Internal Revenue Bulletin 1998-9 (PDF rendition): IRS Announcements

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

INCOME TAX
T.D. 8752, page 4.
Final regulations under sections 354, 355, and 356 of the
Code provide for nonrecognition of gain or loss on the re-
ceipt, in pursuance of a reorganization, of rights to acquire
stock of a corporation that is a party to the reorganization.
T.D. 8753, page 6.
REG–121755–97, page 13.
Temporary and proposed regulations provide guidance
under section 356(e) of the Code on when nonqualified pre-
ferred stock will not be treated as stock or securities for
purposes of sections 354, 355, and 356 of the Code. A
public hearing on the proposed regulations will be held on
May 5, 1998.
EMPLOYEE PLANS
Notice 98–15, page 8.
Weighted average interest rate update.Guidelines are
set forth for determining for February 1998, the weighted
average interest rate and the resulting permissible range of
interest rates used to calculate current liability for purposes
of the full funding limitation of section 412(c)(7) of the Code
as amended by the Omnibus Budget Reconciliation Act of
1987 and by the Uruguay Round Agreements Act (GATT).
EXEMPT ORGANIZATIONS
Announcement 98–16, page 17.
A list is given of organizations now classified as private foun-
dations.
ADMINISTRATIVE
REG–109333–97, page 9.
Proposed regulations under section 7702B of the Code re-
late to consumer protection with respect to qualified long-
term care insurance contracts. A public hearing will be held
on May 13, 1998.
REG–251502–96, page 14.
Proposed regulations under section 7433 of the Code relate
to civil causes of action for damages caused by unlawful col-
lection actions of officers and employees of the Internal
Revenue Service.
Announcement 98–17, page 16.
This announcement supersedes Announcement 98–6,
1998–5 I.R.B. 25, and clarifies Rev. Proc. 97–34, 1997–30
I.R.B. 14 dated July 28, 1997, regarding the use of the IRA,
SEP, and SIMPLE indicators on Form 5498 for magnetic or
electronic filing.
Internal Revenue
bbuulllleettiinn
Bulletin No. 1998–9
March 2, 1998
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 22.
Announcement of Disbarments and Suspensions begins on page 19.
Index for January-February begins on page 24.

Mission of the Service
The purpose of the Internal Revenue Service is to collect
the proper amount of tax revenue at the least cost; serve
the public by continually improving the quality of our prod-
ucts and services; and perform in a manner warranting
the highest degree of public confidence in our integrity, effi-
ciency, and fairness.
2
Statement of Principles
of Internal Revenue
Tax Administration
The function of the Internal Revenue Service is to adminis-
ter the Internal Revenue Code. Tax policy for raising revenue
is determined by Congress.
With this in mind, it is the duty of the Service to carry out that
policy by correctly applying the laws enacted by Congress;
to determine the reasonable meaning of various Code provi-
sions in light of the Congressional purpose in enacting them;
and to perform this work in a fair and impartial manner, with
neither a government nor a taxpayer point of view.
At the heart of administration is interpretation of the Code. It
is the responsibility of each person in the Service, charged
with the duty of interpreting the law, to try to find the true
meaning of the statutory provision and not to adopt a
strained construction in the belief that he or she is “protect-
ing the revenue.” The revenue is properly protected only
when we ascertain and apply the true meaning of the statute.
The Service also has the responsibility of applying and
administering the law in a reasonable, practical manner.
Issues should only be raised by examining officers when
they have merit, never arbitrarily or for trading purposes.
At the same time, the examining officer should never hesi-
tate to raise a meritorious issue. It is also important that
care be exercised not to raise an issue or to ask a court to
adopt a position inconsistent with an established Service
position.
Administration should be both reasonable and vigorous. It
should be conducted with as little delay as possible and
with great courtesy and considerateness. It should never
try to overreach, and should be reasonable within the
bounds of law and sound administration. It should, howev-
er, be vigorous in requiring compliance with law and it
should be relentless in its attack on unreal tax devices and
fraud.

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 of a permanent nature are consoli-
dated 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
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 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.
With the exception of the Notice of Proposed Rulemaking
and the disbarment and suspension list included in this part,
none of these announcements are consolidated in the Cumu-
lative Bulletins.
The first 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 first Bulletin of the succeeding semi-
annual period, respectively.
3
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.

March 2, 199841998–9 I.R.B.
Section 354.—Exchanges of
Stock and Securities in Certain
Reorganizations
26 CFR 1.354–1: Exchanges of stocks and
securities in certain reorganizations.
T.D. 8752
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
Reorganizations/Treatment of
Warrants as Securities
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations
SUMMARY: This document contains
final regulations that in certain instances
provide for nonrecognition of gain or loss
on the receipt, in pursuance of a reorgani-
zation, of rights to acquire stock of a cor-
poration that is a party to the reorganiza-
tion. These regulations change the
existing rules for such rights under sec-
tions 354, 355, and 356 of the Internal
Revenue Code. These regulations will af-
fect holders of these rights who are in-
volved in corporate reorganizations under
sections 355 and 368.
DATES: These regulations are effective
March 9, 1998.
FOR FURTHER INFORMATION CON-
TACT: Michael J. Danbury, (202) 622-
7750 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On December 23, 1996, the IRS and
Treasury Department published a notice of
proposed rulemaking (REG–249819–96
[1997–1 C.B. 793]) in the Federal Regis-
ter(61 F.R. 67508) containing proposed
amendments to the Income Tax Regula-
tions (26 CFR part 1) under sections 354,
355, and 356, relating to exchanges of
stock and securities in certain reorganiza-
tions and corporate divisions. Written and
oral comments responding to this notice
were received. There were no requests to
attend a public hearing and none was held.
After consideration of all comments re-
ceived, the proposed amendments are
adopted as revised by this Treasury deci-
sion. The principal changes to the regula-
tions, as well as the major comments and
suggestions, are discussed below.
Explanation of Provisions
A. The Proposed Regulations
In general, sections 354, 355, and 356
provide for nonrecognition of gain or loss,
in whole or in part, to a stockholder or se-
curity holder on the exchange of stock or
securities of parties to a reorganization and
in pursuance of a plan of reorganization.
The proposed regulations would extend
the nonrecognition rule of sections 354,
355, and 356 to certain rights to acquire
stock. Thus, for purposes of sections 354,
355, and 356, the proposed regulations
would treat rights to acquire stock issued
by a corporation that is a party to a reor-
ganization as securities of the corporation
with no principal amount. The preamble
to the proposed regulations provided that,
for this purpose, the term rights to acquire
stockissued by that corporation would
have the same meaning as the term has in
sections 305(d)(1) and 317(a). In addi-
tion, the preamble stated that the pro-
posed regulations would have no effect on
other Internal Revenue Code rules that
pertain to securities, including sections 83
and 421 through 424 and the regulations
thereunder.
B. Comments on the Proposed
Regulations
1. Elaboration on the Definition of
“Rights To Acquire Stock”
Commentators recommended that the
final regulations include an explicit defin-
ition of rights to acquire stock. They sub-
mitted particular examples for inclusion
in the definition.
The final regulations add a cross-refer-
ence to sections 305 and 317(a) in defin-
ing rights to acquire stock. This cross-
reference should provide sufficient
guidance in most cases for taxpayers to
determine the consequences on a receipt
of rights. The IRS and Treasury believe
that illustrating the terms of sections 305
and 317 is outside the scope of these regu-
lations. Accordingly, the final regulations
provide no definition other than the cross-
reference.
2. Treatment of Stock-For-Warrant
Exchanges
Section 1.354–1(d), Example 3,states
that section 354 does not apply to a share-
holder’s receipt of solely debt securities
in exchange for stock. Commentators re-
quested confirmation that section 354 also
does not apply to a shareholder’s receipt
of solely securities that are rights to ac-
quire stock in exchange for stock. The
final regulations confirm this result in Ex-
ample 4to §1.354–1(d).
3. Effective Date
These final regulations are effective
March 9, 1998. This accords with the de-
layed effective date in the proposed regu-
lations. Commentators requested more
immediate effectiveness.
The IRS and Treasury are concerned
that taxpayers who have planned transac-
tions based on the proposed regulations’
delayed effective date could be disadvan-
taged by a change in the effective date.
Accordingly, the final regulations retain
the delayed effective date.
4. Interrelationship With Section 83
The preamble to the proposed regula-
tions noted that the rules would apply to
rights to acquire stock only for purposes
of sections 354 through 356, and that such
rights may remain subject to other special
rules under the Internal Revenue Code
and the regulations including sections 83
and 421 through 424.
Commentators recommended an ex-
plicit statement to that effect in the final
regulations. The regulations adopt this
recommendation.
5. Effect in “B” Reorganizations
Commentators requested a review of
published guidance that concerns ex-
changes of rights to acquire stock as part
of a larger transaction that includes a
stock-for-stock reorganization under sec-
tion 368(a)(1)(B). The IRS intends to ad-
dress this issue in the near future.
6. No Principal Amount
Commentators sought clarification of
the proposed rule that rights to acquire
stock would have no principal amount.
Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

The IRS and Treasury add Examples 7,
8, and 9 to §1.356–3(b) to illustrate the
effect of a right to acquire stock having no
principal amount.
7. Comments Not Addressed in the Final
Regulations
Comments were received with regard
to the tax issues of rights to acquire stock
under sections 302, 305, 306, and 351.
Resolution of these issues is beyond the
scope of this project and they are not ad-
dressed herein.
8. Interrelationship With Nonqualified
Preferred Stock Provisions
In connection with the finalization of
these regulations, the IRS and Treasury
became aware that additional rules were
needed to coordinate these regulations
with the treatment of rights to acquire
nonqualified preferred stock and new sec-
tions 354(a)(2)(C), 355(a)(3)(D), and
356(e). See §1.356–6T (T.D. 8753) on
page 6 of this Bulletin.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in EO 12866.
Therefore, a regulatory assessment is not
required. It has also been determined that
section 553(b) of the Administrative Pro-
cedure Act (5 U.S.C. chapter 5) does not
apply to these regulations and, because
these regulations do not impose a collec-
tion of information requirement on small
entities, the Regulatory Flexibility Act (5
U.S.C. chapter 6) does not apply. Pur-
suant to section 7805(f) of the Internal
Revenue Code, the notice of proposed
rulemaking preceding these regulations
was submitted to the Chief Counsel for
Advocacy of the Small Business Admin-
istration for comment on its impact on
small business.
Drafting Information
The principal author of these regula-
tions is Michael J. Danbury of the Office
of Assistant Chief Counsel (Corporate).
However, other personnel from the IRS
and Treasury Department participated in
their development.
* * * * *
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read, in part, as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par 2.Section 1.354–1 is amended by:
1. In paragraph (d), redesignating Ex-
ample (1)through Example (3)as Exam-
ple 1through Example 3.
2. Adding Example 4to paragraph (d).
3. Revising paragraph (e).
The addition and revision read as fol-
lows:
§1.354–1 Exchanges of stock and
securities in certain reorganizations.
* * * * *
(d) * * *
Example 4.The facts are the same as in Example
3of this paragraph (d), except that C receives solely
rights to acquire stock in Corporation Z. Section
354 does not apply.
(e) Except as provided in §1.356–6T,
for purposes of section 354, the term se-
curitiesincludes rights issued by a party
to the reorganization to acquire its stock.
For purposes of this section and section
356(d)(2)(B), a right to acquire stock has
no principal amount. For this purpose,
rights to acquire stock has the same mean-
ing as it does under sections 305 and
317(a). Other Internal Revenue Code
provisions governing the treatment of
rights to acquire stock may also apply to
certain exchanges occurring in connection
with a reorganization. See, for example,
sections 83 and 421 through 424 and the
regulations thereunder. This paragraph
(e) applies to exchanges occurring on or
after March 9, 1998.
Par 3.Section 1.355–1 is amended by
removing the last sentence of paragraph
(b) and adding paragraph (c) to read as
follows:
§1.355–1 Distribution of stock and
securities of a controlled corporation.
* * * * *
(c) Stock rights.Except as provided in
§1.356-6T, for purposes of section 355,
the term securitiesincludes rights issued
by the distributing corporation or the con-
trolled corporation to acquire the stock of
that corporation. For purposes of this sec-
tion and section 356(d)(2)(B), a right to
acquire stock has no principal amount.
For this purpose, rights to acquire stock
has the same meaning as it does under
sections 305 and 317(a). Other Internal
Revenue Code provisions governing the
treatment of rights to acquire stock may
also apply to certain distributions occur-
ring in connection with a transaction de-
scribed in section 355. See, for example,
sections 83 and 421 through 424 and the
regulations thereunder. This paragraph
(c) applies to distributions occurring on or
after March 9, 1998.
Par 4. Section 1.356–3 is amended by:
1. Redesignating paragraph (b) as
paragraph (c).
2. Adding a new paragraph (b).
3. In newly designated paragraph (c),
redesignating Example (1)through Ex-
ample (6)as Example 1through Example
6.
4. Revising paragraph (c) introductory
text.
5. Adding Example 7through Example
9to paragraph (c).
The revisions and additions read as fol-
lows:
§1.356–3 Rules for treatment of
securities as “other property.”
* * * * *
(b) Except as provided in §1.356–6T,
for purposes of this section, a right to ac-
quire stock that is treated as a security for
purposes of section 354 or 355 has no
principal amount. Thus, such right is not
other propertywhen received in a trans-
action to which section 356 applies (re-
gardless of whether securities are surren-
dered in the exchange). This paragraph
(b) applies to transactions occurring on or
after March 9, 1998.
(c) In the examples in this paragraph
(c), stockmeans common stock and war-
rantsmeans rights to acquire common
stock. The following examples illustrate
the rules of paragraph (a) of this section:
* * * * *
1998–9 I.R.B5March 2, 1998

