Internal Revenue Bulletin 2003-26 (PDF rendition): IRS Revenue Procedures

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

# Internal Revenue bulletin

Bulletin No. 2003-26
June 30, 2003

## HIGHLIGHTS OF THIS ISSUE

These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.

## INCOME TAX

Rev. Rul. 2003-66, page 1115.
Information reporting requirements. This ruling provides guid-
ance to federal agencies about the information reporting require-
ments under sections 6041A and 6050M of the Code for the pay-
ment of services.

Rev. Rul. 2003-67, page 1119.
Obsolete revenue rulings. This ruling obsoletes prior rulings
which have been identified as no longer being determinative.

Rev. Rul. 2003-68, page 1108.

LIFO; price indexes; department stores. The April 2003 Bu-
reau of Labor Statistics price indexes are accepted for use by
department stores employing the retail inventory and last-in, first-
out inventory methods for valuing inventories for tax years ended
on, or with reference to, April 30, 2003.

Rev. Rul. 2003-69, page 1118.

Small partnership exception. This ruling addresses the is-
sue of whether a partnership qualifies for the small partnership
exception provided in section 6231(a)(1)(B) of the Code, and thus
does not fall within the unified audit and litigation procedures un-
der sections 6221 through 6234 (TEFRA partnership provi-
sions), where one of the partners is either an organization that
is exempt from taxation under section 501(a) that meets the defi-
nition of a C corporation for federal tax purposes or a foreign cor-
poration.

T.D. 9059, page 1109.

Final regulations under section 755 of the Code provide guid-
ance to partnerships and their partners concerning the alloca-
tion of basis adjustments among partnership assets.

### Notice 2003-37, page 1121.

This notice provides a proposed revenue procedure that estab-
lishes an optional procedure for payors who make payments in
the course of their trade or business through payment cards to
determine whether the payments are reportable under sec-
tions 6041 and 6041A of the Code.

Announcement 2003-40, page 1132.

This announcement describes changes the IRS is testing un-
der section 32 of the Code in determining qualifying child eligi-
bility under the Earned Income Credit.

## ADMINISTRATIVE

T.D. 9060, page 1116.
REG-103809-03, page 1132.

Temporary and proposed regulations incorporate and clarify the
phrase "return information reflected on returns" in conform-
ance with the terms of section 6103(j)(5) of the Code. The tem-
porary regulations also remove certain items of return informa-
tion that the Department of Agriculture no longer needs for
conducting the census of Agriculture.

(Continued on the next page)

Finding Lists begin on page ii.

Department of the Treasury
Internal Revenue Service

### Announcement 2003-40, page 1132.

This announcement describes changes the IRS is testing un-
der section 32 of the Code in determining qualifying child eligi-
bility under the Earned Income Credit.

### Announcement 2003-43, page 1139.

This announcement contains the annual report concerning the Pre-
Filing Agreement Program of the Large and Mid-Size Business Di-
vision of the Service for Calendar Year 2002.

### Announcement 2003-44, page 1144.

This document corrects a typographical error in Rev. Rul. 2003-
50, 2003-21 I.R.B. 944. Rev. Rul. 2003-50 modified.

## The IRS Mission

Provide America's taxpayers top quality service by helping them
understand and meet their tax responsibilities and by applying
the tax law with integrity and fairness to all.

## Introduction

The Internal Revenue Bulletin is the authoritative instrument of the
Commissioner of Internal Revenue for announcing official rul-
ings and procedures of the Internal Revenue Service and for pub-
lishing Treasury Decisions, Executive Orders, Tax Conventions,
legislation, court decisions, and other items of general inter-
est. It is published weekly and may be obtained from the Super-
intendent of Documents on a subscription basis. Bulletin con-
tents are consolidated semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.

It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, modify,
or amend any of those previously published in the Bulletin. All pub-
lished rulings apply retroactively unless otherwise indicated. Pro-
cedures relating solely to matters of internal management are
not published; however, statements of internal practices and pro-
cedures that affect the rights and duties of taxpayers are pub-
lished.

Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpay-
ers or technical advice to Service field offices, identifying de-
tails and information of a confidential nature are deleted to pre-
vent unwarranted invasions of privacy and to comply with statutory
requirements.

Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be re-
lied on, used, or cited as precedents by Service personnel in the
disposition of other cases. In applying published rulings and pro-
cedures, the effect of subsequent legislation, regulations, court

decisions, rulings, and procedures must be considered, and Ser-
vice personnel and others concerned are cautioned against reach-
ing the same conclusions in other cases unless the facts and cir-
cumstances are substantially the same.

The Bulletin is divided into four parts as follows:

### Part I .- 1986 Code.

This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.

### Part II .- Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion and Related Committee Reports.

Part III .- Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these sub-
jects are contained in the other Parts and Subparts. Also in-
cluded in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by the
Department of the Treasury's Office of the Assistant Secretary
(Enforcement).

### Part IV .- Items of General Interest.

This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.

The first Bulletin for each month includes a cumulative index for
the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the first Bulletin of the succeeding semiannual pe-
riod, respectively.

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.

## Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

Section 472 .- Last-in,
First-out Inventories

26 CFR 1.472-1: Last-in, first-out inventories.

LIFO; price indexes; department
stores. The April 2003 Bureau of Labor
Statistics price indexes are accepted for use
by department stores employing the retail
inventory and last-in, first-out inventory
methods for valuing inventories for tax
years ended on, or with reference to, April
30, 2003.

### Rev. Rul. 2003-68

The following Department Store Inven-
tory Price Indexes for April 2003 were is-
sued by the Bureau of Labor Statistics. The
indexes are accepted by the Internal Rev-
enue Service, under § 1.472-1(k) of the In-
come Tax Regulations and Rev. Proc. 86-
46, 1986-2 C.B. 739, for appropriate
application to inventories of department
stores employing the retail inventory and
last-in, first-out inventory methods for tax
years ended on, or with reference to, April
30, 2003.

The Department Store Inventory Price
Indexes are prepared on a national basis and
include (a) 23 major groups of depart-
ments, (b) three special combinations of the
major groups - soft goods, durable goods,
and miscellaneous goods, and (c) a store to-
tal, which covers all departments, includ-
ing some not listed separately, except for
the following: candy, food, liquor, tobacco,
and contract departments.

BUREAU OF LABOR STATISTICS, DEPARTMENT STORE INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS (January 1941 = 100, unless otherwise noted)

Groups

Apr. 2002

Apr. 2003

Percent Change from Apr. 2002 to Apr. 20031

Piece Goods

488.7

457.9

-6.3

Domestics and Draperies

597.7

568.1

-5.0

Women's and Children's Shoes

652.6

646.4

-1.0

Men's Shoes

902.7

844.7

-6.4

Infants' Wear

622.2

597.8

-3.9

Women's Underwear

554.0

517.2

-6.6

Women's Hosiery

356.0

347.1

-2.5

Women's and Girls' Accessories

565.6

552.1

-2.4

Women's Outerwear and Girls' Wear

395.0

385.7

-2.4

10.

Men's Clothing

600.2

569.0

-5.2

11.

Men's Furnishings

604.4

589.8

-2.4

12.

Boys' Clothing and Furnishings

504.2

465.5

-7.7

13.

Jewelry

905.6

876.5

-3.2

14.

Notions

794.8

794.1

-0.1

15.

Toilet Articles and Drugs

974.7

982.5

0.8

16.

Furniture and Bedding

627.7

0.0

17.

Floor Coverings

618.7

584.4

-5.5

18.

Housewares

756.6

730.3

-3.5

19.

Major Appliances

222.6

215.3

-3.3

20.

Radio and Television

50.8

46.4

-8.7

21.

Recreation and Education2

87.2

83.7

-4.0

22.

Home Improvements2

125.8

125.1

-0.6

23.

Auto Accessories2

110.8

111.5

0.6

Groups 1-15: Soft Goods

591.9

573.8

-3.1

Groups 16-20: Durable Goods

413.9

399.0

-3.6

Groups 21-23: Misc. Goods2

97.1

94.8

-2.4

Store Total3

526.3

510.0

-3.1

(Footnotes are on the following page.)

1 Absence of a minus sign before the percentage change in this column signifies a price increase.

2Indexes on a January 1986 = 100 base.

3The store total index covers all departments, including some not listed separately, except for the following: candy, food, liquor,
tobacco and contract departments.

#### DRAFTING INFORMATION

The principal author of this revenue rul-
ing is Michael Burkom of the Office of As-
sociate Chief Counsel (Income Tax and Ac-
counting). For further information regarding
this revenue ruling, contact Mr. Burkom at
(202) 622-7718 (not a toll-free call).

### Section 755 .- Rules for Allocation of Basis

26 CFR 1.755-1: Rules for allocation of basis.

T.D. 9059

DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602

Coordination of Sections 755
and 1060; Allocation of Basis
Adjustments Among
Partnership Assets and
Application of the Residual
Method to Certain
Partnership Transactions

AGENCY: Internal Revenue Service (IRS),
Treasury.

ACTION: Final regulations and removal of
temporary regulations.

SUMMARY: This document finalizes regu-
lations relating to the allocation of basis ad-
justments among partnership assets under
section 755. The regulations are neces-
sary to implement section 1060, which ap-
plies the residual method to certain part-
nership transactions.

DATES: These regulations are effective
June 9, 2003.

FOR FURTHER INFORMATION
CONTACT: Craig Gerson, (202) 622-3050
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

#### Background

This document contains amendments to
26 CFR part 1 under section 755 of the In-

ternal Revenue Code (Code). On April 5,
2000, a notice of proposed rulemaking
(REG-107872-99, 2000-1 C.B. 911 [65 FR
17829]) under section 755 was published
in the Federal Register. Only one com-
mentator submitted written comments in re-
sponse to the notice of proposed rulemak-
ing, and no public hearing was requested
or held. After consideration of the com-
ment, the proposed regulations are adopted
as revised by this Treasury decision.

##### Explanation of Revisions and Sum- mary of Contents

###### 1. Summary

Section 743(b) provides for an optional
adjustment to the basis of partnership prop-
erty following certain transfers of partner-
ship interests. The amount of the basis ad-
justment is the difference between the
transferee's basis in the partnership inter-
est and the transferee's share of the part-
nership's basis in the partnership's assets.
Once the amount of the basis adjustment
is determined, it is allocated among the part-
nership's individual assets pursuant to sec-
tion 755.

On December 14, 1999, final regula-
tions (T.D. 8847, 1999-2 C.B. 701 [64 FR
69903]) were published in the Federal Reg-
ister under section 755. Under these regu-
lations, basis adjustments under section
743(b) are allocated among a partnership's
assets as follows. First, the adjustment is
allocated between the two classes of prop-
erty described in section 755(b). These
classes of property consist of capital as-
sets and section 1231(b) property (capital
gain property), and any other property of
the partnership (ordinary income prop-
erty). The amount of a basis adjustment un-
der section 743(b) that is allocated to the
class of ordinary income property is equal
to the total amount of income, gain, or loss
that would be allocated to the transferee
from the sale of all ordinary income prop-
erty. The amount of the basis adjustment un-
der section 743(b) that is allocated to capi-
tal gain property is the total amount of the
basis adjustment under section 743(b) less
the amount of the basis adjustment allo-

cated to ordinary income property. The ba-
sis adjustment is then allocated to indi-
vidual assets within each class.

The final regulations issued on Decem-
ber 14, 1999, worked in conjunction with
§1.755-2T. In the case of a basis adjust-
ment under section 743(b) or section 732(d),
the fair market values of all assets other
than goodwill or going concern value were
determined on the basis of all the facts and
circumstances, and the fair market value of
goodwill and going concern value was de-
termined using the residual method. As de-
scribed more fully in the notice of pro-
posed rulemaking, §1.755-2T was published
prior to the enactment of section 1060(d),
which (as amended in 1993) requires the
residual method to be applied for purposes
of determining the values of section 197 in-
tangibles for purposes of applying sec-
tion 755. These final regulations imple-
ment section 1060(d) and replace §1.755-
2T.

These final regulations differ from
§1.755-2T by using the residual method to
value all section 197 intangibles (not just
goodwill and going concern value). In ad-
dition, these final regulations also apply to
basis adjustments under section 734(b) and
contain special rules for certain substi-
tuted basis transactions. Finally, for con-
venience, the provisions of the regula-
tions have been relocated to the beginning
of §1.755-1.

Under these final regulations, a partner-
ship is required to assign values to its as-
sets as follows. First, the partnership must
determine the values of each of its assets
other than section 197 intangibles under all
the facts and circumstances, taking into ac-
count section 7701(g) (treating the fair mar-
ket value of a property as not less than the
amount of any nonrecourse indebtedness to
which the property is subject). The part-
nership then must determine the gross value
of all partnership assets (partnership gross
value). Last, the partnership is required to
use the residual method to assign values to
the partnership's section 197 intangibles. For
purposes of these regulations, the term sec-
tion 197 intangibles includes all section 197
intangibles (as defined in section 197), as

well as any goodwill or going concern value
that would not qualify as a section 197 in-
tangible under section 197.

If the aggregate value of partnership
property other than section 197 intangibles
is equal to or greater than partnership gross
value, then all section 197 intangibles are
deemed to have a value of zero. In all other
cases, the aggregate value of the partner-
ship's section 197 intangibles (the residual
section 197 intangibles value) is deemed to
equal the excess of partnership gross value
over the aggregate value of partnership
property other than section 197 intangibles.
The residual section 197 intangibles value
must be allocated, first, among section 197
intangibles other than goodwill and going
concern value. Any remaining value is as-
signed to goodwill and going concern value.

The proposed regulations used the re-
sidual method to assign values to all part-
nership assets, rather than limiting the scope
of the residual method to section 197 in-
tangibles. Treasury and the IRS have con-
cluded that these rules were unduly com-
plex, especially when they applied to
partnerships whose partnership agreements
contained special allocations of partner-
ship income or loss. Accordingly, the fi-
nal regulations utilize the residual method
only to value section 197 intangibles.

###### 2. Transactions Subject to the Regulations

Because the proposed regulations used
the residual method to value all partner-
ship assets (and not just section 197 intan-
gibles), it was desirable for all partner-
ships to value their assets using the same
method. Accordingly, under the authority of
sections 1060(d) and 755, the proposed
regulations applied to all partnerships,
whether or not their assets constituted a
trade or business. In contrast, the final regu-
lations apply the residual method only for
the purpose of valuing section 197 intan-
gibles, which are usually held by partner-
ships whose assets constitute a trade or busi-
ness. Thus, the final regulations apply the
residual method only to partnerships whose
assets constitute a trade or business (as de-
scribed in §1.1060-1(b)(2)).

The proposed regulations specifically ap-
plied to basis adjustments under section
732(d). Some references to section 732(d)
have been removed in the final regula-
tions to enhance readability. Neverthe-

less, the final regulations continue to ap-
ply to basis adjustments under section
732(d).

###### 3. Methods for Determining Partnership Gross Value

If a partnership interest is transferred in
a taxable transaction, the transferee's ba-
sis in its partnership interest provides a
frame of reference for determining part-
nership gross value. In these transactions,
both the proposed and the final regula-
tions generally provide that partnership gross
value is the amount that, if assigned to all
partnership property, would result in a liq-
uidating distribution to the transferee part-
ner equal to that partner's basis (reduced by
the amount, if any, of such basis that is at-
tributable to partnership liabilities) in the
transferred partnership interest immedi-
ately following the relevant transfer.

In certain circumstances involving ba-
sis adjustments under section 743(b), such
as where income or loss with respect to par-
ticular section 197 intangibles is allocated
differently among partners, partnership gross
value may vary depending on the fair mar-
ket values of particular section 197 intan-
gibles held by the partnership. In these situ-
ations, the final regulations require the
partnership to use a reasonable method, con-
sistent with the purposes of the final regu-
lations, to determine partnership gross value.

In the preamble to the proposed regu-
lations, the IRS and the Treasury Depart-
ment requested comments regarding how
the residual method applies in the context
of a basis adjustment that results from an
exchange of a partnership interest in which
the transferee's basis in the interest is de-
termined in whole or in part by reference
to the transferor's basis in the interest (a
transferred basis exchange). Determining
partnership gross value in such an exchange
is problematic, because the transferee's ba-
sis in the partnership interest does not nec-
essarily have any connection to the fair mar-
ket values of partnership assets. No
comments were received regarding the spe-
cific method to be adopted by the final
regulations.

The IRS and the Treasury Department
also requested comments regarding how the
residual method applies in the context of
basis adjustments under section 734(b). One
commentator suggested that the final regu-
lations should require one method for valu-
ing partnership assets in the case of a "pro

rata" distribution, and another method for
valuing partnership assets in the case of a
"non-pro rata" distribution. The IRS and
the Treasury Department believe that this
approach would be unnecessarily com-
plex.

The final regulations adopt a single
method for determining partnership gross
value that applies to all section 734(b) ba-
sis adjustments and to section 743(b) ba-
sis adjustments resulting from transferred
basis exchanges. In these circumstances,
partnership gross value is the value of the
entire partnership as a going concern, in-
creased by the amount of partnership li-
abilities. In the case of a basis adjustment
under section 734(b), the value of the en-
tire partnership as a going concern is de-
termined immediately after the distribu-
tion causing the adjustment.

A commentator has suggested that the
same method for determining partnership
gross value should apply to exchanged ba-
sis transactions, such as the distribution of
a partnership interest by a partnership. The
final regulations adopt this comment by re-
placing all references to transferred basis
exchanges with references to substituted ba-
sis transactions. Conforming adjustments are
also made to the special rules contained in
§1.755-1(b)(5) for allocating basis adjust-
ments under section 743(b) among a part-
nership's assets in these exchanges.

###### 4. Transferors of Partnership Interests

In the preamble to the proposed regu-
lations, comments were requested as to
whether the residual method should be used
to determine the fair market values of part-
nership assets for purposes of applying sec-
tion 1(h)(6)(B) (collectibles gain or loss),
section 1(h)(7) (section 1250 capital gain),
and section 751(a) (ordinary income) to the
sale or other disposition of a partnership in-
terest. No comments were received on this
issue. Treasury and the IRS have deter-
mined that the potential benefits of a rule
allowing transferors to use the residual
method do not justify the increased com-
plexity that the rule would have created.

###### 5. Other Changes

The final regulations add two clarify-
ing rules for allocating basis adjustments un-
der section 743(b) among a partnership's as-
sets in the case of a transaction that is not
a substituted basis transaction. The first rule
provides that assets with respect to which

the transferee partner has no interest in in-
come, gain, losses, or deductions are not
taken into account in allocating basis ad-
justments to capital assets. The second rule
provides that in no event may the amount
of any decrease in basis allocated to an item
of capital gain property exceed the part-
nership's adjusted basis in that item. If the
amount of a decrease in basis otherwise al-
locable to a particular capital asset ex-
ceeds the partnership's adjusted basis in that
asset, the transferee's negative basis ad-
justment in that asset is limited to the part-
nership's adjusted basis in that asset, and
the excess must be applied to reduce the re-
maining basis, if any, of other capital gain
assets pro rata in proportion to the part-
nership's adjusted bases in such assets.

#### Effective Date

These regulations apply to transfers of
partnership interests and distributions of
property from partnerships that occur on or
after June 9, 2003.

#### Special Analyses

It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It also has been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does not
apply to these regulations, and because the
regulations do not impose a collection of
information on small entities, the Regula-
tory Flexibility Act (5 U.S.C. chapter 6)
does not apply. Pursuant to section 7805(f)
of the Internal Revenue Code, the notice of
proposed rulemaking preceding these regu-
lations was submitted to the Chief Coun-
sel for Advocacy of the Small Business Ad-
ministration for comment on its impact on
small businesses.

##### Drafting Information

The principal author of these regula-
tions is Craig Gerson of the Office of the
Associate Chief Counsel (Passthroughs and
Special Industries). However, personnel
from other offices of the IRS and the Trea-
sury Department participated in their de-
velopment.

### 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 adding an entry to
read in part as follows:

Authority: 26 U.S.C. 7805.

Section 1.755-2 also issued under 26
U.S.C. 755 and 26 U.S.C. 1060. * * *

Par. 2. Section 1.755-1 is amended as
follows:

1\. Paragraph (a) is revised.

2-3. A paragraph heading is added for
paragraph (b)(1)(i).

4\. The first two sentences of paragraph
(b)(1)(i) are revised.

5\. Paragraph (b)(3)(iii) is redesignated
as paragraph (b)(3)(iv).

6\. New paragraph (b)(3)(iii) is added.

7\. In paragraph (b)(4)(ii), the Example
is revised.

8\. The paragraph heading for paragraph
(b)(5) is revised.

9\. Paragraph (b)(5)(i) is revised.

10\. In paragraph (b)(5)(iv) Example 1,
the last sentence is amended by removing
the language "transferred basis exchange"
and adding "substituted basis transaction"
in its place.

11\. In paragraph (b)(5)(iv) Example 2,
paragraph (iii), the third sentence is
amended by adding the language "this" be-
fore the language "paragraph (b)(5)".

12\. In paragraph (c)(5) Example (i) in-
troductory text is revised.

13\. Paragraph (d) is revised.

14\. Paragraph (e) is added.

The revisions and additions read as
follows:

§1.755-1 Rules for allocation of basis.

