Internal Revenue Bulletin 1998-44 (PDF rendition): IRS Notices

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INCOME TAX
T.D. 8786, page 4.
Final regulations under section 863 of the Code govern the
source of income from sales of inventory produced in the
United States and sold in a possession of the United States
or produced in a possession of the United States and sold in
the United States and from sales of inventory purchased in a
possession of the United States and sold in the United
States. Final regulations under section 936 of the Code gov-
ern the source of income from sales in the United States of
property purchased from a corporation that has an election
under section 936 in effect.
EMPLOYEE PLANS
Notice 98–50, page 10.
Roth IRAs; recharacterizations; conversions. This no-
tice sets forth examples and a proposed rule with respect to
the recharacterization and reconversion of amounts con-
verted from a traditional IRA to a Roth IRA.
Notice 98–51, page 11.
Weighted average interest rate update.The weighted
average interest rate for October 1998 and the resulting
permissible range of interest rates used to calculate current
liability for purposes of the full funding limitation of section
412(c)(7) of the Code are set forth.
EXEMPT ORGANIZATIONS
Announcement 98–98, page 18.
A list is provided of organizations that no longer qualify as
organizations for which contributions are deductible under
section 170 of the Code.
ADMINISTRATIVE
Announcement 98–95, page 13.
The Service announces a proposed revision to Form 8857,
Request for Innocent Spouse Relief (And Allocation of Liability
and Equitable Relief) and requests comments on the revision.
Announcement 98–96, page 18.
T.D. 8776, 1998–33 I.R.B. 6, relating to U.S. taxpayers op-
erating, investing, or otherwise conducting business in the
currencies of certain European countries that are replacing
their national currencies with a single, multinational currency
called the euro, is corrected.
Announcement 98–97, page 18.
REG–245256–96, 1998–34 I.R.B. 9, relating to the excise
taxes on excess benefit transactions, is corrected.
Internal Revenue
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Bulletin No. 1998–44
November 2, 1998
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
Department of the Treasury
Internal Revenue Service
Finding Lists begin on page 21.
Index for January-October begins on page 23.
IRB 1998-44 10/28/98 9:32 AM Page 1

The IRS Mission
Provide America’s taxpayers top quality service by help-
ing them understand and meet their tax responsibilities
and by applying the tax law with integrity and fairness to
all.
2
Statement of Principles
of Internal Revenue
Tax Administration
The function of the Internal Revenue Service is to adminis-
ter the Internal Revenue Code. Tax policy for raising revenue
is determined by Congress.
With this in mind, it is the duty of the Service to carry out that
policy by correctly applying the laws enacted by Congress;
to determine the reasonable meaning of various Code provi-
sions in light of the Congressional purpose in enacting them;
and to perform this work in a fair and impartial manner, with
neither a government nor a taxpayer point of view.
At the heart of administration is interpretation of the Code. It
is the responsibility of each person in the Service, charged
with the duty of interpreting the law, to try to find the true
meaning of the statutory provision and not to adopt a
strained construction in the belief that he or she is “protect-
ing the revenue.” The revenue is properly protected only
when we ascertain and apply the true meaning of the statute.
The Service also has the responsibility of applying and
administering the law in a reasonable, practical manner.
Issues should only be raised by examining officers when
they have merit, never arbitrarily or for trading purposes.
At the same time, the examining officer should never hesi-
tate to raise a meritorious issue. It is also important that
care be exercised not to raise an issue or to ask a court to
adopt a position inconsistent with an established Service
position.
Administration should be both reasonable and vigorous. It
should be conducted with as little delay as possible and
with great courtesy and considerateness. It should never
try to overreach, and should be reasonable within the
bounds of law and sound administration. It should, howev-
er, be vigorous in requiring compliance with law and it
should be relentless in its attack on unreal tax devices and
fraud.
IRB 1998-44 10/28/98 9:32 AM Page 2

The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
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It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
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Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
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clusions in other cases unless the facts and circumstances
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The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions, and Subpart B, Legislation and Related
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To the extent practicable, pertinent cross references to
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3
Introduction
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.
IRB 1998-44 10/28/98 9:32 AM Page 3

Section 863.—Special Rules for
Determining Source
26 CFR 1.863–3: Allocation and apportionment of
income from certain sales of inventory.
T.D. 8786
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Source of Income From Sales of
Inventory Partly From Sources
Within a Possession of the
United States; Also, Source of
Income Derived From Certain
Purchases From a Corporation
Electing Section 936
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations under section 863 gov-
erning the source of income from sales of
inventory produced in the United States
and sold in a possession of the United
States or produced in a possession of the
United States and sold in the United
States; final regulations under section
863 governing the source of income from
sales of inventory purchased in a posses-
sion of the United States and sold in the
United States; and final regulations under
section 936 governing the source of in-
come of a taxpayer from the sale in the
United States of property purchased from
a corporation that has an election under
section 936 in effect. This document af-
fects persons who produce (in whole or
in part) inventory in the United States
and sell in a possession, or produce (in
whole or in part) inventory in a posses-
sion and sell in the United States, as well
as persons who purchase inventory in a
possession and sell in the United States,
and also persons who sell in the United
States property purchased from a corpo-
ration that has a section 936 election in
effect.
DATES: Effective Date.These regula-
tions are effective November 13, 1998.
Applicability Date.These regulations
apply to taxable years beginning on or
after November 13, 1998.
FOR FURTHER INFORMATION CON-
TACT: Anne Shelburne, (202) 874-1305
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in this final regulation has been re-
viewed and approved by the Office of
Management and Budget in accordance
with the requirements of the Paperwork
Reduction Act of 1995 (44 U.S.C.
3507(d)) under control number 1545–
1556. Responses to this collection of in-
formation are mandatory.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless the col-
lection of information displays a valid
control number.
The estimated average annual burden
per respondent is approximately 2.5
hours.
Comments concerning the accuracy of
this burden estimate and suggestions for
reducing this burden should be sent to the
Internal Revenue Service,Attn: IRS
Reports Clearance Officer, OP:FS:FP,
Washington, DC 20224, and the Office of
Management and Budget,Attn: Desk
Officer for the Department of Treasury,
Office of Information and Regulatory Af-
fairs, Washington, DC 20503.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mater-
ial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.
Background
This document contains final regula-
tions under section 863 of the Internal
Revenue Code (Code), providing rules to
source income from cross-border sales of
certain property, where the property is
manufactured in a possession of the
United States and sold in the United
States, or vice versa, or purchased in a
possession and sold in the United States.
These regulations also contain rules under
section 936 to source income of a tax-
payer from the sale in the United States of
property purchased from a corporation
that has an election under section 936 in
effect.
On October 10, 1997, proposed regula-
tions [REG–251985–96] were published
in the Federal Register(62 F.R. 52953).
Having considered the comments, the IRS
and the Treasury Department adopt the
proposed regulations without significant
change in this Treasury decision.
Explanation of Provisions
I.Income Partly From Sources Within a
Possession
Section 863 authorizes the Secretary to
promulgate regulations allocating or ap-
portioning, to sources within or without
the United States, all items of gross in-
come, expenses, losses, and deductions
other than those items specified in sec-
tions 861(a) and 862(a).
Guidance in these regulations to deter-
mine the source of possession income
under section 863 concerns two types of
transactions: transactions described in
section 863(b)(2) for property produced
in the United States and sold in a posses-
sion (or vice versa), and transactions de-
scribed in section 863(b)(3) for property
purchased in a possession and sold in the
United States (collectively, Section 863
Possession Sales).
1. Methods for allocating or
apportioning gross income from
Section 863 Possession Sales
a. Property produced and sold
Under the final regulations, income
from sales of inventory produced in the
United States and sold in a possession of
the United States or produced in a posses-
sion and sold in the United States (collec-
tively, Possession Production Sales), is al-
located or apportioned according to one
of three methods.
Paragraph (f)(2)(i)(A) of the regula-
tions makes the 50/50 method the general
rule to allocate gross income from Posses-
sion Production Sales between production
November 2, 199841998–44 I.R.B.
Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
IRB 1998-44 10/28/98 9:32 AM Page 4

activity and business sales activity, so that
the income from each type of activity can
then be apportioned between U.S. and
foreign sources. The taxpayer, however,
may elect to apply the independent fac-
tory price (IFP) method (described in
paragraph (f)(2)(i)(B)), or, with the con-
sent of the District Director, the books
and records method (described in para-
graph (f)(2)(i)(C)).
Under the possession 50/50 method,
the final regulations allocate half of the
taxpayer’s gross income from Possession
Production Sales to production activity
and half to business sales activity. The in-
come is then apportioned between U.S.
and possession sources based on a prop-
erty fraction and a business sales activity
fraction.
The final regulations apply the property
fraction in §1.863–3(c) to apportion the
half of a taxpayer’s income allocated to
production activity. Thus, income is ap-
portioned to the United States or to a pos-
session or to other foreign sources based
on the location of the taxpayer’s produc-
tion assets. Consistent with the changes
made to the regulations under §1.863–
3(c), production assets are defined as tan-
gible and intangible assets owned directly
by the taxpayer that are directly used by
the taxpayer to produce inventory sold in
Possession Production Sales. Production
assets are included in the fraction at their
adjusted tax basis, consistent with the
changes made to the regulations under
§1.863–3(c).
The other half of the taxpayer’s gross
income, allocated to business sales activ-
ity, is apportioned according to a business
sales activity fraction. The portion of this
income that is possession source income
is determined by multiplying the income
by a fraction, the numerator being the
business sales activity of the taxpayer in
the possession, and the denominator
being the business sales activity of the
taxpayer within the possession and out-
side the possession. The remaining in-
come is sourced in the United States. Al-
though some of the business sales
activity factors not incurred in a posses-
sion may be incurred in a foreign country,
Treasury and the IRS believe that the
business sales activity fraction is only in-
tended to source the business sales activ-
ity portion of Possession Production
Sales outside the United States to the ex-
tent of business sales activity located in a
possession.
Under the final regulations, as opposed
to the current regulations, business sales
activity is measured by the sum of certain
expenses, including amounts paid for
labor, materials, advertising, and market-
ing (but excluding any expenses or other
amounts that are nondeductible under sec-
tion 263A, interest, and research and de-
velopment), plus receipts for the sale of
goods. This formula is intended to reflect
better the business sales activity produc-
ing the income by including more of the
factors responsible for producing that in-
come. Also, cost of goods sold is now ex-
cluded from the business sales activity
fraction apportioning income from Pos-
session Production Sales, because such
costs generally reflect production activity.
Production activity is already represented
in the formula by the one-half of the tax-
payer’s income apportioned according to
the location of production assets.
The final regulations provide explicit
guidance for attributing business sales ac-
tivity between the United States and a
possession. In attributing business sales
activity between the United States and a
possession, expenses are allocated and
apportioned between the United States
and a possession based on the rules in
§§1.861–8 through 1.861–14T. Gross
sales are allocated to the United States or
a possession based on the place of sale.
The final regulations make the IFP
method elective, and thus eliminate any
bias against taxpayers choosing to export
through independent distributors. The
regulations rely upon the regulations
under §1.863–3 for rules in applying the
IFP method.
The final regulations permit taxpayers
to request permission from the District
Director to use their books and records to
determine the source of their income. The
final regulations refer to §1.863-3(b)(3) in
applying the method to Possession Pro-
duction Sales.
b. Property purchased and sold
Paragraph (f)(3)(i)(A) makes the busi-
ness activity method the general rule to
apportion income between the United
States and a possession, from sales of
property purchased in a possession and
sold in the United States (Possession Pur-
chase Sales). The taxpayer may, how-
ever, elect to apply, with consent of the
District Director, the books and records
method.
The final regulations apportion the tax-
payer’s income from Possession Purchase
Sales on the basis of a business activity
fraction. The portion of this income that
is possession source income is determined
by multiplying the income by a fraction,
the numerator being the business of the
taxpayer in the possession, and the de-
nominator being the business of the tax-
payer within the possession and outside
the possession. The remaining income is
sourced in the United States.
The business activity fraction is similar
to the business sales activity fraction dis-
cussed previously, used to apportion the
taxpayer’s income in Possession Produc-
tion Sales, except that the fraction applies
only to expenses, cost of goods sold, and
sales attributable to Possession Purchase
Sales. In addition, the business activity
fraction apportioning Possession Pur-
chase Sales includes amounts paid for
cost of goods sold. Such costs are attrib-
uted to the possession, however, only to
the extent the property purchased is man-
ufactured, produced, grown, or extracted
in the possession. Treasury and the Inter-
nal Revenue Service anticipate that if a
taxpayer acts in the reasonable belief that
the products were manufactured in the
possession, the taxpayer could act on that
basis in preparing its tax return. The busi-
ness activity fraction reflects the view of
Treasury and the IRS that the purchase
rule of section 863(b)(3) was intended to
apply only to purchase and resale transac-
tions where the goods purchased are cre-
ated or derived from the possession.
The final regulations permit taxpayers
to request permission from the District
Director to use their books and records to
determine the source of their income. The
proposed regulations refer to §1.863–
3(b)(3) in applying the method to Posses-
sion Purchase Sales.
2. Determination of source of gross
income
Under the final regulations, once gross
income attributable to production activity,
business activity, or sales activity has
been determined under one of the pre-
scribed methods, the source of the gross
1998–44 I.R.B.5November 2, 1998
IRB 1998-44 10/28/98 9:32 AM Page 5