Example 7. G, an individual, exchanged stock for
stock and a warrant. The warrant had no principal
amount. Thus, G received no excess principal
amount within the meaning of section 356(d).
Example 8.H, an individual, exchanged a war-
rant for stock and a warrant. The warrants had no
principal amount. Thus, H received no excess prin-
cipal amount within the meaning of section 356(d).
Example 9. I, an individual, exchanged a warrant
for stock and a debt security. The warrant had no
principal amount. The debt security had a $100
principal amount. I received $100 of excess princi-
pal amount within the meaning of section 356(d).
Michael P. Dolan,
Deputy Commissioner of
Internal Revenue.
Approved December 17, 1997.
Donald C. Lubick,
Acting Assistant Secretary of
the Treasury.
(Filed by the Office of the Federal Register on
January 5, 1998, 8:45 a.m., and published in the
issue of the Federal Register for January 6, 1998, 63
F.R. 409)
Section 356.—Receipt of
Additional Consideration
26 CFR 1.356–6T: Rules for treatment of
nonqualified preferred stock as “other property”
(temporary).
T.D. 8753
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
Reorganizations; Nonqualified
Preferred Stock
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Temporary regulations.
SUMMARY: This document contains a
temporary regulation providing guidance
under section 356(e) of the Internal Rev-
enue Code (Code) on when nonqualified
preferred stock (as defined in section
351(g)(2)) will not be treated as stock or
securities for purposes of sections 354,
355, and 356 of the Code. The guidance
also addresses the treatment of the receipt
of a right to acquire nonqualified pre-
ferred stock. The temporary regulation
provides that in some circumstances the
terms stockand securitieswill not include
nonqualified preferred stock, or a right to
acquire such stock, when received in ex-
change for stock or rights to acquire
stock. The text of this temporary regula-
tion also serves as the text of REG–
121755–97, page 13 of this Bulletin.
DATES: This regulation is effective
March 9, 1998.
FOR FURTHER INFORMATION CON-
TACT: Concerning the temporary regula-
tion, Michael J. Danbury, (202) 622-7750
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
A. In General
This document contains a temporary
regulation under section 356(e) of the In-
ternal Revenue Code as added by section
1014 of the Taxpayer Relief Act of 1997
(TRA of 1997), Public Law 105–34. Sec-
tion 1014 of the TRA of 1997, enacted on
August 5, 1997, amended sections 351,
354, 355, 356, and 1036 of the Code. As
amended, sections 354, 355, and 356, in
general, provide that nonqualified pre-
ferred stock (as defined in section
351(g)(2)) received in exchange for stock
other than nonqualified preferred stock
will not be treated as stock or securities
but, instead, will be treated as “other
property” or “boot.” As a result, unless
the transition rule of section 1014(f)(2) of
TRA of 1997 or another exception ap-
plies, the receipt of nonqualified preferred
stock will result in gain recognition.
Section 351(g)(4) provides authority to
issue regulations coordinating the rules
for nonqualified preferred stock with
other provisions of the Code. In connec-
tion with the issuance of final regulations
treating certain rights to acquire stock as
securities which can be received tax-free
under sections 354, 355, and 356 (see
§§1.354–1(e), 1.355–1(c), and 1.356–3(b)
(T.D. 8752) also published on page 4 of
this Bulletin, the IRS and Treasury be-
came aware that additional rules were
needed to address the treatment of rights
to acquire nonqualified preferred stock to
coordinate with new sections 354(a)(2)-
(C), 355(a)(3)(D), and 356(e). Accord-
ingly, this temporary regulation provides
that, notwithstanding §§1.354–1(e),
1.355–1(c), and 1.356–3(b), a right to ac-
quire nonqualified preferred stock re-
ceived in exchange for stock other than
nonqualified preferred stock (or for a
right to acquire stock other than nonquali-
fied preferred stock) will not be treated as
a security, and that nonqualified preferred
stock received in exchange for stock other
than nonqualified preferred stock (or for a
right to acquire stock other than nonquali-
fied preferred stock) will not be treated as
stock or a security.
This regulation does not attempt to ad-
dress all questions and issues that may
arise regarding the exchange or receipt of
nonqualified preferred stock. The IRS
and Treasury recognize that further guid-
ance is necessary on these matters and in-
tend to provide it in the future. Accord-
ingly, comments are requested not only
on these temporary and proposed regula-
tions, but also with regard to the types of
guidance needed and other issues under
section 351(g) and the related provisions.
B. Effective Date
Except as provided in section 1014(f)(2)
of TRA of 1997, this temporary regulation
applies to nonqualified preferred stock (or
a right to acquire such stock) received in
connection with a transaction occurring on
or after March 9, 1998.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in EO 12866.
Therefore, a regulatory assessment is not
required. It has also been determined that
section 553(b) of the Administrative Pro-
cedure Act (5 U.S.C. chapter 5) does not
apply to this regulation. Because the reg-
ulation does not impose a collection of in-
formation on small entities, the Regula-
tory Flexibility Act (5 U.S.C. chapter 6)
does not apply. Pursuant to section
7805(f) of the Internal Revenue Code, the
notice of proposed rulemaking accompa-
nying this regulation is being sent to the
Small Business Administration for com-
ment on its impact on small business.
Drafting Information
The principal author of this regulation
is Michael J. Danbury of the Office of As-
sistant Chief Counsel (Corporate). How-
March 2, 199861998–9 I.R.B.

ever, other personnel from the IRS and
Treasury Department participated in its
development.
* * * * *
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read, in part, as fol-
lows:
Authority:26 U.S.C. 7805 * * *
Par. 2. Section 1.356–6T is added to
read as follows:
§1.356–6T Rules for treatment of
nonqualified preferred stock as “other
property” (temporary).
(a) In general. For purposes of
§§1.354–1(e), 1.355–1(c), and 1.356–
3(b), the terms stockand securitiesdo not
include—
(1) Nonqualified preferred stock, as de-
fined in section 351(g)(2), received in ex-
change for (or in a distribution with re-
spect to) stock, or a right to acquire stock,
other than nonqualified preferred stock; or
(2) A right to acquire such nonqualified
preferred stock, received in exchange for
(or in a distribution with respect to) stock,
or a right to acquire stock, other than non-
qualified preferred stock.
(b) Exceptions. The following excep-
tions apply:
(1) Certain recapitalizations.Para-
graph (a) of this section does not apply in
the case of a recapitalization under sec-
tion 368(a)(1)(E) of a family-owned cor-
poration as described in section 354(a)-
(2)(C)(ii)(II).
(2) Transition rule.Paragraph (a) of
this section does not apply to a transaction
described in section 1014(f)(2) of the Tax-
payer Relief Act of 1997 (111 Stat. 921).
(c) Effective date.This section applies
to nonqualified preferred stock, or a right
to acquire such stock, received in connec-
tion with a transaction occurring on or
after March 9, 1998.
Michael P. Dolan,
Deputy Commissioner of
Internal Revenue.
Approved December 17, 1997.
Donald C. Lubick,
Acting Assistant Secretary of
the Treasury.
(Filed by the Office of the Federal Register on
January 5, 1998, 8:45 a.m., and published in the
issue of the Federal Register for January 6, 1998, 63
F.R. 411)
1998–9 I.R.B7March 2, 1998

March 2, 199881998–9 I.R.B.
Weighted Average Interest Rate
Update
Notice 98–15
Notice 88–73 provides guidelines for
determining the weighted average interest
rate and the resulting permissible range of
interest rates used to calculate current lia-
bility for the purpose of the full funding
limitation of § 412(c)(7) of the Internal
Revenue Code as amended by the Om-
nibus Budget Reconciliation Act of 1987
and as further amended by the Uruguay
Round Agreements Act, Pub. L. 103–465
(GATT).
The average yield on the 30-year Trea-
sury Constant Maturities for January 1998
is 5.81 percent.
The following rates were determined
for the plan years beginning in the month
shown below.
Part III. Administrative, Procedural, and Miscellaneous
90% to 106%90% to 110%
WeightedPermissiblePermissible
MonthYearAverageRangeRange
February19986.736.06 to 7.146.06 to 7.41
Drafting Information
The principal author of this notice is
Donna Prestia of the Employee Plans Di-
vision. For further information regarding
this notice, call (202) 622-6076 between
2:30 and 3:30 p.m. Eastern time (not a
toll-free number). Ms. Prestia’s number
is (202) 622-7377 (also not a toll-free
number).