(a) In general-(1) Scope. This sec-
tion provides rules for allocating basis ad-
justments under sections 743(b) and 734(b)
among partnership property. If there is a ba-
sis adjustment to which this section ap-
plies, the basis adjustment is allocated
among the partnership's assets as follows.
First, the partnership must determine the
value of each of its assets under paragraphs
(a)(2) through (5) of this section. Second,
the basis adjustment is allocated between
the two classes of property described in sec-
tion 755(b). These classes of property con-
sist of capital assets and section 1231(b)
property (capital gain property), and any
other property of the partnership (ordi-
nary income property). For purposes of this
section, properties and potential gain treated

as unrealized receivables under section
751(c) and the regulations thereunder shall
be treated as separate assets that are ordi-
nary income property. Third, the portion of
the basis adjustment allocated to each class
is allocated among the items within the
class. Basis adjustments under section
743(b) are allocated among partnership as-
sets under paragraph (b) of this section. Ba-
sis adjustments under section 734(b) are al-
located among partnership assets under
paragraph (c) of this section.

(2) Coordination of sections 755 and
1060. If there is a basis adjustment to which
this section applies, and the assets of the
partnership constitute a trade or business (as
described in §1.1060-1(b)(2)), then the part-
nership is required to use the residual
method to assign values to the partner-
ship's section 197 intangibles. To do so, the
partnership must, first, determine the value
of partnership assets other than section 197
intangibles under paragraph (a)(3) of this
section. The partnership then must deter-
mine partnership gross value under para-
graph (a)(4) of this section. Last, the part-
nership must assign values to the
partnership's section 197 intangibles un-
der paragraph (a)(5) of this section. For pur-
poses of this section, the term section 197
intangibles includes all section 197 intan-
gibles (as defined in section 197), as well
as any goodwill or going concern value that
would not qualify as a section 197 intan-
gible under section 197.

(3) Values of properties other than sec-
tion 197 intangibles. For purposes of this
section, the fair market value of each item
of partnership property other than section
197 intangibles shall be determined on the
basis of all the facts and circumstances, tak-
ing into account section 7701(g).

(4) Partnership gross value-(i) Basis
adjustments under section 743(b)-(A) In
general. Except as provided in paragraph
(a)(4)(ii) of this section, in the case of a ba-
sis adjustment under section 743(b), part-
nership gross value generally is equal to the
amount that, if assigned to all partnership
property, would result in a liquidating dis-
tribution to the partner equal to the trans-
feree's basis in the transferred partner-
ship interest immediately following the
relevant transfer (reduced by the amount,
if any, of such basis that is attributable to
partnership liabilities).

(B) Special situations. In certain cir-
cumstances, such as where income or loss

with respect to particular section 197 in-
tangibles are allocated differently among
partners, partnership gross value may vary
depending on the values of particular sec-
tion 197 intangibles held by the partner-
ship. In these special situations, the part-
nership must assign value, first, among
section 197 intangibles (other than good-
will and going concern value) in a reason-
able manner that is consistent with the or-
dering rule in paragraph (a)(5) of this
section and would cause the appropriate liq-
uidating distribution under paragraph
(a)(4)(i)(A) of this section. If the actual fair
market values, determined on the basis of
all the facts and circumstances, of all sec-
tion 197 intangibles (other than goodwill
and going concern value) is not sufficient
to cause the appropriate liquidating distri-
bution, then the fair market value of good-
will and going concern value shall be pre-
sumed to equal an amount that if assigned
to goodwill and going concern value would
cause the appropriate liquidating distribu-
tion.

(C) Income in respect of a decedent.
Solely for the purpose of determining part-
nership gross value under this paragraph
(a)(4)(i), where a partnership interest is
transferred as a result of the death of a part-
ner, the transferee's basis in its partner-
ship interest is determined without regard
to section 1014(c), and is deemed to be ad-
justed for that portion of the interest, if any,
that is attributable to items representing in-
come in respect of a decedent under sec-
tion 691.

(ii) Basis adjustments under section
743(b) resulting from substituted basis
transactions. This paragraph (a)(4)(ii) ap-
plies to basis adjustments under section
743(b) that result from exchanges in which
the transferee's basis in the partnership in-
terest is determined in whole or in part by
reference to the transferor's basis in the in-
terest or to the basis of other property held
at any time by the transferee (substituted
basis transactions). In the case of a substi-
tuted basis transaction, partnership gross
value equals the value of the entire part-
nership as a going concern, increased by the
amount of partnership liabilities at the time
of the exchange giving rise to the basis ad-
justment.

(iii) Basis adjustments under section
734(b). In the case of a basis adjustment un-
der section 734(b), partnership gross value
equals the value of the entire partnership

as a going concern immediately follow-
ing the distribution causing the adjust-
ment, increased by the amount of partner-
ship liabilities immediately following the
distribution.

(5) Determining the values of section 197
intangibles-(i) Two classes. If the aggre-
gate value of partnership property other than
section 197 intangibles (as determined in
paragraph (a)(3) of this section) is equal to
or greater than partnership gross value (as
determined in paragraph (a)(4) of this sec-
tion), then all section 197 intangibles are
deemed to have a value of zero for pur-
poses of this section. In all other cases, the
aggregate value of the partnership's sec-
tion 197 intangibles (the residual section 197
intangibles value) is deemed to equal the
excess of partnership gross value over the
aggregate value of partnership property
other than section 197 intangibles. The re-
sidual section 197 intangibles value must
be allocated between two asset classes in
the following order -

(A) Among section 197 intangibles other
than goodwill and going concern value; and

(B) To goodwill and going concern
value.

(ii) Values assigned to section 197 in-
tangibles other than goodwill and going
concern value. The fair market value as-
signed to a section 197 intangible (other
than goodwill and going concern value)
shall not exceed the actual fair market value
(determined on the basis of all the facts and
circumstances) of that asset on the date of
the relevant transfer. If the residual sec-
tion 197 intangibles value is less than the
sum of the actual fair market values (de-
termined on the basis of all the facts and
circumstances) of all section 197 intan-
gibles (other than goodwill and going con-
cern value) held by the partnership, then the
residual section 197 intangibles value must
be allocated among the individual section
197 intangibles (other than goodwill and go-
ing concern value) as follows. The residual
section 197 intangibles value is assigned
first to any section 197 intangibles (other
than goodwill and going concern value)
having potential gain that would be treated
as unrealized receivables under the flush
language of section 751(c) (flush language
receivables) to the extent of the basis of
those section 197 intangibles and the
amount of income arising from the flush
language receivables that the partnership
would recognize if the section 197 intan-

gibles were sold for their actual fair mar-
ket values (determined based on all the facts
and circumstances) (collectively, the flush
language receivables value). If the value as-
signed to section 197 intangibles (other than
goodwill and going concern value) is less
than the flush language receivables value,
then the assigned value is allocated among
the properties giving rise to the flush lan-
guage receivables in proportion to the flush
language receivables value in those prop-
erties. Any remaining residual section 197
intangibles value is allocated among the re-
maining portions of the section 197 intan-
gibles (other than goodwill and going con-
cern value) in proportion to the actual fair
market values of such portions (determined
based on all the facts and circumstances).

(iii) Value assigned to goodwill and go-
ing concern value. The fair market value
of goodwill and going concern value is the
amount, if any, by which the residual sec-
tion 197 intangibles value exceeds the ag-
gregate value of the partnership's section
197 intangibles (other than goodwill and go-
ing concern value).

(6) Examples. The provisions of para-
graphs (a)(2) through (5) are illustrated by
the following examples, which assume that
the partnerships have an election in effect
under section 754 at the time of the trans-
fer and that the assets of each partnership
constitute a trade or business (as described
in §1.1060-1(b)(2)). Except as provided, no
partnership asset (other than inventory) is
property described in section 751(a), and
partnership liabilities are secured by all part-
nership assets. The examples are as follows:

Example 1. (i) A is the sole general partner in PRS,
a limited partnership having three equal partners. PRS
has goodwill and going concern value, two section 197
intangibles other than goodwill and going concern
value (Intangible 1 and Intangible 2), and two other
assets with fair market values (determined using all
the facts and circumstances) as follows: inventory
worth $1,000,000 and a building (a capital asset) worth
$2,000,000. The fair market value of each of Intan-
gible 1 and Intangible 2 is $50,000. PRS has one li-
ability of $1,000,000, for which A bears the entire risk
of loss under section 752 and the regulations there-
under. D purchases A's partnership interest for
$650,000, resulting in a basis adjustment under sec-
tion 743(b). After the purchase, D bears the entire risk
of loss for PRS's liability under section 752 and the
regulations thereunder. Therefore, D's basis in its in-
terest in PRS is $1,650,000.

(ii) D's basis in the transferred partnership inter-
est (reduced by the amount of such basis that is at-
tributable to partnership liabilities) is $650,000
($1,650,000 - $1,000,000). Under paragraph (a)(4)(i)
of this section, partnership gross value is $2,950,000

(the amount that, if assigned to all partnership prop-
erty, would result in a liquidating distribution to D
equal to $650,000).

(iii) Under paragraph (a)(3) of this section, the in-
ventory has a fair market value of $1,000,000, and the
building has a fair market value of $2,000,000. Thus,
the aggregate value of partnership property other than
section 197 intangibles, $3,000,000, is equal to or
greater than partnership gross value, $2,950,000. Ac-
cordingly, under paragraphs (a)(3) and (5) of this sec-
tion, the value assigned to each of the partnership's
assets is as follows: inventory, $1,000,000; build-
ing, $2,000,000; Intangibles 1 and 2, $0; and good-
will and going concern value, $0. D's section 743(b)
adjustment must be allocated under paragraph (b) of
this section using these assigned fair market values.

Example 2. (i) Assume the same facts as in Ex-
ample 1, except that the fair market values of Intan-
gible 1 and Intangible 2 are each $300,000, and that
D purchases A's interest in PRS for $1,000,000. Af-
ter the purchase, D's basis in its interest in PRS is
$2,000,000.

(ii) D's basis in the transferred partnership inter-
est (reduced by the amount of such basis that is at-
tributable to partnership liabilities) is $1,000,000
($2,000,000 - $1,000,000). Under paragraph (a)(4)(i)
of this section, partnership gross value is $4,000,000
(the amount that, if assigned to all partnership prop-
erty, would result in a liquidating distribution to D
equal to $1,000,000).

(iii) Under paragraph (a)(5) of this section, the re-
sidual section 197 intangibles value is $1,000,000 (the
excess of partnership gross value, $4,000,000, over the
aggregate value of assets other than section 197 in-
tangibles, $3,000,000 (the sum of the value of the in-
ventory, $1,000,000, and the value of the building,
$2,000,000)). The partnership must determine the val-
ues of section 197 assets by allocating the residual sec-
tion 197 intangibles value among the partnership's as-
sets. The residual section 197 intangibles value is
assigned first to section 197 intangibles other than
goodwill and going concern value, and then to good-
will and going concern value. Thus, $300,000 is as-
signed to each of Intangible 1 and Intangible 2, and
$400,000 is assigned to goodwill and going concern
value (the amount by which the residual section 197
intangibles value, $1,000,000, exceeds the fair mar-
ket value of section 197 intangibles other than good-
will and going concern value, $600,000). D's sec-
tion 743(b) adjustment must be allocated under
paragraph (b) of this section using these assigned fair
market values.

Example 3. (i) Assume the same facts as in Ex-
ample 1, except that the fair market values of Intan-
gible 1 and Intangible 2 are each $300,000, and that
D purchases A's interest in PRS for $750,000. After
the purchase, D's basis in its interest in PRS is
$1,750,000. Also assume that Intangible 1 was origi-
nally purchased for $300,000, and that its adjusted ba-
sis has been decreased to $50,000 as a result of am-
ortization. Assume that, if PRS were to sell Intangible
1 for $300,000, it would recognize $250,000 of gain
that would be treated as an unrealized receivable un-
der the flush language in section 751(c).

(ii) D's basis in the transferred partnership inter-
est (reduced by the amount of such basis that is at-
tributable to partnership liabilities) is $750,000
($1,750,000 - $1,000,000). Under paragraph (a)(4)(i)
of this section, partnership gross value is $3,250,000

(the amount that, if assigned to all partnership prop-
erty, would result in a liquidating distribution to D
equal to $750,000).

(iii) Under paragraph (a)(5) of this section, the re-
sidual section 197 intangibles value is $250,000 (the
amount by which partnership gross value, $3,250,000,
exceeds the aggregate value of partnership property
other than section 197 intangibles, $3,000,000). In-
tangible 1 has potential gain that would be treated as
unrealized receivables under the flush language of sec-
tion 751(c). The flush language receivables value in
Intangible 1 is $300,000 (the sum of PRS's basis in
Intangible 1, $50,000, and the amount of ordinary in-
come, $250,000, that the partnership would recog-
nize if Intangible 1 were sold for its actual fair mar-
ket value). Because the residual section 197 intangibles
value, $250,000, is less than the flush language re-
ceivables value of Intangible 1, Intangible 1 is as-
signed a value of $250,000, and Intangible 2 and good-
will and going concern value are assigned a value of
zero. D's section 743(b) adjustment must be allo-
cated under paragraph (b) of this section using these
assigned fair market values.

Example 4. Assume the same facts as in Example
1, except that the fair market values of Intangible 1
and Intangible 2 are each $300,000, and that A does
not sell its interest in PRS. Instead, A contributes its
interest in PRS to E, a newly formed corporation
wholly-owned by A, in a transaction described in sec-
tion 351. Assume that the contribution results in a ba-
sis adjustment under section 743(b) (other than zero).
PRS determines that its value as a going concern im-
mediately following the contribution is $3,000,000. Un-
der paragraph (a)(4)(ii) of this section, partnership gross
value is $4,000,000 (the value of PRS as a going con-
cern, $3,000,000, increased by the partnership's li-
ability, $1,000,000, immediately after the contribu-
tion). Under paragraph (a)(5) of this section, the
residual section 197 intangibles value is $1,000,000
(the amount by which partnership gross value,
$4,000,000, exceeds the aggregate value of partner-
ship property other than section 197 intangibles,
$3,000,000). Of the residual section 197 intangibles
value, $300,000 is assigned to each of Intangible 1 and
Intangible 2, and $400,000 is assigned to goodwill and
going concern value (the amount by which the re-
sidual section 197 intangibles value, $1,000,000, ex-
ceeds the fair market value of section 197 intan-
gibles other than goodwill and going concern value,
$600,000). E's section 743(b) adjustment must be al-
located under paragraph (b)(5) of this section using
these assigned fair market values.

Example 5. G is the sole general partner in PRS,
a limited partnership having three equal partners (G,
H, and I). PRS has goodwill and going concern value,
two section 197 intangibles other than goodwill and
going concern value (Intangible 1 and Intangible 2),
and two capital assets with fair market values (de-
termined using all the facts and circumstances) as
follows: vacant land worth $1,000,000, and a build-
ing worth $2,000,000. The fair market value of each
of Intangible 1 and Intangible 2 is $300,000. PRS has
one liability of $1,000,000, for which G bears the en-
tire risk of loss under section 752 and the regula-
tions thereunder. PRS distributes the land to H in liq-
uidation of H's interest in PRS. Immediately prior to
the distribution, PRS's basis in the land is $800,000,
and H's basis in its interest in PRS is $750,000. The
distribution causes the partnership to increase the ba-
sis of its remaining property by $50,000 under sec-

tion 734(b)(1)(B). PRS determines that its value as a
going concern immediately following the distribu-
tion is $2,000,000. Under paragraph (a)(4)(iii) of this
section, partnership gross value is $3,000,000 (the value
of PRS as a going concern, $2,000,000, increased by
the partnership's liability, $1,000,000, immediately af-
ter the distribution). Under paragraph (a)(5) of this sec-
tion, the residual section 197 intangibles value of PRS's
section 197 intangibles is $1,000,000 (the amount by
which partnership gross value, $3,000,000, exceeds
the aggregate value of partnership property other than
section 197 intangibles, $2,000,000). Of the residual
section 197 intangibles value, $300,000 is assigned to
each of Intangible 1 and Intangible 2, and $400,000
is assigned to goodwill and going concern value (the
amount by which the residual section 197 intan-
gibles value, $1,000,000, exceeds the fair market value
of section 197 intangibles other than goodwill and go-
ing concern value, $600,000). PRS's section 734(b)
adjustment must be allocated under paragraph (c) of
this section using these assigned fair market values.

(b) Adjustments under section 743(b)-
(1) Generally-(i) Application. For basis ad-
justments under section 743(b) resulting
from substituted basis transactions, para-
graph (b)(5) of this section shall apply. For
basis adjustments under section 743(b) re-
sulting from all other transfers, paragraphs
(b)(2) through (4) of this section shall ap-
ply. * * *

* * * * *

(3) * * *

(iii) Special rules-(A) Assets in which
partner has no interest. An asset with re-
spect to which the transferee partner has no
interest in income, gain, losses, or deduc-
tions shall not be taken into account in ap-
plying paragraph (b)(3)(ii)(B) of this sec-
tion.

(B) Limitation in decrease of basis. In
no event may the amount of any decrease
in basis allocated to an item of capital gain
property under paragraph (b)(3)(ii)(B) of this
section exceed the partnership's adjusted ba-
sis in that item (or in the case of property
subject to the remedial allocation method,
the transferee's share of any remedial loss
under §1.704-3(d) from the hypothetical
transaction). In the event that a decrease in
basis allocated under paragraph (b)(3)(ii)(B)
of this section to an item of capital gain
property would otherwise exceed the part-
nership's adjusted basis in that item, the ex-
cess must be applied to reduce the remain-
ing basis, if any, of other capital gain assets
pro rata in proportion to the bases of such
assets (as adjusted under this paragraph
(b)(3)).

* * * * *

(4) * * *

(ii) * * *

Example. (i) A and B are equal partners in per-
sonal service partnership PRS.

In 2004, as a result of B's death, B's partnership
interest is transferred to T when PRS's balance sheet
(reflecting a cash receipts and disbursements method

of accounting) is as follows (based on all the facts and
circumstances):

Assets

Adjusted Basis

Fair Market Value

Section 197 Intangible

$2,000

$ 5,000

Unrealized Receivables

15,000

Total

$2,000

$20,000

Liabilities and Capital

Adjusted Per Books

Fair Market Value

Capital:

1,000

10,000

1,000

10,000

Total

$2,000

$20,000

(ii) None of the assets owned by PRS is section
704(c) property, and the section 197 intangible is not
amortizable. The fair market value of T's partner-
ship interest on the applicable date of valuation set
forth in section 1014 is $10,000. Of this amount,
$2,500 is attributable to T's 50% share of the part-
nership's section 197 intangible, and $7,500 is attrib-
utable to T's 50% share of the partnership's unreal-
ized receivables. The partnership's unrealized
receivables represent income in respect of a dece-
dent. Accordingly, under section 1014(c), T's basis in
its partnership interest is not adjusted for that por-
tion of the interest which is attributable to the unre-
alized receivables. Therefore, T's basis in its partner-
ship interest is $2,500.

(iii) Under paragraph (a)(4)(i)(C) of this section,
solely for purposes of determining partnership gross
value, T's basis in its partnership interest is deemed
to be $10,000. Under paragraph (a)(4)(i) of this sec-
tion, partnership gross value is $20,000 (the amount
that, if assigned to all partnership property, would re-
sult in a liquidating distribution to T equal to $10,000).

(iv) Under paragraph (a)(5) of this section, the re-
sidual section 197 intangibles value is $5,000 (the ex-
cess of partnership gross value, $20,000, over the ag-
gregate value of assets other than section 197
intangibles, $15,000). The residual section 197 in-
tangibles value is assigned first to section 197 intan-
gibles other than goodwill and going concern value,
and then to goodwill and going concern value. Thus,
$5,000 is assigned to the section 197 intangible, and
$0 is assigned to goodwill and going concern value.
T's section 743(b) adjustment must be allocated us-
ing these assigned fair market values.

(v) At the time of the transfer, B's share of the part-
nership's basis in partnership assets is $1,000. Ac-
cordingly, T receives a $1,500 basis adjustment un-
der section 743(b). Under this paragraph (b)(4), the
entire basis adjustment is allocated to the partner-
ship's section 197 intangible.

(5) Substituted basis transactions-(i) In
general. This paragraph (b)(5) applies to ba-

sis adjustments under section 743(b) that re-
sult from exchanges in which the transfer-
ee's basis in the partnership interest is
determined in whole or in part by refer-
ence to the transferor's basis in that inter-
est. For exchanges on or after June 9, 2003,
this paragraph (b)(5) also applies to basis
adjustments under section 743(b) that re-
sult from exchanges in which the transfer-
ee's basis in the partnership interest is de-
termined by reference to other property held
at any time by the transferee. For example,
this paragraph (b)(5) applies if a partner-
ship interest is contributed to a corpora-
tion in a transaction to which section 351
applies, if a partnership interest is contrib-
uted to a partnership in a transaction to
which section 721(a) applies, or if a part-
nership interest is distributed by a partner-
ship in a transaction to which section 731(a)
applies.