income is determined separately for each
type of income. The source of gross in-
come attributable to production activity
(when applying the possession 50/50
method) is determined under paragraph
(c)(1), based on the location of production
assets. The source of gross income attrib-
utable to sales activity (when applying the
IFP method or the books and records
method) is determined under paragraph
(c)(2), based generally on the location of
the sale. The source of gross income at-
tributable to business sales activity (when
applying the possession 50/50 method) is
determined under paragraph (f)(2)(ii)(B),
based on expenses and gross sales attrib-
utable to Possession Production Sales.
The source of gross income attributable to
business activity (when applying the busi-
ness activity method) is determined under
paragraph (f)(3)(ii), based on expenses,
cost of goods sold, and gross sales attrib-
utable to Possession Purchase Sales.
3. Determination of source of taxable
income
Once the source of gross income is de-
termined under paragraph (f)(2) or (3),
taxpayers then determine the source of
taxable income. Under paragraph (f)(4),
taxpayers must allocate and apportion
under §§1.861–8 through 1.861-–14T the
amounts of expenses, losses and other de-
ductions to gross income determined
under each of the prescribed methods. In
the case of amounts of expenses, losses
and other deductions allocated and appor-
tioned to gross income determined under
the IFP method or the books and records
method, the taxpayer must apply the rules
of §§1.861–8 through 1.861–14T to allo-
cate and apportion these amounts between
gross income from sources within the
United States and within a possession.
However, for expenses, losses and other
deductions allocated and apportioned to
gross income determined under the pos-
sessions 50/50 method or gross income
from Possession Purchase Sales deter-
mined under the business activity method,
taxpayers must apportion expenses and
other deductions pro rata based on the rel-
ative amounts of U.S. and possession
source gross income. Nevertheless, the
research and experimental (R&E) ex-
pense allocation rules in §1.861–17 apply
to taxpayers using the 50/50 method, so
that the R&E set aside (described in
§1.861–17) remains available to such tax-
payers.
4. Treatment of gross income derived
from certain purchases from a
corporation that has an election in
effect under section 936
The final regulations clarify that sec-
tion 863 does not apply to determine the
source of a taxpayer’s gross income de-
rived from a purchase of inventory from a
corporation that has an election in effect
under section 936, if the taxpayer’s in-
come from sales of that inventory is taken
into account to determine benefits under
section 936(h)(5)(C) for the section 936
corporation.
5. Treatment of partners and partnerships
The final regulations rely on the rules
in §1.863–3(g) for determining the appro-
priate treatment in transactions involving
partnerships. Under those rules, the ag-
gregate approach applies to a partner-
ship’s production and sales activity for
two purposes only. First, the aggregate
approach applies in determining the char-
acter of a partner’s distributive share of
partnership income. Second, the aggre-
gate approach applies in sourcing income
from sales of inventory property that is
transferred in-kind from or to a partner-
ship.
6. Election and reporting rules
Under paragraph (f)(6)(i) of the final
regulations, a taxpayer must use the 50/50
method to determine the source of income
from Possession Production Sales unless
the taxpayer elects to use the IFP method,
or elects the books and records method.
For Possession Purchase Sales, a taxpayer
must use the business activity method,
unless the taxpayer elects the books and
records method. The taxpayer makes an
election by using the method on its timely
filed original tax return. That method
must be used in later taxable years unless
the Commissioner or his delegate con-
sents to a change. Permission to change
methods in later years will be granted un-
less the change would result in a substan-
tial distortion of the source of income.
A taxpayer must fully explain the
methodology used in applying either
paragraph (f)(2) or (3), and the amount of
income allocated or apportioned to U.S.
and foreign sources, in a statement at-
tached to its tax return.
II. Income Derived From Certain
Purchases From a Corporation That
Has an Election in Effect Under
Section 936
These regulations clarify that, where a
taxpayer purchases a product from a cor-
poration that has an election in effect
under section 936, the source of the tax-
payer’s gross income derived from sales
of that product (in whatever form sold) in
the United States is U.S. source, if the tax-
payer’s income from sales of that product
is taken into account to determine benefits
under section 936(h)(5)(C)(i) for the sec-
tion 936 corporation. The taxpayer’s in-
come is U.S. source without regard to
whether a possession product is a compo-
nent, end-product form, or integrated
product. No inference should be drawn
concerning the treatment of transactions
involving sales of property purchased
from a section 936 corporation entered
into before the regulations are applicable.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in EO 12866.
Therefore, a regulatory assessment is not
required. It is hereby certified that these
regulations will not have a significant
economic impact on a substantial number
of small entities. This certification is
based on the fact that the rules of this sec-
tion principally impact large multination-
als who pay foreign taxes on substantial
foreign operations and therefore the rules
will impact very few small entities.
Moreover, in those few instances where
the rules of this section impact small enti-
ties, the economic impact on such entities
is not likely to be significant. Accord-
ingly, a regulatory flexibility analysis is
not required. Pursuant to section 7805(f)
of the Internal Revenue Code, the notice
of proposed rulemaking preceding these
regulations was submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small business.
Drafting Information
The principal author of these regula-
tions is Anne Shelburne, Office of Associ-
November 2, 199861998–44 I.R.B.
IRB 1998-44 10/28/98 9:32 AM Page 6

