Rev. Rul. 1997-39

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INCOME TAX Rev. Rul. 97–39, page 4. Mark-to-market accounting method for dealers in securities. This ruling provides guidance to enable taxpay- ers to comply with the mark-to-market requirements of sec- tion 475 of the Code. Rev. Ruls. 94–7 and 93–76 clarified, modified, partially obsoleted, and superseded. Rev. Rul. 97–40, page 8. Interest rates; underpayments and overpayments. The rate of interest determined under section 6621 of the Code for the calendar quarter beginning October 1, 1997, will be 8 percent for overpayments, 9 percent for underpayments, and 11 percent for large corporate underpayments. The rate of interest paid on the portion of a corporate overpayment exceeding $10,000 is 6.5 percent. Rev. Proc. 97–43, page 12. Consent to change accounting method to comply with section 475 mark-to-market rules. Automatic consent to change accounting methods is provided to certain taxpayers that become subject to section 475(a) of the Code. In order to receive automatic consent, the taxpayer must file a com- pleted Form 3115, including a list of securities identified under section 475(b)(2), in the manner provided in this rev- enue procedure. EXEMPT ORGANIZATIONS Announcement 97–98, page 15. A list is given of organizations now classified as private foun- dations. ADMINISTRATIVE Announcement 97–96, page 15. The Service announces the number of medical savings ac- counts established as of June 30, 1997. Internal Revenue bbuulllleettiinn Bulletin No. 1997–39 September 29, 1997 HIGHLIGHTS OF THIS ISSUE These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations. Department of the Treasury Internal Revenue Service Finding Lists begin on page 18.

Mission of the Service The purpose of the Inter nal Revenue Ser vice is to collect the proper amount of tax r evenue at the least cost; ser ve the public by continually impr oving the quality of our pr od- ucts and ser vices; and per form in a manner war ranting the highest degree of public confidence in our integrity, effi- ciency, and fair ness.

Statement of Principles of Internal Revenue Tax Administration The function of the Inter nal Revenue Ser vice is to ad minis- ter the Internal Revenue Code. Tax policy for raising revenue is determined by Congress. With this in mind, it is the duty of the Service to carry out that policy by correctly applying the laws enacted by Congr ess; to determine the reasonable meaning of various Code provi- sions in light of the Congressional purpose in enacting them; and to perform this work in a fair and impartial manner, with neither a government nor a taxpayer point of view. At the heart of administration is interpretation of the Code. It is the responsibility of each person in the Ser vice, charged with the duty of interpr eting the law , to tr y to find the tr ue meaning of the statutor y pr ovision and not to adopt a strained construction in the belief that he or she is "protect- ing the r evenue." The r evenue is pr operly pr otected only when we ascertain and apply the true meaning of the statute. The Ser vice also has the r esponsibility of applying and administering the law in a r easonable, practical manner . Issues should only be raised by examining of ficers when they have merit, never arbitrarily or for trading purposes. At the same time, the examining of ficer should never hesi - tate to raise a meritorious issue. It is also impor tant that care be exercised not to raise an issue or to ask a cour t to adopt a position inconsistent with an established Ser vice position. Administration should be both r easonable and vigor ous. It should be conducted with as little delay as possible and with gr eat cour tesy and considerateness. It should never try to over reach, and should be r easonable within the bounds of law and sound administration. It should, howev - er, be vigor ous in r equiring compliance with law and it should be relentless in its attack on unr eal tax devices and fraud.

The Internal Revenue Bulletin is the authoritative instr ument of the Commissioner of Internal Revenue for announcing offi- cial rulings and procedures of the Inter nal Revenue Ser vice and for publishing Treasury Decisions, Executive Orders, Tax Conventions, 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 of a per manent nature are consoli- dated semiannually into Cumulative Bulletins, which ar e 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 r ulings that supersede, revoke, modify, or amend any of those pr eviously published in the Bulletin. All published rulings apply retroactively unless other- wise indicated. Pr ocedures relating solely to matters of in - ternal management are not published; however, statements of inter nal practices and pr ocedures that af fect 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 r ulings to taxpayers or technical advice to Ser vice field of fices, identifying details and infor mation of a confidential natur e 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 for ce and ef fect of T reasury Depar tment Regulations, but they may be used as pr ecedents. Unpublished r ulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying pub - lished rulings and procedures, the effect of subsequent leg- islation, r egulations, cour t decisions, r ulings, and pr oce- dures must be consider ed, and Ser vice personnel and oth - ers concerned are cautioned against reaching the same con- clusions in other cases unless the facts and cir cumstances are substantially the same. The Bulletin is divided into four parts as follows: Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986. Part II.—T reaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions, and Subpar t B, Legislation and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, per tinent cr oss r eferences to these subjects ar e contained in the other Par ts and Sub - parts. Also included in this part are Bank Secrecy Act Admin- istrative Rulings. Bank Secr ecy Act Administrative Rulings are issued by the Department of the Treasury's Office of the Assistant Secretary (Enforcement). Part IV.—Items of General Inter est. With the exception of the Notice of Pr oposed Rulemaking and the disbarment and suspension list included in this part, none of these announcements are consolidated in the Cumu- lative Bulletins. The first Bulletin for each month includes a cumulative index for the matters published during the pr eceding months. These monthly indexes ar e cumulated on a quar terly and semiannual basis, and are published in the first Bulletin of the succeeding quarterly and semiannual period, respectively.

Introduction The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate. For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

September 29, 1997 4 1997–39 I.R.B. Section 446.—General Rule for Methods of Accounting 26 CFR 1.446–1: General rule for methods of accounting. Questions and answers about the application of section 475 and the regulations thereunder. See Rev. Rul. 97–39, page 4. 26 CFR 1.446–1: General rule for methods of accounting. What information must a taxpayer provide in order to obtain automatic consent to change ac- counting method when section 475(a) becomes ap- plicable as a result of the taxpayer making an elec- tion (i) to treat transactions within a consolidated group as transactions with customers as provided by section 1.475(c)–1(a), or (ii) not to be governed by the exemptions from the status of a dealer in securi- ties provided by section 1.475(c)–1(b) or –1(c)? See Rev. Proc. 97–43, page 12. Section 475.—Mark-to-Market Accounting Method for Dealers in Securities 26 CFR 1.475(b)–2: Exemptions—identification requirements. (Also §§ 446, 475, 7805; 1.446–1, 1.475(c)–1, 301.7805–1.) Mark-to-market accounting method fordealers in securities. This ruling pro- vides guidance to enable taxpayers to comply with the mark-to-market require- ments of section 475 of the Code. Rev. Ruls. 94–7 and 93–76 clarified, modified, partially obsoleted, and superseded. Rev. Rul. 97–39 PURPOSE This revenue ruling provides guidance under § 475 of the Internal Revenue Code to enable taxpayers to comply with the mark-to-market requirements of § 475. Rev. Rul. 93–76, 1993–2 C.B. 235 (which was previously modified by Rev. Rul. 94–7, 1994–1 C.B. 151), is clarified, modified, partially obsoleted, and super- seded. LA W Section 475 of the Code was enacted on August 10, 1993, in the Omnibus Bud- get Reconciliation Act of 1993 (the "1993 Act"), section 13223, 1993-3 C.B. 1, 69. It requires mark-to-market ac- counting treatment for certain securities held by a "dealer in securities" as defined in § 475(c)(1). This requirement is effec- tive for all taxable years ending on or after December 31, 1993. Section 475 was amended on August 5, 1997, in the Taxpayer Relief Act of 1997 (the "1997 Act"), section 1001(b) (redesignating old § 475(e) as § 475(g) and adding new § 475(e) and (f) to allow dealers in com- modities and traders in securities and commodities to elect mark-to-market ac- counting, effective for taxable years end- ing after August 5, 1997). This revenue ruling is limited to issues arising under the 1993 Act and does not address issues arising under the 1997 Act. Section 475(a) sets forth two mark-to- market rules. First, any security that is in- ventory in the hands of a dealer must be included in inventory at its fair market value. Second, any security that is not in- ventory in the hands of a dealer and that is held at the close of any taxable year is treated as sold by the dealer for its fair market value on the last business day of that taxable year, and any gain or loss is required to be taken into account for that taxable year. Section 475(b)(1) provides that the mark-to-market rules do not apply to: (1) any security held for investment; (2) any evidence of indebtedness that is acquired (including originated), or any obligation to acquire an evidence of indebtedness that is entered into, by a dealer in the or- dinary course of its trade or business, but only if the evidence of indebtedness or obligation to acquire an evidence of in- debtedness is not held for sale; (3) any security that is a hedge with respect to a security that is not subject to the mark-to- market rules; and (4) any security that is a hedge of a position, right to income, or liability that is not a security in the hands of the taxpayer. Under § 475(b)(2), a se- curity must be clearly identified in the dealer's records as being covered by one of the exceptions described in § 475(b)(1) before the close of the day on which the dealer acquired, originated, or entered into the security. In addition to the identification require- ments in § 475(b), § 475(c)(2)(F)(iii) re- quires a dealer in securities to identify a position that is not a security described in § 475(c)(2)(A)–(E), but that is treated as a security because it is a hedge with respect to such a security. ISSUES AND HOLDINGS Issue 1: If a taxpayer is not otherwise a dealer in securities within the meaning of § 475(c)(1) but, nevertheless, timely iden- tifies all of its securities as being covered by one of the exceptions in § 475(b)(1), does that "protective identification" cause the taxpayer to be treated as a dealer? Holding 1: No. A taxpayer that is not a dealer in securities within the meaning of § 475(c)(1) does not become a dealer in securities or create an inference that it is a dealer in securities by making a protective identification of its securities. Issue 2: Is a bank or an insurance com- pany excepted from the mark-to-market rules on the grounds that it is, per se, not a dealer in securities within the meaning of § 475(c)(1)? Holding 2: No. A bank or an insur- ance company is subject to the mark-to- market rules if its activities bring it within the definition of a dealer in securi- ties in § 475(c)(1). For example, many banks are dealers because they regularly originate and sell loans. As another ex- ample, an insurance company that regu- larly makes and sells policyholder loans is a dealer for purposes of § 475. Issue 3: If a taxpayer's sole business consists of trading in securities (that is, the taxpayer does not purchase from, sell to, or otherwise enter into transac- tions with customers), is the taxpayer a dealer in securities within the meaning of § 475(c)? Holding 3: No. A taxpayer whose sole business consists of trading in securities is not a dealer in securities within the mean- ing of § 475(c) because that taxpayer does not purchase from, sell to, or enter into transactions with, customers in the ordi- nary course of a trade or business. Issue 4: Does the classification of a se- curity under financial accounting princi- ples, including FASB Statement No. 115 (Accounting for Certain Investments in Debt and Equity Securities), determine whether the security qualifies for one of the exceptions to the mark-to-market rules under § 475(b)(1)? Holding 4: No. The classification of a security under financial accounting Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