* * * * *

(5)

Example. (i) A, B, and C form equal partnership
PRS. A contributes $50,000 and Asset 1, nondepre-
ciable capital gain property with a fair market value
of $50,000 and an adjusted tax basis of $25,000. B
and C each contributes $100,000. PRS uses the cash
to purchase Assets 2, 3, 4, 5, and 6. Assets 2 and 3
are nondepreciable capital assets, and Assets 4, 5, and
6 are inventory that has not appreciated substan-
tially in value within the meaning of section 751(b)(3).
Assets 4, 5, and 6 are the only assets held by the part-
nership that are subject to section 751. The partner-
ship has an election in effect under section 754. Af-

ter seven years, the adjusted basis and fair market value
of PRS's assets are as follows:

* * * * *

(d) Required statements. See §1.743-
1(k)(2) for provisions requiring the trans-
feree of a partnership interest to provide in-
formation to the partnership relating to the
transfer of an interest in the partnership. See
§1.743-1(k)(1) for a provision requiring the
partnership to attach a statement to the part-
nership return showing the computation of
a basis adjustment under section 743(b) and
the partnership properties to which the ad-
justment is allocated under section 755. See
§1.732-1(d)(3) for a provision requiring a
transferee partner to attach a statement to
its return showing the computation of a ba-
sis adjustment under section 732(d) and the
partnership properties to which the adjust-
ment is allocated under section 755. See
§1.732-1(d)(5) for a provision requiring the
partnership to provide information to a
transferee partner reporting a basis adjust-
ment under section 732(d).

(e) Effective Date-(1) Generally. Ex-
cept as provided in paragraphs (b)(5) and
(e)(2) of this section, this section applies to
transfers of partnership interests and dis-
tributions of property from a partnership that
occur on or after December 15, 1999.

(2) Special rules. Paragraphs (a) and
(b)(3)(iii) of this section apply to trans-
fers of partnership interests and distribu-
tions of property from a partnership that oc-
cur on or after June 9, 2003.

### §1.755-2T [Removed]

Par. 3. Section 1.755-2T is removed.

Par. 4. In §1.1060-1, paragraph (e)(2) is
revised to read as follows:

§1.1060-1 Special allocation rules for
certain asset acquisitions.

* * * * *

(e) * * *

(2) Transfers of interests in partner-
ships. For reporting requirements relating
to the transfer of a partnership interest, see
§1.755-1(d).

#### PART 602-OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

Par. 5. The authority citation for part 602
continues to read as follows:
Authority: 26 U.S.C. 7805.

602.101 [Amended]

Par. 6. In §602.101, paragraph (b), the
entry for "1.755-2T" is removed.

David A. Mader,
Assistant Deputy Commissioner of
Internal Revenue.

Approved May 22, 2003.

Pamela F. Olson,
Assistant Secretary of the Treasury.

(Filed by the Office of the Federal Register on June 6, 2003,
8:45 a.m., and published in the issue of the Federal Regis-
ter for June 9, 2003, 68 F.R. 34293)

## Section 6041A .- Returns Regarding Payments of Remuneration for Services and Direct Sales

(Also: 6050M.)

26 CFR 1.6041A-1: Return of information as to
payments of $600 or more.
(Also: 1.6050M-1.)

Information reporting requirements.
This ruling provides guidance to federal
agencies about the information reporting re-
quirements under sections 6041A and
6050M of the Code for the payment of ser-
vices.

### Rev. Rul. 2003-66 PURPOSE

This revenue ruling provides guidance
to federal agencies about the information

reporting requirements under sections
6041A and 6050M of the Internal Rev-
enue Code. This revenue ruling clarifies that
sections 6041A and 6050M impose sepa-
rate information reporting requirements and
have different underlying purposes and that,
in some cases, the required information may
overlap.

ISSUE

When is a federal executive agency re-
quired to report under sections 6041A and
6050M?

FACTS

Agency X is a federal executive agency
of the United States as defined by section
6050M(b), which is (1) any Executive
agency (as defined in section 105 of title
5, United States Code) other than the Gen-
eral Accounting Office, (2) any military de-
partment (as defined in section 102 of such
title), and (3) the United States Postal Ser-
vice and the Postal Rate Commission of the
United States. All payments are made dur-
ing the same calendar year.

Situation 1. Agency X pays Corpora-
tion A for cleaning services. The contract
between Agency X and Corporation A pro-
vides that the total payment for the ser-
vices is $30,000.

Situation 2. Agency X pays Corpora-
tion B for the purchase of computer equip-
ment. The contract requires a total pay-
ment of $25,000 for the computer
equipment.

Situation 3. Agency X pays Corpora-
tion C for repairs to one of the agency's au-
tomobiles. The repairs include the replace-
ment of parts. The agency pays $1000 for
the repairs of which $700 is for services.

None of the situations described above
fall within the exception under section
6050M(e).

LAW

Section 6041A(a) provides that if (1) any
service-recipient engaged in a trade or busi-
ness pays in the course of such trade or
business during any calendar year remu-
neration to any person for services per-
formed by such person, and (2) the aggre-
gate of such remuneration paid to such
person during such calendar year is $600
or more, then the service-recipient must file
a return, according to the forms or regu-
lations prescribed by the Secretary, set-

ting forth the aggregate amount of such pay-
ments and the name and address of the
recipient of such payments. For purposes
of the preceding sentence, the term "service-
recipient" means the person for whom the
service is performed. This information must
be filed on Form 1099-MISC, Miscella-
neous Income.

Section 6041A(d)(1) provides that the
term "person" includes any governmental
unit (and any agency or instrumentality
thereof). Section 6041A(d)(2) provides that
in the case of any payment by a govern-
mental entity or any agency or instrumen-
tality thereof (A) section 6041A(a) shall be
applied without regard to the trade or busi-
ness requirement contained therein, and (B)
any return under section 6041A shall be
made by the officer or employee having
control of the payment or appropriately des-
ignated for the purpose of making such re-
turn.

Section 6041A(d)(3)(A) provides that
section 6041A(a) shall apply to remunera-
tion paid to a corporation by any federal ex-
ecutive agency (as defined in section
6050M(b)).

Section 6050M(a) provides that the head
of every federal executive agency which en-
ters into any contract shall make a return
setting forth (1) the name, address, and TIN
of each person with which such agency en-
tered into a contract during the calendar
year, and (2) such other information as the
Secretary may require. This information
must be filed on Form 8596, Information
Return for Federal Contracts. See Treas.
Reg. § 1.6050M-1(d).

Section 1.6050M-1(b)(2) of the Income
Tax Regulations defines a "contract" as an
obligation of a federal executive agency to
make payment of money (or other prop-
erty) to a person in return for the sale of
property, the rendering of services, or other
consideration.

Section 1.6050M-1(c)(1)(i) limits the in-
formation reporting requirement of sec-
tion 6050M by providing that any con-
tract or contract action for which the amount
obligated is $25,000 or less does not have
to be reported.

Sections 6041A and 6050M are sepa-
rate reporting requirements and differ in
their primary purpose. The purpose of sec-
tion 6041A is to identify unreported in-
come. See S. Rep. No. 494, 97th Cong, 2d
Sess. 247 (1982), July 12, 1982 (Senate Re-
port). The purpose of section 6050M is to

provide the IRS with information concern-
ing sources from which it can collect de-
linquent taxes owed by federal contrac-
tors. See H.R. Rep. No. 426, 99th Congress,
1st Sess. 855 (1985), 1986-3 (Vol. 2) C.B.
855.

### ANALYSIS

Situation 1. The payment for the con-
tracted cleaning services is subject to in-
formation reporting under section 6041A be-
cause the agency's payment for services
exceeds the $600 threshold. Agency X must
file Form 1099-MISC. In addition, upon en-
tering into the contract, Agency X is sub-
ject to information reporting under sec-
tion 6050M because the contracted amount
exceeds the $25,000 threshold. Agency X
must file Form 8596.

Situation 2. The payment for the pur-
chase of computer equipment is not sub-
ject to information reporting under sec-
tion 6041A because the payment is not for
services. The contract is not subject to in-
formation reporting under section 6050M
because the agency did not enter into a con-
tract obligating an amount exceeding
$25,000. Agency X does not have to file ei-
ther Form 1099-MISC or Form 8596.

Situation 3. The payment for the auto-
mobile repairs is subject to information re-
porting under section 6041A because the
portion attributable to services exceeds the
$600 threshold. Agency X must file Form
1099-MISC. Agency X is not subject to
section 6050M because the agency did not
enter into a contract obligating an amount
exceeding $25,000. Agency X does not have
to file Form 8596.

### HOLDING

Sections 6041A and 6050M are sepa-
rate information reporting requirements.
Thus, with respect to a contract and the pay-
ments under that contract, a federal agency
may be required, depending on the circum-
stances, to make an information return only
under section 6041A, only under section
6050M, under both provisions, or under nei-
ther provision.

### DRAFTING INFORMATION

The principal author of this revenue pro-
cedure is Tiffany P. Smith of the Office of
the Associate Chief Counsel (Procedure and
Administration), Administrative Provi-

sions and Judicial Practice Division. For fur-
ther information regarding this revenue pro-
cedure, contact Tiffany P. Smith at (202)
622-4910 (not a toll-free call).

## Section 6050M .- Returns Relating to Persons Receiving Contracts From Federal Executive Agencies

Guidance is provided to federal agen-
cies about the information reporting re-
quirements under sections 6041A and
6050M of the Internal Revenue Code. This
ruling clarifies that sections 6041A and
6050M impose separate information re-
porting requirements and have different un-
derlying purposes and that, in some cases,
the required information may overlap. See
Rev. Rul. 2003-66, page 1115.

## Section 6103 .- Confiden- tiality and Disclosure of Returns and Return Information

26 CFR 301.6103(j)(5)-1T: Disclosures of return
information reflected on returns to officers and
employees of the Department of Agriculture for
conducting the census of agriculture (temporary).

T.D. 9060

DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 301

### Disclosure of Return Information to the Department of Agriculture

AGENCY: Internal Revenue Service (IRS),
Treasury.

ACTION: Final and temporary regulations.

SUMMARY: This document contains regu-
lations that incorporate and clarify the
phrase "return information reflected on re-
turns" in conformance with the terms of
section 6103(j)(5) of the Internal Rev-
enue Code (Code). These temporary regu-
lations also remove certain items of re-
turn information that the IRS currently
discloses, but the Department of Agricul-

ture no longer needs, for conducting the
census of agriculture. The text of the tem-
porary regulations serves as the text of the
proposed regulations (REG-103809-03) set
forth on page 1132 of this issue of the Bul-
letin.

DATES: Effective Date: These regulations
are effective on June 6, 2003.

FOR FURTHER INFORMATION CON-
TACT: Christine Irwin at (202) 622-4570
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

#### Background

These temporary regulations incorpo-
rate the phrase "return information reflected
on returns" into §301.6103(j)(5)-1 in con-
formance with the statutory language that
describes the type of return information that
the IRS may disclose to the Department of
Agriculture under section 6103(j)(5) of the
Code. These temporary regulations are con-
sistent with a recent clarification of the same
phrase (i.e., return information reflected on
returns) in §301.6103(j)(1)-1, involving the
disclosure of return information to the Bu-
reau of the Census. See 68 FR 2691 (T.D.
9037, 2003-9 I.R.B. 535).

Also, currently §301.6103(j)(5)-1 pro-
vides an itemized description of the re-
turn information authorized for disclo-
sure in conjunction with the census of
agriculture. These temporary regulations re-
move certain items of return information
currently listed in §301.6103(j)(5)-1 that the
Department of Agriculture no longer needs
in conjunction with the census of agricul-
ture.

### Explanation of Provisions

These temporary regulations adopt the
phrase "return information reflected on re-
turns" in lieu of the phrase "return infor-
mation" that currently appears in
§301.6103(j)(5)-1. (The phrase "return in-
formation reflected on returns" encom-
passes the phrase "return information re-
flected thereon" in section 6103(j)(5) of the
Code.) These temporary regulations clarify
the phrase "return information reflected on
returns" by explaining that the phrase in-
cludes, but is not limited to, information on
returns, information derived from process-
ing such returns, and information derived
from other sources for the purposes of es-
tablishing and maintaining taxpayer infor-

mation relating to returns. The phrase in-
cludes information derived from returns,
monthly corrections of, and additions to,
taxpayer information contained in IRS da-
tabases (e.g., taxpayer address and name
changes) that are obtained from other
sources, and computer codes the IRS de-
rives from returns and/or tax forms and in-
tegrates within taxpayer data bases.

On March 4, 2003, and March 17, 2003,
the Department of Agriculture's National
Agriculture Statistics Service (NASS) no-
tified the IRS that certain items of return
information that are currently listed in
§301.6103(j)(5)-1 are no longer needed in
conjunction with the census of agricul-
ture. Specifically, the Department of Ag-
riculture no longer needs the following
items currently extracted from IRS forms:
(1) From Form 1040, Schedule F (Profit or
Loss From Farming): sales of livestock and
produce raised; (2) From Form 1120 series:
Parent corporation Employer Identifica-
tion Number, and related Name and Prin-
cipal Business Activity (PBA) code for en-
tities with agricultural activity; and (3) From
Form 851 (Affiliations Schedule): subsid-
iary taxpayer identity information, annual
accounting period, subsidiary PBA code,
parent taxpayer identity information, par-
ent PBA code, Master File Tax Code, Docu-
ment Locator Number, and cycle posted. As
a result, these items of return information
currently listed in §301.6103(j)(5)-1 will be
removed by this document.

### Special Analyses

It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It also has been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does not
apply to these regulations, and because no
preceding notice of proposed rulemaking is
required for this temporary regulation, the
provisions of the Regulatory Flexibility Act
(5 U.S.C. chapter 6) do not apply. Pursu-
ant to section 7805(f) of the Code, the IRS
will submit this Treasury decision to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on its
impact on small business.

### Drafting Information

The principal author of these regula-
tions is Christine Irwin, Office of the As-

sociate Chief Counsel, Procedure & Ad-
ministration (Disclosure & Privacy Law
Division).

#### Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 301 is
amended as follows:

##### PART 301- PROCEDURE AND ADMINISTRATION

Paragraph 1. The authority citation for
part 301 is amended by removing the en-
try for "Section 301.6103(j)(5)-1" and add-
ing an entry in numerical order to read in
part as follows:

Authority: 26 U.S.C. 7805 * * *

Section 301.6103(j)(5)-1T also issued
under 26 U.S.C. 6103(j)(5).
* * *

## §301.6103(j)(5)-1 [Removed]

Par. 2. Section 301.6103(j)(5)-1 is re-
moved.

Par. 3. Section 301.6103(j)(5)-1T is
added to read as follows:

§301.6103(j)(5)-1T Disclosures of return
information reflected on returns to
officers and employees of the
Department of Agriculture for
conducting the census of agriculture
(temporary).

(a) General rule. Pursuant to the pro-
visions of section 6103(j)(5) of the Inter-
nal Revenue Code and subject to the re-
quirements of paragraph (c) of this section,
officers or employees of the Internal Rev-
enue Service will disclose return informa-
tion reflected on returns to officers and em-
ployees of the Department of Agriculture
to the extent, and for such purposes, as may
be provided by paragraph (b) of this sec-
tion. "Return information reflected on re-
turns" includes, but is not limited to, in-
formation on returns, information derived
from processing such returns, and infor-
mation derived from other sources for the
purposes of establishing and maintaining
taxpayer information relating to returns.

(b) Disclosure of return information re-
flected on returns to officers and employ-
ees of the Department of Agriculture. (1)
Officers or employees of the Internal Rev-
enue Service will disclose the following re-
turn information reflected on returns in this

paragraph (b) for individuals, partnerships
and corporations with agricultural activ-
ity, as determined generally by industry code
classification or the filing of returns for such
activity, to officers and employees of the
Department of Agriculture for purposes of,
but only to the extent necessary in, struc-
turing, preparing, and conducting, as au-
thorized by chapter 55 of title 7, United
States Code, the census of agriculture.

(2) From Form 1040 (Schedule F)-

(i) Taxpayer identity information (as de-
fined in section 6103(b)(6) of the Internal
Revenue Code);

(ii) Spouse's Social Security Number;

(iii) Annual accounting period;

(iv) Principal Business Activity (PBA)
code;

(v) Taxable cooperative distributions;

(vi) Income from custom hire and ma-
chine work;

(vii) Gross income;

(viii) Master File Tax (MFT) code;

(ix) Document Locator Number (DLN);

(x) Cycle posted;

(xi) Final return indicator;

(xii) Part year return indicator; and

(xiii) Taxpayer telephone number.

(3) From Form 943-

(i) Taxpayer identity information;

(ii) Annual accounting period;

(iii) Total wages subject to Medicare
taxes;

(iv) MFT code;

(v) DLN;

(vi) Cycle posted;

(vii) Final return indicator; and
(viii) Part year return indicator.

(4) From Form 1120 series -

(i) Taxpayer identity information;

(ii) Annual accounting period;

(iii) Gross receipts less returns and al-
lowances;

(iv) PBA code;

(v) MFT Code;

(vi) DLN;

(vii) Cycle posted;

(viii) Final return indicator;

(ix) Part year return indicator; and

(x) Consolidated return indicator.

(5) From Form 1065 series -

(i) Taxpayer identity information;

(ii) Annual accounting period;

(iii) PBA code;

(iv) Gross receipts less returns and al-
lowances;

(v) Net farm profit (loss);

(vi) MFT code;

(vii) DLN;

(viii) Cycle posted;

(ix) Final return indicator; and

(x) Part year return indicator.
☒

(c) Procedures and Restrictions. (1) Dis-
closure of return information reflected on
returns by officers or employees of the In-
ternal Revenue Service as provided by para-
graph (b) of this section will be made only
upon written request designating, by name
and title, the officers and employees of the
Department of Agriculture to whom such
disclosure is authorized, to the Commis-
sioner of Internal Revenue by the Secre-
tary of Agriculture and describing-

(i) The particular return information re-
flected on returns for disclosure;

(ii) The taxable period or date to which
such return information reflected on re-
turns relates; and

(iii) The particular purpose for the re-
quested return information reflected on re-
turns.

(2) (i) No such officer or employee to
whom the Internal Revenue Service dis-
closes return information reflected on re-
turns pursuant to the provisions of para-
graph (b) of this section shall disclose such
information to any person, other than the
taxpayer to whom such return informa-
tion reflected on returns relates or other of-
ficers or employees of the Department of
Agriculture whose duties or responsibili-
ties require such disclosure for a purpose
described in paragraph (b) of this section,
except in a form that cannot be associ-
ated with, or otherwise identify, directly or
indirectly, a particular taxpayer.

(ii) If the Internal Revenue Service de-
termines that the Department of Agricul-
ture, or any officer or employee thereof, has
failed to, or does not, satisfy the require-
ments of section 6103(p)(4) of the Inter-
nal Revenue Code or regulations or pub-
lished procedures thereunder, the Internal
Revenue Service may take such actions as
are deemed necessary to ensure that such
requirements are or shall be satisfied, in-
cluding suspension of disclosures of re-
turn information reflected on returns oth-
erwise authorized by section 6103(j)(5) and
paragraph (b) of this section, until the In-
ternal Revenue Service determines that such
requirements have been or will be satis-
fied.

(d) Effective date. This section is appli-
cable on June 6, 2003.

David A. Mader,
Assistant Deputy Commissioner of
Internal Revenue.

Approved May 12, 2003.

Pamela F. Olson,
Assistant Secretary of the Treasury
(Tax Policy).

(Filed by the Office of the Federal Register on June 5, 2003,
8:45 a.m., and published in the issue of the Federal Regis-
ter for June 6, 2003, 68 F.R. 33857)

## Section 6231(a)(1)(B) .- Def- initions and Special Rules - Exception for Small Partnerships

26 CFR 1.6231(a)(1)-1: Exception for small
partnerships.

Small partnership exception. This rul-
ing addresses the issue of whether a part-
nership qualifies for the small partnership
exception provided in section 6231(a)(1)(B)
of the Code, and thus does not fall within
the unified audit and litigation proce-
dures under sections 6221 through 6234
(TEFRA partnership provisions), where one
of the partners is either an organization that
is exempt from taxation under section
501(a) that meets the definition of a C cor-
poration for federal tax purposes or a for-
eign corporation.

### Rev. Rul. 2003-69 ISSUE:

Whether a partnership qualifies for the
small partnership exception provided in
I.R.C. § 6231(a)(1)(B), and thus does not
fall within the unified audit and litigation
procedures under sections 6221 through
6234 (TEFRA partnership provisions),
where one of the partners is either an or-
ganization that is exempt from taxation un-
der section 501(a) that meets the defini-
tion of a C corporation for federal tax
purposes or a foreign corporation.

FACTS:

Situation 1. Partnership A (a domestic
partnership required to file returns pursu-
ant to section 6031(a)) consists of three part-
ners, X, Y, and Z. X is an individual and
U.S. citizen, Y is a domestic C corpora-
tion, and Z is an association that is ex-

empt from taxation under section 501(a). Z
also meets the definition of a C corpora-
tion for federal tax purposes.

Situation 2. Partnership B (a domestic
partnership required to file returns pursu-
ant to section 6031(a)) consists of three part-
ners, U, V, and W. U is an individual and
U.S. citizen, V is a domestic C corpora-
tion, and W is a foreign corporation.

LAW AND ANALYSIS:

Section 6231 defines a partnership item
as an item required to be taken into ac-
count for the partnership's taxable year un-
der subtitle A, to the extent regulations pro-
vide that the item is more appropriately
determined at the partnership level than at
the partner level. Under section 6221, the
tax treatment of any partnership item shall
be determined at the partnership level un-
der the TEFRA partnership provisions. As
a general rule, the TEFRA partnership pro-
visions apply to any partnership required to
file a return of partnership income under
section 6031. Section 6231(a)(1)(A). The
TEFRA partnership provisions, however, do
not apply to a partnership that qualifies as
a small partnership under section
6231(a)(1)(B), unless the partnership elects
to apply those provisions.

