Internal Revenue Bulletin 2011-35 (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.

Bulletin No. 201
1-35
August 29, 2011
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
T.D. 9539, page 179.
Final regulations under section 280C of the Code amend the
regulations concerning the election to claim the reduced re-
search credit. The final regulations simplify how taxpayers
make the election and affect taxpayers that claim the reduced
research credit.
Notice 2011–66, page 184.
This notice provides guidance with regard to the time and man-
ner in which the executor of the estate of a decedent who died
in 2010 elects to have the provisions of section 1022 of the
Code apply to determine a recipient’s basis in certain prop-
erty deemed acquired from the decedent. This notice also pro-
vides guidance with respect to generation-skipping transfers
(GSTs) and transfers that have GST potential that occurred dur-
ing 2010.
Rev. Proc. 2011–41, page 188.
This procedure provides optional safe harbor guidance to the
executor of the estate of a decedent who died in 2010 and
elects to have the provisions of section 1022 of the Code apply
to determine a recipient’s basis in certain property acquired
from the decedent.
ESTATE TAX
Notice 2011–66, page 184.
This notice provides guidance with regard to the time and man-
ner in which the executor of the estate of a decedent who died
in 2010 elects to have the provisions of section 1022 of the
Code apply to determine a recipient’s basis in certain prop-
erty deemed acquired from the decedent. This notice also pro-
vides guidance with respect to generation-skipping transfers
(GSTs) and transfers that have GST potential that occurred dur-
ing 2010.
Rev. Proc. 2011–41, page 188.
This procedure provides optional safe harbor guidance to the
executor of the estate of a decedent who died in 2010 and
elects to have the provisions of section 1022 of the Code apply
to determine a recipient’s basis in certain property acquired
from the decedent.
EXCISE TAX
T.D. 9537, page 181.
REG–122813–11, page 197.
Final, temporary, and proposed regulations under section 6071
of the Code provide guidance on the filing of Form 2290 (Heavy
Highway Vehicle Use Tax Return) and payment of the associated
highway use tax for the taxable period beginning July 1, 2011.
ADMINISTRATIVE
T.D. 9537, page 181.
REG–122813–11, page 197.
Final, temporary, and proposed regulations under section 6071
of the Code provide guidance on the filing of Form 2290 (Heavy
Highway Vehicle Use Tax Return) and payment of the associated
highway use tax for the taxable period beginning July 1, 2011.
(Continued on the next page)
Fi
nding Lists begin on page ii.
Index for July through August begins on page iv.

Announcement 2011–43, page 198.
This document contains a correction to final regulations (T.D.
9475, 2010–4 I.R.B. 304) that provide guidance regarding
the qualification of certain transactions as reorganizations de-
scribed in section 368(a)(1)(D) of the Code where no stock
and/or securities of the acquiring corporation is issued and
distributed in the transaction.
August 29, 20112011–35 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top-quality service by helping
them understa
nd and meet their tax responsibilities and en-
force the law wi
th integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2011–35 I.R.B.August 29, 2011

August 29, 20112011–35 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 280C.
—Certain
Expenses for W
hich Credits
are Allowable
26 CFR1.280C–4: Credit for increasing research ac-
tivities.
T.D. 9539
Election of Reduced Research
Credit under Section
280C(c)(3)
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains fi-
nal regulations that amend the regulations
concerning the election to claim the re-
duced research credit. The final regu-
lations simplify how taxpayers make the
election and affect taxpayers that claim the
reduced research credit.
DATES:Effective Date:These regulations
are effective on July 27, 2011.
Applicability Date:For dates of appli-
cability, see §1.280C–4(c).
FOR FURTHER INFORMATION
CONTACT: David Selig, (202) 622–3040
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This d
ocument contains amendments
to the
Income Tax Regulations (26 CFR
Part 1
) relating to the election for claiming
the re
duced research credit under section
280C
(c)(3). On July 16, 2009, a notice of
prop
osed rulemaking (REG–130200–08,
2009
–31 I.R.B. 174) was published in the
Fede
ral Register(74 FR 34523). No pub-
lic h
earing was requested or held. Written
and
electronic comments responding to
the
notice of proposed rulemaking were
rec
eived. After considering the com-
men
ts received the proposed regulations
are
adopted as revised by this Treasury
dec
ision.
Sec
tion 280C(c)(1) provides that no de-
duc
tion shall be allowed for that portion
of the qualifi
ed research expenses (as de-
fined in secti
on 41(b)) or basic research ex-
penses (as def
ined in section 41(e)(2)) oth-
erwise allow
able as a deduction for the tax-
able year whi
ch is equal to the amount of
the credit de
termined for such taxable year
under sectio
n41(a).
Similarly, s
ection 280C(c)(2) provides
that if the am
ount of the credit deter-
mined for th
e taxable year under section
41(a)(1) ex
ceeds the amount allowable as
a deduction
for such taxable year for qual-
ified resea
rch expenses or basic research
expenses (
determined without regard to
section 28
0C(c)(1)), the amount charge-
able to cap
ital account for the taxable year
for such ex
penses shall be reduced by the
amount of s
uch excess.
Section 28
0C(c)(3)(A) provides, in
general,
that in the case of any taxable
year for w
hich an election is made under
section 2
80C(c)(3), sections 280C(c)(1)
and (c)(2
) shall not apply, and the
amount of
the credit under section 41(a)
shall be t
he amount determined under
section
280C(c)(3)(B). Under section
280C(c)
(3)(B), the amount of credit for
any taxa
ble year shall be the amount equal
to the ex
cess of the amount of credit deter-
mined u
nder section 41(a) without regard
to sect
ion 280C(c)(3), over the product
of the a
mount of credit determined under
sectio
n 280C(c)(3)(B)(i), and the maxi-
mum rat
e of tax under section 11(b)(1).
Sectio
n 280C(c)(3)(C) provides that an
electi
on under section 280C(c)(3) for any
taxab
le year shall be made not later than
the ti
me for filing the return of tax for
such y
ear (including extensions), shall be
made o
n such return, and shall be made
in suc
h manner as the Secretary may pre-
scri
be. Section 1.280C–4(a) provides that
the s
ection 280C(c)(3) election to have the
prov
isions of section 280C(c)(1) and (c)(2)
not a
pply shall be made by claiming the
redu
ced credit under section 41(a) deter-
mine
d by the method provided in section
280
C(c)(3)(B) on an original return for the
tax
able year, filed at any time on or before
the
due date (including extensions) for fil-
ing
the income tax return for such year.
Sec
tion 280C(c)(4) provides that sec-
tio
n 280C(b)(3) shall apply for pur-
pos
es of section 280C(c). Under section
280C(b)(3), i
n the case of a corporation
which is a memb
er of a controlled group of
corporations
(within the meaning of sec-
tion 41(f)(5
)) or a trade or business which
is treated as
being under common control
with other tr
ades or businesses (within
the meaning o
f section 41(f)(1)(B)), sec-
tion 280C(b
) shall be applied under rules
prescribed
by the Secretary similar to the
rules appli
cable under section 41(f)(1)(A)
and (f)(1)(
B).
Section 1.4
1–6(a)(1) provides that to
determine t
he amount of research credit (if
any) allow
able to a trade or business that
at the end o
f its taxable year is a mem-
berofacon
trolled group, a taxpayer must:
(i) comput
e the group credit in the man-
ner descri
bed in §1.41–6(b), and (ii) allo-
cate the g
roup credit among the members
of the gro
up in the manner described under
§1.41–6(
c). All members of the controlled
group are
required to use the same compu-
tation me
thod, that is, the section 41(a)(1)
method o
r the section 41(c)(5) alternative
simplif
ied research credit method, in com-
puting t
he group credit for the credit year.
Explana
tion and Summary of
Comment
s
These fi
nal regulations simplify the sec-
tion 28
0C(c)(3) election to have the provi-
sions o
f section 280C(c)(1) and (c)(2) not
apply b
y requiring the election to be made
on Form
6765, “Credit for Increasing Re-
search
Activities.”Theformmustbefiled
with a
n original return for the taxable year
filed
on or before the due date (including
exten
sions) for filing the income tax return
for su
ch year. An election, once made for
any ta
xable year, is irrevocable for that tax-
able
year.
These
final regulations also provide
that
each member of a controlled group
may m
ake the election under section
280C
(c)(3) after the group credit is com-
pute
d and allocated under §§1.41–6(b)(1)
and 1
.41–6(c).
One c
ommentator was concerned that
the c
ontrolled group rules in the proposed
reg
ulations might cause administrative
com
plexity for some members of a con-
tro
lled group filing a consolidated return
bec
ause each member would be required
2011–35 I.R.B.179August 29, 2011

to file a separate Form 6765 to make
the election under section 280C(c)(3).
Generally, the proposed regulations pro-
vided that each member of a controlled
group of corporations (within the mean-
ing of section 41(f)(5)), or a trade or
business which is treated as being un-
der common control with other trades or
businesses (within the meaning of section
41(f)(1)(B)), could make the election un-
der section 280C(c)(3). In order to clarify
and simplify the election procedure for
members of consolidated groups, how-
ever, the final regulations add that only
a common parent (within the meaning
of §1.1502–77(a)(1)(i)) of a consolidated
group may make the election under section
280C(c)(3) on behalf of the members of
the consolidated group. An attachment to
a Form 6765 filed by a common parent of a
consolidated group adequately identifying
the members for which an election under
section 280C(c)(3) is made is generally
sufficient to clearly indicate the intent of
the common parent to make the election
for those members.
Another commentator believed that
some members of a controlled group may
fail to make a timely election under section
280C(c)(3) because, at the time of filing
the Form 6765 with the original return, no
credit was reported by such members. The
election under section 280C(c)(3) may be
made whether or not a taxpayer claims
any amount of credit on its original return.
An example has been added to the final
regulations showing that a taxpayer may
make an election under section 280C(c)(3)
on its original return without reporting any
credit.
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 assessment
is not required. It also has been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations.
When an agency promulgates a fi-
nal rule, the Regulatory Flexibility Act
(5 U.S.C. chapter 6) requires the agency
to “prepare a final regulatory flexibility
analysis” with “a description of and an
estimate of the number of small entities to
which the rule will apply.” See 5 U.S.C.
604(a). Section 605 of the Regulatory
Flexibility Act provides an exception to
this requirement if the agency certifies that
the final rule will not have a significant
economic impact on a substantial number
of small entities.
The final rule affects individuals and
small businesses engaged in research ac-
tivities under section 41. The IRS has de-
termined that the final rule will have an
impact on a substantial number of small
entities. However, the IRS also has de-
termined that the impact on entities af-
fected by the final rule will not be sig-
nificant. This determination is based on
the fact that the regulations would sim-
plify the procedure for making the election
for the reduced research credit under sec-
tion 280C(c)(3)(C). Instead of requiring
such an election to be made by claiming
the reduced credit “on an original return,”
the regulations specify that the election
is made by clearly indicating an intent to
make the election on Form 6765, “Credit
for Increasing Research Activities,” which
is attached to the return. This form re-
quires only a minimal amount of time to
complete and places no greater burden on
the taxpayer than the current procedure.
Accordingly, a final regulatory flexibility
analysis is not required. Pursuant to sec-
tion 7805(f) of the Internal Revenue Code,
the notice of proposed rulemaking preced-
ing these regulations was submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Drafting Information
The principal author of these regula-
tions is David Selig, Office of Associate
Chief Counsel (Passthroughs and Special
Industries). However, other personnel
from the IRS and the Treasury Department
participated in their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.280C–4 is revised to
read as follows:
§1.280C–4 Credit for increasing research
activities.
(a)In general. An election under sec-
tion 280C(c)(3) to have the provisions of
section 280C(c)(1) and (c)(2) not apply
and elect the reduced research credit un-
der section 280C(c)(3)(B) shall be made
on Form 6765, “Credit for Increasing
Research Activities” (or any successor
form). In order for the election to be effec-
tive, the Form 6765 must clearly indicate
the taxpayer’s intent to make the section
280C(c)(3) election, and must be filed
with an original return for the taxable year
filed on or before the due date (including
extensions) for filing the income tax return
for such year, regardless of whether any
research credits are claimed on the origi-
nal return. An election, once made for any
taxable year, is irrevocable for that taxable
year.
(b)Controlled groups of corporations;
trades or businesses under common con-
trol—(1)In general. A member of a con-
trolled group of corporations (within the
meaning of section 41(f)(5)), or a trade
or business which is treated as being un-
der common control with other trades or
businesses (within the meaning of section
41(f)(1)(B)), may make the election un-
der section 280C(c)(3). However, only
the common parent (within the meaning
of §1.1502–77(a)(1)(i)) of a consolidated
group may make the election on behalf of
the members of a consolidated group. A
member or trade or business shall make the
election on Form 6765 and by the time pre-
scribed in paragraph (a) of this section.
(2)Example. The following example
illustrates an application of paragraph (b)
of this section:
Example. A, B, and C, all of which are cal-
endar year taxpayers, are members of a controlled
group of corporations (within the meaning of section
41(f)(5)). A, B, and C each attach a statement to the
2009 Form 6765, “Credit for Increasing Research
Activities,” showing A and C had stand-alone entity
credits (within the meaning of §1.41–6(c)(2)) that
exceeded the group credit (within the meaning of
§1.41–6(a)(3)(iv)). A and C report their allocated
portions of the group credit (as determined under
§1.41–6(c)) on the 2009 Form 6765 and B reports
no research credit on the 2009 Form 6765. A and
B, but not C, each make an election for the reduced
credit on the 2009 Form 6765. In December 2010, A
August 29, 20111802011–35 I.R.B.