1998–9 I.R.B9March 2, 1998
Notice of Proposed Rulemaking
and Notice of Public Hearing
Qualified Long-Term Care
Insurance Contracts
REG–109333–97
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing and notice of public hearing.
SUMMARY: This document contains
proposed regulations relating to consumer
protection with respect to qualified long-
term care insurance contracts and relating
to events that will be considered material
changes with respect to long-term care in-
surance contracts issued prior to January
1, 1997. Changes to the applicable law
were made by the Health Insurance Porta-
bility and Accountability Act of 1996.
The regulations affect issuers of long-
term care insurance contracts and individ-
uals entitled to receive payments under
these contracts. The regulations are nec-
essary to provide these taxpayers with
guidance needed to comply with these
changes.
DATES: Written comments must be re-
ceived by April 2, 1998. Outlines of top-
ics to be discussed at the public hearing
scheduled for May 13, 1998, must be re-
ceived by April 2, 1998.
ADDRESSES: Send submissions to:
CC:DOM:CORP:R (REG–109333–97),
room 5226, Internal Revenue Service,
POB 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may be
hand delivered between the hours of 8
a.m. and 5 p.m. to CC:DOM:CORP:R
(REG–109333–97), Courier’s Desk, In-
ternal Revenue Service, 1111 Constitution
Avenue NW, Washington, DC. Alterna-
tively, taxpayers may also submit com-
ments electronically via the Internet by
selecting the “Tax Regs” option on the
IRS Home Page, or by submitting com-
ments directly to the IRS Internet site at
http://www.irs.ustreas.gov/prod/tax_regs/
comments.html. The public hearing will
be held in room 2615, Internal Revenue
Building, 1111 Constitution Avenue NW,
Washington, DC.
FOR FURTHER INFORMATION CON-
TACT: Concerning the regulations,
Katherine A. Hossofsky, (202) 622-3477;
concerning submissions and the hearing,
LaNita VanDyke, (202) 622-7190 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Income Tax Regula-
tions (26 CFR part 1) to provide rules
under section 7702B of the Internal Rev-
enue Code of 1986 (the “Code”). Section
7702B was added by sections 321 and
325 of the Health Insurance Portability
and Accountability Act of 1996 (Pub. L.
104–191, 110 Stat. 1936, 2054 and 110
Stat. at 2063)(“HIPAA”). Notice 97–31,
1997–21 I.R.B. 5 (May 6, 1997), provides
interim guidance on certain provisions of
section 7702B and other provisions of the
Code added or amended by HIPAA.
Explanation of Statutory Provisions
Section 7702B establishes the tax treat-
ment for qualified long-term care insur-
ance contracts. Sections 7702B(a)(1) and
(3) provide that a qualified long-term care
insurance contract is treated as an acci-
dent and health insurance contract and
that any employer plan providing cover-
age under a qualified long-term care in-
surance contract is treated as an accident
or health plan with respect to that cover-
age.
Section 7702B(a)(2) provides that
amounts (other than policyholder divi-
dends and premium dividends) received
under a qualified long-term care insur-
ance contract are generally excludable
from gross income as amounts received
for personal injuries and sickness.
Section 213(d)(1)(D) was amended by
section 322 of HIPAA to provide that eli-
gible long-term care premiums as defined
in section 213(d)(10) are deductible med-
ical expenses.
Under section 7702B(b)(1)(F), a quali-
fied long-term care insurance contract
must meet the consumer protection provi-
sions of section 7702B(g). In addition,
section 4980C imposes an excise tax on
issuers of qualified long-term care insur-
ance contracts that do not provide further
consumer protections.
Section 7702B of the Code applies to
contracts issued after December 31, 1996.
Section 321(f)(2) of HIPAA treats a con-
tract issued before January 1, 1997, as a
qualified long-term care insurance con-
tract under section 7702B(b) of the Code,
and services provided or reimbursed
under such a contract as qualified long-
term care services under section 7702B(c)
of the Code, provided the contract met the
long-term care requirements of the State
in which the contract was sitused at the
time the contract was issued. Section
321(f)(2) of HIPAA also provides that in
the case of an individual covered on De-
cember 31, 1996, by a State long-term
care plan under section 7702B(f) of the
Code, the terms of the plan on that date
are treated as a contract meeting the long-
term care insurance requirements of that
State.
Section 321(f)(4) of HIPAA provides
that for purposes of applying sections
101(f), 7702, and 7702A of the Code, nei-
ther the issuance of a rider that is treated
as a qualified long-term care insurance
contract nor the addition of any provision
required to conform any other long-term
care rider to the requirements applicable
to a qualified long-term care insurance
contract is treated as a modification or
material change of the contract.
Explanation of Provisions
The proposed regulations provide guid-
ance concerning
• the consumer protection require-
ments that apply to qualified long-term
care insurance contracts under sections
7702B(g), 7702B(b)(1)(F), and 4980C
of the Code; and
• the grandfather provisions of section
321(f)(2) of HIPAA under which pre-
1997 contracts are treated as qualified
long-term care insurance contracts if
certain conditions are met.
The standards in the proposed regulations
are based on safe harbors that were origi-
nally set forth in Notice 97–31. They re-
flect comments made by consumer repre-
sentatives, issuers of long-term care
insurance, independent sales agents, State
regulators of long-term care insurance,
Part IV. Items of General Interest

March 2, 1998101998–9 I.R.B.
and others. The proposed regulations are
intended to provide clear and workable
rules to assist those who want to ensure
that a contract issued before 1997 retains
its status as a qualified long-term care in-
surance contract.
Notice 97–31
Notice 97–31 was issued to provide in-
terim standards for taxpayers to use in in-
terpreting the new long-term care provi-
sions and to facilitate operation of the
insurance market by avoiding the need to
amend contracts. For example, Notice
97–31 includes interim guidance on the
determination of whether an individual is
a “chronically ill individual,” including
safe harbor definitions of the terms “sub-
stantial assistance,” “hands-on assis-
tance,” “standby assistance,” “severe cog-
nitive impairment,” and “substantial
supervision.” The standards contained in
Notice 97–31 include interim guidance on
both the consumer protection provisions
and the scope of the statutory grandfather
provisions that apply to long-term care in-
surance contracts issued before 1997.
Consumer Protection Requirements
Under sections 7702B(b)(1)(F),
7702B(g), and 4980C, qualified long-term
care insurance contracts and issuers of
those contracts are required to satisfy cer-
tain provisions of the model act and model
regulation promulgated by the National
Association of Insurance Commissioners
(NAIC) for long-term care insurance as of
January 1993. The requirements relate to
guaranteed renewability, unintentional
lapse, disclosure, prohibitions against
post-claims underwriting, inflation protec-
tion, and prohibitions against pre-existing
conditions exclusions and probationary
periods. Section 4980C imposes an excise
tax on an issuer of a qualified long-term
care insurance contract if, after 1996, the
issuer fails to satisfy certain requirements,
including requirements relating to applica-
tion forms, reporting, marketing, appropri-
ateness of recommended purchase, stan-
dard format outline of coverage, delivery
of a shopper’s guide, right to return, out-
line of coverage, and incontestability.
Most of these requirements are based on
the NAIC model act and regulation.
The proposed regulations reflect the
standards that were set forth in Notice 97–
31. For example, the consumer protection
requirements will be considered satisfied
if a contract complies with State law in a
State that has adopted the related NAIC
model or a more stringent version of the
model.
Pre-1997 Long-Term Care Insurance
Contracts
Section 321(f)(2) of HIPAA provides
that a contract issued before January 1,
1997, is treated as a qualified long-term
care insurance contract if the contract met
the “long-term care insurance require-
ments of the State” in which the contract
was sitused at the time it was issued.
Under the proposed regulations, the date
on which a long-term care insurance con-
tract other than a group long-term care in-
surance contract is issued is generally the
date assigned to the contract by the insur-
ance company. In no event is the issue
date earlier than the date on which the
policyholder submitted a signed applica-
tion for coverage to the insurance com-
pany. In addition, if the period between
the date of application and the date on
which the long-term care insurance con-
tract actually becomes effective is sub-
stantially longer than under the insurance
company’s usual business practice, then
the issue date is the date the contract be-
comes effective. For purposes of apply-
ing the grandfather rule of section
321(f)(2) to a group long-term care insur-
ance contract, the issue date of the con-
tract is the date the group contract was is-
sued. As a result, coverage for an
individual who joins a grandfathered
group long-term care insurance contract
on or after January 1, 1997, is accorded
the same treatment under section
321(f)(2) as is accorded coverage for
those who joined the group before that
date.
For purposes of applying section
321(f)(2) of HIPAA to long-term care in-
surance contracts issued before January 1,
1997, a material change in the contract
generally is considered the issuance of a
new contract. Notice 97–31 provides that
a material change includes any change in
the terms of the contract altering the
amount or timing of any item payable by
the policyholder (or certificate holder),
the insured, or the insurance company.
Notice 97–31 also provides that the exer-
cise of an option or right granted to a pol-
icyholder under a qualified long-term care
insurance contract as in effect on Decem-
ber 31, 1996, does not constitute a mater-
ial change.
1
After Notice 97–31 was issued, com-
mentators recommended that certain com-
mon practices should not cause long-term
care insurance contracts issued before
January 1, 1997, to lose their grandfa-
thered status. In response to these com-
ments, the proposed regulations provide
additional exceptions to the general rule
that a material change in a long-term care
insurance contract issued before January
1, 1997, will be considered the issuance
of a new contract.
• The proposed regulations provide
that the exercise of any right provided
to a policyholder (i.e.,a right that can
be exercised without the issuer’s con-
sent and without other conditions, such
as underwriting) or the addition of any
right that is required by State law to be
provided to the policyholder will not be
treated as a material change to a long-
term care insurance contract.
• In addition, the proposed regulations
provide that the following practices
will not be treated as material changes
for purposes of section 7702B: (1) any
change in the mode of premium pay-
ment, such as a change from paying
premiums monthly to quarterly; (2) any
classwide increase or decrease in pre-
miums for contracts that have been is-
sued on a guaranteed renewable basis;
(3) a reduction in premiums due to the
purchase of a long-term care insurance
policy by a member of the policy-
holder’s family; (4) any reduction in
coverage (with correspondingly lower
premiums) made at the request of a pol-
icyholder; (5) the addition, without an
increase in premiums, of alternative
forms of benefits that may be selected
by the policyholder; (6) the purchase of
a rider to increase benefits under a pre-
1997 contract if the rider would consti-
tute a qualified long-term care insur-
ance contract if it were a separate
1
The definition of material change in Notice 97–
31 is narrower than the definition of material change
for purposes of other sections of the Code. For ex-
ample, the exercise of an option in a life insurance
contract results in the loss of grandfathering under
section 7702 if the option only guarantees terms that
are likely to be available when the option is exer-
cised.

1998–9 I.R.B11March 2, 1998
contract;
2
(7) the deletion of a rider or
provision of a contract (called an HHS
rider) that prohibited coordination of
benefits with Medicare; and (8) the ef-
fectuation of a continuation or conver-
sion of coverage right under a group
contract following an individual’s ineli-
gibility for continued coverage under
the group contract.
The proposed regulations include exam-
ples illustrating certain of these standards.
The exceptions to the general rule that a
material change results in the issuance of
a new contract apply solely for purposes
of determining whether a pre-1997 insur-
ance contract is treated as a qualified
long-term care insurance contract under
section 7702B.
3
Comments are requested on these
standards, including (1) whether the ma-
terial change rules in the proposed regula-
tions should be limited to pre-1997 long-
term care insurance contracts that cannot
have cash surrender value; (2) whether
there are any conditions under which the
expansion of coverage under a group
long-term care insurance contract in con-
nection with a corporate merger, acquisi-
tion or similar transaction should not con-
stitute a material change; and (3) whether
the extension of a group long-term care
contract to a collective bargaining unit is
a material change in all cases. For exam-
ple, should the extension of a group long-
term care contract to a bargaining unit
after 1997 be treated as a material change
if the bargaining agreement for the unit
has not been renewed since before the
group contract was first adopted?
Comments also are requested on what
the effective date of the final regulations
should be. It is intended that the regula-
tions will not be effective until after the
end of a specified period following adop-
tion of the final regulations. Taxpayers
may rely on these proposed regulations
for guidance pending the issuance of final
regulations. If, and to the extent, future
guidance is more restrictive than the guid-
ance in these proposed regulations, the fu-
ture guidance will be applied without
retroactive effect. In addition, until fur-
ther notice, taxpayers may continue to
rely on Notice 97–31.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in EO
12866. Therefore, a regulatory assess-
ment is not required. It has also been de-
termined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regula-
tions, and because the regulations do not
impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Internal
Revenue Code, this notice of proposed
rulemaking will be submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small business.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, considera-
tion will be given to any comments that
are submitted timely to the IRS (a signed
original and eight (8) copies). All com-
ments will be available for public inspec-
tion and copying.
A public hearing has been scheduled
for May 13, 1998, at 10 a.m., in room
2615, Internal Revenue Building, 1111
Constitution Avenue NW, Washington,
DC. Because of access restrictions, visi-
tors will not be admitted beyond the Inter-
nal Revenue Building lobby more than 15
minutes before the hearing starts.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing.
Persons that wish to present oral com-
ments at the hearing must submit written
comments by April 2, 1998 and submit an
outline of the topics to be discussed and
the time to be devoted to each topic by
April 2, 1998.
A period of 10 minutes will be allotted
to each person for making comments.
An agenda showing the scheduling of
the speakers will be prepared after the
deadline for receiving outlines has
passed. Copies of the agenda will be
available free of charge at the hearing.
Drafting Information
The principal author of these regula-
tions is Katherine A. Hossofsky, Office of
Assistant Chief Counsel (Financial Insti-
tutions & Products). However, other per-
sonnel from the IRS and Treasury Depart-
ment participated in their development.
* * * * *
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Sections 1.7702B–1 through
1.7702B–2 are added to read as follows:
§ 1.7702B–1 Consumer protection
provisions.
(a) In general.Under sections
7702B(b)(1)(F), 7702B(g), and 4980C,
qualified long-term care insurance con-
tracts and issuers of those contracts are re-
quired to satisfy certain provisions of the
Long-Term Care Insurance Model Act
(Model Act) and Long-Term Care Insur-
ance Model Regulation (Model Regula-
tion) promulgated by the National Associ-
ation of Insurance Commissioners
(NAIC), as adopted as of January 1993.
The requirements for qualified long-term
care insurance contracts under sections
7702B(b)(1)(F) and 7702B(g) relate to
guaranteed renewal or noncancellability,
prohibitions on limitations and exclu-
sions, extension of benefits, continuation
or conversion of coverage, discontinu-
ance and replacement of policies, unin-
tentional lapse, disclosure, prohibitions
2
Thus, for example, the only coverage provided
under the rider must be coverage for qualified long-
term care services and the purchase must satisfy the
consumer protection requirements of section
7702B(g) of the Code. (This would not include pro-
tections that apply only the first time a contract is
purchased, i.e.,subsections (g)(2)(A)(i)(III),
(V),(VII)(other than section 6B of the NAIC model
regulation), and (X),(g)(3), and (g)(4) of section
7702B. Similarly, subsections (c)(1)(A)(i) and
(c)(2) of section 4980C would apply only the first
time a contract is purchased.)
3
The exceptions depart from the definition of ma-
terial change that would apply for purposes of other
sections of the Code, including sections 7702,
7702A, 101(f), and 264. These exceptions are con-
sistent with the purpose of section 7702B, which has
the effect of expanding the tax benefits for certain
long-term care insurance contracts. By contrast,
sections 7702, 7702A, 101(f), and 264, for example,
limit the tax benefits associated with certain insur-
ance products and, unlike pre-1997 long-term care
insurance contracts, apply to contracts with a sub-
stantial investment orientation.

