Internal Revenue Bulletin 2000-30 (PDF rendition): IRS Announcements

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

INCOME TAX
T.D. 8889, page 124.
Final regulations under section 894 of the Code clarify the
availability of treaty benefits with respect to an item of U.S.
source income paid to an entity that is treated as fiscally
transparent under the laws of one or more jurisdictions (in-
cluding the United States) with respect to that item of in-
come. These regulations provide rules for determining
whether an entity is fiscally transparent under the laws of a
jurisdiction and for determining whether such income is de-
rived by persons entitled to treaty benefits.
T.D. 8890, page 122.
Final regulations under section 671 of the Code define the
term “grantor” for purposes of determining who is the
grantor of a trust.
Notice 2000–39, page 132.
Individual retirement accounts; net income calcula-
tion. This notice provides a new method for calculating net
income attributable to IRA contributions returned pursuant to
section 408(d)(4) of the Code and to IRA contributions
recharacterized pursuant to section 408A(d)(6).
EMPLOYEE PLANS
Notice 2000–40, page 134.
Weighted average interest rate update.The weighted
average interest rate for July 2000 and the resulting permis-
sible range of interest rates used to calculate current liability
for purposes of the full funding limitation of section 412(c)(7)
of the Code are set forth.
EXEMPT ORGANIZATIONS
Announcement 2000–61, page 136.
A list is provided of organizations now classified as private
foundations.
Announcement 2000–62, page 137.
A list is provided of organizations that no longer qualify as
organizations to which contributions are deductible under
section 170 of the Code.
ADMINISTRATIVE
Announcement 2000–58, page 135.
This document announces the terms and conditions under
which the Service will settle taxpayer claims for the Targeted
Jobs Tax Credit in circumstances where the taxpayer re-
quested but never received certification because the certifi-
cation program shut down after the credit expired on De-
cember 31, 1994.
Internal Revenue
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Bulletin No. 2000–30
July 24, 2000
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.
Department of the Treasury
Internal Revenue Service
Finding Lists begin on page ii.

July 24, 20002000–30 I.R.B.
The Internal Revenue Bulletin is the authoritative instrument
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Introduction
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For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

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2000–30 I.R.B.July 24, 2000

July 24, 20001222000–30 I.R.B.
Section 671.—Trust Income,
Deductions, and Credits
Attributable to Grantors and
Others As Substantial Owners
26 CFR 1.671–2: Applicable principles.
T.D. 8890
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
Definition of Grantor
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regula-
tions.
SUMMARY: This document contains
final regulations defining the term
grantorfor purposes of part I of subchap-
ter J, chapter 1 of the Internal Revenue
Code. These regulations provide neces-
sary guidance in determining who is the
grantor of a trust in applying those Code
sections. These regulations affect trusts
and any person creating or funding a trust.
DATES: Effective Date: These regula-
tions are effective July 5, 2000.
Applicability Dates: For dates of ap-
plicability of §1.671–2(e), see
§1.671–2(e)(7).
FOR FURTHER INFORMATION CON-
TACT: James A. Quinn at (202) 622-
3060 (not a toll-free number).
SUPPLEMENTARY INFORMATION
Background
On June 5, 1997, the Treasury Depart-
ment and the IRS published a notice of
proposed rulemaking (REG–252487–96,
1997–1 C.B. 806) under section 671 of
the Internal Revenue Code (Code) in the
Federal Register(62 F.R. 30785). Com-
ments responding to the notice were re-
ceived and a public hearing was held on
August 27, 1997. After consideration of
the comments, the proposed regulations
under section 671 were re-issued as pro-
posed (64 F.R. 43323) and temporary reg-
ulations (64 F.R. 43267) on August 10,
1999.
The proposed and temporary regulations
provide a definition of grantor for purposes
of part I of subchapter J, chapter 1 of the
Code. No comments were received in re-
sponse to the Notice of Proposed Rulemak-
ing published on August 10, 1999, in the
Federal Register, and no one requested to
speak at the public hearing scheduled for
November 2, 1999. Accordingly, the pub-
lic hearing was canceled on October 28,
1999 (64 F.R. 58006). This document fi-
nalizes the proposed regulations and re-
moves the temporary regulations.
Special Analyses
It has been determined that this Treasury
decision is not a significant regulatory ac-
tion as defined in Executive Order 12866.
Therefore, a regulatory assessment is not
required. It also has been determined that
section 553(b) of the Administrative Pro-
cedure Act (5 U.S.C. chapter 5) does not
apply to these regulations, and, because the
regulations do not impose a collection of
information on small entities, the Regula-
tory Flexibility Act (5 U.S.C. chapter 6)
does not apply. Pursuant to section 7805(f)
of the Code, the notice of proposed rule-
making preceding these regulations was
submitted to the Small Business Adminis-
tration for comment on the regulations’ im-
pact on small business.
Drafting Information
The principal author of these regula-
tions is James A. Quinn of the Office of
the Assistant Chief Counsel
(Passthroughs and Special Industries).
However, other personnel from the IRS
and Treasury Department participated in
their development.
* * * * *
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by removing the entry
for section 1.671–2T and adding an entry
in numerical order to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Section 1.671–2 also issued under 26
U.S.C. 643(a)(7) and 672(f)(6). * * *
§1.643(h)–1 [Amended]
Par. 2. Section 1.643(h)–1 is amended
as follows:
1. In paragraph (a)(2)(i) the language
“§1.671–2T(e)(2)” is removed, and
“§1.671–2(e)(2)” is added in its place.
2. In paragraph (b)(1) the language
“§1.671–2T(e)(2)” is removed, and
“§1.671–2(e)(2)” is added in its place.
3. In paragraph (b)(2) the language
“§1.671–2T(e)” is removed, and
“§1.671–2(e)” is added in its place.
4. In paragraph (g) Example 1the lan-
guage “§1.671–2T(e)(2)” is removed, and
“§1.671–2(e)(2)” is added in its place.
Par. 3. Section 1.671–2(e) is revised to
read as follows:
§1.671–2 Applicable principles.
* * * * *
(e)(1) For purposes of part I of sub-
chapter J, chapter 1 of the Internal Rev-
enue Code, a grantor includes any person
to the extent such person either creates a
trust, or directly or indirectly makes a gra-
tuitous transfer (within the meaning of
paragraph (e)(2) of this section) of prop-
erty to a trust. For purposes of this sec-
tion, the term propertyincludes cash. If a
person creates or funds a trust on behalf
of another person, both persons are
treated as grantors of the trust. (See sec-
tion 6048 for reporting requirements that
apply to grantors of foreign trusts.) How-
ever, a person who creates a trust but
makes no gratuitous transfers to the trust
is not treated as an owner of any portion
of the trust under sections 671 through
677 or 679. Also, a person who funds a
trust with an amount that is directly reim-
bursed to such person within a reasonable
period of time and who makes no other
transfers to the trust that constitute gratu-
itous transfers is not treated as an owner
of any portion of the trust under sections
671 through 677 or 679. See also
§1.672(f)–5(a).
(2)(i) A gratuitous transfer is any trans-
fer other than a transfer for fair market
value. A transfer of property to a trust
may be considered a gratuitous transfer
Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

2000–30 I.R.B.123July 24, 2000
without regard to whether the transfer is
treated as a gift for gift tax purposes.
(ii) For purposes of this paragraph (e),
a transfer is for fair market value only to
the extent of the value of property re-
ceived from the trust, services rendered
by the trust, or the right to use property of
the trust. For example, rents, royalties,
interest, and compensation paid to a trust
are transfers for fair market value only to
the extent that the payments reflect an
arm’s length price for the use of the prop-
erty of, or for the services rendered by, the
trust. For purposes of this determination,
an interest in the trust is not property re-
ceived from the trust. In addition, a per-
son will not be treated as making a trans-
fer for fair market value merely because
the transferor recognizes gain on the
transaction. See, for example, section
684 regarding the recognition of gain on
certain transfers to foreign trusts.
(iii) For purposes of this paragraph (e),
a gratuitous transfer does not include a
distribution to a trust with respect to an
interest held by such trust in either a trust
described in paragraph (e)(3) of this sec-
tion or an entity other than a trust. For ex-
ample, a distribution to a trust by a corpo-
ration with respect to its stock described
in section 301 is not a gratuitous transfer.
(3) A grantor includes any person who
acquires an interest in a trust from a
grantor of the trust if the interest acquired
is an interest in certain investment trusts
described in §301.7701–4(c) of this chap-
ter, liquidating trusts described in
§301.7701–4(d) of this chapter, or envi-
ronmental remediation trusts described in
§301.7701–4(e) of this chapter.
(4) If a gratuitous transfer is made by a
partnership or corporation to a trust and is
for a business purpose of the partnership
or corporation, the partnership or corpora-
tion will generally be treated as the grantor
of the trust. For example, if a partnership
makes a gratuitous transfer to a trust in
order to secure a legal obligation of the
partnership to a third party unrelated to the
partnership, the partnership will be treated
as the grantor of the trust. However, if a
partnership or a corporation makes a gra-
tuitous transfer to a trust that is not for a
business purpose of the partnership or cor-
poration but is for the personal purposes of
one or more of the partners or sharehold-
ers, the gratuitous transfer will be treated
as a constructive distribution to such part-
ners or shareholders under federal tax
principles and the partners or the share-
holders will be treated as the grantors of
the trust. For example, if a partnership
makes a gratuitous transfer to a trust that is
for the benefit of a child of a partner, the
gratuitous transfer will be treated as a dis-
tribution to the partner under section 731
and a subsequent gratuitous transfer by the
partner to the trust.
(5) If a trust makes a gratuitous trans-
fer of property to another trust, the
grantor of the transferor trust generally
will be treated as the grantor of the trans-
feree trust. However, if a person with a
general power of appointment over the
transferor trust exercises that power in
favor of another trust, then such person
will be treated as the grantor of the trans-
feree trust, even if the grantor of the trans-
feror trust is treated as the owner of the
transferor trust under subpart E of part I,
subchapter J, chapter 1 of the Internal
Revenue Code.
(6) The following examples illustrate the
rules of this paragraph (e). Unless other-
wise indicated, all trusts are domestic trusts,
and all other persons are United States per-
sons. The examples are as follows:
Example 1. A creates and funds a trust, T, for the
benefit of her children. B subsequently makes a gra-
tuitous transfer to T. Under paragraph (e)(1) of this
section, both A and B are grantors of T.
Example 2. A makes an investment in a fixed in-
vestment trust, T, that is classified as a trust under
§301.7701–4(c)(1) of this chapter. A is a grantor of
T. B subsequently acquires A’s entire interest in T.
Under paragraph (e)(3) of this section, B is a grantor
of T with respect to such interest.
Example 3. A, an attorney, creates a foreign trust,
FT, on behalf of A’s client, B, and transfers $100 to
FT out of A’s funds. A is reimbursed by B for the
$100 transferred to FT. The trust instrument states
that the trustee has discretion to distribute the in-
come or corpus of FT to B and B’s children. Both A
and B are treated as grantors of FT under paragraph
(e)(1) of this section. In addition, B is treated as the
owner of the entire trust under section 677. Because
A is reimbursed for the $100 transferred to FT on
behalf of B, A is not treated as transferring any prop-
erty to FT. Therefore, A is not an owner of any por-
tion of FT under sections 671 through 677 regardless
of whether A retained any power over or interest in
FT described in sections 673 through 677. Further-
more, A is not treated as an owner of any portion of
FT under section 679. Both A and B are responsible
parties for purposes of the requirements in section
6048.
Example 4. A creates and funds a trust, T. A does
not retain any power or interest in T that would
cause A to be treated as an owner of any portion of
the trust under sections 671 through 677. B holds an
unrestricted power, exercisable solely by B, to with-
draw certain amounts contributed to the trust before
the end of the calendar year and to vest those
amounts in B. B is treated as an owner of the por-
tion of T that is subject to the withdrawal power
under section 678(a)(1). However, B is not a grantor
of T under paragraph (e)(1) of this section because B
neither created T nor made a gratuitous transfer to T.
Example 5. A transfers cash to a trust, T, through
a broker, in exchange for units in T. The units in T
are not property for purposes of determining
whether A has received fair market value under
paragraph (e)(2)(ii) of this section. Therefore, A has
made a gratuitous transfer to T, and, under paragraph
(e)(1) of this section, A is a grantor of T.
Example 6. A borrows cash from T, a trust. A has
not made any gratuitous transfers to T. Arm’s length
interest payments by A to T will not be treated as
gratuitous transfers under paragraph (e)(2)(ii) of this
section. Therefore, under paragraph (e)(1) of this
section, A is not a grantor of T with respect to the in-
terest payments.
Example 7. A, B’s brother, creates a trust, T, for
B’s benefit and transfers $50,000 to T. The trustee
invests the $50,000 in stock of Company X. C, B’s
uncle, purportedly sells property with a fair market
value of $1,000,000 to T in exchange for the stock
when it has appreciated to a fair market value of
$100,000. Under paragraph (e)(2)(ii) of this section,
the $900,000 excess value is a gratuitous transfer by
C. Therefore, under paragraph (e)(1) of this section,
A is a grantor with respect to the portion of the trust
valued at $100,000, and C is a grantor of T with re-
spect to the portion of the trust valued at $900,000.
In addition, A or C or both will be treated as the
owners of the respective portions of the trust of
which each person is a grantor if A or C or both re-
tain powers over or interests in such portions under
sections 673 through 677.
Example 8. G creates and funds a trust, T1, for
the benefit of G’s children and grandchildren. After
G’s death, under authority granted to the trustees in
the trust instrument, the trustees of T1 transfer a por-
tion of the assets of T1 to another trust, T2, and re-
tain a power to revoke T2 and revest the assets of T2
in T1. Under paragraphs (e)(1) and (5) of this sec-
tion, G is the grantor of T1 and T2. In addition, be-
cause the trustees of T1 have retained a power to
revest the assets of T2 in T1, T1 is treated as the
owner of T2 under section 678(a).
Example 9. G creates and funds a trust, T1, for
the benefit of B. G retains a power to revest the as-
sets of T1 in G within the meaning of section 676.
Under the trust agreement, B is given a general
power of appointment over the assets of T1. B exer-
cises the general power of appointment with respect
to one-half of the corpus of T1 in favor of a trust, T2,
that is for the benefit of C, B’s child. Under para-
graph (e)(1) of this section, G is the grantor of T1,
and under paragraphs (e)(1) and (5) of this section,
B is the grantor of T2.
(7) The rules of this section are applic-
able to any transfer to a trust, or transfer
of an interest in a trust, on or after August
10, 1999.
§1.671–2T [Removed]
Par. 4. Section 1.671–2T is removed.

