time.
15
Applies only to full-time student or trainee.

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Definition of Terms
Revenue rulings and revenue proce-
dures (hereinafter referred to as ‘‘rul-
ings’’) that have an effect on previous
rulings use the following defined terms
to describe the effect:
Amplified describes a situation where
no change is being made in a prior
published position, but the prior posi-
tion is being extended to apply to a
variation of the fact situation set forth
therein. Thus, if an earlier ruling held
that a principle applied to A, and the
new ruling holds that the same princi-
ple also applies to B, the earlier ruling
is amplified. (Compare with modified,
below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in
a prior ruling is being changed.
Distinguished describes a situation
where a ruling mentions a previously
published ruling and points out an
essential difference between them.
Modified is used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but
not to B, and the new ruling holds that
it applies to both A and B, the prior
ruling is modified because it corrects a
published position. (Compare with am-
plified and clarified, above).
Obsoleted describes a previously
published ruling that is not considered
determinative with respect to future
transactions. This term is most com-
monly used in a ruling that lists
previously published rulings that are
obsoleted because of changes in law or
regulations. A ruling may also be
obsoleted because the substance has
been included in regulations subse-
quently adopted.
Revoked describes situations where
the position in the previously published
ruling 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 pub-
lished under the 1939 Code and regula-
tions. 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
period of time in separate rulings. If
If the new ruling does more than
restate the substance of a prior ruling, a
combination of terms is used. For
example, modified and superseded de-
scribes a situation where the substance
of a previously published ruling is
being changed in part and is continued
without change in part and it is desired
to restate the valid portion of the
previously published ruling in a new
ruling that is self contained. In this
case the previously published ruling is
first modified and then, as modified, is
superseded.
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 published 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
formerly used will appear in material published
in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C.—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance 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 Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

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Numerical Finding List
1
Bulletins 1996–1 through 1996–10
Announcements:
96–1, 1996–2 I.R.B. 57
96–2, 1996–2 I.R.B. 57
96–3, 1996–2 I.R.B. 57
96–4, 1996–3 I.R.B. 50
96–5, 1996–4 I.R.B. 99
96–6, 1996–5 I.R.B. 43
96–7, 1996–5 I.R.B. 44
96–8, 1996–7 I.R.B. 56
96–9, 1996–8 I.R.B. 30
96–10, 1996–8 I.R.B. 30
96–11, 1996–9 I.R.B. 11
Delegations Orders:
232 (Rev. 2), 1996–7 I.R.B. 49
239 (Rev. 1), 1996–7 I.R.B. 49
Notices:
96–2, 1996–2 I.R.B. 15
96–1, 1996–3 I.R.B. 30
96–4, 1996–4 I.R.B. 69
96–5, 1996–6 I.R.B. 22
96–6, 1996–5 I.R.B. 27
96–7, 1996–6 I.R.B. 22
96–8, 1996–6 I.R.B. 23
96–9, 1996–6 I.R.B. 26
96–10, 1996–7 I.R.B. 47
96–11, 1996–8 I.R.B. 19
96–12, 1996–10 I.R.B. 29
96–13, 1996–10 I.R.B. 29
Proposed Regulations:
DL–1–95, 1996–6 I.R.B. 28
EE–20–95, 1996–5 I.R.B. 15
EE–34–95, 1996–3 I.R.B. 49
EE–35–95, 1996–5 I.R.B. 19
EE–53–95, 1996–5 I.R.B. 23
EE–106–82, 1996–10 I.R.B. 31
IA–33–95, 1996–4 I.R.B. 99
INTL–3–95, 1996–6 I.R.B. 29
INTL–9–95, 1996–5 I.R.B. 25
PS–2–95, 1996–7 I.R.B. 50
Revenue Procedures:
96–1, 1996–1 I.R.B. 8
96–2, 1996–1 I.R.B. 60
96–3, 1996–1 I.R.B. 82
96–4, 1996–1 I.R.B. 94
96–5, 1996–1 I.R.B. 129
96–6, 1996–1 I.R.B. 151
96–7, 1996–1 I.R.B. 185
96–8, 1996–1 I.R.B. 187
96–8A, 1996–9 I.R.B. 10
1
A cumulative list of all Revenue Rulings,
Revenue Procedures, Treasury Decisions, etc.,
published in Internal Revenue Bulletins 1995–27
through 1995–52 will be found in Internal
Revenue Bulletin 1996–1, dated January 2, 1996.
Revenue Procedures—Continued
96–9, 1996–2 I.R.B. 15
96–10, 1996–2 I.R.B. 17
96–11, 1996–2 I.R.B. 18
96–12, 1996–3 I.R.B. 30
96–13, 1996–3 I.R.B. 31
96–14, 1996–3 I.R.B. 41
96–15, 1996–3 I.R.B. 41
96–16, 1996–3 I.R.B. 45
96–17, 1996–4 I.R.B. 69
96–18, 1996–4 I.R.B. 73
96–19, 1996–4 I.R.B. 80
96–20, 1996–4 I.R.B. 88
96–21, 1996–4 I.R.B. 96
96–22, 1996–5 I.R.B. 27
96–23, 1996–5 I.R.B. 27
96–24, 1996–5 I.R.B. 28
96–25, 1996–8 I.R.B. 19
96–26, 1996–8 I.R.B. 22
Revenue Rulings:
96–1, 1996–1 I.R.B. 7
96–2, 1996–2 I.R.B. 5
96–3, 1996–2 I.R.B. 14
96–6, 1996–2 I.R.B. 8
96–4, 1996–3 I.R.B. 16
96–5, 1996–3 I.R.B. 29
96–7, 1996–3 I.R.B. 12
96–8, 1996–4 I.R.B. 62
96–9, 1996–4 I.R.B. 5
96–10, 1996–4 I.R.B. 27
96–11, 1996–4 I.R.B. 28
96–12, 1996–9 I.R.B. 4
96–13, 1996–10 I.R.B. 19
96–14, 1996–6 I.R.B. 20
Treasury Decisions:
8630, 1996–3 I.R.B. 19
8631, 1996–3 I.R.B. 7
8632, 1996–4 I.R.B. 6
8633, 1996–4 I.R.B. 20
8634, 1996–3 I.R.B. 17
8635, 1996–3 I.R.B. 5
8636, 1996–4 I.R.B. 64
8637, 1996–4 I.R.B. 29
8638, 1996–5 I.R.B. 5
8639, 1996–5 I.R.B. 12
8640, 1996–2 I.R.B. 10
8641, 1996–6 I.R.B. 4
8642, 1996–7 I.R.B. 4
8644, 1996–7 I.R.B. 16
8645, 1996–8 I.R.B. 4
8646, 1996–8 I.R.B. 10
8647, 1996–9 I.R.B. 7
8648, 1996–10 I.R.B. 23
8649, 1996–9 I.R.B. 5
8650, 1996–10 I.R.B. 5

