Internal Revenue Bulletin 2010-12 (PDF rendition): IRS Revenue Procedures

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Bulletin No. 201
0-12
March 22, 2010
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Notice 2010–21, page 451.
Low-income housing tax credit; private activity bonds.
Resident populations of the 50 states, the District of Columbia,
Puerto Rico, and the insular areas for purposes of determining
the 2010 calendar year (1) state housing credit ceiling under
section 42(h) of the Code, (2) private activity bond volume cap
under section 146, and (3) private activity bond volume limit
under section 142(k) are reproduced.
Rev. Proc. 2010–14, page 456.
Safe harbor for failed section 1031 exchanges.This pro-
cedure provides a safe harbor method of reporting gain or loss
for certain taxpayers who initiate deferred like-kind exchanges
under section 1031 of the Code, but fail to complete the ex-
change because a qualified intermediary defaults on its obliga-
tion to acquire and transfer replacement property to the tax-
payer.
Announcement 2010–18, page 460.
This document contains a correction to final regulations
(T.D. 9424, 2008–44 I.R.B. 1012) that apply to corporations
filing consolidated returns, and corporations that enter into
certain tax-free reorganizations. The regulations provide rules
for determining the tax consequences of a member’s transfer
(including by deconsolidation and worthlessness) of loss
shares of subsidiary stock.
EMPLOYEE PLANS
Notice 2010–24, page 452.
Weighted average interest rate update; corporate bond
indices; 30-year Treasury securities; segment rates.
This notice contains updates for the corporate bond weighted
average interest rate for plan years beginning in March 2010;
the 24-month average segment rates; the funding transitional
segment rates applicable for March 2010; and the minimum
present value transitional rates for February 2010.
Finding Lists begin on page ii.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax law with
integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
March 22, 20102010–12 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
2010 Calendar Year Resident
Population Estimates
Notice 2010–21
This notice informs (1) State and lo-
cal housing credit agencies that allocate
low-income housing tax credits under
§ 42 of the Internal Revenue Code and
(2) States and other issuers of tax-exempt
private activity bonds under § 141, of
the proper population figures to be used
for calculating the 2010 calendar year
population-based component of the State
housing credit ceiling (Credit Ceiling)
under § 42(h)(3)(C)(ii), the 2010 calen-
dar year volume cap (Volume Cap) under
§ 146, and the 2010 volume limit (Volume
Limit) under § 142(k)(5).
The population figures for both the
population-based component of the Credit
Ceiling and the Volume Cap are deter-
mined by reference to § 146(j). That
section provides generally that determina-
tions of population for any calendar year
are made on the basis of the most recent
census estimate of the resident population
of a State (or issuing authority) released
by the U.S. Census Bureau before the
beginning of such calendar year. Section
142(k)(5) provides that the Volume Limit
is based on the State population.
The population-based component of
the Credit Ceiling and the Volume Cap
are adjusted for inflation pursuant to
§§ 42(h)(3)(H) and 146(d)(2), respec-
tively. The adjustments for the 2010
calendar year were published in Rev. Proc.
2009–50, 2009–45 I.R.B. 617. Section
3.08 of Rev. Proc. 2009–50 provides
that, for calendar year 2010, the amounts
used under § 42(h)(3)(C)(ii) to calculate
the Credit Ceiling is the greater of $2.10
multiplied by the State population (see
the resident population figures provided
below) or $2,430,000. Further, section
3.15 of Rev. Proc. 2009–50 provides
that the amounts used under § 146(d)(1)
to calculate the Volume Cap for calendar
year 2010 is the greater of $90 multiplied
by the State population (see the resident
population figures provided below) or
$273,775,000.
The proper population figures for cal-
culating the Credit Ceiling, the Volume
Cap, and the Volume Limit for the 2010
calendar year are the estimates of the
resident population of the 50 states, the
District of Columbia, and Puerto Rico
released electronically by the U.S. Census
Bureau on December 23, 2009, in Press
Release CB09–199. The proper popu-
lation figures for calculating the Credit
Ceiling, the Volume Cap, and the Volume
Limit for the 2010 calendar year for Guam
and the U.S. Virgin Islands are the figures
released electronically by the U.S. Census
Bureau on July 17, 2003, and referenced
in Census Bureau Tip Sheet TP03–16,
dated August 8, 2003. The figures for
these two areas are in the U.S. Census
Bureau’s International Data Base (IDB)
as 2009 midyear population figures. The
proper population figure for calculating
the Credit Ceiling, the Volume Cap, and
the Volume Limit for the 2010 calendar
year for American Samoa is the figure
released electronically by the U.S. Census
Bureau in an IDB release note dated
June 18, 2008, which is also in the IDB
as a 2009 midyear population figure. The
proper population figure for calculating
the Credit Ceiling, the Volume Cap, and
the Volume Limit for the 2010 calendar
year for the Northern Mariana Islands is
the figure released electronically by the
U.S. Census Bureau in an IDB release note
dated June 23, 2009, which is also in the
IDB as a 2009 midyear population figure.
For convenience, these estimates and
figures are reprinted below.
Res
ident Population Figures
Ala
bama
4,7
08,708
Alaska698,473
American Samoa
65,628
Arizona
6,595,778
Arkansas
2
,889,450
C
alifornia
3
6,961,664
Colorado
5,024,748
Connecticut
3,518,288
Delaware
885,122
District of Columbia
599,657
Florida
18,537,969
Georgia9,829,211
Guam178,430
Hawaii
1,295,178
Idaho
1,545,801
Illinois12,910,409
Indiana6,423,113
Iowa
3,007,856
2010–12 I.R.B.451March 22, 2010

Resident Population Figures
Kansas2,818,747
Kentucky4,314,113
Louisiana4,492,076
Maine1,318,301
Maryland
5,699,478
Massachusetts
6,593,587
Michigan9,969,727
Minnesota
5,266,214
Mississippi
2,951,996
Missouri
5,987,580
Montana974,989
Nebraska1,796,619
Nevada
2,643,085
New Hampshi
re
1,324,575
New Jersey8,707,739
New Mexico2,009,671
New York
19,541,453
North Carolina9,380,884
North Dakota646,844
Norther
n Mariana Islands
51,484
Ohio
11,542,645
Oklahoma
3,687,050
Oregon
3,825,
657
Pennsy
lvania
12,604
,767
Puerto Rico3,967,288
Rhode Island
1,053,209
South Carolina
4,561,242
South Dakota812,383
Tennessee
6,296
,254
Texas24,782,302
U.S. Virgin Islands
109,825
Utah
2,784,572
Vermont621,760
Virginia
7,882,590
Washington
6,664,195
West
Virginia
1,81
9,777
Wisconsin
5,654,774
Wyoming
544,270
The principal authors of this notice are
Christopher J. Wilson, Office of the As-
sociate Chief Counsel (Passthroughs and
Special Industries) and Timothy L. Jones,
Office of the Associate Chief Counsel (Fi-
nancial Institutions and Products). For fur-
ther information regarding this notice, con-
tact Mr. Wilson at (202) 622–3040 (not a
toll-free call).
Update for Weighted Average
Interest Rates, Yield Curves,
and Segment Rates
Notice 2010–24
This notice provides guidance as to the
corporate bond weighted average interest
rate and the permissible range of interest
rates specified under §412(b)(5)(B)(ii)(II)
of the Internal Revenue Code as in ef-
fect for plan years beginning before 2008.
It also provides guidance on the corpo-
rate bond monthly yield curve (and the
corresponding spot segment rates), the
24-month average segment rates, and
the funding transitional segment rates
under § 430(h)(2). In addition, this no-
tice provides guidance as to the interest
March 22, 20104522010–12 I.R.B.

