Internal Revenue Bulletin 2016-43 (PDF rendition): IRS Announcements

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HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
REG–123600–16, page 523.
The proposed regulations provide guidance on the require-
ments that are used to determine whether a corporation qual-
ifies as a regulated investment company (RIC) for federal in-
come tax purposes. The proposed regulations clarify that
amounts included in gross income under §951(a)(1)(A)(i) or
1293(a) are treated as dividends only to the extent that there
is an actual distribution out of the earnings and profits of the
taxable year that are attributable to the amounts so included.
The proposed regulations also clarify that inclusions under
§§951(a)(1)(A)(i) and 1293(a) do not qualify as “other income”
under §851(b)(2). In addition, the proposed regulations refer to
Rev. Proc. 2016–50, a companion “no-rule” revenue proce-
dure related to the treatment of a corporation as a RIC that
requires a determination whether a financial instrument or
position is a security under the 1940 Act.
Rev. Proc. 2016–50, page 522.
Rev. Proc. 2016–50 supplements Rev. Proc. 2016–3, the
annual “no-rule” revenue procedure, by adding to the list of
areas in which the Service will not ordinarily rule any issue
relating to the treatment of a corporation as a regulated invest-
ment company (RIC) under section 851 and related provisions
that requires a determination whether a financial instrument or
position is a security as defined in the Investment Company Act
of 1940
1
.
EXEMPT ORGANIZATIONS
Announcement 2016–38, page 523.
Revocation of IRC 501(c)(3) Organizations for failure to meet
the code section requirements. Contributions made to the
organizations by individual donors are no longer deductible
under IRC 170(b)(1)(A).
Finding Lists begin on page ii.
Bulletin No. 2016–43
October 24, 2016

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all
substantive 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 internal
management are not published; however, statements of inter-
nal 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, identify-
ing details and information of a confidential nature are deleted
to prevent unwarranted invasions of privacy and to comply with
statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—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, Legisla-
tion and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Sec-
retary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index for
the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The 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.
October 24, 2016Bulletin No. 2016–43

Part III. Administrative, Procedural, and Miscellaneous
26 CFR 601.201: Rulings and determination letter-
sAlso: (Part 1, § 851)
Rev. Proc. 2016–50
SECTION 1. PURPOSE
This revenue procedure supplements
Rev. Proc. 2016 –3, 2016 –1 I.R.B. 126,
which sets forth areas of the Internal Rev-
enue Code (Code) on which the Internal
Revenue Service (Service) will not issue
letter rulings or determination letters (no-
rule areas).
SECTION 2. BACKGROUND
In the interest of sound tax administra-
tion, the Service answers inquiries from
individuals and organizations regarding
their status for tax purposes and the tax
effects of their acts or transactions before
the filing of returns or reports that are
required by the Code. See Rev. Proc.
2016 –1, 2016 –1 I.R.B. 1. There are, how-
ever, areas in which the Service will not
issue letter rulings or determination letters
because the issues are inherently factual
or for other reasons. The Service pub-
lishes guidance setting forth these no-rule
areas throughout the year and incorporates
them annually into the third revenue pro-
cedure of the year, currently Rev. Proc.
2016 –3.
Section 4 of Rev. Proc. 2016 –3 sets
forth areas in which the Service ordinarily
will not issue letter rulings or determina-
tion letters. “Not ordinarily” means that
unique and compelling reasons must be
demonstrated to justify the issuance of a
letter ruling or determination letter. Sec-
tion 2.01 of Rev. Proc. 2016 –3.
SECTION 3. PROCEDURE
Rev. Proc. 2016 –3 is supplemented by
adding a new paragraph (63) to section
4.01 to read as follows:
(63) Section 851.—Definition of Reg-
ulated Investment Company.—Any issue
relating to the treatment of a corporation
as a regulated investment company under
section 851 and related provisions that
requires a determination whether a finan-
cial instrument or position is a security as
defined in the Investment Company Act of
1940.
