Internal Revenue Bulletin 2009-6 (PDF rendition): IRS Revenue Procedures

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Bulletin No. 200
9-6
February 9, 2009
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. 2009–5, page 432.
Federal rates; adjusted federal rates; adjusted federal
long-termrateandthelong-termexemptrate.For pur-
poses of sections 382, 642, 1274, 1288, and other sections
of the Code, tables set forth the rates for February 2009.
T.D. 9442, page 434.
Final regulations under section 1502 of the Code provide guid-
ance regarding the treatment of transactions involving debt
obligations and securities between members of a consolidated
group.
Notice 2009–12, page 446.
Allocation of homebuyer credit between unmarried
co-purchasers of a principal residence.This notice
explains how to allocate the first-time homebuyer credit under
section 36 of the Code between unmarried co-purchasers of
aprincipalresidence.
Notice 2009–13, page 447.
This notice provides interim guidance regarding section 7216
of the Code and regulations section 301.7216–2(o), relating to
the ability of a tax return preparer to disclose and use statistical
compilations of anonymous tax return information in support of
the preparer’s tax return preparation business without the con-
sent of the preparer’s taxpayer clients. The notice expands,
during 2009 only, the ability of tax return preparers to disclose
statistical compilations, subject to specific requirements to en-
sure anonymity and other restrictions.
Notice 2009–15, page 449.
This notice sets forth the manner in which the Treasury Depart-
ment and the Service will determine and announce the credit
rates for certain tax credit bonds for purposes of sections
54, 54A, 1400N(l) of the Code, and similar provisions. No-
tice 99–35 obsoleted. Notice 2007–26 modified.
Rev. Proc. 2009–16, page 449.
Section 168(k)(4) guidance.This procedure provides addi-
tional guidance with respect to new section 168(k)(4) of the
Code, which was added by section 3081(a) of the Housing
and Economic Recovery Act of 2008 (the “Housing Act”). This
procedureprovidesguidanceregardingthetimeandmanner
for making the section 168(k)(4) election, the allocation of the
credit limitation increases allowed by this election among mem-
bers of a controlled group, the effect of the election on partner-
ships with corporate partners that make the section 168(k)(4)
election, the application of section 168(k)(4) to S corporations,
and the election under section 3081(b) of the Housing Act by
certain automotive partnerships. Rev. Proc. 2008–65 ampli-
fied and supplemented.
EXEMPT ORGANIZATIONS
Announcement 2009–3, page 459.
The IRS has revoked its determination that the Hoodland Com-
munity Childrens Center of Welches, OR, qualifies as an or-
ganization described in sections 501(c)(3) and 170(c)(2) of the
Code.
Finding Lists begin on page ii.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax law with
integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
February 9, 20092009–6 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 38.—G
eneral
Business Cred
it
Section 168(k
)(4) allows corporations to make an
electiontofo
rgo additional first year depreciation and
insteadtoinc
rease their business credit limitation un-
der section 3
8(c) (including the research credit deter-
mined under s
ection 41) or alternative minimum tax
credit limit
ation under section 53(c). See Rev. Proc.
2009-16, pag
e 449.
Section 41.—Credit for
Increasing Research
Activities
Section 168(k)(4) allows corporations to make an
election to forgo additional first year depreciation and
instead to increase their business credit limitation un-
der section 38(c) (including the research credit deter-
mined under section 41) or alternative minimum tax
credit limitation under section 53(c). See Rev. Proc.
2009-16, page 449.
Section 42.—Low-Income
Housing Credit
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2009. See Rev. Rul. 2009-5, page 432.
Section 52.—Special Rules
All corporations which are treated as a single em-
ployer under section 52(a) (generally any controlled
group of corporations within the meaning of section
1563(a), determined by substituting “more than 50
percent” for “more than 80 percent” each place it
appears in that section) shall be treated as one tax-
payer for purposes of section 168(k)(4) and as having
elected to apply section 168(k)(4) if any such corpo-
ration so elects. See Rev. Proc. 2009-16, page 449.
Section 53.—Credit for
Prior Year Minimum
Tax Liability
Section 168(k)(4) allows corporations to make an
election to forgo additional first year depreciation and
instead to increase their business credit limitation un-
der section 38(c) (including the research credit deter-
mined under section 41) or alternative minimum tax
credit limitation under section 53(c). See Rev. Proc.
2009-16, page 449.
Section 54.—C
redit to
Holders of Cle
an Renewable
Energy Bonds
A notice sets f
orth the manner in which the Trea-
sury Departme
nt and the Internal Revenue Service
will determi
ne and announce the credit rates for cer-
tain tax cred
it bonds for purposes of sections 54, 54A,
1400N(l), an
d similar provisions. See Notice 2009-
15, page 449.
Section 54A.—Credit to
Holders of Qualified Tax
Credit Bonds
A notice sets forth the manner in which the Trea-
sury Department and the Internal Revenue Service
will determine and announce the credit rates for cer-
tain tax credit bonds for purposes of sections 54, 54A,
1400N(l), and similar provisions. See Notice 2009-
15, page 449.
Section 16
8.—Accelerated
Cost Recov
ery System
Section 16
8(k)(4) allows corporations to make an
election t
o forgo additional first year depreciation and
instead t
o increase their business credit limitation un-
der secti
on 38(c) (including the research credit deter-
mined und
er section 41) or alternative minimum tax
credit li
mitation under section 53(c). See Rev. Proc.
2009-16,
page 449.
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term rates
are set forth for the month of February 2009. See Rev.
Rul. 2009-5, page 432.
Section 382.—Limitation
on Net Operating Loss
Carryfo
rwards and Certain
Built-In Losses Following
Ownership Change
The adjusted applicable federal long-term rate is
set forth for the month of February 2009. See Rev.
Rul. 2009-5, page 432.
Section 383.—Special
Limitations on Certain
Excess Credits, Etc.
The increases in the business credit limitation un-
der section 38(c) and AMT credit limitation under
section 53(c)
that result from a section 168(k)(4) elec-
tiondonotall
ow a taxpayer to utilize credit carryfor-
wards that are
otherwise limited by section 383. See
Rev. Proc. 200
9-16, page 449.
Section 412.—Minimum
Funding Standards
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2009. See Rev. Rul. 2009-5, page 432.
Section 467.—Certain
Payments for the Use of
Property or Services
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2009. See Rev. Rul. 2009-5, page 432.
Section 468.—Special
Rules for Mining and Solid
Waste Reclamation and
Closing Costs
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2009. See Rev. Rul. 2009-5, page 432.
Section 482.—Allocation
of Income and Deductions
Among Taxpayers
Federal short-term, mid-term, and long-term rates
are set forth for the month of February 2009. See Rev.
Rul. 2009-5, page 432.
Section 483.—Interest on
Certain Deferred Payments
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2009. See Rev. Rul. 2009-5, page 432.
Section 642.—Special
Rules for Credits and
Deductions
Federal short-term, mid-term, and long-term rates
are set forth for the month of February 2009. See Rev.
Rul. 2009-5, page 432.
2009–6 I.R.B.431February 9, 2009

Section 702.—Income and
Credits for Partner
If a corporation makes the section 168(k)(4)
election and is a partner in a partnership (electing
corporate partner), the partnership must provide the
electing corporate partner with sufficient information
to apply section 168(k)(4)(G)(ii) in determining its
distributive share of partnership items under section
702 relating to any eligible qualified property placed
in service by the partnership during the taxable
year. This information must be provided in the time
and manner required by section 6031(b) and sec-
tion 1.6031(b)–IT(a)(3)(ii) and (b). See Rev. Proc.
2009-16, page 449.
Section 807.—Rules for
Certain Reserves
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2009. See Rev. Rul. 2009-5, page 432.
Section 846
.—Discounted
Unpaid Loss
es Defined
The adjuste
d applicable federal short-term, mid-
term, and lo
ng-term rates are set forth for the month
of Februar
y 2009. See Rev. Rul. 2009-5, page 432.
Section 1274.—Determi-
nation of Issue Price in the
Case of Certain Debt Instru-
ments Issued for Property
(Also Sections 42, 280G, 382, 412, 467, 468, 482,
483, 642, 807, 846, 1288, 7520, 7872.)
Federal rates; adjusted federal rates;
adjusted federal long-term rate and the
long-term exempt rate.For purposes of
sections 382, 642, 1274, 1288, and other
sections of the Code, tables set forth the
rates for February 2009.
Rev. Rul. 2009–5
This revenue ruling provides various
prescribed rates for federal income tax
purposes for February 2009 (the current
month). Table 1 contains the short-term,
mid-term, and long-term applicable fed-
eral rates (AFR) for the current month
for purposes of section 1274(d) of the
Internal Revenue Code. Table 2 contains
the short-term, mid-term, and long-term
adjusted applicable federal rates (adjusted
AFR) for the current month for purposes
of section 1288(b). Table 3 sets forth the
adjusted federal long-term rate and the
long-term tax-exempt rate described in
section 382(f). Table 4 contains the ap-
propriate percentages for determining the
low-income housing credit described in
section 42(b)(1) for buildings placed in
service during the current month. How-
ever, under section 42(b)(2), the applicable
percentage for non-federally subsidized
new buildings placed in service after July
30, 2008, and before December 31, 2013,
shall not be less than 9%. Finally, Table
5 contains the federal rate for determining
the present value of an annuity, an interest
for life or for a term of years, or a remain-
der or a reversionary interest for purposes
of section 7520.
REV. RUL. 2009–5 TABLE 1
Applicable Federal Rates (AFR) for February 2009
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
AFR.60%.60%.60%.60%
110% AFR.66%.66%.66%.66%
120% AFR.72%.72%.72%.72%
130% AFR.78%.78%.78%.78%
Mid-term
AFR
1.65%
1.64%1.64%1.63%
110% AFR1.81%1.80%1.80%1.79%
120% AFR1.98%1.97%1.97%1.96%
130% AFR2.14%2.13%2.12%2.12%
150% AFR
2.48%2.46%
2.45%2.45%
175% AFR
2.89%2.87%2.86%
2.85%
Long-term
AFR2.96%2.94%2.93%2.92%
110% AFR3.26%3.23%3.22%3.21%
120% AFR
3.56%3.53%3.51%3.50%
130% AFR3.86%3.82%3.80%3.79%
February 9, 20094322009–6 I.R.B.

REV. RUL. 2009–5 TABLE 2
Adjusted AFR for February 2009
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term adj
usted
AFR
1.50%
1.49%1.49%1.49%
Mid-term adjusted AFR2.83%2.81%2.80%2.79%
Long-term adjusted
AFR
5.27%5.20%5.17%5.14%
REV. RUL. 2009–5 TABLE 3
Rates Under Section 382 for February 2009
Adjusted federal long-term rate for the current month
5.27%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted
federal long-term rates for the current month and the prior two months.)5.49%
REV. RUL. 2009–5 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for February 2009
Note: Under Section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July
30, 2008, and before December 31, 2013, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit
7.53%
Appropriate percentage for the 30% present value low-income housing credit3.23%
REV. RUL. 2009–5 TABLE 5
Rate Under Section 7520 for February 2009
Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,
or a remainder or reversionary interest2.0%
Section 1288.—Treatment
of Original Issue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2009. See Rev. Rul. 2009-5, page 432.
Section 1374.—Tax
Imposed on Certain
Built-In Gains
Under section 1374(b)(3)(B), an S corporation is
allowed as a credit against the section 1374(a) tax any
business and AMT credit carryforwards that arose in
a taxable year in which the corporation was a C cor-
poration. The section 168(k)(4) election does not in-
crease the S corporation’s section 1374(b)(3)(B) lim-
itations and, therefore, if the section 168(k)(4) elec-
tion is made an S corporation may not claim business
credits or AMT credits in excess of its section 1374(a)
tax for the taxable year. Any credits allowed as a re-
sult of the increases in the business or AMT credit
limitations, which may be used only as an additional
credit against the section 1374(a) tax, are not refund-
able to the S corporation. See Rev. Proc. 2009-16,
page 449.
Section 1400N.—Tax
Benefits for Gulf
Opportunity Zone
A notice sets forth the manner in which the Trea-
sury Department and the Internal Revenue Service
will determine and announce the credit rates for cer-
tain tax credit bonds for purposes of sections 54, 54A,
1400N(l), and similar provisions. See Notice 2009-
15, page 449.
Section 1502.—Regulations
If all members of a controlled group are members
of an affiliated group of corporations that file a con-
solidated return (hereinafter, a “consolidated group”),
the common parent (within the meaning of section
1.1502–77(a)(1)(i)) of the consolidated group makes
the section 168(k)(4) election on behalf of all mem-
bers of the consolidated group. A section 168(k)(4)
election (or the lack of a section 168(k)(4) election)
made by a consolidated group (or a controlled group
in which the consolidated group is a member) applies
to any eligible qualified property placed in service by
a member of the consolidated group during a consoli-
dated return year, even if such member is not a mem-
ber of the consolidated group on the date that con-
trolled group membership is determined under this
revenue procedure. See Rev. Proc. 2009-16, page
449.
2009–6 I.R.B.433February 9, 2009

26 CFR 1.1502–13: Intercompany transactions.
T.D. 9442
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Consolidated Returns;
Intercompany Obligations
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains final
regulations under section 1502 of the In-
ternal Revenue Code (Code). The regula-
tions provide guidance regarding the treat-
ment of transactions involving obligations
between members of a consolidated group.
These final regulations will affect affili-
ated groups of corporations filing consoli-
dated returns.
DATES:Effective Date:These regulations
are effective on December 24, 2008.
Applicability Date:For dates of ap-
plicability, see §§1.1502–13(g)(8) and
1.1502–28(d).
FOR FURTHER INFORMATION
CONTACT: Frances Kelly, (202)
622–7770 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On September 28, 2007, the IRS and the
Treasury Department published a notice of
proposed rulemaking (REG–107592–00,
2007–44 I.R.B. 908) in theFederal Reg-
ister(72 FR 55139) (the 2007 Proposed
Regulations) which proposed to amend
§1.1502–13(g) (regarding the treatment
of transactions involving obligations be-
tween members of a consolidated group)
and to add §1.1502–13(e)(2)(ii)(C) (re-
garding the treatment of certain trans-
actions involving the provision of in-
surance between members of a con-
solidated group). The 2007 Proposed
Regulations replaced an earlier pro-
posal (REG–105964–98, 1999–1 C.B. 22
[63 FR 70354]), published in theFederal
Registeron December 21, 1998, which
was withdrawn.
On February 25, 2008, the IRS and the
Treasury Department published a notice
(Announcement 2008–25, 2008–14 I.R.B.
732) in theFederal Register(73 FR 9972)
withdrawing the portion of the 2007 Pro-
posed Regulations relating to the treatment
of intercompany insurance transactions.
No public hearing regarding the remaining
portion of the 2007 Proposed Regulations
was requested or held. However, written,
electronic, and oral comments were re-
ceived. After consideration of all of the
comments, the 2007 Proposed Regulations
are adopted as revised by this Treasury
decision. The principal comments and
changes are discussed in this preamble.
Explanation of Provisions
Former Regulations Under §1.1502–13(g)
(the Former Regulations)
An intercompany obligation is gen-
erally defined as an obligation between
members of a consolidated group, but
only for the period during which both the
creditor and debtor are members of the
group. The Former Regulations under
§1.1502–13(g) (the 1995 regulations and
the 1998 proposed regulations, as in effect
before these final regulations), prescribe
rules relating to the treatment of trans-
actions involving such obligations, and
apply generally to three broad categories
of transactions; transactions in which an
obligation between a group member and
a nonmember becomes an intercompany
obligation (inbound transactions), transac-
tions in which an intercompany obligation
ceases to be an intercompany obligation
(outbound transactions), and transactions
in which an intercompany obligation is
assigned or extinguished within the con-
solidated group (intragroup transactions).
For all three types of transactions, the
intercompany obligation is treated as sat-
isfied and, if it remains outstanding, reis-
sued as a new obligation (the deemed sat-
isfaction-reissuance model).
Significant Changes Made by the 2007
Proposed Regulations
The 2007 Proposed Regulations make
several significant changes to the Former
Regulations, principally with respect to in-
tragroup and outbound transactions.
First, the 2007 Proposed Regulations
simplify the mechanics of the deemed sat-
isfaction-reissuancemodel by separating
the deemed transactions from the actual
transaction. In general, the new model
deems the following sequence of events
to occur immediately before, and indepen-
dently of, the actual transaction: (i) the
debtor is deemed to satisfy the obligation
for a cash amount equal to the obligation’s
fair market value, and (ii) the debtor is
deemed to immediately reissue the obliga-
tion to the original creditor for that same
cash amount. The parties are then treated
as engaging in the actual transaction but
with the new obligation.
Second, the 2007 Proposed Regulations
provide that for transactions where it is
appropriate to require a deemed satisfac-
tion and reissuance, the intercompany obli-
gation generally should be deemed satis-
fied and reissued for its fair market value
(rather than issue price determined under
the original issue discount principles of
sections 1273 and 1274).
Third, the 2007 Proposed Regulations
narrow the scope of intragroup and out-
bound transactions that trigger the deemed
satisfaction-reissuance model by provid-
ing a number of exceptions to its appli-
cation. A deemed satisfaction and reis-
suance generally is not required for these
excepted transactions either because it is
not necessary to apply the deemed satis-
faction-reissuance model to carry out the
purposes of §1.1502–13(g) or because the
burdens associated with valuing the obli-
gation or applying the mechanics of the
deemed satisfaction-reissuance model out-
weigh the benefits achieved by its applica-
tion.
Finally, the 2007 Proposed Regulations
include two anti-abuse rules, the “material
tax benefit rule” and the “off-market is-
suance rule,” which are intended to prevent
distortions of consolidated taxable income
resulting from the shifting of built-in items
from intercompany obligations, or from
the issuance of obligations at a materially
off-market rate of interest through the ma-
nipulation of a member’s tax attributes or
stock basis. These rules are aimed at in-
tragroup transactions otherwise excepted
from the deemed satisfaction-reissuance
model (to ensure that the exceptions can-
not be used to distort consolidated taxable
income through intragroup transactions)
and similar direct lending transactions.
February 9, 20094342009–6 I.R.B.

General Comments
In general, commentators have been
supportive of the 2007 Proposed Regu-
lations, particularly with respect to the
simplified mechanics of the deemed sat-
isfaction-reissuance model and the avail-
ability of exceptions to its application.
However, concerns have been raised re-
garding the application of the material tax
benefit rule and the off-market issuance
rule. The principal comments made with
respect to these rules and other significant
provisions, as well as the changes made in
the final regulations in response to these
comments, are discussed in this preamble.
A.Anti-Abuse Rules
As proposed, the material tax benefit
rulegenerallyappliestoanintragroupas-
signment or extinguishment otherwise ex-
cepted from the deemed satisfaction-reis-
suance model. Under this rule, if, at the
time of the assignment or extinguishment,
it is reasonably foreseeable that the shift-
ing of built-in items from an intercompany
obligation between members will secure
a material tax benefit, the intercompany
transaction will be subject to the deemed
satisfaction-reissuance model.
The proposed off-market issuance rule
generally applies if an intercompany obli-
gation is issued at a materially off-market
rate of interest, and at the time of issuance,
it is reasonably foreseeable that the shift-
ing of built-in items from the obligation
will secure a material tax benefit. In such
cases, the intercompany obligation will be
treated as originally issued for its fair mar-
ket value, and any difference between the
amount loaned and the fair market value
of the obligation will be treated as trans-
ferred between the creditor member and
the debtor member, as appropriate (for ex-
ample, as a distribution or a contribution to
capital).
While acknowledging certain benefits
of the “reasonably foreseeable” test, com-
mentators believed that it would be dif-
ficult to apply because the results of the
test would not be easily determined. These
commentators suggested that, for purposes
of determining the applicability of each
of the rules, the “reasonably foreseeable”
test be replaced with a test that placed
more emphasis on the intent of the par-
ties at the time of the transaction (or is-
suance). Specifically, they recommended
that the rules apply if “a principal pur-
pose” of the transaction (or the issuance)
was to secure a material tax benefit. If
such a test were adopted, the commen-
tators also thought it appropriate to pro-
vide certain pro-government presumptions
in cases where the facts surrounding the
transaction suggested such intent.
These final regulations adopt the com-
mentators’ suggestions that the rules
should be “intent-based.” However, con-
sistent with other consolidated return
anti-abuse rules, these final regulations
provide that the rules’ application will be
determined based upon a “with a view”
standard and eliminate the requirement
that the tax benefit to be secured by the
transaction (or issuance) be material. In
addition, because the IRS and the Trea-
sury Department remain concerned about
distortions that could result from transfers
of intercompany obligations in section
351 exchanges that are excepted from the
deemed satisfaction and reissuance model,
these final regulations also adopt more
specific rules regarding such transfers (de-
scribed in part C.3.a. of this Preamble).
B.Deemed Satisfaction and Reissuance
forFairMarketValue
Commentators were generally support-
ive of the 2007 Proposed Regulations’
use of fair market value as the amount
for which an intercompany obligation is
deemed satisfied and reissued. However,
commentators also noted the difficulty in
valuing intercompany obligations. Based
upon these comments, the IRS and the
Treasury Department are continuing to
study whether it is appropriate to include
certain simplifying presumptions in deter-
mining value, and comments are requested
in this regard.
C.Exceptions and Related Provisions
1.Overlap of Exceptions and Deemed
Exchanges under §1.1001–3
The 2007 Proposed Regulations pro-
vide a number of special rules for trans-
actions in which intercompany debt is ex-
changed for newly issued intercompany
debt. With respect to these intragroup
debt-for-debt exchanges, the newly issued
obligation generally is treated as issued for
its fair market value, and the intercompany
debt is deemed satisfied and reissued for its
fair market value.
Commentators questioned whether this
latter rule applied only in cases in which
the intragroup debt-for-debt exchange in-
volved a single issuer or also in cases in
which the obligations had different issuers.
The requirement is intended to apply in
both such cases. Because the language
of the 2007 Proposed Regulations encom-
passes both of these situations, this rule has
been retained without change.
However, the 2007 Proposed Regu-
lations also contain an exception to the
deemed satisfaction-reissuance model for
certain routine debt modifications involv-
ing a single issuer (the routine modifica-
tion exception). This exception applies if
all of the rights and obligations under an
intercompany obligation are extinguished
in an exchange (or deemed exchange under
§1.1001–3) for a newly issued intercom-
pany obligation, and the issue price of the
new obligation equals both the adjusted
issue price and basis of the extinguished
obligation.
In addition to the routine modification
exception, the 2007 Proposed Regulations
except from the deemed satisfaction-reis-
suance model many transactions that
involve the assumption of a debtor mem-
ber’s obligations under an intercompany
obligation (for example, an assumption
of an intercompany obligation in connec-
tion with an intercompany nonrecognition
transaction). A number of commentators
noted that, in some cases, these assump-
tion transactions also may be a significant
modification of the instrument resulting in
a deemed exchange under §1.1001–3. In
such cases, commentators questioned how
the deemed exchange interacted with the
various exceptions to the deemed satisfac-
tion-reissuance model.
The IRS and the Treasury Department
believe that a deemed exchange under
§1.1001–3 that results from an assump-
tion transaction should be subject to the
same set of rules and exceptions as apply
to an actual two-party exchange of a debt
instrument. Thus, even if the assumption
transaction is excepted from the deemed
satisfaction-reissuance model, any deemed
exchange resulting from the assumption
would be a triggering transaction poten-
tially subject to the model. However, in
most such cases the deemed exchange will
2009–6 I.R.B.435February 9, 2009

