Rev Proc 2011-58

Bulletin No. 2011-50
December 12, 2011

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

ESTATE TAX

REG–109564–10, page 852.

T.D. 9555, page 838.

Proposed regulations under section 704 of the Code remove
section 1.704–1(b)(iii)(e) (the de minimis partner rule) because
the rule may have resulted in unintended tax consequences.

Final regulations under section 2036 of the Code provide guidance on the portion of trust property includible in the grantor’s
gross estate if the grantor has retained the use of the property,
the right to an annuity, unitrust, graduated retained interest, or
other payment from such property for life, for any period not
ascertainable without reference to the grantor’s death, or for a
period that does not in fact end before the grantor’s death.

Notice 2011–99, page 847.
The notice provides a proposed revenue procedure in which
the Service will allow a taxpayer to use a simplified proportional method of accounting for original issue discount (“OID”)
on pools of credit card receivables under section 1272(a)(6)
of the Code. The proportional method allocates to an accrual
period an amount of unaccrued OID that is proportional to the
amount of pool principal that is paid by cardholders during the
period.

EXEMPT ORGANIZATIONS
Announcement 2011–76, page 854.
The IRS has revoked its determination that The Big Charity
Sale, Inc., of Houston, TX; Echelon Community Services, Inc.,
of Washington, DC; The GT Foundation of Irvine, CA; Mandala
Transformation Foundation of Rafael, CA; San Francisco Medical Research Foundation of Mill Valley, CA; Southern Utah Foundation of Cedar City, UT; and Sunset Non-Profit Housing Association of Murrieta, CA, qualify as organizations described in
sections 501(c)(3) and 170(c)(2) of the Code.

EMPLOYMENT TAX
T.D. 9554, page 843.
REG–136565–09, page 851.
Final, temporary, and proposed regulations under section 3121
of the Code would extend the exceptions from taxes under the
Federal Insurance Contributions Act and the Federal Unemployment Tax Act under sections 3121(b)(3), 3127, and 3306(c)(5)
to entities that are disregarded as separate from their owners
for federal tax purposes. The temporary regulations also clarify the existing rule that the owners of disregarded entities,
except for qualified subchapter S subsidiaries, are responsible for backup withholding and related information reporting
requirements under section 3406.

(Continued on the next page)

Finding Lists begin on page ii.

ADMINISTRATIVE
Rev. Proc. 2011–58, page 849.
Theft losses from fraudulent investment arrangement.
This procedure extends the safe harbor of Rev. Proc.
2009–20 to certain cases in which a lead figure in a specified
fraudulent arrangement dies and a state or federal government
entity brings a civil complaint against the lead figure or an
associated entity. Rev. Proc. 2009–20 modified.

December 12, 2011

2011–50 I.R.B.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-

force the 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 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 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 substantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management 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.—1986 Code.
This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Legislation 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 Rulings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbarment and 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 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.

2011–50 I.R.B.

December 12, 2011

December 12, 2011

2011–50 I.R.B.

Part I. Rulings and Decisions Under the Internal Revenue Code
of 1986
Section 2036.—Transfers
With Retained Life Estate
26 CFR 20.2036–1: Transfers with retained life estate.

T.D. 9555
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 20
Graduated Retained Interests
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains final
regulations that provide guidance on the
portion of property (held in trust or otherwise) includible in the grantor’s gross estate if the grantor has retained the use of
the property, the right to an annuity, unitrust, graduated retained interest, or other
payment from the property for life, for any
period not ascertainable without reference
to the grantor’s death, or for a period that
does not in fact end before the grantor’s
death. The final regulations will affect estates that file Form 706, United States Estate (and Generation-Skipping Transfer)
Tax Return.
DATES: Effective Date: These regulations
are effective on November 8, 2011.
Applicability Date: For dates of applicability, see §20.2036–1(c)(3).
FOR
FURTHER
INFORMATION
CONTACT: Theresa M. Melchiorre at
(202) 622–3090 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
On April 30, 2009, proposed regulations (REG–119532–08, 2009–20 I.R.B.
1017) were published in the Federal Register (74 FR 19913). The proposed regulations provide the method required to determine the portion of trust corpus of a

2011–50 I.R.B.

grantor retained annuity or unitrust trust
(GRT) that is includible in the grantor’s
gross estate under section 2036 if the deceased grantor retains an interest described
in §25.2702–3(b)(1)(ii)(A) or (b)(1)(ii)(B)
or §25.2702–3(c)(1)(ii); that is, the interest
retained by the grantor increases annually
during the term of the trust (a graduated
retained interest). This method would apply to graduated retained interests in transferred property whether or not held in trust.
In addition, the proposed regulations
would add §20.2036–1(c)(1)(ii), Example
1, illustrating the amount includible under section 2036 if the decedent transfers
property in trust pursuant to the terms
of which trust income is payable to the
decedent and decedent’s child, C, in equal
shares during their joint lives and, on the
death of the first to die of decedent and
C, all trust income is to be paid to the
survivor. The proposed regulations also
would amend §20.2036–1(b)(1)(ii) to address the method required to determine the
amount includible under section 2036 if
the decedent and C were entitled to receive
annuity interests rather than trust income.
Written comments were received on
the proposed regulations.
No public
hearing was scheduled because no individual or organization requested the
opportunity to provide oral comments at
a hearing. All comments are available at
www.regulations.gov or upon request. The
proposed regulations, with certain changes
made in response to the written comments
received, are adopted as final regulations.
Summary of Comments and
Explanation of Provisions
Section 20.2036–1(b)(1)(ii) —
Determining the portion includible
if the decedent’s retained annuity follows
a preceding annuity interest.
Section 20.2036–1(b)(1)(ii) of the proposed regulations provides the method required to compute the amount includible
in the decedent’s gross estate under section 2036 in a situation where the decedent is to receive a payment (or an increased payment) after the death of another beneficiary who is receiving an annuity or other payment at the time of the

838

decedent’s death. If the decedent predeceases the other beneficiary, under the proposed regulations, the amount includible
is the greater of: (1) the amount of corpus required to generate sufficient income
to pay the annuity payable to the decedent
as of the date of death; or (2) the amount
of corpus required to produce sufficient income to satisfy the annuity or other payment the decedent would have been entitled to receive if the decedent had survived the other beneficiary, reduced by the
present value of the other beneficiary’s interest. The amount includible, however,
cannot exceed the fair market value of the
trust corpus on the date of death.
One commentator opined that this
method attributes to the decedent a greater
portion of a trust’s value than is appropriate, because the method does not take into
account any depletion of trust principal
that is assumed if the annuity payable to
the current recipient is a greater percentage
of the trust corpus than the assumed rate
of return based on the applicable section
7520 rate. Alternatively, the commentator proposed that the amount includible
under section 2036 should be the sum of:
(1) the amount of trust corpus required to
produce sufficient income to satisfy the
annuity or other payment the decedent
was receiving at death; plus the lesser of:
(A) the amount of trust corpus required
to produce sufficient income to satisfy the
additional annuity payable to the decedent
if the decedent had survived the current
recipient; or (B) the fair market value of
the corpus on the date of the decedent’s
death less the present value of the current
recipient’s annuity.
The requested approach in the comment
was not adopted because it is inconsistent
with the existing regulations. The regulations have provided, historically, that if
the decedent retained or reserved an interest or right with respect to all or a portion of the property transferred, then the
amount includible under section 2036 is
the value of the property with respect to
which the decedent retained the interest
less the value of any outstanding income
interest that is not subject to the decedent’s
retained interest and that is being enjoyed
by another person at the time of decedent’s

December 12, 2011

death. Nevertheless, once this computation has been completed, a ceiling on the
amount includible in the gross estate under
section 2036 (specifically, the fair market
value of the trust at death) is imposed. The
method in the proposed regulations implements this principle. This method has been
clarified in the final regulations by providing that, solely for the purpose of calculating the present value of the current recipient’s interest in this computation, the
exhaustion of trust corpus test described
in §20.7520–3(b)(2) is not to be applied in
cases where §20.7520–3(b)(2) would otherwise require it to be applied.
Clarification of §20.2036–1(c)(1)(ii),
paragraph (i) of Example 1.
In response to a comment, paragraph
(i) of Example 1 in §20.2036–1(c)(1)(ii)
has been revised to clarify that the present
value of C’s outstanding life estate reduces
only the 50 percent of trust corpus from
which it is payable.
Section 20.2036–1(c)(2)(ii) — Amount
includible in the case of a graduated
retained interest.
In response to a commentator’s request
for a detailed example, a step-by-step
illustration of the method described in
§20.2036–1(c)(2)(ii) (renumbered as
§20.2036–1(c)(2)(iii) in the final regulations) has been added in Example 7 of
§20.2036–1(c)(2)(iv).
Section 20.2036–1(c)(2) — Inclusion
under sections 2036 and 2033.
One commentator requested that the
regulations clarify the interaction of sections 2033 and 2036 in a situation where
the decedent establishes a GRT under the
terms of which the retained interest is paid
to the decedent for a specified term of
years and, if the decedent dies prior to
the expiration of that term, the retained
annuity or other payment is to be paid to
the decedent’s estate for the balance of
the term. See for example §25.2702–3(e),
Example 5.
The commentator noted that, because
all or a portion of the trust corpus is includible in the decedent’s gross estate under section 2036, the annuity or other payments that become payable after the decedent’s death and are required to be paid

December 12, 2011

to the estate for the remainder of the trust
term are reflected in the amount includible
under section 2036, and therefore should
not also be includible under section 2033.
The IRS and the Treasury Department
agree. To the extent that all or a portion of the trust corpus is includible in
the gross estate under section 2036 as a
result of the decedent’s retained annuity
or other interest, double inclusion of the
same asset would result if any payment
that becomes payable after the decedent’s
date of death to the estate also is included
in the decedent’s gross estate under section 2033 as a separate item. Accordingly,
§20.2036–1(c)(1)(i) of the regulations has
been revised to provide specifically that
payments that become payable to the decedent’s estate after the decedent’s death (as
opposed to payments that are payable to
the decedent prior to the decedent’s death
but are not paid until after the decedent’s
death) are not subject to inclusion under
section 2033, if section 2036 is applied to
include all or a portion of the trust corpus
in the gross estate. This rule is also reflected in §20.2036–1(c)(2)(iv), Example
2 paragraph (ii) and Example 7.
The payments described in the preceding paragraph are to be distinguished,
however, from annuity or other payments
payable to the decedent prior to the decedent’s date of death, but that are not paid
until after death. Such payments are includible in the decedent’s gross estate
under section 2033 as a separate receivable. Thus, such an amount payable by
the trust reduces the fair market value of
the trust as of the date of death, but is included in the decedent’s gross estate under
section 2033 as a receivable amount.

Also in response to a comment, the
manner of computing the amount to
be included in the decedent’s gross estate has been clarified at the end of
§20.2036–1(c)(2)(i).
Special Analyses
It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order
12866, as supplemented by Executive Order 13563. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter
5) does not apply to these regulations and,
because these regulations do not impose
on small entities a collection of information requirement, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Code,
the notice of proposed rulemaking preceding this regulation was submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Drafting Information
The principal author of these regulations is Theresa M. Melchiorre, Office of
Associate Chief Counsel (Passthroughs
and Special Industries), IRS.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 20 is
amended as follows:

Organizational changes to and
clarification of §20.2036–1(b) and (c).