rate on 30-year Treasury securities un-
der § 417(e)(3)(A)(ii)(II) as in effect for
plan years beginning before 2008, the
30-year Treasury weighted average rate
under § 431(c)(6)(E)(ii)(I), and the min-
imum present value segment rates under
§ 417(e)(3)(D) as in effect for plan years
beginning after 2007.
CORPORATE BOND WEIGHTED
AVERAGE INTEREST RATE
Sections412(b)(5)(B)(ii)and
412(l)(7)(C)(i), as amended by the Pen-
sion Funding Equity Act of 2004 and by
the Pension Protection Act of 2006 (PPA),
provide that the interest rates used to cal-
culate current liability and to determine
the required contribution under § 412(l)
for plan years beginning in 2004 through
2007 must be within a permissible range
based on the weighted average of the rates
of interest on amounts invested conser-
vatively in long term investment grade
corporate bonds during the 4-year period
ending on the last day before the beginning
of the plan year.
Notice 2004–34, 2004–1 C.B. 848, pro-
vides guidelines for determining the cor-
porate bond weighted average interest rate
and the resulting permissible range of in-
terest rates used to calculate current liabil-
ity. That notice establishes that the corpo-
rate bond weighted average is based on the
monthly composite corporate bond rate de-
rived from designated corporate bond in-
dices. The methodology for determining
the monthly composite corporate bond rate
as set forth in Notice 2004–34 continues to
apply in determining that rate. See Notice
2006–75, 2006–2 C.B. 366.
The composite corporate bond rate for
February 2010 is 6.01 percent. Pursuant
to Notice 2004–34, the Service has de-
termined this rate as the average of the
monthly yields for the included corporate
bond indices for that month.
The following corporate bond weighted
average interest rate was determined for
plan years beginning in the month shown
below.
For Plan Years
Beginning inPermissible Range
MonthYear
Corporate
Bond Weighted
Average90%to100%
March20106.40
5.76
6.40
YIELD CUR
VE AND SEGMENT
RATES
General
ly for plan years beginning
after 20
07 (except for delayed effective
dates fo
r certain plans under sections 104,
105, and
106 of PPA), § 430 of the Code
specifi
es the minimum funding require-
ments t
hat apply to single employer plans
pursua
nt to § 412. Section 430(h)(2) spec-
ifies t
he interest rates that must be used
to dete
rmine a plan’s target normal cost
and fun
ding target. Under this provision,
prese
nt value is generally determined us-
ing th
ree 24-month average interest rates
(“segmen
t rates”), each of which applies
to cash f
lows during specified periods.
However
, an election may be made under
§430(h)
(2)(D)(ii) to use the monthly yield
curve in
place of the segment rates. For
plan yea
rs beginning in 2008 and 2009, a
transi
tional rule under § 430(h)(2)(G) pro-
vides t
hat the segment rates are blended
with th
e corporate bond weighted average
as spec
ified above. An election may be
made un
der § 430(h)(2)(G)(iv) to use the
segme
nt rates without applying the transi-
tiona
lrule.
Notic
e 2007–81, 2007–2 C.B. 899,
provi
des guidelines for determining the
monthly c
orporate bond yield curve, the
24-mont
h average corporate bond seg-
ment rat
es, and the funding transitional
segment
rates used to compute the tar-
get norm
al cost and the funding target.
Pursuan
t to Notice 2007–81, the monthly
corpor
ate bond yield curve derived from
Februa
ry 2010 data is in Table I at the end
of this
notice. The spot first, second, and
third s
egment rates for the month of Feb-
ruary 2
010 are, respectively, 2.29, 5.77,
and 6.
63. The three 24-month average
corpo
rate bond segment rates applica-
ble fo
r March 2010 under the election of
§ 430(
h)(2)(G)(iv) are as follows:
First
Segment
Second
Segment
Third
Segment
4.446.626.74
The transitional segment rates under
§ 430(h)(2)(G) applicable for March 2010,
taking into account the corporate bond
weighted average of 6.40 stated above, are
as follows:
For Plan Years
Beginning in
First
Segment
Second
Segment
Third
Segment
2009
5.096.55
6.63
The transitional rule of § 430(h)(2)(G)
does not apply to plan years starting in
2010. Therefore, for a plan year starting
in 2010 with a lookback month to March
2010, the funding segment rates are the
three 24-month average corporate bond
2010–12 I.R.B.453March 22, 2010

segment rates applicable for March 2010,
listed above without blending for the tran-
sitional period.
30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 417(e)(3)(A)(ii)(II) (prior to
amendment by PPA) defines the appli-
cable interest rate, which must be used
for purposes of determining the minimum
present value of a participant’s benefit
under § 417(e)(1) and (2), as the annual
rate of interest on 30-year Treasury se-
curities for the month before the date
of distribution or such other time as the
Secretary may by regulations prescribe.
Section 1.417(e)–1(d)(3) of the Income
Tax Regulations provides that the applica-
bleinterestrateforamonthistheannual
rate of interest on 30-year Treasury secu-
rities as specified by the Commissioner
for that month in revenue rulings, notices
or other guidance published in the Internal
Revenue Bulletin.
The rate of interest on 30-year Treasury
securities for February 2010 is 4.62 per-
cent. The Service has determined this rate
as the average of the yield on the 30-year
Treasury bond maturing in November
2039 determined each day through Febru-
ary 10, 2010, and the yield on the 30-year
Treasury bond maturing in February 2040
determined each day for the balance of the
month.
Generally for plan years beginning
after 2007, § 431 specifies the mini-
mum funding requirements that apply to
multiemployer plans pursuant to § 412.
Section 431(c)(6)(B) specifies a minimum
amount for the full-funding limitation
described in section 431(c)(6)(A), based
on the plan’s current liability. Section
431(c)(6)(E)(ii)(I) provides that the inter-
est rate used to calculate current liability
for this purpose must be no more than 5
percent above and no more than 10 percent
below the weighted average of the rates of
interest on 30-year Treasury securities dur-
ing the four-year period ending on the last
day before the beginning of the plan year.
Notice 88–73, 1988–2 C.B. 383, provides
guidelines for determining the weighted
average interest rate. The following rates
were determined for plan years beginning
in the month shown below.
For Plan Years
Beginning inPermissible Range
MonthYear
30-Year
Treasury
Weighted
Average
90%to
105%
March20104.39
3.95
4.61
MINIMUM PRESENT VALUE
SEGMENT RATES
Generally for plan years beginning af-
ter December 31, 2007, the applicable in-
terest rates under § 417(e)(3)(D) are seg-
ment rates computed without regard to a
24-month average. For plan years begin-
ning in 2008 through 2011, the applica-
ble interest rates are the monthly spot seg-
ment rates blended with the applicable rate
under § 417(e)(3)(A)(ii)(II) as in effect
for plan years beginning in 2007. Notice
2007–81 provides guidelines for determin-
ing the minimum present value segment
rates. Pursuant to that notice, the min-
imum present value transitional segment
rates determined for February 2010, tak-
ing into account the February 2010 30-year
Treasury rate of 4.62 stated above, are as
follows:
For Plan Years
Beginning in
First
Segment
Second
Segment
Third
Segment
20093.69
5.085.42
20103.22
5.315.83
DRAFTING
INFORMATION
The princ
ipal author of this notice is
Tony Mont
anaro of the Employee Plans,
Tax Exemp
t and Government Entities Di-
vision. M
r. Montanaro may be e-mailed at
Retireme
ntPlanQuestions@irs.gov.
March 22, 20104542010–12 I.R.B.