determines that it understated its qualified research
expenses in 2009 resulting in the group credit ex-
ceeding the sum of the stand-alone credits. On an
amended 2009 Form 6765, A, B, and C each report
their allocated portions of the group credit (including
the excess group credit). B reports its credit as a reg-
ular credit under section 41(a) and reduces the credit
under section 280C(c)(3)(B). C may not reduce its
credit under section 280C(c)(3)(B) because C did
not make an election for the reduced credit with its
original return.
(c)Effective/applicability date.This
section applies to taxable years ending on
or after July 27, 2011.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved July 19, 2011.
Emily S. McMahon,
Acting Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on July 26, 2011,
8:45 a.m., and published in the issue of the Federal Register
for July 27,
2011, 76 F.R. 44800)
Section 6001.—Notice
or Regulations Requiring
Records, Statements, and
Special Returns.
26 CFR 41.6001–2: Proof of payments for State reg-
istration purposes.
T.D. 9537
Highway Use Tax; Filing and
Payment for Taxable Period
Beginning July 1, 2011
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regula-
tions.
SUMMARY: This document contains
final and temporary regulations that pro-
vide guidance on the filing of Form 2290
(“Heavy Highway Vehicle Use Tax Re-
turn”) and payment of the associated
highway use tax for the taxable period
beginning July 1, 2011. The regulations
affect owners and operators of highway
motor vehicles with a taxable gross weight
of 55,000 pounds or more. The text of the
temporary regulations (REG–122813–11)
also serves as the text of the proposed
regulations on this subject in this issue of
the Bulletin.
DATES:Effective Date:These regulations
are effective on July 20, 2011.
Applicability Date:For dates of
applicability, see §§41.6001–2T(d),
41.6071(a)–1T(c)(3),and
41.6151(a)–1T(b).
FOR FURTHER INFORMATION
CONTACT: Natalie Payne, (202)
622–3130 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document amends the Highway
Use Tax Regulations (26 CFR Part 41) un-
der section 4481 of the Internal Revenue
Code (Code).
Section 4481 imposes a tax on the use
in any taxable period of a highway mo-
tor vehicle with a taxable gross weight of
55,000 pounds or more. The person in
whose name the vehicle is registered at the
time of the first use must pay the tax. The
rate of tax is based on the weight of the ve-
hicle with a maximum of $550 per vehicle
per taxable period (the standard amount).
Generally, a “taxable period” is the year
that begins on July 1 and ends on the fol-
lowing June 30. For the taxable period be-
ginning on July 1, 2011, however, section
4482(c)(4) of present law provides that the
taxable period ends at the close of Septem-
ber 30, 2011. For this three month period,
the tax rate is a reduced amount that is 25
percent of the tax rate for a 12-month pe-
riod.
Section 41.6011(a)–1(a)(1) requires
each person that is liable for the tax im-
posedbysection4481tofileareturnfor
each taxable period and§41.6011(a)–1(b)
provides that the return is Form 2290,
“Heavy Highway Vehicle Use Tax Return.”
The due date for filing Form 2290 is
not prescribed by statute and section 6071
provides that when the Code does not set
the time for filing a return, the Secretary
is to prescribe such time by regulations.
Under §41.6071(a)–1(a), Form 2290 gen-
erally must be filed by the last day of the
month following the month in which a per-
son becomes liable for tax. For most tax-
payers, their first use of a vehicle in a tax-
able period occurs inJuly and thus their re-
turn is due by August 31.
Section 41.6001–2(b) provides, gener-
ally, that a State that receives an applica-
tion to register a highway motor vehicle
must receive from the applicant “proof of
payment” of the tax imposed by section
4481(a). Section 41.6001–2(c) specifies
that this proof of payment generally con-
sists of a receipted Schedule 1 (Form 2290)
that is returned by the IRS to a taxpayer
that files Form 2290 and pays the amount
of tax due with the return. The taxpayer
generally must present proof of payment
for the taxable period that includes the date
on which the application for registration is
filed, but in the case of an application filed
in July, August, or September proof of pay-
ment for the preceding taxable period may
be used.
The tax imposed under section 4481
will expire on September 30, 2011, unless
Congress changes the law. Under exist-
ing regulations, the person liable for the
highway use tax must file a Form 2290
by the last day of the month following
the month in which the person becomes
liable for the tax. Therefore, under current
statutory and regulatory provisions, the
person liable for the tax will be required
to file a Form 2290 for taxable use dur-
ing the period of July 1, 2011, through
September 30, 2011 (the “2011 short
taxable period”). Further, if Congress
extends the tax past September 30, 2011,
a person who filed Form 2290 for the
2011 short taxable period would have to
file a second Form 2290 covering the
period after September 30, 2011, through
the earlier of the expiration date of the
extension or June 30, 2012.
Explanation of Provisions
For purposes of efficient tax admin-
istration and alleviating taxpayers’ po-
tential administrative burden, the tem-
porary regulations postpone the due date
of Form 2290 for the 2011 short tax-
able period until November 30, 2011. If
Congress does not extend the tax past
September 30, 2011, taxpayers will file
one Form 2290 and will pay the reduced
amount for the 2011 short taxable period
by November 30; if Congress does extend
the tax past September 30, 2011, and
substitutes a longer taxable period for the
2011 short taxable period, taxpayers who
become liable for the highway use tax after
June 30, 2011, and before November 1,
2011–35 I.R.B.181August 29, 2011

2011, also will file a Form 2290 for the
period July 1, 2011 — June 30, 2012
(or the end of the new taxable period, if
earlier), by November 30, 2011. In either
case, most taxpayers will have to file only
one return for the taxable period beginning
July 1, 2011. But for the change made by
the temporary regulations, most taxpayers
would have to file two returns if Congress
extends the tax past September 30.
Further, the temporary regulations state
that taxpayers should file a Form 2290 no
earlier than November 1, 2011, for taxable
use during the 2011 short taxable pe-
riod. The IRS will not provide a receipted
Schedule 1 for a return and associated
payment for the taxable period begin-
ning July 1, 2011, before November 1,
2011. Because taxpayers will not be
able to receive a receipted Schedule 1
for filing a Form 2290 and paying the
tax for the taxable period beginning
July 1, 2011, until November 1, 2011,
the temporary regulations provide that
the receipted Schedule 1 for the taxable
period ending June 30, 2010, must be
accepted by a State as a substitute proof of
payment for registration applications filed
during the period of July 1, 2011, through
November 30, 2011.
Section 41.6001–2(b)(1) provides that
a State may register a highway motor
vehicle without proof of payment if the
person registering the vehicle presents the
original or a photocopy of a bill of sale (or
other document evidencing transfer) indi-
cating that the vehicle was purchased by
the owner either as a new or used vehicle
during the preceding 60 days before the
date that the State receives the application
for registration of such vehicle. Because
taxpayers will not be able to obtain proof
of payment during the period between
July 1, 2011, and November 1, 2011,
the temporary regulations provide that
between July 1, 2011, and November 30,
2011, a State must register a highway
motor vehicle without proof of payment if
the person registering the vehicle presents
the original or a photocopy of a bill of
sale (or other document evidencing the
sale) that demonstrates that the owner
purchased the vehicle, either as a new or
used vehicle, within 150 days of the date
that the State receives the application for
registration, and the vehicle has not been
registered in any state since the purchase
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, as supplemented by Executive Or-
der 13563. Therefore, a regulatory assess-
ment is not required. It also has been de-
termined that section 553(b) of the Admin-
istrative Procedure Act (5 U.S.C. chapter
5) does not apply to this regulation. For
applicability of the Regulatory Flexibility
Act (5 U.S.C. chapter 6), please refer to
the Special Analysis section in the pream-
ble to the cross-referenced notice of pro-
posedrulemakinginthisissueoftheBul-
letin. Pursuant to section 7805(f) of the
Code, this final and temporary regulation
was submitted to the Chief Counsel for
Advocacy of the Small Business Admin-
istration for comment on their impact on
small business.
Drafting Information
The principal author of these regu-
lations is Natalie Payne, Office of the
Associate Chief Counsel (Passthroughs
and Special Industries). However, other
personnel from the IRS and the Treasury
Department participated in their develop-
ment.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 41 is
amended as follows:
PART 41—EXCISE TAX ON USE
OF CERTAIN HIGHWAY MOTOR
VEHICLES
Paragraph 1. The authority citation for
part 41 is amended to read in part as fol-
lows:
Authority: 26 U.S.C. 7805. * * *
Section 41.6001–2T also issued under
26 U.S.C. 6001. * * *
Section 41.6071(a)–1T also issued un-
der 26 U.S.C. 6071(a). * * *
Section 41.6151(a)–1T also issued un-
der 26 U.S.C. 6151(a). * * *
Par. 2. Section 41.6001–2 is amended
by:
1. Redesignating paragraph (b)(1) as
paragraph (b)(1)(i) and adding a paragraph
heading to newly designated paragraph
(b)(1)(i).
2. Adding paragraph (b)(1)(ii).
3. Redesignating paragraph (b)(4) as
paragraph (b)(4)(i) and adding a paragraph
heading to newly designated paragraph
(b)(4)(i).
4. Adding paragraph (b)(4)(ii).
5. Redesignating paragraph (c)(2) as
paragraph (c)(2)(i), adding a paragraph
heading to newly designated paragraph
(c)(2)(i) and adding paragraph (c)(2)(ii).
The additions read as follows:
§41.6001–2 Proof of payment for State
registration purposes.
*****
(b) * * *
(1) * * *
(i)Registration generally.***
(ii) [Reserved]. For further guidance,
see §41.6001–2T(b)(1)(ii).
*****
(4) * * *
(i)General rule.***
(ii) [Reserved]. For further guidance,
see §41.6001–2T(b)(4)(ii).
*****
(c) * * *
(2) * * *
(i)General rule.***
(ii) [Reserved]. For further guidance,
see §41.6001–2T(c)(2)(ii).
*****
Par. 3. Section 41.6001–2T is added to
read as follows:
§41.6001–2T Proof of payment for State
registration purposes (temporary).
(a) [Reserved]. For further guidance,
see §41.6001–2(a) .
(b)(1)(i) [Reserved]. For further guid-
ance, see §41.6001–2(b)(1)(i).
(ii)Special rule for registration after
June 30, 2011, and before December 1,
2011. Between July 1, 2011, and Novem-
ber 30, 2011, a State must register a high-
way motor vehicle without proof of pay-
ment if the person registering the vehicle
presents the original or a photocopy of a
bill of sale (or other document evidenc-
ing transfer) indicating that the vehicle was
purchased by the owner either as a new or
used vehicle during the preceding 150 days
before the date that the State receives the
application for registration of the vehicle,
August 29, 20111822011–35 I.R.B.

and the vehicle has not been registered in
any state subsequent to such date of pur-
chase.
(b)(2) through (b)(4)(i) [Reserved]. For
further guidance, see §41.6001–2(b)(2)
through (b)(4)(i).
(ii)Special rule for registration after
June 30, 2011, and before December 1,
2011. In the case of a highway motor ve-
hicle subject to tax under section 4481(a)
for which a State receives an application
for registration during the months of July,
August, September, October, or November
of 2011, a State shall accept proof of pay-
ment for the taxable period of July 1, 2010,
through June 30, 2011, to verify payment
of the tax imposed by section 4481(a).
(c) introductory text through (c)(2)(i)
[Reserved]. For further guidance, see
§41.6001–2(c) through (c)(2)(i).
(ii)Substitute proof of payment for the
taxable period beginning July 1, 2011.For
purposes of this section and §41.6001–2,
in the case of a highway motor vehicle for
which a State receives an application for
registration during the period of July 1,
2011, through November 30, 2011, a State
shall accept as a substitute for proof of
payment, proof of payment for the taxable
period of July 1, 2010, through June 30,
2011.
(iii)Cross reference. For provisions
relating to the use of proof of payment
for the taxable period of July 1, 2010,
through June 30, 2011, to verify payment
of the tax imposed by section 4481(a), see
§41.6001–2T(b)(4)(ii).
(d)Effective/applicability date. Para-
graphs (b)(1)(ii), (b)(4)(ii), (c)(2)(ii) and
(c)(2)(iii) of this section apply on and af-
ter July 20, 2011.
(e)Expiration date. The applicability
of this section expires on or before July 15,
2014.
Par. 4. Section 41.6071(a)–1 is
amended as follows:
1. In paragraph (a) introductory text,
the phrase “Except as provided in para-
graph (b) of this section” is removed and
“Except as provided in paragraph (b) or
paragraph (c) of this section” is added in
its place.
2. Add paragraph (c).
The addition reads as follows:
§41.6071(a)–1 Time for filing returns.
*****
(c) [Reserved]. For further guidance,
see §41.6071(a)–1T(c) through (c)(3).
Par. 5. Section 41.6071(a)–1T is added
to read as follows:
§41.6071(a)–1T Time for filing returns
(temporary).
(a) through (b) [Reserved]. For further
guidance, see §41.6071(a)–1(a) through
(b).
(c)Special rule for highway motor vehi-
cles for which a taxable use occurs during
the period July 1, 2011, through Septem-
ber 30, 2011—(1)Date for filing returns.
In the case of a highway motor vehicle for
which a taxable use occurs during the pe-
riod July 1, 2011, through September 30,
2011, the person liable for the tax must
file a return describedin §41.6011(a)–1 no
later than November 30, 2011. The return
should be filed no earlier than November 1,
2011. If the return is filed and payment
is submitted before November 1, 2011, the
IRS will not provide a receipted Schedule
1 (Form 2290, “Heavy Highway Vehicle
Use Tax Return”) as proof of payment until
after November 1, 2011, and will provide
such receipted Schedule 1 only if the full
amount of the tax for the 2011 taxable
period (determined under the law in effect
as of November 1, 2011) has been paid.
(2)Cross reference. For provisions
relating to time and place for paying
the tax imposed under section 4481, see
§41.6151(a)–1.
(3)Effective/applicability date.This
paragraph (c) applies on and after July 20,
2011.
(4)Expiration date. The applicability
of this section expires on or before July 15,
2014.
Par. 6. Section 41.6151(a)–1 is revised
to read as follows:
§41.6151(a)–1 Time and place for paying
tax.
[Reserved]. For further guidance, see
§41.6071(a)–1T(a) and (b).
Par. 7. Section 41.6151(a)–1T is added
to read as follows:
§41.6151(a)–1T Time and place for
paying tax (temporary).
(a)In general.Thetaxmustbepaidat
the time prescribed in §41.6071(a)–1 (or
§41.6071(a)–1T, as appropriate) for filing
the return and at the place prescribed in
§41.6091–1 for filing the return.
(b)Effective/applicability date.This
sectionappliesonandafterJuly20,2011.
(c)Expiration date. The applicability
of this section expires on or before July 15,
2014.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved July 13, 2011.
Emily S. McMahon,
Acting Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on July 15, 2011,
4:15 p.m., and published in the issue of the Federal Register
for July 20, 2011, 76 F.R. 43121)
2011–35 I.R.B.183August 29, 2011

Part III. Administrative, Procedural, and Miscellaneous
Method for Making Election
to Apply Carryover Basis
Treatment under Section
1022 to the Estates of
Decedents who Died in 2010
and Rules Applicable to
Inter Vivos and Testamentary
Generation-Skipping Transfers
in 2010
Notice 2011–66
PURPOSE
This notice provides guidance with re-
gard to the time and manner in which the
executor of the estate of a decedent who
died in 2010 elects, pursuant to section
301(c) of the Tax Relief, Unemployment
Insurance Reauthorization, and Job Cre-
ation Act of 2010, P.L. 111–312 (124 Stat.
3296) (TRUIRJCA), to have the estate tax
not apply and to have the carryover ba-
sis rules in section 1022 apply to prop-
erty transferred as a result of the dece-
dent’s death. This notice also addresses
how a donor may elect out of the automatic
allocation of generation-skipping transfer
(GST) tax exemption to direct skips oc-
curring during 2010.It also clarifies the
due dates for returns for the taxable year
ending December 31, 2010, that report a
generation-skipping transfer, that allocate
GST exemption, or that opt out of the au-
tomatic allocation of GST exemption. In
addition, the notice discusses the applica-
tion of chapter 13 (the GST tax) to tes-
tamentary transfers during 2010. Finally,
this notice addresses certain other collat-
eral issues arising from the determination
of basis under section 1022.
This notice applies to executors of the
estates of decedents who died in 2010 and
to recipients of property acquired from
such decedents (within the meaning of
section 1022(e)) (hereinafter,acquired
from the decedent), if the executors make
the election under section 301(c) of TRU-
IRJCA. This notice also applies to donors
whomadeagiftduring2010thatisagen-
eration-skipping transfer or an indirect gift
for purposes of the GST tax. See Revenue
Procedure 2011–41 for a safe harbor with
regard to the interpretation and application
of section 1022.
BACKGROUND
Subtitle A of title V of the Economic
Growth and Tax Relief Reconciliation Act
of 2001, P.L. 107–16 (EGTRRA) enacted
section 2210, which made chapter 11 (the
estate tax) inapplicable to the estate of any
decedent who died in 2010 and chapter
13 (the GST tax) inapplicable to genera-
tion-skipping transfers made in 2010. On
December 17, 2010, TRUIRJCA became
law, and section 301(a) of TRUIRJCA
retroactively reinstated the estate and
GST taxes. However, section 301(c) of
TRUIRJCA allows the executor of the
estate of a decedent who died in 2010
to elect to apply the Internal Revenue
Code (IRC) as though section 301(a) of
TRUIRJCAdidnotapplywithrespectto
chapter 11 and with respect to property
acquired or passing from the decedent
(within the meaning of section 1014(b)).
Thus, section 301(c) of TRUIRJCA allows
the executor of the estate of a decedent
whodiedin2010toelectnottohave
the provisions of chapter 11 apply to the
decedent’s estate, but rather, to have the
provisions of section 1022 apply (Section
1022 Election).
Even though an executor may elect
out of the estate tax under TRUIRJCA,
the provisions of chapter 13 (GST tax)
nonetheless continue to apply. Section
302(c) of TRUIRJCA, however, provides
that the applicable tax rate for each GST
occurring during 2010 is zero. Section
301(d)(2) provides that, in the case of
any generation-skipping transfer made
after December 31, 2009, and before
December 17, 2010, the due date for filing
a return required under section 2662 of the
IRC (including any election required to be
made on such return) shall not be earlier
than September 17, 2011.
TRUIRJCA also retroactively repealed
section 2511(c), which treated each trans-
fer in trust during 2010 as a gift unless the
trust was treated as wholly owned by the
donor or the donor’s spouse. Because of
this retroactive repeal, this section does not
apply even if a Section 1022 Election is
made.
GUIDANCE
I Section 1022 Election and Filing
Requirements.
A. Section 1022 Election.
The executor of the estate of a decedent
whodiedin2010maymaketheSection
1022 Election by filing a Form 8939,Al-
location of Increasein Basis for Property
Acquired From a Decedent,onorbefore
November 15, 2011. Once made, the elec-
tion is irrevocable except as provided in
section I.D.1 or D.2 of this notice. Prior fil-
ings purporting to make the Section 1022
Election must be replaced with a timely
filed Form 8939.
If, for the same decedent, the Internal
Revenue Service (IRS) receives a Form
8939 and either a Form 706,United States
Estate (and Generation-Skipping Trans-
fer) Tax Return, or a Form 706–NA,United
States Estate (and Generation-Skipping
Transfer) Tax Return Estate of Nonresident
not a Citizen of the United States,theIRS
will issue a letter to each person who filed
such a form. The letter will include the
name and address of each person who filed
a Form 706 (or Form 706–NA) or a Form
8939 with respect to the decedent, and will
explain that each of those persons must
collectively sign and file either a restated
Form 706 (or Form 706–NA) or Form
8939 on or before 90 days from the date
the IRS mails such letters. If no restated
Form 706 (or Form 706–NA) or Form
8939, signed by each person who previ-
ouslyfiledanysuchform,isfiledwithin
that 90-day period, the IRS will determine
whether the executor has made a Section
1022 Election for the decedent’s estate or
whether the decedent’s estate is subject to
chapter 11. In making this determination,
the IRS will consider all relevant facts
and circumstances disclosed to the IRS,
including without limitation the relative
total fair market values of the decedent’s
property in the possession of the executors
and the nature and significance of the eco-
nomic impact of the Section 1022 Election
(or its loss) on the beneficial owners of
the property held by each executor. Some
factors may be more relevant, and may be
accorded more weight, than others for any
particular estate.
August 29, 20111842011–35 I.R.B.