SECTION 4. EFFECTIVE DATE
This revenue procedure applies to all
requests for letter rulings, including any
requests pending in the national office and
any requests submitted on or after Sep-
tember 27, 2016.
SECTION 5. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2016 –3 is supplemented.
SECTION 6. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Matthew P. Howard of the
Office of Associate Chief Counsel (Finan-
cial Institutions & Products). For further
information regarding this revenue proce-
dure contact Mr. Howard at (202) 317-
7053 (not a toll-free number).
October 24, 2016Bulletin No. 2016–43
522

Part IV. Items of General Interest
Deletions From Cumulative
List of Organizations,
Contributions to Which are
Deductible Under Section
170 of the Code
Announcement 2016–38
____________________________
Table of Contents
The Internal Revenue Service has re-
voked its determination that the organiza-
tions listed below qualify as organizations
described in sections 501(c)(3) and
170(c)(2) of the Internal Revenue Code of
1986.
Generally, the IRS will not disallow
deductions for contributions made to a
listed organization on or before the date of
announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the IRS is not pre-
cluded from disallowing a deduction for
any contributions made after an organiza-
tion ceases to qualify under section
170(c)(2) if the organization has not
timely filed a suit for declaratory judg-
ment under section 7428 and if the con-
tributor (1) had knowledge of the revoca-
tion of the ruling or determination letter,
(2) was aware that such revocation was
imminent, or (3) was in part responsible
for or was aware of the activities or omis-
sions of the organization that brought
about this revocation.
If on the other hand a suit for declara-
tory judgment has been timely filed, con-
tributions from individuals and organiza-
tions described in section 170(c)(2) that
are otherwise allowable will continue to
be deductible. Protection under section
7428(c) would begin on October 24, 2016
and would end on the date the court first
determines the organization is not de-
scribed in section 170(c)(2) as more par-
ticularly set for in section 7428(c)(1). For
individual contributors, the maximum de-
duction protected is $1,000, with a hus-
band and wife treated as one contributor.
This benefit is not extended to any indi-
vidual, in whole or in part, for the acts or
omissions of the organization that were
the basis for revocation.
NAME OF ORGANIZATIONEffective Date of RevocationLOCATION
Community Progress Committee Inc. – Sherwood Manor7/1/2013Lebanon, TN
Community Progress Committee, Inc. – The Pavilion CPC7/1/2013Lebanon, TN
Dryhootch of America, Inc.1/1/2013Milwaukee, WI
Errict Rhett Foundation1/1/2011Plantation, FL
George’s Place Animal Sanctuary and Mobile Animal Care1/1/2012Durham, NC
Gospel To The Unreached Millions1/1/2011Huffman, TX
Grand View Charter School, Inc.7/1/2014Grand View, ID
House of Refuge Mission, Inc.1/1/2013Cincinnati, OH
Society For Promoting Elliot’s Welfare11/5/2013Richardson, TX
Transitions Charitable Fund, Inc.1/1/2013West Hills, CA
Barbara’s Pantry, Inc.1/1/2014Hemet, CA
Notice of Proposed
Rulemaking Guidance
Under Section 851 Relating
to Investments in Stock and
Securities
REG–123600–16
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document provides
guidance relating to the income test and
the asset diversification requirements that
are used to determine whether a corpora-
tion may qualify as a regulated investment
company (RIC) for federal income tax
purposes. These proposed regulations pro-
vide guidance to corporations that intend
to qualify as RICs.
DATES: Written or electronic comments
and requests for a public hearing must be
received by December 27, 2016.
ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG–123600 –16), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand de-
livered Monday through Friday between
the hours of 8 am and 4 pm to: CC:PA:
LPD:PR (REG–123600 –16), Courier’s
Desk, Internal Revenue Service, 1111
Constitution Avenue, NW, Washington,
DC 20224, or sent electronically via the
Federal eRulemaking Portal at www.
regulations.gov (IRS REG–123600 –16).
FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regula-
tions, Matthew Howard of the Office of
Associate Chief Counsel (Financial Insti-
tutions and Products) at (202) 317-7053;
concerning submissions of comments and
requests for a public hearing, Regina
Johnson (202) 317-6901 (not toll-free
numbers).
Bulletin No. 2016–43October 24, 2016
523

SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
This document contains amendments
to the Income Tax Regulations (26 CFR
part 1) relating to RICs. Section 851 of the
Internal Revenue Code (Code) sets forth
requirements for qualifying as a RIC.
Section 851(a) provides that a RIC is
any domestic corporation that (1) at all
times during the taxable year is registered
under the Investment Company Act of
1940, Pub. L. No. 76 –768, 54 Stat. 789
(codified as amended at 15 U.S.C.§§80a–
1 – 80a– 64 (2016)) (the 1940 Act), as a
management company or unit investment
trust or has in effect an election under the
1940 Act to be treated as a business de-
velopment company; or (2) is a common
trust fund or other similar fund excluded
by section 3(c)(3) of the 1940 Act from
the definition of “investment company”
and is not included in the definition of
“common trust fund” by section 584(a).
To be treated as a RIC for a taxable
year, a corporation must satisfy the in-
come test set forth in section 851(b). The
income test under section 851(b)(2) re-
quires that at least 90 percent of the cor-
poration’s gross income for the taxable
year be derived from:
(A) dividends, interest, payments
with respect to securities loans (as
defined in section 512(a)(5)), and
gains from the sale or other dispo-
sition ofstock or securities (as de-
fined in section 2(a)(36) of the [1940
Act]) or foreign currencies, or other
income (including but not limited to
gains from options, futures or forward
contracts) derived with respect to its
business of investing in such stock,
securities, or currencies, and
(B) net income derived from an in-
terest in a qualified publicly traded
partnership (as defined in [section
851(h)]).
Section 851(b)(3) provides that to be
treated as a RIC a corporation also must
satisfy the following asset diversification
requirements at the close of each quarter
of the corporation’s taxable year:
(A) at least 50 percent of the value of
its total assets is represented by—
(i) cash and cash items (including re-
ceivables), Government securities and
securities of other [RICs], and
(ii) other securities for purposes of this
calculation limited, except and to the
extent provided in [section 851(e)], in
respect of any one issuer to an amount
not greater in value than 5 percent of
the value of the total assets of the tax-
payer and to not more than 10 percent
of the outstanding voting securities of
such issuer, and
(B) not more than 25 percent of the
value of its total assets is invested in—
(i) the securities (other than Govern-
ment securities or the securities of
other [RICs]) of any one issuer,
(ii) the securities (other than the secu-
rities of other [RICs]) of two or more
issuers which the taxpayer controls and
which are determined, under regula-
tions prescribed by the Secretary, to be
engaged in the same or similar trades
or businesses or related trades or busi-
nesses, or
(iii) the securities of one or more qual-
ified publicly traded partnerships (as
defined in [section 851(h)]).
These proposed regulations relate to
the RIC income test and asset diversifica-
tion requirements. Section A. of this pre-
amble concerns the meaning of security.
Section B. of this preamble addresses in-
clusions under sections 951(a)(1)(A)(i)
and 1293(a). These proposed regulations
also revise § 1.851–2(b)(1) of the existing
final regulations to merely incorporate
changes to section 851(b)(2) since the ex-
isting final regulations were published in
theFederal Registeron November 26,
1960, in TD 6500 (25 FR 11910).
