Internal Revenue Bulletin 2004-33 (PDF rendition): IRS Revenue Procedures

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Bulletin No. 200
4-33
August 16, 2004
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
Rev. Rul. 2004–85, page 189.
Effect of mergers on qualified subchapter S subsidiary
(QSub) elections.This ruling discusses the effect certain in-
terest transfers have on QSub and entity classification elec-
tions.
Rev. Rul. 2
004–86, page 191.
Classific
ation of Delaware statutory trust.This ruling ex-
plains how
a Delaware statutory trust described in the ruling
will be cla
ssified for federal tax purposes and whether a tax-
payer may
acquire an interest in the Delaware statutory trust
without r
ecognition of gain or loss under section 1031 of the
Code. Rev
. Ruls. 78–371 and 92–105 distinguished.
Notice 2004–50, page 196.
This notice consists of 88 questions and answers on Health
Savings Accounts (HSAs) that have not been previously ad-
dressed. This notice also provides transition relief for months
before January 1, 2005, for health plans, which would other-
wise qualify as high deductible health plans (HDHPs) except
for the absence of an express limit on out-of-pocket expenses.
It also provides transition relief for months before January 1,
2006, for health plans which allow deductibles to be satisfied
over a period of more than 12 months. Notice 2004–2 modi-
fied.
Notice 2004–53, page 209.
Requests for comments concerning the application of
section 761.This notice requests comments regarding the
application of section 761 of the Code and whether section
1.761–2(a)(2) of the regulations should be revised, modified,
or clarified.
Notice 2004–54, page 209.
This notice provides that paid preparers will be permitted to
sign original returns, amended returns, or requests for filing
extensions by rubber stamp, mechanical device (such as sig-
nature pen), or computer software program.
Rev. Proc. 2004–49, page 210.
This procedure grants relief to S corporations that had a QSub
election of a subsidiary terminate as a result of a transfer de-
scribed in Situation 2 of Rev. Rul. 2004–85.
Rev. Proc. 2004–51, page 294.
Like-kind exchanges using qualified exchange accom-
modation arrangements.This procedure modifies Rev.
Proc. 2000–37, 2000–2 C.B. 308, to provide that the safe
harbor of Rev. Proc. 2000–37 does not apply to replacement
property held in a qualified exchange accommodation arrange-
ment if the property is owned by a taxpayer within the 180–day
period ending on the date of transfer of qualified indicia of
ownership of the property to an exchange accommodation
titleholder. Rev. Proc. 2000–37 modified.
EXEMPT ORGANIZATIONS
Announcement 2004–65, page 300.
Heritage Resources II, Inc., of Mercer, PA and Total Impact Cen-
ter for Youth, of Houston, TX, no longer qualify as organizations
to which contributions are deductible under section 170 of the
Code.
(Continued on the next page)
Announcements of Disbarments and Suspensions begin on page 296.
Fi
nding Lists begin on page ii.

ADMINISTRATIVE
Notice 2004–54, page 209.
This notice provides that paid preparers will be permitted to
sign original returns, amended returns, or requests for filing
extensions by rubber stamp, mechanical device (such as sig-
nature pen), or computer software program.
Rev. Proc. 200
4–50, page 211.
Electronic fi
ling;magneticmedia;2004formspecifica-
tions.Specif
ications are set forth for the electronic or mag-
netic filing o
f 2004 Forms 1098, 1099, 5498, and W–2G.
Rev. Proc. 200
3–52 superseded.
August 16, 20042004–33 I.R.B.

The IRS Mission
Provide America’s taxpayers top quality service by helping
them understand and meet their tax responsibilities and by
applying the tax law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Sec-
retary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2004–33 I.R.B.August 16, 2004

Part I. Rulings and Decisions Under the Internal Revenue Code
of 1986
Section 368.—Definitions
Relating to Corporate
Reorganizations
Does an election to treat a wholly owned sub-
sidiary of an S corporation as a qualified subchapter
S subsidiary (QSub) or an entity classification elec-
tion of a subsidiary terminate when the subsidiary’s
interest is transferred pursuant to certain section
368(a)(1) reorganizations or otherwise? See Rev.
Rul. 2004-85, page 189.
How does an S corporation taxpayer obtain late
QSub election relief for a subsidiary whose QSub
election terminated as a result of a transfer of the
QSub’s interest from one S corporation to another S
corporation? See Rev. Proc. 2004-49, page 210.
Section 671.—Trust
Income, Deductions, and
Credits Attributable to
Grantors and Others as
Substantial Owners
How will certain Delaware statutory trusts be clas-
sified for federal tax purposes and may a taxpayer ac-
quire an interest in certain Delaware statutory trusts
without recognition of gain or loss under section 1031
of the Internal Revenue Code. See Rev. Rul. 2004-
86, page 191.
Section 677.—Income for
Benefit of Grantor
How will certain Delaware statutory trusts be clas-
sified for federal tax purposes and may a taxpayer ac-
quire an interest in certain Delaware statutory trusts
without recognition of gain or loss under section 1031
of the Internal Revenue Code. See Rev. Rul. 2004-
86, page 191.
Section 761.—Terms
Defined
How will certain Delaware statutory trusts be clas-
sified for federal tax purposes and may a taxpayer ac-
quire an interest in certain Delaware statutory trusts
without recognition of gain or loss under section 1031
of the Internal Revenue Code. See Rev. Rul. 2004-
86, page 191.
Section 1031.—Exchange
of Property Held for
Productive Use or
Investment
How will certain Delaware statutory trusts be clas-
sified for federal tax purposes and may a taxpayer ac-
quire an interest in certain Delaware statutory trusts
without recognition of gain or loss under section 1031
of the Internal Revenue Code. See Rev. Rul. 2004-
86, page 191.
Section 1361.—S Corpo-
ration Defined
26 CFR 1.1361–5: Termination of QSub election.
(Also §§ 368, 1361, 7701, 1.1361–3, 1.1361–4,
1.1361–5, 301.7701–3.)
Effect of mergers on qualified sub-
chapter S subsidiary (QSub) elections.
This ruling discusses the effect certain in-
terest transfers have on QSub and entity
classification elections.
Rev. Rul. 2004–85
ISSUES
(1)Doesanelectiontotreatawholly
ownedsubsidiaryofanScorporationasa
qualified subchapter S subsidiary (QSub),
as described in § 1361(b)(3)(B) of the In-
ternal Revenue Code, terminate solely be-
cause the S corporation engages in a trans-
action that qualifies as a reorganization un-
der § 368(a)(1)(F)?
(2)Doesanelectiontotreatasubsidiary
as a QSub terminate ifthe S corporation
(whether by sale or reorganization un-
der§368(a)(1)(A),(C),or(D))transfers
100 percent of the QSub stock to an-
other S corporation in a transaction that
does not qualify as a reorganization under
§368(a)(1)(F)?
(3) Does an entity classification elec-
tion of an eligible entity, as described in
§ 301.7701–3(b) of the Procedure and Ad-
ministration Regulations, terminate solely
because the owner transfers (whether by
sale, reorganization under § 368(a)(1)(A),
(C), (D), or (F), or otherwise) all of the
membership interest in the eligible entity
to another person?
FACTS
Situation 1.Xis a StateAS corporation
that owns 100 percent of the stock ofSub
1, a corporation thatXhas elected to treat
as a QSub. The shareholders ofXform
U,aState Bcorporation.Xmerges with
and intoUin a transaction qualifying as
a reorganization under§ 368(a)(1)(F). The
shareholders ofXown 100 percent of the
stock ofUandUis eligible to be an S
corporation under § 1361(b)(1).
Situation 2.Yis anScorporation that
owns 100 percent of the stock ofSub 2,a
corporation thatYhas elected to treat as
aQSub.Y(whether by sale or reorgani-
zation under § 368(a)(1)(A), (C), or (D))
transfersY’s assets, including 100 percent
ofSub 2stock, toM, an S corporation, in a
transaction that is not a reorganization un-
der § 368(a)(1)(F).
Situation 3.Zis a corporation that owns
100 percent of the membership interests in
LLC1, an eligible entity that elected to be
classified for federal tax purposes as an as-
sociation, contrary toits default classifica-
tion.Z(whether by sale, reorganization
under § 368(a)(1)(A), (C), (D), or (F), or
otherwise) transfers all of the membership
interests inLLC1toN, another person.
LAW AND ANALYSIS
Situations 1 and 2
Section 1361(a)(1) provides that the
term “S corporation” means, with respect
to a taxable year, a small business corpora-
tion (as defined in § 1361(b)(1)) for which
an election under § 1362(a) is in effect for
the year.
Section 1361(b)(3)(B) allows an S cor-
poration to elect to treat any domestic cor-
poration that is not anineligible corpora-
tion (as defined in § 1361(b)(2)) as a QSub
if 100 percent of the stock of the corpo-
ration is held by the S corporation. Sec-
tion 1.1361–3(a) of the Income Tax Reg-
ulations provides the time and manner of
making a QSub election.
Under § 1361(b)(3)(A), a corporation
that is a QSub is not treated as a separate
corporation. Instead, all assets, liabilities,
and items of income, deduction and credit
2004–33 I.R.B.189August 16, 2004

of a QSub are treated as assets, liabilities,
and such items (as the case may be) of the
S corporation.
Section 1.1361–4(a)(2) provides that, if
an S corporation makes a valid QSub elec-
tion with respect to a subsidiary, the sub-
sidiary is deemed to have liquidated into
the S corporation. Under § 1.1361–4(b),
this liquidation is generally deemed to oc-
cur at the close of the day before the QSub
election is effective.
Under § 1.1361–5(a)(1)(ii), if a QSub
election terminates as a result of the ter-
mination of its parent’s S corporation elec-
tion, then the termination of the QSub elec-
tion is effective at the close of the last day
of the parent’s last taxable year as an S cor-
poration. Under § 1.1361–5(a)(1)(iii), if a
QSub election terminates as the result of
any other event, thenthe termination of a
QSub election is effective at the close of
the day on which the event causing the ter-
mination occurs.
Sections 1361(b)(3)(C) and 1.1361–
5(b)(1) provide that if a QSub election
terminates, the former QSub is treated as a
new corporation that, immediately before
the termination, acquires all of its assets
(and assumes all of its liabilities) from the
S corporation in exchange for stock of the
new corporation. The tax treatment of this
transaction or of a larger transaction that
includes this transaction is determined un-
der the Internal Revenue Code and general
principles of tax law, including the step
transaction doctrine.
Section 1.1361–5(b)(3),Example 9,de-
scribes the tax consequences of a trans-
ferbyanScorporation(X)of100percent
of the stock of a QSub (Y)toaCcorpo-
ration (Z). The example provides that the
deemed formation ofYbyX(as a con-
sequence of the termination ofY’s QSub
election) is disregarded for federal income
tax purposes. The transaction is treated as
a transfer of the assets ofYtoZ, followed
byZ’s transfer of those assets to the capi-
tal ofYin exchange forYstock. If, instead,
Zis an S corporation, andZmakes a QSub
election forYeffective as of the date ofZ’s
acquisition ofY,thenZ’s transfer of the as-
sets ofYin exchange forYstock, followed
by the immediate liquidation ofYas a con-
sequence of the QSub election are disre-
garded for federal income tax purposes.
Sections 1361(b)(3)(D) and 1.1361–
5(c)(1) provide that, absent the consent of
the Commissioner, a corporation whose
QSub status terminates (and any successor
corporation as defined in § 1.1362–5(b))
may not make an S election or have a
QSub election made with respect to it
before its fifth taxable year which begins
after the first taxable year for which the
termination was effective.
Section 1.1361–5(c)(2) provides that in
the case of S and QSub elections effec-
tive after December 31, 1996, if a corpo-
ration’s QSub election terminates, the cor-
poration may make an S election or have
a QSub election made with respect to it
before the expiration of the five-year pe-
riod described in § 1361(b)(3)(D) provided
that (i) immediately following the termina-
tion, the corporation (or its successor cor-
poration) is otherwise eligible to make an
S election or have a QSub election made
for it; and (ii) the relevant election is made
effective immediately following the termi-
nation of the QSub election.
Section 368(a)(1)(F)provides that the
term “reorganization” means, among other
things, a mere change in identity, form, or
place of organization of one corporation,
however effected.
Section 1.381(b)–1(a)(2) provides that,
in the case of a reorganization qualify-
ing under § 368(a)(1)(F) (whether or not
such reorganization also qualifies under
any other provision of § 368(a)(1)), the
acquiring corporation shall be treated (for
purposes of § 381) just as the transferor
corporation would have been treated if
there had been no reorganization.
Rev. Rul. 64–250, 1964–2 C.B. 333,
concludes that when an S corporation
merges into a newly formed corporation
in a transaction qualifying as a reorganiza-
tion under § 368(a)(1)(F), and the newly
formed surviving corporation also meets
the requirements of an S corporation, the
reorganization does not terminate the S
election. Thus, the S election remains in
effect for the new corporation.
InSituation 1,X(an S corporation)
merges intoU(a corporation that meets the
requirements to be a small business cor-
poration under § 1361(b)(1)) in a transac-
tion qualifying as a reorganization under
§ 368(a)(1)(F). Under Rev. Rul. 64–250,
Uwill be treated as a continuation ofX.
U, therefore, will be an S corporation im-
mediately after the merger. BecauseUis
treated as a continuation ofX, the reorga-
nization does not terminateX’s election to
treatSub 1as a QSub.
InSituation 2,Y(an S corporation)
transfers its assets, including 100 percent
of the stock ofSub 2(a QSub), toM(an
S corporation). Because the transaction
does not qualify as a reorganization under
§ 368(a)(1)(F),Mwill not be treated just
asYwould have been treated if there had
been no reorganization. After the trans-
action,Yno longer ownsSub 2,andY’s
QSub election forSub 2does not carry
over toM. Therefore, the QSub election
ofSub 2terminates at the close of the day
on whichYtransfers its assets, including
100 percent of theSub 2stock toM, un-
lessMmakes a QSub election forSub 2,
effective immediately following the ter-
mination. See § 1.1361–5(a)(1)(iii) and
1.1361–5(c)(2).
IfMmakes a QSub election forSub
2, effective immediately following the
termination ofSub 2’s QSub election,
thenM’s deemed transfer of the assets of
Sub 2in exchange for the stock ofSub
2and the immediate liquidation ofSub
2as a consequence of the QSub election
are disregarded for federal income tax
purposes.See§§ 1.1361–4(b)(3)(ii) and
1361–5(b)(3),Example 9. There will be
no period between the termination ofSub
2’s QSub election and the deemed liqui-
dation ofSub 2during whichSub 2is a C
corporation.
IfMdoes not make a QSub election for
Sub 2, effective immediately following the
termination, then the transaction will be
treated as a transfer of the assets ofSub 2to
M,followedbyM’s contribution ofSub 2’s
assets toSub 2in exchange forSub 2stock.
See§ 1.1361–5(b)(3),Example 9.Sub 2
will not be eligible to be treated as a QSub
or an S corporation before the expiration of
the period describedin § 1361(b)(3)(D).
Situation 3
Section 301.7701–3(a) of the Procedure
and Administration Regulations provides
that a business entitythat is not classified
as a corporation under § 301.7701–2(b)(1),
(3), (4), (5), (6), (7), or (8) (an eligible en-
tity) can elect its classification for federal
tax purposes.
Section 301.7701–3(b) provides default
classifications for eligible entities. Under
§ 301.7701–3(b)(1), unless a domestic el-
igible entity elects otherwise, it is disre-
garded as an entity separate from its owner
if it has a single owner and is a partner-
August 16, 20041902004–33 I.R.B.

ship if it has more than one owner. Un-
der § 301.7701–3(b)(2)(i), unless a foreign
eligible entity elects otherwise, it is: (A)
a partnership if it has two or more own-
ers and at least one owner does not have
limited liability, (B) an association if all
owners have limited liability, or (C) disre-
garded as an entity separate from its owner
if it has a single owner that does not have
limited liability.
Section 301.7701–3(c)(1)(i) provides
that an eligible entity may elect to be
classified other than as provided under
§ 301.7701–3(b) by filing Form 8832,
Entity Classification Election,with the
applicable service center.
InSituation 3,Ztransfers toN100
percent of the membership interests in
LLC1, an eligible entity that has elected
to be classified as an association. Under
§ 301.7701–3(c)(1),LLC1elects its own
classification.LLC1’s classification con-
tinues untilLLC1elects otherwise or no
longer remains eligible for that classifica-
tion. Therefore, the sale or transfer of the
LLC1membership interests toNdoes not
affectLLC1’s election to be classified as
an association.
HOLDINGS
(1) An election to treat a wholly owned
subsidiary of an S corporation as a QSub,
as described in § 1361(b)(3)(B), does not
terminate solely because the S corporation
engages in a transaction that qualifies as a
reorganization under § 368(a)(1)(F).
(2) An election to treat a subsidiary
as a QSub terminates if the S corpora-
tion transfers 100 percent of the QSub
stock (whether by sale or reorganization
under § 368(a)(1)(A), (C), or (D)), to an-
other S corporation in a transaction that
does not qualify as a reorganization under
§368(a)(1)(F).
(3) An entity classification election
of an eligible entity, as described in
§ 301.7701–3(b), does not terminate solely
because the owner (whether by sale, reor-
ganization under §368(a)(1)(A), (C), (D),
or (F), or otherwise) transfers all of the
membership interest in the eligible entity
to another person.
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Charles J. Langley, Jr. of the Office
of Associate Chief Counsel (Passthroughs
& Special Industries). For further infor-
mation regarding this revenue ruling, con-
tact Mr. Langley at 202–622–3060 (not a
toll-free call).
Section 7701.—Definitions
26 CFR 301.7701–3: Classification of certain busi-
ness entities.
Does an election to treat a wholly owned sub-
sidiary of an S corporation as a qualified subchapter
S subsidiary (QSub) or an entity classification elec-
tion of a subsidiary terminate when the subsidiary’s
interest is transferred pursuant to certain section
368(a)(1) reorganizations or otherwise? See Rev.
Rul. 2004-85, page 189.
26 CFR 301.7701–1: Classification of or
ganizations
for federal tax purposes.
(Also: §§ 671, 677, 761, 1031, 1.761–2, 3
01.7701–1,
301.7701–3, 301.7701–4.)
Classification ofDelaware statu-
tory trust.This ruling explains how a
Delaware statutory trust described in the
ruling will be classified for federal tax pur-
poses and whether a taxpayer may acquire
an interest in the Delaware statutory trust
without recognition of gain or loss under
section 1031 of the Code. Rev. Ruls.
78–371 and 92–105 distinguished.
Rev. Rul. 2004–86
ISSUE(S)
(1) In the situation described below,
how is a Delaware statutory trust, de-
scribed in Del. Code Ann. title 12,
§§ 3801 – 3824, classified for federal
tax purposes?
(2) In the situation described below,
may a taxpayer exchange real property for
an interest in a Delaware statutory trust
without recognition of gain or loss under
§ 1031 of the Internal Revenue Code?
FACTS
On January 1, 2005,A, an individual,
borrows money fromBK, a bank, and signs
a 10-year note bearing adequate stated in-
terest, within the meaning of § 483. On
January 1, 2005,Auses the proceeds of
the loan to purchase Blackacre, rental real
property. The note is secured by Blackacre
and is nonrecourse toA.
Immediately followingA’s purchase of
Blackacre,Aenters into a net lease withZ
for a term of 10 years. Under the terms of
the lease,Zis to pay all taxes, assessments,
fees, or other charges imposed on Black-
acre by federal, state, or local authorities.
In addition,Zis to pay all insurance, main-
tenance, ordinary repairs, and utilities re-
lating to Blackacre.Zmay sublease Black-
acre.Z’s rent is a fixed amount that may
be adjusted by a formula described in the
lease agreement that is based upon a fixed
rate or an objective index, such as an es-
calator clause based upon the Consumer
Price Index, but adjustments to the rate or
index are not within the control of any of
the parties to the lease.Z’s rent is not con-
tingent onZ’s ability to lease the property
or onZ’s gross sales or net profits derived
from the property.
Also on January 1, 2005,AformsDST,
a Delaware statutory trust described in the
Delaware Statutory Trust Act, Del. Code
Ann. title 12, §§ 3801 – 3824, to hold
property for investment.Acontributes
Blackacre toDST. Upon contribution,DST
assumesA’s rights and obligations under
the note withBKand the lease withZ.In
accordance with the terms of the note, nei-
therDSTnor any of its beneficial owners
are personally liable toBKon the note,
whichcontinuestobesecuredbyBlack-
acre.
The trust agreement provides that inter-
ests inDSTare freely transferable. How-
ever,DSTinterests are not publicly traded
on an established securities market.DST
will terminate on the earlier of 10 years
from the date of its creation or the disposi-
tion of Blackacre, but will not terminate on
the bankruptcy, death, or incapacity of any
owner or on the transfer of any right, title,
or interest of the owners. The trust agree-
ment further provides that interests inDST
will be of a single class, representing un-
divided beneficial interests in the assets of
DST.
Under the trust agreement, the trustee
is authorized to establish a reasonable re-
serve for expenses associated with holding
Blackacre that may be payable out of trust
funds. The trustee is required to distrib-
ute all available cash less reserves quar-
terly to each beneficial owner in propor-
tion to their respective interests inDST.
The trustee is required to invest cash re-
ceived from Blackacre between each quar-
terly distribution and all cash held in re-
serve in short-term obligations of (or guar-
anteed by) the United States, or any agency
2004–33 I.R.B.191August 16, 2004

or instrumentality thereof, and in certifi-
cates of deposit of any bank or trust com-
pany having a minimum stated surplus and
capital. The trustee is permitted to invest
only in obligations maturing prior to the
next distribution date and is required to
hold such obligations until maturity. In ad-
dition to the right to a quarterly distribution
of cash, each beneficial owner has the right
to an in-kind distribution of its proportion-
ate share of trust property.
The trust agreement provides that the
trustee’s activities are limited to the col-
lection and distribution of income. The
trustee may not exchange Blackacre for
other property, purchase assets other than
the short-term investments described
above, or accept additional contributions
of assets (including money) toDST.The
trustee may not renegotiate the terms of
the debt used to acquire Blackacre and
may not renegotiate the lease withZor
enter into leases with tenants other than
Z, except in the case ofZ’s bankruptcy or
insolvency. In addition, the trustee may
make only minor non-structural modi-
fications to Blackacre, unless otherwise
required by law. The trust agreement fur-
ther provides that the trustee may engage
in ministerial activities to the extent re-
quired to maintain and operateDSTunder
local law.
On January 3, 2005,BandCexchange
Whiteacre and Greenacre, respectively,
for all ofA’s interests inDSTthrough a
qualified intermediary, within the meaning
of § 1.1031(k)–1(g).Adoes not engage
in a § 1031 exchange. Whiteacre and
Greenacre were held for investment and
are of like kind to Blackacre, within the
meaning of § 1031.
NeitherDSTnor its trustee enters into a
written agreement withA,B,orC, creating
an agency relationship. In dealings with
third parties, neitherDSTnor its trustee is
represented as an agent ofA,B,orC.
BKis not related toA,B,C,DST’s
trustee orZwithin the meaning of § 267(b)
or § 707(b).Zis not related toB,C,
orDST’s trustee within the meaning of
§ 267(b) or § 707(b).
LAW
Delaware law provides that a Delaware
statutory trust is an unincorporated associ-
ation recognized as an entity separate from
its owners. A Delaware statutory trust is
created by executing agoverning instru-
mentandfilinganexecuted certificate of
trust. Creditors of the beneficial owners of
a Delaware statutory trust may not assert
claims directly against the property in the
trust. A Delaware statutory trust may sue
or be sued, and property held in a Delaware
statutory trust is subject to attachment or
execution as if the trust were a corporation.
Beneficial owners of a Delaware statutory
trust are entitled to the same limitation on
personal liability because of actions of the
Delaware statutory trust that is extended
to stockholders of Delaware corporations.
A Delaware statutory trust may merge or
consolidate with or into one or more statu-
tory entities or other business entities.
Section 671 provides that, where the
grantor or another person is treated as the
owner of any portion of a trust (commonly
referred to as a “grantor trust”), there shall
be included in computing the taxable in-
come and credits of the grantor or the other
person those items of income, deductions,
and credits against tax of the trust which
are attributable to that portion of the trust
to the extent that the items would be taken
into account under chapter 1 in computing
taxable income or credits against the tax of
an individual.
Section 1.671–2(e)(1) of the Income
Tax Regulations provides that, for pur-
poses of subchapter J, a grantor includes
any person to the extent such person ei-
ther creates a trust or directly or indirectly
makes a gratuitous transfer of property to
atrust.
Under § 1.671–2(e)(3), the term
“grantor” includes any person who ac-
quires an interest in a trust from a grantor
of the trust if the interest acquired is an
interest in certain investment trusts de-
scribed in § 301.7701–4(c).
Under § 677(a), the grantor is treated as
the owner of any portion of a trust whose
income without the approval or consent of
any adverse party is, or, in the discretion of
the grantor or a nonadverse party, or both,
may be distributed, or held or accumulated
for future distribution, to the grantor or the
grantor’s spouse.
A person that is treated as the owner of
an undivided fractional interest of a trust
under subpart E of part I, subchapter J of
the Code (§§ 671 and following), is con-
sidered to own the trust assets attributable
to that undivided fractional interest of the
trust for federal income tax purposes.See
Rev. Rul. 88–103, 1988–2 C.B. 304; Rev.
Rul. 85–45, 1985–1 C.B. 183; and Rev.
Rul. 85–13, 1985–1 C.B. 184.See also
§ 1.1001–2(c),Example5.
Section 761(a) provides that the term
“partnership” includes a syndicate, group,
pool, joint venture, or other unincorpo-
rated organization through or by means of
which any business, financial operation,
or venture is carried on, and that is not
a corporation or a trust or estate. Un-
der regulations the Secretary may, at the
election of all the members of the unin-
corporated organization, exclude such or-
ganization from the application of all or
part of subchapter K, if the income of the
members of the organization may be ad-
equately determined without the compu-
tation of partnership taxable income and
the organization is availed of (1) for in-
vestment purposes only and not for the ac-
tive conduct of a business, (2) for the joint
production, extraction, or use of property,
but not for the purpose of selling services
or property produced or extracted, or (3)
by dealers in securities for a short period
for the purpose of underwriting, selling, or
distributing a particular issue of securities.
Section 1.761–2(a)(2) provides the re-
quirements that must be satisfied for par-
ticipants in the joint purchase, retention,
sale, or exchange of investment property
to elect to be excluded from the application
of the provisions of subchapter K. One of
these requirements is that the participants
own the property as coowners.
Section 1031(a)(1) provides that no
gain or loss is recognized on the exchange
of property held for productive use in a
trade or business or for investment if such
property is exchanged solely for property
of like kind that is to be held either for
productive use in a trade or business or for
investment.
Section 1031(a)(2) provides that
§ 1031(a) does not apply to any exchange
of stocks, bonds or notes, other securities
or evidences of indebtedness or interest,
interests in a partnership, or certificates
of trust or beneficial interests. It further
provides that an interest in a partnership
that has in effect a valid election under
§ 761(a) to be excluded from the applica-
tion of all of subchapter K shall be treated
as an interest in each of the assets of the
partnership and not as an interest in a part-
nership.
August 16, 20041922004–33 I.R.B.

Under § 301.7701–1(a)(1) of the Pro-
cedure and Administration Regulations,
whether an organization is an entity sep-
arate from its owners for federal tax pur-
posesisamatteroffederaltaxlawand
does not depend on whether the organiza-
tion is recognized as an entity under local
law.
Generally, when participants in a ven-
ture form a state law entity and avail them-
selves of the benefits of that entity for a
valid business purpose, such as investment
or profit, and not for tax avoidance, the
entity will be recognized for federal tax
purposes.See Moline Properties, Inc. v.
Comm’r, 319 U.S. 436 (1943);Zmuda v.
Comm’r, 731 F.2d 1417 (9
th
Cir. 1984);
Boca Investerings P’ship v. United States,
314 F.3d 625 (D.C. Cir. 2003);Saba
P’ship v. Comm’r, 273 F.3d 1135 (D.C.
Cir. 2001);ASA Investerings P’ship v.
Comm’r, 201 F.3d 505 (D.C. Cir. 2000);
Markosian v. Comm’r,73T.C.1235
(1980).
Section 301.7701–2(a) defines the term
“business entity” asany entity recognized
for federal tax purposes (including an en-
tity with a single owner that may be disre-
garded as an entity separate from its owner
under § 301.7701–3) that is not properly
classified as a trust under § 301.7701–4 or
otherwise subject to special treatment un-
der the Code. A business entity with two
or more owners is classified for federal tax
purposes as either a corporation or a part-
nership. A business entity with only one
owner is classified as a corporation or is
disregarded.
Section 301.7701–3(a) provides that
an eligible entity can elect its classifi-
cation for federal tax purposes. Under
§ 301.7701–3(b)(1), unless the entity
elects otherwise, a domestic eligible entity
is a partnership if it has two or more own-
ers or is disregarded as an entity separate
from its owner if it has a single owner.
Section 301.7701–4(a) provides that
the term “trust” refers to an arrangement
created either by will or by an inter vivos
declaration whereby trustees take title to
property for the purpose of protecting and
conserving it for the beneficiaries. Usu-
ally the beneficiaries of a trust do no more
than accept the benefits thereof and are not
voluntary planners or creators of the trust
arrangement. However, the beneficiaries
of a trust may be the persons who create
it, and it will be recognized as a trust if it
was created for the purpose of protecting
and conserving the trust property for ben-
eficiaries who stand in the same relation
to the trust as they would if the trust had
been created by others for them.
Section 301.7701–4(b) provides that
there are other arrangements known as
trusts because the legal title to property
is conveyed to trustees for the benefit of
beneficiaries, but that are not classified as
trusts for federal tax purposes because they
are not simply arrangements to protect or
conserve the property for the beneficia-
ries. These trusts, which are often known
as business or commercial trusts, generally
are created by the beneficiaries simply as a
device to carry on a profit-making business
that normally would have been carried on
through business organizations that are
classified as corporations or partnerships.
Section 301.7701–4(c)(1) provides that
an “investment” trust will not be classified
as a trust if there is a power under the trust
agreement to vary the investment of the
certificate holders.See Comm’r v. North
American Bond Trust, 122 F.2d 545 (2d
Cir. 1941),cert. denied,314U.S.701
(1942). An investment trust with a single
class of ownership interests, representing
undivided beneficial interests in the assets
of the trust, will be classified as a trust if
there is no power to vary the investment of
the certificate holders.
A power to vary the investment of the
certificate holders exists where there is a
managerial power, under the trust instru-
ment, that enables a trust to take advantage
of variations in the market to improve the
investment of the investors.See Comm’r
v. North American Bond Trust, 122 F.2d at
546.
Rev. Rul. 75–192, 1975–1 C.B. 384,
discusses the situation where a provision in
the trust agreement requires the trustee to
invest cash on hand between the quarterly
distribution dates. The trustee is required
to invest the money in short-term obli-
gations of (or guaranteed by) the United
States, or any agency or instrumentality
thereof, and in certificates of deposit of any
bank or trust company having a minimum
stated surplus and capital. The trustee is
permitted to invest only in obligations ma-
turing prior to the next distribution date
and is required to hold such obligations un-
til maturity. Rev. Rul. 75–192 concludes
that, because the restrictions on the types
of permitted investments limit the trustee
to a fixed return similar to that earned on
a bank account and eliminate any oppor-
tunity to profit from market fluctuations,
the power to invest in the specified kinds
of short-term investments is not a power
to vary the trust’s investment.
Rev. Rul. 78–371, 1978–2 C.B. 344,
concludes that a trust established by the
heirs of a number of contiguous parcels of
real estate is an association taxable as a
corporation for federal tax purposes where
the trustees have the power to purchase and
sell contiguous or adjacent real estate, ac-
cept or retain contributions of contiguous
or adjacent real estate, raze or erect any
building or structure, make any improve-
ments to the land originally contributed,
borrow money, and mortgage or lease the
property.CompareRev. Rul. 79–77,
1979–1 C.B. 448 (concluding that a trust
formed by three parties to hold a single
parcel of real estate is classified as a trust
for federal income tax purposes when the
trustee has limited powers that do not evi-
dence an intent to carry on a profit making
business).
Rev. Rul. 92–105, 1992–2 C.B. 204,
addresses the transfer of a taxpayer’s in-
terest in an Illinois land trust under § 1031.
Under the facts of the ruling, a single tax-
payer created an Illinois land trust and
named a domestic corporation as trustee.
Under the deed of trust, the taxpayer trans-
ferred legal and equitable title to real prop-
erty to the trust, subject to the provisions
of an accompanying land trust agreement.
The land trust agreement provided that the
taxpayer retained exclusive control of the
management, operation, renting, and sell-
ing of the real property, together with an
exclusive right to the earnings and pro-
ceeds from the real property. Under the
agreement, the taxpayer was required to
file all tax returns, pay all taxes, and sat-
isfy any other liabilities with respect to the
real property. Rev. Rul 92–105 concludes
that, because the trustee’s only responsi-
bility was to hold and transfer title at the
direction of the taxpayer, a trust, as de-
fined in § 301.7701–4(a), was not estab-
lished. Moreover, there were no other ar-
rangements between the taxpayer and the
trustee (or between the taxpayer and any
other person) that would cause the overall
arrangement to be classified as a partner-
ship(oranyothertypeofentity).Instead,
the trustee was a mere agent for the holding
and transfer of title to real property, and the
2004–33 I.R.B.193August 16, 2004

taxpayer retained direct ownership of the
real property for federal income tax pur-
poses.
ANALYSIS
Under Delaware law,DSTis an entity
that is recognized as separate from its own-
ers. Creditors of the beneficial owners of
DSTmay not assert claims directly against
Blackacre.DSTmay sue or be sued, and
the property ofDSTis subject to attach-
ment and execution as if it were a corpo-
ration. The beneficial owners ofDSTare
entitled to the same limitation on personal
liability because of actions ofDSTthat is
extended to stockholders of Delaware cor-
porations.DSTmay merge or consolidate
with or into one or more statutory entities
or other business entities.DSTis formed
for investment purposes. Thus,DSTis an
entity for federal tax purposes.
WhetherDSTor its trustee is an agent
ofDST’s beneficial owners depends upon
the arrangement between the parties. The
beneficiaries ofDSTdo not enter into an
agency agreement withDSTor its trustee.
Further, neitherDSTnor its trustee acts as
an agent forA,B,orCin dealings with
third parties. Thus, neitherDSTnor its
trustee is the agent ofDST’s beneficial
owners.Cf.Comm’rv.Bollinger,485
U.S. 340 (1988).
This situation is distinguishable from
Rev. Rul. 92–105. First, in Rev. Rul.
92–105, the beneficiary retained the direct
obligation to pay liabilities and taxes re-
lating to the property.DST,incontrast,
assumedA’s obligations on the lease with
Zand on the loan withBK,andDelaware
law provides the beneficial owners ofDST
with the same limitation on personal liabil-
ity extended to shareholders of Delaware
corporations. Second, unlikeA, the bene-
ficiary in Rev. Rul. 92–105 retained the
right to manage and control the trust prop-
erty.
Issue 1. Classification of Delaware
Statutory Trust
BecauseDSTis an entity separate from
its owner,DSTis either a trust or a business
entity for federal tax purposes. To deter-
mine whetherDSTisatrustorabusiness
entity for federal tax purposes, it is neces-
sary, under § 301.7701–4(c)(1), to deter-
mine whether there is a power under the
trust agreement to vary the investment of
the certificate holders.
Prior to, but on the same date as, the
transfer of Blackacre toDST,Aentered
into a 10-year nonrecourse loan secured by
Blackacre.Aalso entered into the 10-year
net lease agreement withZ.A’s rights and
obligations under the loan and lease were
assumed byDST. Because the duration of
DSTis 10 years (unless Blackacre is dis-
posed of prior to that time), the financing
and leasing arrangements related to Black-
acre that were made prior to the incep-
tion ofDSTare fixed for the entire life
ofDST. Further, the trustee may only in-
vest in short-term obligations that mature
prior to the next distribution date and is re-
quired to hold these obligations until matu-
rity. Because the trust agreement requires
that any cash from Blackacre, and any cash
earned on short-term obligations held by
DSTbetween distribution dates, be dis-
tributed quarterly,and because the disposi-
tion of Blackacre results in the termination
ofDST, no reinvestment of such monies is
possible.
The trust agreement provides that the
trustee’s activities are limited to the col-
lection and distribution of income. The
trustee may not exchange Blackacre for
other property, purchase assets other than
the short-term investments described
above, or accept additional contributions
of assets (including money) toDST.The
trustee may not renegotiate the terms of
the debt used to acquire Blackacre and
may not renegotiate the lease withZor
enter into leases with tenants other than
Z, except in the case ofZ’s bankruptcy or
insolvency. In addition, the trustee may
make only minor non-structural modi-
fications to Blackacre, unless otherwise
required by law.
This situation is distinguishable from
Rev. Rul. 78–371, becauseDST’s trustee
has none of the powers described in Rev.
Rul. 78–371, which evidence an intent to
carry on a profit making business. Because
all of the interests inDSTare of a sin-
gle class representing undivided beneficial
interests in the assets ofDSTandDST’s
trustee has no power to vary the investment
of the certificate holders to benefit from
variations in the market,DSTis an invest-
ment trust that will be classified as a trust
under § 301.7701–4(c)(1).
Issue 2. Exchange of Real Property for
Interests under § 1031
BandCare treated as grantors of the
trust under § 1.671–2(e)(3) when they ac-
quire their interests in the trust fromA.Be-
cause they have the right to distributions
of all trust income attributable to their un-
divided fractional interests in the trust,B
andCare each treated, by reason of § 677,
as the owner of analiquotportion of the
trust and all income, deductions, and cred-
its attributable to that portion are includi-
ble byBandCunder § 671 in computing
their taxable income. Because the owner
of an undivided fractional interest of a trust
is considered to own the trust assets attrib-
utable to that interest for federal income
tax purposes,BandCare each considered
to own an undivided fractional interest in
Blackacre for federal income tax purposes.
SeeRev. Rul. 85–13.
Accordingly, the exchange of real prop-
erty byBandCfor an interest inDST
through a qualified intermediary is the ex-
change of real property for an interest in
Blackacre, and not the exchange of real
property for a certificate of trust or bene-
ficial interest under § 1031(a)(2)(E). Be-
cause Whiteacre and Greenacre are of like
kind to Blackacre, and provided the other
requirements of § 1031 are satisfied, the
exchange of real property for an interest
inDSTbyBandCwill qualify for non-
recognition of gain or loss under § 1031.
Moreover, becauseDSTis a grantor trust,
the outcome to the parties will remain the
same, even ifAtransfers interests in Black-
acre directly toBandC,andBandCim-
mediately formDSTby contributing their
interests in Blackacre.
Under the facts of this case, ifDST’s
trustee has additional powers under the
trust agreement such as the power to do
one or more of the following: (i) dis-
pose of Blackacre and acquire new prop-
erty; (ii) renegotiate the lease withZor
enter into leases with tenants other than
Z; (iii) renegotiate or refinance the obliga-
tion used to purchase Blackacre; (iv) in-
vest cash received to profit from market
fluctuations; or (v) make more than minor
non-structural modifications to Blackacre
not required by law,DSTwill be a busi-
ness entity which, if it has two or more
owners, will be classified as a partner-
ship for federal tax purposes, unless it is
treated as a corporation under § 7704 or
August 16, 20041942004–33 I.R.B.

elects to be classified as a corporation un-
der § 301.7701–3. In addition, because the
assets ofDSTwill not be owned by the
beneficiaries as coowners under state law,
DSTwill not be able to elect to be excluded
from the application of subchapter K.See
§ 1.761–2(a)(2)(i).
HOLDINGS
(1) The Delaware statutory trust de-
scribed above is an investment trust, under
§ 301.7701–4(c), that will be classified as
a trust for federal tax purposes.
(2) A taxpayer may exchange real prop-
erty for an interest in the Delaware statu-
tory trust described above without recog-
nition of gain or loss under § 1031, if the
other requirements of § 1031 are satisfied.
EFFECT ON OTHER REVENUE
RULINGS
Rev. Rul. 78–371 and Rev. Rul. 92–
105 are distinguished.
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Christopher L. Trump of the Office
of Associate Chief Counsel (Passthroughs
and Special Industries). For further in-
formation regarding this revenue ruling,
contact Christopher L. Trump at (202)
622–3070 (not a toll-free call).
2004–33 I.R.B.195August 16, 2004

Part III. Administrative, Procedural, and Miscellaneous
Health Savings
Accounts—Additional Qs&As
Notice 2004–50
PURPOSE
This notice provides guidance on
Health Savings Accounts.
BACKGROUND
Section 1201 of the Medicare Prescrip-
tion Drug, Improvement, and Moderniza-
tion Act of 2003, Pub. L. No. 108–173,
added section 223 to the Internal Revenue
Code to permit eligible individuals to es-
tablish Health Savings Accounts (HSAs)
for taxable years beginning after Decem-
ber 31, 2003. Notice 2004–2, 2004–2
I.R.B. 269, provides certain basic infor-
mationonHSAsinquestionandanswer
format. This notice addresses additional
questions relating to HSAs.
1
OUTLINE TABLE OF CONTENTS
The following is an outline of the ques-
tions and answers covered in this notice:
I.Eligible Individuals
Q&A 1. Choice between low-deductible health plan and HDHP
Q&A 2. Eligible for Medicare and contributions to HSA
Q&A 3. Eligible for Medicare and catch-up contributions
Q&A 4. Government retiree and enrollment in Medicare Part B
Q&A 5. Eligible for medical benefits from VA
Q&A 6. Coverage under TRICARE
Q&A 7. HDHP and coverage for one or more specific diseases or illnesses
Q&A 8. Permitted insurance and insurance contracts
Q&A 9. HDHP and discount cards
Q&A 10. Employee Assistance Programs (EAPs), disease management programs and wellness programs
Q&A 11. Payroll period other than a calendar month
II. High Deductible Health Plans (HDHPs)
Q&A 12. Family HDHP coverage defined
Q&A 13. State high-risk pools and HDHPs
Q&A 14. Lifetime limit on benefits under HDHPs
Q&A 15. Annual and lifetime limiton specific benefits under HDHPs
Q&A 16. Payments in excess of usual, customary and reasonable (UCR) amounts
Q&A 17. HDHPs without express limit on out-of-pocket expenses
Q&A 18. HDHPs and pre-certification requirements
Q&A 19. HDHPs and increased coinsurance payments
Q&A 20. Cumulative embedded deductibles and out-of-pocket maximum
Q&A 21. Amounts incurred before satisfying deductible and out-of-pocket maximum
Q&A 22. Deductible credit for short year
Q&A 23. Deductible credit after changes in category of coverage
Q&A 24. HDHP deductible and coverage period longer than 12 months
Q&A 25. HDHPs and discounted prices
III. Preventive Care
Q&A 26. Preventive care and treatment of related conditions
Q&A 27. Drugs or medications as preventive care
IV. Contributions
Q&A 28. Contributions on behalf of eligible individuals
Q&A 29. State government contributions and high-risk pools
Q&A 30. Calculating maximum HSA contributions for family coverage
Q&A 31. Contribution rules for family HDHP coverage and ineligible individuals
Q&A 32. Dividing HSA contributions between spouses
Q&A 33. Contribution limit if covered by both HDHP and post-deductible HRA
Q&A 34. Computation of net income on HSA excess contributions
Q&A 35. Withdrawal of nonexcess HSA contributions
V. Distributions
Q&A 36. Distributions for spouse or dependents covered under non-HDHP
Q&A 37. Mistaken HSA distributions
Q&A 38. Use of distributions where both spouses have HSAs
Q&A 39. Deferred distributions for expenses incurred in prior years
1
Specific issues on HSAs are also discussed in Rev. Rul. 2004–45, 2004–22 I.R.B. 971; Rev. Rul. 2004–38, 2004–15 I.R.B. 717; Rev. Proc. 2004–22, 2004–15 I.R.B. 727; Notice 2004–43,
2004–27 I.R.B. 10; Notice 2004–25, 2004–15 I.R.B. 727; Notice 2004–23, 2004–15 I.R.B. 725.
August 16, 20041962004–33 I.R.B.