March 2, 1998121998–9 I.R.B.
against post-claims underwriting, mini-
mum standards, inflation protection, pro-
hibitions against pre-existing conditions
exclusions and probationary periods, and
prior hospitalization. The requirements
for qualified long-term care insurance
contracts under section 4980C relate to ap-
plication forms and replacement coverage,
reporting requirements, filing require-
ments for marketing, standards for mar-
keting, appropriateness of recommended
purchase, standard format outline of cov-
erage, delivery of a shopper’s guide, right
to return, outline of coverage, certificates
under group plans, policy summary,
monthly reports on accelerated death ben-
efits, and incontestability period.
(b) Coordination with State require-
ments—(1) Contracts issued in a State
that imposes more stringent requirements.
If a State imposes a requirement that is
more stringent than the analogous re-
quirement imposed by section 7702B(g)
or 4980C, then, under section 4980C(f),
compliance with the more stringent re-
quirement of State law is considered com-
pliance with the parallel requirement of
section 7702B(g) or 4980C. The princi-
ples of paragraph (b)(3) of this section
apply to any case in which a State im-
poses a requirement that is more stringent
than the analogous requirement imposed
by section 7702B(g) or 4980C (as de-
scribed in this paragraph (b)(1)), but in
which there has been a failure to comply
with that State requirement.
(2) Contracts issued in a State that has
adopted the model provisions.If a State
imposes a requirement that is the same as
the parallel requirement imposed by sec-
tion 7702B(g) or 4980C, compliance with
that requirement of State law is consid-
ered compliance with the parallel require-
ment of section 7702B(g) or 4980C, and
failure to comply with that requirement of
State law is considered failure to comply
with the parallel requirement of section
7702B(g) or 4980C.
(3) Contracts issued in a State that has
not adopted the model provisions or more
stringent requirements.If a State has not
adopted the Model Act, the Model Regu-
lation, or a requirement that is the same as
or more stringent than the analogous re-
quirement imposed by section 7702B(g)
or 4980C, then the language, caption, for-
mat, and content requirements imposed
by sections 7702B(g) and 4980C with re-
spect to contracts, applications, outlines
of coverage, policy summaries, and no-
tices will be considered satisfied for a
contract subject to the law of that State if
the language, caption, format, and content
are substantially similar to those required
under the parallel provision of the Model
Act or Model Regulation. Only nonsub-
stantive deviations are permitted in order
for language, caption, format, and content
to be considered substantially similar to
the requirements of the Model Act or
Model Regulation.
§1.7702B–2 Special rules for pre-1997
long-term care insurance contracts.
(a) Scope. The definitions and special
provisions of this section apply solely for
purposes of determining whether an in-
surance contract (other than a qualified
long-term care insurance contract de-
scribed in section 7702B(b) and any regu-
lations issued thereunder) is treated as a
qualified long-term care insurance con-
tract for purposes of the Internal Revenue
Code.
(b) Pre-1997 long-term care insurance
contracts.—(1) In general.A pre-1997
long-term care insurance contract is
treated as a qualified long-term care in-
surance contract, regardless of whether
the contract satisfies section 7702B(b)
and any regulations issued thereunder.
(2) Pre-1997 long-term care insurance
contract defined.A pre-1997 long-term
care insurance contract is any insurance
contract with an issue date before January
1, 1997, that met the long-term care insur-
ance requirements of the State in which
the contract was sitused on the issue date.
For this purpose, the long-term care insur-
ance requirements of the State are the
State laws (including statutory and ad-
ministrative law) that are intended to reg-
ulate insurance coverage that constitutes
“long-term care insurance” (as defined in
section 4 of the National Association of
Insurance Commissioners (NAIC) Long-
Term Care Insurance Model Act, as in ef-
fect on August 21, 1996), regardless of
the terminology used by the State in de-
scribing the insurance coverage.
(3) Issue date of a contract.(i) In gen-
eral.The issue date of a contract is the
issue date assigned to the contract by the
insurance company, but in no event is the
issue date earlier than the date the policy-
holder submitted a signed application for
coverage to the insurance company.
However, if the period between the date
the signed application is submitted to the
insurance company and the date coverage
under the contract actually becomes ef-
fective is substantially longer than under
the insurance company’s usual business
practice, then the issue date is the date
coverage under the contract becomes ef-
fective (if this is later than the issue date
assigned to the contract by the insurance
company). A policyholder’s right to re-
turn a contract within a “free-look” period
following delivery for a full refund of any
premiums paid is not taken into account
in determining the contract’s issue date.
(ii) Special rule for group contracts.
The issue date of a group contract (includ-
ing any certificate issued thereunder) is
the date on which coverage under the
group contract becomes effective.
(iii) Exchange of contract or material
change in a contract treated as a new is-
suance.For purposes of this paragraph
(b)(3)—
(A) A contract issued in exchange for
an existing contract after December 31,
1996, is considered a contract issued after
that date;
(B) Any material change (as defined in
paragraph (b)(4) of this section) in a con-
tract is treated as the issuance of a new
contract with an issue date no earlier than
the date the material change goes into ef-
fect; and
(C) If a material change occurs with re-
gard to one or more, but fewer than all, of
the certificates evidencing coverage under
a group contract, then the insurance cov-
erage under the changed certificates is
treated as coverage under a newly issued
group contract (and the insurance cover-
age provided by any unchanged certifi-
cate continues to be treated as coverage
under the original group contract).
(4) Material change.(i) In general.
For purposes of paragraph (b)(3) of this
section, except as provided in paragraph
(b)(4)(ii) of this section, a material
change means—
(A) A change in the terms of a contract
that alters the amount or timing of an item
payable by the policyholder (or certificate
holder), the insured, or the insurance
company;
(B) A substitution of the insured under
an individual contract; or

1998–9 I.R.B13March 2, 1998
(C) A change (other than an immaterial
change) in the eligibility for membership
in the group covered under a group
contract.
(ii) Exceptions. For purposes of this
paragraph (b)(4), the following changes
are not treated as a material change:
(A) A policyholder’s exercise of any
right provided under the terms of the con-
tract as in effect on December 31, 1996,
or a right required by applicable State law
to be provided to the policyholder;
(B) A change in the mode of premium
payment (for example, a change from
monthly to quarterly premiums);
(C) In the case of a policy that is guar-
anteed renewable or noncancellable,
a classwide increase or decrease in
premiums;
(D) A reduction in premiums due to the
purchase of a long-term care insurance
contract by a family member of the poli-
cyholder;
(E) A reduction in coverage (with a
corresponding reduction in premiums)
made at the request of a policyholder;
(F) The addition, without an increase in
premiums, of alternative forms of benefits
that may be selected by the policyholder;
(G) The addition of a rider (including
any similarly identifiable amendment) to
a pre-1997 long-term care insurance con-
tract in any case in which the rider, if is-
sued as a separate contract of insurance,
would itself be a qualified long-term care
insurance contract under section 7702B
and any regulations issued thereunder (in-
cluding the consumer protection provi-
sions in section 7702B(g) to the extent ap-
plicable to the addition of a rider);
(H) The deletion of a rider or provision
of a contract (often referred to as an HHS
rider) that prohibited coordination of ben-
efits with Medicare; and
(I) The effectuation of a continuation
or conversion of coverage right provided
under a group contract following an indi-
vidual’s ineligibility for continued cover-
age under the group contract.
(5) Examples.The following examples
illustrate the principles of this paragraph
(b):
Example 1.(i) On December 3, 1996, A, an indi-
vidual, submits a signed application to an insurance
company to purchase a nursing home contract that
meets the long-term care insurance requirements of
the State in which the contract is sitused. The insur-
ance company decides on December 20, 1996, that it
will issue the contract, and assigns December 20,
1996, as the issue date for the contract. Under the
terms of the contract, A’s insurance coverage be-
comes effective on January 1, 1997. The company
delivers the contract to A on January 3, 1997. A has
the right to return the contract within 15 days fol-
lowing delivery for a refund of all premiums paid.
(ii) Under paragraph (b)(3)(i) of this section, the
issue date of the contract is December 20, 1996.
Thus, the contract is a pre-1997 long-term care in-
surance contract that is treated as a qualified long-
term care insurance contract.
Example 2.(i) The facts are the same as in Ex-
ample 1,except that the insurance coverage under
the contract does not become effective until March
1, 1997. Under the insurance company’s usual busi-
ness practice, the period between the date of the ap-
plication and the date the contract becomes effective
is 30 days or less.
(ii) Under paragraph (b)(3)(i) of this section, the
issue date of the contract is March 1, 1997. Thus,
the contract is not a pre-1997 long-term care insur-
ance contract, and, accordingly, the contract must
meet the requirements of section 7702B(b) and any
regulations issued thereunder to be a qualified long-
term care insurance contract.
Example 3.(i) B, an individual, is the policy-
holder under a long-term care insurance contract pur-
chased in 1995. On June 15, 2000, the insurance cov-
erage and premiums under the contract are increased
by agreement between B and the insurance company.
(ii) Under paragraph (b)(4)(i)(A) of this section,
a change in the terms of a contract that alters the
amount or timing of an item payable by the policy-
holder or the insurance company is a material
change in the contract. Thus, B’s coverage is treated
as coverage under a contract issued on June 15,
2000, and, accordingly, the contract must meet the
requirements of section 7702B(b) and any regula-
tions issued thereunder in order to be a qualified
long-term care insurance contract.
Example 4.(i) C, an individual, is the policy-
holder under a long-term care insurance contract
purchased in 1994. At that time and through De-
cember 31, 1996, the contract met the long-term
care insurance requirements of the State in which
the contract was sitused. In 1996, the policy was
amended to add a provision requiring the policy-
holder to be offered the right to increase dollar limits
for inflation every three years (without the policy-
holder being required to pass a physical or satisfy
any other underwriting requirements). During 2002,
C elects to increase the amount of insurance cover-
age (with a resulting premium increase) pursuant to
the inflation protection provision.
(ii) Under paragraph (b)(4)(ii)(A) of this section,
an increase in the amount of insurance coverage at
the election of the policyholder (without the insur-
ance company’s consent and without underwriting
or other limitations on the policyholder’s rights) pur-
suant to a pre-1997 inflation protection provision
does not constitute a material change in the contract.
Thus, C’s contract continues to be a pre-1997 long-
term care insurance contract that is treated as a qual-
ified long-term care insurance contract.
Michael P. Dolan,
Deputy Commissioner of
Internal Revenue.
(Filed by the Office of the Federal Register on
December 31, 1997, 8:45 a.m., and published in the
issue of the Federal Register for January 2, 1998, 63
F.R. 35)
Notice of Proposed Rulemaking
and Notice of Public Hearing
Reorganizations; Nonqualified
Preferred Stock
REG–121755–97
AGENCY:Internal Revenue Service
(IRS), Treasury.
ACTION:Notice of proposed rulemak-
ing by cross-reference to temporary regu-
lations and notice of public hearing.
SUMMARY:In T.D. 8753, page 6 of
this Bulletin, the IRS and Treasury De-
partment are issuing a temporary regula-
tion under section 356(e) of the Internal
Revenue Code (Code) relating to the re-
ceipt of nonqualified preferred stock in
certain exchanges. The temporary regula-
tion provides guidance on when nonquali-
fied preferred stock (as defined in section
351(g)(2)) will not be treated as stock or
securities for purposes of sections 354,
355, and 356. The guidance also ad-
dresses the treatment of the receipt of a
right to acquire nonqualified preferred
stock. The temporary regulation provides
that in certain circumstances the terms
stockand securitieswill not include non-
qualified preferred stock, or a right to ac-
quire such stock, when received in ex-
change for stock or rights to acquire
stock. The text of the temporary regula-
tion also serves as the text of this pro-
posed regulation. This document also
provides notice of a public hearing on this
proposed regulation.
DATES:Written comments must be re-
ceived by April 6, 1998. Requests to ap-
pear and outlines of topics to be discussed
at the public hearing scheduled for May 5,
1998, at 10 a.m. must be received by
April 14, 1998.
ADDRESSES:Send submissions to:
CC:DOM:CORP:R [REG–121755–97],
room 5226, Internal Revenue Service,
POB 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may be
hand delivered between the hours of 8
a.m. and 5 p.m. to: CC:DOM:CORP:R