generally qualify for the routine modifi-
cation exception and thus not require a
deemed satisfaction-reissuance.
Accordingly, these final regulations
clarify that the routine modification ex-
ception applies to a deemed exchange of
intercompany debt for intercompany debt
that occurs under §1.1001–3 as a result of
an assumption transaction. Specifically,
these final regulations provide that, solely
for purposes of this exception, a newly is-
sued intercompany obligation will include
an obligation that is issued (or deemed
issued) by a member other than the origi-
nal debtor if such other member assumes
the original debtor’s obligations in cer-
tain excepted transactions (intercompany
nonrecognition exchanges or intercom-
pany taxable assumption transactions),
and the assumption results in a significant
modification and deemed exchange under
§1.1001–3.
2.Exception for Intercompany Taxable
Assumption Transactions
The 2007 Proposed Regulations pro-
vide an exception to the application of the
deemed satisfaction-reissuance model for
certain intercompany sales or dispositions
of assets where intercompany obligations
are assumed as part of the transaction. This
exception was intended to apply only in
the case of a taxable sale (or other tax-
able disposition) of assets. Commenta-
tors noted, however, that the 2007 Pro-
posed Regulations may be read to apply to
nonrecognition transactions as well as tax-
able transactions. The IRS and the Trea-
sury Department agree with the commen-
tators and have revised the regulation to re-
flect its intended scope. However, as dis-
cussed in this preamble, these final regula-
tions also clarify that the exception for cer-
tain section 351 nonrecognition exchanges
is available for transactions in which a
debtor’s obligation is assumed.
3.Intercompany Nonrecognition
Exchange Exceptions
The 2007 Proposed Regulations pro-
vide an exception to the deemed satisfac-
tion-reissuance model for intercompany
exchanges to which section 332 or 361
apply if neither the creditor nor the debtor
recognize an amount of income, gain, de-
duction, or loss in the transaction, or in
intercompany exchanges to which section
351appliesifnosuchamountisrecog-
nized by the creditor.
a.Section 351 Exception
Commentators questioned whether the
exception for section 351 exchanges is
available only for transactions in which a
creditor assigns an intercompany obliga-
tion or if it also is available for transactions
in which a debtor’s obligation under an
intercompany obligation is assumed. The
exception is intended to apply to both such
transactions. Consistent with the excep-
tion for intercompany exchanges under
section 332 and section 361, these final
regulations revise the exception for inter-
company exchanges under section 351 by
providing that it will apply only if neither
the creditor nor the debtor recognizes an
amount.
In addition, because the IRS and the
Treasury Department believe that the as-
signment by a creditor of an intercompany
obligation in an intercompany section 351
exchange presents significant potential for
distortion, these final regulations limit the
availability of the exception for certain
of these section 351 transactions. These
transactions generally involve exchanges
where the transferor or transferee member
has a unique tax attribute or special sta-
tus, where the transferee member issues
preferred stock in the exchange, or where
the stock of the transferee member (or the
stock of a direct or indirect owner of the
transferee member) is disposed of within a
short period after the exchange.
b.Scope of Exception under Section 332
With respect to intercompany ex-
changes under section 332, commentators
requested clarification as to the scope of
the exception, particularly with respect to
the requirement that no amount be rec-
ognized in the exchange. Accordingly,
these final regulations revise the exception
to provide that it applies to exchanges to
which both section 332 and section 337(a)
apply in which no amount is recognized
by either the creditor or debtor member.
c.Gain or Loss With Respect to an
Intercompany Obligation
The exception to the deemed satisfac-
tion-reissuance model for intercompany
exchanges under sections 332, 351, and
361 generally is available if no amount of
income, gain, deduction or loss is recog-
nized. Commentators questioned whether
this exception was available only where
the amount recognized was with respect to
the intercompany obligation. The require-
ment that no amount be recognized in the
exchange applies to amounts recognized
with respect to all assets. In exchanges
where amounts are recognized, the fair
market value of all assets (including the
intercompany obligation) must be deter-
mined. In such cases, the IRS and the
Treasury Department do not believe it is
unduly burdensome to require a deemed
satisfaction and reissuance. Accordingly,
these final regulations retain the language
of the 2007 Proposed Regulations.
4.Outbound Exception for Intercompany
Obligations Newly-Issued in a
Reorganization
The 2007 Proposed Regulations pro-
vide an exception to the deemed satisfac-
tion-reissuance model for the outbound
transfer of an intercompany obligation that
is newly issued in an intragroup reorga-
nization and pursuant to the plan of reor-
ganization, is distributed to a nonmember
shareholder or creditor in a transaction to
which section 361(c) applies. Commenta-
tors generally supported this exception but
also suggested that, under similar circum-
stances, an exception be added to apply to
certain intercompany distributions of an
intercompany obligation if the obligation
is transferred outside of the group within
a relatively short period of time.
The IRS and the Treasury Department
are continuing to study the effects of the
deemed satisfaction-reissuance model on
such intercompany distributions in con-
junction with a broader study regarding the
interaction of section 361 and the inter-
company transaction rules. Accordingly,
these final regulations do not include the
suggested exception. However, the IRS
and the Treasury Department request fur-
ther comments in this regard.
5.Exceptions to the Application of Section
108(e)(4)
The 2007 Proposed Regulations retain
the exceptions in the Former Regulations
for transactions involving an obligation
that becomes (in the context of an inbound
transaction) or became (in the context of
February 9, 20094362009–6 I.R.B.

an intragroup or outbound transaction), an
intercompany obligation by reason of an
event described in §1.108–2(e). In gen-
eral, these events are: (1) acquisitions of
indebtedness with a stated maturity date
within one year of the acquisition date if
the indebtedness is retired on or before that
date (the “short-term debt exception”);
and (2) acquisitions of indebtedness by a
dealer that acquires and disposes of the
indebtedness in the ordinary course of
its business of dealing in securities (the
“dealer exception”).
The short-term debt exception is
premised upon the view that imposition of
the deemed satisfaction-reissuance model
is unwarranted because the indebtedness
would be retired within the short term by
itsownterms(andtheretirementwould
produce the same results as that of the
deemed satisfaction and reissuance). With
respect to the dealer exception, because
the indebtedness’ status as an intercom-
pany obligation is likely transitory, the
burden associated with the deemed satis-
faction-reissuance model does not warrant
its application.
One commentator questioned whether
the short-term debt exception is appropri-
ate because the intragroup retirement of
the instrument may produce items that dif-
fer in character from those that would be
obtained if the instrument were subject to
the deemed satisfaction-reissuance model
upon entering the group. For example, if a
depreciated obligation is deemed satisfied
and reissued immediately after it enters the
group, the attributes of the creditor’s loss
and the debtor’s discharge of indebtedness
income are determined on a separate entity
basis. However, if the instrument is ex-
cepted from the deemed satisfaction-reis-
suance model when it enters the group,
the subsequent retirement of the note may
result, arguably, in a character match of
the creditor’s and debtor’s items. In cases
where the adjusted issue price and basis
of the note differ in amount, the potential
for differing results is amplified. There-
fore, the IRS and the Treasury Department
agree that the short term debt exceptions
for both inbound and intragroup transac-
tions should be eliminated in these final
regulations. The dealer exception has been
retained in these final regulations.
Consistent with the Former Regula-
tions’ treatment of inbound transactions,
the 2007 Proposed Regulations treat the
attributes of the debtor and creditor mem-
ber’s items from the deemed satisfaction
on a separate entity basis. The IRS and the
Treasury Department continue to believe
that separate entity treatment is appropri-
ate for such inbound transactions.
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 is hereby certified that
these regulations do not have a significant
economic impact on a substantial number
of small entities. This certification is based
on the fact that these regulations primarily
affect affiliated groupsof corporations that
have elected to file consolidated returns,
which tend to be larger businesses, and,
moreover, that any burden on taxpayers is
minimal. Therefore,a Regulatory Flexi-
bility Analysis under the Regulatory Flex-
ibility Act (5 U.S.C. chapter 6) is not re-
quired. Pursuant to section 7805(f) of the
Internal Revenue Code, the notice of pro-
posed rulemaking preceding these regula-
tions was submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on its impact on
small business.
Drafting Information
The principal author of these regula-
tions is Frances Kelly, Office of Asso-
ciate Chief Counsel (Corporate). How-
ever, other personnel from the IRS and the
Treasury Department participated in their
development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Sections 1.1502–13 and 1.1502–28 also
issued under 26 U.S.C. 1502. * * *
Par. 2. Section 1.1502–13 is amended
by:
1. Revising the heading and the en-
tries for §1.1502–13(g)(5) in paragraph
(a)(6)(ii).
2. Revising the first sentence of para-
graph (e)(2)(i).
3. Revising paragraph (g).
4. Removing paragraph (j)(9)Example
(5)(c).
The revisions read as follows:
§1.1502–13 Intercompany transactions.
(a) * * *
(6) * * *
(ii) * * *
Obligations of members.
(§1.1502–13(g)(7)(ii))
Example 1. Interest on intercompany
obligation.
Example 2. Intercompany obligation
becomes nonintercompany obligation.
Example 3. Loss or bad debt deduction
with respect to intercompany obligation.
Example 4. Intercompany nonrecogni-
tion transactions.
Example 5. Assumption of intercom-
pany obligation.
Example 6. Extinguishment of inter-
company obligation.
Example 7. Exchange of intercompany
obligations.
Example 8. Tax benefit rule.
Example 9. Issuance at off-market rate
of interest.
Example 10. Nonintercompany obliga-
tion becomes intercompany obligation.
Example 11. Notional principal con-
tracts.
*****
(e) * * *
(2)***(i)***Exceptasprovided
in paragraph (g)(4)(v) of this section (de-
ferral of items from an intercompany obli-
gation), a member’s addition to, or reduc-
tion of, a reserve for bad debts that is main-
tained under section 585 is taken into ac-
count on a separate entity basis. * * *
*****
(g)Obligations of members—(1)In
general. In addition to the general rules of
this section, the rules of this paragraph (g)
apply to intercompany obligations.
(2)Definitions.For purposes of this
section, the following definitions apply—
(i)Obligation of a memberis a debt or
security of a member.
2009–6 I.R.B.437February 9, 2009

(A)Debt of a memberis any obliga-
tion of the member constituting indebted-
ness under general principles of Federal
income tax law (for example, under non-
statutory authorities, or under section 108,
section 163, or §1.1275–1(d)), but not an
executory obligation to purchase or pro-
vide goods or services.
(B)Security of a memberis any se-
curity of the member described in sec-
tion 475(c)(2)(D) or (E), and any com-
modity of the member described in sec-
tion 475(e)(2)(A), (B), or (C), but not if the
security or commodity is a position with
respect to the member’s stock. See para-
graphs (f)(4) and (f)(6) of this section for
special rules applicable to positions with
respect to a member’s stock.
(ii)Intercompany obligationis an obli-
gation between members, but only for the
period during which both parties are mem-
bers.
(iii)Intercompany obligation subgroup
is comprised of two or more members that
include the creditor and debtor on an in-
tercompany obligation if the creditor and
debtor bear the relationship described in
section 1504(a)(1) to each other through an
intercompany obligation subgroup parent.
(iv)Intercompany obligation subgroup
parentis the corporation (including either
the creditor or debtor) that bears the same
relationship to the other members of the in-
tercompany obligation subgroup as a com-
mon parent bears to the members of a con-
solidated group. Any reference to an in-
tercompany obligation subgroup parent in-
cludes, as the context may require, a ref-
erence to a predecessor or successor. For
this purpose, a predecessor is a transferor
ofassetstoatransferee(thesuccessor)in
a transaction to which section 381(a) ap-
plies.
(v)Tax benefitis the benefit of, for Fed-
eral tax purposes, a net reduction in income
or gain, or a net increase in loss, deduc-
tion, credit, or allowance. A tax benefit
includes, but is not limited to, the use of
a built-in item or items from an intercom-
pany obligation to reduce gain or increase
loss on the sale of member stock, or to cre-
ate or absorb a tax attribute of a member or
subgroup.
(vi)Eighty-percent chainis a chain
of two or more corporations in which
stock meeting the requirements of section
1504(a)(2) of each lower-tier member is
held directly by a higher-tier member of
such chain.
(3)Deemed satisfaction and reissuance
of intercompany obligations in triggering
transactions—(i)Scope—(A)Triggering
transactions. For purposes of this para-
graph (g)(3), a triggering transaction in-
cludes the following:
(1)Assignment and extinguishment
transactions. Any intercompany trans-
action in which a member realizes an
amount, directly or indirectly, from the
assignment or extinguishment of all or
part of its remaining rights or obligations
under an intercompany obligation or any
comparable transaction in which a mem-
ber realizes any such amount, directly or
indirectly, from an intercompany obliga-
tion (for example, a mark to fair market
value of an obligation or a bad debt deduc-
tion). However, a reduction of the basis
of an intercompany obligation pursuant
to §1.1502–36(d) (attribute reduction to
prevent duplication of loss), or pursuant
to sections 108 and 1017 and §1.1502–28
(basis reductions upon the exclusion from
gross income of discharge of indebted-
ness) or any other provision that adjusts
the basis of an intercompany obligation as
a substitute for income, gain, deduction,
or loss, is not a comparable transaction.
(2)Outbound transactions.Anytrans-
action in which an intercompany obliga-
tion becomes an obligation that is not an
intercompany obligation.
(B)Exceptions. Except as provided
in paragraph (g)(3)(i)(C) of this section,
a transaction is not a triggering transac-
tion as described in paragraph (g)(3)(i)(A)
of this section if any of the exceptions
in this paragraph (g)(3)(i)(B) apply. In
making this determination, if a creditor
or debtor realizes an amount in a trans-
action in which a creditor assigns all or
part of its rights under an intercompany
obligation to the debtor, or a debtor as-
signs all of or part of its obligations under
an intercompany obligation to the creditor,
the transaction will be treated as an extin-
guishment and will be excepted from the
definition of “triggering transaction” only
if either of the exceptions in paragraphs
(g)(3)(i)(B)(5)or(6) of this section apply.
The exceptions are as follows.
(1)Intercompany section 361, 332,
or 351 exchange. The transaction is an
intercompany exchange to which section
361(a), sections 332 and 337(a), or (except
as provided in the following sentence)
section 351 applies in which no amount
of income, gain, deduction or loss is rec-
ognized by the creditor or debtor. The
assignment of an intercompany obligation
by a creditor member in an intercompany
exchange to which section 351 applies is
a triggering transaction, notwithstanding
the preceding sentence, if a member of
the group is described in, or engages in a
transaction that is described in, any of the
following paragraphs.
(i) The transferor or transferee member
has a loss subject to a limitation (for ex-
ample, a loss from a separate return lim-
itation year that is subject to limitation
under §1.1502–21(c), or a dual consoli-
dated loss that is subject to limitation under
§1.1503(d)–4), but only if the other mem-
ber is not subject to a comparable limita-
tion;
(ii) The transferor or transferee mem-
ber has a special status within the meaning
of §1.1502–13(c)(5) (for example, a bank
defined in section 581, or a life insurance
company subject to tax under section 801)
that the other member does not also pos-
sess;
(iii) A member of the group realizes dis-
charge of indebtedness income that is ex-
cluded from gross income under section
108(a) within the same taxable year as that
of the exchange, and the tax attributes at-
tributable to either the transferor or the
transferee member are reduced under sec-
tions 108, 1017, and §1.1502–28 (except if
the attribute reduction results solely from
the application of §1.1502–28(a)(4) (re-
duction of certain tax attributes attribut-
able to other members));
(iv) The transferee member has a non-
member shareholder;
(v) The transferee member issues pre-
ferred stock to the transferor member in
exchange for the assignment of the inter-
company obligation; or
(vi) The stock of the transferee mem-
ber (or a higher-tier member other than a
higher-tier member of an 80-percent chain
that includes the transferee) is disposed
of within 12 months from the assignment
of the intercompany obligation, unless at
the time of the assignment, the transferor
member, transferee member (or in the case
of successive section 351 exchanges, each
transferor and transferee member) and the
debtor member are all in the same 80-per-
cent chain; and all of the stock of the trans-
February 9, 20094382009–6 I.R.B.

feree (or in the case of successive section
351 exchanges, the lowest-tier transferee)
held by members of the group is disposed
of as part of the same plan or arrangement,
either directly or indirectly, to persons that
are not members of the group.
(2)Intercompany assumption transac-
tion. All of the debtor’s obligations under
an intercompany obligation are assumed in
connection with the debtor’s sale or other
disposition of property (other than solely
money) in an intercompany transaction in
which gain or loss is recognized under sec-
tion 1001.
(3)Exception to the application of sec-
tion 108(e)(4). The obligation became an
intercompany obligation by reason of an
event described in §1.108–2(e)(2) (excep-
tion to the application of section 108(e)(4)
in the case of acquisitions by securities
dealers).
(4)Reserve accounting. The amount
realized is from reserve accounting under
section 585 (see paragraph (g)(4)(v) of this
section for special rules).
(5)Intercompany extinguishment trans-
action. All or part of the rights and obli-
gations under the intercompany obligation
are extinguished in an intercompany trans-
action (other than an exchange or deemed
exchange of an intercompany obligation
for a newly issued intercompany obliga-
tion), the adjusted issue price of the obli-
gation is equal to the creditor’s basis in the
obligation, and the debtor’s correspond-
ing item and the creditor’s intercompany
item (after taking into account the special
rules of paragraph (g)(4)(i)(C) of this sec-
tion) with respect to the obligation offset
in amount.
(6)Routine modification of intercom-
pany obligation. All of the rights and
obligations under the intercompany obli-
gation are extinguished in an intercom-
pany transaction that is an exchange (or
deemed exchange) for a newly issued
intercompany obligation, and the issue
price of the newly issued obligation equals
both the adjusted issue price of the extin-
guished obligation and the creditor’s basis
in the extinguished obligation. Solely
for purposes of the preceding sentence,
a newly issued intercompany obligation
includes an obligation that is issued (or
deemed issued) by a member other than
the original debtor if such other member
assumes the original debtor’s obligations
under the original obligation in a transac-
tion that is described in either paragraph
(g)(3)(i)(B)(1)or(g)(3)(i)(B)(2)ofthis
section and the assumption results in a
significant modification of the original
obligation under §1.1001–3(e)(4) and a
deemed exchange under §1.1001–3(b).
(7)Outbound distribution of newly is-
sued intercompany obligation.Theinter-
company obligation becomes an obliga-
tion that is not an intercompany obligation
in a transaction in which a member that
is a party to the reorganization exchanges
property in pursuance of the plan of re-
organization for a newly issued intercom-
pany obligation of another member that
is a party to the reorganization and dis-
tributes such intercompany obligation to
a nonmember shareholder or nonmember
creditor in a transaction to which section
361(c) applies.
(8)Outbound subgroup exception.The
intercompany obligation becomes an obli-
gation that is not an intercompany obliga-
tion in a transaction in which the members
of an intercompany obligation subgroup
cease to be members of a consolidated
group, neither the creditor nor the debtor
recognize any income, gain, deduction, or
loss with respect to the intercompany obli-
gation, and such members constitute an
intercompany obligation subgroup of an-
other consolidated group immediately af-
ter the transaction.
(C)Tax benefit rule. If an assignment
or extinguishment of an intercompany
obligation in an intercompany transaction
is otherwise excepted from the definition
of triggering transaction under paragraph
(g)(3)(i)(B)(1), (2), (5), or (6)ofthis
section (and not also under paragraph
(g)(3)(i)(B)(3)or(4)ofthissection),and
the assignment or extinguishment is en-
gaged in with a view to shift items of
built-in gain, loss, income, or deduction
from the obligation from one member to
another member in order to secure a tax
benefit (as defined in paragraph (g)(2)(v)
of this section) that the group or its mem-
bers would not otherwise enjoy in a con-
solidated or separate return year, then the
assignment or extinguishment will be a
triggering transaction to which paragraph
(g)(3)(ii) of this section applies.
(ii)Application of deemed satisfaction
and reissuance. This paragraph (g)(3)(ii)
applies if a triggeringtransaction occurs.
(A)General rule. If the intercompany
obligation is debt of a member, then (ex-
cept as provided in the following sentence)
the debt is treated for all Federal income
tax purposes as having been satisfied by
the debtor for cash in an amount equal to
its fair market value, and then as having
been reissued as a new obligation (with a
new holding period but otherwise identi-
cal terms) for the same amount of cash,
immediately before the triggering trans-
action. However, if the creditor realizes
an amount with respect to the debt in the
triggering transaction that differs from the
debt’s fair market value, and the triggering
transaction is not an exchange (or deemed
exchange) of debt of a member for newly
issued debt of a member, then the debt is
treated for all Federal income tax purposes
as having been satisfied by the debtor for
cash in an amount equal to such amount
realized, and reissued as a new obliga-
tion (with a new holding period but other-
wise identical terms)for the same amount
of cash, immediately before the triggering
transaction. If the triggering transaction
is a mark to fair market value under sec-
tion 475, then the intercompany obligation
will be deemed satisfied and reissued for
its fair market value (as determined un-
der section 475 and applicable regulations)
and section 475 will not otherwise apply
with respect to that triggering transaction.
If the intercompany obligation is a security
of a member, similar principles apply (with
appropriate adjustments) to treat the secu-
rity as having been satisfied and reissued
immediately before thetriggering transac-
tion.
(B)Treatment as separate transaction.
The deemed satisfaction and deemed reis-
suance are treated as transactions separate
and apart from the triggering transaction.
The deemed satisfaction and reissuance of
a member’s debt will not cause the debt to
be recharacterized as other than debt for
Federal income tax purposes.
(4)Special rules—(i)Timing and at-
tributes. For purposes of applying the
matching rule and the acceleration rule
to a transaction involving an intercom-
pany obligation (other than a transaction
to which paragraph (g)(5) of this section
applies)—
(A) Paragraph (c)(6)(i) of this section
(treatment of intercompany items if cor-
responding items are excluded or non-
deductible) will not apply to exclude any
amount of income or gain attributable to a
reduction of the basis of the intercompany
2009–6 I.R.B.439February 9, 2009