B. Method to Allocate Basis.
The executor must allocate Basis In-
crease, as defined in section 4.02 of Rev-
enue Procedure 2011–41, on a timely filed
Form 8939. For purposes of this section,
references to the term “executor” shall be
construed in accordance with section 2203
as if that section was applicable. Accord-
ingly, if an executor has been appointed,
has qualified, and is acting for a dece-
dent’s estate within the United States, the
IRS generally will only accept Forms 8939
filedbysuchexecutor.
If an executor has not been appointed,
any person in actual or constructive pos-
session of property acquired from the
decedent may file a Form 8939 for the
property he or she actually or construc-
tively possesses. If the IRS receives mul-
tiple Forms 8939 that collectively purport
to allocate Basis Increase in an amount
greater than the amount of Basis Increase
available to the estate, the IRS will issue
a letter to each person who filed such a
form. The letter will include the name and
address of each other person who filed a
Form 8939 with respect to the decedent,
and will explain that each of those persons
must collectively sign and file a single,
restated Form 8939 allocating available
Basis Increase in order to make the Sec-
tion 1022 Election. The restated Form
8939 must be filed on or before 90 days
from the date the IRS mails such letters.
If no restated Form 8939, signed by each
such person who previously submitted a
Form 8939, is filed within that 90-day
period, the IRS will allocate the available
Basis Increase as the IRS, in its discretion,
may determine. In making this determi-
nation and exercising its discretion, the
IRS will consider all relevant facts and
circumstances disclosed to the IRS. That
allocation might be made on apro-rata
basis, based on the amount of unrecog-
nized appreciation in the property owned
by the decedent (within the meaning of
section 1022(d)) (hereinafter,owned by
the decedent) at death and acquired from
the decedent that was reported on the
timely filed Forms 8939, or in any other
manner deemed appropriate for the par-
ticular decedent’s estate by the IRS in the
exercise of its discretion.
The recipient’s basis in a particular
property (including the amount of Basis
Increase allocated to that property) is sub-
ject to adjustment upon the examination
by the IRS of any tax return reporting a
value dependent upon the property’s basis
(for example, the property’s depreciation,
sale, or other disposition that triggers gain
or loss on the property, or otherwise).
C. Reporting Requirements.
If the executor makes the Section 1022
Election, the executor must report and
value on Form 8939 all property (ex-
cluding cash and property that constitutes
the right to receive an item of income in
respect of a decedent under section 691
(IRD)) acquired from the decedent. Sec-
tion 6018(b)(1). In addition, the executor
also must report all appreciated property
acquired from the decedent, valued as
of the decedent’s date of death, that was
required to be included on the donor’s
Form 709,United States Gift (and Genera-
tion-Skipping Transfer) Tax Return,ifsuch
property was acquired by the decedent by
gift or byinter vivostransfer for less than
adequate and full consideration in money
or money’s worth during the 3-year period
ending on the date of the decedent’s death.
Section 6018(b)(2). This does not include
property transferred to the decedent by the
decedent’s spouse, who had not acquired
the property in whole or in part by gift or
byinter vivostransfer for less than ade-
quate and full consideration in money or
money’s worth during that same 3-year
period.
In the case of a deceased nonresident
who is not a citizen of the United States,
the property to be reported is limited to tan-
gible property situated in the United States
that is acquired from the decedent and any
other property acquired from the decedent
by a United States person. Section 6018
describes the information that must be pro-
vided on Form 8939.
In addition to the information as pro-
vided in this paragraph C, the executor
must include with the Form 8939 any other
information and supporting documenta-
tion as identified in the instructions to the
Form 8939 or in any Internal Revenue
Bulletin (see § 601.601(d)(2)(ii)(b)).
Within 30 days after the executor files
a timely filed Form 8939, the executor (or
each executor filing such a form) must pro-
vide a statement to each recipient acquir-
ingpropertyreportedonthatform,set-
ting forth the information required under
section 6018(c), regardless of whether the
executor allocates Basis Increase to such
property on the form. Section 6018(e). If
an adjustment is made to the basis of prop-
erty reported on a Form 8939, the executor
must provide updated statements to each
recipient of property affected by that ad-
justment within 30 days after making the
adjustment or receiving notice of the ad-
justment from the IRS, whichever is appli-
cable.
D. Time for Filing Return.
1. In General.
Form 8939 is due November 15, 2011.
A Form 8939 filed prior to that date may
be amended or revoked, but only on a
subsequent Form 8939 filed on or before
November 15, 2011. The Form 8939 that
is timely filed by an executor is the last
Form 8939 filed by that executor on or be-
fore November 15, 2011. No executor’s
Form 8939 will have any effect on any
Form 8939 filed by a different executor.
The IRS will not grant extensions of time
to file a Form 8939 and will not accept a
Form 8939 or an amended Form 8939 filed
after the due date, except as provided in
section I.A or B (in the event of conflict-
ing filings) or in section I.D.2 (regarding
relief provisions) of this notice. Thus, a
taxpayer may not file an estate tax return as
well as a conditional Form 8939 that would
take effect only if an estate tax audit results
in an increase in the gross estate above
the applicable exclusion amount. Notwith-
standing the previous sentences, however,
for persons qualifying under section 7508
or 7508A, the due date for filing a Form
8939 is postponed as provided in those sec-
tions. Any executor filing a Form 8939 af-
ter November 15, 2011, pursuant to section
7508 or 7508A should write “Filed Pur-
suant to Section 7508” or “Filed Pursuant
to Section 7508A”, as applicable, on the
top of the form. The failure to write these
notations at the top of the Form 8939, how-
ever, does not adversely impact the exten-
sion granted under section 7508 or 7508A.
Furthermore, for decedents qualifying for
relief under section 692, an executor must
file a Form 8939 to make the Section 1022
Election.
2011–35 I.R.B.185August 29, 2011

2. Relief Provisions.
Four types of relief from the require-
ments of section I.D.1 of this notice are
available. First, an amended Form 8939
may be filed after the due date of that form
for the sole purpose of allocating Spousal
Property Basis Increase, as that term is
defined in section 1022(c)(2) and section
4.02(3) of Revenue Procedure 2011–41,
among the property eligible to receive an
allocation of that basis, provided that each
of the two following requirements is satis-
fied. The first requirement is that the Form
8939 must have been timely filed and was
complete when filed except for the alloca-
tion of the full amount of the Spousal Prop-
erty Basis Increase to the eligible property
reported on that Form 8939. The second
requirement is that each amended Form
8939 must be filed no more than 90 days
after the date of the distribution of the qual-
ified spousal property to which Spousal
Property Basis Increase is allocated on that
amended Form 8939.
Second, provided an executor timely
filed a Form 8939, the executor may file an
amended Form 8939 under the provisions
of § 301.9100–2(b) on or before May 15,
2012, for any purposeexcept to make or re-
voke a Section 1022 Election. The execu-
tor must write “Filed Pursuant to Section
301.9100–2” on the top of the amended
Form 8939.
Third, an executor may apply for relief
to supplement a timely filed Form 8939
under § 301.9100–3. A request for relief
to supplement a timely filed Form 8939
is limited to an extension of time to allo-
cate any Basis Increase that has not previ-
ously been validly allocated, and such re-
lief, if appropriate, will be granted only if:
(1) after filing the Form 8939, the executor
discovers additional property to which re-
maining Basis Increase could be allocated;
and/or (2) the fair market value of prop-
erty reported on the Form 8939 is adjusted
as the result of an IRS examination or in-
quiry. Relief will not be granted to reduce
an allocation of Basis Increase made on a
timely filed Form 8939.
Fourth, an executor may apply for re-
lief under § 301.9100–3 in the form of
an extension of the time in which to file
the Form 8939 (thus, making the Section
1022 Election and the allocation of Basis
Increase), which relief may be granted if
the requirements of § 301.9100–3 are sat-
isfied. Taxpayers should be aware, how-
ever, that, in this context, the amount of
time that has elapsed since the decedent’s
death may constitute a lack of reasonable-
ness and good faith and/or prejudice to the
interests of the government (for example,
the use of hindsight to achieve a more fa-
vorable tax result and/or the lack of records
available to establish what property was or
was not owned by the decedent at death),
which would prevent the grant of the re-
quested relief.
II GST Tax in 2010.
A. With Respect to Decedents Who
Died in 2010
The GST tax was retroactively rein-
stated by TRUIRJCA and applies to the es-
tates of all decedents who died after De-
cember 31, 2009, regardless of whether a
Section 1022 Election is made. The GST
tax is computed by multiplying the tax-
able amount by the applicable rate. Sec-
tion 2602. Section 2641(a) defines the ap-
plicable rate for this purpose as the max-
imum federal estate tax rate applicable to
the estate of a decedent dying at the time
of the transfer, multiplied by the inclusion
ratio with respect to that transfer. Sec-
tion 302(c) of TRUIRJCA provides that,
for each GST occurring during 2010, the
applicable rate under section 2641(a) is
zero. This provision is interpreted to mean
that the maximum federal estate tax rate
for purposes of computing the GST tax
on such a transfer is deemed to be zero
which, when multiplied by any inclusion
ratio, will result in an applicable rate of
zero. As under the law applicable to GSTs
occurring prior to 2010, the only way to
achieve a zero inclusion ratio for the trans-
fer is to make a timely allocation of GST
exemption to the transfer.
If the executor of a decedent who died
in 2010 makes the Section 1022 Elec-
tion, the executor allocates that decedent’s
available GST exemptionbyattachingthe
Schedule R of Form 8939 to the Form
8939 for that decedent’s estate. If the Form
8939 is timely filed, this allocation will
be considered a timely allocation of the
decedent’s GST exemption under section
2632.
B.Inter VivosDirect Skips
In the case ofinter vivosdirect skips
that occurred in 2010, if the donor wishes
to pay GST tax at the rate of zero per-
cent and therefore does not wish to have
any GST exemption allocated to that
transfer, the donor may elect out of the
automatic allocation of GST exemption
to that direct skip in either of two ways.
First, the donor affirmatively may elect
out of the automatic allocation by de-
scribing, on a timely filed Form 709,
both the transfer and the extent to which
the automatic allocation is not to apply.
See section 26.2632–1(b)(1)(i). Alterna-
tively, that same regulation also provides
that, “. . . a timely-filed Form 709
accompanied by payment of the GST tax
(as shown on the return with respect to
the direct skip) is sufficient to prevent an
automatic allocation of GST exemption
with respect to the transferred property.”
Because it is clear that a 2010 transfer
not in trust to a skip person is a direct
skip to which the donor would never want
to allocate GST exemption, the IRS will
interpret the reporting of aninter vivos
direct skip not in trust occurring in 2010 on
a timely filed Form 709 as constituting the
payment of tax (at the rate of zero percent)
and therefore as an election out of the
automatic allocation of GST exemption
to that direct skip. This interpretation
also applies to a direct skip not in trust
occurring at the close of an estate tax
inclusion period (ETIP) in 2010 other than
by reason of the donor’s death. However,
a donor may or may not want to allocate
GST exemption to a 2010 direct skip made
to a trust. Therefore, this interpretation
will not apply to any transfer in trust
that is a direct skip or that occurs at the
end of an ETIP. In addition, because this
interpretation only applies tointer vivos
direct skips, it will also not apply to any
direct skip, or to the close of an ETIP,
by reason of the donor’s death. Section
26.2632–1(c)(4). The rules regarding the
automatic allocation of GST exemption
willapplytotransfersdescribedinthe
preceding sentence unless the transferor
affirmatively elects to have those rules not
apply.
August 29, 20111862011–35 I.R.B.

