rp-01-59.pdf

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Part III
Administrative, Procedural, and Miscellaneous
26 CFR 601.602: Tax forms and instructions.
(Also Part I, §§ 1, 24, 25A, 32, 59, 63, 68, 132, 135, 151, 170, 213, 220, 512, 513,
685, 877, 2032A, 2503, 2523, 2631, 4001, 4003, 4261, 6033, 6039F, 6323, 6334,
6601, 7430, 7702B)
REV. PROC. 2001-59
Table of Contents
SECTION 1. PURPOSE
SECTION 2. CHANGES
SECTION 3. 2002 ADJUSTED ITEMS
Code Section
.01 Tax Rate Tables 1(a)-(e)
.02 Unearned Income of Minor Children Taxed 1(g)
as if Parent's Income ("Kiddie Tax")
.03 Child Tax Credit24
.04 Hope and Lifetime Learning Credits 25A
.05 Earned Income Tax Credit 32
.06 Alternative Minimum Tax Exemption for a Child59(j)
Subject to the "Kiddie Tax"

.07 Standard Deduction 63
.08 Overall Limitation on Itemized Deductions 68
.09 Qualified Transportation Fringe 132(f)
.10 Income from United States Savings Bonds 135
for Taxpayers Who Pay Qualified Higher
Education Expenses
.11 Personal Exemption 151
.12 Eligible Long-Term Care Premiums 213(d)(10)
.13 Medical Savings Accounts 220
.14 Treatment of Dues Paid to Agricultural 512(d)
or Horticultural Organizations.
.15 Insubstantial Benefit Limitations for 513(h)
Contributions Associated with Charitable
Fund-Raising Campaigns
.16 Funeral Trusts 685
.17 Expatriation to Avoid Tax 877
.18 Valuation of Qualified Real Property 2032A
in Decedent's Gross Estate
.19 Annual Exclusion for Gifts 2503 & 2523
.20 Generation-Skipping Transfer Tax Exemption 2631
.21 Luxury Automobile Excise Tax 4001 & 4003
.22 Passenger Air Transportation Excise Tax 4261
.23 Reporting Exception for Certain Exempt 6033(e)(3)
Organizations with Nondeductible
Lobbying Expenditures
.24 Notice of Large Gifts Received from 6039F
Foreign Persons

.25 Persons against Which a Federal Tax Lien 6323
is Not Valid
.26 Property Exempt from Levy 6334
.27 Interest on a Certain Portion of the 6601(j)
Estate Tax Payable in Installments
.28 Attorney Fee Awards 7430
.29 Periodic Payments Received under Qualified 7702B(d)
Long-Term Care Insurance Contracts or under
Certain Life Insurance Contracts

SECTION 4. EFFECTIVE DATE
SECTION 5. DRAFTING INFORMATION
SECTION 1. PURPOSE
This revenue procedure sets forth inflation adjusted items for 2002.
SECTION 2. CHANGES
.01 Section 201 of the Economic Growth and Tax Relief Reconciliation Act of
2001 (EGTRRA) amended § 24 to increase the amount of credit under § 24 that may
be refundable. The value in § 24(d)(1)(B)(i) used in determining the new potentially
refundable amount is adjusted for inflation.
.02 The amounts in § 25A(b)(1) which are used in determining the Hope
Scholarship Credit and the amounts in § 25A(d)(2)(A)(ii) which are used in
determining the reduction in the amount of the Hope Scholarship and Lifetime
Learning Credits otherwise allowable under § 25A(a) are adjusted for inflation.

SECTION 3. 2002 ADJUSTED ITEMS
.01 Tax Rate Tables. For tax years beginning in 2002, the tax rate tables under § 1
are as follows:

TABLE 1 - Section 1(a).-- MARRIED INDIVIDUALS FILING JOINT RETURNS AND
SURVIVING SPOUSES
If Taxable Income Is: The Tax Is:
Not Over $12,000 10% of the taxable income
Over $12,000 but $1,200 plus 15% of
not over $46,700excess over $12,000
Over $46,700 but $6,405 plus 27% of
not over $112,850excess over $46,700
Over $112,850 but $24,265.50 plus 30% of
not over $171,950excess over $112,850
Over $171,950 but $41,995.50 plus 35% of
not over $307,050excess over $171,950
Over $307,050$89,280.50 plus 38.6% of
excess over $307,050
TABLE 2 - Section 1(b). -- HEADS OF HOUSEHOLDS
If Taxable Income Is:The Tax is:
Not Over $10,000 10% of the taxable income
Over $10,000 but $1,000 plus 15% of
not over $37,450 excess over $10,000
Over $37,450 but $5,117.50 plus 27% of
not over $96,700the excess over $37,450
Over $96,700 but$21,115 plus 30% of
not over $156,600the excess over $96,700
Over $156,600 but$39,085 plus 35% of
not over $307,050the excess over $156,600
Over $307,050$91,742.50 plus 38.6% of
the excess over $307,050

TABLE 3 - Section 1(c). -- UNMARRIED INDIVIDUALS (OTHER THAN SURVIVING
SPOUSES AND HEADS OF HOUSEHOLDS).
If Taxable Income Is:The Tax Is:
Not over $6,00010% of the taxable income
Over $6,000 but$600 plus 15% of
not over $27,950the excess over $6,000
Over $27,950 but$3,892.50 plus 27% of
not over $67,700the excess over $27,950
Over $67,700 but$14,625 plus 30% of
not over $141,250the excess over $67,700
Over $141,250 but$36,690 plus 35% of
not over $307,050the excess over $141,250
Over $307,050 $94,720 plus 38.6% of
the excess over $307,050
TABLE 4 - Section 1(d). -- MARRIED INDIVIDUALS FILING SEPARATE RETURNS
If Taxable Income Is:The Tax Is:
Not Over $6,000 10% of the taxable income
Over $6,000 but $600.00 plus 15% of
not over $23,350the excess over $6,000
Over $23,350 but $3,202.50 plus 27% of
not over $56,425the excess over $23,350
Over $56,425 but $12,132.75 plus 30% of
not over $85,975the excess over $56,425
Over $85,975 but $20,997.75 plus 35% of
not over $153,525 the excess over $85,975

Over $153,525$44,640.25 plus 38.6% of
the excess over $153,525

TABLE 5 - Section 1(e). -- ESTATES AND TRUSTS
If Taxable Income Is: The Tax Is:
Not Over $1,850 15% of the taxable income
Over $1,850 $277.50 plus 27% of
but not over $4,400 the excess over $1,850

Over $4,400 $966.00 plus 30% of
but not over $6,750 the excess over $4,400
Over $6,750 $1,671.00 plus 35% of
but not over $9,200 the excess over $6,750
Over $9,200 $2,528.50 plus 38.6% of
the excess over $9,200
.02 Unearned Income of Minor Children Taxed as if Parent’s Income (the “Kiddie
Tax”). For tax years beginning in 2002, the amount in § 1(g)(4)(A)(ii)(I), which is used to
reduce the net unearned income reported on the child's return that is subject to the “kiddie
tax,” is $750. (This amount is the same as the $750 standard deduction amount provided
in section 3.07(2) of this revenue procedure.) The same $750 amount is also used for
purposes of § 1(g)(7) (that is, determining whether a parent may elect to include a child’s
gross income in the parent’s gross income and for calculating the “kiddie tax”). For
example, one of the requirements for such a parental election is that a child’s gross
income be more than the amount referenced in § 1(g)(4)(A)(ii)(I) but less than 10 times
such amount; thus, a child’s gross income for 2002 must be more than $750 but less than
$7,500 to satisfy that requirement.
.03 Child Tax Credit. Section 201 of the Economic Growth and Tax Relief
Reconciliation Act of 2001 (EGTRRA) amended § 24 to increase the amount of credit
under § 24 that may be refundable. The value in § 24(d)(1)(B)(i) used in determining the
new potentially refundable amount is adjusted for inflation. For tax years beginning in
2002, that value is $10,350.
.04 Hope and Lifetime Learning Credits.
(1) For taxable years beginning in 2002, 100 percent of qualified tuition and related
expenses not in excess of $1,000 and 50 percent of such expenses in excess of $1,000
are taken into account in determining the amount of the Hope Scholarship Credit under
§ 25A(b)(1).