For taxable years ending after August 5,
1997, section 6231(a)(1)(B) defines a small
partnership as a partnership in which there
are ten or fewer partners each of whom is
an individual (other than a nonresident
alien), an estate of a deceased partner, or
a C corporation. Treas. Reg. § 301.6231
(a)(1)-1, which is effective for partner-
ship taxable years beginning on or after Oc-
tober 4, 2001, addresses the exception for
small partnerships and refers to section
1361(a)(2) for the definition of C corpo-
ration. Section 1361(a)(2) provides that "for
purposes of [the Internal Revenue Code],
the term 'C corporation' means, with re-
spect to any taxable year, a corporation
which is not an S corporation for such
year."

Section 7701(a)(3) defines the term cor-
poration as including "associations, joint-
stock companies, and insurance compa-
nies." Treas. Reg. § 301.7701-2(b) states
that the term corporation means: (1) a busi-
ness entity organized under federal or state
statute (or under a statute of a federally rec-
ognized Indian tribe) if the statute refers to
the entity as incorporated or as a corpora-
tion, body corporate, or body politic; (2) an

association (determined under section
301.7701-3); (3) a business entity orga-
nized under state statute, if the statute re-
fers to the entity as a joint-stock com-
pany or joint-stock association; (4) an
insurance company; (5) a state-chartered
business entity conducting banking activi-
ties, if any of its deposits are insured un-
der the Federal Deposit Insurance Act (12
U.S.C. § 1811 et seq.), or a similar fed-
eral statute; (6) a business entity wholly
owned by a state or any political subdivi-
sion thereof; (7) a business entity that is tax-
able as a corporation under a provision of
the Internal Revenue Code other than sec-
tion 7701(a)(3); and (8) certain foreign en-
tities.

Treas. Reg. § 301.7701-3 allows a busi-
ness entity that is not classified as a cor-
poration under Treas. Reg. § 301.7701-
2(b)(1), (3), (4), (5), (6), (7), or (8) (an
eligible entity) to elect its classification for
federal tax purposes. Under Treas. Reg.
§ 301.7701-3(c)(1)(v), an eligible entity that
is determined to be, or claims to be, ex-
empt from tax under section 501(a) is
treated as having made an election to be
classified as a corporation.

As a general matter, an S corporation is
defined in section 1361(a) as a "small busi-
ness corporation." A "small business cor-
poration" is defined by section 1361(b), in
part, as "a domestic corporation." Treas.
Reg. § 301.7701-5 defines a domestic cor-
poration as one organized or created in the
United States and a foreign corporation as
one that is not domestic.

Thus, an exempt organization under sec-
tion 501(a) can be a "C corporation" for
purposes of the small partnership excep-
tion. Similarly, because a foreign corpora-
tion cannot be an S corporation, the cor-
poration is a C corporation for purposes of
the small partnership exception.

Accordingly, in each of the situations de-
scribed above, all of the partners in the re-
spective partnerships are either individu-
als (other than a nonresident alien) or C
corporations.

HOLDINGS:

Situation 1. Partnership A qualifies for
the small partnership exception to the
TEFRA partnership provisions.

Situation 2. Partnership B qualifies for
the small partnership exception to the
TEFRA partnership provisions.

### DRAFTING INFORMATION

The principal author of this revenue rul-
ing is David A. Abernathy of the Office of
Associate Chief Counsel (Procedure and
Administration), Administrative Provi-
sions and Judicial Practice Division. For fur-
ther information regarding this revenue rul-
ing, contact Mr. Abernathy at (202) 622-
7940 (not a toll-free call).

## Section 7805 .- Rules and Regulations

26 CFR 301.7805-1: Rules and Regulations.

Obsolete revenue rulings. This ruling

obsoletes prior rulings which have been
identified as no longer being determina-
tive.

## Rev. Rul. 2003-67

The Internal Revenue Service is con-
tinuing its program of reviewing rulings (in-
cluding revenue rulings, revenue proce-
dures and notices) published in the Internal
Revenue Bulletin to identify and publish
lists of those rulings that, although not spe-
cifically revoked or superseded, are no
longer considered determinative because: (1)
the applicable statutory provisions or regu-
lations have been changed or repealed; (2)
the ruling position is specifically covered
by statute, regulations, or subsequent pub-
lished position; or, (3) the facts set forth no
longer exist or are not sufficiently described
to permit clear application of the current
statute and regulations.

This revenue ruling publishes a list of
rulings that have been identified under the
Service's review program as no longer be-
ing determinative. The rulings are catego-
rized by the Assistant Chief Counsel of-
fices in the Office of Associate Chief
Counsel (Procedure and Administration) that
have primary jurisdiction over the subject
matter of the rulings that have been iden-
tified as no longer being determinative.

Accordingly, the rulings listed below are
hereby declared obsolete.

### Assistant Chief Counsel (Administrative Provisions and Judicial Practice)

Ruling No.

C.B. Citation

Rev. Rul. 54-86

1954-1 C.B. 79

Rev. Rul. 54-431

1954-2 C.B. 116

Rev. Rul. 54-571

1954-2 C.B. 235

Rev. Rul. 55-606

1955-2 C.B. 489

Rev. Rul. 59-328

1959-2 C.B. 379

Rev. Rul. 63-248

1963-2 C.B. 623

Rev. Rul. 64-36

1964-1 C.B. 446

Rev. Rul. 65-129

1965-1 C.B. 519

Rev. Rul. 65-248

1965-2 C.B. 432

Rev. Rul. 66-270

1966-2 C.B. 106

Rev. Rul. 67-121

1967-1 C.B. 363

Rev. Rul. 67-197

1967-1 C.B. 319

Rev. Rul. 71-310

1971-2 C.B. 169

Rev. Rul. 73-232

1973-1 C.B. 541

Rev. Rul. 74-126

1974-1 C.B. 337

Ruling No.

C.B. Citation

Rev. Rul. 76-561

1976-2 C.B. 395

Rev. Rul. 77-53

1977-1 C.B. 368

Rev. Rul. 78-157

1978-1 C.B. 431

Rev. Rul. 78-169

1978-1 C.B. 432

Rev. Rul. 81-245

1981-2 C.B. 235

Rev. Rul. 85-37

1985-1 C.B. 362

Rev. Rul. 85-50

1985-1 C.B. 345

Rev. Proc. 88-16

1988-1 C.B. 691

Rev. Rul. 93-70

1993-2 C.B. 294

# Assistant Chief Counsel (Collection, Bankruptcy and Summons)

Ruling No.

Citation

Rev. Rul. 225 (1953)

1953-2 C.B. 467

Rev. Rul. 54-93

1954-1 C.B. 280

Rev. Rul. 54-125

1954-1 C.B. 282

Rev. Rul. 55-134

1955-1 C.B. 196

Rev. Rul. 55-227

1955-1 C.B. 551

Rev. Rul. 56-41

1956-1 C.B. 562

Rev. Rul. 66-383

1966-2 C.B. 502

Rev. Proc. 67-25

1967-1 C.B. 626

Rev. Proc. 71-37

1971-2 C.B. 573

Rev. Proc. 76-23

1976-1 C.B. 562

## Assistant Chief Counsel (Disclosure and Privacy Law)

Ruling No.

Citation

Rev. Rul. 54-598

1954-2 C.B. 121

Rev. Proc. 58-120

1958-1 C.B. 498

Rev. Proc. 66-4

1966-1 C.B. 607

Rev. Proc. 70-11

1970-1 C.B. 437

Rev. Proc. 73-6

1973-1 C.B. 752

Rev. Proc. 85-21

1985-1 C.B. 539

Rev. Proc. 85-33

1985-2 C.B. 414

Rev. Proc. 88-39

1988-2 C.B. 562

Rev. Proc. 89-33

1989-1 C.B. 905

Rev. Proc. 91-42

1991-2 C.B. 717

Rev. Proc. 92-55

1992-2 C.B. 394

The Service will continue to review other
rulings to identify those that, for the rea-
sons stated above, are no longer determi-
native. Therefore, failure to include any par-
ticular ruling in the above list should not
be construed as an indication that the rul-
ing necessarily is determinative.

# DRAFTING INFORMATION

The principal author of this revenue rul-
ing is A. M. Gulas of the Office of Asso-
ciate Chief Counsel, Procedure and Ad-
ministration (Disclosure and Privacy Law).

For further information regarding the rul-
ings obsoleted in this revenue ruling, con-
tact the following persons from the appro-
priate Assistant Chief Counsel offices (not
toll-free calls):

Name

Assistant Chief Counsel

Telephone No.

Blaise Dusenberry

Administrative Provisions &amp; Judicial Practice

202-622-7940

Peter Devlin

Collection, Bankruptcy &amp; Summons

202-622-3600

A. M. Gulas

Disclosure &amp; Privacy Law

202-622-4560

# Part III. Administrative, Procedural, and Miscellaneous

## Notice of Proposed Revenue Procedure for Cardholder/Payors to Rely on Merchant Category Codes to Determine Reportable Payments

### Notice 2003-37

This notice provides a proposed rev-
enue procedure that, when finalized, would
provide an optional procedure that payors
and their authorized agents may use in de-
termining whether payment card transac-
tions are reportable under section 6041 or
section 6041A of the Internal Revenue
Code.

The Internal Revenue Service requests
comments on this proposed revenue pro-
cedure. Written comments must be received
by September 29, 2003. Comments should
be submitted to: CC:PA:RU (NOT-129380-
02), Room 5526, Internal Revenue Ser-
vice, Ben Franklin Station, Washington, DC
20224. Alternatively, comments may be
hand delivered between the hours of 8:00
a.m. and 5:00 p.m. to CC:PA:RU (NOT-
129380-02), Courier's Desk, Internal Rev-
enue Service, 1111 Constitution Ave., NW,
Washington, DC. Comments may also be
transmitted electronically via the follow-
ing e-mail address: Notice.Comments@
irscounsel.treas.gov. Please include "No-
tice 2003-37" in the subject line of any
electronic communications.

For further information regarding this no-
tice, contact Joseph P. Dewald of the Of-
fice of Associate Chief Counsel (Proce-
dure and Administration), Administrative
Provisions and Judicial Practice Division.
Mr. Dewald may be contacted at 202-622-
4910 (not a toll-free call).

#### APPENDIX (PROPOSED REVENUE PROCEDURE)

### SECTION 1. PURPOSE

This revenue procedure provides an op-
tional procedure that payors may use in de-
termining whether payment card transac-
tions are reportable under section 6041 or
section 6041A of the Internal Revenue
Code. In addition, payors, or their autho-
rized agents, may use this optional proce-

dure in determining whether payment card
transactions are reportable payments for pur-
poses of the Internal Revenue Service TIN
Matching Program under section 3406.

In general, this revenue procedure clas-
sifies businesses, by Merchant Category
Codes (MCCs), according to whether they
predominantly furnish services (for which
payments are reportable) or predominantly
provide goods (for which payments are not
reportable). A payment card organization or
one of its members or affiliates may as-
sign MCCs, or equivalent Industry Codes,
to merchant/payees that accept its pay-
ment cards and notify cardholder/payors that
use its payment card of the MCC or equiva-
lent Industry Code assigned to a merchant/
payee. A cardholder/payor may then rely on
the MCC or equivalent Industry Code as-
signed to a merchant/payee in determin-
ing whether a payment card transaction with
that merchant/payee is subject to report-
ing under section 6041 or section 6041A.

### SECTION 2. BACKGROUND

.01 Reporting requirements under sec-
tions 6041 and 6041A. If a person is en-
gaged in a trade or business and, in the
course of that trade or business, pays any
person $600 or more of rent, salaries,
wages, premiums, annuities, compensa-
tion, remunerations, emoluments, or other
fixed or determinable gains, profits, and in-
come during a calendar year, section 6041
generally requires the payor to file an in-
formation return with the Internal Rev-
enue Service and to furnish an informa-
tion statement to the payee.

Section 1.6041-3(c) of the Income Tax
Regulations provides an exception to re-
porting for payments for merchandise, tele-
grams, telephone, freight, storage and simi-
lar charges. Section 1.6041-3(p)(1) provides
an exception to reporting for payments
made to a corporation, unless the corpo-
ration is engaged in providing medical and
health care services or is engaged in the bill-
ing and collecting of payments in respect
to providing medical and health care ser-
vices. The same provision also provides that
reporting is not required for payments made
to a hospital or extended care facility that
is a tax-exempt organization described in
section 501(c)(3) or to a hospital or ex-
tended care facility owned and operated by
the United States, a State, the District of Co-

lumbia, a possession of the United States,
or a political subdivision, agency or instru-
mentality of any of the foregoing. Sec-
tion 1.6041-3(p)(2) provides that report-
ing is not required for payments to an
organization exempt from taxation under
section 501(a) or an individual retirement
plan. Section 1.6041-3(p)(3) provides that
reporting is not required for payments made
to the United States. Section 1.6041-3(p)(4)
provides that reporting is not required for
payments made to a State, the District of
Columbia, a possession of the United States,
or any political subdivision of the forego-
ing.

If a person is engaged in a trade or busi-
ness and, in the course of that trade or busi-
ness, pays any person $600 or more for ser-
vices during a calendar year, section
6041A(a) generally requires the payor to file
an information return with the Service and
to furnish an information statement to the
service provider. In general, the excep-
tions to reporting under section 6041 ap-
ply to reporting under section 6041A. How-
ever, section 6041A(d)(3) provides that
reporting is generally required for pay-
ments made by a federal executive agency
to a corporation.

Revenue Ruling 81-232, 1981-2 C.B.
231, involved an insurance company mak-
ing payments to an automobile repair shop
for the repair of an insured automobile. The
repair contract required payment of $300
for labor and $700 for parts. The ruling held
that the entire payment was reportable un-
der section 6041 because the portion of the
payment attributable to parts was merely in-
cidental to the obligation to repair the au-
tomobile. The ruling further held that no
part of the payment was excepted from the
reporting requirements of section 6041 as
a payment of a bill for merchandise.

.02 Payment card transactions. A pay-
ment card transaction is a transaction in
which a cardholder/payor uses a payment
card (as defined in section 4.05 of this rev-
enue procedure) to purchase goods or ser-
vices and a merchant agrees to accept a
payment card as a means of obtaining pay-
ment. A payment card organization (as de-
fined in section 4.06 of this revenue pro-
cedure) sets the standards and provides the
mechanism, either directly or indirectly
through members and affiliates, for effect-
ing the payment.

Payment card organizations and the In-
formation Reporting Program Advisory
Committee have recommended that
cardholder/payors be allowed to rely on
MCCs or equivalent Industry Codes pro-
vided by the payment card organization in
determining, for purposes of sections 6041
and 6041A(a), whether a payment card
transaction is a payment for services or a
payment for goods.

### SECTION 3. SCOPE.

This revenue procedure applies to pay-
ment card organizations and their mem-
bers and affiliates and to cardholder/payors
that purchase goods or services in pay-
ment card transactions. In addition,
cardholder/payors, or their authorized agents,
will be allowed to rely on MCCs or equiva-
lent Industry Codes for purposes of TIN
matching with respect to reportable pay-
ments.

### SECTION 4. DEFINITIONS

For purposes of this revenue procedure,
the terms listed below are defined as
follows:

.01 Cardholder. A cardholder is the
payor for payments made to a merchant/
payee through a payment card.

.02 Merchant. A merchant is a payee that
has entered into an agreement with a pay-
ment card organization, or a member or af-
filiate, to accept the organization's pay-
ment card as payment for goods and
services.

.03 Merchant Category Code. A Mer-
chant Category Code (MCC) is a classifi-
cation code that is assigned by a payment
card organization or one of its members or
affiliates to a merchant that has been ac-
cepted to participate in the payment card
system as a card-accepting merchant. The
payment card organization or one of its
members or affiliates assigns the merchant
a particular code based on the predomi-
nant business activity of the merchant.

.04 Industry Code. An Industry Code is
the number that corresponds to, and iden-
tifies, a merchant in the same business as
a merchant assigned a particular MCC.

.05 Payment Card. A payment card is a
card (or an account) issued by a payment
card organization, or one of its members or
affiliates, to a cardholder/payor, which upon
presentation to a merchant/payee, repre-
sents an agreement of the cardholder to pay
the merchant through the payment card or-
ganization.

.06 Payment Card Organization. A pay-
ment card organization is an entity that sets
the standards and provides the mechanism,
either directly or indirectly through mem-
bers and affiliates, for effectuating pay-
ment between a purchaser and a merchant
in a payment card transaction. A payment
card organization generally provides such
a payment mechanism by issuing payment
cards, enrolling merchants as authorized ac-
ceptors of payment cards for payment for
goods or services, and ensuring the sys-
tem conducts the transactions in accor-
dance with prescribed standards.

.07 Payment Card Transactions. A pay-
ment card transaction is a transaction in
which a cardholder/payor uses a payment
card (as defined in section 4.05 of this rev-
enue procedure) to purchase goods or ser-
vices, and a merchant agrees to accept a
payment card as a means of obtaining pay-
ment.

### SECTION 5. APPLICATION

.01 Payment Card Organizations. A pay-
ment card organization or one of its mem-
bers or affiliates may assign MCCs, or
equivalent Industry Codes, to merchant/
payees that accept its payment cards and no-
tify cardholder/payors that use its pay-
ment card of the MCC or equivalent
Industry Code assigned to a merchant/
payee. The MCCs assigned to merchant/
payees must be determined under the table
in section 5.03 of this revenue procedure.
If the Internal Revenue Service notifies the

payment card organization that the MCC or
equivalent Industry Code assigned to a
merchant/payee is incorrect, this revenue
procedure does not apply to a payment card
transaction with the merchant/payee occur-
ring after the date of the notification un-
less the payment card organization or one
of its members or affiliates has assigned the
merchant/payee a MCC or equivalent In-
dustry Code that is satisfactory to the In-
ternal Revenue Service and has notified the
cardholder/payor of the correction.

02\. Cardholder/payors. A cardholder/
payor may rely on the MCC or equiva-
lent Industry Code assigned to a merchant/
payee in determining whether a payment
card transaction with that merchant/payee
is subject to information reporting under
section 6041 or section 6041A. Thus, if a
merchant/payee is assigned a MCC and the
table in section 5.03 indicates that pay-
ments to merchants in that category are not
reportable under section 6041 or section
6041A, a cardholder/payor is not required
to report payment card transactions with the
merchant/payee. Similarly, an indication in
the table that payments to a category of
merchants are reportable under section 6041
or section 6041A reflects a determination
by the Internal Revenue Service that those
merchants predominantly furnish services,
and cardholder/payors may treat payment
card transactions with those merchants as
payments for services. Although the trans-
actions do not qualify for the merchan-
dise exception to information reporting un-
der this revenue procedure, they may qualify
for the exception under the generally ap-
plicable rules of sections 6041 and 6041A
if, in fact, only merchandise is provided. In
addition, other exceptions to information re-
porting (such as the exception for pay-
ments to corporations) may apply.

.03 Table. The following table is used in
applying the optional procedure permit-
ted under this revenue procedure.