Q&A 40. Distributions for qualifiedlong-term care insurance premiums
Q&A 41. Deduction limits under section 213(d)(10)
Q&A 42. Distributions for long-term care services
Q&A 43. Distributions for retiree’s self-insured retiree coverage
Q&A 44. Distributions to pay health insurance premiums by individuals with end stage renal disease (ESRD)
or disability
Q&A 45. Distributions to pay Medicare premiums
VI. Comparability
Q&A 46. Matching employees’ HSA contributions
Q&A 47. Match
ing contributions under cafeteria plans
Q&A 48. Comparability and health assessments, disease management or wellness programs
Q&A 49. Comparability and health assessments, disease management or wellness programs under a cafeteria plan
Q&A 50. Comp
arability and catch-up contributions
Q&A 51. Comparability and full-time employees working less than 12 months
Q&A 52. Testing period for making comparable contributions
Q&A 53. Com
parability and eligible individuals’ coverage under employer’s HDHP
Q&A 54. Comparability and after-tax employee contributions
VII. Rollover
s
Q&A 55. Frequency of rollovers
Q&A 56. Trustee-to-trustee transfers
VIII. Cafeteria Plans and HSAs
Q&A 57. FSA requirements and HSAs
Q&A 58. S
ection 125 change in status rules
Q&A 59. HSA offered as new benefit under cafeteria plan
Q&A 60. Accelerated HSA contributions by employer
Q&A 61.
Negative elections for HSAs
IX. Account Administration
Q&A 62
. Model forms for HSAs
Q&A 63. No joint HSA for husband and wife
Q&A 64. Multiple HSAs
Q&A 6
5. Permissible investments for HSAs
Q&A 66. Commingling HSA funds
Q&A 67. Prohibited transactions and account beneficiaries
Q&A 6
8. Prohibited transactions and trustees or custodians
Q&A 69. Administration fees withdrawn from an HSA
Q&A 70. Administration fees and contribution limits
Q&A
71. Administration fees paid directly
X. Trustees and Custodians
Q&
A 72. Insurance company qualifying as HSA trustee or custodian
Q&A 73. Limit on annual HSA contributions acceptable by trustee or custodian
Q&A 74. Tracking maximum annual contribution limit for a particular account beneficiary
Q
&A 75. Tracking account beneficiary’s age
Q&A 76. Return of mistaken distributions
Q&A 77. No restrictions on rollovers from HSA
Q
&A 78. Acceptance of rollover contributions
Q&A 79. No restrictions on HSA distributions for qualified medical expenses
Q&A 80. Restrictions on frequency or amount of distributions
XI. Other Issues
Q&A 81. Determining eligibility and contribution limits by employer
Q&A 82. Recoupment of HSA contributions by employer
Q&A 83. HSAs and section 105(h)
Q&A 84. HSA contributions and SECA tax
Q&A 85. HSA contributions and the EIC
Q&A 86. HDHP and cost-of-living adjustments
Q&A 87. HSAs andbona-fideresidents of Commonwealth of Puerto Rico, American Samoa, the U.S. Virgin
Islands, Guam, the Commonwealth of the Northern Mariana Islands
Q&A 88. C corporation contributions to HSAs of shareholders
2004–33 I.R.B.197August 16, 2004

QUESTIONS AND ANSWERS
I. Eligible individuals
Q–1. If an employer offers an em-
ployee a choice between a low-deductible
health plan and a high-deductible health
plan (HDHP), and the employee selects
coverage only under the HDHP, is the em-
ployee an eligible individual under section
223(c)(1)?
A–1. Yes, if the employee is other-
wise an eligible individual. To determine if
an individual is an eligible individual, the
actual health coverage selected by the in-
dividual is controlling. Thus, it does not
matter that the individual could have cho-
sen, but did not choose, a low-deductible
health plan or other coverage that would
have disqualified the individual from con-
tributingtoanHSA.
Q–2. May an otherwise eligible indi-
vidual who is eligiblefor Medicare, but not
enrolled in Medicare Part A or Part B, con-
tributetoanHSA?
A–2. Yes. Section 223(b)(7) states that
an individual ceases to be an eligible indi-
vidual starting with the month he or she is
entitled to benefits under Medicare. Under
this provision, mere eligibility for Medi-
care does not make an individual ineligi-
ble to contribute to an HSA. Rather, the
term “entitled to benefits under” Medicare
means both eligibility and enrollment in
Medicare. Thus, an otherwise eligible in-
dividual under section 223(c)(1) who is not
actually enrolled in Medicare Part A or
Part B may contribute to an HSA until the
month that individual is enrolled in Medi-
care.
Example (1). Y, age 66, is covered under her em-
ployer’s HDHP. Although Y is eligible for Medicare,
Y is not actually entitled to Medicare because she did
not apply for benefits under Medicare (i.e., enroll in
Medicare Part A or Part B). If Y is otherwise an eligi-
ble individual under section 223(c)(1), she may con-
tribute to an HSA.
Example (2). In August 2004, X attains age 65
and applies for and begins receiving Social Security
benefits. X is automatically enrolled in Medicare. As
of August 1, 2004, X is no longer an eligible individ-
ual and may not contribute to an HSA.
Q–3. May an otherwise eligible indi-
vidual under section 223(c)(1) who is age
65 or older and thus eligible for Medicare,
but is not enrolled in Medicare Part A or
Part B, make the additional catch-up con-
tribution under section 223(b)(3) for per-
sons age 55 or older?
A–3. Yes. See Notice 2004–2, Q&A
14, on catch-up contributions.
Q–4. Is a government retiree who is
enrolled in Medicare Part B (but not Part
A) an eligible individual under section
223(c)(1)?
A–4. No. Under section 223(b)(7),
an individual who is enrolled in Medicare
may not contribute to an HSA.
Q–5. If an otherwise eligible individ-
ual under section 223(c)(1) is eligible for
medical benefits through the Department
of Veterans Affairs (VA), may he or she
contribute to an HSA?
A–5. An otherwise eligible individ-
ual who is eligible to receive VA medi-
cal benefits, but who has not actually re-
ceived such benefits during the preceding
three months, is an eligible individual un-
der section 223(c)(1). An individual is not
eligible to make HSA contributions for any
month, however, if the individual has re-
ceived medical benefits from the VA at any
time during the previous three months.
Q–6. May an otherwise eligible indi-
vidual who is covered by an HDHP and
also receives health benefits under TRI-
CARE (the health care program for active
duty and retired members of the uniformed
services, their families and survivors) con-
tributetoanHSA?
A–6. No. Coverage options under TRI-
CARE do not meet the minimum annual
deductible requirements for an HDHP un-
der section 223(c)(2). Thus, an individual
covered under TRICARE is not an eligi-
ble individual and may not contribute to an
HSA.
Q–7. May an otherwise eligible indi-
vidual who is covered by both an HDHP
and also by insurance contracts for one or
more specific diseases or illnesses, such
as cancer, diabetes, asthma or congestive
heart failure, contribute to an HSA if the
insurance provides benefits before the de-
ductible of the HDHP is satisfied?
A–7. Yes. Section 223(c)(1)(B)(i)
provides that an eligible individual cov-
ered under an HDHP may also be cov-
ered “for any benefit provided by permit-
ted insurance.” Section 223(c)(3)(B) pro-
vides that the term “permitted insurance”
includes “insurance for a specified disease
or illness.” Therefore, an eligible individ-
ual may be covered by an HDHP and also
by permitted insurance for one or more
specific diseases, such as cancer, diabetes,
asthma or congestive heart failure, as long
as the principal health coverage is pro-
vided by the HDHP.
Q–8. Must coverage for “permitted in-
surance” described in section 223(c)(3) (li-
abilities incurred under workers’ compen-
sation laws, tort liabilities, liabilities relat-
ing to ownership or use of property, in-
surance for a specified disease or illness,
and insurance paying a fixed amount per
day (or other period) of hospitalization), be
provided under insurance contracts?
A–8. Yes. Benefits for “permitted
insurance” under section 223(c)(3) must
generally be provided through insurance
contracts and not on a self-insured basis.
However, where benefits (such as work-
ers’ compensation benefits) are provided
in satisfaction of a statutory requirement
and any resulting benefits for medical care
are secondary or incidental to other bene-
fits, the benefits will qualify as “permitted
insurance” even if self-insured.
Q–9. May an individual who is cov-
ered by an HDHP and also has a discount
card that enables the user to obtain dis-
counts for health care services or products,
contribute to an HSA?
A–9. Yes. Discount cards that entitle
holders to obtain discounts for health care
services or products at managed care mar-
ket rates will not disqualify an individual
from being an eligible individual for HSA
purposes if the individual is required to pay
the costs of the health care (taking into ac-
count the discount) until the deductible of
the HDHP is satisfied.
Example. An employer provides its employees
with a pharmacy discount card. For a fixed annual
fee (paid by the employer), each employee receives a
card that entitles the holder to choose any participat-
ing pharmacy. During the one-year life of the card,
the card holder receives discounts of 15 percent to 50
percent off the usual and customary fees charged by
the providers, with no dollar cap on the amount of
discounts received during the year. The cardholder is
responsible for paying the costs of any drugs (taking
into account the discount) until the deductible of any
other health plan covering the individual is satisfied.
An employee who is otherwise eligible for an HSA
will not become ineligible solely as a result of having
this benefit.
Q–10. Does coverage under an Em-
ployee Assistance Program (EAP), dis-
ease management program, or wellness
program make an individual ineligible to
contribute to an HSA?
A–10. An individual will not fail to
be an eligible individual under section
223(c)(1)(A) solely because the individual
is covered under an EAP, disease man-
August 16, 20041982004–33 I.R.B.

agement program or wellness program
if the program does not provide signifi-
cant benefits in the nature of medical care
or treatment, and therefore, is not con-
sidered a “health plan” for purposes of
section 223(c)(1). To determine whether
a program provides significant benefits in
the nature of medical care or treatment,
screening and other preventive care ser-
vices as described in Notice 2004–23 will
be disregarded. See also Q&A 48 on in-
centives for employeeswho participate in
these programs.
Example (1). An employer offers a program that
provides employees with benefits under an EAP, re-
gardless of enrollment in a health plan. The EAP is
specifically designed to assist the employer in im-
proving productivity by helping employees identify
and resolve personal and work concerns that affect
job performance and the work environment. The ben-
efits consist primarily of free or low-cost confiden-
tial short-term counseling to identify an employee’s
problem that may affect job performance and, when
appropriate, referrals to an outside organization, fa-
cility or program to assist the employee in resolv-
ing the problem. The issues addressed during the
short-term counseling include, but are not limited to,
substance abuse, alcoholism, mental health or emo-
tional disorders, financial or legal difficulties, and de-
pendent care needs. This EAP is not a “health plan”
under section 223(c)(1) because it does not provide
significant benefits in the nature of medical care or
treatment.
Example (2). An employer maintains a disease
management program that identifies employees and
their family members who have, or are at risk for,
certain chronic conditions. The disease management
program provides evidence-based information, dis-
ease specific support, case monitoring and coordina-
tion of the care and treatment provided by a health
plan. Typical interventions include monitoring lab-
oratory or other test results, telephone contacts or
web-based reminders of health care schedules, and
providing information to minimize health risks. This
disease management program is not a “health plan”
under section 223(c)(1) because it does not provide
significant benefits in the nature of medical care or
treatment.
Example (3). An employer offers a wellness pro-
gram for all employees regardless of participation
in a health plan. The wellness program provides a
wide-range of education and fitness services designed
to improve the overall health of the employees and
prevent illness. Typical services include education,
fitness, sports, and recreation activities, stress man-
agement and health screenings. Any costs charged to
the individual for participating in the services are sep-
arate from the individual’s coverage under the health
plan. This wellness program is not a “health plan”
under section 223(c)(1) because it does not provide
significant benefits in the nature of medical care or
treatment.
Q–11. If an employee begins HDHP
coverage mid-month, when does the em-
ployee become an eligible individual?
(For example, coverage under the HDHP
begins on the first day of a biweekly pay-
roll period.)
A–11. Under section 223(b)(2), an el-
igible individual must have HDHP cover-
age as of the first day of the month. An
individual with employer-provided HDHP
coverage on a payroll-by-payroll basis be-
comes an eligible individual on the first
dayofthemonthonorfollowingthefirst
day of the pay period when HDHP cover-
age begins.
Example. An employee begins HDHP coverage
on the first day of a pay period, which is August
16, 2004, and continues to be covered by the HDHP
throughout 2004. For purposes of contributing to an
HSA, the employee becomes an eligible individual on
September 1, 2004.
II. High Deductible Health Plans
(HDHPs)
Q–12. What is family HDHP coverage
under section 223?
A–12. Under section 223(c)(4), the
term “family coverage” means any cover-
age other than self-only coverage. Self-
only coverage is a health plan covering
only one individual; self-only HDHP cov-
erage is an HDHP covering only one indi-
vidual if that individual is an eligible indi-
vidual. Family HDHP coverage is a health
plan covering one eligible individual and
at least one other individual (whether or
not the other individual is an eligible in-
dividual).
Example. An individual, who is an eligible indi-
vidual, and his dependent child are covered under an
“employee plus one” HDHP offered by the individ-
ual’s employer. The coverage is family HDHP cov-
erage under section 223(c)(4).
Q–13. Can a state high-risk health in-
surance plan (high-risk pool) qualify as an
HDHP?
A–13. Yes. If the state’s high-risk pool
does not pay benefits below the minimum
annual deductible of an HDHP as set forth
in section 223(c)(2)(A), the plan can qual-
ify as an HDHP.
Q–14. May an HDHP impose a life-
time limit on benefits?
A–14. Yes. An HDHP may impose
a reasonable lifetime limit on benefits
provided under the plan. In such cases,
amounts paid by the covered individ-
ual above the lifetime limit will not be
treated as out-of-pocket expenses in de-
termining the annual out-of-pocket max-
imum. However, a lifetime limit on
benefits designed to circumvent the max-
imum annual out-of-pocket amount in
section 223(c)(2)(A) is not reasonable.
Example. A health plan has an annual deductible
that satisfies the minimum annual deductible under
section 223(c)(2)(A)(i) for self-only coverage and for
family coverage. After satisfying the deductible, the
plan pays 100 percent of covered expenses, up to a
lifetime limit of $1 million. The lifetime limit of $1
million is reasonable and the health plan is not dis-
qualified from being an HDHP because of the life-
time limit on benefits.
Q–15. If a plan imposes an annual
or lifetime limit on specific benefits, are
amounts paid by covered individuals after
satisfying the deductible treated as out-of-
pocket expenses under section 223?
A–15. The out-of-pocket maximum in
section 223(c)(2)(A) applies only to cov-
ered benefits. Plans may be designed with
reasonable benefit restrictions limiting the
plan’s covered benefits. A restriction or
exclusion on benefits is reasonable only if
significant other benefits remain available
under the plan in addition to the benefits
subject to the restriction or exclusion.
Example (1). In 2004, a self-only health plan
with a $1,000 deductible includes a $1 million life-
time limit on covered benefits. The plan provides no
benefits for experimental treatments, mental health,
or chiropractic care visits. Although the plan pro-
vides benefits for substance abuse treatment, it lim-
its payments to 26 treatments per year, after the de-
ductible is satisfied. Although the plan provides ben-
efits for fertility treatments, it limits lifetime reim-
bursements to $10,000, after the deductible is satis-
fied. Other than these limits on covered benefits, the
plan pays 80 percent of major medical expenses in-
curred after satisfying the deductible. When the 20
percent coinsurance paid by the covered individuals
reaches $4,000, the planpays 100 percent. Under
these facts, the plan is an HDHP and no expenses
incurred by a covered individual other than the de-
ductible and the 20 percent coinsurance are treated as
out-of-pocket expenses under section 223(c)(2)(A).
Example (2). In 2004, a self-only health plan
with a $1,000 deductible imposes a lifetime limit
on reimbursements for covered benefits of $1 mil-
lion. While the plan pays 100 percent of expenses
incurred for covered benefits after satisfying the
deductible, the plan imposes a $10,000 annual limit
on benefits for any single condition. The $10,000 an-
nual limit under these facts is not reasonable because
significant other benefits do not remain available
under the plan. Under these facts, any expenses
incurred by a covered individual after satisfying
the deductible are treated as out-of-pocket expenses
under section 223(c)(2)(A).
Q–16. If a plan limits benefits to
usual, customary and reasonable (UCR)
amounts, are amounts paid by covered
individuals in excess of UCR included in
determining the maximum out-of-pocket
expenses paid?
2004–33 I.R.B.199August 16, 2004

A–16. Restricting benefits to UCR is
a reasonable restrictiononbenefits.Thus,
amounts paid by covered individuals in ex-
cess of UCR that are not paid by an HDHP
are not included in determining maximum
out-of-pocket expenses.
Q–17. Can a plan with no express limit
on out-of-pocket expenses qualify as an
HDHP?
A–17. A health plan without an ex-
press limit on out-of-pocket expenses is
generally not an HDHP unless such limit
is not necessary to prevent exceeding the
out-of-pocket maximum.
Example (1). A plan provides self-only cover-
age with a $2,000 deductible and pays 100 percent of
covered benefits above the deductible. Because the
plan pays 100 percent of covered benefits after the
deductible is satisfied, the maximum out-of-pocket
expenses paid by a covered individual would never
exceed the deductible. Thus, the plan does not re-
quire a specific limit on out-of-pocket expenses to in-
sure that the covered individual will not be subject to
out-of-pocket expenses in excess of the maximum set
forth in section 223(c)(2)(A).
Example (2). A plan provides self-only coverage
with a $2,000 deductible. The plan imposes a life-
time limit on reimbursements for covered benefits of
$1 million. For expenses for covered benefits in-
curred above the deductible, the plan reimburses 80
percent of the UCR costs. The plan includes no ex-
press limit on out-of-pocket expenses. This plan does
not qualify as a HDHP because it does not have a limit
on out-of-pocket expenses.
Example (3). The same facts as Example 2, ex-
cept that after the 20 percent coinsurance paid by the
covered individual reaches $3,000, the plan pays 100
percent of the UCR costs until the $1 million limit is
reached. For the purpose ofdetermining the individ-
ual’s out-of-pocket expenses, the plan only takes into
account the 20 percent of UCR paid by the individ-
ual. This plan satisfies the out-of-pocket limit.
Q–18. A health plan which otherwise
qualifies as an HDHP imposes a flat dollar
penalty on a participant who fails to obtain
pre-certification for a specific provider or
for certain medical procedures. Is the
penalty paid by the covered individual in-
cluded in determining the maximum out-
of-pocket expenses paid?
A–18. No. The penalty is not an out-
of-pocket expense and, therefore, does not
count toward the expense limits in section
223(c)(2)(A).
Q–19. A health plan which other-
wise qualifies as an HDHP generally
requires a 10 percent coinsurance pay-
ment after a covered individual satisfies
the deductible. However, if an individual
fails to get pre-certification for a specific
provider, the plan requires a 20 percent
coinsurance payment. Is the increased
coinsurance amount included in determin-
ing the maximum out-of-pocket expenses
paid?
A–19. No. Under the facts set forth,
only the generally applicable 10 percent
coinsurance payment is included in com-
puting the maximum out-of-pocket ex-
penses paid. The result is the same if the
plan imposes a higher coinsurance amount
for an out-of-network provider. See also
Notice 2004–2, Q&A 4.
Q–20. Are cumulative embedded de-
ductibles under family coverage subject to
the out-of-pocket maximum?
A–20. Yes. An HDHP generally must
limit the out-of-pocket expenses paid by
the covered individuals, either by design or
by its express terms.
Example (1). In 2004, a plan which other-
wise qualifies as an HDHP provides family cov-
erage with a $2,000 deductible for each family
member. The plan pays 100 percent of covered
benefits for each family member after that fam-
ily member satisfies the $2,000 deductible. The
plan contains no express limit on out-of-pocket
expenses. Section 223(c)(2)(A)(ii)(II) limits the
maximum out-of-pocket expenses to $10,000 for
family coverage. The plan is an HDHP for any
family with two to five covered individuals ($2,000
x 5 = $10,000). However, the plan is not an HDHP
for a family with six or more covered individuals.
Example (2). The same facts as Example 1, ex-
cept that the plan includes an umbrella deductible of
$10,000. The plan reimburses 100 percent of cov-
ered benefits if the family satisfies the $10,000 in the
aggregate, even if no single family member satisfies
the $2,000 embedded deductible. This plan qualifies
as an HDHP for the family, regardless of the number
of covered individuals.
Q–21. Are amounts incurred by an
individual for medical care before a health
plan’s deductible is satisfied included in
computing the plan’s out-of-pocket ex-
penses under section 223(c)(2)(A)?
A–21. A health plan’s out-of-pocket
limit includes the deductible, co-pay-
ments, and other amounts, but not premi-
ums. Notice 2004–2, Q&A 3. Amounts
incurred for noncovered benefits (includ-
ing amounts in excess of UCR and finan-
cial penalties) also are not counted toward
the deductible or the out-of-pocket limit.
If a plan does not take copayments into
account in determining if the deductible
is satisfied, the copayments must still be
taken into account in determining if the
out-of-pocket maximum is exceeded.
Example. In 2004, a health plan has a $1,000 de-
ductible for self-only coverage. After the deductible
is satisfied, the plan pays 100 percent of UCR for cov-
ered benefits. In addition, the plan pays 100 per-
cent for preventive care, minus a $20 copayment per
screening. The plan does not take into account co-
payments in determining if the $1,000 deductible has
been satisfied. The copayments must be included in
determining if the plan meets the out-of-pocket max-
imum. Unless the plan includes an express limit on
out-of-pocket expenses taking into account the co-
payments, or limits the copayments to $4,000, the
plan is not an HDHP.
Q–22. If an employer changes health
plans mid-year, does the new health plan
fail to satisfy section 223(c)(2)(A) merely
because it provides a credit towards the de-
ductible for expenses incurred during the
previous health plan’s short plan year and
not reimbursed?
A–22. No. If the period during which
expenses are incurred for purposes of sat-
isfying the deductible is 12 months or less
and the plan satisfies the requirements for
an HDHP, the new plan’s taking into ac-
count expenses incurred during the prior
plan’s short plan year (whether or not the
prior plan is an HDHP) and not reim-
bursed, does not violate the requirements
of section 223(c)(2)(A).
Example. An employer with a calendar year
health plan switches from a non-HDHP plan to a new
plan with the first day of coverage under the new
plan of July 1. The annual deductible under the new
plan satisfies the minimum annual deductible for
an HDHP under section 223(c)(2)(A)(i) and counts
expenses incurred under the prior plan during the
first six months of the year in determining if the new
plan’s annual deductible is satisfied. The new plan
satisfies the HDHP deductible limit under section
223(c)(2)(A).
Q–23. If an eligible individual changes
coverage during the plan year from
self-only HDHP coverage to family HDHP
coverage, does the individual (or any other
person covered under the family coverage)
fail to be covered by an HDHP merely be-
cause the family HDHP coverage takes
into account expensesincurred while the
individual had self-only coverage?
A–23. No.
Example. An eligible individual has self-only
coverage from January 1 through March 31, marries
in March and from April 1 through December 31,
has family coverage under a plan otherwise quali-
fying as an HDHP. The family coverage plan ap-
plies expenses incurred by the individual from Jan-
uary through March toward satisfying the family de-
ductible. The individual does not fail to be covered
by an HDHP. The family coverage satisfies the de-
ductible limit in section 223(c)(2)(A)(i)(II). The in-
dividual’scontributiontoanHSAisbasedonthree
months of the self-only coverage (i.e., 3/12 of the de-
ductible for the self-only coverage) and nine months
of family coverage (9/12 of the deductible for family
coverage).
Q–24. How are the minimum de-
ductible in section 223(c)(2)(A) for an
August 16, 20042002004–33 I.R.B.

HDHP and the maximum contribution to
an HSA in section 223(b) calculated when
the period for satisfying a health plan’s
deductible is longer than 12 months?
A–24. The deductible limits in sec-
tion 223(c)(2)(A) are based on 12 months.
If a plan’s deductible may be satisfied
over a period longer than 12 months, the
minimum annual deductible under sec-
tion 223(c)(2)(A) must be increased to
take into account the longer period in de-
termining if the plan satisfies the HDHP
deductible requirements. The adjustment
will be done as follows:
(1) Multiply the minimum annual de-
ductible in section 223(c)(2)(A)(i) (as ad-
justed under section 223(g)) by the num-
ber of months allowed to satisfy the de-
ductible.
(2) Divide the amount in (1) above by
12. This is the adjusted deductible for
the longer period that is used to test for
compliance with section 223(c)(2)(A).
(3) Compare the amount in (2) to the
plan’s deductible. If the plan’s deductible
equals or exceeds the amount in (2), the
plan satisfies the requirements for the min-
imum deductible in section 223(c)(2)(A).
(Note that the deductible for an HDHP
may not exceed the out-of-pocket maxi-
mum under section 223(c)(2)(A)(ii).)
If the plan qualifies as an HDHP, an
eligible individual’s maximum annual
HSA contribution will be the lesser of the
amounts in (1) or (2) below:
(1) Divide the plan’s deductible by the
number of months allowed to satisfy the
deductible, and multiply this amount by
12;
(2) The statutory amount in sec-
tion 223(b)(2)(A)(ii) for self-only cov-
erage ($2,600 in 2004) or section
223(b)(2)(B)(ii) for family coverage
($5,150 in 2004), as applicable.
Example. For 2004, a health plan takes into
account medical expenses incurred in the last three
months of 2003 to satisfy its deductible for calen-
dar year 2004. The plan’s deductible for self-only
coverage is $1,500 and covers 15 months (the last
three months of 2003 and 12 months of 2004). To
determine if the plan’s deductible satisfies sec-
tion 223(c)(2)(A) the following calculations are
performed: (1) multiply $1,000, the minimum an-
nual deductible in section 223(c)(2)(A)(i), by 15,
the number of months in which expenses incurred
are taken into account to satisfy the deductible, =
$15,000; (2) divide $15,000 by 12 = $1,250; (3) The
HDHP minimum deductible for self-only coverage
for 15 months must be at least $1,250. Because
the plan’s deductible, $1,500, exceeds $1,250, the
plan’s self-only coverage satisfies the deductible
rule in section 223(c)(2)(A). The maximum annual
HSA contribution in 2004 for an eligible individual
with self-only coverage under these facts is $1,200,
the lesser of (1) ($1,500/15) X 12 = $1,200; or (2)
$2,600.
Q–25. A health plan which otherwise
meets the definition of an HDHP negoti-
ates discounted prices for health care ser-
vices from providers. Covered individuals
receive benefits at the discounted prices,
regardless of whether they have satisfied
the plan’s deductible. Do the discounted
prices prevent the health plan from being
an HDHP as defined in section 223(c)(2)?
A–25. No.
III. Preventive care
Q–26. Does a preventive care service
or screening that also includes the treat-
ment of a related condition during that pro-
cedure come within the safe harbor for pre-
ventive care in Notice 2004–23?
A–26. Yes. Although Notice 2004–23
states that preventive care generally does
not include any service or benefit intended
to treat an existing illness, injury, or con-
dition, in situations where it would be un-
reasonable or impracticable to perform an-
other procedure to treat the condition, any
treatment that is incidental or ancillary to a
preventive care service or screening as de-
scribed in Notice 2004–23 also falls within
the safe-harbor for preventive care. For
example, removal of polyps during a diag-
nostic colonoscopy is preventive care that
can be provided before the deductible in an
HDHP has been satisfied.
Q–27. To what extent do drugs or
medications come within the safe-harbor
for preventive care services under section
223(c)(2)(C)?
A–27. Notice 2004–23 sets out a
preventive care deductiblesafeharbor
for HDHPs under section 223(c)(2)(C).
Solely for this purpose, drugs or medica-
tions are preventive care when taken by a
person who has developed risk factors for
a disease that has not yet manifested itself
or not yet become clinically apparent (i.e.,
asymptomatic), or to prevent the reoccur-
rence of a disease from which a person
has recovered. For example, the treatment
of high cholesterol with cholesterol-low-
ering medications (e.g., statins) to prevent
heart disease or the treatment of recov-
ered heart attack or stroke victims with
Angiotensin-converting Enzyme (ACE)
inhibitors to prevent a reoccurrence, con-
stitute preventive care. In addition, drugs
or medications used as part of procedures
providing preventive care services speci-
fied in Notice 2004–23, including obesity
weight-loss and tobacco cessation pro-
grams, are also preventive care. However,
the preventive care safe harbor under sec-
tion 223(c)(2)(C) does not include any
service or benefit intended to treat an
existing illness, injury, or condition, in-
cluding drugs or medications used to treat
an existing illness, injury or condition.
IV. Contributions
Q–28. Who may make contributions
on behalf of an eligible individual?
A–28. Although Q&A 11 of Notice
2004–2 only refers to contributions by em-
ployers or family members, any person
(an employer, a family member or any
other person) may make contributions to
an HSA on behalf of an eligible individ-
ual.
Q–29. May a state government make
an HSA contribution on behalf of eligi-
ble individuals insured under the state’s
comprehensive health insurance programs
for high-risk individuals (state high-risk
pool)?
A–29. Yes. See also Q&A 13.
Q–30.How is the maximum an-
nual HSA contribution limit in section
223(b)(2) determined for an eligible in-
dividual with family coverage under an
HDHP that includes embedded individual
deductibles and an umbrella deductible?
A–30. Generally, under section 223
(b)(2)(B), the maximum annual HSA con-
tribution limit for an eligible individual
with family coverage under an HDHP
(without regard to catch-up contributions)
is the lesser of: (1) the annual deductible
under the HDHP, or (2) the statutory limit
on family coverage contributions as in-
dexed by section 223(g). An HDHP often
has a stated maximum amount of expenses
the family could incur before receiving
benefits (i.e., the umbrella deductible), but
also provides payments for covered med-
ical expenses if any individual member
of the family incurs medical expenses in
excess of the minimum annual deductible
in section 223(c)(2)(A)(i)(II) (the embed-
ded individual deductible). The maximum
annual HSA contribution limit for an eli-
gible individual who has family coverage
2004–33 I.R.B.201August 16, 2004

under an HDHP with embedded individual
deductibles and an umbrella deductible as
described above, is the least of the follow-
ing amounts:
1. the maximum annual contribution
limit for family coverage specified in
section 223(b)(2)(B)(ii) ($5,150 for
calendar year 2004);
2. the umbrella deductible; or
3. the embedded individual deductible
multiplied by the number of family
members covered by the plan.
See Notice 2004–2, Q&A 3, which re-
quires that the embedded individual de-
ductible satisfy the minimum annual de-
ductible for an HDHP.
Example (1). In 2004, H and W, a married cou-
ple, have HDHP coverage for themselves and their
two dependent children. The HDHP will pay bene-
fits for any family member whose covered expenses
exceed $2,000 (the embedded individual deductible),
and will pay benefits for all family members after
their covered expenses exceed $5,000 (the umbrella
deductible). The maximum annual contribution limit
under section 223(b)(2)(B)(ii) is $5,150. The embed-
ded deductible multiplied by the number of family
members covered is $8,000 (4 X $2,000). The max-
imum annual contribution which H and W can make
to their HSAs is $5,000 (the least of $5,000, $5,150
or $8,000). The $5,000 limit is divided equally be-
tween H and W, unless they agree to a different divi-
sion. See Q&A 32 and Notice 2004–2, Q&A 15.
Example (2). The same facts as Example 1, ex-
cept the HDHP provides coverage only for H and W.
The maximum annual contribution limit under sec-
tion 223(b)(2)(B)(ii) is $5,150. The umbrella de-
ductible is $5,000. The embedded individual de-
ductible multiplied by the number of family members
covered is $4,000 (2 X $2,000). The maximum an-
nual contribution which H and W can make to their
HSAs for 2004 is $4,000 (the least of $5,000, $5,150
or $4,000).
Q–31. How do the maximum annual
HSA contribution limits apply to family
HDHP coverage that may include an inel-
igible individual?
A–31. The maximum annual HSA con-
tribution for a married couple with family
HDHP coverage is the lesser of: (1) the
lowest HDHP family deductible appli-
cable to the family (minimum $2,000)
or (2) the section 223(b)(2)(B) statutory
maximum ($5,150 in 2004). Although
the special rule for married individuals in
section 223(b)(5) generally allows a mar-
ried couple to divide the maximum HSA
contribution between spouses, if only one
spouse is an eligible individual, only that
spouse may contribute to an HSA (not-
withstanding the treatment under section
223(b)(5)(A) of both spouses as having
only family coverage). For an HDHP
with embedded individual deductibles see
Q&A 30.
Example (1). In2004,HandWareamarried
couple and neither qualifies for catch-up contribu-
tions under section 223(b)(3). H and W have fam-
ily HDHP coverage with a $5,000 deductible. H is
an eligible individual and has no other coverage. W
also has self-only coverage with a $200 deductible.
W, who has coverage under a low-deductible plan, is
not an eligible individual. H may contribute $5,000
(the lesser of $5,000 or $5,150) to an HSA while W
may not contribute to an HSA.
Example (2). The same facts as Example 1, ex-
cept that, in addition to the family HDHP with a
$5,000 deductible, W has self-only HDHP coverage
with a $2,000 deductible rather than self-only cover-
age with a $200 deductible. Both H and W are el-
igible individuals. H and W are treated as having
only family coverage under section 223(b)(5). The
maximum combined HSA contribution by H and W
is $5,000, to be divided between them by agreement.
Example (3). The same facts as Example 1, ex-
cept that, in addition to the family HDHP with a
$5,000 deductible, W has family HDHP coverage
with a $3,000 deductible rather than self-only cover-
age with a $200 deductible. Both H and W are eligi-
ble individuals. H and W are treated as having fam-
ily HDHP coverage with the lowest annual deductible
under section 223(b)(5)(A). The maximum combined
HSA contribution by H and W is $3,000, to be divided
between them by agreement.
Example (4). The same facts as Example 1, ex-
cept that, in addition to family coverage under the
HDHP with a $5,000 deductible, W has family cover-
age with a $500 deductible rather than self-only cov-
erage with a $200 deductible. H and W are treated
as having family coverage with the lowest annual de-
ductible under section 223(b)(5)(A). Neither H nor W
is an eligible individual and neither may contribute to
an HSA.
Example (5). ThesamefactsasExample1,
except that, in addition to the family HDHP with
a $5,000 deductible, W is enrolled in Medicare
rather than having self-only coverage with a $200
deductible. W is not an eligible individual. H may
contribute $5,000 to an HSA while W may not con-
tribute to an HSA.
Example (6). Individual X is a single individual
who does not qualify for catch-up contributions. X is
an eligible individual and has a dependent. X and his
dependent have family HDHP coverage with a $5,000
deductible. The dependent also has self-only cover-
age with a $200 deductible. X may contribute $5,000
to an HSA while the dependent may not contribute to
an HSA.
Q–32. How may spouses agree to
divide the annual HSA contribution limit
between themselves?
A–32. Section 223(b)(5) provides
special rules for married individuals and
states that HSA contributions (without
regard to the catch-up contribution) “shall
be divided equally between them unless
they agree on a different division.” Thus,
spouses can divide the annual HSA con-
tributioninanywaytheywant,including
allocating nothing to one spouse. See also
Notice 2004–2, Q&A 15.
Example. In 2004, X, an eligible individual, has
self-only HDHP coverage with a $1,200 deductible
from January 1 through March 31. In March, X and Y
marry. Neither X nor Y qualifies for the catch-up con-
tribution. From April 1through December 31, 2004,
X and Y have HDHP family coverage with a $2,400
deductible. Y is an eligible individual from April 1
through December 31, 2004. X and Y’s contribution
limit for the nine months of family coverage is $1,800
(nine months of the deductible for family coverage.
9/12 x $2,400). X and Y divide the $1,800 between
them. X’s contribution limit to his HSA for the three
months of single coverage is $300 (three months of
the deductible for self-only coverage. 3/12 x $1,200).
The $300 limit is not divided between X and Y. See
also Q&A 23.
Q–33. What is the contribution limit
for an eligible individual covered by an
HDHP and also by a post-deductible health
reimbursement arrangement (HRA)?
A–33. Rev. Rul. 2004–45, Situation 4,
describes a post-deductible HRA that does
not pay or reimburse any medical expense
incurred before the minimum annual de-
ductible under section 223(c)(2)(A)(i) is
satisfied. The ruling states that the de-
ductible for the HRA need not be the
sameasthedeductiblefortheHDHP,
butinnoeventmaytheHDHPorother
coverage provide benefits before the min-
imum annual deductible under section
223(c)(2)(A)(i) is satisfied. Where the
HDHP and the other coverage do not
have identical deductibles, contributions
to the HSA are limited to the lower of
the deductibles. In addition, although the
deductibles of the HDHP and the other
coverage may be satisfied independently
by separate expenses, no benefits may be
paid by the HDHP or the other coverage
before the minimum annual deductible
under section 223(c)(2)(A)(i) has been
satisfied.
Example. In 2004, an individual has self-only
coverage under an HDHP with a deductible of
$2,500. The individual is also covered under a
post-deductible HRA (as described in Rev. Rul.
2004–45) which pays or reimburses qualified med-
ical expenses only after $2,000 of the HDHP’s
deductible has been satisfied (i.e., if the individual
incurs covered medical expenses of $2,250, the HRA
will pay $250). Because the HRA’s deductible of
$2,000 is less than the HDHP’s deductible of $2,500,
the individual’s HSA contribution limit is $2,000.
Q–34. An account beneficiary wants
to withdraw an excess contribution from
an HSA before the due date of his or her
August 16, 20042022004–33 I.R.B.

