Internal Revenue Bulletin 2001-27 (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
REG–106917–99, page 4.
Proposed regulations relate to certain adoptions, changes,
and retentions of annual accounting periods. The proposed
regulations primarily affect taxpayers that want to adopt an
annual accounting period under section 441 of the Code or
that must receive approval from the Commissioner to adopt,
change, or retain their annual accounting periods under sec-
tion 442 of the Code. Rev. Ruls. 57–589, 65–316, 68–125,
69–563, 74–326, and 78–179 obsoleted. A public hearing
is scheduled for October 2, 2001.
EMPLOYEE PLANS
Notice 2001–39, page 3.
Weighted average interest rate update.The weighted
average interest rate for June 2001 and the resulting per-
missible range of interest rates used to calculate current lia-
bility for purposes of the full funding limitation of section
412(c)(7) of the Code are set forth.
EMPLOYMENT TAX
Page 1.
Railroad retirement; rate determination; quarterly.
The Railroad Retirement Board has determined that the rate
of tax imposed by section 3221 of the Code shall be 26
cents for the quarter beginning July 1, 2001.
EXEMPT ORGANIZATIONS
Announcement 2001–70, page 23.
A list is provided of organizations now classified as private
foundations.
TAX CONVENTIONS
Notice 2001–41, page 2.
French social security agreement.The mutual agree-
ment between the United States and France on the tax treat-
ment of contributions to, and distributions from, the French
social security regime (Basic Plan and Complementary
Plans) is set forth.
EXCISE TAX
Announcement 2001-69, page 23.
The Service announces the availability of new Form 2290SP,
Declaración del Impuesto sobre el Uso de Vehículos
Pesados en las Carreteras, and its separate instructions for
use by Spanish-speaking taxpayers for filing as of July 1,
2001. This return is used to pay the tax on highway motor
vehicles with a taxable gross weight of 55,000 pounds or
more.
ADMINISTRATIVE
Announcement 2001-71, page 26.
A public hearing has been rescheduled for July 25, 2001, on
proposed regulations (REG-107186-00, 2001-13 I.R.B. 973)
relating to the voluntary electronic furnishing of payee state-
ments on Forms W-2.
Internal Revenue
bbuulllleettiinn
Bulletin No. 2001–27
July 2, 2001
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
Department of the Treasury
Internal Revenue Service
Finding Lists begin on page ii.
Index for January through June begins on page vi

July 2, 20012001–27 I.R.B.
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly and may be obtained
from the Superintendent of Documents on a subscription
basis. Bulletin contents are consolidated semiannually into
Cumulative Bulletins, which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of in-
ternal management are not published; however, statements
of internal practices and procedures that affect the rights
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 Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to
these subjects are contained in the other Parts and Sub-
parts. Also included in this part are Bank Secrecy Act Admin-
istrative Rulings. Bank Secrecy Act Administrative Rulings
are issued by the Department of the Treasury’s Office of the
Assistant Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The first Bulletin for each month includes a cumulative index
for the matters published during the preceding months.
These monthly indexes are cumulated on a semiannual basis,
and are published in the first Bulletin of the succeeding semi-
annual period, respectively.
The IRS Mission
Provide America’s taxpayers top quality service by help-
ing them understand and meet their tax responsibilities
and by applying the tax law with integrity and fairness to
all.
Introduction
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

Section 3221.—Rate of Tax
Determination of Quarterly Rate
of Excise Tax for Railroad
Retirement Supplemental
Annuity Program
In accordance with directions in Sec-
tion 3221(c) of the Railroad Retirement
Tax Act (26 U.S.C., Section 3221(c)), the
Railroad Retirement Board has deter-
mined that the excise tax imposed by such
Section 3221(c) on every employer, with
respect to having individuals in his em-
ploy, for each work-hour for which com-
pensation is paid by such employer for
services rendered to him during the quar-
ter beginning July 1, 2001, shall be at the
rate of 26 cents.
In accordance with directions in Sec-
tion 15(a) of the Railroad Retirement Act
of 1974, the Railroad Retirement Board
has determined that for the quarter begin-
ning July 1, 2001, 38.6 percent of the
taxes collected under Sections 3211(b)
and 3221(c) of the Railroad Retirement
Tax Act shall be credited to the Railroad
Retirement Account and 61.4 percent of
the taxes collected under such Sections
3211(b) and 3221(c) plus 100 percent of
the taxes collected under Section 3221(d)
of the Railroad Retirement Tax Act shall
be credited to the Railroad Retirement
Supplemental Account.
Dated May 24, 2001.
By Authority of the Board.
Beatrice Ezerski,
Secretary to the Board.
(Filed by the Office of the Federal Register on May
31, 2001, 8:45 a.m., and published in the issue of the
Federal Register for June 1, 2001, 66 F.R. 29848)
2001–27 I.R.B.1July 2, 2001
Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

July 2, 200122001–27 I.R.B.
Subpart A.—Tax Conventions
and Other Related Items
French Social Security
Agreement
Notice 2001–41
The following is a copy of the News
Release issued by the Director, Interna-
tional (U.S. Competent Authority) on
May 31, 2001 (IR–2001–54).
U.S. AND FRANCE AGREE ON
TAXATION OF FRENCH SOCIAL
SECURITY
Washington — The Competent Authori-
ties of the United States and France reached
a mutual agreement on the tax treatment of
contributions to, and distributions from, the
French social security regime (Basic Plan
and Complementary Plans). The agree-
ment clarifies the application of Article 18
of the Convention between the Govern-
ment of the United States of America and
the Government of the French Republic for
the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with respect
to Taxes on Income and Capital (the
“Treaty”), signed on August 31, 1994, and
entered into force on December 30, 1995.
BACKGROUND
Subparagraph (a) of Article 18(1) of the
Treaty provides that, except as provided in
subparagraph (b), distributions from private
pension and other retirement arrangements
derived and beneficially owned by a resi-
dent of a Contracting State in consideration
of past employment shall be taxable only in
that State. Subparagraph (b) provides that
pensions and other payments made under
the social security legislation of a Contract-
ing State to a resident of the other Contract-
ing State shall be taxable only in the first-
mentioned State.
Article 18(2) of the Treaty applies when
determining the taxable income of an indi-
vidual who renders personal services and
who is a resident of a Contracting State, but
not a national of that State. Contributions
paid by, or on behalf of, such individual to a
pension or other retirement arrangement
that is established, maintained, and recog-
nized for tax purposes in the other Contract-
ing State shall be treated in the same way
for tax purposes in the first-mentioned State
as a contribution paid to a pension or other
retirement arrangement that is established,
maintained, and recognized for tax purposes
in that first-mentioned State. However, the
competent authority of the first-mentioned
State must agree that the pension or other
retirement arrangement generally corre-
sponds to a pension or other retirement
arrangement recognized for tax purposes by
that State.
Questions have arisen concerning the
treatment of contributions to, and distribu-
tions from, the French social security
regime (Basic Plan and Complementary
Plans) by, and to, individuals residing in the
United States.
The United States and France have
agreed that until the applicable language in
the Treaty is amended or terminated, the
Treaty will be applied as follows.
TREATMENT OF CONTRIBUTIONS
For purposes of Article 18(2), the French
social security regime does not generally
correspond to a pension or other retirement
arrangement that is recognized for tax pur-
poses by the United States. Accordingly,
both mandatory and voluntary contribu-
tions to the French social security regime
(Basic Plan and Complementary Plans) by
individuals who are resident in the United
States are not deductible or excludible for
purposes of determining the individuals’
taxable income in the United States.
TREATMENT OF DISTRIBUTIONS
Under Article 18(1)(b), distributions
from the French social security regime
(Basic Plan and Complementary Plans) to
individuals who are residents of the
United States are taxable only by France
and not by the United States, regardless of
whether contributions to the Plans were
made on a voluntary or mandatory basis.
WAIVER OF DISCLOSURE
REQUIREMENT
Section 6114(a) of the Internal Rev-
enue Code requires that taxpayers taking
the position that a U.S. treaty overrules a
general U.S. tax principle of law must dis-
close such position on a return of tax or, if
no return of tax is required to be filed, as
the Internal Revenue Service may pre-
scribe. However, pursuant to Treas. Reg.
Sec. 301.6114–1(c)(1)(iii), the reporting
requirement is waived with regard to tax-
payers taking the position that a U.S.
treaty reduces or modifies the taxation of
income derived from public or private
pensions or social security. Accordingly,
taxpayers claiming exemption for French
social security benefits pursuant to Article
18(1)(b) of the Treaty are not required to
disclose this position on their income tax
return for the year in which the distribu-
tions are received.
EFFECTIVE DATE
The mutual agreement is applicable to
tax years beginning on or after January 1,
1996. Pursuant to Article 26(1) of the
Treaty, an individual who paid U.S. income
tax on distributions from the French social
security regime (Basic Plan and Comple-
mentary Plans) for one or more tax years
beginning on or after January 1, 1996, may
request a refund of such tax within three
years of the date of this news release pro-
vided such individual was a resident of the
United States during each year for which a
refund is requested. Individuals who took
the position for purposes of determining
their taxable income in the United States
that mandatory or voluntary contributions
to the French social security regime (Basic
Plan and Complementary Plans) were de-
ductible or excludible, should file amended
returns for all tax years beginning on or
after January 1, 1996, for which the statute
of limitations on assessment and collection
has not expired as of the date of this news
release (generally calendar years 1998,
1999, and 2000).
CONTACT INFORMATION
For further information or assistance re-
garding the U.S. income tax treatment of
social security pensions received from
France, please contact David Kosterlitz,
IRS Large & Mid-size Business, Interna-
tional, Tax Treaty, ((202) 874-1550 (not a
toll-free number)). For information or as-
sistance regarding the French tax treatment
of social security pensions received from
France, please contact Christiane Marechal,
Fiscal Attache, French Embassy, ((202)
944-6390 (not a toll-free number)). In
France, please contact Centre des Impots
des Non-Residents, 9, Rue d’Uzes, 75094,
Paris Cedex 02.
Part II. Treaties and Tax Legislation

2001–27 I.R.B.3July 2, 2001
Weighted Average Interest Rate
Update
Notice 2001-39
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 section 412(c)(7) of the In-
ternal Revenue Code as amended by the
Omnibus 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 May 2001 is
5.78 percent.
The following rates were determined
for the plan years beginning in the month
shown below.
Part III. Administrative, Procedural, and Miscellanous
90% to 105%90% to 110%
WeightedPermissiblePermissible
MonthYearAverageRangeRange
June20015.825.24 to 6.11 5.24 to 6.40
Drafting Information
The principal author of this notice is
Todd Newman of the Employee Plans,
Tax Exempt and Government Entities Di-
vision. For further information regarding
this notice, please call Mr. Newman at
(202) 283-9702 (not a toll-free number).

Notice of Proposed Rulemaking
and Notice of Public Hearing
Changes in Accounting Periods
REG–106917–99
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains pro-
posed regulations under sections 441, 442,
706, 898, and 1378 of the Internal Revenue
Code of 1986 that relate to certain adop-
tions, changes, and retentions of annual ac-
counting periods. The proposed regula-
tions are necessary to update, clarify, and
reorganize the rules and procedures for
adopting, changing, and retaining a tax-
payer’s annual accounting period. The pro-
posed regulations primarily affect taxpay-
ers that want to adopt an annual accounting
period under section 441 or that must re-
ceive approval from the Commissioner to
adopt, change, or retain their annual ac-
counting periods under section 442. This
document also contains a notice of public
hearing on these proposed regulations.
DATES: Written and electronic com-
ments and requests to speak (with outlines
of oral comments) at a public hearing
scheduled for October 2, 2001, must be
received by September 11, 2001.
ADDRESSES: Send submissions to:
CC:M&SP:RU (REG–106917–99), room
5226, Internal Revenue Service, POB
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand de-
livered Monday through Friday between
the hours of 8 a.m. and 5 p.m. to:
CC:M&SP:RU (REG–106917–99),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC. Alternatively, taxpayers
may submit comments electronically via
the Internet by selecting the “Tax Regs”
option on the IRS Home Page, or by sub-
mitting comments directly to the IRS In-
ternet site at http://www.irs.ustreas.gov/
tax_regs/regslist.html.The public hear-
ing will be held in the IRS Auditorium,
Internal Revenue Building, 1111 Consti-
tution Avenue, NW, Washington, DC.
FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regula-
tions, Roy A. Hirschhorn and Martin
Scully, Jr. (202) 622-4960; concerning
submissions of comments and the hear-
ing, and/or to be placed on the building
access list to attend the hearing, Treena
Garrett (202) 622-7180 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collections of information con-
tained in this notice of proposed rulemak-
ing have been submitted to the Office of
Management and Budget for review in ac-
cordance with the Paperwork Reduction
Act of 1995 (44 U.S.C. 3507(d)). Com-
ments on the collections of information
should be sent to the Office of Manage-
ment and Budget, Attn: Desk Officer for
the Department of the Treasury, Office of
Information and Regulatory Affairs,
Washington, DC 20503, with copies to
the Internal Revenue Service, Attn:
IRS Reports Clearance Officer,
W:CAR:MP:FP:S:O, Washington, DC
20224. Comments on the collections of
information should be received by August
13, 2001. Comments are specifically re-
quested concerning:
Whether the proposed collections of in-
formation are necessary for the proper
performance of the functions of the Inter-
nal Revenue Service, including whether
the information will have practical utility;
The accuracy of the estimated burden
associated with the proposed collections
of information (see below);
How the quality, utility, and clarity of
the information to be collected may be en-
hanced;
How the burden of complying with the
proposed collections of information may
be minimized, including through the ap-
plication of automated collection tech-
niques or other forms of information tech-
nology; and
Estimates of capital or start-up costs
and costs of operation, maintenance, and
purchase of services to provide informa-
tion.
The collection of information can be
found in §§1.441–2(b)(1), 1.442–1(b)(1)
and (b)(4) and (d), and 1.1378–1 of these
regulations. Section 1.441–2(b)(1) re-
quires certain taxpayers to file statements
on their federal income tax returns to no-
tify the Commissioner of the taxpayers’
election to adopt a 52-53-week taxable
year. Section 1.442–1(b)(4) provides that
certain taxpayers must establish books
and records that clearly reflect income for
the short period involved when changing
their taxable year from their taxable year
to a proposed fiscal taxable year. Section
1.442–1(d) requires a newly married hus-
band or wife to file a statement with their
short period return when changing to the
other spouse’s taxable year. This collec-
tion of information is mandatory. The
likely respondents are businesses or other
profit entities and individuals.
The estimated average annual burden
per respondent and/or recordkeeper re-
quired by §§1.442–1(b)(1) and 1.1378–1
are reflected in the burdens of Forms
1128 and 2553.
Further, the estimated average burden
per respondent and/or recordkeeper re-
quired by §§1.441–2(b)(1), 1.442–1(b)(4)
and 1.442–1(d) is as follows:
Estimated total reporting/recordkeep-
ing burden: 3,500 hours.
Estimated average burden per respon-
dent/recordkeeper: 21 minutes.
Estimated number of respondents/
recordkeepers: 10,000.
Estimated annual frequency of re-
sponses: On occasion.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless the col-
lection of information displays a valid
OMB control number.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mater-
ial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.
Background and Explanation of
Provisions
A. Overview
This document contains proposed
amendments to regulations under section
441 (period for computing taxable in-
come), and sections 442, 706, 898, and
July 2, 200142001–27 I.R.B.
Part IV. Items of General Interest

1378 (regarding the requirement to obtain
the approval of the Commissioner to
adopt, change, or retain an annual ac-
counting period).
B. Section 441: Period for computing
taxable income
1. Background. Section 441 provides
that taxable income must be computed on
the basis of the taxpayer’s taxable year
and generally defines the term “taxable
year.” The current temporary regulations
under section 441 are primarily the prod-
uct of two separate Treasury Decisions,
T.D. 8167, 52 FR 485241 (published with
a cross reference to a notice of proposed
rulemaking) and T.D. 8123, 52 FR 3615
(1988). Prior to the issuance of T.D. 8167
and T.D. 8123 (the temporary regulations),
the regulations under section 441 con-
tained provisions relating mostly to the pe-
riod for computing taxable income and the
election of a 52-53-week taxable year.
The temporary regulations retain these
provisions, but also add new provisions to
implement section 806 of the Tax Reform
Act of 1986, Public Law 99–514 (100
Stat. 2362), 1986–3 C.B. (Vol. 1) 1, 279,
(the 1986 Act). Enacted with the principal
intent of eliminating the deferral period
between certain entities and their owners,
the 1986 Act generally required partner-
ships, S corporations, and personal service
corporations (PSCs) to conform their tax-
able years to the taxable years of their
partners, shareholders, or employee-own-
ers, respectively. H.R. Conf. Rep. No.
99–841, 99
th
Cong., 2d Sess., II–318,
1986–3 (Vol. 4) C.B. 319.
In addition to general implementation
provisions, the temporary regulations in-
clude transition and anti-abuse provisions
specific to taxpayers in existence at the
time the 1986 Act became effective. For
example, §1.441–3T provides rules in-
tended to prevent taxpayers from circum-
venting the effective date of the provi-
sions of the 1986 Act by adopting or
changing to (or from) a 52-53-week tax-
able year during the period beginning
after September 29, 1986, and ending be-
fore January 5, 1987.
Generally, this document reproposes the
temporary regulations under section 441.
However, this document also reorganizes,
clarifies, modifies, and updates the tempo-
rary regulations. Many of the provisions
contained in the temporary regulations re-
main essentially the same, including the
general rules for adopting a taxable year,
the provisions relating to electing a 52-53-
week taxable year, and the rules for PSCs.
However,provisions that are now obsolete
have been removed, and new rules and de-
finitions have been added, as described in
more detail below. In addition, new cross-
references to section 442 and the proposed
regulations thereunder are included to
guide taxpayers, where appropriate, to the
rules and procedures for obtaining ap-
proval to adopt, change, or retain their an-
nual accounting periods.
2. General Rules and Definitions. Most
of the substantive provisions in
§1.441–1T of the temporary regulations
have been retained, including the general
rules for the period for computing tax, nu-
merous definitions, and the requirement
that partnerships, S corporations, electing
S corporations, and PSCs generally must
demonstrate a business purpose and ob-
tain the Commissioner’s approval to
adopt or retain a taxable year other than
their required taxable year. However,
§1.441–1T has been reorganized, obsolete
transition rules have been removed, and
some rules have been clarified. For ex-
ample, the proposed regulations now de-
fine the term required taxable year, iden-
tify entities that have such a year (with
appropriate cross-references), and clarify
the applicable exceptions.
In addition, the proposed regulations
clarify the meaning of the requirement to
keep books for taxpayers using a fiscal
year. The temporary regulations provide
that a fiscal year will be recognized only
if the books of the taxpayer are kept in ac-
cordance with that fiscal year. The pro-
posed regulations conform the book keep-
ing requirement for taxpayers using a
fiscal year to that of §1.446–1(a)(4),
which allows for a reconciliation between
the taxpayer’s books and return. How-
ever, as a term and condition of obtaining
approval to adopt, change to, or retain an
annual accounting period under section
442, certain taxpayers nevertheless may
be required to compute income and keep
their books (including financial state-
ments and reports to creditors) on the
basis of the requested annual accounting
period. See, e.g., Rev. Proc. 2000–11
(2000–3 I.R.B. 309).
The proposed regulations also provide
that a taxable year is adopted by filing the
first federal income tax return using that
taxable year. Accordingly, filing an appli-
cation for an employer identification
number, filing an extension, or making
estimated tax payments, indicating a par-
ticular taxable year do not constitute an
adoption of that year. Consequently, Rev.
Rul. 57–589 (1957–2 C.B. 298), and Rev.
Rul. 69–563 (1969–2 C.B. 104), holding
that the filing of an extension and esti-
mated tax payments establishes a taxable
year, are proposed to be superseded. The
IRS will continue to follow the decision
in E.G. Wilson, 267 F.Supp. 89 (East.
Dist. MO, 1967), with respect to the clas-
sification of an amended return as a “first
return.”
3. 52-53-week Taxable Years. The pro-
posed regulations retain most of the rules
provided in §1.441–2T of the temporary
regulations for taxpayers electing to use a
52-53-week taxable year or changing to
or from a 52-53-week taxable year. How-
ever, the procedures for certain taxpayers
to obtain approval (automatic or other-
wise) to change to or from a 52-53-week
taxable year have been removed and are
now contained in administrative proce-
dures published by the Commissioner.
See Rev. Proc. 2000–11; and Notice
2001–35 (2001–23 I.R.B. 1314). In addi-
tion, although these administrative proce-
dures continue to provide automatic ap-
proval for a change to a 52-53-week
taxable year ending with reference to the
same calendar month, the change will be
effected with a Form 1128 (Application to
Adopt, Change or Retain a Tax Year)
rather than with a statement, consistent
with most other changes.
The proposed regulations also expand
the applicability of the rules for determin-
ing the inclusion of income and deduc-
tions from a pass-through entity where ei-
ther the entity or its owner uses a
52-53-week taxable year. In addition to
applying to partnerships, S corporations,
and PSCs (as in the temporary regula-
tions), the proposed regulations apply
these inclusion rules to trusts, common
trust funds, controlled foreign corpora-
tions, foreign personal holding compa-
nies, and passive foreign investment com-
panies that are qualified electing funds.
4. Transition Rules.Section 1.441–3T of
the temporary regulations provide transition
rules for the 1986 Act that generally were
effective from September 29, 1986, through
2001–27 I.R.B.5July 2, 2001

January 5, 1987. Moreover, the rules con-
tained in §1.441–3T regarding 52-53-week
taxable years and the definition of a PSC
were superseded by similar rules promul-
gated under §§1.441–2T and 1.441–4T, re-
spectively. Because these rules are now ob-
solete, this section has been removed from
the proposed regulations.
5. Personal Service Corporations. The
rules for PSCs contained in §1.441–4T of
the temporary regulations generally have
been retained in the proposed regulations.
However, the proposed regulations reor-
ganize and clarify the required taxable
year of a PSC and the rules for adopting,
changing to, and retaining a year other
than the required taxable year. For exam-
ple, the proposed regulations make clear
that a PSC may have a year other than a
required taxable year by making an elec-
tion under section 444. In addition, the
provision allowing a PSC to obtain auto-
matic approval to change to its required
taxable year has been removed and is now
contained in Notice 2001–35 (2001–23
I.R.B. 1314). Similarly, the rules regard-
ing establishing a business purpose and
obtaining approval for the use of a fiscal
year have been moved to §1.442–1(b) and
Notice 2001–34 (2001–23 I.R.B. 1302).
Comments were received on the notice
of proposed rulemaking that is cross-ref-
erenced by the temporary regulations
under §1.441–4T. Most significantly,
one commentator suggested that the test-
ing period for determining whether a tax-
payer is a PSC should be the three preced-
ing taxable years, rather than the
preceding taxable year, to prevent taxpay-
ers from becoming a PSC due to tempo-
rary or aberrational conditions. The pro-
posed regulations retain the one-year
testing period provided in the temporary
regulations. However, the IRS and Trea-
sury Department will reconsider this test-
ing period, as well as other comments re-
ceived on the temporary regulations, to
the extent similar comments are received
on these proposed regulations now that
taxpayers have significantly more experi-
ence with the provisions in the temporary
regulations.
C.Section 442: Changes of annual
accounting period
1. Background. Under section 442 and
the current regulations, a taxpayer gener-
ally can change its annual accounting pe-
riod only by obtaining the approval of the
Commissioner. The current regulations
set forth the general rules for obtaining
such approval, including: (1) the manner
and time for filing an application to
change an annual accounting period; (2)
the requirement that the taxpayer demon-
strate a substantial business purpose for
the change; and (3) the need for agree-
ment between the taxpayer and the Com-
missioner to the terms, conditions, and
adjustments that are necessary to effect
the change. Under the current regula-
tions, both tax and non-tax factors are
considered in determining whether a tax-
payer has established a substantial busi-
ness purpose.
2. Manner and Time for Filing. The
proposed regulations retain the general re-
quirement to file a Form 1128 to request
approval, but extend the time for filing
the Form 1128. The current regulations
require that the Form 1128 be filed on or
before the 15
th
day of the second calendar
month (generally 45 days) following the
close of the short period. Under the pro-
posed regulations, the Form 1128 must be
filed by the 15
th
day of the third calendar
month (generally 75 days) after the close
of the taxable year in which the taxpayer
wants the adoption, change, or retention
to be effective (i.e., the first effective
year). However, taxpayers are encour-
aged to file their Forms 1128 as soon after
the close of the first effective year as pos-
sible to allow the IRS adequate time to
process the Form 1128 before the ex-
tended due date of the return for the first
effective year. Because the IRS has found
that Forms 1128 filed before the close of
the short period often lack complete infor-
mation and result in processing delays,
the proposed regulation provides that the
Form 1128 may not be filed prior to the
close of the first effective year.
3. Business Purpose, Terms, Condi-
tions, and Adjustments. Taxpayers have
expressed concern with the substantial
business purpose requirement set forth in
the current regulations. In particular, tax-
payers have complained that the Commis-
sioner’s interpretation of a substantial
business purpose as demonstrated in the
IRS’s ruling practice has been unclear, in-
consistent, and overly restrictive.
As a result, the IRS and Treasury De-
partment published Notice 99–19
(1999–1 C.B. 919) soliciting comments
on how the rules for obtaining approval of
an adoption, change, or retention in an-
nual accounting period could be clarified
and simplified. In response, commenta-
tors urged the IRS and Treasury Depart-
ment to expand the categories of taxpay-
ers that would be granted automatic
approval for an annual accounting period
and to revise the substantial business pur-
pose requirement to broaden the circum-
stances in which a taxpayer will be
granted approval to change an annual ac-
counting period.
The IRS and Treasury Department be-
lieve that the proposed regulations, in
combination with automatic and prior ap-
proval revenue procedures, will clarify
the rules governing accounting periods,
expand the circumstances in which tax-
payers will be granted approval (automat-
ically and otherwise), and result in a more
clear, uniform ruling practice.
The proposed regulations continue to
provide the general standards for obtain-
ing approval for an adoption, change, or
retention in annual accounting period:
taxpayers must demonstrate the existence
of a “business purpose” and must agree to
the terms, conditions, and adjustments for
the adoption, change, or retention. In
modifying the “substantial business pur-
pose” requirement to “business purpose,”
the IRS and Treasury Department intend
merely to conform to the language of the
business purpose requirement found in
sections 441(i), 706, and 1378 and not to
lower the current standard. In addition,
the proposed regulations contain business
purpose guidelines generally applicable to
all taxpayers. For example, the proposed
regulations provide the general rule that
deferral of income will not be treated as a
business purpose. They also explain that
a taxpayer will have demonstrated a busi-
ness purpose by applying to adopt,
change to, or retain a year coinciding with
its required taxable year, ownership tax-
able year, or natural business year.
The prior approval revenue procedure
is intended to provide more detailed guid-
ance about how a taxpayer’s business pur-
pose will be evaluated, and the terms,
conditions, and adjustments that will
apply to an adoption, change, or retention
of annual accounting period. Notice
2001–34, issued concurrently with these
proposed regulations, proposes a revenue
procedure that, when finalized, will pro-
July 2, 200162001–27 I.R.B.