MCC

Merchant

Reportable under 6041/6041A and Authority for Exception

0742

Veterinary Services

Yes

0763

Agricultural Cooperative

Yes

0780

Landscaping Services

Yes

1520

General Contractors

Yes

1711

Heating, Plumbing, A/C

Yes

1731

Electrical Contractors

Yes

1740

Masonry, Stonework, and Plaster

Yes

1750

Carpentry Contractors

Yes

1761

Roofing/Siding, Sheet Metal

Yes

1771

Concrete Work Contractors

Yes

1799

Special Trade Contractors

Yes

2741

Miscellaneous Publishing and Printing

Yes

2791

Typesetting, Plate Making, and Related Services

Yes

2842

Specialty Cleaning

Yes

3000-3299

Airlines

Yes

3351-3441

Car Rental

Yes

3501-3790

Hotels/Motels/Inns/Resorts

Yes

4011

Railroads

1.6041-3(c)

4111

Commuter Transport, Ferries

Yes

4112

Passenger Railways

Yes

4119

Ambulance Services

Yes

4121

Taxicabs/Limousines

Yes

4131

Bus Lines

Yes

4214

Motor Freight Carriers and Trucking - Local and Long Distance, Moving and

Storage Companies, and Local Delivery Services

1.6041-3(c)

4215

Courier Services

Yes

4225

Public Warehousing and Storage - Farm Products, Refrigerated Goods, House-

hold Goods, and Storage

1.6041-3(c)

4411

Cruise Lines

Yes

4457

Boat Rentals and Leases

Yes

4468

Marinas, Service and Supplies

Yes

4511

Airlines, Air Carriers

Yes

4582

Airports, Flying Fields

Yes

4722

Travel Agencies, Tour Operators

Yes

4723

TUI Travel - Germany

Yes

4784

Tolls/Bridge Fees

1.6041-3(c)

4789

Transportation Services (Not Elsewhere Classified)

Yes

4812

Telecommunication Equipment and Telephone Sales

No 1.6041-3(c)

4814

Telecommunication Services

No 1.6041-3(c)

4815

Visaphone

No 1.6041-3(c)

4816

Computer Network Services

No 1.6041-3(c)

4821

Telegraph Services

1.6041-3(c)

MCC

Merchant

Reportable under 6041/6041A and Authority for Exception

4829

Wires, Money Orders

No 1.6041-3(c)

4899

Cable, Satellite, and Other Pay Television and Radio

No 1.6041-3(c)

4900

Utilities

No 1.6041-3(c)

5013

Motor Vehicle Supplies and New Parts

1.6041-3(c)

5021

Office and Commercial Furniture

No 1.6041-3(c)

5039

Construction Materials (Not Elsewhere Classified)

No 1.6041-3(c)

5044

Photographic, Photocopy, Microfilm Equipment, and Supplies

No 1.6041-3(c)

5045

Computers, Peripherals, and Software

No 1.6041-3(c)

5046

Commercial Equipment (Not Elsewhere Classified)

No 1.6041-3(c)

5047

Medical, Dental, Ophthalmic, and Hospital Equipment and Supplies

No 1.6041-3(c)

5051

Metal Service Centers

No 1.6041-3(c)

5065

Electrical Parts and Equipment

No 1.6041-3(c)

5072

Hardware, Equipment, and Supplies

No 1.6041-3(c)

5074

Plumbing, Heating Equipment, and Supplies

No 1.6041-3(c)

5085

Industrial Supplies (Not Elsewhere Classified)

No 1.6041-3(c)

5094

Precious Stones and Metals, Watches and Jewelry

No 1.6041-3(c)

5099

Durable Goods (Not Elsewhere Classified)

No 1.6041-3(c)

5111

Stationary, Office Supplies, Printing and Writing Paper

No 1.6041-3(c)

5122

Drugs, Drug Proprietaries, and Druggist Sundries

No 1.6041-3(c)

5131

Piece Goods, Notions, and Other Dry Goods

No 1.6041-3(c)

5137

Uniforms, Commercial Clothing

No 1.6041-3(c)

5139

Commercial Footwear

No 1.6041-3(c)

5169

Chemicals and Allied Products (Not Elsewhere Classified)

No 1.6041-3(c)

5172

Petroleum and Petroleum Products

No 1.6041-3(c)

5192

Books, Periodicals, and Newspapers

No 1.6041-3(c)

5193

Florists Supplies, Nursery Stock, and Flowers

1.6041-3(c)

MCC

Merchant

Reportable under 6041/6041A and Authority for Exception

5198

Paints, Varnishes, and Supplies

No 1.6041-3(c)

5199

Nondurable Goods (Not Elsewhere Classified)

No 1.6041-3(c)

5200

Home Supply Warehouse Stores

No 1.6041-3(c)

5211

Lumber, Building Materials Stores

No 1.6041-3(c)

5231

Glass, Paint, and Wallpaper Stores

No 1.6041-3(c)

5251

Hardware Stores

No 1.6041-3(c)

5261

Nurseries, Lawn and Garden Supply Stores

No 1.6041-3(c)

5271

Mobile Home Dealers

No 1.6041-3(c)

5300

Wholesale Clubs

1.6041-3(c)

5309

Duty Free Stores

1.6041-3(c)

5310

Discount Stores

1.6041-3(c)

5311

Department Stores

No 1.6041-3(c)

5331

Variety Stores

1.6041-3(c)

5399

Miscellaneous General Merchandise

No 1.6041-3(c)

5411

Grocery Stores, Supermarkets

1.6041-3(c)

5422

Freezer and Locker Meat Provisioners

No 1.6041-3(c)

5441

Candy, Nut, and Confectionery Stores

1.6041-3(c)

5451

Dairy Products Stores

No 1.6041-3(c)

5462

Bakeries

1.6041-3(c)

5499

Miscellaneous Food Stores - Convenience Stores and Specialty Markets

No 1.6041-3(c)

5511

Auto Service, Repairs

Yes

5521

Auto/Truck Dealers

No 1.6041-3(c)

5531

Auto and Home Supply Stores

No 1.6041-3(c)

5532

Automotive Tire Stores

1.6041-3(c)

5533

Automotive Parts and Accessories Stores

1.6041-3(c)

5541

Service Stations

1.6041-3(c)

MCC

Merchant

Reportable under 6041/6041A and Authority for Exception

5542

Automated Fuel Dispensers

No 1.6041-3(c)

5551

Boat Dealers

No 1.6041-3(c)

5561

Motorcycle Shops, Dealers

1.6041-3(c)

5571

Motorcycle Shops and Dealers

No 1.6041-3(c)

5592

Motor Homes Dealers

No 1.6041-3(c)

5598

Snowmobile Dealers

No 1.6041-3(c)

5599

Miscellaneous Auto Dealers

1.6041-3(c)

5611

Men's and Boy's Clothing and Accessories Stores

No 1.6041-3(c)

5621

Women's Ready-To-Wear Stores

1.6041-3(c)

5631

Women's Accessory and Specialty Shops

No 1.6041-3(c)

5641

Children's and Infant's Wear Stores

1.6041-3(c)

5651

Family Clothing Stores

1.6041-3(c)

5655

Sports and Riding Apparel Stores

No 1.6041-3(c)

5661

Shoe Stores

No 1.6041-3(c)

5681

Furriers and Fur Shops

No 1.6041-3(c)

5691

Men's, Women's Clothing Stores

1.6041-3(c)

5697

Tailors, Alterations

Yes

5698

Wig and Toupee Stores

No 1.6041-3(c)

5699

Miscellaneous Apparel and Accessory Shops

No 1.6041-3(c)

5712

Furniture, Home Furnishings, and Equipment Stores, Except Appliances

No 1.6041-3(c)

5713

Floor Covering Stores

No 1.6041-3(c)

5714

Drapery, Window Covering, and Upholstery Stores

No 1.6041-3(c)

5718

Fireplace, Fireplace Screens, and Accessories Stores

No 1.6041-3(c)

5719

Miscellaneous Home Furnishing Specialty Stores

1.6041-3(c)

5722

Household Appliance Stores

1.6041-3(c)

5732

Electronics Stores

1.6041-3(c)

MCC

Merchant

Reportable under 6041/6041A and Authority for Exception

5733

Music Stores-Musical Instruments, Pianos, and Sheet Music

No 1.6041-3(c)

5734

Computer Software Stores

No 1.6041-3(c)

5735

Record Stores

No 1.6041-3(c)

5811

Caterers

Yes

5812

Eating Places, Restaurants

No 1.6041-3(c)

5813

Drinking Places

No 1.6041-3(c)

5814

Fast Food Restaurants

No 1.6041-3(c)

5912

Drug Stores and Pharmacies

1.6041-3(c)

5921

Package Stores-Beer, Wine, and Liquor

1.6041-3(c)

5931

Used Merchandise and Secondhand Stores

No 1.6041-3(c)

5932

Antique Shops

No 1.6041-3(c)

5933

Pawn Shops

1.6041-3(c)

5935

Wrecking and Salvage Yards

Yes

5937

Antique Reproductions

No 1.6041-3(c)

5940

Bicycle Shops

1.6041-3(c)

5941

Sporting Goods Stores

No 1.6041-3(c)

5942

Book Stores

1.6041-3(c)

5943

Stationery Stores, Office, and School Supply Stores

No 1.6041-3(c)

5944

Jewelry Stores, Watches, Clocks, and Silverware Stores

No 1.6041-3(c)

5945

Hobby, Toy, and Game Shops

1.6041-3(c)

5946

Camera and Photographic Supply Stores

No 1.6041-3(c)

5947

Gift, Card, Novelty, and Souvenir Shops

No 1.6041-3(c)

5948

Luggage and Leather Goods Stores

No 1.6041-3(c)

5949

Sewing, Needlework, Fabric, and Piece Goods Stores

No 1.6041-3(c)

5950

Glassware, Crystal Stores

1.6041-3(c)

5960

Direct Marketing - Insurance Services

Yes

5962

Direct Marketing - Travel

Yes

5963

Door-To-Door Sales

1.6041-3(c)

MCC

Merchant

Reportable under 6041/6041A and Authority for Exception

5964

Direct Marketing - Catalog Merchant

No 1.6041-3(c)

5965

Direct Marketing - Combination Catalog and Retail Merchant

No 1.6041-3(c)

5966

Direct Marketing - Outbound Tele

No 1.6041-3(c)

5967

Direct Marketing - Inbound Tele

No 1.6041-3(c)

5968

Direct Marketing - Subscription

No 1.6041-3(c)

5969

Direct Marketing - Other

No 1.6041-3(c)

5970

Artist's Supply and Craft Shops

No 1.6041-3(c)

5971

Art Dealers and Galleries

No 1.6041-3(c)

5972

Stamp and Coin Stores

No 1.6041-3(c)

5973

Religious Goods Stores

No 1.6041-3(c)

5975

Hearing Aids Sales and Supplies

No 1.6041-3(c)

5976

Orthopedic Goods - Prosthetic Devices

No 1.6041-3(c)

5977

Cosmetic Stores

No 1.6041-3(c)

5978

Typewriter Stores

No 1.6041-3(c)

5983

Fuel Dealers (Non Automotive)

No 1.6041-3(c)

5992

Florists

No 1.6041-3(c)

5993

Cigar Stores and Stands

No 1.6041-3(c)

5994

News Dealers and Newsstands

No 1.6041-3(c)

5995

Pet Shops, Pet Food, and Supplies

No 1.6041-3(c)

5996

Swimming Pools Sales

No 1.6041-3(c)

5997

Electric Razor Stores

No 1.6041-3(c)

5998

Tent and Awning Shops

No 1.6041-3(c)

5999

Miscellaneous Specialty Retail

No 1.6041-3(c)

6010

Manual Cash Disburse

No 1.6041-3(c)

6011

Automated Cash Disburse

No 1.6041-3(c)

6012

Financial Institutions

Yes

MCC

Merchant

Reportable under 6041/6041A and Authority for Exception

6051

Non-FI, Money Orders

No 1.6041-3(c)

6211

Security Brokers/Dealers

Yes

6300

Insurance Underwriting, Premiums

No 1.6041-3(c)

6381

Insurance Premiums

No 1.6041-3(c)

6399

Insurance - Default

No 1.6041-3(c)

6513

Real Estate Agents and Managers - Rentals

Yes

7011

Hotels, Motels, and Resorts

Yes

7012

Timeshares

Yes

7032

Sporting/Recreation Camps

Yes

7033

Trailer Parks, Campgrounds

Yes

7210

Laundry, Cleaning Services

Yes

7211

Laundries

Yes

7216

Dry Cleaners

Yes

7217

Carpet/Upholstery Cleaning

Yes

7221

Photographic Studios

Yes

7230

Barber and Beauty Shops

Yes

7251

Shoe Repair/Hat Cleaning

Yes

7261

Funeral Services, Crematories

Yes

7273

Dating/Escort Services

Yes

7276

Tax Preparation Services

Yes

7277

Counseling Services

Yes

7278

Buying/Shopping Services

Yes

7296

Clothing Rental

Yes

7297

Massage Parlors

Yes

7298

Health and Beauty Spas

Yes

7299

Miscellaneous General Services

Yes

7311

Advertising Services

Yes

7321

Credit Reporting Agencies

Yes

7332

Blueprinting and Photocopying Services

Yes

7333

Commercial Photography

Yes

7338

Quick Copy, Repro, and Blueprint

Yes

7339

Secretarial Support Services

Yes

7342

Exterminating Services

Yes

7349

Cleaning and Maintenance

Yes

7361

Employment/Temp Agencies

Yes

7372

Computer Programming

Yes

7375

Information Retrieval Services

Yes

7379

Computer Repair

Yes

7392

Consulting, Public Relations

Yes

7393

Detective Agencies

Yes

7394

Equipment Rental

Yes

7395

Photo Developing

Yes

7399

Miscellaneous Business Services

Yes

7511

Truck Stop

Yes

7512

Car Rental Agencies

Yes

7513

Truck/Utility Trailer Rentals

Yes

MCC

Merchant

Reportable under 6041/6041A and Authority for Exception

7519

Recreational Vehicle Rentals

Yes

7523

Parking Lots, Garages

Yes

7531

Auto Body Repair Shops

Yes

7534

Tire Retreading and Repair

Yes

7535

Auto Paint Shops

Yes

7538

Auto Service Shops

Yes

7542

Car Washes

Yes

7549

Towing Services

Yes

7622

Electronics Repair Shops

Yes

7623

A/C, Refrigeration Repair

Yes

7629

Small Appliance Repair

Yes

7631

Watch/Jewelry Repair

Yes

7641

Furniture Repair, Refinishing

Yes

7692

Welding Repair

Yes

7699

Miscellaneous Repair Shops

Yes

7829

Picture/Video Production

Yes

7832

Motion Picture Theaters

Yes

7841

Video Tape Rental Stores

Yes

7911

Dance Hall, Studios, Schools

Yes

7922

Theatrical Ticket Agencies

Yes

7929

Bands, Orchestras

Yes

7932

Billiard/Pool Establishments

Yes

7933

Bowling Alleys

Yes

7941

Sports Clubs/Fields

Yes

7991

Tourist Attractions and Exhibits

Yes

7992

Golf Courses - Public

Yes

7993

Video Amusement Game Supplies

1.6041-3(c)

7994

Video Game Arcades

Yes

7995

Betting/Casino Gambling

Yes

7996

Amusement Parks/Carnivals

Yes

7997

Country Clubs

Yes

7998

Aquariums

Yes

7999

Miscellaneous Recreation Services

Yes

8011

Doctors

Yes

8021

Dentists, Orthodontists

Yes

8031

Osteopaths

Yes

8041

Chiropractors

Yes

8042

Optometrists, Ophthalmologist

Yes

8043

Opticians, Eyeglasses

Yes

8044

Optical Goods and Glasses

1.6041-3(c)

8049

Chiropodists, Podiatrists

Yes

8050

Nursing/Personal Care

Yes

8062

Hospitals

Yes

8071

Medical and Dental Labs

Yes

8099

Medical Services

Yes

8111

Legal Services, Attorneys

Yes

8211

Elementary, Secondary Schools

1.6041-3(p)(2)

MCC
8220
8241
8244
8249

8299
8351
8398

8641

8651

8661

8675
8699
8734

8911
8931

8999
9211

9222

9223

9311

9399

9402

9405

9950

Merchant

Reportable under 6041/6041A and Authority for Exception

Colleges, Universities

No 1.6041-3(p)(2)

Correspondence Schools

No 1.6041-3(p)(2)

Business/Secretarial Schools

No 1.6041-3(p)(2)

Vocational/Trade Schools

No 1.6041-3(p)(2)

Educational Services

Yes

Child Care Services

Yes

Charitable and Social Service Organizations - Fundraising

1.6041-3(p)(2)

Civic, Social, Fraternal Associations

No 1.6041-3(p)(2)

Political Organizations

Yes

Religious Organizations

No 1.6041-3(p)(2)

Automobile Associations

Yes

Membership Organizations

Yes

Testing Laboratories

Yes

Architectural/Surveying Services

Yes

Accounting/Bookkeeping Services

Yes

Professional Services

Yes

Court Costs, Including Alimony and Child Support - Courts of Law

1.6041-3(p)(4)

Fines - Government Administrative Entities

No 1.6041-3(p)(4)

Bail and Bond Payments

Yes

Tax Payments - Government Agencies

No 1.6041-3(p)(4)

Government Services (Not Elsewhere Classified)

No 1.6041-3(p)(4)

Postal Services - Government Only

No 1.6041-3(p)(3)

U.S. Federal Government Agencies or Departments

No 1.6041-3(p)(3)

Intra-Company Purchases

No 1.6041-3(c)

# SECTION 5. EFFECTIVE DATE

The procedures are proposed to be
effective on the date they are published as
a final revenue procedure.

# Part IV. Items of General Interest

Notice of Proposed Rulemak-
ing by Cross-Reference to
Temporary Regulations

## Disclosure of Return Information to the Department of Agriculture

### REG-103809-03

AGENCY: Internal Revenue Service (IRS),
Treasury.

ACTION: Notice of proposed rulemak-
ing by cross-reference to temporary regu-
lations.

SUMMARY: The IRS is issuing regula-
tions to incorporate and clarify the phrase
"return information reflected on returns" in
conformance with the terms of section
6103(j)(5) of the Internal Revenue Code
(Code). These temporary regulations also
remove certain items of return informa-
tion that the IRS currently discloses, but the
Department of Agriculture no longer needs,
for conducting the census of agriculture. The
text of the temporary regulations (T.D.
9060) published in this issue of the Bul-
letin serves as the text of the proposed regu-
lations.

DATES: Written and electronic comments
and requests for a public hearing must be
received by September 8, 2003.

ADDRESSES: Send submissions to:
CC:PA:RU (REG-103809-03), room 5226,
Internal Revenue Service, P.O. Box 7604,
Ben Franklin Station, Washington, DC
20044. Submissions may be hand-delivered
between the hours of 8 a.m. and 4 p.m. to
CC:PA:RU (REG-103809-03), Courier's
Desk, Internal Revenue Service, 1111 Con-
stitution Avenue, NW, Washington, DC, or
sent electronically, via the IRS Internet site
at www.irs.gov/regs.

FOR FURTHER INFORMATION CON-
TACT: Christine Irwin at (202) 622-4570
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

#### Background

Temporary regulations in this issue of the
Bulletin amend the Procedure and Admin-

istration Regulations (26 CFR Part 301) re-
lating to Code section 6103(j)(5). The tem-
porary regulations contain rules relating to
the disclosure of return information re-
flected on returns to officers and employ-
ees of the Department of Agriculture for
conducting the census of agriculture.

The text of the temporary regulations
also serves as the text of these proposed
regulations. The preamble to the tempo-
rary regulations explains the temporary
regulations and these proposed regula-
tions.

### Special Analyses

It has been determined this notice of pro-
posed rulemaking is not a significant regu-
latory action as defined in Executive Or-
der 12866. Therefore, a regulatory
assessment is not required. It also has been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C. chap-
ter 5) does not apply to these regulations,
and because the regulations do not im-
pose a collection of information on small
entities, the Regulatory Flexibility Act (5
U.S.C. chapter 6) does not apply. Pursu-
ant to section 7805(f) of the Code, the IRS
will submit this notice of proposed rule-
making to the Chief Counsel for Advo-
cacy of the Small Business Administra-
tion for comment on its impact on small
business.

### Comments and Requests for Public Hearing

Before adoption of these proposed regu-
lations as final regulations, the IRS will con-
sider any written (a signed original and eight
(8) copies) or electronic comments that the
IRS timely receives. The IRS and Trea-
sury Department request comments on the
clarity of the proposed rules and how they
can be made easier to understand. All com-
ments will be available for public inspec-
tion and copying. The IRS may schedule
a public hearing if any person who timely
submits written comments requests such a
hearing in writing. If a public hearing is
scheduled, notice of the date, time, and
place for the public hearing will be pub-
lished in the Federal Register.

### Drafting Information

The principal author of these regula-
tions is Christine Irwin, Office of the As-
sociate Chief Counsel, Procedure & Ad-

ministration (Disclosure & Privacy Law
Division).

### Proposed Amendments to the Regulations

Accordingly, 26 CFR part 301 is pro-
posed to be amended as follows:

PART 301- PROCEDURE AND
ADMINISTRATION

Paragraph 1. The authority citation for
part 301 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 301.6103(j)(5)-1 is added
to read as follows:

§301.6103(j)(5)-1 Disclosures of return
information reflected on returns to
officers and employees of the
Department of Agriculture for
conducting the census of agriculture.

[The text of this proposed section is the
same as the text of §301.6103(j)(5)-1T pub-
lished elsewhere in this issue of the Bul-
letin.]

David A. Mader,
Assistant Deputy Commissioner of
Internal Revenue.

(Filed by the Office of the Federal Register on June 5, 2003,
8:45 a.m., and published in the issue of the Federal Regis-
ter for June 6, 2003, 68 F.R. 33887)

# Administration of the Earned Income Credit

## Announcement 2003-40

### I. Purpose

This announcement describes changes
the Internal Revenue Service (IRS) is test-
ing in determining qualifying child eligi-
bility under the earned income credit (EIC)
under I.R.C. section 32. This announce-
ment also solicits public comment on those
changes.

### II. Background

The EIC plays a vital role in reward-
ing work and lifting working families out
of poverty. Historically, the EIC program

has experienced a relatively high partici-
pation rate. The IRS received claims total-
ing over $32 billion from 19 million claim-
ants for tax year 2002. Studies indicate that
between 75 and 86 percent of eligible tax-
payers participate in the EIC program. In
2001, the EIC lifted 3.9 million people out
of poverty.

Although the EIC program has been suc-
cessful in reaching and assisting low in-
come working families, the EIC program
also suffers from high noncompliance. The
most recent compliance study, Compli-
ance Estimates For Earned Income Tax
Credit Claimed on 1999 Returns (the 1999
study), released in February 2002, esti-
mates that out of the $31.3 billion of EIC
claims made by taxpayers for tax year 1999,
between $8.5 and $9.9 billion - or be-
tween 27.0 and 31.7 percent of total EIC
claims - were erroneous unrecovered over-
claims. The largest amount of EIC over-
claims (for which errors were known) was
associated with taxpayers claiming chil-
dren who were not the taxpayers' qualify-
ing children. The most common qualify-
ing child error was claiming a child who
did not live with the taxpayer for over half
the taxable year and therefore did not sat-
isfy the residency requirement of the EIC.
Another common qualifying child error was
claiming a child who did not bear an ap-
propriate relationship to the taxpayer. Most
taxpayers who did not meet the relation-
ship requirement also did not meet the resi-
dency requirement.