federal income tax return (including exten-
sions), to avoid the 6 percent excise tax
under section 4973(a)(5). How is the net
income attributable to the excess contribu-
tion computed?
A–34. Section 223(f)(3)(A)(ii) pro-
vides that any distribution of excess con-
tribution to an HSA must be “accompanied
by the amount of net income attributable
to such excess contribution.” Any net in-
come is included in the individual’s gross
income. The rules for computing attribut-
able net income for excess IRA contribu-
tions apply to HSAs. See Treas. Reg.
§ 1.408–11 and Notice 2004–2, Q&A 22.
Q–35. May an individual who has not
made excess HSA contributions treat a dis-
tribution from an HSA other than for qual-
ified medical expenses as the withdrawal
of excess HSA contributions?
A–35. No. This withdrawal is deemed
a withdrawal for non-qualified medical ex-
penses and includable in the individual’s
gross income under section 223(f)(2).
(The additional tax under section 223(f)(4)
also applies, unless otherwise excepted).
V. Distributions
Q–36. If an account beneficiary’s
spouse or dependents are covered under a
non-HDHP, are distributions from an HSA
to pay their qualified medical expenses
excluded from the account beneficiary’s
gross income?
A–36. Yes. Distributions from an
HSA are excluded from income if made
for any qualified medical expense of the
account beneficiary, the account benefi-
ciary’s spouse and dependents (without re-
gard to their status as eligible individuals).
However, distributions made for expenses
reimbursed by another health plan are not
excludable from gross income, whether or
not the other health plan is an HDHP. See
Notice 2004–2, Q&A 26.
Q–37. An account beneficiary receives
an HSA distribution as the result of a mis-
take of fact due to reasonable cause (e.g.,
the account beneficiary reasonably, but
mistakenly, believed that an expense was
a qualified medical expense and was re-
imbursed for that expense from the HSA).
The account beneficiary then repays the
mistaken distribution to the HSA. Is the
mistaken distribution included in gross
income under section 223(f)(2) and sub-
ject to the 10 percent additional tax under
section 223(f)(4) or subject to the excise
tax on excess contributions under section
4973(a)(5)?
A–37. If there is clear and convinc-
ing evidence that amounts were distributed
from an HSA because of a mistake of fact
due to reasonable cause, the account ben-
eficiary may repay the mistaken distribu-
tion no later than April 15 following the
first year the account beneficiary knew or
should have known the distribution was a
mistake. Under these circumstances, the
distribution is not included in gross in-
come under section 223(f)(2), or subject to
the 10 percent additional tax under section
223(f)(4), and the repayment is not subject
to the excise tax on excess contributions
under section 4973(a)(5). But see Q&A 76
on the trustee’s or custodian’s obligation to
accept a return of mistaken distributions.
Q–38. If both spouses have HSAs
and one spouse uses distributions from
his or her HSA to pay or reimburse the
section 213(d) qualified medical expenses
of the other spouse, are the distributions
excluded from the account beneficiary’s
gross income under section 223(f)?
A–38. Yes. However, both HSAs may
not reimburse the same expense amounts.
Q–39. When must a distribution from
an HSA be taken to pay or reimburse, on a
tax-free basis, qualified medical expenses
incurred in the current year?
A–39. An account beneficiary may de-
fer to later taxable years distributions from
HSAs to pay or reimburse qualified med-
ical expenses incurred in the current year
as long as the expenses were incurred after
the HSA was established. Similarly, a dis-
tribution from an HSA in the current year
can be used to pay or reimburse expenses
incurred in any prior year as long as the
expenses were incurred after the HSA was
established. Thus, there is no time limit on
when the distribution must occur. How-
ever, to be excludable from the account
beneficiary’s gross income, he or she must
keep records sufficient to later show that
the distributions were exclusively to pay or
reimburse qualified medical expenses, that
the qualified medical expenses have not
been previously paid or reimbursed from
another source and that the medical ex-
penses have not been taken as an itemized
deduction in any prior taxable year. See
Notice 2004–2, Q&A 31 and also Notice
2004–25, for transition relief in calendar
year 2004 for reimbursement of medical
expenses incurred before opening an HSA.
Example. An eligible individual contributes
$1,000 to an HSA in 2004. On December 1, 2004,
the individual incurs a $1,500 qualified medical
expense and has a balance in his HSA of $1,025. On
January 3, 2005, the individual contributes another
$1,000 to the HSA, bringing the balance in the HSA
to $2,025. In June, 2005,the individual receives
a distribution of $1,500 to reimburse him for the
$1,500 medical expense incurred in 2004. The indi-
vidual can show that the $1,500 HSA distribution in
2005 is a reimbursement for a qualified medical ex-
pense that has not been previously paid or otherwise
reimbursed and has not been taken as an itemized
deduction. The distribution is excludable from the
account beneficiary’s gross income.
Q–40. May an account beneficiary pay
qualified long-termcare insurance pre-
miums with distributions from an HSA
if contributions to the HSA are made by
salary-reduction though a section 125
cafeteria plan?
A–40. Yes. Section 125(f) provides
that the term “qualified benefit” under a
section 125 cafeteria plan shall not in-
clude any product which is advertised,
marketed, or offered as long-term care
insurance. However, for HSA purposes,
section 223(d)(2)(C)(ii) provides that the
payment of any expense for coverage un-
der a qualified long-term care insurance
contract (as defined in section 7702B(b))
is a qualified medical expense. Where an
HSA that is offered under a cafeteria plan
pays or reimburses individuals for quali-
fied long-term care insurance premiums,
section 125(f) is not applicable because it
is the HSA and not the long-term care in-
surance that is offered under the cafeteria
plan.
Q–41. Do the section 213(d)(10) lim-
its on the deduction for “eligible long-term
care premiums” restrict the amount of dis-
tributions for qualified medical expenses
that may be excluded from income under
an HSA?
A–41. Yes. “Eligible long-term
care premiums” are deductible medical
expenses under section 213, but the de-
duction is limited to the annually adjusted
amounts in section 213(d)(10) (based on
age). See Rev. Proc. 2003–85 § 3.18,
2003–49 I.R.B. 1184 for the 2004 limits.
Thus, although HSA distributions to pay
or reimburse qualified long-term care in-
surance premiums are qualified medical
expenses, the exclusion from gross income
is limited to the adjusted amounts under
section 213(d)(10). Any excess premium
2004–33 I.R.B.203August 16, 2004

reimbursements are includable in gross
income and may also be subject to the 10
percent penalty under section 223(f)(4).
Example. In 2004, X, age 41, pays premiums of
$1,290 for a qualified long term care insurance con-
tract. The section 213(d)(10) limit in calendar year
2004 for deductions for persons age 40, but not more
than 50, is $490. X’s HSA can reimburse X up to
$490 on a tax-free basis for the long-term care pre-
miums. The remaining $800 ($1,290-$490), if reim-
bursed from the HSA, is not for qualified medical ex-
penses and is includable in gross income.
Q–42. Are distributions from an HSA
for long-term care services qualified med-
ical expenses which are excluded from in-
come?
A–42. Yes. Section 106(c) provides
that employer-provided coverage for
long-term care services provided through
a flexible spending or similar arrange-
ment are included in an employee’s gross
income. Section 213(d)(1)(C) provides
that amounts paid for qualified long-term
care services are medical care and section
223(f)(1) provides that amounts paid or
distributed out of an HSA used to pay
for qualified medical expenses are not
includible in gross income. Qualified
medical expenses are amounts paid for
medical care (as defined in section 213(d))
for the account beneficiary, his or her
spouse and dependents. Although section
106(c) applies to benefits provided by a
flexible spending or similar arrangement,
it does not apply to distributions from
an HSA, which is a personal health care
savings vehicle used to pay for qualified
medical expenses through a trust or cus-
todial account, whether or not the HSA is
funded by salary-reduction contributions
through a section 125 cafeteria plan.
Q–43. May a retiree who is age 65 or
older receive tax-free distributions from an
HSA to pay the retiree’s contribution to
an employer’s self-insured retiree health
coverage?
A–43. Yes. Pursuant to section 223
(d)(2)(B), the purchase of health insurance
is generally not a qualified medical ex-
pense that can be paid or reimbursed by an
HSA. See Notice 2004–2, Q&A 27. How-
ever, section 223(d)(2)(C)(iv) provides an
exception for coverage for health insur-
ance once an account beneficiary has at-
tained age 65. The exception applies to
both insured and self-insured plans.
Q–44. May an individual who is un-
der age 65 and has end stage renal disease
(ESRD) or is disabled receive tax-free dis-
tributions from an HSA to pay for health
insurance premiums?
A–44. No. Section 223(d)(2)(B)
provides that health insurance may not
be paid by an HSA. However, section
223(d)(2)(C)(iv) provides that payment of
health insurance premiums are qualified
medical expenses, but only in the case of
an account beneficiary who has attained
the age specified in section 1811 of the
Social Security Act (i.e., age 65).
Q–45. If a retiree who is enrolled
in Medicare receives a distribution from
an HSA to reimburse the retiree’s Medi-
care premiums, is the reimbursement a
qualified medical expense under section
223(d)(2)?
A–45. Yes. Where premiums for
Medicare are deducted from Social Secu-
rity benefit payments, an HSA distribu-
tion to reimburse the Medicare beneficiary
equal to the Medicare premium deduction
is a qualified medical expense.
VI. Comparability
Q–46. Does an employer who offers
to make available a contribution to the
HSA of each employee who is an eligi-
ble individual in an amount equal to the
employee’s HSA contribution or a per-
centage of the employee’s HSA contribu-
tion (i.e., “matching contributions”) satisfy
the requirement under section 4980G that
all comparable participating employees re-
ceive comparable contributions?
A–46. If all employees who are eligi-
ble individuals do not contribute the same
amount to their HSAs and, consequently,
do not receive comparable contributions to
their HSAs, the section 4980G compara-
bility rules are not satisfied, notwithstand-
ing that the employer offers to make avail-
able the same contribution amount to each
employee who is an eligible individual.
But see Q&A 47 on comparable contribu-
tions made througha cafeteria plan.
Q–47. If an employer makes contribu-
tions through a cafeteria plan to the HSA
of each employee who is an eligible indi-
vidual in an amount equal to the amount of
the employee’s HSA contribution or a per-
centage of the amount of the employee’s
HSA contribution (i.e., “matching contri-
butions”), are the contributions subject to
the section 4980G comparability rules?
A–47. No. The conference report for
the Medicare Prescription Drug, Improve-
ment, and Modernization Act of 2003
states that the comparability rules do not
apply to contributions made through a
cafeteria plan. Conf. Rep. No. 391,
108
th
Cong., 1
st
Sess. 840 (2003). No-
tice 2004–2, Q&A 32 similarly provides
that the comparability rules do not ap-
ply to HSA contributions made through
a cafeteria plan. Thus, where matching
contributions are made by an employer
through a cafeteria plan, the contributions
are not subject to the comparability rules
of section 4980G. However, contributions,
including “matching contributions”, to an
HSA made under a cafeteria plan are sub-
ject to the section 125 nondiscrimination
rules (eligibility rules, contributions and
benefits tests and key employee concen-
tration tests). See section 125(b), (c) and
(g) and Prop. Treas. Reg. § 1.125–1,
Q&A 19.
Q–48. If an employer conditions
contributions by the employer to an em-
ployee’s HSA on an employee’s partic-
ipation in health assessments, disease
management programs or wellness pro-
grams and makes the same contributions
available to all employees who partici-
pate in the programs, do the contributions
satisfy the section 4980G comparability
rules?
A–48. If all eligible employees do not
elect to participate in all the programs
and consequently, all employees who are
eligible individuals do not receive com-
parable contributions to their HSAs, the
employer contributions fail to satisfy the
section 4980G comparability rules. But
see Q&A 49 on comparable contributions
made through a cafeteria plan.
Q–49. If under the employer’s cafete-
ria plan, employees who are eligible indi-
viduals and who participate in health as-
sessments, disease management programs
or wellness programs receive an employer
contribution to an HSA, unless the em-
ployee elects cash, are the contributions
subject to the section 4980G comparabil-
ity rules?
A–49. No. The comparability rules
under section 4980G do not apply to em-
ployer contributions to an HSA through a
cafeteria plan.
Q–50. If an employer offers to make
available additional HSA contributions to
all employees who are eligible individu-
als and who have attained a specified age
or who qualify for the additional contri-
August 16, 20042042004–33 I.R.B.

butions under section 223(b)(3) (catch-up
contributions), do the contributions satisfy
the section 4980G comparability rules?
A–50. No. If all employees who are
eligible individuals do not meet the age
requirement or do not qualify for the
additional contributions under section
223(b)(3), all employees who are eligible
individuals do not receive comparable
contributions to their HSAs and the em-
ployer contributions fail to satisfy the
section 4980G comparability rules.
Q–51. How do the comparability rules
in section 4980G apply to employer contri-
butions to employees’ HSAs if some em-
ployees work full-time during the entire
calendar year, and other employees work
full-time for less than the entire calendar
year?
A–51. An employer contributing to
HSAs of employees who work full-time
for less than twelve months, satisfies the
comparability rules if the contribution
amount is comparable when determined
on a month-to-month basis. For example,
if the employer contributes $240 to the
HSAs of each full-time employee who
works the entire calendar year, the em-
ployer must contribute $60 to the HSA
of a full-time employee who works three
months of the year. See section 4980G(b)
andsection4980E(d)(2)(B).SeealsoNo-
tice 2004–2, Q&A 32on comparability
rules for part-time employees (i.e.,em-
ployees who are customarily employed for
fewer than 30 hours per week).
Q–52. What is the testing period for
making comparable contributions to em-
ployees’ HSAs?
A–52. To satisfy the comparability rule
in section 4980G, an employer must make
comparable contributions for the calendar
year to HSAs of employees who are eli-
gible individuals. See section 4980G and
section 4980E(d).
Q–53. Under section 4980G, must an
employer make comparable contributions
to all employees who are eligible individ-
uals or only to those employees who are el-
igible individuals and are also covered by
an HDHP provided by the employer?
A–53. If during a calendar year, an em-
ployer contributes to the HSA of any em-
ployee covered under an HDHP provided
by the employer, the employer is required
to make comparable contributions to all el-
igible individuals with coverage under any
HDHP provided by the employer. An em-
ployer that contributes to the HSAs of em-
ployees with coverage under the HDHP
provided by the employer is not required to
make comparable contributions to HSAs
of employees who are not covered un-
der the HDHP provided by the employer.
However, an employer that contributes to
the HSA of any eligible individual with
coverage under any HDHP, even if that
coverage is not an HDHP of the employer,
must make comparable contributions to all
eligible individuals whether or not covered
under an HDHP of the employer. See also
Notice 2004–2, Q&A 32.
Example (1). An employer offers an HDHP to
its full-time employees. Most full-time employees
are covered under the employer’s HDHP and the em-
ployer makes comparable contributions only to these
employees’ HSAs. Employee D, a full-time em-
ployee and an eligible individual (as defined in sec-
tion 223(c)(1)), is covered under his spouse’s HDHP
and not under his employer’s HDHP. The employer
is not required to make comparable contributions to
D’s HSA.
Example (2). An employer does not offer an
HDHP. Several full-time employees, who are eligi-
ble individuals (as defined in section 223(c)(1)), have
HSAs. The employer contributes to these employ-
ees’ HSAs. The employer must make comparable
contributions to the HSAs of all full-time employees
who are eligible individuals.
Example (3).AnemployeroffersanHDHP
to its full-time employees. Most full-time em-
ployees are covered under the employer’s HDHP
and the employer makes comparable contributions
to these employees’ HSAs and also to HSAs of
full-time employees not covered under the em-
ployer’s HDHP. Employee E, a full-time employee
and an eligible individual (as defined in section
223(c)(1)), is covered under his spouse’s HDHP and
not under his employer’s HDHP. The employer
must make comparable contributions to E’s HSA.
Q–54. If an employee requests that his
or her employer deduct after-tax amounts
from the employee’s compensation and
forward these amounts as employee con-
tributions to the employee’s HSA, do the
section 4980G comparability rules apply
to these amounts?
A–54. No. Section 106(d) provides that
amounts contributed by an employer to an
eligible employee’s HSA shall be treated
as employer-provided coverage for medi-
cal expenses and excludable from the em-
ployee’s gross income up to the limit in
section 223(b). After-tax employee contri-
butions to the HSA are not subject to sec-
tion 4980G because they are not employer
contributions under section 106(d). See
Notice 2004–2, Q&A 12 on aggregation of
HSA contributions.
VII. Rollovers
Q–55. How frequently may an account
beneficiary make rollover contributions to
an HSA under section 223(f)(5)?
A–55. An account beneficiary may
make only one rollover contribution to an
HSA during a 1-year period. In addition,
to qualify as a rollover, any amount paid
or distributed from an HSA to an account
beneficiary must be paid over to an HSA
within 60 days after the date of receipt of
the payment or distribution. But see Q&A
78 regarding trustee’s or custodian’s obli-
gation to accept rollovers. See also Notice
2004–2, Q&A 23 for additional rules on
rollovers.
Q–56. Are transfers of HSA amounts
from one HSA trustee directly to another
HSA trustee (trustee-to-trustee transfers),
subject to the rollover restrictions?
A–56. No. The rules under section
223(f)(5) limiting the number of rollover
contributions to one a year do not apply to
trustee-to-trustee transfers. Thus, there is
no limit on the number oftrustee-to-trustee
transfers allowed during a year.
VIII. Cafeteria Plans and HSAs
Q–57. Which requirements that apply
to health flexible spending arrangements
(FSAs) under a section 125 cafeteria plan
do not apply to HSAs?
A–57. The following requirements for
health FSAs under a section 125 cafete-
ria plan (which are generally imposed so
that health FSAs operate in a manner sim-
ilar to “insurance-type” accident or health
plans under section 105) are not applicable
to HSAs: (1) the prohibition against a ben-
efit that defers compensation by permit-
ting employees to carry over unused elec-
tive contributions or plan benefits from
one plan year to another plan year (See
section 125(d)(2)(D)); (2) the requirement
that the maximum amount of reimburse-
ment must be available at all times during
the coverage period; and (3) the mandatory
twelve-month period of coverage.
Q–58. Do the section 125 change in sta-
tus rules apply to elections of HSA contri-
butions through acafeteria plan?
A–58. A cafeteria plan may permit an
employee to revoke an election during a
period of coverage with respect to a qual-
ified benefit and make a new election for
the remaining portion of the period only as
2004–33 I.R.B.205August 16, 2004

provided in Treas. Reg. § 1.125–4. Be-
cause the eligibility requirements and con-
tribution limits for HSAs are determined
on a month-by-month basis, rather than on
an annual basis, an employee who elects to
make HSA contributions under a cafeteria
plan may start or stop the election or in-
crease or decrease the election at any time
as long as the change is effective prospec-
tively (i.e., after the request for the change
is received). If an employer places addi-
tional restrictions on the election of HSA
contributions under a cafeteria plan, the
same restrictions must apply to all employ-
ees.
Q–59. Can an employer permit em-
ployees to elect an HSA mid-year if
offered as a new benefit under the em-
ployer’s cafeteria plan?
A–59. Yes, if the election for the HSA
is made on a prospective basis. However,
the HSA election does not permit a change
or revocation of any other coverage un-
der the cafeteria plan unless the change
is permitted by Treas. Reg. § 1.125–4.
Thus, while an HSA may be offered to and
elected by an employee mid-year, the em-
ployee may have other coverage under the
cafeteria plan that cannot be changed, (e.g.,
coverage under a health FSA), which may
prevent the employee from being an eligi-
ble individual. See Rev. Rul. 2004–45.
Q–60. If an employee elects to make
contributions to an HSA through the em-
ployer’s cafeteria plan, may the employer
contribute amounts to an employee’s HSA
to cover qualified medical expenses in-
curred by an employee that exceed the em-
ployee’s current HSA balance?
A–60. Yes. Where an employee elects
to make contributions to an HSA through a
cafeteria plan, the employer may, but is not
required to, contribute amounts to an em-
ployee’s HSA up to the maximum amount
elected by the employee. While any ac-
celerated contribution made by the em-
ployer must be equally available to all par-
ticipating employees throughout the plan
year and must be provided to all participat-
ing employees on the same terms, the em-
ployee must repay the amount of the accel-
erated contribution by the end of the plan
year. But see Q&A 82 on recoupment of
HSA contributions by an employer.
Q–61. Can employers provide negative
elections for HSAs if offered through a
cafeteria plan?
A–61. Yes. See Rev. Rul. 2002–27,
2002–1 C.B. 925.
IX. Account Administration
Q–62. Are there model IRS forms for
establishing HSAs?
A–62. Yes. See Form 5305-B “Health
Savings Trust Account” and Form 5305-C
“Health Savings Custodial Account.”
Q–63. May a husband and wife have a
joint HSA?
A–63. No. Each spouse who is an
“eligible individual” as described in sec-
tion 223(c)(1) and wants to make contri-
butions to an HSA must open a separate
HSA. Thus, only one person may be the
account beneficiary of an HSA. But see
Q&A 32 concerning allocating contribu-
tions between spouses. See also Q&A 38
concerning reimbursements from spousal
HSAs.
Q–64. May an eligible individual have
more than one HSA?
A–64. Yes. An eligible individual may
establish more than one HSA, and may
contribute to more than one HSA. The
same rules governing HSAs apply (e.g.,
maximum contribution limit), regardless
of the number of HSAs established by
an eligible individual. See also Notice
2004–2, Q&A 12.
Example. For 2004, eligible individual A’s maxi-
mum contribution to an HSA is $2,400. For 2004, A’s
employer contributes $1,000 to an HSA on behalf of
A. A opens a second HSA and contributes $1,400. If
additional contributions are made for 2004 to either
of the HSAs, then there are excess contributions to
A’s HSAs.
Q–65. What are permissible invest-
ments for HSAs?
A–65. HSA funds may be invested in
investments approved for IRAs (e.g.,bank
accounts, annuities, certificates of deposit,
stocks, mutual funds, or bonds). HSAs
may not invest in life insurance contracts,
or in collectibles (e.g., any work of art, an-
tique, metal, gem, stamp, coin, alcoholic
beverage, or other tangible personal prop-
erty specified in IRS guidance under sec-
tion 408(m)). HSAs may, however, in-
vest in certain types of bullion or coins,
as described in section 408(m)(3). The
HSA trust or custodial agreement may re-
strict investments to certain types of per-
missible investments (e.g., particular in-
vestment funds).
Q–66. May HSA funds be commingled
in a common trust fund or common invest-
ment fund?
A–66. Section 223(d)(1)(D) states that
the HSA trust assets may not be commin-
gled except in a common trust fund or
common investment fund. Thus, individ-
ual accounts maintained on behalf of indi-
vidual HSA account beneficiaries may be
held in a common trust fund or common in-
vestment fund. A “common trust fund” is
defined in Treas. Reg. § 1.408–2(b)(5)(ii).
A “common investment fund” is defined in
section 584(a)(1).
Q–67.Are there any transactions
which account beneficiaries are prohibited
from entering into with an HSA?
A–67. Yes. Section 223(e)(2) pro-
vides that rules similar to the rules of sec-
tion 408(e)(2) and (4) shall apply to HSAs.
Therefore, account beneficiaries may not
enter into “prohibited transactions” with
an HSA (e.g., the account beneficiary may
not sell, exchange, or lease property, bor-
row or lend money, furnish goods, services
or facilities, transfer to or use by or for
the benefit of himself/herself any assets,
pledge the HSA, etc.). Any amount treated
as distributed as the result of a prohibited
transaction will not be treated as used to
pay for qualified medical expenses. The
account beneficiary must, therefore, in-
clude the distribution in gross income and
generally will be subject to the additional
10 percent tax on distributions not made
for qualified medical expenses. See No-
tice 2004–2, Q&A 25.
Q–68. Are HSA trustees and custodi-
ans also subject to the rules against prohib-
ited transactions?
A–68. Yes. The same rules that apply
to account beneficiaries apply to trustees
and custodians.
Q–69. If administration and account
maintenance fees (e.g., flat administrative
fees) are withdrawn from the HSA, are the
withdrawn amounts treated as taxable dis-
tributions to the account beneficiary?
A–69. No. Amounts withdrawn from
an HSA for administration and account
maintenance fees will not be treated as
a taxable distribution and will not be in-
cluded in the account beneficiary’s gross
income.
Q–70. If administration and account
maintenance fees are withdrawn from the
HSA, does the withdrawn amount increase
August 16, 20042062004–33 I.R.B.

the maximum annual HSA contribution
limit?
A–70. No. For example, if the maxi-
mum annual contribution limit is $2,000,
and a $25 administration fee is withdrawn
from the HSA, the annual contribution
limit is still $2,000, not $2,025.
Q–71. If administration and account
maintenance fees are paid by the account
beneficiary or employer directly to the
trustee or custodian, do these payments
count toward the annual maximum contri-
bution limit for the HSA?
A–71. No. Administration and account
maintenance fees paid directly by the ac-
count beneficiary or employer will not be
considered contributions to the HSA. For
example, an individual contributes the
maximum annual amount to his HSA of
$2,000. The account beneficiary pays an
annual administration fee of $25 directly
to the trustee. The individual’s maximum
annual contribution limit is not affected by
the payment of the administration fee.
X. Trustees and Custodians
Q–72. Is any insurance company a
qualified HSA trustee or custodian?
A–72. Yes. Any insurance company or
any bank (including a similar financial in-
stitution as defined in section 408(n)) can
be an HSA trustee or custodian. In ad-
dition, any other person already approved
bytheIRStobeatrusteeorcustodian
of IRAs or Archer MSAs is automatically
approved to be an HSA trustee or cus-
todian. Other persons may request ap-
proval to be a trustee or custodian in ac-
cordance with the procedures set forth in
Treas. Reg. § 1.408–2(e) (relating to IRA
nonbank trustees).
Q–73. Is there a limit on the annual
HSA contribution which the trustee or cus-
todian may accept?
A–73. Yes. Except in the case of
rollover contributions described in section
223(f)(5) or trustee-to-trustee transfers, the
trustee or custodian may not accept annual
contributions to any HSA that exceed the
sum of: (1) the dollar amount in effect un-
der section 223(b)(2)(B)(ii) (i.e., the maxi-
mum family coverage deductible) plus (2)
the dollar amount in effect under section
223(b)(3)(B) (i.e., the catch-up contribu-
tion amount). All contributions must be
in cash, other than rollover contributions
or trustee-to-trustee transfers. See section
223(d)(1)(A).
Q–74. Is the HSA trustee or custo-
dian responsible for determining whether
contributions to anHSA exceed the max-
imum annual contribution for a particular
account beneficiary?
A–74. No. This is the responsibility
of the account beneficiary, who is also re-
sponsible for notifying the trustee or cus-
todian of any excess contribution and re-
questing a withdrawal of the excess con-
tribution together with any net income at-
tributable to the excess contribution. The
HSA trustee or custodian is, however, re-
sponsible for accepting cash contributions
within the limits in Q&A 73 and for filing
required information returns with the IRS
(Form 5498-SA and Form 1099-SA).
Q–75. Is the trustee or custodian re-
sponsible for tracking the account benefi-
ciary’s age?
A–75. Yes. However, the trustee or
custodian may rely on the account benefi-
ciary’s representation as to his or her date
of birth.
Q–76. Must the trustee or custodian
allow account beneficiaries to return mis-
taken distributions to the HSA?
A–76. No, this is optional. If the HSA
trust or custodial agreement allows the re-
turn of mistaken distributions as described
in Q&A 37, the trustee or custodian may
rely on the account beneficiary’s represen-
tation that the distribution was, in fact, a
mistake.
Q–77. May an HSA trust or custo-
dial agreement restrict the account bene-
ficiary’s ability to rollover amounts from
that HSA?
A–77. No. Section 223(f)(5) permits
the rollover of amounts in an HSA to an-
other HSA, and transfers from one trustee
to another trustee.
Q–78. Are HSA trustees or custodians
required to accept rollover contributions or
trustee-to-trustee transfers?
A–78. No. Rollover contributions
or trustee-to-trusteetransfers from other
HSAs or from Archer MSAs are allowed,
but trustees or custodians are not required
to accept them. See Notice 2004–2, Q&A
23.
Q–79. May an HSA trust or custo-
dial agreement restrict HSA distributions
to pay or reimburse only the account ben-
eficiary’s qualified medical expenses?
A–79. No. The HSA trust or custodial
agreement may not contain a provision that
restricts HSA distributions to pay or reim-
burse only the account beneficiary’s qual-
ified medical expenses. Thus, the account
beneficiary is entitled to distributions for
any purpose and distributions may be used
to pay or reimburse qualified medical ex-
penses or for other nonmedical expendi-
tures. Only the account beneficiary may
determine how the HSA distributions will
be used. But see Notice 2004–2, Q&A 25
on the taxation of HSA distributions not
used exclusively for qualified medical ex-
penses. See also Q&A 80 on restrictions
on the frequency or minimum amount of
HSA distributions.
Q–80. May a trustee or custodian re-
strict the frequency or minimum amount of
distributions from an HSA?
A–80. Yes. Trustees or custodians
may place reasonable restrictions on both
the frequency and the minimum amount
of distributions from an HSA. For exam-
ple, the trustee may prohibit distributions
for amounts of less than $50 or only al-
low a certain number of distributions per
month. Generally, the terms regarding the
frequency or minimum amount of distribu-
tions from an HSA are matters of contract
between the trustee and the account bene-
ficiary.
XI. Other Issues
Q–81. Are employers who contribute
to an employee’s HSA responsible for de-
termining whether the employee is an eli-
gible individual and the employee’s maxi-
mum annual contribution limit?
A–81. Employers are only responsible
for determining the following with respect
to an employee’s eligibility and maximum
annual contribution limit on HSA contri-
butions: (1) whether the employee is cov-
ered under an HDHP (and the deductible)
or low deductible health plan or plans (in-
cluding health FSAs and HRAs) sponsored
by that employer; and (2) the employee’s
age (for catch-up contributions). The em-
ployer may rely on the employee’s repre-
sentation as to his or her date of birth.
Q–82. May the employer recoup from
an employee’s HSA any portion of the
employer’s contribution to the employee’s
HSA?
A–82. No. Under section 223(d)(1)(E),
an account beneficiary’s interest in an
2004–33 I.R.B.207August 16, 2004

HSA is nonforfeitable. For example, on
January 2, 2005, the employer makes the
maximum annual contribution to employ-
ees’ HSAs, in the expectation that the
employees would work for the entire cal-
endar year 2005. On February 1, 2005,
one employee terminates employment.
The employer may not recoup from that
employee’s HSA any portion of the contri-
bution previously made to the employee’s
HSA.
Q–83. Is an HSA distribution subject
to the nondiscrimination rules of section
105(h)?
A–83. No. For amounts reimbursed
to a highly compensated individual by a
self-insured medical reimbursement plan
to be fully excludable from the individ-
ual’s gross income under section 105(b),
the self-insured medical reimbursement
plan must satisfy the requirements of sec-
tion 105(h). Section 105(h) is not satisfied
if the plan discriminates in favor of highly
compensated individuals as to eligibility
to participate or benefits. Because the
exclusion from gross income for amounts
distributed from an HSA is not determined
by section 105(b), but by section 223(b),
section 105(h) does not apply to HSAs.
Q–84. Is a deduction under section
223(a) for contributions to a self-employed
individual’s own HSA taken into account
in determining net earnings from self-em-
ployment under section 1402(a)?
A–84. No. The deduction is an ad-
justment to gross income under section
62(a)(19), and is reportable on the self-em-
ployed individual’sForm 1040 as an ad-
justment to gross income. It is not a de-
duction attributable to the self-employed
individual’s trade or business so it is not
taken as a deduction on Schedule C, Form
1040, nor is it taken into account in deter-
mining net earnings from self-employment
on Schedule SE, Form 1040.
Q–85. Does an employer’s contribu-
tion to an employee’s HSA affect the com-
putation of the earned income credit (EIC)
under section 32?
A–85. No. An employer’s contri-
butions to an employee’s HSAs are not
treated as earned income for EIC purposes.
Q–86. May an HDHP apply any re-
quired cost-of-living adjustments under
section 223(g) to the minimum annual
deductible amounts or maximum annual
out-of-pocket expense limits on the re-
newal date of the HDHP if that date is
after January 1st?
A–86. Yes. Generally, an HDHP
is a health plan that satisfies certain re-
quirements with respect to minimum
annual deductibles and maximum annual
out-of-pocket expense. These annual
amounts are indexed for inflation using
annual cost-of-living adjustments. Any
required change to the deductibles and
out-of-pocket expense limits may be ap-
pliedasoftherenewaldateoftheHDHP
in cases where the renewal date is after
the beginning of the calendar year, but in
no event longer than a 12-month period
ending on the renewal date. Thus, a fiscal
year plan that satisfies the minimum an-
nual deductible on the first day of the first
month of its fiscal year may apply that de-
ductible for the entire fiscal year, even if
the minimum annual deductible increases
on January 1 of the next calendar year.
Example. An individual obtains self-only cov-
erage under an HDHP on June 1, 2004, the first
day of the plan year, with an annual deductible of
$1,000. Assume that the cost-of living adjustments
require the minimum deductible amount to be in-
creased for 2005. The plan’s deductible is not
increased to comply with the increased minimum
deductible amount until the plan’s renewal date of
June 1, 2005. The plan satisfies the requirements for
an HDHP with respect to deductibles through May
30, 2005.
Q–87. Are HSAs available tobona
fideresidents of the Commonwealth of
Puerto Rico, American Samoa, the U.S.
Virgin Islands, Guam, and the Common-
wealth of the Northern Mariana Islands?
A–87.Bona fideresidents of the U.S.
Virgin Islands, Guam and the Common-
wealth of the Northern Mariana Islands
may establish HSAs. However,bona
fideresidents of Puerto Rico and Ameri-
can Samoa may establish HSAs only after
statutory provisions similar to sections 223
and 106(d) are enacted.
Q–88. If a C corporation makes a con-
tribution to the HSA of a shareholder who
is not an employee of the C corporation,
what are the tax consequences to the share-
holder and to the C corporation?
A–88. If a C corporation makes a con-
tribution to the HSA of a shareholder who
is not an employee of the C corporation,
the contribution will be treated as a distri-
bution under section 301. The distribution
is treated as a dividend to the extent the C
corporation has earnings and profits. The
portion of the distribution which is not a
dividend is applied against and reduces the
adjusted basis of the stock. To the extent
the amount of the distribution exceeds the
adjusted basis of the stock, the balance is
treated as gain from a sale or exchange of
property.
EFFECT ON OTHER DOCUMENTS
Notice 2004–2, 2004–2 I.R.B. 269, is
changed as follows:
The second sentence of A–2 is changed
to read: An “eligible individual” means ...
(3) is not enrolled in Medicare ....”
The last sentence in the first paragraph
of A–12 is changed to read: “In addition
to the maximum contribution amount,
catch-up contributions, as described in
[Notice 2004–2] A–14, may be made by
or on behalf of individuals age 55 and
older, who are not enrolled in Medicare.”
The first sentence of A–14 is changed to
read: “For individuals (and their spouses
covered under the HDHP) who have at-
tained 55 and are also not enrolled in Medi-
care ....”
The first sentence of the Example in
A–14 is changed to read: “An individ-
ual attains age 65 and becomes enrolled in
Medicare ....”
TRANSITION RELIEF
For months before January 1, 2005, a
health plan that would otherwise qualify
as an HDHP but for the lack of an ex-
press maximum on payments above the
deductible that complies with the out-of-
pocket requirement, as set forth in Q&A
17 and 20 will be treated as an HDHP. In-
dividuals covered under these health plans
will continue to be eligible to contribute to
HSAs before January 1, 2005.
For months before January 1, 2006, a
health plan that would otherwise qualify
as an HDHP but for an annual deductible
that does not satisfy the rule in Q&A
24 (concerning deductibles for periods
of more than 12 months) will be treated
as an HDHP if the plan was in effect or
submitted to approval to state insurance
regulators as of the date of publication of
this notice in the Internal Revenue Bul-
letin. Individuals covered under these
health plans will continue to be eligible
to contribute to HSAs before January 1,
2006.
August 16, 20042082004–33 I.R.B.

DRAFTING INFORMATION
The principal author of this notice
is Shoshanna Tanner of the Office of
Division Counsel/Associate Chief Coun-
sel (Tax Exempt and Government Enti-
ties). For further information regarding
this notice, contact Ms. Tanner at (202)
622–6080 (not a toll-free call).
Request for Comments
Concerning the Application of
Section 761
Notice 2004–53
SECTION 1. PURPOSE
This notice requests comments from
the public regarding the application of
§ 1.761–2(a)(2) of the Income Tax Regu-
lations.
SECTION 2. BACKGROUND
Section 761(a) of the Internal Revenue
Code provides that, under regulations, the
Secretary may, at the election of all of the
members of an unincorporated organiza-
tion, exclude such organization from the
application of all or part of subchapter K
of chapter 1, subtitle A of the Code, if the
income of the members of the organization
may be adequately determined without the
computation of partnership taxable income
and the organization is availed of (1) for in-
vestment purposes only and not for the ac-
tive conduct of a business, (2) for the joint
production, extraction, or use of property,
but not for the purpose of selling services
or property producedor extracted, or (3)
by dealers in securities for a short period
for the purpose of underwriting, selling, or
distributing a particular issue of securities.
Section 1.761–2(a)(2) provides that,
where the participants in the joint pur-
chase, retention, sale, or exchange of
investment property: (i) own the property
as coowners, (ii) reserve the right sepa-
rately to take or dispose of their shares of
any property acquired or retained, and (iii)
do not actively conduct business or irre-
vocably authorize some person or persons
acting in a representative capacity to pur-
chase, sell, or exchange such investment
property, although each separate partici-
pant may delegate authority to purchase,
sell, or exchange the participant’s share
of any such investment property for the
time being for the participant’s account,
but not for a period of more than one year,
then the group may be excluded from the
application of the provisions of subchapter
K under the rules set forth in § 1.761–2(b).
SECTION 3. REQUEST FOR PUBLIC
COMMENT
The Internal Revenue Service and the
Treasury Department request comments
regarding the application of the conditions
set forth in § 1.761–2(a)(2) and whether
those conditions should be revised, mod-
ified, or clarified. Among other things,
comments are requested on the circum-
stances under which participants in the
joint purchase, retention, sale, or exchange
of investment property should be treated
as owning the property as coowners for
purposes of electing out of subchapter K
under section 761.
Comments are also requested on the
facts that should be considered in deter-
mining whether participants in the joint
purchase, retention, sale, or exchange of
investment property have reserved the
right separately to take or dispose of their
underlying shares in the property. For
example, comments are requested as to
whether an agreement with a third party,
such as a lender, that limits the rights of
the coowners to take or dispose of their un-
derlying shares in the investment property
would prohibit the group from electing to
be excluded from the provisions of all or
part of subchapter K.
In addition, comments are requested on
the meaning of investment property for
purposes of § 1.761–2(a)(2). For example,
comments are requested on whether rental
real estate is (or can be) properly treated as
investment property for these purposes.
Taxpayers may submit comments in
writing to:
Internal Revenue Service
Attn: CC:PSI:RU (Notice 2004–53)
P.O. Box 7604
Room 5226
Ben Franklin Station
Washington, DC 20044
Or have them hand delivered between
the hours of 8:00 a.m. and 5:00 p.m. to:
Courier’s Desk
Internal Revenue Service
Attn: CC:PSI:RU (Notice 2004–53,
Room 5226)
1111 Constitution Ave., NW
Washington, DC 20224
Alternatively,taxpayersmay
submitcommentselectroni-
cally to the following address:
Notice.Comments@irscounsel.treas.gov.
Please include Notice 2004–53 in the sub-
ject line. Comments should be received
by November 15, 2004. All comments
submitted will be available for public
inspection and copying.
The principal author of this notice
is Christopher L. Trump of the Office of
Associate Chief Counsel (Passthroughs
& Special Industries). For further in-
formation regarding this notice, con-
tact Christopher L. Trump at (202)
622–3080 (not a toll-free call).
Alternative Methods of
Signing for Income Tax Return
Preparers
Notice 2004–54
I. PURPOSE
This notice provides that the Internal
Revenue Service will permit income tax
return preparers to sign original returns,
amended returns, or requests for filing ex-
tensions by rubber stamp, mechanical de-
vice, or computer software program.
II. BACKGROUND
Section 6061 of the Internal Revenue
Code generally provides that any tax re-
turn, statement, or other document shall be
signed in accordance with forms or regu-
lations prescribed by the Secretary. Sec-
tion 6695(b) imposes a monetary penalty
on income tax return preparers who fail to
sign a return. Treas. Reg. § 1.6695–1T(b)
requires an income tax return preparer to
sign a return after it is completed and be-
fore the return is presented to the taxpayer
for signature.
2004–33 I.R.B.209August 16, 2004

III. REQUIREMENTS FOR USE
OF ALTERNATIVE METHODS OF
SIGNING
This notice authorizes income tax re-
turn preparers to sign original returns,
amended returns, and requests for filing
extensions by means of a rubber stamp,
mechanical device, orcomputer software
program. These alternative methods of
signing must include either a facsimile
of the individual preparer’s signature or
the individual preparer’s printed name.
Income tax return preparers utilizing one
of these alternative means are personally
responsible for affixing their signatures to
returns or requests for extension.
Income tax return preparers who use al-
ternative methods of signing must provide
all of the other preparer information that is
required on returns and extensions, such as
the name, address, relevant employer iden-
tification number, the preparer’s individ-
ual identification number (social security
number or preparer tax identification num-
ber), and phone number.
This notice applies only to income tax
return preparers as defined by Treas. Reg.
§ 301.7701–15(a) and does not alter the
signature requirements for any other type
of document currently required to be man-
ually signed, such as elections, applica-
tions for changes in accounting method,
powers of attorney, or consent forms. In
addition, this notice does not alter the re-
quirement that tax returns or requests for
filing extensions be signed by the person
(i.e., the taxpayer) making the return or the
request by handwritten signature or other
authorized means.
IV. EFFECTIVE DATE
This notice applies to any original re-
turn, amended return, or request for filing
extension filed on or after January 1, 2004.
DRAFTING INFORMATION
The principal author of this notice
is Richard Charles Grosenick of the Of-
fice of Associate Chief Counsel (Proce-
dure and Administration). For further
information regarding this notice, con-
tact Richard Charles Grosenick at (202)
622–7950 (not a toll-free call).
26 CFR 601.105: Examination of returns and claims
for refund, credit or abatement; determination of cor-
rect tax liability.
(Also Part 1, §§ 368, 1361; 1.1361–3, 1.1362–5.)
Rev. Proc. 2004–49
SECTION 1. PURPOSE
This revenue procedure provides a sim-
plified procedure for a Qualified S Corpo-
ration,describedinsection3.03ofthisrev-
enue procedure, to request relief for a late
qualified subchapter S subsidiary (QSub)
election for a Qualified Subsidiary, de-
scribedinsection3.02ofthisrevenuepro-
cedure.
SECTION 2. BACKGROUND
Section 1361(b)(3)(B) of the Internal
Revenue Code allows an S corporation to
elect to treat a domesticcorporation that is
not an ineligible corporation (as defined in
§ 1361(b)(2)) as a QSub if 100 percent of
the stock of the corporation is held by the
S corporation. Under § 1361(b)(3)(A), a
QSub is not treated as a separate corpora-
tion and all assets, liabilities, and items of
income, deduction, and credit of a QSub
are treated as assets, liabilities, and such
items (as the case may be) of the S corpo-
ration.
Section 1.1361–3(a) of the Income Tax
Regulations generally provides the time
and manner of making a QSub election.
An S corporation makes a QSub election
for an eligible subsidiary by filing a Form
8869,Qualified Subchapter S Subsidiary
Election, with the applicable service cen-
ter. Under § 1.1361–3(a)(4), a QSub
election cannot be effective more than 2
months and 15 days prior to the date of
filing, and cannot be effective more than
12 months after the date of filing.
Situation 2 of Rev. Rul. 2004–85, pub-
lished in this Internal Revenue Bulletin,
concludes that an election to treat a sub-
sidiary as a QSub terminates if the S cor-
poration transfers 100 percent of the QSub
stock (whether by sale or reorganization
under § 368(a)(1)(A), (C), or (D)), to an-
other S corporation in a transaction that
does not qualify as a reorganization under
§368(a)(1)(F). In the interest of sound tax
administration, the Treasury Department
and the Internal Revenue Service believe
that a simplified procedure for requesting
relief for a late QSub election following
a QSub termination as a result of transac-
tiondescribedinSituation2ofRev. Rul.
2004–85 is appropriate.
SECTION 3. SCOPE
.01In General. This revenue procedure
provides a simplified procedure for a Qual-
ified S Corporation, described in section
3.03 of this revenue procedure, to obtain
relief for a late QSub election for a Qual-
ifiedSubsidiary,describedinsection3.02
of this revenue procedure.
.02Qualified Subsidiary. A corporation
is a Qualified Subsidiary if:
(1) 100 percent of its stock was trans-
ferred by one S corporation to another S
corporation in a sale or as part of a reorga-
nization under § 368(a)(1)(A), (C), or (D),
but not as part of a reorganization under
§ 368(a)(1)(F); and
(2) A QSub election was in effect for
such corporation immediately prior to such
transfer.
.03Qualified S Corporation.AnScor-
poration is a Qualified S Corporation with
respect to a Qualified Subsidiary if the S
corporation owns 100 percent of the stock
of the Qualified Subsidiary immediately
after the transaction described in section
3.02 of this revenue procedure.
SECTION 4. APPLICATION
.01Prospective relief.AQualifiedS
Corporation may obtain relief for a late
QSub election for a Qualified Subsidiary
byattachingacompletedForm8869toits
timely filed return (including extensions)
for the taxable year during which the trans-
action described in section 3.02(1) of this
revenue procedure occurred. The Form
8869 must state at the top “FILED PUR-
SUANT TO REV. PROC. 2004–49” and
must specify as the effective date for the
QSub election the date on which the trans-
action described in section 3.02(1) of this
revenue procedure occurred.
.02Alternative Relief. Revenue Pro-
cedure 2003–43, 2003–1 C.B. 998, pro-
vides alternative relief for late QSub elec-
tions that are not made within the period
described in section 4.01 of this revenue
procedure.
August 16, 20042102004–33 I.R.B.

.03Relief for Previous Transactions.
Prior to August 16, 2004, a corporation
may have participated in a transaction de-
scribed in section 3.02(1) of this revenue
procedure without knowing that the trans-
action required the making of a new QSub
election. An S corporation may obtain re-
lief for a late QSub election with respect to
such a transaction if it meets the following
conditions:
(1) The late QSub election is made by
a Qualified S Corporation for a Qualified
Subsidiary that, prior to August 16, 2004,
participated in a transaction described in
section 3.02(1) of this revenue procedure;
(2) The Qualified Subsidiary failed to
qualify as a QSub solely because the Qual-
ified S Corporation did not file a Form
8869 for the Qualified Subsidiary that was
effective as of the date of the transaction
described in section 3.02(1) of this revenue
procedure;
(3) The Qualified S Corporation re-
ported its items on its return for the taxable
year in which the transaction described in
section 3.02(1) of this revenue procedure
occurred, filed within 6 months of the
duedateforthereturn (excluding exten-
sions) and on all other affected returns (if
any), consistent with a timely QSub elec-
tion having been made for the Qualified
Subsidiary effective as of the date of the
transaction described in section 3.02(1) of
this revenue procedure;
(4) The Qualified S Corporation share-
holders treated the Qualified Subsidiary as
a QSub on their original returns for the
taxable year during which the transaction
described in section 3.02(1) of this rev-
enue procedure occurred and on all other
affected returns (if any);
(5) The Qualified S Corporation files a
completed Form 8869 with the appropriate
service center by August 16, 2005. The
Form 8869 must state at the top “FILED
PURSUANT TO REV. PROC. 2004–49”
and must specify as the effective date for
theQSubelectionthedateonwhichthe
transaction described in section 3.02(1) of
this revenue procedure occurred.
.04Relief by letter ruling. These pro-
cedures are in lieu of the letter ruling pro-
cedure that is used to obtain relief for a
late election under § 301.9100–1 through
301.9100–3 of the Procedure and Admin-
istration Regulations. Accordingly, user
fees do not apply to corrective action taken
under this revenue procedure. An entity
that is not eligible for relief under this rev-
enue procedure, or is denied relief by the
service center, may request relief by ap-
plying for a letter ruling. The procedural
requirements for requesting a letter rul-
ingaredescribedinRev. Proc. 2004–1,
2004–1 I.R.B. 1 (or its successor).
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective on
August 16, 2004.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Charles J. Langley, Jr. of
the Office of the Associate Chief Counsel
(Passthroughs and Special Industries). For
further information regarding this revenue
procedure, contact Mr. Langley at (202)
622–3060 (not a toll-free call).
NOTE: This revenue procedure will be reprinted as the next revision of IRS Publication 1220,Specifications for Filing Forms
1098, 5498, and W–2G Electronically or Magnetically:
Use this Revenue Procedure to prepare Tax Year2004and prior year information returns for submission to Internal Revenue Service
(IRS) using any of the following:
- Electronic Filing
- Tape Cartridge
-3
1
/2-Inch Diskette
Caution to filers:
Please read this publication carefully. Persons or businesses required to file information returns electronically or
magnetically may be subject to penalties for failure to file or include correct information if they do not follow the
instructions in this Revenue Procedure.
2004–33 I.R.B.211August 16, 2004

IMPORTANT NOTES:
IRS/MCC now offers an Internet connection athttp://fire.irs.govfor electronic filing.
The FIRE Syste
m will be down from Dec. 23, 2004, through Jan. 4, 2005, for upgrading.
It is not operational during this time for submissions.
Beginning in
Tax Year 2006 processing year 2007, IRS/MCC will no longer accept
3
1
/2-inch diskettes for filing information returns.
Rev. Proc. 2004–50
TABLE OF CONTENTS
PART A. GENERAL
SEC. 1. PURPOSE................................................................................................. 214
SEC. 2. NATURE OF CHANGES—CURRENT YEAR (TAX YEAR2004).................................................. 215
SEC. 3. WHERE TO FILE AND HOW TO CONTACT THE IRS, MARTINSBURG COMPUTING CENTER.................... 216
SEC. 4. FILING REQUIREMENTS.................................................................................. 217
SEC. 5. VENDOR LIST............................................................................................. 218
SEC. 6. FORM 4419, APPLICATION FOR FILING INFORMATION RETURNS
ELECTRONICALLY/MAGNETICALLY
.................................................................. 218
SEC. 7. TEST FILES............................................................................................... 219
SEC. 8. FILING OF INFORMATION RETURNS MAGNETICALLY AND RETENTION REQUIREMENTS.................... 220
SEC. 9. DUE DATES............................................................................................... 221
S
EC. 10. REPLACEMENT MAGNETIC MEDIA
.....................................................
.................. 2
21
SEC. 11. CORRECTED RETURNS................................................................................... 222
SEC. 12. EFFECT ON PAPER RETURNS AND STATEMENTS TO RECIPIENTS.......................................... 226
SEC. 13. COMBINED FEDERAL/STATE FILING PROGRAM........................................................... 226
SEC. 14. PENALTIES ASSOCIATED WITH INFORMATION RETURNS.................................................. 228
SEC. 15. STATE ABBREVIATIONS.................................................................................. 229
SEC. 16. MAJOR PROBLEMS ENCOUNTERED...................................................................... 229
PART B. ELECTRONIC FILING SPECIFICATIONS
SEC. 1. GENERAL................................................................................................ 231
SEC. 2. ADVANTAGES OF FILING ELECTRONICALLY.............................................................. 231
SEC. 3. ELECTRONIC FILING APPROVAL PROCEDURE............................................................. 231
SEC. 4. TEST FILES............................................................................................... 232
SEC. 5. ELECTRONIC SUBMISSIONS.............................................................................. 232
SEC. 6. PIN REQUIREMENTS...................................................................................... 233
SEC. 7. ELECTRONIC FILING SPECIFICATIONS.................................................................... 233
August 16, 20042122004–33 I.R.B.