ate Chief Counsel (International). How-
ever, other personnel from the IRS and
Treasury Department participated in their
development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and 602
are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by revising the entry for
“Section 1.863–3”, removing the entry for
“Sections 1.936–4 through 1.936–7” and
adding entries in numerical order to read
as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.863–3 also issued under 26
U.S.C. 863(a) and (b), and 26 U.S.C.
936(h).***
Section 1.936–4 also issued under 26
U.S.C. 936(h).
Section 1.936–5 also issued under 26
U.S.C. 936(h).
Section 1.936–6 also issued under 26
U.S.C. 863(a) and (b), and 26 U.S.C.
936(h).
Section 1.936–7 also issued under 26
U.S.C. 936(h).***
Par. 2 Section 1.863–3 is amended as
follows:
1. Paragraph (f) is revised.
2. Paragraph (h) is amended by adding
a sentence at the end of the paragraph.
The revision and addition read as fol-
lows:
§1.863–3 Allocation and apportionment
of income from certain sales of inventory.
* * * * *
(f) Income partly from sources within a
possession of the United States—(1) In
general.This paragraph (f) relates to
gains, profits, and income, which are
treated as derived partly from sources
within the United States and partly from
sources within a possession of the United
States (Section 863 Possession Sales).
This paragraph (f) applies to determine
the source of income derived from the
sale of inventory produced (in whole or in
part) by the taxpayer within the United
States and sold within a possession, or
produced (in whole or in part) by a tax-
payer in a possession and sold within the
United States (Possession Production
Sales). It also applies to determine the
source of income derived from the pur-
chase of personal property within a pos-
session of the United States and its sale
within the United States (Possession Pur-
chase Sales). A taxpayer subject to this
paragraph (f) must divide gross income
from Section 863 Possession Sales using
one of the methods described in either
paragraph (f)(2)(i) of this section (in the
case of Possession Production Sales) or
paragraph (f)(3)(i) of this section (in the
case of Possession Purchase Sales). Once
a taxpayer has elected a method, the tax-
payer must separately apply that method
to the applicable category of Section 863
Possession Sales in the United States and
to those in a possession. The source of
gross income from each type of activity
must then be determined under either
paragraph (f)(2)(ii) or (3)(ii) of this sec-
tion, as appropriate. The source of taxable
income from Section 863 Possession
Sales is determined under paragraph
(f)(4) of this section. The taxpayer must
apply the rules for computing gross and
taxable income by aggregating all Section
863 Possession Sales to which a method
in this section applies after separately ap-
plying that method to Section 863 Posses-
sion Sales in the United States and to Sec-
tion 863 Possession Sales in a possession.
This section does not apply to determine
the source of a taxpayer’s gross income
derived from a sale of inventory pur-
chased from a corporation that has an
election in effect under section 936, if the
taxpayer’s income from sales of that in-
ventory is taken into account to determine
benefits under section 936 for the section
936 corporation. For rules to be applied
to determine the source of such income,
see §1.936–6(a)(5) Q&A 7a and 1.936–
6(b)(1) Q&A 13.
(2) Allocation or apportionment for
Possession Production Sales—(i) Meth-
ods for determining the source of gross
income for Possession Production
Sales—(A) Possession 50/50 method.
Under the possession 50/50 method, gross
income from Possession Production Sales
is allocated between production activity
and business sales activity as described in
this paragraph (f)(2)(i)(A). Under the
possession 50/50 method, one-half of the
taxpayer’s gross income will be consid-
ered income attributable to production ac-
tivity and the source of that income will
be determined under the rules of para-
graph (f)(2)(ii)(A) of this section. The re-
maining one-half of such gross income
will be considered income attributable to
business sales activity and the source of
that income will be determined under the
rules of paragraph (f)(2)(ii)(B) of this sec-
tion.
(B) IFP method.In lieu of the posses-
sion 50/50 method, a taxpayer may elect
the independent factory price (IFP)
method. Under the IFP method, gross in-
come from Possession Production Sales is
allocated to production activity or sales
activity using the IFP method, as de-
scribed in paragraph (b)(2) of this section,
if an IFP is fairly established under the
rules of paragraph (b)(2) of this section.
See paragraphs (f)(2)(ii)(A) and (C) of
this section for rules for determining the
source of gross income attributable to
production activity and sales activity.
(C) Books and records method.A tax-
payer may elect to allocate gross income
using the books and records method de-
scribed in paragraph (b)(3) of this section,
if it has received in advance the permis-
sion of the District Director having audit
responsibility over its return. See para-
graph (f)(2)(ii) of this section for rules for
determining the source of gross income.
(ii) Determination of source of gross
income from production, business sales,
and sales activity—(A) Gross income at-
tributable to production activity.The
source of gross income from production
activity is determined under the rules of
paragraph (c)(1) of this section, except
that the term possession is substituted for
foreign country wherever it appears.
(B) Gross income attributable to busi-
ness sales activity—(1) Source of gross
income.Gross income from the tax-
payer’s business sales activity is sourced
in the possession in the same proportion
that the amount of the taxpayer’s business
sales activity for the taxable year within
the possession bears to the amount of the
taxpayer’s business sales activity for the
taxable year both within the possession
and outside the possession, with respect
to Possession Production Sales. The re-
maining income is sourced in the United
States.
(2) Business sales activity.For pur-
poses of this paragraph (f)(2)(ii)(B), the
1998–44 I.R.B.7November 2, 1998
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taxpayer’s business sales activity is equal
to the sum of—
(i) The amounts for the taxable period
paid for wages, salaries, and other com-
pensation of employees, and other ex-
penses attributable to Possession Produc-
tion Sales (other than amounts that are
nondeductible under section 263A, inter-
est, and research and development); and
(ii) Possession Production Sales for the
taxable period.
(3) Location of business sales activity.
For purposes of determining the location
of the taxpayer’s business activity within
a possession, the following rules apply:
(i) Sales.Receipts from gross sales
will be attributed to a possession under
the provisions of paragraph (c)(2) of this
section.
(ii) Expenses.Expenses will be attrib-
uted to a possession under the rules of
§§1.861–8 through 1.861–14T.
(C) Gross income attributable to sales
activity. The source of the taxpayer’s in-
come that is attributable to sales activity,
as determined under the IFP method or
the books and records method, will be de-
termined under the provisions of para-
graph (c)(2) of this section.
(3) Allocation or apportionment for
Possession Purchase Sales—(i) Methods
for determining the source of gross in-
come for Possession Purchase Sales—
(A) Business activity method.Gross in-
come from Possession Purchase Sales is
allocated in its entirety to the taxpayer’s
business activity, and is then apportioned
between U.S. and possession sources
under paragraph (f)(3)(ii) of this section.
(B) Books and records method.A tax-
payer may elect to allocate gross income
using the books and records method de-
scribed in paragraph (b)(3) of this section,
subject to the conditions set forth in para-
graph (b)(3) of this section. See para-
graph (f)(2)(ii) of this section for rules for
determining the source of gross income.
(ii) Determination of source of gross
income from business activity—(A)
Source of gross income.Gross income
from the taxpayer’s business activity is
sourced in the possession in the same pro-
portion that the amount of the taxpayer’s
business activity for the taxable year
within the possession bears to the amount
of the taxpayer’s business activity for the
taxable year both within the possession
and outside the possession, with respect
to Possession Purchase Sales. The re-
maining income is sourced in the United
States.
(B) Business activity.For purposes of
this paragraph (f)(3)(ii), the taxpayer’s
business activity is equal to the sum of—
(1) The amounts for the taxable period
paid for wages, salaries, and other com-
pensation of employees, and other ex-
penses attributable to Possession Pur-
chase Sales (other than amounts that are
nondeductible under section 263A, inter-
est, and research and development);
(2) Cost of goods sold attributable to
Possession Purchase Sales during the tax-
able period; and
(3) Possession Purchase Sales for the
taxable period.
(C) Location of business activity.For
purposes of determining the location of
the taxpayer’s business activity within a
possession, the following rules apply:
(1) Sales. Receipts from gross sales
will be attributed to a possession under
the provisions of paragraph (c)(2) of this
section.
(2) Cost of goods sold.Payments for
cost of goods sold will be properly attrib-
utable to gross receipts from sources
within the possession only to the extent
that the property purchased was manufac-
tured, produced, grown, or extracted in
the possession (within the meaning of
section 954(d)(1)(A)).
(3) Expenses.Expenses will be attrib-
uted to a possession under the rules of
§§1.861–8 through 1.861–14T.
(iii) Examples. The following exam-
ples illustrate the rules of paragraph
(f)(3)(ii) of this section relating to the de-
termination of source of gross income
from business activity:
Example 1.(i) U.S. Co. purchases in a posses-
sion product X for $80 from A. A manufactures X in
the possession. Without further production, U.S.
Co. sells X in the United States for $100. Assume
U.S. Co. has sales and administrative expenses in
the possession of $10.
(ii) To determine the source of U.S. Co.’s gross
income, the $100 gross income from sales of X is al-
located entirely to U.S. Co.’s business activity.
Forty-seven dollars of U.S. Co.’s gross income is
sourced in the possession. [Possession expenses
($10) plus possession purchases (i.e., cost of goods
sold) ($80) plus possessions sales ($0), divided by
total expenses ($10) plus total purchases ($80) plus
total sales ($100).] The remaining $53 is sourced in
the United States.
Example 2.(i) Assume the same facts as in Ex-
ample 1, except that A manufactures X outside the
possession.
(ii) To determine the source of U.S. Co.’s gross
income, the $100 gross income is allocated entirely
to U.S. Co.’s business activity. Five dollars of U.S.
Co.’s gross income is sourced in the possession.
[Possession expenses ($10) plus possession pur-
chases ($0) plus possession sales ($0), divided by
total expenses ($10) plus total purchases ($80) plus
total sales ($100).] The $80 purchase is not included
in the numerator used to determine U.S. Co.’s busi-
ness activity in the possession, since product X was
not manufactured in the possession. The remaining
$95 is sourced in the United States.
(4) Determination of source of taxable
income. Once the source of gross income
has been determined under paragraph
(f)(2) or (3) of this section, the taxpayer
must properly allocate and apportion sep-
arately under §§1.861–8 through 1.861–
14T the amounts of its expenses, losses,
and other deductions to its respective
amounts of gross income from Section
863 Possession Sales determined sepa-
rately under each method described in
paragraph (f)(2) or (3) of this section. In
addition, if the taxpayer deducts expenses
for research and development under sec-
tion 174 that may be attributed to its Sec-
tion 863 Possession Sales under §1.861–
17, the taxpayer must separately allocate
or apportion expenses, losses, and other
deductions to its respective amounts of
gross income from each relevant product
category that the taxpayer uses in apply-
ing the rules of §1.861–17. Thus, in the
case of gross income from Section 863
Possession Sales determined under the
IFP method or books and records method,
a taxpayer must apply the rules of
§§1.861–8 through 1.861–14T to properly
allocate or apportion amounts of ex-
penses, losses and other deductions, allo-
cated and apportioned to such gross in-
come, between gross income from
sources within and without the United
States. However, in the case of gross in-
come from Possession Production Sales
determined under the possessions 50/50
method or gross income from Possession
Purchase Sales computed under the busi-
ness activity method, the amounts of ex-
penses, losses, and other deductions allo-
cated and apportioned to such gross
income must be apportioned between
sources within and without the United
States pro rata based on the relative
amounts of gross income from sources
within and without the United States de-
termined under those methods, except
that the rules regarding the allocation and
November 2, 199881998–44 I.R.B.
IRB 1998-44 10/28/98 9:32 AM Page 8

apportionment of research and experi-
mental expenditures in §1.861–17 shall
apply to such expenditures of taxpayers
using the 50/50 method.
(5) Special rules for partnerships.In
applying the rules of this paragraph (f) to
transactions involving partners and part-
nerships, the rules of paragraph (g) of this
section apply.
(6) Election and reporting rules—(i)
Elections under paragraph (f)(2) or (3) of
this section.If a taxpayer does not elect
one of the methods specified in paragraph
(f)(2) or (3) of this section, the taxpayer
must apply the possession 50/50 method
in the case of Possession Production Sales
or the business activity method in the case
of Possession Purchase Sales. The tax-
payer may elect to apply a method speci-
fied in either paragraph (f)(2) or (3) of
this section by using the method on a
timely filed original return (including ex-
tensions). Once a method has been used,
that method must be used in later taxable
years unless the Commissioner consents
to a change. Permission to change meth-
ods from one year to another year will be
granted unless the change would result in
a substantial distortion of the source of
the taxpayer’s income.
(ii) Disclosure on tax return.A tax-
payer who uses one of the methods de-
scribed in paragraph (f)(2) or (3) of this
section must fully explain in a statement
attached to the tax return the methodology
used, the circumstances justifying use of
that methodology, the extent that sales are
aggregated, and the amount of income so
allocated.
* * * * *
(h) Effective dates.* * * However,
the rules of paragraph (f) of this section
apply to taxable years beginning on or
after November 13, 1998.
Par. 3. In §1.936–6, paragraph (a)(5)
Q&A 7a is added to read as follows:
§1.936–6 Intangible property income
when an election out is made: Cost
sharing and profit split options; covered
intangibles.
* * * * *
(a) * * *
(5) * * *
Q.7a:What is the source of the tax-
payer’s gross income derived from a sale
in the United States of a possession prod-
uct purchased by the taxpayer (or an affil-
iate) from a corporation that has an elec-
tion in effect under section 936, if the
income from such sale is taken into ac-
count to determine benefits under cost
sharing for the section 936 corporation?
Is the result different if the taxpayer (or an
affiliate) derives gross income from a sale
in the United States of an integrated prod-
uct incorporating a possession product
purchased by the taxpayer (or an affiliate)
from the section 936 corporation, if the
taxpayer (or an affiliate) processes the
possession product or an excluded com-
ponent in the United States?
A.7a:Under either scenario, the in-
come is U.S. source, without regard to
whether the possession product is a com-
ponent, end-product, or integrated prod-
uct. Section 863 does not apply in deter-
mining the source of the taxpayer’s
income. This Q&A 7a is applicable for
taxable years beginning on or after No-
vember 13, 1998.
* * * * *
PART 602—OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION ACT
Par. 4. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 5. In §602.101, paragraph (c) is
amended in the table by revising the entry
for 1.863–3 to read as follows:
§602.101 OMB Control numbers.
* * * * *
(c) * * *
CFR part or sectionCurrent OMB
where identified andcontrol No.
described
* * * * *
1.863–3 . . . . . . . . . . . . . . . . . 1545–1476
1545–1556
* * * * *
Michael P. Dolan,
Deputy Commissioner of
Internal Revenue.
Approved September 18, 1998.
Donald C. Lubick,
Assistant Secretary of the
Treasury for Tax Policy.
(Filed by the Office of the Federal Register on
October 13, 1998, at 8:45 a.m., and published in the
issue of the Federal Register for October 14, 1998,
63 F.R. 55020)
1998–44 I.R.B.9November 2, 1998
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November 2, 1998101998–44 I.R.B.
Roth IRA Guidance
Notice 98–50
PURPOSE
This notice responds to questions that
have arisen regarding whether a taxpayer
who has converted an amount from a tra-
ditional IRA to a Roth IRA may not only
transfer the amount back to a traditional
IRA in a recharacterization but also sub-
sequently “reconvert” that amount from
the traditional IRA to a Roth IRA.
BACKGROUND
Section 408A of the Internal Revenue
Code (the “Code”), which was added by
§ 302 of the Taxpayer Relief Act of 1997,
Pub. L. 105–34, establishes the Roth IRA
as a new type of individual retirement
plan, effective for taxable years beginning
on or after January 1, 1998. The provi-
sions of § 408A were amended by the In-
ternal Revenue Service Restructuring and
Reform Act of 1998, Pub. L. 105–206.
On September 3, 1998, proposed regula-
tions relating to Roth IRAs, §§ 1.408A–1
through 1.408A–9, were published in the
Federal Register (63 F.R. 46937). This
notice incorporates definitions and terms
used in those proposed regulations.
Section 408A(d)(3) of the Code and
§ 1.408A–4 of the proposed regulations
prescribe rules for the conversion of an
amount from a traditional IRA to a Roth
IRA. Any amount converted from a tradi-
tional IRA to a Roth IRA is treated as dis-
tributed from the traditional IRA and
rolled over to the Roth IRA and is gener-
ally includible in gross income for the
year in which the amount is distributed or
transferred from the traditional IRA (sub-
ject to a “4-year spread” for 1998 conver-
sions, unless the taxpayer elects other-
wise).
Section 408A(d)(6) of the Code and
§ 1.408A–5 of the proposed regulations
prescribe rules for “recharacterizations”
of IRA contributions, including Roth IRA
conversion contributions. Section
408A(d)(6) provides that, except as other-
wise provided by the Secretary of the
Treasury, an IRA contribution that is
transferred to another IRA in a trustee-to-
trustee transfer on or before the date pre-
scribed by law for filing the taxpayer’s
Federal income tax return, including ex-
tensions, (the “due date”) for the taxable
year of the contribution is treated as made
to the transferee IRA and not the trans-
feror IRA. The proposed regulations in-
terpret § 408A(d)(6) to make its applica-
tion elective by the taxpayer, permit the
taxpayer to recharacterize most types of
IRA contributions, and permit the tax-
payer to recharacterize all or any portion
of an IRA contribution.
TREATMENT OF
RECONVERSIONS
The question has arisen whether a tax-
payer who has converted an amount from
a traditional IRA to a Roth IRA may not
only transfer the amount back to a tradi-
tional IRA in a recharacterization but also
subsequently “reconvert” that amount
from the traditional IRA to a Roth IRA.
The proposed regulations do not specifi-
cally address this question, and the Ser-
vice and Treasury are considering
whether final regulations should permit
reconversions under any circumstances.
However, effective as of November 1,
1998, the interim rules set forth below
will apply for 1998 and 1999. Any future
guidance that either prohibits reconver-
sions or imposes conditions on reconver-
sions more restrictive than those imposed
under this notice will not apply to recon-
versions completed before issuance of
that guidance.
If a taxpayer converts (or reconverts)
an amount, transfers that amount back to
a traditional IRA by means of a recharac-
terization, and reconverts that amount in a
transaction for which the taxpayer is not
eligible under the interim rules set forth in
this notice, the reconversion will be
deemed an “excess reconversion.” How-
ever, any reconversions that a taxpayer
has made before November 1, 1998, will
not be treated as excess reconversions and
will not be taken into account in deter-
mining whether any later reconversion is
an excess reconversion.
A taxpayer who converts an amount
from a traditional IRA to a Roth IRA dur-
ing 1998 and then transfers that amount
back to a traditional IRA by means of a
recharacterization is eligible to reconvert
that amount to a Roth IRA once (but no
more than once) on or after November 1,
1998, and on or before December 31,
1998; the taxpayer also is eligible to re-
convert that amount once (but no more
than once) during 1999. (Any conversion
of that amount during 1999 would consti-
tute a reconversion because the taxpayer
previously converted that amount during
1998.) This rule applies without regard to
whether the taxpayer’s initial conversion
or recharacterization of the amount occurs
before, on, or after November 1, 1998,
and (as indicated above) even if the tax-
payer has made one or more reconver-
sions before November 1, 1998.
A taxpayer who converts an amount
from a traditional IRA to a Roth IRA dur-
ing 1999 that has not been converted pre-
viously and then transfers that amount
back to a traditional IRA by means of a
recharacterization is eligible to reconvert
that amount to a Roth IRA once (but no
more than once) on or before December
31, 1999. In determining whether a tax-
payer has made a previous conversion for
purposes of these interim rules, a failed
conversion, as described in proposed reg-
ulations § 1.408A–4, Q&A–3 (that is, an
attempted conversion for which the tax-
payer is not eligible for reasons set forth
in proposed regulations § 1.408A–4), will
not be treated as a conversion.
Any excess reconversion of an amount
during 1998 or 1999 will not change the
taxpayer’s taxable conversion amount (as
defined in proposed regulations
§ 1.408A–8, Q&A–1(b)(7)). Instead, the
excess reconversion and the last preced-
ing recharacterization will not be taken
into account for purposes of determining
the taxpayer’s taxable conversion amount,
and the taxpayer’s taxable conversion
amount will be based on the last reconver-
sion that was not an excess reconversion
(unless, after the excess reconversion, the
amount is transferred back to a traditional
IRA by means of a recharacterization).
An excess reconversion will otherwise be
treated as a valid reconversion.
Any conversion, recharacterization, or
reconversion of an amount under this no-
tice must satisfy the provisions of § 408A
and the proposed regulations. For exam-
ple, a taxpayer making a conversion or re-
conversion must satisfy the $100,000
Part III. Administrative, Procedural, and Miscellaneous
IRB 1998-44 10/28/98 9:32 AM Page 10