C. Filing Deadlines
Section 2611(a) defines a GST transfer
as a direct skip, a taxable distribution, or
a taxable termination. An indirect skip,
as defined in section 2632(c)(3), is not
a GST transfer. Section 2631 provides
that each individual is allowed a GST ex-
emption amount which may be allocated
to any property with respect to which
such individual is the transferor. Under
§ 26.2632–1(b)(3) and (4), an election to
treat a trust as a GST trust or to allocate
GST exemption to anyinter vivostrans-
fer other than a direct skip, is made on a
timely filed Form 709. Section 2632(b)(1)
and (c)(1) provide that, if any individ-
ual makes a direct or indirect skip during
life, any unused portion of such individ-
ual’s GST exemption shall be allocated
to the property transferred to the extent
necessary to make the inclusion ratio for
such property zero. Sections 2632(b)(3)
and (c)(5) and § 26.2632–1(b)(1)(i) and
(b)(2)(ii) provide that an individual may
prevent the automatic allocation of GST
exemption by so providing on a timely
filed Form 709.
Section 301(d)(2) of TRUIRJCA ex-
tends the time for filing any return re-
quired under section 2662 (including any
election required to be made on such
return) to report a GST transfer made
after December 31, 2009, and before
December 17, 2010, to September 17,
2011. Accordingly, the due date for filing
a return reporting a direct skip, a taxable
distribution, or a taxable termination
(includinganyelectionrequiredtobe
made on such return) that occurred
on or after January 1, 2010, through
December 16, 2010, is September 19,
2011, including extensions (because
September 17, 2011, falls on a Saturday),
except in the case of a Schedule R attached
to Form 8939, which is due on or before
November 15, 2011.
However, the language of Section
301(d)(2) of TRUIRJCA does not extend
the due date of all gift and GST returns
for 2010. Specifically, to the extent a
return relates to an indirect skip, or to a
post-December 16, 2010, direct skip, the
due date of the return is not extended.
Thus, the due date for filing a Form 709
that does not report a GST transfer or that
reports a GST transfer (or any election
pertaining to such transfer) that occurs
on or after December 17, 2010, through
December 31, 2010, was April 18, 2011,
including extensions. In addition, the due
date for filing a Form 709 to elect to treat
a trust as a GST trust or to allocate GST
exemption to a transfer occurring during
2010 under § 26.2632–1(b)(3) or (4) was
April 18, 2011, including extensions.
However, if a donor timely filed Form 709
for the taxable year ending December 31,
2010, but failed to allocate GST exemption
to a transfer occurring during such year,
see § 301.9100–2 for possible relief.
D. Application of Chapter 13 to
Testamentary Transfers During 2010
For purposes of chapter 13, the Trea-
sury Department and IRS will construe
and apply any reference to chapter 11
without regard to whether the executor
of a decedent who died in 2010 made a
Section 1022 Election. For example, ref-
erences to chapter 11 in §§ 2612(c)(1),
2642(b)(2)(A), 2642(f), 2651(e)(1)(B),
and 2661(2) will be construed as if the
decedent was subject to chapter 11 even if
the decedent’s executor made the Section
1022 Election.
III Transfer Certificates Under
§ 20.6325–1
Section 6324(a)(1) generally provides
that, unless the estate tax is paid in full,
a lien is imposed upon the gross estate of
a decedent for 10 years from the date of
death for any unpaid estate tax liability.
Section 6324(a)(2) generally provides that,
if the estate tax is not paid when due, then
(1) any transferee, trustee, person in pos-
session of property, or person who receives
property from the gross estate as described
in sections 2034 to 2042 shall be person-
ally liable for the estate tax to the extent
of the value of that property on the dece-
dent’s date of death and (2) any part of any
property included in the gross estate that
is transferred by such person shall be di-
vested of the lien and a like lien shall at-
tach to all of the property of such person.
Section 6325(c) and the regulations there-
under provide procedures for issuing a cer-
tificate of discharge of lien for any prop-
erty subject to any lien imposed by section
6324.
In the case of a transfer agent holding
property registered in the name of a non-
resident decedent who is not a citizen of
the United States, § 20.6325–1(a) provides
thattheIRSmayissueatransfercertifi-
cate to permit the transfer of property with-
out liability for such decedent’s estate tax.
Specifically—
[a] transfer certificate is a certificate
permitting the transfer of property of a
nonresident decedent without liability.
. . . Corporations, transfer agents of
domestic corporations, transfer agents
of foreign corporations (except as to
shares held in the name of a nonresi-
dent decedent not a citizen of the United
States), banks, trust companies, or other
custodians in actual or constructive pos-
session of property, of such a dece-
dent can insure avoidance of liability
for taxes and penalties only by demand-
ing and receiving transfer certificates
before transfer of property of nonresi-
dent decedents.
Thus, transfer certificates requested
with respect to property of a nonresident
decedent who is not a citizen of the United
States have been issued by the IRS when
the Commissioner has been satisfied that
the “tax imposed upon the estate, if any,
has been fully discharged or provided for.”
Section 20.6325–1(c).
Concerns have been raised as to
whether it is still necessary to obtain such
transfer certificates prior to transferring
property owned by nonresident decedents
who are not citizens of the United States,
who died in 2010, and whose executors
make the Section 1022 Election. This
notice clarifies that a transfer certificate
is not required, and the IRS will not issue
transfer certificates, with respect to the
property of a nonresident decedent who
is not a citizen of the United States, who
died in 2010, and whose executor makes
the Section 1022 Election.
IV Election to Treat a Trust as Part of
an Estate Under Section 645
Under section 645, if the executor (if
any) of an estate and the trustee of a qual-
ified revocable trust so elect, the trust will
be treated as part of the estate (and not as a
separate trust) for income tax purposes for
all taxable years of the estate ending after
the date of the decedent’s death and before
the applicable date. Section 645(b)(2) de-
fines “applicable date” as, “(A) if no return
of tax imposed by chapter 11 is required
to be filed, the date which is 2 years after
2011–35 I.R.B.187August 29, 2011

the date of the decedent’s death, and (B)
if such a return is required to be filed, the
date which is 6 months after the date of
the final determination of the liability for
tax imposed by chapter 11.” If an execu-
tor makes the Section 1022 Election, no
return of tax imposed by chapter 11 is re-
quired to be filed. Accordingly, if an ex-
ecutor makes the Section 1022 Election,
section 645(b)(2)(A) applies and the appli-
cable date is the date that is 2 years after the
date of the decedent’s death.
REQUEST FOR COMMENTS
The Treasury Department and the IRS
invite public comments on the guidance
provided in this notice. All materials sub-
mitted will be available for public inspec-
tion and copying.
Comments may be submitted to In-
ternal Revenue Service, CC:PA:LPD:PR
(Notice 2011–66), Room 5203, PO Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may also be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to the Couriers Desk at 1111 Constitution
Avenue, NW, Washington, DC 20224,
Attn:CC:PA:LPD:PR (Notice 2011–66),
Room 5203. Submissions may also be
sent electronically via the internet to the
following email address:Notice.com-
ments@irscounsel.treas.gov. Include the
notice number (Notice 2011–66) in the
subject line.
EFFECTIVE DATE
This notice is applicable to executors of
the estates of decedents who died in 2010,
and to persons acquiring property from
such a decedent whose executor makes
the Section 1022 Election. This notice
is also applicable to donors who made a
GST transfer or an indirect gift for pur-
poses of the GST tax during 2010. The
Treasury Department and the IRS intend to
issue regulations to confirm the guidance
set forth in this notice.
DRAFTING INFORMATION
The principal authors of this notice are
Laura Urich Daly, Theresa Melchiorre,
and Mayer Samuels of the Office of
Associate Chief Counsel (Passthroughs
& Special Industries).For further
information regarding this notice, contact
Laura Urich Daly, Theresa Melchiorre, or
Mayer Samuels at (202) 622–3090 (not a
toll-free call).
PAPERWORK REDUCTION ACT
The collection of information contained
in this notice has been submitted to the Of-
fice of Management and Budget (OMB) in
accordance with the Paperwork Reduction
Act (44 U.S.C. 3507) and OMB approval
is pending. An agency may not conduct
or sponsor, and a person is not required to
respond to, a collection of information un-
less the collection of information displays
a valid control number.
The first, second, and third collection
of information requirements, as required
by section 6018(c) and (e), are in section
I.C. of this notice. The collection of in-
formation relates to the requirement that
the executor provide a statement to each
recipient acquiring property reported on
Form 8939. Section I.C of this notice also
requires the executor to provide updated
statements to each recipient of property af-
fected by any adjustment made to Form
8939. Finally, section I.C of this notice re-
quires the executor to provide any other in-
formation and supporting documentation
as identified in the instructions to the Form
8939 or in any Internal Revenue Bulletin
(see § 601.601(d)(2)(ii)(b)). This collec-
tion of information is necessary for the
proper performance of the function of the
IRS in the collection of income tax when
the property is later disposed of by the re-
cipient or other holder of the property.
It is anticipated that the decedent’s ex-
ecutor will complete and attach to Form
8939 schedules showing property received
by each recipient acquiring property from
a decedent. To meet this collection of in-
formation requirement, the executor is re-
quired to send a copy of the schedule re-
lating to property received by that particu-
lar recipient to such recipient and to send
an updated schedule to each recipient in
the event the information on the schedule
changes. The decedent’s executor will also
have to provide any other information and
supporting documentation as identified in
the instructions to the Form 8939 or in any
Internal Revenue Bulletin. We estimate
that approximately 7,000 estates of dece-
dents who died in 2010 will file Form 8939
and that it will take an executor approxi-
mately 10 hours to comply with these re-
quirements. The total reporting burden is
estimated to be 70,000 hours.
The fourth collection of information
requirement in this notice is in section
II.A, as provided in Treasury Regulation
§ 26.2632–1(d)(1), and relates to allocat-
ing the decedent’s unused GST exemption.
This information collection is necessary
for the proper performance of the function
of the IRS in the collection of GST tax
when there is a taxable termination or tax-
able distribution. We estimate that 6,000
executors of estates of decedents who died
in 2010 will allocate the decedent’s un-
used GST exemption on a Schedule R for
Form 8939 attached to Form 8939 and that
it will take each executor approximately
3 hours to prepare the documentation. The
total reporting burden is estimated to be
18,000 hours.
Books or records relating to collections
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by section 6103.
26 CFR 601.105: Examination of returns and claims
for refund, credit or abatement; determination of cor-
rect liability
(Also Part 1 §§1022, 172, 165, 469, 1212, 1040, 684,
6018, 20.6325–1)
Rev. Proc. 2011–41
SECTION 1. PURPOSE
This revenue procedure provides op-
tional safe harbor guidance under sec-
tion 1022 of the Internal Revenue Code
(Code), enacted by section 542 of the
Economic Growth and Tax Relief Rec-
onciliation Act of 2001 (EGTRRA), P.L.
107–16 (115 Stat. 76–81). Section 1022
determines a recipient’s basis in property
acquired from the decedent (within the
meaning of section 1022(e)) who died
in 2010 if the decedent’s executor elects
to have section 1022 apply. Section
301(c) of the Tax Relief, Unemployment
Insurance Reauthorization, and Job
Creation Act of 2010, P.L. 111–312 (124
Stat. 3296) (TRUIRJCA), allows such
an executor to elect to have the estate
tax not apply and to have the carryover
basis rules in section 1022 apply to
August 29, 20111882011–35 I.R.B.

property transferred as a result of the
decedent’s death (Section 1022 Election).
This revenue procedure does not address
the time or manner in which such an
executor makes the Section 1022 Election
or allocates generation-skipping transfer
(GST) exemption to transfers occurring as
a result of such decedent’s death. Instead,
taxpayers must see Notice 2011–66 for
such guidance.
SECTION 2. BACKGROUND
Subtitle A of title V of EGTRRA en-
acted section 2210, which made chapter 11
(the estate tax) inapplicable to the estate of
any decedent who died in 2010 and chapter
13 (the GST tax) inapplicable to genera-
tion-skipping transfers made in 2010. On
December 17, 2010, TRUIRJCA became
law, and section 301(a) of TRUIRJCA
retroactively reinstated the estate and
GST taxes. However, section 301(c) of
TRUIRJCA allows the executor of the
estate of a decedent who died in 2010
to elect to apply the Code as though
section301(a)ofTRUIRJCAdidnot
apply with respect to chapter 11 and with
respect to property acquired or passing
from a decedent (within the meaning of
section 1014(b)). Thus, section 301(c)
of TRUIRJCA allows the executor of the
estate of a decedent who died in 2010 to
elect not to have the provisions of chapter
11 apply to the decedent’s estate, but
rather, to have the provisions of section
1022 apply.
SECTION 3. SCOPE
The safe harbor procedures of this rev-
enue procedure applyto executors of the
estates of decedents who died in 2010 and
to recipients of property acquired from
such decedents, if the executors make the
Section 1022 Election. If the executor of
the estate of the decedent who died in 2010
makes the Section 1022 Election and fol-
lows the applicable provisions of section
4 of this revenue procedure and takes no
return position contrary to any provisions
of section 4, the Internal Revenue Service
(IRS) will not challenge the taxpayer’s
ability to rely on the provisions of section
4 either on the Form 8939,Allocation of
Increase in Basis forProperty Acquired
From a Decedent, or any other return of
tax.
SECTION 4. APPLICATION
.01Application of Section 1022.
(1)In General. Section 1022 applies to
the estate of a decedent who died in 2010
only if the executor, as defined in section
2203, makes the Section 1022 Election
as described in Notice 2011–66. Section
1022(a)(1) generally provides that prop-
erty acquired from the decedent (within the
meaning of section 1022(e)) (hereinafter,
acquired from the decedent) is treated as
having been transferred by gift. If the
decedent’s adjusted basis is less than or
equal to the property’s fair market value
(FMV) determined as of the decedent’s
date of death, the recipient’s basis is the
adjusted basis of thedecedent. Section
1022(a)(2)(A). If the decedent’s adjusted
basis is greater than that FMV, the recip-
ient’s basis is limited to that FMV. Section
1022(a)(2)(B).
If the executor of the estate of a dece-
dent who died in 2010 makes the Section
1022 Election, section 1022 applies to de-
termine a recipient’s basis in all property
acquired from that decedent, regardless of
the year in which the property is sold or
distributed. Accordingly, if property is
acquired from the decedent who died in
2010 and the executor makes the Section
1022 Election, then when the property is
sold during 2010, 2011 or any subsequent
year, the recipient’s (seller’s) basis in the
property is determined under section 1022
rather than under section 1014.
Furthermore, sections 1022(b) and (c)
allow the executor of such a decedent’s
estate to allocate additional basis (Basis
Increase) to increase the basis of certain
assets that both are acquired from the
decedent and are owned by the decedent
(within the meaning of section 1022(d))
(hereinafter,owned by the decedent)at
death. If the property is acquired from
and owned by the decedent, and if the
decedent’s adjusted basis in the property
is less than the property’s FMV on the
decedent’s date of death, then the executor
generally may allocate Basis Increase to
the property, provided that the property’s
total basis may not exceed the property’s
FMV on the date of death.
(2)Property Not Subject to Section
1022. If the decedent’s executor makes
the Section 1022 Election, section 1022
will apply to determine a recipient’s basis
only in property acquired from the dece-
dent as further described in section 4.01(3)
of this revenue procedure. Thus, section
1022 does not determine the recipient’s
basis in every type of property transferred
from a decedent who died in 2010. An
example of property that is not property
acquired from the decedent is property
that constitutes a right to receive an item
of income in respect of a decedent under
section 691 (IRD). Section 1022(f). For
purposes of section 1022, annuities sub-
ject to income tax under section 72 are
considered propertythat constitutes the
right to receive an item of IRD. Rev. Rul.
2005–30, 2005–1 C.B. 1015. The recipi-
ent’s basis in property that is not subject
to section 1022 is determined under other
applicable sections of the Code.
(3)Property Acquired From the Dece-
dent — Section 1022(e). Property acquired
from the decedent (within the meaning of
section 1022(e)) is property acquired by
bequest, devise, or inheritance, or by the
decedent’s estate from the decedent. The
term also includes property transferred by
the decedent during the decedent’s life-
time: (i) to a qualified revocable trust as
defined in section 645(b)(1), regardless of
whether the election under section 645 is
made for that trust; or (ii) to any other
trust with respect to which the decedent re-
served the right to make any change in the
enjoyment thereof through the exercise of
a power to alter, amend, or terminate the
trust (which, for this purpose, is deemed to
include a retained reversionary interest in
the trust on death and trust property subject
to any retained power of appointment). Fi-
nally, the term includes any other property
that passes from the decedent by reason
of death to the extent that such property
passes without consideration, such as: (i)
any property transferred at the decedent’s
death by reason of the decedent’s hold-
ing and/or exercising a general power of
appointment (as defined in section 2041)
with respect to such property if that power
was not created by the decedent, (ii) prop-
erty held by the decedent and another per-
son as joint tenants with right of survivor-
ship or as tenants by the entirety; and (iii)
the surviving spouse’s one-half interest in
community property (as discussed in sec-
tion 4.05 of this revenue procedure).
The term does not include, however,
a decedent’s interest in a qualified ter-
minable interest property (QTIP) trust or
similar arrangement described in section
2011–35 I.R.B.189August 29, 2011