principles is not dispositive of the treat- ment of the security for federal income tax purposes. For example, for purposes of § 475, a security may in certain cases qualify for the held-for-investment ex- ception to the mark-to-market rules even though, under applicable financial ac- counting principles, the security is clas- sified as available for sale. Issue 5: Does an identification of a se- curity as "held for investment" under § 1236 serve to identify that security as "held for investment" (within the mean- ing of § 475(b)(1)(A)) or as "not held for sale" (within the meaning of § 475(b)(1)(B))? Holding 5: No. Taxpayers may choose not to identify under § 475(b)(2) some or all of the securities that they identify under § 1236(a)(1). (For a transitional rule applicable to securities held as of the close of the last taxable year ending be- fore December 31, 1993, however, see § 1.475(b)–4(a) of the Income Tax Regu- lations.) Accordingly, even if a § 1236 identification has been made, an identifi- cation of a security or hedge is a valid identification for purposes of § 475(b)(2) only if it contains a specific reference to § 475; this specific reference, however, may be ef fected by any reasonable method. For instance, certain accounts may be identified in such a way that plac- ing a security or hedge in the account identifies the security or hedge for pur- poses of both § 1236(a)(1) and § 475(b)(1)(A), (B), or (C). See Holding 6 below. See Holding 15 below for a transitional rule that requires less speci- ficity for identification of securities held by certain taxpayers that were not dealers in securities under § 1.475(c)–1T(as con- tained in 26 CFR part 1 revised April 1, 1996). Issue 6: Is a dealer in securities re- quired to use a special procedure to com- ply with the identification requirements under § 475? Holding 6: No. Unless the Commis- sioner otherwise prescribes, a dealer may comply with the identification require- ments under § 475 using any reasonable method (see, for example, guidance con- cerning identification requirements under §§ 988(a)(1)(B), 1221, 1236(a)(1), and 1256(e)(2)(C)). The identification, how- ever, must be made on, and retained as part of, the dealer's books and records. The dealer's books and records must clearly indicate the specific security or hedge being identified, and the identifica- tion must clearly indicate that it is being made for purposes of § 475. Alterna- tively, the dealer may identify specific ac- counts as containing only securities or hedges that are covered by a particular ex- ception, so that placing a security or hedge in the account identifies the secu- rity or hedge as being covered by that ex- ception. Under § 1.475(b)–2(a), an iden- tification need not distinguish between an exception under § 475(b)(1)(A) (concern- ing certain securities held for investment) and one under § 475(b)(1)(B) (concerning securities not held for sale). Exceptions under either of these provisions, however, must be distinguished from exceptions under § 475(b)(1)(C) (concerning securi- ties held as hedges). In addition, rather than identifying spe- cific securities or accounts as being cov- ered by an exception described in § 475(b)(1), a dealer may comply with the identification requirement under § 475(b) by clearly indicating the specific securi- ties or accounts that are not covered by a particular exception (that is, indicating that they are covered by some other ex- ception or that they are not exempt) and identifying all other securities or accounts as being covered by a particular excep- tion. For example, a dealer may place on its books and records a statement that, un- less otherwise identified, all of its securi- ties for which an identification is still timely (including securities yet to be ac- quired) are identified as exempt under either § 475(b)(1)(A) or (B). This state- ment is effective to identify under § 475(b)(1)(A) or (B) each security cov- ered by its terms unless, before the expi- ration of the period during which the se- curity may be timely identified, the dealer identifies it as not exempt or as exempt under § 475(b)(1)(C). Analogously, under Rev. Rul. 64–160, 1964–1 (Part I) C.B. 306, modified by Rev . Rul. 76–489, 1976–2 C.B. 250, dealers can identify specified accounts as containing only securities held for invest- ment for purposes of § 1236(a)(1). Ac - cordingly, dealers can satisfy the identifi- cation requirements of § 475(b)(2) by unambiguously indicating that all of the securities in one or more of these ac- counts are also described, for example, in § 475(b)(1)(A) or (B). Once such an identification of an account is made, placing a security in the account identi- fies the security not only as being "held for investment" for purposes of § 1236 but also as being described in the applica- ble subparagraph of § 475(b)(1). Issue 7 in Rev. Rul. 93–76 concerned transitional identification issues for secu- rities acquired, originated, or entered into between August 10, 1993, and October 31, 1993. As the transition period has now ended, Issue 7 is obsolete and is not reprinted in this revenue ruling. Issue 8: If a dealer in securities origi- nates or acquires an evidence of indebted- ness in the ordinary course of a trade or business, are there any exceptions to the requirement that the dealer make an iden- tification under § 475(b)(2) before the close of the day on which it originates or acquires the security? Holding 8: Yes. Pending further guid- ance, if a financial institution (as defined in § 265(b)(5)) originates or acquires an evidence of indebtedness in the ordinary course of a trade or business, an identifi- cation of the evidence of indebtedness is timely if it is made in accordance with the dealer's accounting practice, but no later than 30 calendar days after the date of origination, or acquisition, by the finan- cial institution. The preceding sentence applies to any dealer in securities for evi- dences of indebtedness that are mortgage loans. Also, pending further guidance, a dealer in securities that enters into com- mitments to acquire mortgage loans may identify those commitments as being held for investment if the dealer acquires the mortgage loans and holds the mortgages as investments. This identification of commitments to acquire mortgage loans must be made in accordance with the dealer's accounting practice, but no later than 30 calendar days after the date of ac- quisition of the mortgage loans. Issues 9, 10, and 11 discussed transi- tional issues concerning proper identifica- tion, computation of adjustments, and the period over which to spread any adjust- ments, for taxable years that included De- cember 31, 1993. As the transition period has now passed, Issues 9, 10, and 11 are obsolete and are not reprinted in this rev- enue ruling. 1997–39 I.R.B. 5 September 29, 1997