§1.672(f)–2 [Amended]
Par. 5. Section 1.672(f)–2 is amended
as follows:
1. In paragraph (b)(1) the language
“§1.671–2T(e)(2)” is removed, and
“§1.671–2(e)(2)” is added in its place.
2. In paragraph (d) Example 1the lan-
guage “§1.671–2T(e)” is removed, and
“§1.671–2(e)” is added in its place.
§1.672(f)–3 [Amended]
Par. 6. Section 1.672(f)–3 is amended
as follows:
1. In paragraph (a)(1) the language
“§1.671–2T(e)” is removed, and
“§1.671–2(e)” is added in its place.
2. In paragraph (a)(4) Example 2the
language “§1.671–2T(e)” is removed, and
“§1.671–2(e)” is added in its place.
3. In paragraph (b)(1) the language
“§1.671–2T(e)(2)” is removed, and
“§1.671–2(e)(2)” is added in its place.
4. In paragraph (b)(1) the language
“§1.671–2T(e)” is removed, and
“§1.671–2(e)” is added in its place.
5. In paragraph (b)(4) Example 1the
language “§1.671–2T(e)” is removed, and
“§1.671–2(e)” is added in its place.
6. In paragraph (b)(4) Example 2the
language “§1.671–2T(e)” is removed and
“§1.671–2(e)” is added in its place.
§1.672(f)–4 [Amended]
Par. 7. Section 1.672(f)–4 is amended
as follows:
1. In paragraph (c)(1) the language
“§1.671–2T(e)(2)” is removed, and
“§1.671–2(e)(2)” is added in its place.
2. In paragraph (c)(1) the language
“§1.671–2T(e)(4)” is removed, and
“§1.671–2(e)(4)” is added in its place.
3. In paragraph (d)(1) the language
“§1.671–2T(e)(2)(ii)” is removed, and
“§1.671–2(e)(2)(ii)” is added in its place.
4. In paragraph (g) Example 4the lan-
guage “§1.671–2T(e)” is removed, and
“§1.671–2(e)” is added in its place.
§1.672(f)–5 [Amended]
Par. 8. In §1.672(f)–5, paragraph (a)(1)
is amended by removing the language
“§1.671–2T(e)(2)” and adding
“§1.671–2(e)(2)” in its place.
Robert E. Wenzel,
Deputy Commissioner
of Internal Revenue.
Approved June 28, 2000.
Jonathan Talisman,
Deputy Assistant Secretary
of the Treasury.
(Filed by the Office of the Federal Register on July
3, 2000, 8:45 a.m., and published in the issue of the
Federal Register for July 5, 2000, 65 F.R. 41332)
Section 894.—Income Affected
by Treaty
26 CFR 1.894–1: Income affected by treaty.
T.D. 8889
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
Guidance Regarding Claims for
Certain Income Tax Convention
Benefits
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations relating to treaty with-
holding rates for items of income received
by entities that are fiscally transparent in
the United States and/or a foreign juris-
diction. The regulations affect the deter-
mination of tax treaty benefits available to
foreign persons with respect to such items
of income.
DATES: Effective Dates: These regula-
tions are effective June 30, 2000.
Applicability Dates: These regulations
apply to items of income paid on or after
June 30, 2000.
FOR FURTHER INFORMATION CON-
TACT: Shawn R. Pringle, (202) 622-3850
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains final regula-
tions relating to the Income Tax Regula-
tions (CFR part 1) under section 894 of
the Internal Revenue Code (Code). On
June 30, 1997, the IRS and Treasury is-
sued temporary regulations (T.D. 8722,
1997–2 C.B. 81) in the Federal Register
(62 F.R. 35673, as corrected at 62 F.R.
46876, 46877) under section 894 of the
Code relating to eligibility for benefits
under income tax treaties for payments to
entities. A notice of proposed rulemaking
(REG–104893–97, 1997–2 C.B. 646)
cross-referencing the temporary regula-
tions was also published in the same issue
of the Federal Register(62 F.R. 35755).
Need for Changes
Since the publication of T.D. 8722 and
proposed regulation §1.894(d)(REG–
104893–97, 62 F.R. 35755), the IRS and
Treasury have received numerous com-
ments. This Treasury decision contains
changes made in response to some of
those comments.
Explanation of Provisions
I.General
These final section 894 regulations
clarify the availability of treaty benefits
with respect to an item of U.S. source in-
come paid to an entity that is treated as
fiscally transparent under the laws of one
or more jurisdictions (including the
United States) with respect to that item of
income. An entity that is treated as fis-
cally transparent in one jurisdiction but
not another is referred to as a hybrid en-
tity. If an item of U.S. source income is
paid to a hybrid entity, the United States
may regard the entity as fiscally transpar-
ent with respect to the item of income and
the foreign treaty jurisdiction may regard
the entity as deriving the item of income.
Alternatively, the United States may re-
gard the entity as deriving the item of in-
come under U.S. tax principles, but a for-
eign treaty jurisdiction may regard the
entity as fiscally transparent and may
therefore regard the interest holders as de-
riving the item of income. This dual clas-
sification may give rise to inappropriate
and unintended results under tax treaties,
such as double non–taxation or double
taxation of the item of income, unless the
tax treaties are interpreted to resolve the
conflict of laws.
These final regulations clarify how to
apply U.S. treaties when the entity classi-
fication law of the United States and a
foreign treaty jurisdiction conflict by pro-
viding that a reduced treaty rate for an
item of U.S. source income is available
only if the income is derived by a foreign
recipient resident in the applicable treaty
July 24, 20001242000–30 I.R.B.

jurisdiction. This general rule, which has
been simplified but not substantially
changed from the rule contained in the
temporary and proposed section 894 regu-
lations, is discussed in greater detail
below.
These final regulations are fully consis-
tent with existing U.S. treaties. They rely
on the basic principle that tax treaties are
intended to relieve double taxation or ex-
cessive taxation. Accordingly, the United
States and its treaty partners agree to cede
part or all of their taxation rights on in-
come arising from sources within their re-
spective borders on the mutual under-
standing that the other party is asserting
tax jurisdiction over the items of income.
This objective is generally achieved
through treaty provisions that limit or
eliminate the tax that the source state may
impose on income arising within its bor-
ders to the extent that the income is con-
sidered to be derived by a resident of the
other jurisdiction. In general, an item of
income will be considered derived by a
resident for treaty purposes only when the
residence country is asserting taxing juris-
diction over the item of income. How-
ever, the source state does not necessarily
require, as a condition for ceding its tax-
ing jurisdiction, that the income actually
be taxed in the residence state or taxed at
a rate commensurate with the rate im-
posed in the source state. The source
state and the residence state may come to
different conclusions regarding the appro-
priate taxation principles that apply to a
particular type of taxpayer or a particular
type of income. Such differences reflect
how each state has decided to assert its
taxing jurisdiction over that taxpayer or
item of income and may or may not affect
the source state’s willingness to forego its
taxing rights in whole or in part during the
treaty negotiation process.
The approach adopted in these final
regulations is consistent with the evolving
multilateral consensus among the member
countries of the Organization for Eco-
nomic Cooperation and Development
(OECD) on the appropriate method for
source countries to follow to determine if
they should provide treaty benefits on
items of income paid to fiscally transpar-
ent entities, particularly when an entity
classification conflict exists between the
source and residence states. This evolv-
ing multilateral consensus is described in
greater detail in the OECD report, “The
Application of the OECD Model Tax
Convention to Partnerships” (OECD Part-
nership Report). The report generally
provides that a source state is required to
grant treaty benefits on income paid to an
entity only if the income is considered to
be derived by a resident of a treaty partner
for purposes of the treaty partner’s tax
laws. IRS and Treasury will continue to
coordinate these issues with U.S. tax
treaty partners both bilaterally and multi-
laterally to resolve substantive issues aris-
ing from application of the principles set
forth in the section 894 regulations and
the OECD Partnership Report.
These regulations apply with respect to
all U.S. income tax treaties regardless of
whether such treaties contain partnership
provisions, unless the competent authori-
ties agree otherwise. As with the pro-
posed and temporary regulations, the final
regulations address only the treatment of
U.S. source income that is not effectively
connected with the conduct of a U.S.
trade or business. The IRS and Treasury
may issue additional regulations address-
ing the availability of other tax treaty ben-
efits, such as the application of business
profits provisions, with respect to the in-
come of fiscally transparent entities, par-
ticularly where a conflict in entity classi-
fication exists.
II. Objective Versus Subjective
Regulatory Approach
The temporary and proposed section
894 regulations adopted an objective ap-
proach to determining whether the United
States should grant treaty benefits on U.S.
source items of income paid to entities.
Application of the regulations did not turn
on whether there existed a tax avoidance
motive for choosing a particular transac-
tion or structure.
Commentators recommended a nar-
rower approach that would deny treaty
benefits on items of income paid to an en-
tity only if the entity served a tax avoid-
ance purpose. As part of this approach,
commentators requested implementation
of a ruling procedure that could be used to
claim treaty benefits by rebutting any
deemed tax avoidance motive for the
items of income paid to an entity. This
suggestion was not adopted. These final
regulations are intended to provide objec-
tive rules regarding eligibility for treaty
benefits on certain items of U.S. source
income paid to entities. Although a ruling
procedure was not adopted, taxpayers
may still invoke the Mutual Agreement
Procedures under an applicable treaty in
appropriate circumstances.
III. Simplified Standard For Determining
When U.S. Source Income is Derived by a
Treaty Resident
The proposed and temporary regula-
tions provided that the tax imposed by
sections 871(a), 881(a), 1461, and
4948(a) on an item of income received by
an entity is eligible for reduction under
the terms of an income tax treaty to which
the United States is a party if such item of
income is treated as derived by a resident
of an applicable treaty jurisdiction, such
resident is a beneficial owner of the item
of income, and all other applicable re-
quirements for benefits under the treaty
are satisfied. The proposed and tempo-
rary regulations further provided that an
item of income received by an entity is
treated as derived by a resident only to the
extent the item of income is subject to tax
in the hands of a resident of such jurisdic-
tion. Numerous comments were received
stating that this general rule needed clari-
fication. As a result, the IRS and Treasury
are eliminating the use of the terms bene-
ficial ownership and subject to tax from
the general rule, as described in greater
detail below.
A. Beneficial ownership
Commentators requested clarification
regarding the relationship between bene-
ficial owner and the §1.881–3 anti-con-
duit regulations issued under the authority
of section 7701(l). The anti-conduit rules
under section 7701(l) are incorporated
into the U.S. determination of beneficial
owner. They are not separate additional
requirements.
The concept of beneficial owner was
included in the proposed regulations to
explain the circumstances under which a
hybrid entity may beneficially own an
item of income for purposes of an income
tax treaty, in light of the then proposed
withholding regulations under
§1.1441–1(c)(6)(ii)(B). However, the de-
finition of beneficial owner in
§1.1441–1(c)(6) of the amended final reg-
ulations (T.D. 8881, 2000–23 I.R.B 1158)
2000–30 I.R.B.125July 24, 2000