March 2, 1998141998–9 I.R.B.
[REG–121755–97], Courier’s Desk, In-
ternal Revenue Service, 1111 Constitution
Avenue NW, Washington, DC. Alterna-
tively, taxpayers may submit comments
electronically via the Internet by selecting
the “Tax Regs” option on the IRS Home
Page or by submitting comments directly
to the IRS Internet site at: http://www.irs.
ustreas.gov/prod/tax_regs/comments.html
. The public hearing will be held in room
2615, Internal Revenue Building, 1111
Constitution Avenue NW, Washington,
DC 20224.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulation, Michael J. Danbury, (202)
622-7750; concerning submissions and
the public hearing, LaNita Van Dyke,
(202) 622-7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
A temporary regulation in T.D. 8753
amends the Income Tax Regulations (26
CFR part 1) relating to section 356 by
adding §1.356–6T. The text of that tem-
porary regulation also serves as the text of
this proposed regulation. The preamble to
the temporary regulation explains the rea-
son for the addition.
Special Analyses
It has been determined that this notice of
proposed rulemaking is not a significant
regulatory action as defined in EO 12866.
Therefore, a regulatory assessment is not
required. It has also been determined that
section 553(b) of the Administrative Pro-
cedure Act (5 U.S.C. chapter 5) does not
apply to this regulation. Because the regu-
lation does not impose a collection of in-
formation on small entities, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does
not apply. Pursuant to section 7805(f) of
the Code, this notice of proposed rulemak-
ing will be submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on its impact on
small business.
Comments and Public Hearing
Before this proposed regulation is
adopted as a final regulation, considera-
tion will be given to any written com-
ments (a signed original and eight (8)
copies) that are submitted timely to the
IRS. All comments will be available for
public inspection and copying.
A public hearing has been scheduled
for May 5, 1998, at 10 a.m. in room 2615,
Internal Revenue Building, 1111 Consti-
tution Ave., NW, Washington, DC. Be-
cause of access restrictions, visitors will
not be admitted beyond the building
lobby more than 15 minutes before the
hearing starts.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing.
Persons who wish to present oral com-
ments at the hearing must submit written
comments by April 6, 1998, and submit
an outline of the topics to be discussed
and the time to be devoted to each topic
(signed original and eight (8) copies) by
April 14, 1998.
A period of 10 minutes will be allotted
to each person for making comments.
An agenda showing the scheduling of
the speakers will be prepared after the
deadline for receiving outlines has
passed. Copies of the agenda will be
available free of charge at the hearing.
Drafting Information
The principal author of this regulation
is Michael J. Danbury of the Office of As-
sistant Chief Counsel (Corporate). How-
ever, other personnel from the IRS and
Treasury Department participated in its
development.
* * * * *
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1.The authority citation for
part 1 continues to read, in part, as follows:
Authority:26 U.S.C. 7805 * * *
Par 2.Section 1.356–6 is added to
read as follows:
§1.356–6 Rules for treatment of
nonqualified preferred stock as “other
property.”
[The text of this proposed section is the
same as the text of §1.356–6T published
in T.D. 8753.]
Michael P. Dolan,
Deputy Commissioner of
Internal Revenue.
(Filed by the Office of the Federal Register on
January 5, 1998, 8:45 a.m., and published in the
issue of the Federal Register for January 6, 1998, 63
F.R. 453)
Notice of Proposed Rulemaking
Civil Cause of Action for Certain
Unauthorized Collection Actions
REG–251502–96
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing.
SUMMARY: This document contains pro-
posed regulations relating to civil causes of
action for damages caused by unlawful
collection actions of officers and employ-
ees of the Internal Revenue Service (IRS).
The proposed regulations reflect amend-
ments made by the Taxpayer Bill of Rights
2. The proposed regulations affect all tax-
payers who file civil actions for damages
caused by unlawful collection actions of
officers or employees of the IRS.
DATES: Written comments and requests
for a public hearing must be received by
March 31, 1998.
ADDRESSES: Send submissions to:
CC:DOM:CORP:R (REG–251502–96),
room 5226, Internal Revenue Service,
POB 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may be
hand delivered between the hours of 8
a.m. and 5 p.m. to: CC:DOM:CORP:R
(REG–251502–96), Courier’s Desk, In-
ternal Revenue Service, 1111 Constitution
Avenue NW, Washington, DC. Alterna-
tively, taxpayers may submit comments
electronically via the Internet by selecting
the “Tax Regs" option on the IRS Home
Page, or by submitting comments directly
to the IRS Internet site at http://www.irs.
ustreas.gov/prod/tax
–
regs/comments.html.
FOR FURTHER INFORMATION CON-
TACT: Kevin B. Connelly, (202) 622-
3640 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Procedure and Admin-

1998–9 I.R.B15March 2, 1998
istration Regulations (26 CFR part 301)
relating to civil actions for damages
caused by unlawful collection actions of
officers or employees of the IRS. The
Taxpayer Bill of Rights 2 (TBOR2), Pub-
lic Law 104–168, 110 Stat. 1465 (1996),
amended section 7433 of the Internal
Revenue Code of 1986 (Code) by raising
the cap on the amount a taxpayer may be
awarded for damages caused by unlawful
collection actions from $100,000 to
$1,000,000. Under prior law, a suit for
damages could not be brought unless the
taxpayer first exhausted administrative
remedies available within the IRS.
TBOR2 eliminated this jurisdictional pre-
requisite but authorized federal district
courts to reduce damage awards if the tax-
payer fails to exhaust administrative
remedies. The proposed regulations re-
flect these changes.
Explanation of Provision
Section 801 of TBOR2 amended section
7433(a) of the Code by increasing from
$100,000 to $1,000,000 the cap on the
amount of damages that a taxpayer may
recover in Federal district court from the
United States for damages caused by any
unauthorized collection actions of an offi-
cer or employee of the IRS occurring after
July 30, 1996. Section 802 of TBOR2
amended section 7433(d)(1) of the Code
by providing that a taxpayer’s failure to
exhaust administrative remedies available
within the IRS shall only be a factor that
the court may consider in determining
whether to reduce the amount of an award.
In actions filed prior to the enactment of
TBOR2, the failure to exhaust administra-
tive remedies was a jurisdictional bar to an
action. The proposed regulations reflect
the changes made by TBOR2.
The regulations that are being amended
by these proposed regulations currently
provide that administrative remedies shall
be considered exhausted on the earlier of:
(1) the date the decision is rendered by the
IRS on an administrative claim for dam-
ages filed in accordance with the manner
and form set forth in the regulations; or
(2) the date six months after the date an
administrative claim is filed in accord-
ance with the manner and form set forth
in the regulations. 26 CFR §301.7433–
l(d). An exception to this rule is provided
with respect to civil actions filed in fed-
eral district court prior to July 31, 1996.
Under this exception, if an administrative
claim is filed during the last six months of
the period of limitations for filing a civil
action for damages under section 7433 of
the Code, administrative remedies shall
be considered exhausted on the date the
administrative claim is filed. The excep-
tion was included in the current regula-
tions because, prior to the enactment of
TBOR2, the failure to exhaust administra-
tive remedies was a jurisdictional bar to
an action. Without the exception, if a tax-
payer filed an administrative claim during
the last six months of the period of limita-
tions and the IRS did not consider the
claim before the limitations period ex-
pired, the taxpayer automatically would
have been barred from filing suit. These
provisions still apply to actions that were
filed on or before July 30, 1996, the en-
actment date of TBOR2.
With respect to actions filed after July
30, 1996, the proposed regulations do not
contain the exception for administrative
claims filed during the last six months of
the period of limitation because the fail-
ure to exhaust administrative remedies is
no longer a bar to an action. Since the en-
actment of TBOR2, the failure to exhaust
administrative remedies is just one factor
the court may consider in determining
whether to reduce an award of damages.
Pursuant to the notice of proposed rule-
making, if a taxpayer waits until the last
six months of the period of limitations to
file an administrative claim, the IRS does
not reach a determination before the limi-
tations period expires, and the taxpayer
files a timely action under section 7433,
the court may consider the facts and cir-
cumstances of the case and decide what
effect the late filing of the claim should
have on the amount of damages awarded.
The proposed manner and form for fil-
ing an administrative claim for damages
remain the same as those set forth in the
current regulations at 26 CFR 301.7433–
l(e)(1) and (2). The claim must be sent in
writing to the district director (marked for
the attention of the Chief, Special Proce-
dures Function) of the district in which
the taxpayer resides. The claim must in-
clude: (1) the name, current address, cur-
rent home and work telephone numbers
and any convenient times to be contacted,
and taxpayer identification number of the
taxpayer making the claim; (2) the
grounds, in reasonable detail, for the
claim (include copies of any available
substantiating documentation or corre-
spondence with the Internal Revenue Ser-
vice); (3) a description of the injuries in-
curred by the taxpayer filing the claim
(include copies of any available substanti-
ating documentation or evidence); (4) the
dollar amount of the claim, including any
damages that have not yet been incurred
but which are reasonably foreseeable (in-
clude copies of any available substantiat-
ing documentation or evidence); and (5)
the signature of the taxpayer or duly au-
thorized representative.
The notice of proposed rulemaking
does not have a new effective date para-
graph because amended paragraphs (a),
(d), and (e) set forth the effective dates of
the new statutory provisions as well as the
statutory provisions they are replacing.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in EO
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, and because the regulation does not
impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Internal
Revenue Code, this notice of proposed
rulemaking will be submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, considera-
tion will be given to any written com-
ments that are submitted timely (a signed
original and eight (8) copies) to the IRS.
All comments will be available for public
inspection and copying. A public hearing
may be scheduled if requested in writing
by a person that timely submits written
comments. If a public hearing is sched-
uled, notice of the date, time, and place
for the hearing will be published in the
Federal Register.