vide the rules and procedures applicable
to taxpayers who must apply to the na-
tional office to obtain the Commissioner’s
prior approval for an adoption, change, or
retention. Under the proposed revenue
procedure, the IRS in its ruling practice
would no longer weigh the merit of the
taxpayer’s stated business purpose against
the amount of distortion of income or
other tax consequences resulting from an
adoption, change, or retention. Taxpayers
wanting to adopt, change to, or retain a
natural business year generally would be
granted approval (provided they agree to
general terms and conditions) under the
proposed revenue procedure as under the
current IRS ruling practice. Also consis-
tent with the current IRS ruling practice,
establishing a natural business year gener-
ally will be the only circumstance under
which a partnership, S corporation, elect-
ing S corporation, or PSC will be granted
approval. However, the IRS ruling prac-
tice for other taxpayers generally will be
liberalized. These other taxpayers that do
not establish a natural business year gen-
erally would be granted approval under
the proposed revenue procedure if they
agree to certain additional terms, condi-
tions, and adjustments designed to neu-
tralize the tax effects of substantial distor-
tion of income resulting from the change.
Under the IRS’s current ruling practice,
these other taxpayers generally would
have been denied approval to change their
annual accounting period if the change
would have resulted in more than de min-
imisdistortion of income.
4. Automatic Approval. Under the cur-
rent regulations, automatic approval is
granted to a C corporation that satisfies
certain conditions through the filing of a
statement with the District Director.
Among the requirements for automatic
approval are that the taxpayer not have
changed its annual accounting period at
any time within the preceding ten calen-
dar years, and that a C corporation not
elect S corporation status for the taxable
year immediately following the short pe-
riod. The rules for C corporations con-
tained in the current regulations are in-
consistent with, and generally more
restrictive than, the automatic approval
procedures in Rev. Proc. 2000–11. For
example, under Rev. Proc. 2000–11, six
years (rather than ten) is the required pe-
riod of time between automatic changes
and an S corporation election is allowed
for the tax year following the short pe-
riod. Consequently, the proposed regula-
tions remove the automatic approval pro-
vision contained in the current
regulations.
Further, the proposed regulations pro-
vide that the procedures to obtain auto-
matic approval of the Commissioner for
an adoption, change, or retention of an-
nual accounting period generally are con-
tained in administrative procedures. The
IRS and Treasury Department believe that
this structure will allow for the issuance
of more detailed and useful guidance.
See, for example, Rev. Proc. 2000–11
(2000–3 I.R.B. 309), which provides pro-
cedures for automatic approval for corpo-
rations; Notice 2001–35, proposing to up-
date and supersede Rev. Proc. 87–32
(1987–2 C.B. 396), which provides pro-
cedures for automatic approval for part-
nerships, S corporations, electing S cor-
porations, and PSCs; and Rev. Proc.
66–50 (1966–2 C.B. 1260), which pro-
vides automatic approval provisions for
individuals. As part of the finalization of
these proposed regulations and the pro-
posed revenue procedures contained in
Notices 2001–34 and 2001–35, the IRS
and Treasury Department intend to update
the procedures in Rev. Proc. 2000–11 to
make conforming changes. For example,
Rev. Proc. 2000–11 may be modified to
reduce the time period between automatic
changes from six to four years (as pro-
posed in Notice 2001–34) and to provide
audit protection for taxpayers making vol-
untary period changes (as proposed in
both notices).
5. Obsolete Provisions. The rules relat-
ing to partners and partnerships contained
in the current regulations are proposed to
be removed because they have been su-
perseded by the 1986 Act. Updated rules
for partners and partnerships are provided
in new proposed regulations under
§1.706–1 contained in this notice of pro-
posed rulemaking.
Similarly, the rules relating to certain
foreign corporations contained in the cur-
rent regulations are proposed to be re-
moved because they have been superseded
by section 898. Updated rules for these
foreign corporations are contained in pro-
posed regulations under section 898.
Finally, the proposed regulations would
remove the following transitional provi-
sions, which are now obsolete:
§§5c.442–1, 5f.442–1, 1.442–2T, and
1.442–3T.
D.Sections 706: Taxable Years of
Partners and Partnerships
1. Partnership taxable year.
The current regulations under §1.706–1
have not been updated to reflect changes
made to section 706(b) by the 1986 Act.
These proposed regulations modify the
current regulations to reflect the required
taxable year of a partnership consistent
with the 1986 Act and §1.706–1T (regard-
ing the taxable year that results in the least
aggregate deferral of income). The pro-
posed regulations also remove the proce-
dural aspects of establishing a business
purpose and requesting approval of the
Commissioner to adopt or change a taxable
year and instead refer to the procedures in
§1.442–1 (including the administrative
procedures prescribed thereunder).
These regulations also propose to re-
move §1.706–1T. This removal is not in-
tended to effect a substantive change be-
cause the provisions of §1.706–1T
generally are adopted by the proposed reg-
ulations. The IRS and Treasury recently
expressed a commitment to the finalization
of §1.706–1T, as well as other previously
proposed regulations under section 706,
LR–183–84 (1985–1 C.B. 653 [49 FR
47048]) and LR–53–88 (1988–1 C.B. 935
[53 FR 19715]). See 66 FR 3920, 3922.
However, it is believed that adopting the
substantive provisions of §1.706–1T in the
current proposed regulations will promote
clarity and efficiency.
2.Inclusion rule for distributions, sales,
and exchanges.
Section 1.706–1(a)(2) of the current
regulations provides that any gain or loss
from a partnership distribution or from a
sale or exchange of all or part of a part-
nership interest is includible in the part-
ner’s gross income for the taxable year in
which the payment is made. Gain or loss
from a distribution or a sale or exchange
of a partnership interest generally is in-
cludible in gross income in the taxable
year in which payment is made, but not
always. For example, a partner who sells
his partnership interest in exchange for an
installment note may be able to defer in-
clusion of the gain from that sale under
2001–27 I.R.B.7July 2, 2001

the installment method of accounting.
Because the IRS and Treasury Depart-
ment believe that other provisions of the
Code and regulations provide adequate
guidance on the time for including gain or
loss from a partnership distribution or
from a sale or exchange of a partnership
interest, the inclusion rule in
§1.706–1(a)(2) is proposed to be re-
moved.
3.Determination of interest in profits and
capital.
To apply any of the three required tax-
able year tests, a partnership must deter-
mine the partners’ interests in partnership
profits and capital. The proposed regula-
tions elaborate on the meaning of a part-
ner’s interest in partnership profits and
capital for purposes of these tests. With
respect to profits interests, the regulations
clarify that a partner’s profits interest is
the partner’s share of the taxable income,
rather than the book income, of the part-
nership. The regulations also clarify that
the partners’ profits interests are deter-
mined on an annual basis based on the
manner in which the partnership expects
to allocate its income for the year. If the
partnership does not expect to have in-
come in the current year, then the partner-
ship determines the partner’s profits inter-
ests based on the manner in which it
expects to allocate its income in the first
taxable year in which the partnership ex-
pects to have income.
Generally, a partner’s interest in part-
nership capital is determined through ref-
erence to the assets of the partnership that
the partner would be entitled to upon
withdrawal from the partnership or upon
the liquidation of the partnership. See,
e.g., §1.704–1(e)(v), Rev. Proc. 93–27
(1993 C.B. 343). As a practical matter,
such a determination will require a valua-
tion of the partnership’s assets. Because
the determination under section 706 must
be made on an annual basis, the burden
associated with actual valuations may
make it difficult for partnerships to iden-
tify their taxable years quickly and easily.
Therefore, for partnerships that maintain
capital accounts in accordance with
§1.704–1(b)(2)(iv), these proposed regu-
lations provide that in making this deter-
mination, it will be reasonable for the
partnership to assume that a partner’s in-
terest in partnership capital is the ratio of
the partner’s capital account to all part-
ners’ capital accounts. The IRS and Trea-
sury Department are aware that this
method will not always be as precise as an
actual valuation, but believe that any im-
precision is outweighed by the strong in-
terest that partnerships have in being able
to easily determine their taxable year.
This definition of a partner’s interest in
partnership profits and capital was de-
signed to be compatible with the provi-
sions of, and policies underlying, section
706(b). Many other sections of the Code
also contain references to a partner’s in-
terest in partnership profits or capital. As
those sections address concerns that differ
substantially from the concerns addressed
by section 706(b), this proposed regula-
tion should not be read to create any im-
plication as to the meaning of a partner’s
interest in partnership profits and capital
for purposes of those sections.
E. Section 1378: S Corporations
The current regulations under
§18.1378–1 describe the permitted year
of an S corporation and provide proce-
dural rules for an S corporation or elect-
ing S corporation to obtain approval to
adopt, change, or retain its taxable year.
However, the automatic change provision
contained in these regulations is more re-
strictive than the automatic change pro-
posed in Notice 2001–35. For this reason,
and to be consistent with the policy deci-
sion to provide the procedural aspects of
adopting, retaining, or changing a taxable
year under §1.442–1 (including the ad-
ministrative procedures prescribed there-
under), these regulations propose to mod-
ify §18.1378–1 to remove these
procedural rules and instead refer to
§1.442–1.
F. Proposed Effective Date
These regulations are proposed to be
applicable for taxable years ending on or
after the date these regulations are pub-
lished in the Federal Registeras final
regulations.
Effect on Other Documents
Rev. Rul. 57–589 is obsolete.
Rev. Rul. 65–316 (1965–2 C.B. 149) is
obsolete.
Rev. Rul. 68–125 (1968–1 C.B. 189) is
obsolete.
Rev. Rul. 69–563 is obsolete.
Rev. Rul. 74–326 (1974–2 C.B. 142) is
obsolete.
Rev. Rul. 78–179 (1978–1 C.B. 132) is
obsolete.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in Exec-
utive Order 12866. Therefore, a regula-
tory assessment is not required. It also
has been determined that section 553(b)
of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these
regulations. It is hereby certified that the
collection of information in these regula-
tions will not have a significant economic
impact on a substantial number of small
entities. This certification is based upon
the fact that few small entities are ex-
pected to adopt a 52-53-week taxable
year, triggering the collection of informa-
tion, and that for those who do, the burden
imposed under §1.441–2(b)(1)(ii) will be
minimal. Therefore, a Regulatory Flexi-
bility Analysis under the Regulatory Flex-
ibility Act (5 U.S.C. chapter 6) is not re-
quired. Pursuant to section 7805(f) of the
Internal Revenue Code, this notice of pro-
posed rulemaking will be submitted to the
Chief Counsel for Advocacy of the Small
Business 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 written com-
ments (a signed original and eight (8)
copies) and electronic comments that are
submitted timely to the IRS. The IRS and
Treasury Department specifically request
comments on the clarity of the proposed
rules and how they can be made easier to
understand. All comments will be avail-
able for public inspection and copying.
A public hearing has been scheduled
for October 2, 2001, at 10 a.m., in the IRS
Auditorium, Internal Revenue Building,
1111 Constitution Avenue, NW, Washing-
ton, DC. Due to building security proce-
dures, visitors must enter at the 10th
Street entrance, located between Consti-
tution and Pennsylvania Avenues, NW. In
addition, all visitors must present photo
identification to enter the building. Be-
cause of access restrictions, visitors will
July 2, 200182001–27 I.R.B.

not be admitted beyond the immediate en-
trance area more than 15 minutes before
the hearing starts. For information about
having your name placed on the building
access list to attend the hearing, see the
“FOR FURTHER INFORMATION
CONTACT” section of this preamble.
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 timely
written or electronic comments and must
submit an outline of the topics to be dis-
cussed and the time to be devoted to each
topic (preferably a signed original and
eight (8) copies) by September 11, 2001.
A period of 10 minutes will be allo-
cated to each person for making com-
ments.
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 authors of these regula-
tions are Roy A. Hirschhorn and Martin
Scully, Jr. of the Office of Associate Chief
Counsel (Income Tax and Accounting).
However, other personnel from the IRS
and Treasury Department participated in
their development.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR parts 1, 5c, 5f,
18, and 301 are proposed 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. In the list below, for each sec-
tion indicated in the left column, remove
the old language in the middle column
and add the new language in the right col-
umn.
2001–27 I.R.B.9July 2, 2001
Affected SectionRemoveAdd
1.46–1(p)(2)(iv)paragraph (b)(1) of §1.441–2§1.441–2
1.48–3(d)(1)(iii)paragraph (b)(1) of §1.441–2§1.441–2
1.280H–1T(a), last sentence§1.441–4T(d)§1.441–3(c)
1.443–1(b)(1)(ii)and paragraph (c)(5) of §1.441–2and §1.441–2(b)(2)(ii)
1.444–1T(a)(1), first sentence§1.441–4T(d)§1.441–3(c)
1.444–2T(a), last sentence§1.441–4T(d)§1.441–3(c)
1.448–1(h)(2)(ii)(B)(1)§1.441–2T(b)(1)§1.441–2(c)
1.469–1(h)(4)(ii)(D)§1.441–4T(f)§1.441–3(e)
1.469–1T(g)(2)(i)§1.441–4T(d)§1.441–3(c)
1.1561–1(c)(2)See paragraph (b)(1) of §1.441–2See §1.441–2
1.6654–2(a), concluding textparagraph (b) of §1.441–2§1.441–2(c)
1.6655–2(a)(4), first sentenceparagraph (b) of §1.441–2§1.441–2(c)
301.7701(b)–6(a), third sentence §1.441–1(e)§1.441–1(b)
Par. 3. Sections 1.441–0, 1.441–1,
1.441–2, 1.441–3, and 1.441–4 are added
to read as follows:
§1.441–0 Table of contents.
This section lists the captions contained
in §§1.441–1 through 1.441–4 as follows:
§1.441–1 Period for computation of
taxable income.
(a) Computation of taxable income.
(1) In general.
(2) Length of taxable year.
(b) General rules and definitions.
(1) Taxable year.
(2) Required taxable year.
(i)In general.
(ii) Exceptions.
(A) 52-53-week taxable years.
(B) Partnerships, S corporations, and
PSCs.
(C) Specified foreign corporations.
(3) Annual accounting period.
(4) Calendar year.
(5) Fiscal year.
(i) Definition.
(ii) Recognition.
(6) Grandfathered fiscal year.
(7) Books.
(c) Adoption of taxable year.
(1) In general.
(2) Approval required.
(i) Taxpayers with required taxable
years.
(ii) Taxpayers without books.
(d) Retention of taxable year.
(e) Change of taxable year.
(f) Obtaining approval of the Comm-
issioner or making a section 444
election.
§1.441–2 Election of taxable year
consisting of 52-53 weeks.
(a) In general.
(1) Election.
(2) Eligible taxpayer
(3) Example.
(b) Procedures to elect a 52-53-week
taxable year.
(1) Adoption of a 52-53-week taxable
year.
(i) In general.
(ii) Filing requirement.

(2) Change to (or from) a 52-53-week
taxable year.
(i) In general.
(ii) Special rules for short period
required to effect the change.
(3) Examples.
(c) Application of effective dates.
(1) In general.
(2) Examples.
(3) Changes in tax rates.
(4) Examples.
(d) Computation of taxable income.
(e) Treatment of taxable years ending
with reference to the same calendar
month.
(1) Pass-through entities.
(2) Personal service corporations and
employee-owners.
(3) Definitions.
(i)Pass-through entity.
(ii) Owner of a pass-through entity.
(4) Examples.
(5) Transition rule.
§1.441–3 Taxable year of a personal
service corporation.
(a) Taxable year.
(1) Required taxable year.
(2) Exceptions.
(b) Adoption, change, or retention of
taxable year.
(1) Adoption of taxable year.
(2) Change in taxable year.
(3) Retention of taxable year.
(4) Procedures for obtaining approval or
making a section 444 election.
(5) Examples.
(c) Personal service corporation de-
fined.
(1) In general.
(2) Testing period.
(i)In general.
(ii) New corporations.
(3) Examples.
(d) Performance of personal services.
(1) Activities described in section
448(d)(2)(A).
(2) Activities not described in section
448(d)(2)(A).
(e) Principal activity.
(1) General rule.
(2) Compensation cost.
(i)Amounts included.
(ii) Amounts excluded.
(3) Attribution of compensation cost to
personal service activity.
(i)Employees involved only in the per-
formance of personal services.
(ii) Employees involved only in activi-
ties that are not treated as the perfor-
mance of personal services.
(iii) Other employees.
(A) Compensation cost attributable to
personal service activity.
(B) Compensation cost not attributable
to personal service activity.
(f)Services substantially performed by
employee-owners.
(1) General rule.
(2) Compensation cost attributable to
personal services.
(3) Examples.
(g) Employee-owner defined.
(1) General rule.
(2) Special rule for independent contrac-
tors who are owners.
(h) Special rules for affiliated groups fil-
ing consolidated returns.
(1) In general.
(2) Examples.
§1.441–4 Effective date.
§1.441–1 Period for computation of
taxable income.
(a) Computation of taxable income—
(1) In general. Taxable income must be
computed and a return must be made for a
period known as the “taxable year.” For
rules relating to methods of accounting,
the taxable year for which items of gross
income are included and deductions are
taken, inventories, and adjustments, see
parts II and III (section 446 and follow-
ing), subchapter E, chapter 1 of the Inter-
nal Revenue Code, and the regulations
thereunder.
(2) Length of taxable year. Except as
otherwise provided in the Internal Rev-
enue Code and the regulations thereunder
(e.g., §1.441–2 regarding 52-53-week
taxable years), a taxable year may not
cover a period of more than 12 calendar
months.
(b) General rules and definitions. The
general rules and definitions in this para-
graph (b) apply for purposes of sections
441 and 442 and the regulations thereun-
der.
(1) Taxable year. Taxable year
means—
(i) The period for which a return is
made, if a return is made for a period of
less than 12 months (short period). See
section 443 and the regulations thereun-
der;
(ii) Except as provided in paragraph
(b)(1)(i) of this section, the taxpayer’s re-
quired taxable year (as defined in para-
graph (b)(2) of this section), if applicable;
(iii) Except as provided in paragraphs
(b)(1)(i) and (ii) of this section, the tax-
payer’s annual accounting period (as de-
fined in paragraph (b)(3) of this sec-
tion), if it is a calendar year or a fiscal
year; or
(iv) Except as provided in paragraphs
(b)(1)(i) and (ii) of this section, the calen-
dar year, if the taxpayer keeps no books,
does not have an annual accounting pe-
riod, or has an annual accounting period
that does not qualify as a fiscal year.
(2) Required taxable year—(i) In gen-
eral. Certain taxpayers must use the par-
ticular taxable year that is required under
the Internal Revenue Code and the regula-
tions thereunder (the required taxable
year). For example, the required taxable
year is—
(A) In the case of a foreign sales corpo-
ration or domestic international sales cor-
poration, the taxable year determined
under section 441(h) and §1.921–1T
(a)(11), (b)(4), and (b)(6);
(B) In the case of a personal service
corporation (PSC), the taxable year deter-
mined under section 441(i) and §1.441–3;
(C) In the case of a nuclear decommis-
sioning fund, the taxable year determined
under §1.468A–4(c)(1);
(D) In the case of a designated settle-
ment fund or a qualified settlement fund,
the taxable year determined under
§1.468B–2(j);
(E) In the case of a common trust fund,
the taxable year determined under section
584(i);
(F) In the case of certain trusts, the tax-
able year determined under section 644;
(G) In the case of a partnership, the tax-
able year determined under section 706
and §1.706–1;
(H) In the case of an insurance com-
pany, the taxable year determined under
section 843 and §1.1502–76(a)(2);
(I) In the case of a real estate invest-
ment trust, the taxable year determined
under section 859;
(J) In the case of a real estate mortgage
investment conduit, the taxable year de-
termined under section 860D(a)(5) and
§1.860D–1(b)(6);
(K) In the case of a specified foreign
corporation, the taxable year determined
July 2, 2001102001–27 I.R.B.

under section 898(c) and §§1.898–1
through 1.898–4;
(L) In the case of an S corporation, the
taxable year determined under section
1378 and §1.1378–1; or
(M) In the case of a member of an affil-
iated group that makes a consolidated re-
turn, the taxable year determined under
§1.1502–76.
(ii) Exceptions. Notwithstanding para-
graph (b)(2)(i) of this section, the follow-
ing taxpayers may have a taxable year
other than their required taxable year:
(A) 52-53-week taxable years. Certain
taxpayers may elect to use a 52-53-week
taxable year that ends with reference to
their required taxable year. See, for exam-
ple, §§1.441–3 (PSCs), 1.706–1 (partner-
ships), 1.1378–1 (S corporations), and
1.1502–76(a)(1) (members of a consoli-
dated group), and 1.898–4(c)(3) (speci-
fied foreign corporations).
(B) Partnerships, S corporations, and
PSCs. A partnership, S corporation, or
PSC may use a taxable year other than its
required taxable year if the taxpayer
elects a 52-53-week taxable year that ends
with reference to its required taxable year
as provided in paragraph (b)(2)(ii)(A) of
this section, elects to use a taxable year
other than its required taxable year under
section 444, or establishes a business pur-
pose to the satisfaction of the Commis-
sioner under section 442 (such as a grand-
fathered fiscal year).
(C) Specified foreign corporations. A
specified foreign corporation (as defined
in section 898(b)) may use a taxable year
other than its required taxable year if it
elects a 52-53-week taxable year that ends
with reference to its required taxable year
as provided in paragraph (b)(2)(ii)(A) of
this section or makes a one-month defer-
ral election under section 898(c)(1)(B)
and §1.898–3(a)(2).
(3) Annual accounting period. Annual
accounting periodmeans the annual pe-
riod (calendar year or fiscal year) on the
basis of which the taxpayer regularly
computes its income in keeping its books.
(4) Calendar year. Calendar year
means a period of 12 consecutive months
ending on December 31. A taxpayer who
has not established a fiscal year must
make its return on the basis of a calendar
year.
(5) Fiscal year—(i) Definition. Fiscal
yearmeans—
(A) A period of 12 consecutive months
ending on the last day of any month other
than December; or
(B) A 52-53-week taxable year, if such
period has been elected by the taxpayer.
See §1.441–2.
(ii) Recognition. A fiscal year will be
recognized only if the books of the tax-
payer are kept in accordance with such
fiscal year.
(6) Grandfathered fiscal year. Grand-
fathered fiscal yearmeans a fiscal year
(other than a year that resulted in a three
month or less deferral of income) that a
partnership or an S corporation received
permission to use on or after July 1, 1974,
by a letter ruling (i.e., not by automatic
approval).
(7) Books. Booksinclude the tax-
payer’s regular books of account and
such other records and data as may be
necessary to support the entries on the
taxpayer’s books and on the taxpayer’s
return, as for example, a reconciliation
of any difference between such books
and the taxpayer’s return. Records that
are sufficient to reflect income ade-
quately and clearly on the basis of an an-
nual accounting period will be regarded
as the keeping of books. See section
6001 and the regulations thereunder for
rules relating to the keeping of books
and records.
(c) Adoption of taxable year—(1)In
general. Except as provided in paragraph
(c)(2) of this section, a new taxpayer may
adopt any taxable year that satisfies the
requirements of section 441 and the regu-
lations thereunder without the approval of
the Commissioner. A taxable year of a
new taxpayer is adopted by filing its first
federal income tax return using that tax-
able year. The filing of an application for
automatic extension of time to file a fed-
eral income tax return (e.g., Form 7004),
the filing of an application for an em-
ployer identification number (i.e., Form
SS-4), or the payment of estimated taxes,
for a particular taxable year do not consti-
tute an adoption of that taxable year.
(2) Approval required—(i) Taxpayers
with required taxable years. A newly-
formed partnership, electing S corpora-
tion, or newly-formed PSC that wants to
adopt a taxable year other than its re-
quired taxable year, a 52-53-week taxable
year that ends with reference to its re-
quired taxable year, or a taxable year
elected under section 444, must establish
a business purpose and obtain the ap-
proval of the Commissioner under section
442.
(ii) Taxpayers without books. A tax-
payer that must use a calendar year under
section 441(g) and paragraph (f) of this
section may not adopt a fiscal year with-
out obtaining the approval of the Com-
missioner.
(d) Retention of taxable year. In cer-
tain cases, a partnership, S corporation, or
PSC will be required to change its taxable
year unless it obtains the approval of the
Commissioner under section 442, or
makes an election under section 444, to
retain its current taxable year. For exam-
ple, a corporation using a June 30 fiscal
year that either becomes a PSC or elects
to be an S corporation and, as a result, is
required to use the calendar year under
sections 441(i) or 1378, respectively,
must obtain the approval of the Commis-
sioner to retain its current fiscal year.
Similarly, a partnership using a taxable
year that corresponds to its required tax-
able year must obtain the approval of the
Commissioner to retain such taxable year
if its required taxable year changes as a
result of a change in ownership. How-
ever, a partnership that previously estab-
lished a business purpose to the satisfac-
tion of the Commissioner to use a taxable
year is not required to obtain the approval
of the Commissioner if its required tax-
able year changes as a result of a change
in ownership.
(e) Change of taxable year. Once a
taxpayer has adopted a taxable year, such
taxable year must be used in computing
taxable income and making returns for all
subsequent years unless the taxpayer ob-
tains approval from the Commissioner to
make a change or the taxpayer is other-
wise authorized to change without the ap-
proval of the Commissioner under the In-
ternal Revenue Code (e.g., section 444 or
section 859) or the regulations thereunder.
(f) Obtaining approval of the Commis-
sioner or making a section 444 election.
See §1.442–1(b) for procedures for ob-
taining approval of the Commissioner
(automatically or otherwise) to adopt,
change, or retain an annual accounting
period. See §§1.444–1T and 1.444–2T
for qualifications, and 1.444–3T for pro-
cedures, for making an election under
section 444.
2001–27 I.R.B.11July 2, 2001