(2) For tax years beginning in 2002, a taxpayer’s modified gross income in excess of
$41,000 ($82,000 in the case of a joint return) is taken into account in determining the
reduction under § 25A(d)(2)(A)(ii) in the amount of the Hope Scholarship and Lifetime
Learning Credits otherwise allowable under § 25A(a).
.05 Earned Income Tax Credit.
(1) In general. For tax years beginning in 2002, the following amounts are used to
determine the earned income tax credit under § 32(b). The "earned income amount" is the
amount of earned income at or above which the maximum amount of the earned income
tax credit is allowed. The "threshold phaseout amount" is the amount of adjusted gross
income (or, if greater, earned income) above which the maximum amount of the credit
begins to phase out. The "completed phaseout amount" is the amount of adjusted gross
income (or if greater, earned income) at or above which no credit is allowed.
Item Number of Qualifying Children
One Two or More None

Earned Income Amount$ 7,370 $10,350 $ 4,910
Maximum Amount of Credit$ 2,506 $ 4,140 $ 376
Threshold Phaseout Amount $13,520$13,520 $ 6,150
Completed Phaseout Amount $29,201 $33,178 $11,060
Threshold Phaseout Amount $14,520 $14,520 $ 7,150
(Married Filing Jointly)
Completed Phaseout Amount
(Married Filing Jointly)$30,201 $34,178$12,060
The Internal Revenue Service, in the instructions for the Form 1040 series, provides
tables showing the amount of the earned income tax credit for each type of taxpayer.
(2) Excessive investment income. For tax years beginning in 2002, the earned
income tax credit is denied under §32(i) if the aggregate amount of certain investment
income exceeds $2,550.
.06 Alternative Minimum Tax Exemption for a Child Subject to the "Kiddie Tax." For
tax years beginning in 2002, in the case of a child to whom the § 1(g) "kiddie tax" applies,
the exemption amount under § 55 and § 59(j) for purposes of the alternative minimum tax
under § 55 may not exceed the sum of (A) such child's earned income for the taxable year,
plus (B) $5,500.
.07 Standard Deduction.
(1) In general. For tax years beginning in 2002, the standard deduction amounts
under § 63(c)(2) are as follows:

Filing Status Standard Deduction
MARRIED INDIVIDUALS FILING JOINT RETURNS
AND SURVIVING SPOUSES (§ 1(a)) $7,850
HEADS OF HOUSEHOLDS (§ 1(b)) $6,900
UNMARRIED INDIVIDUALS (OTHER THAN SURVIVING
SPOUSES AND HEADS OF HOUSEHOLDS) (§ 1(c)) $4,700
MARRIED INDIVIDUALS FILING SEPARATE
RETURNS (§ 1(d)) $3,925
(2) Dependent. For tax years beginning in 2002, the standard deduction amount
under § 63(c)(5) for an individual who may be claimed as a dependent by another taxpayer
may not exceed the greater of $750, or the sum of $250 and the individual's earned
income.
(3) Aged and blind. For tax years beginning in 2002, the additional standard
deduction amounts under § 63(f) for the aged and for the blind are $900 for each. These
amounts are increased to $1,150 if the individual is also unmarried and not a surviving
spouse.
.08 Overall Limitation on Itemized Deductions. For tax years beginning in 2002,
the "applicable amount" of adjusted gross income under § 68(b), above which the amount
of otherwise allowable itemized deductions is reduced under § 68, is $137,300 (or
$68,650 for a separate return filed by a married individual).
.09 Qualified Transportation Fringe. For tax years beginning in 2002, the monthly
limitation under § 132(f)(2)(A), regarding the aggregate fringe benefit exclusion amount for
transportation in a commuter highway vehicle and any transit pass, is $100. The monthly
limitation under § 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified
parking is $185.
.10 Income from United States Savings Bonds for Taxpayers Who Pay Qualified
Higher Education Expenses. For tax years beginning in 2002, the exclusion under § 135,
regarding income from United States savings bonds for taxpayers who pay qualified higher
education expenses, begins to phase out for modified adjusted gross income above
$86,400 for joint returns and $57,600 for other returns. This exclusion completely phases
out for modified adjusted gross income of $116,400 or more for joint returns and
$72,600 or more for other returns.