does not apply to claims for reduced with-
holding under an income tax treaty. Ac-
cordingly, because there is no longer a
need to clarify the meaning of the term
under the section 1441 regulations in the
treaty context, these final regulations no
longer provide specific rules for this de-
termination. The concept of beneficial
owner nevertheless remains an important
condition for claiming tax treaty benefits
that is determined under U.S. tax princi-
ples, including the anti-conduit rules.
B. Subject to tax
Commentators suggested that the term
subject to tax in the proposed and tempo-
rary regulations was ambiguous and could
be misinterpreted. Commentators sug-
gested that the term subject to tax could
be interpreted as requiring that an actual
tax be paid rather than requiring an exer-
cise of taxing jurisdiction by the applica-
ble treaty jurisdiction, whether or not
there is an actual tax paid. Commentators
suggested that such an interpretation
would lead to anomalous results, for ex-
ample, in cases when the applicable treaty
jurisdiction provides an exemption from
income for U.S. source dividends under
its tax laws.
The IRS and Treasury agree that the
term subject to tax could cause uninten-
tional confusion and that a more direct
and simpler way of ensuring that an item
of income is subject to the taxing jurisdic-
tion of the residence country is to deter-
mine if the item of income is derived by a
resident of a treaty jurisdiction. The con-
cept of derived by a resident is a more
useful surrogate for the concept of subject
to the taxing jurisdiction of the residence
state, the necessary prerequisite for the
grant of treaty benefits on an item of in-
come.
C. New general rule based on “derived
by” standard
The regulations now provide three spe-
cific situations in which income is derived
by a resident of a treaty jurisdiction, and
thus considered subject to the taxing juris-
diction of the residence jurisdiction and
eligible for treaty benefits.
In the first situation, an item of income
paid to an entity is considered to be de-
rived by the entity if the entity is not fis-
cally transparent with respect to the item
of income under the laws of the entity’s
jurisdiction. The entity’s jurisdiction is
generally the place of the entity’s organi-
zation, although it may be the place of
management and control of the entity if it
is a resident in a jurisdiction by reason of
such factors.
In the second situation, regardless of
whether the entity is found to be fiscally
transparent with respect to the item of in-
come under the laws of the entity’s juris-
diction, an interest holder in the entity
may derive the item of income if that in-
terest holder can establish that, under the
laws of the jurisdiction in which the inter-
est holder is a resident, the entity is fis-
cally transparent with respect to the item
of income. Under this test, the interest
holder itself must not be considered fis-
cally transparent with respect to the item
of income under the laws of its jurisdic-
tion in order to claim the treaty benefit of
that jurisdiction.
In the third situation, an item of income
paid to a type of entity specifically listed
in a treaty as a resident of that treaty juris-
diction is treated as derived by a resident
of that jurisdiction. The reason for this
rule is that the two treaty partners reached
an explicit agreement on the appropriate
treatment of that entity and treaty benefits
accordingly should be provided on items
of income paid to it.
In some circumstances, both the entity
and the interest holders in the entity will
be treated as deriving the item of income
under the foregoing tests. In that event,
both the interest holder and the entity may
be entitled to treaty benefits if all other
conditions are satisfied. See
§1.1441–6(b)(2) for procedures for dual
rate claims under separate income tax
treaties.
IV. Determining Fiscal Transparency
A. Generally
The concept of fiscally transparent
therefore is critical to the determination of
whether an item of income is derived by
an entity or an interest holder in an entity.
Paragraph (d)(4)(ii) of the proposed and
temporary regulations provided that an
entity is treated as fiscally transparent by
a jurisdiction to the extent the jurisdiction
requires interest holders in the entity to
take into account separately on a current
basis their respective shares of the items
of income paid to the entity and to deter-
mine the character of such item as if such
items were realized directly from the
source from which realized by the entity
for purposes of the tax laws of the juris-
diction. The proposed and temporary reg-
ulations further provided that entities that
are fiscally transparent for U.S. federal in-
come tax purposes include partnerships,
common trust funds described under sec-
tion 584, simple trusts, grantor trusts, as
well as certain other entities (including
entities that have a single interest holder)
that are treated as partnerships or as disre-
garded entities for U.S. federal income
tax purposes.
The IRS and Treasury received numer-
ous comments regarding the definition of
fiscally transparent under the proposed
regulations. The comments stated that it
is unclear, in situations when multiple for-
eign jurisdictions are involved, which ju-
risdiction’s laws apply in determining
whether an entity is fiscally transparent.
The comments further stated that the re-
quirement that all items of income be sep-
arately stated is not consistent with the
U.S. tax rules regarding partnerships,
which permit partners not to state sepa-
rately certain items if the outcome is the
same whether or not the item is separately
stated. Commentators also suggested that
the regulations were unclear as to whether
fiscal transparency is an item by item de-
termination or a determination made with
respect to the entity as a whole.
In response to the comments, several
simplifying and clarifying changes were
made to the regulations. When an entity
is invoking the treaty, paragraph (d)(3)(ii)
of the final regulations provides a defini-
tion for purposes of determining whether
the entity will be treated as fiscally trans-
parent under the laws of the entity’s juris-
diction with respect to an item of income
received by the entity. When an interest
holder in an entity is invoking the treaty,
paragraph (d)(3)(iii) of the final regula-
tions provides a definition for purposes of
determining whether the entity will be fis-
cally transparent under the laws of the in-
terest holder’s jurisdiction. This clarifies
which jurisdiction’s laws apply in deter-
mining fiscal transparency in cases in
which multiple foreign jurisdictions are
involved.
Paragraphs (d)(3)(ii) and (iii) of the
final regulations generally retain the defi-
July 24, 20001262000–30 I.R.B.

nition of fiscally transparent as provided
by the proposed and temporary regula-
tions, with certain clarifications and mod-
ifications. They provide that an entity
will be fiscally transparent only if inclu-
sion by the interest holders in the entity is
required whether or not an item of income
is distributed to such interest holders and,
generally, the character and source of the
item in the hands of the interest holder are
determined as if such item were realized
directly from the source from which real-
ized by the entity. They also provide that
fiscal transparency is determined on an
item of income by item of income basis.
Accordingly, for example, an entity can
be fiscally transparent with respect to in-
terest income, but not with respect to div-
idend income. The regulations further
provide, however, that if an item of in-
come is not separately taken into account
by its interest holders, the entity may still
be fiscally transparent with respect to that
item of income if failure to take the item
of income into account separately does
not result in a treatment under the tax
laws of the applicable treaty jurisdiction
different from that which would be re-
quired if the interest holder did separately
take the share of such item into account.
This is consistent with the U.S. tax provi-
sions with respect to partnerships.
Because the final regulations adopt an
item by item determination of fiscal trans-
parency, the provision in the proposed
regulations stating that partnerships, com-
mon trust funds described in section 584,
simple trusts, grantor trusts and certain
other entities are fiscally transparent for
U.S. federal income tax purposes has
been deleted from the final regulations.
The foregoing language implied that fis-
cal transparency is determined with re-
spect to the entity as a whole. Although
the final regulations remove this lan-
guage, it is anticipated that such entities
ordinarily will be fiscally transparent for
federal income tax purposes with regard
to all items of income received by them.
B. Investment vehicles
Commentators also requested clarifica-
tion regarding the treatment of investment
vehicles that may be allowed an exclusion
or deduction from income for amounts
distributed to interest holders. The final
regulations clarify that if an entity such as
an investment company is not otherwise
fiscally transparent as defined in para-
graphs (d)(3)(ii) and (iii) of the final regu-
lations, it will not be deemed to be fis-
cally transparent merely because it is
allowed to exclude or deduct from income
amounts distributed to interest holders.
Examples provide further guidance with
respect to foreign investment vehicles,
most of which will not be fiscally trans-
parent under the final regulations.
C. Treatment of tax exempt organizations
In addition to the foregoing, several
commentators suggested that the regula-
tions undermine reciprocal treaty exemp-
tions for pension funds and other tax ex-
empt organizations by, for example,
denying treaty benefits under circum-
stances when the fund or organization in-
vests in U.S. LLCs that are treated as part-
nerships for purposes of U.S. tax law and
as corporations under the laws of the ap-
plicable treaty jurisdiction. Treasury does
not believe that the regulations conflict
with U.S. treaty obligations to provide re-
duced treaty rates to pension funds and
other tax exempt organizations investing
in the United States. In most cases, the
denial of benefits described by commen-
tators can be avoided by ensuring that the
pension fund or tax exempt organization
invests directly or through an entity
treated as fiscally transparent under the
laws of the jurisdiction of the fund or or-
ganization, with the result that the fund or
organization will still be able to claim ex-
emptions under the applicable treaty. In
addition, treaties may be negotiated that
permit pensions and other tax exempt or-
ganizations to invest in the United States
through nonfiscally transparent entities
and still obtain reduced treaty rates. (See
for example paragraph 2(b) of Article
XXI of the U.S.-Canada treaty, with re-
spect to pension funds). Further, para-
graph (d)(4) gives the competent authori-
ties the flexibility, in appropriate
circumstances, to enter into a mutual reci-
procal understanding that would depart
from the rules of paragraph (d) with re-
spect to certain classes of entities.
D. Treatment of complex trusts
The proposed and temporary regula-
tions did not specifically address the treat-
ment of section 661 trusts that are permit-
ted to accumulate income from year to
year. Commentators suggested that they
should be treated as fiscally transparent
for U.S. tax purposes because, under sec-
tion 662, the distributable net income of
such trusts retains its character in the
hands of the beneficiaries if it is distrib-
uted in the current year and not accumu-
lated. The definitions of fiscally transpar-
ent as set forth in the final regulations
provide that, in order for the entity to be
fiscally transparent with respect to an
item of income, the interest holder must
be required to take that item of income
into account in a taxable year whether or
not the item is distributed, and generally
the character and source of the item in the
hands of the interest holder are deter-
mined as if such item were realized di-
rectly from the source from which real-
ized by the entity.
Thus, to the extent the beneficiaries of
a trust are required under section 662 to
take an item of the trust’s income into ac-
count in a taxable year, whether or not the
item is distributed, and the character and
source of the item in the hands of the ben-
eficiaries are determined as if such item
were realized directly from the source
from which realized by the entity, the
trust will be treated as fiscally transparent
for U.S. tax purposes with respect to that
item of income. If inclusion by the inter-
est holders is not required whether or not
such item of income is distributed, or the
character and source of the item in the
hands of the interest holder are not deter-
mined as if such item were realized di-
rectly from the source from which real-
ized by the entity, the trust will not be
treated as fiscally transparent for U.S. tax
purposes. In determining whether a trust,
or any other entity, is fiscally transparent
with respect to an item of income under
the laws of any other jurisdiction, the
treatment of that item of income under the
laws of that jurisdiction controls, not the
treatment under U.S. laws.
E. Effect of Anti-Deferral Regimes
Commentators also argued that con-
trolled foreign corporations should be
treated as fiscally transparent to the extent
interest holders are required to account
for the controlled foreign corporation’s
net passive income on a current basis.
This suggestion was rejected because the
nature of an inclusion under an anti-defer-
ral regime is that of a deemed distribution
of after-tax profits of the controlled for-
2000–30 I.R.B.127July 24, 2000

