Internal Revenue Bulletin 2000-41 (PDF rendition): IRS Revenue Procedures

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

INCOME TAX
Rev. Rul. 2000–43, page 333.
Charitable contributions; S corporations; section 170-
(a)(2).An accrual-basis S corporation may not elect under
section 170(a)(2) of the Code to treat a charitable contribu-
tion as paid in the year authorized by the S corporation’s
board of directors if the contribution is paid by the S corpo-
ration after the close of the tax year.
Rev. Rul. 2000–44, page 336.
Transactions between partner and partnership.A corpo-
ration that acquires assets of another corporation in a trans-
action described in section 381(a) of the Code succeeds to the
status of the other corporation for purposes of applying the
exception for reimbursements of preformation expenditures
and determining whether a liability is a qualified liability under
the regulations regarding the disguised sale provisions of sec-
tion 707(a)(2)(B).
Rev. Rul. 2000–45, page 337.
Federal rates; adjusted federal rates; adjusted federal
long-term rate, and the long-term exempt rate.For pur-
poses of sections 1274, 1288, 382, and other sections of the
Code, tables set forth the rates for October 2000.
Rev. Rul. 2000–46, page 334.
LIFO; price indexes; department stores.The August 2000
Bureau of Labor Statistics price indexes are accepted for use
by department stores employing the retail inventory and last-in,
first-out inventory methods for valuing inventories for tax years
ended on, or with reference to, August 31, 2000.
T.D. 8902, page 323.
Final regulations interpret the look-through provisions of sec-
tion 1(h) of the Code (relating to collectibles and section
1250 capital gain) when an interest in a pass-thru entity is
sold or exchanged and provide rules for dividing the holding
period of an interest in a partnership.
ADMINISTRATIVE
Rev. Proc. 2000–39, page 340.
Per diemallowances.This procedure provides optional rules
for deeming substantiated the amount of certain reimbursed
traveling expenses of an employee as well as for determining
the amount of deductible meals while traveling away from
home. Rev. Proc. 2000–9 superseded. Notice 2000–48
superseded.
Announcement 2000–81, page 348.
This document contains corrections to final regulations (T.D.
8892, 2000–32 I.R.B. 158) relating to the removal of tem-
porary regulations concerning the Telefile Voice Signature
test.
Announcement 2000–83, page 348.
New Form 8869, Qualified Subchapter S Subsidiary Election,
is now available. This form is used by a parent S corporation
to elect to treat one or more of its eligible subsidiaries as a
qualified subchapter S subsidiary (QSub).
Internal Revenue
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Bulletin No. 2000–41
October 10, 2000
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
Department of the Treasury
Internal Revenue Service
Finding Lists begin on page ii.
Actions Relating to Court Decisions is on the page following the introduction.

October 10, 20002000–41 I.R.B.
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly and may be obtained
from the Superintendent of Documents on a subscription
basis. Bulletin contents are consolidated semiannually into
Cumulative Bulletins, which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of in-
ternal management are not published; however, statements
of internal practices and procedures that affect the rights
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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,
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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 pub-
lished rulings and procedures, the effect of subsequent leg-
islation, regulations, court decisions, rulings, and proce-
dures must be considered, and Service personnel and oth-
ers concerned are cautioned against reaching the same con-
clusions in other cases unless the facts and circumstances
are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions, and Subpart B, Legislation and Related
Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to
these subjects are contained in the other Parts and Sub-
parts. Also included in this part are Bank Secrecy Act Admin-
istrative Rulings. Bank Secrecy Act Administrative Rulings
are issued by the Department of the Treasury’s Office of the
Assistant Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The first Bulletin for each month includes a cumulative index
for the matters published during the preceding months.
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and are published in the first Bulletin of the succeeding semi-
annual period, respectively.
The IRS Mission
Provide America’s taxpayers top quality service by help-
ing them understand and meet their tax responsibilities
and by applying the tax law with integrity and fairness to
all.
Introduction
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

2000–41 I.R.B.October 10, 2000
It is the policy of the Internal Revenue
Service to announce at an early date
whether it will follow the holdings in cer-
tain cases. An Action on Decision is the
document making such an announcement.
An Action on Decision will be issued at
the discretion of the Service only on un-
appealed issues decided adverse to the
government. Generally, an Action on De-
cision is issued where its guidance would
be helpful to Service personnel working
with the same or similar issues. Unlike a
Treasury Regulation or a Revenue Ruling,
an Action on Decision is not an affirma-
tive statement of Service position. It is not
intended to serve as public guidance and
may not be cited as precedent.
Actions on Decisions shall be relied
upon within the Service only as conclu-
sions applying the law to the facts in the
particular case at the time the Action on
Decision was issued. Caution should be
exercised in extending the recommenda-
tion of the Action on Decision to similar
cases where the facts are different. More-
over, the recommendation in the Action
on Decision may be superseded by new
legislation, regulations, rulings, cases, or
Actions on Decisions.
Prior to 1991, the Service published ac-
quiescence or nonacquiescence only in
certain regular Tax Court opinions. The
Service has expanded its acquiescence
program to include other civil tax cases
where guidance is determined to be help-
ful. Accordingly, the Service now may ac-
quiesce or nonacquiesce in the holdings
of memorandum Tax Court opinions, as
well as those of the United States District
Courts, Claims Court, and Circuit Courts
of Appeal. Regardless of the court decid-
ing the case, the recommendation of any
Action on Decision will be published in
the Internal Revenue Bulletin.
The recommendation in every Action
on Decision will be summarized as ac-
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or nonacquiescence. Both “acquies-
cence” and “acquiescence in result only”
mean that the Service accepts the holding
of the court in a case and that the Service
will follow it in disposing of cases with
the same controlling facts. However, “ac-
quiescence” indicates neither approval
nor disapproval of the reasons assigned
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“acquiescence in result only” indicates
disagreement or concern with some or all
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nifies that, although no further review
was sought, the Service does not agree
with the holding of the court and, gener-
ally, will not follow the decision in dis-
posing of cases involving other taxpay-
ers. In reference to an opinion of a circuit
court of appeals, a “nonacquiescence” in-
dicates that the Service will not follow
the holding on a nationwide basis. How-
ever, the Service will recognize the
precedential impact of the opinion on
cases arising within the venue of the de-
ciding circuit.
The Actions on Decisions published in
the weekly Internal Revenue Bulletin are
consolidated semiannually and appear in
the first Bulletin for July and the Cumu-
lative Bulletin for the first half of the
year. A semiannual consolidation also ap-
pears in the first Bulletin for the follow-
ing January and in the Cumulative Bul-
letin for the last half of the year.
The Commissioner ACQUIESCES in
the following decision:
Kathy A. King v. Commissioner,
1
115 T.C. No. 8
Actions Relating to Decisions of the Tax Court
1
Acquiescence relating to whether a nonpetitioning spouse (or former spouse) is entitled to notice and an opportunity to become a party within the meaning of I.R.C.
section 6015(e)(4) in a deficiency case where the petitioning spouse (or former spouse) is claiming relief from joint and several liability under section 6015.

Section 1.—Tax Imposed
26 CFR 1.1(h)–1: Capital gains look-through rule
for sales or exchanges of interests in a partnership,
S corporation, or trust.
T.D. 8902
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Capital Gains, Partnership,
Subchapter S, and Trust
Provisions
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations relating to sales or ex-
changes of interests in partnerships, S
corporations, and trusts. The regulations
interpret the look-through provisions of
section 1(h), added by section 311 of the
Taxpayer Relief Act of 1997 and amended
by sections 5001 and 6005(d) of the Inter-
nal Revenue Service Restructuring and
Reform Act of 1998, and explain the rules
relating to the division of the holding pe-
riod of a partnership interest. The regula-
tions affect partnerships, partners, S cor-
porations, S corporation shareholders,
trusts, and trust beneficiaries.
DATES: Effective Date: These regula-
tions are effective September 21, 2000.
FOR FURTHER INFORMATION CON-
TACT: Jeanne M. Sullivan or David J.
Sotos (202) 622-3050 (not a toll-free
number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collections of information con-
tained in these final regulations have been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507) under control
number 1545-1654. Responses to these
collections of information are required to
verify compliance with section 1(h) and
to determine that the tax on capital gains
has been computed correctly.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless the col-
lection of information displays a valid
control number assigned by the Office of
Management and Budget.
The estimated annual burden per re-
spondent/recordkeeper is 10 minutes.
Comments concerning the accuracy of
this burden estimate and suggestions for
reducing this burden should be sent to the
Internal Revenue Service, Attn: IRS Re-
ports Clearance Officer, OP:FS:FP, Wash-
ington, DC 20224, and to the Office of
Management and Budget, Attn: Desk
Officer for the Department of the Trea-
sury, Office of Information and Regula-
tory Affairs, Washington, DC 20503.
Books or records relating to this collec-
tion of information must be retained as
long as their contents may become mater-
ial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.
Background
Section 311 of the Taxpayer Relief Act
of 1997, Public Law 105-34 (111 Stat.
788, 831) (the 1997 Act), as modified by
sections 5001 and 6005(d) of the Internal
Revenue Service Restructuring and Re-
form Act of 1998, Public Law 105-206
(112 Stat. 685, 787, 800) (the 1998 Act),
reduced the maximum statutory tax rates
for long-term capital gains of individuals
in general and provided regulatory author-
ity to apply the rules to sales and ex-
changes of interests in pass-thru entities
and to sales and exchanges by pass-thru
entities. On August 9, 1999, the IRS pub-
lished in the Federal Registera notice of
proposed rulemaking (REG–106527–98,
1999–34 I.R.B. 304 [64 F.R. 43117]) relat-
ing to the taxation of capital gains in the
case of sales or exchanges of interests in
partnerships, S corporations, and trusts.
The regulations interpreted rules added by
the 1997 Act and amended by the 1998
Act, and provided guidance relating to the
division of the holding period of a partner-
ship interest. The IRS received no re-
quests to speak at a public hearing that
was scheduled for November 18, 1999,
and canceled the hearing. Written com-
ments were received in response to the no-
tice of proposed rulemaking. After con-
sideration of the comments, the proposed
regulations under sections 1(h), 741, and
1223 are adopted, as revised by this Trea-
sury decision. The comments received
and revisions made are discussed below.
Explanation of Revisions and Summary
of Comments
1. Look-Through Capital Gain
a. In General
Section 1(h) provides maximum capital
gains rates in three categories: 20-percent
rate gain, 25-percent rate gain, and 28-per-
cent rate gain. Twenty percent rate gain is
net capital gain from the sale or exchange
of capital assets held for more than one
year, reduced by the sum of 25-percent
rate gain and 28-percent rate gain.
Twenty-five percent rate gain is limited to
unrecaptured section 1250 gain. Twenty-
eight percent rate gain includes capital
gains and losses from the sale or exchange
of collectibles (as defined in section
408(m) without regard to section
408(m)(3)) held for more than one year
and certain other types of gain.
Capital gain attributable to the sale or
exchange of an interest in a pass-thru en-
tity held for more than one year generally
is in the 20-percent rate gain category.
However, the proposed regulations pro-
vide that, when a taxpayer sells or ex-
changes an interest in a partnership, S cor-
poration, or trust that holds collectibles,
rules similar to the rules under section
751(a) apply to determine the capital gain
that is attributable to certain unrealized
gain in the collectibles. Furthermore,
under the proposed regulations, rules simi-
lar to the rules under section 751(a) also
apply to determine the capital gain attrib-
utable to certain unrealized gain in section
1250 property held by a partnership when
a taxpayer sells or exchanges an interest in
a partnership that holds such property.
b. Net Collectibles Loss
Twenty-eight percent rate gain is the
excess (if any) of (i) the sum of col-
lectibles gain and section 1202 gain, over
2000–41 I.R.B.323October 10, 2000
Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

October 10, 20003242000–41 I.R.B.
(ii) the sum of collectibles loss, the net
short-term loss, and the amount of long-
term capital loss carried under section
1212(b)(1)(B) to the taxable year. One
commentator suggested that, when an in-
terest in a partnership, S corporation, or
trust is transferred, net collectibles loss as
well as net collectibles gain in property
held by such an entity should be taken
into account in determining a taxpayer’s
overall collectibles gain or collectibles
loss. The Treasury Department (Trea-
sury) and the IRS believe that the pro-
posed regulations are consistent with the
rule in section 1(h)(6)(B), which, in pro-
viding look-through treatment with re-
spect to collectibles, refers only to “gain
from the sale of an interest in a partner-
ship, S corporation, or trust which is at-
tributable to unrealized appreciation in
the value of collectibles . . .” Accord-
ingly, the comment is not adopted in the
final regulations.
c. Limitations with Respect to Section
1231 Property
Section 1(h)(7)(B) limits the amount
of unrecaptured section 1250 gain recog-
nized as a consequence of sales, ex-
changes, and conversions described in
section 1231(a)(3)(A) to the taxpayer’s
net section 1231 gain (as defined in sec-
tion 1231(c)(3)) for the taxable year. The
proposed regulations provide that, upon a
partner’s transfer of a partnership inter-
est, the partner’s allocable share of sec-
tion 1250 capital gain (as defined in
§1.1(h)-1(b)(3)) is not treated as section
1231 gain for purposes of applying the
limitation in section 1(h)(7)(B). There
has been some confusion regarding
whether the section 1(h)(7)(B) limitation
applies to all unrecaptured section 1250
gain, including section 1250 capital gain
recognized on the transfer of a partner-
ship interest.
Because the transfer of an interest in a
partnership is not described in section
1231(a)(3)(A), the limitation provided in
section 1(h)(7)(B) is not applicable with
respect to such transfers. Accordingly,
under the final regulations (and consis-
tent with the proposed regulations),
where a partner sells an interest in a part-
nership, the partner must take into ac-
count the entire allocable share of section
1250 capital gain in determining the un-
recaptured section 1250 gain under sec-
tion 1(h)(7)(A), without regard to the
limitation set forth in section 1(h)(7)(B).
d. Redemption of a Partnership Interest
Some practitioners have expressed con-
cern that the look-through capital gains
provisions of the proposed regulations
apply to the redemption of a partnership
interest. To apply the regulations in the
context of redemptions, it would be nec-
essary to import the concepts utilized in
section 751(b). Treasury and the IRS be-
lieve that this would not be advisable.
Accordingly, these regulations do not
apply to any transaction that is treated as a
redemption of a partnership interest for
Federal income tax purposes.
e. Allocating Section 704(c) Gain and
Loss
Certain commentators requested that
the final regulations provide guidance
with respect to the proportionate part of
the section 704(c) built-in gain or loss that
is transferred to the purchaser when a sec-
tion 704(c) partner sells a portion of a
partnership interest. This issue is relevant
because, in determining a taxpayer’s
share of collectibles gain or section 1250
capital gain on the sale of a partnership
interest, it is necessary to calculate how
much of such gain would be allocated
with respect to the partnership interest
sold if the underlying collectibles or sec-
tion 1250 property held by the partnership
were sold for their fair market value. In
making this determination where a part-
ner sells only a portion of its interest in a
partnership, it is necessary to determine
how much section 704(c) gain relating to
collectibles or section 1250 property is al-
locable to the portion of the partnership
interest that is sold. Although relevant,
Treasury and the IRS believe that this
issue is beyond the scope of these regula-
tions. Accordingly, this comment is not
addressed in these regulations.
f. Look-Through Capital Gain Where the
Pass-Thru Entity Has a Short-Term
Holding Period in Collectibles
The final regulations modify the pro-
posed regulations to provide that a pass-
thru entity’s holding period in the col-
lectibles is not relevant in determining
whether long-term capital gain recog-
nized on the sale of an interest in the en-
tity is collectibles gain (taxable at a 28-
percent rate). Consistent with the purpose
of the look-through provisions contained
in section 1(h), these regulations charac-
terize a transferor’s long-term capital gain
recognized on the sale of the interest in a
pass-thru entity by reference to the en-
tity’s underlying assets that give rise to
such gain. Where a transferor recognizes
long-term capital gain on the sale of an in-
terest in a partnership, S corporation, or
trust, it would be anomalous to provide
the transferor with a better tax result if the
entity has a short-term holding period in
collectibles than if the entity has a long-
term holding period in such property.
This rule is not relevant with respect to
section 1250 property. Because all depre-
ciation with respect to section 1250 prop-
erty held for one year or less is treated as
additional depreciation under section
1250(b)(1), such amounts will be treated
as unrealized receivables under section
751(c) and thus will give rise to ordinary
income under section 751(a) upon a dis-
position of the partnership interest.
2. Determination of Holding Period in a
Partnership
a. In General
The proposed regulations provide rules
relating to the allocation of a divided
holding period with respect to an interest
in a partnership. These rules generally
provide that the holding period of a part-
nership interest will be divided if a part-
ner acquires portions of an interest at dif-
ferent times or if an interest is acquired in
a single transaction that gives rise to dif-
ferent holding periods under section
1223. Under the proposed regulations,
the holding period of a portion of a part-
nership interest generally is determined
based on a fraction that is equal to the fair
market value of the portion of the partner-
ship interest to which the holding period
relates (determined immediately after the
acquisition) over the fair market value of
the entire partnership interest.
Under the proposed regulations, a sell-
ing partner generally cannot identify and
use the actual holding period for a portion
of the partner’s interest. However, the
proposed regulations provide that a sell-
ing partner is permitted to identify the
portion of a partnership interest sold with
its holding period if the partnership is a