PART 20—ESTATE TAX; ESTATES
OF DECEDENTS DYING AFTER
AUGUST 16, 1954

In response to comments, the method
set forth in §20.2036–1(b)(1)(ii) of the
proposed regulations for calculating the
amount includible if part or all of the decedent’s retained annuity follows an annuity
interest payable to another at the time of
the decedent’s death has been moved to
a separate section, §20.2036–1(c)(2)(ii).
As a conforming change, paragraph (ii)
of Example 1 of §20.2036–1(c)(1)(ii) has
been moved and renumbered as Example
8 of §20.2036–1(c)(2)(iv) in the final regulations.

Paragraph 1. The authority citation for
part 20 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 20.2036–1 is amended
by:
1. Revising paragraph (b)(1)(ii).
2. Adding two sentences at the end of
paragraph (c)(1)(i).
3. Adding paragraph (c)(1)(ii) Example
1.
4. Removing the third sentence of paragraph (c)(2)(i) and adding three new sentences in its place.

839

2011–50 I.R.B.

5. Redesignating paragraphs (c)(2)(ii)
and (c)(2)(iii) as paragraphs (c)(2)(iii) and
(c)(2)(iv), respectively.
6. Adding new paragraph (c)(2)(ii)
and text to newly-designated paragraph
(c)(2)(iii).
7. Revising the introductory text of
and adding Example 7 and Example 8 to
newly-designated paragraph (c)(2)(iv).
8. Adding two sentences at the end of
paragraph (c)(3).
The revisions and additions read as follows:
§20.2036–1 Transfers with retained life
estate.
*****
(b) * * *
(1) * * *
(ii) A decedent reserved the right to receive the income, annuity, or other payment from transferred property after the
death of another person who was in fact
enjoying the income, annuity, or other payment at the time of the decedent’s death.
In such a case, the amount to be included
in the decedent’s gross estate under this
section does not include the value of the
outstanding interest of the other person
as determined in paragraphs (c)(1)(i) and
(c)(2)(ii) of this section. See also, paragraphs (c)(1)(ii) Example 1 and (c)(2)(iv)
Example 8 of this section. If the other person predeceased the decedent, the reservation by the decedent may be considered to
be either for life, or for a period that does
not in fact end before death.
*****
(c) * * *
(1) * * *
(i) * * * If this section applies to an
interest retained by the decedent in a trust
or otherwise and the terms of the trust
or other governing instrument provide
that, after the decedent’s death, payments
the decedent was receiving during life
are to continue to be made to the decedent’s estate for a specified period (as
opposed to payments that were payable
to the decedent prior to the decedent’s
death but were not actually paid until after
the decedent’s death), such payments that
become payable after the decedent’s death
are not includible in the decedent’s gross
estate under section 2033 because they are
properly reflected in the value of the trust
corpus included under this section. Pay-

2011–50 I.R.B.

ments that become payable to the decedent
prior to the decedent’s date of death, but
are not paid until after the decedent’s date
of death, are includible in the decedent’s
gross estate under section 2033.
(ii) * * *
Example 1. Decedent (D) creates an irrevocable
inter vivos trust. The terms of the trust provide that
all of the trust income is to be paid to D and D’s child,
C, in equal shares during their joint lives and, on the
death of the first to die of D and C, all of the trust income is to be paid to the survivor. On the death of the
survivor of D and C, the remainder is to be paid to another individual, F. Subsequently, D dies survived by
C. Fifty percent of the value of the trust corpus is includible in D’s gross estate under section 2036(a)(1)
because, under the terms of the trust, D retained the
right to receive one-half of the trust income for D’s
life. In addition, the excess (if any) of the value of
the remaining 50 percent of the trust corpus, over the
present value of C’s outstanding life estate in that 50
percent of trust corpus, also is includible in D’s gross
estate under section 2036(a)(1), because D retained
the right to receive all of the trust income for such
time as D survived C. If C had predeceased D, then
100 percent of the trust corpus would have been includible in D’s gross estate.

*****
(2) * * *
(i) * * * The portion of the trust’s corpus
includible in the decedent’s gross estate for
Federal estate tax purposes is that portion
of the trust corpus necessary to provide the
decedent’s retained use or retained annuity, unitrust, or other payment (without reducing or invading principal). In the case
of a retained annuity or unitrust, the portion of the trust’s corpus includible in the
decedent’s gross estate is that portion of
the trust corpus necessary to generate sufficient income to satisfy the retained annuity or unitrust (without reducing or invading principal), using the interest rates
provided in section 7520 and the adjustment factors prescribed in §20.2031–7 (or
§20.2031–7A), if applicable. The computation is illustrated in paragraph (c)(2)(iv),
Examples 1, 2, and 3 of this section. * * *
(ii) Decedent’s retained annuity following a current annuity interest of another
person. If the decedent retained the right to
receive an annuity or other payment (rather
than income) after the death of the current
recipient of that interest, then the amount
includible in the decedent’s gross estate
under this section is the amount of trust
corpus required to produce sufficient income to satisfy the entire annuity or other
payment the decedent would have been entitled to receive if the decedent had survived the current recipient (thus, also in-

840

cluding the portion of that entire amount
payable to the decedent before the current
recipient’s death), reduced by the present
value of the current recipient’s interest.
However, the amount includible shall not
be less than the amount of corpus required
to produce sufficient income to satisfy the
annuity or other payment the decedent was
entitled, at the time of the decedent’s death,
to receive for each year. In addition, in
no event shall the amount includible exceed the value of the trust corpus on the
date of death. Finally, in calculating the
present value of the current recipient’s interest, the exhaustion of trust corpus test
described in §20.7520–3(b)(2) (exhaustion
test) is not to be applied, even in cases
where §20.7520–3(b)(2) would otherwise
require it to be applied. The following
steps implement this computation.
(A) Step 1: Determine the fair market
value of the trust corpus on the decedent’s
date of death.
(B) Step 2: Determine, in accordance
with paragraph (c)(2)(i) of this section, the
amount of corpus required to generate sufficient income to pay the annuity, unitrust,
or other payment (determined on the date
of the decedent’s death) payable to the
decedent for the trust year in which the
decedent’s death occurred.
(C) Step 3: Determine, in accordance
with paragraph (c)(2)(i) of this section, the
amount of corpus required to generate sufficient income to pay the annuity, unitrust,
or other payment that the decedent would
have been entitled to receive for each trust
year if the decedent had survived the current recipient.
(D) Step 4: Determine the present value
of the current recipient’s annuity, unitrust,
or other payment (without applying the exhaustion test).
(E) Step 5: Reduce the amount determined in Step 3 by the amount determined
in Step 4, but not to below the amount determined in Step 2.
(F) Step 6: The amount includible in the
decedent’s gross estate under this section
is the lesser of the amounts determined in
Step 5 and Step 1.
(iii) Graduated retained interests—(A)
In general. For purposes of this section, a
graduated retained interest is the grantor’s
reservation of a right to receive an annuity,
unitrust, or other payment as described in
paragraph (c)(2)(i) of this section, payable
at least annually, that increases (but does

December 12, 2011

not decrease) over a period of time, not
more often than annually.
(B) Other definitions—(1) Base
amount. The base amount is the amount
of corpus required to generate the annuity,
unitrust, or other payment payable for the
trust year in which the decedent’s death
occurs. See paragraph (c)(2)(i) of this section for the calculation of the base amount.
(2) Periodic addition. The periodic addition in a graduated retained interest for

Year 3
Year 4
Year 5
(3) Corpus amount. For each trust
year in which a periodic addition occurs
(increase year), the corpus amount is the
amount of trust corpus which, starting
from the decedent’s date of death, is necessary to generate an amount of income
sufficient to pay the periodic addition, beginning in the increase year and continuing
in perpetuity, without reducing or invading
principal. For each year with a periodic

each year after the year in which decedent’s death occurs is the amount (if any)
by which the annuity, unitrust, or other
payment that would have been payable for
that year if the decedent had survived exceeds the total amount of payments that
would have been payable for the year immediately preceding that year. For example, assume the trust instrument provides
that the grantor is to receive an annual annuity payable to the grantor or the grantor’s
(1)
Annual
Payment

(2)
Prior Year
Payment

(1 - 2)
Periodic
Addition

144,000
172,800
207,360

120,000
144,000
172,800

24,000
28,800
34,560

addition, the corpus amount required as of
the decedent’s date of death is the product
of two factors: the first is the result of
dividing the periodic addition (adjusted
for payments made more frequently than
annually, if applicable, and for payments
due at the beginning, rather than the end,
of a payment period (see Table K or J of
§20.2031–7(d)(6)) by the section 7520
rate (periodic addition / rate)); and the

(Periodic Addition) x (Adjustment Factor)
Section 7520 Rate
(ii) The adjustment factor, if applicable, is the factor for payments made more
frequently than annually and for payments
due at the beginning, rather than the end,
of a calendar period (see Table K or J of
§20.2031–7(d)(6)). T equals the time period in years from the decedent’s date of
death through the last day of the trust year
immediately before the year for which the
periodic addition is first payable.
(C) Amount includible. The amount includible in the gross estate in the case of
a graduated retained interest is the sum of
the base amount and the corpus amount for
each year for which a periodic addition is
first payable. The sum of these amounts
represents the amount of trust principal
that would be necessary to generate the an-

December 12, 2011

estate for a 5-year term. The initial annual payment is $100,000, and each succeeding annual payment is to be 120 percent of the amount payable for the preceding year. Assuming the grantor dies in the
second year of the trust (whether before or
after the due date of the second annual payment), the periodic additions for years 3, 4,
and 5 of the trust are as follows:

x

nual payments that would have been paid
to the decedent if the decedent had survived and had continued to receive the
graduated retained interest. The amount
of trust corpus includible in a decedent’s
gross estate under this section, however,
shall not exceed the fair market value of
the trust corpus on the decedent’s date
of death. The provisions of this section
also apply to graduated retained interests
in transferred property not held in trust.
(iv) Examples. The application of paragraphs (c)(2)(i), (c)(2)(ii), and (c)(2)(iii) of
this section is illustrated in the following
examples:
*****

second is 1 divided by the sum of 1 and
the section 7520 rate raised to the T power
(1 / (1 + rate)^T). The second factor applies a present value discount to reflect the
period beginning with the date of death
and ending on the last day of the trust year
immediately before the year for which the
periodic addition is first payable.
(i) The corpus amount is determined as
follows:
1
(1+ Section 7520 Rate)T
terms of the GRAT, the trustee is to pay to D an annuity for a 5-year term that is a qualified interest described in section 2702(b). The annuity amount is to
be paid annually at the end of each trust year, on October 31st. The first annual payment is to be $100,000.
Each succeeding payment is to be 120 percent of the
amount paid in the preceding year. Income not distributed in any year is to be added to principal. If D
dies during the 5-year term, the payments are to be
made to D’s estate for the balance of the GRAT term.
At the end of the 5-year term, the trust is to terminate
and the corpus is to be distributed to C, D’s child. D
dies on January 31st of the third year of the GRAT
term. On the date of D’s death, the value of the trust
corpus is $3,200,000, the section 7520 interest rate is
6.8 percent, and the adjustment factor from Table K
of §20.2031–7 is 1.0000. D’s executor does not elect
to value the gross estate as of the alternate valuation
date pursuant to section 2032.

Example 7. (i) On November 1, year N, D transfers assets valued at $2,000,000 to a GRAT. Under the

841

2011–50 I.R.B.