EIC noncompliance is high in part be-
cause it is difficult for the IRS to verify
whether a child claimed by a taxpayer meets
the residency and relationship tests of the
EIC prior to paying out a refund. The IRS
employs extensive outreach and educa-
tional programs to inform taxpayers and tax
return preparers of the requirements of the
EIC. These programs encourage eligible tax-
payers to participate in the EIC program and
discourage ineligible taxpayers from mak-
ing erroneous EIC claims. In addition, the
IRS conducts examinations to verify the eli-
gibility of individuals with questionable
claims. Despite these and other efforts, the
IRS has been unable to significantly re-
duce the noncompliance rate over the years.

To prevent qualifying child errors, the
IRS and Treasury Department plan to imple-
ment a certification program under which
certain taxpayers will be required to dem-
onstrate that they meet the residency re-

quirement with respect to a child before
their EIC claims are accepted. The taxpay-
ers required to demonstrate residency will
be those who, based on IRS research, are
more likely to claim children who do not
satisfy the residency requirement (such as
caregivers other than the child's parents and
fathers who do not file joint returns).

Under the certification program, a tax-
payer will be encouraged to fill out a form
and provide certain documentation that es-
tablishes that the taxpayer meets the resi-
dency requirement with respect to a child
in advance of the filing season. If such tax-
payers choose not to pre-certify, they will
be required to send in the same forms and
documentation with their tax returns. Tax-
payers who pre-certify will receive their EIC
refunds faster than taxpayers who send in-
formation with their tax returns. Taxpay-
ers who do not pre-certify or send in the
required information with their tax returns
will be given an additional opportunity to
certify residency, after which time, they will
be denied the EIC with respect to a claimed
child, subject to normal appeals rights and
the ability to contest the denial in Tax Court.

The goal of the certification program is
to evaluate high-risk EITC claims before
they are paid, using a process that is less
burdensome to taxpayers and less costly to
the IRS than an audit. In addition, the cer-
tification program will enable eligible, but
high-risk, taxpayers to receive their re-
funds faster than if they were subsequently
challenged by the IRS. By helping to en-
sure that certain high-risk taxpayers re-
ceive the right amount of the credit be-
fore refunds are paid, the program will also
reduce the burden that is imposed when tax-
payers must repay erroneous refunds.

The IRS and the Treasury Department
want to implement this program in a man-
ner that will continue the goals of the EIC
program, will not be overly burdensome for
taxpayers (and other parties) and will not
adversely affect participation. Accordingly,
the IRS will test the certification program
with a limited number of taxpayers (ap-
proximately 45,000) and will carefully study
the results from this group to determine the
effect of certification on compliance and
participation. In addition, the IRS and Trea-
sury Department are continuing to evalu-
ate the proposed form and instructions, the
types of documentation that will be re-
quired, and the IRS' communication and
outreach strategy. As part of this evalua-

tion, the IRS will be conducting focus
groups of taxpayers, practitioners and third
parties (who are asked to help establish resi-
dency) prior to the test of the certifica-
tion program.

As part of the certification program, the
IRS and Treasury Department previously
considered requiring certain taxpayers
whose relationship with a claimed child
could not be systematically checked by the
IRS through existing databases (e.g., so-
cial security records) to establish a quali-
fying relationship with the child before their
EIC claim is accepted. The certification test
will not include a relationship certifica-
tion requirement and will be limited to resi-
dency certification.

### III. Request for Comments

Based on preliminary discussions and
initial drafts of the residency certification
form, stakeholders have expressed con-
cerns about various aspects of the certifi-
cation program. The IRS and Treasury De-
partment are committed to continuing this
dialogue with stakeholders and are issu-
ing this announcement to help facilitate
comments. Concerns expressed by stake-
holders prior to and in response to this an-
nouncement will be carefully considered by
the IRS and Treasury Department in de-
veloping the certification program.

The IRS has revised Form 8836, which
is attached to this announcement and will
be posted on the IRS' website at http://
www.irs.gov/taxpros/lists/0,,id=97784,00
.html.

The IRS and Treasury Department wel-
come all comments and suggestions and are
particularly interested in comments on the
following matters:

1\. Under Form 8836, taxpayers will have
the option to provide different types of in-
formation or documentation to establish
residency. Are there other sources or types
of information that should be added to the
form (as another option) that would still
give the IRS reasonable assurances that the
taxpayer satisfies the residency require-
ment? What information or documenta-
tion could the IRS request that taxpayers
currently possess or could reasonably ob-
tain to verify that the taxpayer resides with
a child? What information or documenta-
tion currently requested on the forms is dif-
ficult or burdensome for the taxpayer or a
third party to provide, and why?

2\. How can Form 8836 be simplified or
clarified? For example, would it be easier
for taxpayers to certify one child per form
or two children per form? How could the
instructions to Form 8836 be simplified or
clarified?

3\. What can the IRS do to reach out to
taxpayers and encourage them to pre-certify,
rather than wait until the filing season?
What is the message the IRS needs to con-
vey and what are the best means through
which to convey that message? Who should
be the primary deliverer of particular mes-
sages - the IRS or outside stakeholders?
Are there other incentives the IRS can pro-
vide to taxpayers to encourage them to pre-
certify?

4\. How can the certification program be
used to reach out to taxpayers who are eli-
gible for the EIC, but not currently claim-

ing the credit? Should the messages asso-
ciated with the certification program be
coupled with messages designed to edu-
cate taxpayers about their eligibility to claim
the EIC and to increase participation? Al-
ternatively, would combining these mes-
sages cause confusion, in which case, what
separate measures should the IRS take to
reach out to eligible taxpayers who are not
claiming the credit?

5\. What factors should the IRS take into
account in designing the study of the ini-
tial group of taxpayers who are asked to
certify and in evaluating the results of that
study?

Comments about the draft Form 8836 or
the certification pilot must be submitted on
or before July 14, 2003, in order to be con-
sidered for the pilot. Otherwise, comments
about the precertification process should be

submitted on or before December 31, 2003.
Comments about certification taking place
during the filing season should be submit-
ted on or before April 15, 2004.

Taxpayers may submit electronic com-
ments on Form 8836 at http://www.irs.gov/
taxpros/lists/0,,id=97784,00.html and on the
pre-certification and certification processes
to notice.comments@irscounsel.treas.gov.
Alternatively, comments may be sent to:
CC:PA:RU (Announcement 2003-40), room
5226, Internal Revenue Service, POB 7604,
Ben Franklin Station, Washington, DC
20044. Submissions may be hand deliv-
ered Monday through Friday between the
hours of 8 a.m. and 4 p.m. to: CC:PA:RU
(Announcement 2003-40), Courier's Desk,
Internal Revenue Service, 1111 Constitu-
tion Avenue, NW, Washington, DC.

Form
8836

Department of the Treasury
Internal Revenue Service

# Qualifying Children Residency Statement

See instructions starting on page 2.

OMB No. 1545-1829

2003
Attachment
Sequence No. 136

Part I Taxpayer Information (to be completed by taxpayer)

Your first name and initial

Last name

Your social security number

If you will be filing a joint return for 2003, spouse's first name and initial

Last name

Spouse's social security number

Home address (number and street). If you have a P.O. box, see instructions

Your daytime phone number ( )

City, town or post office, state, and ZIP code

Your evening phone number ( )

## Part II

## Qualifying Children Information (to be completed by taxpayer) Caution. If you have two qualifying children, see instructions before completing this part.

Child 1

Child's first name

Last name

Child's social security number

Child 2

Child's first name

Last name

Child's social security number

Part III
Proof of Residency (to be completed by taxpayer) (see instructions)

Check one or more boxes below and attach any required documentation. The combined documentation must include your
name, the child's name, street address, and dates the child lived with you to show that you and the child lived together for
more than half of 2003. See Residency Test on page 2 for details and exceptions.
☐
I have attached copies of one or more of the following official records: Child-care records, community-based organization
records, employment records, Indian tribal enrollment records, leases, medical records, religious records, school records,
social service agency records, or utility bills.
☐
I have attached a letter on official letterhead from one or more of the following third parties: Child-care provider, clergy,
community-based organization official, employer, health-care provider, Indian tribal official, landlord or property manager,
school official, social service agency official, or utility company.
☐
A third party has completed Part IV below.

Note. The IRS may contact the third party who signs Part IV and any person or organization that provides the documentation
you attach to this form.

Under penalties of perjury, I declare that I have examined this statement, and to the best of my knowledge and belief, it is true, correct, and complete.

Taxpayer
Sign Here

Signature of spouse
named in Part I

Date

### Part IV Third Party Affidavit (to be completed by third party if the last box in Part III is checked)

First, check the box below that best describes your relationship to the taxpayer or one or both children named above.
☐
Child-care provider
☐
Clergy
☐
Community-based organization official
☐
Employer
☐
Health-care provider

☐
Indian tribal official
☐
Landlord or property manager
☐
School official
☐
Social service agency official
Next, complete the following statement.

Based on my records or personal knowledge, I believe that one (or both) of the above-named taxpayer(s) and (check the box that applies)
☐
Child 1
☐
Child 2
☐
Child 1 and 2
lived together at the following address:

Address (number and street)

City, town or post office, state, and ZIP code

from month

day
2003, through month
day

2003\.

Under penalties of perjury, I declare that I have examined this affidavit, and to the best of my knowledge and belief, it is true, correct, and complete.

Third Party
Sign Here

Date

Your name
(print or type)

Title (if any)

Name of organization (if any)

Address (including city, town or post office, state, and ZIP code)

Your daytime phone number

( )

For Privacy Act and Paperwork Reduction Act Notice, see page 4.

Cat. No. 14955C

Form 8836 (2003)

## Instructions

### Purpose of Form

Use Form 8836 if the IRS sent this form to you and
you have a qualifying child for the earned income
credit (EIC). We need this form to show that you and
your child met the residency test (defined on this
page) for 2003.

### Who Must File

File this form only if:

. You are claiming or expect to claim the EIC with a
qualifying child for 2003 and

. The IRS sent this form to you with a letter directing
you to file it.

If you do not file Form 8836, the IRS will not allow
the EIC with a qualifying child for 2003.

For details on the EIC eligibility rules, including the
definition of qualifying child, see Pub. 596, Earned
Income Credit (EIC). You can order Pub. 596 by calling
1-800-TAX-FORM (1-800-829-3676) or you can
download it from the IRS website at www.irs.gov.

Pre-recorded information about the EIC is also
available by phone 24 hours a day, 7 days a week. Call
1-800-829-4477 and select TeleTax Topic No. 601.
Have paper and a pen or pencil handy to take notes.

### When To File

There are two different time periods for filing Form
8836 for 2003. You may file Form 8836 either:

. Before January 1, 2004. If you file the form during
this period, you may be able to avoid a delay in
receiving the EIC part of your tax refund for 2003.
. With your 2003 tax return. Under this option, the
EIC part of your refund will be delayed while we
review the information you submitted.

Where To File
Send the form to:

Internal Revenue Service
Stop 4300, Annex R2
Kansas City, MO 64999-0065

Note. If you file this form after December 31, 2003,
you may either file it at the above address or attach it
to your tax return. If you file it with your return, be sure
to send it to the Internal Revenue Service address
shown in the instructions for your tax return.

!
CAUTION

You cannot file this form electronically.
However, you may still file your tax return
electronically. If you do so, send Form 8836
and all required attachments to:

Internal Revenue Service
Stop 4300, Annex R2
Kansas City, MO 64999-0065

### Residency Test

Your child must have lived with you in the United
States for more than half of 2003. Include the time that
you or your child are temporarily apart due to a special
circumstance, such as military service, school
attendance, or juvenile detention. It does not matter
where you lived with your child. For example, you may
live with your child in a homeless shelter. For more
details on the residency test, see Pub. 596.

Special Rule For a Child Who Was Born or Died in
2003. A child is considered to have lived with you for
more than half of 2003 if the child was born or died in
2003 and your home was the child's home for the
entire time he or she was alive in 2003.

What We Will Do After We Receive This
Form

We will review the information you send us. We will let
you know if you have met the residency test needed to
get your EIC. If we need more information, we will
contact you.

If you do not meet the residency test for a child, we
will let you know. The IRS will not allow the EIC based
on that child.

## How To Get Help

Call 1-800-294-2723 if you need assistance
completing this form or you are having difficulty
obtaining the documentation you are required to
provide with this form. Assistance is available Monday
through Friday from 8:00 a.m. to 8:00 p.m. Eastern
time.

You may also visit any IRS Taxpayer Assistance
Center. To find out the location and hours of the
nearest center, call 1-800-829-1040 or visit the IRS
website at www.irs.gov/localcontacts. You also can
contact the Taxpayer Advocate Service at
1-877-777-4778 or the local Taxpayer Advocate office
in your area.

## Part I

P.O. Box. Enter your box number only if your post
office does not deliver mail to your home. Otherwise,
enter your home street address.

Daytime and Evening Phone Numbers. Providing
your daytime and evening phone numbers may help
speed the processing of this form. We may have
questions about the information you provided. By
answering our questions over the phone, we may be
able to continue processing the form without mailing
you a letter. If you will be filing a joint return, you may
enter either spouse's phone numbers.

## Part II

Be sure that any child named is your qualifying child
and you expect to claim that child for the EIC on your
2003 tax return.

Your qualifying child must have a valid social security
number (SSN), unless the child was born and died in
2003. If the qualifying child was born and died in 2003

and did not have an SSN, attach a copy of that child's
birth certificate to Form 8836 and enter "Died" instead
of the child's SSN.

For purposes of claiming the EIC, a valid SSN is a
number issued by the Social Security Administration
unless "Not Valid for Employment" is printed on the
social security card and the number was issued solely
to apply for or receive a Federally funded benefit.

If you have two qualifying children you may need to
complete more than one Form 8836. For example, if in
Part IV a doctor is signing for Child 1 and a clergyman
is signing for Child 2, you will have to complete two
forms. List Child 1 on the form you are giving to the
doctor and Child 2 on the form you are giving to the
clergyman.

Do not provide information for more than two
qualifying children. You need only two qualifying
children to claim the maximum EIC.

## Part III

You must attach documentation showing that each
qualifying child lived with you for more than half of
2003. You may need to send more than one item to
show that your child lived with you for more than half
of 2003.

If you and your spouse are filing a joint return, you
only need to show that one of you lived with your child
for more than half of 2003.

Who Can Provide Documents to You. You may
submit documentation from any of the following third
parties (other than you or your spouse).

· School official (such as a teacher, principal, or
adminstrative assistant).

· Health-care provider (such as your doctor, your
nurse practitioner, or a clinic official).

· Member of the clergy (such as your minister, priest,
rabbi, or imam).

· Child-care provider who is age 18 or older (and not
your neighbor or relative) or licensed or regulated by
the state or local government for the area in which the
child care was provided.

· Your employer.

. Landlord or property manager.

· Social service agency official (such as a case worker
at a public assistance office).

· Community-based organization official (such as an
official from the YMCA, YWCA, Boy Scouts, Girl
Scouts, Boys and Girls Clubs, 4-H, Little League,
Police Athletic League, immigrant advocacy groups,
low-income taxpayer clinics, neighborhood
associations, homeowners and condominium
associations and other non-profit groups).

. Indian tribal official.

. Utility company (such as an electric power or natural
gas company).

What Kind of Documents You Must Provide. You
may provide either of the following from any third party
listed above:

. A copy of an official record (such as child-care
records, a lease, medical records, a pay stub, or
school records), or

. A letter on official letterhead.

You also may ask any third party that is listed in Part
IV of the form to complete the Part IV affidavit to show
that you and your child lived together for part or all of
2003. See the instructions for Part IV on page 4.

What the Documents Must Show. If you send an
official record or letter, it must clearly show:

. Your name, your child's name, or both names, and

. A street address and the dates that you or your child
lived at that address during 2003, and

. The name, address, and phone number of the
person or organization that provided the record or
letter.

If someone fills out Part IV of this form for you, be
sure that it is complete.

How Many Documents Do You Need? You may
submit any combination of the documents listed above
as long as they show, when taken together, that you
lived with your child for more than half of 2003. In
some cases, a single document will show that you and
your child lived at the same address. In other cases,
you may need to provide one document showing your
name and address as well as a second document
showing your child's name with the same address.
Multiple documents may be necessary to show that
your address and your child's address were the same
for more than half of 2003.

Here are a few acceptable combinations of
documents:

. One document that shows that both you and your
child lived at the same address for more than half of
2003.

. One document that shows that you lived at an
address for more than half of 2003 and a second
document that shows that your child lived at the same
address during the same period of time.

. One document that shows that you and your child
lived at the same address for part of 2003 and a
second document that shows that you and your child
lived together for the remainder of 2003.

. If you have two children, separate documents for
each child to show that each one lived with you for
more than half of 2003.

. If you have two children, one document to show that
both of your children lived with you for more than half
of 2003.

Example 1. You attach a letter on official letterhead
from Acme Medical Clinic showing that your child lived
with you from January 1, 2003, through March 31,
2003. You also have Reverend Smith, your clergyman,
complete Part IV showing that you and your child lived
together from April 1, 2003, through July 31, 2003. You
check the second and third boxes in Part III. Because
the total time shown is more than half of the year, the
residency test is met.

Example 2. You attach a transcript of your child's
grades from the Washington Elementary School
showing that your child lived with you from January 1,
2003, through May 31, 2003. You also attach a letter
on official letterhead from the principal of the Lincoln
Middle School. The letter shows the dates of school
attendance and that the child's address was the same
as yours. The letter covers the period from September
1, 2003, through October 31, 2003. You check the first
two boxes in Part III. Because the total time shown is
more than half of the year, the residency test is met.

Note. If you cannot obtain official records, a letter, or a
completed Part IV from one or more third parties to
show that your child lived with you for more than half
of 2003, call 1-800-294-2723 and we will help you.

Signing the Form. You must sign and date Part III
under penalties of perjury before you send it to us with
the documents. Criminal penalties may be imposed for
making a false statement.

### Part IV

You may skip Part IV if you are submitting official
records or letters that show that your child lived with
you for more than half the year in 2003.

If you need to provide more than one
TIP
affidavit (Part IV) to show that your child
lived with you for more than half of 2003,
complete as many additional Forms 8836 as
you need. On the additional Forms 8836, you do not
have to enter your spouse's name and SSN or your
address.

Neither you nor your spouse may complete this part.
A third party listed in Part IV who has records that
show, or who personally knows, that you and your
qualifying child lived together for part or all of 2003
must complete this part. The third party must complete
all applicable information and sign Part IV under
penalties of perjury. If the third party does not
complete all applicable information in Part IV, the
affidavit may not be accepted. Criminal penalties may
be imposed for making a false statement.

#### Privacy Act and Paperwork Reduction Act Notice.

The Privacy Act of 1974 and the Paperwork Reduction
Act of 1980 require that when we ask you for
information we must first tell you our legal right to ask
for the information, why we are asking for it, and how
it will be used. We must also tell you what could
happen if we do not receive it and whether your
response is voluntary, required to obtain a benefit, or
mandatory under the law.

This notice applies to all papers you file with us. It
also applies to any questions we need to ask you so
we can complete, correct, or process your return;
figure your tax; and collect tax, interest, or penalties.

Our legal right to ask for information is Internal
Revenue Code sections 6001, 6011, and 6012(a), and
their regulations. They say that you must file a return
or statement with us for any tax for which you are
liable. Your response is mandatory under these
sections. Code section 6109 and its regulations say
that you must provide your taxpayer identification
number on what you file. This is so we know who you
are, and can process your return and other papers.

You are not required to provide the information
requested on a form that is subject to the Paperwork
Reduction Act unless the form displays a valid OMB
control number. Books or records relating to a form or
its instructions must be retained as long as their
contents may become material in the administration of
any Internal Revenue law. Generally, tax returns and
return information are confidential, as stated in Code
section 6103.

We ask for tax return information to carry out the tax
laws of the United States. We need it to figure and
collect the right amount of tax.

We may give the information to the Department of
Justice and to other Federal agencies, as provided by
law. We may give it to cities, states, the District of
Columbia, and U.S. commonwealths or possessions to
carry out their tax laws. We may also disclose this
information to other countries under a tax treaty, or to
Federal and state agencies to enforce Federal nontax
criminal laws and to combat terrorism.

If you do not file a return or give fraudulent
information, you may be charged penalties and be
subject to criminal prosecution.

Please keep this notice with your records. It may
help you if we ask you for other information. If you
have any questions about the rules for filing and giving
information, please call or visit any Internal Revenue
Service office.

The time needed to complete and file this form will
vary depending on individual circumstances. The
estimated average time is: Recordkeeping, 6 min .;
Learning about the law, 11 min .; Preparing the form,
24 min .; Copying, assembling, and sending the form
to the IRS, 20 min.

If you have comments concerning the accuracy of
these time estimates or suggestions for making this
form simpler, we would be happy to hear from you.
You can write to the Tax Products Coordinating
Committee, Western Area Distribution Center, Rancho
Cordova, CA 95743-0001. Do not send the form to
this address. Instead, see Where To File on page 2.

## Announcement and Report Concerning Pre-Filing Agreements

### Announcement 2003-43

#### Introduction

This announcement is issued pursuant to
the Conference Report to H.R. 4577 (Pub.
L. 106-554), The Community Renewal Tax
Relief Act of 2000, which requires that the
Secretary of the Treasury make publicly
available an annual report relating to the
Pre-Filing Agreement ("PFA") program op-
erations for the preceding calendar year. The
Conference Report states that the report is
to include: (1) the number of pre-filing
agreements completed, (2) the number of
applications received, (3) the number of ap-
plications withdrawn, (4) the types of is-
sues which are resolved by completed
agreements, (5) whether the program is be-
ing utilized by taxpayers who were previ-
ously subject to audit, (6) the average length
of time required to complete an agree-
ment, (7) the number, if any, and subject
of technical advice and Chief Counsel ad-
vice memoranda issued to address issues
arising in connection with any pre-filing
agreement, (8) any model agreements, and
(9) any other information the Secretary
deems appropriate. This is the third an-
nual report. It provides information con-
cerning activity under the permanent PFA
program (Rev. Proc. 2001-22, 2001-1 C.B.
745), during calendar year 2002.