publicly traded partnership (as defined
under section 7704(b)), the partnership
interest is divided into identifiable units
with ascertainable holding periods, and
the selling partner can identify the portion
of the interest transferred.
b. Contributions of Cash by Existing
Partners
The proposed regulations include an
example of a pro rata contribution of cash
by partners that results in a divided hold-
ing period in those partners’ interests in
the partnership. Commentators suggested
that it is inappropriate to provide for a di-
vided holding period where an existing
partner contributes cash to the partner-
ship, particularly where the contribution
is pro rata by all of the partners. Accord-
ing to these commentators, such an ap-
proach may unfairly convert portions of
long-term appreciation of partnership as-
sets into a short-term capital gain on the
sale of a long held partnership interest.
(This conversion occurs regardless of
whether the partner sells all or a portion
of a partnership interest.)
The conversion of long-term apprecia-
tion in partnership assets into short-term
capital gain upon the sale of a partnership
interest as a result of cash contributions to
the partnership is largely the product of
partners having unitary bases in their part-
nership interests. See Rev. Rul. 84-53
(1984-1 C.B. 159) (a partner has a single
basis in a partnership interest). Under this
rule, gain attributable to previously con-
tributed or acquired assets may be allo-
cated to the short-term portion of a part-
nership interest even though the value of
the short-term portion is no greater than
the amount of cash contributed to the
partnership. If basis from contributed
cash or property could be traced to a seg-
regated interest in the partnership, this
conversion of long-term capital apprecia-
tion into short-term capital gain would not
occur. Larger problems would arise,
however, in the context of partnership
taxation if a partner were allowed to have
a divided basis in a partnership interest.
An aggregate approach to determining
the holding period of an interest in a part-
nership would make it more likely that a
contribution of cash would not give rise to
a short-term holding period. Under an ag-
gregate approach, one could trace con-
tributed funds into the partnership and de-
termine whether a new holding period
was created by reference to whether the
funds were used for capital expenditures
(in which circumstance, a short-term
holding period generally would be appro-
priate) or for operating expenditures of
the partnership (in which circumstance,
no new holding period should be created).
On the other hand, to the extent that a
partnership interest is a capital asset that
is distinct from the partnership’s assets
(an entity approach), its holding period
and basis should be determined indepen-
dently and should not be affected by the
partnership’s use of the contributed funds.
In choosing the entity approach in the
proposed regulations, Treasury and the
IRS concluded that tracing funds to their
ultimate use in the partnership is not an
administrable means of determining
whether a contribution to a partnership
creates a new holding period.
Furthermore, the proposed regulations
are consistent with general rules relating
to the holding period of capital and sec-
tion 1231 assets. Where a capital asset
(including a capital asset held for one year
or less) or property described in section
1231 is contributed to a partnership, sec-
tion 1223(1) requires the tacking of the
holding period in the partnership interest,
whether the partners make pro rata contri-
butions of property or instead make non-
pro rata contributions that increase the
proportionate interests of one or more
partners.
In addition, the proposed regulations
avoid inappropriate results that may occur
if cash contributions are ignored after the
formation of a partnership. If cash contri-
butions were ignored, it would be possible
for partners to form shelf partnerships
with nominal cash contributions in order
to start their holding period in the inter-
ests, where the majority of cash would not
be contributed (and significant operating
assets of the partnership would not be ac-
quired) until some time in the future. This
clearly would not be a proper result.
Based upon the foregoing, Treasury and
the IRS continue to believe that the ap-
proach taken in the proposed regulations
is appropriate. However, in response to
comments, Treasury and the IRS have pro-
vided one exception, and explicitly grant
authority for another, where the contribu-
tion of cash will not create a new holding
period in a partnership interest.
If a partner makes cash contributions
and receives cash distributions from a
partnership during the one-year period be-
fore sale of all or a portion of the interest
in the partnership, Treasury and the IRS
believe it is appropriate that the net cash
contribution to the partnership determine
the portion of the interest that is held for
one year or less. Therefore, the final reg-
ulations provide that, if a partner makes
one or more cash contributions and re-
ceives one or more cash distributions with
respect to the partnership during the one-
year period ending on the date of the sale
or exchange of all or a portion of the part-
ner’s interest in the partnership, in apply-
ing the rules for determining the partner’s
holding period in its partnership interest
with respect to cash contributions, the
partner may reduce the cash contributions
made during the year by cash distribu-
tions received on a last-in-first-out basis,
treating all cash distributions as if they
were received by the partner immediately
before the sale or exchange. This rule
also applies in determining the holding
period of a partnership interest where gain
or loss is recognized under section 731(a)
upon a distribution by the partnership.
In addition, the final regulations in-
clude authority for the Secretary to pro-
vide, in published guidance, additional
exceptions to the general holding period
rules with respect to other cash contribu-
tions, including de minimiscash contribu-
tions, to a partnership. Treasury and the
IRS request comments as to the appropri-
ate level for a de minimisexception.
c. Treatment of Deemed Cash
Contributions under Section 752(a)
Section 752(a) provides that an in-
crease in a partner’s share of partnership
liabilities, or an increase in a partner’s in-
dividual liabilities by reason of the part-
ner’s assumption of partnership liabilities,
shall be treated as a contribution of
money by the partner to the partnership.
Some practitioners have questioned
whether a partner’s deemed contribution
of cash under section 752(a) will give rise
to a new holding period in that partner’s
interest in the partnership. A deemed con-
tribution of cash resulting from a shift
among partners in their share of liabilities
or as a result of a partnership incurring
new debt does not expand the net asset
base of the partners represented by their
2000–41 I.R.B.325October 10, 2000

interests in the partnership. Accordingly,
it is inappropriate to create a new holding
period as a result of such deemed contri-
butions. However, to the extent that a
partner actually assumes a debt of the
partnership, thus causing an increase in
the net asset base of the partnership, the
creation of a new holding period with re-
spect to a portion of the partner’s interest
is appropriate.
In addressing a similar issue, the capi-
tal account rules regarding the treatment
of liabilities under §1.704–1(b)(2)(iv)(c)
attempt to measure the increase or de-
crease in a partner’s economic interest in
the partnership resulting from the as-
sumption of liabilities by either the part-
ner or the partnership. Those rules pro-
vide:
(1) money contributed by a partner to a partner-
ship includes the amount of any partnership liabili-
ties that are assumed by such partner (other than
[certain] liabilities . . . that are assumed by a distrib-
utee partner [in connection with a distribution of
property by the partnership]) but does not include
increases in such partner’s share of partnership lia-
bilities (see section 752(a)), and (2) money distrib-
uted to a partner by a partnership includes the
amount of such partner’s individual liabilities that
are assumed by the partnership (other than [certain]
liabilities . . . that are assumed by the partnership [in
connection with a contribution of property to the
partnership]) but does not include decreases in such
partner’s share of partnership liabilities (see section
752(b)). . .
This rule is incorporated in the final
regulations. The final regulations provide
that deemed contributions and distribu-
tions of cash under sections 752(a) and
(b) will be disregarded in determining a
partner’s holding period in its partnership
interest to the same extent that such
amounts are disregarded under
§1.704–1(b)(2)(iv)(c). (Deemed distribu-
tions under section 752(b) are relevant as
a result of the cash netting rule added in
these final regulations.)
d. Contribution of Section 751 Assets
Commentators noted that, if a partner
has a short-term holding period in a part-
nership interest on account of the contri-
bution of assets described in section
751(c) or (d) (section 751 assets), the
rules of section 751(a) in conjunction
with the proposed regulations cause the
section 751 assets to be counted twice if a
partnership interest is sold within 12
months of the contribution, once in apply-
ing section 751(a) to treat part of the
amount received as ordinary income, and
again in determining the selling partner’s
short-term capital gain. In response to
these comments, the final regulations pro-
vide that, if a partner recognizes ordinary
income or loss on account of section 751
assets, either under section 751(a) as a re-
sult of the sale of all or part of the partner-
ship interest or as a result of the sale by
the partnership of the section 751 assets,
the section 751 assets shall be disregarded
in determining the division of the holding
period of an interest in a partnership upon
a sale of such partnership interest during
the one-year period following the contri-
bution. This rule does not apply if, in the
absence of the rule, a partner would not
be treated as having held any portion of
the interest for more than one year. Ac-
cordingly, if a partner’s only contributions
to a partnership are contributions of sec-
tion 751 assets or section 751 assets and
cash within the prior one-year period, the
adjustment will not be available, and the
partner appropriately will be treated as
having a short-term holding period with
respect to the entire interest.
A similar rule disregarding the contri-
bution of section 751 assets does not
apply in determining the holding period
of a partnership interest with respect to
gain or loss recognized under section 731
upon a distribution by a partnership.
Properly coordinating the holding period
rules with gain or loss determinations
under section 751(b) would be inordi-
nately complex. In addition, where,
within a one-year period, a partner con-
tributes section 751 assets to a partnership
and receives a cash distribution large
enough to require the recognition of gain,
it is likely that the contribution and distri-
bution will constitute a disguised sale of
the section 751 assets to the partnership
under section 707(a)(2)(B), thus render-
ing the holding period rules irrelevant
since the sale of an asset to a partnership
does not affect the holding period of an
interest in the partnership.
e. Treatment of Recapture and Other
Unrealized Receivables
An example in the proposed regula-
tions treats the portion of a contributed
asset that would be recaptured as ordinary
income under section 1245 upon disposi-
tion as non-section 1231 property for pur-
poses of the tacked holding period rule in
section 1223(1). Some commentators
have raised questions regarding the posi-
tion taken in this example. For purposes
of these regulations, Treasury and the IRS
believe that it is appropriate to character-
ize all properties and potential gain
treated as unrealized receivables under
section 751(c) and the regulations there-
under as separate assets that are not capi-
tal assets or property described in section
1231. Accordingly, while the example in
the proposed regulations has been elimi-
nated, a specific rule has been added in
the final regulations to provide for such a
result. This rule is consistent with the
rule added in the final regulations regard-
ing the holding period exception for con-
tributed section 751 assets. As discussed
above, that rule will disregard the contri-
bution of section 751 assets (including
properties and potential gain treated as
unrealized receivables under section
751(c)) in computing the holding period
of a partnership interest where the interest
is sold within one year after contribution.
Accordingly, while section 1245 recap-
ture (and similar items treated as unreal-
ized receivables) will be treated as a sepa-
rate asset that is not a capital or section
1231 asset, the asset will not give rise to a
short-term holding period where a part-
nership interest is sold. This rule also is
similar to the rule contained in
§ 1.755–1(a), which provides that proper-
ties and potential gain treated as unreal-
ized receivables under section 751(c) are
considered separate ordinary income as-
sets for purposes of allocating basis ad-
justments under section 755.
f. Identification of Publicly Traded
Partnership Units
The proposed regulations provide that
a selling partner may use the actual hold-
ing period of the portion of a partnership
interest sold if the partnership is a “pub-
licly traded partnership” (as defined
under section 7704(b)), the partnership
interest is divided into identifiable units
with ascertainable holding periods, and
the selling partner can identify the por-
tion of the interest transferred. Commen-
tators suggested that it may be appropri-
ate to provide that a partner must be
consistent in electing, for holding period
purposes, to identify units of a publicly
traded partnership that are sold or ex-
changed in order to avoid distortion in
the total long-term and short-term capital
October 10, 20003262000–41 I.R.B.

gain recognized. This suggestion is
adopted in the final regulations.
g. Conversion from General Partnership
to Limited Partnership
A commentator requested clarification
that a partner’s holding period in its part-
nership interest carries over when a part-
nership converts from a general partner-
ship to a limited partnership, as described
in Rev. Rul. 84-52 (1984–1 C.B. 157).
The ruling concludes that, pursuant to
section 1223(1), there will be no change
to the holding period of any partner’s in-
terest in the partnership as a result of such
a conversion. The final regulations do not
change the result set forth in Rev. Rul. 84-
52.
h. Other Miscellaneous Issues
The proposed regulations contain an ex-
ample which, consistent with Rev. Rul.
84–53, states that a partner has a single
basis in its partnership interest. Certain
commentators suggested that the principle
that a partner has a single basis in its part-
nership interest should be set forth in regu-
lations, rather than simply relying on Rev.
Rul. 84–53. The rules set forth in these
regulations address only holding period
and character issues. In illustrating the
operation of certain of these rules, the ex-
ample accurately reflects current law.
Treasury and the IRS believe that the in-
clusion of a separate rule providing that a
partner has a single basis in its partnership
interest is unnecessary and is beyond the
scope of these regulations.
Finally, it was suggested that the final
regulations cross-reference section 83(f),
which provides that in determining the
holding period of property to which sec-
tion 83(a) applies, only the holding period
during which rights are transferable or are
not subject to a substantial risk of forfei-
ture shall be included. Treasury and the
IRS currently are studying the extent to
which section 83(a) applies to the issuance
of certain partnership interests (i.e., a prof-
its interest in a partnership) in exchange
for services. Section 83(f) is relevant to
the extent that section 83(a) applies with
respect to a partnership interest. However,
in order to avoid any implication that sec-
tion 83(a) applies to all partnership inter-
ests issued in exchange for services, a
cross reference to section 83(f) has not
been included in the final regulations.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assess-
ment is not required. It also has been de-
termined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regula-
tions. It is hereby certified that the collec-
tion of information in these regulations
will not have a significant impact on a
substantial number of small businesses.
This certification is based upon the fact
that the economic burden imposed on tax-
payers by the collection of information
and recordkeeping requirements of these
regulations is insignificant. For example,
the estimated average annual burden per
respondent is 10 minutes. Therefore, a
Regulatory Flexibility Analysis is not re-
quired under the Regulatory Flexibility
Act (5 U.S.C. chapter 6). Pursuant to sec-
tion 7805(f) of the Internal Revenue
Code, the notice of proposed rulemaking
preceding these regulations was submit-
ted to the Chief Counsel for Advocacy of
the Small Business Administration for
comment on its impact on small business.
Drafting Information
The principal authors of these regula-
tions are Jeanne M. Sullivan and David J.
Sotos of the Associate Chief Counsel
(Passthroughs and Special Industries).
However, other personnel from Treasury
and the IRS participated in their develop-
ment.
* * * * *
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and 602
are amended as follows:
PART 1— INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding an entry in
numerical order to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Section 1.1(h)–1 is also issued under
26 U.S.C. 1(h); * * *
Par. 2. Section 1.1(h)–1 is added to
read as follows:
§1.1(h)–1 Capital gains look-through
rule for sales or exchanges of interests in
a partnership, S corporation, or trust.
(a) In general. When an interest in a
partnership held for more than one year is
sold or exchanged, the transferor may rec-
ognize ordinary income (e.g., under sec-
tion 751(a)), collectibles gain, section
1250 capital gain, and residual long-term
capital gain or loss. When stock in an S
corporation held for more than one year is
sold or exchanged, the transferor may rec-
ognize ordinary income (e.g., under sec-
tions 304, 306, 341, 1254), collectibles
gain, and residual long-term capital gain
or loss. When an interest in a trust held
for more than one year is sold or ex-
changed, a transferor who is not treated as
the owner of the portion of the trust attrib-
utable to the interest sold or exchanged
(sections 673 through 679) (a non-grantor
transferor) may recognize collectibles
gain and residual long-term capital gain
or loss.
(b) Look-through capital gain—(1) In
general. Look-through capital gain is the
share of collectibles gain allocable to an
interest in a partnership, S corporation, or
trust, plus the share of section 1250 capi-
tal gain allocable to an interest in a part-
nership, determined under paragraphs
(b)(2) and (3) of this section.
(2) Collectibles gain—(i) Definition.
For purposes of this section, collectibles
gainshall be treated as gain from the sale
or exchange of a collectible (as defined in
section 408(m) without regard to section
408(m)(3)) that is a capital asset held for
more than 1 year.
(ii) Share of collectibles gain allocable
to an interest in a partnership, S corpora-
tion, or a trust. When an interest in a
partnership, S corporation, or trust held
for more than one year is sold or ex-
changed in a transaction in which all real-
ized gain is recognized, the transferor
shall recognize as collectibles gain the
amount of net gain (but not net loss) that
would be allocated to that partner (taking
into account any remedial allocation
under §1.704–3(d)), shareholder, or bene-
ficiary (to the extent attributable to the
portion of the partnership interest, S cor-
poration stock, or trust interest transferred
that was held for more than one year) if
the partnership, S corporation, or trust
transferred all of its collectibles for cash
equal to the fair market value of the assets
in a fully taxable transaction immediately
2000–41 I.R.B.327October 10, 2000