obligation pursuant to §1.1502–36(d),
or pursuant to sections 108 and 1017
and §1.1502–28 or any other provision
that adjusts the basis of an intercompany
obligation as a substitute for income or
gain;
(B) Paragraph (c)(6)(ii) of this section
(limitation on treatment of intercompany
income or gain as excluded from gross in-
come) does not apply to prevent any in-
tercompany income or gain from the inter-
company obligation from being excluded
from gross income;
(C) Any income, gain, deduction, or
loss from the intercompany obligation
is not subject to section 108(a), section
354, section 355(a)(1), section 1091, or,
in the case of an extinguishment of an in-
tercompany obligation in a transaction in
which the creditor transfers the obligation
to the debtor in exchange for stock in such
debtor, section 351(a); and
(D) Section 108(e)(7) does not apply
upon the extinguishment of an intercom-
pany obligation.
(ii)Newly issued obligation in inter-
company exchange. If an intercompany
obligation is exchanged (or is deemed ex-
changed) for a newly issued intercompany
obligation and the exchange (or deemed
exchange) is not a routine modification of
an intercompany obligation (as described
in paragraph (g)(3)(i)(B)(6)ofthissec-
tion), then the newly issued obligation will
be treated for all Federal income tax pur-
poses as having an issue price equal to its
fair market value.
(iii)Off-market issuance.Ifaninter-
company obligation is issued at a rate of
interest that is materially off-market (off-
market obligation) with a view to shift
items of built-in gain, loss, income, or
deduction from the obligation from one
member to another member in order to se-
cure a tax benefit (as defined in paragraph
(g)(2)(v) of this section), then the inter-
company obligation will be treated, for all
Federal income tax purposes, as originally
issued for its fair market value, and any dif-
ference between the amount loaned and the
fair market value of the obligation will be
treated as transferred between the creditor
and the debtor at the time the obligation is
issued. For example, if S lends $100 to B
in return for an off-market B note valued
at$130,andthenoteisissuedwithaview
toshiftitemsfromthenotetosecureatax
benefit, then the B note will be treated as
issued for $130. The $30 difference will
be treated as a distribution or capital con-
tribution between S and B (as appropriate)
at the time of issuance, and this amount
will be reflected in future payments on the
note as bond issuance premium. An ad-
justment to an off-market obligation un-
der this paragraph (g)(4)(iii) will be made
without regard to the application of, and in
lieu of any adjustment under, section 467
(certain payments for the use of property
or services), 482 (allocations among com-
monly controlled taxpayers), 483 (interest
on certain deferred payments), 1274 (de-
termination of issue price for certain debt
instruments issued for property), or 7872
(treatment of loans with below-market in-
terest rates).
(iv)Deferral of loss or deduction with
respect to nonmember indebtedness ac-
quired in certain debt exchanges. If a cred-
itor transfers an intercompany obligation
to a nonmember (former intercompany
obligation) in exchange for newly issued
debt of a nonmember (nonmember debt),
and the issue price of the nonmember debt
is not determined by reference to its fair
market value (for example, the issue price
is determined under section 1273(b)(4) or
1274(a) or any other provision of appli-
cable law), then any loss of the creditor
otherwise allowable on the subsequent
disposition of the nonmember debt, or any
comparable tax benefit that would other-
wise be available in any other transaction
that directly or indirectly results from the
disposition of the nonmember debt, is de-
ferred until the date the debtor retires the
former intercompany obligation.
(v)Bad debt reserve. A member’s de-
duction under section 585 for an addition
to its reserve for bad debts with respect
to an intercompany obligation is not taken
into account, and is not treated as realized
for purposes of paragraph (g)(3)(i)(A)(1)
of this section, until the intercompany obli-
gation is extinguished or becomes an obli-
gation that is not an intercompany obliga-
tion.
(5)Deemed satisfaction and reissuance
of obligations becoming intercompany
obligations—(i)Application of deemed
satisfaction and reissuance—(A)In gen-
eral. This paragraph (g)(5) applies if an
obligation that is not an intercompany
obligation becomes an intercompany obli-
gation.
(B)Exceptions.This paragraph (g)(5)
does not apply to an intercompany obliga-
tion if either of the following exceptions
apply.
(1)Exception to the application of sec-
tion 108(e)(4). The obligation becomes an
intercompany obligation by reason of an
event described in §1.108–2(e)(2) (excep-
tion to the application of section 108(e)(4)
in the case of acquisitions by securities
dealers); or
(2)Inbound subgroup exception.The
obligation becomes an intercompany obli-
gation in a transaction in which the mem-
bers of an intercompany obligation sub-
group cease to be members of a consol-
idated group, neither the creditor nor the
debtor recognize any income, gain, de-
duction, or loss with respect to the inter-
company obligation, and such members
constitute an intercompany obligation sub-
group of another consolidated group im-
mediately after the transaction.
(ii)Deemed satisfaction and reis-
suance—(A)General rule. If the inter-
company obligation is debt of a member,
then the debt is treated for all Federal
income tax purposes, immediately after
it becomes an intercompany obligation,
as having been satisfied by the debtor
for cash in an amount determined under
the principles of §1.108–2(f), and then as
having been reissued as a new obligation
(with a new holding period but otherwise
identical terms) for the same amount of
cash. If the intercompany obligation is
a security of a member, similar princi-
ples apply (with appropriate adjustments)
to treat the security, immediately after it
becomes an intercompany obligation, as
satisfied and reissued by the debtor for
cash in an amount equal to its fair market
value.
(B)Treatment as separate transaction.
The deemed satisfaction and deemed reis-
suance are treated as transactions separate
and apart from the transaction in which the
debt becomes an intercompany obligation,
and the tax consequences of the transac-
tion in which the debt becomes an inter-
company obligation must be determined
before the deemed satisfaction and reis-
suance occurs. (For example, if the debt
becomes an intercompany obligation in a
transaction to which section 351 applies,
any limitation imposed by section 362(e)
on the basis of the intercompany obliga-
tion in the hands of the transferee member
February 9, 20094402009–6 I.R.B.

is determined before the deemed satisfac-
tion and reissuance.) The deemed satisfac-
tion and reissuance of a member’s debt will
not cause the debt to be recharacterized as
other than debt for Federal income tax pur-
poses.
(6)Special rules—(i)Timing and at-
tributes. If paragraph (g)(5) of this section
applies to an intercompany obligation—
(A) Section 108(e)(4) does not apply;
(B) The attributes of all items taken into
account from the satisfaction of the inter-
company obligation are determined on a
separate entity basis, rather than by treat-
ing S and B as divisions of a single corpo-
ration; and
(C) Any intercompany gain or loss real-
ized by the creditor is not subject to section
354orsection1091.
(ii)Waiver of loss carryovers from sep-
arate return limitation years.Solelyfor
purposes of §1.1502–32(b)(4) and the ef-
fect of any election under that provision,
any loss taken into account under para-
graph (g)(5) of this section by a corpo-
ration that becomes a member as a re-
sult of the transaction in which the obliga-
tion becomes an intercompany obligation
is treated as a loss carryover from a sepa-
rate return limitation year.
(iii)Deduction of repurchase premium
in certain debt exchanges. If an obliga-
tion to which paragraph (g)(5) of this sec-
tion applies is acquired in exchange for the
issuance of an obligation to a nonmem-
ber and the issue price of this newly is-
sued obligation is not determined by ref-
erence to its fair market value (for exam-
ple, the issue price is determined under
section 1273(b)(4) or 1274(a) or any other
provision of applicable law), then, under
the principles of §1.163–7(c), any repur-
chase premium from the deemed satisfac-
tion of the intercompany obligation under
paragraph (g)(5)(ii) of this section will be
amortized by the debtor over the term of
the obligation issued to the nonmember in
the same manner as if it were original is-
sue discount and the obligation to the non-
member had been issued directly by the
debtor.
(7)Examples—(i)In general. For pur-
poses of the examples in this paragraph (g),
unless otherwise stated, interest is qual-
ified stated interest under §1.1273–1(c),
and the intercompany obligations are capi-
tal assets and are not subject to section 475.
(ii) The application of this section to
obligations of members is illustrated by the
following examples:
Example 1.Interest on intercompany obligation.
(i)Facts. On January 1 of year 1, B borrows $100
from S in return for B’s note providing for $10 of in-
terest annually at the end of each year, and repayment
of $100 at the end of year 5. B fully performs its obli-
gations. Under their separate entity methods of ac-
counting, B accrues a $10 interest deduction annually
under section 163, and S accrues $10 of interest in-
come annually under section 61(a)(4) and §1.446–2.
(ii)Matching rule. Under paragraph (b)(1) of this
section, the accrual of interest on B’s note is an in-
tercompany transaction. Under the matching rule, S
takesits$10ofincomeintoaccountineachofyears
1 through 5 to reflect the $10 difference between B’s
$10 of interest expense taken into account and the $0
recomputed expense. S’s income and B’s deduction
are ordinary items. (Because S’s intercompany item
and B’s corresponding item would both be ordinary
on a separate entity basis, the attributes are not rede-
termined under paragraph (c)(1)(i) of this section.)
(iii)Original issue discount.Thefactsarethe
same as in paragraph (i) of thisExample 1, except
that B borrows $90 (rather than $100) from S in re-
turn for B’s note providing for $10 of interest annu-
ally and repayment of $100 at the end of year 5. The
principles described in paragraph (ii) of thisExample
1for stated interest also apply to the $10 of original
issue discount. Thus, as B takes into account its cor-
responding expense under section 163(e), S takes into
account its intercompany income under section 1272.
S’s income and B’s deduction are ordinary items.
(iv)Tax-exempt income. The facts are the same
as in paragraph (i) of thisExample 1,exceptthatB’s
borrowing from S is allocable under section 265 to
B’s purchase of state and local bonds to which sec-
tion 103 applies. The timing of S’s income is the
same as in paragraph (ii) of thisExample 1.Un-
der paragraph (c)(4)(i) of this section, the attributes
of B’s corresponding item of disallowed interest ex-
pense control the attributes of S’s offsetting intercom-
pany interest income. Paragraph (c)(6) of this section
does not prevent the redetermination of S’s intercom-
pany item as excluded from gross income because
section 265(a)(2) permanently and explicitly disal-
lows B’s corresponding deduction and because, un-
der paragraph (g)(4)(i)(B) of this section, paragraph
(c)(6)(ii) of this section does not apply to prevent any
intercompany income from the B note from being ex-
cluded from gross income. Accordingly, S’s inter-
company income is treated as excluded from gross
income.
Example 2.Intercompany obligation becomes
nonintercompany obligation.(i)Facts.OnJanuary
1 of year 1, B borrows $100 from S in return for
B’s note providing for $10 of interest annually at
the end of each year, and repayment of $100 at the
end of year 5. As of January 1 of year 3, B has paid
the interest accruing under the note and S sells B’s
note to X for $70, reflecting an increase in prevailing
market interest rates. B is never insolvent within the
meaning of section 108(d)(3).
(ii)Deemed satisfaction and reissuance. Because
the B note becomes an obligation that is not an in-
tercompany obligation, the transaction is a trigger-
ing transaction under paragraph (g)(3)(i)(A)(2) of this
section. Under paragraph (g)(3)(ii) of this section,
B’s note is treated as satisfied and reissued for its fair
market value of $70 immediately before S’s sale to
X. As a result of the deemed satisfaction of the note
for less than its adjusted issue price, B takes into ac-
count $30 of discharge of indebtedness income under
§1.61–12. On a separate entity basis, S’s $30 loss
would be a capital loss under section 1271(a)(1). Un-
der the matching rule, however, the attributes of S’s
intercompany item and B’s corresponding item must
be redetermined to produce the same effect as if the
transaction had occurred between divisions of a sin-
gle corporation. Under paragraph (c)(4)(i) of this sec-
tion, the attributes of B’s $30 of discharge of indebt-
edness income control the attributes of S’s loss. Thus,
S’s loss is treated as ordinary loss. B is also treated
as reissuing, immediately after the satisfaction, a new
note to S with a $70 issue price, a $100 stated redemp-
tion price at maturity, and a $70 basis in the hands of
S. S is then treated as selling the new note to X for the
$70 received by S in the actual transaction. Because
S has a basis of $70 in the new note, S recognizes no
gain or loss from the sale to X. After the sale, the new
note held by X is not an intercompany obligation, it
has a $70 issue price, a $100 stated redemption price
at maturity, and a $70 basis. The $30 of original issue
discount will be taken into account by B and X under
sections 163(e) and 1272.
(iii)Creditor deconsolidation. The facts are the
same as in paragraph (i) of thisExample 2, except
that P sells S’s stock to X (rather than S selling B’s
note to X). Because the B note becomes an obligation
that is not an intercompany obligation, the trans-
action is a triggering transaction under paragraph
(g)(3)(i)(A)(2)ofthissection. Underparagraph
(g)(3)(ii) of this section, B’s note is treated as sat-
isfied and reissued for its $70 fair market value
immediately before S becomes a nonmember. The
treatment of S’s $30 of loss and B’s $30 of discharge
of indebtedness income is the same as in paragraph
(ii) of thisExample 2. The new note held by S upon
deconsolidation is not an intercompany obligation, it
has a $70 issue price, a $100 stated redemption price
at maturity, and a $70 basis. The $30 of original
issue discount will be taken into account by B and S
under sections 163(e) and 1272.
(iv)Debtor deconsolidation. The facts are the
same as in paragraph (i) of thisExample 2, except
that P sells B’s stock to X (rather than S selling B’s
notetoX).TheresultstoSandBarethesameasin
paragraph (iii) of thisExample 2.
(v)Subgroup exception. The facts are the same
as in paragraph (i) of thisExample 2, except that P
owns all of the stock of S, S owns all of the stock of
B, and P sells all of the S stock to X, the parent of
another consolidated group. Because B and S, mem-
bers of an intercompany obligation subgroup, cease
to be members of the P group in a transaction that
does not cause either member to recognize an item
with respect to the B note, and such members con-
stitute an intercompany obligation subgroup in the X
group, P’s sale of S stock is not a triggering transac-
tion under paragraph (g)(3)(i)(B)(8) of this section,
and the note is not treated as satisfied and reissued
under paragraph (g)(3)(ii) of this section. After the
sale, the note held by S has a $100 issue price, a $100
stated redemption price at maturity, and a $100 basis.
The results are the same if the S stock is sold to an
individual and the S-B affiliated group elects to file
2009–6 I.R.B.441February 9, 2009

a consolidated return for the period beginning on the
day after S and B cease to be members of the P group.
(vi)Section 338 election.The facts are the same
as paragraph (i) of thisExample 2,exceptthatPsells
S’s stock to X and a section 338 election is made with
respect to the stock sale. Under section 338, S is
treated as selling all of its assets to new S, including
the B note, at the close of the acquisition date. The
aggregate deemed sales price (within the meaning of
§1.338–4) allocated to the B note is $70. Because the
B note becomes an obligation that is not an intercom-
pany obligation, the transaction is a triggering trans-
action under paragraph (g)(3)(i)(A)(2)ofthissection.
Under paragraph (g)(3)(ii) of this section, B’s note is
treated as satisfied and reissued immediately before
S’s deemed sale to new S for $70, the amount realized
with respect to the note (the aggregate deemed sales
price allocated to the note under §1.338–6). The re-
sults to S and B are the same as in paragraph (ii) of
thisExample 2.
(vii)Appreciated note. The facts are the same
as in paragraph (i) of thisExample 2,exceptthatS
sells B’s note to X for $130 (rather than $70), reflect-
ing a decline in prevailing market interest rates. Be-
cause the B note becomes an obligation that is not
an intercompany obligation, the transaction is a trig-
gering transaction under paragraph (g)(3)(i)(A)(2)of
this section. Under paragraph (g)(3)(ii) of this sec-
tion, B’s note is treated assatisfied and reissued for
its fair market value of $130 immediately before S’s
sale to X. As a result of the deemed satisfaction of
the note for more than its adjusted issue price, B
takes into account $30 of repurchase premium under
§1.163–7(c). On a separate entity basis, S’s $30 gain
would be a capital gain under section 1271(a)(1). Un-
der the matching rule, however, the attributes of S’s
intercompany item and B’s corresponding item must
be redetermined to produce the same effect as if the
transaction had occurred between divisions of a sin-
gle corporation. Under paragraph (c)(4)(i) of this sec-
tion, the attributes of B’s premium deduction control
the attributes of S’s gain. Accordingly, S’s gain is
treated as ordinary income. B is also treated as reis-
suing, immediately after the satisfaction, a new note
to S with a $130 issue price, $100 stated redemption
price at maturity, and $130 basis in the hands of S. S is
then treated as selling the new note to X for the $130
received by S in the actual transaction. Because S has
a basis of $130 in the new note, S recognizes no gain
or loss from the sale to X. After the sale, the new note
held by X is not an intercompany obligation, it has a
$130 issue price, a $100 stated redemption price at
maturity, and a $130 basis. The treatment of B’s $30
of bond issuance premium under the new note is de-
termined under §1.163–13.
(viii)Deferral of loss or deduction with respect to
nonmember indebtedness acquired in debt exchange.
The facts are the same as in paragraph (i) of this
Example 2, except that S sells B’s note to X for a
non-publicly traded X note with an issue price and
face amount of $100 and a fair market value of $70,
and that, subsequently, S sells the X note for $70. Be-
cause the B note becomes an obligation that is not
an intercompany obligation, the transaction is a trig-
gering transaction under paragraph (g)(3)(i)(A)(2)of
this section. Under paragraph (g)(3)(ii) of this sec-
tion, B’s note is treated as satisfied and reissued im-
mediately before S’s sale to X for $100, the amount
realized with respect to the note (determined under
section 1274). As a result of the deemed satisfaction,
neither S nor B take into account any items of income,
gain, deduction, or loss. S is then treated as selling the
new B note to X for the X note received by S in the
actual transaction. Because S has a basis of $100 in
the new note, S recognizes no gain or loss from the
sale to X. After the sale, the new B note held by X
is not an intercompany obligation, it has a $100 issue
price, a $100 stated redemption price at maturity, and
a $100 basis. S also holds an X note with a basis of
$100 but a fair market value of $70. When S disposes
of the X note, S’s loss on the disposition is deferred
under paragraph (g)(4)(iv) of this section, until B re-
tires its note (the former intercompany obligation in
the hands of X).
Example 3.Loss or bad debt deduction with re-
spect to intercompany obligation.(i)Facts.On Jan-
uary 1 of year 1, B borrows $100 from S in return for
B’s note providing for $10 of interest annually at the
end of each year, and repayment of $100 at the end
of year 5. On January 1 of year 3, the fair market
value of the B note has declined to $60 and S sells
the B note to P for property with a fair market value
of $60. B is never insolvent within the meaning of
section 108(d)(3). The B note is not a security within
the meaning of section 165(g)(2).
(ii)Deemed satisfaction and reissuance. Because
S realizes an amount of loss from the assignment of
the B note, the transaction is a triggering transaction
under paragraph (g)(3)(i)(A)(1) of this section. Un-
der paragraph (g)(3)(ii) of this section, B’s note is
treated as satisfied and reissued for its fair market
value of $60 immediately before S’s sale to P. As a
result of the deemed satisfaction of the note for less
than its adjusted issue price ($100), B takes into ac-
count $40 of discharge of indebtedness income under
§1.61–12. On a separate entity basis, S’s $40 loss
would be a capital loss under section 1271(a)(1). Un-
der the matching rule, however, the attributes of S’s
intercompany item and B’s corresponding item must
be redetermined to produce the same effect as if the
transaction had occurred between divisions of a sin-
gle corporation. Under paragraph (c)(4)(i) of this sec-
tion, the attributes of B’s $40 of discharge of indebt-
edness income control the attributes of S’s loss. Thus,
S’s loss is treated as ordinary loss. B is also treated
as reissuing, immediately after the satisfaction, a new
note to S with a $60 issue price, $100 stated redemp-
tion price at maturity, and $60 basis in the hands of S.
S is then treated as selling the new note to P for the
$60 of property received by S in the actual transac-
tion. Because S has a basis of $60 in the new note, S
recognizes no gain or loss from the sale to P. After the
sale, the note is an intercompany obligation, it has a
$60 issue price and a $100 stated redemption price at
maturity, and the $40 of original issue discount will be
taken into account by B and P under sections 163(e)
and 1272.
(iii)Partial bad debt deduction. The facts are
the same as in paragraph (i) of thisExample 3,ex-
cept that S claims a $40 partial bad debt deduction
under section 166(a)(2) (rather than selling the note
to P). Because S realizes a deduction from a trans-
action comparable to an assignment of the B note,
the transaction is a triggering transaction under para-
graph (g)(3)(i)(A)(1) of this section. Under para-
graph (g)(3)(ii) of this section, B’s note is treated as
satisfied and reissued for its fair market value of $60
immediately before section 166(a)(2) applies. The
treatment of S’s $40 loss and B’s $40 of discharge of
indebtedness income are thesame as in paragraph (ii)
of thisExample 3. After the reissuance, S has a basis
of $60 in the new note. Accordingly, the application
of section 166(a)(2) does not result in any additional
deduction for S. The $40 of original issue discount
on the new note will be taken into account by B and
S under sections 163(e) and 1272.
(iv)Insolvent debtor. The facts are the same as
in paragraph (i) of thisExample 3,exceptthatBis
insolvent within the meaning of section 108(d)(3) at
the time that S sells the note to P. As explained in
paragraph (ii) of thisExample 3, the transaction is
a triggering transaction and the B note is treated as
satisfied and reissued for its fair market value of $60
immediately before S’s sale to P. On a separate entity
basis, S’s $40 loss would be capital, B’s $40 income
would be excluded from gross income under section
108(a), and B would reduce attributes under section
108(b) or section 1017 (see also §1.1502–28). How-
ever, under paragraph (g)(4)(i)(C) of this section, sec-
tion 108(a) does not apply to characterize B’s income
as excluded from gross income. Accordingly, the at-
tributes of S’s loss and B’s income are redetermined
in the same manner as in paragraph (ii) of thisExam-
ple 3.
Example 4.Intercompany nonrecognition trans-
actions.(i)Facts.OnJanuary1ofyear1,Bborrows
$100 from S in return for B’s note providing for $10
of interest annually at the end of each year, and re-
paymentof$100attheendofyear5.AsofJanuary
1 of year 3, B has fully performed its obligations, but
the note’s fair market value is $130, reflecting a de-
cline in prevailing market interest rates. On January
1 of year 3, S transfers the note and other assets to a
newly formed corporation, Newco, for all of Newco’s
common stock in an exchange to which section 351
applies.
(ii)No deemed satisfaction and reissuance.Be-
cause the assignment of the B note is an exchange to
which section 351 applies and S recognizes no gain
or loss, the transaction is not a triggering transaction
under paragraph (g)(3)(i)(B)(1)ofthissection,and
the note is not treated as satisfied and reissued under
paragraph (g)(3)(ii) of this section.
(iii)Receipt of other property. The facts are the
same as in paragraph (i) of thisExample 4, except
that the other assets transferred to Newco have a ba-
sis of $100 and a fair market value of $260, and S
receives, in addition to Newco common stock, $15 of
cash. Because S would recognize $15 of gain under
section 351(b), the assignment of the B note is a trig-
gering transaction under paragraph (g)(3)(i)(A)(1)of
this section. Under paragraph (g)(3)(ii) of this sec-
tion, B’s note is treated as satisfied and reissued for
its fair market value of $130 immediately before the
transfer to Newco. As a result of the deemed satisfac-
tion of the note for more than its adjusted issue price,
B takes into account $30 of repurchase premium un-
der §1.163–7(c). On a separate entity basis, S’s $30
gain would be a capital gain under section 1271(a)(1).
Under the matching rule, however, the attributes of
S’s intercompany item and B’s corresponding item
must be redetermined to produce the same effect as
if the transaction had occurred between divisions of a
single corporation. Under paragraph (c)(4)(i) of this
section, the attributes of B’s premium deduction con-
trol the attributes of S’s gain. Accordingly, S’s gain is
treated as ordinary income. B is also treated as reis-
February 9, 20094422009–6 I.R.B.