A.Defining Securities
The income test and asset diversifica-
tion requirements both use the term “se-
curities.” For purposes of the income test,
a security is defined by reference to sec-
tion 2(a)(36) of the 1940 Act, while sec-
tion 851(c) provides rules and definitions
that apply for purposes of the asset diver-
sificationrequirementsofsection
851(b)(3) but does not specifically define
“security.” Section 851(c)(6), however,
provides that the terms used in section
851(b)(3) and (c) have the same meaning
as when used in the 1940 Act. An asset is
therefore a security for purposes of the
income test and the asset diversification
requirements if it is a security under the
1940 Act.
The Treasury Department and the IRS
have in the past addressed whether certain
instruments or positions are securities for
purposes of section 851. In particular, Rev.
Rul. 2006 –1 (2006 –1 CB 261) concludes
that aderivative contract with respect to a
commodity index is not a security for pur-
poses of section 851(b)(2). The ruling also
holds that income from such a contract is
not qualifying other income for purposes
of section 851(b)(2) because that income
is not derived with respect to the RIC’s
business of investing in stocks, securities,
or currencies. Rev. Rul. 2006 –1 was mod-
ified and clarified by Rev. Rul. 2006 –31
(2006 –1 CB 1133), which states that Rev.
Rul. 2006 –1 was not intended to preclude
a conclusion that income from certain in-
struments (such as certain structured
notes) that create commodity exposure for
the holder is qualifying income under sec-
tion 851(b)(2).
After the issuance of Rev. Rul. 2006 –
31, the IRS received a number of private
letter ruling requests concerning whether
certain instruments that provide RICs with
commodity exposure were securities for
purposes of the income test and the asset
diversification requirements. By 2010, the
IRS was devoting substantial resources to
these private letter ruling requests. More-
over, it is not clear whether Congress in-
tended to allow RICs to invest in securi-
ties that provided commodity exposure.
Consequently, in July 2011, the IRS noti-
fied taxpayers that the IRS would not
issue further private letter rulings address-
ing specific proposed RIC commodity-
relatedinvestments while the IRS reviewed
the issues and considered guidance of
broader applicability.
Finally, determining whether certain
investments that provide RICs with com-
modity exposure are securities for pur-
poses of the income test and the asset
diversification requirements requires the
IRS implicitly to determine what is a se-
curity within the meaning of section
2(a)(36) of the 1940 Act. Section 38 of the
1940 Act, however, grants exclusive rule-
making authority under the 1940 Act to
the Securities and Exchange Commission
(SEC), including “defining accounting,
technical, and trade terms” used in the
1940 Act. Any future guidance regarding
October 24, 2016Bulletin No. 2016–43
524

whether particular financial instruments,
including investments that provide RICs
with commodity exposure, are securities
for purposes of the 1940 Act is therefore
within the jurisdiction of the SEC.
Section 2.01 of Rev. Proc. 2016 –3
(2016 –1 IRB 126) provides that the IRS
may decline to issue a letter ruling or a
determination letter when appropriate in
the interest of sound tax administration
(including due to resource constraints) or
on other grounds whenever warranted by
the facts or circumstances of a particular
case. If the IRS determines that it is not in
the interest of sound tax administration to
issue a letter ruling or determination letter
due to resource constraints, the IRS will
adopt a consistent approach with respect
to taxpayers that request a ruling on the
same issue. The IRS will also consider
adding the issue to the no rule list at the
first opportunity.
The Treasury Department and the IRS
have reviewed the issues, considered the
concerns expressed, considered resource
constraints, and determined that the IRS
should no longer issue letter rulings on
questions relating to the treatment of a
corporation as a RIC that require a deter-
mination of whether a financial instrument
or position is a security under the 1940
Act. Contemporaneously with the publi-
cation of these proposed regulations, the
Treasury Department and the IRS are
issuing Rev. Proc. 2016 –50 (2016 – 43
IRB 522), which provides that the IRS
ordinarily will not issue rulings or deter-
mination letters on any issue relating to
the treatment of a corporation as a RIC
that requires a determination of whether a
financial instrument or position is a secu-
rity under the 1940 Act. Thus, for exam-
ple, the IRS ordinarily will not issue a
ruling on whether income is of a type
described in the income test of section
851(b)(2) if that ruling depends on
whether an instrument is a security under
the 1940 Act.