before the transfer of the interest in the
partnership, S corporation, or trust. If less
than all of the realized gain is recognized
upon the sale or exchange of an interest in
a partnership, S corporation, or trust, the
same methodology shall apply to deter-
mine the collectibles gain recognized by
the transferor, except that the partnership,
S corporation, or trust shall be treated as
transferring only a proportionate amount
of each of its collectibles determined as a
fraction that is the amount of gain recog-
nized in the sale or exchange over the
amount of gain realized in the sale or ex-
change. With respect to the transfer of an
interest in a trust, this paragraph (b)(2)
applies only to transfers by non-grantor
transferors (as defined in paragraph (a) of
this section). This paragraph (b)(2) does
not apply to a transaction that is treated,
for Federal income tax purposes, as a re-
demption of an interest in a partnership, S
corporation, or trust.
(3)Section 1250 capital gain—(i) Defi-
nition. For purposes of this section, sec-
tion 1250 capital gainmeans the capital
gain (not otherwise treated as ordinary in-
come) that would be treated as ordinary
income if section 1250(b)(1) included all
depreciation and the applicable percent-
age under section 1250(a) were 100 per-
cent.
(ii) Share of section 1250 capital gain
allocable to interest in partnership.
When an interest in a partnership held for
more than one year is sold or exchanged
in a transaction in which all realized gain
is recognized, there shall be taken into ac-
count under section 1(h)(7)(A)(i) in deter-
mining the partner’s unrecaptured section
1250 gain the amount of section 1250
capital gain that would be allocated (tak-
ing into account any remedial allocation
under §1.704–3(d)) to that partner (to the
extent attributable to the portion of the
partnership interest transferred that was
held for more than one year) if the part-
nership transferred all of its section 1250
property in a fully taxable transaction for
cash equal to the fair market value of the
assets immediately before the transfer of
the interest in the partnership. If less than
all of the realized gain is recognized upon
the sale or exchange of an interest in a
partnership, the same methodology shall
apply to determine the section 1250 capi-
tal gain recognized by the transferor, ex-
cept that the partnership shall be treated
as transferring only a proportionate
amount of each section 1250 property de-
termined as a fraction that is the amount
of gain recognized in the sale or exchange
over the amount of gain realized in the
sale or exchange. This paragraph (b)(3)
does not apply to a transaction that is
treated, for Federal income tax purposes,
as a redemption of a partnership interest.
(iii) Limitation with respect to net sec-
tion 1231 gain. In determining a trans-
feror partner’s net section 1231 gain (as
defined in section 1231(c)(3)) for pur-
poses of section 1(h)(7)(B), the transferor
partner’s allocable share of section 1250
capital gain in partnership property shall
not be treated as section 1231 gain, re-
gardless of whether the partnership prop-
erty is used in the trade or business (as de-
fined in section 1231(b)).
(c) Residual long-term capital gain or
loss. The amount of residual long-term
capital gain or loss recognized by a part-
ner, shareholder of an S corporation, or
beneficiary of a trust on account of the
sale or exchange of an interest in a part-
nership, S corporation, or trust shall equal
the amount of long-term capital gain or
loss that the partner would recognize
under section 741, that the shareholder
would recognize upon the sale or ex-
change of stock of an S corporation, or
that the beneficiary would recognize upon
the sale or exchange of an interest in a
trust (pre-look-through long-term capital
gain or loss) minus the amount of look-
through capital gain determined under
paragraph (b) of this section.
(d) Special rule for tiered entities.In
determining whether a partnership, S cor-
poration, or trust has gain from col-
lectibles, such partnership, S corporation,
or trust shall be treated as owning its pro-
portionate share of the collectibles of any
partnership, S corporation, or trust in
which it owns an interest either directly or
indirectly through a chain of such entities.
In determining whether a partnership has
section 1250 capital gain, such partner-
ship shall be treated as owning its propor-
tionate share of the section 1250 property
of any partnership in which it owns an in-
terest, either directly or indirectly through
a chain of partnerships.
(e) Notification requirements. Report-
ing rules similar to those that apply to the
partners and the partnership under section
751(a) shall apply in the case of sales or
exchanges of interests in a partnership, S
corporation, or trust that cause holders of
such interests to recognize collectibles gain
and in the case of sales or exchanges of in-
terests in a partnership that cause holders
of such interests to recognize section 1250
capital gain. See §1.751–1(a)(3).
(f) Examples.The following examples
illustrate the requirements of this section:
Example 1. Collectibles gain. (i) Aand Bare
equal partners in a personal service partnership
(PRS). Btransfers B’s interest in PRStoTfor
$15,000 when PRS’s balance sheet (reflecting a cash
receipts and disbursements method of accounting) is
as follows:
October 10, 20003282000–41 I.R.B.
ASSETS
AdjustedMarket
BasisValue
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 3,000$3,000
Loans Owed to Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,00010,000
Collectibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,0003,000
Other Capital Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,0002,000
Capital Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,0005,000
Unrealized Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .014,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$20,000$32,000

LIABILITIES AND CAPITAL
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 2,000$ 2,000
Capital:
A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9,00015,000
B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9,00015,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$20,000$32,000
2000–41 I.R.B.329October 10, 2000
(ii) At the time of the transfer, Bhas held the in-
terest in PRSfor more than one year, and B’s basis
for the partnership interest is $10,000 ($9,000 plus
$1,000, B’s share of partnership liabilities). None of
the property owned by PRSis section 704(c) prop-
erty. The total amount realized by Bis $16,000,
consisting of the cash received, $15,000, plus
$1,000, B’s share of the partnership liabilities as-
sumed by T. See section 752. B’s undivided one-
half interest in PRSincludes a one-half interest in
the partnership’s unrealized receivables and a one-
half interest in the partnership’s collectibles.
(iii) If PRSwere to sell all of its section 751 prop-
erty in a fully taxable transaction for cash equal to
the fair market value of the assets immediately prior
to the transfer of B’s partnership interest to T, B
would be allocated $7,000 of ordinary income from
the sale of PRS’s unrealized receivables. Therefore,
Bwill recognize $7,000 of ordinary income with re-
spect to the unrealized receivables. The difference
between the amount of capital gain or loss that the
partner would realize in the absence of section 751
($6,000) and the amount of ordinary income or loss
determined under §1.751–1(a)(2) ($7,000) is the
partner’s capital gain or loss on the sale of the part-
nership interest under section 741. In this case, the
transferor has a $1,000 pre-look-through long-term
capital loss.
(iv) If PRSwere to sell all of its collectibles in a
fully taxable transaction for cash equal to the fair
market value of the assets immediately prior to the
transfer of B’s partnership interest to T, Bwould be
allocated $1,000 of gain from the sale of the col-
lectibles. Therefore, Bwill recognize $1,000 of col-
lectibles gain on account of the collectibles held by
PRS.
(v) The difference between the transferor’s pre-
look-through long-term capital gain or loss (-$1,000)
and the look-through capital gain determined under
this section ($1,000) is the transferor’s residual long-
term capital gain or loss on the sale of the partner-
ship interest. Under these facts, Bwill recognize a
$2,000 residual long-term capital loss on account of
the sale or exchange of the interest in PRS.
Example 2. Special allocations. Assume the
same facts as in Example 1, except that under the
partnership agreement, all gain from the sale of the
collectibles is specially allocated to B, and Btrans-
fers B’s interest to Tfor $16,000. All items of in-
come, gain, loss, or deduction of PRS, other than
the gain from the collectibles, are divided equally
between Aand B. Under these facts, B’s amount re-
alized is $17,000, consisting of the cash received,
$16,000, plus $1,000, B’s share of the partnership
liabilities assumed by T. See section 752. Bwill
recognize $7,000 of ordinary income with respect
to the unrealized receivables (determined under
§1.751–1(a)(2)). Accordingly, B’s pre-look-through
long-term capital gain would be $0. If PRSwere to
sell all of its collectibles in a fully taxable transac-
tion for cash equal to the fair market value of the as-
sets immediately prior to the transfer of B’s partner-
ship interest to T, Bwould be allocated $2,000 of
gain from the sale of the collectibles. Therefore, B
will recognize $2,000 of collectibles gain on ac-
count of the collectibles held by PRS. Bwill recog-
nize a $2,000 residual long-term capital loss on ac-
count of the sale of B
’s interest in PRS.
Example 3. Net collectibles loss ignored. As-
sume the same facts as in Example 1, except that the
collectibles held by PRShave an adjusted basis of
$3,000 and a fair market value of $1,000, and the
other capital assets have an adjusted basis of $4,000
and a fair market value of $4,000. (The total ad-
justed basis and fair market value of the partner-
ship’s capital assets are the same as in Example 1.)
If PRSwere to sell all of its collectibles in a fully
taxable transaction for cash equal to the fair market
value of the assets immediately prior to the transfer
of B’s partnership interest to T, Bwould be allo-
cated $1,000 of loss from the sale of the col-
lectibles. Because none of the gain from the sale of
the interest in PRSis attributable to unrealized ap-
preciation in the value of collectibles held by PRS,
the net loss in collectibles held by PRSis not recog-
nized at the time Btransfers the interest in PRS. B
will recognize $7,000 of ordinary income (deter-
mined under §1.751–1(a)(2)) and a $1,000 long-
term capital loss on account of the sale of B’s inter-
est in PRS.
Example 4. Collectibles gain in an S corpora-
tion. (i) A corporation (X) has always been an S
corporation and is owned by individuals A, B, and
C. In 1996, Xinvested in antiques. Subsequent to
their purchase, the antiques appreciated in value by
$300. Aowns one-third of the shares of Xstock and
has held that stock for more than one year. A’s ad-
justed basis in the Xstock is $100. If Awere to sell
all of A’s Xstock to Tfor $150, Awould realize $50
of pre-look-through long-term capital gain.
(ii) If Xwere to sell its antiques in a fully taxable
transaction for cash equal to the fair market value of
the assets immediately before the transfer to T, A
would be allocated $100 of gain on account of the
sale. Therefore, Awill recognize $100 of col-
lectibles gain (look-through capital gain) on ac-
count of the collectibles held by X.
(iii) The difference between the transferor’s pre-
look-through long-term capital gain or loss ($50)
and the look-through capital gain determined under
this section ($100) is the transferor’s residual long-
term capital gain or loss on the sale of the S corpo-
ration stock. Under these facts, Awill recognize
$100 of collectibles gain and a $50 residual long-
term capital loss on account of the sale of A’s inter-
est in X.
Example 5. Sale or exchange of partnership in-
terest where part of the interest has a short-term
holding period. (i) A, B,
and Cform an equal part-
nership (PRS). In connection with the formation, A
contributes $5,000 in cash and a capital asset with a
fair market value of $5,000 and a basis of $2,000; B
contributes $7,000 in cash and a collectible with a
fair market value of $3,000 and a basis of $3,000;
and Ccontributes $10,000 in cash. At the time of
the contribution, Ahad held the contributed prop-
erty for two years. Six months later, when A’s basis
in PRSis $7,000, Atransfers A’s interest in PRSto
Tfor $14,000 at a time when PRS’s balance sheet
(reflecting a cash receipts and disbursements
method of accounting) is as follows:
ASSETS
AdjustedMarket
BasisValue
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 22,000$22,000
Unrealized Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .06,000
Capital Asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,0005,000
Collectible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3,0009,000
Capital Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,00014,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 27,000$42,000

October 10, 20003302000–41 I.R.B.
(ii) Although at the time of the transfer Ahas
not held A’s interest in PRSfor more than one
year, 50 percent of the fair market value of A’s in-
terest in PRSwas received in exchange for a capi-
tal asset with a long-term holding period. There-
fore, 50 percent of A’s interest in PRShas a
long-term holding period. See §1.1223–3(b)(1).
(iii) If PRS were to sell all of its section 751
property in a fully taxable transaction immediately
before A’s transfer of the partnership interest, A
would be allocated $2,000 of ordinary income.
Accordingly, Awill recognize $2,000 ordinary in-
come and $5,000 ($7,000 - $2,000) of capital gain
on account of the transfer to Tof A’s interest in
PRS. Fifty percent ($2,500) of that gain is long-
term capital gain and 50 percent ($2,500) is short-
term capital gain. See §1.1223–3(c)(1).
(iv) If the collectible were sold or exchanged
in a fully taxable transaction immediately before
A’s transfer of the partnership interest, Awould be
allocated $2,000 of gain attributable to the col-
lectible. The gain attributable to the collectible
that is allocable to the portion of the transferred in-
terest in PRSwith a long-term holding period is
$1,000 (50 percent of $2,000). Accordingly, A
will recognize $1,000 of collectibles gain on ac-
count of the transfer of A’s interest in PRS.
(v) The difference between the amount of pre-
look-through long-term capital gain or loss
($2,500) and the look-through capital gain
($1,000) is the amount of residual long-term capi-
tal gain or loss that Awill recognize on account of
the transfer of A’s interest in PRS. Under these
facts, Awill recognize a residual long-term capital
gain of $1,500 and a short-term capital gain of
$2,500.
(g) Effective date. This section ap-
plies to transfers of interests in partner-
ships, S corporations, and trusts that
occur on or after September 21, 2000.
Par. 3. Section 1.741–1 is amended
by adding paragraphs (e) and (f) to read
as follows:
§1.741–1 Recognition and character of
gain or loss on sale or exchange.
* * * * *
(e) For rules relating to the capital
gain or loss recognized when a partner
sells or exchanges an interest in a part-
nership that holds appreciated col-
lectibles or section 1250 property with
section 1250 capital gain, see §
1.1(h)–1. This paragraph (e) applies to
transfers of interests in partnerships that
occur on or after September 21, 2000.
(f) For rules relating to dividing the
holding period of an interest in a part-
nership, see §1.1223–3. This paragraph
(f) applies to transfers of partnership in-
terests and distributions of property
from a partnership that occur on or after
September 21, 2000.
Par. 4. Section 1.1223–3 is added
under the undesignated center heading
“General Rules for Determining Capital
Gains and Losses” to read as follows:
§1.1223–3 Rules relating to the holding
periods of partnership interests.
(a) In general. A partner shall not
have a divided holding period in an in-
terest in a partnership unless—
(1) The partner acquired portions of
an interest at different times; or
(2) The partner acquired portions of
the partnership interest in exchange for
property transferred at the same time but
resulting in different holding periods
(e.g., section 1223).
(b) Accounting for holding periods of
an interest in a partnership—(1) Gen-
eral rule. The portion of a partnership
interest to which a holding period relates
shall be determined by reference to a
fraction, the numerator of which is the
fair market value of the portion of the
partnership interest received in the
transaction to which the holding period
relates, and the denominator of which is
the fair market value of the entire part-
nership interest (determined immedi-
ately after the transaction).
(2) Special rule. For purposes of ap-
plying paragraph (b)(1) of this section to
determine the holding period of a part-
nership interest (or portion thereof) that
is sold or exchanged (or with respect to
which gain or loss is recognized upon a
distribution under section 731), if a part-
ner makes one or more contributions of
cash to the partnership and receives one
or more distributions of cash from the
partnership during the one-year period
ending on the date of the sale or ex-
change (or distribution with respect to
which gain or loss is recognized under
section 731), the partner may reduce the
cash contributions made during the year
by cash distributions received on a last-
in-first-out basis, treating all cash distri-
butions as if they were received immedi-
ately before the sale or exchange (or at
the time of the distribution with respect
to which gain or loss is recognized
under section 731).
(3) Deemed contributions and distrib-
utions. For purposes of paragraphs
(b)(1) and (2) of this section, deemed
contributions of cash under section
752(a) and deemed distributions of cash
under section 752(b) shall be disre-
garded to the same extent that such
amounts are disregarded under
§1.704–1(b)(2)(iv)(c).
(4) Adjustment with respect to con-
tributed section 751 assets. For purposes
of applying paragraph (b)(1) of this sec-
tion to determine the holding period of a
partnership interest (or portion thereof)
that is sold or exchanged, if a partner re-
ceives a portion of the partnership interest
in exchange for property described in sec-
tion 751(c) or (d) (section 751 assets)
within the one-year period ending on the
date of the sale or exchange of all or a
portion of the partner’s interest in the
partnership, and the partner recognizes
ordinary income or loss on account of
such a section 751 asset in a fully taxable
transaction (either as a result of the sale of
all or part of the partner’s interest in the
partnership or the sale by the partnership
of the section 751 asset), the contribution
of the section 751 asset during the one-
year period shall be disregarded. How-
ever, if, in the absence of this paragraph, a
partner would not be treated as having
held any portion of the interest for more
than one year (e.g., because the partner’s
only contributions to the partnership are
contributions of section 751 assets or sec-
tion 751 assets and cash within the prior
one-year period), this adjustment is not
available.
(5) Exception. The Commissioner may
prescribe by guidance published in the In-
ternal Revenue Bulletin (see §601.-
601(d)(2) of this chapter) a rule disregard-
ing certain cash contributions (including
contributions of ade minimisamount of
cash) in applying paragraph (b)(1) of this
section to determine the holding period of
a partnership interest (or portion thereof)
that is sold or exchanged.
(c) Sale or exchange of all or a portion
of an interest in a partnership—(1) Sale
or exchange of entire interest in a part-
nership. If a partner sells or exchanges
the partner’s entire interest in a partner-
ship, any capital gain or loss recognized
shall be divided between long-term and
short-term capital gain or loss in the same
proportions as the holding period of the
interest in the partnership is divided be-
tween the portion of the interest held for
more than one year and the portion of the
interest held for one year or less.
(2) Sale or exchange of a portion of an
interest in a partnership—(i) Certain