eign corporation, while an inclusion be-
cause an entity is fiscally transparent is in
the nature of a share of the item of income
itself, as if the interest holder realized the
income directly. This follows from the
definition of fiscal transparency contained
in paragraph (d)(3)(iii), relating to
whether an entity is fiscally transparent
under the laws of the interest holder’s ju-
risdiction.
V. Treatment of Payments To and From
Domestic Reverse Hybrid Entities
Section 1.894–1T(d)(3) provided guid-
ance on the appropriate treatment of items
of income paid to an entity that is treated
as a domestic corporation for U.S. tax
purposes but is treated as fiscally trans-
parent under the laws of an interest
holder’s jurisdiction (a “domestic reverse
hybrid” entity). That section provided
that §1.894–1T(d)(1) may not be applied
to reduce the amount of federal income
tax on U.S. source income received by a
domestic reverse hybrid entity through
application of an income tax treaty. Com-
mentators expressed concern that this rule
did not provide sufficient guidance and
could lead to inappropriate results, noting
that an item of income paid bya domestic
reverse hybrid entity could be viewed as
neither “received by” the interest holder
nor “subject to tax” because the interest
holder’s jurisdiction would treat the do-
mestic reverse hybrid entity as fiscally
transparent. Thus, the interest holder’s
jurisdiction would view the interest
holder as “receiving” the items of income
paid tothe domestic reverse hybrid entity
and as being “subject to tax” on those
items of income on an immediate basis,
but may not recognize the items of in-
come paid bythe domestic reverse hybrid
entity to the interest holder.
The IRS and Treasury are also aware of
certain abusive structures involving do-
mestic reverse hybrid entities, which are
designed to manipulate differences in
U.S. and foreign entity classification rules
to produce inappropriate reductions in
U.S. tax. These transactions give rise to
some of the same concerns that led to the
promulgation of the temporary and pro-
posed regulations and caused Congress to
enact section 894(c). Treasury and the
IRS expect to issue guidance shortly re-
garding payments by domestic reverse
hybrid entities to their interest holders in a
separate regulation package. Thus, these
final regulations reserve on the question
of eligibility for treaty benefits with re-
spect to payments by domestic reverse
hybrid entities.
Effective Date
The final regulations apply to items of
income paid on or after June 30, 2000.
Withholding agents should consider the
effect of these regulations on their with-
holding obligations, including the need to
obtain a new withholding certificate to
confirm claims of treaty benefits for items
of income paid on or after the effective
date.
Special Analyses
It has been determined that this trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assess-
ment is not required. It has also been de-
termined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regula-
tions and, because these regulations do
not impose on small entities a collection
of information requirement, the Regula-
tory Flexibility Act (5 U.S.C. chapter 6)
does not apply. Therefore, a Regulatory
Flexibility Analysis is not required.
Drafting Information
The principal author of these regula-
tions is Shawn R. Pringle of the Office of
Associate Chief Counsel (International).
However, other personnel from the IRS
and Treasury participated in their devel-
opment.
* * * * *
Adoption of Amendments to the
Regulations
Accordingly, CFR 26 part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority for part 1 is
amended by revising the entry for section
1.894–1 to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Section 1.894–1 also issued under 26
U.S.C. 894 and 7701(l). * * *
Par. 2. In §1.894–1, paragraph (d) is
revised to read as follows:
§1.894–1 Income affected by treaty.
* * * * *
(d) Special rule for items of income re-
ceived by entities—(1) In general. The
tax imposed by sections 871(a), 881(a),
1443, 1461, and 4948(a) on an item of in-
come received by an entity, wherever or-
ganized, that is fiscally transparent under
the laws of the United States and/or any
other jurisdiction with respect to an item
of income shall be eligible for reduction
under the terms of an income tax treaty to
which the United States is a party only if
the item of income is derived by a resident
of the applicable treaty jurisdiction. For
this purpose, an item of income may be
derived by either the entity receiving the
item of income or by the interest holders
in the entity or, in certain circumstances,
both. An item of income paid to an entity
shall be considered to be derived by the
entity only if the entity is not fiscally
transparent under the laws of the entity’s
jurisdiction, as defined in paragraph
(d)(3)(ii) of this section, with respect to
the item of income. An item of income
paid to an entity shall be considered to be
derived by the interest holder in the entity
only if the interest holder is not fiscally
transparent in its jurisdiction with respect
to the item of income and if the entity is
considered to be fiscally transparent under
the laws of the interest holder’s jurisdic-
tion with respect to the item of income, as
defined in paragraph (d)(3)(iii) of this sec-
tion. Notwithstanding the preceding two
sentences, an item of income paid directly
to a type of entity specifically identified in
a treaty as a resident of a treaty jurisdic-
tion shall be treated as derived by a resi-
dent of that treaty jurisdiction.
(2) Application to domestic reverse hy-
brid entities—(i) In general. An income
tax treaty may not apply to reduce the
amount of federal income tax on U.S.
source payments received by a domestic
reverse hybrid entity. Further, notwith-
standing paragraph (d)(1) of this section,
the foreign interest holders of a domestic
reverse hybrid entity are not entitled to
the benefits of a reduction of U.S. income
tax under an income tax treaty on items of
income received from U.S. sources by
such entity. A domestic reverse hybrid
entity is a domestic entity that is treated as
not fiscally transparent for U.S. tax pur-
poses and as fiscally transparent under the
laws of the interest holder’s jurisdiction,
July 24, 20001282000–30 I.R.B.

with respect to the item of income re-
ceived by the domestic entity.
(ii) Payments by domestic reverse hy-
brid entities. [Reserved].
(3) Definitions—(i) Entity. For pur-
poses of this paragraph (d), the term entity
shall mean any person that is treated by
the United States or the applicable treaty
jurisdiction as other than an individual.
The term entityincludes disregarded enti-
ties, including single member disregarded
entities with individual owners.
(ii) Fiscally transparent under the law
of the entity’s jurisdiction—(A) General
rule. For purposes of this paragraph (d),
an entity is fiscally transparent under the
laws of the entity’s jurisdiction with re-
spect to an item of income to the extent
that the laws of that jurisdiction require
the interest holder in the entity, wherever
resident, to separately take into account
on a current basis the interest holder’s re-
spective share of the item of income paid
to the entity, whether or not distributed to
the interest holder, and the character and
source of the item in the hands of the in-
terest holder are determined as if such
item were realized directly from the
source from which realized by the entity.
However, the entity will be fiscally trans-
parent with respect to the item of income
even if the item of income is not sepa-
rately taken into account by the interest
holder, provided the item of income, if
separately taken into account by the inter-
est holder, would not result in an income
tax liability for that interest holder differ-
ent from that which would result if the in-
terest holder did not take the item into ac-
count separately, and provided the interest
holder is required to take into account on
a current basis the interest holder’s share
of all such nonseparately stated items of
income paid to the entity, whether or not
distributed to the interest holder. In deter-
mining whether an entity is fiscally trans-
parent with respect to an item of income
in the entity’s jurisdiction, it is irrelevant
that, under the laws of the entity’s juris-
diction, the entity is permitted to exclude
such item from gross income or that the
entity is required to include such item in
gross income but is entitled to a deduction
for distributions to its interest holders.
(B) Special definitions. For purposes
of this paragraph (d)(3)(ii), an entity’s ju-
risdiction is the jurisdiction where the en-
tity is organized or incorporated or may
otherwise be considered a resident under
the laws of that jurisdiction. An interest
holder will be treated as taking into ac-
count that person’s share of income paid
to an entity on a current basis even if such
amount is taken into account by the inter-
est holder in a taxable year other than the
taxable year of the entity if the difference
is due solely to differing taxable years.
(iii) Fiscally transparent under the law
of an interest holder’s jurisdiction—(A)
General rule. For purposes of this para-
graph (d), an entity is treated as fiscally
transparent under the law of an interest
holder’s jurisdiction with respect to an
item of income to the extent that the laws
of the interest holder’s jurisdiction require
the interest holder resident in that juris-
diction to separately take into account on
a current basis the interest holder’s re-
spective share of the item of income paid
to the entity, whether or not distributed to
the interest holder, and the character and
source of the item in the hands of the in-
terest holder are determined as if such
item were realized directly from the
source from which realized by the entity.
However, an entity will be fiscally trans-
parent with respect to the item of income
even if the item of income is not sepa-
rately taken into account by the interest
holder, provided the item of income, if
separately taken into account by the inter-
est holder, would not result in an income
tax liability for that interest holder differ-
ent from that which would result if the in-
terest holder did not take the item into ac-
count separately, and provided the interest
holder is required to take into account on
a current basis the interest holder’s share
of all such nonseparately stated items of
income paid to the entity, whether or not
distributed to the interest holder. An en-
tity will not be treated as fiscally transpar-
ent with respect to an item of income
under the laws of the interest holder’s ju-
risdiction, however, if, under the laws of
the interest holder’s jurisdiction, the inter-
est holder in the entity is required to in-
clude in gross income a share of all or a
part of the entity’s income on a current
basis year under any type of anti-deferral
or comparable mechanism. In determin-
ing whether an entity is fiscally transpar-
ent with respect to an item of income
under the laws of an interest holder’s ju-
risdiction, it is irrelevant how the entity is
treated under the laws of the entity’s juris-
diction.
(B) Special definitions. For purposes
of this paragraph (d)(3)(iii), an interest
holder’s jurisdiction is the jurisdiction
where the interest holder is organized or
incorporated or may otherwise be consid-
ered a resident under the laws of that ju-
risdiction. An interest holder will be
treated as taking into account that per-
son’s share of income paid to an entity on
a current basis even if such amount is
taken into account by such person in a
taxable year other than the taxable year of
the entity if the difference is due solely to
differing taxable years.
(iv) Applicable treaty jurisdiction. The
term applicable treaty jurisdictionmeans
the jurisdiction whose income tax treaty
with the United States is invoked for pur-
poses of reducing the rate of tax imposed
under sections 871(a), 881(a), 1461, and
4948(a).
(v) Resident. The term residentshall
have the meaning assigned to such term in
the applicable income tax treaty.
(4) Application to all income tax
treaties. Unless otherwise explicitly
agreed upon in the text of an income tax
treaty, the rules contained in this para-
graph (d) shall apply in respect of all in-
come tax treaties to which the United
States is a party. Notwithstanding the
foregoing sentence, the competent author-
ities may agree on a mutual basis to de-
part from the rules contained in this para-
graph (d) in appropriate circumstances.
However, a reduced rate under a tax treaty
for an item of U.S. source income paid
will not be available irrespective of the
provisions in this paragraph (d) to the ex-
tent that the applicable treaty jurisdiction
would not grant a reduced rate under the
tax treaty to a U.S. resident in similar cir-
cumstances, as evidenced by a mutual
agreement between the relevant compe-
tent authorities or by a public notice of the
treaty jurisdiction. The Internal Revenue
Service shall announce the terms of any
such mutual agreement or public notice of
the treaty jurisdiction. Any denial of tax
treaty benefits as a consequence of such a
mutual agreement or notice shall affect
only payment of U.S. source items of in-
come made after announcement of the
terms of the agreement or of the notice.
(5) Examples. This paragraph (d) is il-
lustrated by the following examples:
Example 1. Treatment of entity treated as part-
2000–30 I.R.B.129July 24, 2000