The Treasury Department and the IRS
request comments as to whether Rev. Rul.
2006 –1, Rev. Rul. 2006 –31, and other
previously issued guidance that involves
determinations of whether a financial in-
strument or position held by a RIC is a
security under the 1940 Act should be
withdrawn effective as of the date of pub-
lication in theFederal Registerof a Trea-
sury decision adopting these proposed
regulations as final regulations.
B.Inclusions Under Section
951(a)(1)(A)(i) or 1293(a)
In certain circumstances, a U.S. person
may be required under section 951(a)(1)(A)
(i) or 1293(a) to include in taxable income
certain earnings of a foreign corporation
in which the U.S. person holds an interest,
without regard to whether the foreign cor-
poration makes a corresponding distribu-
tion of cash or property to the U.S. person.
Section 851(b) was amended by the Tax
Reduction Act of 1975, Pub. L. No. 94 –
12, § 602, 89 Stat. 26, 58 (the “1975 Act”)
(for inclusions under section 951(a)(1)(A)
(i)), and by the Tax Reform Act of 1986,
Pub. L. No. 99 –514, § 1235, 100 Stat.
2085, 2575 (the “1986 Act”) (for inclu-
sions under section 1293(a)), to specify
how a RIC treats amounts included in
income under section 951(a)(1)(A)(i) or
1293(a) for purposes of the income test of
section 851(b)(2). The language added in
those amendments provides:
For purposes of [section 851(b)(2)],
there shall be treated as dividends
amounts included in gross income
under section 951(a)(1)(A)(i) or 1293
(a) for the taxable year to the extent
that, under section 959(a)(1) or
1293(c) (as the case may be), there
is a distribution out of the earnings
and profits of the taxable year which
are attributable to the amounts so
included.
The significance of treating an inclusion
as a dividend under section 851 is that a
dividend is qualifying income under sec-
tion 851(b)(2). The amendments to sec-
tion 851(b) made by the 1975 Act and the
1986 Act unambiguously condition divi-
dend treatment of an inclusion under sec-
tion 951(a)(1)(A)(i) or 1293(a) on a dis-
tribution from the foreign corporation’s
earnings and profits attributable to the
amount included. Absent a distribution,
there is no support in the Code for treating
an inclusion under section 951(a)(1)(A)(i)
or 1293(a) as a dividend under section
851.
Notwithstanding the distribution re-
quired by section 851(b), in certain cir-
cumstances the IRS has previously issued
letter rulings under section 851(b)(2) that
permit an inclusion under section 951(a)(1)
(A)(i) or 1293(a) to qualify as “other
income” derived with respect to a RIC’s
business of investing in currencies or
1940 Act stock or securities even in the
absence of a distribution. Reading section
851(b)(2) in this manner ignores the re-
quirement in section 851(b) that amounts
be distributed in order to treat these inclu-
sions as dividends. This distribution re-
quirement is a more specific provision
than the other income clause. In addition,
it cannot be suggested that the distribution
requirement was superseded by the other
income clause because the other income
clause and the distribution requirement for
inclusions under section 1293(a) were
both added by the 1986 Act. Therefore,
these proposed regulations specify that an
inclusion under section 951(a)(1)(A)(i) or
1293(a) is treated as a dividend for pur-
poses of section 851(b)(2) only to the ex-
tent that the distribution requirement in
section 851(b) is met. These proposed reg-
ulations further provide that, for purposes
of section 851(b)(2), an inclusion under
section 951(a)(1) or 1293(a) does not
qualify as other income derived with re-
spect to a RIC’s business of investing in
stock, securities, or currencies.