publicly traded partnerships. A selling
partner in a publicly traded partnership
(as defined under section 7704(b)) may
use the actual holding period of the por-
tion of a partnership interest transferred
if—
(A) The ownership interest is divided
into identifiable units with ascertainable
holding periods;
(B) The selling partner can identify the
portion of the partnership interest trans-
ferred; and
(C) The selling partner elects to use the
identification method for all sales or ex-
changes of interests in the partnership
after September 21, 2000. The selling
partner makes the election referred to in
this paragraph (c)(2)(i)(C) by using the
actual holding period of the portion of the
partner’s interest in the partnership first
transferred after September 21, 2000, in
reporting the transaction for federal in-
come tax purposes.
(ii) Other partnerships. If a partner
has a divided holding period in a partner-
ship interest, and paragraph (c)(2)(i) of
this section does not apply, then the hold-
ing period of the transferred interest shall
be divided between long-term and short-
term capital gain or loss in the same pro-
portions as the long-term and short-term
capital gain or loss that the transferor
partner would realize if the entire interest
in the partnership were transferred in a
fully taxable transaction immediately be-
fore the actual transfer.
(d) Distributions—(1) In general. Ex-
cept as provided in paragraph (b)(2) of
this section, a partner’s holding period in
a partnership interest is not affected by
distributions from the partnership.
(2) Character of capital gain or loss
recognized as a result of a distribution
from a partnership. If a partner is re-
quired to recognize capital gain or loss as
a result of a distribution from a partner-
ship, then the capital gain or loss recog-
nized shall be divided between long-term
and short-term capital gain or loss in the
same proportions as the long-term and
short-term capital gain or loss that the
distributee partner would realize if such
partner’s entire interest in the partnership
were transferred in a fully taxable trans-
action immediately before the distribu-
tion.
(e) Section 751(c) assets. For purposes
of this section, properties and potential
gain treated as unrealized receivables
under section 751(c) shall be treated as
separate assets that are not capital assets
as defined in section 1221 or property de-
scribed in section 1231.
(f) Examples. The provisions of this
section are illustrated by the following
examples:
Example 1. Division of holding period—contri-
bution of money and a capital asset. (i) Acon-
tributes $5,000 of cash and a nondepreciable capital
asset Ahas held for two years to a partnership (PRS)
for a 50 percent interest in PRS. A’s basis in the
capital asset is $5,000, and the fair market value of
the asset is $10,000. After the exchange, A’s basis
in A’s interest in PRSis $10,000, and the fair mar-
ket value of the interest is $15,000. Areceived one-
third of the interest in PRSfor a cash payment of
$5,000 ($5,000/$15,000). Therefore, A’s holding
period in one-third of the interest received (attribut-
able to the contribution of money to the partnership)
begins on the day after the contribution. Areceived
two-thirds of the interest in PRSin exchange for the
capital asset ($10,000/$15,000). Accordingly, pur-
suant to section 1223(1), Ahas a two-year holding
period in two-thirds of the interest received in PRS.
(ii) Six months later, when A’s basis in PRSis
$12,000 (due to a $2,000 allocation of partnership
income to A), Asells the interest in PRSfor
$17,000. Assuming PRSholds no inventory or un-
realized receivables (as defined under section
751(c)) and no collectibles or section 1250 prop-
erty, Awill realize $5,000 of capital gain. As deter-
mined above, one-third of A’s interest in PRShas a
holding period of one year or less, and two- thirds
of A’s interest in PRShas a holding period equal to
two years and six months. Therefore, one-third of
the capital gain will be short-term capital gain, and
two-thirds of the capital gain will be long-term cap-
ital gain.
Example 2. Division of holding period—contri-
bution of section 751 asset and a capital asset. A
contributes inventory with a basis of $2,000 and a
fair market value of $6,000 and a capital asset
which Ahas held for more than one year with a
basis of $4,000 and a fair market value of $6,000,
and Bcontributes cash of $12,000 to form a partner-
ship (AB). As a result of the contribution, one-half
of A’s interest in ABis treated as having been held
for more than one year under section 1223(1). Six
months later, Atransfers one-half of A’s interest in
ABto Cfor $6,000, realizing a gain of $3,000. If
ABwere to sell all of its section 751 property in a
fully taxable transaction immediately before A’s
transfer of the partnership interest, Awould be allo-
cated $4,000 of ordinary income on account of the
inventory. Accordingly, Awill recognize $2,000 of
ordinary income and $1,000 of capital gain ($3,000
- $2,000) on account of the transfer to C. Because
Arecognizes ordinary income on account of the in-
ventory that was contributed to ABwithin the one
year period ending on the date of the sale, the in-
ventory will be disregarded in determining the hold-
ing period of A’s interest in AB. All of the capital
gain will be long-term.
Example 3. Netting of cash contributions and
distributions. (i) On January 1, 2000, Aholds a 50
percent interest in the capital and profits of a part-
nership (PS). The value of A’s PSinterest is $900,
and A’s holding period in the entire interest is long-
term. On January 2, 2000, when the value of A’s PS
interest is still $900, Acontributes $100 to PS. On
June 1, 2000, Areceives a distribution of $40 cash
from the partnership. On September 1, 2000, when
the value of A’s interest in PSis $1,350, Acon-
tributes an additional $230 cash to PS, and on Octo-
ber 1, 2000, Areceives another $40 cash distribu-
tion from PS. Asells A’s entire partnership interest
on November 1, 2000, for $1,600. A’s adjusted
basis in the PSinterest at the time of the sale is
$1,000.
(ii) For purposes of netting cash contributions
and distributions in determining the holding period
of A’s interest in PS, Ais treated as having received
a distribution of $80 on November 1, 2000. Apply-
ing that distribution on a last-in-first-out basis to re-
duce prior contributions during the year, the contri-
bution made on September 1, 2000, is reduced to
$150 ($230 - $80). The holding period then is de-
termined as follows: Immediately after the contri-
bution of $100 on January 2, 2000, A’s holding pe-
riod in A’s PSinterest is 90 percent long-term
($900/($900 + $100)) and 10 percent short-term
($100/($900 + $100)). The contribution of $150 on
September 1, 2000, causes 10 percent of A’s part-
nership interest ($150/($1,350 + $150)) to have a
short-term holding period. Accordingly, immedi-
ately after the contribution on September 1, 2000,
A’s holding period in A’s PSinterest is 81 percent
long-term (.90 x .90) and 19 percent short-term
((.10 x .90) + .10). Accordingly, $486 ($600 x .81)
of the gain from A’s sale of the PSinterest is long-
term capital gain, and $114 ($600 x .19) is short-
term capital gain.
Example 4. Division of holding period when
capital account is increased by contribution. A, B,
C, and Dare equal partners in a partnership (PRS),
and the fair market value of a 25 percent interest in
PRSis $100. A, B, C, and Deach contribute an ad-
ditional $100 to partnership capital, thereby in-
creasing the fair market value of each partner’s in-
terest to $200. As a result of the contribution, each
partner has a new holding period in the portion of
the partner’s interest in PRSthat is attributable to
the contribution. That portion equals 50 percent
($100/$200) of each partner’s interest in PRS.
Example 5. Sale or exchange of a portion of an
interest in a partnership. (i) A, B, and Cform an
equal partnership (PRS). In connection with the
formation, Acontributes $5,000 in cash and a capi-
tal asset (capital asset 1) with a fair market value of
$5,000 and a basis of $2,000; Bcontributes $7,000
in cash and a capital asset (capital asset 2) with a
fair market value of $3,000 and a basis of $3,000;
and Ccontributes $10,000 in cash. At the time of
the contribution, Ahad held the contributed prop-
erty for two years. Six months later, when A’s basis
in PRSis $7,000, Atransfers one-half of A’s interest
in PRSto Tfor $7,000 at a time when PRS’s bal-
ance sheet (reflecting a cash receipts and disburse-
ments method of accounting) is as follows:
2000–41 I.R.B.331October 10, 2000

October 10, 20003322000–41 I.R.B.
(ii) Although at the time of the transfer Ahas not
held A’s interest in PRSfor more than one year, 50
percent of the fair market value of A’s interest in
PRSwas received in exchange for a capital asset
with a long-term holding period. Therefore, 50 per-
cent of A’s interest in PRShas a long-term holding
period.
(iii) If PRSwere to sell all of its section 751 prop-
erty in a fully taxable transaction immediately be-
fore A’s transfer of the partnership interest, Awould
be allocated $2,000 of ordinary income. One-half of
that amount ($1,000) is attributable to the portion of
A’s interest in PRStransferred to T. Accordingly, A
will recognize $1,000 ordinary income and $2,500
($3,500 - $1,000) of capital gain on account of the
transfer to Tof one-half of A’s interest in PRS. Fifty
percent ($1,250) of that gain is long-term capital
gain and 50 percent ($1,250) is short-term capital
gain.
Example 6. Sale of units of interests in a partner-
ship. A publicly traded partnership (PRS) has own-
ership interests that are segregated into identifiable
units of interest. Aowns 10 limited partnership units
in PRSfor which Apaid $10,000 on January 1,
1999. On August 1, 2000, Apurchases five addi-
tional units for $10,000. At the time of purchase, the
fair market value of each unit has increased to
$2,000. A’s holding period for one-third
($10,000/$30,000) of the interest in PRSbegins on
the day after the purchase of the five additional
units. Less than one year later, Asells five units of
ownership in PRSfor $11,000. At the time, A’s
basis in the 15 units of PRSis $20,000, and A’s capi-
tal gain on the sale of 5 units is $4,333 (amount real-
ized of $11,000 - one-third of the adjusted basis or
$6,667). For purposes of determining the holding
period, Acan designate the specific units of PRS
sold. If Aproperly identifies the five units sold as
five of the ten units for which A has a long-term
holding period and elects to use the identification
method for all subsequent sales or exchanges of in-
terests in the partnership by using the actual holding
period in reporting the transaction on A’s federal in-
come tax return, the capital gain realized will be
long-term capital gain.
Example 7. Disproportionate distribution. In
1997, Aand Beach contribute cash of $50,000 to
form and become equal partners in a partnership
(PRS). More than one year later, Areceives a distri-
bution worth $22,000 from PRS, which reduces A’s
interest in PRSto 36 percent. After the distribution,
Bowns 64 percent of PRS. The holding periods of A
and Bin their interests in PRSare not affected by the
distribution.
Example 8. Gain or loss as a result of a distribu-
tion—(i) On January 1, 1996, Acontributes prop-
erty with a basis of $10 and a fair market value of
$10,000 in exchange for an interest in a partnership
(ABC). On September 30, 2000, when A’s interest in
ABCis worth $12,000 (and the basis of A’s partner-
ship interest is still $10), Acontributes $12,000 cash
in exchange for an additional interest in ABC. Ais
allocated a loss equal to $10,000 by ABCfor the tax-
able year ending December 31, 2000, thereby reduc-
ing the basis of A’s partnership interest to $2,010.
On February 1, 2001, ABCmakes a cash distribu-
tion to Aof $10,000. ABCholds no inventory or un-
realized receivables. (Assume that Ais allocated no
gain or loss for the taxable year ending December
31, 2001, so that the basis of A’s partnership interest
does not increase or decrease as a result of such allo-
cations.)
(ii) The netting rule contained in paragraph (b)(2)
of this section provides that, in determining the
holding period of A’s interest in ABC, the cash con-
tribution made on September 30, 2000, must be re-
duced by the distribution made on February 1, 2001.
Accordingly, for purposes of determining the hold-
ing period of A’s interest in ABC, Ais treated as hav-
ing made a cash contribution of $2,000 ($12,000 -
$10,000) to ABCon September 30, 2000. A’s hold-
ing period in one-seventh of A’s interest in ABC
($2,000 cash contributed over the $14,000 value of
the entire interest (determined as if only $2,000 were
contributed rather than $12,000)) begins on the day
after the cash contribution. Arecognizes $7,990 of
capital gain as a result of the distribution. See sec-
tion 731(a)(1). One-seventh of the capital gain rec-
ognized as a result of the distribution is short-term
capital gain, and six-sevenths of the capital gain is
long-term capital gain. After the distribution, A’s
basis in the interest in PRSis $0, and the holding pe-
riod for the interest in PRScontinues to be divided
in the same proportions as before the distribution.
(g) Effective date. This section applies
to transfers of partnership interests and
distributions of property from a partner-
ship that occur on or after September 21,
2000.
PART 602—OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION ACT
Par. 5. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 6. In § 602.101, paragraph (b) is
amended by adding an entry in numerical
order to the table to read as follows:
§602.101 OMB Control numbers.
* * * * *
(b) * * *
ASSETS
AdjustedMarket
BasisValue
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 22,000$22,000
Unrealized Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .06,000
Capital Asset 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,0005,000
Capital Asset 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3,0009,000
Capital Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,00014,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 27,000$42,000
CFR part or section whereCurrent OMB
identified and describedcontrol No.
1.1(h)–1(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1545-1654
* * * * *

2000–41 I.R.B.333October 10, 2000
Robert E. Wenzel,
Deputy Commissioner
of Internal Revenue.
Approved August 29, 2000.
Jonathan Talisman,
Acting Assistant Secretary
of the Treasury.
(Filed by the Office of the Federal Register on Sep-
tember 20, 2000, 8:45 a.m., and published in the issue
of the Federal Register for September 21, 2000, 65
F.R. 57092)
Section 42.—Low-Income
Housing Credit
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2000. See Rev. Rul. 2000–45, page 337.
Section 62.—Adjusted Gross
Income Defined
26 CFR 1.62–2: Reimbursements and other
expense allowance arrangements.
Rules are set forth under which a reimbursement
or other expense allowance arrangement for the cost
of lodging, meal, and incidental expenses or meal
and incidental expenses incurred by an employee
while traveling away from home will satisfy the re-
quirement of § 62 (c) of the Code as to substantia-
tion of the amount of the expenses. See Rev. Proc.
2000–39, page 340.
Section 162.—Trade or
Business Expenses
26 CFR 1.162–17: Reporting and substantiation of
certain business expenses of employees.
Rules are set forth for substantiating the amount
of a deduction or an expense for lodging, meal, and
incidental expenses or meal and incidental expenses
incurred while traveling away from home. See Rev.
Proc. 2000–39, page 340.
Section 170.—Charitable, Etc.,
Contributions and Gifts
(Also § 1366.)
Charitable contributions; S corpora-
tions; section 170(a)(2).This ruling pro-
vides that an accrual-basis S corporation
may not elect under section 170(a)(2) to
treat a charitable contribution as paid in
the year authorized by the S corporation’s
board of directors if the contribution is
paid by the S corporation after the close
of the tax year.
Rev. Rul. 2000–43
ISSUE
May an accrual-basis subchapter S cor-
poration elect under § 170(a)(2) of the In-
ternal Revenue Code to treat a charitable
contribution as paid in the year authorized
by the S corporation’s Board of Directors
if the contribution is paid by the S corpo-
ration after the close of the taxable year
and before the 15th day of the third month
following the close of the taxable year?
FACTS
Taxpayer is the sole shareholder of an
accrual-basis subchapter S corporation.
The S corporation reports on a calendar
year period. On December 31, 1999, the
S corporation’s Board of Directors autho-
rized a charitable contribution to Charity,
a qualified donee under § 170(c)(2) and
an organization described under
§ 501(c)(3). The S corporation paid the
charitable contribution to Charity on
March 1, 2000.
LAW AND ANALYSIS
Section 170(a)(1) allows as a deduc-
tion any charitable contribution (as de-
fined in § 170(c)) the payment of which
is made within the taxable year. Under
§ 170(b)(1), the percentage limitation on
charitable contributions for an individual
is 50 percent, 30 percent, or 20 percent of
the taxpayer’s contribution base (gener-
ally adjusted gross income) for the tax-
able year, depending generally on the
type of property contributed and the type
of qualified donee. Under § 170(b)(2),
the percentage limitation on charitable
contributions by a corporation is 10 per-
cent of the taxpayer’s taxable income
with certain adjustments.
Under § 170(a)(2), a corporation re-
porting its taxable income on the accrual
basis may elect to deduct a charitable
contribution in the year in which the
board of directors authorizes the contri-
bution, if the payment is made by the
15th day of the third month following the
close of the taxable year. The election
may be made only at the time of the filing
of the return for the taxable year and is
made by reporting the contribution on the
return. See § 1.170A–11(b)(2) of the In-
come Tax Regulations.
The legislative history to § 170(a)(2)
provides that the exception for accrual
basis corporations was desirable because
corporations intending to make the maxi-
mum charitable contribution allowable as
a deduction had experienced difficulty in
determining before the end of the taxable
year what constituted 5 percent of their
net income (the § 170(b) gross income
limitation for corporations at the time of
enactment). S. Rep. No. 831, 81st
Cong., 1st Sess. at 1949–2 C.B. 289,
290–1.
Section 1363(b) states that the taxable
income of an S corporation is computed
in the same manner as in the case of an
individual with certain exceptions,
among which is an exception that the de-
ductions referred to in § 703(a)(2) are not
allowed to the corporation. Section
703(a)(2)(C) specifically refers to the de-
duction for charitable contributions pro-
vided in § 170.
Section 1366(a)(1)(A) provides that in
determining the tax of a shareholder, each
shareholder takes into account the share-
holder’s pro rata share of the corporation’s
items of income (including tax-exempt in-
come), loss, deduction or credit, the sepa-
rate treatment of which could affect any
shareholder’s tax liability. Section
1366(a)(1) provides further that the items
referred to in § 1366(a)(1)(A) include
amounts described in § 702(a)(4). Section
702(a)(4) refers to charitable contributions
(as defined in § 170(c)).
Section 1.1366–1(a)(2)(iii) provides that
the separately stated items of a subchapter
S corporation include charitable contribu-
tions, grouped by the percentage limitations
of § 170(b), paid by the corporation within
the taxable year of the corporation.
The legislative history of § 1366 states
that the corporate limitation on charitable
contributions will no longer apply. Instead,
charitable contributions by S corporations
will pass through to the shareholders and be
subject to the individual limitations on de-
ductibility. See H.R. Rep. No. 826, 97th
Cong., 2d Sess. 14 (1982); S. Rep. No. 640,
97th Cong., 2d Sess. 16 (1982).
Under § 1363(b), a subchapter S corpo-
ration computes its taxable income in the
same manner as an individual. The election
in § 170(a)(2) is not available to an individ-
ual. An individual taxpayer may deduct a