September 29, 1997 6 1997–39 I.R.B. Issue 12: May a taxpayer use an amended return to make an election under § 1.475(c)–1(c)(1)(ii) (which concerns taxpayers that purchase securities from customers but make no more than negligi- ble sales of securities)? Holding 12: For any taxable year for which an original federal income tax re- turn is filed after October 31, 1997, an election under § 1.475(c)–1(c)(1)(ii) must be made on an original federal income tax return that is filed on or before the due date (including any extensions of time) for that return. For any taxable year for which an original federal income tax return was filed on or before October 31, 1997, an election under § 1.475(c)– 1(c)(1)(ii) also may be made on an amended return filed not later than October 31, 1997. Not later than December 15, 1997, compliance with § 475 must be reflected on an original or amended return for every other taxable year which is subject to the election and the original return for which is due on or before October 31, 1997. Note that amended returns must be filed before the expiration of the statute of limitations on assessment under § 6501(a). As is noted in Holding 17 below, a tax- payer subject to more than one exemption must affirmatively elect out of all applica- ble exemptions to be treated as a dealer in securities. Issue 13: If a taxpayer wishes to use an amended return to make an election out of the customer paper exemption under § 1.475(c)–1(b)(4)(i)(B), by what date must the taxpayer file the amended return? Holding 13: Section 1.475(c)–1(b) (4)(i)(B) provides a June 23, 1997, dead- line to make the customer paper election on an amended return. Notice 97–37, 1997–27 I.R.B. 8, provides that additional guidance will extend that deadline. Ac - cordingly, that deadline to file an amended return is extended to October 31, 1997. Not later than December 15, 1997, com- pliance with § 475 must be reflected on an original or amended return for every other taxable year which is subject to the elec- tion and the original return for which is due on or before October 31, 1997. Note that amended returns must be filed before the expiration of the statute of limitations on assessment under § 6501(a). Issue 14: What is the general rule for identifying a security as excepted from mark-to-market accounting? Holding 14: For a security to be exempt from mark-to-market accounting, the tax- payer must make an identification that is timely under § 475(b)(2), which generally requires a security to be identified before the close of the day on which it is acquired. For the only current exceptions to this rule, see Holding 8 above (identifications of se- curities by financial institutions and dealers in mortgages), § 1.475(b)–1(b)(4)(ii)(A) (identification of securities to which § 1.475(b)–1(b)(1) ceases to apply), and Holding 15 below (special identification rules for taxpayers not treated as dealers under § 1.475(c)–1T). For information about the required specificity of the identi- fication, see Holding 5 above. Issue 15: If a taxpayer makes an election out of either § 1.475(c)–1(b)(1) (customer paper exemption) or § 1.475(c)–1(c)(1) (negligible sales exemption) and the elec- tion has the effect of causing the taxpayer to be treated as a dealer in securities for a taxable year starting before the date the tax- payer filed the documentation effecting the election (date of the election), how does the taxpayer identify securities that were ac- quired before the date of the election? Holding 15: A special identification regime applies to taxpayers that satisfy the following criteria: First, the taxpayer is making an elec- tion out of the customer paper exemption, the negligible sales exemption, or both. Second, the taxpayer was not treated as a dealer in securities under § 1.475(c)–1T (as contained in 26 CFR part 1 revised April 1, 1996). The special identification regime applies only to securities ("transition securities") for which an identification would have been timely under the general rule (de- scribed in Holding 14 above) only if made on or before October 31, 1997. In apply- ing the preceding sentence, a taxpayer may choose to substitute any earlier date that is on or after December 24, 1996. To make this substitution, the taxpayer must place in its books and records no later than October 31, 1997, an unambiguous statement that the taxpayer chooses to apply the general identification rule described in Holding 14 for all securities acquired on or after the specific date selected by the taxpayer. Under the special identification regime, a transition security was properly identified as exempt for the purposes of § 475(b)(2) or (c)(2)(F)(iii) if the information that is contained in the taxpayer's books and records and that was entered substantially contemporaneously with the date of acqui- sition of the transition security supports a conclusion that the transition security was described by § 475(b)(1)(A), (B), or (C). This rule applies even if the information in the books and records does not meet the specificity that Holding 5 generally re- quires for identification. The status of a transition security that was acquired before the first day of the taxable year for which the election is being made is determined by examining the books and records as of the last day of the preceding taxable year. The taxpayer must, by October 31, 1997, place in its books and records a statement resolving ambiguities, if any, concerning which transition securities are properly identified within the meaning of the preceding paragraph. Any informa- tion that supports treating a transition se- curity as being described in § 475(b)(2) or (c)(2)(F)(iii) must be applied consistently. A taxpayer, in determining whether a transition security must be identified, must apply the following principles: if the tran- sition security was identified under § 1.1221–2 or § 1256(e) and the item being hedged is described in § 475(b)(1)(C)(i) or (ii), the § 1.1221–2 or § 1256(e) identification constitutes an identification for purposes of § 475(b)(2); and, if the item being hedged was ordinary property, as defined in § 1.1221–2, and the taxpayer did not identify the transition se- curity as a hedging transaction, the transi- tion security cannot be identified under § 475(b)(1)(C). If a taxpayer made a protective identifi- cation (as described in Issue 1 above) of a transition security, and subsequent to the protective identification the taxpayer makes an election that causes the taxpayer to be a dealer in securities for purposes of § 475, the protective identification is rec- ognized and the taxpayer is subject to the general rules governing identifications for all transition securities that were eligible to be timely identified after the date that the taxpayer began making protective identifications. Thus, if a transition secu- rity was properly and timely identified as exempt from being marked to market and remains eligible for the exemption claimed, that transition security is not marked to market even though § 475 ap- plies to the taxpayer. If a transition secu-

rity was properly and timely identified and thereafter ceases to be held for invest- ment or as a hedge, see § 475(b)(3). If a transition security was not eligible to be identified as exempt, see § 475(d)(2). Issue 16: If an issuer of an evidence of indebtedness has the right to prepay at any time without a penalty (for example, a revolving credit card balance), does that right preclude that indebtedness from having a fair market value that is greater than the face value of the obligation? Holding 16: No. Securities must be marked to fair market value based on all the facts and circumstances. For example, in light of contractual interest rates and general payment history on customer obligations, the fair market value of a customer obliga- tion may be greater than the face amount, even if the customer has the right to repay the debt at its face amount at any time. Issue 17: If a taxpayer would meet the definition of a dealer in securities under § 475 but otherwise satisfies more than one exemption from dealer status, must the taxpayer elect out of all applicable exemptions to be a dealer in securities for the purpose of § 475? Holding 17: Generally, a taxpayer must make an election out of all applicable ex- emptions in order to be treated as a dealer under § 475. A taxpayer subject to multi- ple exemptions from § 475 must file all the documentation required to elect out of each applicable exemption. Sometimes, the documentation required for one elec- tion satisfies all of the filing requirements for another election. For example, if a tax- payer is subject to both the customer paper exemption under § 1.475(c)–1(b) and the negligible sales exemption under § 1.475(c)–1(c), the taxpayer may make an election under § 1.475(c)–1(b)(4) that is effective as of January 1, 1993, and timely file an amended 1993 federal in- come tax return using mark-to-market ac- counting for securities. The amended 1993 return itself represents an election out of the negligible sales exemption. Issue 18: How does a taxpayer that is in its first year of existence elect out of an exemption from dealer status under § 475? Holding 18: If a taxpayer decides for its first year of existence to make an election out of the negligible sales exemption to ac- count for securities on a mark-to-market basis, the taxpayer should attach to its orig- inal return for that first year the following statement: "[Insert name and taxpayer identification number of the taxpayer] hereby elects not to be governed by § 1.475(c)–1(c)(1)(i) of the income tax regu- lations for the taxable year ending [de- scribe the last day of the year] and for sub- sequent taxable years." If a taxpayer decides for its first year of existence to make an election out of the customer paper exemption or to make the intragroup-cus- tomer election, the taxpayer must meet the requirements of § 1.475(c)–1. Issue 19: Which changes of accounting method are covered by the consent provi- sions of § 13223(c)(2) of the 1993 Act? Holding 19: Under § 13223(c)(2) of the 1993 Act, certain changes of accounting method are treated as made with the con- sent of the Commissioner. This treatment extends only to a change in method that was effected by a taxpayer who (1) became a dealer for the taxable year that includes December 31, 1993, merely by virtue of the passage of the 1993 Act, and (2) who accounted for securities as a dealer under § 475 on its original federal income tax re- turn for that year. Consent for other changes of method to comply with § 475 must be obtained either on a taxpayer-by- taxpayer basis or as part of automatic con- sent contained in published guidance. See Rev. Proc. 97–43, page 12, this Bulletin. Issue 20: If a taxpayer is accounting for securities by marking them to market under § 475(a), may the taxpayer, without the consent of the Commissioner, file a federal income tax return for a later tax- able year that does not account for securi- ties on a mark-to-market basis? Holding 20: No. Once a taxpayer has used the § 475 mark-to-market method as its method of accounting for securities, the taxpayer may not change that method of accounting without obtaining the con- sent of the Commissioner. See § 446(e). Unless the Commissioner otherwise pre- scribes, to request consent the taxpayer must comply with the requirements of Rev. Proc. 97–27, 1997–21 I.R.B. 10. For example, if a taxpayer accounts for secu- rities by marking them to market because the taxpayer made more than negligible sales of securities and in a later year makes only negligible sales of securities, the taxpayer must obtain the consent of the Commissioner to change its method of accounting for securities. If a taxpayer made no more than negligible sales of se- curities but, pursuant to § 1.475(c)–1(c)- (1)(ii), accounted for securities on a mark-to-market basis and the taxpayer makes no more than negligible sales of securities in a subsequent year, the tax- payer must obtain the consent of the Commissioner to change its method of ac- counting for securities. Especially in the latter example, consent for the change will be granted only in unusual circum- stances. EFFECT ON OTHER DOCUMENTS Rev. Rul. 93–76 as modified by Rev. Rul. 94–7, is clarified, modified, partially obsoleted, and superseded. Notice 97–37, 1997–27 I.R.B. 8, is obsoleted. PROSPECTIVE APPLICA TION Pursuant to § 7805(b), if an identifica- tion is made on or before June 30, 1997, and the identification complies with the requirements set forth in the third para- graph of Holding 6 of Rev. Rul. 93-76, the identification will not be treated as failing to satisfy the requirements of § 475(b)(2) solely on the grounds that it failed to identify the operative subpara- graph of that provision. PAPER WORK REDUCTION ACT The collections of information con- tained in this revenue ruling have been re- viewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–1558. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the col- lection of information displays a valid control number. The collections of information in this revenue ruling are in sections 26 CFR 1.475(b)–2, 26 CFR 1.475(b)–4, and 26 CFR 1.475(c)–1. This information is re- quired to facilitate the administration of § 475 of the Internal Revenue Code. This information will be used to facilitate au- dits of taxpayers that elect to not be gov- erned by certain exemptions under § 475 of the Code. The collections of informa- tion are required to obtain a benefit. The likely respondents are business or other for-profit institutions. 1997–39 I.R.B. 7 September 29, 1997