1022(c)(5) funded for the benefit of the
decedent by the decedent’s predeceased
spouse. As a result, this property is not
subject to section 1022 and a recipient’s
basis in this property will not be deter-
mined under section 1022. See section
4.01(2) of this revenue procedure.
(4)Property Owned by the Decedent —
Section 1022(d). Property acquired from
the decedent must also be owned by the
decedent at death (within the meaning of
section 1022(d)) to be eligible for the al-
location of Basis Increase under sections
1022(b) and/or (c). Section 1022(d)(1)(A).
Thus, property may be acquired from the
decedent, and its basis will be determined
under section 1022(a), but will not be eli-
gible to receive an allocation of Basis In-
crease unless that property is also owned
by the decedent at death. Property owned
by the decedent at death includes, but is not
limited to: (i) any property legally titled in
the name of the decedent at death (and not
held by the decedent solely in a legal or
representative capacity); (ii) certain jointly
owned property, whether owned as tenants
in common or with rights of survivorship
(see section 1022(d)(1)(B)(i)); (iii) prop-
erty transferred by the decedent during life
to a qualified revocable trust as defined
in section 645(b)(1), regardless of whether
the election under section 645 is made
for that trust; and (iv) certain community
property (see section 1022(d)(1)(B)(iv)).
Section 1022(d)(1)(B) provides addi-
tional rules defining ownership for this
purpose and specifically states that, for
purposes of determining whether Basis In-
crease may be allocated to property, certain
property is not owned by the decedent at
death. For example, property over which
the decedent holds any power of appoint-
ment is not considered owned by the dece-
dent at death. In addition, although consid-
ered to have been acquired from the dece-
dent, property transferred to a trust by the
decedent during life in which the decedent
retained a power to alter, amend, or ter-
minate the trust is not considered owned
by the decedent at death for this purpose.
Property transferred to a trust by the dece-
dent during life in which the decedent re-
tained an income interest is not consid-
ered owned by the decedent at death solely
by reason of that retained income interest.
In addition, because of the different defi-
nitions of ownership in sections 679 and
1022, although a transfer of property to a
foreign trust by a United States grantor, for
example, may be sufficient to cause that
grantor to be treated as the owner of at least
a portion of that trust for income tax pur-
poses under section 679, such a transfer
is not sufficient to result in the trust’s be-
ingconsideredtobeownedbytheUnited
States grantor at that grantor’s death for
purposes of section 1022(d).
Notwithstanding these examples, how-
ever, even though the property in these
types of trusts would not be deemed to
be owned by the decedent, if the terms of
the trust require the trust property to re-
vert back to the decedent upon death, then
such property is deemed to be owned by
the decedent. Finally, an interest in a QTIP
trust or similar arrangement described in
section 1022(c)(5) funded for the benefit
of the decedent by a predeceased spouse of
the decedent is not owned by the decedent
for this purpose.
The provisions of sections 4.01(2), (3),
and (4) are illustrated by the following ex-
amples:
Example 1. On August 1, 2006, decedent (D) cre-
ated a qualified personal residence trust (QPRT) pur-
suant to § 25.2702–5(c). The term of the QPRT ex-
pires on July 31, 2011. The QPRT instrument pro-
vided that, if D dies prior to July 31, 2011, the prop-
erty in the QPRT is to be distributed to D’s child (C).
D died in 2010, and D’s executor made the Section
1022 Election. In this case, the property in the trust
hadbeentransferredtothetrustbyDduringD’slife-
time. The QPRT is not a qualified revocable trust
as defined in section 645(b)(1) nor is it a trust over
which the decedent reserved the right to make any
change in the enjoyment thereof through the exercise
of a power to alter, amend, or terminate the trust. The
property that passes to C under the QPRT instrument
by reason of D’s death is not considered to have been
acquired from D and thus, section 1022 is not appli-
cable to determine C’s basis in the property held in
the QPRT. Instead, C’s basis in this property is deter-
mined under other applicable sections of the Code.
Example 2. Assume the same facts as inExample
1, except that the QPRT instrument provided that, if
D dies prior to July 31, 2011, the QPRT terminates
and the property in the QPRT is to be distributed to
D’s estate. Because the trust property becomes the
property of D’s estate at D’s death, the trust property
is considered to have beenacquired from D. Section
1022(e)(1). For the same reason, the property is also
considered owned by D and, therefore, Basis Increase
may be allocated to this trust property.
(5)Property Owned By and Acquired
From the Decedent But Not Eligible for
the Allocation of Basis Increase. Notwith-
standing the rules regarding the definition
of property owned by and acquired from
the decedent, section 1022 provides that
Basis Increase may not be allocated to two
types of property. First, pursuant to sec-
tion 1022(d)(1)(C), the executor may not
allocate Basis Increase to property that is
acquired by the decedent by gift or byin-
ter vivostransfer for less than adequate and
full consideration in money or money’s
worth during the three-year period end-
ing on the date of the decedent’s death.
This prohibition does not apply, however,
to property acquired by the decedent from
the decedent’s spouse, provided the prop-
erty had not been transferred to the spouse
during such three-year period in whole or
in part by gift or byinter vivostransfer for
less than adequate and full consideration in
money or money’s worth.
Second,pursuant to section
1022(d)(1)(D), the executor may not
allocate Basis Increase to the stock or
securities of a foreign personal holding
company, a DISC or former DISC, a
foreign investment company, or a passive
foreign investment company, unless such
company is a qualified electing fund as
defined in section 1295 with respect to the
decedent.
.02AmountofBasisIncrease.
(1)Basis Increase. Basis Increase con-
sists of the sum of the General Basis In-
crease (Aggregate Basis Increase and Car-
ryovers/Unrealized Losses Increase) under
section 1022(b) and the Spousal Property
Basis Increase under section 1022(c).
(2)General Basis Increase. The Gen-
eral Basis Increase is the sum of the
Aggregate Basis Increase and the Carry-
overs/Unrealized Losses Increase under
section 1022(b).
(a)Aggregate Basis Increase.TheAg-
gregate Basis Increase is $1,300,000 under
section 1022(b)(2)(B).
(b)Carryovers/Unrealized Losses In-
crease. The Carryovers/Unrealized Losses
Increase consists of the sum of: (i) the
amount of any capital loss carryovers un-
der section 1212(b) that would (but for
the decedent’s death) have been carried
from the decedent’s last taxable year to a
later taxable year; (ii) the amount of any
net operating loss carryovers under sec-
tion 172 that would (but for the decedent’s
death) have been carried from the dece-
dent’s last taxable year to a later taxable
year; and (iii) the amount of unrealized
losses that would have been allowable un-
der section 165 if the property acquired
from the decedent had been sold at FMV
immediately before the decedent’s death.
Section 1022(b)(2)(C).
August 29, 20111902011–35 I.R.B.

The capital loss carryovers under sec-
tion 1212(b) and the net operating loss car-
ryovers under section 172 available to be
included in General Basis Increase are the
losses that would carry forward to years af-
ter the year of the decedent’s death.
The amount of unrealized losses con-
sists solely of the losses described in sec-
tion 165(c)(1) and (2) from all property ac-
quired from the decedent that would have
been allowable as a deduction, if the prop-
erty had been sold at FMV immediately
before the decedent’s death. However,
losses described in section 165(c)(3) are
sustained prior to the decedent’s death and
would not arise on a hypothetical sale of
the property. These losses therefore must
be claimed instead on the decedent’s fi-
nal Form 1040, and may not be included
in the Carryovers/Unrealized Losses In-
crease. For the purpose of computing un-
realized losses, the capital loss limitations
referred to in section 165(f) are ignored.
Thus, for example, the amount of any loss
that would have been allowable under sec-
tion 165 if the property acquired from the
decedent had been sold at FMV imme-
diately before the decedent’s death is de-
termined without the dollar limitations on
capital losses under section 1211. Section
1022(b)(2)(C)(ii).
Existing income tax rules will apply to
determine the decedent’s share of these
loss carryovers and unrealized losses un-
der section 172 and section 1212(b) if the
decedent’s final Form 1040 is filed jointly
with the decedent’s surviving spouse.
Thus for example, if a calendar year dece-
dent and the surviving spouse file a joint
Form 1040 for 2010, these amounts will
be determined based on their tax liability
with respect to the decedent’s final taxable
year ending on the date of the decedent’s
death and the surviving spouse’s taxable
year ending on December 31, 2010. With
regard to such loss carryovers and un-
realized losses arising from community
property, see sections 4.05 and 4.06(4) of
this revenue procedure.
The provisions of this section
4.02(2)(b) are illustrated by the following
example:
Example 3. D owned 100 shares of stock that
D held for profit within the meaning of section
165(c)(2). The stock is a capital asset, and any gain
or loss from the sale of the stock would be long-term
capital gain or loss under sections 1221 and 1222(3).
D died in 2010, still owning the stock. As of D’s date
of death, D’s adjusted basis in the stock pursuant
to section 1011 was $5,000, and the stock’s FMV
on D’s date of death was $1,000. D did not sell the
stock during life, and thus did not incur a loss under
section 165(c)(2) reportable on D’s final Form 1040.
The stock is considered to be property owned by
and acquired from D. D’s executor made the Section
1022 Election. If D had sold the stock immediately
prior to D’s death, D would have had a net long-term
capital loss of $4,000. Based on D’s 2010 taxable
income, D would have been able to deduct $3,000 of
the loss and $1,000 would have been carried over to
future years. Section 1211(b). For purposes of sec-
tion 1022, however, the full unrealized net long-term
capital loss of $4,000, that would have been available
to D if D had sold the stock before death, is available
as a Carryovers/Unrealized Losses Basis Increase.
(3)Spousal Property Basis Increase.
The Spousal PropertyBasis Increase is
$3,000,000 under section 1022(c)(2) and
may be allocated to any or all property
owned by and acquired from the dece-
dent that also satisfies the definition of
qualified spousal property in section
1022(c)(3). Qualified spousal property
is property that either is transferred out-
right to the decedent’s surviving spouse
(within the meaning of section 1022(c)(4))
or is QTIP (within the meaning of section
1022(c)(5)), whether or not held in trust.
The definition of QTIP under this provi-
sion does not require that a QTIP election
under section 2056(b)(7) be made.
The executor may allocate Spousal
Property Basis Increase to qualified
spousal property that has already been
distributed. See paragraph I.D.2 of Notice
2011–66 regarding relief for allocating
Spousal Property Basis Increase to such
property distributed after the due date of
the Form 8939.
In addition, Spousal Property Basis In-
crease also may be allocated to property
that is sold (regardless of whether the allo-
cation of Spousal Property Basis Increase
is made before or after such sale) prior to
its distribution. However, this allocation
may be made only to the extent that the ex-
ecutor (1) certifies on the Form 8939 that
the net proceeds from the sale of that prop-
erty will be distributed to or for the ben-
efit of the decedent’s surviving spouse in
a manner that would qualify property as
qualified spousal property, and (2) attaches
to Form 8939 each document providing a
bequest or devise to the surviving spouse.
The allocation of Spousal Property Ba-
sis Increase to property not distributed in
kind is illustrated by the following exam-
ples. In each example, assume that the
decedent’s Aggregate Basis Increase and
Carryovers/Unrealized Losses Increase
have been fully allocated to other assets.
Example 4. D died in 2010 owning 20,000 shares
of Corporation X stock. D’s executor made the Sec-
tion 1022 Election. D’s adjusted basis in the stock is
$600,000 ($30 per share), and the FMV on D’s date
of death is $2,000,000 ($100 per share). Under the
terms of D’s will, D’s Spouse (S) is to receive 50 per-
cent of D’s estate, outright. Four months after D’s
death, the FMV of the stock declines to $1,800,000
($90 per share). D’s executor sells all 20,000 shares
of the stock and receives $1,770,000 in proceeds net
of sales commissions (thus, $88.50 per share). D’s
executor intends to distribute all of the proceeds from
the sale of the stock to S, in partial satisfaction of
S’s residuary bequest; there are no known outstand-
ing liabilities that would reduce this distribution. D’s
executor may allocate up to $1,400,000 of Spousal
Property Basis Increase ($70 to each of the 20,000
shares of stock) if the required certification and sup-
porting documentation is included on a timely filed
Form 8939. (Note that, to the extent that more than
$58.50 per share is allocated to the stock, the sale will
generate a loss.)
Example 5.ThefactsarethesameasinExample
4except that D’s executor applies $165,000 of the net
proceeds from the sale of the stock to pay administra-
tive expenses of D’s estate. D’s executor intends to
distribute the remaining$1,605,000 of net proceeds
from the sale of the stock to S. Spousal Property
Basis Increase may be allocated to no more than
18,135 shares. This number of shares is determined
either by dividing the net proceeds to be distributed
to S by the net per-share proceeds ($1,605,000 /
$88.50 = 18,135.6 shares, limited for this purpose to
18,135 whole shares), or by calculating the ratio of
the net proceeds payable toS to the total net proceeds
(20,000 shares x $1,605,000 / $1,770,000 = 18,135.6
shares, thus limited to 18,135 whole shares). As
inExample 4, D’s executor may allocate up to $70
of Spousal Property Basis Increase to each of these
18,135 shares of the stock (for a total of $1,269,450),
all of the net proceeds of which will be distributed to
S, provided a certification and supporting documen-
tation are included on a timely filed Form 8939.
Example 6. D died in 2010 owning personal prop-
erty with an adjusted basis of $200,000 and a FMV on
D’s date of death of $500,000. D’s executor made the
Section 1022 Election. Under the terms of D’s will,
D’s spouse (S) is to receive 50 percent of D’s estate,
outright. Four months after D’s death, D’s executor
sells the personal property for $600,000. D’s executor
applies $150,000 of the net proceeds from the sale of
the personal property to pay administrative expenses
of D’s estate and intends to distribute the remaining
$450,000 of net proceeds from the sale of the personal
property to S. D’s executor may allocate no more than
$225,000 of Spousal Property Basis Increase to the
personal property. This maximum allocation is de-
termined by multiplying the unrealized appreciation
at death ($300,000) by the ratio of net proceeds to
be distributed to S over the total net proceeds of the
sale. Thus, D’s executor may allocate up to $225,000
($300,000 X ($450,000 / $600,000)) of Spousal Prop-
erty Basis Increase to the personal property, provided
a certification and supporting documentation are in-
cludedonatimelyfiledForm8939.
2011–35 I.R.B.191August 29, 2011

Spousal Property Basis Increase also
may be allocated to property held by a
testamentary charitable remainder trust
(CRT) as defined in section 664 (subject
to the limit of section 1022(d)(2)), if the
surviving spouse is the sole non-charitable
beneficiary of the CRT and the CRT would
have qualified for the marital deduction
under section 2056(b)(8) if the executor
of the decedent’s estate had not made the
Section 1022 Election.
(4)Nonresident Decedents who are not
citizens of the United States. In the case
of a nonresident decedent who was not
a citizen of the United States at death,
the amount of the Aggregate Basis In-
crease is limited to $60,000 and is not
increased by any Carryovers/Unrealized
Losses Increase. This limitation in sec-
tion 1022(b)(3), however, only applies to
limit the available General Basis Increase
to $60,000. Accordingly, an executor of
the estate of a nonresident decedent who
was not a citizen of the United States at
death may allocate Spousal Property Ba-
sis Increase to qualified spousal property
(within the meaning of section 1022(c)(3))
owned by and acquired from the decedent.
.03General Rules for Allocating Basis
Increase. The executor may allocate Ba-
sis Increase to property owned by and ac-
quired from the decedent on a property-
by-property basis, provided that the dece-
dent’s adjusted basis in each such property
(after the allocation, if any) does not ex-
ceed the FMV of that property at the dece-
dent’s death. For example, Basis Increase
maybeallocatedtooneormoresharesof
stock or to a particular block of stock rather
than to the decedent’s entire holding of that
stock. Generally, Basis Increase may be al-
located to property owned by and acquired
from the decedent even after the executor
has disposed of or distributed the property.
For a special rule regarding Spousal Prop-
erty Basis Increase, see section 4.02(3) of
this revenue procedure.
For each property, the sum of the dece-
dent’s adjusted basis in that property and
the Basis Increase allocated to that prop-
erty may not exceed the FMV of that prop-
erty on the decedent’s date of death. Sec-
tion 1022(d)(2). Under this rule, the ex-
ecutor may not allocate any Basis Increase
to increases in value occurring after the
decedent’s death.
For purposes of section 1022(a), refer-
ences to the term “property” include in-
terests in that property. Thus, Basis In-
crease may be allocated to some or all of
the decedent’s shares of stock in a particu-
lar company, or to a life or remainder inter-
est owned by the decedent at death. How-
ever, if, by reason of the decedent’s death,
the decedent’s property is divided into dif-
ferent interests that are not undivided por-
tions or fractional interests of each and ev-
ery interest or right in the property that
was owned by the decedent, Basis Increase
may not be allocated separately to the var-
ious interests in that property created by
reason of the decedent’s death. An exam-
ple of such a division of property is the di-
vision of property owned outright by the
decedent at death into a life interest and a
remainder interest in that property. Basis
Increase may be allocated to the property
owned by the decedent at death, but may
not be allocated separately to the life es-
tate and/or remainder interest.
.04Determination of Fair Market
Value.
(1)In General. The FMV of property
acquired from the decedent who died in
2010 is determined in the same manner for
purposes of section 1022 as for purposes
oftheestatetax. Thus,theprovisions
contained in the regulations under section
2031 that require appraisals to determine
the FMV of certain property included in
the gross estate for federal estate tax pur-
poses also apply for purposes of determin-
ing the FMV of property acquired from the
decedent under section 1022. The execu-
tor must attach any appraisals required un-
der section 2031 to the Form 8939.
(2)Aggregation Rule.TheBasisIn-
crease allocated to property acquired from
the decedent by a recipient cannot increase
the recipient’s basis in that property or
property interest above the FMV of that
property or interest in the hands of the
decedent at death. See section 1022(d)(2).
Therefore, for purposes of section 1022,
the FMV of an undivided portion of the
decedent’s property that is acquired from
the decedent at death is a fractional share
of the FMV of the decedent’s property at
death. Thus, if each of two or more re-
cipients acquires an undivided portion of a
property from the decedent, then the FMV
of each recipient’s portion of that property
for purposes of section 1022 is the FMV of
the decedent’s entire interest in the prop-
erty at death multiplied by a fraction. The
numerator of that fraction is the undivided
portion of the decedent’s property acquired
by that recipient, and the denominator is
the decedent’s entire interest in that prop-
erty at death. An undivided portion of the
decedent’s property refers to a fraction or
percentage of each and every interest or
right the decedent held in the property at
death.
.05Special Rules for Community Prop-
erty. The decedent’s interest in community
property held by the decedent and the sur-
viving spouse under the community prop-
erty laws of any state or possession of the
United States or any foreign jurisdiction is
treated as owned by and acquired from the
decedent if the decedent’s interest satisfies
the requirements of sections 1022(d) and
(e). If at least one-half of the whole of
the community interest is treated as owned
by and acquired from the decedent under
these provisions (without regard to the spe-
cial rule for communityproperty in section
1022(d)(1)(B)(iv)), the surviving spouse’s
one-half interest in that community prop-
erty also is treated as owned by and ac-
quired from the decedent for purposes of
section 1022. Section 1022(d)(1)(B)(iv).
Accordingly, the surviving spouse’s ba-
sis in his or her one-half interest in com-
munity property, as determined under sec-
tion 1022(a), will be the lesser of the sur-
viving spouse’s adjusted basis of that in-
terest in such community property or the
FMV of that interest on the decedent’s
date of death. In addition, Basis Increase
may be allocated to the surviving spouse’s
one-half interest in such community prop-
erty.
If both spouses’ interests in such com-
munity property are treated as owned by
and acquired from the decedent as de-
scribed in the preceding paragraph, all of
the unrealized losses described in section
4.02(2)(b) of this revenue procedure that
would have been allowable to both the
decedent and the surviving spouse if the
property had been sold at FMV imme-
diately before the decedent’s death are
included in the General Basis Increase. In
contrast, only the decedent’s net operating
loss carryovers and capital loss carryovers
areeligibletobeincludedintheGeneral
Basis Increase. Further, to the extent the
decedent’s net operating loss carryovers
and capital loss carryovers are deductible
on the final jointly filed Form 1040, they
are not available to be added to the Gen-
eral Basis Increase.
August 29, 20111922011–35 I.R.B.