charitable contribution only in the year in
which payment is actually made to the
charitable organization. Furthermore, the
rationale behind § 170(a)(2), a corpora-
tion’s difficulty in determining its charita-
ble contribution limit under § 170(b)(2),
does not apply to subchapter S corporations
because a subchapter S corporation is not
subject to the same § 170(b)(2) limit.
Accordingly, under the facts described
above, the S corporation must report the
charitable contribution on its tax return for
the year in which it actually paid the chari-
table contribution, the taxable year ending
December 31, 2000.
HOLDING
An accrual-basis subchapter S corpo-
ration may not elect under § 170(a)(2) to
treat a charitable contribution as paid in
the year authorized by the S corpora-
tion’s Board of Directors if the contribu-
tion is paid by the S corporation after
the close of the taxable year.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Martin Schäffer of the Office of
Associate Chief Counsel (Passthroughs
and Special Industries). For further in-
formation regarding this revenue ruling
contact Martin Schäffer at (202) 622-
3080 (not a toll-free call).
Section 267.—Losses,
Expenses, and Interest With
Respect to Transactions Between
Related Taxpayers
26 CFR 1.267 (a)–1: Deductions disallowed.
When a payor provides a per diem allowance to
an employee who is a related party, the rules set forth
for the deemed substantiation to the payor of the
amount of the employee’s ordinary and necessary
business expenses for lodging, meal, and incidental
expenses incurred while traveling away from home
do not apply. See Rev. Proc. 2000–39, page 340.
Section 274.—Disallowance of
Certain Entertainment, etc.,
Expenses
26 CFR 1.274–5: Substantiation requirements.
Rules are set forth for an optional method for sub-
stantiating the amount of ordinary and necessary
business expenses of an employee for lodging, meal,
and incidental expenses or meal and incidental ex-
penses incurred while traveling away from home
when a payor provides a per diemallowance under a
reimbursement or other expense allowance arrange-
ment to pay for such expenses. Rules are also set
forth for an optional method for employees and self-
employed individuals to use in computing the de-
ductible costs of business meal and incidental ex-
pense paid or incurred while traveling away from
home. See Rev. Proc. 2000–39, page 340.
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term rates
are set forth for the month of October 2000. See Rev.
Rul. 2000–45, page 337.
Section 382.—Limitation on Net
Operating Loss Carryforwards
and Certain Built-In Losses
Following Ownership Change
The adjusted applicable federal long-term rate is
set forth for the month of October 2000. See Rev.
Rul. 2000–45, page 337.
Section 412.—Minimum Funding
Standards
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2000. See Rev. Rul. 2000–45, page 337.
Section 467.—Certain Payments
for the Use of Property or
Services
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2000. See Rev. Rul. 2000–45, page 337.
Section 468.—Special Rules for
Mining and Solid Waste
Reclamation and Closing Costs
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2000. See Rev. Rul. 2000–45, page 337.
Section 472.—Last-in, First-out
Inventories
26 CFR 1.472–1: Last-in, first-out inventories.
LIFO; price indexes; department
stores. The August 2000 Bureau of Labor
Statistics price indexes are accepted for
use by department stores employing the
retail inventory and last-in, first-out in-
ventory methods for valuing inventories
for tax years ended on, or with reference
to, August 31, 2000.
Rev. Rul. 2000–46
The following Department Store Inven-
tory Price Indexes for August 2000 were
issued by the Bureau of Labor Statistics.
The indexes are accepted by the Internal
Revenue Service, under § 1.472–1(k) of
the Income Tax Regulations and Rev.
Proc. 86–46, 1986–2 C.B. 739, for appro-
priate application to inventories of depart-
ment stores employing the retail inven-
tory and last-in, first-out inventory
methods for tax years ended on, or with
reference to, August 31, 2000.
The Department Store Inventory Price
Indexes are prepared on a national basis
and include (a) 23 major groups of depart-
ments, (b) three special combinations of
the major groups - soft goods, durable
goods, and miscellaneous goods, and (c) a
store total, which covers all departments,
including some not listed separately, ex-
cept for the following: candy, food,
liquor, tobacco, and contract departments.
October 10, 20003342000–41 I.R.B.

2000–41 I.R.B.335October 10, 2000
BUREAU OF LABOR STATISTICS, DEPARTMENT STORE
INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS
(January 1941 = 100, unless otherwise noted)
Percent Change
GroupsAug.Aug.from Aug. 1999
19992000to Aug. 2000
1
1. Piece Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 546.1509.2-6.8
2. Domestics and Draperies. . . . . . . . . . . . . . . . . . . . 630.1617.9-1.9
3. Women’s and Children’s Shoes . . . . . . . . . . . . . . . 635.3618.3-2.7
4. Men’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 882.3913.23.5
5. Infants’ Wear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 623.9619.8-0.7
6. Women’s Underwear . . . . . . . . . . . . . . . . . . . . . . . 550.7570.23.5
7. Women’s Hosiery . . . . . . . . . . . . . . . . . . . . . . . . . 322.1334.7 3.9
8. Women’s and Girls’ Accessories . . . . . . . . . . . . . . 528.1532.00.7
9. Women’s Outerwear and Girls’ Wear . . . . . . . . . . 377.6370.5-1.9
10. Men’s Clothing . . . . . . . . . . . . . . . . . . . . . . . . . . . 609.9605.4-0.7
11. Men’s Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . 610.6612.90.4
12. Boys’ Clothing and Furnishings . . . . . . . . . . . . . . 473.3473.0 -0.1
13. Jewelry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 962.0936.5-2.7
14. Notions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 793.9785.9-1.0
15. Toilet Articles and Drugs. . . . . . . . . . . . . . . . . . . . 971.6971.0-0.1
16. Furniture and Bedding. . . . . . . . . . . . . . . . . . . . . . 679.3687.91.3
17. Floor Coverings . . . . . . . . . . . . . . . . . . . . . . . . . . . 602.1603.20.2
18. Housewares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 788.2778.5-1.2
19. Major Appliances . . . . . . . . . . . . . . . . . . . . . . . . . 234.8230.9-1.7
20. Radio and Television . . . . . . . . . . . . . . . . . . . . . . . 65.758.8-10.5
21. Recreation and Education
2
. . . . . . . . . . . . . . . . . . 97.092.2-4.9
22. Home Improvements
2
. . . . . . . . . . . . . . . . . . . . . . 127.6129.21.3
23. Auto Accessories
2
. . . . . . . . . . . . . . . . . . . . . . . . . 106.8106.2-0.6
Groups 1 - 15: Soft Goods . . . . . . . . . . . . . . . . . . . . . . . 589.9585.3-0.8
Groups 16 - 20: Durable Goods . . . . . . . . . . . . . . . . . . . 447.4437.2-2.3
Groups 21 - 23: Misc. Goods
2
. . . . . . . . . . . . . . . . . . . . . 102.999.8-3.0
Store Total
3
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 536.9529.7-1.3
1
Absence of a minus sign before the percentage change in this column signifies a price increase.
2
Indexes on a January 1986=100 base.
3
The store total index covers all departments, including some not listed separately, except for the following: candy, food, liquor, tobacco, and contract departments.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Alan J. Tomsic of the Office of
Associate Chief Counsel (Income Tax and
Accounting). For further information re-
garding this revenue ruling, contact Mr.
Tomsic at (202) 622-4970 (not a toll-free
call).
Section 482.—Allocation of
Income and Deductions Among
Taxpayers
Federal short-term, mid-term, and long-term rates
are set forth for the month of October 2000. See Rev.
Rul. 2000–45, page 337.
Section 483.—Interest on
Certain Deferred Payments
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2000. See Rev. Rul. 2000–45, page 337.

Section 642.—Special Rules for
Credits and Deductions
Federal short-term, mid-term, and long-term rates
are set forth for the month of October 2000. See Rev.
Rul. 2000–45, page 337.
Section 707.—Transactions
Between Partner and Partnership
26 CFR 1.707–3: Disguised sales of property to
partnership; general rules.
(Also §§ 381, 707, 721, 731, 752; 1.707–3, 1.707–4,
1.707–5.)
This ruling provides that a corporation
that acquires assets of another corporation
in a transaction described in § 381(a) of the
Code succeeds to the status of the other
corporation for purposes of applying the
exception for reimbursements of preforma-
tion expenditures and determining whether
a liability is a qualified liability under the
regulations regarding the disguised sale
provisions of § 707(a)(2)(B)
Rev. Rul. 2000–44
ISSUE
Does a corporation that acquires assets
of another corporation in a transaction de-
scribed in § 381(a) of the Internal Rev-
enue Code succeed to the status of the
other corporation for purposes of applying
the exception for reimbursements of pre-
formation expenditures and determining
whether a liability is a qualified liability
under the regulations regarding the dis-
guised sale provisions of § 707(a)(2)(B)?
FACTS
Corporation Powns all of the stock of
corporation S. Shas only one asset,
rental property, that is encumbered by a
nonrecourse liability of $40xoriginally
incurred by Son January 1, 1995. Sin-
curred $5xin capital expenditures with
respect to the rental property on Decem-
ber 1, 1998.
On January 1, 1999, Sdistributes the
rental property, subject to the $40xliabil-
ity, to Pin a transaction that qualifies as a
complete liquidation of Swithin the
meaning of § 332.
On January 1, 2000, Pcontributes the
rental property, subject to the $40xliabil-
ity, to a partnership (PRS) in exchange
for an interest in PRS. In connection
with the transaction, PRSreimburses P
$5xfor the capital expenditures incurred
by Swith respect to the contributed prop-
erty. At the time that Ptransfers the
rental property to PRS, the rental prop-
erty has a fair market value of $100xand
an adjusted basis of $70x.
LAW
Section 721(a) provides that no gain or
loss shall be recognized to a partnership
or to any of its partners in the case of a
contribution of property to the partner-
ship in exchange for an interest in the
partnership.
Section 731(a)(1) provides that in the
case of a distribution by a partnership to a
partner, gain shall not be recognized to
the partner, except to the extent that any
money distributed exceeds the adjusted
basis of the partner’s interest in the part-
nership immediately before the distribu-
tion.
Section 752(b) provides that any de-
crease in a partner’s share of the liabili-
ties of a partnership, or any decrease in a
partner’s individual liabilities by reason
of the assumption by the partnership of
the individual liabilities, shall be consid-
ered as a distribution of money to the
partner by the partnership.
Section 707(a)(2)(B) provides that if (i)
there is a direct or indirect transfer of
money or other property by a partner to a
partnership, (ii) there is a related direct or
indirect transfer of money or other prop-
erty by the partnership to the partner (or
another partner), and (iii) the transfers
when viewed together are properly char-
acterized as a sale or exchange of prop-
erty, then the transfers shall be treated ei-
ther as a transaction between the
partnership and a partner not acting in the
partner’s capacity as a partner or as a
transaction between two or more partners
acting other than in their capacity as part-
ners.
Section 1.707–3(a) of the Income Tax
Regulations provides that, except as oth-
erwise provided in § 1.707–3, if a transfer
of property by a partner to a partnership
and one or more transfers of money or
other consideration by the partnership to
the partner constitute a sale based on all
the facts and circumstances, the transfers
are treated as a sale of property to the
partnership.
Section 1.707–3(c)(1) provides that if
within a 2-year period a partner transfers
property to a partnership and the partner-
ship transfers money or other considera-
tion to the partner (without regard to the
order of the transfers), the transfers are
presumed to be a sale of the property to the
partnership unless the facts and circum-
stances clearly establish that the transfers
do not constitute a sale.
Section 1.707-4(d) provides that, in
general, notwithstanding the presumption
relating to transfers made within 2 years of
each other, a transfer of money or other
consideration by the partnership to a part-
ner is not treated as part of a sale of prop-
erty by the partner to the partnership under
§ 1.707-3(a) to the extent that the transfer
to the partner by the partnership is made to
reimburse the partner for, and does not ex-
ceed the amount of, capital expenditures
that (1) are incurred during the 2-year pe-
riod preceding the transfer by the partner
to the partnership; and (2) are incurred by
the partner with respect to (i) partnership
organization and syndication costs de-
scribed in § 709; or (ii) property con-
tributed to the partnership by the partner,
but only to the extent the reimbursed capi-
tal expenditures do not exceed 20 percent
of the fair market value of the property at
the time of the contribution (preformation
expenditures).
Section 1.707-5(a)(1) provides that for
purposes of the disguised sale rules, if a
partnership assumes or takes property
subject to a qualified liability, as defined
in
§ 1.707-5(a)(6), the partnership is
treated as transferring consideration to
the partner only to the extent that the
transfer of property to the partnership is
otherwise treated as part of a sale. By
contrast, if the partnership assumes or
takes property subject to a liability of the
partner other than a qualified liability, the
partnership is treated as transferring con-
sideration to the partner to the extent that
the amount of the liability exceeds the
partner’s share of that liability immedi-
ately after the partnership assumes or
takes subject to the liability as provided
in § 1.707-5(a)(2), (3), and (4).
Under § 1.707-5(a)(6), a qualified lia-
bility is (1) a liability that was incurred
by the partner more than 2 years prior to
the earlier of the date the partner agrees
in writing to transfer the property or the
October 10, 20003362000–41 I.R.B.

date the partner transfers the property to
the partnership and that has encumbered
the transferred property throughout that
2-year period; (2) a liability that was in-
curred within the 2-year period that has
encumbered the transferred property
since it was incurred, so long as the lia-
bility was not incurred in anticipation of
the transfer of the property to a partner-
ship; (3) a liability that is allocable under
the rules of § 1.163–8T of the temporary
Income Tax Regulations to capital expen-
ditures with respect to the property; or (4)
a liability that was incurred in the ordi-
nary course of the trade or business in
which property transferred to the partner-
ship was used or held but only if all the
assets related to that trade or business are
transferred other than assets that are not
material to a continuation of the trade or
business. Certain additional limitations
apply with respect to recourse liabilities.
See § 1.707–5(a)(6)(ii).
Under § 1.707–4(e), the Commissioner
may provide by guidance published in the
Internal Revenue Bulletin situations in
addition to those specifically addressed in
the regulations where payments or trans-
fers to a partner will not be treated as part
of a disguised sale.
Section 381(a) references certain trans-
actions that involve one corporation ac-
quiring assets of another corporation in a
tax-free transfer (that is, liquidations
under § 332, reorganizations under
§ 368(a)(1)(A), (C), and (F), and certain
nondivisive reorganizations under
§ 368(a)(1)(D) and (G)).
ANALYSIS
The rules regarding preformation ex-
penses and qualified liabilities contained
in the disguised sale regulations recog-
nize that certain expenditures will be
made, and certain liabilities will be in-
curred, under circumstances that do not
violate the disguised sale rules. Where a
corporation incurs preformation expenses
or undertakes a borrowing, and another
corporation acquires assets of the corpo-
ration in a § 381 transaction, the transfer
does not alter the circumstances under
which the expenditures or indebtedness
were originally incurred or otherwise
raise concerns that would justify not
treating the transferee corporation as hav-
ing incurred the expenditures or under-
taken the liabilities at the time they were
incurred or undertaken by the predeces-
sor corporation.
Transactions enumerated in § 381(a)
involve situations where the transferor
corporation is absorbed by the transferee
corporation in a tax-free transaction.
Given the purposes for the rules relating
to preformation expenses and qualified
liabilities, it is appropriate that, in trans-
actions described in § 381(a), the trans-
feree corporation will succeed to the sta-
tus of the distributor or transferor
corporation for purposes of applying the
exception for reimbursements of prefor-
mation expenditures and determining
whether a liability is a qualified liability.
Accordingly, under the facts presented,
Pwill succeed to the status of Sfor pur-
poses of determining whether the $5xcash
reimbursement from PRSqualifies for the
exception for reimbursements of prefor-
mation expenditures under § 1.707–4(d).
S incurred $5xin capital expenditures with
respect to the rental property on December
1, 1998, which is within the 2-year period
preceding the transfer of the property to
PRS. The reimbursed capital expenditures
do not exceed 20 percent of the fair mar-
ket value of the contributed property.
Thus, the $5xcash reimbursement from
PRSto Pfor the capital expenditures in-
curred by Swith respect to the rental prop-
erty falls within the exception for reim-
bursement of preformation expenditures
and will not give rise to a disguised sale
between Pand PRSunder § 707(a)(2)(B)
and the regulations.
Palso will succeed to the status of S
for purposes of determining whether the
$40xliability is a qualified liability
within the meaning of § 1.707–5(a)(6).
The $40xliability encumbering the prop-
erty was incurred by Son January 1,
1995, which is more than 2 years prior to
the date the rental property was con-
tributed to PRS. Accordingly, the $40x
liability is a qualified liability within the
meaning of § 1.707-5(a)(6). As a result,
the fact that Ptransfers the rental prop-
erty to PRSsubject to the liability will
not give rise to a disguised sale between
Pand PRSunder § 707(a)(2)(B) and the
regulations.
HOLDING
A corporation that acquires assets of
another corporation in a transaction de-
scribed in § 381(a) will succeed to status
of the other corporation for purposes of
applying the exception for reimburse-
ments of preformation expenditures and
determining whether a liability is a quali-
fied liability under the regulations re-
garding the disguised sale provisions of
§ 707(a)(2)(B).
DRAFTING INFORMATION
The principal author of this revenue
ruling is Shannon Cohen of the Office of
Associate Chief Counsel (Passthroughs
and Special Industries). For further in-
formation regarding this revenue ruling
contact Shannon Cohen at (202) 622-
3050 (not a toll-free call).
Section 807.—Rules for Certain
Reserves
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2000. See Rev. Rul. 2000–45, page 337.
Section 846.—Discounted
Unpaid Losses Defined
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2000. See Rev. Rul. 2000–45, page 337.
Section 1274.—Determination
of Issue Price in the Case of
Certain Debt Instruments Issued
for Property
(Also Sections 42, 280G, 382, 412, 467, 468, 482,
483, 642, 807, 846, 1288, 7520, 7872.)
Federal rates; adjusted federal rates;
adjusted federal long-term rate, and
the long-term exempt rate.For purposes
of sections 1274, 1288, 382, and other
sections of the Code, tables set forth the
rates for October 2000.
Rev. Rul. 2000–45
This revenue ruling provides various
prescribed rates for federal income tax
purposes for October 2000 (the current
month.) Table 1 contains the short-term,
mid-term, and long-term applicable fed-
eral rates (AFR) for the current month for
purposes of section 1274(d) of the Inter-
nal Revenue Code. Table 2 contains the
short-term, mid-term, and long-term ad-
2000–41 I.R.B.337October 10, 2000

justed applicable federal rates (adjusted
AFR) for the current month for purposes
of section 1288(b). Table 3 sets forth the
adjusted federal long-term rate and the
long-term tax-exempt rate described in
section 382(f). Table 4 contains the ap-
propriate percentages for determining the
low-income housing credit described in
section 42(b)(2) for buildings placed in
service during the current month. Finally,
Table 5 contains the federal rate for deter-
mining the present value of an annuity, an
interest for life or for a term of years, or a
remainder or a reversionary interest for
purposes of section 7520.
October 10, 20003382000–41 I.R.B.
REV. RUL. 2000–45 TABLE 1
Applicable Federal Rates (AFR) for October 2000
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-Term
AFR6.30%6.20%6.15%6.12%
110% AFR6.94%6.82%6.76%6.73%
120% AFR7.58%7.44%7.37%7.33%
130% AFR8.22%8.06%7.98%7.93%
Mid-Term
AFR6.09%6.00%5.96%5.93%
110% AFR6.71%6.60%6.55%6.51%
120% AFR7.33%7.20%7.14%7.09%
130% AFR7.95%7.80%7.73%7.68%
150% AFR9.20%9.00%8.90%8.84%
175% AFR10.78%10.50%10.37%10.28%
Long-Term
AFR5.96%5.87%5.83%5.80%
110% AFR6.56%6.46%6.41%6.37%
120% AFR7.16%7.04%6.98%6.94%
130% AFR7.78%7.63%7.56%7.51%
REV. RUL. 2000–45 TABLE 2
Adjusted AFR for October 2000
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
adjusted AFR4.30%4.25%4.23%4.21%
Mid-term
adjusted AFR4.52%4.47%4.45%4.43%
Long-term
adjusted AFR5.33%5.26%5.23%5.20%
REV. RUL. 2000–45 TABLE 3
Rates Under Section 382 for October 2000
Adjusted federal long-term rate for the current month5.33%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted
federal long-term rates for the current month and the prior two months.)5.53%
REV. RUL. 2000–45 TABLE 4
Appropriate Percentages Under Section 42(b)(2) for October 2000
Appropriate percentage for the 70% present value low-income housing credit8.41%
Appropriate percentage for the 30% present value low-income housing credit3.60%