SEC. 8. CONNECTING TO THE FIRE SYSTEM....................................................................... 233
SEC. 9. COMMON PROBLEMS AND QUESTIONS ASSOCIATED WITH ELE
CTRONIC FILING
.........
.................. 235
PART C. MAGNETIC MEDIA FILING SPECIFICATIONS
SEC. 1. TAPE CARTRIDGE SPECIFICATIONS....................................................................... 236
SEC. 2. 3
1
/2-INCH DISKETTE SPECIFICATIONS..................................................................... 236
PART D. RECORD FORMAT SPECIFICATIONS AND RECORD LAYOUTS
SEC. 1. GENERAL................................................................................................. 237
SEC. 2. TRANSMITTER “T” RECORD — GENERAL FIELD DESCRIPTIONS............................................ 237
SEC. 3. TRANSMITTER “T” RECORD — RECORD LAYOUT.......................................................... 240
SEC. 4. PAYER “A” RECORD — GENERAL FIELD DESCRIPTIONS.................................................... 241
SEC. 5. PAYER “A” RECORD — RECORD LAYOUT.................................................................. 250
SEC. 6. PAYEE “B” RECORD — GENERAL FIELD DESCRIPTIONS AND RECORD LAYOUTS............................ 251
(1)Payee“B”Record—RecordLayoutPositions544–750forForm1098......................................... 258
(2)Payee“B”Record—RecordLayoutPositions544–750forForm1098–E ...................................... 259
(3)Payee“B”Record—RecordLayoutPositions544–750forForm1098–T ...................................... 259
(4)Payee“B”Record—RecordLayoutPositions544–750forForm1099–A...................................... 260
(5)Payee“B”Record—RecordLayoutPositions544–750forForm1099–B...................................... 261
(6)Payee“B”Record—RecordLayoutPositions544–750forForm1099–C...................................... 263
(7)Payee“B”Record—RecordLayoutPositions544–750forForm1099–CAP ................................... 264
(8)Payee“B”Record—RecordLayoutPositions544–750forForm1099–DIV.................................... 265
(9)Payee“B”Record—RecordLayoutPositions544–750forForm1099–G...................................... 266
(10)Payee“B”Record—RecordLayoutPositions544–750forForm1099–H..................................... 267
(11)Payee“B”Record—RecordLayoutPositions544–750forForm1099–INT................................... 268
(12)Payee“B”Record—RecordLayoutPositions544–750forForm1099–LTC................................... 269
(13)Payee“B”Record—RecordLayoutPositions544–750forForm1099–MISC................................. 271
(14)Payee“B”Record—RecordLayoutPositions544–750forForm1099–OID................................... 272
(15)Payee“B”Record—RecordLayoutPositions544–750forForm1099–PATR ................................. 273
(16)Payee“B”Record—RecordLayoutPositions544–750forForm1099–Q..................................... 274
(17)Payee“B”Record—RecordLayoutPositions544–750forForm1099–R..................................... 275
(18)Payee“B”Record—RecordLayoutPositions544–750forForm1099–S ..................................... 279
(19)Payee “B” Record — Record Layout Positions 544–750 for Form 1099–SA.................................... 280
(20)Payee“B”Record—RecordLayoutPositions544–750forForm5498........................................ 281
(21)Payee“B”Record—RecordLayoutPositions544–750forForm5498–ESA .................................. 282
(22)Payee “B” Record — Record Layout Positions 544–750 for Form 5498–SA.................................... 282
(23)Payee“B”Record—RecordLayoutPositions544–750forFormW–2G...................................... 283
SEC. 7. END OF PAYER “C” RECORD — GENERAL FIELD DESCRIPTIONS AND RECORD LAYOUT..................... 285
SEC. 8. STATE TOTALS “K” RECORD — GENERAL FIELD DESCRIPTIONS AND RECORD LAYOUT..................... 286
SEC. 9. END OF TRANSMISSION “F” RECORD — GENERAL FIELD DESCRIPTIONS AND RECORD
LAYOUT
............................................................................................. 288
SEC. 10. FILE LAYOUT DIAGRAM.................................................................................. 290
PART E. EXTENSIONS OF TIME AND WAIVERS
SEC. 1. GENERAL — EXTENSIONS................................................................................. 290
SEC. 2. SPECIFICATIONS FOR ELECTRONIC FILING OR MAGNETIC MEDIA EXTENSIONS OF TIME.................. 291
SEC. 3. RECORD LAYOUT — EXTENSION OF TIME................................................................. 292
2004–33 I.R.B.213August 16, 2004

SEC. 4. EXTENSION OF TIME FOR RECIPIENT COPIES OF INFORMATION RETURNS................................. 293
SEC. 5. FORM 8508, REQUEST FOR WAIVER FROM FILING INFORMATION RETURNS ON MAGNETIC
MEDIA
............................................................................................... 294
PART A. GENERAL
Revenue Procedures are generally revised annually to reflect legislative and form changes. Comments concerning this Revenue
Procedure, or suggestions for making it more helpful, can be addressed to:
Internal Revenue Service
Martinsburg Computing Center
Attn: Information Reporting Program
230 Murall Drive
Kearneysville, WV 25430
Sec. 1. Purpose
.01The purpose of this Revenue Procedure is to provide the specifications for filing Forms 1098, 1099, 5498, and W–2G with
IRS electronically through the IRS FIRE System or magnetically, using IBM 3480, 3490, 3490E, 3590, 3590E, tape cartridges or
3
1
/2-inch diskettes. This Revenue Procedure must be used for the preparation of Tax Year2004information returns and information
returns for tax years prior to2004filed beginning January 1, 2005,and postmarked by December 1, 2005. Specifications for filing
the following forms are contained in this Revenue Procedure.
(a)Form 1098, Mortgage Interest Statement
(b)Form 1098–E, Student Loan Interest Statement
(c)Form 1098–T, Tuition Statement
(d)Form 1099–A, Acquisition or Abandonment of Secured Property
(e)Form 1099–B, Proceeds From Broker and Barter Exchange Transactions
(f)Form 1099–C, Cancellation of Debt
(g)Form 1099–CAP, Changes in Corporate Control and Capital Structure
(h)Form 1099–DIV, Dividends and Distributions
(i)Form 1099–G, Certain Government Payments
(j)Form 1099–H, Health Insurance Advance Payments
(k)Form 1099–INT, Interest Income
(l)Form 1099–LTC, Long-Term Care and Accelerated Death Benefits
(m)Form 1099–MISC, Miscellaneous Income
(n)Form 1099–OID, Original Issue Discount
(o)Form 1099–PATR, Taxable Distributions Received From Cooperatives
(p)Form 1099–Q, Payments From Qualified Education Programs (Under Section 529 and 530)
(q)Form 1099–R, Distributions From Pensions, Annuities, Retirement or Profit-SharingPlans, IRAs, Insurance Contracts, etc.
(r)Form 1099–S, Proceeds From Real Estate Transactions
(s)Form 1099–SA, Distributions From a HSA, Archer MSA, or Medicare+Choice MSA
(t)Form 5498, IRA Contribution Information
(u)Form 5498–ESA, Coverdell ESA Contribution Information
(v)Form 5498–SA, HSA, Archer MSA, or Medicare+Choice MSA Information
(w)Form W–2G, Certain Gambling Winnings
.02All data received at IRS/MCC for processing will be given the same protection as individual income tax returns (Form 1040).
IRS/MCC will process the data and determine if the records are formatted andcoded according to this Revenue Procedure.
.03Specifications for filing Forms W–2, Wage and Tax Statements, magnetically/electronically areonlyavailable from the Social
Security Administration (SSA). Filers cancall 1–800–SSA–6270 to obtain the telephone number of the SSA Employer Service Liaison
Officer for their area.
.04IRS/MCC doesnotprocess Forms W–2. Paperand/ormagnetic media for Forms W–2 must be sent to SSA. IRS/MCC does,
however, process waiver requests (Form 8508) and extension of time to file requests (Form 8809) for Forms W–2 and requests for an
extension of time to provide the employee copies of Forms W–2.
.05Generally, the box numbers on the paper forms correspond withthe amount codes used to file electronically/magnetically;
however, if discrepancies occur, the instructions in this Revenue Procedure govern.
.06This Revenue Procedure also provides the requirements and specifications for electronic or magnetic media filing under the
Combined Federal/State Filing Program.
.07The following Revenue Procedures and publications provide moredetailed filing procedures for certain information returns:
August 16, 20042142004–33 I.R.B.

(a)2004 General Instructions for Forms 1099, 1098, 5498, and W–2G.
(b)Publication 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, W–2G and 1042–S.
(c)Publication 1239, Specifications for Filing Form 8027, Employer’s Annual Information Return of Tip Income and Allocated
Tips, Magnetically or Electronically.
(d)Publication 1187, Specifications for Filing Form 1042–S, Foreign Person’s U.S. Source Income Subject to Withholding,
Electronically or Magnetically.
(e)Publication 1245, Specifications for Filing Form W–4, Employee’s Withholding Allowance Certificate, Magnetically or
Electronically.
.08This Revenue Procedure supersedes Rev. Proc. 2003–52 published as Publication 1220 (Rev. 9–2003), Specifications for
Filing Forms 1098, 1099, 5498, and W–2G Electronically or Magnetically.
Sec. 2. Nature of Changes—Current Year (Tax Year2004)
.01In this publication, all pertinent changes for Tax Year2004are emphasized by the use ofitalics. Portions of text that require
special attention are in boldface text. Filers are always encouraged to read the publication in its entirety.
.02 Programming Changes
a. General
(1)Part B, Electronic Filing Specifications, was completely revised. Please read carefully. We nowoffer an internet connection
athttp://fire.irs.gov.
(2)Clarifying information is included in the Payee ‘B’ Record, the Payer’s Account Number for Payee, positions 21–40.
(3)Several forms have been revised including Form 1099-B, 1099-CAP and 1099-DIV. Because several fields on each of these
forms were deleted, the prior year correction process will be impacted. If you are required to make correctionselectronically
or magnetically to any of these forms for tax year 2003 or earlier, contact the Information Reporting Program Customer
Service Section for instructions toll-free at 866–455–7438.
b. Programming Changes — Transmitter “T” Record
(1)For all forms, Payment Year, Field Positions 2–5, mustbe incremented to update the four-digit report year(2003 to 2004),
unless reporting prior year data.
c. Programming Changes — Payer “A” Record
(1)For all forms, Payment Year, Field Positions 2–5, mustbe incremented to update the four-digit report year(2003 to 2004),
unless reporting prior year data.
(2)For Form 1099–B, Amount Code A, Proceeds From Broker and Barter Exchange Transactions Post – 05/05/2003 Profit or
(loss) realized and Amount Code B, Post – 05/05/2003 Aggregate profit or (loss) were deleted.
(3)Form 1099–CAP, Amount Code 4, Federal Income Tax Withheld, Amount Code 8, Fair Market Value of Stock Received
and Amount Code 9, Fair Market Value of Other Property Received were deleted. Amount Code 3 was changed to Amount
Code 2 and the title was changed to Aggregate Amount Received.
(4)For Form 1099–DIV, Dividends and Distributions, Amount Code 4, Post – May 5 capital gain distribution and Amount
Code 5, Qualified 5-year gain, were deleted.
(5)Form 1099–MSA is changed to 1099–SA, Distributions Froma HSA, Archer MSA, or Medicare+Choice MSA. All refer-
ences in the publication to 1099-MSA have changed to 1099–SA.
(6)Form 5498–MSA is changed to 5498–SA, HSA, Archer MSA, or Medicare+Choice MSA Information. The titles of Amount
Codes 1, 3 and 5 have changed to include HSA. All references in the publication to 5498–MSA have changed to 5498–SA
d. Programming Changes — Payee “B” Record
(1)For all forms, Payment Year, Field Positions 2–5, mustbe incremented to update the four-digit report year(2003 to 2004),
unless reporting prior year data.
(2)For Form 1099-B, positions 608–626, provide specific formatting for the following information: Number of Shares Ex-
changed, Classes of Stock Exchanged, and Recipient Indicator. The Corporation’s Name, Street Address, City, State and
ZIP can be entered in the Special Data Entry Fields, positions 663–722.
(3)For Form 1099–CAP, the following fields were deleted: Second TIN Notice, position 544,Gross Proceeds Indicator, posi-
tion 547, CUSIP Number, positions 556–568, Description, positions 569–607, and Filed by Broker Indicator, position 626.
(4)For Form 1099–Q, field position 547, the title of the field has changed to ‘Trustee to Trustee Transfer Indicator’.
(5)For Form 1099–R, distribution codes 5, Q and T can not be used with any other distribution code. Code J can be used with
codes 8 or P.
(6)For Form 5498, use the Special Data Entry field, to report military service codes. Refer to 2004 Instructions for Forms
1099–R and 5498 for specific code information.
2004–33 I.R.B.215August 16, 2004

(7)For Form 1099-SA, two new indicator fields, position 548, HSA Indicator and position 549, Archer MSA Indicator were
added.
(8)For Form 5498-SA, two new indicator fields, position 548, HSA Indicator and position 549, Archer MSA Indicator were
added.
Sec. 3. Where To File and How to Contact the IRS, Martinsburg Computing Center
.01All information returns filed electronically or magnetically are processed at IRS/MCC. Files containing information returns
and requests for IRS electronic and magnetic media filing information should be sent to the following address:
IRS-Martinsburg Computing Center
Information Reporting Program
230 Murall Drive
Kearneysville, WV 25430
.02All reque
sts for an extension of time to file information returnswith IRS/MCC or to the recipients and requests for undue
hardship wai
vers filed on Form 8508 should be sent to the following address:
IRS-Martins
burg Computing Center
Information Reporting Program
Attn: Extension of Time Coordinator
240 Murall D
rive
Kearneysville, WV 25430
.03The telephone numbers for magnetic media inquiries or electronic submissions are:
Information Reporting Program Customer Service Section
TOLL-FREE 1–866–455–7438 or outside the U.S. 1–304–263–8700
email atm
ccirp@irs.gov
304–267–3367 — TDD
(Telecommunication Device for the Deaf)
304–264–5602 — Fax Machine
Electron
ic Filing — FIRE system
http://fire.irs.gov
TO OBTAI
NFORMS:
1–800–TAX–FORM (1–800–829–3676)
www.ir
s.gov — IRS website access to forms (See Note.)
Note: Because paper forms are scanned during processing, you cannot file with the IRS Form 1096, and Copy A of Forms
1098, 1099, 5498 or W2–G that you download and print from the IRS website.
.04The2004 General Instructions for Forms 1099, 1098, 5498, and W–2Ghas been included in the Publication 1220 for your
convenience. Form 1096 is used only to transmit Copy A ofpaperForms 1099, 1098, 5498, and W–2G. If filing paper returns, follow
the mailing instructions on Form 1096 and submit the paper returns to the appropriate IRS Service Center.
.05Make requests for paper Forms 1096, 1098, 1099, 5498, and W–2G,and publications related to electronic/magnetic filing by
calling the IRS toll-free number1–800–TAX–FORM (1–800–829–3676) or on the IRS website at www.irs.gov.
.06Questions pertaining to magnetic media or internet filing of Forms W–2mustbe directed to the Social Security Administration
(SSA). Filers can call 1–800–772–6270 to obtain the phone number of the SSA Employer Service Liaison Officer for their area.
.07Payersshould notcontact IRS/MCC if they have received a penalty notice and need additional information or are requesting
an abatement of the penalty. A penalty notice contains an IRS representative’s name and/or telephone number for contact purposes;
or, the payer may be instructed to respond in writing to the address provided. IRS/MCC doesnotissue penalty notices and doesnot
have the authority to abate penalties. For penalty information, refer to the Penalties section of the2004 General Instructions for Forms
1099, 1098, 5498, and W–2G.
August 16, 20042162004–33 I.R.B.

.08A taxpayer or authorized representative may request a copy of a tax return, including Form W–2 filed with a return, by submitting
Form 4506, Request for Copy of Tax Form, to IRS. This form may be obtained by calling1–800–TAX–FORM (1–800–829–3676).
For any questions regarding this form, call 1–800–829–1040.
.09The Information Reporting Program Customer Service Section (IRP/CSS), located atIRS/MCC, answers electronic/magnetic
media, paper filing, and tax law questions from the payer community relating to the correct preparation and filing of business informa-
tion returns (Forms 1096, 1098, 1099, 5498, 8027, W–2G, and W–4). IRP/CSS also answers questions relating to the electronic/mag-
netic media filing of Forms 1042–S and to the tax law criteria and paper filing instructions for Forms W–2 and W–3. Inquiries dealing
with backup withholding and reasonable cause requirements due to missing and incorrect taxpayer identification numbers are also
addressed by IRP/CSS. Assistance is available year-round to payers, transmitters, and employers nationwide, Monday through Friday,
8:30 a.m. to 4:30 p.m. Eastern time, by calling toll-free1–866–455–7438or via email at m
ccirp@irs.gov.Do not include SSNs or
EINs on emails since this is not a secure line. The Telecommunications Device for the Deaf(TDD)toll number is304–267–3367.
Call as soon as questions arise to avoid the busy filing seasons at the end of January and February. Recipients of information returns
(payees) should continue to contact 1–800–829–1040 with any questions on how to report the information returns data on their tax
returns.
.10Form 4419, Application for Filing Information Returns Electronically/Magnetically, Form 8809, Application for Extension of
Time to File Information Returns, and Form 8508, Request for Waiver From Filing Information Returns on Magnetic Media, may be
faxed to IRS/MCC at 304–264–5602. Form 4804, Transmittal of Information Returns Filed Magnetically,mustalways be included
with media shipments.
Sec. 4. Filing Requirements
.01The regulations under section 6011(e)(2)(A) of the Internal Revenue Code provide that any person, including a corporation,
partnership, individual, estate, and trust, who is required to file250 or more information returns must file such returns electroni-
cally/magnetically.The 250* or more requirement applies separately foreach type of return and separately to each type of
corrected return.
*Even though filers may submit up to 249 information returns on paper, IRS encourages filers to transmit those infor-
mation returns electronically or magnetically.
.02All filing requirements that follow apply individually to each reporting entity as defined by its separate Taxpayer Identification
Number (TIN), Social Security Number (SSN),Employer Identification Number (EIN), or Individual Taxpayer Identification Number
(ITIN). For example, if a corporation with several branches or locations uses the same EIN, the corporation must aggregate the total
volume of returns to be filed for that EIN and apply thefiling requirements to eachtype of return accordingly.
.03Payers who are required to submit their information returns on magnetic media may choose to submit their documents by
electronic filing. Payers, who submit their information returns electronically by March 31,2005, are considered to have satisfied the
magnetic media filing requirements.
.04IRS/MCC has one method for filing information returns electronically; see Part B.
.05The following requirements apply separately to both originals and corrections filed electronically/magnetically:
2004–33 I.R.B.217August 16, 2004

1098
1098–E
1098–T
1099–A
1099–B
1099–C
1099–CAP
1099–DIV
1099–G
1099–H
1099–INT
1099–LTC
1099–MISC
1099–OID
1099–PATR
1099–Q
1099–R
1099–S
1099–SA
5498
5498–ESA
5498–SA
W–2G
250ormoreofanyof these forms require magnetic media filing with IRS. Filing electronically
will also meet this requirement. These are stand-alone documents and are not to be aggregated
for purposes of determining the 250 threshold. For example, if you must file 100 Forms 1099–B
and 300 Forms 1099–INT, Forms 1099–B need not be filed electronically or magnetically since
they do not meet the threshold of 250. However, Forms 1099–INT must be filed electronically or
magnetically since they meet the threshold of 250.
.06The above requirements do not apply if the payer establishes undue hardship (See Part E, Sec. 5).
Sec. 5. Vendor List
.01IRS/MCC prepares a list of vendors who support electronic or magnetic media filing. The Vendor List (Pub. 1582) contains
the names of service bureaus that will produce or submit files for electronic filing or on the prescribed types of magnetic media. It
also contains the names of vendors who provide software packages for payers who wish toproduce electronic files or magnetic media
on their own computer systems. This list is compiled as a courtesy and in no way implies IRS/MCC approval or endorsement.
.02If filers meeting the filing requirementsengage a service bureau to prepare media ontheir behalf, the filers should be careful
not to report duplicate data, which may cause penalty notices to be generated.
.03The Vendor List, Publication 1582, is updated periodically. Themost recent revision will be available on the IRS website at
www.irs.gov.
.04A vendor, who offers a software package, orhas the capability to electronically file information returns, or has the ability to
produce magnetic media for customers, and who would like to be included on the list, must submit a letter or email to IRS/MCC. The
request should include:
(a)Company name
(b)Address (include city, state, and ZIP code)
(c)Telephone and FAX number (include area code)
(d)Email address
(e)Contact person
(f)Type(s) of service provided (e.g.,service bureau and/or software)
(g)Type(s) of media offered (e.g., tape cartridge, 3
1
/2-inch diskette, or electronic filing)
(h)Type(s) of return(s)
Sec. 6. Form 4419, Application for Filing Information Retur
ns Electronically/Magnetically
.01Transmitters are required to submit Form 4419, Application forFiling Information Returns Electronically/Magnetically, to
request authorization to file information returns with IRS/MCC. A single Form 4419 should be filed no matter how many types of
returns the transmitter will be submitting electronically/magnetically. For example, if a transmitter plans to file Forms 1099–INT,
one Form 4419 should be submitted. If, at a later date, another type of form (Forms 1098, 1099, 5498 and W–2G) is to be filed, the
transmitter does not need to submit a new Form 4419.
Note: EXCEPTIONS — An additional Form 4419 is required for filing each of the following types of returns: Form
1042–S, Foreign Person’s U.S. Source Income Subject to Withholding, Form 8027, Employer’s Annual Information Return of
Tip Income and Allocated Tips, and Form W–4, Employee’s Withholding Allowance Certificate. See the back of Form 4419
for detailed instructions.
August 16, 20042182004–33 I.R.B.

.02Tape cartridge, diskette, and electronically filed returns may not be submitted to IRS/MCC until the application has been ap-
proved. Please read the instructions on the back of Form 4419 carefully. Form 4419 is included in the Publication 1220 for the filer’s
use. This form may be photocopied. Additional forms may be obtained by calling1–800–TAX–FORM (1–800–829–3676).The
form is also available on the IRS Website atwww.irs.gov.
.03Upon approval, a five-character alpha/numeric Transmitter Control Code (TCC) will be assigned and included in an approval
letter. The TCCmustbe coded in the Transmitter “T” Record. IRS/MCC uses the TCC to identify payer/transmitters and to track
their files through the processing system. The same TCC can be used regardless of the method of filing. For example, a payer may
send their production data on a tape cartridge and then later file a correction file electronically. The same TCC can be used for each
filing.
.04IRS/MCC encourages transmitters who file for multiple payersto submit one application and to use the assigned TCC for all
payers. While not encouraged, multiple TCCs can be issued to payers with multiple TINs. If a transmitter uses more than one TCC
to file, each TCC must be reported in separate transmissions if filing electronically or on separatemedia if filing magnetically.
.05If a payer’s files are prepared by a service bureau, the payer may not need to submit an applicationtoobtainaTCC.Some
service bureaus will produce files, code their own TCC in the file, and send it to IRS/MCC for the payer. Other service bureaus will
prepare the file and return the file to the payer for submission to IRS/MCC. These service bureaus may require the payer to obtain a
TCC, which is coded in the Transmitter “T” Record. Payers should contact their service bureaus for further information.
.06Form 4419 may be submitted anytime during the year; however, itmustbe submitted to IRS/MCC at least 30 days before the
due date of the return(s) for current year processing. This will allow IRS/MCC the minimum amount of time necessary to process
and respond to applications. In the event that computer equipment or software is not compatible with IRS/MCC, a waiver may be
requested to file returns on paper documents (See Part E, Sec. 5).
.07Once a transmitter is approved to file electronically/magnetically, it is not necessary to reapplyunless:
(a)The payer has discontinued filing electronically or magnetically for two consecutive years. The payer’s TCC may have been
reassigned by IRS/MCC. Payers who are aware the TCC assigned will no longer be used are requested to notify IRS/MCC
so these numbers may be reassigned.
(b)The payer’s files were transmitted in the past by a service bureau using the service bureau’s TCC, but now the payer has
computer equipment compatible with that of IRS/MCC and wishes to prepare his or her own files. The payer must request
a TCC by filing Form 4419.
.08In accordance with Regulations Section 1.6041–7(b), payments by separate departments of a health care carrier to providers of
medical and health care services may be reported on separate returns filed electronically or magnetically. In this case, the headquarters
will be considered the transmitter, and the individual departments of the company filing reports will be considered payers. A single
Form 4419 covering all departments filing electronically/magnetically should be submitted. One TCC may be used for all departments.
.09Annually, a Publication 1220 containing the current Revenue Procedure, forms, and instructions will be sent to the attention of
the contact person indicated on Form 4419. Additional copies can be obtained by downloading from the IRS Website atwww.irs.gov
or by calling 1–800–829–3676.
.10Ifanyof the information (name, TIN or address) on Form 4419 changes, please notify IRS/MCC in writing so the IRS/MCC
database can be updated. You may use our email address, m
ccirp@irs.gov, for basic name and address changes. IRS/MCC can not
accept TIN information via email. A change in the method by which information returns are submitted is not information that needs
to be updated (e.g., diskette to electronic). The transmitter should include the TCC in all correspondence.
.11Approval to file does not imply endorsement by IRS/MCC of any computer software or of the quality of tax preparation services
provided by a service bureau or software vendor.
Sec. 7. Test Files
.01IRS/MCC encourages first time electronic or magnetic media filers to submit a test. Test files arerequiredfor filers wishing to
participate in the Combined Federal/State Filing Program. See Part A, Sec. 13, for further information on the Combined Federal/State
Filing Program.
.02The test filemustconsist of a sample of each type of record:
(a)Transmitter “T” Record (all fields marked required must include transmitter information)
(b)Payer “A” Record (must not be fictitious data)
(c)Multiple Payee “B” Records(at least 11 “B” Records per each “A” Record)
(d)End of Payer “C” Record
(e)State Totals “K” Record, if participating in the Combined Federal/State Filing Program
(f)End of Transmission “F” Record (See Part D for record formats.)
.03Use the Test Indicator “T” in Field Position 28 of the “T” Record to show this is a test file.
.04IRS/MCC will check the file to ensure it meets the specifications ofthis Revenue Procedure. For current filers, sending a test
file will provide the opportunity to ensure their software reflects any programming changes.
.05Electronic tests may be submittedNovember 1, 2004, through February 15, 2005. See Part B, Sec. 4.03, for information on
electronic test results.
2004–33 I.R.B.219August 16, 2004

.06Tests submitted on magnetic media should bepostmarkedno earlier thanOctober 1, 2004, and no later than December 1,
2004.Testsmustbereceivedat MCC by December 15 in order to be processed. Test processing will not begin until November 1.
For tests filed on tape cartridge, and 3
1
/2-inch diskette, the transmitter must include the signed Form 4804 in the same package with
the corresponding magnetic media. The “TEST” box in Block 1 on Form 4804 must be marked and the external media label must
denote “TEST”.
.07IRS/MCC will send a letter of acknowledgment to indicate the magnetic media test results. Unacceptable magnetic media test
filers will receive a letter and/or documentation identifying the errors. Resubmission of magnetic media test files must bereceived
by IRS/MCC no later thanDecember 15, 2004.
TESTING PERIODS
MAGNETIC MEDIAELECTRONIC FILES
November 1, 2004, through December 15, 2004*
* Postmark media by Dec. 1 in order for media to be
receivedat MCC by December 15
November 1, 2004, through February 15, 2005
Sec. 8. Filing of Information Returns Magnetically and Retention Requirements
.01Form 4804, Transmittal of Information Returns Reported Magnetically, or a computer-generated substitute, must accompany
allmagnetic media shipments except for replacements, when Form 4804 is not always necessary (See Part A, Sec. 10).
.02IRS/MCC allows for the use of computer-generated substitutes for Form 4804. The substitutes must contain all information
requested on the original forms including the affidavit and signature line. Photocopies areacceptable, however, an original signature is
required. When using computer-generated forms, be sure to clearly mark the tax year being reported. This will eliminate a telephone
communication from IRS/MCC to question the tax year.
.03Form 4804 may be signed by the payer or the transmitter, servicebureau, paying agent, or disbursingagent (all hereafter referred
to as agent) on behalf of the payer. Failure to sign the affidavit onForm 4804 may delay processing or could result in the files being
unprocessed. An agent may sign Form 4804 if the agent has the authority to sign the affidavit under an agency agreement (either oral,
written, or implied) that is valid under state law and adds the caption “FOR: (name of payer).”
.04Although an authorized agent may sign the affidavit, the payer is responsible for the accuracyof Form 4804 and the returns
filed. The payer will be liable for penalties for failure to comply with filing requirements.
.05Multiple types of media may be submitted in a shipment. However, a separate Form 4804 must be submitted for each type of
media.
.06Current and prior year data may be submitted in the same shipment; however, each tax year must be on separate media, and a
separate Form 4804 must be prepared to clearly indicate each tax year.
.07Filers who have prepared their information returns in advance of the due date are encouraged to submit this information to
IRS/MCC no earlier than January 1 of the year the returns are due.
.08 Do not report duplicate information. If a filer submits returns electronically/magnetically, identical paper documents
must not be filed. This may resultin erroneous penalty notices.
.09A self-adhesive external media label, created by the filer, must be affixed to each piece of magnetic media. For instructions on
how to prepare an external media label, refer to Notice 210 in the forms section of this publication. If diskettes are used, be certain that
only MS-DOS compatible operating systems were used to prepare the diskettes.Non MS-DOS diskettes are no longer acceptable
at IRS/MCC.
.10When submitting files include the following:
(a)AsignedForm 4804
(b)External media label (created byfiler) affixed to magnetic media
(c)IRB Box
oflabeled on outside of each package
.11IRS/MCC will not return media after successful processing. Therefore, if the transmitter wants proof that IRS/MCC received
a shipment, the transmitter should select a service with tracking capabilities or one that will provide proof of delivery. Do not use
special shipping containers for mailing media to IRS/MCC. Shipping containers will not be returned.
.12IRS/MCC will not pay for or accept “Cash-on-Delivery” or “Charge to IRS” shipmentsof tax information that an individual
or organization is legally required to submit.
.13 Payers should retain a copy of the information returns filed with IRS or have the ability to reconstruct the data for at
least 3 years from the reporting due date, with the exception of:
(a)A 4-year retention period is required for all information returns when backup withholding is imposed.
(b)A financial entity must retain a copy of Form 1099–C, Cancellation of Debt, or have the ability to reconstruct the data
required to be included on the return, for at least 4 years from the date such return is required to be filed.
August 16, 20042202004–33 I.R.B.

Sec. 9. Due Dates
.01The due dates for filing paper returns with IRS also apply to magnetic media. Filing of information returns is on a calendar
year basis, except for Forms 5498 and 5498–SA, which are used to report amounts contributed during or after the calendar year (but
not later than April 15). The following due dates will apply to Tax Year2004:
Due Dates
Electronic FilingMagnetic Filing (See Note.)
Forms 1098, 1099, and W–2GForms 1098, 1099, and W–2G
Recipient Copy — January 31, 2005Recipient Copy — January 31, 2005
IRS Copy — March 31, 2005IRS Copy — February 28, 2005
Electronic/Magnetic Filing
Forms 5498*, 5498–SA* and 5498–ESA**
IRS Copy — May 31, 2005
Participant Copy — May 31, 2005*
Participant Copy – May 2, 2005**
* Participants’ copies of Forms 5498 and 5498–SA to furnish fair market value information — January 31, 2005
.02If any due date falls on a Saturday, Sunday, or legal holiday, the return or statement is considered timely if filed or furnished
on the next day that is not a Saturday, Sunday, or legal holiday.
.03Magnetic media returns postmarked by the United States Postal Service (USPS) on or before March 1, 2005, and delivered by
United States mail to the IRS/MCC after the due date, are treatedas timely under the “timely mailing as timely filing” rule. Refer to
the2004 General Instructions for Forms 1099, 1098, 5498, and W–2G, When to File, located in the backof this publication for more
detailed information. Notice 97–26, 1997–1 C.B. 413, provides rules for determining the date that is treated as the postmark date.
For items delivered by a non-designated Private Delivery Service (PDS), the actual date of receipt by IRS/MCC will be used as the
filing date. For items delivered by a designated PDS, but through a type of service not designated in Notice 99–41, the actual date
of receipt by IRS/MCC will be used as the filing date. The timely mailing rule also applies to furnishing statements to recipients and
participants.
Note: Due to security regulations at MCC, the Internal Revenue police officers will only accept media from PDSs or couri-
ers from 7:00 a.m. to 5:00 p.m., Monday through Friday.
.04Use this Revenue Procedure to prepare information returns filed electronically or magnetically beginningJanuary 1, 2005,and
postmarked no later thanDecember 1, 2005.
.05Media postmarked December 2, 2005, or latermusthave the Prior Year Data Indicator coded with a “P” in position 6 of the
Transmitter “T” Record.
Sec. 10. Replacement Magnetic Media
Note: Replacement Electronic files is detailed in Part B, Sec. 5.
.01A replacement is an information return file sent by the filerat the request of IRS/MCCbecause of errors encountered while
processing the filer’s original file or correction file. After the necessary changes have been made, the entire file must be returned for
processing along with the Media Tracking Slip (Form 9267) which was included in the correspondence from IRS/MCC.(See Note.)
Note: Filers should never send anything to IRS/MCC marked “Replacement” unless IRS/MCC has requested a replace-
ment file in writing or via the FIRE System.
.02Magnetic Media filers will receive a Media Tracking Slip (Form 9267), listing, and letter detailing the reason(s) their media
could not be processed. It is imperative that filers maintain backup copies and/or recreate capabilities for their information return files.
Open all correspondence from IRS/MCC immediately.
.03When possible, sample records identifying errors encountered will be provided with the returned information. It is the respon-
sibility of the transmitter to check the entire file for similar errors.
.04Before sending replacement media, makecertain the following items are in place:
(a)Make the required changes noted in the enclosed correspondence and check entire file for other errors.
(b)Code Transmitter “T” record, in positions 21–22 for replacement. See Part D, Sec. 3.
(c)Code Payer “A” record in position 49 with “1” for replacement file. See Part D, Sec. 4.
2004–33 I.R.B.221August 16, 2004

(d)Enclose Form 9267, Media Tracking Slip, with your replacement media.
(e)Label your Media“Replacement Data”and indicate the appropriate Tax Year.
(f)CompleteanewForm4804if any of your information has changed.
.05Replacement files must be corrected and returned to IRS/MCC within 45 days from the date of the letter. Refer to Part B, Sec.
5 .05, for procedures for files submitted electronically. A penalty for failure to return a replacement file will be assessed if the files
are not corrected and returned within the 45 daysor if filers are notified by IRS/MCC of the need for a replacement file more
than two times.A penalty for intentional disregard of filing requirementswill be assessed if a replacement file is not received. (For
penalty information, refer to the Penalty section of the2004 General Instructions for Forms 1099, 1098, 5498, and W–2G.)
Sec. 11. Corrected Returns
•Acorrectionis an information return submitted by the transmitter to correct an information return that was previously submit-
tedtoandprocessedbyIRS/MCC,butcontained erroneous information.
•While we encourage you to file your corrections electronically/magnetically, you may file upto 249 paper corrections even
though your originals were filedelectronically or magnetically.
•DO NOT SEND YOUR ENTIRE FILE AGAIN.Only send the information returns in need of correction.
•Information returns omitted from the original filemust notbe coded as corrections. Submit them under a separate Payer “A”
Record as original returns.
•Be sure to use the same payee account number that was used onthe original submission. The account number is used to match
a correction record to the original information return.
•Before creating your correction file, reviewthe following guidelines chart carefully.
.01The magnetic media filing requirement of information returns of 250 or more applies separately to both original and corrected
returns.
E
X
A
M
P
L
E
If a payer has 100 Forms 1099–A to be corrected, they can be filed on paper because they
fall under the 250 threshold. However, if the payer has 300 Forms 1099–B to be corrected, they
must be filed electronically or magnetically because they meet the 250 threshold. If for some
reason a payer cannot file the 300 corrections electronically or magnetically, to avoid penalties, a
request for a waiver must be submitted before filing on paper. If a waiver is approved for original
documents, any corrections for the same typeof return will be covered under this waiver.
.02Corrections should be filedas soon as possible. Corrections filed after August 1 may be subject to the maximum penalty of
$50 per return. Corrections filed by August 1 may be subject to a lesser penalty. (For information on penalties, refer to the Penalties
section of the2004 General Instructions for Forms 1099, 1098, 5498, and W–2G.) However, if payers discover errors after August
1, they should file corrections, as prompt correction is a factor considered in determining whether the intentional disregard penalty
should be assessed or whether a waiver of the penalty for reasonable cause may be granted. All fields must be completed with the
correct information, not just the data fieldsneeding correction. Submit corrections only for the returns filed in error, not the entire
file. Furnish correctedstatements to recipients as soon as possible.
Note: Do NOT resubmit your entire file as corrections. This will result in duplicate filingand erroneous notices may be
sent to payees. Submit only those returns which need to be corrected.
.03There are numerous types of errors, and in some cases, more than one transaction may be required to correct the initial error.
If the original return was filed as an aggregate, the filers must consider this in filing corrected returns.
.04The payee’s account number must be included onallcorrection records. This is especially important when more than one
information return of the same type is reported for a payee. Theaccount number is used to determine which information return is
being corrected. It is vital that each information return reported for a payee have a unique account number. See Part D, Sec. 6, Payer’s
Account Number For Payee.
.05Corrected returns may be included on the same media as original returns; however, separate “A”Records are required. Cor-
rected returns must be identified on Form 4804 and the external medialabel by indicating “Correction.” If filers discover that certain
information returns were omitted on their original file, they must not code these documents as corrections. The file must be coded
and submitted as originals.
August 16, 20042222004–33 I.R.B.

.06If a payer realizes duplicate reportinghas occurred, IRS/MCC should be contactedimmediatelyfor instructions on how to
avoid notices. The standard correction process will not resolve duplicate reporting.
.07If a payer discovers errors that affect a large number of payees, in addition to sending IRS the corrected returns and notifying the
payees, IRS/MCC underreporter section should be contacted toll-free at 1–866–455–7438 for additional requirements. Corrections
must be submitted on actual information return documents or filed electronically/magnetically. Form 4804 must be submitted with
corrected files submitted magnetically. If filing magnetically, provide the correct tax year in Block 2 of Form 4804 and on the external
media label. All references to Form 4804 in the guidelines apply only to files submitted magnetically. Form 4804 is not required for
electronic filing.
.08Prior year data, original and corrected,mustbe filed according to the requirements of this Revenue Procedure. If submitting
prior year corrections, use the record format for the current year and submit on separate media. However, use the actual year desig-
nation of the correction in Field Positions 2–5 of the “T”, “A”, and “B” Records. If filing electronically, a separate transmission must
be made for each tax year.
.09In general, filers should submit corrections for returns filed within the last 3 calendar years (4 years if the payment is a reportable
payment subject to backup withholding under section 3406 of the Code and also for Form 1099–C, Cancellation of Debt).
.10All paper returns, whether original or corrected,mustbefiledwiththeappropriate service center.
.11If a payer discovers an error(s) in reporting the payer name and/or TIN, write a letter to IRS/MCC (See Part A, Sec. 3) containing
the following information:
(a)Name and address of payer
(b)Type of error (please include the incorrect payer name/TIN that was reported)
(c)Tax year
(d)Payer TIN
(e)TCC
(f)Type of Return
(g)Number of Payees
(h)Filing method, paper, electronic, or magnetic media
.12The “B” Record provides a 20-position field for a unique Payer’s Account Number for Payee. If a payee has more than one
reporting of the same document type, it is vital that each reporting have a unique account number. This number will help identify the
appropriate incorrect return if more than one return is filed for a particular payee.Do not enter a TIN in this field.A payer’s account
number for the payee may be a checking account number, savingsaccount number, serial number, orany other number assigned to
the payee by the payer that will distinguish the specific account. This number should appear on the initial return and on the corrected
return in order to identify and process the correction properly.
.13The record sequence for filing correctionsisthesameasfororiginalreturns.
.14Review the chart that follows. Errors normally fall under oneof the two categories listed. Next to each type of error is a list of
instructions on how to file the corrected return.
Guidelines for Filing Corrected Returns Electronically/Magnetically
Error Made on the Original ReturnHow To File the Corrected Return
Note: Refere
nces to Form 4804 apply to magnetically filed media only. Form 4804 is not required for files submitted
electronica
lly through the FIRE System.
One transaction is required to make the following corrections properly. (See Note 3.)
2004–33 I.R.B.223August 16, 2004

Guidelines for Filing Corrected Returns Electronically/Magnetically (Continued)
ERRORTYPE1CORRECTION
1.A.Prepare a new Form 4804 that includes information
relating to this new file.
B.Mark “Correction” in Block 1 of Form 4804.
C.Prepare a new file. The first record on the file will be
the Transmitter “T” Record.
D.Make a separate “A” Record for each type of return
and each payer being reported. Information in the
“A” Record may be the same as it was in the original
submission. However, remove the “1” (one) in Field
Position 48 and set the Correction File Indicator (Field
Position 50), to “1” (one).
Original return was filed with one or more of the
following errors:
(a)Incorrect payment amount codes in the Payer “A”
Record
(b)Incorrect payment amounts in the Payee “B” Record
(c)Incorrect code in the distribution code field in the
Payee “B” Record
(d)Incorrect payee address
(e)Incorrectpayee indicator
E.The Payee “B” Records must show the correct record
information as well as a Corrected Return Indicator
Code of “G” in Field Position 6.
F.CorrectedreturnssubmittedtoIRS/MCCusing“G”
coded “B” Records may be on the same file as those
returns submitted without the “G” coded “B” Records;
however,separate “A” Records are required.
G.Prepare a separate “C” Record for each type of return
and each payer being reported.
H.The last record on the file will be the End of
Transmission “F” Record.
Note:For information on
correcting errors to the payer’s
name and TIN, see Sec. 11, .11.
I.Indicate “Correction” on the external media label.
File layoutonestep corrections
Transmitter
“T”
Record
Payer
“A”
Record
“G”
coded
Payee “B”
Record
“G”
coded
Payee “B”
Record
End of Payer
“C”
Record
End of
Transmission
“F” Record
Guidelines for Filing Corrected Returns Electronically/Magnetically
Error Made on the Original ReturnHow To File the Corrected Return
Two (2) separate transactions are required to make the following corrections properly.
Follow the directions for both Transactions 1 and 2. (See Note 2.)
DO NOT use the two step correction process to correct money amounts.
August 16, 20042242004–33 I.R.B.