(ii) The amount includible in D’s gross estate
under section 2036(a)(1) as described in paragraph

(c)(2)(iii)(C) of this section is determined and illustrated as follows:

A

B

C

Periodic
Addition

D
Required
Principal:
C x Adj. Factor /
0.068

E
Deferral
Period:
Death to
GRAT Year

F
Present
Value
Factor:
1/(1+.068)^E

G
Corpus or Base
Amount
At Death:
DxF

GRAT
Year

Annual
Annuity
Payment

3

144,000

n/a

2,117,647

n/a

n/a

2,117,647

4

172,800

28,800

423,529

0.747945

0.951985

403,193

5

207,360

34,560

508,235

1.747945

0.891372

453,026

Total:

2,973,866

(iii) Specifically:
(A) Column A. First, determine the year of the
trust term during which the decedent’s death occurs,
and the number of subsequent years remaining in the
trust term for which the decedent retained or reserved
an interest. In this example, D dies during year 3, with
two additional years remaining in the term.
(B) Column B. Under the formula specified in the
st
trust, the annuity payment to be made on October 31
rd
of the 3 year of the trust term is $144,000. Using
that same formula, determine the annuity amounts for
years 4 and 5.
(C) Column C. Determine the periodic addition
for year 4 and year 5 by subtracting the annuity
amount for the preceding year from the annuity
amount for that year; the periodic addition for that
year is the amount of the increase in the annuity
amount for that year.

(D) Columns D through G for year 3. For the year
of the decedent’s death (year 3), determine the principal required to produce the annuity amount (Column D) by multiplying the annuity amount (Column
B) by the adjustment factor (in this case 1.0000) and
by dividing the product by the applicable interest rate
under section 7520. Because this is the year of decedent’s death and reflects the annuity amount payable
to the decedent in that year, there is no deferral, so
this is also the Base Amount (the amount of corpus
required to produce the annuity for year 3) (Column
G).
(E) Columns D through G for years 4 and 5. For
each succeeding year of the trust term during which
the periodic addition will not be payable until a year
subsequent to the year of the decedent’s death, determine the principal required to produce the periodic
addition payable for that year (Column D) by multi-

plying the periodic addition (Column C) by the adjustment factor and by dividing the product by the
applicable interest rate under section 7520. Compute
the factors to reflect the length of the deferral period
(Column E) and the present value (Column F) as described in paragraph (c)(2)(iii)(B)(3) of this section.
Multiply the amount of corpus in Column D by the
factors in Columns E and F to determine the Corpus
Amount for that year (Column G).
(F) Column G total. The sum of the amounts in
Column G represents the total amount includable in
the gross estate (but not in excess of the fair market
value of the trust on the decedent’s date of death).
(iv) An illustration of the amount of trust corpus
(as of the decedent’s death) necessary to produce the
scheduled payments is as follows:

(v) A total corpus amount (as defined in paragraph (c)(2)(iii)(B)(3) of this section) of $2,973,866
constitutes the principal required as of decedent’s
date of death to produce (without reducing or invading principal) the annual payments that D would
have received if D had survived and had continued to
receive the retained annuity. Therefore, $2,973,866
of the trust corpus is includible in D’s gross estate
under section 2036(a)(1). The remaining $226,134
of the trust corpus is not includible in D’s gross estate
under section 2036(a)(1). The result would be the
same if D’s retained annuity instead had been payable
to D for a term of 5 years, or until D’s prior death, at
which time the GRAT would have terminated and the
trust corpus would have become payable to another.
(vi) If, instead, D’s annuity was to have been paid
on a monthly or quarterly basis, then the periodic

addition would have to be adjusted as provided in
paragraph (c)(2)(iii)(B)(3) of this section. Specifically, in Column D of the Table for years 4 and 5
in this example, the amount of the principal required
would be computed by multiplying the periodic addition by the appropriate factor from Table K or J
of §20.2031–7(d)(6) before dividing as indicated and
computing the amounts in Columns E through G. In
addition, Column D in year 3 also would have to
be so adjusted. Under the facts presented, section
2039 does not apply to include any amount in D’s
gross estate by reason of this retained interest. See
§20.2039–1(e).
Example 8. (i) D creates an irrevocable inter vivos
trust. The terms of the trust provide that an annuity of
$10,000 per year is to be paid to D and C, D’s child, in
equal shares during their joint lives. On the death of

the first to die of D and C, the entire $10,000 annuity
is to be paid to the survivor for life. On the death of
the survivor of D and C, the remainder is to be paid to
another individual, F. Subsequently, D dies survived
by C. On D’s date of death, the fair market value of
the trust is $120,000 and the section 7520 rate is 7 percent. At the date of D’s death, the amount of trust corpus needed to produce D’s annuity interest ($5,000
per year) is $71,429 ($5,000/0.07). In addition, assume the present value of C’s right to receive $5,000
annually for the remainder of C’s life is $40,000. The
portion of the trust corpus includible in D’s gross estate under section 2036(a)(1) is $102,857, determined
as follows:

2011–50 I.R.B.

842

December 12, 2011

(ii) Step 1: Fair market value of corpus.

$120,000

(iii) Step 2: Corpus required to produce D’s date of death annuity ($5,000/0.07).

$71,429

(iv) Step 3: Corpus required to produce D’s annuity if D had survived C
($10,000/0.07).

$142,857

(v) Step 4: Present value of C’s interest.

$40,000

(vi) Step 5: The amount determined in Step 3, reduced by the amount
determined in Step 4, but not to below the amount determined in Step 2
($142,857 - $40,000, but not less than $71,429).

$102,857

(vii) Step 6: The lesser of the amounts determined in Steps 5 and 1 ($102,857
or $120,000).

$102,857.

(3) Effective/applicability dates. * * *
All but the last two sentences at the end
of paragraph (c)(1)(i) of this section are
applicable to the estates of decedents
dying after August 16, 1954. The first,
second, and sixth sentences in paragraph
(c)(2)(i) of this section and all but the
introductory text, Example 7, and Example
8 of paragraph (c)(2)(iv) of this section
are applicable to the estates of decedent’s
dying on or after July 14, 2008. Paragraph
(b)(1)(ii) of this section, the last two
sentences at the end of paragraph (c)(1)(i)
of this section, Example 1 of paragraph
(c)(1)(ii) of this section, the third, fourth,
and fifth sentences in paragraph (c)(2)(i)
of this section; paragraph (c)(2)(ii) of
this section; paragraph (c)(2)(iii) of this
section; and the introductory text, Example
7, and Example 8 of paragraph (c)(2)(iv)
of this section are applicable to the estates
of decedents dying on or after November
8, 2011.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved October 27, 2011.
Emily S. McMahon,
Acting Assistant Secretary
of the Treasury (Tax Policy).
(Filed by the Office of the Federal Register on November 7,
2011, 8:45 a.m., and published in the issue of the Federal
Register for November 8, 2011, 76 F.R. 69126)

December 12, 2011

Section 3121.—Definitions
26 CFR 3121(b)(3)–1: Family employment.

T.D. 9554
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 31 and 301
Extending Religious and
Family Member FICA and FUTA
Exceptions to Disregarded
Entities
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regulations.
SUMMARY: This document contains
final and temporary regulations amending 26 CFR parts 31 and 301. These
regulations extend the exceptions from
taxes under the Federal Insurance Contributions Act (“FICA”) and the Federal
Unemployment Tax Act (“FUTA”) under
sections 3121(b)(3) (concerning individuals who work for certain family members),
3127 (concerning members of religious
faiths), and 3306(c)(5) (concerning persons employed by children and spouses
and children under 21 employed by their
parents) of the Internal Revenue Code
(“Code”) to entities that are disregarded as
separate from their owners for federal tax
purposes. The temporary regulations also
clarify the existing rule that the owners of
disregarded entities, except for qualified
subchapter S subsidiaries, are responsible for backup withholding and related
information reporting requirements under
section 3406. The text of the temporary

843

regulations also serves as the text of the
proposed regulations (REG–136565–09)
set forth in the notice of proposed rulemaking on this subject in this issue of the
Bulletin.
DATES: Effective Date: These regulations
are effective on November 1, 2011.
Applicability Date: For dates of applicability see §§31.3121(b)(3)–1T(e),
31.3127–1T(d),
31.3306(c)(5)–1T(e),
301.7701–2T(e)(5).
FOR
FURTHER
INFORMATION
CONTACT:
Joseph
Perera
(202)
622–6040 (not a toll-free call).
SUPPLEMENTARY INFORMATION:
Background
This document contains final and temporary regulations amending the Employment Tax Regulations (26 CFR part 31)
and the Procedure and Administration
Regulations (26 CFR part 301) to extend
the FICA and FUTA exceptions for family members and religious sect members
to certain entities that are disregarded
as separate from their owners for federal tax purposes under §301.7701–2(c).
Section 301.7701–2(c)(2)(i) provides
that generally, except as otherwise provided, a business entity that has a single
owner and is not a corporation under
§301.7701–2(b) is disregarded as an entity separate from its owner. Prior to
2009, single-member entities disregarded
as separate from their owners were generally disregarded for employment taxes
and certain other requirements of law
arising under subtitle C. An employer is
generally defined as the person for whom
an individual performs services as an
employee. Sections 3401(d), 3121(d),
and 3306(a). Prior to 2009, the owner

2011–50 I.R.B.

of the disregarded entity was treated as
the employer for purposes of employment
tax liabilities and all other employment
tax obligations related to wages paid to
employees performing services for the
disregarded entity.
Recent
changes
to
§301.7701–2(c)(2)(iv) provide that, with
respect to wages paid after December 31,
2008, a disregarded entity is treated
as a separate entity for purposes of
employment taxes imposed under Subtitle
C and related reporting requirements. In
addition, the separate entity is treated as a
corporation for purposes of employment
taxes imposed under Subtitle C and related
reporting requirements. Therefore, the
entity, rather than the owner, is considered
to be the employer of any individual
performing services for the entity.
Sections 3111 and 3301 of the Code impose FICA and FUTA taxes, respectively,
on the employer in an amount equal to a
percentage of the wages paid by that employer with respect to employment. Under section 3101, FICA tax is also imposed
on the employee. Sections 3121(b) and
3306(c) define employment for FICA and
FUTA purposes as any service, of whatever nature, performed by an employee for
the person employing him. However, there
are some services which are explicitly excepted from the definition of employment.
For example, section 3121(b)(3)(A) provides that service performed by a child under the age of 18 in the employ of his father
or mother is not considered employment
for FICA purposes. Section 3121(b)(3)(B)
provides that service performed by an individual under the age of 21 employed by
his father or mother, or performed by an individual employed by his spouse or son or
daughter (subject to certain conditions) for
domestic service in a private home of the
employer is not considered employment
for FICA purposes. Section 3306(c)(5)
provides that service performed by an individual in the employ of his son, daughter, or spouse, and service performed by a
child under the age of 21 in the employ of
his father or mother are not considered employment for FUTA purposes.
Prior to the recent changes to
§301.7701–2(c), the services a family
member performed for a disregarded
entity wholly owned by another family
member could qualify for the exceptions
under sections 3121(b)(3) and 3306(c)(5)

2011–50 I.R.B.