§1.441–2 Election of taxable year
consisting of 52-53 weeks.
(a) In general—(1) Election. An eligi-
ble taxpayer may elect to compute its tax-
able income on the basis of a fiscal year
that—
(i) Varies from 52 to 53 weeks;
(ii) Ends always on the same day of the
week; and
(iii) Ends always on—
(A) Whatever date this same day of the
week last occurs in a calendar month; or
(B) Whatever date this same day of the
week falls that is the nearest to the last
day of the calendar month.
(2) Eligible taxpayer. A taxpayer is eli-
gible to elect a 52-53-week taxable year if
such fiscal year would otherwise satisfy
the requirements of section 441 and the
regulations thereunder. For example, a
taxpayer that is required to use a calendar
year under §1.441–1(b)(1)(D) is not an el-
igible taxpayer.
(3) Example. The provisions of this
paragraph (a) are illustrated by the fol-
lowing example:
Example. If the taxpayer elects a taxable year
ending always on the last Saturday in November,
then for the year 2001, the taxable year would end
on November 24, 2001. On the other hand, if the
taxpayer had elected a taxable year ending always
on the Saturday nearest to the end of November,
then for the year 2001, the taxable year would end
on December 1, 2001. Thus, in the case of a taxable
year described in paragraph (a)(1)(iii)(A) of this sec-
tion, the year will always end within the month and
may end on the last day of the month, or as many as
six days before the end of the month. In the case of a
taxable year described in paragraph (a)(1)(iii)(B) of
this section, the year may end on the last day of the
month, or as many as three days before or three days
after the last day of the month.
(b) Procedures to elect a 52-53-week
taxable year—(1) Adoption of a 52-53-
week taxable year—(i) In general. A new
eligible taxpayer elects a 52-53-week tax-
able year by adopting such year in accor-
dance with §1.441–1(c). A newly-formed
partnership, electing S corporation, or
newly-formed personal service corpora-
tion (PSC) may adopt a 52-53-week tax-
able year without the approval of the
Commissioner if such year ends with ref-
erence to either the taxpayer’s required
taxable year (as defined in
§1.441–1(b)(2)) or the taxable year
elected under section 444. See
§§1.706–1, 1.1378–1 and 1.441–3. Simi-
larly, a newly-formed specified foreign
corporation (as defined in section 898(b))
may adopt a 52-53-week taxable year if
such year ends with reference to the tax-
payer’s required taxable year, or, if the
one-month deferral election under section
898(c)(1)(B) is made, with reference to
the month immediately preceding the re-
quired taxable year. See §1.898–4(c)(3).
Seealso §1.1502–76(a)(1) for special
rules regarding subsidiaries adopting 52-
53-week taxable years.
(ii) Filing requirement. A taxpayer
adopting a 52-53-week taxable year must
file with its federal income tax return for
its first taxable year a statement contain-
ing the following information—
(A) The calendar month with reference
to which the new 52-53-week taxable
year ends;
(B) The day of the week on which the
52-53-week taxable year always will end;
and
(C) Whether the 52-53-week taxable
year will always end on the date on which
that day of the week last occurs in the cal-
endar month, or on the date on which that
day of the week falls that is nearest to the
last day of that calendar month.
(2) Change to (or from) a 52-53-week
taxable year—(i) In general. An election
of a 52-53-week taxable year by an exist-
ing eligible taxpayer with an established
taxable year is treated as a change in an-
nual accounting period that requires the
approval of the Commissioner in accor-
dance with §1.442–1. Thus, a taxpayer
must obtain approval to change from its
current taxable year to a 52-53-week tax-
able year. Similarly, a taxpayer must ob-
tain approval to change from a 52-53-
week taxable year, or to change from one
52-53-week taxable year to another 52-
53-week taxable year. However, if a
change to a 52-53-week taxable year ends
with reference to the same calendar
month as the existing taxable year, or if a
change from a 52-53-week taxable year
ends with reference to the same calendar
month as the proposed taxable year, the
taxpayer may obtain approval for the
change automatically pursuant to admin-
istrative procedures published by the
Commissioner. See §1.442–1(b) for pro-
cedures for obtaining such approval.
(ii) Special rules for the short period
required to effect the change. If a change
to or from a 52-53-week taxable year re-
sults in a short period (within the meaning
of §1.443–1(a)) of 359 days or more, or
six days or less, the tax computation
under §1.443–1(b) does not apply. If the
short period is 359 days or more, it is
treated as a full taxable year. If the short
period is six days or less, such short pe-
riod is not a separate taxable year but in-
stead is added to and deemed a part of the
following taxable year. (In the case of a
change to or from a 52-53-week taxable
year not involving a change of the month
with reference to which the taxable year
ends, the tax computation under
§1.443–1(b) does not apply because the
short period will always be 359 days or
more, or six days or less.) In the case of a
short period which is more than six days
and less than 359 days, taxable income
for the short period is placed on an annual
basis for purposes of §1.443–1(b) by mul-
tiplying such income by 365 and dividing
the result by the number of days in the
short period. In such case, the tax for the
short period is the same part of the tax
computed on such income placed on an
annual basis as the number of days in the
short period is of 365 days (unless
§1.443–1(b)(2), relating to the alternative
tax computation, applies). For an adjust-
ment in deduction for personal exemp-
tion, see§1.443–1(b)(1)(v).
(3) Examples. The following examples
illustrate paragraph (b)(2)(ii) of this sec-
tion:
Example 1. A taxpayer having a fiscal year end-
ing April 30, obtains approval to change to a 52-53-
week taxable year ending the last Saturday in April
for taxable years beginning after April 30, 2001.
This change involves a short period of 362 days,
from May 1, 2001, to April 27, 2002, inclusive. Be-
cause the change results in a short period of 359
days or more, it is not placed on an annual basis and
is treated as a full taxable year.
Example 2. Assume the same conditions as Ex-
ample 1, except that the taxpayer changes for tax-
able years beginning after April 30, 2002, to a tax-
able year ending on the Thursday nearest to April
30. This change results in a short period of two
days, May 1 to May 2, 2002. Because the short pe-
riod is less than seven days, tax is not separately
computed. This short period is added to and deemed
part of the following 52-53-week taxable year,
which would otherwise begin on May 3, 2002, and
end on May 1, 2003.
(c) Application of effective dates—(1)
In general. Except as provided in para-
graph (c)(3) of this section, for purposes
of determining the effective date (e.g., of
legislative or regulatory changes) or the
applicability of any provision of this title
that is expressed in terms of taxable years
beginning, including, or ending with ref-
erence to the first or last day of a specified
July 2, 2001122001–27 I.R.B.

calendar month, a 52-53-week taxable
year is deemed to begin on the first day of
the calendar month nearest to the first day
of the 52-53-week taxable year, and is
deemed to end or close on the last day of
the calendar month nearest to the last day
of the 52-53-week taxable year, as the
case may be. Examples of provisions of
this title, the applicability of which is ex-
pressed in terms referred to in the preced-
ing sentence, include the provisions relat-
ing to the time for filing returns and other
documents, paying tax, or performing
other acts, and the provisions of part II,
subchapter B, chapter 6 (section 1561 and
following) relating to surtax exemptions
of certain controlled corporations.
(2) Examples. The provisions of para-
graph (c)(1) of this section may be illus-
trated by the following examples:
Example 1. Assume that an income tax provision
is applicable to taxable years beginning on or after
January 1, 2001. For that purpose, a 52-53-week tax-
able year beginning on any day within the period
December 26, 2000, to January 4, 2001, inclusive, is
treated as beginning on January 1, 2001.
Example 2. Assume that an income tax provision
requires that a return must be filed on or before the
15th day of the third month following the close of
the taxable year. For that purpose, a 52-53-week tax-
able year ending on any day during the period May
25 to June 3, inclusive, is treated as ending on May
31, the last day of the month ending nearest to the
last day of the taxable year, and the return, therefore,
must be made on or before August 15.
Example 3. X, a corporation created on January
1, 2001, elects a 52-53-week taxable year ending on
the Friday nearest the end of December. Thus, X’s
first taxable year begins on Monday, January 1,
2001, and ends on Friday, December 28, 2001; its
next taxable year begins on Saturday, December 29,
2001, and ends on Friday, January 3, 2003; and its
next taxable year begins on Saturday, January 4,
2003, and ends on Friday, January 2, 2004. For pur-
poses of applying the provisions of Part II, subchap-
ter B, chapter 6 of the Internal Revenue Code, X’s
first taxable year is deemed to end on December 31,
2001; its next taxable year is deemed to begin on
January 1, 2002, and end on December 31, 2002,
and its next taxable year is deemed to begin on Janu-
ary 1, 2003, and end on December 31, 2003. Ac-
cordingly, each such taxable year is treated as in-
cluding one and only one December 31
st
.
(3) Changes in tax rates. If a change in
the rate of tax is effective during a 52-53-
week taxable year (other than on the first
day of such year as determined under
paragraph (c)(1) of this section), the tax
for the 52-53-week taxable year must be
computed in accordance with section 15,
relating to effect of changes, and the regu-
lations thereunder. For the purpose of the
computation under section 15, the deter-
mination of the number of days in the pe-
riod before the change, and in the period
on and after the change, is to be made
without regard to the provisions of para-
graph (b)(1) of this paragraph.
(4)Examples. The provisions of para-
graph (c)(3) of this section may be illus-
trated by the following examples:
Example 1. Assume a change in the rate of tax is
effective for taxable years beginning after June 30,
2002. For a 52-53-week taxable year beginning on
Friday, November 2, 2001, the tax must be com-
puted on the basis of the old rates for the actual
number of days from November 2, 2001, to June 30,
2002, inclusive, and on the basis of the new rates for
the actual number of days from July 1, 2002, to
Thursday, October 31, 2002, inclusive.
Example 2. Assume a change in the rate of tax is
effective for taxable years beginning after June 30,
2001. For this purpose, a 52-53-week taxable year
beginning on any of the days from June 25 to July 4,
inclusive, is treated as beginning on July 1. There-
fore, no computation under section 15 will be re-
quired for such year because of the change in rate.
(d) Computation of taxable income.
The principles of section 451, relating to
the taxable year for inclusion of items of
gross income, and section 461, relating to
the taxable year for taking deductions,
generally are applicable to 52-53-week
taxable years. Thus, except as otherwise
provided, all items of income and deduc-
tion must be determined on the basis of a
52-53-week taxable year. However, a
taxpayer may determine particular items
as though the 52-53-week taxable year
were a taxable year consisting of 12 cal-
endar months, provided that practice is
consistently followed by the taxpayer and
clearly reflects income. For example, an
allowance for depreciation or amortiza-
tion may be determined on the basis of a
52-53-week taxable year, or as though the
52-53-week taxable year is a taxable year
consisting of 12 calendar months, pro-
vided the taxpayer consistently follows
that practice with respect to all deprecia-
ble or amortizable items.
(e) Treatment of taxable years ending
with reference to the same calendar
month—(1)Pass-through entities. If a
pass-through entity (as defined in para-
graph (e)(3)(i) of this section) or an owner
of a pass-through entity (as defined in
paragraph (e)(3)(ii) of this section), or
both, use a 52-53-week taxable year and
the taxable year of the pass-through entity
and the owner end with reference to the
same calendar month, then, for purposes
of determining the taxable year in which
items of income, gain, loss, deductions, or
credits from the pass-through entity are
taken into account by the owner of the
pass-through, the owner’s taxable year
will be deemed to end on the last day of
the pass-through’s taxable year. Thus, if
the taxable year of a partnership and a
partner end with reference to the same
calendar month, then for purposes of de-
termining the taxable year in which that
partner takes into account items described
in section 702 and items that are de-
ductible by the partnership (including
items described in section 707(c)) and in-
cludible in the income of that partner, that
partner’s taxable year will be deemed to
end on the last day of the partnership’s
taxable year. Similarly, if the taxable year
of an S corporation and a shareholder end
with reference to the same calendar
month, then for purposes of determining
the taxable year in which that shareholder
takes into account items described in sec-
tion 1366(a) and items that are deductible
by the S corporation and includible in the
income of that shareholder, that share-
holder’s taxable year will be deemed to
end on the last day of the S corporation’s
taxable year.
(2) Personal service corporations and
employee-owners. If the taxable year of a
PSC (within the meaning of §1.441–3(c))
and an employee-owner (within the
meaning of §1.441–3(g)) end with refer-
ence to the same calendar month, then for
purposes of determining the taxable year
in which an employee-owner takes into
account items that are deductible by the
PSC and includible in the income of the
employee-owner, the employee-owner’s
taxable year will be deemed to end on the
last day of the PSC’s taxable year.
(3) Definitions—(i) Pass-through en-
tity. For purposes of this section, a pass-
through entity means a partnership, S cor-
poration, trust, estate, common trust fund
(within the meaning of section 584(i)),
controlled foreign corporation (within the
meaning of section 957), foreign personal
holding company (within the meaning of
section 552), or passive foreign invest-
ment company that is a qualified electing
fund (within the meaning of section
1295).
(ii) Owner of a pass-through entity.For
purposes of this section, an owner of a
pass-through entity means a taxpayer that
owns an interest in, or stock of, a pass-
through entity. For example, an owner of
a pass-through entity includes a partner in
2001–27 I.R.B.13July 2, 2001

a partnership, a shareholder of an S cor-
poration, a beneficiary of a trust or an es-
tate, a participant in a common trust fund,
a U.S. shareholder (as defined in section
951(b)) of a controlled foreign corpora-
tion, a U.S. shareholder (as defined in
section 551(a)) of a foreign personal hold-
ing company, or a U.S. person that holds
stock in a passive foreign investment
company that is a qualified electing fund.
(4) Examples. The provisions of para-
graph (e)(2) of this section may be illus-
trated by the following examples:
Example 1.ABC Partnership uses a 52-53-week
taxable year that ends on the Wednesday nearest to
December 31, and its partners, A, B, and C, are indi-
vidual calendar year taxpayers. Assume that, for
ABC’s taxable year ending January 3, 2001, each
partner’s distributive share of ABC’s taxable income
is $10,000. Under section 706(a) and paragraph
(e)(1) of this section, for the taxable year ending De-
cember 31, 2000, A, B, and C each must include
$10,000 in income with respect to the ABC year
ending January 3, 2001. Similarly, if ABC makes a
guaranteed payment to A on January 2, 2001, A must
include the payment in income for A’s taxable year
ending December 31, 2000.
Example 2. X, a PSC, uses a 52-53-week taxable
year that ends on the Wednesday nearest to Decem-
ber 31, and all of the employee-owners of X are indi-
vidual calendar year taxpayers. Assume that, for its
taxable year ending January 3, 2001, X pays a bonus
of $10,000 to each employee-owner on January 2,
2001. Under paragraph (e)(2) of this section, each
employee-owner must include its bonus in income
for the taxable year ending December 31, 2000.
(5) Transition rule. In the case of an
owner of a pass-through entity (other than
the owner of a partnership or S corpora-
tion) that is required by this paragraph (e)
to include in income for its first taxable
year ending on or after the date these reg-
ulations are published in the Federal
Registeras final regulations amounts at-
tributable to two taxable years of a pass-
through entity, the amount that otherwise
would be required to be included in in-
come for such first taxable year by reason
of this paragraph (e) should be included in
income ratably over the four-taxable-year
period beginning with such first taxable
year under principles similar to
§1.702–3T, unless the owner of the pass-
through elects to include all such income
in its first taxable year ending on or after
the date these regulations are published in
the Federal Registeras final regulations.
§1.441–3 Taxable year of a personal
service corporation.
(a) Taxable year—(1) Required taxable
year. Except as provided in paragraph
(a)(2) of this section, the taxable year of a
personal service corporation (PSC) (as
defined in paragraph (c) of this section)
must be the calendar year.
(2) Exceptions. A PSC may have a tax-
able year other than its required taxable
year (i.e., a fiscal year) if it elects to use a
52-53-week taxable year that ends with
reference to the calendar year, makes an
election under section 444, or establishes
a business purpose for such fiscal year
and obtains the approval of the Commis-
sioner under section 442.
(b) Adoption, change, or retention of
taxable year—(1)Adoption of taxable
year. A PSC may adopt, in accordance
with §1.441–1(c), the calendar year, a 52-
53-week taxable year ending with refer-
ence to the calendar year, or a taxable
year elected under section 444 without the
approval of the Commissioner. See
§1.441–1. A PSC that wants to adopt any
other taxable year must establish a busi-
ness purpose and obtain the approval of
the Commissioner under section 442.
(2) Change in taxable year. A PSC
that wants to change its taxable year
must obtain the approval of the Commis-
sioner under section 442 or make an
election under section 444. However, a
PSC may obtain automatic approval for
certain changes, including a change to
the calendar year or to a 52-53-week tax-
able year ending with reference to the
calendar year, pursuant to administrative
procedures published by the Commis-
sioner.
(3) Retention of taxable year. In cer-
tain cases, a PSC will be required to
change its taxable year unless it obtains
the approval of the Commissioner under
section 442, or makes an election under
section 444, to retain its current taxable
year. For example, a corporation using a
June 30 fiscal year that becomes a PSC
and, as a result, is required to use the cal-
endar year must obtain the approval of the
Commissioner to retain its current fiscal
year.
(4) Procedures for obtaining approval
or making a section 444 election. See
§1.442–1(b) for procedures to obtain the
approval of the Commissioner (automati-
cally or otherwise) to adopt, change, or
retain a taxable year. See§§1.444–1T and
1.444–2T for qualifications, and
1.444–3T for procedures, for making an
election under section 444.
(5) Examples.The provisions of para-
graph (b)(4) of this section may be illus-
trated by the following examples:
Example 1. X, whose taxable year ends on January
31, 2001, becomes a PSC for its taxable year begin-
ning February 1, 2001, and does not obtain the ap-
proval of the Commissioner for using a fiscal year.
Thus, for taxable years ending before February 1,
2001, this section does not apply with respect to X.
For its taxable year beginning on February 1, 2001,
however, X will be required to comply with paragraph
(a) of this section. Thus, unless X obtains approval of
the Commissioner to use a January 31 taxable year, or
makes a section 444 election, X will be required to
change its taxable year to the calendar year under
paragraph (b) of this section by using a short taxable
year that begins on February 1, 2001, and ends on De-
cember 31, 2001. Under paragraph (b)(1) of this sec-
tion, X may obtain automatic approval to change its
taxable year to a calendar year. See §1.442-1(b).
Example 2. Assume the same facts as in Example
1, except that X desires to change to a 52-53-week
taxable year ending with reference to the month of
December. Under paragraph (b)(1) of this section X
may obtain automatic approval to make the change.
See §1.442–1(b).
(c) Personal service corporation de-
fined—(1) In general. For purposes of
this section and section 442, a taxpayer is
a PSC for a taxable year only if—
(i) The taxpayer is a C corporation (as
defined in section 1361(a)(2)) for the tax-
able year;
(ii) The principal activity of the tax-
payer during the testing period is the per-
formance of personal services;
(iii) During the testing period, those
services are substantially performed by
employee-owners (as defined in para-
graph (g) of this section); and
(iv) Employee-owners own (as deter-
mined under the attribution rules of sec-
tion 318, except that “any” applies instead
of “50 percent” in section 318(a)(2)(C))
more than 10 percent of the fair market
value of the outstanding stock in the tax-
payer on the last day of the testing period.
(2) Testing period—(i) In general. Ex-
cept as otherwise provided in paragraph
(c)(2)(ii) of this section, the testing period
for any taxable year is the immediately
preceding taxable year.
(ii) New corporations.The testing pe-
riod for a taxpayer’s first taxable year is the
period beginning on the first day of that
taxable year and ending on the earlier of—
(A) The last day of that taxable year; or
(B) The last day of the calendar year in
which that taxable year begins.
(3) Examples. The provisions of para-
graph (c)(2)(ii) of this section may be il-
lustrated by the following examples:
July 2, 2001142001–27 I.R.B.