#### Background

The Large and Mid-Size Business Di-
vision ("LMSB") within the Internal Rev-
enue Service serves corporations and part-
nerships with assets greater than $10
million. In 2002, approximately 150,000
corporations and partnerships filed returns
reporting assets in this range. The returns
filed by these taxpayers present a wide va-
riety of complex issues. The largest of these
taxpayers deal with the IRS on a continu-
ous basis.

One of LMSB's strategic initiatives is
issue management. Through effective is-
sue management, LMSB seeks to resolve
issues of tax controversy on a more cur-
rent basis. This includes, but is not lim-
ited to, increasing the efficiency of the ex-
amination process and seeking alternative
issue resolution tools. The Pre-Filing Agree-
ment program was designed to support

LMSB's issue management strategy. LMSB
believes the Pre-Filing Agreement pro-
gram reduces taxpayer burden and makes
more effective use of IRS resources by re-
solving or eliminating tax controversy be-
fore the tax return is filed.

The PFA program is designed to per-
mit a taxpayer to resolve, before the fil-
ing of a return, the treatment of an issue that
otherwise would likely be disputed in a
post-filing examination. The PFA program
is intended to produce agreement on fac-
tual issues and apply settled legal prin-
ciples to those facts. A PFA is a specific
matter closing agreement under § 7121 of
the Internal Revenue Code and resolves the
subject of the PFA for a specified taxable
period. Execution of a PFA that resolves is-
sues prior to filing permits taxpayers to
avoid costs, burdens and delays that are fre-
quently incident to post-filing examina-
tion disputes between taxpayers and the
IRS.

##### PFA Program

As a result of the success of a pilot pro-
gram, the IRS established a permanent PFA
Program with the issuance of Rev. Proc.
2001-22. Although many of the proce-
dures remained the same, there were some
significant changes, including:

1\. All taxpayers, both Coordinated Is-
sue and Industry cases, within the juris-
diction of LMSB are eligible to partici-
pate;

2\. More issues are considered appropri-
ate;

3\. There are fewer excludible circum-
stances;

4\. Certain international issues are now
considered appropriate; and

5\. A user fee was implemented for those
taxpayers accepted into the program.

PFA Process

The PFA process is managed and con-
ducted by LMSB Industry Directors and
field staff, with support from the Office of
Pre-Filing and Technical Guidance in
LMSB Headquarters. The PFA Program
Manager receives all applications and, with
the assistance of the Technical Advisors and
the Office of Chief Counsel, ensures that
the issues presented are appropriate for in-
clusion in the PFA program.

The Industry Director with jurisdiction
over the taxpayer makes the final deci-

sion whether to accept a taxpayer's re-
quest for participation in the PFA program.
The criteria for selecting a request include:

a. The suitability of the issue presented
by the taxpayer;

b. The direct or indirect impact of a PFA
upon other years, issues, taxpayers, or re-
lated cases;

c. The availability of IRS resources;

d. The ability and willingness of the tax-
payer to dedicate sufficient resources to the
process;

e. The likelihood that the PFA may re-
sult in contrary positions with respect to an
item or transaction ("whipsaw"); and

f. The probability of completing the ex-
amination of the issue and entering into a
PFA by the target date.

For the cases selected, a mandatory ori-
entation session for the examination team
and the taxpayer is conducted. Subsequently,
the taxpayer and examination team con-
vene a joint planning meeting to reach
agreement on a proposed timeframe, to
identify and arrange for IRS access to rel-
evant records and testimony, and to de-
fine the potential scope and nature of the
PFA.

The examination team conducts the fac-
tual determination and issue development
consistent with IRS auditing standards.
Based upon an examination of the issue, the
Team Manager prepares a PFA recommen-
dation for the Industry Director. The In-
dustry Director's decision to execute a PFA
Closing Agreement is based on the Team
Manager's recommendation and discus-
sions with the PFA Program Manager, Chief
Counsel attorneys, appropriate Technical
Advisors and the taxpayer. Following Chief
Counsel review to ensure that the pro-
posed PFA conforms with guidance pro-
vided in Rev. Proc. 68-16 (regarding clos-
ing agreements), the Industry Director could
execute a PFA if he or she determines that:

a. Entering into the PFA is consistent
with the goals of the PFA program as stated
in Rev. Proc. 2001-22;

b. The resolution in the PFA reflects
settled legal principles and correctly ap-
plies those principles (or positions autho-
rized under Delegation Order Nos. 236 or
247) to facts found by the examination
team; and

c. There appears to be an advantage in
having the issue(s) permanently and con-
clusively closed for the taxable period cov-
ered by the PFA, or that the taxpayer shows

good and sufficient reasons for desiring a
closing agreement and that the United States
would sustain no disadvantage through con-
summation of such an agreement (see
§ 301.7121-1(a) of the Procedure and Ad-
ministration Regulations).

Program Oversight

A designated PFA Program Manager as-
signed to the Office of Pre-Filing and Tech-
nical Guidance in LMSB Headquarters pro-
vides oversight for the PFA program. The
PFA Program Manager provides assistance
to taxpayers, Industry Directors and Team
Managers throughout the process.

## Pre-Filing Agreement Program Accomplishments

Statistical Overview of PFA Program -
Calendar Year 2002

The table below reflects activity con-
cerning those PFA requests which were re-
ceived in calendar year 2001 and carried
over into calendar year 2002.

Overview of PFA Applications Received in Calendar Year 2001

Totals

Applications Pending Acceptance/Rejection on January 1, 2002

Applications In-Process on January 1, 2002

Applications Rejected in 2002

Applications Withdrawn in 2002

Applications for Which There Were Closing Agreements in 2002

Applications Pending Acceptance/Rejection on December 31, 2002

Applications in-Process on December 31, 2002

The table below reflects the status of PFA requests received in calendar year 2002.

Overview of PFA Applications Received in Calendar Year 2002

Totals

Applications Received in 2002

Applications Accepted in 2002

Applications Rejected in 2002

Applications Withdrawn before Acceptance/Rejection in 2002

Applications Withdrawn after Acceptance in 2002

Applications for Which There Were Closing Agreements in 2002

Applications Pending Acceptance/Rejection on December 31, 2002

Applications in-Process on December 31, 2002

Description of Applications Received in Calendar Year 2002

The forty-four applications that were received for the PFA program in calendar year 2002 came from each LMSB industry seg-
ment and involved a variety of issues.

Number of Requests Received and Accepted by Industry Segment

Industry Segment

Received

Accepted

Financial Services (FS)

Retailers, Food, Pharmaceuticals &amp; Healthcare (RFP&amp;H)

Natural Resources &amp; Construction (NR&amp;C)

Communications, Technology &amp; Media (CT&amp;M)

Heavy Manufacturing &amp; Transportation (HM&amp;T)

Total

### Types of Issues Received

Issue

Received

Original Issue Discount Issue Price

Fair Market Value of Assets Exchanged for Stock

Abandonment Loss

Sale of Assets - Amount of Built-in Gains and Built-in Losses

Sale of Assets &amp;/or Stock

Allocation of Sales Price

Research &amp; Experiment Credit

Sale - Leaseback

Bad Debts &amp;/or Worthless Securities

Legal/Consulting Fees vs Lobbying

Bank Owned Life Insurance

Spin-off &amp; Merger

Deduction for Dividends Paid to Employee Stock Ownership Plan

Investigatory Costs

Allocation of Losses

Restructuring

Period of Income Inclusion

Tax Motivated Transaction

Donation of Intangibles

Donation of Real Property

Qualified Conservation Donation

Liquidation

Synthetic Fuel Credit

Total

Reasons Why Applications Received in Calendar Year 2002 Were Not Accepted

Fourteen of the applications received in 2002 were not considered appropriate for the PFA program.

Reasons for Non-acceptance

Applications

Issue Not Suitable or Ineligible

International Issue Not Listed in Rev. Proc. 2001-22

Not Well-Settled Law

Tax Motivated Transaction

Total

#### Taxpayer Withdrawal (3)

In accordance with the procedures set
forth in Section 8 of Rev. Proc. 2001-22,
three taxpayers withdrew from the PFA pro-
cess - 2 after their requests had been ac-
cepted and one prior to acceptance. In two
cases, the withdrawals were necessitated, as
indicated by the taxpayers, by their inabil-
ity to devote sufficient resources required
to successfully continue the PFA process.
In the other instance, the taxpayer with-
drew because of the reluctance of the In-
dustry Director to reach agreement on all
the issues in the taxpayer's application.

#### IRS Withdrawal (2)

The Service withdrew from the PFA pro-
cess in one case where, after significant fac-
tual development and legal analysis of all
of the issues, the Service concluded that the
issues did not involve well settled law. The
Service withdrew from the PFA process in
a second case where, after factual devel-
opment, the Service determined that the is-
sues were not suitable for the PFA pro-
gram and would be more effectively
considered during a post-filing examina-
tion.

#### PFAs Executed (12)

Twelve PFAs were completed in calen-
dar year 2002, resulting in the execution of
closing agreements.

The Office of Chief Counsel provided
advice to the examination teams and as-
sisted in the drafting and review of the PFA
closing agreements. No Technical Advice
or Chief Counsel Advice Memoranda were
issued for issues addressed in the PFA pro-
cess. The executed PFAs covered the fol-
lowing issues:

### PFAs Executed by Issue

Year Application Received

Issue

Number

2001

Tax Basis/Holding Period/Reorganization

2001

Bad Debts &amp; Worthless Stock

2001

Accounting Method

2001

Reorganization &amp; Basis of Stock

2001

Donation of Intangibles

2001

Gain on Sale of Assets

2002

Treatment of costs associated with acquiring another corporation

2002

Allocation of Sales Price

2002

Sale of Assets - Amount of Built-in Gains and Built-in Losses

2002

Spin-off &amp; Merger

2002

Deduction for Dividends Paid to ESOP

Total

Tax Basis/Holding Period/Reorganization

The taxpayer requested a determina-
tion concerning the tax basis and holding
period of stock acquired in a reorganiza-
tion described in §§ 368(a)(1)(B) and
368(a)(2)(E). The parties entered into a clos-
ing agreement that established the amount
of the taxpayer's basis in the stock. The
closing agreement also established the date
that the taxpayer will have met the five-
year holding period prescribed by § 355(d).

### Bad Debts & Worthless Stock

The taxpayer and the IRS entered into
a closing agreement stipulating that the en-
tire debt owed by a subsidiary to the tax-
payer had become worthless within the
meaning of § 166(a)(1) during the taxpay-
er's taxable year ending in 2002. In addi-
tion, the closing agreement stipulated that
the taxpayer's securities in the subsidiary
had become worthless within the mean-
ing of § 165(g)(3) during the taxpayer's tax-
able year ending in 2002.

### Accounting Method

The taxpayer requested a determina-
tion concerning the proper tax accounting
treatment of rebates paid to customers. The
taxpayer had acquired all the assets and li-
abilities of another corporation that used a
different method of accounting for rebates
than the taxpayer. In integrating the two ac-
counting systems, the taxpayer wanted to
use the method previously used by the ac-

quired corporation. A closing agreement was
executed allowing the taxpayer to use the
desired method of accounting.

#### Reorganization & Basis of Stock

The taxpayer requested a determina-
tion concerning its basis in stock acquired
in a reorganization described in
§ 368(a)(2)(E). The parties entered into a
closing agreement whereby it was agreed
that the taxpayer could determine its ba-
sis under § 1.358-6 as if the basis in the
acquired stock was determined under
§ 362(b). In addition, the parties agreed to
the amount of the basis.

#### Donation of Intangibles (2)

In each of these unrelated cases, tax-
payers sought an agreement as to the fair
market value of certain intellectual prop-
erty donated to qualified organizations. In
both instances, a closing agreement was
reached specifying the fair market value of
the property contributed. The closing agree-
ment did not address the deductibility of the
charitable contributions.

#### Gain on Sale of Assets

In this case, the taxpayer sold assets to
an unrelated third party in a transaction de-
scribed in § 1060. The purchaser paid cash
and assumed liabilities in exchange for the
assets. A closing agreement was executed
establishing the amount of capital gain and
ordinary loss to be reported from the trans-
action for each asset class under § 1060.

##### Treatment of Costs Associated with Acquiring another Corporation

Taxpayer requested a determination with
respect to the treatment of certain costs as-
sociated with the acquisition of another cor-
poration. A closing agreement was executed
specifying, based on the facts, the amount
deductible as ordinary and necessary busi-
ness expenses under § 162, the amount al-
lowable under § 195 as start-up expendi-
tures and the amount required to be
capitalized under § 263.

###### Allocation of Sales Price

In this case, the taxpayer sold assets to
a third party. The taxpayer requested an
agreement concerning the proper alloca-
tion of the sale proceeds among the as-
sets sold. A factual determination was
reached concerning the allocation of the
sales proceeds and the amount and char-
acter of income, gain and loss to be re-
ported.

###### Sale of Assets - Amount of Built-in Gains and Built-in Losses

The taxpayer requested a factual deter-
mination regarding the amount of built-in
gains and built-in losses, as defined in
§§ 1374(d)(3) and (d)(4), recognized from
the sale of its qualified subchapter S sub-
sidiaries (QSubs). Under § 1.1361-5, the
sale of the QSubs was treated as a direct
sale of the assets of the QSubs. The ex-
amination consisted of a review of the tax-
payer's computations and a review of the

books and records and other information
provided by the taxpayer. A closing agree-
ment was entered into specifying the
amounts of gain and loss to be recognized.

###### Spin-off & Merger

The taxpayer distributed all of the is-
sued and outstanding stock of a number of
its wholly-owned subsidiaries to sharehold-
ers in complete redemption of their shares.
Subsequent to the distribution, the subsid-
iaries merged into another corporation. An
agreement was reached indicating the dis-
tribution satisfied the requirements of § 355,
other than the business purpose require-
ment (which was not addressed by the clos-
ing agreement), and therefore, subject to sat-
isfying the business purpose requirement,
no gain or loss was recognized by any of
the shareholders or any of the corpora-
tions as a result of the distribution and sub-
sequent merger.

Deduction for Dividends Paid to ESOP

The taxpayer requested a determina-
tion regarding the treatment of dividends
that were paid by the taxpayer to an Em-
ployee Stock Ownership Plan (ESOP) and
were subject to a distribution/reinvestment
election during the first 90 days of 2002.
A closing agreement was executed stipu-
lating the amount of dividends that quali-
fied as applicable dividends under § 404(k)
and therefore were deductible by the tax-
payer.

###### Closing Agreements

A pro forma or model agreement does
not exist for a PFA Closing Agreement. A
PFA represents a specific matter closing
agreement under § 7121. The closing agree-
ments entered into under this program were
prepared with assistance from the Office of
Chief Counsel and conform to the guid-
ance provided in Rev. Proc. 68-16.

###### PFA Program Utilization

The PFA Program is available to all tax-
payers under the jurisdiction of LMSB. Dur-
ing calendar year 2002, 44 taxpayers sub-
mitted PFA requests. These included both
Coordinated Industry Case (CIC) taxpay-
ers that are typically subject to examina-
tion on a continuing basis and Industry Case
(IC) taxpayers that are subject to exami-
nation on a more limited basis. Of the 44
requests, 38 were from CIC taxpayers and
6 from IC taxpayers. For the twelve cases
that resulted in closing agreements dur-
ing calendar year 2002, 10 were with CIC
taxpayers and 2 were with IC taxpayers.

###### Processing Statistics

The average elapsed time to resolve the
12 cases that resulted in closing agree-
ments in calendar year 2002 (the applica-
tions of which were received in 2001 and
2002) and the 5 cases that were withdrawn
in calendar year 2002 was 199.1 days.

Average Processing Time for Seventeen Cases Closed in 2002

Range (Elapsed Days)

Average (Elapsed Days)

Phase I - Application Screening Process

23-92

53.1

Phase II - PFA Evaluation Process

8-320

146.1

Total Time to Close a PFA Case

54-392

199.1

###### Phase I - Application Screening Process

Phase I is the screening process to de-
termine if an application is appropriate for
inclusion in the PFA program. This screen-
ing process includes obtaining comments
from various LMSB functions and Chief
Counsel, the review of these comments and
the acceptance/rejection of an application
by the Industry Director. Of the 44 appli-
cations received during the calendar year
2002, 39 completed the Phase I Process. For
these 39 applications, the average time from
the date an application was received by the
IRS until the Industry Director rendered a
decision to accept or reject an application

was 65 days. For the 12 cases that resulted
in closing agreements in 2002, the aver-
age time for Phase I was 52.8 days.

###### Phase II - PFA Evaluation Process

The second (and final) phase in the PFA
program process was the evaluation phase.
This phase began when the Industry Di-
rector accepted an application into the PFA
program and ended when a PFA closing
agreement was executed or the process
ended in a withdrawal. The average elapsed
time for the 12 cases that resulted in clos-
ing agreements and the 5 cases that were
withdrawn in calendar year 2002 was 146.1
days.

### Program Evaluation

The PFA Program Manager ensures that
an evaluation of all of the PFA program
cases, based on feedback from LMSB em-
ployees and taxpayer participants, is solic-
ited. As a part of this program evalua-
tion, LMSB and taxpayer participants were
asked to provide the direct examination time
expended to complete the PFA and an es-
timate of the direct examination time it
would have taken to resolve the issue in a
post-filing context. The table below indi-
cates the results for those that responded to
the solicitation:

Cumulative Hours (Executed PFAs)

Taxpayer (Hours)

LMSB (Hours)

Actual - PFA Process

3,984

8,166

Estimated - Post-Filing Process

6,300

10,407

Estimated Savings

2,316

2,241

Estimated Savings Percentage (Average)

36.8%

21.5%

Cumulative Hours (Executed PFAs)

Taxpayer (Hours)

LMSB (Hours)

Estimated Savings Percentage (Range)

21.4%-85%

(4.8)%-51.2%

Comparative Analysis - Processing
Statistics

The average total time to conclude the
12 cases that resulted in closing agree-
ments in calendar year 2002 was 235.4

days. The range was from 151 to 392 days.
Illustrated below are the average elapsed
time (in days) processing statistics for the
12 cases that resulted in closing agree-
ments in calendar year 2002, the 7 cases
that resulted in closing agreements in cal-

endar year 2001, and the 11 cases that re-
sulted in closing agreements under the pi-
lot program.

Average Processing Time for PFAs (Days)

Overall Pilot (11 cases)

Program CY 2001 (7 cases)

Program CY 2003 (12 cases)

Phase I - Application Screening Process

38.3

46.6

52.8

Phase II - PFA Evaluation Process

242.2

126.1

182.6

Total Time to Complete a PFA

280.5

172.7

235.4

The increased processing time for 2002
can be attributed to the degree of complex-
ity of the issues and the time necessary to
develop the factual aspects of the issues.
Generally, the more complex and exami-
nation intensive the issue is, the greater the
time necessary to complete the process.

#### Pre-Filing Agreement Program Summary

The PFA program is now available to all
LMSB taxpayers, including taxpayers that
are not currently under examination. While
the PFA program will continue to be lim-
ited to issues that involve settled legal prin-
ciples, the list of recommended issues has
been expanded, and now includes certain
international issues. Generally, the opera-
tional procedures used during the PFA pi-
lot program were adopted and enhanced in
the permanent PFA program.

Overall, the PFA program is meeting the
LMSB strategic program objectives as con-
tained in its issue management strategic ini-

tiative. Issues of potential controversy are
being resolved more efficiently and on a
more current basis yielding benefits to tax-
payers and the IRS.

The principal author of this announce-
ment is J. Michael Mann, in the Office of
Pre-Filing and Technical Guidance, Large
and Mid-Size Business Division. For fur-
ther information regarding this announce-
ment, contact Mr. Mann at (202) 283-
8424 (not a toll-free call).

# Correction to Rev. Rul. 2003-50 - BLS Department Store Indexes for March 2003

## Announcement 2003-44

### PURPOSE

This announcement corrects a typo-
graphical error in Rev. Rul. 2003-50,
2003-21 I.R.B. 944, Bureau of Labor Sta-

tistics, Department Store Inventory Price In-
dexes by Department Groups for March
2003. Line 14 (Notions), Column 2 (March
2003), incorrectly reads "797.7." The cor-
rect figure is 797.1.

## EFFECTIVE DATE

This announcement is effective for tax-
able years ended on, or with reference to,
March 31, 2003.

## EFFECT ON OTHER DOCUMENTS

Rev. Rul. 2003-50 is modified.

## DRAFTING INFORMATION

The principal author of this announce-
ment is Michael Burkom of the Office of
Associate Chief Counsel (Income Tax &
Accounting). For further information re-
garding this announcement, contact
Mr. Burkom at (202) 622-7718 (not a toll-
free number).

# Definition of Terms

Revenue rulings and revenue procedures
(hereinafter referred to as"rulings") that
have an effect on previous rulings use the
following defined terms to describe the
effect:

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.

Distinguished describes 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

applies to both A and B, the prior ruling
is modified because it corrects a pub-
lished 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
period 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 published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings 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 formerly used will appear in
material published in the Bulletin.