Proposed Effective/Applicability Date
The rule in § 1.851–2(b)(2)(iii) of the
proposed regulations applies to taxable
years that begin on or after the date that is
90 days after the date of publication in the
Federal Registerof a Treasury decision
adopting these proposed regulations as fi-
nal regulations.
Special Analyses
Certain IRS regulations, including this
one, are exempt from the requirements of
Executive Order 12866, as supplemented
and reaffirmed by Executive Order 13563.
Therefore, a regulatory impact 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, and because the
regulations do not impose a collection of
information on small entities, the Regula-
tory Flexibility Act (5 U.S.C. chapter 6)
does not apply. Pursuant to section 7805(f)
of the Internal Revenue Code, this notice of
proposed rulemaking will be submitted to
the Chief Counsel for Advocacy of the
Bulletin No. 2016–43October 24, 2016
525

Small Business Administration for com-
ment on its impact on small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are
submitted timely to the IRS as prescribed
in this preamble under the “Addresses”
heading. The Treasury Department and
the IRS specifically request comments on
the clarity of the proposed regulations and
how they can be made easier to under-
stand. All comments will be made available
for public inspection atwww.regulations.
govor upon request. A public hearing will
be scheduled if requested in writing by any
person that timely submits written com-
ments. If a public hearing is scheduled, no-
tice of the date, time, and place for the
public hearing will be published in the
Federal Register.
Drafting Information
The principal author of these proposed
regulations is Matthew Howard, Office of
Associate Chief Counsel (Financial Insti-
tutions and Products). However, other
personnel from the Treasury Department
and the IRS participated in their develop-
ment.
Statement of Availability of IRS
Documents
The IRS revenue rulings and revenue
procedure cited in this preamble are pub-
lished in the Internal Revenue Bulletin (or
Cumulative Bulletin) and are available
from the Superintendent of Documents,
U.S.GovernmentPublishingOffice,
Washington, DC 20402, or by visiting the
IRS website atwww.irs.gov.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805***
Par. 2. Section 1.851–2 is amended by:
1. Revising paragraphs (b)(1) and
(b)(2)(i).
2. Adding paragraph (b)(2)(iii).
The addition and revisions read as fol-
lows:
§ 1.851–2 Limitations.
*****
(b)Gross income requirement—(1)
General rule. A corporation will not be a
regulated investment company for a tax-
able year unless 90 percent of its gross
income for that year is income described
in paragraph (b)(1)(i) of this section or in
paragraph (b)(1)(ii) of this section. Any
loss from the sale or other disposition of
stock or securities is not taken into ac-
count in the gross income computation.
(i)Gross income amounts. Income is
described in this paragraph (b)(1)(i) if it is
gross income derived from:
(A) Dividends;
(B) Interest;
(C) Payments with respect to securities
loans (as defined in section 512(a)(5));
(D) Gains from the sale or other dispo-
sition of stocks or securities (as defined in
section 2(a)(36) of the Investment Com-
pany Act of 1940, as amended);
(E) Gains from the sale or other dispo-
sition of foreign currencies; or
(F) Other income (including but not
limited to gains from options, futures, or
forward contracts) derived with respect to
a regulated investment company’s busi-
ness of investing in such stock, securities,
or currencies.
(ii)Income from a publicly traded part-
nership. Income is described in this para-
graph (b)(1)(ii) if it is net income derived
from an interest in a qualified publicly
traded partnership (as defined in section
851(h)).
(2)Special rules—(i) For purposes of
section851(b)(2)(A)andparagraph
(b)(1)(i)(A) of this section, amounts in-
cluded in gross income for the taxable
year under section 951(a)(1)(A)(i) or
1293(a) are treated as dividends only to
the extent that, under section 959(a)(1) or
1293(c) (as the case may be), there is a
distribution out of the earnings and profits
of the taxable year that are attributable to
the amounts included in gross income for
the taxable year under section 951(a)(1)
(A)(i) or 1293(a). For allocation of distri-
butions to earnings and profits of foreign
corporations, see § 1.959 –3.