nership by U.S. and country of organization. (i)
Facts. Entity A is a business organization formed
under the laws of Country X that has an income tax
treaty in effect with the United States. A is treated as
a partnership for U.S. federal income tax purposes.
A is also treated as a partnership under the laws of
Country X, and therefore Country X requires the in-
terest holders in A to separately take into account on
a current basis their respective shares of the items of
income paid to A, whether or not distributed to the
interest holders, and the character and source of the
items in the hands of the interest holders are deter-
mined as if such items were realized directly from
the source from which realized by A. A receives
royalty income from U.S. sources that is not effec-
tively connected with the conduct of a trade or busi-
ness in the United States.
(ii) Analysis. A is fiscally transparent in its juris-
diction within the meaning of paragraph (d)(3)(ii) of
this section with respect to the U.S. source royalty
income in Country X and, thus, A does not derive
such income for purposes of the U.S.-X income tax
treaty.
Example 2. Treatment of interest holders in en-
tity treated as partnership by U.S. and country of or-
ganization. (i) Facts. The facts are the same as
under Example 1. A’s partners are M, a corporation
organized under the laws of Country Y that has an
income tax treaty in effect with the United States,
and T, a corporation organized under the laws of
Country Z that has an income tax treaty in effect
with the United States. M and T are not fiscally
transparent under the laws of their respective coun-
tries of incorporation. Country Y requires M to sep-
arately take into account on a current basis M’s re-
spective share of the items of income paid to A,
whether or not distributed to M, and the character
and source of the items of income in M’s hands are
determined as if such items were realized directly
from the source from which realized by A. Country
Z treats A as a corporation and does not require T to
take its share of A’s income into account on a current
basis whether or not distributed.
(ii) Analysis. M is treated as deriving its share of
the U.S. source royalty income for purposes of the
U.S.-Y income tax treaty because A is fiscally trans-
parent under paragraph (d)(3)(iii) with respect to
that income under the laws of Country Y. Under
Country Z law, however, because T is not required to
take into account its share of the U.S. source royalty
income received by A on a current basis whether or
not distributed, A is not treated as fiscally transpar-
ent. Accordingly, T is not treated as deriving its
share of the U.S. source royalty income for purposes
of the U.S.-Z income tax treaty.
Example 3. Dual benefits to entity and interest
holder. (i) Facts.The facts are the same as under
Example 2, except that A is taxable as a corporation
under the laws of Country X. Article 12 of the U.S.-
X income tax treaty provides for a source country
reduced rate of taxation on royalties of 5-percent.
Article 12 of the U.S.-Y income tax treaty provides
that royalty income may only be taxed by the benefi-
cial owner’s country of residence.
(ii) Analysis. A is treated as deriving the U.S.
source royalty income for purposes of the U.S.-X in-
come tax treaty because it is not fiscally transparent
with respect to the item of income within the mean-
ing of paragraph (d)(3)(ii) of this section in Country
X, its country of organization. M is also treated as
deriving its share of the U.S. source royalty income
for purposes of the U.S.-Y income tax treaty because
A is fiscally transparent under paragraph (d)(3)(iii)
of this section with respect to that income under the
laws of Country Y. T is not treated as deriving the
U.S. source royalty income for purposes of the U.S.-
Z income tax treaty because under Country Z law A
is not fiscally transparent. Assuming all other re-
quirements for eligibility for treaty benefits have
been satisfied, A is entitled to the 5-percent treaty re-
duced rate on royalties under the U.S.-X income tax
treaty with respect to the entire royalty payment.
Assuming all other requirements for treaty benefits
have been satisfied, M is also entitled to a zero rate
under the U.S.-Y income tax treaty with respect to
its share of the royalty income.
Example 4. Treatment of grantor trust. (i) Facts.
Entity A is a trust organized under the laws of Coun-
try X, which does not have an income tax treaty in
effect with the United States. M, the grantor and
owner of A for U.S. income tax purposes, is a resi-
dent of Country Y, which has an income tax treaty in
effect with the United States. M is also treated as
the grantor and owner of the trust under the laws of
Country Y. Thus, Country Y requires M to take into
account all items of A’s income in the taxable year,
whether or not distributed to M, and determines the
character of each item in M’s hands as if such item
was realized directly from the source from which re-
alized by A. Country X does not treat M as the
owner of A and does not require M to account for A’s
income on a current basis whether or not distributed
to M. A receives interest income from U.S. sources
that is neither portfolio interest nor effectively con-
nected with the conduct of a trade or business in the
United States.
(ii) Analysis. A is not fiscally transparent under
the laws of Country X within the meaning of para-
graph (d)(3)(ii) of this section with respect to the
U.S. source interest income, but A may not claim
treaty benefits because there is no U.S.-X income
tax treaty. M, however, does derive the income for
purposes of the U.S.-Y income tax treaty because
under the laws of Country Y, A is fiscally transpar-
ent.
Example 5. Treatment of complex trust. (i)
Facts. The facts are the same as in Example 4ex-
cept that M is treated as the owner of the trust only
under U.S. tax law, after application of section
672(f), but not under the law of Country Y. Al-
though the trust document governing A does not re-
quire that A distribute any of its income on a current
basis, some distributions are made currently to M.
There is no requirement under Country Y law that M
take into account A’s income on a current basis
whether or not distributed to him in that year. Under
the laws of Country Y, with respect to current distri-
butions, the character of the item of income in the
hands of the interest holder is determined as if such
item were realized directly from the source from
which realized by A. Accordingly, upon a current
distribution of interest income to M, the interest in-
come retains its source as U.S. source income.
(ii) Analysis. M does not derive the U.S. source
interest income because A is not fiscally transparent
under paragraph (d)(3)(ii) of this section with re-
spect to the U.S. source interest income under the
laws of Country Y. Although the character of the in-
terest in the hands of M is determined as if realized
directly from the source from which realized by A,
under the laws of Country Y, M is not required to
take into account his share of A’s interest income on
a current basis whether or not distributed. Accord-
ingly, neither A nor M is entitled to claim treaty ben-
efits, since A is a resident of a non-treaty jurisdiction
and M does not derive the U.S. source interest in-
come for purposes of the U.S.-Y income tax treaty.
Example 6. Treatment of interest holders re-
quired to include passive income under anti-deferral
regime.(i) Facts. The facts are the same as under
Example 2. However, Country Z does require T, who
is treated as owning 60-percent of the stock of A, to
take into account its respective share of the royalty
income of A under an anti-deferral regime applica-
ble to certain passive income of controlled foreign
corporations.
(ii) Analysis. T is still not eligible to claim treaty
benefits with respect to the royalty income. T is not
treated as deriving the U.S. source royalty income
for purposes of the U.S.-Z income tax treaty under
paragraph (d)(3)(iii) of this section because T is only
required to take into account its pro rata share of the
U.S. source royalty income by reason of Country Z’s
anti-deferral regime.
Example 7. Treatment of contractual arrange-
ments operating as collective investment vehicles.
(i) Facts. A is a contractual arrangement without
legal personality for all purposes under the laws of
Country X providing for joint ownership of securi-
ties. Country X has an income tax treaty in effect
with the United States. A is a collective investment
fund which is of a type known as a Common Fund
under Country X law. Because of the absence of
legal personality of the arrangement, A is not liable
to tax at the entity level in Country X and is not a
resident within the meaning of the Residence Article
of the U.S.-X income tax treaty. A is treated as a
partnership for U.S. income tax purposes and re-
ceives U.S. source dividend income. Under the laws
of Country X, however, investors in A only take into
account their respective share of A’s income upon
distribution from the Common Fund. Some of A’s
interest holders are residents of Country X and some
of Country Y. Country Y has no income tax treaty in
effect with the United States.
(ii) Analysis. A is not fiscally transparent under
paragraph (d)(3)(ii) of this section with respect to the
U.S. source dividend income because the interest
holders in A are not required to take into account their
respective shares of such income in the taxable year
whether or not distributed. Because A is an arrange-
ment without a legal personality that is not considered
a resident of Country X under the Residence Article
of the U.S.-X income tax treaty, however, A does not
derive the income for purposes of the U.S.-X income
tax treaty. Further, because A is not fiscally transpar-
ent under paragraph (d)(3)(iii) of this section with re-
spect to the U.S. source dividend income, A’s interest
holders that are residents of Country X do not derive
the income as residents of Country X for purposes of
the U.S.-X income tax treaty.
Example 8. Treatment of person specifically
listed as resident in applicable treaty. (i) Facts. The
facts are the same as in Example 7except that A (the
Common Fund) is organized in Country Z and the
Residence Article of the U.S.-Z income tax treaty
provides that “the term ‘resident of a Contracting
State’ includes, in the case of Country Z, Common
Funds....”
(ii) Analysis. A is treated, for purposes of the
July 24, 20001302000–30 I.R.B.

U.S.-Z income tax treaty as deriving the dividend in-
come as a resident of Country Z under paragraph
(d)(1) of this section because the item of income is
paid directly to A, A is a Common Fund under the
laws of Country Z, and Common Funds are specifi-
cally identified as residents of Country Z in the
U.S.-Z treaty. There is no need to determine
whether A meets the definition of fiscally transpar-
ent under paragraph (d)(3)(ii) of this section.
Example 9. Treatment of investment company
when entity receives distribution deductions, and all
distributions sourced by residence of entity. (i)
Facts. Entity A is a business organization formed
under the laws of Country X, which has an income
tax treaty in effect with the United States. A is
treated as a partnership for U.S. income tax pur-
poses. Under the laws of Country X, A is an invest-
ment company taxable at the entity level and a resi-
dent of Country X. It is also entitled to a distribution
deduction for amounts distributed to its interest
holders on a current basis. A distributes all its net in-
come on a current basis to its interest holders and,
thus, in fact, has no income tax liability to Country
X. A receives U.S. source dividend income. Under
Country X law, all amounts distributed to interest
holders of this type of business entity are treated as
dividends from sources within Country X and Coun-
try X imposes a withholding tax on all payments by
A to foreign persons. Under Country X laws, the in-
terest holders in A do not have to separately take into
account their respective shares of A’s income on a
current basis if such income is not, in fact, distrib-
uted.
(ii) Analysis. A is not fiscally transparent under
paragraph (d)(3)(ii) of this section with respect to
the U.S. source dividends because the interest hold-
ers in A do not have to take into account their re-
spective share of the U.S. source dividends on a cur-
rent basis whether or not distributed. A is also not
fiscally transparent under paragraph (d)(3)(ii) of this
section because there is a change in source of the in-
come received by A when A distributes the income
to its interest holders and, thus, the character and
source of the income in the hands of A’s interest
holder are not determined as if such income were re-
alized directly from the source from which realized
by A. Accordingly, A is treated as deriving the U.S.
source dividends for purposes of the U.S.-Country X
treaty.
Example 10. Item by item determination of fiscal
transparency. (i) Facts. Entity A is a business orga-
nization formed under the laws of Country X, which
has an income tax treaty in effect with the United
States. A is treated as a partnership for U.S. income
tax purposes. Under the laws of Country X, A is an
investment company taxable at the entity level and a
resident of Country X. It is also entitled to a distrib-
ution deduction for amounts distributed to its inter-
est holders on a current basis. A receives both U.S.
source dividend income and interest income from
U.S. sources that is neither portfolio interest nor ef-
fectively connected with the conduct of a trade or
business in the United States. Country X law
sources all distributions attributable to dividend in-
come based on the residence of the investment com-
pany. In contrast, Country X law sources all distrib-
utions attributable to interest income based on the
residence of the payor of the interest. No withhold-
ing applies with respect to distributions attributable
to U.S. source interest and the character of the distri-
butions attributable to the interest income remains
the same in the hands of A’s interest holders as if
such items were realized directly from the source
from which realized by A. However, under Country
X law the interest holders in A do not have to take
into account their respective share of the interest in-
come received by A on a current basis whether or
not distributed.
(ii) Analysis. An item by item analysis is re-
quired under paragraph (d) of this section. The
analysis is the same as Example 9with respect to the
dividend income. A is also not fiscally transparent
under paragraph (d)(3)(ii) of this section with re-
spect to the interest income because, although the
character of the distributions attributable to the in-
terest income in the hands of A’s interest holders is
determined as if realized directly from the source
from which realized by A, under Country X law the
interest holders in A do not have to take into account
their respective share of the interest income received
by A on a current basis whether or not distributed.
Accordingly, A derives the U.S. source interest in-
come for purpose of the U.S.-X treaty.
Example 11. Treatment of charitable organiza-
tions. (i) Facts. Entity A is a corporation organized
under the laws of Country X that has an income tax
treaty in effect with the United States. Entity A is
established and operated exclusively for religious,
charitable, scientific, artistic, cultural, or educational
purposes. Entity A receives U.S. source dividend in-
come from U.S. sources. A provision of Country X
law generally exempts Entity A’s income from
Country X tax due to the fact that Entity A is estab-
lished and operated exclusively for religious, chari-
table, scientific, artistic, cultural, or educational pur-
poses. But for such provision, Entity A’s income
would be subject to tax by Country X.
(ii) Analysis. Entity A is not fiscally transparent
under paragraph (d)(3)(ii) of this section with re-
spect to the U.S. source dividend income because,
under Country X law, the dividend income is treated
as an item of income of A and no other persons are
required to take into account their respective share
of the item of income on a current basis, whether or
not distributed. Accordingly, Entity A is treated as
deriving the U.S. source dividend income.
Example 12. Treatment of pension trusts. (i)
Facts. Entity A is a trust established and operated in
Country X exclusively to provide pension or other
similar benefits to employees pursuant to a plan.
Entity A receives U.S. source dividend income. A
provision of Country X law generally exempts En-
tity A’s income from Country X tax due to the fact
that Entity A is established and operated exclusively
to provide pension or other similar benefits to em-
ployees pursuant to a plan. Under the laws of Coun-
try X, the beneficiaries of the trust are not required
to take into account their respective share of A’s in-
come on a current basis, whether or not distributed
and the character and source of the income in the
hands of A’s interest holders are not determined as if
realized directly from the source from which real-
ized by A.
(ii) Analysis. A is not fiscally transparent under
paragraph (d)(3)(ii) of this section with respect to
the U.S. source dividend income because under the
laws of Country X, the beneficiaries of A are not re-
quired to take into account their respective share of
A’s income on a current basis, whether or not distrib-
uted. A is also not fiscally transparent under para-
graph (d)(3)(ii) of this section with respect to the
U.S. source dividend income because under the laws
of Country X, the character and source of the in-
come in the hands of A’s interest holders are not de-
termined as if realized directly from the source from
which realized by A. Accordingly, A derives the
U.S. source dividend income for purposes of the
U.S.-X income tax treaty.
(6) Effective date. This paragraph (d)
applies to items of income paid on or after
June 30, 2000.
Robert E. Wenzel,
Deputy Commissioner
of Internal Revenue.
Approved June 28, 2000.
Jonathan Talisman,
Deputy Assistant Secretary
of the Treasury (Tax Policy).
(Filed by the Office of the Federal Register on June
30, 2000, 8:45 a.m., and published in the issue of the
Federal Register for July 3, 2000, 65 F.R. 40993)
2000–30 I.R.B.131July 24, 2000