The recordkeeping burden described in Holding 6 was reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–1496. The estimated total annual recordkeep- ing burden described in Holding 15 is 450,000 hours. The estimated annual burden per recordkeeper varies from 15 hours to 45 hours, depending on individual circum- stances, with an estimated average of 22.5 hours. The estimated number of record- keepers is 20,000. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. DRAFTING INFORMA TION The principal authors of this revenue ruling are Pamela Lew and Robert B. W illiams of the Office of the Assistant Chief Counsel (Financial Institutions and Products). For further information regarding this revenue ruling contact Ms. Lew at (202) 622-3950 or Mr . W illiams at (202) 622-3960 (not toll- free calls) 26 CFR 1.475(c)–1: Exemptions—identification requirements. Questions and answers about the application of section 475 and the regulations thereunder. See Rev. Rul. 97–39, page 4. 26 CFR 1.475(c)–1; Definitions—dealer in securities. What information must a taxpayer provide in order to obtain automatic consent to change ac- counting method when section 475(a) becomes ap- plicable as a result of the taxpayer making an elec- tion (i) to treat transactions within a consolidated group as transactions with customers as provided by section 1.475(c)–1(a), or (ii) not to be governed by the exemptions from the status of a dealer in securi- ties provided by section 1.475(c)–1(b) or –1(c)? See Rev. Proc. 97–43, page 12. Section 6621.— Deter mination of Interest Rate 26 CFR 301.6621–1: Interest rate. Interest rates; underpayments and overpayments. The rate of interest deter- mined under section 6621 of the Code for the calendar quarter beginning October 1, 1997, will be 8 percent for overpayments, 9 percent for underpayments, and 11 per- cent for large corporate underpayments. The rate of interest paid on the portion of a corporate overpayment exceeding $10,000 is 6.5 percent. Rev. Rul. 97–40 Section 6621 of the Internal Revenue Code establishes different rates for inter- est on tax overpayments and interest on tax underpayments. Under § 6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 2 percentage points, except the rate for the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the sum of the federal short-term rate plus 0.5 of a percentage point for interest computations made after December 31, 1994. Under § 6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Section 6621(c) provides that for pur- poses of interest payable under § 6601 on any large corporate underpayment, the un- derpayment rate under § 6621(a)(2) is deter- mined by substituting "5 percentage points" for "3 percentage points." See § 6621(c) and § 301.6621–3 of the Regulations on Procedure and Administration for the defi- nition of a large corporate underpayment and for the rules for determining the ap- plicable rate. Section 6621(c) and § 301.6621–3 are generally effective for periods after December 31, 1990. Section 6621(b)(1) provides that the Secretary will determine the federal short- term rate for the first month in each calen- dar quarter. Section 6621(b)(2)(A) provides that the federal short-term rate determined under § 6621(b)(1) for any month applies during the first calendar quarter beginning after such month. Section 6621(b)(3) provides that the federal short-term rate for any month is the federal short-term rate determined during such month by the Secretary in ac- cordance with § 1274(d), rounded to the nearest full percent (or, if a multiple of 1/2 of 1 percent, the rate is increased to the next highest full percent). Notice 88–59, 1988–1 C.B. 546, an- nounced that in determining the quar- terly interest rates to be used for over- payments and underpayments of tax under § 6621, the Internal Revenue Ser- vice will use the federal short-term rate based on daily compounding because that rate is most consistent with § 6621 which, pursuant to § 6622, is subject to daily compounding. Rounded to the nearest full percent, the federal short-term rate based on daily com- pounding determined during the month of July 1997 is 6 percent. Accordingly, an overpayment rate of 8 percent and an un- derpayment rate of 9 percent are estab- lished for the calendar quarter beginning October 1, 1997. The overpayment rate for the portion of corporate overpayments exceeding $10,000 for the calendar quarter beginning October 1, 1997, is 6.5 percent. The underpayment rate for large corporate underpayments for the calendar quarter be- ginning October 1, 1997, is 11 percent. These rates apply to amounts bearing inter- est during that calendar quarter. Interest factors for daily compound in- terest for annual rates of 6.5 percent, 8 percent, 9 percent, and 11 percent are published in Tables 18, 21, 23, and 27 of Rev. Proc. 95–17, 1995–1 C.B. 556, 572, 575, 577, and 581. Annual interest rates to be compounded daily pursuant to § 6622 that apply for prior periods are set forth in the accompa- nying tables. DRAFTING INFORMA TION The principal author of this revenue ruling is Marcia Rachy of the Office of Assistant Chief Counsel (Income Tax and Accounting). For further information re- garding this revenue ruling, contact Ms. Rachy on (202) 622-4940 (not a toll-free call) September 29, 1997 8 1997–39 I.R.B.

1997–39 I.R.B. 9 September 29, 1997 TABLE OF INTEREST RA TES PERIODS BEFORE JUL. 1, 1975 — PERIODS ENDING DEC. 31, 1986 OVERP A YMENTS AND UNDERP A YMENTS PERIOD DAIL Y RA TE TABLE RA TE IN 1995–1 C.B. Before Jul. 1, 1975 6% Table 2, pg. 557 Jul. 1, 1975—Jan. 31, 1976 9% Table 4, pg. 559 Feb. 1, 1976—Jan. 31, 1978 7% Table 3, pg. 558 Feb. 1, 1978—Jan. 31, 1980 6% Table 2, pg. 557 Feb. 1, 1980—Jan. 31, 1982 12% Table 5, pg. 560 Feb. 1, 1982—Dec. 31, 1982 20% Table 6, pg. 560 Jan. 1, 1983—Jun. 30, 1983 16% Table 37, pg. 591 Jul. 1, 1983—Dec. 31, 1983 11% Table 27, pg. 581 Jan. 1, 1984—Jun. 30, 1984 11% Table 75, pg. 629 Jul. 1, 1984—Dec. 31, 1984 11% Table 75, pg. 629 Jan. 1, 1985—Jun. 30, 1985 13% Table 31, pg. 585 Jul. 1, 1985—Dec. 31, 1985 11% Table 27, pg. 581 Jan. 1, 1986—Jun. 30, 1986 10% Table 25, pg. 579 Jul. 1, 1986—Dec. 31, 1986 9% Table 23, pg. 577 TABLE OF INTEREST RA TES FROM JAN. 1, 1987—PRESENT OVERP A YMENTS UNDERP A YMENTS RA TE TABLE PG RA TE TABLE PG 1995–1 C.B. 1995–1 C.B. Jan. 1, 1987—Mar. 31, 1987 8% 21 575 9% 23 577 Apr. 1, 1987—Jun. 30, 1987 8% 21 575 9% 23 577 Jul. 1, 1987—Sep. 30, 1987 8% 21 575 9% 23 577 Oct. 1, 1987—Dec. 31, 1987 9% 23 577 10% 25 579 Jan. 1, 1988—Mar. 31, 1988 10% 73 627 11% 75 629 Apr. 1, 1988—Jun. 30, 1988 9% 71 625 10% 73 627 Jul. 1, 1988—Sep. 30, 1988 9% 71 625 10% 73 627 Oct. 1, 1988—Dec. 31, 1988 10% 73 627 11% 75 629 Jan. 1, 1989—Mar. 31, 1989 10% 25 579 11% 27 581 Apr. 1, 1989—Jun. 30, 1989 11% 27 581 12% 29 583 Jul. 1, 1989—Sep. 30, 1989 11% 27 581 12% 29 583 Oct. 1, 1989—Dec. 31, 1989 10% 25 579 11% 27 581 Jan. 1, 1990—Mar. 31, 1990 10% 25 579 11% 27 581 Apr. 1, 1990—Jun. 30, 1990 10% 25 579 11% 27 581 Jul. 1, 1990—Sep. 30, 1990 10% 25 579 11% 27 581 Oct. 1, 1990—Dec. 31, 1990 10% 25 579 11% 27 581 Jan. 1, 1991—Mar. 31, 1991 10% 25 579 11% 27 581 Apr. 1, 1991—Jun. 30, 1991 9% 23 577 10% 25 579 Jul. 1, 1991—Sep. 30, 1991 9% 23 577 10% 25 579 Oct. 1, 1991—Dec. 31, 1991 9% 23 577 10% 25 579 Jan. 1, 1992—Mar. 31, 1992 8% 69 623 9% 71 625 Apr. 1, 1992—Jun. 30, 1992 7% 67 621 8% 69 623 Jul. 1, 1992—Sep. 30, 1992 7% 67 621 8% 69 623 Oct. 1, 1992—Dec. 31, 1992 6% 65 619 7% 67 621