1998–44 I.R.B.11November 2, 1998
modified AGI limitation of § 408A(c)-
(3)(B)(i) and proposed regulations
§ 1.408A–4, Q&A-2, and a taxpayer
transferring a contribution from one IRA
to another IRA by means of a recharacter-
ization must make the transfer on or be-
fore the due date for the taxable year of
the contribution, as required by
§ 408A(d)(6) and proposed regulations
§ 1.408A–5, Q&A–1. In determining the
portion of any amount held in a Roth IRA
or a traditional IRA that a taxpayer is not
eligible to reconvert under the interim
rules set forth in this notice, any amount
previously converted (or reconverted) is
adjusted for subsequent net gains or
losses thereon.
Example 1.On May 1, 1998, T converted an
amount in a traditional IRA (Traditional IRA 1) to a
Roth IRA (Roth IRA 1). T did not contribute any
other amount to Roth IRA 1. On October 15, 1998, T
transferred the amount in Roth IRA 1 to a traditional
IRA (Traditional IRA 2) by means of a recharacteri-
zation. T is eligible to reconvert the amount in Tradi-
tional IRA 2 to a Roth IRA once (but no more than
once) at any time on or after November 1, 1998, and
on or before December 31, 1998. Any additional re-
conversion during 1998 would be an excess recon-
version. This result would not be different if the
recharacterization had occurred on or after Novem-
ber 1, 1998, instead of before November 1, 1998.
Example 2. The facts are the same as in Example
1,except that, on November 25, 1998, T reconverts
the amount in Traditional IRA 2 to a Roth IRA (Roth
IRA 2). After that reconversion, T may transfer the
amount from Roth IRA 2 back to a traditional IRA
by means of a recharacterization, but any subsequent
reconversion of that amount to a Roth IRA before
January 1, 1999, would be an excess reconversion.
If T does transfer the amount from Roth IRA 2 back
to a traditional IRA by means of a recharacteriza-
tion, T is eligible to reconvert that amount once (but
no more than once) during 1999. Any additional re-
conversion of that amount during 1999 would be an
excess reconversion.
Example 3.The facts are the same as in Example
2,except that, on December 4, 1998, T transfers the
amount from Roth IRA 2 back to a traditional IRA
(Traditional IRA 3) by means of a recharacteriza-
tion. If T does not reconvert that amount to a Roth
IRA on or before December 31, 1998, T cannot use
the 4-year spread available for 1998 conversions.
Example 4. The facts are the same as in Example
3.The value of the amount converted on May 1,
1998, was $X, and the value of the amount con-
verted on November 25, 1998, was $Y. On Decem-
ber 8, 1998, T reconverts the amount in Traditional
IRA 3 (which then has a value of $Z) to a Roth IRA
(Roth IRA 3). Under the interim rules set forth in
this notice, T is not eligible to make the December 8,
1998, reconversion, and that excess reconversion
will not be taken into account for purposes of deter-
mining T’s taxable conversion amount (although it is
otherwise treated as a valid conversion). Instead,
T’s taxable conversion amount will be based on T’s
November 25, 1998, reconversion. Therefore, T’s
taxable conversion amount will be $Y. Because it is
a 1998 conversion, the November 25, 1998, recon-
version is eligible for the 4-year spread (unless T
again transfers the amount from Roth IRA 3 to a tra-
ditional IRA by means of a recharacterization).
Example 5.The facts are the same as in Example
2,except that T’s modified AGI for 1998 was
$110,000. Therefore, T was not eligible to convert
an amount from a traditional IRA to a Roth IRA in
1998, and T’s attempted conversion (on May 1,
1998) and reconversion (on November 25, 1998) are
failed conversions, as described in proposed regula-
tions § 1.408A–4, Q&A–3. Therefore, if T transfers
the amount of the failed conversion in Roth IRA 2
back to a traditional IRA by means of a recharacteri-
zation and converts that amount from the traditional
IRA to a Roth IRA during 1999, T will be eligible to
reconvert that amount once (but no more than once)
on or before December 31, 1999. Any additional re-
conversion of that amount during 1999 would be an
excess reconversion.
Example 6.On November 5, 1998, R converts an
amount in a traditional IRA (Traditional IRA 1) to a
Roth IRA (Roth IRA 1). On November 25, 1998, R
transfers the amount in Roth IRA 1 back to a tradi-
tional IRA (Traditional IRA 2) by means of a rechar-
acterization. R is then eligible to reconvert the
amount in Traditional IRA 2 to a Roth IRA at any
time on or before December 31, 1998. After that re-
conversion, R may transfer the amount back to a tra-
ditional IRA by means of a recharacterization, but
any subsequent reconversion of that amount to a
Roth IRA before January 1, 1999, would be an ex-
cess reconversion. If R does transfer the amount
back to a traditional IRA by means of a recharacteri-
zation (whether before or after the end of 1998), R
will be eligible to reconvert that amount once (but
no more than once) during 1999. Any additional re-
conversion of that amount during 1999 would be an
excess reconversion.
Example 7.On January 5, 1999, S converts an
amount in a traditional IRA (Traditional IRA 1) to a
Roth IRA (Roth IRA 1). S had not previously con-
verted that amount. On February 17, 1999, S trans-
fers the amount in Roth IRA 1 back to a traditional
IRA (Traditional IRA 2) by means of a recharacter-
ization. After the recharacterization, S is eligible
to reconvert the amount in Traditional IRA 2 once
(but no more than once) at any time on or before
December 31, 1999. Any additional reconversion
of that amount during 1999 would be an excess re-
conversion.
This notice is intended to clarify and
supplement the guidance provided in the
proposed regulations under § 408A and
may be relied upon as if it were incorpo-
rated in those regulations. In accordance
with the procedures for submitting com-
ments on the proposed regulations, inter-
ested parties are invited to submit com-
ments on whether final regulations should
permit reconversions (and, if so, under
what circumstances and conditions). Pos-
sible approaches to reconversions in final
regulations might include providing that a
taxpayer is not eligible to reconvert an
amount before the end of the taxable year
in which the amount was first converted
(or the due date for that taxable year) or
that a taxpayer who transfers a converted
amount back to a traditional IRA in a
recharacterization must wait until the pas-
sage of a fixed number of days (e.g., 30 or
60 days) before reconverting. Addition-
ally, such approaches might include pro-
viding that an excess reconversion would
be treated as a failed conversion that
would be subject to the consequences de-
scribed in proposed regulations
§ 1.408A–4, Q&A–3, and that could be
remedied as described therein.
DRAFTING INFORMATION
The principal authors of this notice are
Roger Kuehnle of the Employee Plans Di-
vision and Cathy A. Vohs of the Office of
the Associate Chief Counsel (Employee
Benefits and Exempt Organizations).
However, other personnel from the Inter-
nal Revenue Service and the Treasury De-
partment participated in its development.
For further information regarding this no-
tice, please contact the Employee Plans
Division’s taxpayer assistance telephone
service at (202) 622-6074/6075 (not toll-
free numbers), between the hours of 1:30
and 3:30 p.m. Eastern Time, Monday
through Thursday, or Ms. Vohs at (202)
622-6030 (also not toll-free).
Weighted Average Interest Rate
Update
Notice 98–51
Notice 88–73 provides guidelines for
determining the weighted average interest
rate and the resulting permissible range of
interest rates used to calculate current lia-
bility for the purpose of the full funding
limitation of § 412(c)(7) of the Internal
Revenue Code as amended by the Om-
nibus Budget Reconciliation Act of 1987
and as further amended by the Uruguay
Round Agreements Act, Pub. L. 103–465
(GATT).
The average yield on the 30-year Trea-
sury Constant Maturities for September
1998 is 5.20 percent.
The following rates were determined
for the plan years beginning in the month
shown below.
IRB 1998-44 10/28/98 9:32 AM Page 11