Example 1. Corporation A’s first taxable year be-
gins on June 1, 2001, and A desires to use a Septem-
ber 30 taxable year. However, if A is a personal ser-
vice corporation, it must obtain the Commissioner’s
approval to use a September 30 taxable year. Pur-
suant to paragraph (c)(2)(ii) of this section, A’s test-
ing period for its first taxable year beginning June 1,
2001, is the period June 1, 2001, through September
30, 2001. Thus, if, based upon such testing period, A
is a personal service corporation, A must obtain the
Commissioner’s permission to use a September 30
taxable year.
Example 2. The facts are the same as in Example
1, except that A desires to use a March 31 taxable
year. Pursuant to paragraph (c)(2)(ii) of this section,
A’s testing period for its first taxable year beginning
June 1, 2001, is the period June 1, 2001, through De-
cember 31, 2001. Thus, if, based upon such testing
period, A is a personal service corporation, A must
obtain the Commissioner’s permission to use a
March 31 taxable year.
(d) Performance of personal services—
(1) Activities described in section
448(d)(2)(A). For purposes of this section,
any activity of the taxpayer described in
section 448(d)(2)(A) or the regulations
thereunder will be treated as the perfor-
mance of personal services. Therefore,
any activity of the taxpayer that involves
the performance of services in the fields
of health, law, engineering, architecture,
accounting, actuarial science, performing
arts, or consulting (as such fields are de-
fined in §1.448–1T) will be treated as the
performance of personal services for pur-
poses of this section.
(2) Activities not described in section
448(d)(2)(A).For purposes of this section,
any activity of the taxpayer not described
in section 448(d)(2)(A) or the regulations
thereunder will not be treated as the per-
formance of personal services.
(e) Principal activity—(1) General
rule. For purposes of this section, the
principal activity of a corporation for any
testing period will be the performance of
personal services if the cost of the corpo-
ration’s compensation (the compensation
cost) for such testing period that is attrib-
utable to its activities that are treated as
the performance of personal services
within the meaning of paragraph (d) of
this section (i.e., the total compensation
for personal service activities) exceeds 50
percent of the corporation’s total compen-
sation cost for such testing period.
(2) Compensation cost—(i) Amounts
included. For purposes of this section, the
compensation cost of a corporation for a
taxable year is equal to the sum of the fol-
lowing amounts allowable as a deduction,
allocated to a long-term contract, or oth-
erwise chargeable to a capital account by
the corporation during such taxable
year—
(A) Wages and salaries; and
(B) Any other amounts, attributable to
services performed for or on behalf of the
corporation by a person who is an em-
ployee of the corporation (including an
owner of the corporation who is treated as
an employee under paragraph (g)(2) of
this section) during the testing period.
Such amounts include, but are not limited
to, amounts attributable to deferred com-
pensation, commissions, bonuses, com-
pensation includible in income under sec-
tion 83, compensation for services based
on a percentage of profits, and the cost of
providing fringe benefits that are includi-
ble in income.
(ii) Amounts excluded. Notwithstand-
ing paragraph (e)(2)(i) of this section,
compensation cost does not include
amounts attributable to a plan qualified
under section 401(a) or 403(a), or to a
simplified employee pension plan defined
in section 408(k).
(3) Attribution of compensation cost to
personal service activity—(i) Employees
involved only in the performance of per-
sonal services. The compensation cost for
employees involved only in the perfor-
mance of activities that are treated as per-
sonal services under paragraph (d) of this
section, or employees involved only in
supporting the work of such employees,
are considered to be attributable to the
corporation’s personal service activity.
(ii) Employees involved only in activi-
ties that are not treated as the perfor-
mance of personal services. The compen-
sation cost for employees involved only
in the performance of activities that are
not treated as personal services under
paragraph (d) of this section, or for em-
ployees involved only in supporting the
work of such employees, are not consid-
ered to be attributable to the corporation’s
personal service activity.
(iii) Other employees.The compensa-
tion cost for any employee who is not de-
scribed in either paragraph (e)(3)(i) or
paragraph (e)(3)(ii) of this section (a
mixed-activity employee) is allocated as
follows—
(A)Compensation cost attributable to
personal service activity. That portion of
the compensation cost for a mixed activ-
ity employee that is attributable to the
corporation’s personal service activity
equals the compensation cost for that em-
ployee multiplied by the percentage of the
total time worked for the corporation by
that employee during the year that is at-
tributable to activities of the corporation
that are treated as the performance of per-
sonal services under paragraph (d) of this
section. That percentage is to be deter-
mined by the taxpayer in any reasonable
and consistent manner. Time logs are not
required unless maintained for other pur-
poses;
(B) Compensation cost not attributable
to personal service activity. That portion
of the compensation cost for a mixed ac-
tivity employee that is not considered to
be attributable to the corporation’s per-
sonal service activity is the compensation
cost for that employee less the amount de-
termined in paragraph (e)(3)(iii)(A) of
this section.
(f) Services substantially performed by
employee-owners—(1) General rule.
Personal services are substantially per-
formed during the testing period by em-
ployee-owners of the corporation if more
than 20 percent of the corporation’s com-
pensation cost for that period attributable
to its activities that are treated as the per-
formance of personal services within the
meaning of paragraph (d) of this section
(i.e., the total compensation for personal
service activities) is attributable to per-
sonal services performed by employee-
owners.
(2) Compensation cost attributable to
personal services. For purposes of para-
graph (f)(1) of this section—
(i) The corporation’s compensation
cost attributable to its activities that are
treated as the performance of personal
services is determined under paragraph
(e)(3) of this section; and
(ii) The portion of the amount deter-
mined under paragraph (f)(2)(i) of this
section that is attributable to personal ser-
vices performed by employee-owners is
to be determined by the taxpayer in any
reasonable and consistent manner.
(3) Examples. The provisions of this
paragraph (f) may be illustrated by the
following examples:
Example 1. For its taxable year beginning Febru-
ary 1, 2001, Corp A’s testing period is the taxable
year ending January 31, 2000. During that testing
period, A’s only activity was the performance of per-
sonal services. The total compensation cost of A (in-
cluding compensation cost attributable to employee-
2001–27 I.R.B.15July 2, 2001

owners) for the testing period was $1,000,000. The
total compensation cost attributable to employee-
owners of A for the testing period was $210,000.
Pursuant to paragraph (f)(1) of this section, the em-
ployee-owners of A substantially performed the per-
sonal services of A during the testing period because
the compensation cost of A’s employee-owners was
more than 20 percent of the total compensation cost
for all of A’s employees (including employee-own-
ers).
Example 2.Corp B has the same facts as corpora-
tion A in Example 1, except that during the taxable
year ending January 31, 2001, B also participated in
an activity that would not be characterized as the
performance of personal services under this section.
The total compensation cost of B (including com-
pensation cost attributable to employee-owners) for
the testing period was $1,500,000 ($1,000,000 at-
tributable to B’s personal service activity and
$500,000 attributable to B’s other activity). The total
compensation cost attributable to employee-owners
of B for the testing period was $250,000 ($210,000
attributable to B’s personal service activity and
$40,000 attributable to B’s other activity). Pursuant
to paragraph (f)(1) of this section, the employee-
owners of B substantially performed the personal
services of B during the testing period because more
than 20 percent of B’s compensation cost during the
testing period attributable to its personal service ac-
tivities was attributable to personal services per-
formed by employee-owners ($210,000).
(g) Employee-owner defined—(1) Gen-
eral rule. For purposes of this section, a
person is an employee-owner of a corpo-
ration for a testing period if—
(i) The person is an employee of the
corporation on any day of the testing pe-
riod; and
(ii) The person owns any outstanding
stock of the corporation on any day of the
testing period.
(2) Special rule for independent con-
tractors who are owners.Any person who
is an owner of the corporation within the
meaning of paragraph (g)(1)(ii) of this sec-
tion and who performs personal services
for, or on behalf of, the corporation is
treated as an employee for purposes of this
section, even if the legal form of that per-
son’s relationship to the corporation is such
that the person would be considered an in-
dependent contractor for other purposes.
(h) Special rules for affiliated groups
filing consolidated returns—(1) In gen-
eral. For purposes of applying this section
to the members of an affiliated group of
corporations filing a consolidated return
for the taxable year—
(i) The members of the affiliated group
are treated as a single corporation;
(ii) The employees of the members of
the affiliated group are treated as employ-
ees of such single corporation; and
(iii) All of the stock of the members of
the affiliated group that is not owned by
any other member of the affiliated group
is treated as the outstanding stock of that
corporation.
(2) Examples.The provisions of this
paragraph (h) may be illustrated by the
following examples:
Example 1. The affiliated group AB, consisting
of corporation A and its wholly owned subsidiary B,
filed a consolidated federal income tax return for the
taxable year ending January 31, 2001, and AB is at-
tempting to determine whether it is affected by this
section for its taxable year beginning February 1,
2001. During the testing period (i.e., the taxable
year ending January 31, 2001), A did not perform
personal services. However, B’s only activity was
the performance of personal services. On the last
day of the testing period, employees of A did not
own any stock in A. However, some of B’s employ-
ees own stock in A. In the aggregate, B’s employees
own 9 percent of A’s stock on the last day of the test-
ing period. Pursuant to paragraph (h)(1) of this sec-
tion, this section is effectively applied on a consoli-
dated basis to members of an affiliated group filing a
consolidated federal income tax return. Because the
only employee-owners of AB are the employees of
B, and because B’s employees do not own more than
10 percent of AB on the last day of the testing pe-
riod, AB is not a PSC subject to the provisions of
this section. Thus, AB is not required to determine
on a consolidated basis whether, during the testing
period, its principal activity is the providing of per-
sonal services, or the personal services are substan-
tially performed by employee-owners.
Example 2. The facts are the same as in Example
1, except that on the last day of the testing period A
owns only 80 percent of B. The remaining 20 per-
cent of B is owned by employees of B. The fair
market value of A, including its 80 percent interest
in B, as of the last day of the testing period, is
$1,000,000. In addition, the fair market value of the
20 percent interest in B owned by B’s employees is
$50,000 as of the last day of the testing period. Pur-
suant to paragraphs (c)(1)(iv) and paragraph (h)(1)
of this section, AB must determine whether the em-
ployee-owners of A and B (i.e., B’s employees) own
more than 10 percent of the fair market value of A
and B as of the last day of the testing period. Be-
cause the $140,000 [($1,000,000 x .09) + $50,000]
fair market value of the stock held by B’s employees
is greater than 10 percent of the aggregate fair mar-
ket value of A and B as of the last day of the testing
period, or $105,000 [$1,000,000 + $50,000 x .10],
AB may be subject to this section if, on a consoli-
dated basis during the testing period, the principal
activity of AB is the performance of personal ser-
vices and the personal services are substantially per-
formed by employee-owners.
§1.441–4 Effective date.
Sections 1.441–0 through 1.441–3 are
applicable for taxable years ending on or
after the date these regulations are pub-
lished in the Federal Registeras final
regulations.
§§ 1.441–1T, 1.441–2T, 1.441–3T and
1.441–4T [Removed]
Par. 4. Sections 1.441–1T, 1.441–2T,
1.441–3T, and 1.441–4T are removed.
Par. 5. Section 1.442–1 is revised to
read as follows:
§1.442–1 Change of annual accounting
period.
(a) Approval of the Commissioner.A
taxpayer that has adopted an annual ac-
counting period (as defined in
§1.441–1(b)(3)) as its taxable year gener-
ally must continue to use that annual ac-
counting period in computing its taxable
income and for making its federal income
tax returns. If the taxpayer wants to
change its annual accounting period and
use a new taxable year, it must obtain the
approval of the Commissioner, unless it is
otherwise authorized to change without
the approval of the Commissioner under
either the Internal Revenue Code (e.g.,
section 444 and section 859) or the regu-
lations thereunder (e.g., paragraph (c) of
this section). In addition, as described in
§1.441–1(c) and (d), a partnership, S cor-
poration, electing S corporation, or per-
sonal service corporation (PSC) generally
is required to secure the approval of the
Commissioner to adopt or retain an an-
nual accounting period other than its re-
quired taxable year. The manner of ob-
taining approval from the Commissioner
to adopt, change, or retain an annual ac-
counting period is provided in paragraph
(b) of this section. However, special rules
for obtaining approval may be provided in
other sections.
(b) Obtaining approval—(1) Time and
manner for requesting approval.Except
as otherwise provided in paragraph (b)(3)
of this section, in order to secure the ap-
proval of the Commissioner to adopt,
change, or retain an annual accounting
period, a taxpayer must file an applica-
tion, generally on Form 1128 (Application
to Adopt, Change, or Retain a Tax Year),
with the Commissioner. The Form 1128
must be filed no earlier than the day fol-
lowing the close of the first taxable year
in which the taxpayer wants the adoption,
change, or retention to be effective (the
first effective year) and no later than the
15
th
day of the third calendar month fol-
lowing the close of the first effective year.
However, in the case of a change that re-
July 2, 2001162001–27 I.R.B.

sults in a short period of six days or less,
the Form 1128 must be filed no later than
the 15
th
day of the third calendar month
following the close of the short period,
even though the short period is not treated
as a separate taxable year under
§1.441–2(b)(2).
(2) General requirements for approval.
Except as provided in paragraph (b)(3) of
this section, an adoption, change, or re-
tention in annual accounting period will
be approved where the taxpayer estab-
lishes a business purpose for the re-
quested annual accounting period and
agrees to the Commissioner’s prescribed
terms, conditions, and adjustments for ef-
fecting the adoption, change, or retention.
In determining whether a taxpayer has es-
tablished a business purpose and which
terms, conditions, and adjustments will be
required, consideration will be given to
all the facts and circumstances relating to
the adoption, change, or retention, includ-
ing the tax consequences resulting there-
from. Generally, the requirement of a
business purpose will be satisfied, and ad-
justments to neutralize any tax conse-
quences will not be required, if the re-
quested annual accounting period
coincides with the taxpayer’s required
taxable year (as defined in §1.441–1
(b)(2)), ownership taxable year, or natural
business year. In the case of a partner-
ship, S corporation, electing S corpora-
tion, or PSC, deferral of income to part-
ners, shareholders, or employee-owners
will not be treated as a business purpose.
(3) Administrative procedures.
Notwithstanding the provisions of para-
graphs (b)(1) and (2) of this section, the
Commissioner may prescribe administra-
tive procedures under which a taxpayer
will be permitted to adopt, change, or re-
tain an annual accounting period. These
administrative procedures will describe
the business purpose requirements (in-
cluding an ownership taxable year and a
natural business year) and the terms, con-
ditions, and adjustments necessary to ob-
tain approval. Such terms, conditions,
and adjustments may include adjustments
necessary to neutralize the tax effects of a
substantial distortion of income that
would otherwise result from the re-
quested annual accounting period includ-
ing: a deferral of a substantial portion of
the taxpayer’s income, or shifting of a
substantial portion of deductions, from
one taxable year to another; a similar de-
ferral or shifting in the case of any other
person, such as a beneficiary in an estate;
the creation of a short period in which
there is a substantial net operating loss,
capital loss, or credit (including a general
business credit); or the creation of a short
period in which there is a substantial
amount of income to offset an expiring
net operating loss, capital loss, or credit.
See, for example, Notice 2001–34
(2001–23 I.R.B. 1302), procedures to ob-
tain the Commissioner’s prior approval
of an adoption, change, or retention in
annual accounting period through appli-
cation to the national office; Rev. Proc.
2000–11 (2000–3 I.R.B. 309), automatic
approval procedures for certain corpora-
tions; Notice 2001–35 (2001–23 I.R.B.
1314), automatic approval procedures for
partnerships, S corporations, electing S
corporations, and PSCs; and Rev. Proc.
66–50 (1966–2 C.B. 1260), automatic ap-
proval procedures for individuals. For
availability of Revenue Procedures and
Notices, see §601.601(d)(2) of this chap-
ter.
(4) Taxpayers to whom section 441(g)
applies. If section 441(g) and
§1.441–1(b)(1)(iv) apply to a taxpayer,
the adoption of a fiscal year is treated as a
change in the taxpayer’s annual account-
ing period under section 442. Therefore,
that fiscal year can become the taxpayer’s
taxable year only with the approval of the
Commissioner. In addition to any other
terms and conditions that may apply to
such a change, the taxpayer must estab-
lish and maintain books that adequately
and clearly reflect income for the short
period involved in the change and for the
fiscal year proposed.
(c) Special rule for change of annual
accounting period by subsidiary corpora-
tion. A subsidiary corporation that is re-
quired to change its annual accounting pe-
riod under §1.1502–76, relating to the
taxable year of members of an affiliated
group that file a consolidated return, does
not need to obtain the approval of the
Commissioner or file an application on
Form 1128 with respect to that change.
(d) Special rule for newly married cou-
ples.(1) A newly married husband or wife
may obtain automatic approval under this
paragraph (d) to change his or her annual
accounting period in order to use the an-
nual accounting period of the other
spouse so that a joint return may be filed
for the first or second taxable year of that
spouse ending after the date of marriage.
Such automatic approval will be granted
only if the newly married husband or wife
adopting the annual accounting period of
the other spouse files a federal income tax
return for the short period required by that
change on or before the 15th day of the
4th month following the close of the short
period. See section 443 and the regula-
tions thereunder. If the due date for any
such short-period return occurs before the
date of marriage, the first taxable year of
the other spouse ending after the date of
marriage cannot be adopted under this
paragraph (d). The short-period return
must contain a statement at the top of
page one of the return that it is filed under
the authority of this paragraph (d). The
newly married husband or wife need not
file Form 1128 with respect to a change
described in this paragraph (d). For a
change of annual accounting period by a
husband or wife that does not qualify
under this paragraph (d), see paragraph
(b) of this section.
(2) The provisions of this paragraph
(d) may be illustrated by the following ex-
ample:
Example. H & W marry on September 25, 2001.
H is on a fiscal year ending June 30, and W is on a
calendar year. H wishes to change to a calendar year
in order to file joint returns with W. W’s first taxable
year after marriage ends on December 31, 2001. H
may not change to a calendar year for 2001 since,
under this paragraph (d), he would have had to file a
return for the short period from July 1 to December
31, 2000, by April 16, 2001. Since the date of mar-
riage occurred subsequent to this due date, the return
could not be filed under this paragraph (d). There-
fore, H cannot change to a calendar year for 2001.
However, H may change to a calendar year for 2002
by filing a return under this paragraph (d) by April
15, 2002, for the short period from July 1 to Decem-
ber 31, 2001. If H files such a return, H and W may
file a joint return for calendar year 2002 (which is
W’s second taxable year ending after the date of
marriage).
(e)Effective date. The rules of this sec-
tion are applicable for taxable years end-
ing on or after the date these regulations
are published in the Federal Registeras
final regulations.
§§ 1.442–2T and 1.442–3T [Removed]
Par. 6. Sections 1.442–2T and 1.442–
3T are removed.
Par. 7. Section 1.706–1 is amended by
revising paragraphs (a) and (b) and
adding paragraph (d) to read as follows:
2001–27 I.R.B.17July 2, 2001

§1.706–1 Taxable years of partner and
partnership.
(a) Year in which partnership income is
includible. (1) In computing taxable in-
come for a taxable year, a partner is re-
quired to include the partner’s distributive
share of partnership items set forth in sec-
tion 702 and the regulations thereunder
for any partnership taxable year ending
within or with the partner’s taxable year.
A partner must also include in taxable in-
come for a taxable year guaranteed pay-
ments under section 707(c) that are de-
ductible by the partnership under its
method of accounting in the partnership
taxable year ending within or with the
partner’s taxable year.
(2) The rules of this paragraph (a)(1)
may be illustrated by the following exam-
ple:
Example. Partner A reports his income using a
calendar year, while the partnership of which he is a
member reports its income using a fiscal year ending
May 31. The partnership reports its income and de-
ductions under the cash method of accounting. Dur-
ing the partnership taxable year ending May 31,
2002, the partnership makes guaranteed payments of
$120,000 to A for services and for the use of capital.
Of this amount, $70,000 was paid to A between June
1 and December 31, 2001, and the remaining
$50,000 was paid to A between January 1 and May
31, 2002. The entire $120,000 paid to A is includi-
ble in A’s taxable income for the calendar year 2002
(together with A’s distributive share of partnership
items set forth in section 702 for the partnership tax-
able year ending May 31, 2002).
(3) If a partner receives distributions
under section 731 or sells or exchanges all
or part of a partnership interest, any gain
or loss arising therefrom does not consti-
tute partnership income.
(b) Taxable year—(1) Partnership
treated as a taxpayer. The taxable year of
a partnership must be determined as
though the partnership were a taxpayer.
(2) Partnership’s taxable year—(i) Re-
quired taxable year.Except as provided in
paragraph (b)(2)(ii) of this section, the
taxable year of a partnership must be—
(A) The majority interest taxable year,
as defined in section 706(b)(4);
(B) If there is no majority interest tax-
able year, the taxable year of all of the
principal partners of the partnership, as
defined in 706(b)(3) (the principal part-
ners’ taxable year); or;
(C) If there is no majority interest tax-
able year or principal partners’ taxable
year, the taxable year that produces the
least aggregate deferral of income as de-
termined under §1.706–1(b)(3).
(ii) Exceptions. A partnership may have
a taxable year other than its required tax-
able year if it elects to use a 52-53-week
taxable year that ends with reference to its
required taxable year, makes an election
under section 444, or establishes a busi-
ness purpose for such taxable year and
obtains approval of the Commissioner
under section 442.
(3) Least aggregate deferral—(i) Ta x -
able year that results in the least aggre-
gate deferral of income.The taxable year
that results in the least aggregate deferral
of income will be the taxable year of one
or more of the partners in the partnership
which will result in the least aggregate de-
ferral of income to the partners. The ag-
gregate deferral for a particular year is
equal to the sum of the products deter-
mined by multiplying the month(s) of de-
ferral for each partner that would be gen-
erated by that year and each partner’s
interest in partnership profits for that year.
The partner’s taxable year that produces
the lowest sum when compared to the
other partner’s taxable years is the taxable
year that results in the least aggregate de-
ferral of income to the partners. If the cal-
culation results in more than one taxable
year qualifying as the taxable year with
the least aggregate deferral, the partner-
ship may select any one of those taxable
years as its taxable year. However, if one
of the qualifying taxable years is also the
partnership’s existing taxable year, the
partnership must maintain its existing tax-
able year. The determination of the tax-
able year that results in the least aggregate
deferral of income generally must be
made as of the beginning of the partner-
ship’s current taxable year. The district di-
rector, however, may determine that the
first day of the current taxable year is not
the appropriate testing day and require the
use of some other day or period that will
more accurately reflect the ownership of
the partnership and thereby the actual ag-
gregate deferral to the partners where the
partners engage in a transaction that has
as its principal purpose the avoidance of
the principles of this section. Thus, for ex-
ample, the preceding sentence would
apply where there is a transfer of an inter-
est in the partnership that results in a tem-
porary transfer of that interest principally
for purposes of qualifying for a specific
taxable year under the principles of this
section. For purposes of this section, de-
ferral to each partner is measured in terms
of months from the end of the partner-
ship’s taxable year forward to the end of
the partner’s taxable year.
(ii) Determination of the taxable year
of a partner or partnership that uses a 52-
53-week taxable year. For purposes of the
calculation described in paragraph
(b)(3)(i) of this section, the taxable year
of a partner or partnership that uses a 52-
53-week taxable year must be the same
year determined under the rules of section
441(f) and the regulations thereunder with
respect to the inclusion of income by the
partner or partnership.
(iii) Special de minimis rule. If the tax-
able year that results in the least aggregate
deferral produces an aggregate deferral
that is less than .5 when compared to the
aggregate deferral of the current taxable
year, the partnership’s current taxable
year will be treated as the taxable year
with the least aggregate deferral. Thus,
the partnership will not be permitted to
change its taxable year.
(iv) Examples. The principles of this
section may be illustrated by the follow-
ing examples:
Example 1. Partnership P is on a fiscal year end-
ing June 30. Partner A reports income on the fiscal
year ending June 30 and Partner B reports income
on the fiscal year ending July 31. A and B each have
a 50 percent interest in partnership profits. For its
taxable year beginning July 1, 1987, the partnership
will be required to retain its taxable year since the
fiscal year ending June 30 results in the least aggre-
gate deferral of income to the partners. This determi-
nation is made as follows:
July 2, 2001182001–27 I.R.B.

2001–27 I.R.B.19July 2, 2001
Test 6/30Year EndInterest inMonths of Interest
PartnershipDeferral forx Deferral
Profits6/30 Year
End
Partner A6/30.500
Partner B7/31.51.5
—————
Aggregate deferral.5
Test 7/31Year EndInterest in Months of Interest
PartnershipDeferral forx Deferral
Profits7/31 Year
End
Partner A6/30.5115.5
Partner B7/31.500
—————
Aggregate deferral5.5
Example 2. The facts are the same as in Example 1except that A reports income on the calendar year and B reports on the fiscal year ending November 30. For the
partnership’s taxable year beginning July 1, 1987, the partnership is required to change its taxable year to a fiscal year ending November 30 because such year results
in the least aggregate deferral of income to the partners. This determination is made as follows:
Test 12/31Year EndInterest in Months of Interest
PartnershipDeferral forx Deferral
Profits12/31 Year
End
Partner A12/31.500
Partner B11/30.5115.5
—————
Aggregate deferral5.5
Test 11/30Year EndInterest inMonths of Interest
PartnershipDeferral forx Deferral
Profits11/30 Year
End
Partner A12/31.51.5
Partner B11/30.500
—————
Aggregate deferral.5
Example 3. The facts are the same as in Example 2except that B reports income on the fiscal year ending June 30. For the partnership’s taxable year beginning
July 1, 1987, each partner’s taxable year will result in identical aggregate deferral of income. If the partnership’s current taxable year was neither a fiscal year ending
June 30 nor the calendar year, the partnership would select either the fiscal year ending June 30 or the calendar year as its taxable year. However, since the partner-
ship’s current taxable year ends June 30, it must retain its current taxable year. The determination is made as follows:
Test 12/31Year EndInterest inMonths of Interest
PartnershipDeferralx Deferral
Profitsfor 12/31
Year End
Partner A12/31.500
Partner B6/30.563.0
—————
Aggregate deferral3.0
Test 6/30Year EndInterest in Months of Interest
PartnershipDeferralx Deferral
Profitsfor 6/30
Year End
Partner A12/31.563.0
Partner B6/30.500
——————
Aggregate deferral3.0
Example 4. The facts are the same as in Example 1except that on December 31, 1987, partner A sells a 4 percent interest in the partnership to Partner C, who re-
ports income on the fiscal year ending June 30, and a 40 percent interest in the partnership to Partner D, who also reports income on the fiscal year ending June 30.
The taxable year beginning July 1, 1987, is unaffected by the sale. However, for the taxable year beginning July 31, 1988, the partnership must determine the taxable
year resulting in the least aggregate deferral as of July 1, 1988. In this case, the partnership will be required to retain its taxable year since the fiscal year ending June
30 continues to be the taxable year that results in the least aggregate deferral of income to the partners.

Example 5. The facts are the same as in Example 4except that Partner D reports income on the fiscal year ending April 30. As in Example 4, the taxable year dur-
ing which the sale took place is unaffected by the shifts in interests. However, for its taxable year beginning July 1, 1988, the partnership will be required to change
its taxable year to the fiscal year ending April 30. This determination is made as follows:
Test 7/31Year EndInterest inMonths of Interest
PartnershipDeferralx Deferral
Profitsfor 7/31
Year End
Partner A6/30.0611.66
Partner B7/31.500
Partner C6/30.0411.44
Partner D4/30.493.60
——————
Aggregate deferral4.70
Test 6/30Year EndInterest inMonths ofInterest
PartnershipDeferralx Deferral
Profitsfor 6/30
Year End
Partner A6/30.0600
Partner B7/31.51.5
Partner C6/30.0400
Partner D4/30.4104.0
——————
Aggregate deferral4.5
Test 4/30Year EndInterest inMonths ofInterest
PartnershipDeferralx Deferral
Profitsfor 4/30
Year End
Partner A6/30.062.12
Partner B7/31.531.50
Partner C6/30.042.08
Partner D4/30.400
——————
Aggregate deferral1.70
§1.706-1(b)(3) Test:
Current taxable year (June 30)4.5
Less: Taxable year producing the least aggregate deferral (April 30)1.7
———
Additional aggregate deferral (greater than .5)2.8
Example 6. (i) Partnership P has two partners, A who reports income on the fiscal year ending March 31, and B who reports income on the fiscal year ending July
31. A and B share profits equally. P has determined its taxable year under §1.706–1(b)(3) to be the fiscal year ending March 31 as follows:
Test 3/31Year EndInterest in Deferral forInterest
Partnership3/31 Yearx Deferral
ProfitsEnd
Partner A3/31.500
Partner B7/31.542
——————
Aggregate deferral2
Test 7/31Year EndInterest in Deferral forInterest
Partnership7/31 Yearx Deferral
ProfitsEnd
Partner A3/31.584
Partner B7/31.500
——————
Aggregate deferral4
(ii) In May 1988, Partner A sells a 45 percent interest in the partnership to C, who reports income on the fiscal year ending April 30. For the taxable period begin-
ning April 1, 1989, the fiscal year ending April 30 is the taxable year that produces the least aggregate deferral of income to the partners. However, under paragraph
(b)(3)(iii) of this section the partnership is required to retain its fiscal year ending March 31. This determination is made as follows:
July 2, 2001202001–27 I.R.B.