September 29, 1997 10 1997–39 I.R.B. TABLE OF INTEREST RA TES FOR LARGE CORPORA TE UNDERP A YMENTS FROM JANUAR Y 1, 1991—PRESENT RA TE TABLE PG 1995–1 C.B. Jan. 1, 1991—Mar. 31, 1991 13% 31 585 Apr. 1, 1991—Jun. 30, 1991 12% 29 583 Jul. 1, 1991—Sep. 30, 1991 12% 29 583 Oct. 1, 1991—Dec. 31, 1991 12% 29 583 Jan. 1, 1992—Mar. 31, 1992 11% 75 629 Apr. 1, 1992—Jun. 30, 1992 10% 73 627 Jul. 1, 1992—Sep. 30, 1992 10% 73 627 Oct. 1, 1992—Dec. 31, 1992 9% 71 625 Jan. 1, 1993—Mar. 31, 1993 9% 23 577 Apr. 1, 1993—Jun. 30, 1993 9% 23 577 Jul. 1, 1993—Sep. 30, 1993 9% 23 577 Oct. 1, 1993—Dec. 31, 1993 9% 23 577 Jan. 1, 1994—Mar. 31, 1994 9% 23 577 Apr. 1, 1994—Jun. 30, 1994 9% 23 577 Jul. 1, 1994—Sep. 30, 1994 10% 25 579 Oct. 1, 1994—Dec. 31, 1994 11% 27 581 Jan. 1, 1995—Mar. 31, 1995 11% 27 581 Apr. 1, 1995—Jun. 30, 1995 12% 29 583 Jul. 1, 1995—Sep. 30, 1995 11% 27 581 TABLE OF INTEREST RA TES — Continued FROM JAN. 1, 1987—PRESENT OVERP A YMENTS UNDERP A YMENTS RA TE TABLE PG RA TE TABLE PG 1995–1 C.B. 1995–1 C.B. Jan. 1, 1993—Mar. 31, 1993 6% 17 571 7% 19 573 Apr. 1, 1993—Jun. 30, 1993 6% 17 571 7% 19 573 Jul. 1, 1993—Sep. 30, 1993 6% 17 571 7% 19 573 Oct. 1, 1993—Dec. 31, 1993 6% 17 571 7% 19 573 Jan. 1, 1994—Mar. 31, 1994 6% 17 571 7% 19 573 Apr. 1, 1994—Jun. 30, 1994 6% 17 571 7% 19 573 Jul. 1, 1994—Sep. 30, 1994 7% 19 573 8% 21 575 Oct. 1, 1994—Dec. 31, 1994 8% 21 575 9% 23 577 Jan. 1, 1995—Mar. 31, 1995 8% 21 575 9% 23 577 Apr. 1, 1995—Jun. 30, 1995 9% 23 577 10% 25 579 Jul. 1, 1995—Sep. 30, 1995 8% 21 575 9% 23 577 Oct. 1, 1995—Dec. 31, 1995 8% 21 575 9% 23 577 Jan. 1, 1996—Mar. 31, 1996 8% 69 623 9% 71 625 Apr. 1, 1996—Jun. 30, 1996 7% 67 621 8% 69 623 Jul. 1, 1996—Sep. 30, 1996 8% 69 623 9% 71 625 Oct. 1, 1996—Dec. 31, 1996 8% 69 623 9% 71 625 Jan. 1, 1997—Mar. 31, 1997 8% 21 575 9% 23 577 Apr. 1, 1997—Jun. 30, 1997 8% 21 575 9% 23 577 Jul. 1, 1997—Sep. 30, 1997 8% 21 575 9% 23 577 Oct. 1, 1997—Dec. 31, 1997 8% 21 575 9% 23 577

1997–39 I.R.B. 11 September 29, 1997 TABLE OF INTEREST RA TES FOR CORPORA TE OVERP A YMENTS EXCEEDING $10,000 FROM JANUAR Y 1, 1995 — PRESENT RA TE TABLE PG 1995–1 C.B Jan. 1, 1995—Mar. 31, 1995 6.5% 18 572 Apr. 1, 1995—Jun. 30, 1995 7.5% 20 574 Jul. 1, 1995—Sep. 30, 1995 6.5% 18 572 Oct. 1, 1995—Dec. 31, 1995 6.5% 18 572 Jan. 1, 1996—Mar. 31, 1996 6.5% 66 620 Apr. 1, 1996—Jun. 30, 1996 5.5% 64 618 Jul. 1, 1996—Sep. 30, 1996 6.5% 66 620 Oct. 1, 1996—Dec. 31, 1996 6.5% 66 620 Jan. 1, 1997—Mar. 31, 1997 6.5% 18 572 Apr. 1, 1997—Jun. 30, 1997 6.5% 18 572 Jul. 1, 1997—Sep. 30, 1997 6.5% 18 572 Oct. 1, 1997—Dec. 31, 1997 6.5% 18 572 TABLE OF INTEREST RA TES FOR LARGE CORPORA TE UNDERP A YMENTS — Continued FROM JANUAR Y 1, 1991– PRESENT RA TE TABLE PG 1995–1 C.B. Oct. 1, 1995—Dec. 31, 1995 11% 27 581 Jan. 1, 1996—Mar. 31, 1996 11% 75 629 Apr. 1, 1996—Jun. 30, 1996 10% 73 627 Jul. 1, 1996—Sep. 30, 1996 11% 75 629 Oct. 1, 1996—Dec. 31, 1996 11% 75 629 Jan. 1, 1997—Mar. 31, 1997 11% 27 581 Apr. 1, 1997—Jun. 30, 1997 11% 27 581 Jul. 1, 1997—Sep. 30, 1997 11% 27 581 Oct. 1, 1997—Dec. 31, 1997 11% 27 581 Section 7805.—Rules and Regulations 26 CFR 301.7805–1: Rules and regulations. Questions and answers about the application of section 475 and the regulations thereunder. See Rev. Rul. 97–39, page 4.

26 CFR 601.204: Changes in accounting periods and in methods of accounting. (Also Part I, §§ 446, 475; 1.446–1, 1.475(c)–1.) Rev. Proc. 97–43

# SEC. 1. PURPOSE

This revenue procedure tells taxpayers how to request consent to change methods of accounting to comply with elections out of certain exemptions from dealer sta- tus for purposes of § 475 of the Internal Revenue Code. See § 1.475(c)–1(a)(3) of the Income Tax Regulations (concerning taxpayers buying securities from or sell- ing securities to members of the same consolidated group); § 1.475(c)–1(b) (concerning sellers of nonfinancial goods and services); and § 1.475(c)–1(c) (con- cerning taxpayers that engage in no more than negligible sales of securities).

# SEC. 2. BACKGROUND

.01 Under § 475(a), dealers in securi- ties must use a mark-to-market account- ing method for securities other than cer- tain securities timely identified as exempt under § 475(b)(2). Section 475(c)(1) de- fines dealer in securities for purposes of § 475. .02 One component of the definition of dealer in securities in § 475(c)(1) is enter- ing into transactions in securities with customers. Members of the same consoli- dated group are ordinarily not each other's customers for purposes of § 475(c)(1). Section 1.475(c)–1(a)(3)(ii). A consolidated group may, however, elect to treat its members as potential cus- tomers of one another for purposes of § 475(c)(1) (the intragroup-customer election). Unless the Commissioner oth- erwise prescribes, the election is made by filing a specified statement with a timely filed consolidated federal income tax re- turn. Section 1.475(c)–1(a)(3)(iii)(B). .03 A taxpayer is ordinarily exempt from treatment as a dealer in securities if the taxpayer would not be a dealer in se- curities but for its purchases and sales of debt instruments that are customer paper as defined in § 1.475(c)–1(b)(2) with re- spect to the taxpayer or another member of its consolidated group (the customer paper exemption). Section 1.475 (c)–1(b)(1). Taxpayers may elect not to be governed by the customer paper ex- emption. Section 1.475(c)–1(b)(4). Un- less the Commissioner otherwise pre- scribes, the election generally is made by filing a specified statement with a timely filed federal income tax return (or, in lim- ited cases, an amended return). Section 1.475(c)–1(b)(4)(i); see also Rev . Rul. 97–39, page 4, this Bulletin, Holding 13. .04 A taxpayer's purchases of securities from customers do not make the taxpayer a dealer in securities if the taxpayer en- gages in no more than negligible sales of securities as defined in § 1.475(c)–1(c)(2) (the negligible sales exemption). Section 1.475(c)–1(c)(1)(i). Taxpayers may elect not to be governed by the negligible sales exemption. This is done on a timely filed original federal income tax return (or, in limited cases, on an amended return). Section 1.475(c)–1(c)(1)(ii); see alsoRev. Rul. 97–39, Holding 12. .05 In general, making one of these elections results in the taxpayer being re- quired to change its method of accounting to reflect the application of § 475(a). But see Rev . Rul. 97-39, Holding 17 (dis- cussing circumstances in which more than one election must be made for § 475(a) to apply). A taxpayer must obtain the con- sent of the Commissioner to change an accounting method. Section 446(e). .06 A taxpayer that accounts for securi- ties under § 475(a) may change that method only with the consent of the Com- missioner. Section 446(e). See Rev. Rul. 97–39, Holding 20; see alsoRev. Proc. 97–27, 1997–21 I.R.B. 10, or its succes- sor on how to request consent to change.

# SEC. 3. SCOPE

This revenue procedure applies to tax- payers required to change methods of ac- counting as a result of elections under § 1.475(c)–1(a)(3)(iii), –1(b)(4), or –1(c)(1)(ii) (including taxpayers that made those elections prior to September 10, 1997).