November 2, 1998121998–44 I.R.B.
90% to 106%90% to 110%
WeightedPermissiblePermissible
MonthYearAverageRangeRange
October19986.405.76 to 6.795.76 to 7.05
Drafting Information
The principal author of this notice is
Todd Newman of the Employee Plans Di-
vision. For further information regarding
this notice, call (202) 622-6076 between
2:30 and 3:30 p.m. Eastern time (not a
toll-free number). Mr. Newman’s number
is (202) 622-8458 (also not a toll-free
number).
IRB 1998-44 10/28/98 9:32 AM Page 12

Announcement 98–95
Revisions to Form 8857
PurposeThe purpose of this announcement is to request public comments on the revised Form 8857, Request
for Innocent Spouse Relief (And Allocation of Liability and Equitable Relief). Form 8857 is being re-
vised to reflect section 3201 of the IRS Restructuring and Reform Act of 1998.
Note:The revised Form 8857 in this announcement is subject to change and OMB approval before
final release.
Revisions to Form The revisions include the following:
8857
• The requirement that filers need to have over $500 of additional tax due in order to request relief is
eliminated.
• Procedures are provided for requesting innocent spouse relief, allocation of liability, and equitable
relief.
• Explanations of the law changes and types of relief are added to the instructions.
Benefits of the The revised Form 8857 will:
revisions
• Help filers become aware of the new tax law.
• Provide filers a means to request the various types of relief.
• Help filers by providing simple explanations of the new tax law and guidance for completing the
form.
• Allow the IRS to improve control and processing of the requests by highlighting the Cincinnati Ser-
vice Center filing address.
Comments requestedThe IRS would like to receive comments on the proposed revisions to Form 8857 from interested par-
ties by November 30, 1998. Send written comments to:
Chairman, Tax Forms Coordinating Committee
Internal Revenue Service, OP:FS:FP, Room 5577
1111 Constitution Avenue, NW
Washington, D.C. 20224
Alternatively, you may send comments to the Chairman, TFCC, by fax at (202) 622-5025, or e-mail to
tfpmail@publish.no.irs.gov
After the end of the comment period, the IRS will evaluate the documents received and announce the
final changes to Form 8857. Although we will not be able to respond to each comment, we will care-
fully consider all of them.
1998–44 I.R.B.13November 2, 1998
Part IV. Items of General Interest
IRB 1998-44 10/28/98 9:32 AM Page 13

November 2, 1998141998–44 I.R.B.
IRB 1998-44 10/28/98 9:32 AM Page 14

1998–44 I.R.B.15November 2, 1998
IRB 1998-44 10/28/98 9:32 AM Page 15

November 2, 1998161998–44 I.R.B.
IRB 1998-44 10/28/98 9:33 AM Page 16

1998–44 I.R.B.17November 2, 1998
IRB 1998-44 10/28/98 9:33 AM Page 17

Conversion to the Euro;
Correction
Announcement 98–96
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correction to temporary regu-
lations.
SUMMARY: This document contains a
correction to Treasury Decision 8776,
which was published in the Federal Reg-
isteron Wednesday, July 29, 1998 (63
F.R. 40366 [1998–33 I.R.B. 6]) relating to
U.S. taxpayers operating, investing or
otherwise conducting business in the cur-
rencies of certain European countries that
are replacing their national currencies
with a single, multinational currency
called the euro.
DATES: This correction is effective July
29, 1998.
FOR FURTHER INFORMATION CON-
TACT: Howard Weiner, (202) 622-3870
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The temporary regulations that are the
subject of this correction are under sec-
tion 1001 of the Internal Revenue Code.
Need for Correction
As published, TD 8776 contains an
error which may prove to be misleading
and is in need of clarification.
Correction of Publication
Accordingly, the publication of the
temporary regulations (TD 8776), which
was the subject of FR Doc. 98–20023, is
corrected as follows:
§1.985–8T [Corrected]
On page 40369, column 2, §1.985–
8T(c)(3)(iv)(B), third line from the top of
the column, the language “year of change
which includes the” is corrected to read
“year ending immediately prior to the
year of change which includes the”.
Cynthia E. Grigsby,
Chief, Regulations Unit,
Assistant Chief Counsel (Corporate).
(Filed by the Office of the Federal Register on
October 14, 1998, 8:45 a.m., and published in the
issue of the Federal Register for October 15, 1998,
63 F.R. 55333)
Failure by Certain Charitable
Organizations to Meet Certain
Qualification Requirements;
Taxes on Excess Benefit
Transactions; Correction
Announcement 98–97
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correction to notice of pro-
posed rulemaking.
SUMMARY: This document contains a
correction to REG–245256–94, which
was published in the Federal Registeron
Tuesday, August 4, 1998 (63 F.R. 41486
[1998–34 I.R.B. 9]), relating to the excise
taxes on excess benefit transactions.
FOR FURTHER INFORMATION CON-
TACT: Phyllis D. Haney, (202) 622-4290
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The notice of proposed rulemaking that
is the subject of this correction is under
section 4958 of the Internal Revenue
Code.
Need for Correction
As published, REG–246256–96 con-
tains an error which may prove to be mis-
leading and is in need of clarification.
Correction of Publication
Accordingly, the publication of the no-
tice of proposed rulemaking (REG–
246256–96), which is the subject of FR
Doc. 98–20419, is corrected as follows:
§53.4958–4 [Corrected]
On page 41502, column 1, §53.4958–
4(b)(3)(iii), Example 2,ninth line from
the bottom of the paragraph, the language
“determination of whether N’s compensa-
tion” is corrected to read “determination
of whether K’s compensation”.
Cynthia E. Grigsby,
Chief, Regulations Unit,
Assistant Chief Counsel (Corporate).
(Filed by the Office of the Federal Register on
October 6, 1998, 8:45 a.m., and published in the
issue of the Federal Register for October 7, 1998, 63
F.R. 53862)
Deletions From Cumulative List
of Organizations Contributions
to Which Are Deductible Under
Section 170 of the Code
Announcement 98–98
The names of organizations that no
longer qualify 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 orga-
nization ceases to qualify under section
170(c)(2) if the organization has not
timely filed a suit for declaratory judg-
ment under section 7428 and if the con-
tributor (1) had knowledge of the revoca-
tion of the ruling or determination letter,
(2) was aware that such revocation was
imminent, or (3) was in part responsible
for or was aware of the activities or omis-
sions of the organization that brought
about this revocation.
If on the other hand a suit for declara-
tory judgment has been timely filed, con-
tributions from individuals and organiza-
tions described in section 170(c)(2) that
are otherwise allowable will continue to
be deductible. Protection under section
7428(c) would begin on November 2,
1998, 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 husband and wife treated
as one contributor. This benefit is not ex-
tended to any individual who was respon-
sible, in whole or in part, for the acts or
omissions of the organization that were
the basis for revocation.
November 2, 1998181998–44 I.R.B.
IRB 1998-44 10/28/98 9:33 AM Page 18

Crossreach of the Holy Cross Society,
Lake Orion, MI
Flynn Home for Alcoholic Addiction,
Inc., Portsmouth, VA
Senior Housing, Inc.,
Hampton, VA
Senior Meals, Inc.,
Hampton, VA
1998–44 I.R.B.19November 2, 1998
IRB 1998-44 10/28/98 9:33 AM Page 19

November 2, 1998201998–44 I.R.B.
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds
that the same principle also applies to B,
the earlier ruling is amplified. (Compare
with modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial difference between them.
Modified is used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but not
to B, and the new ruling holds that it ap-
plies to both A and B, the prior ruling is
modified because it corrects a published
position. (Compare with amplified and
clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used
in a ruling that lists previously published
rulings that are obsoleted because of
changes in law or regulations. A ruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revoked describes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the
new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example, modified
and superseded describes a situation
where the substance of a previously pub-
lished ruling is being changed in part and
is continued without change in part and it
is desired to restate the valid portion of
the previously published ruling in a new
ruling that is self contained. In this case
the previously published ruling is first
modified and then, as modified, is super-
seded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and
that list is expanded by adding further
names in subsequent rulings. After the
original ruling has been supplemented
several times, a new ruling may be pub-
lished that includes the list in the original
ruling and the additions, and supersedes
all prior rulings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current use and for-
merly used will appear in material published in the
Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C.—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contribution Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedral Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Definition of Terms
IRB 1998-44 10/28/98 9:33 AM Page 20

1998–44 I.R.B.21November 2, 1998
Numerical Finding List
1
Bulletins 1998–29 through 43
Announcements:
98–62, 1998–29 I.R.B. 13
98–68, 1998–29 I.R.B. 14
98–69, 1998–30 I.R.B. 16
98–70, 1998–30 I.R.B. 17
98–71, 1998–30 I.R.B. 17
98–72, 1998–31 I.R.B.14
98–73, 1998–31 I.R.B.14
98–74, 1998–31 I.R.B.15
98–75, 1998–31 I.R.B.15
98–76, 1998–32 I.R.B.64
98–77, 1998–34 I.R.B.30
98–78, 1998–34 I.R.B.30
98–79, 1998–34 I.R.B.31
98–80, 1998–34 I.R.B.32
98–81, 1998–36 I.R.B.35
98–82, 1998–35 I.R.B. 17
98–83, 1998–36 I.R.B. 36
98–84, 1998–38 I.R.B.30
98–85, 1998–38 I.R.B.30
98–86, 1998–38 I.R.B.31
98–87, 1998–40 I.R.B.11
98–88, 1998–41 I.R.B. 14
98–89, 1998–40 I.R.B.11
98–90, 1998–42 I.R.B.22
98–91, 1998–40 I.R.B.12
98–92, 1998–41 I.R.B.15
98–93, 1998–43 I.R.B.10
98–94, 1998–43 I.R.B.32
Court Decisions:
2063, 1998–36 I.R.B. 13
2064, 1998–37 I.R.B. 4
2065, 1998–39 I.R.B.7
Notices:
98–36, 1998–29 I.R.B. 8
98–37, 1998–30 I.R.B.13
98–38, 1998–34 I.R.B.7
98–39, 1998–33 I.R.B.11
98–40, 1998–35 I.R.B. 7
98–41, 1998–33 I.R.B.12
98–42, 1998–33 I.R.B.12
98–43, 1998–33 I.R.B.13
98–44, 1998–34 I.R.B.7
98–45, 1998–35 I.R.B.7
98–46, 1998–36 I.R.B. 21
98–47, 1998–37 I.R.B. 8
98–48, 1998–39 I.R.B.17
98–49, 1998–38 I.R.B.5
Railroad Retirement Quarterly Rate:
1998–31 I.R.B. 7
Proposed Regulations:
REG–209446–82, 1998–36 I.R.B. 24
REG–209060–86, 1998–39 I.R.B. 18
REG–209769–95, 1998–41 I.R.B.8
REG–209813–96, 1998–35 I.R.B. 9
REG–246256–96, 1998–34 I.R.B.9
REG–104641–97, 1998–29 I.R.B. 9
REG–104565–97, 1998–39 I.R.B.21
REG–106177–97, 1998–37 I.R.B.33
REG–115446–97, 1998–36 I.R.B. 23
REG–116608–97, 1998–29 I.R.B. 12
Proposed Regulations—Continued
REG–118926–97, 1998–39 I.R.B.23
REG–118966–97, 1998–39 I.R.B.29
REG–119227–97, 1998–30 I.R.B. 13
REG–122488–97, 1998–42 I.R.B. 19
REG–101363–98, 1998–40 I.R.B.10
REG–106221–98, 1998–41 I.R.B.10
REG–110332–98, 1998–33 I.R.B.18
REG–110403–98, 1998–29 I.R.B.11
REG–115393–98, 1998–39 I.R.B.34
Revenue Procedures:
98–40, 1998–32 I.R.B. 6
98–41, 1998–32 I.R.B. 7
98–42, 1998–28 I.R.B. 9
98–43, 1998–29 I.R.B. 8
98–44, 1998–32 I.R.B. 11
98–45, 1998–34 I.R.B.8
98–46, 1998–36 I.R.B. 21
98–47, 1998–37 I.R.B. 8
98–48, 1998–38 I.R.B.7
98–49, 1998–37 I.R.B. 9
98–50, 1998–38 I.R.B.8
98–51, 1998–38 I.R.B.20
98–52, 1998–37 I.R.B. 12
98–53, 1998–40 I.R.B.9
98–54, 1998–43 I.R.B.7
Revenue Rulings:
98–34, 1998–31 I.R.B. 12
98–35, 1998–30 I.R.B. 4
98–36, 1998–31 I.R.B.6
98–37, 1998–32 I.R.B.5
98–38, 1998–32 I.R.B.4
98–39, 1998–33 I.R.B.4
98–40, 1998–33 I.R.B.4
98–41, 1998–35 I.R.B.6
98–42, 1998–35 I.R.B. 5
98–43, 1998–36 I.R.B. 9
98–44, 1998–37 I.R.B.4
98–45, 1998–38 I.R.B.4
98–46, 1998–39 I.R.B. 10
98–47, 1998–39 I.R.B. 4
98–48, 1998–39 I.R.B. 6
98–49, 1998–40 I.R.B.4
98–50, 1998–40 I.R.B.7
98–51, 1998–43 I.R.B.4
Tax Conventions:
1998–43 I.R.B. 6
Treasury Decisions:
8771, 1998–29 I.R.B. 6
8772, 1998–31 I.R.B. 8
8773, 1998–29 I.R.B. 4
8774, 1998–30 I.R.B. 5
8775, 1998–31 I.R.B.4
8776, 1998–33 I.R.B.6
8777, 1998–34 I.R.B.4
8778, 1998–36 I.R.B. 4
8779, 1998–36 I.R.B. 11
8780, 1998–39 I.R.B.14
8781, 1998–40 I.R.B. 4
8782, 1998–41 I.R.B.5
8783, 1998–41 I.R.B.4
8784, 1998–42 I.R.B.4
8785, 1998–42 I.R.B.5
1
A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 1998–1 through 1998–28
will be found in Internal Revenue Bulletin 1998–29,
dated July 20, 1998.
IRB 1998-44 10/28/98 9:33 AM Page 21