if all the requirements were satisfied,
as the individual family member owner
was treated as the employer. However,
due to the recent changes to the regulations, family members can no longer
qualify for the FICA and FUTA exceptions that apply to family employment
because §301.7701–2(c)(2)(iv) regards
the disregarded entity as a separate entity and treats the separate entity as a
corporation for employment tax purposes. Sections 31.3121(b)(3)–1(c) and
31.3306(c)(5)–1(c) explicitly state that
services performed in the employ of a
corporation are not within the exceptions
from employment that apply because of
the existence of a family relationship between the employee and the individual
employing him.
Section 3127 provides an exception
from FICA taxes where both the employer
and the employee are members of a religious faith opposed to participation in the
Social Security Act. Both the employer
and the employee must be members of a
recognized religious sect and both must
have filed and had approved an application certifying that they are members of
a qualifying religious faith. Prior to the
recent changes made to §301.7701–2(c),
service performed by a member of a qualifying religious sect for a disregarded entity
wholly owned by another member of a
qualifying religious sect could qualify for
this exception as the individual sect member was considered to be the employer.
However, as a result of the recent changes
to §301.7701–2(c)(2)(iv), the disregarded
entity is regarded as a separate entity for
employment tax purposes and the separate
entity is treated as a corporation. As a corporation, the entity cannot be considered
a member of a qualifying religious sect.
Therefore, the exception cannot apply, as
the employer would not be a member of a
qualifying religious sect.
Section 301.7701–2(c)(2)(iv) treats disregarded entities as corporations for employment tax purposes. Such entities cannot qualify for the FICA and FUTA exceptions contained in sections 3121(b)(3),
3127, and 3306(c)(5) because the individual owner is no longer considered the employer. The IRS and the Treasury Department did not intend to render these exceptions inapplicable to disregarded entities that were eligible for the exceptions
prior to the effective date of the new reg-

844

ulations in §301.7701–2(c). The inability
of these entities to benefit from the exceptions for family employees and members
of religious faiths has an adverse impact on
small businesses. Accordingly, a change is
necessary to correct this problem.
While §301.7701–2(c)(2)(iv) treats an
entity that is disregarded as an entity separate from its owner as a corporation for
employment tax purposes, such entity remains disregarded for backup withholding
and related information reporting purposes. The preamble to Treasury Decision
9356, 2007–2 C.B. 675, which finalized
the changes to §301.7701–2(c) indicates
that these regulations do not apply to reportable payments under section 3406.
Accordingly, the owner of the disregarded
entity is responsible for any backup withholding that is required with respect to
reportable payments considered made by
the owner rather than the disregarded entity, other than a qualified subchapter S
subsidiary. However, the final regulations
themselves do not explicitly state that such
disregarded entities are not responsible
for information reporting and backup
withholding.
This has caused some
confusion as to the responsible party for
filing information returns for reportable
payments and related backup withholding
requirements. Therefore, language has
been added to these regulations to clarify
the existing rules with respect to backup
withholding and related information
reporting responsibilities.
Explanation of Provisions
The temporary regulations would allow certain disregarded entities under
§301.7701–2 to qualify for the FICA and
FUTA exceptions of sections 3121(b)(3),
3127 and 3306(c)(5). The disregarded
entity will continue to be treated as a corporation for all employment tax purposes,
except the entity will be disregarded for
the limited purposes of applying the FICA
and FUTA exceptions found in sections
3121(b)(3), 3127 and 3306(c)(5). For
purposes of applying these exceptions
only, the owner of the disregarded entity
will be treated as the employer and the
employee will be considered to be an employee of the owner. Additionally, the
regulations clarify the existing rule that
disregarded entities under §301.7701–2
are not responsible for backup withholding

December 12, 2011

and information reporting of reportable
payments under section 3406. Rather,
the owner of a disregarded entity under
§301.7701–2 is responsible for backup
withholding and information reporting of
reportable payments under section 3406.
This does not change the existing rule.
Special Analyses
It has been determined that this Treasury Decision is not a significant regulatory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It has also been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations, and because
the regulations do not impose a collection
of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6)
does not apply. Pursuant to section 7805(f)
of the Code, this regulation will be submitted to the Chief Counsel for Advocacy
of the Small Business Administration for
comment on its impact on small business.
Drafting Information
The principal author of these regulations is Joseph Perera, Office of Associate
Chief Counsel (Tax Exempt & Government Entities). However, other personnel from the IRS and Treasury Department
participated in their development.
*****
Amendments to the Regulations
Accordingly, 26 CFR parts 31 and 301
are amended as follows:
PART 31—EMPLOYMENT TAXES AND
COLLECTION OF INCOME TAX AT
SOURCE
Paragraph 1. The authority citation for
part 31 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 31.3121(b)(3)–1 is
amended by revising paragraph (c) and
adding paragraphs (d) and (e) to read as
follows:
§31.3121(b)(3)–1 Family employment.
*****
(c) [Reserved]. For further guidance,
see §31.3121(b)(3)–1T(c).

December 12, 2011

(d) [Reserved]. For further guidance,
see §31.3121(b)(3)–1T(d).
(e) [Reserved]. For further guidance,
see §31.3121(b)(3)–1T(e).
Par. 3. Section 31.3121(b)(3)–1T is
added to read as follows:
§31.3121(b)(3)–1T Family employment
(temporary).
(a) [Reserved]. For further guidance,
see §31.3121(b)(3)–1(a).
(b) [Reserved]. For further guidance,
see §31.3121(b)(3)–1(b).
(c) Services performed in the employ of
a corporation are not within the exceptions,
except as provided in paragraph (d). Services performed in the employ of a partnership are not within the exception unless
the requisite family relationship exists between the employee and each of the partners comprising the partnership.
(d) A disregarded entity that
is treated as a corporation under
§301.7701–2(c)(2)(iv)(B) of this chapter
(Procedure and Administration Regulations) shall not be treated as a corporation for purposes of applying section
3121(b)(3). For purposes of applying
section 3121(b)(3), the owner of the disregarded entity will be treated as the
employer.
(e) Paragraphs (c) and (d) of this section
apply with respect to wages paid on or after
November 1, 2011. However, taxpayers
may apply paragraphs (c) and (d) of this
section to wages paid on or after January 1,
2009.
(f) Expiration date. The applicability
of paragraphs (c) and (d) of this section
expires on or before October 31, 2014.
Par. 4. Section 31.3127–1T is added to
subpart B to read as follows:
§31.3127–1T Exemption for employers
and their employees where both are
members of religious faiths opposed
to participation in Social Security Act
programs (temporary).
(a) If an employer (or if the employer
is a partnership, each partner therein) and
their employee are members of a recognized religious sect or division described
in section 1402(g)(1) of the Code, both
the employer and employee adhere to the
tenets and teachings of that sect, and both
the employer and employee have filed and

845

had approved applications under section
3127(b) for exemption from the taxes imposed by sections 3111 and 3101 then the
employer is exempt from taxes imposed by
section 3111 with respect to the wages paid
to the eligible employee, and the employee
is exempt from the taxes imposed by section 3101 with respect to the wages paid by
that employer.
(b) Services performed in the employ of
a corporation are not within the exception,
except as provided in paragraph (c) of this
section.
(c) A disregarded entity that
is treated as a corporation under
§301.7701–2(c)(2)(iv)(B) of this chapter
(Procedure and Administration Regulations) shall not be treated as a corporation
for purposes of applying section 3127. For
purposes of section 3127, the owner of the
disregarded entity will be treated as the
employer and the payor of the employee’s
wages.
(d) This section applies with respect to
wages paid on or after November 1, 2011.
However, taxpayers may apply this section
to wages paid on or after January 1, 2009.
(e) Expiration date. The applicability of this section expires on or before
October 31, 2014.
Par. 5. Section 31.3306(c)(5)–1 is
amended by revising paragraph (c) and
adding paragraphs (d) and (e) to read as
follows:
§31.3306(c)(5)–1 Family Employment.
*****
(c) [Reserved]. For further guidance,
see §31.3306(c)(5)–1T(c).
(d) [Reserved]. For further guidance,
see §31.3306(c)(5)–1T(d).
(e) [Reserved]. For further guidance,
see §31.3306(c)(5)–1T(e).
Par. 6. Section 31.3306(c)(5)–1T is
added to read as follows:
§31.3306(c)(5)–1T Family employment
(temporary).
(a) [Reserved]. For further guidance,
see §31.3306(c)(5)–1(a).
(b) [Reserved]. For further guidance,
see §31.3306(c)(5)–1(b).
(c) Services performed in the employ
of a corporation are not within the exception, except as provided in paragraph (d)
of this section. Services performed in the

2011–50 I.R.B.

employ of a partnership are not within the
exception unless the requisite family relationship exists between the employee and
each of the partners comprising the partnership.
(d) A disregarded entity that
is treated as a corporation under
§301.7701–2(c)(2)(iv)(B) of this chapter
(Procedure and Administration Regulations) shall not be treated as a corporation for purposes of applying section
3306(c)(5). For purposes of applying
section 3306(c)(5), the owner of the disregarded entity will be treated as the
employer.
(e) Paragraphs (c) and (d) of this section
apply with respect to wages paid on or after
November 1, 2011. However, taxpayers
may apply paragraphs (c) and (d) of this
section to wages paid on or after January 1,
2009.
(f) Expiration date. The applicability
of paragraphs (c) and (d) of this section
expires on or before October 31, 2014.
PART 301—PROCEDURE AND
ADMINISTRATION.
Par. 7. The authority citation for part
301 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 8. Section 301.7701–2 is amended
by:
1. Revising paragraph (c)(2)(iv)(A).
2.
Redesignating paragraph
(c)(2)(iv)(C) as paragraph (c)(2)(iv)(D)
and adding new paragraph (c)(2)(iv)(C).
§301.7701–2 Business entities;
definitions.
*****

2011–50 I.R.B.

(c) * * *
(2) * * *
(iv) * * *
(A) [Reserved]. For further guidance,
see §301.7701–2T(c)(2)(iv)(A).
*****
(C) [Reserved]. For further guidance,
see §301.7701–2T(c)(2)(iv)(C).
*****
Par. 9. Section 301.7701–2T is added
to read as follows:
§301.7701–2T Business entities;
definitions (temporary).
(a) through (c)(2)(iv) [Reserved]. For
further guidance, see §301.7701–2(a)
through (c)(2)(iv).
(A)
In
general.
Section
§301.7701–2(c)(2)(i) (relating to certain
wholly owned entities) does not apply
to taxes imposed under Subtitle C—Employment Taxes and Collection of Income
Tax (Chapters 21, 22, 23, 23A, 24 and
25 of the Internal Revenue Code). However, §301.7701–2(c)(2)(i) does apply
to withholding requirements imposed
under section 3406 (backup withholding).
The owner of a business entity that is
disregarded under §301.7701–2 is subject
to the withholding requirements imposed
under section 3406 (backup withholding).
Section 301.7701–2(c)(2)(i) also applies
to taxes imposed under Subtitle A, including Chapter 2—Tax on Self Employment
Income. The owner of an entity that
is treated in the same manner as a sole
proprietorship under §301.7701–2(a) will
be subject to tax on self-employment
income.