2000–41 I.R.B.339October 10, 2000
Section 1288.—Treatment of
Original Issue Discounts on Tax-
1 Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2000. See Rev. Rul. 2000–45, page 337.
Section 1366.—Pass-Thru of
Items to Shareholders
26 CFR 1.1366–1: Shareholder’s share of items of
an S corporation.
May an accrual-basis subchapter S corporation
elect under § 170(a)(2) of the Internal Revenue
Code to treat a charitable contribution as paid in the
year authorized by the S corporation’s Board of Di-
rectors if the contribution is paid by the S corpora-
tion after the close of the taxable year and before the
15th day of the third month following the close of
the taxable year? See Rev. Rul. 2000–43, page 333.
Section 7520.—Valuation Tables
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2000. See Rev. Rul. 2000–45, page 337.
Section 7872.—Treatment of
Loans with Below-Market
Interest Rates
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of October 2000. See Rev. Rul. 2000–45, page 337.
REV. RUL. 2000–45 TABLE 5
Rate Under Section 7520 for October 2000
Applicable federal rate for determining the present value of an annuity, an interest for life or
a term of years, or a remainder or reversionary interest7.4%

26 CFR 601.105: Examination of returns and
claims for refund, credit, or abatement;
determination of correct tax liability.
(Also Part I, sections 62, 162, 267, 274; 1.62-2,
1.162-17, 1.267(a)-1, 1.274-5.)
Rev. Proc. 2000-39
SECTION 1. PURPOSE
This revenue procedure updates Rev.
Proc. 2000-9, 2000-2 I.R.B. 280, by pro-
viding rules under which the amount of
ordinary and necessary business expenses
of an employee for lodging, meal, and in-
cidental expenses or for meal and inciden-
tal expenses incurred while traveling
away from home will be deemed substan-
tiated under § 1.274-5 of the Income Tax
Regulations when a payor (the employer,
its agent, or a third party) provides a per
diemallowance under a reimbursement or
other expense allowance arrangement to
pay for such expenses. This revenue pro-
cedure also provides an optional method
for employees and self-employed individ-
uals to use in computing the deductible
costs of business meal and incidental ex-
penses paid or incurred while traveling
away from home. Use of a method de-
scribed in this revenue procedure is not
mandatory and a taxpayer may use actual
allowable expenses if the taxpayer main-
tains adequate records or other sufficient
evidence for proper substantiation. This
revenue procedure does not provide rules
under which the amount of an employee’s
lodging expenses will be deemed substan-
tiated when a payor provides an al-
lowance to pay for those expenses but not
meal and incidental expenses.
SECTION 2. BACKGROUND AND
CHANGES
.01 Section 162(a) of the Internal Rev-
enue Code allows a deduction for all the
ordinary and necessary expenses paid or
incurred during the taxable year in carry-
ing on any trade or business. Under that
provision, an employee or self-employed
individual may deduct expenses paid or
incurred while traveling away from home
in pursuit of a trade or business. How-
ever, under § 262, no portion of such
travel expenses that is attributable to per-
sonal, living, or family expenses is de-
ductible.
.02 Section 274(n) generally limits the
amount allowable as a deduction under
§ 162 for any expense for food, bever-
ages, or entertainment to 50 percent of the
amount of the expense that otherwise
would be allowable as a deduction. In the
case of any expenses for food or bever-
ages consumed while away from home
(within the meaning of § 162(a)(2)) by an
individual during, or incident to, the pe-
riod of duty subject to the hours of service
limitations of the Department of Trans-
portation, § 274(n)(3) gradually increases
the deductible percentage to 80 percent
for taxable years beginning in 2008. For
taxable years beginning in 2000 or 2001,
the deductible percentage for these ex-
penses is 60 percent.
.03 Section 274(d) provides, in part,
that no deduction shall be allowed under
§ 162 for any traveling expense (includ-
ing meals and lodging while away from
home) unless the taxpayer complies with
certain substantiation requirements. The
section further provides that regulations
may prescribe that some or all of the
substantiation requirements do not apply
to an expense that does not exceed an
amount prescribed by such regulations.
.04 Section 1.274-5(g) of the regula-
tions, in part, grants the Commissioner
the authority to prescribe rules relating
to reimbursement arrangements or per
diem allowances for ordinary and neces-
sary expenses paid or incurred while
traveling away from home. Pursuant to
this grant of authority, the Commissioner
may prescribe rules under which such
arrangements or allowances, if in accor-
dance with reasonable business practice,
will be regarded (1) as equivalent to sub-
stantiation, by adequate records or other
sufficient evidence, of the amount of
such travel expenses for purposes of §
1.274-5(c), and (2) as satisfying the re-
quirements of an adequate accounting to
the employer of the amount of such
travel expenses for purposes of § 1.274-
5(f).
.05 For purposes of determining ad-
justed gross income, § 62(a)(2)(A) al-
lows an employee a deduction for ex-
penses allowed by Part VI (§ 161 and
following), subchapter B, chapter 1 of
the Code, paid or incurred by the em-
ployee in connection with the perfor-
mance of services as an employee under
a reimbursement or other expense al-
lowance arrangement with a payor.
.06 Section 62(c) provides that an
arrangement will not be treated as a reim-
bursement or other expense allowance
arrangement for purposes of § 62(a)(2)(A)
if it—
(1) does not require the employee to
substantiate the expenses covered by the
arrangement to the payor, or
(2) provides the employee with the
right to retain any amount in excess of the
substantiated expenses covered under the
arrangement.
Section 62(c) further provides that the
substantiation requirements described
therein shall not apply to any expense to
the extent that, under the grant of regula-
tory authority prescribed in § 274(d), the
Commissioner has provided that substan-
tiation is not required for such expense.
.07 Under § 1.62-2(c)(1) a reimburse-
ment or other expense allowance arrange-
ment satisfies the requirements of § 62(c)
if it meets the requirements of business
connection, substantiation, and returning
amounts in excess of expenses as speci-
fied in the regulations. Section 1.62-
2(e)(2) specifically provides that substan-
tiation of certain business expenses in
accordance with rules prescribed under
the authority of § 1.274-5(g) or 1.274-
5(j)(1) will be treated as substantiation of
the amount of such expenses for purposes
of § 1.62-2. Under § 1.62-2(f)(2), the
Commissioner may prescribe rules under
which an arrangement providing per diem
allowances will be treated as satisfying
the requirement of returning amounts in
excess of expenses, even though the
arrangement does not require the em-
ployee to return the portion of such an al-
lowance that relates to days of travel sub-
stantiated and that exceeds the amount of
the employee’s expenses deemed substan-
tiated pursuant to rules prescribed under
§ 274(d), provided the allowance is rea-
sonably calculated not to exceed the
amount of the employee’s expenses or an-
ticipated expenses and the employee is re-
quired to return any portion of such an al-
lowance that relates to days of travel not
substantiated.
.08 Section 1.62-2(h)(2)(i)(B) provides
that if a payor pays a per diem allowance
October 10, 20003402000–41 I.R.B.
Part III. Administrative, Procedural, and Miscellaneous

that meets the requirements of § 1.62-
2(c)(1), the portion, if any, of the al-
lowance that relates to days of travel sub-
stantiated in accordance with § 1.62-2(e),
that exceeds the amount of the em-
ployee’s expenses deemed substantiated
for such travel pursuant to rules pre-
scribed under § 274(d) and § 1.274-5(g)
or § 1.274-5(j)(1), and that the employee
is not required to return, is subject to
withholding and payment of employment
taxes. See §§ 31.3121(a)-3, 31.3231(e)-
1(a)(5), 31.3306(b)-2, and 31.3401(a)-4
of the Employment Tax Regulations. Be-
cause the employee is not required to re-
turn this excess portion, the reasonable
period of time provisions of § 1.62-2(g)
(relating to the return of excess amounts)
do not apply to this portion.
.09 Under § 1.62-2(h)(2)(i)(B)(4), the
Commissioner may, in his or her discre-
tion, prescribe special rules regarding the
timing of withholding and payment of em-
ployment taxes on per diemallowances.
.10 Section 1.274-5(j)(1) grants the
Commissioner the authority to establish a
method under which a taxpayer may elect
to use a specified amount for meals paid or
incurred while traveling away from home
in lieu of substantiating the actual cost of
meals.
.11 Section 5.04 of this revenue proce-
dure contains revisions to the list of high-
cost localities and to the high-low rates for
purposes of section 5.
.12 Section 6.07 of this revenue proce-
dure contains a revision to the related party
rules.
.13 Sections 3.02, 4.04(5), and 5.06 pro-
vide transition rules for the last 3 months
of calendar year 2000 due to changes in the
effective date of the CONUS rates pub-
lished by GSA.
SECTION 3. DEFINITIONS
.01 Per diem allowance. The term “per
diemallowance” means a payment under a
reimbursement or other expense allowance
arrangement that meets the requirements
specified in § 1.62-2(c)(1) and that is
(1) paid with respect to ordinary and
necessary business expenses incurred, or
which the payor reasonably anticipates
will be incurred, by an employee for lodg-
ing, meal, and incidental expenses or for
meal and incidental expenses for travel
away from home in connection with the
performance of services as an employee of
the employer,
(2) reasonably calculated not to ex-
ceed the amount of the expenses or the an-
ticipated expenses, and
(3) paid at or below the applicable
federal per diem rate, a flat rate or stated
schedule, or in accordance with any other
Service-specified rate or schedule.
.02Federal per diem rate and federal
M&IE rate.
(1) General rule. The federal per
diemrate is equal to the sum of the applic-
able federal lodging expense rate and the
applicable federal meal and incidental ex-
pense (M&IE) rate for the day and locality
of travel.
(a) CONUS rates. The rates for lo-
calities in the continental United States
(“CONUS”) are set forth in Appendix A to
41 C.F.R. ch. 301. However, in applying
section 4.01, 4.02, or 4.03 of this revenue
procedure, taxpayers may continue to use
the CONUS rates in effect for the first 9
months of 2000 for expenses of all
CONUS travel while away from home that
are paid or incurred during calendar year
2000 in lieu of the updated GSA rates. A
taxpayer must consistently use either these
rates or the updated rates for the period of
October 1, 2000, through December 31,
2000.
(b) OCONUS rates. The rates for
localities outside the continental United
States (“OCONUS”) are established by the
Secretary of Defense (rates for non-foreign
localities, including Alaska, Hawaii,
Puerto Rico, the Northern Mariana Islands,
and the possessions of the United States)
and by the Secretary of State (rates for for-
eign localities), and are published in the
Per Diem Supplement to the Standardized
Regulations (Government Civilians, For-
eign Areas) (updated on a monthly basis).
(c) Internet access to the rates.
The CONUS and OCONUS rates may be
found on the Internet at www.policy-
works.gov/perdiem.
(2) Locality of travel. The term “lo-
cality of travel” means the locality where
an employee traveling away from home in
connection with the performance of ser-
vices as an employee of the employer stops
for sleep or rest.
(3) Incidental expenses. The term
“incidental expenses” includes, but is not
limited to, expenses for laundry, cleaning
and pressing of clothing, and fees and tips
for services, such as for porters and bag-
gage carriers. The term “incidental ex-
penses” does not include taxicab fares,
lodging taxes, or the costs of telegrams or
telephone calls.
.03 Flat rate or stated schedule.
(1) In general. Except as provided in
section 3.03(2) of this revenue procedure,
an allowance is paid at a flat rate or stated
schedule if it is provided on a uniform and
objective basis with respect to the ex-
penses described in section 3.01 of this
revenue procedure. Such allowance may
be paid with respect to the number of days
away from home in connection with the
performance of services as an employee or
on any other basis that is consistently ap-
plied and in accordance with reasonable
business practice. Thus, for example, an
hourly payment to cover meal and inciden-
tal expenses paid to a pilot or flight atten-
dant who is traveling away from home in
connection with the performance of ser-
vices as an employee is an allowance paid
at a flat rate or stated schedule. Likewise,
a payment based on the number of miles
traveled (e.g., cents per mile) to cover meal
and incidental expenses paid to an over-
the-road truck driver who is traveling away
from home in connection with the perfor-
mance of services as an employee is an al-
lowance paid at a flat rate or stated sched-
ule.
(2) Limitation. For purposes of this
revenue procedure, an allowance that is
computed on a basis similar to that used in
computing the employee’s wages or other
compensation (e.g., the number of hours
worked, miles traveled, or pieces pro-
duced) does not meet the business connec-
tion requirement of § 1.62-2(d), is not a per
diem allowance, and is not paid at a flat
rate or stated schedule, unless, as of De-
cember 12, 1989, (a) the allowance was
identified by the payor either by making a
separate payment or by specifically identi-
fying the amount of the allowance, or (b)
an allowance computed on that basis was
commonly used in the industry in which
the employee is employed. See § 1.62-
2(d)(3)(ii).
SECTION 4. PER DIEM
SUBSTANTIATION METHOD
.01 Per diem allowance. If a payor
pays a per diemallowance in lieu of reim-
bursing actual expenses for lodging, meal,
2000–41 I.R.B.341October 10, 2000