Guidelines for Filing Corrected Returns Electronically/Magnetically (Continued)
Error Made on the Original ReturnHow To File the Corrected Return
ERRORTYPE2CORRECTION
1.Original return was filed with one or more of the
following errors:
Transaction 1:Identify incorrect returns.
A.Prepare a new Form 4804 that includes information
related to this new file.
B.Mark “Correction” in Block 1 of Form 4804.
C.Prepare a new file. The first record on the file will be
the Transmitter “T” Record.
(a)No payee TIN (SSN, EIN, ITIN or QI-EIN)
(b)Incorrect payee TIN
(c)Incorrect payee nameand address
(d)Wrong type of return indicator
D.Make a separate “A” Record for each type of return
and each payer being reported. The information in
the “A” Record will beexactlythe same as it was in
the original submission with one exception; remove
the “1” from Field Position 48, and set the Correction
File Indicator (Field Position 50) to “1” (one).(See
Note 1.)
E.The Payee “B” Records must containexactly the
sameinformation as submitted previously,except,
insert a Corrected Return Indicator Code of “G” in
Field Position 6 of the “B” Records, and enter “0”
(zeros) in all payment amounts.(See Note 1.)
F.Corrected returns submitted to IRS/MCC using “G”
coded “B” Records may be on the same file as those
returns submitted with a “C” code;however, separate
“A” Records are required.
G.Prepare a separate “C” Record for each type of return
and each payer being reported.
H.Continue with Transaction 2 to complete the
correction.
Transaction 2:Report the correct information.
A.Make a separate “A” Record for each type of return
and each payer being reported. Remove the “1” in
Field Position 48 and set the Correction File Indicator
(Field Position 50), to “1” (one).
B.The P
ayee “B” Records must show the correct
info
rmation as well as a Corrected Return Indicator
Code
of “C” in Field Position 6.
C.Corrected returns submitted to IRS/MCC using “C”
coded “B” Records may be on the same file as those
returns submitted with “G” codes;however, separate
“A” Records are required.
D.Prepare a separate “C” Record for each type of return
and each payer being reported.
E.Th
e last record on the file will be the End of
Tr
ansmission “F” Record.
F.Indicate “Correction” on the external media label.
2004–33 I.R.B.225August 16, 2004

Guidelines for Filing Corrected Returns Electronically/Magnetically (Continued)
Error Made on the Original ReturnHow To File the Corrected Return
Note 1: The Record Sequence Number will be different since this is a counter number and is unique to each file. For
1099–R corrections, if the corrected amounts arezeros, certain indicators will not be used.
Note 2: See the2004 General Instructions for Forms 1099, 1098, 5498, and W–2Gfor additional information on
regulations affecting corrections and related penalties.
File layouttwostep corrections
Transmitter
“T”
Record
Payer
“A”
Record
“G”
coded
Payee “B”
Record
“G”
coded
Payee “B”
Record
End of Payer
“C”
Record
Payer
“A”
Record
“C”
coded
Payee “B”
Record
“C”
coded
Payee “B”
Record
End of Payer
“C”
Record
End of
Transmission
“F” Record
Note 3: If a filer is correcting the name and/or TIN in addition to any errors listed in item 2 of the chart, two transactions
will be required. If a filer is reporting “G” coded, “C” coded, and/or “Non-coded” (original) returns on the same media, each
category must be reported under separate “A” Records.
Sec. 12. Effect on Paper Returns and Statements to Recipients
.01Electronic/Magnetic reporting of information returns eliminates the need to submit paper documents to the IRS.CAUTION:
Do not send Copy A of the paper forms to IRS/MCC for any forms filed electronically or magnetically.This will result in
duplicate filing; therefore, erroneous notices could be generated.
.02Payers are responsible for providing statements to the payees as outlined in the2004 General Instructions for Forms 1099,
1098, 5498, and W–2G. Refer to those instructions for filing information returns on paper with the IRS and furnishing statements to
recipients.
.03Statements to recipients should be clear and legible. If the official IRS form is not used, the filer must adhere to the specifications
and guidelines in Publication 1179, Rules and Specifications for Private Printing of Substitute Forms 1096, 1098, 1099, 5498, and
W–2G.
Sec. 13. Combined Federal/State Filing Program
•Through the Combined Federal/State Filing (CF/SF) Program, IRS/MCC will forward original and corrected information re-
turns filed electronically or magnetically to participating states for approved filers.
•For approval, the filer must submit a test file coded for this program. See Part A, Sec. 7, Test Files.
•For magnetic media test files, attach a letter to Form 4804 requesting approval to participate in the CF/SF Program. Form 4804
or letter is not required fortests sent electronically.
•Approved filers are sent Form 6847, Consent for Internal Revenue Service to Release Tax Information, which must be com-
pleted and returned to IRS/MCC. A separate form is required for each payer.
.01The Combined Federal/State Filing (CF/SF) Program was established to simplify information returns filing for the taxpayer.
IRS/MCC will forward this information to participating states free of charge for approved filers. Separate reporting to those states is
not necessary. The following information returns may be filed under the Combined Federal/State Filing Program:
August 16, 20042262004–33 I.R.B.

Form 1099–DIV—Dividends and Distributions
Form 1099–G—Certain Government Payments
Form 1099–INT—Interest Income
Form 1099–MISC—Miscellaneous Income
Form 1099–OID—Original Issue Discount
Form 1099–PA
TR—Taxable DistributionsReceived From Cooperatives
Form 1099–R—Distributions From Pensions, Annuities, Retirement or
Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
Form 5498—IRA Contribution Information
.02To request approval to participate, a magnetic media test file coded for this programmustbe submitted to IRS/MCC between
November l, 2004, and December 15, 2004. Media must bepostmarkedno later than December 1, 2004 in order to be received at
MCC by December 15 for processing. Electronic test files coded for this program must be submitted betweenNovember 1, 2004,and
February 15, 2005.
.03Attach a letter to Form 4804 submitted with the test file to indicate a desire to participate in the Combined Federal/State Filing
Program. Test files sent electronically do not require Form 4804 or letter. If the test file is coded for the Combined Federal/State Filing
Program and is acceptable, an approval letter and Form 6847, Consent For Internal Revenue Service to Release Tax Information, will
be sent to the filer.
.04A test file is only required for thefirstyear when you apply to participate in the Program. Each record, both in the test and the
actual data file, must conform to this Revenue Procedure.
.05If the test file is acceptable, IRS/MCC will send the filer an approval letter, and Form 6847, Consent for Internal Revenue
Service to Release Tax Information, which the payermustcomplete, sign, and return to IRS/MCC before any tax information can be
released to the state. Filers must write their TCC on Form 6847.
.06If the test file is not acceptable, IRS/MCC will send magnetic media filers information indicating the problems. Electronic
filers must log on to the FIRE System within two business days to check the acceptability of their test file. The new test file must be
postmarked no later than December 1, 2004, for magnetic media, or February 15, 2005, for an electronically filed test.
.07A separate Form 6847 isrequiredfor each payer. A transmitter may not combine payers on one Form 6847 even if acting
as Attorney-in-Fact for several payers. Form 6847 may be computer-generated as long asit includes all information that is on the
original form or it may be photocopied. If Form 6847 is signed by an Attorney-in-Fact, the written consent from the payer must clearly
indicate that the Attorney-in-Fact is empowered to authorize release of the information.
.08Only code the records for participating states and for those payers who have submitted Form 6847.
.09If a payee has a reporting requirement for more than one state, separate “B” records must be created for each state. Pro-rate
the reporting, allocating what should be reported to each state. Donotreport the total amount to each state. This will cause duplicate
reporting.
.10Some participating states require separate notification that the payer is filing in this manner. Since IRS/MCC acts as a forward-
ing agent only, it is the payer’s responsibility to contact the appropriate states for further information.
.11All corrections properly coded for the Combined Federal/State Filing Program will be forwarded to the participating states.
Only send corrections which affect the Federal reporting. Errors which apply only to the state filing requirement should be sent directly
to the state.
.12Participating states and corresponding valid state codes are listed inTable 1of this section. The appropriate state codemust
be entered for those documents that meet the state filing requirements;do not use state abbreviations.
.13Each state’s filing requirements are subject to change by the state. It is the payer’s responsibility to contact the participating
states to verify their criteria.
.14Upon submission of the actual files, the transmittermustbe sure of the following:
(a)All records are coded exactly as required by this Revenue Procedure.
(b)A State Total “K” Record(s) for each state(s)being reported follows the “C” Record.
(c)Payment amount totals and the valid participating statecode are included in the State Totals “K” Record(s).
(d)The last “K” Record is followed by an “A” Record or an End of Transmission “F” Record (if this is the last record of the
entire file).
2004–33 I.R.B.227August 16, 2004

Table 1. Participating States and Their Codes*
StateCodeStateCodeStateCode
Alabama01Indiana18Nebraska31
Arizona04Iowa19New Jersey34
Arkansas05Kansas20New Mexico35
California06Louisiana22North Carolina37
Colorado07Maine23North Dakota38
Connecticut08Maryland24Ohio39
Delaware10Massachusetts25South Carolina45
District of Columbia11Minnesota27Virginia51
Georgia13Mississippi28Wisconsin55
Hawaii15Missouri29
Idaho16Montana30
* The codes listed above are correct for the IRS Combined Federal/State Filing Program and maynotcorrespondtothestate
codes of other Agencies or programs.
Sample File Layout for Combined Federal/State Filer
Transmitter “T”Payer “A”Payee “B”Payee “B”Payee “B”End of Payer
RecordRecord codedRecord withRecord withRecord no“C” Record
with 1 instate code 15state code 06state code
position 26in positionin position
747–748747–748
State Total “K” RecordState Total“K” RecordEnd of Transmission “F”
for “B” records coded 15.for“B” records coded 06.Record
“K” re
cord coded 15 in
“K” re
cordcoded06in
positions 747–748.positions 747–748.
Sec. 14. Penalties Associated With Information Returns
.01The following penalties generally apply to the person required to file information returns. The penalties apply to electronic/mag-
netic media filers as well as to paper filers.
.02 Failure To File Correct Information Returns by the Due Date (Section 6721).If you fail to file a correct information return
by the due date and you cannot show reasonable cause, you may be subject to a penalty. The penalty applies if you fail to file timely,
you fail to include all information required to be shown on a return, or you include incorrect information on a return. The penalty also
applies if you file on paper when you were required to file on magnetic media, you report an incorrect TIN or fail to report a TIN, or
you fail to file paper forms that are machine readable.
The amount of the penalty is based on when you file the correct information return. The penalty is:
•$15per information return if you correctly file within 30 days of the due date of the return (See Part A, Sec. 9 .01); maximum
penalty $75,000 per year ($25,000 for small businesses).
•$30per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $150,000
per year ($50,000 for small businesses).
•$50per information return if you file after August 1 or you do not file required information returns; maximum penalty $250,000
per year ($100,000 for small businesses).
.03A late filing penalty may be assessed for a replacement file which is not returned by the required date. Files which require
replacement more than two times will also be subject to penalty.See Part A, Sec. 10, for more information on replacement files.
.04 Intentional disregard of filing requirements.If any failure to file a correct information return is due to intentional disregard
of the filing or correct information requirements, the penalty is at least $100 per information return with no maximum penalty.
.05 Failure To Furnish Correct Payee Statements (Section 6722).For information regarding penalties which may apply to
failure to furnish correct payee statements, see2004 General Instructions for Forms 1099, 1098, 5498, and W–2G.
August 16, 20042282004–33 I.R.B.

Sec. 15. State Abbreviations
.01The following state and U.S. territory abbreviations are to be used when developing the state code portion of address fields. This
table provides state and territory abbreviations only, and does not represent those states participating in the Combined Federal/State
Filing Program.
StateCodeStateCodeStateCode
AlabamaALKentuckyKYNo. Mariana IslandsMP
AlaskaAKLouisianaLAOhioOH
American SamoaASMaineMEOklahomaOK
ArizonaAZMarshall IslandsMHOregonOR
ArkansasARMarylandMDPennsylvaniaPA
CaliforniaCAMassachusettsMAPuerto RicoPR
ColoradoCOMichiganMIRhode IslandRI
ConnecticutCTMinnesotaMNSouth CarolinaSC
DelawareDEMississippiMSSouth DakotaSD
District of ColumbiaDCMissouriMOTennesseeTN
Federated States of Micronesia FMMontanaMTTexasTX
FloridaFLNebraskaNEUtahUT
GeorgiaGANevadaNVVermontVT
GuamGUNew HampshireNHVirginiaVA
HawaiiHINew JerseyNJ(U.S.) Virgin IslandsVI
IdahoIDNew MexicoNMWashingtonWA
IllinoisILNew YorkNYWest VirginiaWV
IndianaINNorth CarolinaNCWisconsinWI
IowaIANorth DakotaNDWyomingWY
KansasKS
.02Filers must adhere to the city, state, and ZIP Code format for U.S. addresses in the “B” Record. This also includes American
Samoa, Federated States of Micronesia, Guam, Marshall Islands, Northern Mariana Islands, Puerto Rico, and the U. S. Virgin Islands.
.03For foreign country addresses, filers may use a 51 position free format which should include city, province or state, postal code,
and name of country in this order. This is allowable only if a “1” (one) appears in the Foreign Country Indicator, Field Position 247,
of the “B” Record.
.04When reporting APO/FPO addresses, use the following format:
EXAMPLE:
Payee NamePVT Willard J. Doe
Mailing AddressCompany F, PSC Box 100
167 Infantry REGT
Payee CityAPO (or FPO)
Payee StateAE, AA, or AP*
Payee ZIP Code098010100
*AE is the designation for ZIPs beginning with 090–098, AA for ZIP 340, and AP for ZIPs 962–966.
Sec. 16. Major Problems Encountered
IRS/MCC encourages filers to verify the format and content ofeach type of record to ensure the accuracy of the data. This may
eliminate the need for IRS/MCC to request replacement files. This may be important for those payers who have either had their files
prepared by a service bureau or who have purchased preprogrammed software packages.
Filers who engage a service bureau to prepare media on their behalf should be careful not to report duplicate data, which
may generate penalty notices.
The Major Problems Encountered lists some of the most frequently encountered problems with electronic/magnetic files submitted
to IRS/MCC. These problems may result in IRS/MCC requesting replacement files. Some of the problems resulted from not referring
to this publication for instructions.
2004–33 I.R.B.229August 16, 2004

1. Incorrect Format
•Multiple Files on diskettes — Each diskette must contain onlyONEfile, namedIRSTAX. A file consists of one
Transmitter “T” Record followed by a Payer “A” Record, Payee “B” Records, End of Payer “C” Record, State Totals “K”
Record (if applicable for CF/SF Program), and the End of Transmission “F” Record. A file cancontain multiple Payer “A”
Records, but, o
nlyoneTransmitter“T”Record.See Part D, Sec. 10, for file layout diagram.
•Invalid record length —A
LLRecords must be 750 Positions in length.
•Prior tax year datamustbe formatted in thecurrenttax year format. Be sure to use thecurrent Revenue Procedure
(Publication 1220)for formatting prior tax year data.
2. Unable to read tape cartridge.
Please review all tape cartridge specifications carefully (See Part C, Sections 1 and 2.)
3. No Form 4804, Transmittal of Information Returns Reported Magnetically
Each shipment of media sent to IRS/MCC must include a signed Form 4804. More than one type of media may be sent in the
same shipment, (i.e., diskette, and tape cartridge) but must have a separate Form 4804 to accompanyeach type of media.
4. Discrepancy Between IRS/MCC Totals and Totals in Payer “C” Records
The “C” Record is a summary record for a type of return for agiven payer. IRS compares the total number of payees and
payment amounts in the “B” records with totals in the “C” Records. The two totalsmustagree. DoNOTenter negative
amounts except when reporting Forms 1099–B or 1099–Q. Money amounts must be all numeric, right-justified and zero (0)
filled.Do Not Use Blanks.
5. The Payment Amount Fields in the “B” Record Do Not Correspond to the Amount Codes in the “A” Record
The Amount Codes used in the “A” recordMUSTcorrespond with the payment amount fields used in the “B” records. The amount
codes must be left-justified, in ascendingorder with the unused positions blank. For Example: If the “B” records show payment
amounts in payment amount fields 2, 4, and 7, then the “A” record must correspond with 2, 4, and 7 in the amount codes field.
6. Incorrect TIN in Payer “A” Record
The Payer’s TIN reported in positions 12–20 of the “A” record must be nine numeric characters only.(Do Not Enter Hyphen.)
The TIN and the First Payer Name Line provided in the “A” record must correspond.
7. Incorrect Tax Year in the Transmitter “T” Record, Payer “A” Record and the Payee “B” Records
The tax year in the transmitter, payer and payee records should reflect the tax year of the information return being reported. For
prior tax year data, there must be a “P” in position 6 of the Transmitter “T” record. Mediapostmarked December 1, 2004, or
latermusthave the Prior Year Data Indicator coded with a “P” in position 6 of the Transmitter “T” Record. This position must
be blank for current tax year data.
8. Incorrect Reporting of Form W–2 Information to IRS
Form W–2 information is submitted to SSA andnotto IRS/MCC.Any media received at IRS/MCC that contains W–2
information will be forwarded to SSA. The filer will be notified of this action by letter.To inquire about filing Form W–2
information magnetically/electronically, call 1–800-SSA–6270.
9. Incorrect use of Test Indicator
When sending a test file, position 28 of the Transmitter“T” record must contain a “T”, otherwise blank fill.
10. Incorrect Format for TINs in the Payee “B” Record
TINs entered in position 12–20 of the Payee “B” record must consist of nine numerics only.(Do Not Enter Hyphens.)Incorrect
formatting of TINs may result in a penalty.
Payers/Transmitters who submit data with missing TINs, and have taken the required steps to obtain this information are
encouraged to attach a letter of explanation to the required Form 4804. This letter, however, will not prevent backup withholding
notices (CP2100 and CP2100A Notices) or proposed penalties (Notice 972CG) for missing or incorrect TINs. For penalty
information, refer to the Penalties section of the2004 General Instructions for Forms 1099, 1098, 5498, and W–2G.
August 16, 20042302004–33 I.R.B.

11. Distribution Codes for Form 1099–R Reported Incorrectly
For Forms 1099–R, there must be valid Distribution Code(s) inposition 545–546 of the Payee “B” record. For valid codes (and
combinations), see Guide to Distribution Codes in Part D. If only one distribution code is required, it must be entered in position
545 and position 546 must be blank. A blank in position 545 is not acceptable.
12. Incorrect Record Totals Listed on Form 4804
The Combined Total Payee Records listed on Form 4804 (Block 6) are used in the verification process of information returns.
The figure in this blockmustbe the total number of payee “B” records contained on each individual piece of media submitted.
A separate Form 4804 should be sent foreach piece of media that contains a file.
13. Missing Correction Indicator in Payee “B” Record
When a file is submitted as a correction file, there must be acorrection indicator, “G” or “C” in position 6 of the Payee “B”
record. See Part A, Sec. 11.
PART B. ELECTRONIC FILING SPECIFICATIONS
Note: The FIRE System is now on the Internet athttp://fire.irs.gov.It is no longer a dial-up connection.
Sec. 1. General
.01Electronic filing of Forms 1098,1099, 5498, and W–2G information returns, originals, corrections, and replacements is of-
fered as an alternative to magnetic media (tape cartridge or diskette) or paper filing. Filing electronically will fulfill the magnetic
media requirements for those payers who are required to file magnetically. Payers who are under the filing threshold requirement,
are encouraged to file electronically. If theoriginal file was sent magnetically, but IRS/MCC has requested a replacement file, the
replacement may be transmitted electronically. Also, if the original file was submitted via magnetic media, any corrections may be
transmitted electronically.
.02All electronic filing of information returns are received at IRS/MCC via the FIRE (Filing Information Returns Electronically)
System. To connect to the FIRE System, point your browser tohttp://fire.irs.gov.The system is designed to support the electronic
filing of information returns only.
.03The electronic filing of information returns is not affiliated with any other IRS electronic filing programs. Filers must obtain
separate approval to participate in each of them. Only inquiries concerning electronic filing of information returns should be directed
to IRS/MCC.
.04Files submitted to IRS/MCC electronically must be in standardASCII code. Do not send magnetic media or paper forms with
the same information as electronically submitted files. This would create duplicate reporting resulting in penalty notices.
.05The record formats of the “T”, “A”, “B”, “C”, “K”, and “F” records are the same for both electronically or magnetically filed
records. See Part D, Record FormatSpecifications and Record Layouts.
Sec. 2. Advantages of Filing Electronically
Some of the advantages of filing electronically are:
(1)Paperless, no Form 4804 requirements.
(2)Security – Secure Socket Layer (SSL) 128-bit encryption.
(3)Results available within 1–2 workdays regarding the acceptability of the data transmitted. It is the filer’s responsibility to
log into the system and check results.
(4)Later due date than magnetic media or paper for electronically filed Forms 1098, 1099, and W–2G (refer to Part A, Sec.
9.01).
(5)Allows more attempts than magnetic media filing to replace bad files within a specific time frame before imposing penalties
(refer to Part B, Sec. 5.05).
(6)Better customer service due to on-line availability of transmitter’s files for research purposes.
(7)Extended period to test electronic files: November 1, 2004 to February 15, 2005.
Sec. 3. Electronic Filing Approval Procedure
.01Filers must obtain a Transmitter Control Code (TCC) prior to submitting files electronically. Filers who currently have a TCC
for magnetic media filing may use their assigned TCC for electronic filing. Refer to Part A, Sec. 6, for information on how to obtain
a TCC.
.02Once a TCC is obtained, electronic filers assign their own userID, password and PIN (Personal Identification Number) and do
not need prior or special approval. See Part B, Sec. 6, for more information on the PIN.
2004–33 I.R.B.231August 16, 2004

.03If a filer is submitting files for more than one TCC, it is notnecessary to create a separate logon and password for each TCC.
.04For all passwords, it is the user’s responsibility to remember the password and not allow the password to be compromised.
Passwords are user assigned at first logon and must be 8 alpha/numerics containing at least 1 uppercase, 1 lowercase, and 1 numeric.
However, filers who forget their password or PIN, can calltoll-free 1–866–455–7438for assistance. The FIRE System may require
users to change their passwords on a yearly basis.
Sec. 4. Test Files
.01Filers are not required to submit a test file
; however, the submission of a test file is encouraged for all new electronic filers to
test hardware and software. If filers wish to s
ubmit an electronic test file for Tax Year2004(returns to be filed in2005), itmustbe
submitted to IRS/MCCno earlier thanNovember
1, 2004, andno later thanFebruary 15, 2005.
.02Filers who encounter problems while trans
mitting the electronic test file can contact IRS/MCCtoll-free at 1–866–455–7438
for assistance.
.03Filers must verify the status of the transm
itted test data by going tohttp://fire.irs.govand verifying the status of their file by
clicking on CHECK FILE STATUS. This informati
on will be available within 1–2 workdaysafter the transmission is received by
IRS/MCC.
.04Form 4804 is not required for test files su
bmitted electronically. See Part B, Sec. 6.
.05 A test file is required from filers who wan
t approval for the Combined Federal/State Filing Program. See Part A, Sec.
13, for further details.
Sec. 5. Electronic Submissions
.01Electronically filed information may be submitted to IRS/MCC 24 hours a day, 7 days a week. Technical assistance will be
available Monday through Friday between 8:30 a.m. and 4:30 p.m. Eastern time by callingtoll-free at 1–866–455–7438.
.02 The FIRE System will be down from December 23, 2004, through January 4, 2005.This allows IRS/MCC to update its
system to reflect current year changes.
Note: If you are sending a TY2003 file electronically, do not enter a ‘P’ in position 6 of the ‘T’ record (for prior year)
unless you are sending the file after 12/22/2004. After 12/22/2004, any file submittedelectronically for TY2003 or earlier will
need to be coded with a ‘P’ in position 6 of the ‘T’ record.
.03If you are sending files larger than 10,000 records electronically, data compression is encouraged. If you are considering sending
files larger than 5 million records, please contact IRS/MCC forspecifics. WinZip and PKZip arethe only acceptable compression
packages. IRS/MCC cannot accept self-extracting zip files or compressed files containing multiple files. The time required to transmit
information returns electronically will vary depending upon the type of connection to the internet and if data compression is used.
The time required to transmit a file can be reduced by as much as 95 percent by using compression.
.04Transmitters may create files using self assigned files name(s). Files submitted electronicallywill be assigned a new unique file
name by the FIRE System. The filename assigned by the FIRE System will consist of submission type (TEST, ORIG [original], CORR
[correction], and REPL [replacement]), the filer’s TCC and a four-digit number sequence. The sequence number will be incremented
for every file sent. For example, if it is your first original file for the calendar year and your TCC is 44444, the IRS assigned filename
would be ORIG.44444.0001.Record the filename. This information will be needed by MCC to identify the file, if assistance is
required.
.05If a file was submitted timely and is bad, the filer will have up to60 days from the day the file was transmitted or 4 replacement
attempts within that 60 day period, whichever comes first, to transmit an acceptable file. If an acceptable file is not received within
60 days, or within 4 replacement attempts, then the payer could be subject to late filing penalties. This only applies to files originally
submitted electronically.
.06The following definitions have been provided to help distinguish between a correction and a replacement:
•Acorrectionis an information return submitted by the transmitter to correct an information return that was previously submit-
ted to and processed by IRS/MCC, but contained erroneous information.(See Note.)
Note: Corrections should only be made to records that have been submitted incorrectly, not the entire file.
•Areplacementis an information return file sent by the filer because the CHECK FILE STATUS option on the FIRE System
indicated the original file was bad. After the necessary changes have been made, the file must be transmitted through the FIRE
System. (See Note.)
Note: Filers should never transmit anything to IRS/MCC asa “Replacement” file unless the CHECK FILE STATUS option
on the FIRE System indicates the file is bad.
August 16, 20042322004–33 I.R.B.

.07The TCC in the Transmitter “T” Record must be the TCC used to transmit the file; otherwise, the file will be considered an
error.
Sec. 6. PIN Requirements
.01Form 4804 is not required for electronic files. Instead, the user will be prompted to create a PIN consisting of 10 numerics
when establishing their initial logon name and password.
.02The PIN is required each time an ORIGINAL, CORRECTION, OR REPLACEMENT file is sent electronically and is permis-
sion to release the file. It is not needed for a TEST file. An authorized agent may enter their PIN, however, the payer is responsible
for the accuracy of the returns. The payer will be liable for penalties for failure to comply with filing requirements. If you forget your
PIN, please calltoll-free 1–866–455–7438for assistance.
.03If the file is good, it is released for mainline processing after 10 calendar days from receipt. Contact ustoll-free 1–866–455–7438
within this 10-day period if there is a reason the file should not be released for further processing. If the file is bad, follow normal
replacement procedures.
Sec. 7. Electronic Filing Specifications
.01The FIRE System is designed exclusively for the filingof Forms 1042–S, 1098, 1099, 5498, 8027, W–2G and Question-
able W–4.
.02A transmitter must have a TCC (see Part A, Sec. 6) before a filecan be transmitted. A TCC assigned for magnetic media filing
should also be used for electronic filing.
.03The results of the electronic transmission will be available in the CHECK FILE STATUS area of the FIRE System within 1–2
business days. It is the filer’s responsibility to verify the acceptability of files submitted by selecting the CHECK FILE STATUS
option. Forms 1042–S, 8027 and Questionable W–4 require a longer processing time.
Sec. 8. Connecting to the FIRE System
.01Point your browser tohttp://fire.irs.govto connect to the FIRE System.
.02When running Norton Internet Security or similar software, you may need to disable this feature if your file transfer does not
complete properly.
.03Before connecting, have your TCC and EIN available.
.04Your browser must support SSL 128-bit encryption.
.05Your browser must be set to receive “cookies”. Cookies are used to preserve your User ID status.
F
irsttimeconnectiontoTheFIRESystem(If you have logged on previously, skip to Subsequent Connections to the FIRE
System.)
Click“Create New Account”.
Fill out the registration form and click“Submit”.
Enter yourUser ID(most users logon with their first and last name).
Enter and verify yourpassword(the password is user assigned and must be 8 alpha/numerics,
containing at least 1 uppercase, 1 lowercase and1numeric).FIREmayrequireyoutochange
the password once a year.
Click“Create”.
If you receive the message“Account Created”,click“OK”.
Enter and
verify your 10 digit self-assigned PIN (Personal Identification Number).
Click“Submit”.
If you receive the message“Your PIN has been successfully created!”,click“OK”.
Read the
bulletin(s) and/or click“Start the FIRE application”.
S
ubsequentconnectionstoTheFIRESystem
Click“Log On”.
Enter yourUser ID(most users logon with their first and last name).
Enter yourpassword(the password is user assigned and is case sensitive).
2004–33 I.R.B.233August 16, 2004

UploadingyourfiletotheFIRESystem
At Menu Options
:
Click“Send Information Returns”
Enter yourTCC:
Enter yourEIN:
Click“Submit”.
The system will then display the company name, address, city, state, ZIP code, phone number,
contact, and email address. Thisinformation will be used to contact or send correspondence (if
necessary) regarding this transmission. Update as appropriate and/or Click“Accept”.
Click one of the following:
Original File
Correcti
on File
Test File
Replacement File(if you select this option, select one of the following):
NEW FIRE
Replacement(file was originally transmitted on this system)
Click file to be replaced.
Magnetic Media Replacement
Enter the alpha character from Form9267, Media Tracking Slip, that was
sent with the request for replacement file. Click“Submit”.
Enteryour10digitPIN.
Click“Submit”.
Click“Browse”to locate the file and open it.
Click“Upload”.
Whe
n the upload is complete, the screen will display the total bytes received and tell you the name of the file you just
upl
oaded.
If you have more files to upload for that TCC:
Click“File Another?”;otherwise,
Cl
ick“Main Menu”.
It is your responsibility to check the acceptability of your file; therefore, be
sure to check back into the system in 1–2 business days using the CHECK
FILE STATUS option.
CheckingyourFILESTATUS
At the Main Menu:
Click“Check File Status”.
Enter yourTCC:
Enter yourEIN:
Click“Search”.
If “Results” indicate:
“Good, Not Released”and you agree with the “Count of Payees”, you
are finished with this file. The file will automatically be released after 10
calendar days unless you contact us within this timeframe.
“Good, Released”— File has been released to our mainline processing.
“Bad”— Correct the errors and timely resubmit the file as a “replacement”.
August 16, 20042342004–33 I.R.B.

CheckingyourFILESTATUS
“Not yet processed”— File has been received, but we do not have results
available yet. Please check back in a few days.
Click on the de
sired file for a detailed report of your transmission.
When you are finished, click onMain Menu.
Click“Log Out”.
Close your Web Browser.
Sec. 9. Common Problems and Questions Associated with Electronic Filing
.01Refer to Part A, Sec. 16, for common format errors associated with electronic/magnetic files.
.02The following are the major errors associated with electronic filing:
N
ON-FORMATERRORS
1. Transmitter does not check the FIRE System to determine file acceptability.
The results of your file transfer are posted to the FIRE System within two business days. It is your responsibility to verify file
acceptability and, if the file contains errors, you can get an online listing of the errors. Date received and number of payee
records are also displayed. If the file is good, but you do not want the file processed, you must contact IRS/MCC within 10
calendar days from the transmission of your file.
2. Incorrect file is not replaced timely.
If your fi
le is bad, correct the file and timely resubmit as a replacement.
3. Transmitter compresses several files into one.
Only compress one file at a time. For example, if you have 10 uncompressed files to send, compress each file separately and
send 10 separate compressed files.
4. Transmitter sends a file and CHECK FILE STATUS indicates that the file is good, but the transmitter wants to send a
replacement or correction file to replace the original/correction/replacement file.
Once a file has been transmitted, you cannot send a replacement file unless CHECK FILE STATUS indicates the file is bad
(1–2 business days after file was transmitted). If you donot want us to process the file, you must first contact ustoll-free at
1–866–455–7438to see if this is a possibility.
5. Tran
smitter sends an original file that is good, then sends a correction file for the entire file even though there are
onlyaf
ew changes.
The correction file, containing the proper coding, should only contain the records needing correction, not the entire file.
6. File is formatted as EBCDIC.
All files submitted electronicallymust be in standard ASCII code.
7. Transmitter has one TCC number, but is filing for multiple companies, which EIN should be used when logging
into the system to send the file?
When sending the file electronically, you will need to enter theEIN of the company assigned to the TCC. When you upload the
file, it will contain the EINs for the other companies that you are filing for. This is the information that will be passed forward.
8. Transmitter sent the wrong file, what should be done?
Cal
lusassoonaspossibletoll-free at 1–866–455–7438. We may be able to stop the file before it has been processed.Please do
not
send a replacement for a file that is marked as a good file.
2004–33 I.R.B.235August 16, 2004

PART C. MAGNETIC MEDIA FILING SPECIFICATIONS
.01Transmitters should be consistent in the use of recording codes and density on files. If the media does not meet these specifi-
cations, IRS/MCC will request a replacement file. Filers are encouraged to submit a test prior to submitting the actual file. Contact
IRS/MCCtoll-free at 1–866–455–7438extension 5 for further information. Transmitters should also check media for viruses before
submitting it to IRS/MCC.
Sec. 1. Tape Cartridge Specifications
.01In most instances, IRS/MCC can process tape cartridges that meet the following specifications:
(a)Must be IBM 3480, 3490, 3490E, 3590, or 3590E.
(b)Must meet American National Standard Institute (ANSI) standards, and have the following characteristics:
(1)Tape cartridges will be
1
/2-inch tape contained in plastic cartridges that areapproximately 4-inches by 5-inches by 1-inch
in dimension.
(2)Magnetic tape will be chromium dioxide particle based
1
/2-inch tape.
(3)Cartridges must be 18-track, 36-track, 128-track or 256-track parallel (See Note).
(4)Cartridges will contain 37,871 CPI, 75,742 CPI, or 3590 CPI (characters per inch).
(5)Mode will be full function.
(6)The data may be compressed using EDRC (Memorex) or IDRC (IBM) compression.
(7)Either EBCDIC (Extended Binary CodedDecimal Interchange Code) or ASCII (American Standard Coded Information
Interchange) may be used.
.02The tape cartridge records definedin this Revenue Procedure may be blocked subject to the following:
(a)Ablockmust notexceed 32,250 tape positions.
(b)If the use of blocked records would result in a short block, all remaining positions of the block must be filled with 9s;
however, the last block of the file may be filled with 9s or truncated.Do not pad a block with blanks.
(c)All records, except the header and trailer labels, may be blocked or unblocked. A record may not contain any control fields
or block descriptor fields, which describe the length of the block or the logical records within the block. The number of
logical records within a block (the blocking factor) must be constant in every block with the exception of the last block,
which may be shorter (see item (b) above). Theblock length must be evenly divisible by 750.
(d)Records may not span blocks.
.03Tape cartridges may be labeled or unlabeled.
.04For the purposes of this Revenue Procedure, the following must be used:
Tape Mark:
(a)Signifies the physical end of the recording on tape.
(b)For even parity, use BCD configuration 001111 (8421).
(c)May follow the header label and precede and/or follow the trailer label.
Note: Filers should indicate on the external media label whether the cartridge is 18-track, 36-track, 128-track or 256-track.
Sec. 2. 3
1
/2-Inch Diskette Specifications
.01To be compatible, a diskette file mustmeet the following specifications:
(a)3
1
/2-inches in diameter.
(b)Datamustbe recorded in standard ASCII code.
(c)Records must be a fixed length of 750 bytes per record.
(d)Delimiter character commas (,) must not be used.
(e)Positions 749 and 750 of each record have been reserved for use as carriage return/line feed (cr/lf) characters, if applicable.
(f)Filename of IRSTAX must be used. Do not enter any other data in this field. If a file will consist of more than one diskette,
the filename IRSTAX will contain a three-digit extension. This extension will indicate the sequence of the diskettes within
the file. For example, if the file consists of three diskettes, the first diskette will be named IRSTAX.001, the second will
be IRSTAX.002, and the third will be IRSTAX.003. The first diskette, IRSTAX.001 will begin with a “T” Record and the
third diskette, IRSTAX.003 will have an “F” Record at the end of the file.
(g)A diskette can not contain multiple files. A file can have onlyONETransmitter “T” Record.
(h)Failure to comply with instructions will result in IRS/MCC requesting a replacement file.
August 16, 20042362004–33 I.R.B.

(i)Diskettes must meet one of the following specifications:
CapacityTracksSides/DensitySector Size
1.44 mb96tpihd512
1.44 mb135tpihd512
.02IRS/MCC encourages transmitters to use blank or currently formatted diskettes when preparing files. If extraneous data follows
the End of Transmission “F” Record, IRS/MCC will request a replacement file.
.03IRS/MCC willonlyaccept 3
1
/2-inch diskettes created using MS-DOS.
.04 3
1
/2-inch diskettes created on a System 36 or iSeries(AS400) are notacceptable.
PART D. RECORD FORMAT SPECIFICATIONS AND RECORD LAYOUTS
Sec. 1. General
.01The specifications contained in this part of the Revenue Procedure define the required formation and contents of the records to
be included in the electronic or magnetic media files.
.02A provision is made in the “B” Records for entries which are optional. If the field is not used, enter blanks to maintain a fixed
record length of 750 positions. Each field descriptionexplains the intended use of specific field positions.
Sec. 2. Transmitter “T” Record — General Field Descriptions
.01The Transmitter “T” Record identifies the entity transmitting the electronic/magnetic media file and contains information which
is critical if it is necessary for IRS/MCC to contact the filer.
.02The Transmitter “T” Record is the first record on each file and is followed by a Payer “A” Record. A file format diagram is
located at the end of Part D. A replacement file will be requested by IRS/MCC if the “T” Record is not present. For transmitters with
multiple diskettes, refer to Part C, Sec. 2, 3
1
/2-Inch Diskette Specifications.
.03For all fields marked“Required”, the transmitter must provide the information described under Description and Remarks.
For those fields not marked“Required”, a transmitter must allow for the field, but may be instructed to enter blanks or zeros in the
indicated field positions and for the indicated length.
.04All records must be a fixed length of 750 positions.
.05All alpha characters entered in the “T”Record must be upper-case, except emailaddresses which may be case sensitive.Do
notuse punctuation in the name and address fields.
Record Name: Transmitter “T” Record
Field
Position
Field TitleLength Description and Remarks
1Record Type1Required.Enter “T.”
2–5Payment Year4Required.Enter “2004” (unless reporting prior year data; report the year which
applies [2002, 2003 etc.] and set the Prior Year Data Indicator in field position 6).
6Prior Year Data
Indicator
1Required.Enter “P”onlyif reporting prior year data; otherwise, enter blank.
Do not enter a “P” if tax year is2004.(SeeNote.)
Note: Cur
rent year data MAILED December 2 or later or electronic files SENT December 23 or later must be coded
with a “P”
. Current year processing ends in December and programs are converted for the next processing year.
7–15Transmitter’s TIN9Required.Enter the transmitter’s nine-digit Taxpayer Identification Number
(TIN). May be an EIN or SSN.
16–20Transmitter Control
Code
5Required.Enter the five-character alpha/numeric Transmitter Control Code
(TCC) assigned by IRS/MCC. A TCC must be obtained to file data with this
program.
2004–33 I.R.B.237August 16, 2004

Record Name: Transmitter“T” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
21–22Replacement Alpha
Character
2Required for magnetic media replacement files only.Enter the alpha/numeric
character which appears immediately following the TCC number on the Media
Tracking Slip (Form 9267). Form 9267 accompanies correspondence sent by
IRS/MCC when files can not be processed. This field must be blank unless a
replacement file has been requested. If the file is being replaced magnetically,
information is required in this field. If the file was originally sent magnetically,
but the replacement is being sent electronically, the information is required in this
field. Otherwise, leave blank for electronic files. Left-justify information and fill
unused positions with blanks.If this is not a replacement file, enter blanks.
23–27Blank5Enter blanks.
28Test File Indicator1Required for test files only.Enter a “T” if this is a test file; otherwise, enter
ablank.
29Foreign Entity
Indicator
1Enter a “1” (one) if the transmitter is a foreign entity. If the transmitter is not a
foreign entity, enter a blank.
30–69Transmitter Name40Required.Enter the name of the transmitter in the manner in which it is used in
normal business. Left-justify and fill unused positions with blanks.
70–109Transmitter Name
(Continuation)
40Required.Enter any additional information that may be part of the name.
Left-justify information and fill unused positions with blanks.
110–149Company Name40Required.Enter the name of the company to be associated with the address
where correspondence should be sent.
150–189Company Name
(Continuation)
40Enter any additional information that may be part of the name of the company
where correspondence should be sent.
190–229Company Mailing
Address
40Required.Enter the mailing address where correspondence should be sent.
Note: Any correspondence relating to problem media or electronic files will be sent to this address. This should be
the same address as in box 5 of Form 4804.
For U.S. addresses,the payer city, state, and ZIP Code must be reported as a 40, 2, and 9-position field, respectively.Filers must
adhere to the correct format for the payer city, state, and ZIP Code.
For fo
reign addresses,filers may use the payer city, state, and ZIP Code as acontinuous 51-position field. Enter information
in the
following order: city, province or state, postal code, and the name of the country. When reporting a foreign address, the
Forei
gn Entity Indicator in position 29 must contain a “1” (one).
230–269Company City40Required.Enter the city, town, or post office where correspondence should
be sent.
270–271Company State2Required.Enter the valid U.S. Postal Servicestate abbreviation. Refer to the
chart for valid state codes in Part A, Sec. 15.
272–
280
Comp
any ZIP Code
9Requ
ired.Enter the valid nine-digit ZIP assigned by the U. S. Postal Service.
If on
ly the first five digits are known, left-justify information and fill unused
posi
tions with blanks.
281–295Blank15Enter blanks.
296–303Total Number of
Payees
8Enter the total number of Payee “B” Records reported in the file. Right-justify
information and fill unused positions with zeros.
304
–343
Con
tact Name
40Req
uired.Enter the name of the person to be contacted if IRS/MCC encounters
pr
oblems with the file or transmission.
August 16, 20042382004–33 I.R.B.