*****
(iii) For purposes of section 851(b)(2)
(A) and paragraph (b)(1)(i)(F) of this sec-
tion, amounts included in gross income
under section 951(a)(1) or 1293(a) are not
treated as other income derived with re-
spect to a corporation’s business of invest-
ing in stock, securities, or currencies. The
rule in this paragraph (b)(2)(iii) applies to
taxable years that begin on or after the
date that is 90 days after the date of pub-
lication in theFederal Registerof a Trea-
sury decision adopting these proposed
regulations as final regulations.
John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
(Filed by the Office of the Federal Register on September
27, 2016, 8:45 a.m., and published in the issue of the Federal
Register for September 28, 2016, 81 F.R. 66576)
October 24, 2016Bulletin No. 2016–43
526

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplifieddescribes 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 ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarifiedis 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 pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified andclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Supersededdescribes 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 sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
supersededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in ma-
terial 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.—Statement 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.
Bulletin No. 2016–43October 24, 2016
i

Numerical Finding List
1
Bulletin 2016 –27 through 2016 – 43
Action on Decision:
2016-01, 2016-16 I.R.B.580
2016-02, 2016-31 I.R.B.193
2016-03, 2016-40 I.R.B.424
Announcements:
2016-21, 2016-27 I.R.B.8
2016-23, 2016-27 I.R.B.10
2016-24, 2016-30 I.R.B.170
2016-25, 2016-31 I.R.B.205
2016-26, 2016-38 I.R.B.389
2016-27, 2016-33 I.R.B.238
2016-28, 2016-34 I.R.B.272
2016-29, 2016-34 I.R.B.272
2016-30, 2016-37 I.R.B.355
2016-31, 2016-38 I.R.B.392
2016-32, 2016-40 I.R.B.434
2016-33, 2016-39 I.R.B.422
2016-34, 2016-39 I.R.B.422
2016-35, 2016-39 I.R.B.423
2016-36, 2016-39 I.R.B.423
2016-37, 2016-39 I.R.B.423
2016-38, 2016-43 I.R.B.523
Notices:
2016-40, 2016-27 I.R.B.4
2016-41, 2016-27 I.R.B.5
2016-42, 2016-29 I.R.B.67
2016-43, 2016-29 I.R.B.132
2016-44, 2016-29 I.R.B.132
2016-45, 2016-29 I.R.B.135
2016-46, 2016-31 I.R.B.202
2016-47, 2016-35 I.R.B.276
2016-48, 2016-33 I.R.B.235
2016-49, 2016-34 I.R.B.265
2016-50, 2016-38 I.R.B.384
2016-51, 2016-37 I.R.B.344
2016-52, 2016-40 I.R.B.425
2016-53, 2016-39 I.R.B.421
2016-54, 2016-40 I.R.B.429
2016-55, 2016-40 I.R.B.432
2016-57, 2016-40 I.R.B.432
2016-58, 2016-41 I.R.B.438
2016-59, 2016-42 I.R.B.457
2016-60, 2016-42 I.R.B.458
Proposed Regulations:
REG-163113-02, 2016-36 I.R.B.329
REG-147196-07, 2016-29 I.R.B.32
REG-123854-12, 2016-28 I.R.B.15
REG-131418-14, 2016-33 I.R.B.248