.11 Personal Exemption.
(1) Exemption amount. For tax years beginning in 2002, the personal
exemption amount under § 151(d) is $3,000.
(2) Phase out. For tax years beginning in 2002, the personal exemption amount
begins to phase out at, and is completely phased out after, the following adjusted gross
income amounts:
Filing Status AGI - Beginning AGI Above Which
of Phaseout Exemption Fully
Phased Out
Code ' 1(a) $206,000 $328,500
Code ' 1(b) $171,650 $294,150
Code ' 1(c) $137,300 $259,800
Code ' 1(d) $103,000 $164,250
.12 Eligible Long-Term Care Premiums. For tax years beginning in 2002, the
limitations under § 213(d), regarding eligible long-term care premiums includible in the
term "medical care," are as follows:
Attained age before the close of the taxable year: Limitation on premiums:
40 or less $ 240
More than 40 but not more than 50 $ 450
More than 50 but not more than 60 $ 900
More than 60 but not more than 70 $2,390
More than 70 $2,990
.13 Medical Savings Accounts.
(1) Self-only coverage. For tax years beginning in 2002, the term "high deductible
health plan" as defined in § 220(c)(2)(A) means, in the case of self-only coverage, a health
plan which has an annual deductible that is not less than $1,650 and not more than
$2,500, and under which the annual out-of-pocket expenses required to be paid (other
than for premiums) for covered benefits does not exceed $3,300.
(2) Family coverage. For tax years beginning in 2002, the term "high deductible
health plan" means, in the case of family coverage, a health plan which has an annual
deductible that is not less than $3,300 and not more than $4,950, and under which the
annual out-of-pocket expenses required to be paid (other than for premiums) for covered
benefits does not exceed $6,050.
.14 Treatment of Dues Paid to Agricultural or Horticultural Organizations. For tax
years beginning in 2002, the limitation under § 512(d)(1), regarding the exemption of

annual dues required to be paid by a member to an agricultural or horticultural
organization, is $120.
.15 Insubstantial Benefit Limitations for Contributions Associated with Charitable
Fund-Raising Campaigns.
(1) Low cost article. For tax years beginning in 2002, the unrelated business income
of certain exempt organizations under § 513(h)(2) does not include a "low cost article" of
$7.90 or less.
(2) Other insubstantial benefits. For tax years beginning in 2002, the $5, $25, and
$50 guidelines in section 3 of Rev. Proc. 90-12, 1990-1 C.B. 471 (as amplified and
modified), for disregarding the value of insubstantial benefits received by a donor in return
for a fully deductible charitable contribution under § 170, are $7.90, $39.50, and $79.00,
respectively.
.16 Funeral Trusts. For a contract entered into during calendar year 2002 for a
"qualified funeral trust," as defined in § 685, the trust may not accept aggregate
contributions by or for the benefit of an individual in excess of $7,700.
.17 Expatriation to Avoid Tax. For calendar year 2002 , the thresholds used
under § 877(a)(2), regarding whether an individual's loss of United States citizenship had
the avoidance of United States taxes as one of its principal purposes, are more than
$120,000 for "average annual net income tax" and $599,000 or more for "net worth."
.18 Valuation of Qualified Real Property in Decedent's Gross Estate. For an estate
of a decedent dying in calendar year 2002, if the executor elects to use the special use
valuation method under § 2032A for qualified real property, the aggregate decrease in the
value of qualified real property resulting from electing to use § 2032A that is taken into
account for purposes of the estate tax may not exceed $820,000.
.19 Annual Exclusion for Gifts.
(1) For calendar year 2002, the first $11,000 of gifts to any person (other than gifts
of future interests in property) are not included in the total amount of taxable gifts under
§ 2503 made during that year.
(2) For calendar year 2002, the first $110,000 of gifts to a spouse who is not a
citizen of the United States (other than gifts of future interests in property) are not included
in the total amount of taxable gifts under §§ 2503 and 2523(i)(2) made during that year.
.20 Generation-Skipping Transfer Tax Exemption. For calendar year 2002, the
generation-skipping transfer tax exemption under § 2631, which is allowed in determining
the "inclusion ratio" defined in § 2642, is $1,100,000.