suing, immediately after the satisfaction, a new note
to S with a $130 issue price, $100 stated redemption
price at maturity, and $130 basis in the hands of S. S
is then treated as transferring the new note to Newco
for the Newco stock and cash received by S in the ac-
tual transaction. Because S has a basis of $130 in the
new B note, S recognizes no gain or loss with respect
to the transfer of the note in the section 351 exchange,
and S recognizes $10 of gain with respect to the trans-
fer of the other assets under section 351(b). After the
transfer, the note has a $130 issue price and a $100
stated redemption price at maturity. The treatment of
B’s $30 of bond issuance premium under the new note
is determined under §1.163–13.
(iv) The facts are the same as in paragraph (i)
of thisExample 4, except that T is a member with
a loss from a separate return limitation year that is
subject to limitation under §1.1502–21(c) (a SRLY
loss), and on January 1 of year 3, S transfers the as-
sets and the B note to T in an exchange to which
section 351 applies. Because the transferee, T, has
a loss that is subject to a limitation, the assignment of
the B note is a triggering transaction under paragraph
(g)(3)(i)(A)(1) of this section (the exception in para-
graph (g)(3)(i)(B)(1) of this section does not apply).
Under paragraph (g)(3)(ii) of this section, B’s note
is treated as satisfied and reissued for its fair market
value, immediately before S’s transfer to T. As a re-
sult of the deemed satisfaction of the note for more
than its adjusted issue price, B takes into account $30
of repurchase premium under §1.163–7(c). On a sep-
arate entity basis, S’s $30 gain would be a capital
gain under section 1271(a)(1). Under the matching
rule, however, the attributes of S’s intercompany item
and B’s corresponding item must be redetermined to
produce the same effect as if the transaction had oc-
curred between divisions of a single corporation. Un-
der paragraph (c)(4)(i) of this section, the attributes of
B’s premium deduction control the attributes of S’s
gain. Accordingly, S’s gain is treated as ordinary in-
come. B is also treated as reissuing, immediately af-
ter the satisfaction, a new note to S with a $130 issue
price, $100 stated redemption price at maturity, and
$130 basis in the hands of S. The treatment of B’s
$30 of bond issuance premium under the new note
is determined under §1.163–13. S is then treated as
transferring the new note to T as part of the section
351 exchange. Because T will have a fair market
value basis in the reissued B note immediately after
the exchange, T’s intercompany item from the sub-
sequent retirement of the B note will not reflect any
of S’s built-in gain (and the amount of T’s SRLY loss
that may be absorbed by such item will be limited to
any appreciation in the B note accruing after the ex-
change).
(v)Intercompany obligation transferred in sec-
tion 332 transaction. The facts are the same as in
paragraph (i) of thisExample 4, except that S transfers
the B note to P in complete liquidation under section
332. Because the transaction is an exchange to which
section 332 and section 337(a) applies, and neither S
nor B recognize gain or loss, the transaction is not a
triggering transaction under paragraph (g)(3)(i)(B)(1)
of this section, and the note is not treated as satisfied
and reissued under paragraph (g)(3)(ii) of this section.
Example 5.Assumption of intercompany obliga-
tion.(i)Facts. On January 1 of year 1, B borrows
$100 from S in return for B’s note providing for $10
of interest annually at the end of each year, and repay-
ment of $100 at the end of year 5. The note is fully
recourse and is incurred for use in Business Z. As of
January 1 of year 3, B has fully performed its obliga-
tions, but the note’s fair market value is $110 reflect-
ing a decline in prevailing market interest rates. Busi-
ness Z has a fair market value of $95. On January 1 of
year 3, B transfers all of the assets of Business Z and
$15 of cash (substantially all of B’s assets) to member
T in exchange for the assumption by T of all of B’s
obligations under the note in a transaction in which
gain or loss is recognized under section 1001. The
terms and conditions of the note are not modified in
connection with the sales transaction, the transaction
does not result in a change in payment expectations,
and no amount of income, gain, loss, or deduction is
recognized by S, B, or T with respect to the note.
(ii)No deemed satisfaction and reissuance.Be-
cause all of B’s obligations under the B note are as-
sumed by T in connection with the sale of the Busi-
ness Z assets, the assignment of B’s obligations un-
der the note is not a triggering transaction under para-
graph (g)(3)(i)(B)(2) of this section, and the note is
not treated as satisfied and reissued under paragraph
(g)(3)(ii) of this section.
Example 6.Extinguishment of intercompany obli-
gation.(i)Facts. On January 1 of year 1, B borrows
$100 from S in return for B’s note providing for $10
of interest annually at the end of each year, and re-
payment of $100 at the end of year 20. The note is
a security within the meaning of section 351(d)(2).
As of January 1 of year 3, B has fully performed its
obligations, but the fair market value of the B note is
$130, reflecting a decline in prevailing market inter-
est rates, and S transfers the note to B in exchange for
$130ofBstockinatransactiontowhichbothsection
351 and section 354 applies.
(ii)No deemed satisfaction and reissuance.Asa
result of the satisfaction of the note for more than its
adjusted issue price, B takes into account $30 of re-
purchase premium under §1.163–7(c). Although the
transfer of the B note is a transaction to which both
section 351 and section 354 applies, under paragraph
(g)(4)(i)(C) of this section, any gain or loss from the
intercompany obligation is not subject to either sec-
tion 351(a) or section 354, and therefore, S has a $30
gain under section 1001. Because the note is extin-
guished in a transaction in which the adjusted issue
price of the note is equal to the creditor’s basis in the
note, and the debtor’s and creditor’s items offset in
amount, the transaction is not a triggering transaction
under paragraph (g)(3)(i)(B)(5) of this section, and
the note is not treated as satisfied and reissued under
paragraph (g)(3)(ii) of this section. On a separate en-
tity basis, S’s $30 gain would be a capital gain under
section 1271(a)(1). Under the matching rule, how-
ever, the attributes of S’s intercompany item and B’s
corresponding item must be redetermined to produce
the same effect as if the transaction had occurred be-
tween divisions of a single corporation. Under para-
graph (c)(4)(i) of this section, the attributes of B’s
premium deduction control the attributes of S’s gain.
Accordingly, S’s gain is treated as ordinary income.
Under paragraph (g)(4)(i)(D) of this section, section
108(e)(7) does not apply upon the extinguishment of
the B note, and therefore, the B stock received by S
in the exchange will not be treated as section 1245
property.
Example 7.Exchange of intercompany obliga-
tions.(i)Facts. On January 1 of year 1, B borrows
$100 from S in return for B’s note providing for $10
of interest annually at the end of each year, and re-
payment of $100 at the end of year 20. As of Jan-
uary 1 of year 3, B has fully performed its obligations
and, pursuant to a recapitalization to which section
368(a)(1)(E) applies, B issues a new note to S in ex-
change for the original B note. The new B note has an
issue price, stated redemption price at maturity, and
stated principal amount of $100, but contains terms
that differ sufficiently from the terms of the original
B note to cause a realization event under §1.1001–3.
The original B note and the new B note are both se-
curities (within the meaning of section 354(a)(1)).
(ii)No deemed satisfaction and reissuance.Be-
cause the original B note is extinguished in exchange
for a newly issued B note and the issue price of the
new B note is equal to both the adjusted issue price
of the original B note and S’s basis in the original
B note, the transaction is not a triggering transaction
under paragraph (g)(3)(i)(B)(6)ofthissection,and
the note is not treated as satisfied and reissued un-
der paragraph (g)(3)(ii) of this section. B has neither
income from discharge of indebtedness under sec-
tion 108(e)(10) nor a deduction for repurchase pre-
mium under §1.163–7(c). Although the exchange of
the original B note for the new B note is a transac-
tion to which section 354 applies, under paragraph
(g)(4)(i)(C) of this section, any gain or loss from the
intercompany obligation is not subject to section 354.
Under section 1001, S has no gain or loss from the ex-
change of notes.
Example 8.Tax benefit rule.(i)Facts.OnJan-
uary 1 of year 1, B borrows $100 from S in return
for B’s note providing for $10 of interest annually at
the end of each year, and repayment of $100 at the
endofyear5.AsofJanuary1ofyear3,Bhasfully
performed its obligations, but the note’s fair market
value has depreciated, reflecting an increase in pre-
vailing market interest rates. On that date, S trans-
fers the B note to member T as part of an exchange
forTcommonstockwhichisintendedtoqualifyfor
nonrecognition treatment under section 351 but with
a view to sell the T stock at a reduced gain. On Feb-
ruary 1 of year 4, all of the stock of T is sold at a
reduced gain.
(ii)Deemed satisfaction and reissuance.Be-
cause the assignment of the B note does not occur
within 12 months of the sale of T stock, paragraph
(g)(3)(i)(B)(1)(vi) of this section does not apply
to treat the assignment as a triggering transaction.
However, because the assignment of the B note was
engaged in with a view to shift built-in loss from
the obligation in order to secure a tax benefit that
the group or its members would not otherwise en-
joy, under paragraph (g)(3)(i)(C) of this section, the
assignment of the B note is a triggering transaction
to which paragraph (g)(3)(ii) of this section applies.
Under paragraph (g)(3)(ii) of this section, B’s note
is treated as satisfied and reissued for its fair market
value, immediately before S’s transfer to T. As a
result of the deemed satisfaction of the note for less
than its adjusted issue price, B takes into account
discharge of indebtedness income and S has a cor-
responding loss which is treated as ordinary loss.
B is also treated as reissuing, immediately after the
deemed satisfaction, a new note to S with an issue
price and basis equal to its fair market value. S is
then treated as transferring the new note to T as part
of the section 351 exchange. Because S’s basis in
2009–6 I.R.B.443February 9, 2009

the T stock received with respect to the transferred
B note is equal to its fair market value, S’s gain
with respect to the T stock will not reflect any of the
built-in loss attributable to the B note. (This example
does not address common law doctrines or other
authorities that might apply to recharacterize the
transaction or to otherwise affect the tax treatment of
the transaction.)
Example 9.Issuance at off-market rate of interest.
(i)Facts. T is a member with a SRLY loss. T’s sole
shareholder, P, borrows an amount of cash from T in
return for a P note that provides for a materially above
market rate of interest. The P note is issued with a
view to generate additional interest income to T over
the term of the note to facilitate the absorption of T’s
SRLY loss.
(ii)With a view. Because the P note is issued
with a view to shift interest income from the off-mar-
ket obligation in order to secure a tax benefit that the
group or its members would not otherwise enjoy, un-
der paragraph (g)(4)(iii) of this section, the intercom-
pany obligation is treated, for all Federal income tax
purposes, as originally issued for its fair market value
so T is treated as purchasing the note at a premium.
The difference between the amount loaned and the
fair market value of the obligation is treated as trans-
ferred from P to T as a capital contribution at the time
the note is issued. Throughout the term of the note, T
takes into account interest income and bond premium
and P takes into account interest deduction and bond
issuance premium under generally applicable Internal
Revenue Code sections. The adjustment under para-
graph (g)(4)(iii) of this section is made without regard
to the application of, and in lieu of any adjustment un-
der, section 482 or 1274.
Example 10.Nonintercompany obligation be-
comes intercompany obligation.(i)Facts.On
January 1 of year 1, B borrows $100 from X in return
for B’s note providing for $10 of interest annually at
the end of each year, and repayment of $100 at the
endofyear5.AsofJanuary1ofyear3,Bhasfully
performed its obligations, but the note’s fair market
value is $70, reflecting an increase in prevailing
market interest rates. On January 1 of year 3, P buys
all of X’s stock. B is solvent within the meaning of
section 108(d)(3).
(ii)Deemed satisfaction and reissuance. Under
paragraph (g)(5)(ii) of this section, B’s note is treated
as satisfied for $70 (determined under the principles
of §1.108–2(f)(2)) immediately after it becomes an
intercompany obligation. Both X’s $30 capital loss
(under section 1271(a)(1)) and B’s $30 of discharge
of indebtedness income (under §1.61–12) are taken
into account in determining consolidated taxable in-
come for year 3. Under paragraph (g)(6)(i)(B) of this
section, the attributes of items resulting from the sat-
isfaction are determined on a separate entity basis.
But see section 382 and §1.1502–15 (as appropriate).
B is also treated as reissuing a new note to X. The
new note is an intercompany obligation, it has a $70
issue price and $100 stated redemption price at ma-
turity, and the $30 of original issue discount will be
takenintoaccountbyBandXinthesamemanneras
provided in paragraph (iii) ofExample 1of this para-
graph (g)(7).
(iii)Amortization of repurchase premium.The
facts are the same as in paragraph (i) of thisExam-
ple 10, except that on January 1 of year 3, the B note
has a fair market value of $130 and rather than P pur-
chasing the X stock, P purchases the B note from X by
issuing its own note. The P note has an issue price,
stated redemption price at maturity, stated principal
amount, and fair market value of $130. Under para-
graph (g)(5)(ii) of this section, B’s note is treated as
satisfied for $130 (determined under the principles of
§1.108–2(f)(1)) immediately after it becomes an in-
tercompany obligation. As a result of the deemed
satisfaction of the note, P has no gain or loss and
B has $30 of repurchase premium. Under paragraph
(g)(6)(iii) of this section, B’s $30 of repurchase pre-
mium from the deemed satisfaction is amortized by B
over the term of the newly issued P note in the same
manner as if it were original issue discount and the
newly issued P note had been issued directly by B. B
is also treated as reissuing a new note to P. The new
note is an intercompany obligation, it has a $130 is-
suepriceand$100statedredemptionpriceatmatu-
rity, and the treatment of B’s $30 of bond issuance
premium under the new B note is determined under
§1.163–13.
(iv)Election to file consolidated returns. Assume
instead that B borrows $100 from S during year 1,
but the P group does not file consolidated returns un-
til year 3. Under paragraph (g)(5)(ii) of this section,
B’s note is treated as satisfied and reissued as a new
note immediately after the note becomes an intercom-
pany obligation. The satisfaction and reissuance are
deemed to occur on January 1 of year 3, for the fair
market value of the obligation (determined under the
principles of §1.108–2(f)(2)) at that time.
Example 11. Notional principal contracts.(i)
Facts. On April 1 of year 1, M1 enters into a contract
with counterparty M2 under which, for a term of five
years, M1 is obligated to make a payment to M2 each
April 1, beginning in year 2, in an amount equal to
the London Interbank Offered Rate (LIBOR), as de-
termined by reference to LIBOR on the day each pay-
ment is due, multiplied by a $1,000 notional principal
amount. M2 is obligated to make a payment to M1
each April 1, beginning in year 2, in an amount equal
to 8 percent multiplied by the same notional principal
amount.LIBORis7.80percentonApril1ofyear2,
andtherefore,M2owes$2toM1.
(ii)Matching rule. Under §1.446–3(d), the net
income (or net deduction) from a notional principal
contract for a taxable year is included in (or deducted
from) gross income. Under §1.446–3(e), the ratable
daily portion of M2’s obligation to M1 as of Decem-
ber 31 of year 1 is $1.50 ($2 multiplied by 275/365).
Under the matching rule, M1’s net income for year
1 of $1.50 is taken into account to reflect the differ-
ence between M2’s net deduction of $1.50 taken into
account and the $0 recomputed net deduction. Simi-
larly, the $.50 balance of the $2 of net periodic pay-
ments made on April 1 of year 2 is taken into ac-
count for year 2 in M1’s and M2’s net income and
net deduction from the contract. In addition, the at-
tributes of M1’s intercompany income and M2’s cor-
responding deduction are redetermined to produce
the same effect as if the transaction had occurred
between divisions of a single corporation. Under
paragraph (c)(4)(i) of this section, the attributes of
M2’s corresponding deduction control the attributes
of M1’s intercompany income. (Although M1 is the
selling member with respect to the payment on April
1 of year 2, it might be the buying member in a sub-
sequent period if it owes the net payment.)
(iii)Dealer. The facts are the same as in para-
graph (i) of thisExample 11,exceptthatM2isa
dealer in securities, and the contract with M1 is not
inventory in the hands of M2. Under section 475,
M2 must mark its securities to fair market value at
year-end. Assume that under section 475, M2’s loss
from marking to fair market value the contract with
M1 is $10. Because M2 realizes an amount of loss
from the mark to fair market value of the contract,
the transaction is a triggering transaction under para-
graph (g)(3)(i)(A)(1) of this section. Under para-
graph (g)(3)(ii) of this section, M2 is treated as mak-
ing a $10 payment to M1 to terminate the contract im-
mediately before a new contract is treated as reissued
with an up-front payment by M1 to M2 of $10. M1’s
$10 of income from the termination payment is taken
into account under the matching rule to reflect M2’s
deduction under §1.446–3(h). The attributes of M1’s
intercompany income and M2’s corresponding de-
duction are redetermined to produce the same effect
as if the transaction had occurred between divisions
of a single corporation. Under paragraph (c)(4)(i) of
this section, the attributes of M2’s corresponding de-
duction control the attributes of M1’s intercompany
income. Accordingly, M1’s income is treated as or-
dinary income. Under §1.446–3(f), the deemed $10
up-front payment by M1 to M2 in connection with
the issuance of a new contract is taken into account
over the term of the new contract in a manner reflect-
ing the economic substance of the contract (for ex-
ample, allocating the payment in accordance with the
forward rates of a series of cash-settled forward con-
tracts that reflect the specified index and the $1,000
notional principal amount). (The timing of taking
items into account is the same if M1, rather than
M2, is the dealer subject to the mark-to-market re-
quirement of section 475 at year-end. However in
this case, because the attributes of the corresponding
deduction control the attributes of the intercompany
income, M1’s income from the deemed termination
payment from M2 might be ordinary or capital). Un-
der paragraph (g)(3)(ii)(A) of this section, section 475
does not apply to mark the notional principal contract
to fair market value after its deemed satisfaction and
reissuance.
(8)Effective/applicability date.The
rules of this paragraph (g) apply to transac-
tions involving intercompany obligations
occurring in consolidated return years be-
ginning on or after December 24, 2008.
*****
Par. 3. Section 1.1502–28 is amended
by:
1. Revising paragraph (b)(5)(i).
2. Revising the last sentence of para-
graph (b)(5)(ii).
3. Adding a sentence to the end of para-
graph (d).
The revisions and addition reads as fol-
lows:
§1.1502–28 Consolidated section 108.
*****
(b) * * *
February 9, 20094442009–6 I.R.B.