November 2, 1998221998–44 I.R.B.
Finding List of Current Action on
Previously Published Items
1
Bulletins 1998–29 through 43
*Denotes entry since last publication
Notices:
87–13
Modified by
98–49, 1998–38 I.R.B. 5
87–16
Modified by
98–49, 1998–38 I.R.B. 5
Revenue Procedures:
83–58
Obsoleted by
98–37, 1998–32 I.R.B. 5
88–17
Clarified, modified, and superseded by
98–54, 1998–43 I.R.B. 7
97–60
Superseded by
98–50, 1998–38 I.R.B. 8
97–61
Superseded by
98–51, 1998–38 I.R.B. 20
98–14
Modified by
98–53, 1998–40 I.R.B. 9
Revenue Rulings:
57–271
Obsoleted by
98–37, 1998–32 I.R.B. 5
67–301
Modified by
98–41, 1998–35 I.R.B. 6
70–225
Obsoleted by
98–44, 1998–37 I.R.B. 4
71–277
Obsoleted by
98–37, 1998–32 I.R.B. 5
71–434
Obsoleted by
98–37, 1998–32 I.R.B. 5
71–574
Obsoleted by
98–37, 1998–32 I.R.B. 5
72–75
Obsoleted by
98–37, 1998–32 I.R.B. 5
72–120
Obsoleted by
98–37, 1998–32 I.R.B. 5
72–121
Obsoleted by
98–37, 1998–32 I.R.B. 5
72–122
Obsoleted by
98–37, 1998–32 I.R.B. 5
74–77
Obsoleted by
98–37, 1998–32 I.R.B. 5
Revenue Rulings—Continued
75–19
Obsoleted by
98–37, 1998–32 I.R.B. 5
76–562
Obsoleted by
98–37, 1998–32 I.R.B. 5
77–214
Obsoleted by
98–37, 1998–32 I.R.B. 5
79–106
Obsoleted by
98–37, 1998–32 I.R.B. 5
83–113
Obsoleted by
98–37, 1998–32 I.R.B. 5
85–143
Obsoleted by
98–37, 1998–32 I.R.B. 5
88–8
Obsoleted by
98–37, 1998–32 I.R.B. 5
88–76
Obsoleted by
98–37, 1998–32 I.R.B. 5
88–79
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–4
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–5
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–6
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–30
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–38
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–49
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–50
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–53
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–81
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–91
Obsoleted by
98–37, 1998–32 I.R.B. 5
93–92
Obsoleted by
98–37, 1998–32 I.R.B. 5
Revenue Rulings—Continued
93–93
Obsoleted by
98–37, 1998–32 I.R.B. 5
94–5
Obsoleted by
98–37, 1998–32 I.R.B. 5
94–6
Obsoleted by
98–37, 1998–32 I.R.B. 5
94–30
Obsoleted by
98–37, 1998–32 I.R.B. 5
94–51
Obsoleted by
98–37, 1998–32 I.R.B. 5
94–79
Obsoleted by
98–37, 1998–32 I.R.B. 5
95–2
Obsoleted by
98–37, 1998–32 I.R.B. 5
95–9
Obsoleted by
98–37, 1998–32 I.R.B. 5
97–37
Obsoleted by
98–39, 1998–33 I.R.B. 4
1
A cumulative finding list for previously published
items mentioned in Internal Revenue Bulletins
1998–1 through 1998–28 will be found in Internal
Revenue Bulletin 1998–29, dated July 20, 1998.
IRB 1998-44 10/28/98 9:33 AM Page 22

Index
Internal Revenue Bulletins
1998–1 Through 1998–43
The abbreviation and number in paren-
thesis following the index entry refer to
the specific item; numbers in roman and
italic type following the parenthesis refer
to the Internal Revenue Bulletin in which
the item may be found and the page
number on which it appears.
Key to Abbreviations:
RRRevenue Ruling
RPRevenue Procedure
TDTreasury Decision
CDCourt Decision
PLPublic Law
EOExecutive Order
DODelegation Order
TDOTreasury Department Order
TCTax Convention
SPRStatement of Procedural
Rules
PTEProhibited Transaction
Exemption
EMPLOYMENT TAX
Magnetic media; electronic filing:
1998 Form W–4 specifications (RP 26)
13, 26
1998 Form 8027 (RP 52) 37, 12
Proposed regulations:
26 CFR 31.3121(v)(2)–1, revised;
FICA and FUTA taxation of amounts
under employee benefit plans (REG–
209484–87; REG–209807–95) 8, 40
26 CFR 31.3221–4, added; exception
from supplemental annuity tax on
railroad employers (REG–209769–
95) 41, 8
26 CFR 31.6053–1, –4; electronic tip
reports (REG–104691–97) 11, 13
Student FICA exception (RP 16) 5,19
26 CFR 31.6302–1(f)(4), revised; fed-
eral employment tax deposits de
minimisrule (REG–110403–98) 29,
11
Railroad retirement; rate determination;
quarterly beginning April 1, 1998 and
July 1, 1998 31, 7
Regulations:
26 CFR 1.6045–1T, –2T, removed;
1.6045–1, –2, amended; 301.6011–2,
amended; 301.6011–2T, removed;
magnetic filing requirements for in-
formation returns (TD 8772) 31, 8
EMPLOYMENT TAX—
Continued
26 CFR 31.6302–1(f)(4), 31.6302–1T,
added; federal employment tax de-
posits de minimisrule (TD 8771) 29,
6
Worker classification; section 530; Tax
Court review (Notice 43) 33, 13
ESTATE TAX
Regulations:
26 CFR 20.2041–3, 20.2056(d)–2,
amended; 20.2046–1, revised; prop-
erty interests and disclaimer (TD
8744) 7, 20
26 CFR 20.2044–1(e), added; 20.2044–
1T, removed; 20.2056(b)–7, revised;
20.2056(b)–7T, removed; 20.2056(b)–
10, revised; 20.2056(b)–10T, re-
moved; certain property for which
marital deduction was previously al-
lowed (TD 8779) 36, 11
26 CFR 25.2702–5, –7, amended; qual-
ified prsonal residence trust, sale of
residence (TD 8743) 7, 26
26 CFR 25.2511–1, 25.2514–3,
25.2518–1, –2, amended; property
interests and disclaimers (TD 8744)
7, 20
Revocable trust; election (RP 13) 4, 21
Special use value; farms; interest rates
(RR 22) 19, 5
Underpayment interest, interest expense
deduction, estates (RP 15) 4, 25
Valuation of compensatory stock options
(RP 34) 18, 15
EXCISE TAX
Ad valoremtax, export clause (Ct.D.
2064) 37, 4
Bows and arrows; taxable and nontaxable
articles (RR 5) 2, 20
Deposit of excise taxes, amendment (No-
tice 36) 29, 8
Federal excise taxes for consular officers
and employees, exemption (RR 24) 19, 6
Proposed regulations:
26 CFR 40.0–1T, added; 40.6011(a)–
1T, added; 40.6302(c)–2T, added;
deposits of excise taxes (REG–
102894–97) 3, 59
26 CFR 48.4052–1, added; 48.4081–1,
amended; 48.4082–6 through –10
and intermediary sections, 48.4091–
3, added; 48.4101–2, amended;
48.4101–3, 48.6427–10, –11, added;
kerosene tax, aviation fuel tax, tax
on heavy trucks and trailers (REG–
119227–97) 30, 13
26 CFR 53.4958; 301.6213–1,
301.6501(e)–1, 301.6501(n)–1,
301.7422–1, amended; 53.4958–0
through –7 and intermediary sections,
added; failure by certain charitable or-
ganizations to meet certain qualifica-
tion requirements, taxes on excess
benefit transactions (REG–246256–
96) 34, 9
26 CFR 54.4980B–1, added; group
health plans continuation coverage
requirements (REG–209485–86) 11,
21
Regulations:
26 CFR 40.0–1(a), amended; 40.6011(a)
–1(a)(2)(iii), 40.5302(c)– 1, amended,
40.6302(c)–2(b)(2)(iii), added; de-
posits of excise taxes (TD 8740) 3, 4
26 CFR 40.6011(a)–1(b)(2)(vi),
amended; 48.4082–5T, removed;
48.4082–5, added; 48.4081–1,
amended; 48.4082–5T, redesignated;
48.6416(b)(4)–1, removed; 48.6421–
3(d)(2), amended; 48.6427–3(d)(2),
amended; 48.6715–1(a)(3), revised;
48.6715–2T, removed; gasoline and
diesel fuel excise tax; special rules for
Alaska, definitions (TD 8748) 8, 24
Regulations:
26 CFR 48.4081–1T, 48.4082–6T
through –10T and intermediary sec-
tions, 48.4091–3T, 48.4101–2T, –3T,
48.6427–10T, –11T, added; 145.4052–
1, amended; kerosene, aviation fuel,
heavy trucks and trailers tax (TD
8774) 30, 5
GIFT TAX
Nonstatutory stock option, transfer (RR
21) 18, 7
Qualifying income interest, disposition
(RR 8) 7, 24
Valuation of compensatory stock options
(RP 34) 18, 15
INCOME TAX
Advance pricing agreements, small busi-
ness taxpayers (Notice 10) 6, 9
Article XIII (8) Rev. Proc. (RP 21) 8, 27
Automobile owners and lessees (RP 24)
10, 31; (RP 30) 17,6
1998–44 I.R.B.23November 2, 1998
EXCISE TAX—Continued
IRB 1998-44 10/28/98 9:33 AM Page 23