March 2, 1998161998–9 I.R.B.
Drafting Information
The principal author of these regula-
tions is Kevin B. Connelly, Office of As-
sistant Chief Counsel (General Litigation)
CC:EL:GL, IRS. However, other person-
nel from the IRS and Treasury Depart-
ment participated in their development.
* * * * *
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 301 is pro-
posed to be amended as follows:
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation for
part 301 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. In §301.7433–1, paragraphs (a),
(d), (e), and (f) are revised to read as fol-
lows:
§301.7433 Civil cause of action for
certain unauthorized collection actions.
(a) In general.If, in connection with
the collection of a federal tax with respect
to a taxpayer, an officer or an employee of
the Internal Revenue Service recklessly or
intentionally disregards any provision of
the Internal Revenue Code or any regula-
tion promulgated under the Internal Reve-
due Code, such taxpayer may bring a civil
action for damages against the United
States in federal district court. The tax-
payer has a duty to mitigate damages. The
total amount of damages recoverable is
the lesser of $1,000,000 ($100,000 if the
act giving rise to damages occurred be-
fore July 31, 1996) or the sum of—
(1) The actual, direct economic dam-
ages sustained as a proximate result of the
reckless or intentional actions of the offi-
cer or employee; and
(2) Costs of the action.
* * * * *
(d) Exhaustion of administrative reme-
dies in suits brought prior to July 31,
1996—(1) General.With respect to civil
actions filed in federal district court prior
to July 31, 1996, no action may be main-
tained before the exhaustion of adminis-
trative remedies. Administrative remedies
are exhausted on the earlier of the follow-
ing dates—
(i) The date the decision is rendered on
an administrative claim filed in accord-
ance with paragraph (f) of this section; or
(ii) The date six months after the date
an administrative claim is filed in accor-
dance with paragraph (f) of this section.
(2) Exception.If an administrative
claim is filed in accordance with para-
graph (f) of this section during the last six
months of the period of limitations de-
scribed in paragraph (g) of this section,
the taxpayer may file an action in federal
district court any time after the adminis-
trative claim is filed and before the expi-
ration of the period of limitations.
(3) No action in federal district court
for any sum in excess of the dollar amount
sought in the administrative claim.With
respect to civil actions filed in federal dis-
trict court prior to July 31, 1996, no action
may be instituted for any sum in excess of
the amount (already incurred and esti-
mated) of the administrative claim filed
under paragraph (f) of this section, except
where the increased amount is based upon
newly discovered evidence not reason-
ably discoverable at the time the adminis-
trative claim was filed, or upon allegation
and proof of intervening facts relating to
the amount of the claim.
(e) Exhaustion of administrative reme-
dies in suits brought after July 30, 1996—
(1) General.With respect to civil actions
filed in federal district court after July 30,
1996, the amount of damages awarded
under paragraph (a) of this section may be
reduced if the court determines that the
taxpayer has not exhausted the adminis-
trative remedies available within the In-
ternal Revenue Service.
(2) Administrative remedies exhausted.
Administrative remedies shall be consid-
ered exhausted on the earlier of—
(i) The date the decision is rendered on
a claim filed in accordance with para-
graph (f) of this section; or
(ii) The date six months after the date
an administrative claim is filed in accord-
ance with paragraph (f) of this section.
(f) Procedures for an administrative
claim—(l) Manner.An administrative
claim for damages shall be sent in writing
to the district director (marked for the at-
tention of the Chief, Special Procedures
Function) of the district in which the tax-
payer resides.
(2) Form.The administrative claim
shall include—
(i) The name, current address, current
home and work telephone numbers and
any convenient times to be contacted, and
taxpayer identification number of the tax-
payer making the claim;
(ii) The grounds, in reasonable detail,
for the claim (include copies of any avail-
able substantiating documentation or cor-
respondence with the Internal Revenue
Service);
(iii) A description of the injuries in-
curred by the taxpayer filing the claim
(include copies of any available substanti-
ating documentation or evidence);
(iv) The dollar amount of the claim, in-
cluding any damages that have not yet
been incurred but which are reasonably
foreseeable (include copies of any avail-
able substantiating documentation or evi-
dence); and
(v) The signature of the taxpayer or the
taxpayer’s duly authorized representative
as defined in paragraph (f)(3) of this
section.
(3) Duly authorized representative.For
purposes of paragraph (f)(2)(v) of this
section, a duly authorized representative
is any attorney, certified public account-
ant, enrolled actuary, or any other person
permitted to represent the taxpayer before
the Internal Revenue Service who is not
disbarred or suspended from practice be-
fore the Internal Revenue Service and
who has a written power of attorney exe-
cuted by the taxpayer.
* * * * *
Michael P. Dolan,
Deputy Commissioner of
Internal Revenue.
(Fi1ed by the Office of the Federal Register on
December 30, 1997, 8:45 a.m., and published in the
issue of the Federal Register for December 31, 1997,
62 F.R. 68242)
Change to Part B, Section 8 of
Rev. Proc. 97–34; Correction
Announcement 98–17
This announcement supersedes An-
nouncement 98–6, 1998–5 I.R.B. 25,
dated February 2, 1998.
The purpose of this announcement is to
clarify information in Part B, Section 8 of
Rev. Proc. 97–34, 1997–30 I.R.B. 14,
dated July 28, 1997, reprinted as Pub.

Foundations Status of Certain
Organizations
Announcement 98–16
The following organizations have
failed to establish or have been unable to
maintain their status as public charities or
as operating foundations. Accordingly,
grantors and contributors may not, after
this date, rely on previous rulings or des-
ignations in the Cumulative List of Orga-
nizations (Publication 78), or on the pre-
sumption arising from the filing of notices
under section 508(b) of the Code. This
listing does notindicate that the organiza-
tions have lost their status as organiza-
tions described in section 501(c)(3), eligi-
ble to receive deductible contributions.
Former Public Charities.The following
organizations (which have been treated as
organizations that are not private founda-
tions described in section 509(a) of the
Code) are now classified as private foun-
dations:
Cephas Ministry, Inc., Zephyehills, FL
Childrens Development Services Inc.,
Leonia, NJ
Childrens Heritage Montessori School,
Cheyenne, WY
Childrens Literature Assembly of the
National Council of Teachers of
English, Dekalb, IL
Childrens Museum of Arkansas Inc.,
Little Rock, AR
Chisam Memorial Trust, Vienna, VA
Christian Basketball Associates Inc., San
Antonio, TX
Christian Fellowship of San Antonio
Firefighters, San Antonio, TX
Christmas in April Greater Gateway, Inc.,
Edwardsville, IL
Christmas in April Joplin, Inc., Joplin,
MO
Chrysalis Inc., New Orleans, LA
The Competitive America Foundation,
Bethesda, MD
Consolidated Community Development
Inc., Fort Smith, AR
Consortium for Educational Process and
Technology Incorporated, Princeton,
NJ
Constitution Football League, Lexington,
KY
Consultation and Counseling Services,
Inc., Philadelphia, PA
Consumer Credit Counseling of Northern
Indiana, Inc., Mishawaka, IN
Downstate Afro-American Hall of Fame
Inc., Peoria, IL
Downtown Crossville Inc., Crossville,
TN
Dr. John Gorrie Science Foundation of
Franklin County Inc., Apalachicola,
FL
Eleusis Theater, Mobile, AL
Elijah Thurston Organization for Training
and Community Development,
Homewood, IL
Elim Retreat Center Inc., Chicago, IL
Elite Ladies Association Inc., Miami, FL
Elkhart County Safe Kids Coalition Inc.,
Elkhart, IN
1998–9 I.R.B17March 2, 1998
1220, Specifications for Filing Forms
1098, 1099 series, 5498, 5498-MSA and
W-2G Magnetically or Electronically.
In the Payee “B” Record, the field de-
scriptions for the Form 5498 IRA, SEP,
and SIMPLE Indicators have been re-
vised. The statement, “and not reporting
contributions in Amount Codes 1, 6 or 7”
has been removed. For Form 5498 infor-
mation returns filed magnetically or elec-
tronically, an IRA, SEP, or SIMPLE Indi-
cator must always be used in conjunction
with Payment Amount Field 2 (Rollover)
or Payment Amount Field 4 (Fair Market
Value).
FieldField
Position TitleLengthDescription and Remarks
141Form 54981Required. Form 5498 only.Enter ‘1’ if reporting a rollover (Amount Code
IRA2) or Fair Market Value (Amount Code 4) for an IRA. Otherwise,
Indicatorenter a blank.
(Individual
Retirement
Arrangement)
142Form 54981Required. Form 5498 only.Enter ‘1’ if reporting a rollover (Amount Code
SEP2) or Fair Market Value (Amount Code 4) for a SEP. Otherwise
Indicatorenter a blank.
(Simplified
Employee
Pension)
143Form 54981Required. Form 5498 only. Enter ‘1’ if reporting a rollover (Amount Code
SIMPLE2) or Fair Market Value (Amount Code 4) for a SIMPLE. Otherwise,
Indicatorenter a blank.
(Savings
Incentive
Match Plan
for Employees
of Small
Employers)

March 2, 1998181998–9 I.R.B.
Elkhorn Day Care Center Inc., Elkhorn,
WI.
Ellis County Child Protective Services
Board, Waxahachie, TX
Fido Inc., Oklahoma City, OK
Final Net Inc., Memphis, TX
Fishermens Wharf Inc., Wheaton, IL
Five Leaf Clover Society Inc., Florence,
KY
Flight for Life Incorporated, Gahanna,
OH
Flint and Vicinity Action Community
Economic Development Corporation,
Flint, MI
French Quarter North and South Inc.,
New Orleans, LA
Fresh Beginnings Incorporated,
Arlington, VA
Friend of Hospice Inc., Henderson, NC
Friends and Neighbors of the Greater
Washington Area Inc., Washington, DC
Friends of Braddock Maryland Chapter,
Silver Spring, MD
Friends of Challenger Inc., Akron, OH
Friends of Egypt Inc., McLean, VA
Friends of Geosphere Inc., Alpharetta,
GA
Friends of Galena the Park Branch
Library, Galena Park, TX
Friends of Gresham Inc., Chicago, IL
Frontline Productions Inc., Tulsa, OK
Fort Wayne Indiana Seminoles Baseball
Club Inc., Fort Wayne, IN
Full Gospel Christian Center Inc.,
Taylorsville, KY
Fuller-Hunt Foundation Inc., Columbus,
OH
Fund for Tenant Ownership Inc.,
Washington, DC
Handi-Capable in the Media, Inc.,
Atlanta, GA
Helping Gods Children Food Pantry,
Lima, OH
Hemingford Community Care Center
Foundation Inc., Alliance, NE
Henderson Catholic Education
Endowment Inc., Henderson, KY
Henderson County Fire Chiefs
Association Inc., Athens, TX
Henry County Family Housing Project
Incorporated, Mt. Pleasant, IA
Henry County Step Ahead Council
Incorporated, New Castle, IN
Henry Gonzales Nursing Education
Foundation, Chicago, IL
Heritage Design Consortium Inc.,
Lafayette, IN
Heritage Rails to Trails Coalition, Amlin,
OH
Jersey City Center for the Performing
Arts Inc., Jersey City, NJ
Jesus Christ Hope Center Inc., Carmel,
IN
Jobworks, Inc., St. Petersburg, FL
Keepers of Young Disadvantaged
Students Inc., Toledo, OH
Kemetic Education for Young Scholars,
Raleigh, NC
Kids Voting Georgia Inc., Macon, GA
Kidtech Inc., Austin, TX
Kimberly Bergalis Memorial Committee
Inc., Ft. Pierce, FL
Kinderfest Inc., Kinder, LA
King Youth Soccer League, King, NC
Lamplight Communications Inc.,
Bradenton, FL
Lancaster Area Interfaith Coalition for
Caring, Lancaster, PA
Lancaster Swim Team Booster Club Inc.,
Lancaster, OH
Lancelot H Owens Scholarship
Foundation Inc., Jersey City, NJ
Lewis County Childrens Fund,
Hohenwald, TN
Limestone Creek Community
Development Corporation, Jupiter, FL
Limon Train Ride & Heritage Society,
Limon, CO
Lincoln Arts & Humanities Foundation,
Lincoln, KS
Max Samples Evangelistic Association,
Inc., W. Frankfort, IL
Maximum Life Community Development
Corporation, Baltimore, MD
Maxine Guy Wildlife Rehabilitation
Center, Inc., Amado, AZ
Maya American Community Council
Inc., Homestead, FL
Mayfield Country Club Scholarship
Foundation, South Euclid, OH
Meals on Wheels of Jefferson County
Inc., Meriden, KS
Mecklenburg Child Daycare Inc., Chase
City, VA
Mediation Center of Kentucky Inc.,
Lexington, KY
Medical Awareness Association Inc.,
Annapolis, MD
Medical International Resource
Reclamation Organization, Denver, CO
Medical Research Junior Board
Foundation, Chicago, IL
Medici Foundation, Omaha, NE
Medina Community Playground, Medina,
OH
Mediplex Hospice Foundation, Abilene,
TX
Memphis City Relief Inc., Memphis, TN
Mending the Broken Hoop Inc., Phoenix,
AZ
Meridian Hills Arts Foundation Inc.,
Indianapolis, IN
M O Educators Inc., Hollywood, FL
Network Community Services, Livonia,
MI
New Directions, Inc., Lexington, KY
San Antonio Urban Network, San
Antonio, TX
Texas Neurosciences Foundation, San
Antonio, TX
Wilson Group, Inc., Princeton, NJ
The Word’s Out, Chantilly, VA
If an organization listed above submits
information that warrants the renewal of its
classification as a public charity or as a pri-
vate operating foundation, the Internal
Revenue Service will issue a ruling or de-
termination letter with the revised classifi-
cation as to foundation status. Grantors and
contributors may thereafter rely upon such
ruling or determination letter as provided
in section 1.509(a)–7 of the Income Tax
Regulations. It is not the practice of the
Service to announce such revised classifi-
cation of foundation status in the Internal
Revenue Bulletin.