(5)Reduction of basis of intercompany
obligations and former intercompany obli-
gations—(i)Intercompany obligations
that cease to be intercompany obligations.
If excluded COD income is realized in a
consolidated return year in which an inter-
company obligation becomes an obliga-
tion that is not an intercompany obligation
because the debtor or creditor becomes
a nonmember, or because the assets of
the debtor or the creditor are acquired by
a nonmember in a transaction to which
section 381 applies, then the basis of such
intercompany obligation (or new obli-
gation if the intercompany obligation is
deemed reissued under §1.1502–13(g)(3))
is available for reduction in respect of
such excluded COD income pursuant to
sections 108 and 1017 and this section.
(ii) * * * See §1.1502–13(g)(3)(i)(A)(1)
and (g)(4)(i)(A).
*****
(d) * * * Paragraph (b)(5)(i) of this
section and the last sentence of paragraph
(b)(5)(ii) of this section applies to trans-
actions occurring in consolidated return
years beginning on or after December 24,
2008.
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved December 18, 2008.
Eric Solomon,
Assistant Secretary of
the Treasury (Tax Policy).
(Filed by the Office of the Federal Register on December 24,
2008, 8:45 a.m., and published in the issue of the Federal
Register for December 29, 2008, 73 F.R. 79324)
Section 6031.—Return of
Partnership Income
If a corporation makes the section 168(k)(4)
election and is a partner in a partnership (electing
corporate partner), the partnership must provide the
electing corporate partner with sufficient information
to apply section 168(k)(4)(G)(ii) in determining its
distributive share of partnership items under section
702 relating to any eligible qualified property placed
in service by the partnership during the taxable
year. This information must be provided in the time
and manner required by section 6031(b) and sec-
tion 1.6031(b)–IT(a)(3)(ii) and (b). See Rev. Proc.
2009-16, page 449.
Section 6401.—Amounts
Treated as Overpayments
To the extent that taxpayer is allowed the busi-
ness credit or alternative minimum tax credit in an
amount allocable to the aggregate increases in the
business credit limitation and the alternative mini-
mum tax credit limitation that result from the sec-
tion 168(k)(4) election, suchamounts(s) are treated as
overpayments within the meaning of section 6041(b)
that are refundable to the taxpayer See Rev. Proc.
2009-16, page 449.
Section 7520.—Valuation
Tables
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2009. See Rev. Rul. 2009-5, page 432.
Section 7872
.—Treatment
of Loans With
Below-Market
Interest Rat
es
The adjuste
d applicable federal short-term, mid-
term, and lo
ng-term rates are set forth for the month
of February
2009. See Rev. Rul. 2009-5, page 432.
2009–6 I.R.B.445February 9, 2009

Part III. Administrative, Procedural, and Miscellaneous
Allocation of Section 36
First-Time Homebuyer Credit
Between Taxpayers Who Are
Not Married
Notice 2009–12
PURPOSE
This notice provides guidance under
§ 36(b)(1)(C) of the Internal Revenue
Code (Code) for allocating the first-time
homebuyer credit between taxpayers who
are not married.
LAW
Section 36 was added to the Code by
section 3011 of the Housing and Eco-
nomic Recovery Act of 2008, Pub. L. No.
110–289, 122 Stat. 2654, 2888 (2008).
Section 36(a) provides that a taxpayer who
is a first-time homebuyer of a principal
residence (as defined in § 121) may claim
a credit on the taxpayer’s income tax re-
turn equal to 10 percent of the purchase
price of the residence. Section 36(c)(1)
defines “first-time homebuyer” as any in-
dividual (and if married, the individual’s
spouse) who has not had an ownership
interest in any principal residence during
the three-year period ending on the date
of the purchase of the principal residence.
Section 36(c)(3) defines “purchase” as
any acquisition, but only if (i) the taxpayer
did not acquire the property from a related
person, and (ii) the taxpayer’s basis in the
property is not determined, in whole or
in part, by reference to the adjusted basis
of the property in the hands of the per-
son from whom the taxpayer acquired the
property, or determined under § 1014(a)
(relating to property acquired from a
decedent). For purposes of § 36(c)(3)(i),
§ 36(c)(5) provides that a person is treated
as related to another person if the rela-
tionship would result in the disallowance
of losses under § 267 or § 707, except
that members of a family of an individual
include only the individual’s spouse, an-
cestors, and lineal descendants.
Pursuant to § 36(h), the first-time
homebuyer credit applies to a home pur-
chased on or after April 9, 2008, and be-
fore July 1, 2009. The maximum amount
of the credit is $7,500 ($3,750 for a mar-
ried taxpayer filing a separate return), as
provided in § 36(b)(1)(A) and (B). Un-
der § 36(b)(2), the credit begins to phase
out for a taxpayer whose modified ad-
justed gross income (MAGI ) is $75,000
($150,000 for married taxpayers filing a
joint return) (“MAGI threshold”). The
allowable credit is reduced by an amount
equal to:
Maximum Allowable x M
AGIinexcessof$75,000($150,000formarriedfilingjointly).
Credit$20,000
The credit is completely phased out for a taxpayer whose MAGIis $95,000 ($170,000 for married taxpayers filing a joint
return) (“MAGI cap”).
Section 36(f) generally requires a tax-
payer who claims the first-time homebuyer
credit to repay the credit allowed in 15
equal annual installments beginning with
the second taxable year after the taxable
year in which the taxpayer claims the
credit. This repayment obligation may
be accelerated or forgiven under certain
exceptions as provided in § 36(f).
For eligible purchases in 2008, a tax-
payer claims the credit by attaching Form
5405,“First-Time Homebuyer Credit,”to
the taxpayer’s 2008 tax return. For eligible
purchases in 2009, a taxpayer may elect to
claim the credit for 2008 or 2009 by attach-
ing Form 5405 to the taxpayer’s original or
amended 2008 tax return or 2009 tax re-
turn.
APPLICATION
Section 36(b)(1)(C) provides that the
Secretary may prescribe the manner in
which the first-time homebuyer credit is
allocated between two or more taxpayers
who are not married and who purchase a
principal residence. The total credit allo-
cated between the taxpayers cannot exceed
$7,500. For purposes of § 36(b)(1)(C),
if two or more taxpayers who are not
married purchase (within the meaning of
§ 36(c)(3)) a principal residence and oth-
erwise satisfy the requirements of § 36,
the first-time homebuyer credit may be
allocated between the taxpayers using any
reasonable method. A reasonable method
is any method that does not allocate any
portion of the credit to a taxpayer not eli-
gible to claim that portion. A reasonable
method includes allocating the credit be-
tween taxpayers who are eligible to claim
the credit based on (1) the taxpayers’ con-
tributions towards the purchase price of a
residence as tenants in common or joint
tenants, or (2) the taxpayers’ ownership
interests in a residence as tenants in com-
mon.
EXAMPLES
The examples illustrate how the first-
time homebuyer credit may be allocated
whenAandBpurchase a principal resi-
dence as tenants in common. The rules
illustrated in the examples also apply in
a similar manner to taxpayers who pur-
chase a principal residence as joint tenants.
Unlessotherwiseindicated,assumethatin
each exampleAandB(i) purchase a prin-
cipal residence on May 1, 2008, (ii) are
not married to each other, (iii) do not have
MAGI in excess of the MAGI threshold,
and (iv) are first-time homebuyers who
otherwise satisfy the requirements of § 36.
Example 1.
A
contributes $45,000 andBcontributes $15,000
towards the $60,000 purchase price of a residence.
Each owns a one-half interest in the residence as
tenants in common. Under § 36(a), the allowable
credit is limited to 10 percent of the purchase price,
or $6,000.AandBmay allocate the allowable $6,000
credit three-fourths toAand one-fourth toBbased
on their contributions toward the purchase price of
the residence, one-half to each based on their own-
ership interests in the residence, or using any other
reasonable method(for example, the entire credit to
AorBbecause bothAandBare eligible to claim the
entire allowable credit).
Example 2.
Acontributes $10,000 for a down payment to-
wards the $100,000 purchase price of a residence, and
AandBobtain and are jointly liable for a $90,000
mortgage for the remainder of the purchase price.
February 9, 20094462009–6 I.R.B.

Each owns a one-half interest in the residence as ten-
ants in common. Under § 36(b)(1)(A), the allow-
able credit is not $10,000 (10 percent of the purchase
price) but is limited to $7,500.AandBmay allocate
the allowable $7,500 credit 55 percent toAand 45
percent toBbased on their contributions toward the
purchase price, one-half to each based on their own-
ership interests in the residence, or using any other
reasonable method (for example, the entire credit to
AorBbecause bothAandBare eligible to claim the
entire allowable credit).
Example 3.
On April 15, 2008,Apays the entire $100,000
purchase price of a residence and is the sole owner.
Under § 36(b)(1)(A), the allowable credit is not
$10,000 (10 percent of the purchase price) but is
limited to $7,500. On May 12, 2008,Atransfers
a one-half interest in the residence toBas a tenant
in common for $10,000.Amay claim the entire
allowable $7,500 credit. BecauseBacquiredB’s
interest in the residence fromAin part by gift,B’s
basis in the residence is determined under § 1015 by
reference toA’s basis in the residence. Therefore,B
did not purchase an interest in the residence within
the meaning of § 36(c)(3), and no portion of the
credit may be allocated toBbecauseBis not eligible
to claim any portion of the credit.
Example 4.
AandBeach contributes $50,000 towards the
$100,000 purchase price of a residence and owns a
one-half interest in the residence as tenants in com-
mon. Under § 36(b)(1)(A), the allowable credit is not
$10,000 (10 percent of the purchase price) but is lim-
ited to $7,500. However,Bis not a first-time home-
buyer within the meaning of § 36(c)(1). Therefore, no
portion of the credit may be allocated toBbecauseB
is not eligible to claim any portion of the credit.A
may claim the entire allowable $7,500 credit.
Example 5.
Acontributes $75,000 andBcontributes $25,000
towards the $100,000 purchase price of a residence,
and each owns a one-half interest in the residence
as tenants in common. Under § 36(b)(1)(A), the al-
lowable credit is not $10,000 (10 percent of the pur-
chase price) but is limited to $7,500.A’s MAGI is
$100,000 andB’s MAGI is $60,000. BecauseA’s
MAGI exceeds the $95,000 MAGI cap, any portion
of the credit allocated toAwould be reduced to $0.
AandB
may allocate the entire allowable $7,500
credit toBbecauseB’s MAGI is less than the $75,000
MAGI threshold and, therefore,Bis eligible to claim
the entire allowable credit.
Example 6.
AandBeach contributes $50,000 towards the
$100,000 purchase price of a residence and owns a
one-half interest in the residence as tenants in com-
mon. Under § 36(b)(1)(A), the allowable credit is not
$10,000 (10 percent of the purchase price) but is lim-
ited to $7,500.A’s MAGI is $80,000 andB’s MAGI
is $60,000. BecauseA’s MAGI exceeds the $75,000
MAGI threshold by $5,000, any portion of the allow-
able credit allocated toAwill be reduced by one-quar-
ter, $5,000 (MAGI in excess of $75,000) / $20,000.
AandBmay allocate the allowable $7,500 credit
one-half toAand one-half toB($3,750 each) based
on their contributions toward the purchase price of
the residence or their ownership interests in the res-
idence. However,A’s $3,750 portion of the credit
is limited by § 36(b)(2) and is reduced by one-quar-
ter ($3,750 x .25 = $937.50) to $2,812.50 ($3,750
- 937.50). Alternatively,AandBmay allocate the
allowable $7,500 credit using any other reasonable
method (for example, the entire credit toBbecause
B’s MAGI is less than the $75,000 MAGI threshold
and, therefore,Bis eligible to claim the entire allow-
able credit).
Example 7.
AandB, who are sisters, each contributes $50,000
towards the $100,000 purchase price of a residence
and each owns a one-half interest as tenants in com-
mon. Under § 36(b)(1)(A), the allowable credit is not
$10,000 (10 percent of the purchase price) but is lim-
ited to $7,500.AandBpurchase the residence from
their cousin,C.A,B,andCare not related persons
within the meaning of §36(c)(5). Therefore,AandB
may allocate the allowable $7,500 credit one-half toA
and one-half toBbased on their contributions toward
the purchase price of the residence or their ownership
interests in the residence. Alternatively,A
andBmay
allocate the allowable $7,500 credit using any other
reasonable method (for example, the entire credit to
AorBbecause bothAandBare eligible to claim the
entire allowable credit).
DRAFTING INFORMATION
The principal author of this notice
is Christina M. Glendening of the Of-
fice of Associate Chief Counsel (Income
Tax & Accounting). For further infor-
mation regarding this notice, contact
Ms. Glendening at (202) 622–4920 (not a
toll-free call).
Disclosure of Statistical
Compilations of Anonymous
Tax Return Information Under
Section 7216
Notice 2009–13
PURPOSE
This notice provides interim guidance
relating to the ability of a tax return pre-
parer to disclose and use statistical compi-
lations of anonymous tax return informa-
tion (i.e., information in a form that cannot
be associated with, or otherwise identify,
directly or indirectly, a particular taxpayer)
described in § 301.7216–1(b)(3)(i)(B) in
support of a tax return preparer’s tax return
preparation business. This notice provides
guidance on the tax return information a
tax return preparer may use to compile
anonymous statisticalinformation that the
tax return preparer may disclose without
taxpayer consent. The ability of a tax re-
turn preparer to disclose and use statistical
compilations of tax return information that
contain any taxpayer identifying informa-
tion is not addressed in this notice and con-
tinues to be governed by § 301.7216–2(o).
BACKGROUND
On January 3, 2008, the Treasury De-
partment and IRS issued final regulations
under section 7216 (T.D. 9375, 2008–5
I.R.B. 344) applicable to disclosures or
uses of tax return information occurring
on or after January 1, 2009. The final
regulations replaced previously issued
final regulations that remained applica-
ble to disclosures or uses of tax return
information occurring prior to January
1, 2009. The final regulations included
§ 301.7216–1(b)(3)(i)(B) which, for dis-
closures and uses of tax return information
occurring on or after January 1, 2009, pro-
vides that tax return information includes
statistical compilations of tax return infor-
mation, including information in a form
that cannot be associated with, or other-
wise identify, directly or indirectly, a par-
ticular taxpayer. The final regulations also
included the addition of § 301.7216–2(o),
which provides limited purposes for when
a tax return preparer may use tax return
information to produce statistical compi-
lations and for when it may use or disclose
the produced statistical compilation. Sec-
tion 301.7216–2(o) currently allows a tax
return preparer to use statistical compi-
lations if such use directly supports the
tax return preparer’s tax return prepara-
tion business. However, § 301.7216–2(o)
also currently prohibits the disclosure
of all statistical compilations, both tax-
payer-identifying and anonymous, unless
the disclosure is made in order to comply
with financial accounting or regulatory
reporting requirements or occurs in con-
junction with the sale or other disposition
of the compiler’s tax return preparation
business. This notice provides interim
guidance with respect to the ability of a
tax return preparer to disclose and use
statistical compilations of anonymous tax
return information data in support of its
tax return preparation business.
The Treasury Department and IRS
have become aware that, under current
§ 301.7216–2(o), tax return preparers may
not disclose anonymous statistical compi-
lations for other purposes that may provide
benefits to taxpayers generally or to the
public as a whole. Anonymous statistical
2009–6 I.R.B.447February 9, 2009

data disclosed within the constraints pro-
vided by the interim guidance described
inthisnoticemaybeusedbytaxreturn
preparers to assist taxpayers in making
informed choices about filing options and
tax return preparers. The availability of
anonymous statistical data can be useful
from a public policy perspective, as the
availability of such data can assist law-
makers, academics, non-profits and other
agencies in the facilitation of sound tax
policy analysis and decisions. In addition,
volunteer tax return preparers that pro-
vide free tax return preparation services to
low- and moderate-income taxpayers and
families would be able to demonstrate the
impact of their efforts in order to obtain
and administer funding necessary for their
continued operation.
The interim guidance provides that
taxreturnpreparersmayuseanddis-
close, without taxpayer consent, statistical
compilations of tax return information to
support the tax return preparer’s tax return
preparation business, but any disclosure
of a statistical compilation must be in a
form which cannot be associated with, or
otherwise identify, directly or indirectly,
a particular taxpayer. To further ensure
anonymity, this interim guidance prohibits
the disclosure of statistical compilations
with cells containing data from fewer than
twenty-five tax returns. Finally, the sale
or exchange for value of all or any part
of an anonymous statistical compilation is
prohibited except if the sale occurs in con-
junction with the transfer of assets made
pursuant to the sale or other disposition of
the tax return preparer’s tax return prepa-
ration business.
This interim guidance continues to pro-
hibit disclosure of anonymous statistical
compilations of average refund, credit,
or rebate amounts, or a part thereof, for
purposes of advertising or marketing. The
Treasury Department and IRS are con-
cerned that advertising and marketing
that discloses average refund, credit, or
rebate amounts could create inaccurate
expectations on the part of taxpayers and
improper incentives on the part of tax
return preparers to meet those expecta-
tions at the expense of tax return accuracy.
Accordingly, in the case of the use or dis-
closure in advertising and marketing of
statistical compilations of average refund,
credit, or rebate amounts, this interim
guidance retains the existing rules gov-
erning the use and disclosure of statistical
compilations found in § 301.7216–2(o).
In addition, the IRS will continue to rely
on all existing enforcement powers to ad-
dress concerns regarding advertising and
marketing claims by tax return preparers.
The Treasury Department and the IRS
believe that this interim guidance ap-
propriately balances concerns regarding
safeguarding the confidentiality of tax re-
turn information against the tax industry’s
(public, private, and governmental) need
to evaluate and use anonymous tax return
information. The Treasury Department
and the IRS will apply the rules set forth
in this notice during 2009 while devot-
ing further consideration, including the
consideration of any public comments in
response to this notice, to whether this
interim guidance should be adopted by
regulations or further modified.
INTERIM GUIDANCE UNDER
SECTION 7216
A tax return preparer may use tax
return information to produce a statis-
tical compilation of data described in
§ 301.7216–1(b)(3)(i)(B). The purpose
and use of the statistical compilation must
relate directly to the internal management
or support of the tax return preparer’s
tax return preparation business. A tax
return preparer who produces a statis-
tical compilation of data described in
§ 301.7216–1(b)(3)(i)(B) may not dis-
close the compilation, or any part thereof,
to any other person unless disclosure of
the statistical compilation is anonymous
as to taxpayer identity, does not disclose
cells containing data from fewer than
twenty-five tax returns, and is in direct
support of the tax return preparer’s tax
return preparation business. A statistical
compilation is anonymous as to taxpayer
identity for purposes of this interim guid-
ance if it is in a form which cannot be
associated with, or otherwise identify, di-
rectly or indirectly, aparticular taxpayer.
For purposes of this interim guidance,
marketing and advertising is in direct
support of the tax return preparer’s tax
return preparation business as long as the
marketing and advertising is not false,
misleading, or unduly influential. How-
ever, this interim guidance does not apply
to the use or disclosure in marketing or
advertising of statistical compilations con-
taining or reflecting average amounts of
refund, credit, or rebate, which use and
disclosure will continue to be governed
by the provisions of § 301.7216–2(o).
Fundraising activities conducted by Vol-
unteer Income Tax Assistance programs
and other organizations described in sec-
tion 501(c) of the Internal Revenue Code
in direct support of their tax return prepa-
ration services are not marketing and
advertising under this interim guidance.
For purposes of this interim guidance, “tax
return preparation business” includesbona
fideresearch or public policy discussions
concerning state or federal taxation or re-
quiring data acquired during the tax return
preparation process. Except as provided
in this interim guidance, the provisions
of § 301.7216–2(o) apply to the use and
disclosure of statistical compilations of
tax return information.
A tax return preparer may not
sell or exchange for value a statisti-
cal compilation of data described in
§ 301.7216–1(b)(3)(i)(B), in whole or in
part, except in conjunction with the trans-
fer of assets made pursuant to the sale
or other disposition of the tax return pre-
parer’s tax return preparation business.
EXAMPLES
The interim guidance described by this
notice may be illustrated by the following
examples.
Example 1. Preparer A is a tax return preparer as
defined by § 301.7216–1(b)(2)(i)(A). In 2008, A used
tax return information to produce a statistical compi-
lation of data for both internal management purposes
and to support A’s tax return preparation business.
The statistical compilation included a cell containing
the information that A prepared thirty-two S corpora-
tion tax returns in 2008. In 2009, A decides to embark
upon a new marketing campaign emphasizing its ex-
perience preparing small business tax returns. In the
campaign, A discloses the cell containing the num-
ber of S corporation tax returns prepared in 2008. A’s
disclosure does not include any information that can
be associated with or that can identify any specific
taxpayers. A may disclose the anonymous statisti-
cal compilation without taxpayer consent because it
complies with the interim guidance described in this
notice.
Example 2. Preparer B is a tax return preparer
as defined by § 301.7216–1(b)(2)(i)(A). In 2009, in
support of B’s tax preparation business, B advertises
that the average tax refund obtained for its clients in
2008 was $2,800. B may not disclose this information
because it contains a statistical compilation reflecting
average refund amounts.
Example 3. Preparer C is a tax return preparer
as defined by § 301.7216–1(b)(2)(i)(A) and is a Vol-
unteer Income Tax Assistance program. In 2009, in
February 9, 20094482009–6 I.R.B.