Table I
Monthly Yield Curve for February 2010
DerivedfromFebruary2010Data
Maturity YieldMaturity YieldMaturity YieldMaturity YieldMaturity Yield
0.50.7520.5
6.42
40.5
6.66
60.5
6.74
80.5
6.79
1.01.0621.06.4341.06.6661.0
6.75
81.0
6.79
1.5
1.39
21.5
6.44
41.5
6.67
61.56.7581.5
6.79
2.01.7322.06.4542.06.6762.06.7582.0
6.79
2.5
2.10
22.5
6.46
42.5
6.67
62.56.7582.5
6.79
3.02.4823.06.4743.06.6763.0
6.75
83.0
6.79
3.52.8523.5
6.48
43.5
6.68
63.56.7583.5
6.79
4.03.2024.0
6.49
44.06.6864.0
6.75
84.0
6.79
4.53.5224.56.5044.5
6.68
64.5
6.76
84.5
6.79
5.03.8225.06.5045.06.6865.06.7685.0
6.79
5.5
4.09
25.56.5145.5
6.69
65.5
6.76
85.5
6.80
6.04.3426.0
6.52
46.0
6.69
66.06.7686.06.80
6.54.5626.56.5246.5
6.69
66.5
6.76
86.5
6.80
7.04.7627.0
6.53
47.0
6.69
67.06.7687.06.80
7.5
4.94
27.56.5447.5
6.70
67.5
6.76
87.5
6.80
8.05.1028.06.5448.06.7068.06.7688.06.80
8.55.2528.56.5548.5
6.70
68.5
6.76
88.5
6.80
9.0
5.38
29.0
6.56
49.0
6.70
69.0
6.77
89.0
6.80
9.5
5.50
29.5
6.56
49.56.7169.56.7789.56.80
10.0
5.61
30.0
6.5750.0
6.7170.06.77
90.0
6.80
10.55.7030.56.5750.5
6.71
70.5
6.7790.56.80
11.05.7931.06.5851.06.7171.06.77
91.0
6.80
11.55.8731.5
6.59
51.5
6.71
71.5
6.7791.56.80
12.05.9432.06.59
52.0
6.7272.06.77
92.0
6.80
12.5
6.00
32.5
6.60
52.5
6.72
72.5
6.7792.56.80
13.06.0633.06.60
53.0
6.7273.06.77
93.0
6.81
13.5
6.10
33.5
6.60
53.5
6.72
73.5
6.7893.56.81
14.06.1534.06.6154.06.7274.06.78
94.0
6.81
14.5
6.19
34.5
6.61
54.5
6.73
74.5
6.7894.56.81
15.0
6.22
35.0
6.62
55.0
6.73
75.0
6.7895.06.81
15.56.2535.5
6.62
55.5
6.73
75.5
6.7895.56.81
16.06.2836.06.63
56.0
6.7376.06.78
96.0
6.81
16.5
6.30
36.5
6.63
56.5
6.73
76.5
6.7896.56.81
17.06.3237.06.6357.06.7377.06.78
97.0
6.81
17.5
6.34
37.5
6.64
57.5
6.74
77.5
6.7897.56.81
18.06.3638.06.64
58.0
6.7478.06.78
98.0
6.81
18.5
6.37
38.56.6558.5
6.74
78.5
6.7898.56.81
19.06.3939.0
6.65
59.06.74
79.06.7999.0
6.81
19.56.4039.5
6.65
59.56.7479.5
6.79
99.56.81
20.06.4140.06.6660.06.7480.0
6.79
100.06.81
2010–12 I.R.B.455March 22, 2010