REG-102516-15, 2016-32 I.R.B.231
REG-109086-15, 2016-30 I.R.B.171
Proposed Regulations:—Continued
REG-134016-15, 2016-31 I.R.B.205
REG-101689-16, 2016-30 I.R.B.170
REG-103058-16, 2016-33 I.R.B.238
REG-105005-16, 2016-38 I.R.B.380
REG-108792-16, 2016-36 I.R.B.320
REG-123600-16, 2016-43 I.R.B.523
Revenue Procedures:
2016-37, 2016-29 I.R.B.136
2016-39, 2016-30 I.R.B.164
2016-40, 2016-32 I.R.B.228
2016-41, 2016-30 I.R.B.165
2016-42, 2016-34 I.R.B.269
2016-43, 2016-36 I.R.B.316
2016-44, 2016-36 I.R.B.316
2016-45, 2016-37 I.R.B.344
2016-46, 2016-37 I.R.B.345
2016-47, 2016-37 I.R.B.346
2016-48, 2016-37 I.R.B.348
2016-49, 2016-42 I.R.B.462
2016-50, 2016-43 I.R.B.522
2016-51, 2016-42 I.R.B.465
2016-52, 2016-42 I.R.B.520
Revenue Rulings:
2016-17, 2016-27 I.R.B.1
2016-18, 2016-31 I.R.B.194
2016-19, 2016-35 I.R.B.273
2016-20, 2016-36 I.R.B.279
2016-23, 2016-39 I.R.B.382
2016-24, 2016-39 I.R.B.395
2016-25, 2016-41 I.R.B.435
Treasury Decisions:
9773, 2016-29 I.R.B.56
9774, 2016-30 I.R.B.151
9775, 2016-30 I.R.B.159
9776, 2016-32 I.R.B.222
9777, 2016-36 I.R.B.282
9778, 2016-31 I.R.B.196
9779, 2016-33 I.R.B.233
9781, 2016-35 I.R.B.274
9782, 2016-36 I.R.B.301
9783, 2016-39 I.R.B.396
9784, 2016-39 I.R.B.402
9785, 2016-38 I.R.B.375
9786, 2016-42 I.R.B.442
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2016 – 01 through 2016 –26 is in Internal Revenue Bulletin
2016 –26, dated June 27, 2016.
October 24, 2016Bulletin No. 2016–43
ii

Finding List of Current Actions on
Previously Published Items
1
Bulletin 2016 –27 through 2016 – 43
Notices:
2009-89
Modified by
Notice 2016-51, 2016-37 I.R.B.344
2012-54
Obsoleted by
Notice 2016-51, 2016-37 I.R.B.344
2013-1
Modified by
Notice 2016-41, 2016-27 I.R.B.5
2013-1
Superseded by
Notice 2016-41, 2016-27 I.R.B.5
2013-67
Modified by
Notice 2016-51, 2016-37 I.R.B.344
2015-63
Superseded by
Notice 2016-58, 2016-41 I.R.B.438
Revenue Procedures:
2003-16
Modified by
Rev. Proc. 2016-47, 2016-37 I.R.B.346
2007-44
Clarified by
Rev. Proc. 2016-37, 2016-29 I.R.B.136
2007-44
Modified by
Rev. Proc. 2016-37, 2016-29 I.R.B.136
2007-44
Superseded by
Rev. Proc. 2016-37, 2016-29 I.R.B.136
2009-33
Modified by
Rev. Proc. 2016-48, 2016-37 I.R.B.348
2015-36
Modified by
Rev. Proc. 2016-37, 2016-29 I.R.B.136
2016-3
Modified by
Rev. Proc. 2016-40, 2016-32 I.R.B.228
Revenue Procedures:—Continued
2016-3
Modified by
Rev. Proc. 2016-45, 2016-37 I.R.B.228
2016-3
Supplemented by
Rev. Proc. 2016-50, 2016-43 I.R.B.542
2016-29
Modified by
Rev. Proc. 2016-39, 2016-30 I.R.B.164
Treasury Decisions:
2013-17
Obsoleted by
T.D. 9785 2016-38 I.R.B.375
2014-12
Modified by
T.D. 9776 2016-32 I.R.B.222
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2016 – 01 through 2016 –26 is in Internal Revenue Bulletin
2016 –26, dated June 27, 2016.
Bulletin No. 2016–43October 24, 2016
iii

INTERNAL REVENUE BULLETIN
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