The provisions of this section 4.05 are
illustrated by the following examples:
Example 7. (i) D and D’s spouse (S) live in a
community property state (State). D died in 2010,
and D’s executor made the Section 1022 Election.
At D’s death, Property X, community property of D
and S under the laws of State, had an adjusted ba-
sis of $1,000,000 and a FMV of $8,000,000. D and
S used Property X in a trade or business within the
meaning of section 165(c)(1). Under the commu-
nity property laws of State, each spouse is entitled
to an undivided equal share of community property.
D and S have filed joint Forms 1040 for all taxable
years in which they have owned Property X, includ-
ing 2010, the year of D’s death. D and S have a total
of $100,000 of net operating losses under section 172,
after the deductions taken on D’s and S’s final joint
Form 1040. $50,000 of the $100,000 of net operating
losses would (but for D’s death) be carried from D’s
last taxable year to a later taxable year of D. Under the
community property laws of State, upon the death of
a married person, one-half of the community prop-
erty belongs to the decedent and the other one-half
belongs to the surviving spouse. Therefore, one-half
of Property X belongs to D and the other one-half be-
longs to S. In D’s will, D bequeathed D’s one-half in-
terest in Property X to D’s child (C). In this case, C ac-
quired Property X by bequest, and therefore, Property
X is acquired from D and is subject to the provisions
of section 1022. As a result, C’s basis in Property
X under section 1022(a)(2) is $500,000, the lesser of
D’s adjusted basis in D’s one-half interest in Property
X or the FMV of that interest at D’s death. In addi-
tion, because Property X is considered as owned by
D at the time of death, General Basis Increase may
be allocated to D’s interest in Property X. The execu-
tor of D’s estate has $1,300,000 in Aggregate Basis
Increase and $50,000 (D’s share of the $100,000 of
the unused net operating losses) in Carryovers/Unre-
alized Losses Increase available to allocate to the in-
terest acquired by C in Property X.
(ii) On the date of D’s death, the other one-half
interest in Property X belongs to S under the laws
of State. As a result, for purposes of section 1022,
S’s one-half interest in Property X is deemed to have
been owned by and acquired from D. Under section
1022(a)(2), S’s basis in S’s one-half interest in Prop-
erty X is $500,000, the lesser of S’s adjusted basis in
S’s one-half interest or the FMV of that interest as of
D’s death. That interest has a FMV on D’s death of
$4,000,000.
(iii) The executor may allocate Basis Increase to
S’s one-half interest in Property X. In this case, the
executor decides to allocate $450,000 of Aggregate
Basis Increase, $50,000 of Carryovers/Unrealized
Losses Increase, and $3,000,000 in Spousal Property
Basis Increase to S’s one-half interest in Property X.
As a result, S’s basis in S’s one-half interest in Prop-
erty X is $4,000,000 (the sum of S’s own adjusted
basis of $500,000 and S’s allocated Basis Increase
of the sum of $450,000, $50,000, and $3,000,000),
equal to its FMV as of D’s date of death. D’s $50,000
in unused net operating losses is included in Basis
Increase that is allocated byD’s executor to S’s inter-
est in Property X; the other $50,000 of the unused net
operating losses is available to S on S’s subsequent
income tax returns.
(iv) With respect to the one-half interest in Prop-
erty X passing from D to C, the executor may allocate
any or all of the remaining General Basis Increase of
$850,000 to this property. In this case, the execu-
tor allocates the entire remaining $850,000 of Gen-
eral Basis Increase to C’s one-half interest in Property
X. C’s basis in the one-half interest in Property X is
$1,350,000 ($500,000 plus $850,000).
Example 8. (i) The facts are the same as inExam-
ple 7, except that the FMV of Property X on D’s date
of death was $800,000. Under section 1022(a)(2),
S’s basis in S’s one-half interest in Property X is
$400,000, the lesser of S’s $500,000 in adjusted ba-
sis and the FMV of that interest in Property X as
of D’s date of death. D’s executor may not allo-
cate any Aggregate Basis Increase, Carryovers/Un-
realized Losses Increase,or Spousal Property Basis
Increase to spouse’s one-half interest in the commu-
nity property because the property’s basis, as aug-
mented under section 1022, may not exceed its FMV
on D’s date of death. For the same reason, D’s execu-
tor may not allocate any General Basis Increase to the
one-half interest in Property X passing to C.
(ii) A loss of $200,000 would have been incurred
if Property X had been sold at FMV immediately be-
fore D’s death. All of this $200,000 is available as
Carryovers/Unrealized Losses Increase that may be
allocated to property owned by and acquired from D
with a basis pursuant to section 1022(a)(2) that is less
than the FMV as of D’s date of death.
.06Interaction of Section 1022 with
Certain Other Income Tax Provisions.
(1)Holding Period of Inherited Prop-
erty. To the extent the recipient’s basis
in property acquired from the decedent is
determined under section 1022, the recip-
ient’s holding period of that property shall
include the period during which the dece-
dent held the property, whether or not the
executor allocates any Basis Increase to
that property.
In computing the applicable percentage
under section 1250 for purposes of deter-
mining the amount of ordinary gain on
the sale of section 1250 property, section
1250(e) applies to determine the period of
time the recipient is deemed to have held
section 1250 property acquired by gift or
on the death of a decedent. Therefore, to
the extent a recipient’s basis in property
is determined under section 1022, the re-
cipient’s holding period of such property
under section 1250(e)(2) includes the pe-
riod during which the property was held by
the decedent, regardless of whether the ex-
ecutor allocates any Basis Increase to that
property.
(2)Tax Character of Inherited Prop-
erty. The tax character of property ac-
quired from the decedent by a recipient is
determined in the same way as the holding
period. Thus, to the extent a recipient’s
basis in property is determined under sec-
tion 1022, the tax character of the property
is the same as it would have been in the
hands of the decedent. Consequently, for
property described in section 1221 (capital
assets)orsection1231(propertyusedina
trade or business and involuntary conver-
sions), and for property subject to section
1245 (depreciation recapture upon dispo-
sition of certain depreciable property) or
section 1250 (depreciation recapture upon
disposition of certain depreciable real
property), the tax character of the property
described in these sections (the basis of
which is determined under section 1022)
in the hands of the recipient is the same
as it would have been in the hands of the
decedent. However, the tax character of
the property may be affected by a subse-
quent change in the recipient’s use of the
property.
The provisions of this section 4.06(2)
are illustrated by the following example:
Example 9. D owned tangible personal property
(section 1245 property) and claimed on D’s income
tax return a depreciation deduction under section 168
that would have been subject to recapture under sec-
tion 1245 if D had sold the property prior to D’s death.
D died in 2010 and D’s executor made the Section
1022 Election. D bequeathed all of D’s tangible per-
sonal property to D’s child (C). Because C’s basis is
determined under section 1022, the property is sec-
tion1245propertyinthehandsofCandtherefore
will be subject to recapture under section 1245 when
sold by C, regardless of whether the property is de-
preciable property in the hands of C or whether the
executor allocates any Basis Increase to that property.
See§ 1.1245–3(a)(3).
(3)Depreciation of Property Acquired
from the Decedent.Ifsection1022applies
to property acquired from the decedent
that is depreciable property in the hands
of the recipient, regardless of whether the
executor allocates any Basis Increase to
the property, the recipient is treated for de-
preciation purposes as the decedent for the
portion of the recipient’s basis in the prop-
erty that equals the decedent’s adjusted
basis in that property. Consequently, the
recipient determines any allowable de-
preciation deductions for this carryover
basis by using the decedent’s depreciation
method, recovery period, and convention
applicable to the property. If the property
is depreciable property in the hands of
both the decedent and the recipient during
2010, the allowable depreciation deduc-
tion for 2010 for the decedent’s adjusted
basis in the property is computed by us-
ing the decedent’s depreciation method,
recovery period, and convention appli-
cable to the property, and is allocated
2011–35 I.R.B.193August 29, 2011

between the decedent and the recipient
on a monthly basis. This allocation is
made in accordance with the rules in
§ 1.168(d)–1(b)(7)(ii) of the Income Tax
Regulations for allocating the depreciation
deduction between the transferor and the
transferee.
The portion of the recipient’s basis in
the property that exceeds the decedent’s
adjusted basis in the property as of the
decedent’s date of death (for example, the
Basis Increase allocated to the property
by the executor) is treated for deprecia-
tion purposes as applying to a separate as-
set that the recipient placed in service on
the day after the date of the decedent’s
death. Accordingly, the recipient deter-
mines any allowable depreciation deduc-
tions for this excess basis by using the de-
preciation method, recovery period, and
convention applicable to the property on
its placed-in-service date or, if not held on
that date as depreciable property by the re-
cipient, on the date of the property’s con-
version to depreciable property.
(4)Passive Activity Loss Provisions.
Section 469(a) disallows certain losses
from passive activities. However, pur-
suant to section 469(b), losses disallowed
under section 469(a) may be suspended
and carried forward.Section 469(g)(2)
provides that, if an interest in a passive
activity is transferred by reason of the
taxpayer’s death, the taxpayer may treat
suspended passive losses as losses that are
not from a passive activity (and therefore
may deduct the losses) to the extent such
losses are greater than the excess (if any)
of the basis of such property in the hands
of the transferee, over the adjusted basis
of such property immediately before the
death of the taxpayer. Section 469(j)(6)
provides that, when an interest in a passive
activity is transferred by gift, the basis
of such interest immediately before the
transfer is increased by the amount of any
passive activity losses allocable to such
interest that have not been allowed as
deductions as a result of section 469(a).
Once used to increase the donor’s basis,
these losses may not be deducted for any
taxable year.
Because property owned by the dece-
dent at death will be treated under sec-
tion 1022 as having been transferred by
gift, section 469(j)(6), rather than section
469(g)(2), applies to determine the dece-
dent’s adjusted basis in such property. The
basis adjustment under section 469(j)(6) is
deemed to occur immediately prior to the
decedent’s death, and thus is applied to de-
termine the decedent’s adjusted basis in the
property at death as described in section
1022(a)(2)(A). In addition, any loss that
would have been sustained under sections
165(c)(1) or (c)(2) on a hypothetical sale
of the property immediately prior to the
decedent’s death (equal to the excess of
the decedent’s adjusted basis (determined
as described under section 469(j)(6)) over
the FMV at death) may be included in the
section 165 losses in the General Basis In-
crease. Because the reduction in the hypo-
thetical loss under section 165 by reason
of the section 469 basis adjustment equals
the amount of section 469 loss added to the
decedent’s basis, there is no duplication of
a benefit under these two sections.
Section 1022(d)(1)(B)(iv) provides that
the surviving spouse’s interest (as well as
the decedent’s interest) in certain com-
munity property is deemed to have been
owned by and acquired from the decedent,
and thus 100 percent of that community
property is deemed to have been trans-
ferred by gift for purposes of section 1022.
Because section 469(j)(6) increases ba-
sis by the amount of suspended passive
activity losses allocable to the interest
that is transferred by gift, 100 percent of
those losses, rather than only the dece-
dent’s one-half of such losses, are to be
added to determine the decedent’s and the
spouse’s adjusted basis in that community
property for purposes of section 1022(a)
and to determine the amount of unrealized
section 165 losses to be included in the
General Basis Increase. To the extent that
losses attributable to the spouse’s inter-
est in the community property are used
to increase basis and/or were included in
Carryovers/Unrealized Losses Increase
allocated by the decedent’s executor, such
losses may not thereafter be deducted by
the spouse. However, to the extent that
losses attributable to the spouse’s interest
in community property are not so used
by the decedent’s executor, they remain
the spouse’s suspended passive activity
losses. For purposes of this computation,
these losses will be deemed to be the last
part of Basis Increase allocated, and the
decedent’s share of these losses will be
deemed to be allocated before the surviv-
ing spouse’s share of these losses.
The provisions of this section 4.06(4)
are illustrated by the following examples:
Example 10. D owned an apartment building that
generated losses that have been disallowed under sec-
tion 469. D died in 2010 and D’s executor made
the Section 1022 Election. The building is property
owned by and acquired from D. Pursuant to D’s will,
D’s child (C) is to acquire the building. On D’s date
of death, the FMV of the building was $100,000, the
basis of the building was $10,000, and the suspended
passive activity losses allocable to the building were
$50,000. Pursuant to section 469(j)(6), the $50,000
in suspended passive activity losses are added to D’s
basis of $10,000, resulting in an adjusted basis of
$60,000. For purposes of section 1022(b)(2)(C)(ii), a
hypothetical sale of the property just before D’s death
would have produced a gain of $40,000 ($100,000
FMV less D’s adjusted basis of $60,000), so there is
no loss under section 165 from this property. C’s ba-
sis in the building as of D’s date of death is $60,000,
plus any amount of the General Basis Increase allo-
catedtothisproperty.
Example 11. AssumethesamefactsasinEx-
ample 10, except that the suspended passive activity
losses allocable to the building are $200,000 in-
stead of $50,000. Pursuant to section 469(j)(6), the
$200,000 in suspended passive activity losses are
added to D’s basis of $10,000 resulting in an adjusted
basis of $210,000. Under section 1022(a)(2), C’s
basis in the building is $100,000 (the lesser of D’s
adjusted basis in the building ($210,000) and the
building’s FMV on the date of death ($100,000)).
Thus, C’s basis in the building reflects $90,000 of
the section 469 suspended losses. If the property
had been sold at FMV immediately before D’s death,
a section 165 loss of $110,000 would have been
allowable (FMV of $100,000 minus $210,000 of D’s
adjusted basis). This $110,000 constitutes the section
165 loss that may be included in the General Basis
Increase.
(5)Recognition of Gain on Satisfac-
tion of Pecuniary Bequest with Appreci-
ated Property. Section 1040, as applica-
ble to the estates of decedents who died in
2010 and whose executors make the Sec-
tion 1022 Election, provides that, if an ex-
ecutor distributes appreciated property to
satisfy a pecuniary bequest, the estate must
recognize gain to the extent the FMV of
the distributed property on the date of dis-
tribution exceeds its FMV on the date of
the decedent’s death. The basis of that
property in the hands of the recipient then
equals the sum of the basis of that prop-
erty immediately before the distribution
and the amount of gain recognized by the
estate.
Section 1040 further provides that the
same rule will apply to distributions of ap-
preciated trust property made in satisfac-
tion of trust provisions that are the equiv-
alent of a pecuniary bequest, but only to
the extent so provided in regulations. This
safe harbor will apply this rule to quali-
August 29, 20111942011–35 I.R.B.