1998–9 I.R.B19March 2, 1998
NameAddressDesignationDate of Suspension
Trempus Jr., JosephCabot, PACPAOctober 1, 1997 to February 28, 1998
Tyler, Delbert D.Monroeville, PACPAOctober 23, 1997 to April 22, 2000
Gillmore, George P.Hampton, NJCPAIndefinite from October 10, 1997
Kamin, James C.Chicago, ILCPADecember 1, 1997 to May 31, 1999
Hubbard, EdwardChicago, ILAttorneyIndefinite from December 1, 1997
Retzlaff, GeneHortonville, WIEnrolled AgentDecember 1, 1997 to May 31, 1998
Conklin, Dennis M.Arlington Hghts, ILCPADecember 3, 1997 to December 2, 1998
Bowen, Roger H.Lake Bluff, ILCPADecember 4, 1997 to December 3, 1999
Ciconte, WilliamWilmington, DEEnrolled AgentDecember 10, 1997 to December 9, 2000
Lopin, Paul I.Chicago, ILCPAIndefinite from December 11, 1997
Goldstein, BenjaminDes Plaines, ILCPADecember 12, 1997 to June 11, 1998
Olsen Jr., BurtonRancho Cordova, CACPADecember 15, 1997 to June 14, 1998
Hickman, MichaelLawrence, KSCPADecember 16, 1997 to April 15, 1998
Grant, Arthur J.Morris Plains, NJCPAJanuary 1, 1998 to December 31, 2000
Zielinski, HenryWoodstock, ILCPAJanuary 1, 1998 to June 30, 1999
Rosales, JohnBatavia, ILCPAJanuary 1, 1998 to April 30, 1998
Reinstein, MaxwellPotomac, MDCPAJanuary 1, 1998 to March 31, 1998
Payne, CharlotteBreckenridge, COCPAJanuary 1, 1998 to December 31, 1999
Ibrahim, MongyRaleigh, NCCPAJanuary 1, 1998 to December 31, 1998
Koutek, Paul J.Westchester, ILCPAJanuary 1, 1998 to August 31, 1998
Doherty, StevenChicago, ILCPAJanuary 1, 1998 to December 31, 1999
Deren, PatriciaLackawanna, NYAttorneyJanuary 1, 1998 to December 31, 1998
Calhoun, SandraLouisville, KYCPAJanuary 1, 1998 to March 31, 1998
Thurman, StephenArcadia, CACPAJanuary 1, 1998 to December 31, 1998
Davidson, MarkTulsa, OKCPAJanuary 15, 1998 to October 14, 1999
Hequembourg, DonaldGlencoe, MOCPAJanuary 20, 1998 to July 19, 1998
Announcement of the Consent Voluntary Suspension of Attorneys,
Certified Public Accountants, Enrolled Agents, and Enrolled Actuaries
From Practice Before the Internal Revenue Service
Under 31 Code of Federal Regulations,
Part 10, an attorney, certified public ac-
countant, enrolled agent, or enrolled ac-
tuary, in order to avoid the institution or
conclusion of a proceeding for his disbar-
ment or suspension from practice before
the Internal Revenue Service, may offer
his consent to suspension from such prac-
tice. The Director of Practice, in his dis-
cretion, may suspend an attorney, certi-
fied public accountant, enrolled agent, or
enrolled actuary in accordance with the
consent offered.
Attorneys, certified public accountants,
enrolled agents, and enrolled actuaries are
prohibited in any Internal Revenue Ser-
vice matter from directly or indirectly em-
ploying, accepting assistance from, being
employed by, or sharing fees with any
practitioner disbarred or suspended from
practice before the Internal Revenue Ser-
vice.
To enable attorneys, certified public ac-
countants, enrolled agents, and enrolled
actuaries to identify practitioners under
consent suspension from practice before the
Internal Revenue Service, the Director
of Practice will announce in the Internal
Revenue Bulletin the names and ad-
dresses of practitioners who have been
suspended from such practice, their desig-
nation as attorney, certified public ac-
countant, enrolled agent, or enrolled actu-
ary, and date or period of suspension. This
announcement will appear in the weekly
Bulletin at the earliest practicable date
after such action and will continue to ap-
pear in the weekly Bulletins for five suc-
cessive weeks or for as many weeks as is
practicable for each attorney, certified
public accountant, enrolled agent, or en-
rolled actuary so suspended and will be
consolidated and published in the Cumu-
lative Bulletin.
The following individuals have been
placed under consent suspension from
practice before the Internal Revenue Ser-
vice:

March 2, 1998201998–9 I.R.B.
Under title 31 of the Code of Federal
Regulations, section 10.76, the Director
of Practice is authorized to immediately
suspend from practice before the Internal
Revenue Service any practitioner who,
within five years from the date the expe-
dited proceeding is instituted, (1) has had
a license to practice as an attorney, certi-
fied public accountant, or actuary sus-
pended or revoked for cause; or (2) has
been convicted of any crime under title 26
of the United States Code or, of a felony
under title 18 of the United States Code
involving dishonesty or breach of trust.
Attorneys, certified public accountants,
enrolled agents, and enrolled actuaries are
prohibited in any Internal Revenue Service
matter from directly or indirectly employ-
ing, accepting assistance from, being em-
ployed by, or sharing fees with, any practi-
tioner disbarred or suspended from practice
before the Internal Revenue Service.
To enable attorneys, certified public ac-
countants, enrolled agents, and enrolled ac-
tuaries to identify practitioners under expe-
dited suspension from practice before the
Internal Revenue Service, the Director of
Practice will announce in the Internal Rev-
enue Bulletin the names and addresses of
practitioners who have been suspended
from such practice, their designation as at-
torney, certified public accountant, en-
rolled agent, or enrolled actuary, and date
or period of suspension. This announce-
ment will appear in the weekly Bulletin at
the earliest practicable date after such ac-
tion and will continue to appear in the
weekly Bulletins for five successive weeks
or for as many weeks as is practicable for
each attorney, certified public accountant,
enrolled agent, or enrolled actuary so sus-
pended and will be consolidated and pub-
lished in the Cumulative Bulletin.
The following individual has been
placed under suspension from practice be-
fore the Internal Revenue Service by virtue
of the expedited proceeding provisions of
the applicable regulations:
Announcement of the Expedited Suspension of Attorneys, Certified Public
Accountants, Enrolled Agents, and Enrolled Actuaries From Practice
Before the Internal Revenue Service
NameAddressDesignationDate of Suspension
Christensen, Reed K.Roseville, CAEnrolled AgentIndefinite from December 16, 1997

1998–9 I.R.B21March 2, 1998
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds
that the same principle also applies to B,
the earlier ruling is amplified. (Compare
with modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial difference between them.
Modified is used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but not
to B, and the new ruling holds that it ap-
plies to both A and B, the prior ruling is
modified because it corrects a published
position. (Compare with amplified and
clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used
in a ruling that lists previously published
rulings that are obsoleted because of
changes in law or regulations. A ruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revoked describes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the
new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example, modified
and superseded describes a situation
where the substance of a previously pub-
lished ruling is being changed in part and
is continued without change in part and it
is desired to restate the valid portion of
the previously published ruling in a new
ruling that is self contained. In this case
the previously published ruling is first
modified and then, as modified, is super-
seded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and
that list is expanded by adding further
names in subsequent rulings. After the
original ruling has been supplemented
several times, a new ruling may be pub-
lished that includes the list in the original
ruling and the additions, and supersedes
all prior rulings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current use and for-
merly used will appear in material published in the
Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C.—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contribution Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Proc..—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedral 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