26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(AlsoPart1,§1031.)
Rev. Proc. 2010–14
SECTION 1. PURPOSE
This revenue procedure provides a safe
harbor method of reporting gain or loss
for certain taxpayers who initiate deferred
like-kind exchanges under § 1031 of the
Internal Revenue Code but fail to complete
the exchange because a qualified interme-
diary (QI) defaults on its obligation to ac-
quire and transfer replacement property to
the taxpayer.
SECTION 2. BACKGROUND
.01 Under § 1031(a), no gain or loss
is recognized on an exchange of property
held for productive use in a trade or busi-
ness or for investment (the “relinquished
property”) if the property is exchanged
solely for property of like kind that is to
be held either for productive use in a trade
or business or for investment (the “replace-
ment property”).
.02 Section 1031 and the regulations
under § 1031 allow for deferred exchanges
of property. Section 1.1031(k)–1(a) de-
fines a deferred exchange as an exchange
in which, pursuant to an agreement (the
“exchange agreement”), the taxpayer
transfers relinquished property and sub-
sequently receives replacement property.
Under § 1031(a)(3), a taxpayer must (A)
identify the replacement property within
45 days of the transfer of the relinquished
property (the “identification period”),
and (B) acquire the replacement property
within 180 days of the transfer of the relin-
quished property, or by the due date of the
taxpayer’s return (including extensions)
for the year of the transfer of the relin-
quished property, if sooner (the “exchange
period”).
.03 Section 1.1031(k)–1(g)(4) allows a
taxpayer to use a QI to facilitate a like-
kind exchange. As required by the writ-
ten exchange agreement entered into with
the taxpayer, the QI acquires the relin-
quished property from the taxpayer, trans-
fers the relinquished property, acquires the
replacement property, and transfers the re-
placement property to the taxpayer. If
a taxpayer transfers relinquished property
using a QI, the taxpayer’s transfer of the
relinquished property to the QI and subse-
quent receipt of replacement property from
the QI is treated as an exchange with the
QI.
.04 Under § 1.1031(k)–1(a), if a tax-
payer actually or constructively receives
money in the full amount of the con-
sideration for the relinquished prop-
erty, the transaction is a sale and not a
deferred like-kind exchange. Section
1.1031(k)–1(f)(2) provides that the de-
termination of whether and the extent to
which a taxpayer is in actual or construc-
tive receipt of money or non like-kind
property is made under the general rules
concerning actual or constructive re-
ceipt and without regard to the taxpayer’s
method of accounting. Generally, actual
or constructive receipt of money by an
agent of the taxpayer is actual or construc-
tive receipt by the taxpayer. However,
§ 1.1031(k)–1(g)(4)(i) provides that a QI
is not considered the agent of the taxpayer
for purposes of determining whether the
taxpayer is in actual or constructive receipt
of money before the taxpayer receives
like-kind replacement property.
.05 The Internal Revenue Service and
the Treasury Department are aware of
situations in which taxpayers initiated
like-kind exchanges by transferring relin-
quished property to a QI and were unable
to complete these exchanges within the ex-
change period solely due to the failure of
the QI to acquire and transfer replacement
property to the taxpayer (a “QI default”).
In many of these cases, the QI enters bank-
ruptcy or receivership, thus preventing
the taxpayer from obtaining immediate
access to the proceeds of the sale of the
relinquished property. The Service and
the Treasury Department generally are of
the view that a taxpayer who in good faith
sought to complete the exchange using the
QI, but who failed to do so because the
QI defaulted on the exchange agreement
and became subject to a bankruptcy or
receivership proceeding, should not be
required to recognize gain from the failed
exchange until the taxable year in which
the taxpayer receives a payment attribut-
able to the relinquished property.
SECTION 3. SCOPE OF REVENUE
PROCEDURE
This revenue procedure applies to tax-
payers who:
.01 Transferred relinquished prop-
erty to a QI in accordance with
§ 1.1031(k)–1(g)(4);
.02 Properly identified replacement
property within the identification period
(unless the QI default occurs during that
period);
.03 Did not complete the like-kind ex-
change solely because of a QI default in-
volving a QI that becomes subject to a
bankruptcy proceeding under the United
States Code or a receivership proceeding
under federal or state law; and
.04 Did not, without regard to any ac-
tual or constructive receipt by the QI, have
actual or constructive receipt of the pro-
ceeds from the disposition of the relin-
quished property or any property of the
QI prior to the time the QI entered bank-
ruptcy or receivership. For purposes of
the preceding sentence, relief of a liability
pursuant to the exchange agreement prior
to the QI default, either through the as-
sumption or satisfaction of the liability in
connection with the transfer of the relin-
quished property or through the transfer of
the relinquished property subject to the li-
ability, is disregarded.
SECTION 4. APPLICATION OF SAFE
HARBOR METHOD FOR REPORTING
FAILED LIKE-KIND EXCHANGES
.01No gain recognized until payment
received. If a QI defaults on its obligation
to acquire and transfer replacement prop-
erty to the taxpayer and becomes subject to
a bankruptcy or receivership proceeding,
the taxpayer generally may not seek to en-
force its rights under the exchange agree-
ment with the QI or otherwise access the
sale proceeds from the relinquished prop-
erty outside of the bankruptcy or receiver-
ship proceeding while the proceeding is
pending. Consequently, the Service will
treat the taxpayer as not having actual or
constructive receipt of the proceeds dur-
ing that period if the taxpayer reports gain
in accordance with this revenue procedure.
Accordingly, the taxpayer need recognize
gain on the disposition of the relinquished
property only as required under the safe
March 22, 20104562010–12 I.R.B.

harbor gross profit ratio method described
in section 4.03 of this revenue procedure.
.02Gain recognized upon receipt of
payment. A taxpayer within the scope of
this revenue procedure may report gain
realized on the disposition of the relin-
quished property as the taxpayer receives
payments attributable to the relinquished
property using the safe harbor gross profit
ratio method described in section 4.03 of
this revenue procedure.
.03Safe harbor gross profit ratio
method. Under the safe harbor gross profit
ratio method, the portion of any payment
attributable to the relinquished property
that is recognized as gain is determined by
multiplying the payment by a fraction, the
numeratorofwhichisthetaxpayer’sgross
profit and the denominator of which is the
taxpayer’s contract price.
.04Definitions. The following defini-
tions apply solely for purposes of applying
the safe harbor gross profit ratio method.
(1)Payment attributable to the relin-
quished property. A payment attributable
to the relinquished property means a
payment of proceeds, damages, or other
amounts attributable to the disposition of
the relinquished property (other than sell-
ing expenses), whether paid by the QI, the
bankruptcy or receivership estate of the
QI, the QI’s insurer or bonding company,
or any other person. Except as provided
in section 4.05 of this revenue procedure,
satisfied indebtedness is not a payment
attributable to the relinquished property.
(2)Gross profit. Gross profit means
the selling price of the relinquished prop-
erty, minus the taxpayer’s adjusted basis
in the relinquished property (increased by
any selling expenses not paid by the QI
using proceeds from the sale of the relin-
quished property).
(3)Selling price. The selling price of
the relinquished property is generally the
amount realized on the sale of the relin-
quished property, without reduction for
selling expenses. However, if a court or-
der, confirmed bankruptcy plan, or written
notice from the trustee or receiver spec-
ifies, by the end of the first taxable year
in which the taxpayer receives a payment
attributable to the relinquished property,
an amount to be received by the taxpayer
in full satisfaction of the taxpayer’s claim,
the selling price of the relinquished prop-
erty is the sum of the payments attributable
to the relinquished property (including
satisfied indebtedness in excess of basis)
received or to be received and the amount
of any satisfied indebtedness not in excess
of the adjusted basis of the relinquished
property.
(4)Contract price. The contract price is
the selling price of the relinquished prop-
erty minus the amount of any satisfied in-
debtedness not in excess of the adjusted
basis of the relinquished property.
(5)Satisfied indebtedness. Satisfied in-
debtedness means any mortgage or encum-
brance on the relinquished property that
was assumed or taken subject to by the
buyer or satisfied in connection with the
transfer of the relinquished property.
.05Treatment of satisfied indebtedness
in excess of basis. The amount of satisfied
indebtedness in excess of the adjusted ba-
sis of the relinquished property is treated as
a payment attributable to the relinquished
property (within the meaning of section
4.04(1) of this revenue procedure) in the
year in which the indebtedness is satisfied.
.06Treatment of recapture income.
Any required depreciation recapture is
taken into account in accordance with
§§ 1245 and 1250, except that the recap-
ture income is included in income in the
taxable year in which gain is recognized
under this section 4 to the extent of the
gain recognized in that taxable year.
.07Maximum gain to be recognized.
The total gain (including recapture in-
come) recognized under this revenue
procedure should not exceed the sum of
(1) the payments attributable to the re-
linquished property (including satisfied
indebtedness in excess of basis) and (2)
the satisfied indebtedness not in excess
of basis, minus the adjusted basis of the
relinquished property. Adjustments to
the gain determined using the safe harbor
gross profit ratio method should be made
in the last taxable year in which the tax-
payer receives a payment attributable to
the relinquished property.
.08Loss deduction. A taxpayer within
the scope of this revenue procedure may
claim a loss deduction under § 165 for the
amount, if any, by which the adjusted ba-
sis of the relinquishedproperty exceeds the
sum of (1) the payments attributable to the
relinquished property (including satisfied
indebtedness in excess of basis), plus (2)
the amount of any satisfied indebtedness
not in excess of basis. A taxpayer who may
claim a loss deduction under the preceding
sentence may also claim a loss deduction
under § 165 for the amount of any gain rec-
ognized in accordance with this section 4
in a prior taxable year. The timing of any
§ 165 loss claimed by the taxpayer is deter-
mined under the general rules of § 165 and
the regulations thereunder, and the char-
acter of any loss is determined under sub-
chapter P of the Code.
.09Imputed interest.
(1)Sections 483 and 1274.Forpur-
poses of applying the safe harbor gross
profit ratio method to a transaction within
the scope of this revenue procedure, the
selling price, the contract price, and any
payment attributable to the relinquished
property must be reduced by the amount of
any imputed interest allocable to the pay-
ment as determined under § 483 or § 1274
and the regulations thereunder, whichever
is applicable. For purposes of applying
§ 483 or § 1274 to a transaction within the
scope of this revenue procedure, the tax-
payer is treated as selling the relinquished
property on the date of the confirmation of
the bankruptcy plan or other court order
that resolves the taxpayer’s claim against
the QI (the “safe harbor sale date”). As a
result, if the only payment in full satisfac-
tion of the taxpayer’s claim is received by
the taxpayer on or before the date that is
six months after the safe harbor sale date,
then no interest is imputed on this payment
under either § 483 or § 1274. In addition,
the selling price determined under section
4.04(3) of this revenue procedure (deter-
mined without regard to this section 4.09)
is used to determine whether § 483 (in gen-
eral, sales for $250,000 or less) or § 1274
(in general, sales for more than $250,000)
applies to a transaction within the scope of
this revenue procedure.
(2)Section 7872. In the case of a
transaction within the scope of this rev-
enue procedure, if exchange funds held
by the QI were treated as an exchange
facilitator loan under § 1.468B–6(c)(1),
and the loan otherwise met the require-
ments of § 1.7872–5(b)(16), the Service
will continue to treat the loan as meeting
the requirements of § 1.7872–5(b)(16)
until the safe harbor sale date, even if the
duration of the loan exceeds six months
solely due to the QI default. In addi-
tion, if an exchange facilitator loan under
§ 1.468B–6(c)(1) does not meet the re-
quirements of § 1.7872–5(b)(16) because
the loan exceeds $2 million, the Service
2010–12 I.R.B.457March 22, 2010