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Finding List of Current Action on
Previously Published Items
1
Bulletins 1996–1 through 1996–10
*Denotes entry since last publication
Delegation Orders:
232 (Rev. 1)
Superseded by
232 (Rev. 2), 1996–7 I.R.B. 49
239
Amended by
239 (Rev. 1), 1996–7 I.R.B. 49
Revenue Procedures:
65–17
Modified by
96–14, 1996–3 I.R.B. 41
66–49
Modified by
96–15, 1996–3 I.R.B. 41
88–32
Obsoleted by
96–15, 1996–3 I.R.B. 41
88–33
Obsoleted by
96–15, 1996–3 I.R.B. 41
89–19
Superseded by
96–17, 1996–4 I.R.B. 69
89–48
Superseded in part by
96–17, 1996–4 I.R.B. 69
91–22
Modified by
96–1, 1996–1 I.R.B. 8
91–22
Amplified by
96–13, 1996–3 I.R.B. 31
91–23
Superseded by
96–13, 1996–3 I.R.B. 31
91–24
Superseded by
96–14, 1996–3 I.R.B. 41
91–26
Superseded by
96–13, 1996–3 I.R.B. 31
92–20
Modified by
96–1, 1996–1 I.R.B. 8
1
A cumulative finding list for previously
published items mentioned in Internal Revenue
Bulletins 1995–27 through 1995–52 will be
found in Internal Revenue Bulletin 1996–1, dated
January 2, 1996.
Revenue Procedures—Continued
92–85
Modified by
96–1, 1996–1 I.R.B. 8
93–16
Superseded by
96–11, 1996–2 I.R.B. 18
93–46
Superseded in part by
96–17, 1996–4 I.R.B. 69
Superseded by
96–18, 1996–4 I.R.B. 73
94–18
Superseded in part by
96–17, 1996–4 I.R.B. 69
Superseded by
96–18, 1996–4 I.R.B. 73
94–59
Superseded in part by
96–17, 1996–4 I.R.B. 69
Superseded by
96–18, 1996–4 I.R.B. 73
95–1
Superseded by
96–1, 1996–1 I.R.B. 8
95–2
Superseded by
96–2, 1996–1 I.R.B. 60
95–3
Superseded by
96–3, 1996–1 I.R.B. 82
95–4
Superseded by
96–4, 1996–1 I.R.B. 94
95–5
Superseded by
96–5, 1996–1 I.R.B. 129
95–6
Superseded by
96–6, 1996–1 I.R.B. 151
95–7
Superseded by
96–7, 1996–1 I.R.B. 185
95–8
Superseded by
96–8, 1996–1 I.R.B. 187
95–13
Superseded by
96–20, 1996–4 I.R.B. 88
Revenue Procedures—Continued
95–20
Superseded by
96–24, 1996–5 I.R.B. 28
95–50
Superseded by
96–3, 1996–1 I.R.B. 82
96–3
Amplified by
96–12, 1996–3 I.R.B. 30
Revenue Rulings:
66–307
Obsoleted by
96–3, 1996–2 I.R.B. 14
72–437
Modified by
96–13, 1996–3 I.R.B. 31
80–80
Obsoleted by
96–3, 1996–2 I.R.B. 14
82–80
Modified by
96–14, 1996–3 I.R.B. 41
92–19
Supplemented in part
96–2, 1996–2 I.R.B. 5
92–75
Clarified by
96–13, 1996–3 I.R.B. 31
95–10
Supplemented and superseded by
96–4, 1996–3 I.R.B. 16
95–11
Supplemented and superseded by
96–5, 1996–3 I.R.B. 29

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NOTES

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NOTES

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NOTES