Test 3/31Year EndInterest in Deferral forInterest
Partnership3/31 Yearx Deferral
ProfitsEnd
Partner A3/31.0500
Partner B7/31.542.0
Partner C4/30.451.45
—————
Aggregate deferral2.45
Test 7/31Year EndInterest in Deferral forInterest
Partnership7/31 Yearx Deferral
ProfitsEnd
Partner A3/31.058.40
Partner B7/31.500
Partner C4/30.4594.05
—————
Aggregate deferral4.45
Test 4/30 Year EndInterest in Deferral forInterest
Partnership4/30 Yearx Deferral
ProfitsEnd
Partner A3/31.0511.55
Partner B7/31.531.50
Partner C4/30.4500
——————
Aggregate deferral2.05
§1.706–1(b)(3) Test:
Current taxable year (3/31)2.45
Less: Taxable year producing the least aggregate deferral (4/30)2.05
————
Additional aggregate deferral (less than .5).40
2001–27 I.R.B.21July 2, 2001
(4) Measurement of partner’s profits
and capital interest— (i) In general. The
rules of this paragraph (b)(4) apply in de-
termining the majority interest taxable
year, the principal partners’ taxable year,
and the least aggregate deferral taxable
year.
(ii) Profits interest—(A) In general.
For purposes of section 706(b), a part-
ner’s interest in partnership profits is gen-
erally the partner’s percentage share of
partnership profits for the current partner-
ship taxable year. If the partnership does
not expect to have net income for the cur-
rent partnership taxable year, then a part-
ner’s interest in partnership profits instead
must be the partner’s percentage share of
partnership net income for the first tax-
able year in which the partnership expects
to have net income.
(B) Percentage share of partnership
net income.The partner’s percentage
share of partnership net income for a part-
nership taxable year is the ratio of: the
partner’s distributive share of partnership
net income for the taxable year, to the
partnership’s net income for the year. If a
partner’s percentage share of partnership
net income for the taxable year depends
on the amount or nature of partnership in-
come for that year (due to, for example,
preferred returns or special allocations of
specific partnership items), then the part-
nership must make a reasonable estimate
of the amount and nature of its income for
the taxable year. This estimate must be
based on all facts and circumstances
known to the partnership as of the first
day of the current partnership taxable
year. The partnership must then use this
estimate in determining the partners’ in-
terests in partnership profits for the tax-
able year.
(C) Distributive share. For purposes of
this paragraph (b)(4)(ii), a partner’s dis-
tributive share of partnership net income
is determined by taking into account all
rules and regulations affecting that deter-
mination, including, without limitation,
section 704(b), (c), and (e), section 736,
and section 743.
(iii) Capital interest.Generally, a part-
ner’s interest in partnership capital is de-
termined by reference to the assets of the
partnership that the partner would be enti-
tled to upon withdrawal from the partner-
ship or upon liquidation of the partner-
ship. If the partnership maintains capital
accounts in accordance with
§1.704–1(b)(2)(iv), then for purposes of
section 706(b), the partnership may as-
sume that a partner’s interest in partner-
ship capital is the ratio of the partner’s
capital account to all partners’ capital ac-
counts as of the first day of the partner-
ship taxable year.
(5) Certain tax-exempt partners disre-
garded. [Reserved]
(6) Foreign partners. [Reserved]
(7) Adoption of taxable year. A newly-
formed partnership may adopt, in accor-
dance with §1.441–1(c), its required tax-
able year, a 52-53-week taxable year
ending with reference to its required tax-
able year, or a taxable year elected under
section 444 without securing the approval
of the Commissioner. If a newly-formed
partnership wants to adopt any other tax-
able year, it must establish a business pur-
pose and secure the approval of the Com-
missioner under section 442.
(8) Change in taxable year—(i) Part-
nerships—(A) Approval required. An ex-
isting partnership may change its taxable
year only by securing the approval of the
Commissioner under section 442 or mak-
ing an election under section 444. How-

ever, a partnership may obtain automatic
approval for certain changes, including a
change to its required taxable year, pur-
suant to administrative procedures pub-
lished by the Commissioner.
(B) Short period tax return. A partner-
ship that changes its taxable year must
make its return for a short period in accor-
dance with section 443, but must not an-
nualize the partnership taxable income.
(C) Change in required taxable year. If
a partnership is required to change to its
majority interest taxable year, then no fur-
ther change in the partnership’s required
taxable year is required for either of the
two years following the year of the change.
This limitation against a second change
within a three-year period applies only if
the first change was to the majority interest
taxable year and does not apply following
a change in the partnership’s taxable year
to the principal partners’ taxable year or
the least aggregate deferral taxable year.
(ii) Partners. Except as otherwise pro-
vided in the Internal Revenue Code or the
regulations thereunder (e.g., section 859 re-
garding real estate investment trusts or
§1.442–2(c) regarding a subsidiary chang-
ing to its consolidated parent’s taxable
year), a partner may not change its taxable
year without securing the approval of the
Commissioner under section 442. How-
ever, certain partners may be eligible to ob-
tain automatic approval to change their tax-
able years pursuant to the regulations or
administrative procedures published by the
Commissioner. A partner that changes its
taxable year must make its return for a short
period in accordance with section 443.
(9) Retention of taxable year. In certain
cases, a partnership will be required to
change its taxable year unless it obtains
the approval of the Commissioner under
section 442, or makes an election under
section 444, to retain its current taxable
year. For example, a partnership using a
taxable year that corresponds to its re-
quired taxable year must obtain the ap-
proval of the Commissioner to retain such
taxable year if its required taxable year
changes as a result of a change in owner-
ship, unless the partnership previously
obtained approval for its current taxable
year or, if appropriate, makes an election
under section 444.
(10) Procedures for obtaining approval
or making a section 444 election. See
§1.442–1(b) for procedures to obtain the
approval of the Commissioner (automati-
cally or otherwise) to adopt, change, or
retain a taxable year. See §§1.444–1T
and 1.444–2T for qualifications, and
§1.444–3T for procedures, for making an
election under section 444.
* * * * *
(d) Effective date. The rules of this
section are applicable for taxable years
ending on or after the date these regula-
tions are published in the Federal Regis-
teras final regulations, except for para-
graph (c) which applies for taxable years
beginning after December 31, 1953.
§1.706–1T [Removed]
Par. 8. Section 1.706–1T is removed.
Par. 9. Section 1.898–4, as proposed to
be added at 58 FR 297, January 5, 1993,
is amended by adding paragraph
(c)(3)(iv) to read as follows:
§1.898–4 Special rules.
*****
(c) ***
(3) ***
(iv) Recognition of income and deduc-
tions. See §1.441–2(e) for rules regarding
the recognition of income and deductions
(e.g., amounts includible in gross income
pursuant to sections 951(a) or 553) if ei-
ther the majority United States share-
holder, or the specified foreign corpora-
tion, or both, elect to use a 52-53-week
taxable year under this paragraph (c)(3).
* * * * *
Par. 10. Section 1.1378–1 is added
under the undesignated centerheading
“Small Business Corporations and Their
Shareholders” to read as follows:
§1.1378–1 Taxable year of S corporation.
(a) In general. The taxable year of an S
corporation must be a permitted year or a
taxable year elected under section 444.
No corporation may make an election to
be an S corporation for any taxable year
unless the taxable year is a permitted year
or a taxable year elected under section
444. In addition, an S corporation may
not change its taxable year to any taxable
year other than a permitted year or a tax-
able year elected under section 444. A
permitted year is the required taxable year
(i.e., a taxable year ending on December
31), a 52-53-week taxable year ending
with reference to the required taxable
year, or any other taxable year for which
the corporation establishes a business pur-
pose to the satisfaction of the Commis-
sioner under section 442.
(b) Adoption of taxable year.An elect-
ing S corporation may adopt, in accor-
dance with §1.441–1(c), its required tax-
able year, a 52-53-week taxable year
ending with reference to its required tax-
able year, or a taxable year elected under
section 444 without the approval of the
Commissioner. See §1.441–1. An elect-
ing S corporation that wants to adopt any
other taxable year, must establish a busi-
ness purpose and obtain the approval of
the Commissioner under section 442.
(c) Change in taxable year.An S corpo-
ration or electing S corporation that wants
to change its taxable year must obtain the
approval of the Commissioner under sec-
tion 442 or make an election under section
444. However, an S corporation or electing
S corporation may obtain automatic ap-
proval for certain changes, including a
change to its required taxable year, pur-
suant to administrative procedures pub-
lished by the Commissioner.
(d) Retention of taxable year. In certain
cases, an S corporation or electing S corpo-
ration will be required to change its taxable
year unless it obtains the approval of the
Commissioner under section 442, or makes
an election under section 444, to retain its
current taxable year. For example, a corpo-
ration using a June 30 fiscal year that elects
to be an S corporation and, as a result, is re-
quired to use the calendar year must obtain
the approval of the Commissioner to retain
its current fiscal year.
(e) Procedures for obtaining approval
or making a section 444 election—(1) In
general. See §1.442–1(b) for procedures
to obtain the approval of the Commis-
sioner (automatically or otherwise) to
adopt, change, or retain a taxable year.
See §§1.444–1T and 1.444–2T for quali-
fications, and 1.444–3T for procedures,
for making an election under section 444.
(2) Special rules for electing S corpo-
rations.An electing S corporation that
wants to adopt, change to, or retain a tax-
able year other than its required taxable
year must request approval of the Com-
missioner on Form 2553 (Election by a
Small Business Corporation) when the
election to be an S corporation is filed
pursuant to section 1362(b) and
§1.1362–6. See §1.1362–6(a)(2)(i) for
July 2, 2001222001–27 I.R.B.

the manner of making an election to be an
S corporation. If such corporation re-
ceives permission to adopt, change to, or
retain a taxable year other than its re-
quired taxable year, the election to be an S
corporation will be effective. Denial of
the request renders the election ineffec-
tive unless the corporation agrees that, in
the event the request to adopt, change to,
or retain a taxable year other than its re-
quired taxable year is denied, it will
adopt, change to, or retain its required
taxable year or, if applicable, make an
election under section 444.
(f) Effective date. The rules of this sec-
tion are applicable for taxable years end-
ing on or after the date these regulations
are published in the Federal Registeras
final regulations.
PART 5c—TEMPORARY INCOME
TAX REGULATIONS UNDER THE
ECONOMIC RECOVERY TAX ACT OF
1981
Par. 11. The authority citation for part
5c continues to read as follows:
Authority 26 U.S.C. 168(f)(8)(G) and
7805.
§5c.442–1 [Removed]
Par. 12. Section 5c.442–1 is removed.
PART 5f—TEMPORARY INCOME
TAX REGULATIONS UNDER THE
TAX EQUITY AND FISCAL
RESPONSIBILITY ACT OF 1982
Par. 13. The authority citation for part
5f continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
§5f.442–1 [Removed]
Par. 14. Section 5f.442–1 is removed.
PART 18—TEMPORARY INCOME
TAX REGULATIONS UNDER THE
SUBCHAPTER S REVISION ACT OF
1982
Par. 15. The authority citation for part
18 continues to read as follows:
Authority 26 U.S.C. 7805.
§18.1378–1 [Removed]
Par. 16. Section 18.1378–1 is removed.
Robert E. Wenzel,
Deputy Commissioner
of Internal Revenue.
(Filed by the Office of the Federal Register on June
12, 2001, 8:45 a.m., and published in the issue of the
Federal Register for June 13, 2001, 66 F.R. 31850)
New Form 2290SP Available for
Spanish-Speaking Taxpayers
Announcement 2001–69
New Form 2290SP, Declaración del
Impuesto sobre el Uso de Vehículos Pesa-
dos en las Carreteras, and its separate in-
structions are available for use by Span-
ish-speaking taxpayers. This return is
used to pay the tax on highway motor ve-
hicles with a taxable gross weight of
55,000 pounds or more. Form 2290SP
and its separate instructions will be avail-
able from IRS offices in the states of
Texas, New Mexico, Arizona, and Cali-
fornia.
You can also obtain Form 2290SP by
telephone or by using IRS electronic in-
formation services.
Request byNumber or address
Telephone1-800-TAX-FORM
(1-800-829-3676)
Personal computer:
IRS Web Sitewww.irs.gov
File transfer protocolftp.irs.gov
Foundations Status of Certain
Organizations
Announcement 2001–70
The following organizations have
failed to establish or have been unable to
maintain their status as public charities
or as operating foundations. Accord-
ingly, grantors and contributors may not,
after this date, rely on previous rulings
or designations in the Cumulative List of
Organizations (Publication 78), or on the
presumption arising from the filing of
notices under section 508(b) of the Code.
This listing does notindicate that the or-
ganizations have lost their status as orga-
nizations described in section 501(c)(3),
eligible to receive deductible contribu-
tions.
Former Public Charities.The follow-
ing organizations (which have been
treated as organizations that are not pri-
vate foundations described in section
509(a) of the Code) are now classified as
private foundations:
20th St. Hope House, Inc.,
Baltimore, MD
Abundant Life Foundation,
Washington, DC
Action-Maryland Foundation, Inc.,
Potomac, MD
Adoptive Family Network, Inc.,
Columbia, MD
Advanced Technology & Training Center,
Inc., Silver Spring, MD
Advocates for Child Care Professionals,
Inc., Rockville, MD
Afcom Foundation, Inc., Fairfax, VA
African American Heritage Society of
Charles County, Inc., Waldorf, MD
African Rural Development Concepts,
Inc., Burtonsville, MD
African Women’s Project, Greenbelt, MD
Afriserve, Inc., Washington, DC
Alexandria Environmental Policy
Foundation, Alexandria, VA
Alpha Employment, Inc.,
Wilmington, DE
American Boating Safety & Education
Association, Inc., Bowie, MD
American Center for Patient Decision-
Making, Inc., Baltimore, MD
American Committee on Jerusalem,
Washington, DC
American Education & Allied Health
Career Center, Inc., College Park, MD
American Friends of the Gdansk Theatre
Foundation, Washington, DC
Angels International, Inc., Rockville, MD
Apollo Productions, Inc., Washington, DC
Arna Valley Community Health Clinic,
Arlington, VA
Assoc. of Lutherans Specializing in
Pastoral Care Ministries, Inc.,
Annapolis, MD
Association of Formulation Chemists,
Inc., Wayne, NJ
Athenas Place, Inc., Poolesville, MD
Balkan Institute, Inc., Yorktown Hts., NY
Baltimore County Housing Education
Fund, Inc., Baltimore, MD
Believers in Christ Fellowships
Ministries, Washington, DC
Betty Newman Residential Center, Inc.,
Jackson, MS
Big Brothers, Incorporated, Joplin, MO
Black Congress on Health Law and
Economics Foundation, Inc.,
Washington, DC
Brown Memorial, Inc., Washington, DC
Calvert T-Ball, Inc., Dunkirk, MD
Cam-Tech Power, Inc.,
Gaithersburg, MD
2001–27 I.R.B.23July 2, 2001

Candidates and Issues Facts Foundation,
Inc., McLean, VA
Capital City Youth and Amateur
Foundation, Richmond, VA
Cardinal & Gold Football Foundation,
Inc., Timonium, MD
Caren Development Company,
Adelphi, MD
Carver Langston Coalition, Inc.,
Washington, DC
Center for Creative Coalitions, Inc.,
Portsmouth, VA
Central Asia Research and Development
Center, Washington, DC
Central Virginia Bluegrass Association,
Stafford, VA
Cherry Hill Hope Development
Corporation, Baltimore, MD
Children’s Choice, Inc., Staunton, VA
Children’s Educational Opportunity
Foundation of Kansas City, Inc.,
Shawnee, KS
Chillum Oaks Adventist Apts., Inc.,
Upper Marlboro, MD
Christs Bride Ministries, Inc.,
Merrifield, VA
Chung San Gol Mission, Inc., Herndon, VA
Church Street Apartments, Jackson, MS
Colin L. Murray Foundation, Inc.,
Baltimore, MD
Committee for the Capital City,
Washington, DC
Community Resource Development
Center, Inc., Bethesda, MD
Computer Smarts Community to
Community, Inc., Arlington, TX
Congregations United for Compassion
and Empowerment, Inc.,
Hyattsville, MD
Cornerstone-Cascade, Inc.,
Columbia, MD
Cultural Alliance of Charles City County
VA, Inc., Charles City, VA
D.C. Corporate Volunteer Council, Inc.,
Washington, DC
D.C. Mental Health Consumers League,
Washington, DC
Dinwiddie County Historical Society,
Dinwiddie, VA
E. Doris Carney Scholarship Fund, Inc.,
Warwick, RI
Earth Keep, Manassas, VA
East Coast Childrens Home, Inc.,
Chillum, MD
Eastern Deaf Timberfest, Inc.,
Lanham, MD
Educators Basketball Association, Inc.,
Boyds, MD
Enuff is Enuff, Washington, DC
Fair Trade Market, Inc., Arlington, VA
Fauquier Artists Alliance, Warrenton, VA
Fire and Rescue Foundation of Prince
Georges County, Inc.,
College Park, MD
First #1 Place, Inc., Upper Marlboro, MD
Fort Washington Community Fund,
Fort Washington, MD
Foundation for Genetic Research Brain
and Behavior, Inc., Silver Spring, MD
Foundation for Global Environmental
Education, Washington, DC
Foundation for Interactive Educational
Activities, New York, NY
Frederick Athletic Academy,
Frederick, MD
Frederick County Human Services
Foundation, Inc., Frederick, MD
Friends for Friends, Incorporated,
Forestville, MD
Friends of Surratts-Clinton Branch
Library, Inc., Clinton, MD
Friends of the Academy of Law Justice
and Security, Inc., Washington, DC
Friends of the Silver Theater, Inc.,
Silver Spring, MD
Glade Valley Nursing & Rehabilitation
Center, Inc., Walkersville, MD
Global Harmony Through Personal
Excellence, Washington, DC
Global Sustainable Development Fund,
New York, NY
Golden Age Providers, Inc.,
Chillum, MD
Greater Cleveland Health Education and
Service Council, Inc., Cleveland, OH
Hare Krishna Food for Life Global, Inc.,
Potomac, MD
Harris Hill Family Resource Center,
Incorporated, Baltimore, MD
Health Care International, Inc.,
Baltimore, MD
Healthpeace, Washington, DC
Healthy Harford, Inc., Fallston, MD
Heart to Heart House, Lake Jackson, TX
Helen Titter Park Committee,
Chesapeake Cy, MD
Helix Foundation, Incorporated,
Chevy Chase, MD
Help our Outdoor Playgrounds, Inc.,
Laurel, MD
Human Capital Development
Corporation, Easton, MD
Ibpat Joint Apprenticeship and Training
Fund, Washington, DC
Inabangnons in the United States and
Canada Inausca, Baltimore, MD
Initiative for the Development of an East
Shore Altn. High School, Inc.,
Bozman, MD
Institute for Technology Assessment,
Washington, DC
Inter City Community Aids Network of
Greater Washington, Inc.,
Washington, DC
International Association of Homes and
Services for the Ageing,
Washington, DC
International Planned Giving Foundation,
Inc., Baltimore, MD
International Society for Twin Studies,
Bethesda, MD
Israel Heritage, Inc., Westport, CT
James E. Morgan Cancer Research Fund,
Annapolis, MD
Jessup-Provinces Youth Organization,
Hanover, MD
Jillian Foundation, Incorporated,
Hagerstown, MD
Jorieum Health Affiliates, Baltimore, MD
Juwan Howard Foundation, Inc.,
Washington, DC
Kent Island Youth Center, Inc.,
Stevensville, MD
Kids First Tutorial, Inc., Lithonia, GA
Kings Court Project, Inc.,
Washington, DC
Knox Hope Development Corporation,
Baltimore, MD
Lambs Nest, Suffolk, VA
Lance Johnson Foundation, Inc.,
Bethesda, MD
Legal Reform Institute, Washington, DC
Leonard E. Hicks Multi-Purpose
Community Center, Incorporated,
Baltimore, MD
Literacy Extension Project, Incorporated,
Baltimore, MD
Madison Hope Development
Corporation, Baltimore, MD
Margate Little Theatre, Inc, Berlin, NJ
Mariadjom Cape Verdean Childrens
Foundation, Inc., Adelphi, MD
Marion Creative Play Area, Inc.,
Marion, VA
Maryland Energy Conservation, Inc.,
Fallston, MD
Maryland Neuro Rehab Foundation, Inc.,
Frederick, MD
Maryland Stallions Youth Association,
Inc., Suitland, MD
Maryland World War II Memorial Fund,
Inc., Baltimore, MD
McS Referral & Resources, Inc.,
Baltimore, MD
July 2, 2001242001–27 I.R.B.

Medical Missions, Inc., Hunt Valley, MD
Mega Institute, Washington, DC
Memories, Inc., Fort Lauderdale, FL
Metro Deaf-Blind Service Center, Inc,
Rockville, MD
Metropolis Uplift, Inc., Washington, DC
Mid-Shore Athletic Association, Inc.,
Preston, MD
Moms Ink, Inkorporated,
San Juan Capistrano, CA
Montessori Resource Center of Delaware,
Inc., Wilmington, DE
Montgomery County Alliance for
Educational Excellence, Inc.,
Silver Spring, MD
Mountain Wilderness Camp, Easley, SC
Multimedia Productions, Inc.,
College Park, MD
Multi-Ventures Community Services,
Inc., Randallstown, MD
National Amputee Empowerment
Foundation, Washington, DC
National Anti-Child Abuse Movement,
Inc., Washington, DC
National Association for Recreational
Equality, Inc., Rockville, MD
National Family for the Advancement of
Minorities with Disabilities,
Washington, DC
National Law Enforcement Integrity
Institute, Inc., Annapolis, MD
National Lesbian and Gay Health
Association, Washington, DC
Nebo Christian Ministries, Inc.,
Baltimore, MD
New Jersey Center for Economic Policy
and Education, Inc., New Brunswick, NJ
New Moment, Inc., Washington, DC
Northumberland Preservation, Inc.,
Heathsville, VA
Open Arms Foundation, Inc,
Capitol Heights, MD
Operation Shield, Inc., Roselle, NJ
Opportunity, Inc., Gambrills, MD
Oppositional Poster Conservation
Initiative Opci, Washington, DC
Orwell Institute, Washington, DC
Oxford Academy of the Arts,
Washington, DC
Paik-Inje Memorial Institute for
Biomedical Science, La Jolla, CA
Pandoras Closet, Inc., Towson, MD
Panthers Playground Foundation, Inc,
Huntington, MD
Parent Support Group for Children with
Sickle Cell Disease, Washington, DC
Partners for Americas Success,
Washington, DC
PATS Pregnant Adolescent Teen Services,
Incorporated, Daytona Beach, FL
Peace or War Calm or Storm Foundation,
Lusby, MD
Pets for Luv Animal Rescue,
Alexandria, VA
Pillar of Truth, Baltimore, MD
Pip Ministries, Washington, DC
Pride in America Leadership Institute,
Alexandria, VA
Prince Georges County Tricentennial
Celebration Foundation, Inc.,
Riverdale, MD
Prof. Assoc. of Teachers Foundation,
Virginia Beach, VA
Project Promise, Baltimore, MD
Project Soar, Washington, DC
Prophecy, Inc., Washington, DC
Rapid Action Food Team, Dublin, OH
Reigning Cats & Dogs, Inc., Stafford, VA
Remy Foundation for Batten Disease,
Woodinville, WA
Research Education and Action on
Poverty, Inc., Washington, DC
Reservoir Hill H.O.P.E., Inc.,
Baltimore, MD
Riverside Walter Reed Hospital
Auxiliary, Inc., Gloucester, VA
Rockville Football League, Inc.,
Rockville, MD
Rural Health Missions, Inc.,
Gaithersburg, MD
Safe Eddy Childrens Educational
Foundation, Tustin, CA
Sandtown-Winchester Senior Center,
Inc., Baltimore, MD
Save Another Youth, Inc., Baltimore, MD
Schools Around the World, Arlington, VA
Scott Anderson Christian Baseball
Scholarship Fund, Arlington, TX
Senior Services of Charles County, Inc.,
La Plata, MD
Serve, Washington, DC
Shane Chadwick Memorial Scholarship
Fund, Chester, MT
Society to Prevent Trade in Stolen Art,
Ltd., Washington, DC
Something Simple Foundation, Newark, NJ
Southern Virginia Rail Trail Committee,
Charlotte Court House, VA
Southwest Community Council, Inc.,
Baltimore, MD
St. Marys County Football Organization,
Inc., California, MD
St. Marys County Youth Lacrosse Club,
Inc., Lexington Park, MD
Stop Looking the Other Way (SLOW),
Inc., Bethesda, MD
Sturdy Black Bridges, Washington, DC
Success International, Ltd.,
Alexandria, VA
Suitland Housing Corporation A
Community Housing Development,
Org., McLean, VA
Sunday Suppers, Washington, DC
Sunflower House, Inc., Washington, DC
Sustainable Earth, Inc., Arlington, VA
Teen Drama Productions, Inc., Sterling, VA
Theatre Conspiracy, Washington, DC
Tranquility Breast Cancer Foundation,
Salem, VA
Trees for Frederick Project, Ltd.,
Frederick, MD
Trinity Hope Development Corporation,
Baltimore, MD
Truth Publications, Incorporated,
Camdenton, MO
Uet-Lahore Alumni Association America,
Inc., Gaithersburg, MD
UMOJA of Illinois, Homewood, IL
Unified Committee for Afro-American
Contributions, Lexington Park, MD
United for Change Community
Development Corporation,
Washington, DC
United States Deaf Soccer Organization,
Bethesda, MD
United States Military Polo Association,
Inc., Fairfax, VA
Unlimited Sports Abroad, Quinton, VA
Upper Room Emmaus of Lynchburg
Central Virginia, Lynchburg, VA
US-Azerbaijan Humanitarian Fund, Inc.,
Rockville, MD
Vegetarian Institute of Nutrition and
Culinary Arts, Inc., Ellicott City, MD
Vietnamese American Society,
Washington, DC
Wacel Memorial Scholarship Fund, Inc.,
Bethesda, MD
Washington Campus for Academic
Programs, Inc., Washington, DC
Washington County Public Schools
Foundation, Inc., Hagerstown, MD
Washington Sports Foundation, Inc.,
Bethesda, MD
Widowed Persons Service of the Eastern
Shore Virginia, Onancock, VA
Winfield Park Teachers Association
Philanthropic Fund, Inc.,
Winfield Park, NJ
Women’s Education Foundation,
Denver, CO
Women’s Research and Education
Institute Fund - The Wrei Fund,
Washington, DC
2001–27 I.R.B.25July 2, 2001