support of C’s tax preparation business, C makes a
grant request to a charitable foundation to fund C’s
operations providing free tax preparation services to
low- and moderate-income families. In support of C’s
request, C includes anonymous statistical data show-
ing that, in 2008, C provided services to 500 taxpay-
ers, that 95% of the taxpayer population served by C
received the Earned Income Tax Credit (EITC), and
that the average amount of the EITC received was
$3,300. C may disclose this information because it
contains an anonymous statistical compilation, is in
direct support of their tax return preparation services,
and is consistent with this interim guidance.
Example 4. Preparer D is a tax return preparer
as defined by § 301.7216–1(b)(2)(i)(A). In Decem-
ber 2007, D produced an anonymous statistical com-
pilation of tax return information obtained during the
2007 filing season. In 2009, D discloses portions of
the anonymous statistical compilation in connection
with the marketing of its financial advisory and asset
planning services. D is required to receive taxpayer
consent under § 301.7216–3 before disclosing the tax
return information contained in the anonymous statis-
tical compilation because the disclosure is not being
made in support of the tax return preparation busi-
ness.
EFFECTIVE DATE
This interim guidance applies to dis-
closures of anonymousstatistical compi-
lations of tax return information occurring
on or after February 9, 2009. This interim
guidance expires on the earlier of the date
that it is superseded or December 31, 2009.
REQUESTS FOR COMMENTS
Interested parties are invited to submit
comments on this notice and modifica-
tions to § 301.7216–2(o) by May 10, 2009.
Comments should be submitted to: In-
ternal Revenue Service, CC:PA:LPD:PR
(Notice 2009–13), Room 5203, P.O. Box
7604, Ben Franklin Station, Washing-
ton, DC 20224. Alternatively, comments
may be hand-delivered Monday through
Friday between the hours of 8:00 a.m.
to 4:00 p.m. to: CC:PA:LPD:PR (No-
tice 2009–13), Courier’s Desk, Inter-
nal Revenue Service, 1111 Constitution
Avenue, N.W., Washington, DC. Com-
ments may also be submitted electron-
ically via the following e-mail address:
Notice.Comments@irscounsel.treas.gov.
Please include Notice 2009–13 in the
subject line of any electronic submission.
DRAFTING INFORMATION
The principal author of this notice is
Molly K. Donnelly, Office of the Associate
Chief Counsel (Procedure and Administra-
tion). For further information regarding
this notice, contact Molly K. Donnelly at
(202) 622–4940 (not a toll-free call).
Credit Rates on Tax Credit
Bonds
Notice 2009–15
SECTION 1. Purp
ose
This notice provides guidance regard-
ing how the Treasury Department and the
Internal Revenue Service (IRS) will deter-
mine and announce credit rates on certain
tax credit bonds described in this notice.
SECTION 2. Background
Section 54A provides for the issuance
of certain qualified tax credit bonds in
which investors are eligible to receive
Federal tax credits in lieu of the payment
of all or a portion of the interest on the tax
credit bonds. Qualified tax credit bonds
under § 54A include qualified forestry
conservation bonds, new clean renewable
energy bonds, qualified energy conserva-
tion bonds, and qualified zone academy
bonds. Section 54A(b)(3) provides that
the applicable credit rate for a qualified tax
credit bond is the rate which the Secretary
of the Treasury estimates will permit the
issuance of the qualified tax credit bond
with a specified maturity or redemption
date without discount and without inter-
est cost to the qualified issuer. Section
54A(b)(3) further provides that the ap-
plicable credit ratewith respect to any
qualified tax credit bond shall be deter-
mined as of the first day on which there is
a binding written contract for the sale or
exchange of the bond. In addition, §§ 54
and 1400N(l) provide for the issuance of
certain tax credit bonds known as clean
renewable energy bonds and Midwest-
ern tax credit bonds, respectively, which
have similar credit rate-setting procedures.
Unless otherwise provided, references in
this notice to tax credit bonds include
qualified tax credit bonds under § 54A,
clean renewable energy bonds under § 54,
and Midwestern taxcredit bonds under
§ 1400N(l).
SECTION 3. Credit Rates
Pending further notice in a manner
described in this notice, the Treasury De-
partment will determine and announce
credit rates for tax credit bonds daily for
purposes of §§ 54, 54A, 1400N(l), and
other similar provisions, based on its es-
timate of the yields on outstanding bonds
from market sectors selected by the Trea-
sury Department in its discretion that have
an investment grade rating of between
AandBBBforbondsofasimilarma-
turity for the business day immediately
preceding the sale date of the tax credit
bonds. The applicablecredit rate for a tax
credit bond on its sale date is the credit
rate published for that date by the Bu-
reau of Public Debt on its Internet site for
State and Local Government Series secu-
rities at:https://www.treasurydirect.gov.
The Treasury Department and the IRS
will set forth future refinements in the
manner for determining credit rates on
tax credit bonds in regulations, public
notices, forms, instructions, or public
notice directly on the above-referenced
Internet site on which credit rates on tax
credit bonds presently are published.
SECTION 4. Effect on Other
Documents
Notice 99–35, 1999–2 C.B. 26 (July
12, 1999) is obsoleted. Notice 2007–26,
2007–14 C.B. 870 (April 2, 2007) is mod-
ified.
SECTION 5. Effective Date.
This notice is effective as of January 22,
2009.
26 CFR 1.168(k)–1: Additional first year deprecia-
tion deduction.
(Also: §§ 38, 41, 52, 53, 168, 383, 702, 1374,1502,
6031, 6401.)
Rev. Proc. 2009–16
SECTION 1. PURPOSE
This revenue procedure supplements
Rev. Proc. 2008–65, 2008–44 I.R.B.
1082, to provide additional guidance under
§ 3081 of the Housing and Economic Re-
covery Act of 2008, Pub. L. No. 110–289,
2009–6 I.R.B.449February 9, 2009

122 Stat. 2654 (July 30, 2008) (Housing
Act). Section 3081(a) of the Housing Act
amends § 168(k) of the Internal Revenue
Code by adding § 168(k)(4), allowing cor-
porations to elect not to claim the 50-per-
cent additional first year depreciation for
certain new property acquired after March
31, 2008, and placed in service generally
before January 1, 2009, and instead to
increase their business credit limitation
under § 38(c) and alternative minimum
tax (AMT) credit limitation under § 53(c).
Section 3081(b) of the Housing Act al-
lows certain automotive partnerships to
elect to be treated as making a refundable
deemed payment of income tax in a certain
amount. Rev. Proc. 2008–65 provides
guidance regarding the effects of mak-
ing the § 168(k)(4) election, the property
eligible for this election, and the computa-
tion of the amount by which the business
credit limitation and AMT credit limita-
tion may be increased if the § 168(k)(4)
election is made. This revenue procedure
provides guidance regarding the time and
manner for making the § 168(k)(4) elec-
tion, the allocation of the credit limitation
increases allowed by this election among
members of a controlled group, the effect
of the election on partnerships with cor-
porate partners that make the § 168(k)(4)
election, the application of § 168(k)(4)
to S corporations, and the election under
§ 3081(b) of the Housing Act by certain
automotive partnerships.
SECTION 2. BACKGROUND
.01 Section 168(k), amended by § 103
of the Economic Stimulus Act of 2008,
Pub. L. No. 110–185, 122 Stat. 613
(February 13, 2008) (Stimulus Act), al-
lows a 50-percent additional first year de-
preciation deduction (Stimulus additional
first year depreciation deduction) for cer-
tain new property acquired by a taxpayer
after 2007 and placed in service by the tax-
payer before 2009 (before 2010 in the case
of property described in § 168(k)(2)(B) or
(C)).
.02 Section 3081(a) of the Housing
Act added § 168(k)(4) to the Code. If a
corporation elects to apply § 168(k)(4),
§ 168(k)(4)(A) provides that, for the cor-
poration’s first taxable year ending after
March 31, 2008, and for any subsequent
taxable year, the corporation forgoes the
Stimulus additional first year deprecia-
tion deduction allowable under § 168(k)
for eligible qualified property placed in
service by the taxpayer and increases the
limitations described in § 38(c) (relating
to the general business credit) and § 53(c)
(relating to the AMT credit). As a result,
the corporation will be able to claim un-
used credits from taxable years beginning
before January 1, 2006, that are allocable
to research expenditures or AMT liabili-
ties. Rev. Proc. 2008–65 clarifies which
depreciable property is eligible qualified
property for purposes of the § 168(k)(4)
election and clarifies the effects of making
the § 168(k)(4) election.
.03 In general, the amount by which
the § 168(k)(4) election increases the busi-
ness credit limitation under § 38(c) and
the AMT credit limitation under § 53(c)
is the bonus depreciation amount.See
§ 168(k)(4)(A)(iii). Except as provided
below, the bonus depreciation amount gen-
erally is equal to 20 percent of the excess of
the aggregate amount of depreciation that
would be allowable for eligible qualified
property if the Stimulus additional first
year depreciation deduction applied to all
such property, over the aggregate amount
of depreciation that would be allowable
for all such property if the Stimulus addi-
tional first year depreciation deduction did
not apply.See§ 168(k)(4)(C)(i). How-
ever, the bonus depreciation amount for
any taxable year must not exceed the max-
imum increase amount reduced by the
sum of the bonus depreciation amounts
determined for all prior taxable years.See
§ 168(k)(4)(C)(ii). In general, the maxi-
mum increase amount is equal to the lesser
of $30 million, or 6 percent of the sum
of the unexpired and unused pre–2006
business credit carryforwards allocable to
the research credit and AMT credit carry-
forwards to the current taxable year.See
§ 168(k)(4)(C)(iii). For any taxable year,
the bonus depreciation amount allocated
to either the business credit limitation
or AMT credit limitation must not ex-
ceed the amount of unexpired and unused
pre–2006 business credit carryforwards
allocable to the research credit or AMT
credit carryforwardsless bonus deprecia-
tion amounts allocated to each limitation,
respectively, for all prior taxable years.
See§ 168(k)(4)(E)(ii). To the extent that
a taxpayer is allowed the business credit
or AMT credit in an amount allocable to
the aggregate increases in the business
credit limitation or AMT credit limitation
that result from the § 168(k)(4) election,
such amount(s) are treated as overpay-
ments within the meaning of § 6401(b)
that are refundable to the taxpayer.See
§ 168(k)(4)(F).
.04 Rev. Proc. 2008–65 states that the
Internal Revenue Service (IRS) and Trea-
sury Department intend to publish sepa-
rate guidance on the time and manner for
making the § 168(k)(4) election and for
specifying the allocation of the bonus de-
preciation amount to increase the business
and AMT credit limitations under, respec-
tively, §§ 38(c) and 53(c). This revenue
procedure provides the time and manner
for making the § 168(k)(4) election (see
section 3 of this revenue procedure) and
provides guidance on making and report-
ing the allocation of the bonus depreciation
amount to increase the business and AMT
credit limitations (see section 4 of this rev-
enue procedure).
.05 Section 168(k)(4)(C)(iv) provides
that all corporations that are treated as
a single employer under § 52(a) (gen-
erally any controlled group of corpora-
tions within the meaning of § 1563(a),
determined by substituting “more than
50 percent” for “more than 80 percent”
each place it appears in § 1563(a)(1))
(hereinafter such group of corporations is
referred to as a “controlled group”) are
treated as one taxpayer for purposes of
§ 168(k)(4) and as having elected to ap-
ply § 168(k)(4) if any member of such
controlled group so elects. This revenue
procedure provides guidance regarding
the allocation of the bonus depreciation
amount to increase the business and AMT
credit limitations among members of a
controlled group (see section 4.02 of this
revenue procedure).
.06 Under § 168(k)(4)(G)(ii), if a cor-
poration that makes the § 168(k)(4) elec-
tion is a partner in a partnership, the elect-
ing corporate partner’s distributive share
of partnership items under § 702 for any el-
igible qualified property placed in service
by the partnership must be computed by
using the straight line method and without
claiming the Stimulus additional first year
depreciation deduction. This revenue pro-
cedure provides guidance regarding part-
nerships with corporate partners that make
the § 168(k)(4) election (see section 5 of
this revenue procedure).
February 9, 20094502009–6 I.R.B.

.07 Except as provided in § 3081(b) of
the Housing Act, only a corporation may
elect to apply § 168(k)(4). Some S cor-
porations and their shareholders are uncer-
tain about whether § 168(k)(4) applies to
them. This revenue procedure clarifies the
application of § 168(k)(4) to S corpora-
tions and their shareholders (see section 6
of this revenue procedure).
.08 Section 3081(b)(1) of the Housing
Act provides that an applicable partnership
may elect to be treated as making a refund-
able deemed payment of income tax in a
certain amount. This revenue procedure
provides guidance regarding this election
(see section 7 of this revenue procedure).
.09 Section 168(k)(4) does not modify
the rules under §§ 383 and 1502. Sec-
tion 383 limitations do not affect the credit
amounts that a taxpayer takes into con-
sideration in calculating its maximum in-
crease amount under section 5.04 of Rev.
Proc. 2008–65. However, the increases in
the business credit limitation under § 38(c)
and AMT credit limitation under § 53(c)
that result from a § 168(k)(4) election do
not allow a taxpayer to utilize credit car-
ryforwards that are otherwise limited by
§ 383.
SECTION 3. TIME AND MANNER
FOR MAKING THE § 168(k)(4)
ELECTION
.01In General. Except as provided in
sections 3.02 and 3.03 of this revenue pro-
cedure, a corporate taxpayer must make
the § 168(k)(4) election by the due date (in-
cluding extensions) of the federal income
tax return for the taxpayer’s first taxable
year ending after March 31, 2008. Even if
the taxpayer does not place in service any
eligible qualified property during its first
taxable year ending after March 31, 2008,
the taxpayer must make the § 168(k)(4)
election for that taxable year if the tax-
payer wishes to apply the election to eli-
gible qualified property placed in service
in subsequent taxable years. If a taxpayer
is not a member of a controlled group, the
taxpayer makes the § 168(k)(4) election
in the manner provided in either sections
3.02, 3.03, or 3.04 of this revenue pro-
cedure. If a taxpayer is a member of a
controlled group, the taxpayer makes the
§ 168(k)(4) election in the manner pro-
vided in section 3.05 of this revenue pro-
cedure. Failure to comply with any of the
reporting or notification requirements pro-
videdbythissection3willnullifyatax-
payer’s attempted § 168(k)(4) election.
.02Taxpayer’s First Taxable Year End-
ing After March 31, 2008, Ends Before De-
cember 31, 2008.
(1)In general. Except as provided in
section 3.03 of this revenue procedure, if
a taxpayer’s first taxable year ending after
March 31, 2008, ends before December
31, 2008, and:
(a) If the taxpayer has not filed its orig-
inal federal income tax return for such tax-
able year on or before March 11, 2009, the
taxpayer makes the § 168(k)(4) election:
(i) Either:
(I) By claiming the Stimulus additional
first year depreciation deduction for any
eligible qualified property placed in ser-
vice by the taxpayer during such taxable
year on its timely-filed federal income tax
return for such taxable year. Such property
must not be property in a class for which
the taxpayer elects out of the Stimulus ad-
ditional first year depreciation deduction
under § 168(k)(2)(D)(iii); or
(II) By filing with its timely-filed fed-
eral income tax return for such taxable
year the 2007 Form 4562,Depreciation
and Amortization (Including Information
on Listed Property),indicating that the
taxpayer used the straight line method and
did not claim the Stimulus additional first
year depreciation deduction for all eligible
qualified property. Taxpayers that choose
to follow this section 3.02(1)(a)(i)(II)
must not claim a refundable credit on their
original federal income tax return. To
claim the refundable credit, see section
3.02(1)(a)(ii).
(ii) By filing an amended federal in-
come tax return for such taxable year in the
manner described in section 3.02(2) on or
before the due date (without regard to ex-
tensions) of the taxpayer’s federal income
tax return for the succeeding taxable year;
and
(iii) If the taxpayer is a partner in a part-
nership, by notifying the partnership in ac-
cordance with section 5.02 of this revenue
procedure.
(b)Ifthetaxpayerhasfileditsoriginal
federal income tax return for such taxable
year on or before March 11, 2009, the tax-
payer makes the § 168(k)(4) election by
following the procedures set forth in sec-
tion 3.02(1)(a)(ii) and (iii) of this revenue
procedure.
(2)Special rules for filing amended re-
turn. If the taxpayer filing the amended
federal income tax return under section
3.02(1)(a)(ii) of this revenue procedure:
(a) is not an S corporation, the taxpayer
(i) includes the amount of the refundable
credit allowed by the § 168(k)(4) election
on Line 5g of the Form 1120X,Amended
U.S. Corporation Income Tax Return, (ii)
makes appropriate adjustments to Lines 2,
3, and 4 of the Form 1120X to reflect the
requirements of § 168(k)(4)(A) (requiring
that the depreciation deduction for all eli-
gible qualified property be determined by
using the straight line method and by not
claiming the Stimulus additional first year
depreciation deduction), and (iii) indicates
in Part II of the Form 1120X that the tax-
payer is making the § 168(k)(4) election.
The taxpayer should refer to the instruc-
tions to the 2008 Form 1120,U.S. Corpo-
ration Income Tax Return, the 2008 Form
3800,General Business Credit,andthe
2008 Form 8827,Credit for Prior Year
Minimum Tax — Corporations,for guid-
ance regarding computation of the refund-
able credit and allocation of the bonus de-
preciation amount between the business
and AMT credit limitations; or
(b) is an S corporation, the taxpayer
(i) makes appropriate adjustments to Line
22b of the amended Form 1120S,U.S.
Income Tax Return for an S Corpora-
tion, to reflect the results described in
section 6.02 of this revenue procedure
from making the § 168(k)(4) election,
(ii) makes appropriate adjustments on the
amended Form 1120S to reflect the re-
quirements of § 168(k)(4)(A) (requiring
that the depreciation deduction for all eli-
gible qualified property be determined by
using the straight line method and by not
claiming the Stimulus additional first year
depreciation deduction), and (iii) attaches
a statement to the amended Form 1120S
indicating that the taxpayer is making the
§ 168(k)(4) election and a statement show-
ing the computation of the increases to the
business credit and AMT credit limitations
under, respectively, §§ 38(c) and 53(c)
resulting from making the § 168(k)(4)
election. The S corporation also should
follow the instructions to the Form 1120S
for filing an amended return.
.03Special Rules for Taxpayers Whose
First Taxable Year Ending After March 31,
2008, Ends Before December 31, 2008.
2009–6 I.R.B.451February 9, 2009