and incidental expenses incurred or to be
incurred by an employee for travel away
from home, the amount of the expenses
that is deemed substantiated for each cal-
endar day is equal to the lesser of the per
diemallowance for such day or the
amount computed at the federal per diem
rate (see section 3.02 of this revenue pro-
cedure) for the locality of travel for such
day (or partial day, see section 6.04 of this
revenue procedure).
.02 Meals only per diem allowance. If
a payor pays a per diemallowance only
for meal and incidental expenses in lieu of
reimbursing actual expenses for meal and
incidental expenses incurred or to be in-
curred by an employee for travel away
from home, the amount of the expenses
that is deemed substantiated for each cal-
endar day is equal to the lesser of the per
diemallowance for such day or the
amount computed at the federal M&IE
rate (see section 3.02 of this revenue pro-
cedure) for the locality of travel for such
day (or partial day, see section 6.04 of this
revenue procedure). Aper diemal-
lowance is treated as paid only for meal
and incidental expenses if (1) the payor
pays the employee for actual expenses for
lodging based on receipts submitted to the
payor, (2) the payor provides the lodging
in kind, (3) the payor pays the actual ex-
penses for lodging directly to the provider
of the lodging, (4) the payor does not
have a reasonable belief that lodging ex-
penses were or will be incurred by the
employee, or (5) the allowance is com-
puted on a basis similar to that used in
computing the employee’s wages or other
compensation (e.g., the number of hours
worked, miles traveled, or pieces pro-
duced).
.03 Optional method for meals only de-
duction. In lieu of using actual expenses,
employees and self-employed individu-
als, in computing the amount allowable as
a deduction for ordinary and necessary
meal and incidental expenses paid or in-
curred for travel away from home, may
use an amount computed at the federal
M&IE rate (see section 3.02 of this rev-
enue procedure) for the locality of travel
for each calendar day (or partial day, see
section 6.04 of this revenue procedure)
the employee or self-employed individual
is away from home. Such amount will be
deemed substantiated for purposes of
paragraphs (b)(2) (travel away from
home) and (c) of § 1.274-5, provided the
employee or self-employed individual
substantiates the elements of time, place,
and business purpose of the travel ex-
penses in accordance with those regula-
tions.
.04 Special rules for transportation
industry.
(1) In general. This section 4.04 ap-
plies to (a) a payor that pays a per diem
allowance only for meal and incidental
expenses for travel away from home as
described in section 4.02 of this revenue
procedure to an employee in the trans-
portation industry, or (b) an employee or
self-employed individual in the trans-
portation industry who computes the
amount allowable as a deduction for meal
and incidental expenses for travel away
from home in accordance with section
4.03 of this revenue procedure.
(2) Rates. A taxpayer described in
section 4.04(1) of this revenue procedure
may treat $38 as the federal M&IE rate
for any locality of travel in CONUS,
and/or $42 as the federal M&IE rate for
any locality of travel OCONUS. A payor
that uses either (or both) of these special
rates with respect to an employee must
use the special rate(s) for all amounts sub-
ject to section 4.02 of this revenue proce-
dure paid to that employee for travel away
from home within CONUS and/or
OCONUS, as the case may be, during the
calendar year. Similarly, an employee or
self-employed individual that uses either
(or both) of these special rates must use
the special rate(s) for all amounts com-
puted pursuant to section 4.03 of this rev-
enue procedure for travel away from
home within CONUS and/or OCONUS,
as the case may be, during the calendar
year. See section 4.04(5) of this revenue
procedure for transition rules.
(3) Periodic rule. A payor described
in section 4.04(1) of this revenue proce-
dure may compute the amount of the em-
ployee’s expenses that is deemed substan-
tiated under section 4.02 of this revenue
procedure periodically (not less fre-
quently than monthly), rather than daily,
by comparing the total per diemal-
lowance paid for the period to the sum of
the amounts computed at the federal
M&IE rate(s) for the localities of travel
for the days (or partial days, see section
6.04 of this revenue procedure) the em-
ployee is away from home during the pe-
riod. For example, assume an employee
in the transportation industry travels away
from home within CONUS on 17 days
(including partial days, see section 6.04 of
this revenue procedure) during a calendar
month and receives a per diemallowance
only for meal and incidental expenses
from a payor that uses the special rule
under section 4.04(2) of this revenue pro-
cedure. The amount deemed substanti-
ated under section 4.02 of this revenue
procedure is equal to the lesser of the total
per diemallowance paid for the month or
$646 (17 days at $38 per day).
(4) Transportation industry defined.
For purposes of this section 4.04 of this
revenue procedure, an employee or self-
employed individual is “in the transporta-
tion industry” only if the employee’s or
individual’s work (a) is of the type that di-
rectly involves moving people or goods
by airplane, barge, bus, ship, train, or
truck, and (b) regularly requires travel
away from home which, during any single
trip away from home, usually involves
travel to localities with differing federal
M&IE rates. For purposes of the preced-
ing sentence, a payor must determine that
an employee or a group of employees is
“in the transportation industry” by using a
method that is consistently applied and in
accordance with reasonable business
practice.
(5) Transition rules. Under the cal-
endar-year convention provided in section
4.04(2), a taxpayer who used the federal
M&IE rates during the first 9 months of
calendar year 2000 to substantiate the
amount of an individual’s travel expenses
under sections 4.02 or 4.03 of Rev. Proc.
2000-9 may not use, for that individual,
the special transportation industry rates
provided in this section 4.04 until January
1, 2001. Similarly, a taxpayer who used
the special transportation industry rates
during the first 9 months of calendar year
2000 to substantiate the amount of an in-
dividual’s travel expenses may not use,
for that individual, the federal M&IE
rates until January 1, 2001.
SECTION 5. HIGH-LOW
SUBSTANTIATION METHOD
.01 General rule. If a payor pays a per
diemallowance in lieu of reimbursing ac-
tual expenses for lodging, meal, and inci-
dental expenses incurred or to be incurred
October 10, 20003422000–41 I.R.B.

by an employee for travel away from
home and the payor uses the high-low
substantiation method described in this
section 5 for travel within CONUS, the
amount of the expenses that is deemed
substantiated for each calendar day is
equal only substantiation method pro-
vided in section 4.02 or 4.03 of this rev-
enue procedure.
.02 Specific high-low rates. Except as
provided in section 5.06 of this revenue
procedure, the per diemrate set forth in
this section 5.02 is $201 for travel to any
“high-cost locality” specified in section
5.03 of this revenue procedure, or $124
for travel to any other locality within
CONUS. Whichever per diemrate ap-
plies, it is applied as if it were the federal
per diemrate for the locality of travel.
For purposes of applying the high-low
substantiation method and the § 274(n)
limitation on meal expenses (see section
6.05 of this revenue procedure), the fed-
eral M&IE rate shall be treated as $42 for
a high-cost locality and $34 for any other
locality within CONUS.
.03 High-cost localities. The following
localities have a federal per diemrate of
$163 or more, and are high-cost localities
for all of the calendar year or the portion
of the calendar year specified in parenthe-
sis under the key city name, except as
provided in section 5.06 of this revenue
procedure:
2000–41 I.R.B.343October 10, 2000
Key cityCounty or other defined location
California
Palm SpringsRiverside
(January 1-May 31)
San FranciscoSan Francisco
Sunnyvale/Palo Alto/San JoseSanta Clara
Tahoe CityPlacer
Colorado
AspenPitkin
(January 1-April 30)
Silverthorne/KeystoneSummit
TellurideSan Miguel
(January 1-March 31)
VailEagle
(July 1-March 31)
District of Columbia
Washington, D.C.Washington, D.C.; the cities of Alexandria,
Fairfax, and Falls Church, and the counties of
Arlington, Fairfax, and Loudoun, in Virginia;
and the counties of Montgomery and Prince
George’s in Maryland
Florida
Key WestMonroe
(January 1-April 30)
Idaho
Sun ValleyCity limits of Sun Valley
Illinois
ChicagoCook and Lake
Louisiana
New Orleans/St. BernardOrleans, St. Bernard, Plaquemine,
(January 1-May 31)and Jefferson Parishes
Maryland
(For the counties of Montgomery and Prince George’s, see District of Columbia)
Ocean CityWorcester
(June 15-October 31)
Massachusetts
BostonSuffolk
CambridgeMiddlesex County (except Lowell)
Martha’s VineyardDukes
(June 1-October 15)

Michigan
Mackinac IslandMackinac
Traverse CityGrand Traverse
(June 1-September 30)
Montana
Big SkyGallatin (except West Yellowstone Park)
(November 1-April 30)
New Jersey
Cape MayCape May (except Ocean City)
(June 1-November 30)
Ocean CityCity limits of Ocean City
(June 15-September 15)
Piscataway/Belle MeadSomerset and Middlesex
Princeton/TrentonMercer County
New York
The Bronx/Brooklyn/QueensThe boroughs of The Bronx, Brooklyn, and
Queens
ManhattanManhattan
Nassau County/Great NeckNassau County
Suffolk CountySuffolk County
White PlainsCity limits of White Plains
Pennsylvania
HersheyCity limits of Hershey
(June 1-September 15)
PhiladelphiaPhiladelphia
Utah
Park CitySummit
(December 15-March 31)
Virginia
(For the cities of Alexandria, Fairfax, and Falls Church, and the counties
of Arlington, Fairfax, and Loudoun, see District of Columbia)
WintergreenNelson
October 10, 20003442000–41 I.R.B.
.04 Changes in high-cost localities.
The list of high-cost localities in section
5.03 of this revenue procedure differs
from the list of high-cost localities in sec-
tion 5.03 of Rev. Proc. 2000-9.
(1) The following localities (listed by
key cities) have been added to the list of
high-cost localities: Palm Springs, Califor-
nia; New Orleans/St. Bernard, Louisiana;
Traverse City, Michigan; Trenton, New Jer-
sey; and Wintergreen, Virginia.
(2) The portion of the year for which
the following are high-cost localities (listed
by key cities) has been changed: Aspen,
Colorado; Telluride, Colorado; Vail, Col-
orado; Key West, Florida; Sun Valley,
Idaho; Ocean City, Maryland; Martha’s
Vineyard, Massachusetts; Big Sky, Mon-
tana; Cape May, New Jersey; and Park
City, Utah.
(3) The following localities (generally
listed by key cities) have been removed
from the list of high-cost localities:
Charlevoix, Michigan, and Union County,
New Jersey.
.05 Specific limitation.
(1) Except as provided in section
5.05(2) of this revenue procedure, a payor
that uses the high-low substantiation
method with respect to an employee must
use that method for all amounts paid to
that employee for travel away from home
within CONUS during the calendar year.
See section 5.06 of this revenue proce-
dure for transition rules.
(2) With respect to an employee de-
scribed in section 5.05(1) of this revenue
procedure, the payor may reimburse ac-
tual expenses or use the meals only per
diemmethod described in section 4.02 of
this revenue procedure for any travel
away from home, and may use the per
diemsubstantiation method described in
section 4.01 of this revenue procedure for
any OCONUS travel away from home.
.06 Transition rules. A payor who used
the substantiation method of section 4.01
of Rev. Proc. 2000-9 for an employee dur-
ing the first 9 months of calendar year
2000 may not use the High-Low Substan-
tiation Method in section 5 of this revenue
procedure for that employee until January
1, 2001. A payor who used the High-Low
Substantiation Method of section 5 of
Rev. Proc. 2000-9 for an employee during
the first 9 months of calendar year 2000
must continue to use the High-Low Sub-
stantiation Method for the remainder of
calendar year 2000 for that employee. A
payor described in the previous sentence
may use the rates and high-cost localities
published in section 5 of Rev. Proc. 2000-
9, in lieu of the updated rates and high-
cost localities provided in section 5 of this

revenue procedure, for travel on or after
October 1, 2000, and before January 1,
2001, if those rates and localities are used
consistently during this period for all em-
ployees reimbursed under this method.
SECTION 6. LIMITATIONS AND
SPECIAL RULES
.01 In general.The federal per diem
rate and the federal M&IE rate described
in section 3.02 of this revenue procedure
for the locality of travel will be applied in
the same manner as applied under the
Federal Travel Regulations, 41 C.F.R.
Part 301-11 (2000), except as provided in
sections 6.02 through 6.04 of this rev-
enue procedure.
.02 Federal per diem rate. A receipt
for lodging expenses is not required in
determining the amount of expenses
deemed substantiated under section 4.01
or 5.01 of this revenue procedure. See
section 7.01 of this revenue procedure for
the requirement that the employee sub-
stantiate the time, place, and business
purpose of the expense.
.03 Federal per diem or M&IE rate. A
payor is not required to reduce the federal
per diemrate or the federal M&IE rate
for the locality of travel for meals pro-
vided in kind, provided the payor has a
reasonable belief that meal and incidental
expenses were or will be incurred by the
employee.
.04 Proration of the federal per diem
or M&IE rate. Pursuant to the Federal
Travel Regulations, in determining the
federal per diemrate or the federal M&IE
rate for the locality of travel, the full ap-
plicable federal M&IE rate is available
for a full day of travel from 12:01 a.m. to
12:00 midnight. For purposes of deter-
mining the amount deemed substantiated
under section 4 or 5 of this revenue pro-
cedure with respect to partial days of
travel away from home, either of the fol-
lowing methods may be used to prorate
the federal M&IE rate to determine the
federal per diemrate or the federal M&IE
rate for the partial days of travel:
(1) Such rate may be prorated using
the method prescribed by the Federal
Travel Regulations. Currently the Fed-
eral Travel Regulations allow three-
fourths of the applicable federal M&IE
rate for each partial day during which the
employee or self-employed individual is
traveling away from home in connection
with the performance of services as an
employee or self-employed individual; or
(2) Such rate may be prorated using
any method that is consistently applied
and in accordance with reasonable busi-
ness practice. For example, if an em-
ployee travels away from home from 9
a.m. one day to 5 p.m. the next day, a
method of proration that results in an
amount equal to 2 times the federal M&IE
rate will be treated as being in accordance
with reasonable business practice (even
though only 1 1/2 times the federal M&IE
rate would be allowed under the Federal
Travel Regulations).
.05 Application of the appropriate
§ 274(n) limitation on meal expenses. All
or part of the amount of an expense
deemed substantiated under this revenue
procedure is subject to the appropriate
limitation under § 274(n) (see section
2.02 of this revenue procedure) on the de-
ductibility of food and beverage ex-
penses.
(1) When an amount for meal and
incidental expenses is computed pur-
suant to section 4.03 of this revenue pro-
cedure, the taxpayer must treat such
amount as an expense for food and bev-
erages.
(2) When a per diemallowance is
paid only for meal and incidental ex-
penses, the payor must treat an amount
equal to the lesser of the allowance or
the federal M&IE rate for the locality of
travel for such day (or partial day, see
section 6.04 of this revenue procedure)
as an expense for food and beverages.
(3) When a per diemallowance is
paid for lodging, meal, and incidental
expenses, the payor must treat an amount
equal to the federal M&IE rate for the lo-
cality of travel for each calendar day (or
partial day, see section 6.04 of this rev-
enue procedure) the employee is away
from home as an expense for food and
beverages. For purposes of the preced-
ing sentence, when a per diemallowance
for lodging, meal, and incidental ex-
penses is paid at a rate that is less than
the federal per diemrate for the locality
of travel for such day (or partial day, see
section 6.04 of this revenue procedure),
the payor may treat an amount equal to
40 percent of such allowance as the fed-
eral M&IE rate for the locality of travel
for such day (or partial day, see section
6.04 of this revenue procedure).
.06 No double reimbursement or de-
duction. If a payor pays a per diemal-
lowance in lieu of reimbursing actual ex-
penses for lodging, meal, and incidental
expenses or for meal and incidental ex-
penses in accordance with section 4 or 5
of this revenue procedure, any additional
payment with respect to such expenses is
treated as paid under a nonaccountable
plan, is included in the employee’s gross
income, is reported as wages or other
compensation on the employee’s Form
W-2, and is subject to withholding and
payment of employment taxes. Simi-
larly, if an employee or self-employed
individual computes the amount allow-
able as a deduction for meal and inciden-
tal expenses for travel away from home
in accordance with section 4.03 or 4.04
of this revenue procedure, no other de-
duction is allowed to the employee or
self-employed individual with respect to
such expenses. For example, assume an
employee receives a per diemallowance
from a payor for lodging, meal, and inci-
dental expenses or for meal and inciden-
tal expenses incurred while traveling
away from home. During that trip, the
employee pays for dinner for the em-
ployee and two business associates. The
payor reimburses as a business entertain-
ment meal expense the meal expense for
the employee and the two business asso-
ciates. Because the payor also pays a per
diemallowance to cover the cost of the
employee’s meals, the amount paid by
the payor for the employee’s portion of
the business entertainment meal expense
is treated as paid under a nonaccountable
plan, is reported as wages or other com-
pensation on the employee’s Form W-2,
and is subject to withholding and pay-
ment of employment taxes.
.07 Related parties. Sections 4.01 and
5 of this revenue procedure will not
apply in any case in which a payor and
an employee are related within the mean-
ing of § 267(b), but for this purpose the
percentage of ownership interest referred
to in § 267(b)(2) shall be 10 percent.
SECTION 7. APPLICATION
.01 If the amount of travel expenses is
deemed substantiated under the rules pro-
vided in section 4 or 5 of this revenue pro-
cedure, and the employee actually sub-
stantiates to the payor the elements of
time, place, and business purpose of the
2000–41 I.R.B.345October 10, 2000