846

(B) [Reserved]. For further guidance,
see §301.7701–2(c)(2)(iv)(B).
(C) Exceptions. For exceptions to the
rule in §301.7701–2(c)(2)(iv)(B), see sections 31.3121(b)(3)–1(d), 31.3127–1(c),
and 31.3306(c)(5)–1(d).
(D)
through
(e)(4)
[Reserved].
For further guidance, see
§301.7701–2(c)(2)(iv)(D) through (e)(4).
(5) Paragraphs (c)(2)(iv)(A) and
(c)(2)(iv)(C) of this section apply to wages
paid on or after November 17, 2011. For
rules that apply to paragraph (c)(2)(iv)(A)
of this section before November 17, 2011,
see 26 CFR part 301 revised as of April 1,
2009. However, taxpayers may apply
paragraphs (c)(2)(iv)(A) and (c)(2)(iv)(C)
of this section to wages paid on or after
January 1, 2009.
(e)(6) through (e)(7) [Reserved]. For
further guidance, see §301.7701–2(e)(6)
through (e)(7).
(8) Expiration Date. The applicability of paragraphs (c)(2)(iv)(A) and
(c)(2)(iv)(C) of this section expires on or
before November 14, 2014.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved November 19, 2011.
Michael Mundaca,
Assistant Secretary of the
Treasury (Tax Policy).
(Filed by the Office of the Federal Register on November 9,
2011, 8:45 a.m., and published in the issue of the Federal
Register for November 10, 2011, 76 F.R. 70057)

December 12, 2011

Part III. Administrative, Procedural, and Miscellaneous
Proposed Method of
Accounting for OID on a Pool
of Credit Card Receivables
Notice 2011–99
Purpose
This notice provides a proposed revenue procedure in which the Internal Revenue Service (“IRS”) will allow a taxpayer
to use a simplified method of accounting
to allocate original issue discount (“OID”)
on a pool of credit card receivables to an
accrual period. The method generally allocates to an accrual period an amount of
unaccrued OID that is proportional to the
amount of the stated redemption price at
maturity (“principal”) of the pool that is
paid by cardholders during the period. The
method is intended to reduce administrative burdens and controversy for taxpayers and the IRS in computing OID accruals
on a pool of credit card receivables under
§ 1272(a)(6) of the Internal Revenue Code.
This notice also requests comments on the
proposed revenue procedure.
Request for Comments
The Treasury Department and the IRS
request comments on all aspects of the
proposed revenue procedure in this notice.
Consideration will be given to any written
public comments that are submitted on or
before March 16, 2012. A signed original
and eight (8) copies of public comments
should be sent by mail to the IRS at
CC:PA:LPD:PR (IRS Notice 2011–99),
Room 5203, Internal Revenue Service, PO
Box 7604, Ben Franklin Station, Washington, DC 20044. Public comments also
may be hand-delivered Monday through
Friday between the hours of 8 a.m. and
4 p.m. to the Courier’s Desk, Internal
Revenue Service, 1111 Constitution Avenue, N.W., Washington, DC 20224, Attn:
CC:PA:LPD:PR (IRS Notice 2011–99).
Comments also may be transmitted electronically via the following e-mail address:
Notice.Comments@irscounsel.treas.gov.
Please include “Notice 2011–99” in the
subject line of any electronic communications. All comments will be available for
public inspection and copying.

December 12, 2011

Drafting Information
The principal author of this notice
is Charles W. Culmer of the Office
of Associate Chief Counsel (Financial
Institutions and Products). For further
information regarding this notice, contact
Charles W. Culmer at (202) 622–3950 (not
a toll-free call).
PROPOSED REVENUE PROCEDURE
Part III
Administrative, Procedural, and
Miscellaneous
26 CFR 601.601: Rules and regulations.
(Also Part I, § 1272(a)(6))

Rev. Proc. [XXXX–XX]
SECTION 1. PURPOSE
This revenue procedure allows a taxpayer to use a safe harbor method of
accounting for original issue discount
(“OID”) on a pool of credit card receivables for purposes of § 1272(a)(6) of the
Internal Revenue Code—the “proportional method.” The proportional method
generally allocates to an accrual period an
amount of unaccrued OID that is proportional to the amount of the stated redemption price at maturity (“principal”) of the
pool that is paid by cardholders during the
period. Under certain assumptions, the
proportional method as described in this
revenue procedure generally produces the
same results as an implementation of the
method described in § 1272(a)(6). The
revenue procedure also describes the exclusive procedures by which a taxpayer
may obtain the Commissioner’s consent
to change to the proportional method.
SECTION 2. BACKGROUND
.01 A debt instrument is issued with
OID if the instrument’s issue price is less
than its stated redemption price at maturity.
Section 1273(a)(1). Under § 1.1273–1(b)
of the Income Tax Regulations, the stated
redemption price at maturity of a debt instrument is the sum of all payments provided by the debt instrument other than
payments of qualified stated interest. In

847

general, qualified stated interest is stated
interest that is unconditionally payable in
cash, or that is constructively received under § 451, at least annually at a single fixed
rate. Section 1.1273–1(c).
.02 Accruals of OID generally are taken
into account over the term of a debt instrument using the constant yield method. See
§ 1272(a)(3) and § 1.1272–1. The Code
provides special rules, however, for certain
debt instruments for which the principal is
subject to acceleration. See § 1272(a)(6).
Under § 1272(a)(6), if the principal on a
debt instrument is subject to acceleration,
OID accruals are determined based on a
prepayment assumption and a formula involving the present value of all remaining
payments under the debt instrument as of
the close of the accrual period, payments
during the accrual period of amounts included in the stated redemption price at
maturity of the debt instrument, and the adjusted issue price of the debt instrument at
the beginning of the accrual period (“statutory method”).
.03 The Taxpayer Relief Act of 1997
extended the rules of § 1272(a)(6) to OID
on any pool of debt instruments the yield
on which may be affected by reason of
prepayments, including a pool of credit
card receivables. See Pub. L. 105–34,
§ 1004(a), 1997–4 C.B. 1, 125. However,
unlike the debt instruments previously
subject to § 1272(a)(6), the balance of
a pool of credit card receivables can be
increased, as well as decreased, from
one accrual period to the next, which
adds complexity in applying the rules of
§ 1272(a)(6).
.04 The Internal Revenue Service
(“IRS”) has challenged the methods of
accounting for OID on pools of credit card
receivables adopted by some taxpayers
as not clearly reflecting income. See, for
example, Capital One Financial Corp.
v. Commissioner, 133 T.C. 136 (2009)
(holding, in relevant part, that the model
used by the taxpayer for computing OID
accruals under § 1272(a)(6) was a reasonable method after some modifications by
the court).
.05 The proportional method as described in this revenue procedure is intended to reduce administrative burdens
and controversy for taxpayers and the IRS

2011–50 I.R.B.

in computing OID accruals on a pool of
credit card receivables under § 1272(a)(6).
Under certain assumptions, the proportional method is a simplified method of
calculation that generally produces the
same results as an implementation of the
statutory method.
.06 Certain credit card fees are treated
as creating or increasing the amount of
OID on the pool of credit card receivables
to which the fees relate. See, for example, Rev. Proc. 2004–33, 2004–1 C.B.
989 (Commissioner will allow a taxpayer
to treat late fees as OID). However, certain
fees do not create or increase the amount
of OID on the pool of credit card receivables to which the fees relate. See, for example, Rev. Rul. 2004–52, 2004–1 C.B.
973 (credit card annual fees do not result
in OID).
SECTION 3. SCOPE
This revenue procedure applies to a taxpayer if—
.01 The taxpayer issues credit cards allowing cardholders to access a revolving
line of credit established by the taxpayer
to purchase goods and services, or to obtain cash advances;
.02 For federal income tax purposes, the
taxpayer does not treat the credit card purchase transactions of its cardholders as creating debt that is given in consideration for
the sale or exchange of property;
.03 The taxpayer maintains one or more
pools of receivables with respect to such
credit cards; and
.04 In the case of a taxpayer that maintains more than one pool of credit card
receivables, the manner in which pools
are established and maintained does not
achieve a result that is unreasonable in
light of the purposes of §§ 1271 through
1275.
SECTION 4. APPLICATION
.01 The proportional method of accounting described in section 5 of this
revenue procedure is a permissible method
for use by a taxpayer within the scope

2011–50 I.R.B.

of this revenue procedure to account for
OID on a pool of credit card receivables
described in section 3 of this revenue procedure. If the proportional method is used
by a taxpayer to account for any pool of
credit card receivables, the method must
be used for every pool of credit card receivables described in section 3 of this
revenue procedure and held by that taxpayer. If the proportional method is used
for more than one such pool, separate data
for each pool must be kept, and the computations must be made separately based
on the data for each pool.
.02 A taxpayer that wants to change
its method of accounting to the proportional method must use the automatic
change in method procedures of Rev.
Proc. 2011–14, 2011–4 I.R.B. 330, or its
successor, to make the change. See section
8 of this revenue procedure. If a taxpayer
changes to the proportional method, the
unaccrued OID for the pool as of the beginning of the first period in the year of
change is equal to the unaccrued OID for
the receivables in the pool as of the end
of the preceding year under the taxpayer’s
previous method of accounting for the
receivables. See section 5.02(2) of this
revenue procedure. If a taxpayer does not
already have a method of accounting for
OID on any pool of credit card receivables,
the taxpayer may adopt the proportional
method by using it on a timely-filed federal income tax return for the first taxable
year the taxpayer must account for OID on
a pool of credit card receivables. A taxpayer may use the proportional method for
the taxpayer’s first taxable year that begins
on or after the effective date described in
section 7 of this revenue procedure.
SECTION 5. PROPORTIONAL
METHOD OF ACCOUNTING
This section 5 describes the proportional method of accounting for OID on a
pool of credit card receivables. Under the
method—
.01 The required computations must be
made monthly. Thus, the computation pe-

848

riod referred to below is a calendar month
(or that portion of a month that falls within
a short taxable year). A taxpayer that
changes its method of accounting to the
proportional method must make the required computations for each month in the
year of change by the due date for the taxpayer’s timely filed (including any extension) original federal income tax return implementing the change in method of accounting for the year of change.
.02 At the beginning of each computation period, the taxpayer must determine
the following information for each pool of
credit card receivables:
(1) The stated redemption price at maturity as of the beginning of the period (“Beginning SRPM”), which is equal to the aggregate balance owed on all credit card receivables included in the pool at the beginning of such period, other than amounts
representing charges or fees that are not
properly treated as OID (such as finance
charges that are qualified stated interest).
(2) The unaccrued OID as of the beginning of the period (“Beginning OID”),
which is equal to the OID with respect to
the credit card receivables included in the
pool at the beginning of such period that
has not previously been taken into income.
.03 During each computation period,
the taxpayer must determine for each pool
of credit card receivables the sum of the
payments during the period of amounts
that reduce the Beginning SRPM for the
period (“SRPM Payments”) (equivalently,
total payments less amounts that are not included in SRPM, such as charges or fees
that are not properly treated as OID).
.04 For each computation period, the
taxpayer must compute the OID allocated
to the period (“Monthly OID”) and include this amount in income for the period.
Monthly OID is the product of (1) the Beginning OID multiplied by (2) the quotient
of the SRPM Payments divided by the Beginning SRPM.
.05 The formula in section 5.04 of this
revenue procedure can be restated as follows:

December 12, 2011

M_OID = BEG_OID * (SRPM_P / BEG_SRPM),
where
M_OID
= Monthly OID;
BEG_OID
= Beginning OID;
SRPM_P
= SRPM Payments;
BEG_SRPM = Beginning SRPM.
.06 For purposes of determining the Beginning SRPM and Beginning OID for a
period, the taxpayer should take into account the following items:
(1) The charges and fees relating to the
pool for the preceding period that are properly treated as OID;
(2) Credit card accounts transferred into
the pool from another one of the taxpayer’s
pools during the preceding period, including any unaccrued OID attributable to the
accounts;
(3) Credit card accounts transferred out
of the pool into another one of the taxpayer’s pools during the preceding period,
including any unaccrued OID attributable
to the accounts; and
(4) Credit card accounts written off during the preceding period, including any unaccrued OID attributable to the accounts.
.07 Section 1.6001–1(a) of the Procedure and Administration Regulations provides that any person subject to tax under
subtitle A of the Internal Revenue Code
shall keep such permanent books of account or records to establish the amount
of gross income, deductions, credits, or
other matters required to be shown by such
person in any return of such tax. In order to satisfy the recordkeeping requirements of § 6001 and the regulations thereunder, a taxpayer that uses the proportional method of accounting should maintain records supporting all aspects of its
method, including, but not limited to, the
computations described in section 5 of this
revenue procedure.
SECTION 6. EXAMPLES
.01 Example 1. (1) On December 1, for the taxpayer’s single pool of credit card receivables, the Beginning SRPM is $100,000,000, and the Beginning
OID is $1,000,000. During December, the taxpayer
receives SRPM payments of $11,000,000 with respect to the pool.
(2) For December, the taxpayer computes
Monthly OID for the pool in the amount of $110,000
($1,000,000 * ($11,000,000 / $100,000,000)).
.02 Example 2. (1) The facts are the same as in
Example 1 except that, during November, additional
transactions occur that affect the Beginning SRPM
and Beginning OID for December. During Novem-

December 12, 2011

ber, cardholders incur additional fees of $100,000 that
are properly treated as OID, and the taxpayer writes
off additional credit card accounts whose aggregate
balance at the time of the write-offs is $50,000. The
taxpayer determines that the unaccrued OID attributable to the additional written-off accounts is $1,000.
As a result, on December 1, the Beginning SRPM is
$100,050,000 ($100,000,000 + $100,000 - $50,000),
and the Beginning OID is $1,099,000 ($1,000,000 +
$100,000 - $1,000).
(2) For December, the taxpayer computes
Monthly OID for the pool in the amount of $120,830
($1,099,000 * ($11,000,000 / $100,050,000)).