# SEC. 4. PROCEDURE

.01 If a taxpayer elects to be governed by the intragroup-customer election and the election results in the taxpayer being required to change its method of account- ing, then the taxpayer must attach both the statement described in § 1.475(c)– 1(a)(3)(iii)(B) and the additional docu- ments required by section 4.07 of this rev- enue procedure to the taxpayer's timely filed original federal income tax return for the first year subject to the election. If that return is filed on or before October 31, 1997, however, the additional docu- ments may be filed at a later date in accor- dance with section 4.04. In addition, a copy of those documents must be filed as required by section 4.05 and, if applica- ble, section 4.06. .02 If a taxpayer elects not to be gov- erned by the customer paper exemption and the election results in the taxpayer being required to change its method of ac- counting, then the taxpayer must attach both the statement described in § 1.475(c)–1(b)(4)(i) and the additional documents required by section 4.07 of this revenue procedure to a timely filed federal income tax return or to an amended return, as appropriate under § 1.475(c)–1(b)(4)(i)(A) or (B) or Hold- ing 13 of Rev. Rul. 97-39. If that return is filed on or before October 31, 1997, how- ever, the additional documents may be filed at a later date in accordance with sec- tion 4.04. In addition, a copy of those doc- uments must be filed as required by section 4.05 and, if applicable, section 4.06. .03 If a taxpayer elects not to be gov- erned by the negligible sales exemption and the election results in the taxpayer being required to change its method of ac- counting, then the taxpayer must attach the documents required by section 4.07 of this revenue procedure to the timely filed original federal income tax return de- scribed in § 1.475(c)–1(c)(1)(ii) or the amended return described in Rev. Rul. 97–39, Holding 12 (discussing when the election not to be governed by the negligi- ble sales exemption may be made by fil- ing an amended return). If that return is filed on or before October 31, 1997, how- ever, the additional documents may be filed at a later date in accordance with sec- tion 4.04. In addition, a copy of those doc- uments must be filed as required by section 4.05 and, if applicable, section 4.06. .04 A taxpayer that files the return de- scribed in section 4.01, 4.02, or 4.03 of this revenue procedure on or before Octo- ber 31, 1997, need not attach the docu- September 29, 1997 12 1997–39 I.R.B. Part III. Administrative, Procedural, and Miscellaneous

ments required by section 4.07 to that re- turn if the taxpayer instead attaches these documents to the first federal income tax return or amended return filed by the tax- payer after October 31, 1997, that is for a taxable year subject to the election. .05 The taxpayer must file a copy of the documents required by section 4.07 of this revenue procedure with the Commissioner of Internal Revenue, Attention: CC:DOM:IT&A, P .O. Box 7604, Benjamin Franklin Station, W ashington, DC 20044 (or, in the case of a designated private de- livery service: Commissioner of Internal Revenue, Attention: CC:DOM:IT&A, 1111 Constitution A venue, NW, W ashing- ton, DC 20224). This filing must occur on or before the later of October 31, 1997, and the time the taxpayer files the return de- scribed in section 4.01, 4.02, or 4.03. The documents must contain the name and tele- phone number of the examining agent, ap- peals office, or counsel of record for the government, if any, described in section 4.06. .06 If a taxpayer files an amended return on which the taxpayer elects not to be gov- erned by the customer paper exemption or the negligible sales exemption and, at the time of filing, the taxable year to which the amended return applies or any subsequent taxable year is before the Service or before a federal court, then the taxpayer must pro- vide a copy of the documents required by section 4.07 of this revenue procedure to the persons provided below. (1) If a taxable year in question is be- fore the Service, a copy of the documents required by section 4.07 of this revenue procedure must be provided to the tax- payer's examining agent or, instead, if the taxable year has been assigned to an ap- peals office, to such appeals office. The taxpayer must provide the copy by the later of October 31, 1997, and the day that is 30 days after the date the taxable year in question first came before the Service. For purposes of this section, a taxable year shall be considered before the Ser- vice from the time the taxpayer (or any member of a consolidated group of which taxpayer was a member during the taxable year) has been contacted in any manner by a representative of the Service for the purpose of scheduling any type of exami- nation of its federal income tax return for that year until the receipt of a no-change letter for that year, the execution of a waiver of restrictions on assessment and collection of deficiency in tax and accep- tance of overassessment, the expiration of the period for filing a petition with the Tax Court for that year, or the filing of a petition with the Tax Court. (2) If a taxable year in question is be- fore a federal court, a copy of the docu- ments required by section 4.07 of this rev- enue procedure must be provided to counsel of record for the government. The taxpayer must provide the copy by the later of October 31, 1997, and the day which is 30 days after the date the taxable year in question first came before a fed- eral court. For purposes of this section, a taxable year will be considered before a federal court if the treatment of any item (whether or not involving a method of ac- counting) for such taxable year would be considered before a federal court for the purpose of Rev. Proc. 97–27, 1997–21 I.R.B. 10, section 3.08(3). .07 The taxpayer must properly com- plete and execute a Form 3115. A legend must be typed on the top of the first page of the Form 3115 that identifies the ap- plicable parts of section 4 of this revenue procedure (other than section 4.04 and section 4.07). The legend should read substantially as follows: "Filed under sec- tion[s] 4.** [and 4.**] of Rev. Proc. 97–43." (1) Form 3115 requires an explanation of the legal basis of the proposed change in method of accounting. That explana- tion must state specifically which elec- tion(s) the taxpayer made under § 1.475(c)–1. See alsoRev. Rul. 97–39, Holding 17 (discussing the need for mul- tiple elections). (2) The taxpayer must attach to the Form 3115 a statement describing all iden- tifications, if any, that are or were effective for the purposes of § 475(b)(2) of securi- ties acquired prior to the date of executing the Form 3115 (or the date of filing if filed more than 30 days after executing). For identifications that are not subject to Hold- ing 15 of Rev. Rul. 97–39, the statement must describe the procedures or systems used to make each identification, the date on which the identifications were made, and the content and location of the identifi- cations in the taxpayer's books and records. See Rev. Rul. 97–39, Holding 14 (discussing when an identification under § 475(b)(2) is timely made). If the tax- payer holds, or held, transition securities, which are subject to identification under Holding 15 of Rev. Rul. 97–39, the state- ment must describe the basis for conclud- ing that the securities were or were not de- scribed in § 475(b)(1)(A), (B), or (C), including the date, content, and location of documents in the taxpayer's books and records that support such conclusions. If there were no identifications, or if none of the taxpayer's securities were transition se- curities, then the statement should convey this information.

# SEC. 5. CONSENT

.01 If a taxpayer described in section 3 of this revenue procedure complies with the requirements set forth in section 4, then the Commissioner hereby grants consent for the taxpayer to change its method of accounting for securities to re- flect the application of § 475(a). .02 Pending further guidance, in the case of any taxpayer granted automatic consent to change an accounting method by this revenue procedure, § 475(a) ap- plies only to changes in value of securities occurring after the start of the year of change, and any built-in gain or loss as of the beginning of the year of change must be taken into account under rules similar to § 1.475(a)–3(b)(2).

# SEC. 6. EFFECTIVE DA TE

This revenue procedure is effectiveSep- tember 10, 1997, the date this revenue pro- cedure was made available to the public.

# SEC. 7. PAPER WORK REDUCTION

ACT The collections of information con- tained in this revenue procedure have been reviewed and approved by the Of- fice of Management and Budget in accor- dance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–1558. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the col- lection of information displays a valid control number. The collections of information in this revenue procedure are in sections 2.02, 2.03, 2.04, and 4.07(2). This information is required by the Service in order to facil- itate monitoring taxpayers changing ac- 1997–39 I.R.B. 13 September 29, 1997

counting methods resulting from making the elections provided by § 1.475(c)– 1(a)(3)(iii), –1(b)(4), or –1(c)(1)(ii). The information collected will be used if a tax- payer making the change is audited. The collection of information is required to ob- tain a benefit. The likely respondents are business or other for-profit institutions. The collection of information contained in sections 2.02, 2.03, and 2.04 were re- viewed and approved by the Office of Man- agement and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–1496. The estimated total annual reporting burden described in section 4.07(2) is 100,000 hours. The estimated annual burden per re- spondent varies from .25 hours to 50 hours, depending on individual circum- stances, with an estimated average of 5 hours. The estimated number of respon- dents is 20,000. The estimated annual frequency of re- sponses is once in the existence of each respondent. Books or records relating to a collec- tion of information must be retained as long as their contents may become mater- ial in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. DRAFTING INFORMA TION The principal author of this revenue procedure is Kenneth P. Christman of the Office of Assistant Chief Counsel (Finan- cial Institutions and Products). For fur- ther information regarding this revenue procedure, contact Mr. Christman at 202- 622-3950 (not a toll-free call). September 29, 1997 14 1997–39 I.R.B.