July 2, 2001262001–27 I.R.B.
Wood Bros. Museums & Virginia
Motorsports Hall of Fame, Stuart, VA
Worcester Chorale, Inc., Berlin, MD
World Medical Mission, Inc.,
Gaithersburg, MD
Yonatans Story, Inc., Silver Spring, MD
Youth Enrichment Services, Inc.,
Baltimore, MD
Youth Works, Inc., Gosburg, VA
If an organization listed above submits
information that warrants the renewal of
its classification as a public charity or as a
private operating foundation, the Internal
Revenue Service will issue a ruling or de-
termination letter with the revised classi-
fication as to foundation status. Grantors
and contributors may thereafter rely upon
such ruling or determination letter as pro-
vided in section 1.509(a)–7 of the Income
Tax Regulations. It is not the practice of
the Service to announce such revised clas-
sification of foundation status in the Inter-
nal Revenue Bulletin.
Electronic Payee Statements;
Hearing
Announcement 2001–71
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Rescheduled public hearing
on proposed rulemaking.
SUMMARY: This document reschedules
the public hearing on proposed regula-
tions (REG–107186–00, 2001–13 I.R.B.
973) relating to voluntary electronic fur-
nishing of payee statements on Forms
W-2.
DATES: The public hearing is being held
on Wednesday, July 25, 2001, at 10 a.m.
Outlines of oral comments must be re-
ceived by July 6, 2001.
ADDRESSES: The public hearing is
being held in room 4716, Internal Rev-
enue Building, 1111 Constitution Avenue,
NW, Washington, DC. Send submissions
to: Regulations Unit CC (REG-107186-
00), room 5226, Internal Revenue Ser-
vice, POB 7604, Ben Franklin Station,
Washington, DC 20044. Submissions
may be hand delivered between the hours
of 8 a.m. and 5 p.m. to: Regulations Unit
CC (REG-107186-00), Courier’s Desk,
Internal Revenue Service, 1111 Constitu-
tion Avenue NW, Washington, DC. Alter-
natively, taxpayers may submit outlines
of oral comments electronically directly
to the IRS Internet site at
http://www.irs.gov/tax_regs/regslist.html.
FOR FURTHER INFORMATION CON-
TACT: Concerning the regulations, Laura
Nash (202) 622-4910; concerning sub-
missions, Sonya M. Cruse (202) 622-
7180 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
A notice of proposed rulemaking and
notice of public hearing, appearing in the
Federal Registeron Wednesday, Febru-
ary 14, 2001 (66 FR 10247), announced
that a public hearing was being held on
June 4, 2001, regarding proposed regula-
tions under sections 6041 and 6051. A
hearing cancellation document was inad-
vertently published in the Federal Regis-
teron May 23, 2001 (66 FR 28408).
Thus, the IRS is rescheduling the public
hearing for Wednesday, July 25, 2001, at
10 a.m. in room 4716. Outlines of oral
comments must be received by July 6,
2001.
Cynthia E. Grigsby,
Chief, Regulations Unit,
Office of Special Counsel
(Modernization & Strategic Planning).
(Filed by the Office of the Federal Register on June
13, 2001, 8:45 a.m., and published in the issue of the
Federal Register for June 14, 2001, 66 F.R. 32279)

2001–27 I.R.B.iJuly 2, 2001
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”)
that have an effect on previous rulings
use the following defined terms to de-
scribe the effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds
that the same principle also applies to B,
the earlier ruling is amplified. (Compare
with modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial difference between them.
Modified is used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but not
to B, and the new ruling holds that it ap-
plies to both A and B, the prior ruling is
modified because it corrects a published
position. (Compare with amplified and
clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used
in a ruling that lists previously published
rulings that are obsoleted because of
changes in law or regulations. A ruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revoked describes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the
new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example, modified
and superseded describes a situation
where the substance of a previously pub-
lished ruling is being changed in part and
is continued without change in part and it
is desired to restate the valid portion of
the previously published ruling in a new
ruling that is self contained. In this case
the previously published ruling is first
modified and then, as modified, is super-
seded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and
that list is expanded by adding further
names in subsequent rulings. After the
original ruling has been supplemented
several times, a new ruling may be pub-
lished that includes the list in the original
ruling and the additions, and supersedes
all prior rulings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current use and for-
merly used will appear in material published in the
Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security
Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Definition of Terms

July 2, 2001ii2001–27 I.R.B.
Numerical Finding List
1
Bulletins 2001–1 through 2001–26
Announcements:
2001–1, 2001–2 I.R.B. 277
2001–2, 2001–2 I.R.B. 277
2001–3, 2001–2 I.R.B. 278
2001–4, 2001–2 I.R.B. 286
2001–5, 2001–2 I.R.B. 286
2001–6, 2001–3 I.R.B. 357
2001–7, 2001–3 I.R.B. 357
2001–8, 2001–3 I.R.B. 357
2001–9, 2001–3 I.R.B. 357
2001–10, 2001–4 I.R.B. 431
2001–11, 2001–4 I.R.B. 432
2001–12, 2001–6 I.R.B. 526
2001–13, 2001–9 I.R.B. 752
2001–14, 2001–7 I.R.B. 648
2001–15, 2001–8 I.R.B. 715
2001–16, 2001–8 I.R.B. 715
2001–17, 2001–8 I.R.B. 716
2001–18, 2001–10 I.R.B. 791
2001–19, 2001–10 I.R.B. 791
2001–20, 2001–8 I.R.B. 716
2001–21, 2001–9 I.R.B. 752
2001–22, 2001–11 I.R.B. 895
2001–23, 2001–10 I.R.B. 791
2001–24, 2001–10 I.R.B. 793
2001–25, 2001–11 I.R.B. 895
2001–26, 2001–11 I.R.B. 896
2001–27, 2001–11 I.R.B. 897
2001–28, 2001–13 I.R.B. 975
2001–29, 2001–14 I.R.B. 1014
2001–30, 2001–15 I.R.B. 1065
2001–31, 2001–17 I.R.B. 1113
2001–32, 2001–17 I.R.B. 1113
2001–33, 2001–17 I.R.B. 1137
2001–34, 2001–16 I.R.B. 1087
2001–35, 2001–16 I.R.B. 1087
2001–36, 2001–16 I.R.B. 1089
2001–37, 2001–16 I.R.B. 1090
2001–38, 2001–17 I.R.B. 1138
2001–39, 2001–17 I.R.B. 1141
2001–40, 2001–17 I.R.B. 1141
2001–41, 2001–18 I.R.B. 1147
2001–42, 2001–18 I.R.B. 1147
2001–43, 2001–18 I.R.B. 1147
2001–44, 2001–18 I.R.B. 1148
2001–45, 2001–18 I.R.B. 1148
2001–46, 2001–19 I.R.B. 1165
2001–47, 2001–19 I.R.B. 1165
2001–48, 2001–19 I.R.B. 1168
2001–49, 2001–20 I.R.B. 1183
2001–50, 2001–20 I.R.B. 1184
2001–51, 2001–20 I.R.B. 1185
2001–52, 2001–20 I.R.B. 1186
2001–53, 2001–20 I.R.B. 1186
2001–54, 2001–21 I.R.B. 1284
2001–55, 2001–21 I.R.B. 1284
2001–56, 2001–21 I.R.B. 1286
2001–57, 2001–20 I.R.B. 1187
2001–58, 2001–22 I.R.B. 1295
2001–59, 2001–23 I.R.B. 1331
2001–60, 2001–21 I.R.B. 1287
2001–61, 2001–22 I.R.B. 1296
2001–62, 2001–24 I.R.B. 1337
2001–63, 2001–25 I.R.B. 1344
2001–64, 2001–25 I.R.B. 1344
2001–65, 2001–26 I.R.B. 1357
Announcements—Continued:
2001–66, 2001–25 I.R.B. 1345
2001–67, 2001–26 I.R.B. 1357
2001–68, 2001–26 I.R.B. 1357
Court Decisions:
2069, 2001–21 I.R.B. 1191
Notices:
2001–1, 2001–2 I.R.B. 261
2001–2, 2001–2 I.R.B. 265
2001–3, 2001–2 I.R.B. 267
2001–4, 2001–2 I.R.B. 267
2001–5, 2001–3 I.R.B. 327
2001–6, 2001–3 I.R.B. 327
2001–7, 2001–4 I.R.B. 374
2001–8, 2001–4 I.R.B. 374
2001–9, 2001–4 I.R.B. 375
2001–10, 2001–5 I.R.B. 459
2001–11, 2001–5 I.R.B. 464
2001–12, 2001–3 I.R.B. 328
2001–13, 2001–6 I.R.B. 514
2001–14, 2001–6 I.R.B. 516
2001–15, 2001–7 I.R.B. 589
2001–16, 2001–9 I.R.B. 730
2001–17, 2001–9 I.R.B. 730
2001–18, 2001–9 I.R.B. 731
2001–19, 2001–10 I.R.B. 784
2001–20, 2001–11 I.R.B. 818
2001–21, 2001–11 I.R.B. 818
2001–22, 2001–12 I.R.B. 911
2001–23, 2001–12 I.R.B. 911
2001–24, 2001–12 I.R.B. 912
2001–25, 2001–13 I.R.B. 941
2001–26, 2001–13 I.R.B. 942
2001–27, 2001–13 I.R.B. 942
2001–28, 2001–13 I.R.B. 944
2001–29, 2001–14 I.R.B. 989
2001–30, 2001–14 I.R.B. 989
2001–31, 2001–17 I.R.B. 1093
2001–32, 2001–18 I.R.B. 1146
2001–33, 2001–19 I.R.B. 1155
2001–34, 2001–23 I.R.B. 1302
2001–35, 2001–23 I.R.B. 1314
2001–36, 2001–24 I.R.B. 1334
2001–37, 2001–25 I.R.B. 1340
2001–38, 2001–24 I.R.B. 1334
2001–40, 2001–26 I.R.B. 1355
Proposed Regulations:
LR–230–76, 2001–13 I.R.B. 945
REG–209461–79, 2001–8 I.R.B. 712
REG–246256–96, 2001–8 I.R.B. 713
REG–251701–96, 2001–4 I.R.B. 396
REG–101520–97, 2001–15 I.R.B. 1057
REG–106030–98, 2001–11 I.R.B. 820
REG–106446–98, 2001–13 I.R.B. 945
REG–106542–98, 2001–5 I.R.B. 473
REG–121928–98, 2001–6 I.R.B. 520
REG–109481–99, 2001–13 I.R.B. 961
REG–111835–99, 2001–11 I.R.B. 834
REG–114998–99, 2001–14 I.R.B. 992
REG–115560–99, 2001–14 I.R.B. 993
REG–101739–00, 2001–14 I.R.B. 996
REG–103320–00, 2001–8 I.R.B. 714
REG–104683–00, 2001–4 I.R.B. 407
REG–104876–00, 2001–14 I.R.B. 998
REG–105801–00, 2001–13 I.R.B. 965
REG–105946–00, 2001–16 I.R.B. 1069
Proposed Regulations—Continued:
REG–106513–00, 2001–16 I.R.B. 1076
REG–106702–00, 2001–4 I.R.B. 424
REG–106791–00, 2001–6 I.R.B. 521
REG–106892–00, 2001–15 I.R.B. 1060
REG–107047–00, 2001–14 I.R.B. 1002
REG–107101–00, 2001–16 I.R.B. 1083
REG–107175–00, 2001–13 I.R.B. 971
REG–107176–00, 2001–4 I.R.B. 428
REG–107186–00, 2001–13 I.R.B. 973
REG–107566–00, 2001–3 I.R.B. 346
REG–110374–00, 2001–12 I.R.B. 915
REG–110659–00, 2001–12 I.R.B. 917
REG–114082–00, 2001–7 I.R.B. 629
REG–114083–00, 2001–7 I.R.B. 630
REG–114084–00, 2001–7 I.R.B. 633
REG–116468–00, 2001–6 I.R.B. 522
REG–119352–00, 2001–6 I.R.B. 525
REG–121109–00, 2001–15 I.R.B. 1064
REG–125237–00, 2001–12 I.R.B. 919
REG–126100–00, 2001–11 I.R.B. 862
REG–129608–00, 2001–14 I.R.B. 1011
REG–130477–00, 2001–11 I.R.B. 865
REG–130481–00, 2001–11 I.R.B. 865
REG–119436–01, 2001–20 I.R.B. 1183
Railroad Retirement Quarterly Rates:
2001–2, I.R.B. 258
2001–15, I.R.B. 1054
Revenue Procedures:
2001–1, 2001–1 I.R.B. 1
2001–2, 2001–1 I.R.B. 79
2001–3, 2001–1 I.R.B. 111
2001–4, 2001–1 I.R.B. 121
2001–5, 2001–1 I.R.B. 164
2001–6, 2001–1 I.R.B. 194
2001–7, 2001–1 I.R.B. 236
2001–8, 2001–1 I.R.B. 239
2001–9, 2001–3 I.R.B. 328
2001–10, 2001–2 I.R.B. 272
2001–11, 2001–2 I.R.B. 275
2001–12, 2001–3 I.R.B. 335
2001–13, 2001–3 I.R.B. 337
2001–14, 2001–3 I.R.B. 343
2001–15, 2001–5 I.R.B. 465
2001–16, 2001–4 I.R.B. 376
2001–17, 2001–7 I.R.B. 589
2001–18, 2001–8 I.R.B. 708
2001–19, 2001–9 I.R.B. 732
2001–20, 2001–9 I.R.B. 738
2001–21, 2001–9 I.R.B. 742
2001–22, 2001–9 I.R.B. 745
2001–23, 2001–10 I.R.B. 784
2001–24, 2001–10 I.R.B. 788
2001–25, 2001–12 I.R.B. 913
2001–26, 2001–17 I.R.B. 1093
2001–27, 2001–19 I.R.B. 1155
2001–28, 2001–19 I.R.B. 1156
2001–29, 2001–19 I.R.B. 1160
2001–30, 2001–19 I.R.B. 1163
2001–31, 2001–20 I.R.B. 1170
2001–32, 2001–21 I.R.B. 1197
2001–33, 2001–23 I.R.B. 1322
2001–34, 2001–22 I.R.B. 1293
2001–35, 2001–22 I.R.B. 1293
2001–36, 2001–23 I.R.B. 1326
2001–37, 2001–23 I.R.B. 1327
2001–38, 2001–24 I.R.B. 1335
1
A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 2000–27 through
2000–52 is in Internal Revenue Bulletin 2001–1,
dated January 2, 2001.

2001–27 I.R.B.iiiJuly 2, 2001
Revenue Rulings:
2001–1, 2001–9 I.R.B. 726
2001–2, 2001–2 I.R.B. 255
2001–3, 2001–3 I.R.B. 319
2001–4, 2001–3 I.R.B. 295
2001–5, 2001–5 I.R.B. 451
2001–6, 2001–6 I.R.B. 491
2001–7, 2001–7 I.R.B. 541
2001–8, 2001–9 I.R.B. 726
2001–9, 2001–8 I.R.B. 652
2001–10, 2001–10 I.R.B. 755
2001–11, 2001–10 I.R.B. 780
2001–12, 2001–11 I.R.B. 811
2001–13, 2001–12 I.R.B. 898
2001–14, 2001–12 I.R.B. 898
2001–15, 2001–13 I.R.B. 922
2001–16, 2001–13 I.R.B. 936
2001–17, 2001–15 I.R.B. 1052
2001–18, 2001–17 I.R.B. 1092
2001–19, 2001–18 I.R.B. 1143
2001–20, 2001–18 I.R.B. 1143
2001–21, 2001–18 I.R.B. 1144
2001–22, 2001–19 I.R.B. 1152
2001–23, 2001–20 I.R.B. 1169
2001–24, 2001–22 I.R.B. 1290
2001–25, 2001–22 I.R.B. 1291
2001–26, 2001–23 I.R.B. 1297
2001–27, 2001–23 I.R.B. 1298
2001–28, 2001–25 I.R.B. 1338
2001–29, 2001–26 I.R.B. 1348
2001–31, 2001–26 I.R.B. 1348
2001–32, 2001–26 I.R.B. 1350
Treasury Decisions:
8910, 2001–2 I.R.B. 258
8911, 2001–3 I.R.B. 321
8912, 2001–5 I.R.B. 452
8913, 2001–3 I.R.B. 300
8914, 2001–8 I.R.B. 653
8915, 2001–4 I.R.B. 359
8916, 2001–4 I.R.B. 360
8917, 2001–7 I.R.B. 538
8918, 2001–4 I.R.B. 372
8919, 2001–6 I.R.B. 505
8920, 2001–8 I.R.B. 654
8921, 2001–7 I.R.B. 532
8922, 2001–6 I.R.B. 508
8923, 2001–6 I.R.B. 485
8924, 2001–6 I.R.B. 489
8925, 2001–6 I.R.B. 496
8926, 2001–6 I.R.B. 492
8927, 2001–11 I.R.B. 807
8928, 2001–8 I.R.B. 685
8929, 2001–10 I.R.B. 756
8930, 2001–5 I.R.B. 433
8931, 2001–7 I.R.B. 542
8932, 2001–11 I.R.B. 813
8933, 2001–11 I.R.B. 794
8934, 2001–12 I.R.B. 904
8935, 2001–8 I.R.B. 702
8936, 2001–9 I.R.B. 720
8937, 2001–11 I.R.B. 806
8938, 2001–13 I.R.B. 929
8939, 2001–12 I.R.B. 899
8940, 2001–15 I.R.B. 1016
8941, 2001–14 I.R.B. 977
8942, 2001–13 I.R.B. 929
8943, 2001–15 I.R.B. 1054
8944, 2001–16 I.R.B. 1067
8945, 2001–23 I.R.B. 1300
8946, 2001–24 I.R.B. 1332

July 2, 2001iv2001–27 I.R.B.
Finding List of Current Actions on
Previously Published Items
1
Bulletins 2001–1 through 2001–26
Announcements:
98–99
Modified by
Ann. 2001–9, 2001–3 I.R.B. 357
99–79
Superseded by
Ann. 2001–3, 2001–2 I.R.B. 278
2000–21
Revised by
Ann. 2001–1, 2001–2 I.R.B. 277
2000–22
Revised by
Ann. 2001–1, 2001–2 I.R.B. 277
2000–23
Revised by
Ann. 2001–1, 2001–2 I.R.B. 277
2000–78
Obsoleted by
T.D. 8933, 2001–11 I.R.B. 794
2000–97
Corrected by
Ann. 2001–7, 2001–3 I.R.B. 357
Cumulative Bulletin:
1998–2
Corrected by
Ann. 2001–5, 2001–2 I.R.B. 286
Notices:
84–37
Modified by
Rev. Proc. 2001–1, 2001–1 I.R.B. 1
87–49
Modified by
Notice 2001–14, 2001–6 I.R.B. 516
94–3
Modified by
T.D. 8933, 2001–11 I.R.B. 794
96–13
Modified by
Rev. Proc. 2001–1, 2001–1 I.R.B. 1
97–19
Modified by
Rev. Proc. 2001–1, 2001–1 I.R.B. 1
98–39
Modified by
Notice 2001–9, 2001–4 I.R.B. 375
99–40
Modified by
Notice 2001–9, 2001–4 I.R.B. 375
99–53
Modified and superseded by
Notice 2001–7, 2001–4 I.R.B. 374
2000–21
Superseded by
Notice 2001–1, 2001–2 I.R.B. 261
2000–22
Modified and superseded by
Notice 2001–8, 2001–4 I.R.B. 374
Notices—Continued:
2000–26
Modified by
Notice 2001–22, 2001–12 I.R.B. 911
2000–33
Obsoleted by
T.D. 8945, 2001–23 I.R.B. 1300
2000–43
Extended by
Notice 2001–13, 2001–6 I.R.B. 514
Proposed Regulations:
EE–130–86
Partially withdrawn and amended by
REG–209461–79, 2001–8 I.R.B. 712
REG–106030–98
Corrected by
Ann. 2001–30, 2001–15 I.R.B. 1065
REG–106542–98
Corrected by
Ann. 2001–24, 2001–10 I.R.B. 793
REG–116733–98
Withdrawn by
Ann. 2001–11, 2001–4 I.R.B. 432
REG–105235–99
Corrected by
Ann. 2001–52, 2001–20 I.R.B. 1186
REG–116048–99
Withdrawn by
Ann. 2001–27, 2001–11 I.R.B. 897
REG–116050–99
Corrected by
Ann. 2001–51, 2001–20 I.R.B. 1185
REG–104683–00
Corrected by
Ann. 2001–42, 2001–18 I.R.B. 1147
REG–106702–00
Corrected by
Ann. 2001–28, 2001–13 I.R.B. 975
REG–110374–00
Corrected by
Ann. 2001–44, 2001–18 I.R.B. 1148
REG–126100–00
Corrected by
Ann. 2001–50, 2001–20 I.R.B. 1184
Revenue Procedures:
75–21
Modified and superseded by
Rev. Proc. 2001–28, 2001–19 I.R.B. 1156
75–28
Modified and superseded by
Rev. Proc. 2001–29, 2001–19 I.R.B. 1160
76–30
Modified and superseded by
Rev. Proc. 2001–28, 2001–19 I.R.B. 1156
79–48
Modified and superseded by
Rev. Proc. 2001–28, 2001–19 I.R.B. 1156
Rev. Proc. 2001–29, 2001–19 I.R.B. 1160
83–87
Superseded by
Rev. Proc. 2001–15, 2001–5 I.R.B. 465
Revenue Procedures—Continued:
90–18
Amplified and superseded by
Rev. Proc. 2001–18, 2001–8 I.R.B. 708
92–19
Superseded by
Rev. Proc. 2001–15, 2001–5 I.R.B. 465
96–15
Modified by
Ann. 2001–22, 2001–11 I.R.B. 895
96–17
Modified by
Rev. Proc. 2001–9, 2001–3 I.R.B. 328
97–25
Superseded by
Rev. Proc. 2001–31, 2001–20 I.R.B. 1170
99–18
Modified and superseded by
Rev. Proc. 2001–21, 2001–9 I.R.B. 742
99–47
Superseded by
Rev. Proc. 2001–16, 2001–4 I.R.B. 376
99–49
Modified and amplified by
Notice 2001–23, 2001–12 I.R.B. 911
Rev. Proc. 2001–10, 2001–2 I.R.B. 272
Rev. Proc. 2001–23, 2001–10 I.R.B. 784
Rev. Proc. 2001–24, 2001–10 I.R.B. 788
Rev. Proc. 2001–25, 2001–12 I.R.B. 913
Rev. Rul. 2001–4, 2001–3 I.R.B. 295
Rev. Rul. 2001–8, 2001–9 I.R.B. 726
2000–1
Superseded by
Rev. Proc. 2001–1, 2001–1 I.R.B. 1
2000–2
Superseded by
Rev. Proc. 2001–2, 2001–1 I.R.B. 79
2000–3
Superseded by
Rev. Proc. 2001–3, 2001–1 I.R.B. 111
2000–4
Superseded by
Rev. Proc. 2001–4, 2001–1 I.R.B. 121
2000–5
Superseded by
Rev. Proc. 2001–5, 2001–1 I.R.B. 164
2000–6
Superseded by
Rev. Proc. 2001–6, 2001–1 I.R.B. 194
2000–7
Superseded by
Rev. Proc. 2001–7, 2001–1 I.R.B. 236
2000–8
Superseded by
Rev. Proc. 2001–8, 2001–1 I.R.B. 239
2000–14
Supplemented by
Rev. Proc. 2001–27, 2001–19 I.R.B. 1155
2000–16
Modified and superseded by
Rev. Proc. 2001–17, 2001–7 I.R.B. 589
2000–21
Obsoleted by
Rev. Proc. 2001–35, 2001–22 I.R.B. 1293
1
A cumulative list of current actions on previously
published items in Internal Revenue Bulletins
2000–27 through 2000–52 is in Internal Revenue
Bulletin 2001–1, dated January 2, 2001.