will not impute additional interest on the
loan after the date of the QI default under
§ 7872. However, interest may be imputed
under § 483 or § 1274 pursuant to section
4.09(1) of this revenue procedure.
.10Examples.
Example 1.A, an individual who files federal
income tax returns on a calendar year basis, owns
investment property (Property 1) with a fair market
value of $150x and an adjusted basis of $50x.Aen-
ters into an agreement withQI, a qualified interme-
diary, to facilitate a deferred like-kind exchange. On
May 6, Year 1,Atransfers Property 1 toQIandQI
transfers Property 1 to a third party in exchange for
$150x.Aintends that the $150x held byQIbe used
byQIto acquireA’s replacement property. On June 1,
Year 1,Aidentifies Property 2 as replacement prop-
erty. On June 15, Year 1,QInotifiesAthat it has
filed for bankruptcy protection and cannot acquire
replacement property. Consequently,Afails to ac-
quire Property 2 or any other replacement property
within the exchange period. As of December 31, Year
1,QI’s bankruptcy proceedings are on-going andA
has received none of the $150x proceeds fromQIor
anyothersource. OnJuly1,Year2,QIexits from
bankruptcy and the bankruptcy court approves the
trustee’s final report, which shows thatAwill be paid
$130x in full satisfaction ofQI’s obligation under the
exchange agreement.Areceives the $130x payment
on August 4, Year 2 and does not receive any other
payment attributable to the relinquished property.
Ais within the scope of this revenue procedure
and thus may report the failed like-kind exchange due
to the QI default in accordance with this section 4.A
is not required to recognize gain in Year 1 because
Adid not receive any payments attributable to the
relinquished property in Year 1.Arecognizes gain
in Year 2.A’s selling price is $130x (the payments
attributable to the relinquished property (the amount
specified by the trustee before the end of the first tax-
able year in whichAreceives a payment attributable
to the relinquished property)).A’s contract price also
is $130x because there is no satisfied or assumed in-
debtedness.A’s gross profit is $80x (the selling price
($130x) minus the adjusted basis ($50x)). A’s gross
profit ratio is 80/130 (the gross profit over the con-
tract price).Amust recognize gain in Year 2 of $80x
(the payment attributable to the relinquished property
($130x) multiplied byA’s gross profit ratio (80/130)).
Furthermore, even thoughthe payment attributable
to the relinquished property ($130x) is less than the
$150x proceeds received by the
QI,Ais not entitled to
a § 165 loss deduction because the payment attribut-
able to the relinquished property exceedsA’s adjusted
basis in the relinquished property ($50x).
Example 2.B, an individual who files federal
income tax returns on a calendar year basis, owns
investment property (Property 1) with a fair market
value of $160x and an adjusted basis of $90x. Prop-
erty 1 is encumbered by a mortgage of $60x.Ben-
ters into an agreement withQI, a qualified interme-
diary, to facilitate a deferred like-kind exchange. On
May 6, Year 1,Btransfers Property 1 toQIandQI
transfers Property 1 to a third party in exchange for
$160x. At closing,QIuses $60x of the proceeds to
satisfy the mortgage on Property 1 and retains the re-
maining $100x.Bintends that the $100x held byQI
be used byQIto acquireB’s replacement property.
On June 1, Year 1,Bidentifies Property 2 as replace-
ment property. On June 15, Year 1,QInotifiesBthat
it has filed for bankruptcy protection and cannot ac-
quire replacement property. Consequently,Bfails to
acquire Property 2 or any other replacement prop-
erty during the exchange period. As of December
31, Year 1,QI’s bankruptcy proceedings are on-go-
ing andBhas received none of the $100x proceeds
fromQIor any other source. On September 1, Year
2,QIexits from bankruptcy and the bankruptcy plan
of reorganization specifies thatBwill receive $70x
in full satisfaction ofQI’s obligation under the ex-
change agreement. The terms of the bankruptcy plan
of reorganization provide thatQIwill payB$35x in
OctoberofYear2and$35xinFebruaryofYear3.B
receives the payments according to the plan and does
not receive any other payment attributable to the re-
linquished property.
Bis within the scope of this revenue procedure
and thus may report the failed like-kind exchange
due to the QI default in accordance with this section
4. Accordingly,Bis not required to recognize gain
in Year 1 becauseBdid not receive any payments
attributable to the relinquished property in Year 1
(the amount of the mortgage satisfied byQIdid not
exceedB
’s adjusted basis in Property 1).Brecog-
nizes gain in Year 2 and Year 3.B’s selling price is
$130x (the payments attributable to the relinquished
property (the amount specified by the bankruptcy
plan before the end of the first taxable year in which
Breceives a payment attributable to the relinquished
property ($70x)) plus the mortgage satisfied by
QI(60x)).B’s contract price is $70x (the selling
price ($130x) minus the satisfied indebtedness not
in excess of basis ($60x)).B’s gross profit is $40x
(the selling price ($130x) minus the adjusted basis
($90x)).B’s gross profit ratio is 40/70 (the gross
profit over the contract price). In Year 2 and Year
3,Bmust recognize gain of $20x each year (the
payment attributable to the relinquished property
($35x) multiplied byB’s gross profit ratio (40/70)).
Furthermore,Bis not entitled to a § 165 loss de-
duction because the sum of all payments attributable
to the relinquished property ($70x) and the amount
ofB’s satisfied indebtedness not in excess of basis
($60x) exceedsB’s adjusted basis in the relinquished
property ($90x).
Example 3. The facts are the same as inExam-
ple 2exceptB’s adjusted basis in Property 1 is $40x.
Bis within the scope of this revenue procedure and
thus may report the failed like-kind exchange due to
the QI default in accordance with this section 4.B
is considered to have received a payment of $20x in
Year 1 because the amount of the mortgage satisfied
byQI($60x) exceedsB’s adjusted basis in the relin-
quished property ($40x).Brecognizes gain in Year
1.B’s selling price is $160x (the amount realized by
the QI on the sale of the relinquished property be-
cause neither a court order, the bankruptcy plan, nor
the trustee specified by the end of Year 1, the first
year in whichBreceives a payment attributable to
the relinquished property, the amountBwill receive
in full satisfaction ofB’s claim).B’s contract price
is $120x (the selling price ($160x) minus the satis-
fied indebtedness not inexcess of basis ($40x)).B’s
gross profit is $120x (the selling price ($160x) mi-
nus the adjusted basis ($40x)).B’s gross profit ratio
is 120/120 (the gross profit over the contract price).
Thus,Bmust recognize gain in Year 1 of $20x (the
deemed payment of $20x multiplied by 120/120) and
$35x in Year 2 and Year 3 (the payments attributable
to the relinquished property received byBin those
years multiplied by 120/120). Furthermore,Bis not
entitled to a §165 loss deduction because the sum of
the payments attributable to the relinquished property
($90x) and the amount ofB’s satisfied indebtedness
not in excess of basis ($40x) exceedsB’s adjusted ba-
sis in the relinquished property ($40x).
Example 4.C, an individual who files federal
income tax returns on a calendar year basis, owns
investment property (Property 1) with a fair market
value of $100x and an adjusted basis of $40x.Cen-
ters into an agreement withQI, a qualified interme-
diary, to facilitate a deferred like-kind exchange. On
May 6, Year 1,Ctransfers Property 1 toQIandQI
transfers Property 1 to a third party in exchange for
$100x.Cintends that the $100x held byQIbe used
byQIto acquireC’s replacement property. On June 1,
Year 1,Cidentifies Property 2 as replacement prop-
erty. On June 15, Year 1,QInotifiesCthat it has filed
for bankruptcy protection and cannot acquire replace-
ment property. Consequently,Cfails to acquire Prop-
erty 2 or any other replacement property within the
exchange period. As of December 31, Year 1,QI’s
bankruptcy proceedings are on-going andChas re-
ceived none of the $100x proceeds fromQIor any
other source. On September 1, Year 2,QIexits from
bankruptcy and the bankruptcy plan of reorganization
provides thatCwill receive $35x in October of Year
2 in partial satisfaction ofQI’s obligation under the
exchange agreement. The bankruptcy plan also pro-
vides that, depending on various facts and circum-
stances described in the reorganization plan,Cmay
receive a payment in February of Year 3. On Octo-
ber 2, Year 2,QIpaysC$35x. On February 3, Year
3,Cis notified that there will be no Year 3 payment
and that the $35x received byCin Year 2 represents
full satisfaction ofQI’s obligation under the exchange
agreement.Creceives no other payments attributable
to the relinquished property.
Cis within the scope of this revenue procedure
and thus may report the failed like-kind exchange due
to the QI default in accordance with this section 4.
Accordingly,Cis not required to recognize gain in
Year 1.Crecognizes gain in Year 2.C’s selling price
is $100x (the amount realized by theQI
on the sale
of the relinquished property because, by stating that
Cmay receive a payment in Year 3, the bankruptcy
plan did not specify by the end of Year 2, the first
year in whichCreceives a payment attributable to
the relinquished property, the amountCwill receive
in full satisfaction ofC’s claim). Because there is no
satisfied or assumed indebtedness,C’s contract price
also is $100x.C’s gross profit is $60x (the selling
price ($100x) minus the adjusted basis ($40x)).C’s
gross profit ratio is 60/100 (the gross profit over the
contract price). Thus,Cmust recognize gain in Year 2
of $21x (the payment attributable to the relinquished
property ($35x) multiplied by 60/100). In Year 3,
Cis entitled to a § 165 loss deduction of $5x, the
excess ofC’s adjusted basis ($40x) over the payments
attributable to the relinquished property ($35x).Cis
also entitled to a § 165 loss deduction of $21x in Year
3, the amount of gain thatCrecognized in Year 2.
Example 5.D, an individual who uses the cash
receipts and disbursements method of accounting and
files federal income tax returns on a calendar year ba-
sis, owns investment property (Property 1) with a fair
March 22, 20104582010–12 I.R.B.