July 24, 20001322000–30 I.R.B.
Earnings Calculation for
Returned or Recharacterized
IRA Contributions
Notice 2000–39
I. PURPOSE
This notice permits a new method to be
used for calculating the net income attrib-
utable to IRA contributions made after
1999 that are distributed as a returned
contribution pursuant to § 408(d)(4) of
the Internal Revenue Code (“Code”) or
recharacterized pursuant to § 408A(d)(6).
However, until further guidance is issued,
net income may continue to be calculated
under the existing method set forth in the
Income Tax Regulations.
II. BACKGROUND
A. Returned Contributions under
§ 408(d)(4)
Section 408(d)(4) provides that an IRA
contribution will not be included in the
IRA owner’s gross income when distrib-
uted as a returned contribution if (1) it is
received by the IRA owner on or before
the day prescribed by law, including ex-
tensions, for filing the owner’s Federal in-
come tax return for the year of the contri-
bution, (2) no deduction is allowed with
respect to the contribution, and (3) the
distribution is accompanied by the
amount of net income attributable to the
contribution.
Section 1.408–4(c)(2)(ii) of the Income
Tax Regulations prescribes the method for
calculating the amount of net income attrib-
utable to a contribution distributed pursuant
to § 408(d)(4). That method, referred to in
this notice as the “old method,” bases the
calculation of the amount of net income at-
tributable to a contribution on the income
earned by the IRA during the period begin-
ning on the first day of the taxable year in
which the contribution is made and ending
on the date of the distribution from the ac-
count. Under the old method, net income
cannot be a negative amount.
B. Recharacterizations under
§ 408A(d)(6)
Section 408A(d)(6) provides that a
contribution made to one type of IRA may
be recharacterized as having been made to
another type of IRA if (1) the recharacter-
ization transfer occurs on or before the
date prescribed by law for filing the IRA
owner’s Federal income tax return for the
year for which the contribution was made,
(2) no deduction is allowed with respect
to the contribution to the transferor IRA,
and (3) the transfer is accompanied by
any net income allocable to the contribu-
tion.
Section 1.408A–5, Q&A–2(c), pro-
vides that if a contribution being rechar-
acterized is in an IRA that at any time
contained other contributions, the net in-
come attributable to the contribution
being recharacterized is calculated in the
manner prescribed by § 1.408–4(c)(2)(ii)
(the old method), except that net income
can be a negative amount. Section
1.408A, Q&A-2(b), provides that if an
IRA is established with a contribution and
no other contributions or distributions are
made, then the subsequent recharacteriza-
tion transfer of the entire account balance
of the IRA will satisfy the requirement
that the transfer be accompanied by any
net income allocable to the contribution.
C. Requests for Alternative Method
The Internal Revenue Service has re-
ceived comments that the old method for
calculating net income attributable to an
IRA contribution often does not reflect
the actual earnings and losses of the IRA
during the time it held the contribution.
This is because, under the old method, ac-
count activity in the part of the year that
precedes the date the contribution is made
is taken into account in the calculation of
the net income attributable to the contri-
bution. In addition, IRA owners and other
interested parties have indicated that net
income should be permitted to be a nega-
tive amount.
In response to these comments, the Ser-
vice and Treasury are providing a new
method for calculating net income that
generally bases the calculation of the
amount of net income attributable to a
contribution on the actual earnings and
losses of the IRA during the time it held
the contribution. Until further guidance is
issued, net income may be calculated
under either the new method or the old
method. However, it is intended that fu-
ture guidance will provide that the new
method is the only method for calculating
net income, and comments are requested
regarding the new method and the effec-
tive date of mandatory use of the new
method.
III. NEW METHOD FOR NET
INCOME CALCULATION UNDER
§ 408(d)(4)
Under the new method, for purposes of
returned contributions under § 408(d)(4),
the net income attributable to a contribu-
tion made to an IRA after December 31,
1999, is determined by allocating to the
contribution a pro-rata portion of the
earnings accrued by the IRA during the
period the IRA held the contribution. The
new method is represented by the follow-
ing formula:
Part III. Administrative, Procedural, and Miscellaneous
Net Income = Contribution x
Adjusted Closing Balance - Adjusted Opening Balance
Adjusted Opening Balance
The “adjusted opening balance” is the
fair market value of the IRA at the begin-
ning of the computation period plus the
amount of any contributions made to the
IRA during the computation period (in-
cluding the contribution that is distributed
as a returned contribution pursuant to
§ 408(d)(4)).
The “adjusted closing balance” is the
fair market value of the IRA at the end of
the computation period plus the amount
of any distributions made from the IRA
during the computation period.
The “computation period” is the period
beginning immediately prior to the time
the particular contribution is made to the
IRA and ending immediately prior to the
removal of the contribution being re-
turned.
For purposes of the above calculation,
when an IRA asset is not normally valued
on a daily basis, the fair market value of
the asset at the beginning of the computa-
tion period is deemed to be the most re-

2000–30 I.R.B.133July 24, 2000
cent, regularly determined, fair market
value of the asset, determined as of a date
that coincides with or precedes the first
day of the computation period. In addi-
tion, solely for purposes of determining
net income, recharacterized contributions
are taken into account for the period they
are actually held in a particular IRA.
Under the new method set forth above,
net income may be a negative number.
In the case of multiple regular contribu-
tions to an IRA, the last regular contribu-
tion made to the IRA for a particular tax-
able year is deemed to be the contribution
that is distributed as a returned contribu-
tion under § 408(d)(4), up to the amount
of the contribution identified by the IRA
owner as the amount distributed as a re-
turned contribution. For purposes of this
notice, a “regular contribution” is an IRA
contribution made by the IRA owner that
is neither a trustee-to-trustee transfer from
another IRA nor a rollover from another
IRA or retirement plan.
In the case of an individual who owns
multiple IRAs, the net income calculation
is performed only on the IRA designated
by the owner as containing the contribu-
tion that is to be distributed as a returned
contribution, and that IRA is the IRA that
must distribute the contribution.
Under the new method described
above, if an IRA is established with a con-
tribution and no other contributions or
distributions are made to or from that
IRA, then the subsequent distribution of
the entire account balance of the IRA pur-
suant to § 408(d)(4) will satisfy the re-
quirement of that Code section that the re-
turn of a contribution be accompanied by
the amount of net income attributable to
the contribution.
The following examples illustrate the
new method net income calculation under
§ 408(d)(4):
Example 1. (i) On May 1, 2000, when her IRA
is worth $4,800, Taxpayer A makes a $1,600 regular
contribution to her IRA. Taxpayer A requests that
$400 of the May 1, 2000, contribution be returned to
her pursuant to § 408(d)(4). Pursuant to this request,
on February 1, 2001, when the IRA is worth $7,600,
the IRA trustee distributes to Taxpayer A the $400
plus attributable net income. During this time, no
other contributions have been made to the IRA and
no distributions have been made.
(ii) The adjusted opening balance is $6,400
[$4,800 + $1,600] and the adjusted closing balance
is $7,600. Thus, the net income attributable to the
$400 May 1, 2000, contribution is $75 [$400 x
($7,600 - $6,400) 4$6,400]. Therefore, the total to
be distributed on February 1, 2001, pursuant to
§ 408(d)(4) is $475.
Example 2.(i) Beginning in 2000, Taxpayer B
contributes $200 on the 15th of each month by pay-
roll deduction to an IRA for 2000, resulting in an ex-
cess regular contribution of $400 for the year. Tax-
payer B requests that the $400 excess regular
contribution be returned to her pursuant to
§ 408(d)(4). Pursuant to this request, on March 1,
2001, when the IRA is worth $16,000, the IRA
trustee distributes to Taxpayer B the $400 plus at-
tributable net income. The excess regular contribu-
tions to be returned are deemed to be the last two
made in 2000: the $200 December 15 contribution,
when the IRA was worth $12,000 immediately prior
to the contribution; and the $200 November 15 con-
tribution, when the IRA was worth $11,000 immedi-
ately prior to the contribution. No distributions have
been made from the IRA and no contributions, other
than the payroll deduction contributions (including
$200 in January and February 2001), have been
made.
(ii) For the December 15 contribution, the ad-
justed opening balance is $12,600 [$12,000 + $200
+ $200 + $200] and the adjusted closing balance is
$16,000. Thus, the net income attributable to the
December 15 contribution is $54 [$200 x ($16,000 -
$12,600) 4$12,600]. For the November 15 contri-
bution, the adjusted opening balance is $11,800
[$11,000 + $200 + $200 + $200 + $200] and the ad-
justed closing balance is $16,000. Thus, the net in-
come attributable to the November 15 contribution
is $71 [$200 x ($16,000 - $11,800) 4$11,800].
Therefore, the total to be distributed as returned con-
tributions on March 1, 2001, to correct the excess
regular contribution is $525 [$200 + $200 + $54 +
$71].
IV. NEW METHOD FOR NET
INCOME CALCULATION UNDER
§ 408A(d)(6)
Under the new method, for purposes of
recharacterizations under § 408A(d)(6),
the net income allocable to a contribution
made to an IRA after December 31, 1999,
is determined by allocating to the contri-
bution a pro-rata portion of the earnings
accrued by the IRA during the period the
IRA held the contribution. The new
method is represented by the following
formula:
Net Income = Contribution x
Adjusted Closing Balance - Adjusted Opening Balance
Adjusted Opening Balance
The “adjusted opening balance” is the
fair market value of the IRA at the begin-
ning of the computation period plus the
amount of any contributions made to the
IRA during the computation period (in-
cluding the contribution that is recharac-
terized pursuant to § 408A(d)(6)).
The “adjusted closing balance” is the
fair market value of the IRA at the end of
the computation period plus the amount
of any distributions made from the IRA
during the computation period.
The “computation period” is the period
beginning immediately prior to the time
the particular contribution being recharac-
terized is made to the IRA and ending im-
mediately prior to the recharacterizing
transfer of the contribution.
For purposes of the above calculation,
when an IRA asset is not normally valued
on a daily basis, the fair market value of
the asset at the beginning of the computa-
tion period is deemed to be the most re-
cent, regularly determined, fair market
value of the asset, determined as of a date
that coincides with or precedes the first
day of the computation period. In addi-
tion, solely for purposes of determining
net income, recharacterized contributions
are taken into account for the period they
are actually held in a particular IRA.
In the case of an individual with multi-
ple IRAs, the net income calculation is
performed only on the IRA designated by
the owner as containing the particular
contribution to be recharacterized, and
that IRA is the IRA from which the
recharacterizing transfer must be made.
As under the old method, net income
may be a negative amount. Also, as under
the old method, in the case of multiple con-
tributions made to an IRA for a particular
year that are eligible for recharacterization,
the IRA owner can choose (by dollar
amount, not by specific assets acquired
with those dollars) which contribution, or
portion thereof, is to be recharacterized.
Also as under the old method, if an
IRA is established with a contribution and
no other contributions or distributions are
made to or from that IRA, then the subse-
quent recharacterization transfer of the
entire account balance of the IRA pur-
suant to § 408A(d)(6) will satisfy the re-