2001–27 I.R.B.vJuly 2, 2001
Revenue Procedures—Continued:
2000–22
Modified and superseded by
Rev. Proc. 2001–10, 2001–2 I.R.B. 272
2000–23
Superseded by
Rev. Proc. 2001–26, 2001–17 I.R.B. 1093
2000–25
Superseded by
Rev. Proc. 2001–32, 2001–21 I.R.B. 1197
2000–27
Modified by
Rev. Proc. 2001–6, 2001–1 I.R.B. 194
2000–46
Superseded by
Rev. Proc. 2001–3, 2001–1 I.R.B. 111
2000–47
Superseded by
Rev. Proc. 2001–3, 2001–1 I.R.B. 111
2001–3
Corrected by
Ann. 2001–25, 2001–11 I.R.B. 895
Section 5.01 revoked by
Rev. Proc. 2001–30, 2001–19 I.R.B. 1163
2001–8
Modified by
Rev. Proc. 2001–17, 2001–7 I.R.B. 589
2001–13
Clarified by
Notice 2001–12, 2001–3 I.R.B. 328
2001–26
Corrected by
Ann. 2001–59, 2001–23 I.R.B. 1331
2001–30
Modified by
Rev. Proc. 2001–34, 2001–22 I.R.B. 1293
Revenue Rulings:
55–747
Revoked by
Notice 2001–10, 2001–5 I.R.B. 459
64–328
Modified by
Notice 2001–10, 2001–5 I.R.B. 459
66–110
Modified by
Notice 2001–10, 2001–5 I.R.B. 459
71–52
Obsoleted by
Notice 2001–14, 2001–6 I.R.B. 516
73–236
Obsoleted by
Rev. Rul. 2001–29, 2001–26 I.R.B. 1348
77–316
Obsoleted by
Rev. Rul. 2001–31, 2001–26 I.R.B. 1348
78–277
Obsoleted by
Rev. Rul. 2001–31, 2001–26 I.R.B. 1348
78–338
Modified by
Rev. Rul. 2001–31, 2001–26 I.R.B. 1348
80–120
Modified by
Rev. Rul. 2001–31, 2001–26 I.R.B. 1348
Revenue Rulings—Continued:
85–30
Clarified by
Rev. Rul. 2001–8, 2001–9 I.R.B. 726
88–72
Obsoleted by
Rev. Rul. 2001–31, 2001–26 I.R.B. 1348
88–95
Clarified by
Rev. Rul. 2001–8, 2001–9 I.R.B. 726
89–61
Obsoleted by
Rev. Rul. 2001–31, 2001–26 I.R.B. 1348
92–19
Supplemented in part by
Rev. Rul. 2001–11, 2001–10 I.R.B. 780
92–93
Modified by
Rev. Rul. 2001–31, 2001–26 I.R.B. 1348
2000–3
Modified by
Rev. Rul. 2001–31, 2001–26 I.R.B. 1348
2000–56
Corrected by
Ann. 2001–19, 2001–10 I.R.B. 791
2001–4
Modified by
Notice 2001–23, 2001–12 I.R.B. 911
Treasury Decisions:
7530
Removed by
T.D. 8938, 2001–13 I.R.B. 929
8757
Revised by
T.D. 8941, 2001–14 I.R.B. 977
8881
Corrected by
Ann. 2001–55, 2001–21 I.R.B. 1284
8889
Corrected by
Ann. 2001–4, 2001–2 I.R.B. 286
8912
Corrected by
Ann. 2001–40, 2001–17 I.R.B. 1141
8913
Corrected by
Ann. 2001–26, 2001–11 I.R.B. 896
8916
Corrected by
Ann. 2001–41, 2001–18 I.R.B. 1147
8921
Corrected by
Ann. 2001–43, 2001–18 I.R.B. 1147
8929
Corrected by
Ann. 2001–56, 2001–21 I.R.B. 1286
8931
Technically amended by
Ann. 2001–37, 2001–16 I.R.B. 1090
8933
Corrected by
Ann. 2001–31, 2001–17 I.R.B. 1113
8940
Corrected by
Ann. 2001–53, 2001–20 I.R.B. 1186

INDEX
Internal Revenue Bulletins
2001–1 through 2001–26
The abbreviation and number in paren-
thesis following the index entry refer to
the specific item; numbers in roman and
italic type following the paranthesis
refer to the Internal Revenue Bulletin in
which the item may be found and the
page number on which it appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction
Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural
Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Advance letter rulings and determination
letters, areas which will not be issued
from:
Associates Chief Counsel & Division
Counsel/Associate Chief Counsel
(TE/GE) (RP 3) 1, 111; correction
(Ann 25) 11, 895
Associate Chief Counsel International
(RP 7) 1, 236
Cafeteria plans, tax treatment of (TD 8921)
7, 532; correction (Ann 43) 18, 1147;
(REG–209461–79) 8, 712
Compensation and qualified transporta-
tion fringe benefits (Notice 37) 25,
1340
Defined benefit pension plan, transfer of
excess assets (REG–116468–00) 6,
522
Determination letters:
Issuing procedures (RP 6) 1, 194
Notice to interested parties requirement
(REG–129608–00) 14, 1011
Employee Plans Compliance Resolution
System (EPCRS), updated (RP 17) 7,589
Employee stock ownership plans,
deductibility of redemption proceeds
(RR 6) 6, 491
Full funding limitations:
Weighted average interest rate for:
December 2000 (Notice 3) 2, 267
January 2001 (Notice 15) 7, 589
February 2001 (Notice 20) 11, 818
March 2001 (Notice 28) 13, 944
April 2001 (Notice 32) 18, 1146
May 2001 (Notice 36) 24, 1334
Group health plans:
Continuation coverage requirements
(TD 8928) 8, 685
HIPAA nondiscrimination:
Bona fide wellness programs
(REG–114084–00) 7, 633
Certain grandfathered church plans,
exception (REG–114083–00) 7,
630
Eligibility not limited by certain
health factors (TD 8931) 7, 542;
(REG–114082–00) 7, 629; correc-
tion to TD 8931 (Ann 37) 16, 1090
GUST remedial amendment period, M&P
plans and volume submitter plans (Ann
12) 6, 526
Letter rulings:
Determination letters and information
letters issued by Associates Chief
Counsel (RP 1) 1, 1
Information letters, etc. (RP 4) 1, 121
Life insurance contracts, “split-dollar”
arrangements (Notice 10) 5, 459
Master and prototype and volume submit-
ters, requests for opinion and advisory
letters (Ann 63) 25, 1344
Nondiscrimination rules, governmental
and church plans, relief from (Notice 9)
4, 375
Practice before the Internal Revenue
Service; Circular 230 (REG–111835–
99) 11, 834
Proposed Regulations:
26 CFR 1.125–1 Q&A–8, amended;
1.125–2 Q&A–6(a), amended;
1.125–2 Q&A–6(b), (c), and (d),
withdrawn; 1.125–2 Q&A–6(e),
redesignated as (b); tax treatment of
cafeteria plans (REG–209461–79) 8,
712
26 CFR 1.401(a)(9)–0 through –8,
added; 1.403(b)–2, added; 1.408–
8, added; 54.4974–2, added;
required minimum distributions
(REG–130477–00 and REG–130481
–00) 11, 865
26 CFR 1.417(e)–1, amended; special
rule for written explanation by quali-
fied retirement plans provided after
annuity starting date (REG–109481–
99) 13, 961
26 CFR 1.420–1, added; defined bene-
fit pension plan, transfer of excess
assets (REG–116468–00) 6, 522
26 CFR 1.7476–2, amended; 601.201,
amended; advance determination let-
ter, notice to interested parties
requirement (REG–129608–00) 14,
1011
26 CFR 54.9802–1, amended; group
health plans, HIPAA nondiscrimina-
tion requirements, eligibility not lim-
ited by certain health factors
(REG–114082–00) 7, 629
26 CFR 54.9802–1(f), amended; group
health plans, HIPAA nondiscrimina-
tion requirements, bona fide well-
ness programs (REG–114084–00) 7,
633
26 CFR 54.9802–2, added; group
health plans, HIPAA nondiscrimina-
tion requirements for certain grand-
fathered church plans, exception
(REG–114083–00) 7, 630
31 CFR Part 10, amended; practice
before the Internal Revenue Service;
Circular 230 (REG–111835–99) 11,
834
Qualified retirement plans:
Required minimum distributions (Ann
18) 10, 791
Written explanation provided after
annuity starting date (REG–109481–
99) 13, 961
Regulations:
26 CFR 1.125–4, amended; 1.125–4T,
removed; tax treatment of cafeteria
plans (TD 8921) 7, 532; correction
(Ann 43) 18,1147
26 CFR 54.4980B–0 through –8,
amended; 54.4980B–9, –10, added;
group health plans, continuation
coverage requirements (TD 8928) 8,
685
26 CFR 54.9802–1, added; 54.9802–1T,
removed; group health plans, HIPAA
nondiscrimination requirements, eli-
gibility not limited by certain health
factors (TD 8931) 7, 542; correction
(Ann 37) 16, 1090
July 2, 2001vi2001–27 I.R.B.
EMPLOYEE PLANS—
Cont.
EMPLOYEE PLANS—
Cont.

Required minimum distributions (REG–
130477–00 and REG–130481–00) 11, 865
Technical advice to:
Directors and chiefs, appeals offices,
from Associates Chief Counsel
& Division Counsel/Associate Chief
Counsel (TE/GE) (RP 2) 1, 79
IRS employees (RP 5) 1, 164
User fees, request for letter rulings (RP 8)
1, 239
EMPLOYMENT TAX
Deposits—de minimis rule (TD 8946) 24,
1332
Electronic filing and magnetic media;
IRS/SSA information reporting semi-
nars for 2001 (Ann 64) 25, 1344
Electronic filing, Form 940 (RP 9) 3, 328
Electronic furnishing of payee statements,
voluntary (TD 8942) 13, 929;
(REG–107186–00) 13, 973
Federal tax deposits, removal of Federal
Reserve banks as depositaries (TD
8918) 4, 372; (REG–107176–00) 4, 428
Forms:
W-2, new code (Ann 7) 3,357
W-2, voluntary electronic furnishing of
payee statements (TD 8942) 13, 929;
(REG–107186–00) 13, 973
W-2 and W-3, specifications for private
printing of paper substitutes (RP 26)
17, 1093; correction (Ann 59) 23,
1331
940, electronic filing (RP 9) 3, 328
1098-E, voluntary electronic furnishing
of payee statements (TD 8942) 13,
929; (REG–107186–00) 13, 973
1098-T, voluntary electronic furnishing
of payee statements (TD 8942) 13,
929; (REG–107186–00) 13, 973
Indian tribal governments under FUTA,
treatment of (Ann 16) 8, 715
Interest-free adjustments (REG–110374–
00) 12, 915; correction (Ann 44) 18,
1148
Practice before the Internal Revenue
Service; Circular 230 (REG–111835–
99) 11, 834
Proposed Regulations:
26 CFR 31.3406(g)–1(d), revised;
reporting requirements for interest
on deposits paid to nonresident
aliens (REG–126100–00) 11, 862
26 CFR 31.6051–1, amended; electron-
ic payee statements, voluntary
(REG–107186–00) 13, 973
26 CFR 31.6205–1, revised; interest-
free adjustments (REG–110374–00)
12, 915; correction (Ann 44) 18,
1148
26 CFR 31.6302–1, amended; 31.6302
(c)–3, amended; removal of Federal
Reserve banks as federal depositaries
(REG–107176–00) 4, 428
31 CFR Part 10, amended; practice
before the Internal Revenue Service;
Circular 230 (REG–111835–99) 11,
834
Railroad retirement, rate determination,
quarterly:
January 1, 2001, 2, 258
April 1, 2001, 15, 1054
Regulations:
26 CFR 31.6051–1T, added; electronic
payee statements, voluntary (TD
8942) 13, 929
26 CFR 31.6053–1, –4, amended;
tips, tip reporting, employer estab-
lished electronic systems (TD
8910) 2, 258
26 CFR 31.6302-1(f)(4), revised;
31.6302-IT, removed; federal
employment tax deposits—de min-
imis rule (TD 8946) 24, 1332
26 CFR 301.6302–1T, added; removal
of Federal Reserve banks as deposi-
taries (TD 8918) 4,372
Reporting requirements for interest on
deposits paid to nonresident aliens
(REG–126100–00) 11, 862
Statutory stock options (Notice 14) 6, 516
Tips:
Tips reporting:
Employer-designed tip reporting,
food and beverage industry
(EmTRAC) programs (Notice 1)
2, 261
Employer established electronic sys-
tems (TD 8910) 2, 258
Voluntary tip reporting agreements
proformas(TRDA and TRAC)
(Ann 1) 2, 277
ESTATE TAX
Art valuation requests, change of address
for submissions (Ann 22) 11, 895
Charitable deductions, guaranteed annuity
and unitrust interest (TD 8923) 6, 485
Definition of income, total return, equitable
adjustments (REG–106513–00) 16, 1076
Generation-skipping transfer tax and reten-
tion of exempt status (TD 8912) 5, 452;
correction (Ann 40) 17, 1141
Interest:
Rates:
Farm real property, special use value
(RR 21) 18, 1144
Practice before the Internal Revenue
Service; Circular 230 (REG–111835–99)
11, 834
Proposed Regulations:
26 CFR 1.641(b)–3, amended;
1.642(c)–1, revised; 1.645–1, added;
1.671–4, amended; 1.6072–1, amend-
ed; 301.6109–1, amended; election to
treat trust as part of an estate
(REG–106542–98) 5, 473; correction
(Ann 24) 10, 793
26 CFR 20.2056(b)–5, –7, –10, amend-
ed; 20.2056A–5, amended; 20.2056A–
13, revised; definition of income for
trust purposes (REG–106513–00)
16, 1076
31 CFR Part 10, amended; practice before
the Internal Revenue Service; Circular
230 (REG–111835–99) 11, 834
QTIP elections, estate tax and nullity (RP
38) 24, 1335
Regulations:
26 CFR 20.2055–2, amended; charitable
deductions, guaranteed annuity and
unitrust interest (TD 8923) 6, 485
26 CFR 26.2601–1, amended; genera-
tion-skipping transfer issues (TD
8912) 5,452; correction (Ann 40) 17,
1141
Trusts, election to treat trust as part of an
estate (REG–106542–98) 5, 472; correc-
tion (Ann 24) 10,793
Valuation of art requests, change of address
for submissions (Ann 22) 11, 895
EXCISE TAX
Administrative appeal of section 6715
penalties (dyed fuel) and sections 4083
and 7342 penalties (refusal) (RP 33) 23,
1322
Air transportation, mileage awards
(Notice 6) 3, 327
2001–27 I.R.B.viiJuly 2, 2001
EMPLOYEE PLANS—
Cont.
ESTATE TAX—Cont.
EMPLOYMENT TAX—
Cont.

Deposits of excise taxes (REG–106892–
00) 15, 1060
Excess benefit transactions (TD 8920) 8,
654; (REG–246256–96) 8, 713; hear-
ing scheduled (Ann 61) 22, 1296
Forms:
720-CS, Carrier Summary Report (Ann
48) 19, 1168
720-TO, Terminal Operator Report
(Ann 48) 19,1168
Nonconventional source fuel, inflation
adjustment factor, reference price, CY
2000 (Notice 31) 17, 1093
Practice before the Internal Revenue
Service; Circular 230 (REG–111835–
99) 11, 834
Proposed Regulations:
26 CFR 40.0–1, amended; 40.6011(a)
–1, –2, amended; 40.6071(a)–1,
amended; 40.6071(a)–2, removed;
40.6091–1, amended; 40.6101–1,
revised; 40.6109(a)–1, revised;
40.6151(a)–1, revised; 40.6302(c)
–1, –2, revised; 40.6302(c)–3,
amended; 40.6302(c)–4, removed;
40.9999–1, removed; deposits of
excise taxes (REG–106892–00) 15,
1060
26 CFR 53.4958–0 through –8, added;
excise taxes on excess benefit trans-
actions (REG–246256–96) 8, 713;
hearing scheduled (Ann 61) 22,
1296
31 CFR Part 10, amended; practice
before the Internal Revenue Service;
Circular 230 (REG–111835–99) 11,
834
Publication 3536, Excise Tax EDI Guide
(Ann 48) 19, 1168
Regulations:
26 CFR 48.4081-8, revised; taxable
fuel measurement (TD 8945) 23,
1300
26 CFR 53.4958–0T through –8T,
added; 53.4963–1, amended;
301.6213–1, amended; 301.6501(e)
–1, amended; 301.6501(n)–1,
amended; 301.7422–1, amended;
301.7454–2, amended; 301.7611–1,
amended; 602.101, amended; excise
taxes on excess benefit transactions
(TD 8920) 8, 654
Taxable fuel measurement (TD 8945) 23,
1300
Advance letter rulings and determination
letters, areas which will not be issued
from Associates Chief Counsel &
Division Counsel/Associate Chief
Counsel (TE/GE) (RP 3) 1, 111; correc-
tion (Ann 25) 11, 895
Excise taxes on excess benefit transac-
tions (TD 8920) 8, 654;
(REG–246256–96) 8,713; public hear-
ing (Ann 61) 22, 1296
Forms:
990, request for comments (Ann 33)
17, 1137
990–EZ, request for comments (Ann
33) 17, 1137
990–PF, request for comments (Ann
33) 17, 1137
Indian tribal governments treated as
states, list (RP 15) 5, 465
Letter rulings, information letters, etc.
(RP 4) 1, 121
List of organizations classified as private
foundations (Ann 35) 16, 1087; (Ann
45) 18, 1148; (Ann 47) 19, 1165; (Ann
57) 20, 1187; (Ann 60) 21, 1287; (Ann
66) 25, 1345; (Ann 68) 26, 1357
Plain language publications and volun-
tary compliance programs (Ann 14) 7,
648
Practice before the Internal Revenue
Service; Circular 230 (REG–111835–
99) 11, 834
Proposed Regulations:
26 CFR 53.4958–0 through –8, added;
excise taxes on excess benefit trans-
actions (REG–246256–96) 8, 713;
public hearing (Ann 61) 22, 1296
31 CFR Part 10, amended; practice
before the Internal Revenue Service;
Circular 230 (REG–111835–99) 11,
834
Regulations:
26 CFR 53.4958–0T through –8T,
added; 53.4963–1, amended;
301.6213–1, amended; 301.6501(e)
–1, amended; 301.6501(n)–1,
amended; 301.7422–1, amended;
301.7454–2, amended; 301.7611–1,
amended; 602.101, amended; excise
taxes on excess benefit transactions
(TD 8920) 8, 654
Revocations (Ann 20) 8,716; (Ann 36)
16, 1089; (Ann 46) 19, 1165; (Ann 67)
26, 1357
Technical advice to:
Directors and chiefs, appeals offices,
from Associates Chief Counsel &
Division Counsel/Associate Chief
Counsel (TE/GE) (RP 2) 1, 79
IRS employees (RP 5) 1, 164
User fees, request for letter rulings (RP 8)
1, 239
Withholding, Voluntary Compliance on
Alien Withholding Program (VCAP)
(RP 20) 9,738
GIFT TAX
Art valuation requests, change of
address for submissions (Ann 22) 11,
895
Charitable deductions, transfers to char-
itable lead trust (TD 8923) 6, 485
Definition of income, total return, equi-
table adjustments (REG–106513–00)
16, 1076
Practice before the Internal Revenue
Service; Circular 230 (REG–111835–
99) 11, 834
Proposed Regulations:
26 CFR 25.2523(e)–1, amended;
25.2523(h)–2, amended; 26.2601–1,
amended; definition of income for
trust purposes (REG–106513–00)
16, 1076
31 CFR Part 10, amended; practice
before the Internal Revenue Service;
Circular 230 (REG–111835–99) 11,
834
QTIP elections, estate tax and nullity (RP
38) 24, 1335
Regulations:
26 CFR 25.2522(c)–3, amended; chari-
table deductions, lifetime charitable
lead trust (TD 8923) 6, 485
Valuation of art requests, change of
address for submissions (Ann 22) 11,
895
INCOME TAX
Accounting periods:
Approval by the Commissioner (Notice
34) 23, 1302
Automatic approval (Notice 35) 23,
1314
Advance letter rulings and determination let-
ters, areas which will not be issued from:
July 2, 2001viii2001–27 I.R.B.
EXEMPT ORGANIZA-
TIONS
EXCISE TAX—Cont.
EXEMPT ORGANIZA-
TIONS—Cont.

Associates Chief Counsel & Division
Counsel/Associate Chief Counsel
(TE/GE) (RP 3) 1, 111; correction
(Ann 25) 11, 895
Associate Chief Counsel International
(RP 7) 1, 236
Advance Pricing Agreement program
(APA) (Ann 32) 17, 1113
Aircraft maintenance costs (RR 4) 3, 295
Appeals, extension of test of mediation
procedure (Ann 9) 3, 357
Archer MSA (Ann 21) 9, 752
Art valuation requests, change of address
for submissions (Ann 22) 11, 895
Asset acquisitions, deemed and actual,
purchase price allocations (TD 8940)
15, 1016; correction (Ann 53) 20, 1186
Attorney’s fees, recovery of (TD 8922) 6,
508; (REG–121928–98) 6, 520
Automobile owners and lessees, determi-
nation of correct tax liability, 2001
inflation adjustment (RP 19) 9, 732
Bureau of the Census, disclosure of return
information (TD 8943) 15, 1054;
REG–121109–00) 15, 1064
Business expenses:
Captive insurance transactions (RR 31)
26, 1348
Changes in method of accounting
(Notice 23) 12, 911
Case Resolution Pilot Program, extension
(Notice 13) 6, 514
Charitable deductions, transfers to chari-
table lead trust (TD 8923) 6, 485
Classification of certain business enti-
ties, check-the-box regulations
(REG–110659–00) 12, 917
Consumer Price Index (CPI) adjustments,
below-market loans (Ann 19) 10, 791
Contribution in aid of construction (CIAC),
regulated public utilities, water or sewer-
age disposal (TD 8936) 9, 720
Conversion to the euro (TD 8927) 11, 807
Corporate reorganizations; mergers and
acquisitions:
Forward triangular merger (RR 24)
22, 1290
Reverse triangular merger (RR 25)
22, 1291
Tender offer and a merger, step
transactions (RR 26) 23,1297
Corporations:
Assumed liabilities (TD 8924) 6, 489;
(REG–106791–00) 6, 521
Consolidated groups, tentative carry-
back adjustments (TD 8919) 6, 505;
(REG–119352–00) 6,525
Distributions of stock or securities in
connection with an acquisition:
Purchase of 50% or greater inter-
est in the corporation making
the distribution or being dis-
tributed (REG–107566–00) 3,
346
Withdrawal of REG–116733–98
(Ann 11) 4, 432
Recognition of gain on certain distribu-
tions of stock or securities (TD 8913)
3, 300; correction (Ann 26) 11, 896
Tax shelter:
Contingent liability (Notice 17) 9, 730
Intermediary transactions (Notice
16) 9, 730
Cost-of-living adjustments for inflation,
2001 (RP 13) 3, 337; clarified (Notice
12) 3, 328
Credits:
Deemed-paid credit computations
(REG–104683–00) 4, 407; correc-
tion (Ann 42) 18, 1147
Foreign tax credit limitations:
Affiliated groups and interest expense
allocations (TD 8916) 4, 360; cor-
rection (Ann 41) 18, 1147
Income subject to separate limita-
tions (REG–104683–00) 4, 407
Increasing research activities, definition
of qualified research (TD 8930) 5, 433
Low-income housing credit:
Resident population estimates, 2001
(Notice 21) 11, 818
Satisfactory bond; “bond factor”
amounts for the period:
October through December 2000
(RR 2) 2, 225;
January through March 2001 (RR
10) 10, 755
April through June 2001 (RR 19)
18, 1143
New markets tax (Ann 49) 20, 1183
Nonconventional source fuel credit,
qualified fuels under section 29
(c)(1)(C), solid fuel from coal, pri-
vate letter rulings (RP 30) 19, 1163;
modified (RP 34) 22,1293
Renewable electricity production cred-
it, 2001 inflation adjustment (Notice
33) 19, 1155
Research credits:
Comments requested on final regu-
lations (Notice 19) 10, 784
Computing for increasing research
activities that include suspension
periods (Notice 2) 2, 265
Extension of time to file, with
expired suspension periods
(Notice 29) 14, 989
Cumulative Bulletin 1998–2, numerical
finding list, finding list of current
actions on previously published items
and index; corrections (Ann 5) 2, 286
Dealers in securities futures contracts
(Notice 27) 13, 942
Debt instrument, annuity issued by insurance
company (REG–125237–00) 12, 919
Debt substitution, election to treat as real-
ization event (RP 21) 9, 742
Definition of income, total return, equi-
table adjustments (REG–106513–00)
16, 1076
Disclosure of returns or return informa-
tion to:
Bureau of the Census (TD 8943) 15,
1054; (REG–121109–00) 15, 1064
Designee of taxpayer (TD 8935) 8,
702; (REG–103320–00) 8, 714
Disqualified person, definition of
(REG–107175–00) 13, 971
Earnings and profits adjustments, exercise
of stock option (RR 1) 9, 726
Electing small business trusts; ESBT:
Qualifications and treatments (REG–
251701–96) 4, 396
Tiered structures (TD 8915) 4, 359
Electronic and magnetic filing, specifica-
tions for Forms:
W-4, Employee’s Withholding Al-
lowance Certificate (RP 16) 4, 376
1042-S, Foreign Person’s U.S.
Source Income Subject to
Withholding (Ann 3) 2, 278
8851, Summary of Archer MSAs
(RP 31) 20, 1170
Electronic filing and magnetic media;
IRS/SSA information reporting semi-
nars for 2001 (Ann 64) 25, 1344
Electronic furnishing of payee statements,
voluntary (TD 8942) 13, 929;
(REG–107186–00) 13, 973
Employee stock ownership plans, deduc-
tibility of redemption proceeds (RR 6)
6, 491
2001–27 I.R.B.ixJuly 2, 2001
INCOME TAX—Cont.
INCOME TAX—Cont.
INCOME TAX—Cont.