SECTION 7. EFFECTIVE DATE
[RESERVED]
SECTION 8. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2011–14 is modified to add
new section 31.02 to the APPENDIX, to
read as follows:
SECTION 31.02. Proportional method
of accounting for OID on a pool of credit
card receivables
(1) Description of change. This change
applies to a taxpayer that wants to change
to the proportional method of accounting
for OID on a pool of credit card receivables
as described in Rev. Proc. xxxx–xx. Under Rev. Proc. xxxx–xx, a taxpayer may
use the proportional method of accounting
for the taxpayer’s first taxable year that begins on or after the effective date described
in section 7 of Rev. Proc. xxxx–xx.
(2) Manner of making change. This
change is made on a cut-off basis. Accordingly, a § 481(a) adjustment is neither required nor permitted. The unaccrued OID
for the pool as of the beginning of the first
period in the year of change is equal to the
unaccrued OID for the receivables in the
pool as of the end of the preceding year under the taxpayer’s previous method of accounting for the receivables. See section
2.06 of this revenue procedure for more information regarding a cut-off basis.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under section 31.02

849

of this APPENDIX is “XXX.” See section
6.02(4) of this revenue procedure.
For fur(4) Contact information.
ther information regarding this section,
please contact Charles W. Culmer at (202)
622–3950 (not a toll-free call).
SECTION 9. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Charles W. Culmer of the
Office of Associate Chief Counsel (Financial Institutions & Products). For further
information regarding this revenue procedure, contact Charles W. Culmer at (202)
622–3950 (not a toll-free call).

26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also Part 1, §§ 165, 1.165–8(c).)

Rev. Proc. 2011–58
SECTION 1. PURPOSE
This revenue procedure modifies the
definition of a qualified loss in section
4.02 of Rev. Proc. 2009–20, 2009–1 C.B.
749, to address certain situations in which
the death of a lead figure (as described
in section 4.01 of Rev. Proc. 2009–20)
has foreclosed the possibility of criminal charges. This revenue procedure also
makes a conforming modification to the
definition of discovery year in section 4.04
of Rev. Proc. 2009–20.
SECTION 2. BACKGROUND
.01 Rev. Rul. 2009–9, 2009–1 C.B.
735, describes the proper income tax treatment for losses resulting from certain
fraudulent investment arrangements, including so-called Ponzi schemes.
.02 Rev. Proc. 2009–20 provides an
optional safe harbor allowing certain investors to claim a theft loss deduction under § 165 of the Internal Revenue Code for

2011–50 I.R.B.

qualified losses from certain fraudulent investment schemes. Under section 4.02 of
Rev. Proc. 2009–20, a qualified loss is a
loss from a specified fraudulent arrangement (defined in section 4.01) for which
authorities have charged the lead figure by
indictment, information, or criminal complaint with a crime that meets the definition of theft for purposes of § 165.
.03 Since publication of Rev. Proc.
2009–20, the deaths of some lead figures
in Ponzi schemes have foreclosed authorities’ ability to charge them with criminal
theft. Qualified investors in these cases are
unable to meet the definition of a qualified
loss in section 4.02 of Rev. Proc. 2009–20
and therefore are precluded from using the
optional safe harbor, solely because of the
death of a lead figure. This revenue procedure expands the definition of qualified
loss in Rev. Proc. 2009–20 to address
these cases.
.04 This revenue procedure also clarifies that the terms “indictment,” “information,” and “criminal complaint” in section
4.02 of Rev. Proc. 2009–20 have meanings similar to the use of those terms in the
Federal Rules of Criminal Procedure.
SECTION 3. SCOPE
This revenue procedure applies to qualified investors within the meaning of section 4.03 of Rev. Proc. 2009–20.
SECTION 4. APPLICATION
.01 Section 4.02 of Rev. Proc. 2009–20
is modified to read as follows:
.02 Qualified loss. A qualified loss is a
loss resulting from a specified fraudulent
arrangement in which, as a result of the
conduct that caused the loss—

2011–50 I.R.B.

(1) A lead figure was charged by indictment or information (see, for example,
Fed. R. Crim. P. 7) under state or federal
law with the commission of fraud, embezzlement, or a similar crime that, if proven,
would meet the definition of theft for purposes of § 165 of the Internal Revenue
Code and § 1.165–8(d) of the Income Tax
Regulations under the law of the jurisdiction in which the theft occurred, and the indictment or information has not been withdrawn or dismissed (other than because of
the death of the lead figure);
(2) A lead figure was the subject of a
state or federal criminal complaint (see, for
example, Fed. R. Crim. P. 3) alleging
the commission of a crime described in
section 4.02(1) of this revenue procedure,
the complaint has not been withdrawn or
dismissed (other than because of the death
of the lead figure), and either—
(a) The complaint alleged an admission
by the lead figure, or the execution of an affidavit by that person admitting the crime;
or
(b) A receiver or trustee was appointed
with respect to the arrangement or assets
of the arrangement were frozen; or
(3) A lead figure, or an associated entity involved in the specified fraudulent arrangement, was the subject of one or more
civil complaints (see, for example, Fed. R.
Civ. P. 3, 7) or similar documents (such
as a notice or order instituting administrative proceedings or other document the Internal Revenue Service designates) that a
state or federal governmental entity filed
with a court or in an administrative agency
enforcement proceeding, and—
(a) The civil complaint or similar documents together allege facts that comprise
substantially all of the elements of a specified fraudulent arrangement, as described

850

in section 4.01 of this revenue procedure,
conducted by the lead figure;
(b) The death of the lead figure precludes a charge by indictment, information, or criminal complaint against that
lead figure as described in section 4.02(1)
or (2) of this revenue procedure; and
(c) A receiver or trustee was appointed
with respect to the arrangement or assets
of the arrangement were frozen.
.02 Section 4.04 of Rev. Proc. 2009–20
is modified to read as follows:
.04 Discovery year. A qualified investor’s discovery year is the investor’s
taxable year in which—
(1) The indictment, information, or
complaint described in section 4.02(1) or
(2) of this revenue procedure is filed; or
(2) The complaint or similar document
described in section 4.02(3) of this revenue
procedure is filed, or the death of the lead
figure occurs, whichever is later.
SECTION 4. EFFECTIVE DATE
This revenue procedure applies to
losses for which the discovery year is a
taxable year beginning after December 31,
2007.
SECTION 5. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2009–20 is modified.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Justin G. Meeks of the Office
of Associate Chief Counsel (Income Tax
& Accounting). For further information
regarding this revenue procedure, contact Mr. Meeks at (202) 622–5020 (not a
toll-free call).

December 12, 2011

Part IV. Items of General Interest
Notice of Proposed
Rulemaking by
Cross-Reference to
Temporary Regulations
Extending Religious and
Family Member FICA and
FUTA Exceptions to Disregard
Entities
REG–136565–09
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
by cross-reference to temporary regulations.
SUMMARY: In this issue of the Bulletin,
the IRS is issuing temporary regulations
(T.D. 9554) to extend the exceptions from
taxes under the Federal Insurance Contributions Act (“FICA”) and the Federal
Unemployment Tax Act (“FUTA”) under
sections 3121(b)(3), 3127, and 3306(c)(5)
to entities that are disregarded as separate
from their owners for federal tax purposes.
The temporary regulations also clarify the
existing rule that the owners of disregarded
entities, except for qualified subchapter S
subsidiaries, are responsible for backup
withholding and related information reporting requirements under section 3406.
The text of those regulations also serves
as the text of these proposed regulations.
DATES: Written or electronic comments
and requests for a public hearing must be
received by January 30, 2012.
ADDRESSES: Send submissions to
CC:PA:LPD:PR (REG–136565–09), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washington, DC 20044. Submissions may be
hand delivered Monday through Friday
between the hours of 8 a.m. to 4 p.m.
to CC:PA:LPD:PR (REG–136565–09),
Courier’s Desk, Internal Revenue SerN.W.,
vice, 1111 Constitution Ave.
Washington, DC. Alternatively, taxpayers may submit electronic comments
via the Federal eRulemaking Portal at

December 12, 2011

www.regulations.gov (indicate IRS and
REG–136565–09).
FOR
FURTHER
INFORMATION
CONTACT: Concerning the proposed
regulations, Joseph Perera, at (202)
622–6040; concerning submissions of
comments or requests for a hearing,
Oluwafunmilayo (Funmi) Taylor at (202)
622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
Temporary regulations in this issue of the Bulletin contain amendments to Employment Tax Regulations (26 CFR Part 31) and the
Procedure and Administration Regulations
(26 CFR Part 301). The text of those
regulations also serves as the text of
these proposed regulations. The preamble
to the temporary regulations explains
the temporary regulations and these
Generally, the
proposed regulations.
regulations allow certain disregarded
entities under §301.7701–2 that are treated
as corporations for employment tax
purposes, to qualify for the FICA and
FUTA exceptions of sections 3121(b)(3),
3127, and 3306(c)(5) by treating the owner
of the disregarded entity as the employer
for purposes of applying those sections.
Additionally, the regulations clarify the
existing rule that the owners of disregarded
entities, other than qualified subchapter
S subsidiaries are responsible for backup
withholding and related information
reporting requirements on reportable
payments.
Proposed Effective/ Applicability Date:
The regulations, as proposed, apply to
wages paid on or after November 1, 2011.
However, the rules in these proposed
regulations may be relied on by taxpayers
for wages paid after December 31, 2008.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive

851

Order 12866. Therefore, a regulatory
assessment is not required. It has also
been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regulations, and because the regulations do
not impose a collection of information
on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the
Code, this notice of proposed rulemaking
will be submitted to the Chief Counsel
for Advocacy of the Small Business
Administration for comment on its impact
on small business.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS.
The IRS and Treasury Department request
comments on the clarity of the proposed
rules and how they can be made easier to
understand. All comments will be made
available for public inspection and copying.
Drafting Information
The principal author of these regulations is Joseph Perera, Office of Associate
Chief Counsel (Tax Exempt & Government Entities).
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR parts 31 and 301
are amended as follows:
PART 31—EMPLOYMENT TAXES
AND COLLECTION OF INCOME TAX
AT SOURCE.
Paragraph 1. The authority citation for
part 31 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 31.3121(b)(3)–1 is
amended by:
1. Revising paragraph (c).
2. Adding paragraphs (d) and (e).

2011–50 I.R.B.