Record Name: Transmitter“T” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
344-358Contact Phone
Number & Extension
15Required.Enter the telephone number of the person to contact regarding
electronic or magnetic files. Omit hyphens. If no extension is available,
left-justify information and fill unused positions with blanks. For example, the
IRS/MCC Customer Service Section phone number of866-455-7438with an
extension of52345would be866455743852345.
359–393Contact Email
Address
35Required if available.Enter the email address of the person to contact regarding
electronic or magnetic files. Left-justify information. If no email address is
available, enter blanks.
394–395Cartridge Tape File
Indicator
2Required for tape cartridge filers only.Enter the letters “LS” (in uppercase
only). Use of this field by filers using other types of media will be acceptable
but is not required.
396–410Electronic File Name
For a Replacement
File
15Required.Use for an electronic file which “FILE STATUS” has indicated was
rejected. Enter the ORIGINAL or CORRECTION electronic file name assigned
by the IRS electronic FIRE System. If you are sending an original, correction, or
test file, enter blanks.
EXAMPLE:Ifyouhavesentanoriginalfile,theTCCis44444anditisyourfirstoriginalfile,thenthefilenamewouldbe
ORIG.44444.0001.
411–416Transmitter’s Media
Number
6For magnetic media filers only. If your organization uses an in-house numbering
system to identify media, enter that number; otherwise, enter blanks.
417–499Blank83Enter blanks.
500–507Record Sequence
Number
8Required.Enter the number of the record as it appears within your file. The
record sequence number for the “T” record will always be “1” (one), since it
is the first record on your file and you can have only one “T” record in a file.
Each record, thereafter, must be incremented by one in ascending numerical
sequence,i.e.,2,3,4,etc.Right-justifynumberswithleadingzeroesinthefield.
For example, the “T” record sequence number would appear as “00000001”
in the field, the first “A” record would be “00000002”, the first “B” record,
“00000003”, the second “B” record, “00000004” and so on until you reach the
final record of the file, the “F” record.
508–517Blank10Enter blanks.
518Vendor Indicator1Required.Enter the appropriate code from the table below to indicate if your
software was provided by a vendor or produced in-house.
IndicatorUsage
VYour software was purchased from a
vendor or other source.
IYour software was produced by
in-house programmers.
Note: In-house programmer is defined as an employee or a hired contract programmer. If your software is produced
in-house, the following Vendor information fields are not required.
519
–558
Ven
dor Name
40Req
uired.Enter the name of the company from whom you purchased your
sof
tware.
2004–33 I.R.B.239August 16, 2004

Record Name: Transmitter“T” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
559–598Vendor Mailing
Address
40Required.Enter the mailing address.
ForU.S.addresses, the vendor city, state, and ZIP Code must be reported as a 40, 2, and 9-position field, respectively.Filers
must adhere to the correct format for the payer city, state, and ZIP Code.
For foreign addresses,filers may use the payer city, state, and ZIP Code as a continuous 51-position field. Enter information in
the following order: city, province or state, postal code, and the name of the country.
599–638Vendor City40Required.Enter the city, town, or post office.
639–640Vendor State2Required.Enter the valid U.S. Postal Servicestate abbreviation. Refer to the
chart of valid state codes in Part A, Sec. 15.
641–649Vendor ZIP Code9Required.Enter the valid nine-digit ZIP Code assigned by the U.S. Postal
Service. If only the first five digits areknown, left-justify information and fill
unused positions with blanks.
650–689Vendor Contact Name40Required.Enter the name of the person who can be contacted concerning any
software questions.
690–704Vendor Contact
Phone Number &
Extension
15Required.Enter the telephone number of the person to contact concerning
software questions. Omit hyphens. If no extension is available, left-justify
information and fill unused positions with blanks.
705–739Vendor Contact Email
Address
35Required.Enter the email address of the person to contact concerning software
questions. Left-justify information and fill unused positions with blanks.
740Vendor Foreign
Entity Indicator
1Enter a “1” (one) if the vendor is a foreign entity. Otherwise, enter a blank.
741–748Blank8Enter blanks.
749–750Blank2Enter blanks, or carriage return/line feedcharacters (CR/LF).
Sec. 3. Transmitter “T” Record — Record Layout
Record
Type
Payment
Year
Prior Year
Data
Indicator
Transmitter’s
TIN
Transmitter
Control
Code
Replacement
Alpha
Character
Blank
12–567–1516–2021–2223–27
Test File
Indicator
Foreign
Entity
Indicator
Transmitter
Name
Transmitter
Name
(Continuation)
Company
Name
Company
Name
(Continuation)
282930–6970–109110–149150–189
Company
Mailing
Address
Company
City
Company
State
Company
ZIP
Code
BlankTotal
Number
of Payees
Contact
Name
190–229230–269270–271272–280281–295296–303304–343
August 16, 20042402004–33 I.R.B.

Contact
Phone
Number &
Extension
Contact
Email
Address
Cartridge
Tape File
Indicator
Electronic
File
Name For a
Replacement
File
Transmitter’s
Media
Number
BlankRecord
Sequence
Number
344–358359–393394–395396–410411–416417–499500–507
BlankVendor
Indicator
Vendor
Name
Vendor
Mailing
Address
Vendor
City
Vendor
State
508–517518519–558559–598599–638639–640
Vendor ZIP
Code
Vendor
Contact
Name
Vendor
Contact
Phone
Number &
Extension
Vendor
Contact
Email
Address
Vendor
Foreign
Entity
Indicator
BlankBlank or
CR/LF
641–649650–689690–704705–739740741–748749–750
Sec. 4. Payer “A” Record — General Field Descriptions
.01The Payer “A” Record identifies the person making payments, a recipient of mortgage or student loan interest payments, an
educational institution, a broker, a person reporting a real estate transaction, a barter exchange, a creditor, a trustee or issuer of any
IRA or MSA plan, and a lender who acquires an interest in secured property or who has a reason to know that the property has been
abandoned. The payer will be held responsible for the completeness, accuracy, and timelysubmission of electronic/magnetic files.
.02The second record on the file must be an “A” Record. A transmitter may include Payee “B” records for more than one payer
in a file. However,each groupof “B” records must be preceded by an “A” Record and followed by an End of Payer “C” Record. A
single file may contain different types of returns but the types of returnsmust notbe intermingled. A separate “A” Record is required
for each payer and each type of return being reported.
.03The number of “A” Records depends on the number of payers and the different types of returns being reported. Do not submit
separate “A” Records for each payment amount being reported. For example, if a payer is filingForm 1099–DIV to report Amount
Codes 1, 2, and 3, all three amount codes should be reported under one “A” Record, not three separate “A” Records.
.04The maximum number of “A” Records allowed on a file is 90,000.
.05All records must be a fixed length of 750 positions.
.06All alpha characters entered inthe “A” Record must be upper case.
.07For all fields marked“Required”, the transmitter must provide the information described under Description and Remarks.
For those fields not marked“Required”, a transmitter must allow for the field, but may be instructed to enter blanks or zeros in the
indicated media position(s) and for the indicated length.
Record Name: Payer “A” Record
Field
Position
Field TitleLength Description and Remarks
1Record Type1Required.Enter an “A.”
2–5Payment Year4Required.Enter “2004” (unless reporting prior year data; report the year which
applies [2002, 2003, etc.]).
6–11Blank6Enter blanks.
2004–33 I.R.B.241August 16, 2004

Record Name: Payer “A” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
12–20Payer’s
Taxpayer
Identification
Number (TIN)
9Required.Must be the valid nine-digit Taxpayer Identification Number assigned to
the payer.Do not enter blanks, hyphens, or alpha characters.All zeros, ones,
twos, etc., will have the effect of an incorrect TIN.
Note: For foreign entities that are not required to have a TIN, this field must be blank. However, the Foreign Entity
Indicator, position 52 of the “A”Record, must be set to “1”(one).
21–24Payer Name
Control
4ThePayerNam
e Control can be obtained only from the mail label on the Package
1099 that is m
ailed to most payers each December. Package 1099 contains Form
7018-C, Orde
rBlankforForms,andthemaillabel on the package contains a
four (4) char
acter name control. If a Package 1099 has not been received, you can
determine y
ou name control using the following simple rules or you can leave the
field blank
. For a business, use the first four significant characters of the business
name. Disre
gard the word “the” when it is the first word of the name, unless there are
only two wor
ds in the name. A dash (-) and an ampersand (&) are the only acceptable
special cha
racters. Names of less than four (4) characters should be left-justified,
filling th
e unused positions with blanks.
25Last Filing
Indicator
1Enter a “1” (one) if this is thelast yearthis payer name and TIN will file information
returns electronically, magnetically or on paper; otherwise, enter blank.
26Combined
Federal/State
Filer
1Required for the Combined Federal/State Filing Program.Enter “1” (one) if
approved or submitting a test to participate in the Combined Federal/State Filing
Program; otherwise, enter blank.
Note: If you entered one in this field position, be sure to code the Payee “B” Records with the appropriate state code.
Refer to Part A, Sec. 13, for further information.
27Type of Return1Required.Enter the appropriate code from the table below:
TypeofReturnCode
10983
1098–E2
1098–T8
1099–A4
1099–BB
1099–C5
1099–CAPP
1099–DIV1
1099–GF
1099–HJ
1099–INT6
1099–LTCT
1099–MISCA
1099–OIDD
1099–PATR7
1099–QQ
1099–R9
1099–SS
1099–SAM
5498L
5498–ESAV
5498–SAK
W–2GW
August 16, 20042422004–33 I.R.B.

Record Name: Payer “A” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
28–41Amount Codes
(See Note.)
14Required.Enter the appropriate amount codes for the type of return being reported.
In most cases, the box numbers on paper information returns correspond with the
amount codes used to file electronically ormagnetically. However, if discrepancies
occur, this Revenue Procedure governs for filing electronically/magnetically. Enter
the amount codes in ascending sequence numerics followed by alphas, left-justify,
and fill unused positions with blanks.
Note: A type of return and an amount code must be present in every Payer “A” Record even if no money amounts are
being reported. For a detailed explanation of the informationtobereportedineachamountcode,refertotheappropriate
paper instructions for each form.
Amount CodesForm 1098—Mortgage
Interest Statement
For Reporting Mortgage Interest Received From Payers/Borrowers (Payer of Record)
on Form 1098:
Amount
C
odeAmountType
1Mortgage interest received from payer(s)/borrower(s)
2Pointspai
d on purchase of principal residence
3Refund (or credit) of overpaid interest
4Blank (Filer’s use)
Amount CodesForm 1098–E— Student
Loan Interest
For Reporting Interest on Student Loans on Form 1098–E:
Amount
C
odeAmountType
1Student
loan interest received by lender
Amount C
odesForm 1098–T— Tuition
Stateme
nt
For Repo
rting Tuition Statements on Form 1098–T:
Amount
C
odeAmountType
1Payments received for qualified tuition and related
expenses
2Amount
s billed for qualified tuition and related expenses
3Adjustments made for prior year
4Scholarships or grants
5Adjus
tments to scholarships or grants for a prior year
Note: Amount codes 3 and 5 are
assumed to be negative. It is not
necessary to code with an over punch
or dash to indicate a negative reporting.
See the2004 Instructions for Form
1098–E and Tfor further information
7Reimbursements or refunds of qualified tuition and
related expenses from an insurance contract
Note
: For Amount Codes 1 and 2 enter either payments received OR amounts billed. DO NOT report both.
Amount CodesForm 1099–A—
Acquisition or Abandonment of Secured
Property
For Reporting the Acquisition or Abandonment of Secured Property on Form
1099–A:
Amount
C
odeAmountType
2Bal
ance of principal outstanding
See the2004 Instructions for Forms
1099–A and 1099–Cfor further
information on coordination with Form
1099–C
4Fair market value of property
2004–33 I.R.B.243August 16, 2004

Record Name: Payer “A” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
For Reporting Payments on Form 1099–B:
Amount
C
odeAmountType
2Stocks, bonds
, etc. (For forward contracts,SeeNote1.)
3Bartering (Do not report negative amounts.)
4Federal income tax withheld (backup withholding) (Do
not report negative amounts.)
6Profit (or loss) realized in2004
7Unrealized
profit (or loss) on open contracts —
12/31/2003
(See Note 2. )
8Unrealized profit (or loss) on open contracts —
12/31/2004(See Note 2.)
Amount CodesForm 1099–B—
Proceeds From Broker and Barter
Exchange Transactions
9Aggregate p
rofit (or loss)(See Note 2.)
Note 1: The payment amount field associated with Amount Code 2 may be used to report a loss from a closing
transaction on a forward contract. Refer to the “B” Record— General Field Descriptionsand Record Layouts, Payment
Amount Fields, for instructions on reporting negative amounts.
Note2:PaymentAmountFields6,7,8,and9aretobeused for the reporting of regulated futures or foreign
currency contracts.
For Reporting Payments on Form 1099–C:
Amount
C
odeAmountType
2Amount of debt canceled
3Interest, if included in Amount Code 2
Amount CodesForm 1099–C—
Cancellation of Debt
7Fair market value of property(See Note.)
Note: Use Amount Code 7 only if a combined Form 1099–A and 1099–C is being filed.
For Reporting Payments on Form 1099–CAP:
Amount
C
odeAmountType
Amount CodeForm 1099–CAP—
Changes in Corporate Control and Capital
Structure
2Aggregate amount received.
Amount CodesForm 1099–DIV—
Dividends and Distributions
For Reporting Payments on Form 1099–DIV:
See the2004 Instructions for Form
1099–DIVfor further information
Amount
C
odeAmountType
1Total ordinary dividends
2Qualified dividends
3Total capital gain distributions
6Unrecaptured Section 1250 gain
7Section 1202 gain
8Co
llectibles (28%) rate gain
9Nontaxable distributions
August 16, 20042442004–33 I.R.B.

Record Name: Payer “A” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
AFederal income tax withheld
BInvestment expenses
CForeign tax paid
DCash liquidation distribution
ENon-cash liquidation distribution
For Reporting Payments on Form 1099–G:
Amount
C
odeAmountType
1Unemployment compensation
2State or local income tax refunds, credits, or offsets
4Federal income tax withheld (backup withholding or
voluntary withholding on unemployment compensation
or Commodity Credit Corporation Loans, or certain crop
disaster payments)
6Taxable grants
Amount CodesForm 1099–G—Certain
Government Payments
7Agriculture payments
For Reporting Payments on Form 1099–H:
Amount
C
odeAmountType
1Gross amount of health insurance advance payments
2Amount of advance payment for January
3Amount of advance payment for February
4Amoun
t of advance payment for March
5Amount of advance payment for April
6Amount of advance payment for May
7Amount of advance payment for June
8Amount of advance payment for July
9Amount of advance payment for August
AAmo
unt of advance payment for September
BAmount of advance payment for October
CAmount of advance payment for November
Amount CodesForm 1099–H— Health
Insurance Advance Payments
DAmount of advance payment for December
Amount CodesForm 1099–INT—
Interest Income
For Reporting Payments on Form 1099–INT:
Amount
C
odeAmountType
1Interest income not included in Amount Code 3
2Early withdrawal penalty
3Interest on U.S. Savings Bonds and Treasury obligations
4Federal income tax withheld (backup withholding)
5Investment expenses
6Foreign tax paid
For Reporting Payments on Form 1099–LTC:
Amount
C
odeAmountType
1Gross long-term care benefits paid
Amount CodesForm 1099–LTC—
Long-Term Care and Accelerated Death
Benefits
2Accelerated death benefits paid
2004–33 I.R.B.245August 16, 2004

Record Name: Payer “A” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
For Reporting Payments on Form 1099–MISC:
Amount
C
odeAmountType
1Rents
2Royalties(See Note 2.)
3Other income
4Federal income tax withheld (backup withholding or
withholding on Indian gaming profits)
5Fishing boat proceeds
6Medical and health care payments
7Nonemploy
ee compensation
8Substitute payments in lieu of dividends or interest
ACrop insurance proceeds
BExcess golden parachute payments
Amount CodesForm 1099–MISC—
Miscellaneous Income(See Note 1.)
CGross proceeds paid to an attorney in connection with
legal services
Note 1: When using the Direct Sales Indicator in position 547 of the Payee “B” Record, use Type of Return Code A
and Amount Code 1 in the Payer “A” Record. All payment amount fields in the Payee “B” Record will contain zeros.
Note 2: Do not report timber royalties under a “pay-as-cut” contract; these mustbe reported on Form 1099–S.
Amount CodesForm 1099–OID—
Original Issue Discount
For Reporting Payments on Form 1099–OID:
Amount
C
odeAmountType
1Original issue discount for2004
2Other periodic interest
3Early withdrawal penalty
4Feder
al income tax withheld (backup withholding)
6Original issue discount on U.S. Treasury Obligations
See the2004 Instructions for Forms
1099–INT and 1099–OIDfor further
reporting information
7Investment expenses
For Reporting Payments on Form 1099–PATR:
Amo
unt
C
od
e
Amo
untType
1Patronage dividends
2Nonpatronage distributions
3Pe
r-unit retain allocations
4Federal income tax withheld (backup withholding)
5Redemption of nonqualified notices and retain
allocations
Pass-Through Credits
6For filer’s use for pass-through credits
7Investment credit
8Work opportunity credit
Amount CodesForm 1099–PATR—
Taxable Distributions Received From
Cooperatives
9Patron’s alternative minimum tax (AMT) adjustment
August 16, 20042462004–33 I.R.B.

Record Name: Payer “A” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
For Reporting Payments From Qualified Education Programs on a Form 1099–Q:
Amount
C
odeAmountType
1Gross distribution
2Earnings
Amount CodesForm 1099–Q—
Payments From Qualified Education
Programs (Under Sections 529 and 530)
3Basis
For Reporting Payments on Form 1099–R:
Amount
C
odeAmountType
1Gross distribution
2Taxable amount(See Note 1.)
3Capital gain (included in Amount Code 2)
4Federal i
ncome tax withheld
5Employee contributions or insurance premiums
6Net unrealized appreciation in employer’s securities
8Other
9Total employee contributions
Amount CodesForm 1099–R—
Distributions From Pensions, Annuities,
Retirement or Profit-Sharing Plans, IRAs,
Insurance Contracts, etc.
ATraditional IRA/SEP/SIMPLE distribution or Roth
conversion(See Note 2.)
Note 1: If the taxable amount cannot be determined, entera “1” (one) in position 547 of the “B” Record. Payment
Amount 2 must contain zeroes.
Note 2: For Form 1099–R, report the Roth conversion or total amount distributed from an IRA, SEP, or SIMPLE in
Payment Amount Field A (IRA/SEP/SIMPLE distribution orRoth conversion) of the Payee “B” Record, and generally,
the same amount in Payment Amount Field 1 (Gross Distribution). The IRA/SEP/SIMPLE indicator should be set to
“1” (one) in Field Position 548 of the Payee “B” Record.
Amount CodesForm 1099–S— Proceeds
From Real Estate Transactions
For Reporting Payments on Form 1099–S:
Amount
C
odeAmountType
2Gross proceeds(See Note.)
5Buy
er’s part of real estate tax
Note: Include payments of timber royalties made under a “pay-as-cut” contract, reportable under IRC section 6050N.
If timber royalties are being reported, enter “TIMBER” in the description field of the “B” Record.
Am
ount CodesForm 1099–SA—
Di
stributions From a HSA, Archer MSA or
Me
dicare+Choice MSA
Fo
r Reporting Distributions from a HSA, Archer Medical Savings Account, or
Me
dicare+Choice MSA on Form 1099–SA:
Am
ount
C
o
de
Am
ountType
1Gross distribution
2Earnings on excess contributions
4F
air market value of the account on date of death
2004–33 I.R.B.247August 16, 2004

Record Name: Payer “A” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
Amount CodesForm 5498—IRA
Contribution Information
For Reporting Information on Form 5498:
Amount
C
odeAmountType
1IRA contributions (other than amounts in Amount Codes
2, 3, 4, 8, 9, and A)(See Notes 1 and 2.)
2Rollover con
tributions
3Roth conversion amount
4Recharacterizedcontributions
5Fair market value of account
6Life insurance cost included in Amount Code 1
8SEP contributions
9SIMPLEcon
tributions
ARoth IRA contributions
Note 1: If reporting IRA contributions fora participant in a military operation, see2004 Instructions for Forms
1099–R and 5498.
Note 2: Also include employee contributions to an IRA under a SEP plan but not salary reduction contributions.
D
ONOTincludeEMPLOYERcontributions; these are included inAmount Code 8.
For Repo
rting Information on Form 5498–ESA:
Amount
C
odeAmountType
1Coverdell ESA contributions
Amount C
odesForm 5498–ESA—
Coverde
ll ESA Contribution Information
2Rollover contributions
For Reporting Information on 5498–SA:
Amount
C
odeAmountType
1Employee or self-employed person’s HSA/Archer MSA
contributions made in 2004 and 2005 for 2004
2Total contributions made in 2004 (See current 2004
Instructions.)
3Total HSA/MSA contributions made in 2005 for 2004
4Rollover contributions(See Note.)
Amount CodesForm 5498–SA—HSA,
Archer MSA or Medicare+Choice MSA
Information
5Fair market value of HSA, Archer MSA or M+C MSA
account on December 31, 2004
Note: For detailed information on reporting, see the2004 Instructions for Forms 1099–SA and 5498–SA.
For Reporting Payments on Form W–2G:
Amo
unt
C
od
e
Amo
untType
1Gross winnings
2Federal income tax withheld
Amount CodesForm W–2G—Certain
Gambling Winnings
7Wi
nnings from identical wagers
August 16, 20042482004–33 I.R.B.

Record Name: Payer “A” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
42–47Blank6Enter blanks.
48Original File
Indicator
1Required for original files only.Enter “1” (one) if the information is original data.
Otherwise, enter a blank.
49Replacement
File Indicator
1Required for replacement files only. Enter “1” (one) if this file is to replace a file
that IRS/MCC has informed you in writing can not be processed or the FIRE System
indicated a FILE STATUS of bad. Otherwise, enter a blank.
Note: If selecting the Replacement File Indicator in Position 49, Field Positions 48 and 50 must be blank. Onlyone
indicator may be selected in positions 48, 49, and 50 for each Payer “A” Record.
50Correction File
Indicator
1Required for correction files onlyEnter“1”(one)ifthisfileistocorrect
information which was previously submitted to IRS/MCC, was processed, but
contained erroneous information. Any information return which was inadvertently
omitted from a file must be submitted as original. Otherwise, enter a blank.
51Blank1Enter a blan
k.
52Foreign Entity
Indicator
1Enter a “1” (one) if the payer is a foreign entity and income is paid by the foreign
entity to a U. S. resident. Otherwise, enter a blank.
53–92First Payer
Name Line
40Required.Enter the name of the payer whose TIN appears in positions 12–20 of the
“A” Record. Any extraneous information must be deleted. Left-justify information,
and fill unused positions with blanks. (Filers should not enter a transfer agent’s
name in this field. Any transfer agent’s name should appear in the Second Payer
Name Line Field.)
93–132Second Pa
yer
Name Lin
e
40If the Tra
nsfer (or Paying) Agent Indicator (position 133) contains a “1” (one), this
field mu
st contain the name of the transfer (or paying) agent. If the indicator contains
a“0”(ze
ro), this field may contain either a continuation of the First Payer Name Line
or blank
s. Left-justify information and fill unused positions with blanks.
133Transfer Agent
Indicator
1Required.Identifies the entity in the Second Payer Name Line Field.
CodeMeaning
1Theent
ity in the Second Payer Name Line Field is the
transf
er (or paying) agent.
0 (zero)The entity shown isnotthe transfer (or paying) agent
(i.e., the Second Payer Name Line Field contains either
a continuation of the First Payer Name Line Field or
blanks).
134–173Payer Shipping
Address
40Required.If the Transfer Agent Indicator in position 133 is a “1” (one), enter the
shipping address of the transfer (or paying) agent. Otherwise, enter theactual
shipping address of the payer. The street address should include number, street,
apartment or suite number, or PO Box if mail is not delivered to street address.
Left-justify information, and fill unused positions with blanks.
For U
.S. addresses,the payer city, state, and ZIP Code must be reported as a 40, 2, and 9-position field, respectively.Filers must
adhe
re to the correct format for the payer city, state, and ZIP Code.
For foreign addresses,filers may use the payer city, state, and ZIP Code as acontinuous 51-position field. Enter information
in the following order: city, province or state, postal code, and the name of the country. When reporting a foreign address, the
Foreign Entity Indicator in position 52 must contain a “1” (one).
174–213Payer City40Required.If the Transfer Agent Indicator in position 133 is a “1” (one), enter the
city, town, or post office of the transfer agent. Otherwise, enter the city, town, or post
office of the payer. Left-justify information, and fill unused positions with blanks.
Do not enter state and ZIP Code information in this field.
2004–33 I.R.B.249August 16, 2004

Record Name: Payer “A” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
214–215Payer State2Required.Enter the valid U.S. Postal Service state abbreviations. Refer to the chart
of valid state abbreviations in Part A, Sec. 15.
216–224Payer ZIP Code 9Required.Enter the valid nine-digit ZIP Code assigned by the U.S. Postal Service.
If only the first five-digits are known, left-justify information and fill the unused
positions with blanks. For foreign countries, alpha characters are acceptable as long
as the filer has entered a “1” (one) in the Foreign Entity Indicator, located in Field
Position 52 of the “A” Record.
225–239Payer Phone
Number &
Extension
15Enter the payer’s phone number and extension. Omit hyphens. Left-justify
information and fill unused positions with blanks.
240–499Blank260Enter blanks.
500–507Record
Sequence
Number
8Required.Enter the number of the record as it appears within your file. The record
sequence number for the “T” record will always be “1” (one), since it is the first
record on your file and you can have onlyone “T” record in a file. Each record,
thereafter, must be incremented by one in ascending numerical sequence, i.e., 2, 3,
4, etc. Right-justify numbers with leading zeroes in the field. For example, the “T”
record sequence number would appear as “00000001” in the field, the first “A” record
would be “00000002”, the first “B” record, “00000003”, the second “B” record,
“00000004” and so on until you reach the final record of the file, the “F” record.
508–748Blank241Enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
Sec. 5. Payer “A” Record — Record Layout
Record
Type
Payment
Year
BlankPayer
TIN
Payer Name
Control
Last Filing
Indicator
12–56–1112–2021–2425
Combined
Federal/State
Filer
Type
of
Return
Amount
Codes
BlankOriginal
File
Indicator
Replacement
File
Indicator
Correction
File
Indicator
262728–4142–47484950
BlankForeign
Entity
Indicator
First
Payer Name
Line
Second
Payer Name
Line
Transfer
Agent
Indicator
Payer
Shipping
Address
515253–9293–132133134–173
Payer
City
Payer
State
Payer
ZIP
Code
Payer Phone
Number and
Extension
BlankRecord
Sequence
Number
BlankBlank or
CR/LF
174–213214–215216–224225–239240–499500–507508–748749–750
August 16, 20042502004–33 I.R.B.

Sec. 6. Payee “B” Record — General Field Descriptions and Record Layouts
.01The “B” Record contains the payment information from the information returns. The record layout for field positions 1 through
543 is the same for all types of returns. Field positions 544 through 750 vary for each type of return toaccommodate special fields for
individual forms. In the “B” Record, the filermustallow for allfourteenPaymentAmountFields.For those fields not used, enter
“0s” (zeros).
.02The following specifications include a field in the payee records called “NameControl” in which the first four characters of
the payee’s surname are to be entered by the filer;
(a)If filers are unable to determine the first four characters of the surname, the Name Control Field may be left blank. Com-
pliance with the following will facilitate IRS computer programs in identifying the correct name control:
1.The surname of the payee whose TIN is shown in the “B” Record should always appear first. If, however, the records
have been developed using the first name first, the filermust leave a blank space between the first and last names.
2.In the case of multiple payees, only the surname of the payee whose TIN (SSN, EIN, ITIN, or ATIN) is shown in the
“B” Record must be present in the First Payee Name Line. Surnames of any other payees may be entered in the Second
Payee Name Line.
.03For all fields marked“Required”, the transmitter must provide the information described under “Description and Remarks”.
For those fields not marked“Required”, the transmitter must allow for the field, but may be instructed to enter blanks or zeros in the
indicated field position(s)and for the indicated length.
.04All records must be a fixed length of 750 positions.
.05A field is also provided in these specifications for Special DataEntries. This field may be used torecord information required
by state or local governments, or for the personal use of the filer. IRS does not use the data provided in the Special Data Entries Field;
therefore, the IRS program does not check the content or format ofthe data entered in this field. It is the filer’s option to use the
Special Data Entry Field.
.06Following the Special Data Entries Field in the “B” Record, payment fields have been allocatedfor State Income Tax Withheld
and Local Income Tax Withheld. These fields are for the convenience of the filers. The information will not be used by IRS/MCC.
.07Those payers participating in the Combined Federal/State Filing Program must adhere to all of the specifications in Part A,
Sec. 13, to participate in this program.
.08All alpha characters in the “B” Record must be uppercase.
.09Donotuse decimal points (.) to indicate dollars and cents. Payment Amount Fields must be all numerics.
Record Name: Payee “B” Record
Field
Position
Field TitleLength Description and Remarks
1Record Type1Required.Enter “B”.
2–5Payment Year4Required.Enter “2004” (unless reporting prior year data; report the
year which applies [2002, 2003, etc.]).
6Corrected Return Indicator(See
Note.)
1Required for corrections only.Indicates a corrected return
CodeDefinition
GIf this is a one-transactioncorrectionorthefirstof
a two-transaction correction
CIf this is the second transaction of a two transaction
correction
BlankIf this is not a return being submitted to correct
information already processed by IRS.
Note: C, G, and non-coded records must be reported using separate Payer “A” Records. Refer to Part A, Sec. 11,
for specific instructions on how to file corrected returns.
2004–33 I.R.B.251August 16, 2004

Record Name: Payee “B” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
7–10Name Control4If determinable, enter thefirst four characters of the surname of the
person whose TIN is being reported in positions 12–20 of the “B”
Record; otherwise,enter blanks. This usually is the payee. If the
name that corresponds to the TIN is not included in the first or sec-
ond payee name line and the correctname control is not provided, a
backup withholding notice may be generated for the record. Sur-
names of less than four characters should be left-justified, filling
the unused positions with blanks. Special characters and imbedded
blanks should be removed. In the case of a business, other than a sole
proprietorship, use the first four significant characters of the business
name. Disregard the word “the” when it is the first word of the name,
unless there are only two words in the name. A dash (-) and an am-
persand (&) are the only acceptable special characters. Surname pre-
fixes are considered, e.g., for Van Elm, the name control would be
VANE. For a sole proprietorship, use the name of the owner to create
the name control and report the owner’s name in positions 248–287,
First Payer Name Line.
Note: Imbedded blanks, extraneous words, titles, and special characters (i.e., Mr., Mrs., Dr., period [.], apostrophe
[’]) should be removed from the Payee Name Lines. This information may be dropped during subsequent processing at
IRS/MCC. A dash (-) and an ampersand (&) are the only acceptable special characters.
The follo
wing examples may be helpful to filers in developing the Name Control:
N
ame:NameControl
Individuals:
JaneB
ro
wn
BROW
John A.L
eeLEE*
James P.E
n,Sr.EN*
JohnO
’NeilONEI
MaryV
anBurenVANB
JuanD
eJesusDEJE
Glori
aA.E
l-Roy
EL-R
Mr. JohnS
mithSMIT
JoeM
cCarthyMCCA
PedroT
orres-Lopes**TORR
MariaL
opez Moreno**LOPE
Binh ToL
aLA*
Nh
at ThiP
ham
PH
AM
August 16, 20042522004–33 I.R.B.

Record Name: Payee “B” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
Corporations:
TheFirst National BankFIRS
T
heHideawayTHEH
A
&BCafeA&BC
1
1THStreet Inc.11TH
Sole Proprietor:
MarkH
emloc
k
DBA The Suns
hine Club
HEML
MarkD
’AllesandroDALL
Partnership:
RobertA
spen
and Bess Willow
ASPE
HaroldF
ir,BruceElm,
and Joyce Spruce et al Ptr
FIR*
Estate:
FrankW
h
iteEstate
WHIT
Estate of SheilaB
lueBLUE
Trusts and Fiduciaries:
D
aisy Corporation Employee
Benefit Trust
DAIS
Trust FBO TheC
herry-blossom
Society
CHER
Exempt Organizations:
Labo
rer’s Union, AFL-CIO
LABO
S
t.Bernard’s Methodist
Church Bldg. Fund
STBE
*Name Controls of less than four significant characters must be left-justified and blank-filled.
**For Hispanic names, when two last names are shown for an individual, derive the name control from the first last name.
11Type of TIN1This field is used to identify the Taxpayer Identification Number
(TIN) in positions 12–20 as eitheran Employer Identification Num-
ber (EIN), a Social Security Number (SSN), an Individual Taxpayer
Identification Number (ITIN) or an Adoption Taxpayer Identification
Number (ATIN). Enter the appropriate code from the following table:
CodeTypeofTINTypeofAccount
1EI
N
Ab
usiness, organization, some
so
le proprietors, or other entity
2SSNAn individual, including some
sole proprietors
2I
TIN
A
n individual required to have a
taxpayer identification number,
but who is not eligible to obtain
an SSN
2004–33 I.R.B.253August 16, 2004

Record Name: Payee “B” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
2ATINAn adopted individual prior to the
assignment of a social security
number
BlankN/AIf the type of TIN is not
determinable, enter a blank.
12–20Payee’s Taxpayer
Identification
Number (TIN)
9Required.Enter the nine-digit Taxpayer Identification Number of
the payee (SSN, ITIN, ATIN, or EIN). If an identification number
has been applied for but not received, enter blanks.Do not enter
hyphens or alpha characters.All zeros, ones, twos, etc., will have
the effect of an incorrect TIN. If the TIN is not available, enter blanks.
Note: If you
are required to report payments made through Foreign Intermediaries and Foreign Flow-Through
Entities on
Form 1099, see the2004 General Instructions for Forms 1099, 1098, 5498 and W–2Gfor reporting requirements.
21–40Payer’s Account Number For
Payee
20
Required if submitting more than one information return of the
same type for the same payee.Enter any number assigned by the
payer to the payee that can be used by the IRS to distinguish between
information returns.This number must be unique for each informa-
tionreturnofthesametypeforthesamepayee.If a payee has more
than one reporting of the same document type, it is vital that each
reporting have a unique account number. For example, if a payer has
3 separate pension distributions for the same payee and 3 separate
Forms 1099-R are filed, 3 separate unique account numbers are re-
quired. A payee’s account number may be given a unique sequencing
number, such as, 01, 02 or A, B, etc.,to differentiate each reported in-
formation return. Do not use the payee’s TIN since this will not make
each record unique. This informationis critical when corrections are
filed. This number will be provided with the backup withholding no-
tification and may be helpful in identifying the branch or subsidiary
reporting the transaction. Do not define data in this field in packed
decimal format. If fewer than twenty characters are used, filers may
either left or right-justify, filling the remaining positions with blanks.
41–44Payer’s Office Code4Enter office code of payer; otherwise, enter blanks. For payers with
multiple locations, this field may be used to identify the location of
the office submitting the information return. This code will also ap-
pear on backup withholding notices.
45–54Blank10Enter blanks
Payment Amount Fields
(Must be numeric)
Required. Filers should allow for all payment amounts. For
those not used, enter zeros.Each payment field must contain 12
numeric characters. Each payment amount must contain U.S. dollars
and cents. The right-most two positions represent cents in the pay-
ment amount fields.Do not enter dollar signs, commas, decimal
points, or negative payments, except those items that reflect a loss
on Form 1099–B or 1099–Q.Positive and negative amounts are in-
dicated by placing a “+” (plus) or “-” (minus) sign in the left-most
position of the payment amount field. A negative over punch in the
unit’s position may be used, instead of a minus sign, to indicate a
negative amount. If a plus sign, minus sign, or negative over punch
is not used, the number is assumed to be positive. Negative over
punch cannot be used in PC created files. Payment amounts must be
right-justified and unused positions must be zero-filled.
August 16, 20042542004–33 I.R.B.

Record Name: Payee “B” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
55–66Payment Amount 1*12The amount reported in this field represents payments for Amount
Code 1 in the “A” Record.
67–78Payment Amount 2*12The amount reported in this field represents payments for Amount
Code 2 in the “A” Record.
79–90Payment Amount 3*12The amount reported in this field represents payments for Amount
Code 3 in the “A” Record.
91–102Payment Amount 4*12The amount reported in this field represents payments for Amount
Code 4 in the “A” Record.
103–114 Payment Amount 5*12The amount reported in this field represents payments for Amount
Code 5 in the “A” Record.
115–126 Payment Amount 6*12The amount reported in this field represents payments for Amount
Code 6 in the “A” Record.
127–138 Payment Amount 7*12The amount reported in this field represents payments for Amount
Code 7 in the “A” Record.
139–150 Payment Amount 8*12The amount reported in this field represents payments for Amount
Code 8 in the “A” Record.
151–162 Payment Amount 9*12The amount reported in this field represents payments for Amount
Code 9 in the “A” Record.
163–174 Payment Amount A*12The amount reported in this field represents payments for Amount
Code A in the “A” Record.
175–186 Payment Amount B*12The amount reported in this field represents payments for Amount
Code B in the “A” Record.
187–198 Payment Amount C*12The amount reported in this field represents payments for Amount
Code C in the “A” Record.
199–210 Payment Amount D*12The amount reported in this field represents payments for Amount
Code D in the “A” Record.
211–222 Payment Amount E*12The amount reported in this field represents payments for Amount
Code E in the “A” Record.
* If there are discrepancies between the payment amount fields and the boxes on the paper forms, the instructions in this
Revenue Procedure must be followed for electronic/magnetic filing.
223–246 Reserved24Enter blanks.
247Foreign Country Indicator1If the address of the payee is in a foreign country, enter a “1”
(one) in this field;otherwise, enter blank. When filers use this in-
dicator, they may use a free format for the payee city, state, and ZIP
Code. Enter information in the following order: city, province or
state, postal code, and the name of the country. Address information
must not appear in the First or Second Payee Name Line.
2004–33 I.R.B.255August 16, 2004

Record Name: Payee “B” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
248–287 First Payee Name Line40Required.Enter the name of the payee (preferably surname first)
whose Taxpayer Identification Number (TIN) was provided in posi-
tions 12–20 of the “B” Record. Left-justify and fill unused positions
with blanks. If more space is required for the name, use the Second
Payee Name Line Field. The names of any other payees may be en-
tered in the Second Payee Name Line Field. If reporting information
for a sole proprietor, the individual’s name must always be present on
theFirstPayeeNameLine.Theuseofthebusinessnameisoptional
intheSecondPayeeNameLineField. EndtheFirstPayeeName
Line with a full word. Use appropriate spacing. Extraneous words,
titles, and special characters (i.e., Mr., Mrs., Dr., period, apostrophe)
should be removed from the Payee Name Lines. This information
may be dropped during subsequent processing at IRS/MCC. A dash
(-) and an ampersand (&) are the only acceptable special characters
for First and Second Payee Name Lines.
Note: If you are required to report payments made through Foreign Intermediariesand Foreign Flow-Through
Entities on Form 1099, see the2004 General Instructions for Forms 1099, 1098, 5498 and W–2Gfor reporting requirements.
288–327 Second Pa
yeeNameLine
40If there a
re multiple payees (e.g., partners, joint owners, or spouses),
use this f
ield for those names not associated with the TIN provided in
position
s 12–20 of the “B” Record, or if not enough space was pro-
vided in t
he First Payee Name Line, continue the name in this field.
Do not ent
er address information.It is important that filers provide
as much pa
yeeinformationtoIRS/MCCaspossibletoidentifythe
payee as
sociated with the TIN. Left-justify and fill unused positions
with bla
nks.SeeNoteaboveinFirstPayeeNameLine.
328–367 Blank40Enter blanks.
368–407 Payee Mailing Address40Required.Enter mailing address of payee. Street address should
include number, street, apartment or suite number, or PO Box if mail
is not delivered to street address.Left-justify information and fill
unused positions with blanks. This fieldmust notcontain any data
other than the payee’s mailing address.
408–4
47
Blank40Enter
blanks.
448–487 Payee City40Required.Enter the city, town or post office. Left-justify informa-
tion and fill the unused positions with blanks. Enter APO or FPO if
applicable. Do not enter state and ZIP Code information in this field.
488–489 Payee State2Required.Enter the valid U.S. Postal Service state abbreviations for
states or the appropriate postal identifier (AA, AE, or AP) described
in Part A, Sec. 15.
490–
498
Paye
eZIPCode
9Requ
ired.Enter the valid ZIP Code (nine or five-digit) assigned
by th
e U.S. Postal Service. If only the first five-digits are known,
lef
t-justify information and fill theunused positions with blanks. For
for
eign countries, alpha characters are acceptable as long as the filer
has
entered a “1” (one) in the Foreign Country Indicator, located in
pos
ition 247 of the “B” Record.
499Blank1Enter blank.
August 16, 20042562004–33 I.R.B.

Record Name: Payee “B” Record (Continued)
Field
Position
Field TitleLength Description and Remarks
500–507 Record Sequence Number8Required.Enter the number of the record as it appears within your
file. The record sequence number for the “T” record will always be
“1” (one), since it is the first record on your file and you can have only
one “T” record in a file. Each record, thereafter, must be incremented
by one in ascending numerical sequence, i.e., 2, 3, 4 etc. Right-justify
numbers with leading zeroes in the field. For example, the “T” record
sequence number would appear as “00000001” in the field, the first
“A” record would be “00000002”, the first “B” record, “00000003”,
the second “B” record, “00000004” and so on until you reach the
final record of the file, the “F” record.
508–543 Blank36Enter blanks.
Standard Payee “B” Record Format For
All Types of Returns, Positions 1–543
Record
Type
Payment
Year
Corrected
Return
Indicator
Name
Control
Type of
TIN
Payee’s
TIN
Payer’s
Account
Number
For Payee
12–567–101112–2021–40
Payer’s
Office
Code
BlankPayment
Amount
1
Payment
Amount
2
Payment
Amount
3
Payment
Amount
4
Payment
Amount
5
41–4445–5455–6667–7879–9091–102103–114
Payment
Amount
6
Payment
Amount
7
Payment
Amount
8
Payment
Amount
9
Payment
Amount A
Payment
Amount B
115–126127–138139–150151–162163–174175–186
Payment
Amount
C
Payment
Amount
D
Payment
Amount
E
ReservedForeign
Country
Indicator
First Payee
Name Line
Second Payee
Name Line
Blank
187–198199–210211–222223–246247248–287288–327328–367
Payee
Mailing
Address
BlankPayee
City
Payee
State
Payee
ZIP
Code
BlankRecord
Sequence
Number
Blank
368–407408–447448–487488–489490–498499500–507508–543
2004–33 I.R.B.257August 16, 2004

The following sections define the field positions for the different types of returns in the Payee “B” Record (positions 544–750):
(1) Form 1098
(2) Form 1098–E
(3) Form 1098–T
(4) Form 1099–A
(5) Form 1099–B
(6) Form 1099–C
(7) Form 1099–CAP
(8) Form 1099–DIV*
(9) Form 1099–G*
(10) Form 1099–H
(11) Form 1099–INT*
(12) Form 1099–LTC
(13) Form 1099–MISC*
(14) Form 1099–OID*
(15) Form 1099–PATR*
(16) Form 1099–Q
(17) Form 1099–R*
(18) Form 1099–S
(19)Form 1099–SA
(20) Form 5498*
(21) Form 5498–ESA
(22)Form 5498–SA
(23) Form W–2G
* These forms may be filed through the Combined Federal/State Filing Program. IRS/MCC will forward these records to participating
states for filers who have been approved for the program. See PartA, Sec. 13, for information about the program, including specific
codes for the record layouts.
(1) Payee “B” Record — Record LayoutPositions 544–750 for Form 1098
Field
Position
Field TitleLengthDescription and Remarks
544–662Blank119Enter blanks.
663–722Special Data
Entries
60This portion of the “B” Record may be used to record informa-
tion for state or local government reporting or for the filer’s own
purposes. Payers should contact the state or local revenue depart-
ments for filing requirements. If this field is not utilized, enter
blanks.
723–748Blank26Enter blanks.
749–750Blank2Enter blanks, or carriage return/line feed (CR/LF) characters.
August 16, 20042582004–33 I.R.B.