(1) If a taxpayer described in sec-
tion 3.02(1)(b) of this revenue procedure
makes the § 168(k)(4) election on its
timely-filed original federal income tax
return and receives arefundable credit
attributable to the § 168(k)(4) election
made on such return, such taxpayer must
not file the amended federal income tax
return required by section 3.02(1)(a)(ii)
and 3.02(1)(b) of this revenue proce-
dure. However, such taxpayer must follow
the notification procedures described in
section 3.02(1)(a)(iii) of this revenue pro-
cedure.
(2) If a taxpayer described in section
3.02(1) of this revenue procedure wishes
to make the § 168(k)(4) election but has
not placed in service any eligible quali-
fied property during its first taxable year
ending after March 31, 2008, the taxpayer
makes the § 168(k)(4) election by attach-
ing a statement to its timely-filed federal
income tax return for that taxable year,
indicating that the taxpayer is making
the § 168(k)(4) election. If a taxpayer
described in section 3.02(1)(b) of this
revenue procedure wishes to make the
§ 168(k)(4) election but has not placed
in service any eligible qualified property
during its first taxable year ending after
March 31, 2008, and did not attach a state-
ment to its original federal income tax
return for such taxable year indicating that
the taxpayer is making the § 168(k)(4)
election, the taxpayer must attach such
statement to the amended federal income
taxreturnrequiredbysection3.02(1)(a)(ii)
and 3.02(1)(b) of this revenue procedure
and follow the notification procedures
described in section 3.02(1)(a)(iii) of this
revenue procedure.
.04Taxpayer’s First Taxable Year End-
ing After March 31, 2008, Ends on or After
December 31, 2008.
(1)C corporations. Except as provided
in section 3.04(3) of this revenue proce-
dure, if a taxpayer’s first taxable year end-
ing after March 31, 2008, ends on or af-
ter December 31, 2008, a C corporation
makes the § 168(k)(4) election by:
(a) Claiming the refundable credit on
Line 32g of the 2008 Form 1120;
(b) Filing the 2008 Form 3800 or Form
8827, or both, as applicable. Taxpayers
should refer to the applicable instructions
to the 2008 Forms 3800 and 8827 for guid-
ance regarding computation of the refund-
able credit and allocation of the bonus de-
preciation amount between the business
credit limitation and AMT credit limita-
tion;
(c) Filing the 2008 Form 4562,Depre-
ciation and Amortization (Including Infor-
mation on Listed Property),indicating that
the taxpayer used the straight line method
and did not claim the Stimulus additional
first year depreciation deduction for all el-
igible qualified property; and
(d) Notifying any partnership in which
the C corporation is a partner, in accor-
dance with section 5.02 of this revenue
procedure.
(2)S corporations. Except as provided
in section 3.04(3) of this revenue proce-
dure, if a taxpayer’s first taxable year end-
ing after March 31, 2008, ends on or af-
ter December 31, 2008, an S corporation
makes the § 168(k)(4) election by:
(a) Making appropriate adjustments to
Line 22b of the 2008 Form 1120S to re-
flect the results described in section 6.02
of this revenue procedure from making the
§ 168(k)(4) election;
(b) Attaching to the Form 1120S a
statement indicating that the taxpayer is
making the § 168(k)(4) election and a
statement showing the computation of
the increases to the business credit and
AMT credit limitations under, respec-
tively, §§ 38(c) and 53(c) resulting from
making the § 168(k)(4) election;
(c) Filing the 2008 Form 4562 indicat-
ing that the taxpayer used the straight line
method and did not claim the Stimulus ad-
ditional first year depreciation deduction
for all eligible qualified property; and
(d) Notifying any partnership in which
the S corporation is a partner, in accor-
dance with section 5.02 of this revenue
procedure.
(3)No eligible qualified property
placed in service during first taxable year
ending after March 31, 2008, ending on or
after December 31, 2008. If a taxpayer’s
first taxable year ending after March 31,
2008, ends on or after December 31, 2008,
and the taxpayer has not placed in ser-
vice any eligible qualified property during
such taxable year, the taxpayer makes the
§ 168(k)(4) election by attaching a state-
ment to its timely-filed federal income tax
return for that taxable year, indicating that
the taxpayer is making the § 168(k)(4)
election.
.05Controlled Groups.
(1)Determination of Controlled Group
Members.
(a)First taxable year ending after
March 31, 2008. For purposes of applying
§ 168(k)(4) and this revenue procedure for
the first taxable year ending after March
31, 2008, § 168(k)(4)(C)(iv) is applied
to determine the members of a controlled
group (as defined in section 2.05 of this
revenue procedure) on December 31,
2008, and all such members on that date
are treated as a controlled group and as
one taxpayer. However, if the first taxable
year ending after March 31, 2008, ends on
the same date for all members of a con-
trolled group (as defined in section 2.05 of
this revenue procedure), all members on
such ending date are treated as a controlled
group and as one taxpayer for purposes
of applying § 168(k)(4) and this revenue
procedure for the first taxable year ending
after March 31, 2008.
(b)Subsequent taxable years.For
purposes of applying § 168(k)(4) and
this revenue procedure for any taxable
year subsequent to a taxpayer’s first tax-
able year ending after March 31, 2008,
§ 168(k)(4)(C)(iv) is applied to determine
the members of a controlled group (as
defined in section 2.05 of this revenue
procedure) on December 31. However,
if a taxable year subsequent to the first
taxable year ending after March 31, 2008,
ends on the same date for all members
of a controlled group (as defined in sec-
tion 2.05 of this revenue procedure), all
members on such ending date are treated
as a controlled group and as one taxpayer
for purposes of applying § 168(k)(4) and
this revenue procedure for that subsequent
taxable year.
(2)Time and manner of making the
§ 168(k)(4) election.
(a)In general. A § 168(k)(4) election
made by any member of a controlled group
(as determined under section 3.05(1)(a) of
this revenue procedure) is binding on all
other members of the controlled group for
all members’ first taxable year ending after
March 31, 2008. If in a subsequent tax-
able year, a controlled group determined
under section 3.05(1)(b) of this revenue
procedure (the second controlled group)
includes 2 or more members of a con-
trolled group determined under 3.05(1)(a)
of this revenue procedure (the first con-
trolled group), all members of the second
controlled group that were members of the
February 9, 20094522009–6 I.R.B.

first controlled group are deemed to have
made (or not made, as the case may be) the
§ 168(k)(4) election of the first controlled
group. Whether members of the second
controlled group that were not members of
the first controlled group are bound by a
§ 168(k)(4) election made by the first con-
trolled group (or bound by the first con-
trolled group’s lack of a § 168(k)(4) elec-
tion) is determined under the rules of sec-
tion 3.05(2)(d) of this revenue procedure.
(b)All members of a controlled group
constitute a single consolidated group.
If all members of a controlled group are
members of an affiliated group of cor-
porations that file a consolidated return
(hereinafter, a “consolidated group”), the
common parent (within the meaning of
§ 1.1502–77(a)(1)(i)) of the consolidated
group makes the § 168(k)(4) election on
behalf of all members of the consolidated
group. The common parent makes this
electionwithinthetimeandinthemanner
provided in sections 3.01, 3.02, 3.03, or
3.04 of this revenue procedure, as applica-
ble.
(c)All members of a controlled group
do not constitute a single consolidated
group.
(i)In general. This section 3.05(2)(c)
applies when separate federal income tax
returns are filed by some or all members of
a controlled group. If a controlled group
includes, but is not limited to, members
of a consolidated group, the consolidated
group is treated as a single member of the
controlled group. A member of the con-
trolled group makes the § 168(k)(4) elec-
tion by:
(I) Following the procedures in section
3.05(2)(c)(ii) or (iii) of this revenue proce-
dure, as applicable; and
(II) Notifying all other members of
the controlled group that the § 168(k)(4)
election has been made. This notification
must be made before the due date (exclud-
ing extensions) of the member’s federal
income tax return for the first taxable
year ending after March 31, 2008. If the
electing member makes the § 168(k)(4)
electionbyfilinganamendedreturnun-
der sections 3.02(1)(a)(ii) or 3.03(2) of
this revenue procedure, as applicable, the
electing member must notify the other
members no later than the date it files an
amended return containing the § 168(k)(4)
election. If the electing member is de-
scribed in section 3.03(1) of this revenue
procedure, the electing member must no-
tify the other members on or before March
11, 2009.
(ii)Controlled group member’s first
taxable year ending after March 31, 2008,
ends before December 31, 2008.Ifacon-
trolled group member’s first taxable year
ending after March 31, 2008, ends before
December 31, 2008, that member makes
the § 168(k)(4) election within the time
and in the manner provided in sections
3.02 or 3.03(2) of this revenue procedure,
as applicable. In addition, the member
must attach to the amended federal income
tax return:
(I) a statement describing the com-
putation of the group bonus depreci-
ation amount (as provided in section
4.02(3)(b)(ii) of this revenue procedure);
and
(II) Schedule O (Form 1120X),Con-
sent Plan and Apportionment Schedule for
aControlledGroup,andindicatingincol-
umn (f) of Part IV that the controlled group
has made the § 168(k)(4) election and the
portion of the group bonus depreciation
amount allocated to the member (as pro-
vided in section 4.02 of this revenue pro-
cedure).
(iii)Controlled group member’s first
taxable year ending after March 31, 2008,
ends on or after December 31, 2008.If
a controlled group member’s first tax-
able year ending after March 31, 2008,
ends on or after December 31, 2008, that
member makes the § 168(k)(4) election
within the time provided in section 3.01 of
this revenue procedure and in the manner
provided in section 3.04 of this revenue
procedure. In addition, the member must
attach to the federal income tax return:
(I) a statement describing the com-
putation of the group bonus depreci-
ation amount (as provided in section
4.02(3)(b)(ii) of this revenue procedure);
and
(II) Schedule O (Form 1120) and indi-
cating in column (f) of Part IV that the
controlled group has made the § 168(k)(4)
election and the portion of the group bonus
depreciation amount allocated to the mem-
ber (as provided in section 4.02 of this rev-
enue procedure).
(d)Effect of § 168(k)(4) election for
members entering or leaving a controlled
group.
(i)Member leaves controlled group that
made § 168(k)(4) election. If a taxpayer
is a member of a controlled group that
makes the § 168(k)(4) election (the old
group), and in a subsequent taxable year
becomes a member of another controlled
group that has not made the § 168(k)(4)
election (the new group), the § 168(k)(4)
election of the old group is not binding on
the new group. The taxpayer, however,
continues to be treated as having made
the § 168(k)(4) election and must continue
to apply §§ 167(f)(1) and 168 as if the
§ 168(k)(4) election was made. Similarly,
if a taxpayer is a member of a controlled
group that makes the § 168(k)(4) election
(the old group), and in a subsequent tax-
able year leaves the old group and does not
become a member of another controlled
group, the taxpayer continues to be treated
as having made the § 168(k)(4) election
and must continue to apply §§ 167(f)(1)
and 168 as if the § 168(k)(4) election was
made.
(ii)Taxpayer becomes a member of a
controlled group after § 168(k)(4) election
is made. If a taxpayer was not a member
of any controlled group when the tax-
payer made the § 168(k)(4) election and
in a subsequent taxable year becomes a
member of a controlled group that did
not make the § 168(k)(4) election, the
taxpayer’s election is not binding on the
controlled group. The taxpayer, however,
continues to be treated as having made
the § 168(k)(4) election and must con-
tinue to apply §§ 167(f)(1) and 168 as
if the § 168(k)(4) election was made. If
a taxpayer neither made the § 168(k)(4)
election nor was a member of a controlled
group that made the § 168(k)(4) election,
and in a subsequent taxable year becomes
a member of a controlled group that made
the § 168(k)(4) election, the controlled
group’s election does not apply to the tax-
payer.
(iii)Special rule for consolidated
groups.Notwithstanding section
3.05(2)(d)(i) and (ii) of this revenue pro-
cedure, a § 168(k)(4) election (or the lack
of a § 168(k)(4) election) made by a con-
solidated group (or a controlled group in
which the consolidated group is a member)
applies to any eligible qualified property
placed in service by a member of the
consolidated group during a consolidated
return year, even if such member is not
a member of the consolidated group on
the date that controlled group membership
2009–6 I.R.B.453February 9, 2009

is determined under section 3.05(1)(a) of
this revenue procedure.
(iv)Special rule for new taxpayers.If
a taxpayer was not in existence for the
first taxable year for which the § 168(k)(4)
election is made by a controlled group
(as defined in section 3.05(1)(a) of this
revenue procedure), immediately after
the taxpayer’s formation the taxpayer is
a member of that controlled group, and
the taxpayer is a member of that con-
trolled group as determined under section
3.05(1)(b) of this revenue procedure, that
controlled group’s § 168(k)(4) election,
if any election is made, applies to the
taxpayer. For example, if a controlled
group makes the § 168(k)(4) election and
subsequently transfers eligible qualified
property to a newly formed member of the
same controlled group (on the day of its
formation and on the determination date
under section 3.05(1)(b) of this revenue
procedure), such property remains eligible
qualified property to which the § 168(k)(4)
election applies and must be depreciated
using the straight line method.
(v)Overlapping groups. For purposes
of this revenue procedure, for any tax-
able year a taxpayer will not be consid-
ered a member of more than one controlled
group. A taxpayer is considered a member
of a single controlled group in accordance
with the principles of § 1.1563–1T(c) of
the temporary Income Tax Regulations.
.06Limited Relief for Late Election.
(1)Automatic 6-Month Extension.Pur-
suant to § 301.9100–2(b) of the Proce-
dure and Administration Regulations, an
automatic extension of 6 months from the
due date of the federal tax return (exclud-
ingextensions) for the taxpayer’s first tax-
able year ending after March 31, 2008, is
granted to make the § 168(k)(4) election,
provided the taxpayer timely filed the tax-
payer’s federal tax return for the taxpayer’s
first taxable year ending after March 31,
2008, and the taxpayer satisfies the re-
quirements in § 301.9100–2(c) and (d).
(2)Other Extensions. A taxpayer that
fails to make the § 168(k)(4) election for
the taxpayer’s first taxable year ending af-
ter March 31, 2008, as provided in sec-
tion 3.01, 3.02, 3.03, 3.04, 3.05, or 3.06(1)
of this revenue procedure but wants to do
so must file a request for an extension of
time to make the election under the rules
in § 301.9100–3.
SECTION 4. ALLOCATION OF THE
BONUS DEPRECIATION AMOUNT
.01In General. A taxpayer allocates
the bonus depreciation amount between
the business credit limitation under § 38(c)
and the AMT credit limitation under
§ 53(c) by the due date (including exten-
sions) of the taxpayer’s federal income
tax return for the taxable year. Except as
provided in section 4.02 of this revenue
procedure, the taxpayer specifies this al-
location by reporting the amounts on the
appropriate lines of the Forms 3800 and
8827. However, if a taxpayer’s first tax-
able year ending after March 31, 2008,
ends before December 31, 2008, the tax-
payer makes and specifies the allocation
for such taxable year on the amended
federal income tax return filed pursuant
to section 3.02(1)(a)(ii) or 3.03(2) of this
revenue procedure. A different allocation
may be used for different taxable years.
.02Controlled Groups.
(1)In general. If a taxpayer is a mem-
ber of a controlled group (as determined
under section 3.05(1) of this revenue pro-
cedure) and any member of the controlled
group makes the § 168(k)(4) election, the
allocation of the group bonus depreciation
amount to each member of the controlled
group must be determined in accordance
with section 4.02(2) or 4.02(3) of this rev-
enue procedure, as applicable. This al-
location of the group bonus depreciation
amount for any taxable year is reported
on Schedule O (Form 1120) (or a similar
statement) that is attached to the federal
income tax return or amended federal in-
come tax return for that taxable year, as
the case may be, filed by each member of
the controlled group within the time pro-
vided in section 4.01 of this revenue pro-
cedure. However, if a member of a con-
trolled group does not have the informa-
tion necessary to allocate the group bonus
depreciation amount for a taxable year on
or before the due date (including exten-
sions) of the member’s federal income tax
return for the taxable year, the member
must make and specify the allocation for
that taxable year on an amended federal in-
come tax return for that taxable year that
is filed on or before the due date (includ-
ing extensions) of the member’s federal in-
come tax return for the succeeding taxable
year. The allocation described in this sec-
tion 4.02 of this revenue procedure applies
to all controlled group members who have
made a section 168(k)(4) election or who
are treated as having made such an elec-
tion pursuant to section 3.05 of this rev-
enue procedure.
(2)All members of a controlled group
constitute a single consolidated group.
If all members of a controlled group are
members of a consolidated group (as de-
fined in section 3.05(2)(b) of this revenue
procedure), the consolidated group deter-
mines its bonus depreciation amount in
accordance with section 5 of Rev. Proc.
2008–65, treating the consolidated group
as a single taxpayer. The allocation of
the bonus depreciation amount among
the members of the consolidated group
must be pursuant to an allocation by the
common parent in accordance with the
principles of § 1502 and its accompanying
regulations.
(3)All members of a controlled group
do not constitute a single consolidated
group.
(a)In general. This section 4.02(3)
applies when separate federal income tax
returns are filed by some or all members of
a controlled group. If a controlled group
includes, but is not limited to, members
of a consolidated group, the consolidated
group is treated as a single member of
the controlled group. The allocation of
the bonus depreciation amount among the
members of the controlled group must be
made pursuant to section 4.02(3)(b) or (c)
of this revenue procedure, as applicable.
Any group bonus depreciation amount
allocated to a consolidated group under
this section 4.02(3) is allocated among
the members of the consolidated group
pursuant to an allocation by the common
parent in accordance with the principles of
§ 1502 and its accompanying regulations.
(b)Allocation of group bonus depreci-
ation amount.
(i)In general. The bonus depreciation
amount allocable to a member of a con-
trolled group is determined by arriving at
each member’s proportionate share of the
group bonus depreciation amount, unless
all members of the group agree to an alter-
native allocation under section 4.02(3)(c)
of this revenue procedure.
(ii)Computation of group bonus depre-
ciation amount. The group bonus depreci-
ation amount is computed as follows:
(A) First, calculate the bonus deprecia-
tion amount in the manner provided in sec-
February 9, 20094542009–6 I.R.B.

tions 5.01 and 5.02 of Rev. Proc. 2008–65
treating the controlled group as a single
taxpayer. To calculate this amount, the eli-
gible qualified property placed in service
by each member of the controlled group
during the taxable year is taken into ac-
count. However, if some or all members of
the controlled group have different taxable
years, the eligible qualified property to be
taken into account is such property placed
in service by each member of the con-
trolled group after March 31, 2008, and be-
fore January 1, 2009 (or, for taxable years
ending in 2009 or thereafter, during such
calendar year);
(B) Second, calculate the maximum
increase amount in section 5.04 of Rev.
Proc. 2008–65, the business credit in-
crease amount in section 5.05 of Rev.
Proc. 2008–65, and the AMT credit in-
crease amount in section 5.06 of Rev.
Proc. 2008–65 by taking into account the
sum of all member’s pre–2006 unexpired
and unused research credits and AMT
credits as of the last day of the taxable year.
However, if the taxable years of some or
all members of the controlled group end
on different dates, the sum of all members’
pre–2006 unexpired and unused research
credits and AMT credits as of the last day
of each member’s last taxable year ending
on or before December 31 (determined for
each calendar year) are taken into account;
and
(C) Finally, calculate the maximum
amount in section 5.03 of Rev. Proc.
2008–65 to arrive at the group bonus de-
preciation amount for the taxable year.
(iii)Member’s proportionate share of
group bonus depreciation amount. Each
member’s proportionate share of the group
bonus depreciation amount is equal to
the group bonus depreciation amount de-
termined under section 4.02(3)(b)(ii)(C)
of this revenue procedure multiplied by
a fraction, the numerator of which is
the amount such member contributed
to the total computed under section
4.02(3)(b)(ii)(A) of this revenue procedure
and the denominator of which is the total
computed under section 4.02(3)(b)(ii)(A)
of this revenue procedure. If the taxable
years of some or all members of the con-
trolled group end on different dates, all (if
any) of a member’s proportionate share
of group bonus depreciation amount must
be claimed by such member in the taxable
year of the member to which such share
relates (determined by reference to the eli-
gible qualified property’s placed in service
date).
(c)Allocation agreement. In lieu of
the method provided in section 4.02(3)(b)
of this revenue procedure, the controlled
group may allocate the group bonus depre-
ciation amount (computed as provided in
section 4.02(3)(b)(ii) of this revenue pro-
cedure) to any member in any proportion
that all members of the controlled group
agree. Any agreement, and the amounts
allocated to all members pursuant to such
agreement, must be shown on Schedule
O (Form 1120) (or a similar statement)
within the time and in the manner pro-
vided in section 4.02(1) of this revenue
procedure. A subsequent agreement may
befiled(shownonScheduleO(orsimi-
lar statement) within the time and in the
manner provided in section 4.01(1) of this
revenue procedure) that varies the group
bonus depreciation amounts allocated to
controlled group members in taxable years
after the group’s first taxable year ending
after March 31, 2008.
.04Example 1. A, B, and C are corporations that,
on December 31, 2008, are the only members of the
ABC controlled group. A’sfirst taxable year ending
after March 31, 2008, ends on June 30, 2008. B and
C’s first taxable year ending after March 31, 2008,
ends on December 31, 2008. As of June 30, 2008, A
has $300 million of unexpired and unused pre–2006
research and AMT creditcarryforwards. As of De-
cember 31, 2008, B and C each have $300 million of
unexpired and unused pre–2006 research and AMT
credit carryforwards. Therefore, as of December 31,
2008, the ABC controlled group has $900 million of
unexpired and unused pre–2006 research and AMT
credit carryforwards.
On May 1, 2008, A and B each placed in ser-
vice eligible qualified property that costs $50 million
and is 5-year property under § 168(e). On Septem-
ber 1, 2008, A also placed in service eligible qual-
ified property that costs $100 million and is 5-year
property under § 168(e). A, B, and C depreciate
their 5-year property using the optional depreciation
table that corresponds with the general depreciation
system, the 200-percent declining balance method, a
5-year recovery period, and the half-year convention.
For each of the properties placed in service on May
1, 2008, the difference between the aggregate amount
of depreciation that would be allowable for the prop-
erty if the Stimulus additional first year depreciation
deduction applied over the aggregate amount of de-
preciation that would be allowable for the property if
the Stimulus additional first year depreciation deduc-
tion did not apply is $20 million. That amount for
the property placed in service by A on September 1,
2008, is $40 million.
For its taxable year ending June 30, 2008, A
makesthe§168(k)(4)electionbyfilinganamended
federal income tax return (Form 1120X) on Jan-
uary 15, 2009, in the manner provided by section
3.05(2)(c)(ii) of this revenue procedure. At the time
A’s Form 1120X is filed, A, B, and C have not en-
tered into any agreement regarding the allocation of
the bonus depreciation amount among them.
(1) Under section 4.02(3)(b)(ii) of this revenue
procedure, the ABC controlled group’s group bonus
depreciation amount is 20 percent of $80 million, or
$16 million. Under section 4.02(3)(b)(ii) of this rev-
enue procedure, because $16 million is less than (i)
$30 million and (ii) 6 percent of the ABC controlled
group aggregate unexpired and unused pre–2006 re-
search and AMT credits (.06 X $900 million, or $54
million), the ABC controlled group is not limited by
the maximum increase amount. Thus, under section
4.02(3)(b)(ii)(C) of this revenue procedure, the ABC
controlled group’s group bonus depreciation amount
for the period ending onDecember 31, 2008, is $16
million.
(2) Under section 4.02(3)(b)(iii) of this revenue
procedure, A’s proportionate share of the group bonus
depreciation amount is $12 million ($16 million X
($60 million/$80 million)). For its taxable year end-
ing June 30, 2008, A may increase its business credit
and AMT credit limitations under, respectively,
§§ 38(c) and 53(c) by, and claim a refundable credit
of, $4 million ($12 million X ($20 million/$60 mil-
lion)) on its Form 1120X. For its taxable year ending
June 30, 2009, A may increase its business credit and
AMT credit limitations by $8 million ($12 million
X ($40 million/$60 million)) (plus any group bonus
depreciation amount calculated for the group and
allocated to A for the period January 1, 2009, through
December 31, 2009). In addition, B’s proportionate
share of the group bonus depreciation amount is $4
million ($16 million X ($20 million/$80 million)).
B may increase its business credit and AMT credit
limitations under, respectively, §§ 38(c) and 53(c)
by, and claim a refundable credit of, $4 million on its
original federal income tax return for its taxable year
ending December 31, 2008. The ABC controlled
group then has a maximum amount of $14 million
of bonus depreciation amount ($30 million less the
$16 million allocated to A and B) remaining to be
used for eligible qualified property placed in service
by the ABC controlled group after December 31,
2008 (e.g., long-lived property orcertain aircraft).
The result of this Example is the same if, instead
of a single corporation, A represents a consolidated
group of corporations, except the $12 million of
group bonus depreciation amount allocated to A is
reallocated within the A consolidated group pursuant
to an allocation by the common parent in accordance
with the principles of § 1502 and its accompanying
regulations.
(b)Example 2. ThefactsarethesameasinEx-
ample 1, except A has no pre–2006 business credit
or AMT credit carryforwards as of the last day of its
June 30, 2008, taxable year and C has $600 million
of pre–2006 research credit and AMT credit carry-
forwards as of December 31, 2008. Although A may
increase its §§ 38(c) and 53(c) credit limitations for
its taxable year ending June 30, 2008, A has no credit
carryforwards that A may use to claim a refundable
credit. Absent an allocation agreement, B and C may
not be allocated any portion of the bonus deprecia-
tion amount that was allocated to A under section
4.02(3)(b)(iii) of this revenue procedure. The ABC
controlled group, therefore, has $26 million of group
bonus depreciation ($30 million less the $4 million
2009–6 I.R.B.455February 9, 2009