fied revocable trusts as defined in section
645(b)(1), as well as to trusts that would
have been included in the decedent’s gross
estate for federal estate tax purposes under
section 2036, 2037, or 2038 had the dece-
dent’s executor not made the Section 1022
Election.
The provisions of section 1040, how-
ever, do not apply to the distribution of
property that constitutes the right to re-
ceive an item of IRD in satisfaction of a
pecuniary bequest.
(6)Sale or Exchange Treatment of
Transfers to Nonresident Aliens. Section
684, enacted in 1997, generally provides
that any transfer of property by a United
States person to a foreign estate or trust
(except to the extent that a person is treated
as the owner of the trust under section
671) is treated as a sale or exchange of
such property, and requires the transferor
to recognize gain in the amount of any
excess of the FMV of the property at the
time of the transfer over the transferor’s
adjusted basis in the property. For trans-
fers of property occurringonthedeath
of a decedent whose executor makes the
Section 1022 Election, this provision also
applies to transfers of property by United
States persons to nonresident aliens.
The existing regulations provide an ex-
ception to the general rule of taxation un-
der section 684 in the case of a transfer of
property by reason ofthe death of a United
States transferor, but only if the basis of
such property in the hands of the recipi-
ent is determined under section 1014(a).
Section 1.684–3(c). If the recipient’s ba-
sis in such property is not determined un-
der section 1014(a), section 684 continues
to apply, and the United States transferor
is treated as having transferred the prop-
erty immediately before death and is re-
quired to recognize the built in gain in the
property transferred at that time. Section
1.684–3(g),Example 3.
For purposes of applying section 684 to
transfers of property by reason of the death
of a United States person in 2010 whose
executor makes the Section 1022 Election,
the question has arisen as to whether (1)
section 684 applies prior to section 1022,
with the effect of treating the transfer as
a sale for FMV before any Basis Increase
may be allocated to the property, or (2)
whether the executor’s allocation of Ba-
sis Increase is deemed to increase the re-
cipient’s basis in the property before the
amount of any unrecognized gain taxable
under section 684 is determined.
If the property is owned by and acquired
from the decedent, the executor’s alloca-
tion of Basis Increase will be deemed to
occur prior to the application of section
684. Specifically, in determining the ad-
justed basis of the property in the hands
of the decedent under section 684(a)(2),
any allocation of Basis Increase shall be
deemed to occur prior to the computa-
tion of gain under section 684. Thus, the
amount of gain recognized under section
684 on the transfer may be reduced or even
eliminated if sufficient Basis Increase is al-
located to such property.
However, if the property transferred is
not owned by the decedent at death, then
no Basis Increase may be allocated to the
property, and the decedent will be required
to recognize all of the unrealized gain in
the property transferred to the foreign es-
tate or trust or to the nonresident alien as
provided in section 684.
The provisions of this section 4.06(6)
are illustrated by the following examples:
Example 12. D, a United States citizen, acquired
stock in 1984 for $1,000 that had a FMV of $30,000
on D’s date of death in 2010. D bequeathed the stock
to D’s brother (N), a nonresident alien. The executor
of D’s estate made the Section 1022 Election, and,
therefore, may allocate General Basis Increase of up
to $29,000 to this stock. Such an allocation of basis
will be deemed to have occurred prior to the deemed
sale under section 684. Accordingly, if the execu-
tor allocates $29,000 of General Basis Increase to the
stock, then D will recognize zero gain on D’s final
Form 1040 under section 684 on the bequest of the
stock to N.
Example 13. D, a United States citizen, acquired
real property located in the United States in 1984 for
$1,000,000 that had a FMV of $10,000,000 on D’s
date of death in 2010. D’s executor made the Section
1022 Election. D’s will devised the real property to
D’s brother (N), a nonresident alien. Assuming that
the General Basis Increase available to the executor
of D’s estate for allocation is $1,300,000, the execu-
tor may allocate up to the entire amount of General
Basis Increase to this property. Such an allocation
will be deemed to have occurred prior to the deemed
sale under section 684. Accordingly, if the execu-
tor allocates $1,300,000 of General Basis Increase to
this property, D will recognize gain on D’s final Form
1040 under section 684 in the amount of $7,700,000
($10,000,000 of FMV less $2,300,000 of basis) on the
devise of the property to N.
Example 14. In 2005, D, a United States citizen,
transferred securities with a FMV of $5,000 and an
adjusted basis of $1,000 to a foreign trust (FT). The
income from FT was payable to D during D’s life,
but D retained no other right to and no power over
FT. At all times after the 2005 transfer through D’s
death, FT has a United States beneficiary, D (within
the meaning of section 679(c)), and D was treated
as the owner of FT under section 679(a). D died in
2010 and D’s executor made the Section 1022 Elec-
tion. The FMV of the assets of FT at D’s death was
$30,000. Notwithstanding that D was the owner of
FT under section 679 on the date of death, because
the securities were transferred by D in aninter vivos
transfer to FT over which D retained no other right
or power, the securities were not acquired from the
decedent and section 1022 does not apply to the se-
curities in FT. Under §1.684–2(e)(1), D is treated as
having transferred the securities to FT immediately
before D’s death, and D must recognize $29,000 of
gain on D’s final Form 1040 under section 684(a).
.07Testamentary Charitable Remain-
der Trusts.Section 1.664–1(a)(1)(iii) pro-
vides, among other things, that a trust is
a CRT if a deduction is allowable under
section 170, 2055, 2106, or 2522 and the
trust meets the description of a charita-
ble remainder annuity trust or a charita-
ble remainder unitrust, as such terms are
described in §§ 1.664–2 and 1.664–3, re-
spectively. A testamentary CRT that other-
wise qualifies as a CRT under section 664
and the regulations thereunder, but fails to
meet the requirement that a deduction is al-
lowable under section 2055 solely because
the decedent’s executor makes a Section
1022 Election thus making section 2055
inapplicable to the decedent’s estate, will
qualify as a CRT under section 664.
SECTION 5. AREAS NOT COVERED
BY THIS REVENUE PROCEDURE
This Revenue Procedure does not ad-
dress the manner in which the executor
of the estate of a decedent who died in
2010 makes the Section 1022 Election.
For information on making that election,
the deadline for making that election and
related procedures, and on allocating the
decedent’s GST exemption to transfers oc-
curring at a death occurring in 2010, see
Notice 2011–66.
SECTION 6. EFFECTIVE DATE
This revenue procedure is effective Au-
gust 29, 2011, the date this revenue proce-
dure was published in the Internal Revenue
Bulletin. However, taxpayers may apply
the safe harbor in this revenue procedure
for prior periods.
SECTION 7. PAPERWORK
REDUCTION ACT
The collection of information contained
in this revenue procedure has been submit-
ted to the Office of Management and Bud-
2011–35 I.R.B.195August 29, 2011

get (OMB) in accordance with the Paper-
work Reduction Act (44 U.S.C. 3507) and
OMB approval is pending. An agency may
not conduct or sponsor, and a person is not
required to respond to, a collection of in-
formation unless the collection of informa-
tion displays a valid control number.
The collection of information require-
ment in this revenue procedure is in section
4.02(3) and section 4.04(1) of this revenue
procedure. The collection of information
in section 4.02(3) relates to certain doc-
uments the executor is required to attach
to the Form 8939 if the executor allocates
Spousal Property Basis Increase to prop-
erty that is sold prior to its distribution to
the surviving spouse.
The collection of information in sec-
tion 4.04(1) relates to the requirement that
the executor obtain and attach to the Form
8939 the FMV appraisal of certain prop-
erty acquired from the decedent. This col-
lection of information is necessary for the
proper performance of the function of the
IRS in the collection of the income tax
when the property is later sold by the recip-
ient or other holder of the property. In ad-
dition, this collection is necessary to com-
ply with the requirements of section 6018.
We estimate that 7,000 executors of es-
tates of decedents who died in 2010 will
make the Section 1022 Election and thus
will be required to file Form 8939, and that
it will take approximately 8 hours to pre-
pare the documentation. The total report-
ing burden is estimated to be 56,000 hours.
Books or records relating to collections
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by section 6103.
SECTION 8. DRAFTING
INFORMATION
The principal authors of this rev-
enue procedure are Laura Urich Daly,
Theresa Melchiorre, and Mayer Samuels
of the Office of Associate Chief Counsel
(Passthroughs & Special Industries). For
further information regarding this rev-
enue procedure, contact Laura Urich Daly,
Theresa Melchiorre, or Mayer Samuels at
(202) 622–3090 (not a toll-free call).
August 29, 20111962011–35 I.R.B.

Part IV. Items o
fGeneralInterest
Notice of Proposed
Rulemaking by
Cross-Reference to
Temporary Regulations
Highway Use Tax; Filing and
Payment for Taxable Period
Beginning July 1, 2011
REG–122813–11
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
by cross-reference to temporary regula-
tions.
SUMMARY: In this issue of the Bulletin,
the IRS is issuing temporary regulations
(T.D. 9537) that provide guidance on the
filing of Form 2290 “Heavy Highway Ve-
hicle Use Tax Return” and payment of the
associated highway use tax for the tax-
able period beginning July 1, 2011. These
regulations affect owners and operators
of highway motor vehicles with a taxable
gross weight of 55,000 pounds or more.
The text of the temporary regulations also
serves as the text of the proposed regula-
tions on this subject.
DATES: Written and electronic comments
and requests for a public hearing must be
received by October 18, 2011.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR(REG–122813–11),
Room 5203, Internal Revenue Service, PO
Box 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may be
hand-delivered to: CC:PA:LPD:PR Mon-
day through Friday between the hours of
8 a.m. and 4 p.m. to: CC:PA:LPD:PR
(REG–122813–11), Courier’s Desk, Inter-
nal Revenue Service, 1111 Constitution
Avenue, NW; Washington, DC, or sent
electronically via the Federal eRulemak-
ing Portal athttp://www.regulations.gov
(IRS REG–122813–11).
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed reg-
ulations, Natalie Payne, (202) 622–3130;
concerning submissions of comments
and requests for a public hearing,
Regina Johnson, (202) 622–7180 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Highway Use Tax
Regulations (26 CFR part 41) under sec-
tions 6001, 6071 and 6151 of the Internal
Revenue Code (Code). The text of tem-
porary regulations published in this issue
of the Bulletin also serves as the text of
these proposed regulations. The preamble
to the temporary regulations explains the
temporary regulations.
Proposed Effective Date
These regulations are proposed to apply
to taxable use of highway motor vehicles
occurring on or after July 1, 2011.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866, as supplemented by Execu-
tive Order 13563. Therefore, a regulatory
assessment is not required. It also has been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C. chap-
ter 5) does not apply to this regulation, and
because this regulation does not impose a
collection of information on small entities,
the provisions of the Regulatory Flexibil-
ity Act (5 U.S.C. chapter 6) do not apply.
Pursuant to section 7805(f) of the Code,
this regulation has been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments
(a signed original and eight (8) copies)
or electronic comments that are submitted
timely to the IRS. All comments will be
available for public inspection and copy-
ing. A public hearing will be scheduled
if requested in writing by any person that
timely submits written comments. If a
public hearing is scheduled, notice of the
date, time, and place for the hearing will
be published in theFederal Register.
Drafting Information
The principal author of these regu-
lations is Natalie Payne, Office of the
Associate Chief Counsel (Passthroughs
and Special Industries). However, other
personnel from the IRS and the Treasury
Department participated in their develop-
ment.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 41 is pro-
posed to be amended as follows:
PART 41—EXCISE TAX ON USE
OF CERTAIN HIGHWAY MOTOR
VEHICLES
Paragraph 1. The authority citation for
part 41 is amended to read in part as fol-
lows:
Authority: 26 U.S.C. 7805. * * *
Section 41.6001–2 also issued under
26 U.S.C. 6001. * * *
Section41.6071(a)–1alsoissuedunder
26 U.S.C. 6071(a). * * *
Section41.6151(a)–1alsoissuedunder
26 U.S.C. 6151(a). * * *
Par. 2. Section 41.6001–2 is
amended by revising paragraphs (b)(1)(ii),
(b)(4)(ii), (c)(2)(ii) and (c)(2)(iii) to read
as follows:
§41.6001–2 Proof of payment for State
registration purposes.
*****
(b)***(1)***
(ii) [The text of this proposed amend-
ment to §41.6001–2(b)(1)(ii) is the same
as the text of §41.6001–2T(b)(1)(ii) pub-
lished elsewhere in this issue of the Bul-
letin].
*****
(4) * * *
(ii) [The text of this proposed amend-
ment to §41.6001–2(b)(4)(ii) is the same
as the text of §41.6001–2T(b)(4)(ii) pub-
lished elsewhere in this issue of the Bul-
letin].
2011–35 I.R.B.197August 29, 2011

*****
(c) * * *
(2) * * *
(ii) [The text of this proposed amend-
ment to §41.6001–2(c)(2)(ii) is the same
as the text of §41.6001–2T(c)(2)(ii) pub-
lished elsewhere in this issue of the Bul-
letin].
(iii)[Thetextofthisproposedamend-
ment to §41.6001–2(c)(iii) is the same as
the text of §41.6001–2T(c)(2)(iii) pub-
lished elsewhere in this issue of the Bul-
letin].
*****
Par. 3. Section 41.6071(a)–1 is
amended by adding paragraph (c) to read
as follows:
§41.6071(a)–1 Time for filing returns.
*****
(c) [The text of this proposed amend-
ment to §41.6071(a)–1(c) is the same as
the text of §41.6071(a)–1T(c) through
(c)(3) published elsewhere in this issue of
the Bulletin].
Par. 4. Section 41.6151(a)–1 is revised
to read as follows:
§41.6151(a)–1 Time and place for paying
tax.
[The text of this proposed amendment
to §41.6151(a)–1 is the same as the text of
§41.6151(a)–1T(a) and (b) published else-
where in this issue of the Bulletin].
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on July 15, 2011,
4:15 p.m., and published in the issue of the Federal Register
for July 20, 2011, 76 F.R. 43225)
Corporate Reorganizations;
Distributions Under Sections
368(a)(1)(D) and 354(b)(1)(B);
Correction
Announcement 2011–43
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correcting amendment.
SUMMARY: This document describes a
correction to final regulations (T.D. 9475,
2010–4 I.R.B. 304) that were published
on Friday, December 18, 2009 (74 FR
67053). The regulations provide guidance
regarding the qualification of certain trans-
actions as reorganizations described in sec-
tion 368(a)(1)(D) where no stock and/or
securities of the acquiring corporation is
issued and distributed in the transaction.
This document also contains final regula-
tions under section 358 that provide guid-
ance regarding the determination of the ba-
sis of stock or securities in a reorganization
described in section 368(a)(1)(D) where
no stock and/or securities of the acquiring
corporation is issued and distributed in the
transaction. This document also contains
final regulations under section 1502 that
govern reorganizations described in sec-
tion 368(a)(1)(D) involving members of a
consolidated group.
DATES: This correction is effective on
August 10, 2011, and is applicable on De-
cember 18, 2009.
FOR FURTHER INFORMATION
CONTACT: Bruce A. Decker, (202)
622–7790 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The final regulations (T.D. 9475) that
are the subject of this document are under
sections 358, 368 and 1502 of the Internal
Revenue Code.
Need for Correction
As published, the final regulations
(T.D. 9475) contain an error that may
prove to be misleading and is in need of
clarification.
*****
Correction of Publication
Accordingly, 26 CFR part 1 is cor-
rected by making the following correcting
amendment:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 2. Section 1.1502–13 is amended
by adding paragraph (l)(6) to read as fol-
lows:
§1.1502–13 Intercompany transactions.
*****
(l) * * *
(6)Effective/applicability date.(i)In
general. Paragraph (f)(7)(i)Example 4.
applies to transactions occurring on or af-
ter December 18, 2009.
(ii)[Reserved]
*****
LaNita Van Dyke,
Chief, Publications and
Regulations Branch,
Legal Processing Division,
Associate Chief Counsel
(Procedure and Administration).
(Filed by the Office of the Federal Register on August 9,
2011, 8:45 a.m., and published in the issue of the Federal
Register for August 10, 2011, 76 F.R. 49300)
August 29, 20111982011–35 I.R.B.