Payee “B” Record — Record Layout Positions 544–750
for Forms 1098
BlankSpecial
Data
Entries
BlankBlank
or CR/LF
544–662663–722723–748749–750
(2) Payee “B” Record — Record Layout Positions 544–750 for Form 1098–E
Field
Position
Field TitleLengthDescription and Remarks
544–546Blank3Enter blanks.
547Origination
Fees/Capitalized
Interest Indicator
1Enter “1” (one) if the amount reported in Payment Amount
Field 1 includes loan origination fees and/or capitalized interest.
Otherwise, enter a blank.
548–662Blank115Enter blanks.
663–722Special Data
Entries
60This portion of the “B” Record may be used to record
information for state or local government reporting or for the
filer’s own purposes. Payers should contact the state or local
revenue departments for the filing requirements. If this field is
not utilized, enter blanks.
723–748Blank26Enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544–750
for Forms 1098–E
BlankOrigination
Fees/
Capitalized
Interest
Indicator
BlankSpecial
Data
Entries
BlankBlank or CR/LF
544–546547548–662663–722723–748749–750
(3) Payee “B” Record — Record Layout Positions 544–750 for Form 1098–T
Field
Position
Field TitleLengthDescription and Remarks
544–546Blank3Enter blanks.
547Half-time Student
Indicator
1Enter “1” (one) if the student was at least a half-time student dur-
ing any academic period that began in 2004. Otherwise, enter a
blank.
548Graduate Student
Indicator
1Enter “1” (one) if the student is enrolled exclusively in a graduate
level program. Otherwise, enter a blank.
2004–33 I.R.B.259August 16, 2004

(3) Payee “B” Record — Record Layout Positions 544–750 for Form 1098–T (Continued)
Field
Position
Field TitleLengthDescription and Remarks
549Academic Period
Indicator
1Enter “1” (one) if the amount in Payment Amount Field 1 or Pay-
ment Amount Field 2 includes amounts for an academic period
beginning January through March 2005. Otherwise, enter a blank.
550–662Blank113Enter blanks.
663–722Special Data
Entries
60This portion of the “B” Record may be used to record informa-
tion for state or local government reporting or for the filer’s own
purposes. Payers should contact the state or local revenue depart-
ments for the filing requirements. If this field is not utilized, enter
blanks.
723–748Blank26Enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544–750
for Form 1098–T
BlankHalf-time
Student
Indicator
Graduate
Student
Indicator
Academic
Period
Indicator
BlankSpecial
Data
Entries
BlankBlank or
CR/LF
544–546547548549550–662663–722723–748749–750
(4) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–A
Field
Position
Field TitleLengthDescription and Remarks
544–546Blank3Enter blanks.
547Personal Liability
Indicator
1Enter the appropriate indicator from the table below:
IndicatorUsage
1Borrower was personally liable for repay-
ment of the debt.
BlankBorrower was not personally liable for re-
payment of the debt.
548–555Date of Lender’s
Acquisition or
Knowledge of
Abandonment
8Enter the acquisition date of the secured property or the date the
lender first knew or had reason to know the property was aban-
doned, in the format YYYYMMDD (e.g., January 5, 2004, would
be 20040105).Do not enter hyphens or slashes.
August 16, 20042602004–33 I.R.B.

(4) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–A (Continued)
Field
Position
Field TitleLengthDescription and Remarks
556–594Description of Property39Enter a brief description of the property. For real property, enter the
address, or, if the address does not sufficiently identify the prop-
erty, enter the section, lot and block. For personal property, enter
the type, make and model (e.g., Car-1999 Buick Regal or Office
Equipment). Enter “CCC” for crops forfeited on Commodity Credit
Corporation loans. If fewer than 39 positions are required, left-jus-
tify information and fill unused positions with blanks.
595–662Blank68Enter blanks.
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own pur-
poses. Payers should contact the state or local revenue departments
for the filing requirements. If this field is not utilized, enter blanks.
723–748Blank26Enter blanks.
749–750Blank2Enter blanks, or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544–750
for Form 1099–A
BlankPersonal Liability
Indicator
Date of Lender’s
Acquisition or
Knowledge of
Abandonment
Description
of
Property
Blank
544–546547548–555556–594595–662
Special
Data
Entries
BlankBlank or
CR/LF
663–722723–748749–750
(5) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–B
Field
Position
Field TitleLengthDescription and Remarks
544Second TIN Notice
(Optional)
1Enter “2” (two) to indicate notification by IRS twice within three
calendar years that the payee provided an incorrect name and/or
TIN combination; otherwise, enter a blank.
545–546Blank2Enter blanks.
2004–33 I.R.B.261August 16, 2004

(5) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–B (Continued)
Field
PositionField TitleLengthDescription and Remarks
547Gross Proceeds Indicator1Enter the appropriateindicator from the following table, to identify
the amount reported in Amount Code 2; otherwise, enter a blank.
IndicatorUsage
1Gross proceeds
2Gross proceeds less commissions and options
premiums
548–555Date of Sale or Exchange8For broker transactions, enter the trade date of the transaction.
For barter exchanges, enter the date when cash, property, a
credit, or scrip is actually or constructively received in the format
YYYYMMDD (e.g., January 5, 2004, would be 20040105). Enter
blanks if this is an aggregate transaction.Do not enter hyphens
or slashes.
556–568CUSIP Number13For broker transactions only, enter the CUSIP (Committee on
Uniform Security Identification Procedures) number of the item
reported for Amount Code 2 (stocks, bonds, etc.). Enter blanks if
this is an aggregate transaction. Enter “0s” (zeros) if the number is
not available. Right-justify information and fill unused positions
with blanks.
569–607Description39If fewer than 39 characters are required, left-justify information
and fill unused positions with blanks. For broker transactions,
enter a brief description of the disposition item (e.g., 100 shares
of XYZ Corp). For regulated futures and forward contracts, enter
“RFC” or other appropriate description. For bartering transactions,
show the services or property provided.
608–615Number of
Shares
Exchanged
8Enter the number of shares of the corporation’s stock which
were exchanged in the transaction. Report whole number only.
Right-justify information and fill unused positions with zeros.
616–625Class of
Stock
Exchanged
10Enter the class of stock that was exchanged. Left-justify the
information and fill unused positions with blanks.
626Recipient
Indicator
1Enter a “1” (one) if the recipient is unable to claim a loss on their
tax return. Otherwise, enter a blank.
627–662Blank36Enter blanks.
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own
purposes. Payers should contact the state or local revenue
departments for filing requirements. If this field is not utilized,
enter blanks.
723–734State Income Tax
Withheld
12State income tax withheld is for the convenience of the filers. This
information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled. If not reporting state tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
August 16, 20042622004–33 I.R.B.

(5) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–B (Continued)
Field
PositionField TitleLengthDescription and Remarks
735–746Local Income Tax
Withheld
12Local income tax withheld is for the convenience of the filers.
This information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled. If not reporting local tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
747–748Blank2Enter blanks.
749–750Blank2Enter blanks, or carriage return/line feed (CR/LF) characters.
Note: Report the Corporation’s Name, Address, City, State, and ZIP in the Special Data Entry field.
Payee “B” Record — Record Layout Positions 544–750
for Form 1099–B
Second
TIN Notice
(Optional
)
BlankGross
Proceeds
Indicator
Date of
Sale
CUSIP
Number
Descripti
on
Number of
Shares
Exchanged
544545–546547548–555556–568569–607608–615
Classes of
Stock
Exchanged
Recipient
Indicator
BlankSpecial
Data
Entries
State
Income
Tax
Withheld
Local
Income
Tax
Withheld
BlankBlank
or
CR/LF
616–625626627–662663–722723–734735–746747–748749–750
(6) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–C
Field
Position
Field TitleLengthDescription and Remarks
544–546Blank3Enter bl
anks.
547Bankruptcy Indicator1Enter “1” (one) to indicate the debt was discharged in bankruptcy,
if known. Otherwise, enter a blank.
548–555Date Canceled8Enter the date the debt was canceled in the format of
YYYYMMDD (e.g., January 5, 2004, would be 20040105).Do
not enter hyphens or slashes.
556–59
4
Debt De
scription
39Enter a
description of the origin of the debt, such as student loan,
mortga
ge or credit card expenditure. If a combined Form 1099–C
and 10
99–A is being filed, also enter a description of the property.
595–662Blank68Enter blanks.
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own
purposes. Payers should contact the state or local revenue
departments for filing requirements. If this field is not utilized,
enter blanks.
2004–33 I.R.B.263August 16, 2004

(6) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–C (Continued)
723–748Blank26Enter blanks.
749–750Blank2Enter blanks, or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544–750
for Forms 1099–C
BlankBankruptcy
Indicator
Date
Canceled
Debt
Description
BlankSpecial
Data
Entries
544–546547548–555556–594595–662663–722
BlankBlank
or CR/LF
723–748749–750
(7) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–CAP
Field
Position
Field TitleLengthDescription and Remarks
544–547Blank4Enter blanks.
548–555Date of Sale or Exchange8Enter the date the stock was exchanged for cash, stock in the
successor corporation, or other property received in the format
YYYYMMDD (e.g., January 5, 2004, would be 20040105).Do
not enter hyphens or slashes.
556–607Blank52Enter blanks.
608–615Number of Shares
Exchanged
8Enter the number of shares of the corporation’s stock which
were exchanged in the transaction. Report whole number only.
Right-justify information and fill unused positions with zeros.
616–625Classes of Stock
Exchanged
10Enter the class of stock that was exchanged. Left-justify the
information and fill unused positions with blanks.
626Blank1Enter a blank.
627Shareholder Indicator1Enter a “1” (one) if the shareholder cannot take a loss on their tax
return. Otherwise, enter a blank.
628–662Blank35Enter blanks.
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own
purposes. Payers should contact the state or local revenue
departments for filing requirements. If this field is not utilized,
enter blanks.
723–748Blank26Enter blanks.
749–750Blank2Enter blanks, or carriage return/line feed (CR/LF) characters.
August 16, 20042642004–33 I.R.B.

Payee “B” Record — Record Layout Positions 544–750
for Form 1099–CAP
BlankDate of Sale or
Exchange
BlankNumber of Shares
Exchanged
Classes of Stock
Exchanged
544–547548–555556–607608–615616–625
BlankShareholder
Indicator
BlankSpecial Data
Entries
BlankBlank or
CR/LF
626627628–662663–722723–748749–750
(8) Payee “B
” Record — Record Layout Positions 544–750 for Form 1099–DIV
Field
Position
Field TitleLengthDescription and Remarks
544Second TIN Notice
(Optional)
1Enter “2” (two) to indicate notification by IRS twice within three
calendar years that the payee provided an incorrect name and/or
TIN combination; otherwise, enter a blank.
545–546Blank2Enter blan
ks.
547–586Foreign Country or U.S.
Possession
40Enter the name of the foreign country or U.S. possession to which
the withheld foreign tax (Amount Code C) applies. Otherwise,
enter blanks.
587–662Blank76Enter blanks.
663–722Special
Data Entries
60This por
tion of the “B” Record may be used to record information
for stat
e or local government reporting or for the filer’s own
purpose
s. Payers should contact the state or local revenue
departm
ents for filing requirements. If this field is not utilized,
enter bl
anks.
723–734State Income Tax
Withheld
12State income tax withheld is for the convenience of the filers. This
information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled. If not reporting state tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
735–746Local Income Tax
Withheld
12Local income tax withheld is for the convenience of the filers.
This information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled. If not reporting local tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
747–
748
Comb
ined Federal/State
Code
2Ifth
is payee record is to be forwarded to a state agency as part of
the C
ombined Federal/State Filing Program, enter the valid state
code
from Part A, Sec. 13, Table 1. For those payers or states not
part
icipating in this program, enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
2004–33 I.R.B.265August 16, 2004

Payee “B” Record — Record Layout Positions 544–750
for Form 1099–DIV
Second
TIN
Notice
(Optional)
BlankForeign
Country
or U.S.
Possession
BlankSpecial
Data Entries
544545–546547–586587–662663–722
State
Income
Tax
Withheld
Local
Income
Tax
Withheld
Combined
Federal/
State
Code
Blank
or CR/LF
723–734735–746747–748749–750
(9) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–G
Field
Position
Field TitleLengthDescription and Remarks
544–546Blank3Enter blanks.
547Trade or Business
Indicator
1Enter “1” (one) to indicate the state or local income tax refund,
credit, or offset (Amount Code 2) is attributable to income tax that
applies exclusively to income from a trade or business.
IndicatorUsage
1Income tax refund applies exclusively to a
trade or business.
BlankIncome tax refund is a general tax refund.
548–551Tax Year of Refund4Enter the tax year for which the refund, credit, or offset (Amount
Code 2) was issued.The tax year must reflect the tax year for
which the payment was made, not the tax year of the Form
1099–G. The tax year must be in the four-position format of
YYYY (e.g., 2001).The valid range of years for the refund is
1994 through 2003.
Note: This data is not considered prior year data since itis required to be reported in the current tax year. Do NOT
enter “P” in field position 6 of the Transmitter “T” Record.
552–662Blank111Enter bl
anks.
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own
purposes. Payers should contact the state or local revenue
departments for filing requirements. You may enter your routing
and transit number (RTN) here. If this field is not utilized, enter
blanks.
723–734State Income Tax
Withheld
12State income tax withheld is for the convenience of the filers. This
information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled. If not reporting state tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
August 16, 20042662004–33 I.R.B.

(9) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–G (Continued)
Field
Position
Field TitleLengthDescription and Remarks
735–746Local Income Tax
Withheld
12Local income tax withheld is for the convenience of the filers.
This information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled. If not reporting local tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
747–748Combined Federal/State
Code
2If this payee record is to be forwarded to a state agency as part of
the Combined Federal/State Filing Program, enter the valid state
code from Part A, Sec. 13, Table 1. For those payers or states not
participating in this program, enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544–750
for Form 1099–G
BlankTrade or Business
Indicator
Tax Year
of
Refund
BlankSpecial
Data
Entries
State
Income
Tax
Withheld
544–546547548–551552–662663–722723–734
Local
Income
Tax
Withheld
Combined
Federal/
State
Code
Blank
or CR/LF
735–746747–748749–750
(10) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–H
Field
Position
Field TitleLengthDescription and Remarks
544–546Blank3Enter blanks.
547–548Number of Months
Eligible
2Required. Enter the total number of months recipient is eligible
for health insurance advance payments. Right-justify and blank
fill any remaining positions.
549–662Blank114Enter blanks.
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own
purposes. Payers should contact the state or local revenue
departments for filing requirements. If this field is not utilized,
enter blanks.
723–748Blank26Enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
2004–33 I.R.B.267August 16, 2004

Payee “B” Record — Record Layout Positions 544–750
for Form 1099–H
BlankNumber of
Months
Eligible
BlankSpecial
Data
Entries
BlankBlank or
CR/LF
544–546547–548549–662663–722723–748749–750
(11) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–INT
Field
Position
Field TitleLengthDescription and Remarks
544Second TIN Notice
(Optional)
1Enter “2” (two) to indicate notification by IRS twice within three
calendar years that the payee provided an incorrect name and/or
TIN combination; otherwise, enter a blank.
545–546Blank2Enter blanks.
547–586Foreign Country or U.S.
Possession
40Enter the name of the foreign country or U.S. possession to which
the withheld foreign tax (Amount Code 6) applies. Otherwise,
enter blanks.
587–662Blank76Enter blanks.
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own
purposes. Payers should contact the state or local revenue
departments for filing requirements. You may enter your routing
and transit number (RTN) here. If this field is not utilized, enter
blanks.
723–734State Income Tax
Withheld
12State income tax withheld is for the convenience of the filers. This
information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled. If not reporting state tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
735–746Local Income Tax
Withheld
12Local income tax withheld is for the convenience of the filers.
This information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled. If not reporting local tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
747–748Combined Federal/State
Code
2If this payee record is to be forwarded to a state agency as part of
the Combined Federal/State Filing Program, enter the valid state
code from Part A, Sec. 13, Table 1. For those payers or states not
participating in this program, enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
August 16, 20042682004–33 I.R.B.

Payee “B” Record — Record Layout Positions 544–750
for Form 1099–INT
Second
TIN
Notice
(Optional)
BlankForeign
Country
or U.S.
Possession
BlankSpecial
Data
Entries
State
Income
Tax
Withheld
544545–546547–586587–662663–722723–734
Local
Income
Tax
Withheld
Combined
Federal/
State
Code
Blank
or CR/LF
735–746747–748749–750
(12) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–LTC
Field
Position
Field TitleLengthDescription and Remarks
544–546Blank3Enter blanks.
547Type of Payment
Indicator
1Enter the appropriate indicator from the following table; otherwise,
enter blanks.
IndicatorUsage
1Per diem
2Reimbursed amount
548–556Social Security Number
of Insured
9Required.Enter the Social SecurityNumber of the insured.
557–596Name of Insured40Required.Enter the name of the insured.
597–636Address of Insured40Required.Enter the address of the insured. Street address should
include number, street, apartment or suite number (or PO Box if
mail is not delivered to street address). Left-justify information
and fill unused positions with blanks. This fieldmust notcontain
any data other than payee’s address.
ForU.S.addresses,the payee city, state, and ZIP Code must be reported as a 40, 2, and 9-position field, respectively.Filers
must adhere to the correct format for theinsured’s city, state, and ZIP Code.
For foreign addresses,filers may use the insured’s city, state, and ZIP Codeas a continuous 51-position field. Enter information
in the following order: city, province or state, postal code, and the name of the country. When reporting a foreign address, the
Foreign Country Indicator in position 247 must contain a “1” (one).
637–676City of Insured40Required.Enter the city, town, or post office. Left-justify
information and fill the unused positions with blanks. Enter APO
or FPO, if applicable. Do not enter state and ZIP Code information
in this field.
677–678State of Insured2Required.Enter the valid U.S. Postal Service state abbreviations
for states or the appropriate postal identifier (AA, AE, or AP)
described in Part A, Sec. 15.
2004–33 I.R.B.269August 16, 2004

(12) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–LTC (Continued)
Field
Position
Field TitleLengthDescription and Remarks
679–687ZIP Code of Insured9Required.Enter the valid nine-digit ZIP Code assigned by
the U.S. Postal Service. If only thefirst five-digits are known,
left-justify information and fill the unused positions with blanks.
For foreign countries, alpha characters are acceptable as long as
the filer has entered a “1” (one) in the Foreign Country Indicator,
located in position 247 of the “B” Record.
688Status of Illness Indicator
(Optional)
1Enter the appropriate code from the table below to indicate the
status of the illness of the insured; otherwise, enter blank:
IndicatorUsage
1Chronically ill
2Terminallyill
689–696Date Certified (Optional)8Enter the latest date of a doctor’s certification of the status of the
insured’s illness. The format of the date is YYYYMMDD (e.g.,
January 5, 2004, would be 20040105).Do not enter hyphens
or slashes.
697Qualified Contract
Indicator (Optional)
1Enter a “1” (one) if benefits were from a qualified long-term care
insurance contract; otherwise, enter blank.
698–722Blank25Enter blanks.
723–734State Income Tax
Withheld
12State income tax withheld is for the convenience of the filers. This
information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled.
735–746Local Income Tax
Withheld
12Local income tax withheld is for the convenience of the filers.
This information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled.
747–748Blank2Enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544–750
for Form 1099–LTC
BlankType of
Payment
Indicator
SSN of
Insured
Name of
Insured
Address
of
Insured
City of
Insured
State of
Insured
ZIP Code
of
Insured
544–546547548–556557–596597–636637–676677–678679–687
Status of
Illness
Indicator
(Optional)
Date
Certified
(Optional)
Qualified
Contract
Indicator
(Optional)
BlankState
Income
Tax
Withheld
Local
Income
Tax
Withheld
688689–696697698–722723–734735–746
August 16, 20042702004–33 I.R.B.

BlankBlank
or CR/LF
747–748749–750
(13) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–MISC
Field
Position
Field TitleLengthDescription and Remarks
544Second TIN Notice
(Optional)
1Enter “2” (two) to indicate notification by IRS twice within three
calendar years that the payee provided an incorrect name and/or
TIN combination; otherwise, enter a blank.
545–546Blank2Enter blanks.
547Direct Sales Indicator
(See Note.)
1
Enter a “1” (one) to indicate sales of $5,000 or more of consumer
products to a person on a buy-sell, deposit-commission, or any
other commission basis for resale anywhere other than in a
permanent retail establishment. Otherwise, enter a blank.
Note: If reporting a direct sales indicator only, use Type of Return “A” in Field Position 27, and Amount Code 1 in
Field Position 28 of the Payer “A” Record. All payment amount fields in the Payee “B” Record will contain zeros.
548–662Blank115Enter blan
ks.
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own
purposes. Payers should contact the state or local revenue
departments for filing requirements. If this field is not used, enter
blanks.
723–734State Income Tax
Withheld
12State income tax withheld is for the convenience of the filers. This
information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled. If not reporting state tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
735–74
6
Local I
ncome Tax
Withhe
ld
12Local i
ncome tax withheld is for the convenience of the filers.
This in
formation does not need to be reported to IRS. The payment
amount
must be right-justified and unused positions must be
zero-f
illed. If not reporting local tax withheld, this field may be
used as
a continuation of the Special Data Entries Field.
747–748Combined Federal/State
Code
2If this payee record is to be forwarded to a state agency as part of
the Combined Federal/State Filing Program, enter the valid state
code from Part A, Sec. 13, Table 1. For those payers or states not
participating in this program, enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
2004–33 I.R.B.271August 16, 2004

Payee “B” Record — Record Layout Positions 544–750
for Form 1099–MISC
Second
TIN
Notice
(Optional)
BlankDirect
Sales
Indicator
BlankSpecial
Data
Entries
State
Income
Tax
Withheld
Local
Income
Tax
Withheld
544545–546547548–662663–722723–734735–746
Combined
Federal/
State
Code
Blank
or CR/LF
747–748749–750
(14) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–OID
Field
Position
Field TitleLengthDescription and Remarks
544Second TIN Notice
(Optional)
1Enter “2” (two) to indicate notification by IRS twice within three
calendar years that the payee provided an incorrect name and/or
TIN combination; otherwise, enter a blank.
545–546Blank2Enter blanks.
547–585Description39Required.Enter the CUSIP number, if any. If there is no CUSIP
number, enter the abbreviation for the stock exchange and issuer,
the coupon rate, and year (must be 4-digit year)ofmaturity(e.g.,
NYSE XYZ 12/2004). Show the name of the issuer if other than
the payer. If fewer than 39 characters are required, left-justify
information and fill unused positions with blanks.
586–662Blank77Enter blanks.
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own
purposes. Payers should contact the state or local revenue
departments for filing requirements. If this field is not utilized,
enter blanks.
723–734State Income Tax
Withheld
12State income tax withheld is for the convenience of the filers. This
information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled. If not reporting state tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
735–746Local Income Tax
Withheld
12Local income tax withheld is for the convenience of the filers.
This information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled. If not reporting local tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
August 16, 20042722004–33 I.R.B.

(14) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–OID (Continued)
Field
Position
Field TitleLengthDescription and Remarks
747–748Combined Federal/State
Code
2If this payee record is to be forwarded to a state agency as part of
the Combined Federal/State Filing Program, enter the valid state
code from Part A, Sec. 13, Table l. For those payers or states not
participating in this program, enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544–750
for Form 1099–OID
Second
TIN
Notice
(Optional)
BlankDescriptionBlankSpecial
Data
Entries
State
Income
Tax
Withheld
544545–546547–585586–662663–722723–734
Local
Income
Tax
Withheld
Combined
Federal/
State
Code
Blank
or CR/LF
735–746747–748749–750
(15) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–PATR
Field
Position
Field TitleLengthDescription and Remarks
544Second TIN Notice
(Optional)
1Enter “2” (two) to indicate notification by IRS twice within three
calendar years that the payee provided an incorrect name and/or
TIN combination; otherwise, enter a blank.
545–662Blank118Enter blanks.
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own
purposes. Payers should contact the state or local revenue
departments for filing requirements. If this field is not utilized,
enter blanks.
723–734State Income Tax
Withheld
12State income tax withheld is for the convenience of the filers. This
information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled. If not reporting state tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
735–746Local Income Tax
Withheld
12Local income tax withheld is for the convenience of the filers.
This information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled. If not reporting local tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
2004–33 I.R.B.273August 16, 2004

(15) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–PATR (Continued)
Field
Position
Field TitleLengthDescription and Remarks
747–748Combined Federal/State
Code
2If this payee record is to be forwarded to a state agency as part of
the Combined Federal/State Filing Program, enter the valid state
code from Part A, Sec. 13, Table 1. For those payers or states not
participating in this program, enter blanks.
749–750Blank2Enter blanks, or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544–750
for Form 1099–PATR
Second
TIN
Notice
(Optional)
BlankSpecial
Data
Entries
State
Income Tax
Withheld
Local
Income
Tax
Withheld
Combined
Federal/
State
Code
Blank
or CR/LF
544545–662663–722723–734735–746747–748749–750
(16) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–Q
Field
Position
Field TitleLengthDescription and Remarks
544–546Blank3Enter blan
ks.
547Trustee to Trustee
Transfer Indicator
1Required.Enter a “1” (one) if reporting a trustee to trustee
transfer, otherwise, enter blank.
548Type of Tuition Payment1Required.Enter the appropriate code from the table below to
indicate the type of tuition payment, otherwise; leave blank.
Indicat
or
Usage
1Private Payment
2StatePayment
3Coverde
ll ESA contribution
549Designated Beneficiary1Required.Enter a “1” (one) if the recipient is not the designated
beneficiary otherwise; enter a blank.
550–662Blank113Enter blanks.
663–7
22
Speci
al Data Entries
60This p
ortion of the “B” Record may be used to record information
for st
ate or local government reporting or for the filer’s own
purpo
ses. Payers should contact the state or local revenue
depar
tments for filing requirements. If this field is not utilized,
enter
blanks.
723–748Blank26Enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
August 16, 20042742004–33 I.R.B.

Payee “B” Record — Record Layout Positions 544–750
for Form 1099–Q
BlankTrustee to
Trustee
Transfer
Indicator
Type of
Tuition
Payment
Designated
Beneficiary
BlankSpecial
Data
Entries
BlankBlank
or
CR/LF
544–546547548549550–662663–722723–748749–750
(17) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–R
Field
Position
Field TitleLengthDescription and Remarks
544Blank1Enter blank.
545–546Distribution Code
(For a detailed
explanation of
distribution codes, see
the2004 Instructions
for Forms 1099–R and
5498.)
See chart at the end of
this record layout
for a diagram of
valid combinations
of Distribution Codes.
2Required.Enter at least one distribution code from the table below.
More than one code may apply. If only one code is necessary, it must
be entered in position 545 and position 546 will be blank. When us-
ing Code P for an IRA distribution under section 408(d)(4) of the
Internal Revenue Code, the filer may also enter Code 1, 2, 4, or J if
applicable. Only three numeric combinations are acceptable: Codes
8 and 1, 8 and 2, and 8 and 4, on one return. These three combina-
tions can be used only if both codes apply to the distribution being
reported. If more than one numericcode is applicable to different
parts of a distribution, report two separate “B” Records.
Distribution Codes 3, 5, 6, 9, E, F, N, Q, R, S and T cannot be
used with any other codes. Distribution Code G may be used with
Distribution Code 4 only if applicable.
CodeCategory
1*Early distribution, no known exception (in most
cases, under age 59
1
/2)
2*Early distribution, exception applies (under age
59
1
/2)
3*Disability
4*Death
5*Prohibited transaction Section 1035 exchange
(a tax-free exchange of life insurance, annuity, or
endowment contracts)
6Section 1035 exchange (a tax-free exchange of life
insurance, annuity, or endowment contracts)
7*Normal distribution
Note: Codes 1, 2, J, Q
and T have been revised
for 2004. See the Guide
to Distribution Codes
in the 2004 Instructions
for Forms 1099-R
and 5498 for more
information.
8*Excess contributions plus earnings/excess deferrals
(and/or earnings) taxable in2004
9Cost of current life insurance protection (premiums
paid by a trustee or custodian for current insurance
protection)
AMay be eligible for 10-year tax option
2004–33 I.R.B.275August 16, 2004

(17) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–R (Continued)
Field
Position
Field TitleLengthDescription and Remarks
D*Excess contributions plus earnings/excess deferrals
taxable in2002
EExcess annual additions under section 415/certain
excess amounts under section 403(b) plans
FCharitable gift annuity
GDirect rollover and rollover contribution
JEarly distribution from aRoth IRA. (This code may
be used with Code 8 or P.)
LLoans treated as deemed distributions under section
72(p)
NRecharacterized IRA contribution made for2004
P*Excess contributions plus earnings/excess deferrals
taxable in2003
QQualified distribution from a Roth IRA. (Distribution
from a Roth IRA when the 5-year holding period has
been met, and the recipient has reached 59
1
/2,has
died, or is disabled.)
RRecharacterized IRA contribution made for2003(See
Note.)
S*Early distribution from a SIMPLE IRA in first 2
years, no known exception
TRoth IRA distribution, exception applies if participant
dies or is disabled.
*If reporting a traditional IRA, SEP, or SIMPLE distribution or a Roth conversion, use the IRA/SEP/SIMPLE Indicator
of “1” (one) in position 548 of the Payee “B” Record.
Note: The trustee of the first IRA must report the recharacterization as a distribution on Form 1099-R (and the
original contribution and its character on Form 5498).
547Taxable Amount Not
Determined Indicator
1Enter “1” (one) only if the taxable amount of the payment entered
for Payment Amount Field 1 (Gross distribution) of the “B” Record
cannot be computed; otherwise, enter blank. (If Taxable Amount
Not Determined Indicator is used, enter “0’s” [zeros] in Payment
Amount Field 2 of the Payee “B” Record.) Please make every effort
to compute the taxable amount.
548IRA/SEP/SIMPLE
Indicator
1Enter “1” (one) for a traditional IRA,SEP,orSIMPLEdistribution
or Roth conversion; otherwise, enter a blank.(See Note.)If the
IRA/SEP/SIMPLE Indicator is used, enter the amount of the Roth
conversion or distribution in Payment Amount Field A of the Payee
“B” Record.Donotusetheindicatorforadistributionfroma
Roth or for an IRA recharacterization.
Not
e: For Form 1099-R, generally, report the Roth conversion or total amount distributed from a traditional IRA,
SEP
, or SIMPLE in Payment Amount Field A (traditional IRA/SEP/SIMPLE distribution or Roth conversion), as well as
Pa
yment Amount Field 1 (Gross Distribution) of the “B” Record. Refer to the2004 Instructions for Forms 1099–R and
54
98forexceptions(Box2ainstructions).
August 16, 20042762004–33 I.R.B.

(17) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–R (Continued)
Field
Position
Field TitleLengthDescription and Remarks
549Total Distribution
Indicator(See Note.)
1Enter a “1” (one) only if the payment shown for Distribution Amount
Code 1 is a total distribution that closed out the account; otherwise,
enter a blank.
Note: A total distribution is one or more distributions within one tax year in which the entire balance of the account is
distributed. Any distribution that does not meet this definition is not a total distribution.
550–551Percentage of Total
Distribution
2Use this field when reporting a total distribution to more than one
person, such as when a participant is deceased and a payer dis-
tributes to two or more beneficiaries. Therefore, if the percentage
is 100, leave this field blank. If the percentage is a fraction, round
off to the nearest whole number (for example, 10.4 percent will be
10 percent; 10.5 percent will be 11 percent). Enter the percentage
received by the person whose TINis included in positions 12–20 of
the “B” Record. This field must be right-justified, and unused posi-
tions must be zero-filled. If not applicable, enter blanks. Filers are
not required to enter this information for any IRA distribution or for
direct rollovers.
552–662Blank111Enter bla
nks.
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own pur-
poses. The state/payer’s state number, state distribution, name of
locality, and/or local distribution can be entered in this field. Pay-
ers should contact the state or local revenue departments for filing
requirements. If this field is not utilized, enter blanks.
723–734State Income Tax
Withheld
12State income tax withheld is for the convenience of the filers.
This information does not need to be reported to IRS. The pay-
ment amount must be right-justified and unused positions must be
zero-filled. If not reporting state tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
735–7
46
Local
Income Tax
Withh
eld
12Local
income tax withheld is for the convenience of the filers.
This i
nformation does not need to be reported to IRS. The pay-
ment a
mount must be right-justified and unused positions must be
zero-
filled. If not reporting local tax withheld, this field may be
used a
s a continuation of the Special Data Entries Field.
747–748Combined Federal/State
Code
2If this payee record is to be forwarded to a state agency as part of
the Combined Federal/State Filing Program, enter the valid state
code from Part A, Sec. 13, Table 1. For those payers or states not
participating in this program, enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
2004–33 I.R.B.277August 16, 2004

Payee “B” Record — Record Layout Positions 544–750
for Form 1099–R
BlankDistribution
Code
Taxable
Amount Not
Determined
Indicator
IRA/SEP/
SIMPLE
Indicator
Total
Distribution
Indicator
Percentage
of Total
Distribution
544545–546547548549550–551
BlankSpecial
Data
Entries
State
Income
Tax
Withheld
Local
Income
Tax
Withheld
Combined
Federal/
State
Code
Blank
or CR/LF
552–662663–722723–734735–746747–748749–750
August 16, 20042782004–33 I.R.B.

(18) Payee “B” Record — Record Layout Positions 544–750 for Form 1099–S
Field
Position
Field TitleLengthDescription and Remarks
544–546Blank3Enter blanks.
547Property or Services
Indicator
1Required.Enter “1” (one) if the transferor received or will receive
property (other than cash and consideration treated as cash in com-
puting gross proceeds) or services as part of the consideration for
the property transferred. Otherwise, enter a blank.
548–555Date of Closing8Required.Enter the closing date in the format YYYYMMDD (e.g.,
January 5, 2004, would be 20040105).Do not enter hyphens or
slashes.
556–594Address or Legal
Description
39Required.Enter the address of the property transferred (including
city, state, and ZIP Code). If the address does not sufficiently iden-
tify the property, also enter a legal description, such as section, lot,
and block. For timber royalties, enter “TIMBER.” If fewer than 39
positions are required, left-justify information and fill unused posi-
tions with blanks.
595–662Blank68Enter blanks.
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own pur-
poses. Payers should contact the state or local revenue departments
for filing requirements. If this field is not utilized, enter blanks.
723–734State Income Tax
Withheld
12State income tax withheld is for the convenience of the filers.
This information does not need to be reported to IRS. The pay-
ment amount must be right-justified and unused positions must be
zero-filled. If not reporting state tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
735–746Local Income Tax
Withheld
12Local income tax withheld is for the convenience of the filers.
This information does not need to be reported to IRS. The pay-
ment amount must be right-justified and unused positions must be
zero-filled. If not reporting localtax withheld, this field may be
used as a continuation of the Special Data Entries Field.
747–748Blank2Enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544–750
for Form 1099–S
BlankProperty
or Services
Indicator
Date of
Closing
Address
or Legal
Description
BlankSpecial
Data
Entries
544–546547548–555556–594595–662663–722
State
Income Tax
Withheld
Local Income
Tax
Withheld
BlankBlank
or CR/LF
723–734735–746747–748749–750
2004–33 I.R.B.279August 16, 2004

(19) Payee “B” Record — Record Layout Positions 544–750 forForm 1099–SA
Field
Position
Field TitleLengthDescription and Remarks
544Blank1Enter blank.
545Distribution Code1Required.Enter the applicable code to indicate the type of
payment:
CodeCategory
1Normal distribution
2Excess contribution
3Disability
4Death distribution other than Code 6 (This
includes distributions to a spouse, nonspouse,
or estate beneficiary in the year of death and
to an estate after the year of death.)
5Prohibited transaction
6Death distributionafter year of deathto
a nonspouse beneficiary (Do not use for
distributiontoanestate.)
546Blank1Enter a blank.
547Medicare+Choice MSA
Indicator
1Enter “1” (one) if distributionsare from a Medicare+Choice MSA.
Otherwise, enter a blank.
548HSA Indicator1Enter “1” (one) if distributions are from a HSA. Otherwise, enter
ablank.
549Archer MSA Indicator1Enter “1” (one) if distributions are from an Archer MSA.
Otherwise, enter a blank.
550–662Blank113Enter blanks.
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own
purposes. Payers should contact the state or local revenue
departments for filing requirements. If this field is not utilized,
enter blanks.
723–734State Income Tax
Withheld
12State income tax withheld is for the convenience of the filers. This
information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled. If not reporting state tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
735–746Local Income Tax
Withheld
12Local income tax withheld is for the convenience of the filers.
This information does not need to be reported to IRS. The payment
amount must be right-justified and unused positions must be
zero-filled. If not reporting local tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
747–748Blank2Enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
August 16, 20042802004–33 I.R.B.

Payee “B” Record — Record Layout Positions 544–750
forForm 1099–SA
BlankDistribution
Code
BlankMedicare+
Choice MSA
Indicator
HSA
Indicator
Archer
MSA
Indicator
BlankSpecial Data
Entries
544545546547548549550–662663–722
State
Income Tax
Withheld
Local Income
Tax
Withheld
BlankBlank
or
CR/LF
723–734735–746747–748749–750
(20) Payee “B” Record — Record Layout Positions 544–750 for Form 5498
Field
Position
Field TitleLengthDescription and Remarks
544–546Blank3Enter blanks.
547IRAIndicator
(Individual
Retirement
Account)
1Required, if applicable.Enter “1” (one) if reporting a rollover
(Amount Code 2) or Fair Market Value (Amount Code 5) for an
IRA. Otherwise, enter a blank.
548SEPIndicator
(SimplifiedEmployee
Pension)
1Required, if applicable.Enter “1” (one) if reporting rollover
(Amount Code 2) or Fair Market Value (Amount Code 5) for a SEP.
Otherwise, enter a blank.
549SIMPLE Indicator
(SavingsIncentive
MatchPlan for
Employees)
1Required, if applicable.Enter “1” (one) if reporting a rollover
(Amount Code 2) or Fair Market Value (Amount Code 5) for a
SIMPLE. Otherwise, enter a blank.
550Roth IRA
Indicator
1Required, if applicable.Enter “1” (one) if reporting a rollover
(Amount Code 2) or Fair Market Value (Amount Code 5) for a Roth
IRA. Otherwise, enter a blank.
551RMD Indicator1Required.Enter “1” (one) if reporting RMD for 2005. Otherwise,
enter a blank.
552–662Blank111Enter blanks.
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own pur-
poses. Payers should contact the state or local revenue departments
for filing requirements. If this field is not utilized, enter blanks.
723–746Blank24Enter blanks.
747–748Combined Federal/State
Code
2If this payee record is to be forwarded to a state agency as part of
the Combined Federal/State Filing Program, enter the valid state
code from Part A, Sec. 13, Table 1. For those payers or states not
participating in this program, enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
Note: For special reporting for U.S. Armed Forces use the Special Data Entry field. Refer to2004 Instructions for Forms
1099-R and 5498forspecificcodeinformation.
2004–33 I.R.B.281August 16, 2004

Payee “B” Record — Record Layout Positions 544–750
for Form 5498
BlankIRA
Indicator
SEP
Indicator
SIMPLE
Indicator
Roth
IRA
Indicator
RMD
Indicator
544–546547548549550551
BlankSpecial
Data
Entries
BlankCombined
Federal/
State
Code
Blank
or CR/LF
552–662663–722723–746747–748749–750
(21) Payee “B” Record — Record Layout Positions 544–750 for Form 5498–ESA
Field
Position
Field TitleLengthDescription and Remarks
544–662Blank119Enter blanks.
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own pur-
poses. Payers should contact the state or local revenue departments
for filing requirements. If this field is not utilized, enter blanks.
723–748Blank26Enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544–750
for Form 5498–ESA
BlankSpecial
Data
Entries
BlankBlank
or CR/LF
544–662663–722723–748749–750
(22) Payee “B” Record — Record Layout Positions 544–750 forForm 5498–SA
Field
Position
Field TitleLengthDescription and Remarks
544–546Blank3Enter blanks.
547Medicare+
Choice MSA
Indicator
1Enter “1” (one) for Medicare+Choice MSA. Otherwise, enter a
blank.
548HSA Indicator1Enter “1” (one) for HSA. Otherwise, enter a blank.
549Archer MSA1Enter “1” (one) for Archer MSA. Otherwise, enter a blank
550–662Blank113Enter blanks.
August 16, 20042822004–33 I.R.B.

(22) Payee “B” Record — Record Layout Positions 544–750 forForm 5498–SA(Continued)
Field
Position
Field TitleLengthDescription and Remarks
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own pur-
poses. Payers should contact the state or local revenue departments
for filing requirements. If this field is not utilized, enter blanks.
723–748Blank26Enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544–750
forForm 5498–SA
BlankMedicare+
Choice MSA
Indicator
HSA
Indicator
Archer
MSA
Indicator
BlankSpecial Data
Entries
BlankBlank or
CR/LF
544–546547548549550–662663–722723–748749–750
(23) Payee “B” Record — Record Layout Positions 544–750 for Form W–2G
Field
Position
Field TitleLengthDescription and Remarks
544–546Blank3Enter blanks.
547Type of Wager Code1Required.Enter the applicable type of wager code from the table
below:
CodeCategory
1Horse race track (or off-track betting of a horse track
nature)
2Dog race track (or off-track betting of a dog track
nature)
3Jai-alai
4State-conducted lottery
5Keno
6Bingo
7Slot machines
8Any other type of gambling winnings
548–555Date Won8Required.Enter the date of the winning transaction in the format
YYYYMMDD (e.g., January 5, 2004 would be 20040105).Do not
enter hyphens or slashes.This is not the date the money was paid,
if paid after the date of the race (or game).
556–570Transaction15Required.For state-conducted lotteries, enter the ticket or other
identifying number. For keno, bingo, and slot machines, enter the
ticket or card number (and color, if applicable), machine serial num-
ber, or any other information that will help identify the winning
transaction. For all others, enter blanks.
2004–33 I.R.B.283August 16, 2004

(23) Payee “B” Record — Record Layout Positions 544–750 for Form W–2G (Continued)
Field
Position
Field TitleLengthDescription and Remarks
571–575Race5If applicable, enter the race (or game) relating to the winning ticket;
otherwise, enter blanks.
576–580Cashier5If applicable, enter the initials or number of the cashier making the
winning payment; otherwise, enter blanks.
581–585Window5If applicable, enter the window number or location of the person
paying the winning payment; otherwise, enter blanks.
586–600First ID15For other than state lotteries, enter the first identification number of
the person receiving the winning payment; otherwise, enter blanks.
601–615Second ID15For other than state lotteries, enter the second identification number
of the person receiving the winnings; otherwise, enter blanks.
616–662Blank47Enter blanks.
663–722Special Data Entries60This portion of the “B” Record may be used to record information
for state or local government reporting or for the filer’s own pur-
poses. Payers should contact the state or local revenue departments
for filing requirements. If this field is not utilized, enter blanks.
723–734State Income Tax
Withheld
12State income tax withheld is for the convenience of the filers.
This information does not need to be reported to IRS. The pay-
ment amount must be right-justified and unused positions must be
zero-filled. If not reporting state tax withheld, this field may be
used as a continuation of the Special Data Entries Field.
735–746Local Income Tax
Withheld
12Local income tax withheld is for the convenience of the filers.
This information does not need to be reported to IRS. The pay-
ment amount must be right-justified and unused positions must be
zero-filled. If not reporting localtax withheld, this field may be
used as a continuation of the Special Data Entries Field.
747–748Blank2Enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544–750
for Form W–2G
BlankType of
Wager Code
Date
Won
TransactionRaceCashierWindowFirst ID
544–546547548–555556–570571–575576–580581–585586–600
Second IDBlankSpecial
Data
Entries
State
Income
Tax
Withheld
Local
Income
Tax
Withheld
BlankBlank
or CR/LF
601–615616–662663–722723–734735–746747–748749–750
August 16, 20042842004–33 I.R.B.