allocated to B) remaining to be used for eligible quali-
fied property placed in service by the ABC controlled
group after December 31, 2008.
(c)Example 3. The facts are the same asExam-
ple 2, except A, B, and C have entered into an agree-
ment regarding the allocation of the group bonus de-
preciation amount. The agreement provides that C
will be allocated all of the group bonus depreciation
amount. C, therefore, may increase its business and
AMT credit limitations under, respectively, §§ 38(c)
and 53(c) by, and claim a refundable credit of, $16
million on its original income tax return for its tax-
able year ending December 31, 2008. Neither A nor
B may claim the refundable credit for their taxable
years ending June 30, 2008, and December 31, 2008,
respectively. The ABC controlled group has a max-
imum amount of $14 million of bonus depreciation
amount ($30 million less the $16 million allocated to
C) remaining to be used for eligible qualified prop-
erty placed in service by the ABC controlled group
after December 31, 2008.
SECTION 5. PARTNERSHIPS WITH
CORPORATE PARTNERS THAT MAKE
THE § 168(k)(4) ELECTION
.01Partnership’s Information to Part-
ner.
(1)In general. If a corporation makes
the § 168(k)(4) election and is a partner in
a partnership (electing corporate partner),
the partnership must provide the electing
corporate partner withsufficient informa-
tion to apply § 168(k)(4)(G)(ii) in deter-
mining its distributive share of partner-
ship items under § 702 relating to any el-
igible qualified property placed in service
by the partnership during the taxable year.
This information must be provided in the
time and manner required by § 6031(b)
and § 1.6031(b)–1T(a)(3)(ii) and (b). If
the partnership has filed its federal tax re-
turn for its first taxable year ending after
March 31, 2008, on or before February 9,
2009, and did not provide the electing cor-
porate partner with sufficient information
to apply § 168(k)(4)(G)(ii), the partnership
must provide such information to the elect-
ing corporate partner by the later of May
11, 2009, or 90 calendar days after receiv-
ing the corporate partner’s notification as
required by section 5.02 of this revenue
procedure.
(2)Determination of Electing Cor-
porate Partner’s Distributive Share.A
partnership must compute an electing
corporate partner’sdistributive share of
depreciation and make other correla-
tive adjustments attributable to eligible
qualified property placed in service by
the partnership using any reasonable
method that is consistent with the intent
of § 168(k)(4)(G)(ii). For example, the
partnership may apply principles similar
to those in § 743(b) and the regulations
thereunder to the extent appropriate to
make adjustments to the basis of the eli-
gible qualified property and the electing
corporate partner’s distributive share of
depreciation attributable to such property.
.02Electing Corporate Partner’s Noti-
fication to Partnership.Anelectingcorpo-
rate partner must notify the partnership, in
writing, that the corporate partner is mak-
ing the § 168(k)(4) election. This notifi-
cation must be made on or before the due
date (including extensions) of the electing
corporate partner’s federal income tax re-
turn for its first taxable year ending after
March 31, 2008. If the electing corpo-
rate partner makes the § 168(k)(4) elec-
tion by filing an amended return under sec-
tions 3.02(1)(a)(ii) or 3.03(2) of this rev-
enue procedure, as applicable, the elect-
ing corporate partner must notify the part-
nership on or before the date it files an
amended return containing the § 168(k)(4)
election. If the electing corporate part-
ner is described in section 3.03(1) of this
revenue procedure, the electing corporate
partner must notify the partnership on or
before March 11, 2009. Failure to com-
ply with the notification requirement pro-
vided by this section 5.02 will nullify a tax-
payer’s attempted § 168(k)(4) election.
SECTION 6. APPLICATION OF
§ 168(k)(4) TO S CORPORATIONS
AND THEIR SHAREHOLDERS
.01In General. An S corporation is
allowed to make the § 168(k)(4) elec-
tion. However, any business or AMT
credit limitation increases that result from
a § 168(k)(4) election are applied at the
corporate level and not at the shareholder
level. Thus, a shareholder of an S corpo-
ration must not increase the shareholder’s
business or AMT credit limitations under,
respectively, §§ 38(c) and 53(c) by the
bonus depreciation amount that results
from a § 168(k)(4) election made by the
S corporation.
.02Applicability to S Corporations.
Under § 1374(a), an S corporation is sub-
ject to tax on its recognized built-in gains
during its taxable year. In general, un-
der § 1374(b)(3)(B), an S corporation is
allowed as a credit against the § 1374(a)
tax any business and AMT credit carryfor-
wards that arose in a taxable year in which
the corporation was a C corporation. The
credits allowed by § 1374(b)(3)(B) are
subject to three limitations: the business
credit limitation in § 38(c), the AMT credit
limitation in § 53(c), and the amount of
the § 1374(a) tax. Sections 1374(b)(3)(B)
and 1.1374–6(b). If an S corporation
makes the § 168(k)(4) election, the S cor-
poration calculates its bonus depreciation
amount as provided in section 5 of Rev.
Proc. 2008–65, increases its business and
AMT credit limitations, uses the straight
line method for depreciating its eligible
qualified property, and must not claim the
Stimulus additional first year depreciation
deduction for such property. However, the
§ 168(k)(4) election does not increase the
S corporation’s § 1374(b)(3)(B) limita-
tion. Therefore, if the § 168(k)(4) election
is made, an S corporation may not claim
business credits or AMT credits in ex-
cess of its § 1374(a) tax for the taxable
year. Any credits allowed as a result of
the increase in the business or AMT credit
limitations, which may be used only as an
additional credit against the § 1374(a) tax,
are not refundable to the S corporation.
.03Time and Manner for Making the
§ 168(k)(4) Election. An S corporation
makes the § 168(k)(4) election within the
time and in the manner provided in section
3 of this revenue procedure.
SECTION 7. APPLICATION OF
§ 3081(b) OF THE HOUSING ACT
.01In General. Section 3081(b)(1)
of the Housing Act allows an applica-
ble partnership to elect to be treated as
making a deemed payment of income tax
(the “deemed payment”) in the amount
determined under section 7.03 of this rev-
enue procedure. Thiselection applies to
any taxable year during which eligible
qualified property is placed in service by
the applicable partnership. See section
3 of Rev. Proc. 2008–65 for determin-
ing which depreciable property qualifies
as eligible qualified property. Notwith-
standing any other provision of the Code,
the deemed payment is refundable to the
applicable partnership and may not be
treated as an offset or credit against any
tax liability of the applicable partnership
or any partner. Section 3081(b)(2)(A) of
the Housing Act.
February 9, 20094562009–6 I.R.B.

.02Definition of Applicable Partner-
ship. An applicable partnership is a do-
mestic partnership that was formed effec-
tive on August 3, 2007, and will produce
in excess of 675,000 automobiles during
the period beginning on January 1, 2008,
and ending on June 30, 2008. Section
3081(b)(4)(A) of the Housing Act.
.03Computation of the Deemed Pay-
ment. Pursuant to § 3081(b)(1)(A) and
(b)(3) of the Housing Act, the amount of
the deemed payment for the taxable year
is equal to the lesser of:
(1) 20 percent of the excess (if any) of
the aggregate amount of depreciation that
would be allowable for eligible qualified
property placed in service by the applica-
ble partnership during the taxable year if
the Stimulus additional first year depreci-
ation deduction applied to all such prop-
erty, over the aggregate amount of depreci-
ation that would be allowable for all eligi-
ble qualified property placed in service by
the applicable partnership during the tax-
able year if the Stimulus additional first
year depreciation deduction did not apply
to any such property. For purposes of com-
puting this amount, the rules in section
5.02 of Rev. Proc. 2008–65 apply;
(2) the applicable partnership’s research
credit (determined under § 41) for the tax-
able year; or
(3) $30 million less any deemed pay-
ments made by the applicable partnership
under § 3081(b) of the Housing Act for all
prior taxable years.
.04Effect of Making Election under
§ 3081(b) of the Housing Act.Ifanap-
plicable partnership makes the election to
apply § 3081(b) of the Housing Act (the
“§ 3081(b) Housing Act election”), the
applicable partnership (1) must determine
the depreciation deduction for any eligible
qualified property placed in service by
the partnership during the taxable year
by using the straight line method and by
not claiming the Stimulus additional first
year depreciation deduction, and (2) must
reduce the amount of its research credit
for the taxable year by the amount of the
deemed payment for the taxable year. Sec-
tion 3081(b)(1)(B) and (C).
.05Time and Manner of Making
§ 3081(b) Housing Act Election.
(1)Time for making election.Anappli-
cable partnership must make the § 3081(b)
Housing Act election by the due date (in-
cluding extensions) of the Form 1065,U.S.
Return of Partnership Income, for the part-
nership’s first taxable year ending after
March 31, 2008. Even if an applicable
partnership does not place in service any
eligible qualified property during its first
taxable year ending after March 31, 2008,
the partnership must make the § 3081(b)
Housing Act election for that taxable year
if the partnership wishes to apply the elec-
tion to eligible qualified property placed in
service in subsequent taxable years.
(2)Manner of making election.Anap-
plicable partnership makes the § 3081(b)
Housing Act election by making the fol-
lowing statement (printed legibly or typed)
on its timely-filed Form 1065 for the first
taxable year ending after March 31, 2008,
in the space below the signature section of
the Form 1065: “A refund in the amount
of $[Insert Amount] is requested pursuant
to Section 3081(b)(1) of P. L. 110–289, the
Housing and Economic Recovery Act of
2008.”
(3)Limited Relief for Late Election.
(a)Automatic 6-Month Extension.Pur-
suant to § 301.9100–2(b) of the Procedure
and Administration Regulations, an auto-
matic extension of 6 months from the due
date of the federal tax return (excludingex-
tensions) for the applicable partnership’s
first taxable year ending after March 31,
2008, is granted to make the § 3081(b)
Housing Act election, provided the appli-
cable partnership timely filed its federal
tax return for its first taxable year end-
ing after March 31, 2008, and the applica-
ble partnership satisfies the requirements
in § 301.9100–2(c) and (d).
(b)Other Extensions. An applicable
partnership that fails to make the § 3081(b)
Housing Act election for the applicable
partnership’s first taxable year ending af-
ter March 31, 2008, as provided in section
7.05(1) and (2) of this revenue procedure
or in section 7.05(3)(a) of this revenue pro-
cedure but wants to do so must file a re-
quest for an extension of time to make the
election under the rules in § 301.9100–3.
.06Filing of Form 1065.
(1)In general. For the taxable year in
which the § 3081(b) Housing Act election
is made (the “year of election”) and for any
subsequent taxable year in which an appli-
cable partnership is claiming a refundable
deemed payment under § 3081(b) of the
Housing Act, the partnership’s Form 1065
and related forms andschedules (includ-
ing Schedules K–1) must not be filed
electronically. Further, the applicable
partnership must mail the Form 1065 and
related forms and schedules (including
Schedules K–1) to: Internal Revenue Ser-
vice, 1973 N. Rulon White Blvd., Attn:
Audrey Martinez Mail Stop 1120, Ogden,
UT 84201.
(2)Taxable years subsequent to the year
of election. If the applicable partnership
claims a refundable deemed payment un-
der § 3081(b) of the Housing Act for any
taxable year subsequent to the year of elec-
tion, the partnership must make the follow-
ing statement (printed legibly or typed) on
its Form 1065 for that taxable year in the
space below the signature section of the
Form 1065: “A refund in the amount of
$[Insert Amount] is requested pursuant to
Section 3081(b)(1) of P. L. 110–289, the
Housing and Economic Recovery Act of
2008.”
SECTION 8. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2008–65 is amplified and
supplemented.
SECTION 9. PAPERWORK
REDUCTION ACT
The collections of information con-
tained in this revenue procedure have
been reviewed and approved by the Office
of Management and Budget in accor-
dance with the Paperwork Reduction Act
(44 U.S.C. 3507) under control number
1545–2133. An agency may not conduct
or sponsor, and a person is not required to
respond to, a collection of information un-
less the collection of information displays
a valid OMB control number.
The collections of information in this
revenue procedure are in sections 3, 4, 5,
and 7. This information is necessary and
will be used to determine whether the tax-
payer is eligible to make the § 168(k)(4)
election and the amount by which the elec-
tion increases the taxpayer’s applicable
credit limitations. The collections of in-
formation are required for the taxpayer to
make the § 168(k)(4) election. The likely
respondents are the following: business
and other for-profit institutions.
The estimated total annual reporting
and/or recordkeeping burden is 2,700
hours.
2009–6 I.R.B.457February 9, 2009

The estimated annual burden per re-
spondent/recordkeeper varies from 0.25
hours to 1 hour, depending on individual
circumstances, with an estimated average
of 0.5 hours. The estimated number of re-
spondents is 5,400. The estimated annual
frequency of responses is on occasion.
SECTION 10. EFFECTIVE DATE
This revenue procedure is effective Jan-
uary 23, 2009.
SECTION 11. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Jeffrey T. Rodrick of the Of-
fice of Associate Chief Counsel (Income
Tax & Accounting). For further infor-
mation regarding this revenue procedure,
contact Mr. Rodrick at (202) 622–4930
(not a toll-free call).
February 9, 20094582009–6 I.R.B.

Part IV. Items o
fGeneralInterest
Deletions Fro
m Cumulative
List of Organi
zations
Contribution
stoWhich
are Deductib
le Under Section
170 of the Cod
e
Announceme
nt 2009–3
The Interna
l Revenue Service has re-
voked its de
termination that the organi-
zations lis
ted below qualify as organiza-
tions descr
ibed in sections 501(c)(3) and
170(c)(2)
of the Internal Revenue Code of
1986.
Generally
, the Service will not disallow
deduction
s for contributions made to a
listed org
anization on or before the date
of announceme
nt in the Internal Revenue
Bulletin that
an organization no longer
qualifies. Ho
wever, the Service is not
precluded fro
m disallowing a deduction
for any contri
butions made after an or-
ganization c
eases to qualify under section
170(c)(2) if
the organization has not timely
filed a suit f
or declaratory judgment under
section 7428
and if the contributor (1) had
knowledge o
f the revocation of the ruling
or determin
ation letter, (2) was aware that
such revoca
tion was imminent, or (3) was
in part resp
onsible for or was aware of the
activitie
s or omissions of the organization
that broug
ht about this revocation.
If on the ot
her hand a suit for declara-
tory judgm
ent has been timely filed, con-
tribution
s from individuals and organiza-
tions describ
ed in section 170(c)(2) that
are otherwise
allowable will continue to
be deductible
. Protection under section
7428(c) would
begin on February 9, 2009,
and would end o
n the date the court first
determines t
hat the organization is not de-
scribedinse
ction 170(c)(2) as more partic-
ularly set fo
rthinsection7428(c)(1). For
individual c
ontributors, the maximum de-
duction pro
tected is $1,000, with a hus-
band and wif
e treated as one contributor.
This benefi
t is not extended to any indi-
vidual, in w
hole or in part, for the acts or
omissions
of the organization that were the
basis for r
evocation.
Hoodland C
ommunity Childrens Center
Welches, O
R
2009–6 I.R.B.459February 9, 2009

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published 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 fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
February 9, 2009i2009–6 I.R.B.

Numerical Finding List
1
Bulletins 2009–1 through 2009–6
Announcements:
2009-1, 2009-1 I.R.B.242
2009-2, 2009-5 I.R.B.424
2009-3, 2009-6 I.R.B.459
Notices:
2009-1, 2009-2 I.R.B.250
2009-2, 2009-4 I.R.B.344
2009-3, 2009-2 I.R.B.250
2009-4, 2009-2 I.R.B.251
2009-5, 2009-3 I.R.B.309
2009-6, 2009-3 I.R.B.311
2009-7, 2009-3 I.R.B.312
2009-8, 2009-4 I.R.B.347
2009-9, 2009-5 I.R.B.419
2009-10, 2009-5 I.R.B.419
2009-11, 2009-5 I.R.B.420
2009-12, 2009-6 I.R.B.446
2009-13, 2009-6 I.R.B.447
2009-15, 2009-6 I.R.B.449
Proposed Regulations:
REG-148568-04, 2009-5 I.R.B.421
REG-160872-04, 2009-4 I.R.B.358
REG-158747-06, 2009-4 I.R.B.362
REG-150670-07, 2009-4 I.R.B.378
REG-113462-08, 2009-4 I.R.B.379
REG-150066-08, 2009-5 I.R.B.423
Revenue Procedures:
2009-1, 2009-1 I.R.B.1
2009-2, 2009-1 I.R.B.87
2009-3, 2009-1 I.R.B.107
2009-4, 2009-1 I.R.B.118
2009-5, 2009-1 I.R.B.161
2009-6, 2009-1 I.R.B.189
2009-7, 2009-1 I.R.B.226
2009-8, 2009-1 I.R.B.229
2009-9, 2009-2 I.R.B.256
2009-10, 2009-2 I.R.B.267
2009-11, 2009-3 I.R.B.313
2009-12, 2009-3 I.R.B.321
2009-13, 2009-3 I.R.B.323
2009-14, 2009-3 I.R.B.324
2009-15, 2009-4 I.R.B.356
2009-16, 2009-6 I.R.B.449
Revenue Rulings:
2009-1, 2009-2 I.R.B.248
2009-2, 2009-2 I.R.B.245
2009-3, 2009-5 I.R.B.382
2009-4, 2009-5 I.R.B.408
Revenue Rulings— Continued:
2009-5, 2009-6 I.R.B.432
Treasury Decisions:
9434, 2009-4 I.R.B.339
9435, 2009-4 I.R.B.333
9436, 2009-3 I.R.B.268
9437, 2009-4 I.R.B.341
9438, 2009-5 I.R.B.387
9439, 2009-5 I.R.B.416
9440, 2009-5 I.R.B.409
9442, 2009-6 I.R.B.434
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2008–27 through 2008–52 is in Internal Revenue Bulletin
2008–52, dated December 29, 2008.
2009–6 I.R.B.iiFebruary 9, 2009

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2009–1 through 2009–6
Notices:
99-35
Obsoleted by
Notice 2009-15, 2009-6 I.R.B.449
2001-55
Modified by
Notice 2009-1, 2009-2 I.R.B.250
2002-27
Modified by
Notice 2009-9, 2009-5 I.R.B.419
2007-26
Modified by
Notice 2009-15, 2009-6 I.R.B.449
2007-54
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
2008-11
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
2008-12
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
Rev. Proc. 2009-11, 2009-3 I.R.B.313
2008-13
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
List of forms modified and superseded by
Rev. Proc. 2009-11, 2009-3 I.R.B.313
Modified and clarified by
Notice 2009-5, 2009-3 I.R.B.309
2008-46
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
Rev. Proc. 2009-11, 2009-3 I.R.B.313
Revenue Procedures:
2007-17
Superseded by
Rev. Proc. 2009-14, 2009-3 I.R.B.324
2007-71
Modified by
Notice 2009-3, 2009-2 I.R.B.250
2008-1
Superseded by
Rev. Proc. 2009-1, 2009-1 I.R.B.1
2008-2
Superseded by
Rev. Proc. 2009-2, 2009-1 I.R.B.87
Revenue Procedures— Continued:
2008-3
Superseded by
Rev. Proc. 2009-3, 2009-1 I.R.B.107
2008-4
Superseded by
Rev. Proc. 2009-4, 2009-1 I.R.B.118
2008-5
Superseded by
Rev. Proc. 2009-5, 2009-1 I.R.B.161
2008-6
Superseded by
Rev. Proc. 2009-6, 2009-1 I.R.B.189
2008-7
Superseded by
Rev. Proc. 2009-7, 2009-1 I.R.B.226
2008-8
Superseded by
Rev. Proc. 2009-8, 2009-1 I.R.B.229
2008-9
Superseded by
Rev. Proc. 2009-9, 2009-2 I.R.B.256
2008-61
Superseded by
Rev. Proc. 2009-3, 2009-1 I.R.B.107
2008-65
Amplified and supplemented by
Rev. Proc. 2009-16, 2009-6 I.R.B.449
2008-68
Amplified and superseded by
Rev. Proc. 2009-15, 2009-4 I.R.B.356
Revenue Rulings:
65-286
Obsoleted by
T.D. 9435, 2009-4 I.R.B.333
76-54
Obsoleted by
T.D. 9435, 2009-4 I.R.B.333
92-19
Supplemented by
Rev. Rul. 2009-3, 2009-5 I.R.B.382
2008-19
Modified by
Rev. Rul. 2009-3, 2009-5 I.R.B.382
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2008–27 through 2008–52 is in Internal Revenue Bulletin 2008–52, dated December 29,
2008.
February 9, 2009iii2009–6 I.R.B.

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