quirement of that Code section that the
transfer be accompanied by any net in-
come allocable to the contribution.
The following examples illustrate the
new method net income calculation under
§ 408A(d)(6):
Example 3.(i) On March 1, 2000, when her Roth
IRA is worth $80,000, Taxpayer C makes a $160,000
conversion contribution to the Roth IRA. Subse-
quently, Taxpayer C discovers that she was ineligible
to make a Roth conversion contribution in 2000 and so
she requests that the $160,000 be recharacterized to a
traditional IRA pursuant to § 408A(d)(6). Pursuant to
this request, on March 1, 2001, when the IRA is worth
$225,000, the Roth IRA trustee transfers to a tradi-
tional IRA the $160,000 plus allocable net income.
No other contributions have been made to the Roth
IRA and no distributions have been made.
(ii) The adjusted opening balance is $240,000
[$80,000 + $160,000] and the adjusted closing balance
is $225,000. Thus the net income allocable to the
$160,000 is -$10,000 [$160,000 x ($225,000 -
$240,000) 4$240,000]. Therefore, in order to rechar-
acterize the March 1, 2000, $160,000 conversion con-
tribution on March 1, 2001, the Roth IRA trustee must
transfer from Taxpayer C’s Roth IRA to her traditional
IRA $150,000 [$160,000 - $10,000].
Example 4. (i) On April 1, 2000, when her tradi-
tional IRA is worth $100,000, Taxpayer D converts the
entire amount, consisting of 100 shares of stock in
ABC Corp. and 100 shares of stock in XYZ Corp., by
transferring the shares to a Roth IRA. At the time of
the conversion, the 100 shares of stock in ABC Corp.
are worth $50,000 and the 100 shares of stock in XYZ
Corp. are also worth $50,000. Taxpayer D decides that
she would like to recharacterize the ABC Corp. shares
back to a traditional IRA. However, D may choose
only by dollar amount the contribution or portion
thereof that is to be recharacterized. On the date of
transfer, November 1, 2000, the 100 shares of stock in
ABC Corp. are worth $40,000 and the 100 shares of
stock in XYZ Corp. are worth $70,000. No other con-
tributions have been made to the Roth IRA and no dis-
tributions have been made.
(ii) If D requests that $50,000 (which was the
value of the ABC Corp. shares at the time of conver-
sion) be recharacterized, the net income allocable to
the $50,000 is $5,000 [$50,000 x ($110,000 -
$100,000) 4$100,000]. Therefore, in order to rechar-
acterize $50,000 of the April 1, 2000, conversion con-
tribution on November 1, 2000, the Roth IRA trustee
must transfer from Taxpayer D’s Roth IRA to a tradi-
tional IRA assets with a value of $55,000 [$50,000 +
$5,000].
(iii) If, on the other hand, D requests that $40,000
(which was the value of the ABC Corp. shares on No-
vember 1) be recharacterized, the net income allocable
to the $40,000 is $4,000 [$40,000 x ($110,000 -
$100,000) 4$100,000]. Therefore, in order to rechar-
acterize $40,000 of the April 1, 2000, conversion con-
tribution on November 1, 2000, the Roth IRA trustee
must transfer from Taxpayer D’s Roth IRA to a tradi-
tional IRA assets with a value of $44,000 [$40,000 +
$4,000].
(iv) Regardless of the amount of the contribution
recharacterized, the determination of that amount (or
of the net income allocable thereto) is not affected by
whether the recharacterization is accomplished by the
transfer of shares of ABC Corp. or of shares of XYZ
Corp.
V. REQUEST FOR COMMENTS
The Service and Treasury invite com-
ments and suggestions concerning the new
method described in this notice for calculat-
ing net income under §§ 408(d)(4) and
408A(d)(6) and also concerning the effec-
tive date for a rule that would establish the
new method as the only method for calcu-
lating net income under §§ 408(d)(4) and
408A(d)(6). Any correspondence received
will be evaluated, together with appropriate
considerations relating to tax administra-
tion, to determine the scope of future guid-
ance.
Comments can be submitted to
CC:DOM:CORP:R (Notice 2000–39),
room 5226, Internal Revenue Service, POB
7604, Ben Franklin Station, Washington,
DC 20044. Comments may be hand deliv-
ered between the hours of 8 a.m. and 5 p.m.
to CC:DOM:CORP:R (Notice 2000–39),
Courier’s Desk, Internal Revenue Service,
1111 Constitution Avenue NW., Washing-
ton, DC. All comments will be available
for public inspection and copying.
DRAFTING INFORMATION
The principal author of this notice is
Roger Kuehnle of Employee Plans (Tax
Exempt and Government Entities Divi-
sion). For further information regarding
this notice, please contact the Employee
Plans’ taxpayer assistance telephone ser-
vice at (202) 622-6074/6075 (not toll-free
numbers) between the hours of 1:30 and
3:30 p.m. Eastern Time, Monday through
Thursday.
Weighted Average Interest Rate
Update
Notice 2000–40
Notice 88–73 provides guidelines for de-
termining the weighted average interest
rate and the resulting permissible range of
interest rates used to calculate current lia-
bility for the purpose of the full funding
limitation of § 412(c)(7) of the Internal
Revenue Code as amended by the Omnibus
Budget Reconciliation Act of 1987 and as
further amended by the Uruguay Round
Agreements Act, Pub. L. 103-465 (GATT).
The average yield on the 30-year Trea-
sury Constant Maturities for June 2000 is
5.93 percent.
The following rates were determined for
the plan years beginning in the month
shown below.
July 24, 20001342000–30 I.R.B.
90% to 105%90% to 110%
WeightedPermissiblePermissible
MonthYearAverageRangeRange
July20005.995.39 to 6.295.39 to 6.59
Drafting Information
The principal author of this notice is
Todd Newman of the Employee Plans, Tax
Exempt and Government Entities Division.
For further information regarding this no-
tice, call the Employee Plans Actuarial hot-
line, (202) 622-6076 between 2:30 and
3:30 p.m. Eastern time (not a toll-free num-
ber). Mr. Newman’s number is (202) 622-
8458 (also not a toll-free number).

Targeted Jobs Tax Credit
Settlement
Announcement 2000–58
The Internal Revenue Service an-
nounces today a settlement initiative
under which taxpayers may resolve an
issue under the Targeted Jobs Tax Credit
(the “TJTC”), formerly section 51 of the
Internal Revenue Code of 1986, as in ef-
fect prior to January 1, 1995 (“section
51”). The issue relates to whether a tax-
payer may claim the TJTC with respect to
an employee for whom it has not received
a certification or denial from a designated
local agency that the employee is a mem-
ber of a targeted group.
The purpose of the settlement initiative
is to relieve both taxpayers and the Service
from the burdens associated with further
development or litigation, and to permit a
quick resolution of this issue. See Perdue
Farms, Inc. v. United States of America,
No. Y–97–3571 (D.C. MD June 14, 1999),
and H.E. Butt Grocery Co. v. United States,
No. SA–98–CA–336– EP (W.D. Tex. July
30, 1999; February 9, 2000).
The settlement initiative is available
only to taxpayers who have timely
claimed (or may timely claim) the TJTC
and can satisfy all of the section 51 re-
quirements, other than the certification re-
quirement (Noncertified Employee
Claims). If a timely claim is not currently
pending (and the statute of limitations
within which to make the claim is open),
the taxpayer should submit its claim with
the Indication of Interest described below.
Under the settlement initiative, taxpayers
may take a credit for 50% of the Verified
Noncertified Employee Claims, as de-
scribed below.
Steps to Follow to Participate in the
Settlement Program for Taxpayers
whose Claims are Pending with the In-
ternal Revenue Service (including Ap-
peals and Tax Court)
Step 1: An eligible taxpayer, whether
or not currently under examination, be-
fore Appeals, or in Tax Court litigation,
must first indicate in writing its interest in
accepting the offer under this settlement
initiative by mailing the following Indi-
cation of Interest to the address listed
below:
Indication of Interest in TJTC Settlement
Program
Taxpayer’s Name:
Taxpayer’s Address:
Taxable Years Involved:
Employer Identification Number:
Amount of Claim: $x 50% =
Settlement: $
If Applicable:
Name, address and telephone number
of I.R.S. employee responsible for claim
year(s):
On behalf of the above-named taxpayer, I
am interested in accepting the settlement
offer described in Announcement
2000–58, 2000–30 I.R.B. (July 24,
2000), relating to the TJTC and Noncerti-
fied Employee Claims.
By Date
Title
Mailing Address of Signatory
The taxpayer should mail the com-
pleted Indication of Interest to the follow-
ing address no later than 120 days after
this Announcement appears in the Internal
Revenue Bulletin to:
Internal Revenue Service
Kansas City, Missouri 64999
Attention: QMSS, Stop 4100, Annex 2.
If the taxpayer is under examination or
before Appeals or in litigation before the
Tax Court for the taxable year(s) listed in
the Indication of Interest, the taxpayer
should also provide a copy of their Indica-
tion of Interest to the IRS employee who
is responsible for the examination or other
consideration of the year(s). (The tax-
payer should also state the name, address
and telephone number of the I.R.S. em-
ployee responsible for the year(s) of the
claim on the Indication of Interest.)
Step 2: Upon receiving the Indication
of Interest, the IRS will send to the tax-
payer instructions on how to accept the
settlement offer.
These instructions will direct taxpayers
to assemble the information that will be
used to determine the Verified Noncerti-
fied Employee Claims. In order to accept
the settlement offer, the taxpayer will be
required to provide, and certify under
penalties of perjury, the following infor-
mation regarding the Noncertified Em-
ployee Claims for each taxable year: (1)
the name and social security number of
each employee included in the claim; (2)
the targeted group in which it claims the
employee belongs (e.g. economically dis-
advantaged youth, etc.); (3) the em-
ployee’s start date; (4) the employee’s end
date, if any; (5) the amount of eligible
wages; (6) the amount of the credit
claimed for that employee; and (7) that
the employer timely submitted a request
for certification. Timely filing means: (a)
a written request submitted to the desig-
nated local agency on or before the day
the individual began work, or (b) if the in-
dividual presented the employer with a
written preliminary determination from
the designated local agency that the indi-
vidual was a member of a targeted group,
a written request submitted to the desig-
nated local agency no later than five days
after the individual began work. The Ser-
vice may also require the taxpayer to pro-
vide additional information to confirm the
accuracy of any information submitted.
Once the Service has confirmed to its sat-
isfaction the accuracy of the information,
that the statutory requirements for mini-
mum hours are met, and that there are not
duplicate claims, it will determine the
amount of Verified Noncertified Em-
ployee Claims subject to the 50% settle-
ment offer.
Step 3: The taxpayer will execute a
closing agreement (Form 906) to docu-
ment the resolution of this issue and ap-
propriate adjustment of related matters
(e.g., section 280C).
Steps to Follow to Participate in the
Settlement Program For Taxpayers
whose Claims are under the Jurisdic-
tion of the Department of Justice
The settlement initiative does not apply
to cases in litigation before the United
States district courts or the United States
2000–30 I.R.B.135July 24, 2000
Part IV. Items of General Interest