Sec. 7. End of Payer “C” Record — General Field Descriptions and Record Layout
.01The “C” Record consists of the total number of payees and the totals of the payment amount fields filed for each payer and/or
particular type of return. The “C” Record must follow thelast “B” Record for each type of return for each payer.
.02For each “A” Record and group of “B” Records on the file, there must be a corresponding “C” Record.
.03The End of Payer “C” Record is a fixedlength of 750 positions. The control fields are each 18 positions in length.
Record Name: End of Payer “C” Record
Field
Position
Field TitleLengthDescription and Remarks
1Record Type1Required.Enter “C”
2–9Number of Payees8Required.Enter the total number of “B” Records covered by the
preceding “A” Record. Right-justify information and fill unused
positions with zeros.
10–15Blank6Enter blanks.
16–33Control Total 118
34–51Control Total 218
52–69Control Total 318
70–87Control Total 418
88–105Control Total 518
106–123Control Total 618
124–141Control Total 718
142–159Control Total 818
160–177Control Total 918
178–195Control Total A18
196–213Control Total B18
214–231Control Total C18
232–249Control Total D18
250–267Control Total E18
Required.Accumulate totals of any payment amount fields in the
“B” Records into the appropriate control total fields of the “C”
Record.Control totals must be right-justified and unused con-
trol total fields zero-filled.All control total fields are 18 positions
in length. Each payment amount must contain U.S. dollars and
cents. The right-most two positions represent cents in the payment
amount fields.
268–499Blank232Enter blanks.
500–507Record Sequence
Number
8Required.Enter the number of the recordas it appears within your
file. The record sequence number for the “T” record will always be
“1” (one), since it is the first record on your file and you can have
only one “T” record in a file. Eachrecord, thereafter, must be in-
cremented by one in ascending numerical sequence, i.e., 2, 3, 4, etc.
Right-justify numbers with leading zeroes in the field. For exam-
ple, the “T” record sequence number would appear as “00000001”
in the field, the first “A” record would be “00000002”, the first “B”
record, “00000003”, the second “B” record, “00000004” and so on
until you reach the final record of the file, the “F” record.
2004–33 I.R.B.285August 16, 2004

Record Name: End of Payer “C” Record (Continued)
Field
Position
Field TitleLengthDescription and Remarks
508–748Blank241Enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
End of Payer “C” Record — Record Layout
Record
Type
Number
of
Payees
BlankControl
Total
1
Control
Total
2
Control
Total
3
Control
Total
4
Control
Total
5
Control
Total
6
12–910–1516–3334–5152–6970–8788–105106–123
Control
Total
7
Control
Total
8
Control
Total
9
Control
Total
A
Control
Total
B
Control
Total
C
Control
Total
D
Control
Total
E
Blank
124–141142–159160–177178–195196–213214–231232–249250–267268–499
Record
Sequence
Number
BlankBlank
or CR/LF
500–507508–748749–750
Sec. 8. State Totals “K” Record — GeneralField Descriptions and Record Layout
.01The State Totals “K” Record is a summary for a given payer and agiven state in the Combined Federal/State Filing Program,
usedonlywhen state reporting approval has been granted.
.02The “K” Record will contain the total number of payees and thetotal of the payment amount fields filed by a given payer for
a given state. The “K” Record(s) must be written after the “C” Record for the related “A”Record. A file format diagram is located
at the end of Part D.
.03The “K” Record is a fixed length of 750 positions. The control total fields are each18 positions in length.
.04In developing the “K” Record, for example, if a payer usedAmount Codes 1, 3, and 6 in the “A” Record, the totals from the
“B” Records coded for this statewould appear in Control Totals 1, 3, and 6 of the “K” Record.
.05There must be a separate “K” Record foreach statebeing reported.
.06Refer to Part A, Sec. 13, for the requirements and conditions thatmustbe met to file via this program.
Record Name: State Totals “K” Record
Field
Position
Field TitleLengthDescription and Remarks
1Record Type1Required.Enter “K”.
2–9Number of Payees8Required.Enter the total number of “B” Records being coded for
this state. Right-justify information and fill unused positions with
zeros.
10–15Blank6Enter blanks.
August 16, 20042862004–33 I.R.B.

Record Name: State Totals “K” Record (Continued)
Field
Position
Field TitleLengthDescription and Remarks
16–33Control Total 118
34–51Control Total 218
52–69Control Total 318
70–87Control Total 418
88–105Control Total 518
106–123Control Total 618
124–141Control Total 718
142–159Control Total 818
160–177Control Total 918
178–195Control Total A18
196–213Control Total B18
214–231Control Total C18
232–249Control Total D18
250–267Control Total E18
Required.Accumulate totals of any payment amount fields in
the “B” Records for each state being reported into the appropriate
control total fields of the appropriate “K” Record. Each payment
amount must contain U.S. dollars and cents. The right-most two
positions represent cents inthe payment amount fields.Control
totals must be right-justified and unused control total fields
zero-filled.All control total fields are 18 positions in length.
268–499Blank232Enter blanks.
500–507Record Sequence
Number
8Required.Enter the number of the recordas it appears within your
file. The record sequence number for the “T” record will always be
“1” (one), since it is the first record on your file and you can have
only one “T” record in the file. Each record, thereafter, must be in-
cremented by one in ascending numerical sequence, i.e., 2, 3, 4, etc.
Right-justify numbers with leading zeroes in the field. For exam-
ple, the “T” record sequence number would appear as “00000001”
in the field, the first “A” record would be “00000002”, the first “B”
record, “00000003”, the second “B” record, “00000004” and so on
until you reach the final record of the file, the “F” record.
508–706Blank199Enter blanks.
707–724State Income Tax
Withheld Total
18State income tax withheld total is for the convenience of the filers.
Aggregate totals of the state income tax withheld field in the Payee
“B” Records; otherwise, enter blanks.
725–742Local Income Tax
Withheld Total
18Local income tax withheld total is for the convenience of the filers.
Aggregate totals of the local income tax withheld field in the Payee
“B” Records; otherwise, enter blanks.
743–746Blank4Enter blanks.
747–748Combined Federal/State
Code
2Required.Enter the code assigned to the state which is to receive
the information. (Refer to Part A, Sec. 13, Table l.)
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
2004–33 I.R.B.287August 16, 2004

State Totals “K” Record — Record Layout Forms 1099–DIV, 1099–G, 1099–INT, 1099–MISC,
1099–OID, 1099–PATR, 1099–R, and 5498
Record
Type
Number
of
Payees
BlankControl
Total
1
Control
Total
2
Control
Total
3
Control
Total
4
Control
Total
5
Control
Total
6
12–910–1516–3334–5152–6970–8788–105106–123
Control
Total
7
Control
Total
8
Control
Total
9
Control
Total
A
Control
Total
B
Control
Total
C
Control
Total
D
Control
Total
E
Blank
124–141142–159160–177178–195196–213214–231232–249250–267268–499
Record
Sequence
Number
BlankState
Income
Tax Withheld
Total
Local
Income
Tax Withheld
Total
BlankCombined
Federal/
State
Code
Blank or
CR/LF
500–507508–706707–724725–742743–746747–748749–750
Sec. 9. End of Transmission “F” Record — General Field Descriptions and Record Layout
.01The End of Transmission “F” Record is a summary of the number of payers in the entire file.
.02The “F” Record is a fixed length of 750 positions.
.03This record must be written after the last “C” Record (or last “K” Record, when applicable) of the entire file.
Record Name: End of Transmission “F” Record
Field
Position
Field TitleLengthDescription and Remarks
1Record Type1Required.Enter “F”.
2–9Number of “A” Records8Enter the total number of Payer “A” Records in the entire file (right-
justify and zero-fill) or enter all zeros.
10–30Zero21Enter zeros.
31–49Blank19Enter blanks.
50–57Total Number of payees8Enter the total number of Payee “B” Records reported in the file.
Right-justify information and fillunused positions with zeros. If
you have entered this total in the “T” Record, you may leave this
field blank.
58–499Blank442Enter blanks.
August 16, 20042882004–33 I.R.B.

Record Name: End of Transmission “F” Record
Field
Position
Field TitleLengthDescription and Remarks
500–507Record Sequence
Number
8Required.Enter the number of the recordas it appears within your
file. The record sequence number for the “T” record will always be
“1” (one), since it is the first record on your file and you can only
have one “T” record in a file. Eachrecord, thereafter, must be in-
cremented by one in ascending numerical sequence, i.e., 2, 3, 4, etc.
Right-justify numbers with leading zeroes in the field. For exam-
ple, the “T” record sequence number would appear as “00000001”
in the field, the first “A” record would be “00000002”, the first “B”
record, “00000003”, the second “B” record, “00000004” and so on
until you reach the final record of the file, the “F” record.
508–748Blank241Enter blanks.
749–750Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
End of Transmission “F” Record — Record Layout
Record
Type
Number
of
“A”
Records
ZeroBlankTotal
Number
of
Payees
BlankRecord
Sequence
Number
BlankBlank or
CR/LF
12–910–3031–4950–5758–499500–507508–748749–750
2004–33 I.R.B.289August 16, 2004

Sec. 10. File Layout Diagram
PART E. EXTENSIONS OF TIME AND WAIVERS
Sec. 1. General — Extensions
.01An extension of time to file may be requested for Forms 1098, 1099, 5498, 5498–SA, 5498–ESA, W–2G, W–2 series, 8027
and 1042–S.
.02Form 8809, Application for Extension of Time To File Information Returns, should be submitted to IRS/MCC at the address
listed in .08 of this section. This form may be used to request an extension of time to file information returns submitted on paper,
electronically or magnetically to the IRS. Use a separate Form 8809for each method of filing information returns you intend to use,
i.e., electronically and/or magnetically.
.03To be considered, an extension request must be postmarked or transmitted by the due date of the returns; otherwise, the request
will be denied. (See Part A, Sec. 9, for due dates.) If requesting an extension of time to file several types of forms, use one Form
8809; however, Form 8809 or file must be postmarked no later than the earliest due date. For example, if requesting an extension of
time to file both Forms 1099–INT and 5498, submit Form 8809 on or before February 28, 2005.
.04Assoonasitisapparentthat a 30-day extension of time to file is needed, an extension request should be submitted. It will take
a minimum of 30 days for IRS/MCC to respond to an extension request. Generally, IRS/MCC does not begin processing extension
requests until January. Extension requests received prior to January are inputon a first come, first serve basis.
.05Under certain circumstances, a request for an extension of time may be denied. When a denial letter is received, any additional
or necessary information may be resubmitted within 20 days.
.06Requesting an extension of time for multiple payers (50 or less) may be done by submitting Form 8809 and attaching a list
of the payer names and associated TINs (EIN or SSN).The listing must be attached to ensure an extension is recorded for all
payers.Form 8809 may be computer-generated or photocopied. Be sureto use the most recently updated version and include all the
pertinent information.
August 16, 20042902004–33 I.R.B.

.07Requests for an extension of time to file for more than 50 payers arerequiredto be submitted electronically or magnetically.
IRS encourages requests for 10 to 50 payers to be filed electronically or magnetically. (See Sec. 3, for the record layout.) The request
may be filed electronically, on tape cartridges, and 3
1
/2-inch diskettes.
.08All requests for an extension of time filed on Form 8809 or magnetic media should be sent using the following address:
IRS—Martinsburg Computing Center
Information Reporting Program
Attn: Extension of Time Coordinator
240 Murall Drive
Kearneysville, WV 25430
Note: Due to the large volume of mail received by IRS/MCC and the time factor involved in processing Extension of Time
(EOT) requests, it is imperative that the attention line bepresent on all envelopes or packages containing Form 8809.
.09Requests for extensions of time to file postmarked by the United States Postal Service on or before the due date of the returns,
and delivered by United States mail to IRS/MCC after the due date, are treated as timely under the “timely mailing as timely filing”
rule. A similar rule applies to designated private delivery services (PDSs). See Part A, Sec. 9, for more information on PDSs. For
requests delivered by a designated PDS, but through a non-designated service, the actual date of receipt by IRS/MCC will be used as
the filing date.
.10Transmitters requesting an extension of time for multiple payers will receive one approval letter, accompanied by a list of payers
covered under that approval.
.11If an additional extension of time is needed, a second Form 8809 or file must be filed by the initial extended due date. Check
line 7 on the form to indicate that an additional extension is being requested. A second 30-day extension will be approved only in
cases of extreme hardship or catastrophic event.If requesting a second 30-day extension of time, submit the information return
filesassoonasprepared.DonotwaitforMCC’s response to your second extension request.
.12If an extension request is approved, the approval letter should be kept on file.DO NOTsend the approval letter or copy of the
approval letter to IRS/MCC with the magnetic media file or to the service center where the paper returns are filed.
.13Request an extension for only one tax year.
.14A signature is not required when requesting a 30 day extension. If a second 30 day extension is requested, the Form 8809
MUSTbe signed.
.15Failure to properly complete and sign Form 8809 may cause delays in processing the request or result in a denial. Carefully
read and follow the instructions on the back of Form 8809.
.16Form 8809 may be obtained by calling1–800-TAX–FORM (1–800–829–3676). The form is also available on theIRS website
at www.irs.gov.A copy of Form 8809 is also provided in the back of Publication 1220.
Sec. 2. Specifications for Electronic Filing or Magnetic Media Extensions of Time
.01The specifications in Sec. 3 include the required 200-byte record layout for extensions of time to file requests submitted elec-
tronically or magnetically. Also included are the instructions for the information that is to be entered in the record.Filers are advised
to read this section in its entirety to ensure proper filing.
.02If a filer does not have an IRS/MCC assigned Transmitter Control Code (TCC), Form 4419, Application for Filing Information
Returns Electronically/Magnetically,mustbe submitted to obtain a TCC. This numbermustbe used to submit an extension request
electronically/magnetically. (See Part A, Sec. 6.)
.03For extension requests filed on magnetic media, the transmitter must mail the completed Form 8809, Application for Extension
of Time To File Information Returns, in the same package as the corresponding media or fax it to 304–264–5602. For extension
requests filed electronically, the transmitter mustfax Form 8809 the same day the transmission is made.
.04 Transmitters submitting an extension of time electronically or magnetically shouldnotsubmitalistofpayernamesand
TINs with Form 8809 since this information is included on the electronicormagneticfile.However,Line6ofForm8809must
be completed with the total number of records included on the electronic file or magnetic media.
.05Do not submit tax year 2004 extension requests filed on magnetic media beforeJanuary 1, 2005, or electronically before
January 5, 2005.
.06Each piece of magnetic mediamusthave an external media label containing the following information:
(a)Transmitter name
(b)Transmitter Control Code (TCC)
(c)Tax year
(d)The words “Extension of Time”
(e)Record count
2004–33 I.R.B.291August 16, 2004

.07Electronic Filing, Tape Cartridge, and 3
1
/2-inch Diskette specifications for extensions are the same as the specifications for
filing of information returns. (See Part B, or C for specific technical information.)
Sec. 3. Record Layout — Extension of Time
.01Positions 6 through 188 of the following record should contain information about thepayerfor whom the extension of time to
file is being requested. Do not enter transmitter information in these fields.OnlyoneTCCmaybepresentinafile.
Record Layout for Extension of Time
Field
Position
Field TitleLength Description and Remarks
1–5Transmitter Control Code5Required.Enter the five-digit Transmitter Control Code (TCC)
issued by IRS.Only one TCC per file is acceptable.
6–14Payer TIN9Required.Must be the valid nine-digit EIN/SSN assigned to the
payer.Do not enter blanks, hyphens or alpha characters.All
zeros, ones, twos, etc., will have the effect of an incorrect TIN.
For foreign entities that are not required to have a TIN, this field
may be blank; however, the Foreign Entity Indicator, position
187,mustbe set to “X.”
15–54Payer Name40Required.Enter the name of the payer whose TIN appears in
positions 6–14. Left-justify information and fill unused positions
with blanks.
55–94Second Payer Name40If additional space is needed, this field may be used to continue
name line information (e.g., c/o First National Bank); otherwise,
enter blanks.
95–134Payer Address40Required.Enter the payer’s address. Street address should in-
clude number, street, apartment or suite number (or PO Box if
mail is not delivered to a street address).
135–174 Payer City40Required.Enter payer city, town, or post office.
175–176 Payer State2Required.Enter the payer valid U.S. Postal Service state abbre-
viation. (Refer to Part A, Sec. 15.)
177–185 Payer ZIP Code9Required.Enter payer ZIP Code. If using a five-digit ZIP Code,
left-justify information and fill unused positions with blanks.
186Document Indicator(See Note.)1Required.Enter the appropriate document code that indicates
the form for which you are requesting an extension of time.
CodeDocument
1W–2
21098, 1098–E, 1098–T, 1099–A,
1099–B, 1099–C, 1099–CAP,
1099–DIV, 1099–G, 1099–H,
1099–INT, 1099–LTC, 1099–MISC,
1099–OID, 1099–PATR, 1099–Q,
1099–R, 1099–S, 1099–SA, or
W–2G
35498
41042–S
August 16, 20042922004–33 I.R.B.

Record Layout for Extension of Time (Continued)
Field
Position
Field TitleLength Description and Remarks
CodeDocument
5REMIC Documents (1099–INT or
1099–OID)
65498–SA
75498–ESA
Note: Do not e
nter any other values in this field. Submit a separate record for each document. For example, if you are
requesting
an extension for Form 1099–INT and Form 5498 for the same payee, submit one record with “2” coded in this
field and an
other record with “3” coded in this field. If you arerequesting an extension for Form 1099–DIV and Form
1099–MISC f
or the same payer, submit one record with “2” coded in this field.
187Foreign Entity Indicator1Enter “X” if the payer is a foreign entity.
188Recipient Request Indicator1Enter “X” if the extension request is to furnish statements to the
recipients of the information return.(See Note.)
Note: A separate file is required for this type of extension request. A file must either contain all blanks or all X’s
in this field.
189–198 Blank10Enter blanks.
199–200 Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
Extension of Time Record Layout
Transmitter
Control Code
Payer
TIN
Payer
Name
Second
Payer Name
Payer AddressPayer CityPayer State
1–56–1415–5455–9495–134135–174175–176
Payer
ZIP
Code
Document
Indicator
Foreign
Entity
Indicator
Recipient
Request
Indicator
BlankBlank
or CR/LF
177–185186187188189–198199–200
Sec. 4. Extension of Time for Recipient Copies of Information Returns
.01Request anextension of time to furnish the statements to recipientsof Forms 1098, 1099 series, 5498 series, W–2G, W–2
series, and 1042–S by submitting a letter to IRS/MCC at the address listed in Part E, Sec. 1.08. The letter should contain the following
information:
(a)Payer name
(b)TIN
(c)Address
(d)Type of Return
(e)Specify that the extension request isto provide statements to recipients
(f)Reason for delay
(g)Signature of payer or duly authorized person
.02Requests for an extension of time to furnish statements to recipients of Forms 1098, 1099 series, 5498 series, W–2G, W–2
series, and 1042–S are not automatically approved; however, if approved, generallyan extension will allow aMAXIMUMof 30
additional days from the due date. The request must be postmarked by the date on which the statements are due to the recipients.
2004–33 I.R.B.293August 16, 2004

.03Generally, only the payer may sign the letter requesting the extension for recipient copies. A transmitter must have a contractual
agreement with the filers to submit extension requests on their behalf. This should be stated in your letter of request for recipient copy
extensions. If you are requesting an extension for multiple payers electronically or magnetically, you must use the format specifica-
tions in Sec. 3.
.04Requests for arecipientextension of time to file for more than 50 payers arerequiredto be submitted electronically or mag-
netically. IRS encourages requests for 10 to 50 payers to be filed electronically or magnetically. (See Sec. 3, for the record layout.)
The request may be filed electronically, on tape cartridges, or 3½-inch diskettes.
Sec. 5. Form 8508, Request for Waiver From Filing Information Returns on Magnetic Media
.01If a payer is required to file on magnetic media but fails to do so (or fails to file electronically in lieu of magnetic media filing)
and does not have an approved waiver on record, the payer will be subject to a penalty of $50 per return in excess of 250. (For penalty
information, refer to the Penalty Section of the2004 General Instructions for Forms 1099, 1098, 5498, and W–2G.)
.02If payers are required to file original or corrected returns on magnetic media, but such filing would create an undue hardship,
they may request a waiver from these filing requirements by submitting Form 8508, Request for Waiver From Filing Information
Returns on Magnetic Media, to IRS/MCC. Form 8508 can be obtained on the IRS website atw
ww.irs.govor by calling toll-free
1–800–829–3676.
.03Even though a payer may submit as many as 249 corrections on paper, IRS encourages electronic or magnetic filing of correc-
tions. Once the 250 threshold has been met, filers are required to submit any returns of 250 or more electronically or magnetically.
However, if a waiver for original documents is approved, any corrections for the same type of returns will be covered under this
waiver.
.04Generally, only the payer may sign Form 8508. A transmitter may sign if given power of attorney; however, a letter signed by
the payer stating this fact must be attached to Form 8508.
.05A transmitter must submit a separate Form 8508 for each payer. Do not submit a list of payers.
.06All information requested on Form 8508 must beprovided to IRS for the request to be processed.
.07The waiver, if approved, will provide exemption from the magnetic media filing requirement for the current tax year only.
Payers may not apply for a waiver for more than one tax year at a time; application must be made each year a waiver is necessary.
.08Form 8508 may be photocopied or computer-generated as long as itcontains all the information requested on the original form.
.09Filers are encouraged to submit Form 8508 to IRS/MCC at least 45 days before the due date of thereturns. Generally, IRS/MCC
does not process waiver requests until January. Waiver requests received prior to January are processed on a first come, first serve
basis.
.10All requests for a waiver should be sent using the following address:
IRS—Martinsburg Computing Center
Information Reporting Program
240 Murall Drive
Kearneysville, WV 25430
.11 File Form 8508 for the W–2 series of forms with IRS/MCC, not SSA.
.12Waivers are evaluated on a case-by-case basis and are approved ordenied based on criteria set forth in the regulations under
section 6011(e) of the Internal Revenue Code. The transmitter must allow a minimum of 30 days for IRS/MCC to respond to a waiver
request.
.13If a waiver request is approved, keep the approval letter on file.DO NOTsend a copy of the approved waiver to the service
center where the paper returns are filed.
.14An approved waiver only applies to the requirement for filing information returns electronically/magnetically. The payer must
still timely file information returns on the official IRS paper formsor an acceptable substitute form with the appropriate service center.
26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also Part 1, §§ 1031; 1.1031(a)–1; 1.1031(k)–1.)
Rev. Proc. 2004–51
SECTION 1. PURPOSE
This revenue procedure modifies sec-
tions 1 and 4 of Rev. Proc. 2000–37,
2000–2 C.B. 308, to provide that Rev.
Proc. 2000–37 does not apply if the
taxpayer owns the property intended to
qualify as replacement property before
initiating a qualified exchange accommo-
dation arrangement (QEAA).
SECTION 2. BACKGROUND
.01 Section 1031(a) provides that no
gain or loss is recognized on the exchange
of property held for productive use in a
trade or business or for investment if the
property is exchanged solely for property
of like kind that is to be held either for pro-
ductive use in a trade or business or for in-
vestment.
.02 Section 1031(a)(3) allows taxpayers
to structure deferredlike-kind exchanges.
Under § 1031(a)(3), property may be
treated as like-kind property if it is (A)
identified as property to be received in
August 16, 20042942004–33 I.R.B.

the exchange (replacement property) on
or before the day that is 45 days after
the date on which the taxpayer transfers
the property relinquished in the exchange
(relinquished property), and (B) received
before the earlier of the date that is 180
days after the date on which the taxpayer
transfers the relinquished property, or the
due date (determined with regard to exten-
sions) for the transferor’s federal income
tax return for the taxable year in which
the transfer of the relinquished property
occurs.
.03 Rev. Proc. 2000–37 addresses
“parking” transactions. See sections 2.05
and 2.06 of Rev. Proc. 2000–37. Park-
ing transactions typically are designed
to “park” the desired replacement prop-
erty with an accommodation party until
such time as the taxpayer arranges for the
transfer of the relinquished property to
the ultimate transferee in a simultaneous
or deferred exchange. Once such a trans-
fer is arranged, the taxpayer transfers the
relinquished property to the accommoda-
tion party in exchange for the replacement
property, and the accommodation party
transfers the relinquished property to the
ultimate transferee. In other situations,
an accommodation party may acquire the
desired replacement property on behalf of
the taxpayer and immediately exchange
that property with the taxpayer for the re-
linquished property, thereafter holding the
relinquished property until the taxpayer ar-
ranges for a transfer of the property to the
ultimate transferee.Rev. Proc. 2000–37
provides proceduresfor qualifying park-
ing transactions as like-kind exchanges
in situations in which the taxpayer has a
genuine intent to accomplish a like-kind
exchange at the time that the taxpayer
arranges for the acquisition of the replace-
ment property and actually accomplishes
the exchange within a short time there-
after.
.04 Section 4.01 of Rev. Proc. 2000–37
provides that the Internal Revenue Ser-
vice will not challenge the qualification
of property held in a QEAA “as either
‘replacement property’ or ‘relinquished
property’ (as defined in § 1.1031(k)–1(a))
for purposes of § 1031 and the regula-
tions thereunder, or the treatment of the
exchange accommodation titleholder as
the beneficial owner of such property....”
Thus, taxpayers are not required to es-
tablish that the exchange accommodation
titleholder bears the economic benefits and
burdens of ownership and is the “owner”
of the property. The Service and Treasury
Department are aware that some taxpayers
have interpreted this language to permit a
taxpayer to treat as a like-kind exchange a
transaction in which the taxpayer transfers
property to an exchange accommodation
titleholder and receives that same property
as replacement property in a purported ex-
change for other property of the taxpayer.
.05 An exchange of real estate owned
by a taxpayer for improvements on land
owned by the same taxpayer does not
meet the requirements of § 1031.See
DeCleene v. Commissioner, 115 T.C. 457
(2000);Bloomington Coca-Cola Bottling
Co.v.Commissioner, 189 F.2d 14 (7th
Cir. 1951). Moreover, Rev. Rul. 67–255,
1967–2 C.B. 270, holds that a building
constructed on land owned by a taxpayer
is not of a like kind to involuntarily con-
verted land of the same taxpayer. Rev.
Proc. 2000–37 does not abrogate the
statutory requirement of § 1031 that the
transaction be an exchange of like-kind
properties.
.06 The Service and Treasury Depart-
ment are continuing to study parking trans-
actions, including transactions in which
a person related to the taxpayer transfers
a leasehold in land to an accommodation
party and the accommodation party makes
improvements to the land and transfers the
leasehold with the improvements to the
taxpayer in exchange for other real estate.
SECTION 3. SCOPE
This revenue procedure applies to tax-
payers applying the safe harbor rules set
forth in Rev. Proc. 2000–37 in structur-
ing like-kind exchanges.
SECTION 4. APPLICATION
.01 Section 1 of Rev. Proc. 2000–37 is
modified to read as follows:
SECTION 1. PURPOSE
This revenue procedure provides a safe
harbor under which the Internal Revenue
Service will treat an exchange accommo-
dation titleholder as the beneficial owner
of property for federal income tax pur-
poses if the property is held in a “qualified
exchange accommodation arrangement”
(QEAA), as defined in section 4.02 of this
revenue procedure.
.02 Section 4.01 of Rev. Proc. 2000–37 is
modified to read as follows:
SECTION 4. QUALIFIED
EXCHANGE ACCOMMODATION
ARRANGEMENTS
.01In general. The Service will treat
an exchange accommodation titleholder as
the beneficial owner of property for federal
income tax purposes if the property is held
in a QEAA. Property held in a QEAA may,
therefore, qualify as either “replacement
property” or “relinquished property” (as
definedin§1.1031(k)–1(a))inatax-de-
ferred like-kind exchange if the exchange
otherwise meets the requirements for de-
ferral of gain or loss under § 1031 and the
regulations thereunder.
.03 Section 4.05 is added to Rev. Proc.
2000–37 to read as follows:
.05Limitation. This revenue procedure
does not apply to replacement property
held in a QEAA if the property is owned
by the taxpayer within the 180-day period
ending on the date of transfer of qualified
indiciaof ownership of the property to an
exchange accommodation titleholder.
SECTION 5. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2000–37 is modified.
SECTION 6. EFFECTIVE DATE
This revenue procedure is effective for
transfers on or after July 20, 2004, of qual-
ifiedindiciaof ownership to exchange ac-
commodation titleholders (as described in
section 4.02(1) of Rev. Proc. 2000–37).
SECTION 7. DRAFTING
INFORMATION
The principal author of this revenue
procedure is J. Peter Baumgarten of the
Office of Associate Chief Counsel (In-
come Tax & Accounting). For further
information regarding this revenue pro-
cedure, contact Mr. Baumgarten at (202)
622–4920 (not a toll-free call).
2004–33 I.R.B.295August 16, 2004

Part IV. Items of General Interest
Announcement of Disciplinary Actions Involving
Attorneys, Certified Public Accountants, Enrolled Agents,
and Enrolled Actuaries — Suspensions, Censures,
Disbarments, and Resignations
Announcement 2004-63
Under Title 31, Code of Federal Regu-
lations, Part 10, attorneys, certified public
accountants, enrolled agents, and enrolled
actuaries may not accept assistance from,
or assist, any person who is under disbar-
ment or suspension from practice before
the Internal Revenue Service if the assis-
tance relates to a matter constituting prac-
tice before the Internal Revenue Service
and may not knowingly aid or abet another
person to practice before the Internal Rev-
enue Service during a period of suspen-
sion, disbarment, or ineligibility of such
other person.
To enable attorneys, certified public
accountants, enrolled agents, and enrolled
actuaries to identify persons to whom
these restrictions apply, the Director, Of-
fice of Professional Responsibility, will
announce in the Internal Revenue Bulletin
their names, their city and state, their pro-
fessional designation, the effective date
of disciplinary action, and the period of
suspension. This announcement will ap-
pear in the weekly Bulletin at the earliest
practicable date after such action and will
continue to appear in the weekly Bulletins
for five successive weeks.
Disbarments From Practice Before the Internal Revenue
Service After Notice and an Opportunity for a Proceeding
Under Title 31, Code of Federal Regu-
lations, Part 10, after notice and an oppor-
tunity for a proceeding before an adminis-
trative law judge, the following individu-
als have been disbarred from practice be-
fore the Internal Revenue Service:
NameAddressDesignationEffective Date
Banister, Joseph R.San Jose, CACPAJune 25, 2004
Suspensions From Practice Before the Internal Revenue
Service After Notice and an Opportunity for a Proceeding
Under Title 31, Code of Federal Reg-
ulations, Part 10, after notice and an op-
portunity for a proceeding before an ad-
ministrative law judge, the following indi-
viduals have been placed under suspension
from practice before the Internal Revenue
Service:
NameAddressDesignationEffective Date
Stukes, Donald A.Pound Ridge, NYCPAMay 13, 2004
to
May 11, 2005
Moore, EarlRiverview, FLCPAMarch 26, 2004
to
March 24, 2006
August 16, 20042962004–33 I.R.B.

Consent Suspensions From Practice Before the Internal
Revenue Service
Under Title 31, Code of Federal Regu-
lations, Part 10, an attorney, certified pub-
lic accountant, enrolled agent, or enrolled
actuary, in order to avoid institution or con-
clusion of a proceeding for his or her dis-
barment or suspension from practice be-
fore the Internal Revenue Service, may of-
fer his or her consent to suspension from
such practice. The Director, Office of Pro-
fessional Responsibility, in his discretion,
may suspend an attorney, certified public
accountant, enrolled agent, or enrolled ac-
tuary in accordance with the consent of-
fered.
The following individuals have been
placed under consent suspension from
practice before the Internal Revenue Ser-
vice:
NameAddressDesignationDate of Suspension
Bell, Don W.Grand Junction, COEnrolled AgentIndefinite
from
April 1, 2004
Lentz, Carole A.Mastic, NYEnrolled AgentIndefinite
from
April 23, 2004
Cummiskey Jr., Edward R. Warwick, NYEnrolled AgentIndefinite
from
April 23, 2004
Goble, Dennis R.Valparaiso, INCPAIndefinite
from
April 26, 2004
Grant, Elaine C.Woodway, WAEnrolled AgentMay 1, 2004
to
October 31, 2004
Rivera, Eduardo M.Torrence, CAAttorneyMay 1, 2004
to
October 29, 2006
Masengale, Thomas J.Indianapolis, INEnrolled AgentIndefinite
from
May 1, 2004
Cohick, Jeffrey S.Newville, PAEnrolled AgentMay 1, 2004
to
October 30, 2004
Bach, Royce E.Deer Park, TXEnrolled AgentIndefinite
from
May 27, 2004
McMillin, JuanellAustin, TXEnrolled AgentIndefinite
from
May 28, 2004
Silva, Hesmeregildo V.Livermore, CAEnrolled AgentIndefinite
from
May 28, 2004
Grossman, RichardDurham, NCAttorneyIndefinite
from
June 1, 2004
2004–33 I.R.B.297August 16, 2004

NameAddressDesignationDate of Suspension
Schnieders, Joseph A.St. Louis, MOEnrolled AgentIndefinite
from
June 1, 2004
Rahn, Miriam C.Hutchinson, MNEnrolled AgentIndefinite
from
June 8, 2004
Tarantur, Dale B.Glenview, ILCPAIndefinite
from
June 15, 2004
Derby, MarkWest Newton, MACPAIndefinite
from
June 15, 2004
Miller, Winfred J.Harrisonburg, VACPAIndefinite
from
June 30, 2004
Croom, John A.Austin, TXCPAIndefinite
from
July 1, 2004
Dion, PaulMiddletown, RICPAIndefinite
from
July 8, 2004
Todd, Debra R.Leander, TXEnrolled AgentIndefinite
from
August 30, 2004
Expedited Suspensions From Practice Before the Internal
Revenue Service
Under Title 31, Code of Federal Regu-
lations, Part 10, the Director, Office of Pro-
fessional Responsibility, is authorized to
immediately suspend from practice before
the Internal RevenueService any practi-
tioner who, within five years from the date
the expedited proceeding is instituted (1)
has had a license to practice as an attor-
ney, certified public accountant, or actuary
suspended or revoked for cause or (2) has
been convicted of certain crimes.
The following individuals have been
placed under suspension from practice be-
fore the Internal Revenue Service by virtue
of the expedited proceeding provisions:
NameAddressDesignationDate of Suspension
Somerville, Sally L.Havre de Grace, MDAttorneyIndefinite
from
May 3, 2004
Simon, Laurence M.Englishtown, NJCPAIndefinite
from
May 10, 2004
Taylor, Joelle T.Carolina Beach, NCCPAIndefinite
from
May 10, 2004
August 16, 20042982004–33 I.R.B.

NameAddressDesignationDate of Suspension
Becker, Joseph C.Austin, TXCPAIndefinite
from
May 10, 2004
Maffongelli Jr., JosephMontclair, NJAttorneyIndefinite
from
May 10, 2004
Lence, John A.Kalispell, MTCPAIndefinite
from
May 21, 2004
McWade, Kenneth W.Kaliua, HIAttorneyIndefinite
from
June 9, 2004
Sims, William A.Sausalito, CAAttorneyIndefinite
from
June 9, 2004
Sommer, Peter J.Baltimore, MDAttorneyIndefinite
from
June 21, 2004
Eisenberg, Alan D.Whitefish Bay, WIAttorneyIndefinite
from
June 21, 2004
Litwin, Martin E.Highland Park, ILAttorneyIndefinite
from
June 21, 2004
Kiernat, Bruce E.St. Paul, MNAttorneyIndefinite
from
July 1, 2004
Resignations of Enrolled Agents
Under Title 31, Code of Federal Regu-
lations, Part 10, an enrolled agent, in or-
der to avoid the institution or conclusion
of a proceeding for his or her disbarment
or suspension from practice before the In-
ternal Revenue Service, may offer his or
her resignation as an enrolled agent. The
Director, Office of Professional Responsi-
bility, in his discretion, may accept the of-
fered resignation.
The Director, Office of Professional
Responsibility, has accepted offers of res-
ignation as an enrolled agent from the
following individuals:
NameAddressDate of Resignation
Murphy, Claire A.Viera, FLMay 10, 2004
Murphy, John W.Viera, FLMay 10, 2004
2004–33 I.R.B.299August 16, 2004

Censure Issued by Consent
Under Title 31, Code of Federal Reg-
ulations, Part 10, in lieu of a proceeding
being instituted or continued, an attorney,
certified public accountant, enrolled agent,
or enrolled actuary, may offer his or her
consent to the issuance of a censure. Cen-
sure is a public reprimand.
The following individuals have con-
sented to the issuance of a Censure:
NameAddressDesignationDate of Censure
Clifton, Michael J.Augusta, KSCPAMay 12, 2004
Flaherty, Patrick J.Traverse City, MICPAMay 19, 2004
Monroy, FrancesPetaluma, CAEnrolled AgentMay 27, 2004
Pearson, Michael N.Houston, TXEnrolled AgentJune 7, 2004
Deletions From Cumulative
List of Organizations
Contributions to Which
are Deductible Under Section
170 of the Code
Announcement 2004–65
The names of organizations that no
longer qualifies as organizations described
in section 170(c)(2) of the Internal Rev-
enue Code of 1986 are listed below.
Generally, the Service 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 Service is not
precluded from disallowing a deduction
for any contributions made after an or-
ganization ceases to qualify under section
170(c)(2) if the organization has not timely
filed a suit for declaratory judgment under
section 7428 and if the contributor (1) had
knowledge of the revocation 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 omissions 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 November 5,
2001, and would end on the date the court
first determines that the organization is
not described in section 170(c)(2) as more
particularly set forth in section 7428(c)(1).
For individual contributors, the maximum
deduction 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.
Heritage Resources II, Inc.
Mercer, PA
Total Impact Center for Youth
Houston, TX
August 16, 20043002004–33 I.R.B.

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations
to show that the previous published rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
2004–33 I.R.B.iAugust 16, 2004

Numerical Finding List
1
Bulletins 2004–27 through 2004–33
Announcements:
2004-55, 2004-27 I.R.B.15
2004-56, 2004-28 I.R.B.41
2004-57, 2004-27 I.R.B.15
2004-58, 2004-29 I.R.B.66
2004-59, 2004-30 I.R.B.94
2004-60, 2004-29 I.R.B.43
2004-61, 2004-29 I.R.B.67
2004-62, 2004-30 I.R.B.103
2004-63, 2004-31 I.R.B.149
2004-65, 2004-33 I.R.B.300
Notices:
2004-41, 2004-28 I.R.B.31
2004-43, 2004-27 I.R.B.10
2004-44, 2004-28 I.R.B.32
2004-45, 2004-28 I.R.B.33
2004-46, 2004-29 I.R.B.46
2004-47, 2004-29 I.R.B.48
2004-48, 2004-30 I.R.B.88
2004-49, 2004-30 I.R.B.88
2004-50, 2004-33 I.R.B.196
2004-51, 2004-30 I.R.B.89
2004-52, 2004-32 I.R.B.168
2004-53, 2004-33 I.R.B.209
2004-54, 2004-33 I.R.B.209
Proposed Regulations:
REG-153841-02, 2004-31 I.R.B.145
REG-131486-03, 2004-28 I.R.B.36
REG-150562-03, 2004-32 I.R.B.175
REG-117307-04, 2004-28 I.R.B.39
Revenue Procedures:
2004-38, 2004-27 I.R.B.10
2004-39, 2004-29 I.R.B.49
2004-40, 2004-29 I.R.B.50
2004-41, 2004-30 I.R.B.90
2004-42, 2004-31 I.R.B.121
2004-43, 2004-31 I.R.B.124
2004-44, 2004-31 I.R.B.134
2004-45, 2004-31 I.R.B.140
2004-46, 2004-31 I.R.B.142
2004-47, 2004-32 I.R.B.169
2004-48, 2004-32 I.R.B.172
2004-49, 2004-33 I.R.B.210
2004-50, 2004-33 I.R.B.211
2004-51, 2004-33 I.R.B.294
Revenue Rulings:
2004-63, 2004-27 I.R.B.6
2004-64, 2004-27 I.R.B.7
Revenue Rulings— Continued:
2004-65, 2004-27 I.R.B.1
2004-66, 2004-27 I.R.B.4
2004-67, 2004-28 I.R.B.28
2004-68, 2004-31 I.R.B.118
2004-71, 2004-30 I.R.B.74
2004-72, 2004-30 I.R.B.77
2004-73, 2004-30 I.R.B.80
2004-74, 2004-30 I.R.B.84
2004-75, 2004-31 I.R.B.109
2004-76, 2004-31 I.R.B.111
2004-77, 2004-31 I.R.B.119
2004-78, 2004-31 I.R.B.108
2004-79, 2004-31 I.R.B.106
2004-80, 2004-32 I.R.B.164
2004-81, 2004-32 I.R.B.161
2004-83, 2004-32 I.R.B.157
2004-84, 2004-32 I.R.B.163
2004-85, 2004-33 I.R.B.189
2004-86, 2004-33 I.R.B.191
2004-87, 2004-32 I.R.B.154
2004-88, 2004-32 I.R.B.165
Tax Conventions:
2004-60, 2004-29 I.R.B.43
Treasury Decisions:
9131, 2004-27 I.R.B.2
9132, 2004-28 I.R.B.16
9133, 2004-28 I.R.B.25
9134, 2004-30 I.R.B.70
9135, 2004-30 I.R.B.69
9136, 2004-31 I.R.B.112
9138, 2004-32 I.R.B.160
9140, 2004-32 I.R.B.159
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2004–1 through 2004–26 is in Internal Revenue Bulletin
2004–26, dated June 28, 2004.
August 16, 2004ii2004–33 I.R.B.

Findings List of Current Actions on
Previously Published Items
1
Bulletins 2004–27 through 2004–33
Notices:
98-65
Superseded by
Rev. Proc. 2004-40, 2004-29 I.R.B.50
2001-50
Modified by
Rev. Proc. 2004-46, 2004-31 I.R.B.142
2004-2
Modified by
Notice 2004-50, 2004-33 I.R.B.196
Revenue Procedures:
79-61
Superseded by
Rev. Proc. 2004-44, 2004-31 I.R.B.134
94-64
Superseded by
Rev. Proc. 2004-38, 2004-27 I.R.B.10
96-53
Superseded by
Rev. Proc. 2004-40, 2004-29 I.R.B.50
2000-37
Modified by
Rev. Proc. 2004-51, 2004-33 I.R.B.294
2002-9
Modified and amplified by
Rev. Proc. 2004-41, 2004-30 I.R.B.90
2003-52
Superseded by
Rev. Proc. 2004-50, 2004-33 I.R.B.211
2004-4
Modified by
Rev. Proc. 2004-44, 2004-31 I.R.B.134
Revenue Rulings:
54-379
Superseded by
Rev. Rul. 2004-68, 2004-31 I.R.B.118
73-354
Obsoleted by
Rev. Rul. 2004-76, 2004-31 I.R.B.111
78-371
Distinguished by
Rev. Rul. 2004-86, 2004-33 I.R.B.191
Revenue Rulings— Continued:
80-7
Amplified and clarified by
Rev. Rul. 2004-71, 2004-30 I.R.B.74
Rev. Rul. 2004-72, 2004-30 I.R.B.77
Rev. Rul. 2004-73, 2004-30 I.R.B.80
Rev. Rul. 2004-74, 2004-30 I.R.B.84
81-100
Clarified and modified by
Rev. Rul. 2004-67, 2004-28 I.R.B.28
85-70
Amplified and clarified by
Rev. Rul. 2004-71, 2004-30 I.R.B.74
Rev. Rul. 2004-72, 2004-30 I.R.B.77
Rev. Rul. 2004-73, 2004-30 I.R.B.80
Rev. Rul. 2004-74, 2004-30 I.R.B.84
92-105
Distinguished by
Rev. Rul. 2004-86, 2004-33 I.R.B.191
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2004–1 through 2004–26 is in Internal Revenue Bulletin 2004–26, dated June 28, 2004.
2004–33 I.R.B.iiiAugust 16, 2004
*U.S. Government Printing Office: 2004—304–778/60148