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
2011–35 I.R.B.iAugust 29, 2011

Numerical Finding List
1
Bulletins 2011–27 through 2011–35
Announcements:
2011-37, 2011-27 I.R.B.37
2011-38, 2011-28 I.R.B.45
2011-39, 2011-28 I.R.B.46
2011-40, 2011-29 I.R.B.56
2011-41, 2011-28 I.R.B.47
2011-42, 2011-32 I.R.B.138
2011-43, 2011-35 I.R.B.198
2011-44, 2011-33 I.R.B.164
2011-45, 2011-34 I.R.B.178
2011-46, 2011-34 I.R.B.178
2011-47, 2011-34 I.R.B.178
Notices:
2011-47, 2011-27 I.R.B.34
2011-50, 2011-27 I.R.B.35
2011-51, 2011-27 I.R.B.36
2011-52, 2011-30 I.R.B.60
2011-53, 2011-32 I.R.B.124
2011-54, 2011-29 I.R.B.53
2011-55, 2011-29 I.R.B.53
2011-56, 2011-29 I.R.B.54
2011-57, 2011-31 I.R.B.84
2011-58, 2011-31 I.R.B.85
2011-59, 2011-31 I.R.B.86
2011-60, 2011-31 I.R.B.90
2011-61, 2011-31 I.R.B.91
2011-62, 2011-32 I.R.B.126
2011-63, 2011-34 I.R.B.172
2011-65, 2011-34 I.R.B.173
2011-66, 2011-35 I.R.B.184
2011-67, 2011-34 I.R.B.174
2011-70, 2011-32 I.R.B.135
Proposed Regulations:
REG-137128-08, 2011-28 I.R.B.43
REG-125592-10, 2011-32 I.R.B.137
REG-101352-11, 2011-30 I.R.B.75
REG-118809-11, 2011-33 I.R.B.162
REG-122813-11, 2011-35 I.R.B.197
Revenue Procedures:
2011-38, 2011-30 I.R.B.66
2011-39, 2011-30 I.R.B.68
2011-41, 2011-35 I.R.B.188
Revenue Rulings:
2011-14, 2011-27 I.R.B.31
2011-15, 2011-30 I.R.B.57
2011-16, 2011-32 I.R.B.93
2011-17, 2011-33 I.R.B.160
Treasury Decisions:
9527, 2011-27 I.R.B.1
9528, 2011-28 I.R.B.38
9529, 2011-30 I.R.B.57
9530, 2011-31 I.R.B.77
9531, 2011-31 I.R.B.79
9532, 2011-32 I.R.B.95
9533, 2011-33 I.R.B.139
9534, 2011-33 I.R.B.144
9537, 2011-35 I.R.B.181
9539, 2011-35 I.R.B.179
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2011–1 through 2011–26 is in Internal Revenue Bulletin
2011–26, dated June 27, 2011.
August 29, 2011ii2011–35 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2011–27 through 2011–35
Notices:
2010-23
Modified and supplemented by
Notice 2011-54, 2011-29 I.R.B.53
2010-81
Amended and supplemented by
Notice 2011-63, 2011-34 I.R.B.172
2010-88
Modified by
Ann. 2011-40, 2011-29 I.R.B.56
Proposed Regulations:
REG-118761-09
Hearing scheduled by
Ann. 2011-38, 2011-28 I.R.B.45
Revenue Procedures:
2008-24
Modified and superseded by
Rev. Proc. 2011-38, 2011-30 I.R.B.66
2008-32
Superseded by
Rev. Proc. 2011-39, 2011-30 I.R.B.68
Revenue Rulings:
58-225
Obsoleted by
Rev. Rul. 2011-15, 2011-30 I.R.B.57
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2011–1 through 2011–26 is in Internal Revenue Bulletin 2011–26, dated June 27, 2011.
2011–35 I.R.B.iiiAugust 29, 2011

INDEX
Internal Revenue Bulletins 2011–27 through
2011–35
The abbreviation and number in parenthesis following the index entry
refer to the specific item; numbers in roman and italic type following
the parentheses refer to the Internal Revenue Bulletin in which the item
may be found and the page number on which it appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Amendment to rules relating to internal claims and ap-
peals and external review processes (TD 9532) 32,95;
(REG–125592–10) 32,137
Full funding limitations, weighted average interest rates, seg-
ment rates for:
July 2011 (Notice 59) 31,86
August 2011 (Notice 67) 34,174
Proposed Regulations:
26 CFR 54.9815–2719, amended; rules relating to inter-
nal claims and appeals and external review processes
(REG–125592–10) 32,137
Regulations:
26 CFR 54.9815–2719T, amended; rules relating to inter-
nal claims and appeals and external review processes (TD
9532) 32,95
EMPLOYMENT TAX
Proposed Regulations:
26 CFR 301.6402–2 thru –4, amended; claims for credit or
refund (REG–137128–08) 28,43
Publication:
4436, General Rules and Specifications for Substitute Form
941, Schedule B (Form 941) and Schedule R (Form 941),
revised (RP 39) 30,68
Section 6402 claims for credit or refund (REG–137128–08) 28,
43
Substitute Form 941, Schedule B (Form 941), and Schedule R
(Form 941), general rules and specifications (RP 39) 30,68
ESTATE TAX
Automatic five-month extensions for certain pass-through enti-
ties (TD 9531) 31,79
Election to apply the rules under section 1022 of the Code (Notice
66) 35,184
Regulations:
26 CFR 1.6081–2, –6, added; 1.6081–2T, –6T, added;
54.6081–1, removed; automatic five-month extensions for
certain pass-through entities (TD 9531) 31,79
Safe harbor guidance with respect to section 1022 of the Code
(RP 41) 35,188
Valuation of certain farm, etc.,real property under section 2032A
(RR 17) 33,160
EXCISE TAX
Amendment to rules relating to internal claims and ap-
peals and external review processes (TD 9532) 32,95;
(REG–125592–10) 32,137
Automatic five-month extensions for certain pass-through enti-
ties (TD 9531) 31,79
Highway use tax, filing and payment (TD 9537) 35,181;
(REG–122813–11) 35,197
Proposed Regulations:
26 CFR 1.150–1, amended; 1.171–1, amended; 1.197–2,
amended; 1.249–1, amended; 1.475(a)–4, amended;
1.860G–2, amended; 1.1001–3, amended; 48.4101–1,
amended; removal of regulatory references to credit rat-
ings pursuant to section 939A of the Dodd-Frank Act
(REG–118809–11) 33,162
26 CFR 41.6001–2, amended; 41.6071(a)–1, amended;
41.6151(a)–1, amended; highway use tax, filing and pay-
ment (REG–122813–11) 35,197
26 CFR 54.9815–2719, amended; rules relating to inter-
nal claims and appeals and external review processes
(REG–125592–10) 32,137
Regulations:
26 CFR 1.150–1, amended; 1.150–1T, added; 1.171–1,
amended; 1.171–1T, added; 1.197–2, amended; 1.197–2T,
added; 1.249–1, amended; 1.249–1T, added; 1.475(a)–4,
amended; 1.475(a)–4T, added; 1.860G–2, amended;
1.860G–2T, added; 1.1001–3, amended; 1.1001–3T, added;
48.4101–1, –1T, amended; removal of regulatory refer-
ences to credit ratings pursuant to section 939A of the
Dodd-Frank Act (TD 9533) 33,139
26 CFR 1.6081–2, –6, added; 1.6081–2T, –6T, added;
54.6081–1, removed; automatic five-month extensions for
certain pass-through entities (TD 9531) 31,79
26 CFR 41.6001–2, amended; 41.6001–2T, added;
41.6071(a)–1, amended;41.6071(a)–1T, added;
41.6151(a)–1, amended; 41.6151(a)–1T, added; highway
use tax, filing and payment (TD 9537) 35,181
26 CFR 54.9815–2719T, amended; rules relating to inter-
nal claims and appeals and external review processes (TD
9532) 32,95
August 29, 2011iv2011–35 I.R.B.

EXCISE TAX—Cont.
Removal of regulatory references to credit ratings pursuant to
section 939(A) of the Dodd-Frank Act (TD 9533) 33,139;
(REG–118809–11) 33,162
EXEMPT ORGANIZATIONS
Community health needs assessment requirements for tax-ex-
empt hospitals, request for comments (Notice 52) 30,60
Form 990, Schedule H, Part V, Section B, optional for 2010 tax
year (Ann 37) 27,37
Revocations (Ann 39) 28,46; (Ann 45) 34,178
INCOME TAX
Accounting methods, use followingreorganizations and liquida-
tions (TD 9534) 33,144
Automatic five-month extensions for certain pass-through enti-
ties (TD 9531) 31,79
Basis of stock (Notice 56) 29,54
Chapter 4 implementation (Notice 53) 32,124
Continuing education providers, request for comments (Notice
61) 31,91
Corporate reorganizations, distributions under sections
368(a)(1)(D) and 354(b)(1)(B), correction to TD 9475 (Ann
43) 35,198
Credits:
Carbon dioxide sequestration, 2011 inflation adjustment (No-
tice 50) 27,35
Credit for increasing research activities:
Changes (TD 9528) 28,38
Election to claim the reduced research credit (TD 9539) 35,
179
Enhanced oil recovery credit, 2011 inflation adjustment (No-
tice 57) 31,84
Low-income housing credit:
Relief for Alabama (Notice 65) 34,173
Relief for Missouri disasters (Notice 47) 27,34
Relief for North Dakota (Notice 60) 31,90
Declaratory judgment suits (Ann 46) 34,178;(Ann47)34,178
Deferred losses on property between members of a controlled
group, hearing (Ann 38) 28,45
Determination of basis in specified U.S. property acquired by a
controlled foreign corporation in certain nonrecognition trans-
actions (TD 9530) 31,77
Disciplinary actions involving attorneys, certified public accoun-
tants, enrolled agents, and enrolled actuaries (Ann 41) 28,47;
(Ann 44) 33,147
Election to apply the rules under section 1022 of the Code (Notice
66) 35,184
Equitable relief under section 6015(f), time limits (Notice 70) 32,
135
Ex parte communication between appeals and other Internal Rev-
enue Service employees (Notice 62) 32,126
INCOME TAX—Cont.
FBAR, additional administrative relief for individuals whose fil-
ing deadline was extended under Notice 2010–23 (Notice 54)
29,53
Form 5472, filing requirements (TD 9529) 30,57;
(REG–101352–11) 30,75
Insurance companies:
Life insurance gross income, prepaid interest on policyholder
loans (RR 15) 30,57
Partial exchange or partial annuitization (RP 38) 30,66
Treatment of Blue Cross/Blue Shield organizations and cer-
tain other health organizations (Notice 51) 27,36
Interest:
Investment:
Federal short-term, mid-term, and long-term rates for:
July 2011 (RR 14) 27,31
August 2011 (RR 16) 32,93
Marginal production rates for 2011 (Notice 58) 31,85
Optional standard mileage rates (Ann 40) 29,56
Per diem substantiationmethod(Ann42)32,138
Proposed Regulations:
26 CFR 1.150–1, amended; 1.171–1, amended; 1.197–2,
amended; 1.249–1, amended; 1.475(a)–4, amended;
1.860G–2, amended; 1.1001–3, amended; 48.4101–1,
amended; removal of regulatory references to credit rat-
ings pursuant to section 939A of the Dodd-Frank Act
(REG–118809–11) 33,162
26 CFR 1.6038A–1, –2, amended; requirements for taxpayers
filing Form 5472 (REG–101352–11) 30,75
26 CFR 301.6402–2 thru –4, amended; claims for credit or
refund (REG–137128–08) 28,43
Publication:
4436, General Rules and Specifications for Substitute Form
941, Schedule B (Form 941) and Schedule R (Form 941),
revised (RP 39) 30,68
Regulations:
26 CFR 1.41–0, –6, –8, amended; 1.41–0T, –6T, –8T, –9T, re-
moved; alternative simplified credit under section 41(c)(5)
(TD 9528) 28,38
26 CFR 1.150–1, amended; 1.150–1T, added; 1.171–1,
amended; 1.171–1T, added; 1.197–2, amended; 1.197–2T,
added; 1.249–1, amended; 1.249–1T, added; 1.475(a)–4,
amended; 1.475(a)–4T, added; 1.860G–2, amended;
1.860G–2T, added; 1.1001–3, amended; 1.1001–3T, added;
48.4101–1, –1T, amended; removal of regulatory refer-
ences to credit ratings pursuant to section 939A of the
Dodd-Frank Act (TD 9533) 33,139
26 CFR 1.280C–4, revised; election of reduced research credit
under section 280(c)(3) (TD 9539) 35,179
26 CFR 1.381(a)–1, revised; 1.381(c)4–1, revised;
1.381(c)5–1, revised; 1.446–1, amended; methods of ac-
counting used by corporations that acquire the assets of
other corporations (TD 9534) 33,144
26 CFR 1.956–1, amended; 1.956–1T, amended; determina-
tion of basis in specified U.S. property acquired by a con-
trolled foreign corporation in certain nonrecognition trans-
actions (TD 9530) 31,77
2011–35 I.R.B.vAugust 29, 2011

INCOME TAX—Cont.
26 CFR 1.1502–13, amended; corporate reorganizations; dis-
tributions under sections 368(a)(1)(D) and 354(b)(1)(B);
correctiontoTD9475(Ann43)35,198
26 CFR 1.6038A–1, –2, amended; 1.6038A–1T, –2T, added;
requirements for taxpayers filing Form 5472 (TD 9529) 30,
57
26 CFR 1.6081–2, –6, added; 1.6081–2T, –6T, removed;
54.6081–1, added; automatic five-month extensions for
certain pass-through entities (TD 9531) 31,79
31 CFR 10.0 thru 10.8, 10.9, added; 10.20, 10.25, 10.30,
10.34, 10.36, 10.38, 10.50, 10.51, 10.53, revised; 10.60 thru
10.66, revised; 10.69, 10.72, revised; 10.76 thru 10.82, re-
vised; 10.90, revised; regulations governing practice before
the Internal Revenue Service (TD 9527) 27,1
Regulations governing practice before the Internal Revenue Ser-
vice (TD 9527) 27,1
Removal of regulatory references to credit ratings pursuant to
section 939(A) of the Dodd-Frank Act (TD 9533) 33,139;
(REG–118809–11) 33,162
Revocations, exempt organizations (Ann 39) 28,46;(Ann45)
34,178
Safe harbor guidance with respect to section 1022 of the Code
(RP 41) 35,188
Section 6402 claims for credit or refund (REG–137128–08) 28,
43
State and local bonds, volume cap and timing of issuing bonds
(Notice 63) 34,172
Substitute Form 941, Schedule B (Form 941), and Schedule R
(Form 941), general rules and specifications (RP 39) 30,68
Suspension of information reporting with respect to foreign fi-
nancial assets and certain interests in a PFIC (Notice 55) 29,
53
August 29, 2011vi2011–35 I.R.B.

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