Medical Savings Accounts Announcement 97–96 PURPOSE Sections 220(i) and (j) of the Internal Revenue Code provide that if the number of medical savings accounts (MSAs) es- tablished as of June 30, 1997, exceeds 525,000, then October 1, 1997, is a "cut- off" date for the MSApilot project. The Internal Revenue Service has determined that the applicable number of MSAs es- tablished as of June 30, 1997, is 17,145. Consequently, October 1, 1997 is not a "cut-off" date and 1997 is not a "cut-off" year for the MSApilot project. BACKGROUND The Health Insurance Portability and Accountability Act of 1996 added section 220 to the Code to permit eligible individ- uals to establish MSAs under a pilot pro- ject effective January 1, 1997. The pilot project has a scheduled "cut-off" year of 2000, but may have an earlier "cut-off" year if the number of individuals who have established MSAs exceeds certain numerical limitations. See sections 220(i) and (j). If a year is a "cut-off" year, section 220(i)(1) generally provides that no indi- vidual will be eligible for a deduction or exclusion for MSAcontributions for any taxable year beginning after the "cut-off" year unless the individual (A) was an ac- tive MSA participant for any taxable year ending on or before the close of the "cut- off" year, or (B) first became an active MSA participant for a taxable year ending after the "cut-off" year by reason of cov- erage under a high deductible health plan of an MSA-participating employer. Section 220(j)(1) provides that the nu- merical limitation for 1997 is exceeded if the number of MSAs established as of June 30, 1997, is more than 525,000. Under section 220(j)(3), in determining whether any calendar year is a "cut-off" year, the MSA of any previously unin- sured individual is not taken into account. In addition, section 220(j)(4)(D) specifies that, to the extent practical, all MSAs es- tablished by an individual are aggregated and two married individuals opening sep- arate MSAs are to be treated as having a single MSA for purposes of determining the number of MSAs. Based on Forms 8851 filed by MSA trustees and custodians, it has been deter- mined that 22,051 taxpayers have estab- lished MSAs as of June 30, 1997. Of this total, 3,670 taxpayers were reported as previously uninsured, and are therefore not taken into account in determining whether 1997 is a "cut-off" year. In addi- tion, 1,236 taxpayers were reported as ex- cludable from the count because their spouse also established an MSA. Accord- ingly, because the applicable number of MSAs established as of June 30, 1997, 17,145 (22,051 minus (3,670 plus 1,236)) is less than 525,000, 1997 is not a "cut- off" year for the MSApilot project. Questions regarding this announcement may be directed to Felix Zech in the Of- fice of Associate Chief Counsel (Em- ployee Benefits and Exempt Organiza- tions) at (202) 622-4606 (not a toll free number). Foundations Status of Certain Organizations Announcement 97–98 The following organizations have failed to establish or have been unable to maintain their status as public charities or as operating foundations. Accordingly, grantors and contributors may not, after this date, rely on previous rulings or des- ignations in the Cumulative List of Orga- nizations (Publication 78), or on the pre- sumption arising from the filing of notices under section 508(b) of the Code. This listing does notindicate that the organiza- tions have lost their status as organiza- tions described in section 501(c)(3), eligi- ble to receive deductible contributions. Former Public Charities.The following organizations (which have been treated as organizations that are not private founda- tions described in section 509(a) of the Code) are now classified as private foun- dations: Asian-Amerasian Youth, Inc., Albany, NY Association for Rescue at Sea Inc., W ebster Groves, MO Association of Friends of Passages, Inc., New York, NY Association to Promote Intercultural Relations, Inc., Climax, MI Athena Telematics Foundation, Inc., White Plains, NY A vrohom Z. Shfronsky Torah Fund, Inc., Staten Island, NY Bangladesh Cultural Exchange, Jamaica Estates, NY Basic Housing Needs, Inc., New Canaan, CT Believers of San Jose De Oasis, Inc., Bronx, NY Big Green Apple Corp., New York, NY Bill W eete Memorial Fund, Inc., Cambridge, MA Bon Accord Theatre Company of New York, Inc., New York, NY Boston Rugby Football Foundation, Inc., Newton, MA Branch Brook Parent Teacher Association, Smithtown, NY Brooklyn Community Correction Center Advisory Board, Inc., Brooklyn, NY Brooklyn Shipbuilding Foundation, Inc., Brooklyn, NY Burrus Residential Group Home, W ashington, CT Business Enterprise Assistance of Connecticut, Inc., Bolton, CT Causa–Peru, Inc., East Hartford, CT Cambiata Chamber Players, Inc., Kingston, NY Center for Advancement of International Relations through Broadcast, New City, NY Center for Art and Earth, Inc., New York, NY Chosen Children From Romania, Barre, VT Christian Clothing Drive, Inc., Merrick, NY Circle of Children Charitable Foundation, Inc., Lexington, MA Citizen Empowerment, Inc., Bennington, NH Citizens Radiological Monitoring Network Pilgrim, Inc., Duxbury, MA Citizens United for the Rehab of Errants Life Long Care, Inc., Jamaica Plain, MA Clothe the Children Foundation, New York, NY Clyde E. Wheeler Group, Mastic, NY Coalition for Sustainable Agriculture, Castile, NY 1997–39 I.R.B. 15 September 29, 1997 Part IV. Items of General Interest

Cobble Hill Foundation, Inc., Brooklyn, NY Columbus A venue Committee, Inc., New York, NY Columbus Outdoor Club, Columbus, OH Communication for Development and Change, Inc., New York, NY Connecticut Environment Roundtable, Inc., Hartford, CT Cooley Center for Indian Unity, Inc., Providence, RI Diversified Educational Resources, Inc., Northfield Falls, VT Don Costa Scholarship Fund, Lowell, MA Drop In Club of Danbury CTInc., Danbury, CT Drum—The Heartbeat of the Native American Community, Inc., Chicchester, NH Eastcor, Inc., Hampton Bays, NY East End Seaport and Marine Foundation, Inc., Greenport, NY Eastern Cashmere Association, Shoreham, VT Eaton Fire Reserve Association, Eaton, NH Ebony Horsewomen, Inc., Hartford, CT E Call, Inc., Boston, MA Echo Evangelique De Boston, Inc., Mattapan, MA Ecletic Theatre Co., Inc., New York, NY Educational Partnership, New York, NY Education Law Project, Inc., W illimantic, CT Environment Technology Education Center, Inc., Cambridge, MA Essex Firefighters Association, Essex, VT European Child Care Day Care Center, Inc., Brooklyn, NY Everybuddy, Incorporated, Manchester Center, VT Family and Child Therapies, Inc., New York, NY Faran Club International, Inc., Jamaica, NY Father Peter G. Young, Jr. Foundation, Inc., Albany, NY First Baptist Church Development Corporation, Strafford, CT First Responders Emergency Medical Services Association, Saranac Lake, NY Flag Acres Zoo, Inc., Hoosick Falls, NY Flower City Down Syndrome Network, Rochester, NY Footnotes Corp., New York, NY Force Athletic Club, Inc., Swampscott, MA Foundation for International Environ- mental Law & Development, Inc., New York, NY Foundation for the Fiftieth Anniversary of the United Nations, New York, NY Franklin County Mens Education Net- work, Inc., Greenfield, MA Free Gift, Hudson, ME French Cultural Heritage Society, Ltd., Brooklyn, NY Friends of Fort Knox, Bucksport, ME Friends of Frederick Douglass, Inc., Rochester, NY Friends of Frederick E. Samuels Foundations, Inc., New York, NY Friends of Greenfield Public Schools, Greenfield, MA Friends of Kids Kreations, Inc., Monroe, CT Friends of Ohel Moshe Institute, Inc., New York, NY Friends of Salem W oods, Inc., Salem, MA Hamilton Senior Center Foundation, Hamilton, TX National Black United Front Educational Fund, Kansas City, MO Pennsylvania Childrens Services, Inc., Harrisburg, PA Public Lands Action Network, Silver City, NM Renewable Energy for African Development, Inc., Arlington, VA Saugus Business Education Collaborative, Inc., Saugus, MA If an organization listed above submits information that warrants the renewal of its classification as a public charity or as a pri- vate operating foundation, the Internal Revenue Service will issue a ruling or de- termination letter with the revised classifi- cation as to foundation status. Grantors and contributors may thereafter rely upon such ruling or determination letter as provided in section 1.509(a)–7 of the Income Tax Regulations. It is not the practice of the Service to announce such revised classifi- cation of foundation status in the Internal Revenue Bulletin. September 29, 1997 16 1997–39 I.R.B.