travel expenses in accordance with para-
graphs (b)(2) (travel away from home)
and (c) (other than subparagraph
(2)(iii)(A) thereof) of § 1.274-5, the em-
ployee is deemed to satisfy the adequate
accounting requirements of § 1.274-5(f)
as well as the requirement to substantiate
by adequate records or other sufficient ev-
idence for purposes of § 1.274-5(c). See
§ 1.62-2(e)(1) for the rule that an arrange-
ment must require business expenses to
be substantiated to the payor within a rea-
sonable period of time.
.02 An arrangement providing per diem
allowances will be treated as satisfying
the requirement of § 1.62-2(f)(2) with re-
spect to returning amounts in excess of
expenses if the employee is required to re-
turn within a reasonable period of time (as
defined in § 1.62-2(g)) any portion of
such an allowance that relates to days of
travel not substantiated, even though the
arrangement does not require the em-
ployee to return the portion of such an al-
lowance that relates to days of travel sub-
stantiated and that exceeds the amount of
the employee’s expenses deemed substan-
tiated. For example, assume a payor pro-
vides an employee an advance per diem
allowance for meal and incidental ex-
penses of $200, based on an anticipated 5
days of business travel at $40 per day to a
locality for which the federal M&IE rate
is $34, and the employee substantiates 3
full days of business travel. The require-
ment to return excess amounts will be
treated as satisfied if the employee is re-
quired to return within a reasonable pe-
riod of time (as defined in § 1.62-2(g)) the
portion of the allowance that is attribut-
able to the 2 unsubstantiated days of
travel ($80), even though the employee is
not required to return the portion of the al-
lowance ($18) that exceeds the amount of
the employee’s expenses deemed substan-
tiated under section 4.02 of this revenue
procedure ($102) for the 3 substantiated
days of travel. However, the $18 excess
portion of the allowance is treated as paid
under a nonaccountable plan as discussed
in section 7.04 of this revenue procedure.
.03 An employee is not required to in-
clude in gross income the portion of a per
diemallowance received from a payor
that is less than or equal to the amount
deemed substantiated under the rules pro-
vided in section 4 or 5 of this revenue pro-
cedure if the employee substantiates the
business travel expenses covered by the
per diem allowance in accordance with
section 7.01 of this revenue procedure.
See § 1.274-5(f)(2)(i). In addition, such
portion of the allowance is treated as paid
under an accountable plan, is not reported
as wages or other compensation on the
employee’s Form W-2, and is exempt
from the withholding and payment of em-
ployment taxes. See § 1.62-2(c)(2) and
(c)(4).
.04 An employee is required to include
in gross income only the portion of the
per diem allowance received from a payor
that exceeds the amount deemed substan-
tiated under the rules provided in section
4 or 5 of this revenue procedure if the em-
ployee substantiates the business travel
expenses covered by the per diem al-
lowance in accordance with section 7.01
of this revenue procedure. See § 1.274-
5(f)(2)(ii). In addition, the excess portion
of the allowance is treated as paid under a
nonaccountable plan, is reported as wages
or other compensation on the employee’s
Form W-2, and is subject to withholding
and payment of employment taxes. See
§ 1.62-2(c)(3)(ii), (c)(5), and (h)(2)(i)(B).
.05 If the amount of the expenses that
is deemed substantiated under the rules
provided in section 4.01, 4.02, or 5 of this
revenue procedure is less than the
amount of the employee’s business ex-
penses for travel away from home, the
employee may claim an itemized deduc-
tion for the amount by which the business
travel expenses exceed the amount that is
deemed substantiated, provided the em-
ployee substantiates all the business
travel expenses, includes on Form 2106,
Employee Business Expenses, the
deemed substantiated portion of the per
diemallowance received from the payor,
and includes in gross income the portion
(if any) of the per diemallowance re-
ceived from the payor that exceeds the
amount deemed substantiated. See
§ 1.274-5(f)(2)(iii). However, for pur-
poses of claiming this itemized deduction
with respect to meal and incidental ex-
penses, substantiation of the amount of
the expenses is not required if the em-
ployee is claiming a deduction that is
equal to or less than the amount com-
puted under section 4.03 of this revenue
procedure minus the amount deemed
substantiated under sections 4.02 and
7.01 of this revenue procedure. The
itemized deduction is subject to the ap-
propriate limitation (see section 2.02 of
this revenue procedure) on meal and en-
tertainment expenses provided in
§ 274(n) and the 2-percent floor on mis-
cellaneous itemized deductions provided
in § 67.
.06 An employee who does not receive
a per diemallowance for meal and inci-
dental expenses may deduct an amount
computed pursuant to section 4.03 of this
revenue procedure only as an itemized
deduction. This itemized deduction is
subject to the appropriate limitation (see
section 2.02 of this revenue procedure)
on meal and entertainment expenses pro-
vided in § 274(n) and the 2-percent floor
on miscellaneous itemized deductions
provided in § 67.
.07 A self-employed individual may
deduct an amount computed pursuant to
section 4.03 of this revenue procedure in
determining adjusted gross income under
§ 62(a)(1). This deduction is subject to
the appropriate limitation (see section
2.02 of this revenue procedure) on meal
and entertainment expenses provided in
§ 274(n).
.08 If a payor’s reimbursement or other
expense allowance arrangement evi-
dences a pattern of abuse of the rules of
§ 62(c) and the regulations thereunder, all
payments under the arrangement will be
treated as made under a nonaccountable
plan. Thus, such payments are included
in the employee’s gross income, are re-
ported as wages or other compensation
on the employee’s Form W-2, and are
subject to withholding and payment of
employment taxes. See § 1.62-2(c)(3),
(c)(5), and (h)(2).
SECTION 8. WITHHOLDING AND
PAYMENT OF EMPLOYMENT
TAXES.
.01 The portion of a per diemal-
lowance, if any, that relates to the days of
business travel substantiated and that ex-
ceeds the amount deemed substantiated
for those days under section 4.01, 4.02,
or 5 of this revenue procedure is subject
to withholding and payment of employ-
ment taxes. See § 1.62-2(h)(2)(i)(B).
.02 In the case of a per diemallowance
paid as a reimbursement, the excess de-
scribed in section 8.01 of this revenue
procedure is subject to withholding and
payment of employment taxes in the pay-
October 10, 20003462000–41 I.R.B.

roll period in which the payor reimburses
the expenses for the days of travel sub-
stantiated. See § 1.62-2(h)(2)(i)(B)(2).
.03 In the case of a per diemallowance
paid as an advance, the excess described
in section 8.01 of this revenue procedure
is subject to withholding and payment of
employment taxes no later than the first
payroll period following the payroll pe-
riod in which the days of travel with re-
spect to which the advance was paid are
substantiated. See § 1.622(h)(2)(i)(B)(3).
If some or all of the days of travel with
respect to which the advance was paid
are not substantiated within a reasonable
period of time and the employee does not
return the portion of the allowance that
relates to those days within a reasonable
period of time, the portion of the al-
lowance that relates to those days is sub-
ject to withholding and payment of em-
ployment taxes no later than the first
payroll period following the end of the
reasonable period. See § 1.622(h)(2)-
(i)(A).
.04 In the case of a per diemallowance
only for meal and incidental expenses for
travel away from home paid to an em-
ployee in the transportation industry by a
payor that uses the rule in section 4.04(3)
of this revenue procedure, the excess of
the per diemallowance paid for the pe-
riod over the amount deemed substanti-
ated for the period under section 4.02 of
this revenue procedure (after applying
section 4.04(3) of this revenue proce-
dure), is subject to withholding and pay-
ment of employment taxes no later than
the first payroll period following the pay-
roll period in which the excess is com-
puted. See § 1.62-2(h)(2)(i)(B)(4).
.05 For example, assume that an em-
ployer pays an employee a per diemal-
lowance to cover business expenses for
meals and lodging for travel away from
home at a rate of 120 percent of the fed-
eral per diemrate for the localities to
which the employee travels. The em-
ployer does not require the employee to
return the 20 percent by which the reim-
bursement for those expenses exceeds the
federal per diemrate. The employee sub-
stantiates 6 days of travel away from
home: 2 days in a locality in which the
federal per diemrate is $100 and 4 days
in a locality in which the federal per diem
rate is $125. The employer reimburses
the employee $840 for the 6 days of
travel away from home (2 x (120% x
$100) + 4 x (120% x $125)), and does not
require the employee to return the excess
payment of $140 (2 days x $20 ($120-
$100) + 4 days x $25 ($150-$125)). For
the payroll period in which the employer
reimburses the expenses, the employer
must withhold and pay employment taxes
on $140. See section 8.02 of this revenue
procedure.
SECTION 9. EFFECT ON OTHER
DOCUMENTS
.01 Rev. Proc. 2000-9 is hereby super-
seded (except to the extent specified in
sections 4.04(5) and 5.06 of this revenue
procedure) for per diemallowances that
are paid both (1) to an employee on or
after October 1, 2000, and (2) with re-
spect to lodging, meal, and incidental ex-
penses or with respect to meal and inci-
dental expenses paid or incurred for travel
while away from home on or after Octo-
ber 1, 2000. Rev. Proc. 2000-9 is also
hereby superseded (except to the extent
specified in section 4.04(5) of this rev-
enue procedure) for purposes of comput-
ing the amount allowable as a deduction
for meal and incidental expenses paid or
incurred by an employee or self-em-
ployed individual for travel while away
from home on or after October 1, 2000.
.02 Notice 2000-48, 2000-37 I.R.B.
265, is hereby superseded.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Edwin B. Cleverdon of the
Office of Associate Chief Counsel (In-
come Tax and Accounting). For further
information regarding this revenue proce-
dure, contact Mr. Cleverdon at (202) 622-
4920 (not a toll-free call).
2000–41 I.R.B.347October 10, 2000

TeleFile Voice Signature Test;
Correction
Announcement 2000–81
AGENCY: Internal Revenue Service
(IRS), Treasury
ACTION: Correction to removal of tem-
porary regulations.
SUMMARY: This document contains
corrections to a removal of temporary
regulations that provides that an individ-
ual Federal income tax return completed
as part of the Telefile Voice Signature test
will be treated as a return that is signed,
authenticated, verified and filed by the
taxpayer. This document was published
in the Federal Register on July 18, 2000
(65 F.R. 44437).
DATES: This correction is effective July
18, 2000.
FOR FURTHER INFORMATION CON-
TACT: Beverly A. Baughman (202)
622-4940 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Need for Correction
As published, the removal of tempo-
rary regulations (TD 8892, 2000–32
I.R.B.158) contains errors that may prove
to be misleading and is in need of clarifi-
cation.
Correction of Publication
Accordingly, the publication of the
removal of temporary regulations (TD
8892), which is the subject of FR Doc.
00-18116, is corrected as follows:
1. On page 44438, column 1, in
amendatory instruction Par. 6., line 1, the
language, “Par. 6.Section 602.101(c) is
amended” is corrected to read “Par. 6.
Section 602.101(b) is amended”.
§602.101 [Corrected]
2. On page 44438, column 1, the para-
graph designation §602.101 (c) is cor-
rectly designated §602.101 (b).
Cynthia Grigsby,
Chief, Regulations Unit,
Office of Special Counsel
(Modernization and Strategic Planning).
(Filed by the Office of the Federal Regis-
ter on September 18, 2000, 8:45 a.m., and
published in the issue of the Federal Reg-
ister for September 19, 2000, 65 F.R.
56484)
New Form 8869, Qualified
Subchapter S Subsidiary
Election
Announcement 2000-83
New Form 8869 is now available. A
parent S corporation uses Form 8869 to
elect to treat one or more of its eligible
subsidiaries as a qualified subchapter S
subsidiary (QSub).
The new form replaces the temporary
procedures for filing a QSub election
under Notice 97-4, 1997-1 C.B. 351. As a
result, Form 966, Corporate Dissolution
or Liquidation, may no longer be used to
make a QSub election.
You can obtain Form 8869 by tele-
phone or by using IRS electronic informa-
tion services.
Request by
Number or address
Telephone1-800-TAX-FORM
(1-800-829-3676)
Personal computer:
IRS Internet Web Sitewww.irs.gov
File transfer protocolftp.irs.gov
Part IV. Items of General Interest
2000–41 I.R.B.348October 10, 2000

2000–41 I.R.B.iOctober 10, 2000
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds
that the same principle also applies to B,
the earlier ruling is amplified. (Compare
with modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial difference between them.
Modified is used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but not
to B, and the new ruling holds that it ap-
plies to both A and B, the prior ruling is
modified because it corrects a published
position. (Compare with amplified and
clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used
in a ruling that lists previously published
rulings that are obsoleted because of
changes in law or regulations. A ruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revoked describes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the
new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example, modified
and superseded describes a situation
where the substance of a previously pub-
lished ruling is being changed in part and
is continued without change in part and it
is desired to restate the valid portion of
the previously published ruling in a new
ruling that is self contained. In this case
the previously published ruling is first
modified and then, as modified, is super-
seded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and
that list is expanded by adding further
names in subsequent rulings. After the
original ruling has been supplemented
several times, a new ruling may be pub-
lished that includes the list in the original
ruling and the additions, and supersedes
all prior rulings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current use and for-
merly used will appear in material published in the
Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Definition of Terms

October 10, 2000ii2000–41 I.R.B.
Numerical Finding List
1
Bulletins 2000–27 through 2000–40
Announcements:
2000–57, 2000–28 I.R.B. 115
2000–58, 2000–30 I.R.B. 135
2000–59, 2000–29 I.R.B. 120
2000–60, 2000–31 I.R.B. 149
2000–61, 2000–30 I.R.B. 136
2000–62, 2000–30 I.R.B. 137
2000–63, 2000–31 I.R.B. 149
2000–64, 2000–31 I.R.B. 149
2000–65, 2000–31 I.R.B. 150
2000–66, 2000–32 I.R.B. 160
2000–67, 2000–32 I.R.B. 160
2000–68, 2000–32 I.R.B. 161
2000–69, 2000–33 I.R.B. 183
2000–70, 2000–34 I.R.B. 204
2000–72, 2000–35 I.R.B. 226
2000–73, 2000–35 I.R.B. 230
2000–74, 2000–35 I.R.B. 230
2000–75, 2000–37 I.R.B. 268
2000–76, 2000–36 I.R.B. 260
2000–77, 2000–36 I.R.B. 260
2000–79, 2000–39 I.R.B. 303
2000–80, 2000–40 I.R.B. 320
Court Decisions:
2068, 2000–28 I.R.B. 109
Notices:
2000–33, 2000–27 I.R.B. 97
2000–34, 2000–33 I.R.B. 172
2000–35, 2000–29 I.R.B. 118
2000–36, 2000–33 I.R.B. 173
2000–37, 2000–29 I.R.B. 118
2000–38, 2000–33 I.R.B. 174
2000–39, 2000–30 I.R.B. 132
2000–40, 2000–30 I.R.B. 134
2000–41, 2000–33 I.R.B. 177
2000–42, 2000–39 I.R.B. 302
2000–43, 2000–35 I.R.B. 209
2000–44, 2000–36 I.R.B. 255
2000–45, 2000–36 I.R.B. 256
2000–46, 2000–37 I.R.B. 265
2000–48, 2000–37 I.R.B. 265
2000–49, 2000–37 I.R.B. 266
2000–50, 2000–38 I.R.B. 291
2000–51, 2000–38 I.R.B. 291
2000–52, 2000–38 I.R.B. 292
2000–53, 2000–38 I.R.B. 293
Proposed Regulations:
REG–209038–89, 2000–34 I.R.B. 191
REG–105316–98, 2000–27 I.R.B. 98
REG–110311–98, 2000–36 I.R.B. 258
REG–116495–99, 2000–33 I.R.B. 179
REG–103735–00, 2000–36 I.R.B. 258
REG–103736–00, 2000–36 I.R.B. 258
REG–108522–00, 2000–34 I.R.B. 187
REG–112502–00, 2000–40 I.R.B. 316
Railroad Retirement Quarterly Rate:
2000–28, I.R.B. 112
2000–29, I.R.B. 117
Revenue Procedures:
2000–28, 2000–27 I.R.B. 60
2000–29, 2000–28 I.R.B. 113
Revenue Procedures—continued:
2000–30, 2000–28 I.R.B. 113
2000–31, 2000–31 I.R.B. 146
2000–32, 2000–33 I.R.B. 172
2000–33, 2000–36 I.R.B. 257
2000–34, 2000–34 I.R.B. 186
2000–35, 2000–35 I.R.B. 211
2000–36, 2000–37 I.R.B. 267
2000–37, 2000–40 I.R.B. 308
2000–38, 2000–40 I.R.B. 310
Revenue Rulings:
2000–32, 2000–27 I.R.B. 1
2000–33, 2000–31 I.R.B. 142
2000–34, 2000–29 I.R.B. 116
2000–35, 2000–31 I.R.B. 138
2000–36, 2000–31 I.R.B. 140
2000–37, 2000–32 I.R.B. 156
2000–38, 2000–32 I.R.B. 157
2000–39, 2000–34 I.R.B. 184
2000–40, 2000–35 I.R.B. 208
2000–41, 2000–36 I.R.B. 248
2000–42, 2000–39 I.R.B. 297
2000–47, 2000–37 I.R.B. 264
Treasury Decisions:
8886, 2000–27 I.R.B. 3
8888, 2000–27 I.R.B. 3
8889, 2000–30 I.R.B. 124
8890, 2000–30 I.R.B. 122
8891, 2000–32 I.R.B. 152
8892, 2000–32 I.R.B. 158
8893, 2000–31 I.R.B. 143
8894, 2000–33 I.R.B. 162
8895, 2000–40 I.R.B. 304
8896, 2000–36 I.R.B. 249
8897, 2000–36 I.R.B. 234
8898, 2000–38 I.R.B. 276
8899, 2000–38 I.R.B. 288
8900, 2000–38 I.R.B. 279
8901, 2000–38 I.R.B. 272
1
A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 2000–1 through 2000–26
is in Internal Revenue Bulletin 2000–27, dated July
3, 2000.

2000–41 I.R.B.iiiOctober 10, 2000
Finding List of Current Actions on
Previously Published Items
1
Bulletins 2000–27 through 2000–40
Notices:
87–76
Obsoleted by
T.D. 8897, 2000–36 I.R.B. 234
88–24
Obsoleted by
T.D. 8897, 2000–36 I.R.B. 234
88–86
Obsoleted by
T.D. 8897 (section V), 2000–36 I.R.B. 234
Proposed Regulations:
FI–42–90
Withdrawn by
Announcement 2000–63, 2000–31 I.R.B. 149
IA–38–93
Withdrawn by
Announcement 2000–68, 2000–32 I.R.B. 161
REG–107644–98
Corrected by
Announcement 2000–66, 2000–32 I.R.B. 160
Revenue Procedures:
88–23
Superseded by
Rev. Proc. 2000–35, 2000–35 I.R.B. 211
98–50
Modified and superseded by
Rev. Proc. 2000–31, 2000–31 I.R.B. 146
98–51
Modified and superseded by
Rev. Proc. 2000–31, 2000–31 I.R.B. 146
99–18
Modified by
Rev. Proc. 2000–29, 2000–28 I.R.B. 113
99–34
Superseded by
Rev. Proc. 2000–28, 2000–27 I.R.B. 60
99–49
Modified and amplified by
Rev. Proc. 2000–38, 2000–40 I.R.B. 310
Treasury Decisions:
8873
Corrected by
Announcement 2000–74, 2000–35 I.R.B. 230
8883
Corrected by
Announcement 2000–57, 2000–28 I.R.B. 115
8884
Corrected by
Announcement 2000–73, 2000–35 I.R.B. 230
1
A cumulative list of current actions on previously
published items in Internal Revenue Bulletins
2000–1 through 2000–26 is in Internal Revenue
Bulletin 2000–27, dated July 3, 2000.

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