court of appeals. Settlements of those cases
should be discussed with the U.S. Depart-
ment of Justice attorneys handling them.
No taxpayer, including one currently
under examination, in Appeals, or in Tax
Court litigation, is required to accept the
terms of the settlement initiative. If a tax-
payer does not believe that the offer is ap-
propriate for its case, the taxpayer may
decline to participate in the settlement ini-
tiative, and the case will be handled under
normal procedures. If participation is de-
clined, the final result in a case could be
either more or less favorable than the set-
tlement offer, depending on the merits of
the taxpayer’s position.
For cases that are not resolved through
the settlement initiative, the Service will
continue to advance the legal argument
that a taxpayer may not claim the TJTC
with respect to an employee for whom it
has not received a certification from a
designated local agency that the employee
is a member of a targeted group. The Ser-
vice will also consider whether, as a fac-
tual matter, an employee is a member of a
targeted group and the other statutory re-
quirements are met. In addition, the Ser-
vice believes that the Work Opportunity
Tax Credit (WOTC), section 51 of the
Code as in effect after September 30,
1996, also requires that an employer re-
ceive a certification before it is entitled to
this credit. Accordingly, the Service will
rely on the certification process required
by the WOTC before allowing this credit.
Please contact the Retail ISP Specialist
at (763) 549–1020 x 328 (not a toll-free
number) if there are any questions regard-
ing the initiative. The settlement initia-
tive is also described at the “Tax Profes-
sional’s Corner” of the IRS Web site at
http://www
.irs.ustreas.gov.
The principal author of this announce-
ment is Robert G. Wheeler. Mr. Wheeler
can be reached at (202) 622-6060 (not a
toll free number).
Foundations Status of Certain
Organizations
Announcement 2000–61
The following organizations have
failed to establish or have been unable to
maintain their status as public charities or
as operating foundations. Accordingly,
grantors and contributors may not, after
this date, rely on previous rulings or des-
ignations in the Cumulative List of Orga-
nizations (Publication 78), or on the pre-
sumption arising from the filing of notices
under section 508(b) of the Code. This
listing does notindicate that the organiza-
tions have lost their status as organiza-
tions described in section 501(c)(3), eligi-
ble to receive deductible contributions.
Former Public Charities.The follow-
ing organizations (which have been
treated as organizations that are not pri-
vate foundations described in section
509(a) of the Code) are now classified as
private foundations:
AEONMS Health and Medical Research
Foundation, Inc., Memphis, TN
Allen Outreach & Development Center,
Inc., Orlando, FL
American Friends of Birkas Rifka, Inc.,
Lakewood, NJ
American Non-Profit Housing
Corporation, Lake Oswego, OR
Assured Nonprofit Services, Inc.,
Sumner, WA
Athena Telematics Foundation, Inc.,
Hartsdale, NY
Austen Foundation, Inc., Ambridge, PA
Bread of Life Mission, Martinsville, VA
Brunettes Adult Residential Care Facility,
Detroit, MI
Camp All American, Inc., Duluth, GA
Camptonville Education Fund,
Camptonville, CA
Canon McMillan Baseball Association,
Cannonsburg, PA
Caribbean Foundation, Hayes, VA
Center for the Development of Senior
Horizons, Detroit, MI
Center for the Unfoldment of Heart,
Mind, & Spirit, Freedom, CA
Charleston Council 22 056 Navy League
of the United States, Charleston, SC
Child Development Center Parent
Advisory Council, Ferguson, MO
Children’s Homes Foundation, Oakley,
CA
Children’s Medical Research Foundation,
Carlsbad, CA
Choreotectonics, Inc., New York, NY
Church Street Graveyard Preservation
Foundation, Inc., Mobile, AL
City of Church Hill Community Chest,
Church Hill, TN
Concerned Clergy Foundation, Inc.,
Indianapolis, IN
David Groves Ministries, Inc., Tulsa, OK
Deborah Salem Foundation, Brooklyn, NY
Edgartown Patrolmens Association, Inc.,
Edgartown, MA
Ezra Health Foundation, Beverly Hills,
CA
Faith Human Services Ministry
Incorporated, New Orleans, LA
Family Journey Center Foundation,
Bluffdale, UT
Fort Bend Songwriters Association,
Richmond, TX
Fortune Arms Corporation, Inc.,
Richmond, TX
Friends of the Holy Cross, Staunton, VA
Gang Outreach Covina, Covina, CA
GOYE Ministry, Chicago, IL
Helpline Soul Rescue Ministry, Inc.,
Baldwin, NY
Hope for Clevelands Children, Akron, OH
Joan Schuman Fund, Inc., New York, NY
John J. McMahon, Jr. Memorial Roller
Hockey Club, Inc., Deer Park, NY
Los Islenos Heritage and Culture Society,
Violet, LA
Love and Hope, Inc., Lynnwood, CA
Marietta Reading Center, Jackson, MS
Middlesex County Bar Foundation, Inc.,
Cambridge, MA
Minnesota Safety & Health Foundation,
St. Paul, MN
National Learning Foundation, Las
Vegas, NV
Nehemiah Ministries, Inc., Cleveland,
OH
New Horizons Un-Limited, Inc.,
Wauwatosa, WI
Newport Volunteer Firefighters & Rescue
Association, Newport, NC
New York Alliance of Black School
Educators, Inc., Brooklyn, NY
Northern Lights Junior Drum & Bugle
Corps Association, Longview, WA
Nurses Registry Care Center
Foundations, Harahan, LA
Ocean Race Chesapeake, Inc., Baltimore,
MD
Paradise Foundation, Ashford, CT
Peninsula Housing Development, Inc. IX,
Miami, FL
Perfect Image Youth Center, Riverside,
CA
Persian Community Center, Inc.,
Doraville, GA
Pious Propagating Islam over U.S., Fort
Worth, TX
Pownal Education Foundation, Pownal,
ME
Public Television Service, Inc.,
Columbia, MD
July 24, 20001362000–30 I.R.B.

Rev. Willie Jordan Community Service
Center, Harvey, IL
Russell House Association, Inc.,
Baltimore, MD
Sahmadan Foundation, Tempe, AZ
Shekinah Refuge, Inc., Sapulpa, OK
Skidrow Passion Outreach, Los Angeles,
CA
Sonlight Ministries, Inc., Fort Collins,
CO
Sub-Saharan Relief Fund, Inc.,
Washington, DC
Sullivan County Scenic Coalition, Inc.,
Livingston Manor, NY
Tennis in Motion, Chicago, IL
Tom Wick Agricultural Scholarship Fund,
Brewster, WA
Trinity Adoption Services International,
Inc., Houston, TX
Triple Cross Ranch, Inc., Okeechobee,
FL
Truman High School Wrestling Team
Parents Association, Bronx, NY
Two, Inc., Kingsport, TN
Urban Outpatient, Inc., Dorchester, MA
Urban Wall Street Community
Development Corp., Kansas City, KS
Vintage War Birds, Louisville, KY
Woodburn, Inc., Cincinnati, OH
YBL Ohana Alliance, Pittsburgh, PA
YETA, Philadelphia, PA
Youth First Communications d/b/a Youth
First Concerns, Englewood, CO
Youth Reach Out Program, Inc., Atlanta,
GA
Youthventures, Inc., Miami, FL
Youth Your Opportunity Upward
Through Hard Work, Lithonia, GA
If an organization listed above submits
information that warrants the renewal of its
classification as a public charity or as a pri-
vate operating foundation, the Internal Rev-
enue Service will issue a ruling or determi-
nation letter with the revised classification
as to foundation status. Grantors and con-
tributors may thereafter rely upon such rul-
ing or determination letter as provided in
section 1.509(a)–7 of the Income Tax Reg-
ulations. It is not the practice of the Service
to announce such revised classification of
foundation status in the Internal Revenue
Bulletin.
Deletions from Cumulative List
of Organizations Contributions
to Which are Deductible Under
Section 170 of the Code
Announcement 2000–62
The names of organizations that no
longer qualify as organizations described
in section 170(c)(2) of the Internal Rev-
enue Code of 1986 are listed below.
Generally, the Service will not disallow
deductions for contributions made to a
listed organization on or before the date
of announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the Service is not
precluded from disallowing a deduction
for any contributions made after an orga-
nization ceases to qualify under section
170(c)(2) if the organization has not
timely filed a suit for declaratory judg-
ment under section 7428 and if the con-
tributor (1) had knowledge of the revoca-
tion of the ruling or determination letter,
(2) was aware that such revocation was
imminent, or (3) was in part responsible
for or was aware of the activities or omis-
sions of the organization that brought
about this revocation.
If on the other hand a suit for declara-
tory judgment has been timely filed, con-
tributions from individuals and organiza-
tions described in section 170(c)(2) that
are otherwise allowable will continue to
be deductible. Protection under section
7428(c) would begin on July 24, 2000,
and would end on the date the court first
determines that the organization is not de-
scribed in section 170(c)(2) as more par-
ticularly set forth in section 7428(c)(1).
For individual contributors, the maximum
deduction protected is $1,000, with a hus-
band and wife treated as one contributor.
This benefit is not extended to any indi-
vidual, in whole or in part, for the acts or
omissions of the organization that were
the basis for revocation.
Animal Right
Seattle, WA
Conservation Education
Seattle, WA
Enviro Hope
Seattle, WA
Great Will
Seattle, WA
Green Nature Service
Seattle, WA
Nature Care
Seattle, WA
Nature &Animal Circle
Seattle, WA
Nature Educator
Seattle, WA
Nature Preservation
Seattle, WA
Project Life Ministries
San Diego, CA
Wildlife Conservation
Seattle, WA
2000–30 I.R.B.137July 24, 2000

July 24, 2000i2000–30 I.R.B.
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds
that the same principle also applies to B,
the earlier ruling is amplified. (Compare
with 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.
Distinguisheddescribes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial difference between them.
Modified is used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but not
to B, and the new ruling holds that it ap-
plies to both A and B, the prior ruling is
modified because it corrects a published
position. (Compare with amplified and
clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used
in a ruling that lists previously published
rulings that are obsoleted because of
changes in law or regulations. A ruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revoked describes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the
new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example, modified
and superseded describes a situation
where the substance of a previously pub-
lished ruling is being changed in part and
is continued without change in part and it
is desired to restate the valid portion of
the previously published ruling in a new
ruling that is self contained. In this case
the previously published ruling is first
modified and then, as modified, is super-
seded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and
that list is expanded by adding further
names in subsequent rulings. After the
original ruling has been supplemented
several times, a new ruling may be pub-
lished that includes the list in the original
ruling and the additions, and supersedes
all prior rulings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current use and for-
merly used will appear in material published in the
Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contribution Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of 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.
Definition of Terms

2000–30 I.R.B.iiJuly 24, 2000
Numerical Finding List
1
Bulletins 2000–27 through 2000–29
Announcements:
2000–57, 2000–28 I.R.B. 115
2000–59, 2000–29 I.R.B. 120
Court Decisions:
2068, 2000–28 I.R.B. 109
Notices:
2000–33, 2000–27 I.R.B. 97
2000–35, 2000–29 I.R.B. 118
2000–37, 2000–29 I.R.B. 118
Proposed Regulations:
REG–105316–98, 2000–27 I.R.B. 98
Railroad Retirement Quarterly Rate:
2000–28, I.R.B. 112
2000–29, I.R.B. 117
Revenue Procedures:
2000–28, 2000–27 I.R.B. 60
2000–29, 2000–28 I.R.B. 113
2000–30, 2000–28 I.R.B. 113
Revenue Rulings:
2000–32, 2000–27 I.R.B. 1
2000–34, 2000–29 I.R.B. 116
Treasury Decisions:
8886, 2000–27 I.R.B. 3
8888, 2000–27 I.R.B. 3
1
A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 2000–1 through 2000–26
is in Internal Revenue Bulletin 2000–27, dated July
3, 2000.

July 24, 2000iii2000–30 I.R.B.
Finding List of Current Actions on
Previously Published Items
1
Bulletins 2000–27 through 2000–29
Revenue Procedures:
99–18
Modified by
Rev. Proc. 2000–29, 2000–28 I.R.B. 113
99–34
Superseded by
Rev. Proc. 2000–28, 2000–27 I.R.B. 60
Treasury Decisions:
8883
Corrected by
Announcement 2000–57, 2000–28 I.R.B. 115
1
A cumulative list of current actions on previously
published items in Internal Revenue Bulletins
2000–1 through 2000–26 is in Internal Revenue
Bulletin 2000–27, dated July 3, 2000.

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