market value of $150x and an adjusted basis of $50x.
Denters into an agreement withQI, a qualified inter-
mediary, to facilitate a deferred like-kind exchange.
On May 6, Year 1,Dtransfers Property 1 toQIand
QItransfersProperty1toathird party in exchange
for $150x.Dintends that the $150x held byQIbe
used byQIto acquireD’s replacement property. On
June 1, Year 1,Didentifies Property 2 as replace-
ment property. On June 15, Year 1,QInotifiesD
that it has filed for bankruptcy protection and cannot
acquire replacement property. Consequently,Dfails
to acquire Property 2 or any other replacement prop-
erty within the exchange period. As of December
31, Year 1,QI’s bankruptcy proceedings are on-going
andDhas received none of the $150x proceeds from
QIor any other source. On July 1, Year 2,QIexits
from bankruptcy and the bankruptcy court approves
the trustee’s final report, which shows thatDwill be
paid, in August of Year 3, $130x in full satisfaction
ofQI’s obligation under the exchange agreement.D
receives the $130x payment on August 1, Year 3 and
does not receive any other payment attributable to the
relinquished property. Assume that the selling price
of Property 1 is less than $250,000 and that, based on
§ 483, $5x of the $130x payment is unstated interest.
Dis within the scope of this revenue procedure
and thus may report the failed like-kind exchange due
to the QI default in accordance with this section 4.D
is not required to recognize gain in Year 1 or Year 2
becauseDdid not receive any payments attributable
to the relinquished property in those years. Further,
§ 483 applies toD’s Year 3 payment because the pay-
ment was due more than 6 months after the safe har-
bor sale date andDreceived the payment more than
1 year after such date. See § 483(c). Under section
4.09(1) of this revenue procedure,D’s selling price
is $125x ($130x minus the $5x of unstated interest).
D’s contract price also is $125x because there is no
assumed or satisfied indebtedness.D’s gross profit is
$75x (the selling price ($125x) minus the adjusted ba-
sis ($50x)).D’s gross profit ratio is 75/125 (the gross
profit over the contract price).Dmust recognize gain
in Year 3 of $75x (the payment attributable to the re-
linquished property ($125x) multiplied byD’s gross
profit ratio (75/125)). In addition,Dmust include
$5x of the $130x payment in income in Year 3 as
interest income. See § 1.446–2. Furthermore, even
though the payment attributable to the relinquished
property ($125x) is less than the $150x proceeds re-
ceived by the QI,Dis not entitled to a § 165 loss de-
duction because the payment attributable to the re-
linquished property exceedsD’s adjusted basis in the
relinquished property ($50x).
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective for
taxpayers whose like-kind exchanges fail
due to a QI default occurring on or af-
ter January 1, 2009. A taxpayer who is
within the scope of this revenue proce-
dure may, subject to the limitations on
credit or refund under § 6511, file an orig-
inal or amended return to report a deferred
like-kind exchange that failed due to a QI
default in a taxable year ending before Jan-
uary 1, 2009, in accordance with this rev-
enue procedure.
SECTION 6. REQUEST FOR
COMMENTS
The Service and the Treasury Depart-
ment are studying whether additional guid-
ance is appropriate to address the effect of
a bankruptcy of a qualified intermediary
on a taxpayer that is attempting to com-
plete a like-kind exchange. For exam-
ple, existing regulations allow for the pro-
ceeds from the disposition of relinquished
property to be held in such a way that
they do not become property of a quali-
fied intermediary’s bankruptcy estate. The
Service and the Treasury Department are
studying whether these regulatory provi-
sions should be modified so that they may
be used in a more efficient manner. The
Service and the Treasury Department re-
quest comments on these issues.
Comments should be submitted in writ-
ing on or before April 12, 2010, and should
include a reference to Rev. Proc. 2010–14.
Submissions should be sent to:
Internal Revenue Service
Attn: CC:PA:LPD:PR
(Rev. Proc. 2010–14), Room 5203
P. O. Box 7604
Ben Franklin Station
Washington, DC 20044
Submissions also may be hand de-
livered Monday through Friday between
the hours of 8 a.m. and 4 p.m. to
CC:PA:LPD:PR (Rev. Proc. 2010–14),
Courier’s Desk, Internal Revenue Service,
1111 Constitution Avenue, N.W., Wash-
ington, DC. Alternatively, comments may
be submitted electronically directly to
the IRS via the following e-mail address:
Notice.comments@irscounsel.treas.gov.
Please include “Rev. Proc. 2010–14” in
the subject line of any electronic commu-
nication. All comments will be available
for public inspection and copying.
SECTION 7. DRAFTING
INFORMATION
The principal author of this revenue
procedure is J. Peter Baumgarten of the
Office of Associate Chief Counsel (In-
come Tax and Accounting). For further
information regarding this revenue pro-
cedure, contact Mr. Baumgarten at (202)
622–4920 (not a toll-free call).
2010–12 I.R.B.459March 22, 2010