INCOME TAX—Continued
Below-market loans; exempted loans;
second mortgage loans under the
MAHRA Act (RR 34) 31, 12
Books and records; automatic data pro-
cessing system (RP 25) 11, 7
Business expenses:
Environmental remediation expendi-
tures (RP 47) 37, 8
Underground waste storage tank (RR
25) 19, 4
Capital gains and charitable remainder
trusts (Notice 20) 13, 25
Classification settlement program:
Extended until further notice (Notice
21) 15, 14
Common Trust Funds, unrelated business
taxable income (RR 41) 35, 6
Deductions:
When taken:
All events test; accrued cooperative
advertising expenses (RR 39) 33,
4
Definition of former Indian reservations
in Oklahoma (Notice 45) 35, 7
Disclosure authorization list (RP 43) 29, 8
Distribution of stock and securities of a
newly formed controlled corporation;
limitations (RR 44) 37, 4
Domestic assets/liability and investment
yield percentages (RP 31) 23, 9
Education loans (Notice 7) 3, 54
Effective date of consolidated overall for-
eign loss provisions (Notice 40) 35, 7
Elections under section 7704(g) (Notice
3) 3, 48
Electronic Federal Tax Payment System:
Batch filers and bulk filers (RP 32) 17,
11
Electronic funds transfer; failure to de-
posit penalty (Notice 30) 22, 9
Employee plans:
Administrative programs; closing
agreements (RP 22) 12, 11
Determination letters (RP 6) 1, 183;
(RP 14) 4,22
Determination letter requests, remedial
amendments (RP 53) 40, 9
Discrimination; CODAs (Notice 1) 3,
42
Eligible deferred compensation plans
(Notice 8) 4, 6
Funding:
Full funding limitations, weighted
average interest rate for Janu-
ary 1998 (Notice 9) 4, 8; Feb-
ruary 1998 (Notice 15) 9,8;
March 1998 (Notice 18) 12,11;
April 1998 (Notice 26) 18, 14;
May 1998 (Notice 32) 22,23;
June 1998 (Notice 33) 25,10;
July 1998 (Notice 37) 30, 13;
August 1998 (Notice 44) 34,7;
September 1998 (Notice 48)
39,17
Group health plans; COBRA continua-
tion coverage; HIPAA portability
(Notice 12) 5, 12
Individual retirement arrangements,
Roth IRAs (Notice 49) 38, 5
Letter rulings, etc. (RP 4) 1, 113
Limitations on benefits and contribu-
tions (RR 1) 2, 5
Minimum Funding Standards (RP 10)
2, 35
Minimum:
Remedial amendments (RP 42) 28, 9
Net unrealized appreciation; capital
gains (Notice 24) 17, 5
Qualification (Notice 29) 22, 8;
CODAs (RR 30) 25, 8
Qualification:
Church plans (Notice 39) 33, 11
Recovery of basis; retirees (Notice 2)
2, 22
Section 457 model amendments (RP
41) 32, 7
Section 457 ruling program (RP 40)
32, 6
SIMPLE-IRAs (Notice 4) 2,25
Technical advice (RP 5) 1, 155
User fees (RP 8) 1, 225
Enhanced oil recovery credit (Notice 41)
33, 12
Environmental cleanup costs; letter
rulings (RP 17) 5, 21
Exempt Organizations:
Letter rulings, etc. (RP 4) 1, 113
Organizations excepted from reporting
lobbying expenditures (RP 19) 7,
30
Tax consequences of physicians re-
cruitment incentives provided by
hospitals (RR 15) 12, 6
Technical advice (RP 5) 1, 155
User fees (RP 8) 1, 225
Failure to deposit federal tax; penalty
abatement (Notice 14) 8, 27
Foreign partnerships, reporting transfer of
property by U.S. persons (Notice 17)
11, 6
Foreign tax credit abuse (Notice 5) 3, 49
Form 1040:
e-fileprogram (RP 50) 38, 8
On-line filing program (RP 51) 38, 20
Fringe benefits aircraft valuation formula,
first half of 1998 (RR 14) 11, 4;
second half of 1998 (RR 40) 33,4
Fuel from a nonconventional source,
credit; section 29 inflation adjustment;
reference price for 1997 (Notice 28)
19, 7
Hybrid arrangements, treatment under
subpart F (Notice 35) 27, 35
Information reporting:
Hope Scholarship and Lifetime Learn-
ing credits (Notice 46) 36, 21
Insurance companies:
Differential earnings rate and recom-
puted differential earnings rate for
mutual life insurance companies (RR
38) 32, 4
Discounting estimated salvage recover-
able (RP 12) 4, 18
Interest rate tables (RR 2) 2,15
Loss reserves; discounting unpaid
losses (RP 11) 4, 9
“Reserve strengthening,” reasonable
interpretation (Ct.D. 2065) 39,7
International operation of ships and/or
aircraft, United Arab Emirates, 43, 6
Interest:
Investment:
Federal short-term, mid-term, and
long-term rates for January 1998
(RR4) 2, 18; February 1998 (RR
7) 6, 6; March 1998 (RR 11) 10,
13; April 1998 (RR 18) 14,22;
May (RR 23) 18,5; June 1998
(RR 28) 22,5; July 1998 (RR 33)
27, 26; August 1998 (RR 36) 31,
6; September 1998 (RR 43) 36,9;
October 1998 (RR 50) 40,7
Rates, underpayments and overpay-
ments (RR 17) 13, 21; calendar
quarter beginning July 1, 1998
(RR 32) 25,4; calendar quarter
beginning October 1, 1998 (RR
46) 39,10
Inventory:
LIFO:
Automobile and truck dealers (RP
46) 36, 21
Price indexes; department stores for
November 1997 (RR 6) 4, 4; De-
cember 1997 (RR 9) 6,5; January
1998 (RR 16) 13,18; February
1998 (RR 20) 15,8; March 1998
(RR 26) 21,4; April 1998 (RR
29) 24,4; May 1998 (RR 35) 30,
4; June 1998 (RR 42) 35, 5; July
November 2, 1998241998–44 I.R.B.
INCOME TAX—ContinuedINCOME TAX—Continued
IRB 1998-44 10/28/98 9:33 AM Page 24

1998 (RR 48) 39,6; August 1998
(RR 51) 43, 4
Price indexes; inventory price com-
putation method (RP 49) 37, 9
Shrinkage estimates:
Changing method of accounting for
estimating inventory shrinkage
(RP 29) 15, 22
Letter rulings, determination letters, and
information letters issued by Associate
Chief Counsel (Domestic), Associate
Chief Counsel (EBEO), Associate
Chief Counsel (Enforcement Litiga-
tion), and Associate Chief Counsel
(International) (RP 1) 1, 7
Lien for taxes; validity and priority against
third parties; judgment creditor (Ct.D.
2063) 36, 13
Losses attributable to a disaster during
1997 (RR 12) 10, 5
Low-income housing tax credit (Notice
13) 6, 19; (RP 45) 34,8
Low-income housing credit:
HUD programs (RR 49) 40, 4
Satisfactory bond; “bond factor”
amounts for the period October
through December 1997 (RR 3) 2, 4;
January–March 1998 (RR 13) 11,4;
April-June 1998 (RR 31) 25,4; July-
September 1998 (RR 45) 38, 4
Magnetic media/electronic filing:
1998 Forms 1098, 1099, 5498, and
W–2G specifications (RP 35) 19,
6
Form 1040NR (RP 36) 23,10
Marginal production rates (Notice 42) 33,
12
Methods of accounting; involuntary
changes (Notice 31) 22, 10
Package design; amortization; capitaliza-
tion; amortizable section 197 intangible
(RP 39) 26, 36
Passive foreign investment companies:
Shareholders may use rules of sec.
1.1295–1T(b)(4), (f), and (g) to tax-
able years beginning before January
1, 1998 (Notice 22) 17, 5
Private letter rulings under sections 877,
2107, and 2501(a)(3)(Notice 34) 27, 30
Proposed regulations:
26 CFR 1.32–3, added; EIC eligibility
requirements (REG–116608–97) 29,
12
26 CFR 1.62–2(e)(2), revised; 1.62–2T,
removed; 1.274–5, added; –5T,
1.274(d)–1, amended; substantiation
of business expenses, use of mileage
rates to substantiate automobile ex-
penses (REG–122488–97) 42, 19
26 CFR 1.72(p)–1, amended; loans to
plan participants (REG–209476–82)
8, 36
26 CFR 1.83–6, 1.1032–2, amended;
1.1032–3, added; treatment of a dis-
position by one corporation of the
stock of another corporation in a tax-
able transaction (REG–106221–98)
41,10
26 CFR 1.141–7, 1.142(f)(4)–1, 1.150–
5, added; 1.141–8, –15, amended;
obligations of states and political
subdivisions (REG–110965–97) 13,
42
26 CFR 1.195–1, added; election to
amortize start-up expenditures
(REG–209373–81) 14,26
26 CFR 1.356–6, added; reorganiza-
tions, nonqualified preferred stock
(REG–121755–97) 9, 13
26 CFR 1.368–1, amended; corporate
reorganizations, continuity of inter-
est (REG–120882–97) 14, 25
26 CFR 1.401(a)(9)–1, amended; quali-
fied plans and individual retirement
plans, required distributions (REG–
209463–82) 4, 27
26 CFR 1.408A–0 through –9 and in-
termediary sections, added; Roth
IRAs, questions and answers
(REG–115393–98) 39, 34
26 CFR 1.417(e)–1 and paragraph (d),
revised; 1.417(e)–1T and paragraph
(d), revised; valuation of plan dis-
tributrions (TD 8768) 20, 4
26 CFR 1.460–6, amended; election
not to apply look-back method in de
minimiscases (REG–120200–97)
12, 32
26 CFR 1.469–10, revised; 1.7704–1,
added; investment income, passive
activity income and loss rules for
publicly traded partnerships
(REG–105163–97) 8, 31
26 CFR 1.475(g)–2, new; 1.482–8,
added; 1.482–0, –1, –2, 1.863,
1.863–7(a)(1), 1.864–4, –6, 1.894–1,
amended; 1.482–9, redesignated;
global dealing operation allocation
and sourcing of income and deduc-
tions among taxpayers (REG–
208299–90) 16, 26
26 CFR 1.513–7, added; travel and tour
activities of tax exempt organiza-
tions (REG–121268–97) 20, 12
26 CFR 1.529–0 through –6 and inter-
mediary sections, added; Qualified
State Tuition Programs (REG–
106177–97) 37, 33
26 CFR 1.671–4, 1.6049–7, 301.6109–
1, amended; reporting requirements
for widely held fixed investment
trusts (REG–209813–96) 35, 9
26 CFR 1.702–1, 1.954–1, 301.7701–3,
amended; 1.952–1(b), (c), redesig-
nated 1.954–2(a)(5), (6), 1.954–
4(b)(2)(iii), 1.954–9, 1.956–2(a)(3),
added (REG–104537–97) 16, 21
26 CFR 1.732–1, amended; 1.732–2,
amended; 1.734–1(e), added; 1.743–
1, revised; 1.751–1, amended;
1.755–1, revised; 1.1017–1, revised;
adjustments to basis of partnership
property and partnership interest
(REG–209682–94) 17, 20
26 CFR 1.864(b)–1; trading safe har-
bors (REG–106031–98) 26, 38
26 CFR 1.925(a)–1, (b)–1, added;
1.927(e)–1, amended; foreign sales
corporation transfer pricing source
and grouping rules (REG–102144–
98) 15, 25
26 CFR 1.936–1T, added; termination
of Puerto Rico and possession tax
credit, new lines of business prohib-
ited (REG–115446–97) 36, 23
26 CFR 1.985–8, 1.1001–5, added;
conversion to the euro (REG–
110332–98) 33, 18
26 CFR 1.1092(c)–1, added; equity op-
tions without standard terms, special
rules and definitions (REG–104641–
97) 29, xx
26 CFR 1.1291–1, 1.1293–1, 1.1295–1,
–3, 1.1297–3(c), added; 1.1296–4,
amended; passive foreign investment
company preferred shares, special
income exclusion (REG–115795–
97) 8, 33
26 CFR 1.1361–0, amended; 1.1361–1,
amended; 1.1361–1(d)(3), removed;
1.1361–2 through –6 and intermedi-
ary sections, added; 1.1362–0,
amended; 1.1362–2, amended;
1.1362–8, added; 1.1368–0,
amended; 1.1368–2(d)(2), amended;
1.1374–8(b), amended; S corpora-
tion subsidiaries (REG–251698–96)
20, 14
26 CFR 1.1366–1, –2, removed;
1.1366–0 through –5 and intermedi-
ary sections, added; 1.1367–0, –1,
amended; 1.1367–3, removed;
1998–44 I.R.B.25November 2, 1998
INCOME TAX—Continued INCOME TAX—Continued INCOME TAX—Continued
IRB 1998-44 10/28/98 9:33 AM Page 25