March 2, 1998221998–9 I.R.B.
1
A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 1997–27 through
1997–52 will be found in Internal Revenue Bulletin
1998–1, dated January 5, 1998.
Numerical Finding List
1
Bulletins 1998–1 through 1998–8
Announcements:
98–1, 1998–2 I.R.B. 38
98–2, 1998–2 I.R.B.38
98–3, 1998–2 I.R.B.38
98–4, 1998–4 I.R.B.31
98–5, 1998–5 I.R.B. 25
98–6, 1998–5 I.R.B. 25
98–7, 1998–5 I.R.B. 26
98–8, 1998–6 I.R.B. 96
98–9, 1998–7 I.R.B. 35
98–10, 1998–7 I.R.B. 35
98–11, 1998–8 I.R.B. 42
98–12, 1998–8 I.R.B. 43
98–13, 1998–8 I.R.B. 43
98–14, 1998–8 I.R.B. 44
Notices:
98–1, 1998–3 I.R.B. 42
98–2, 1998–2 I.R.B. 22
98–3, 1998–3 I.R.B. 48
98–4, 1998–2 I.R.B. 25
98–5, 1998–3 I.B.R.49
98–6, 1998–3 I.R.B. 52
98–7, 1998–3 I.R.B. 54
98–8, 1998–4 I.R.B. 6
98–9, 1998–4 I.R.B. 8
98–10, 1998–6 I.R.B.9
98–11, 1998–6 I.R.B. 18
98–12, 1998–5 I.R.B.12
98–13, 1998–6 I.R.B.19
98–14, 1998–8 I.R.B. 27
Proposed Regulations:
REG–100841–97, 1998–8 I.R.B. 30
REG–102894–97, 1998–3 I.R.B. 59
REG–105163–97, 1998–8 I.R.B. 31
REG–109704–97, 1998–3 I.R.B. 60
REG–115795–97, 1998–8 I.R.B.33
REG–209463–82, 1998–4 I.R.B. 27
REG–209476–82, 1998–8 I.R.B. 36
REG–209484–87, 1998–8 I.R.B.40
REG–209807–95, 1998–8 I.R.B. 40
Revenue Procedures:
98–1, 1998–1 I.R.B. 7
98–2, 1998–1 I.R.B. 74
98–3, 1998–1 I.R.B. 100
98–4, 1998–1 I.R.B. 113
98–5, 1998–1 I.R.B. 155
98–6, 1998–1 I.R.B. 183
98–7, 1998–1 I.R.B. 222
98–8, 1998–1 I.R.B. 225
98–9, 1998–3 I.R.B. 56
98–10, 1998–2 I.R.B. 35
98–11, 1998–4 I.R.B.9
98–12, 1998–4 I.R.B. 18
98–13, 1998–4 I.R.B. 21
98–14, 1998–4 I.R.B. 22
98–15, 1998–4 I.R.B. 25
98–16, 1998–5 I.R.B. 19
98–17, 1998–5 I.R.B. 21
98–18, 1998–6 I.R.B. 20
98–19, 1998–7 I.R.B. 30
98–20, 1998–7 I.R.B. 32
98–21, 1998–8 I.R.B. 27
Revenue Rulings:
98–1, 1998–2 I.R.B. 5
98–2, 1998–2 I.R.B. 15
98–3, 1998–2 I.R.B. 4
98–4, 1998–2 I.R.B. 18
98–5, 1998–2 I.R.B. 20
98–6, 1998–4 I.R.B. 4
98–7, 1998–6 I.R.B.6
98–8, 1998–7 I.R.B. 24
98–9, 1998–6 I.R.B. 5
Treasury Decisions:
8740, 1998–3 I.R.B. 4
8741, 1998–3 I.R.B. 6
8742, 1998–5 I.R.B.4
8743, 1998–7 I.R.B. 26
8744, 1998–7 I.R.B. 20
8745, 1998–7 I.R.B. 15
8746, 1998–7 I.R.B. 4
8747, 1998–7 I.R.B. 18
8748, 1998–8 I.R.B. 24
8749, 1998–7 I.R.B. 16
8750, 1998–8 I.R.B. 4

1998–9 I.R.B23March 2, 1998
Finding List of Current Action on
Previously Published Items
1
Bulletins 1998–1 through 1998–8
Revenue Procedures:
95–35
95–35A
Superseded by
98–19, 1998–7 I.R.B. 30
97–1
Superseded by
98–1, 1998–1 I.R.B. 7
97–2
Superseded by
98–2, 1998–1 I.R.B. 74
97–3
Superseded by
98–3, 1998–1 I.R.B. 100
97–4
Superseded by
98–4, 1998–1 I.R.B. 113
97–5
Superseded by
98–5, 1998–1 I.R.B. 155
97–6
Superseded by
98–6, 1998–1 I.R.B. 183
97–7
Superseded by
98–7, 1998–1 I.R.B. 222
97–8
Superseded by
98–8, 1998–1 I.R.B. 225
97–21
Superseded by
98–2, 1998–1 I.R.B. 74
97–53
Superseded by
98–3, 1998–1 I.R.B. 100
Revenue Rulings:
75–17
Supplemented and superseded by
98–5, 1998–2 I.R.B. 20
92–19
Supplemented in part by
98–2, 1998–2 I.R.B. 15
1
A cumulative finding list for previously published
items mentioned in Internal Revenue Bulletins
1997–27 through 1997–52 will be found in Internal
Revenue Bulletin 1998–1, dated January 5, 1998.

March 2, 1998241998–9 I.R.B.
Index
Internal Revenue Bulletins
1998–1 Through 1998–4
For the index of items published during
the first six months of 1997, see I.R.B.
1998–1, dated January 5, 1998.
The abbreviation and number in paren-
thesis following the index entry refer to
the specific item; numbers in roman and
italic type following the parenthesis refer
to the Internal Revenue Bulletin in which
the item may be found and the page
number on which it appears.
Key to Abbreviations:
RRRevenue Ruling
RPRevenue Procedure
TDTreasury Decision
CDCourt Decision
PLPublic Law
EOExecutive Order
DODelegation Order
TDOTreasury Department Order
TCTax Convention
SPRStatement of Procedural
Rules
PTEProhibited Transaction
Exemption
EMPLOYMENT TAX
Proposed regulations:
26 CFR 31.3121(v)(2)–1, revised;
FICA and FUTA taxation of amounts
under employee benefit plans (REG–
209484–87; REG–209807–95) 8, 40
Student FICA exception (RP 16) 5,19
ESTATE TAX
Regulations:
26 CFR 20.2041–3, 20.2056(d)–2,
amended; 20.2046–1, revised; prop-
erty interests and disclaimer (TD
8744) 7, 20
26 CFR 25.2702–5, –7, amended; qual-
ified prsonal residence trust, sale of
residence (TD 8743) 7, 26
26 CFR 25.2511–1, 25.2514–3,
25.2518–1, –2, amended; property
interests and disclaimers (TD 8744)
7, 20
Revocable trust; election (RP 13) 4, 21
Underpayment interest, interest expense
deduction, estates (RP 15) 4, 25
EXCISE TAX
Bows and arrows; taxable and nontaxable
articles (RR 5) 2, 20
Proposed regulations:
26 CFR 40.0–1T, added; 40.6011(a)–
1T, added; 40.6302(c)–2T, added;
deposits of excise taxes (REG–
102894–97) 3, 59
Regulations:
26 CFR 40.0–1(a), amended;
40.6011(a)–1(a)(2)(iii), 40.5302(c)–
1, amended, 40.6302(c)–2(b)(2)(iii),
added; deposits of excise taxes (TD
8740) 3, 4
26 CFR 40.6011(a)–1(b)(2)(vi),
amended; 48.4082–5T, removed;
48.4082–5, added; 48.4081–1,
amended; 48.4082–5T, redesignated;
48.6416(b)(4)–1, removed; 48.6421–
3(d)(2), amended; 48.6427–3(d)(2),
amended; 48.6715–1(a)(3), revised;
48.6715–2T, removed; gasoline and
diesel fuel excise tax; special rules
for Alaska, definitions (TD 8748) 8,
24
GIFT TAX
Qualifying income interest, disposition
(RR 8) 7, 24
INCOME TAX
Advance pricing agreements, small busi-
ness taxpayers (Notice 10) 6, 9
Article XIII (8) Rev. Proc. (RP 21) 8, 27
Education loans (Notice 7) 3, 54
Elections under section 7704(g) (Notice
3) 3, 48
Employee Plans:
Determination letters (RP 6) 1, 183;
(RP 14) 4,22
Discrimination; CODAs (Notice 1) 3,
42
Eligible deferred compensation plans
(Notice 8) 4, 6
Group health plans; COBRA continua-
tion coverage; HIPAA portability
(Notice 12) 5, 12
Funding:
Full funding limitations, weighted
average interest rate (Notice 9) 4,
8
Letter rulings, etc. (RP 4) 1, 113
Limitations on benefits and contribu-
tions (RR 1) 2, 5
Minimum Funding Standards (RP 10)
2, 35
INCOME TAX—Continued
Proposed regulations:
26 CFR 1.401(a)(9)–1, amended;
qualified plans and individual re-
tirement plans, required distribu-
tions (REG– 209463–82) 4, 27
Recovery of basis; retirees (Notice 2)
2, 22
SIMPLE-IRAs (Notice 4) 2,25
Technical advice (RP 5) 1, 155
User fees (RP 8) 1, 225
Environmental cleanup costs; letter
rulings (RP 17) 5, 21
Exempt Organizations:
Letter rulings, etc. (RP 4) 1, 113
Organizations excepted from reporting
lobbying expenditures (RP 19) 7, 30
Technical advice (RP 5) 1, 155
User fees (RP 8) 1, 225
Failure to deposit federal tax; penalty
abatement (Notice 14) 8, 27
Foreign tax credit abuse (Notice 5) 3, 49
Insurance companies:
Discounting estimated salvage recover-
able (RP 12) 4, 18
Interest rate tables (RR 2) 2,15
Loss reserves; discounting unpaid
losses (RP 11) 4, 9
Interest:
Investment:
Federal short-term, mid-term, and
long-term rates for January 1998
(RR 4) 2, 18; February 1998 (RR
7) 6, 6
Inventory:
LIFO:
Price indexes; department stores for
November 1997 (RR 6) 4, 4; De-
cember 1997 (RR 9) 6, 5
Letter rulings, determination letters, and
information letters issued by Associate
Chief Counsel (Domestic), Associate
Chief Counsel (EBEO), Associate
Chief Counsel (Enforcement Litiga-
tion), and Associate Chief Counsel
(International) (RP 1) 1, 7
Low-income housing tax credit (Notice
13) 6, 19
Satisfactory bond; “bond factor”
amounts for the period October
through December 1997 (RR 3) 2, 4
Proposed regulations:
26 CFR 1.72(p)–1, amended; loans to
plan participants (REG–209476–82)
8, 36
26 CFR 1.469–10, revised; 1.7704–1,
added; investment income, passive
activity income and loss rules for

1998–9 I.R.B25March 2, 1998
publicly traded partnerships
(REG–105163–97) 8, 31
26 CFR 1.1291–1, 1.1293–1, 1.1295–1,
–3, 1.1297–3(c), added; 1.1296–4,
amended; passive foreign investment
company preferred shares, special
income exclusion (REG–115795–
97) 8, 33
26 CFR 301.6159–1, amended; agree-
ments for tax liability installment
payments (REG–100841–97) 8, 30
26 CFR 54.9812–1, added; mental
health parity; HIPAA (REG–
109704–97) 3, 60
Qualified Funeral Trust; guidance (Notice
6) 3, 52
Qualified Zone Academy Zone Bonds
(RP) 3, 100
Real estate transactions (RP 20) 7, 32
Regulations:
26 CFR 1.61–12, 1.249–1, 1.1016–5,
1.1275–1, amended; 1.163–13,
1.171–5, added; 1.171–1, –2, –3, –4,
revised; 1.1016–9, removed; amorti-
zable bond premium (TD 8746) 7, 4
INCOME TAX—Continued INCOME TAX—Continued INCOME TAX—Continued
26 CFR 1.280B–1, added; building de-
molition, definition of structure (TD
8745) 7, 15
26 CFR 1.446–1, amended; 1.446–1T,
removed; 301.9100–0, added;
301.9100–1, revised; 301.9100–2,
–3, added; 301.9100–1T, –2T, –3T;
removed extensions of time to make
elections (TD 8742) 5, 4
26 CFR 1.1202–0, –2, added; qualified
small business stock (TD 8749) 7, 16
26 CFR 1.1290–0, amended; 1.1294–0,
added; 1.1291–0T, amended;
1.1291–1T, added; 1.1291–9,
amended; 1.1293–0, –1T, added;
1.1295–0, –1T, –3T, 1.1297–3T(c),
added; passive foreign investment
company preferred shares, special
income exclusion (TD 8750) 8, 4
26 CFR 1.1396–1; empowerment zone
employment credit, qualified zone
employees (TD 8747) 7, 18
26 CFR 54.9801–2T, amended;
54.9801–4T, –5T, revised; 54.9804–
1T, redesignated; 54.9806–1T, redes-
ignated; 54.9812–1T, added; mental
health parity, interim rules (TD
8741) 3, 6
Rulings:
Areas in which advance rulings will not
be issued:
Associate Chief Counsel (Domes-
tic), Associate Chief Counsel
(EBEO) (RP 3) 1, 100
Associate Chief Counsel (Interna-
tional) (RP 7) 1, 222
Rural airports (RP 18) 6, 20
Technical advice to district directors and
chiefs, appeals offices, Associate Chief
Counsel (Domestic), Associate Chief
Counsel (EBEO), Associate Chief
Counsel (Enforcement Litigation), and
Associate Chief Counsel (International)
(RP 2) 1, 74
Treatment of hybrid arrangements under
subpart F (Notice 11) 6, 18