Part IV. Items o
fGeneralInterest
Unified Rule f
or Loss on
Subsidiary St
ock; Correction
Announcement 2010–18
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correcting amendment.
SUMMARY: This document contains a
correction to final regulations (T.D. 9424,
2008–44 I.R.B. 1012) that were published
in theFederal Registeron Wednesday,
September 17, 2008 (73 FR 53934). The
regulations apply to corporations filing
consolidated returns, and corporations
that enter into certain tax-free reorganiza-
tions. The regulations provide rules for
determining the tax consequences of a
member’s transfer (including by deconsol-
idation and worthlessness) of loss shares
of subsidiary stock.
DATES:Effective Date: This correction is
effective on March 5, 2010, and is applica-
ble on September 17, 2008.
FOR FURTHER INFORMATION
CONTACT: Maury Passman, (202)
622–7550 or Theresa Abell, (202)
622–7700 (not toll-free numbers).
SUPPLEMENTAR
Y INFORMATION:
Background
The final regu
lations (T.D. 9424) that
are the subjec
t of this document are under
sections 337,
358, 362 and 1502 of the
Internal Reve
nue Code.
Need for Corre
ction
As published,
the final regulations
(T.D. 9424) c
ontain an error that may
provetobemi
sleading and is in need of
clarificati
on. The final regulations re-
vised §1.150
2–35(a) to provide that, in
general, §1
.1502–35 would only apply to
transactio
ns completed prior to Septem-
ber 17, 2008
. The final regulations also
revised the
operative rules in §1.1502–35.
However, th
e effective date prescribed in
§1.1502–3
5(j) appeared to preclude the
applicati
on of the revised §1.1502–35 to
transacti
ons completed prior to Septem-
ber 17, 200
8. The final regulations are
clarified
to provide that the revised rules
in §1.150
2–35 (including the ten-year
terminat
ion of application of §1.1502–35
describe
d in Background section 2.A. of
the pream
ble) apply after September 16,
2008, to
all transactions subject to that
section
.
*****
Correction of
Publication
Accordingly, 26 CFR part 1 is cor-
rected by making the following correcting
amendment:
PART 1—INCOME TAXES
Paragraph 1.
The authority citation for
part 1 conti
nues to read in part as follows:
Authority: 2
6U.S.C.7805***
Par. 2. Secti
on 1.1502–35 is amended
by revising t
he first sentence of paragraph
(j) to read a
s follows:
§1.1502–35 Transfers of subsidiary stock
and deconsolidations of subsidiaries.
*****
(j)Effective/applicability dates.This
section applies after September 16, 2008.
***
*****
LaNita Va
n Dyke,
Chief, Pu
blications and
Regulati
ons Branch,
Legal Pro
cessing Division,
Associa
te Chief Counsel
(Proced
ure and Administration).
(Filed b
y the Office of the Federal Register on March 4, 2010,
8:45 a.m., and published in the issue of the Federal Register
for March 5, 2010, 75 F.R. 10172)
March 22, 20104602010–12 I.R.B.