Entity classification rules, clarification of
(REG–101739–00) 14, 996
Equity options, qualified covered call
treatment (REG–115560–99) 14, 993
Exclusion of gain from the sale or exchange
of a taxpayer’s principal residence (Ann
52) 20, 1186
Exempt organization revocations (Ann 20)
8, 716; (Ann 36) 16, 1089; (Ann 46) 19,
1165
Extraterritorial income exclusion elec-
tions (RP 37) 23, 1327
Federal tax deposits, removal of Federal
Reserve banks as depositaries (TD 8918)
4, 372; (REG–107176–00) 4, 428
Financial asset securitization investment
trusts (FASITs) (RP 12) 3, 335
FOIA administrative appeals, authority
transferred to Chief, Appeals (Ann 58)
22, 1295
Foreign corporations, requirements relat-
ing to certain exchanges (TD 8938) 13,
929; (LR–230–76) 13, 945
Foreign sales corporation transfer pricing,
grouping rules (TD 8944) 16, 1067
Forms:
W-2:
New code (Ann 7) 3, 357
Voluntary electronic furnishing of
payee statements (TD 8942) 13,
929; (REG–107186–00) 13, 973
W-2 and W-3, specifications for private
printing of paper substitutes (RP 26)
17, 1093; correction (Ann 59) 23,
1331
W-4, Employee’s Withholding Allow-
ance Certificate, specifications for
filing magnetically or electronically
(RP 16) 4, 376
W-9, Request for Taxpayer Identifi-
cation Number and Certification
(Ann 15) 8, 715
990, request for comments (Ann 33)
17, 1137
990–EZ, request for comments (Ann
33) 17, 1137
990–PF, request for comments (Ann
33) 17, 1137
1042–S, specifications for filing mag-
netically or electronically (Ann 3) 2,
278
1098-E, voluntary electronic furnishing
of payee statements (TD 8942) 13,
929; (REG–107186–00) 13, 973
1098-T, voluntary electronic furnishing
of payee statements (TD 8942) 13,
929; (REG–107186–00) 13, 973
1120, Schedule N, Foreign Operations
of U.S. Corporations (Ann 13) 9, 752
7004, Application for Automatic Exten-
sion of Time to File Corporation Income
Tax Return, new (Notice 29) 14, 989
8851, Summary of Archer MSAs, spec-
ifications for filing magnetically or
electronically (RP 31) 20, 1170
8875, Taxable REIT Subsidiary Elec-
tion, revised (Ann 17) 8,716
Hedging transactions (REG–107047–00)
14, 1002
Hyperinflationary currency, definition of
(TD 8914) 8, 653
Information reporting:
Discharges of indebtedness (Notice 8)
4, 374
Electronic filing and magnetic media;
IRS/SSA information reporting sem-
inars for 2001 (Ann 64) 25, 1344
Exceptions, payments made by service-
recipients (Notice 38) 24, 1334
Payments of qualified tuition and pay-
ments of interest on qualified educa-
tion loans, magnetic media filing
requirements (Ann 10) 4,431
Payments to attorneys (Notice 7) 4, 374
Installment sales; changes in method of
accounting (Notice 22) 12, 911
Insurance, captive insurance transactions,
“economic family theory” (RR 31) 26,
1348
Insurance companies:
Interest rate tables (RR 11) 10, 780
Tentative differential earnings rate
and tentative recomputed differen-
tial earnings rate (Notice 24) 12,
912
Interest:
Investment:
Federal short-term, mid-term, and
long-term rates for:
January 2001 (RR 3) 3, 319
February 2001 (RR 7) 7, 541
March 2001 (RR 12) 11, 811
April 2001 (RR 17) 15, 1052
May 2001 (RR 22) 19, 1152
June 2001 (RR 27) 23, 1298
Rates:
Farm real property, special use value
(RR 21) 18, 1144
Reserve rate tables, insurance com-
panies (RR 11) 10, 780
Underpayments and overpayments,
quarter beginning:
April 1, 2001 (RR 16) 13, 936
July 1, 2001 (RR 32) 26, 1350
Interest on deposits paid to nonresident
aliens reporting requirements (REG–
126100–00) 11, 862; correction (Ann
50) 20, 1184
Inventory:
Floor stocks payments (RR 8) 9, 726
LIFO:
Optional dollar-value LIFO invento-
ry computation method for used
vehicle dealers (RP 23) 10, 784
Price indexes used by department
stores for:
November 2000 (RR 5) 5, 451
December 2000 (RR 9) 8, 652
January 2001 (RR 14) 12, 898
February 2001 (RR 18) 17, 1092
March 2001 (RR 23) 20, 1169
April 2001 (RR 28) 25, 1338
Joint and several liability, relief from
(REG–106446–98) 13, 945
Korean mutual agreement (Ann 34) 16, 1087
Last known address:
Change of address, how to notify the
IRS (RP 18) 8, 708
Definition; use of U.S. Postal Service
database (TD 8939) 12, 899
Letter rulings, determination letters, and
information letters issued by Associates
Chief Counsel (RP 1) 1, 1
Levied upon property; return of
(REG–101520–97) 15, 1057
Life insurance contracts, “split-dollar”
arrangements (Notice 10) 5, 459
Long-term contracts:
Accounting for (TD 8929) 10, 756; cor-
rection (Ann 56) 21, 1286
Mid-contract change in taxpayer
(REG–105946–00) 16, 1069
Methods of accounting:
General rule for 2001 (RP 24) 10, 788
Inventories, small taxpayers (RP 10) 2,
272
Short-term loans, stated interest, cash
method banks, automatic change (RP
25) 12, 913
Mortgage bonds and credit certificates,
median income figures – 2001 (RP 35)
22, 1293
July 2, 2001x2001–27 I.R.B.
INCOME TAX—Cont.
INCOME TAX—Cont.
INCOME TAX—Cont.

Nonconventional source fuel credit:
Inflation adjustment factor, reference
price, CY 2000 (Notice 31) 17, 1093
Qualified fuels under section 29(c)
(1)(C), solid fuel from coal, private
letter rulings (RP 30) 19, 1163
Partnerships:
Automatic permission for securities
partnerships to aggregate built-in
gains and losses (RP 36) 23, 1326
Corporate partner’s stock, partnership
termination (REG–106702–00) 4,
424; correction (Ann 28) 13, 975
Final short-year tax return, determina-
tion of basis (Notice 5) 3, 327
Mergers and divisions (TD 8925) 6,
496
Taxable year, partner and partnership,
foreign partners (REG–104876–00)
14, 998
Practice before the Internal Revenue
Service; Circular 230 (REG–111835–
99) 11, 834
Pre-filing agreement program:
Annual report, Large and Mid-Size
Business Division (Ann 38) 17,
1138
Pre-filing examinations (RP 22) 9, 745
Presidentially declared disaster areas:
Disaster and combat zone, tax-related
deadlines (TD 8911) 3, 321
Major disaster and emergency areas
(RR 15) 13, 922
Taxpayers affected by the Cerro Grande
Fire (Notice 30) 14, 989
Private foundations, organizations now
classified as (Ann 35) 16, 1087; (Ann
45) 18, 1148; (Ann 47) 19, 1165; (Ann
57) 20, 1187; (Ann 60) 21, 1287; (Ann
66) 25, 1345; (Ann 68) 26, 1357
Proposed Regulations:
26 CFR 1.121–1, –2, corrected; exclu-
sion of gain from sale or exchange of
a taxpayer’s principal residence
(Ann 52) 20, 1186
26 CFR 1.141–7, –8, added; 1.141–15,
amended; obligations of states
and political subdivisions (REG–
114998–99) 14, 992
26 CFR 1.263(g)–1 through –5, added;
1.1092(d)–1, amended; capitaliza-
tion of interest and carrying charges
properly allocable to straddles
(REG–105801–00) 13, 965
26 CFR 1.301–1, amended; liabilities
assumed in certain corporate transac-
tions (REG–106791–00) 6, 521
26 CFR 1.355–0, amended; 1.355–7,
added; recognition of gain on certain
distributions of stock or securities in
connection with an acquisition
(REG–107566–00) 3, 346
26 CFR 1.367(b)–3, –8, corrected;
stock transfer rules, carryover of
earnings and taxes (Ann 51) 20, 1185
26 CFR 1.381(c)(4)–1, revised;
1.460–0, –4, amended; 1.460–6(g),
revised; long-term contracts, mid-
contract change in taxpayer
(REG–105946–00) 16, 1069
26 CFR 1.444–4, added; 1.641(c)–0,
–1, added; 1.1361–0, –1, amended;
1.1362–6, –7, amended; 1.1377–1,
–3, amended; electing small business
trusts (REG–251701–96) 4, 396
26 CFR 1.642(c)–2, amended;
1.643(a)–3, revised; 1.643(b)–1,
revised; 1.651(a)–2, added;
1.661(a)–2, revised; 1.664–3, revised;
definition of income for trust purpos-
es (REG–106513–00) 16, 1076
26 CFR 1.705–1, amended; 1.705–2,
added; basis adjustments upon the
sale of a corporate partner’s stock
(REG–106702–00) 4, 424; correc-
tion (Ann 28) 13, 975
26 CFR 1.706–4, added; tax-
able years of partner and
partnership, foreign partners
(REG–104876–00) 14, 998
26 CFR 1.863–3, amended; 1.863–8,
–9, added; source of income from
space and ocean activities, commu-
nications activities (REG–106030–
98) 11, 820
26 CFR 1.892–5, added; 1.892–5T,
amended; 301.7701–2, amended; clar-
ification of entity classification rules
(REG–101739–00) 14, 996
26 CFR 1.894–1, revised; treaty guid-
ance regarding payments with respect
to domestic reverse hybrid entities
(REG–107101–00) 16, 1083
26 CFR 1.902–0, –1, amended;
1.904–0, –4, –6, amended; 1.904–5,
revised; 1.904(b)–1, –2, revised;
1.904(b)–3, –4, removed; 1.904(j)–1,
added; application of section 904 to
income subject to separate limita-
tions and computations of deemed-
paid credit under section 902
(REG–104683–00) 4, 407; correc-
tion (Ann 42) 18, 1147
26 CFR 1.1031(k)–1, amended; defini-
tion of disqualified person
(REG–107175–00) 13, 971
26 CFR 1.1092(c)–1, amended;
1.1092(c)–2, –3, added; equity
options with flexible terms, qualified
covered call treatment (REG–
115560–99) 14, 993
26 CFR 1.1221–2, revised; 1.1256
(e)–1, revised; hedging transac-
tions (REG–107047–00) 14, 1002
26 CFR 1.1271–0, amended; 1.1275–1,
amended; debt instruments with
original issue discount, annuity con-
tracts (REG–125237–00) 12, 919
26 CFR 1.1502–78, amended; corpora-
tions, consolidated groups, tentative
carryback adjustments (REG–
119352–00) 6, 525
26 CFR 1.6013–4, added; 1.6015–0
through –9, added; relief from joint
and several liability (REG–106446–
98) 13, 945
26 CFR 1.6041–2, amended; 1.6050S–1,
–2, added; 301.6724–1, amended;
electronic payee statements, voluntary
(REG–107186–00) 13, 973
26 CFR 1.6049–4(b)(5), revised;
1.6049–6, amended; 1.6049–8,
revised; reporting requirements for
interest on deposits paid to nonresi-
dent aliens (REG–126100–00) 11,
862; correction (Ann 50) 20, 1184
26 CFR 1.6302–1, –2, amended;
removal of Federal Reserve banks as
federal depositaries (REG–107176–
00) 4, 428
26 CFR 7.367(c)–1, –2, withdrawn;
requirements relating to certain
exchanges involving a foreign corpo-
ration (LR–230–76) 13, 945
26 CFR 301.6103(c)–1, added; disclo-
sure of return and return infor-
mation to designee of taxpayer
(REG–103320–00) 8, 714
26 CFR 301.6103(j)(1)–1, amended;
disclosure of return information to the
Bureau of the Census (REG–121109–
00) 15, 1064
2001–27 I.R.B.xiJuly 2, 2001
INCOME TAX—Cont.
INCOME TAX—Cont.
INCOME TAX—Cont.

26 CFR 301.6343–3, added; levied upon
property, return of property in certain
cases (REG–101520–97) 15, 1057
26 CFR 301.7430–0, removed;
301.7430–7, added; attorney’s fees,
recovery of (REG–121928–98) 6, 520
26 CFR 301.7701–3, amended; clas-
sification of certain business enti-
ties, check-the-box regulations
(REG–110659–00) 12, 917
31 CFR Part 10, amended; practice before
the Internal Revenue Service; Circular
230 (REG–111835–99) 11, 834
Publications:
538, Accounting Periods and Methods,
revised (Ann 54) 21, 1284
547, Casualties, Disasters, and Thefts,
revised (Ann 6) 3, 357
551, Basis of Assets, revised 2000 (Ann
2) 2, 277
575, changes in minimum required dis-
tributions (Ann 23) 10, 791
583, Starting a Businesss and Keeping
Records, revised (Ann 8) 3, 357
584-B, Business Casualty, Disaster, and
Theft Loss Workbook, new (Ann 39)
17, 1141
590, changes in minimum required dis-
tributions (Ann 23) 10, 791
954, Tax Incentives for Empowerment
Zones and Other Distressed
Communities, revised (Ann 65) 26,
1357
1187, updated specifications for mag-
netic or electronic filing of Form
1042-S (Ann 3) 2, 278
1212, supplemental information on
short-term Treasury bills (2000 edi-
tion) (Ann 29) 14, 1014
1245, Specifications for Filing Form
W-4, Employee’s Withholding
Allowance Certificate, magnetically
or electronically (RP 6) 4, 376
Qualified transportation fringe benefits
(TD 8933) 11, 794; correction (Ann 31)
17, 1113
Qualified zone academy bonds, limitation
for 2001 (RP 14) 3, 343
Real estate investment trust (REIT), active
conduct of a trade or business, rents
from real property (RR 29) 26, 1348
Real estate mortgage investment con-
duits (REMICs), safe harbor (RP 12)
3, 335
Regulations:
26 CFR 1.41–0, –1, –4, revised;
1.41–2, amended; 1.41–3, redesig-
nated as 1.41–3A; 1.41–3, added;
1.41–5, redesignated as 1.41–4A,
amended; 1.41–6, redesignated as
1.41–5, amended; 1.41–7, redesig-
nated as 1.41–5A, amended; 1.41–8,
redesignated as 1.41–6, amended;
1.41–9, redesignated as 1.41–7;
1.41–8, added; 1.41–0A through
–8A, removed; 1.41–0A, added;
1.218–0, removed; 1.482–7, amend-
ed; credit for increasing research
activities (TD 8930) 5, 433
26 CFR 1.118–2, added; contribution
in aid of construction (CIAC), reg-
ulated public utilities, water or
sewerage disposal (TD 8936) 9,
720
26 CFR 1.132–0, –5, amended;
1.132–9, added; 602.101, amended;
qualified transportation fringe bene-
fits (TD 8933) 11, 794: correction
(Ann 31) 17, 1113
26 CFR 1.141–0, amended; 1.141–7T,
–8T, –15T, revised; 1.141–15, amended;
1.142(f)(4)–1, added; 1.142(f)(4)–1T,
removed; 1.150–5, added; 1.150–5T,
removed; 601.101, amended; obliga-
tions of states and political subdivisions
(TD 8941) 14, 977
26 CFR 1.163–7, amended; 1.1271–0,
amended; 1.1275–1(f), –2, revised;
1.1275–2T, removed; 1.1275–7, added;
reopenings of Treasury securities and
other debt instruments, original issue
discount (TD 8934) 12, 904
26 CFR 1.170A–6, amended; lifetime
charitable lead trust (TD 8923) 6, 485
26 CFR 1.301–1, amended; 1.301–1T,
added; assumed liabilities (TD
8924) 6, 489
26 CFR 1.338–0 through –7, –10,
added; 1.338(h)(10)–1, added;
1.338(i)–1, added; 1.338–0T through
–7T, –10T, removed; 1.338(h)(10)
–1T, removed; 1.338(i)–1T, removed;
1.1060–1T, removed; 1.1060–1,
added; 1.1361–1, –4, amended;
1.1502–76, amended; 602.101,
amended; purchase price allocations
in deemed and actual asset acquisi-
tions (TD 8940) 15, 1016; correction
(Ann 53) 20, 1186
26 CFR 1.355–0, amended; 1.355–6,
revised; recognition of gain on cer-
tain distributions of stock or securi-
ties (TD 8913) 3,300; correction
(Ann 26) 11, 896
26 CFR 1.367(b)–0, amended;
1.367(b)–12, added; 7.367(b)–12,
removed; stock transfer rules, transi-
tion rules (TD 8937) 11, 806
26 CFR 1.367(b)–3(b)(4), withdrawn;
stock transfer rules (Ann 27) 11, 897
26 CFR 1.444–4T, added; ESBT, elect-
ing small business trusts, tiered
structures (TD 8915) 4, 359
26 CFR 1.446–1, amended; 1.451–3,
removed; 1.451–5, amended;
1.460–0, –4, –6, amended; 1.460–1
through –3, revised; 1.460–5, added;
1.460–7, –8, removed; 1.471–10,
amended; 602.101, amended;
accounting for long-term contracts
(TD 8929) 10, 756; correction (Ann
56) 21, 1286
26 CFR 1.467–0, –1, amended;
1.467–2, added; 1.467–3, revised;
rental agreements involving pay-
ments of $2,000,000 or less (TD
8917) 7,538
26 CFR 1.468A–5, amended;
1.503(a)–1, amended; 1.547–2,
amended; 1.856–6, amended;
1.860–2, amended; 1.963–6, amend-
ed; 1.992–3, amended; 1.6081–2, –3,
–4, –6, –7, amended; 301.6110–4, –5,
–6, amended; 301.6212–2, added;
301.6301–1, amended; 301.6305–1,
revised; 301.6320–1T, amended;
301.6325–1, revised; 301.6330–1T,
amended; 301.6331–2, amended;
301.6332–2, amended; 301.6335–1,
amended; 301.6503(c)–1, amended;
301.6672–1, amended; 301.6903–1,
amended; last known address, defini-
tion of (TD 8939) 12, 899
26 CFR 1.643(a)–8, added; 1.664–1, –2,
–3, amended; charitable remainder
trusts, deemed sale, trust distributions,
abusive transactions (TD 8926) 6, 492
26 CFR 1.708–1, amended; 1.752–1,
–5, amended; partnership mergers
and divisions (TD 8925) 6, 496
26 CFR 1.861–9, –11, –14, added;
1.861–9T, –11T, –14T, revised;
July 2, 2001xii2001–27 I.R.B.
INCOME TAX—Cont.
INCOME TAX—Cont.
INCOME TAX—Cont.

1.902–1, amended; 1.904–0, –4, –5,
amended; application of section 904
to income subject to separate limita-
tions and section 864(e) affiliated
group expense allocation and appor-
tionment rules (TD 8916) 4, 360;
correction (Ann 41) 18, 1147
26 CFR 1.894–1, amended; 1.894–1T,
removed; guidance regarding claims
for certain income tax convention
benefits (Ann 4) 2, 286
26 CFR 1.925(a)–1, added;
1.925(a)–1T, amended; 1.925(b)–1T,
amended; foreign sales corporation
transfer pricing, grouping rules (TD
8944) 16, 1067
26 CFR 1.985–1, –4, amended;
1.985–8, added; 1.985–8T, removed;
1.1001–5, added; 1.1001–5T,
removed; conversion to the euro (TD
8927) 11, 807
26 CFR 1.988–1, revised; hyperinfla-
tionary currency (TD 8914) 8, 653
26 CFR 1.1441–1, –5, –7, corrected;
1.1461–1, corrected; 1.6045–1, cor-
rected; 1.6049–5, corrected; U.S.
source income paid to foreign per-
sons; reporting and recordkeeping
requirements (Ann 55) 21, 1284
26 CFR 1.1502–78T, added; corpora-
tions, consolidated groups, tentative
carryback adjustments (TD 8919) 6,
505
26 CFR 1.6041–2T, added; 1.6050S–
1T, –2T, added; 301.6724–1T, added;
602.101, amended; electronic payee
statements, voluntary (TD 8942) 13,
929
26 CFR 7.367(c)–1, –2, removed;
requirements relating to certain
exchanges involving a foreign corpo-
ration (TD 8938) 13, 929
26 CFR 301.6103(c)–1, removed;
301.6103(c)–1T, added; disclosure
of returns or return information to
designee of taxpayer (TD 8935) 8,
702
26 CFR 301.6103(j)(1)(1)–1T, added;
disclosure of return information to
the Bureau of the Census (TD 8943)
15, 1054
26 CFR 301.6302–1T, added; removal
of Federal Reserve banks as deposi-
taries (TD 8918) 4,372
26 CFR 301.7430–7T, added; attor-
ney’s fees, recovery of (TD 8922) 6,
508
26 CFR 301.7502–1, revised;
301.7502–1T, removed; 301.7502
–2, added; timely mailing treated as
timely filing (TD 8932) 11, 813
26 CFR 301.7508–1, added; 301.7508
A–1, added; for combat zone service
or Presidentially declared disasters,
tax related deadlines (TD 8911) 3,
321
Rental agreements (TD 8917) 7, 538
Reopenings, debt instruments, Treasury
securities, original issue discount (TD
8934) 12, 904
Reporting requirements for interest on
deposits paid to nonresident aliens
(REG–126100–00) 11, 862
Revocations, exempt organizations (Ann
20) 8, 716; (Ann 36) 16, 1089; (Ann
46) 19, 1165; (Ann 67) 26, 1357
Ruling guidelines, leveraged leasing
transactions (RP 28) 19, 1156; (RP 29)
19, 1160
S Corporations, pass-through items, dis-
charge of indebtedness (CD 2069) 21,
1191
Section 911(d)(4) waiver, 2000 update
(RP 27) 19, 1155
Short-term leases, qualified lessee con-
struction allowances for (RR 20) 18,
1144
Short-term loans, stated interest, cash
method banks, automatic change (RP
25) 12, 913
Source of income from space and ocean
activities, communications activities
(REG–106030–98) 11, 820; correction
(Ann 30) 15, 1065
Specifications for filing Form 8851,
Summary of Archer MSAs magnetical-
ly or electronically (RP 31) 20, 1170
Standard Industry Fare Level (SIFL) for-
mula (RR 13) 12, 898
States and political subdivisions, obliga-
tions of (TD 8941) 14, 977;
(REG–114998–99) 14, 992
Stock transfer rules:
Carryover of earnings and taxes (Ann
51) 20, 1185
Supplemental rules (Ann 27) 11, 897
Transition rules (TD 8937) 11, 806
Straddles; capitalization of interest and
carrying charges (REG–105801–00)
13, 965
Substantial understatement penalty, ade-
quate disclosure (RP 11) 2, 275
Substitute forms, W-2 and W-3, specifica-
tions for private printing (RP 26) 17,
1093
Tax convention, claims for benefits (Ann
4) 2,286
Tax shelters:
Leasing transactions, exceptions
(Notice 18) 9, 731
New address for filing application for
registration (Ann 62) 24, 1337
Technical advice to directors and chiefs,
appeals offices, from Associates Chief
Counsel and Division Counsel/
Associate Chief Counsel (TE/GE) (RP
2) 1, 79
Timely mailing treated as timely filing
(TD 8932) 11, 813
Treaty benefits, eligibility of items of
income paid by a domestic reverse
hybrid entity (REG–107101–00) 16,
1083
Trusts:
Charitable remainder trusts, deemed
sale, trust distributions, abusive
transactions (TD 8926) 6, 492
Election to treat trust as part of an
estate (REG–106542–98) 5, 473;
correction (Ann 24) 10, 793
ESBTs, electing small business trusts,
estimated tax payments (Notice 25)
13, 941
Qualified revocable trust treated as part
of an estate (Notice 26) 13, 942
U.S.-source income:
Frivolous filing position based on sec-
tion 861 (Notice 40) 26, 1355
Paid to foreign persons, reporting and
recordkeeping requirements (Ann
55) 21,1284
Valuation of art requests, change of
address for submissions (Ann 22) 11,
895
Withholdings:
Payments to financial institutions in
U.S. possessions (Notice 11) 5, 464
Qualified intermediary agreements,
clarifications (Notice 4) 2, 267
Voluntary Compliance on Alien
Withholding Program (VCAP) (RP
20) 9, 738
2001–27 I.R.B.xiiiJuly 2, 2001
INCOME TAX—Cont.
INCOME TAX—Cont.
INCOME TAX—Cont.

SELF-EMPLOYMENT
TAX
Practice before the Internal Revenue
Service; Circular 230 (REG–111835–
99) 11, 834
Proposed Regulations:
31 CFR Part 10, amended; practice
before the Internal Revenue Service;
Circular 230 (REG–111835–99) 11,
834
July 2, 2001xiv2001–27 I.R.B.

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