1997–39 I.R.B. 17 September 29, 1997 Revenue rulings and revenue procedures (hereinafter referred to as "rulings") that have an effect on previous rulings use the following defined terms to describe the effect: Amplified describes a situation where no change is being made in a prior pub- lished position, but the prior position is being extended to apply to a variation of the fact situation set forth therein. Thus, if an earlier ruling held that a principle applied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare with modified, below). Clarified is used in those instances where the language in a prior ruling is being made clear because the language has caused, or may cause, some confu- sion. It is not used where a position in a prior ruling is being changed. Distinguisheddescribes a situation where a ruling mentions a previously published ruling and points out an essen- tial difference between them. Modified is used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it ap- plies to both A and B, the prior ruling is modified because it corrects a published position. (Compare with amplified and clarified, above). Obsoleted describes a previously pub- lished ruling that is not considered deter- minative with respect to future transac- tions. This term is most commonly used in a ruling that lists previously published rulings that are obsoleted because of changes in law or regulations. A ruling may also be obsoleted because the sub- stance has been included in regulations subsequently adopted. Revoked describes situations where the position in the previously published rul- ing is not correct and the correct position is being stated in the new ruling. Superseded describes a situation where the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same position published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a pe- riod of time in separate rulings. If the new ruling does more than restate the substance of a prior ruling, a combination of terms is used. For example, modified and superseded describes a situation where the substance of a previously pub- lished ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case the previously published ruling is first modified and then, as modified, is super- seded. Supplemented is used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original ruling has been supplemented several times, a new ruling may be pub- lished that includes the list in the original ruling and the additions, and supersedes all prior rulings in the series. Suspended is used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study. Abbreviations The following abbreviations in current use and for- merly used will appear in material published in the Bulletin. A—Individual. Acq.—Acquiescence. B—Individual. BE —Beneficiary. BK —Bank. B.T.A.—Board of Tax Appeals. C.—Individual. C.B.—Cumulative Bulletin. CFR —Code of Federal Regulations. CI—City . COOP —Cooperative. Ct.D.—Court Decision. CY —County . D —Decedent. DC —Dummy Corporation. DE —Donee. Del. Order—Delegation Order. DISC —Domestic International Sales Corporation. DR —Donor . E—Estate. EE —Employee. E.O.—Executive Order. ER —Employer . ERISA —Employee Retirement Income Security Act. EX —Executor. F—Fiduciary. FC —Foreign Country. FICA —Federal Insurance Contribution Act. FISC—Foreign International Sales Company. FPH —Foreign Personal Holding Company. F.R.—Federal Register. FUT A—Federal Unemployment Tax Act. FX —Foreign Corporation. G.C.M.—Chief Counsel's Memorandum. GE —Grantee. GP —General Partner. GR —Grantor. IC—Insurance Company. I.R.B.—Internal Revenue Bulletin. LE —Lessee. LP —Limited Partner. LR —Lessor. M —Minor . Nonacq.—Nonacquiescence. O —Or ganization. P—Parent Corporation. PHC —Personal Holding Company. PO —Possession of the U.S. PR —Partner. PRS —Partnership. PTE —Prohibited Transaction Exemption. Pub. L.—Public Law. REIT—Real Estate Investment Trust. Rev. Proc.—Revenue Procedure. Rev. Rul.—Revenue Ruling. S—Subsidiary. S.P.R.—Statements of Procedral Rules. Stat.—Statutes at Large. T—T arget Corporation. T.C.—T ax Court. T.D.—T reasury Decision. TFE —T ransferee. TFR —T ransferor. T.I.R.—T echnical Information Release. TP —T axpayer. TR —T rust. TT—T rustee. U.S.C.—United States Code. X—Corporation. Y—Corporation. Z—Corporation. Definition of Terms

September 29, 1997 18 1997–39 I.R.B. Numerical Finding List

Bulletins 1997–27 through 1997–38 Announcements: 97–61, 1997–29 I.R.B. 13 97–67, 1997–27 I.R.B. 37 97–68, 1997–28 I.R.B. 13 97–69, 1997–28 I.R.B. 13 97–70, 1997–29 I.R.B. 14 97–71, 1997–29 I.R.B. 15 97–72, 1997–29 I.R.B. 15 97–73, 1997–30 I.R.B. 86 97–74, 1997–31 I.R.B.16 97–75, 1997–32 I.R.B. 28 97–76, 1997–32 I.R.B. 28 97–77, 1997–33 I.R.B. 58 97–78, 1997–34 I.R.B. 11 97–79, 1997–35 I.R.B. 8 97–80, 1997–34 I.R.B. 12 97–81, 1997–34 I.R.B. 12 97–82, 1997–34 I.R.B. 12 97–83, 1997–34 I.R.B. 13 97–84, 1997–34 I.R.B. 13 97–85, 1997–35 I.R.B. 8 97–86, 1997–35 I.R.B. 9 97–87, 1997–35 I.R.B. 9 97–88, 1997–35 I.R.B. 9 97–89, 1997–36 I.R.B. 10 97–90, 1997–36 I.R.B. 10 97–91, 1997–37 I.R.B. 25 97–92, 1997–37 I.R.B. 26 97–93, 1997–36 I.R.B. 11 97–94, 1997–36 I.R.B. 12 97–95, 1997–36 I.R.B. 12 97–97, 1997–38 I.R.B. 22 Cour t Decisions: 2061, 1997–31 I.R.B. 5 2062, 1997–32 I.R.B. 8 Delegation Orders: 172 (Rev. 5), 1997–28 I.R.B. 6 Notices: 97–37, 1997–27 I.R.B. 4 97–38, 1997–27 I.R.B. 8 97–39, 1997–27 I.R.B. 8 97–40, 1997–28 I.R.B. 6 97–41, 1997–28 I.R.B. 6 97–42, 1997–29 I.R.B. 12 97–43, 1997–30 I.R.B. 9 97–44, 1997–31 I.R.B. 15 97–45, 1997–33 I.R.B. 7 97–46, 1997–34 I.R.B. 10 97–47, 1997–35 I.R.B. 5 97–48, 1997–35 I.R.B. 5 97–49, 1997–36 I.R.B. 8 97–50, 1997–37 I.R.B. 21 97–51, 1997–38 I.R.B. 20 97–52, 1997–38 I.R.B. 20 Railroad Retirement Quar terly Rate: 1997–28 I.R.B. 5 Proposed Regulations: REG–104893–97, 1997–29 I.R.B. 13 REG–105160–97, 1997–37 I.R.B. 22 REG–106043–97, 1997–37 I.R.B. 24 REG–107644–97, 1997–32 I.R.B. 24 REG–208151–91, 1997–38 I.R.B. 21 Revenue Procedures: 97–32, 1997–27 I.R.B. 9 97–32A, 1997–34 I.R.B. 10 97–33, 1997–30 I.R.B. 10 97–34, 1997–30 I.R.B.14 97–35, 1997–33 I.R.B. 11 97–36, 1997–33 I.R.B. 14 97–37, 1997–33 I.R.B. 18 97–38, 1997–33 I.R.B. 43 97–39, 1997–33 I.R.B. 48 97–40, 1997–33 I.R.B. 50 97–41, 1997–33 I.R.B. 5 97–42, 1997–33 I.R.B. 57 Revenue Rulings: 97–27, 1997–27 I.R.B. 4 97–28, 1997–28 I.R.B. 4 97–29, 1997–28 I.R.B. 4 97–30, 1997–31 I.R.B.12 97–31, 1997–32 I.R.B.4 97–32, 1997–33 I.R.B. 4 97–33, 1997–34 I.R.B. 4 97–34, 1997–34 I.R.B. 14 97–35, 1997–35 I.R.B. 4 97–36, 1997–36 I.R.B. 5 97–37, 1997–37 I.R.B.15 97–38, 1997–38 I.R.B.14 Treasury Decisions: 8722, 1997–29 I.R.B. 4 8723, 1997–30 I.R.B. 4 8724, 1997–36 I.R.B. 4 8725, 1997–37 I.R.B. 16 8726, 1997–34 I.R.B. 7 8727, 1997–34 I.R.B. 5 8728, 1997–37 I.R.B. 4 8729, 1997–38 I.R.B. 4 8730, 1997–38 I.R.B. 16

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 1997–1 through 1997–26 will be found in Internal Revenue Bulletin 1997–27, dated July 7, 1997.

1997–39 I.R.B. 19 September 29, 1997 Finding List of Current Action on Previously Published Items

Bulletins 1997–27 through 1997–38 *Denotes entry since last publication Revenue Procedures: 96–36 Superseded by 97–34, 1997–30 I.R.B. 14 96–42 Superseded by 97–27, 1997–27 I.R.B. 9 97–32 Modified and amplified by 97–32A, 1997–34 I.R.B. 10 Revenue Rulings: 89–42 Supplemented by 97–31, 1997–32 I.R.B. 4

A cumulative finding list for previously published items mentioned in Internal Revenue Bulletins 1997–1 through 1997–26 will be found in Internal Revenue Bulletin 1997–27, dated July 7, 1997.

Notes September 29, 1997 20 1997–39 I.R.B.

Notes 1997–39 I.R.B. 21 September 29, 1997

Notes September 29, 1997 22 1997–39 I.R.B.

1997–39 I.R.B. 23 September 29, 1997

INTERNAL REVENUE BULLETIN The Introduction on page 3 describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superintendent of Documents when their subscriptions must be renewed. CUMULATIVE BULLETINS The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the week- ly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the Superintendent of Documents. HOW TO ORDER Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance, detach entire page, and mail to the Superintendent of Documents, U.S. Government Printing Office, W ashington, DC 20402. Please allow two to six weeks, plus mailing time, for delivery. WE WELCOME COMMENTS ABOUT THE INTERNAL REVENUE BULLETIN If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page (www .irs.ustreas.gov) or write to the IRS Bulletin Unit, T:FP:F:CD, Room 5560, 1111 Constitution A venue NW , W ashington, DC 20224. You can also leave a recorded message 24 hours a day, 7 days a week at 1–800–829–9043. Superintendent of Documents U.S. Government Printing Office Washington, DC 20402 Official Business Penalty for Private Use, $300 First Class Mail Postage and Fees Paid GPO Permit No. G–26

INTERNAL REVENUE BULLETIN The Introduction on page 3 describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superintendent of Documents when their subscriptions must be renewed. CUMULATIVE BULLETINS The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the week- ly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the Superintendent of Documents. HOW TO ORDER Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance, detach entire page, and mail to the Superintendent of Documents, U.S. Government Printing Office, W ashington, DC 20402. Please allow two to six weeks, plus mailing time, for delivery. WE WELCOME COMMENTS ABOUT THE INTERNAL REVENUE BULLETIN If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page (www .irs.ustreas.gov) or write to the IRS Bulletin Unit, T:FP:F:CD, Room 5560, 1111 Constitution A venue NW , W ashington, DC 20224. You can also leave a recorded message 24 hours a day, 7 days a week at 1–800–829–9043. Internal Revenue Service Washington, DC 20224 Official Business Penalty for Private Use, $300 First Class Mail Postage and Fees Paid IRS Permit No. G–48