1.1368–0, –1, –2, –3, amended;
1.1368–4, revised; pass through of
items of an S corporation to its share-
holders (REG–209446– 82) 36, 24
26 CFR 1.1397E–1, added; qualified
zone academy bonds (REG–
119449–97) 10, 35
26 CFR 1.1502–3(c), revised; 1.1502–
4(f)(3), (g)(3), added; 1.1502–9(b)-
(1)(v), added; 1.1502–21(c)(1)(iii),
amended; consolidated returns, limi-
tations on the use of certain losses
and credits (REG–104062–97) 10, 34
26 CFR 1.6031–1, removed; 1.6031(a)–
1, added; 1.6063–1, amended; part-
nership returns (REG–209322–82)
15, 26
26 CFR 1.6038B–1, amended; 1.6038B–
2, added; reporting of certain transfers
to foreign corporations and foreign
partnerships (REG– 118926–97) 39,
23
26 CFR 1.6038–3, added; information
returns for certain foreign partner-
ships (REG–118966–97) 39, 29
26 CFR 1.6046A–1, added; return re-
quirement for U.S. persons owning
interests in foreign partnerships
(REG–209060–86) 39, 18
26 CFR 1.7702B–1, –2, added; quali-
fied long-term care insurance con-
tracts (REG–109333–97) 9, 9
26 CFR 301.6159–1, amended; agree-
ments for tax liability installment
payments (REG–100841–97) 8, 30
26 CFR 301.6402–5(h), added; –6(n),
revised; tax refund offset program
(REG–104565–97) 39, 21
26 CFR 301.6404–2, added; abatement
of interest (REG–209276–87) 11, 18
26 CFR 301.7433–1(a), (d), (e), and
(f), revised; civil cause of action for
certain unauthorized collection ac-
tions (REG–251502–96) 9, 14
26 CFR 54.9812–1, added; mental
health parity; HIPAA (REG–
109704–97) 3, 60
Qualified Funeral Trust; guidance (Notice
6) 3, 52
Qualified intermediary agreements:
Guidance provided to foreign financial
institutions (RP 27) 15, 15
Qualified mortgage bonds, mortgage
credit certificates:
Guidance provided regarding use of na-
tional and area median gross income
figures by issuers (RP 28) 15, 14
Qualified Subchapter S Trust (QSST)
conversion to Electing Small Business
Trust (ESBT) 10, 30
Qualified Zone Academy Zone Bonds
(RP) 3, 100
Real estate transactions (RP 20) 7, 32
Regulations:
26 CFR 1.32–3T, added; EIC eligibility
requirements (TD 8773) 29, 4
26 CFR 1.61–12, 1.249–1, 1.1016–5,
1.1275–1, amended; 1.163–13,
1.171–5, added; 1.171–1, –2, –3, –4,
revised; 1.1016–9, removed; amorti-
zable bond premium (TD 8746) 7, 4
26 CFR 1.141–0, –2, amended;
1.141–7, –8, removed; 1.141–7T,
–8T, –15T, 1.142(f)(4)–1T, 1.150–
5T, added; 1.141–15, revised; oblig-
ations of states and political subdivi-
sions (TD 8757) 13, 4
26 CFR 1.166–3(a)(3), 1.1001–4,
added; 1.166–3T, 1.1001–4T, re-
moved; modifications of bad debts
and dealer assignments of notional
principal contracts (TD 8763) 15, 5
26 CFR 1.280B–1, added; building de-
molition, definition of structure (TD
8745) 7, 15
26 CFR 1.338–2, 1.368–1, –2,
amended; 1.368–1T, added; corpo-
rate reorganizations, continuity of in-
terest, and continuity of business en-
terprise (TD 8760) 14, 4; (TD 8761)
14, 13
26 CFR 1.354–1, 1.355–1, 1.356–3,
amended; reorganizations, treatment
of warrants as securities (TD 8752)
9, 4
26 CFR 1.356–6T, added; reorganiza-
tions, nonqualified preferred stock
(TD 8753) 9, 6
26 CFR 1.367(a)–1T, –3, amended;
1.367(a)–3T, removed; 1.367(a)–8,
1.367(b)–1, –4, added; 1.367(d)–1T,
amended; 1.6038B–1, added;
1.6038B–1T; 7.367(b)–1, –4, –7,
amended; certain transfers of stock
or securities by U.S. persons to for-
eign corporations (TD 8770) 27, 4
26 CFR 1.368–1(e)(6), revised; conti-
nuity of interest requirement for cor-
porate reorganizations (TD 8783) 41,
4
26 CFR 1.411(d)–4, amended; permit-
ted elimination of preretirement op-
tional forms of benefit (TD 8769)
28, 4
26 CFR 1.446–1, amended; 1.446–1T,
removed; 301.9100–0, added;
301.9100–1, revised; 301.9100–2,
–3, added; 301.9100–1T, –2T, –3T;
removed extensions of time to make
elections (TD 8742) 5, 4
26 CFR 1.453.11; installment obliga-
tions received from liquidating cor-
porations (TD 8762) 14, 15
26 CFR 1.460–0, amended; 1.460–6T,
added; election not to apply look-
back method in de minimiscases
(TD 8756) 12, 4
26 CFR 1.460–6T, removed;
1.460–6(i), (j), added; election not to
apply look-back method in de min-
imiscases (TD 8775) 31, 4
26 CFR 1.465–27, added; qualified
nonrecourse financing under section
465(b)(6) (TD 8777) 34, 4
26 CFR 1.468A–2, –3, –8, amended;
nuclear decommissioning funds; re-
vised schedules of ruling amounts
(TD 8758) 13, 15
26 CFR 1.861–18, added; classification
of certain transactions involving
computer programs (TD 8785) 42, 5
26 CFR 1.904–5(o), 1.904–5T, 1.954–
0(b), 1.954–1, amended; 1.954–1T,
–2T, –9T, added; 301.7701–3(f)(1),
amended; controlled foreign corpo-
ration relating to partnerships and
branches (TD 8767) 16, 4
26 CFR 1.905–2, amended; foreign tax
credit filing requirements (TD 8759)
13, 19
26 CFR 1.925(a)–1T, 1.925(b)–
1T(b)(3)(i), amended; 1.927(e)–1T,
revised; foreign sales corporation
transfer pricing source and grouping
rules (TD 8764) 15, 9
26 CFR 1.927(e)–1T, removed;
1.927(e)(1), added; source rules for
foreign sales corporation transfer
pricing (TD 8782) 41, 5
26 CFR 1.936–11T, added; termination
of Puerto Rico and possession tax
credit; new lines of business prohib-
ited (TD 8778) 36, 4
26 CFR 1.985–1, –5(a), amended;
1.985–7, added; dollar approximate
separate transactions method of ac-
counting (DASTM) to profit and loss
method of accounting, change from
P&L method to DASTM (TD 8765)
16, 11
November 2, 1998261998–44 I.R.B.
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26 CFR 1.1271–1, 1.1275–1, amended;
debt instruments with original issue
discount, annuity contracts (TD
8754) 10, 15
26 CFR 1.1202–0, –2, added; qualified
small business stock (TD 8749) 7,
16
26 CFR 1.1290–0, amended; 1.1294–0,
added; a. 1291–0T, amended;
1.1291–1T, added; 1.1291–9,
amended; 1.1293–0, –1T, added;
1.1295–0, –1T, –3T, 1.1297–3T(c),
added; passive foreign investment
company preferred shares, special
income exclusion (TD 8750) 8, 4
26 CFR 1.1396–1; empowerment zone
employment credit, qualified zone
employees (TD 8747) 7, 18
26 CFR 1.1397E–1T, added; qualified
zone academy bonds (TD 8755) 10,
21
26 CFR 1.1502–3, –4, –9(a), –21T(c)-
(1)(iii), amended; 1.1502– 3T, –4T,
–9T, –55T, added; 1.1502– 23T(b),
(c), redesignated; consolidated re-
turns, limitations on the use of cer-
tain losses and credits, overall for-
eign loss accounts (TD 8751) 10, 23
26 CFR 54.9801–2T, amended;
54.9801–4T, –5T, revised; 54.9804–
1T, redesignated; 54.9806–1T, redes-
ignated; 54.9812–1T, added; mental
health parity, interim rules (TD
8741) 3, 6
26 CFR 301.7623–1, revised;
301.7623–1T, removed; rewards for
information relating to violations of
internal revenue laws (TD 8780) 39,
14
Relocation payments:
Authorized by sec. 105(a)(11) of Hous-
ing and Community Development
Act, not includible in gross income
(RR 19) 15, 5
Renewable electricity production credit;
calendar year 1998 inflation adjustment
factor and reference prices. (Notice 27)
18, 14
Reorganizations; exchange of securities
(RR 10) 10, 11
Reproduction of Forms 1096, 1098, 1099,
5498, and W–2G (RP 37) 26, 6
Rescission of notice deficiency (RP 54)
43, 7
Residential rental property, exempt facili-
ty bond (RR 47) 39, 4
Rulings:
Areas in which advance rulings will not
be issued:
Associate Chief Counsel (Domes-
tic), Associate Chief Counsel
(EBEO) (RP 3) 1, 100
Associate Chief Counsel (Interna-
tional) (RP 7) 1, 222
Obsolete (RR 37) 32, 5
Rural airports (RP 18) 6, 20
Sales or exchanges:
Qualified small business stock (RP 48)
38, 7
Social security benefits under U.S.-
Canada treaty, recent changes (Notice
23) 18, 9
Specifications for filing Form 1042–S
(RP 44) 32, 11
Spin-off of subsidiary (RR 27) 22, 4
SRLY notice (Notice 38) 34, 7
Technical advice to district directors and
chiefs, appeals offices, Associate Chief
Counsel (Domestic), Associate Chief
Counsel (EBEO), Associate Chief
Counsel (Enforcement Litigation), and
Associate Chief Counsel (International)
(RP 2) 1, 74
Tentative differential earnings rate for
1997 (Notice 19) 13, 24
Timely filing or payment; private delivery
services (Notice 47) 37, 8
Treatment of hybrid arrangements under
subpart F (Notice 11) 6, 18
Trust, election to treat U.S. person;
domestic trust (Notice 25) 18, 11
Waiver of period of stay in foreign coun-
try (RP 38) 27, 29
Withholding regulations:
Effective date of sec. 1441 withholding
regulations amended (Notice 16) 15,
12
1998–44 I.R.B.27November 2, 1998
INCOME TAX—Continued INCOME TAX—Continued INCOME TAX—Continued
IRB 1998-44 10/28/98 9:33 AM Page 27

Notes
November 2, 1998281998–44 I.R.B.
IRB 1998-44 10/28/98 9:33 AM Page 28

Notes
1998–44 I.R.B.29November 2, 1998
IRB 1998-44 10/28/98 9:33 AM Page 29

Notes
November 2, 1998301998–44 I.R.B.
IRB 1998-44 10/28/98 9:33 AM Page 30

IRB 1998-44 10/28/98 9:33 AM Page 31

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