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
2010–12 I.R.B.iMarch 22, 2010

Numerical Finding List
1
Bulletins 2010–1 through 2010–12
Announcements:
2010-1, 2010-4 I.R.B.333
2010-2, 2010-2 I.R.B.271
2010-3, 2010-4 I.R.B.333
2010-4, 2010-5 I.R.B.384
2010-5, 2010-6 I.R.B.402
2010-6, 2010-6 I.R.B.402
2010-7, 2010-6 I.R.B.403
2010-8, 2010-7 I.R.B.408
2010-9, 2010-7 I.R.B.408
2010-10, 2010-7 I.R.B.410
2010-11, 2010-10 I.R.B.438
2010-12, 2010-7 I.R.B.410
2010-13, 2010-8 I.R.B.426
2010-14, 2010-11 I.R.B.449
2010-15, 2010-10 I.R.B.438
2010-16, 2010-11 I.R.B.450
2010-18, 2010-12 I.R.B.460
Notices:
2010-1, 2010-2 I.R.B.251
2010-2, 2010-2 I.R.B.251
2010-3, 2010-2 I.R.B.253
2010-4, 2010-2 I.R.B.253
2010-5, 2010-2 I.R.B.256
2010-6, 2010-3 I.R.B.275
2010-7, 2010-3 I.R.B.296
2010-8, 2010-3 I.R.B.297
2010-9, 2010-3 I.R.B.298
2010-10, 2010-3 I.R.B.299
2010-11, 2010-4 I.R.B.326
2010-12, 2010-4 I.R.B.326
2010-13, 2010-4 I.R.B.327
2010-14, 2010-5 I.R.B.344
2010-15, 2010-6 I.R.B.390
2010-16, 2010-6 I.R.B.396
2010-19, 2010-7 I.R.B.404
2010-20, 2010-8 I.R.B.422
2010-21, 2010-12 I.R.B.451
2010-22, 2010-10 I.R.B.435
2010-23, 2010-11 I.R.B.441
2010-24, 2010-12 I.R.B.452
Proposed Regulations:
REG-132232-08, 2010-6 I.R.B.401
REG-137036-08, 2010-6 I.R.B.398
REG-101896-09, 2010-5 I.R.B.347
REG-117501-09, 2010-11 I.R.B.442
REG-131028-09, 2010-4 I.R.B.332
REG-148681-09, 2010-11 I.R.B.443
Revenue Procedures:
2010-1, 2010-1 I.R.B.1
2010-2, 2010-1 I.R.B.90
2010-3, 2010-1 I.R.B.110
2010-4, 2010-1 I.R.B.122
2010-5, 2010-1 I.R.B.165
2010-6, 2010-1 I.R.B.193
2010-7, 2010-1 I.R.B.231
2010-8, 2010-1 I.R.B.234
2010-9, 2010-2 I.R.B.258
2010-10, 2010-3 I.R.B.300
2010-11, 2010-2 I.R.B.269
2010-12, 2010-3 I.R.B.302
2010-13, 2010-4 I.R.B.329
2010-14, 2010-12 I.R.B.456
2010-15, 2010-7 I.R.B.404
2010-17, 2010-8 I.R.B.425
2010-18, 2010-9 I.R.B.451
Revenue Rulings:
2010-1, 2010-2 I.R.B.248
2010-2, 2010-3 I.R.B.272
2010-3, 2010-3 I.R.B.272
2010-4, 2010-4 I.R.B.309
2010-5, 2010-4 I.R.B.312
2010-6, 2010-6 I.R.B.387
2010-7, 2010-8 I.R.B.417
2010-8, 2010-10 I.R.B.432
Treasury Decisions:
9474, 2010-4 I.R.B.322
9475, 2010-4 I.R.B.304
9476, 2010-5 I.R.B.336
9477, 2010-6 I.R.B.385
9478, 2010-4 I.R.B.315
9480, 2010-11 I.R.B.439
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin
2009–52, dated December 28, 2009.
March 22, 2010ii2010–12 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2010–1 through 2010–12
Announcements:
2009-51
Supplemented and superseded by
Ann. 2010-16, 2010-11 I.R.B.450
2010-4
Corrected by
Ann. 2010-10, 2010-7 I.R.B.410
Notices:
2005-88
Superseded by
Notice 2010-13, 2010-4 I.R.B.327
2008-41
Modified by
Notice 2010-7, 2010-3 I.R.B.296
2008-55
Modified by
Notice 2010-3, 2010-2 I.R.B.253
2008-88
Modified by
Notice 2010-7, 2010-3 I.R.B.296
2008-113
Modified by
Notice 2010-6, 2010-3 I.R.B.275
2008-115
Modified by
Notice 2010-6, 2010-3 I.R.B.275
2009-11
Amplified by
Notice 2010-9, 2010-3 I.R.B.298
2009-13
Obsoleted by
T.D. 9478, 2010-4 I.R.B.315
REG-131028-09, 2010-4 I.R.B.332
2009-38
Amplified and superseded by
Notice 2010-2, 2010-2 I.R.B.251
2009-62
Modified and supplemented by
Notice 2010-23, 2010-11 I.R.B.441
Proposed Regulations:
REG-127270-06
Hearing scheduled by
Ann. 2010-6, 2010-6 I.R.B.402
Revenue Procedures:
80-59
Modified and superseded by
Rev. Proc. 2010-11, 2010-2 I.R.B.269
87-35
Obsoleted by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2008-14
Updated by
Rev. Proc. 2010-15, 2010-7 I.R.B.404
2009-1
Superseded by
Rev. Proc. 2010-1, 2010-1 I.R.B.1
2009-2
Superseded by
Rev. Proc. 2010-2, 2010-1 I.R.B.90
2009-3
Superseded by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2009-4
Superseded by
Rev. Proc. 2010-4, 2010-1 I.R.B.122
2009-5
Superseded by
Rev. Proc. 2010-5, 2010-1 I.R.B.165
2009-6
Superseded by
Rev. Proc. 2010-6, 2010-1 I.R.B.193
2009-7
Superseded by
Rev. Proc. 2010-7, 2010-1 I.R.B.231
2009-8
Superseded by
Rev. Proc. 2010-8, 2010-1 I.R.B.234
2009-9
Superseded by
Rev. Proc. 2010-9, 2010-2 I.R.B.258
2009-15
Amplified and superseded by
Rev. Proc. 2010-12, 2010-3 I.R.B.302
2009-25
Superseded by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2009-55
Corrected by
Ann. 2010-11, 2010-10 I.R.B.438
2010-1
Corrected by
Ann. 2010-5, 2010-6 I.R.B.402
Revenue Rulings:
67-436
Obsoleted by
REG-101896-09, 2010-5 I.R.B.347
92-19
Supplemented in part by
Rev. Rul. 2010-7, 2010-8 I.R.B.417
2008-52
Supplemented and superseded by
Rev. Rul. 2010-2, 2010-3 I.R.B.272
Treasury Decisions:
9424
Corrected by
Ann. 2010-18, 2010-12 I.R.B.460
9443
Corrected by
Ann. 2010-8, 2010-7 I.R.B.408
9458
Corrected by
Ann. 2010-7, 2010-6 I.R.B.403
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin 2009–52, dated December 28,
2009.
2010–12 I.R.B.iiiMarch 22, 2010

March 22, 20102010–12 I.R.B.

2010–12 I.R.B.March 22, 2010

March 22, 20102010–12 I.R.B.

INTERNAL REVENUE BULLETIN
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