A-Individual.

Acq .- Acquiescence.

B-Individual.

BE-Beneficiary.

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.

COOP-Cooperative.

GR-Grantor.

Ct.D .- Court Decision.

IC-Insurance Company.

CY-County.

I.R.B .- Internal Revenue Bulletin.

D-Decedent.

LE-Lessee.

DC-Dummy Corporation.

LP-Limited Partner.

LR-Lessor.

TT-Trustee.

U.S.C .- United States Code.

DISC-Domestic International Sales Corporation.

DR-Donor.

O-Organization.

Y-Corporation.

E-Estate.

P-Parent Corporation.

PHC-Personal Holding Company.

PO-Possession of the U.S.
PR-Partner.

PRS-Partnership.

PTE-Prohibited Transaction Exemption.

Pub. L .- Public Law.

REIT-Real Estate Investment Trust.

Rev. Proc .- Revenue Procedure.

Rev. Rul .- Revenue Ruling.

S-Subsidiary.

S.P.R .- Statements of Procedural Rules.

Stat .- Statutes at Large.

T-Target Corporation.

T.C .- Tax Court.

T.D .- Treasury Decision.

TFE-Transferee.

TFR-Transferor.

T.I.R .- Technical Information Release.

TP-Taxpayer.

TR-Trust.

DE-Donee.

Del. Order-Delegation Order.

M-Minor.

Nonacq .- Nonacquiescence.

X-Corporation.

Z-Corporation.

EE-Employee.

E.O .- Executive Order.

ER-Employer.

ERISA-Employee Retirement Income Security Act.

EX-Executor.

F-Fiduciary.

FC-Foreign Country.

FICA-Federal Insurance Contributions Act.

FISC-Foreign International Sales Company.

BK-Bank.

B.T.A .- Board of Tax Appeals.

C-Individual.

C.B .- Cumulative Bulletin.

CFR-Code of Federal Regulations.

CI-City.

Numerical Finding List1

Notices-Continued:

Revenue Procedures-Continued:

Bulletins 2003-1 through 2003-25

2003-14, 2003-8 I.R.B. 515

2003-17, 2003-6 I.R.B. 427

2003-15, 2003-9 I.R.B. 540

2003-18, 2003-6 I.R.B. 439

Announcements:

2003-16, 2003-10 I.R.B. 575

2003-19, 2003-5 I.R.B. 371

2003-17, 2003-12 I.R.B. 633

2003-20, 2003-6 I.R.B. 445

2003-1, 2003-2 I.R.B. 281

2003-18, 2003-14 I.R.B. 699

2003-21, 2003-6 I.R.B. 448

2003-2, 2003-3 I.R.B. 301

2003-19, 2003-14 I.R.B. 703

2003-22, 2003-10 I.R.B. 577

2003-3, 2003-4 I.R.B. 361

2003-20, 2003-19 I.R.B. 894

2003-23, 2003-11 I.R.B. 599

2003-4, 2003-5 I.R.B. 396

2003-21, 2003-17 I.R.B. 817

2003-24, 2003-11 I.R.B. 599

2003-5, 2003-5 I.R.B. 397

2003-22, 2003-18 I.R.B. 851

2003-25, 2003-11 I.R.B. 601

2003-6, 2003-6 I.R.B. 450

2003-23, 2003-17 I.R.B. 821

2003-26, 2003-13 I.R.B. 666

2003-7, 2003-6 I.R.B. 450

2003-24, 2003-18 I.R.B. 853

2003-27, 2003-13 I.R.B. 667

2003-8, 2003-6 I.R.B. 451

2003-25, 2003-18 I.R.B. 855

2003-28, 2003-16 I.R.B. 759

2003-9, 2003-7 I.R.B. 490

2003-26, 2003-18 I.R.B. 855

2003-29, 2003-20 I.R.B. 917

2003-10, 2003-7 I.R.B. 490

2003-27, 2003-19 I.R.B. 898

2003-30, 2003-17 I.R.B. 822

2003-11, 2003-10 I.R.B. 585

2003-28, 2003-22 I.R.B. 971

2003-31, 2003-17 I.R.B. 838

2003-12, 2003-10 I.R.B. 585

2003-29, 2003-20 I.R.B. 917

2003-32, 2003-16 I.R.B. 803

2003-13, 2003-11 I.R.B. 603

2003-30, 2003-25 I.R.B. 1044

2003-33, 2003-16 I.R.B. 803

2003-14, 2003-11 I.R.B. 603

2003-31, 2003-21 I.R.B. 948

2003-34, 2003-18 I.R.B. 856

2003-15, 2003-11 I.R.B. 605

2003-32, 2003-21 I.R.B. 949

2003-35, 2003-20 I.R.B. 919

2003-16, 2003-12 I.R.B. 641

2003-33, 2003-23 I.R.B. 990

2003-36, 2003-18 I.R.B. 859

2003-17, 2003-15 I.R.B. 722

2003-34, 2003-23 I.R.B. 990

2003-37, 2003-21 I.R.B. 950

2003-18, 2003-13 I.R.B. 675

2003-35, 2003-23 I.R.B. 992

2003-38, 2003-24 I.R.B. 1017

2003-19, 2003-15 I.R.B. 723

2003-36, 2003-23 I.R.B. 992

2003-39, 2003-22 I.R.B. 971

2003-20, 2003-15 I.R.B. 750

2003-40, 2003-25 I.R.B. 1044

2003-21, 2003-17 I.R.B. 846

Proposed Regulations:

2003-41, 2003-25 I.R.B. 1047

2003-22, 2003-17 I.R.B. 846

REG-209500-86, 2003-2 I.R.B. 262

2003-42, 2003-23 I.R.B. 993

2003-23, 2003-16 I.R.B. 808

REG-113007-99, 2003-23 I.R.B. 1004

2003-43, 2003-23 I.R.B. 998

2003-24, 2003-16 I.R.B. 810

REG-104385-01, 2003-12 I.R.B. 634

2003-44, 2003-25 I.R.B. 1051

2003-25, 2003-17 I.R.B. 846

REG-116641-01, 2003-8 I.R.B. 518

Revenue Rulings:

2003-26, 2003-18 I.R.B. 862

REG-125638-01, 2003-5 I.R.B. 373

2003-27, 2003-18 I.R.B. 862

REG-126016-01, 2003-7 I.R.B. 486

2003-1, 2003-3 I.R.B. 291

2003-28, 2003-19 I.R.B. 899

REG-126485-01, 2003-9 I.R.B. 542

2003-2, 2003-2 I.R.B. 251

2003-29, 2003-20 I.R.B. 928

REG-164754-01, 2003-22 I.R.B. 975

2003-3, 2003-2 I.R.B. 252

2003-30, 2003-20 I.R.B. 929

REG-103580-02, 2003-9 I.R.B. 543

2003-4, 2003-2 I.R.B. 253

2003-31, 2003-20 I.R.B. 930

REG-124069-02, 2003-7 I.R.B. 488

2003-5, 2003-2 I.R.B. 254

2003-32, 2003-20 I.R.B. 933

REG-131478-02, 2003-13 I.R.B. 669

2003-6, 2003-3 I.R.B. 286

2003-33, 2003-21 I.R.B. 953

REG-138882-02, 2003-8 I.R.B. 522

2003-7, 2003-5 I.R.B. 363

2003-34, 2003-21 I.R.B. 953

REG-139768-02, 2003-10 I.R.B. 583

2003-8, 2003-3 I.R.B. 290

2003-35, 2003-21 I.R.B. 956

REG-141097-02, 2003-16 I.R.B. 807

2003-9, 2003-4 I.R.B. 303

2003-36, 2003-25 I.R.B. 1093

REG-141659-02, 2003-20 I.R.B. 927

2003-10, 2003-3 I.R.B. 288

2003-37, 2003-24 I.R.B. 1025

REG-142605-02, 2003-23 I.R.B. 1010

2003-11, 2003-3 I.R.B. 285

2003-38, 2003-24 I.R.B. 1029

REG-151043-02, 2003-3 I.R.B. 300

2003-12, 2003-3 I.R.B. 283

2003-39, 2003-24 I.R.B. 1030

REG-152524-02, 2003-22 I.R.B. 979

2003-13, 2003-4 I.R.B. 305

2003-41, 2003-25 I.R.B. 1098

REG-157302-02, 2003-24 I.R.B. 1021

2003-14, 2003-4 I.R.B. 302

2003-42, 2003-25 I.R.B. 1104

REG-164464-02, 2003-2 I.R.B. 262

2003-15, 2003-4 I.R.B. 302

Court Decisions:

Revenue Procedures:

2003-16, 2003-6 I.R.B. 401

2003-17, 2003-6 I.R.B. 400

2077, 2003-19 I.R.B. 868

2003-1, 2003-1 I.R.B. 1

2003-18, 2003-7 I.R.B. 467

Notices:

2003-2, 2003-1 I.R.B. 76

2003-19, 2003-7 I.R.B. 468

2003-3, 2003-1 I.R.B. 113

2003-20, 2003-7 I.R.B. 465

2003-1, 2003-2 I.R.B. 257

2003-4, 2003-1 I.R.B. 123

2003-21, 2003-8 I.R.B. 509

2003-2, 2003-2 I.R.B. 257

2003-5, 2003-1 I.R.B. 163

2003-22, 2003-8 I.R.B. 494

2003-3, 2003-2 I.R.B. 258

2003-6, 2003-1 I.R.B. 191

2003-23, 2003-8 I.R.B. 511

2003-4, 2003-3 I.R.B. 294

2003-7, 2003-1 I.R.B. 233

2003-24, 2003-10 I.R.B. 557

2003-5, 2003-3 I.R.B. 294

2003-8, 2003-1 I.R.B. 236

2003-25, 2003-13 I.R.B. 642

2003-6, 2003-3 I.R.B. 298

2003-9, 2003-8 I.R.B. 516

2003-26, 2003-10 I.R.B. 563

2003-7, 2003-4 I.R.B. 310

2003-10, 2003-2 I.R.B. 259

2003-27, 2003-11 I.R.B. 597

2003-8, 2003-4 I.R.B. 310

2003-11, 2003-4 I.R.B. 311

2003-28, 2003-11 I.R.B. 594

2003-9, 2003-5 I.R.B. 369

2003-12, 2003-4 I.R.B. 316

2003-29, 2003-11 I.R.B. 587

2003-10, 2003-5 I.R.B. 369

2003-13, 2003-4 I.R.B. 317

2003-30, 2003-13 I.R.B. 659

2003-11, 2003-6 I.R.B. 422

2003-14, 2003-4 I.R.B. 319

2003-31, 2003-13 I.R.B. 643

2003-12, 2003-6 I.R.B. 422

2003-15, 2003-4 I.R.B. 321

2003-32, 2003-14 I.R.B. 689

2003-13, 2003-8 I.R.B. 513

2003-16, 2003-4 I.R.B. 359

2003-33, 2003-13 I.R.B. 642

1 A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 2002-26 through 2002-52 is
in Internal Revenue Bulletin 2003-1, dated January 6, 2003.

Revenue Rulings-Continued:

2003-34, 2003-17 I.R.B. 813
2003-35, 2003-14 I.R.B. 687
2003-36, 2003-18 I.R.B. 849
2003-37, 2003-15 I.R.B. 717
2003-38, 2003-17 I.R.B. 811
2003-39, 2003-17 I.R.B. 811
2003-40, 2003-17 I.R.B. 813
2003-41, 2003-17 I.R.B. 814
2003-42, 2003-16 I.R.B. 754
2003-43, 2003-21 I.R.B. 935
2003-44, 2003-18 I.R.B. 848
2003-45, 2003-19 I.R.B. 876
2003-46, 2003-19 I.R.B. 878
2003-47, 2003-19 I.R.B. 866
2003-48, 2003-19 I.R.B. 863
2003-49, 2003-20 I.R.B. 903
2003-50, 2003-21 I.R.B. 944
2003-51, 2003-21 I.R.B. 938
2003-52, 2003-22 I.R.B. 960
2003-53, 2003-22 I.R.B. 969
2003-54, 2003-23 I.R.B. 982
2003-55, 2003-22 I.R.B. 961
2003-56, 2003-23 I.R.B. 985
2003-57, 2003-22 I.R.B. 959
2003-58, 2003-22 I.R.B. 959
2003-59, 2003-24 I.R.B. 1014
2003-60, 2003-23 I.R.B. 987
2003-61, 2003-24 I.R.B. 1015
2003-62, 2003-25 I.R.B. 1034
2003-63, 2003-25 I.R.B. 1037
2003-64, 2003-25 I.R.B. 1036
2003-65, 2003-25 I.R.B. 1035

## Tax Conventions:

Ann. 2003-21, 2003-17 I.R.B. 846

Treasury Decisions:

9024, 2003-5 I.R.B. 365

9025, 2003-5 I.R.B. 362
9026, 2003-5 I.R.B. 366

9027, 2003-6 I.R.B. 413

9028, 2003-6 I.R.B. 415
9029, 2003-6 I.R.B. 403
9030, 2003-8 I.R.B. 495
9031, 2003-8 I.R.B. 504
9032, 2003-7 I.R.B. 471

9033, 2003-7 I.R.B. 483

9034, 2003-7 I.R.B. 453
9035, 2003-9 I.R.B. 528
9036, 2003-9 I.R.B. 533
9037, 2003-9 I.R.B. 535
9038, 2003-9 I.R.B. 524
9039, 2003-10 I.R.B. 561
9040, 2003-10 I.R.B. 568
9041, 2003-8 I.R.B. 510
9042, 2003-10 I.R.B. 564
9043, 2003-12 I.R.B. 611
9044, 2003-14 I.R.B. 690
9045, 2003-12 I.R.B. 610
9046, 2003-12 I.R.B. 614
9047, 2003-14 I.R.B. 676
9048, 2003-13 I.R.B. 644
9049, 2003-14 I.R.B. 685
9050, 2003-14 I.R.B. 693
9051, 2003-16 I.R.B. 755
9052, 2003-19 I.R.B. 879
9053, 2003-20 I.R.B. 914
9054, 2003-20 I.R.B. 909

Treasury Decisions-Continued:

9055,

2003-21 I.R.B. 945

9056,

2003-21 I.R.B. 940

9057,

2003-22 I.R.B. 964

9058,

2003-22 I.R.B. 962

ili
2003-26 I.R.B.

Finding List of Current Actions on Previously Published Items2

Proposed Regulations-Continued: REG-143321-02

Revenue Procedures-Continued: 2002-9

Corrected by

Modified and amplified by

Bulletins 2003-1 through 2003-25

Ann. 2003-12, 2003-10 I.R.B. 585

Rev. Proc. 2003-20, 2003-6 I.R.B. 445 Rev. Rul. 2003-3, 2003-2 I.R.B. 252

Notices:

REG-164464-02

Rev. Rul. 2003-54, 2003-23 I.R.B. 982

97-19

Corrected by

Suspended in part by

Modified by

Ann. 2003-6, 2003-6 I.R.B. 450

Notice 2003-36, 2003-23 I.R.B. 992

Rev. Proc. 2003-1, 2003-1 I.R.B. 1

Revenue Procedures:

2002-20

97-32

83-23

Supplemented by

Revoked by

Supplemented by

Rev. Proc. 2003-26, 2003-13 I.R.B. 666

T.D. 9058, 2003-22 I.R.B. 962

Rev. Proc. 2003-21, 2003-6 I.R.B. 448

2002-22

2000-38

84-37

Modified by

Rev. Proc. 2003-3, 2003-1 I.R.B. 113

Notice 2003-20, 2003-19 I.R.B. 894

Rev. Proc. 2003-1, 2003-1 I.R.B. 1

2002-29

2001-26

93-38

Modified by

Obsoleted by

Rev. Proc. 2003-10, 2003-2 I.R.B. 259

T.D. 9032, 2003-7 I.R.B. 471

Rev. Proc. 2003-15, 2003-4 I.R.B. 321

2002-37

2001-46

97-31

Modified by

Rev. Proc. 2002-34, 2002-18 I.R.B. 856

Notice 2003-6, 2003-3 I.R.B. 298

Rev. Proc. 2003-9, 2003-8 I.R.B. 516

2002-39

2001-69

98-13

Modified by

Modified and superseded by

Obsoleted by

Rev. Proc. 2002-34, 2002-18 I.R.B. 856

Notice 2003-1, 2003-2 I.R.B. 257

T.D. 9032, 2003-7 I.R.B. 471

2002-47

2002-20

98-55

Modified and superseded by

Superseded by

Rev. Proc. 2003-44, 2003-25 I.R.B. 1051

Rev. Proc. 2003-36, 2003-18 I.R.B. 859

Rev. Proc. 2003-43, 2003-23 I.R.B. 998

2002-51

2002-27

2002-1

Superseded by

Clarified by

Superseded by

Rev. Proc. 2003-31, 2003-17 I.R.B. 838

Notice 2003-3, 2003-2 I.R.B. 258

Rev. Proc. 2003-1, 2003-1 I.R.B. 1

2002-52

2002-2

2002-40

Superseded by

Modified by 1

Modified by

Rev. Proc. 2003-2, 2003-1 I.R.B. 76

Rev. Proc. 2003-1, 2003-1 I.R.B.

Ann. 2003-18, 2003-13 I.R.B. 675

2002-53

2002-3

Superseded by

2002-46

Superseded by

Rev. Proc. 2003-30, 2003-17 I.R.B. 822

Modified by

Rev. Proc. 2003-3, 2003-1 I.R.B. 113

Notice 2003-10, 2003-5 I.R.B. 369

2002-57

2002-4

Superseded by

Proposed Regulations:

Superseded by Rev. Proc. 2003-4, 2003-1 I.R.B. 123

Rev. Proc. 2003-28, 2003-16 I.R.B. 759

REG-209500-86

2002-67

Corrected by

2002-5

Supplemented by

Ann. 2003-6, 2003-6 I.R.B. 450

Superseded by Rev. Proc. 2003-5, 2003-1 I.R.B. 163

Ann. 2003-3, 2003-4 I.R.B. 361

REG-103829-99

2002-75

Corrected by

2002-6

Superseded by

Ann. 2003-12, 2003-10 I.R.B. 585 REG-126485-01

Superseded by Rev. Proc. 2003-6, 2003-1 I.R.B. 191

Rev. Proc. 2003-3, 2003-1 I.R.B. 113

2003-3

Withdrawn by

2002-7

Amplified by

REG-126485-01, 2003-9 I.R.B. 542

Superseded by

Rev. Proc. 2003-14, 2003-4 I.R.B. 319

Corrected by

Rev. Proc. 2003-7, 2003-1 I.R.B. 233

Ann. 2003-25, 2003-17 I.R.B. 846

2002-8

2003-7

REG-164754-01

Superseded by

Corrected by

Supplemented by

Rev. Proc. 2003-8, 2003-1 I.R.B. 236

Ann. 2003-4, 2003-5 I.R.B 396

REG-164754-01, 2003-22 I.R.B. 975

2003-30

REG-131478-02

Corrected by

Ann. 2003-41, 2003-25 I.R.B. 1098

2 A cumulative list of current actions on previously
published items in Internal Revenue Bulletins
2002-26 through 2002-52 is in Internal Revenue
Bulletin 2003-1, dated January 6, 2003.

Ann. 2003-24, 2003-16 I.R.B. 810

### Revenue Rulings:

53-131
Modified by
Rev. Rul. 2003-12, 2003-3 I.R.B. 283

57-190
Obsoleted by
Rev. Rul. 2003-18, 2003-7 I.R.B. 467

65-190
Revoked by
Rev. Rul. 2003-3, 2003-2 I.R.B. 252
66-118
Distinguished by
Rev. Rul. 2003-41, 2003-17 I.R.B. 814
68-345
Obsoleted by
Rev. Rul. 2003-54, 2003-23 I.R.B. 982
69-372
Revoked by
Rev. Rul. 2003-3, 2003-2 I.R.B. 252

70-140
Distinguished by
Rev. Rul. 2003-51, 2003-21 I.R.B. 938
70-522
Distinguished by
Rev. Rul. 2003-51, 2003-21 I.R.B. 938
79-70
Distinguished by
Rev. Rul. 2003-51, 2003-21 I.R.B. 938
79-194
Distinguished by
Rev. Rul. 2003-51, 2003-21 I.R.B. 938

86-88
Supplemented by
Rev. Rul. 2003-46, 2003-19 I.R.B. 878
88-36

Supplemented by
Rev. Rul. 2003-46, 2003-19 I.R.B. 878

92-19
Supplemented in part by
Rev. Rul. 2003-24, 2003-10 I.R.B. 557

2000-49
Modified and superseded by
Rev. Rul. 2003-49, 2003-20 I.R.B. 903

2002-80
Distinguished by
Rev. Rul. 2003-43, 2003-21 I.R.B. 935
2003-2
Revoked by
Rev. Rul. 2003-22, 2003-8 I.R.B. 494

Treasury Decisions:

9002
Corrected by
Ann. 2003-8, 2003-6 I.R.B. 451

9021
Corrected by
Ann. 2003-16, 2003-12 I.R.B. 641

Treasury Decisions-Continued:

9022
Supplemented by
Ann. 2003-7, 2003-6 I.R.B. 450
Corrected by
Ann. 2003-11, 2003-10 I.R.B. 585

9048
Corrected by
Ann. 2003-23, 2003-16 I.R.B. 808

Internal Revenue Bulletin 2003-26 (PDF rendition): IRS Revenue Procedures

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