.21 Luxury Automobile Excise Tax. For calendar year 2002, the excise tax under
§§ 4001 and 4003 is imposed on the first retail sale of a passenger vehicle (including
certain parts or accessories installed within six months of the date after the vehicle was
first placed in service), to the extent the price exceeds $40,000.
.22 Passenger Air Transportation Excise Tax. For calendar year 2002, the tax
under § 4261(c) on any amount paid (whether within or without the United States)
for any transportation of any person by air, if such transportation begins or ends in the
United States, generally is $13.20. However, in the case of a domestic segment beginning
or ending in Alaska or Hawaii as described in § 4261(c)(3), the tax only applies to
departures and is at the rate of $6.60.
.23 Reporting Exception for Certain Exempt Organizations with Nondeductible
Lobbying Expenditures. For tax years beginning in 2002, the annual per person,
family, or entity dues limitation to qualify for the reporting exception under § 6033(e)(3)
(and section 5.05 of Rev. Proc. 98-19, 1998-7 I.R.B. 30), regarding certain exempt
organizations with nondeductible lobbying expenditures, is $83 or less.
.24 Notice of Large Gifts Received from Foreign Persons. For tax years beginning in
2002, recipients of gifts from certain foreign persons may have to report these gifts under
§ 6039F if the aggregate value of gifts received in a taxable year exceeds $11,642.
.25 Persons against Which a Federal Tax Lien is Not Valid. For calendar year 2002,
a federal tax lien is not valid against (1) certain purchasers under § 6323(b)(4) that
purchased personal property in a casual sale for less than $1,130 or (2) a mechanic's
lienor under § 6323(b)(7) that repaired or improved certain residential property if the
contract price with the owner is not more than $5,660.
.26 Property Exempt from Levy. For calendar year 2002, the value of property
exempt from levy under § 6334(a)(2) (fuel, provisions, furniture, and other household
personal effects, as well as arms for personal use, livestock, and poultry) may not exceed
$6,780. The value of property exempt from levy under § 6334(a)(3) (books and tools
necessary for the trade, business, or profession of the taxpayer) may not exceed
$3,390.
.27 Interest on a Certain Portion of the Estate Tax Payable in Installments. For an
estate of a decedent dying in calendar year 2002, the dollar amount used to determine the
"2-percent portion" (for purposes of calculating interest under § 6601(j)) of the estate tax
extended as provided in § 6166 is $1,100,000.
.28 Attorney Fee Awards. For fees incurred in calendar year 2002, the attorney fee
award limitation under § 7430(c)(1)(B)(iii) is $150 per hour.

.29 Periodic Payments Received under Qualified Long-Term Care Insurance
Contracts or under Certain Life Insurance Contracts. For calendar year 2002, the stated
dollar amount of the per diem limitation under § 7702B(d)(4), regarding periodic payments
received under a qualified long-term care insurance contract or periodic payments
received under a life insurance contract that are treated as paid by reason of the death of
a chronically ill individual, is $210.
SECTION 4. EFFECTIVE DATE
.01 General Rule. Except as provided in section 4.02, this revenue procedure
applies to tax years beginning in 2002.
.02 Calendar Year Rule. This revenue procedure applies to transactions or events
occurring in calendar year 2002 for purposes of section 3.16 (funeral trusts), section 3.17
(expatriation to avoid tax), section 3.18 (valuation of qualified real property in decedent's
gross estate), section 3.19 (annual exclusion for gifts), section 3.20 (generation-skipping
transfer tax exemption), section 3.21 (luxury automobile excise tax), section 3.22
(passenger air transportation excise tax), section 3.25 (persons against which a federal tax
lien is not valid), section 3.26 (property exempt from levy), section 3.27 (interest on a
certain portion of the estate tax payable in installments), section 3.28 (attorney fee
awards), and section 3.29 (periodic payments received under qualified long-term care
insurance contracts or under certain life insurance contracts).
SECTION 5. DRAFTING INFORMATION
The principal author of this revenue procedure is Richard Ennis of the Office of
Associate Chief Counsel (Income Tax and Accounting). For further information regarding
this revenue procedure, contact Mr. Ennis on (202) 622-7057 (not a toll-free call).