The revision and addition read as follows:
§31.3121(b)(3)–1 Family Employment
*****
(c) [The text of the proposed amendment to §31.3121(b)(3)–1(c) is the same
as the text of §31.3121(b)(3)–1T(c) published elsewhere in this issue of the Bulletin].
(d) [The text of the proposed amendment to §31.3121(b)(3)–1(d) is the same
as the text of §31.3121(b)(3)–1T(d) published elsewhere in this issue of the Bulletin].
(e) [The text of the proposed amendment to §31.3121(b)(3)–1(e) is the same
as the text of §31.3121(b)(3)–1T(e) published elsewhere in this issue of the Bulletin].
Par. 3. Section 31.3127–1 is added to
read as follows:
§31.3127–1 Exceptions for employers and
their employees where both are members
of religious faiths opposed to participation
in Social Security Act programs.
[The text of the proposed §31.3127–1
is the same as the text of §31.3127–1T
published elsewhere in this issue of the
Bulletin].
Par. 4. Section 31.3306(c)(5)–1 is
amended by:
1. Revising paragraph (c).
2. Adding paragraphs (d) and (e).
The revision and addition read as follows:
§31.3306(c)(5)–1 Family Employment
*****
(c) [The text of the proposed amendment to §31.3306(c)(5)–1(c) is the same as
the text of §31.3306(c)(5)–1T(c) published
elsewhere in this issue of the Bulletin].
(d) [The text of the proposed amendment to §31.3306(c)(5)–1(d) is the same
as the text of §31.3306(c)(5)–1T(d) published elsewhere in this issue of the Bulletin].
(e) [The text of the proposed amendment to §31.3306(c)(5)–1(e) is the same as
the text of §31.3306(c)(5)–1T(e) published
elsewhere in this issue of the Bulletin].
PART 301—PROCEDURE AND
ADMINISTRATION

2011–50 I.R.B.

Par. 5. The authority citation for part
301 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 6. Section 301.7701–2 is amended
by:
1. Revising paragraph (c)(2)(iv)(A).
2.
Redesignating paragraph
(c)(2)(iv)(C) as paragraph (c)(2)(iv)(D)
and adding new paragraph (c)(2)(iv)(C).
3. Adding a sentence at the end of paragraph (e)(5).
The additions and revisions read as follows:

ACTION: Notice of proposed rulemaking.

§301.7701–2 Business entities; definitions

ADDRESSES: Send submissions to:
CC:PA:LPD:PR
(REG–109564–10),
Room 5203, Internal Revenue Service, PO
Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–109564–10),
Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW,
Washington, DC; or sent electronically, via the Federal eRulemaking Portal at http://www.regulations.gov (IRS
REG–109564–10).

*****
(c) * * *
(2) * * *
(iv) * * *
(A) [The text of the proposed amendment
to
§301.7701–2(c)(2)(iv)(A)
is the same as the text of
§301.7701–2T(c)(2)(iv)(A)
published
elsewhere in this issue of the Bulletin].
(B) * * *
(C) [The text of the proposed amendment
to
§301.7701–2(c)(2)(iv)(C)
is the same as the text of
§301.7701–2T(c)(2)(iv)(C)
published
elsewhere in this issue of the Bulletin].

SUMMARY: This document contains proposed regulations removing
§1.704–1(b)(2)(iii)(e) (the de minimis
partner rule) because the rule may have
resulted in unintended tax consequences.
The proposed regulations affect partnerships and their partners.
DATES: Written or electronic comments
and requests for a public hearing must be
received by January 23, 2012.

*****
(e) * * *
(5) * * * [The text of the proposed
amendment to §301.7701–2(e)(5) is the
same as the text of §301.7701–2T(e)(5)
published elsewhere in this issue of the
Bulletin].

FOR
FURTHER
INFORMATION
CONTACT: Concerning the proposed
regulations, Michala Irons, at (202)
622–3050; concerning submission of
comments, or requests for a public hearing, Richard Hurst, at (202)
622–2949 (TDD Telephone) (not toll-free
numbers) and his e-mail address is
Richard.A.Hurst@irscounsel.treas.gov.

*****

SUPPLEMENTARY INFORMATION:
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.

(Filed by the Office of the Federal Register on October 31,
2011, 8:45 a.m., and published in the issue of the Federal
Register for November 1, 2011, 76 F.R. 67384)

Notice of Proposed
Rulemaking
Partner’s Distributive Share
REG–109564–10
AGENCY: Internal Revenue Service
(IRS), Treasury.

852

Background
Subchapter K is intended to permit taxpayers to conduct joint business activities
through a flexible economic arrangement
without incurring an entity-level tax. To
achieve this goal of a flexible economic
arrangement, partners are generally permitted to decide among themselves how a
partnership’s items will be allocated. Section 704(a) of the Internal Revenue Code
provides that a partner’s distributive share
of income, gain, loss, deduction, or credit
shall, except as otherwise provided, be determined by the partnership agreement.
Section 704(b) places a significant limitation on the general flexibility of section

December 12, 2011

704(a). Specifically, section 704(b) provides that a partner’s distributive share of
income, gain, loss, deduction, or credit (or
item thereof) shall be determined in accordance with the partner’s interest in the
partnership (determined by taking into account all facts and circumstances) if the allocation to a partner under the partnership
agreement of income, gain, loss, deduction, or credit (or item thereof) does not
have substantial economic effect. Thus,
the statute provides that partnership allocations either must have substantial economic effect or must be in accordance with
the partners’ interests in the partnership.
Section 1.704–1(b)(2)(i) provides that
the determination of whether an allocation
of income, gain, loss, or deduction to a
partner has substantial economic effect involves a two-part analysis that is made as
of the end of the partnership taxable year to
which the allocation relates. First, the allocation must have economic effect within
the meaning of §1.704–1(b)(2)(ii). Second, the economic effect of the allocation
must be substantial within the meaning of
§1.704–1(b)(2)(iii).
For an allocation to have economic
effect, it must be consistent with the underlying economic arrangement of the
partners. This means that, in the event
that there is an economic benefit or burden that corresponds to the allocation,
the partner to whom the allocation is
made must receive such economic benefit or bear such economic burden. See
§1.704–1(b)(2)(ii). Generally, an allocation of income, gain, loss, or deduction
(or item thereof) to a partner will have
economic effect if, and only if, throughout the full term of the partnership, the
partnership agreement provides: (1) for
the determination and maintenance of the
partners’ capital accounts in accordance
with §1.704–1(b)(2)(iv); (2) for liquidating distributions to the partners to be made
in accordance with the positive capital
account balances of the partners; and (3)
for each partner to be unconditionally
obligated to restore the deficit balance in
the partner’s capital account following
the liquidation of the partner’s partnership
interest. In lieu of satisfying the third
criterion, the partnership may satisfy the
qualified income offset rules set forth in
§1.704–1(b)(2)(ii)(d).
Section 1.704–1(b)(2)(iii)(a) provides
as a general rule that the economic effect

December 12, 2011

of an allocation (or allocations) is substantial if there is a reasonable possibility
that the allocation (or allocations) will
affect substantially the dollar amounts
to be received by the partners from the
partnership, independent of tax consequences. This section further provides
that, even if the allocation affects substantially the dollar amounts, the economic
effect of the allocation (or allocations) is
not substantial if, at the time the allocation (or allocations) becomes part of the
partnership agreement: (1) the after-tax
economic consequences of at least one
partner may, in present value terms, be
enhanced compared to such consequences
if the allocation (or allocations) were not
contained in the partnership agreement,
and (2) there is a strong likelihood that
the after-tax economic consequences of
no partner will, in present value terms,
be substantially diminished compared to
such consequences if the allocation (or
allocations) were not contained in the partnership agreement.
Explanation of Provisions
Removal of De Minimis Partner Rule in
§1.704–1(b)(2)(iii)(e)
The de minimis partner rule in
§1.704–1(b)(2)(iii)(e) (TD 9398, 2008–1
C.B. 1143 [73 FR 28699–01]) was promulgated on May 19, 2008, as part of final
regulations with respect to partners that
are look-through entities. The de minimis
partner rule provides that for purposes of
applying the substantiality rules, the tax
attributes of de minimis partners need not
be taken into account and defines a de
minimis partner as any partner, including
a look-through entity that owns, directly
or indirectly, less than 10 percent of the
capital and profits of a partnership, and
who is allocated less than 10 percent of
each partnership item of income, gain,
loss, deduction, and credit. The intent of
the de minimis partner rule was to allow
partnerships to avoid the complexity of
testing the substantiality of insignificant
allocations to partners owning very small
interests in the partnership. It was not
intended to allow partnerships to entirely
avoid the application of the substantiality
regulations if the partnership is owned by
partners each of whom owns less than 10
percent of the capital or profits, and who

853

are allocated less than 10 percent of each
partnership item of income, gain, loss,
deduction, and credit. The IRS and the
Treasury Department have determined that
the de minimis partner rule should be removed in order to prevent unintended tax
consequences. The IRS and the Treasury
Department request comments on how to
reduce the burden of complying with the
substantial economic effect rules, with
respect to look-through partners, without
diminishing the safeguards the rules provide.
Proposed Effective Date
These regulations are proposed to be effective the date final regulations are published in the Federal Register.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant regulatory action as defined in
Executive Order 12866. Therefore, a regulatory assessment is not required. It has
also been determined that §553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regulations, and because the regulation does
not impose a collection of information
on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to §7805(f) of the Internal
Revenue Code, this notice of proposed
rulemaking has been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Comments and Requests for a Public
Hearing
Before the proposed regulations are
adopted as final regulations, consideration will be given to any written (a signed
original and eight (8) copies) or electronic
comments that are submitted timely to the
IRS. The IRS and the Treasury Department request comments on the clarity of
the proposed rules and how they can be
made easier to understand. All comments
will be available for public inspection and
copying. A public hearing may be scheduled if requested in writing by any person
that timely submits written or electronic
comments. If a public hearing is scheduled, notice of the date, time, and place for

2011–50 I.R.B.

the public hearing will be published in the
Federal Register.
Drafting Information
The principal author of these regulations is Michala Irons, Office of the Associate Chief Counsel (Passthroughs and
Special Industries). However, other personnel from the IRS and the Treasury Department participated in its development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR Part 1 is proposed
to be 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 * * *
Par.
2.
In §1.704–1 paragraph
(b)(2)(iii)(e) is removed.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on October 24,
2011, 8:45 a.m., and published in the issue of the Federal
Register for October 25, 2011, 76 F.R. 66012)

2011–50 I.R.B.

Deletions From Cumulative
List of Organizations
Contributions to Which
are Deductible Under Section
170 of the Code
Announcement 2011–76
The Internal Revenue Service has revoked its determination that the organizations listed below qualify as organizations described in sections 501(c)(3) and
170(c)(2) of the Internal Revenue Code of
1986.
Generally, the Service will not disallow
deductions for contributions made to a
listed organization on or before the date
of announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the Service is not
precluded from disallowing a deduction
for any contributions made after an organization ceases to qualify under section
170(c)(2) if the organization has not timely
filed a suit for declaratory judgment under
section 7428 and if the contributor (1) had
knowledge of the revocation of the ruling
or determination letter, (2) was aware that
such revocation was imminent, or (3) was
in part responsible for or was aware of the
activities or omissions of the organization
that brought about this revocation.
If on the other hand a suit for declaratory judgment has been timely filed, con-

854

tributions from individuals and organizations described in section 170(c)(2) that
are otherwise allowable will continue to
be deductible. Protection under section
7428(c) would begin December 12, 2011,
and would end on the date the court first
determines that the organization is not described in section 170(c)(2) as more particularly set forth in section 7428(c)(1). For
individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor.
This benefit is not extended to any individual, in whole or in part, for the acts or
omissions of the organization that were the
basis for revocation.
The Big Charity Sale, Inc.
Houston, TX
Echelon Community Services, Inc.
Washington, DC
The GT Foundation
Irvine, CA
Mandala Transformation Foundation
Rafael, CA
San Francisco Medical Research
Foundation
Mill Valley, CA
Southern Utah Foundation
Cedar City, UT
Sunset Non-Profit Housing Association
Murrieta, CA

December 12, 2011

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the effect:
Amplified describes a situation where
no change is being made in a prior published 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 confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguished describes a situation
where a ruling mentions a previously published ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A

and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions. This term is most commonly used in
a ruling that lists previously published rulings 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.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same position published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single ruling a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new ruling does more than restate the substance

of a prior ruling, a combination of terms
is used. For example, modified and superseded describes a situation where the
substance of a previously 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 published ruling is first modified and then, as
modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original ruling has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the additions, and supersedes all prior 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.

ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.

PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D. —Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z —Corporation.

Abbreviations
The following abbreviations in current use
and formerly used will appear in material
published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
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.

December 12, 2011

i

2011–50 I.R.B.

Numerical Finding List1

Notices— Continued:

Proposed Regulations— Continued:

Bulletins 2011–27 through 2011–50

2011-59, 2011-31 I.R.B. 86

REG-111283-11, 2011-42 I.R.B. 573

2011-60, 2011-31 I.R.B. 90

REG-116284-11, 2011-43 I.R.B. 598

2011-61, 2011-31 I.R.B. 91

REG-118809-11, 2011-33 I.R.B. 162

2011-62, 2011-32 I.R.B. 126

REG-122813-11, 2011-35 I.R.B. 197

2011-63, 2011-34 I.R.B. 172

REG-126519-11, 2011-39 I.R.B. 452

Announcements:
2011-37, 2011-27 I.R.B. 37
2011-38, 2011-28 I.R.B. 45
2011-39, 2011-28 I.R.B. 46
2011-40, 2011-29 I.R.B. 56
2011-41, 2011-28 I.R.B. 47
2011-42, 2011-32 I.R.B. 138
2011-43, 2011-35 I.R.B. 198
2011-44, 2011-33 I.R.B. 164
2011-45, 2011-34 I.R.B. 178
2011-46, 2011-34 I.R.B. 178
2011-47, 2011-34 I.R.B. 178
2011-48, 2011-36 I.R.B. 227
2011-49, 2011-36 I.R.B. 228
2011-50, 2011-38 I.R.B. 409
2011-51, 2011-38 I.R.B. 409
2011-52, 2011-38 I.R.B. 409
2011-53, 2011-38 I.R.B. 409
2011-54, 2011-38 I.R.B. 409
2011-55, 2011-38 I.R.B. 409
2011-56, 2011-38 I.R.B. 409
2011-57, 2011-38 I.R.B. 409
2011-58, 2011-38 I.R.B. 410
2011-59, 2011-37 I.R.B. 335
2011-61, 2011-39 I.R.B. 453
2011-62, 2011-40 I.R.B. 483
2011-63, 2011-41 I.R.B. 503
2011-64, 2011-41 I.R.B. 503
2011-65, 2011-44 I.R.B. 691
2011-66, 2011-44 I.R.B. 691
2011-67, 2011-44 I.R.B. 691
2011-68, 2011-44 I.R.B. 691
2011-69, 2011-44 I.R.B. 691
2011-70, 2011-45 I.R.B. 715
2011-71, 2011-46 I.R.B. 770

2011-64, 2011-37 I.R.B. 231
2011-65, 2011-34 I.R.B. 173

Revenue Procedures:

2011-66, 2011-35 I.R.B. 184

2011-38, 2011-30 I.R.B. 66

2011-67, 2011-34 I.R.B. 174

2011-39, 2011-30 I.R.B. 68

2011-68, 2011-36 I.R.B. 205

2011-40, 2011-37 I.R.B. 235

2011-69, 2011-39 I.R.B. 445

2011-41, 2011-35 I.R.B. 188

2011-70, 2011-32 I.R.B. 135

2011-42, 2011-37 I.R.B. 318

2011-71, 2011-37 I.R.B. 233

2011-43, 2011-37 I.R.B. 326

2011-72, 2011-38 I.R.B. 407

2011-44, 2011-39 I.R.B. 446

2011-73, 2011-40 I.R.B. 474

2011-45, 2011-39 I.R.B. 449

2011-74, 2011-41 I.R.B. 496

2011-46, 2011-42 I.R.B. 518

2011-75, 2011-40 I.R.B. 475

2011-47, 2011-42 I.R.B. 520

2011-76, 2011-40 I.R.B. 479

2011-48, 2011-42 I.R.B. 527

2011-78, 2011-41 I.R.B. 497

2011-49, 2011-44 I.R.B. 608

2011-79, 2011-41 I.R.B. 498

2011-50, 2011-44 I.R.B. 628

2011-80, 2011-43 I.R.B. 591

2011-51, 2011-44 I.R.B. 669

2011-81, 2011-42 I.R.B. 513

2011-52, 2011-45 I.R.B. 701

2011-82, 2011-42 I.R.B. 516

2011-53, 2011-46 I.R.B. 749

2011-83, 2011-43 I.R.B. 593

2011-54, 2011-46 I.R.B. 759

2011-84, 2011-43 I.R.B. 595

2011-55, 2011-47 I.R.B. 793

2011-85, 2011-44 I.R.B. 605

2011-56, 2011-49 I.R.B. 834

2011-86, 2011-45 I.R.B. 698

2011-57, 2011-49 I.R.B. 836

2011-87, 2011-45 I.R.B. 699

2011-58, 2011-50 I.R.B. 849

2011-88, 2011-46 I.R.B. 748
2011-89, 2011-46 I.R.B. 748

Revenue Rulings:

2011-90, 2011-47 I.R.B. 791

2011-14, 2011-27 I.R.B. 31

2011-91, 2011-47 I.R.B. 792

2011-15, 2011-30 I.R.B. 57

2011-92, 2011-48 I.R.B. 809

2011-16, 2011-32 I.R.B. 93

2011-93, 2011-48 I.R.B. 810

2011-17, 2011-33 I.R.B. 160

2011-94, 2011-49 I.R.B. 834

2011-18, 2011-39 I.R.B. 428

2011-99, 2011-50 I.R.B. 847

2011-19, 2011-36 I.R.B. 199

Proposed Regulations:

2011-20, 2011-36 I.R.B. 202
2011-21, 2011-40 I.R.B. 458

2011-72, 2011-47 I.R.B. 796
2011-73, 2011-48 I.R.B. 822

REG-128224-06, 2011-42 I.R.B. 533

2011-22, 2011-41 I.R.B. 489

2011-74, 2011-47 I.R.B. 796

REG-146537-06, 2011-48 I.R.B. 813

2011-23, 2011-43 I.R.B. 585

2011-75, 2011-48 I.R.B. 823

REG-137128-08, 2011-28 I.R.B. 43

2011-24, 2011-41 I.R.B. 485

2011-76, 2011-50 I.R.B. 854

REG-136565-09, 2011-50 I.R.B. 851

2011-25, 2011-45 I.R.B. 695

REG-140280-09, 2011-45 I.R.B. 709

2011-26, 2011-48 I.R.B. 803

REG-114749-09, 2011-48 I.R.B. 819

2011-27, 2011-48 I.R.B. 805

REG-146297-09, 2011-47 I.R.B. 795

2011-28, 2011-49 I.R.B. 830

REG-109564-10, 2011-50 I.R.B. 852

2011-29, 2011-49 I.R.B. 824

REG-112805-10, 2011-40 I.R.B. 482

2011-30, 2011-49 I.R.B. 826

REG-120391-10, 2011-39 I.R.B. 451

2011-31, 2011-49 I.R.B. 829

Notices:
2011-47, 2011-27 I.R.B. 34
2011-50, 2011-27 I.R.B. 35
2011-51, 2011-27 I.R.B. 36
2011-52, 2011-30 I.R.B. 60
2011-53, 2011-32 I.R.B. 124
2011-54, 2011-29 I.R.B. 53
2011-55, 2011-29 I.R.B. 53
2011-56, 2011-29 I.R.B. 54
2011-57, 2011-31 I.R.B. 84
2011-58, 2011-31 I.R.B. 85

REG-125592-10, 2011-32 I.R.B. 137
REG-125949-10, 2011-45 I.R.B. 712

Treasury Decisions:

REG-131491-10, 2011-36 I.R.B. 208

9527, 2011-27 I.R.B. 1

REG-133002-10, 2011-46 I.R.B. 766

9528, 2011-28 I.R.B. 38

REG-140038-10, 2011-42 I.R.B. 537

9529, 2011-30 I.R.B. 57

REG-109006-11, 2011-37 I.R.B. 334

9530, 2011-31 I.R.B. 77

REG-101352-11, 2011-30 I.R.B. 75

9531, 2011-31 I.R.B. 79

1

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2011–1 through 2011–26 is in Internal Revenue Bulletin
2011–26, dated June 27, 2011.

2011–50 I.R.B.

ii

December 12, 2011

Treasury Decisions— Continued:
9532, 2011-32 I.R.B. 95
9533, 2011-33 I.R.B. 139
9534, 2011-33 I.R.B. 144
9535, 2011-39 I.R.B. 415
9536, 2011-39 I.R.B. 426
9537, 2011-35 I.R.B. 181
9538, 2011-37 I.R.B. 229
9539, 2011-35 I.R.B. 179
9540, 2011-38 I.R.B. 341
9541, 2011-39 I.R.B. 438
9542, 2011-39 I.R.B. 411
9543, 2011-40 I.R.B. 470
9544, 2011-40 I.R.B. 458
9545, 2011-41 I.R.B. 490
9546, 2011-42 I.R.B. 505
9547, 2011-43 I.R.B. 580
9548, 2011-46 I.R.B. 716
9549, 2011-46 I.R.B. 718
9550, 2011-47 I.R.B. 785
9551, 2011-47 I.R.B. 774
9552, 2011-47 I.R.B. 783
9553, 2011-48 I.R.B. 806
9554, 2011-50 I.R.B. 843
9555, 2011-50 I.R.B. 838

December 12, 2011

iii

2011–50 I.R.B.

Finding List of Current Actions on
Previously Published Items1
Bulletins 2011–27 through 2011–50
Announcements:

Revenue Procedures— Continued:
2004-29
Amplified and modified by
Rev. Proc. 2011-42, 2011-37 I.R.B. 318
2005-16

2007-47

Modified and superseded by

Updated and superseded by

Rev. Proc. 2011-49, 2011-44 I.R.B. 608

Ann. 2011-59, 2011-37 I.R.B. 335

2006-56

Notices:

Modified and amplified by
Rev. Proc. 2011-46, 2011-42 I.R.B. 518

2002-1
Amplified by
Notice 2011-86, 2011-45 I.R.B. 698
2006-101
Amplified and superseded by
Notice 2011-64, 2011-37 I.R.B. 231
2007-93
Obsoleted by
T.D. 9545, 2011-41 I.R.B. 490
2010-23
Modified and supplemented by
Notice 2011-54, 2011-29 I.R.B. 53
2010-77
Modified by
Notice 2011-85, 2011-44 I.R.B. 605
2010-81
Amended and supplemented by
Notice 2011-63, 2011-34 I.R.B. 172
2010-88
Modified by
Ann. 2011-40, 2011-29 I.R.B. 56
2010-90
Modified by
Notice 2011-85, 2011-44 I.R.B. 605

Proposed Regulations:
REG-158677-05
Withdrawn by
Ann. 2011-75, 2011-48 I.R.B. 823
REG-118761-09
Hearing scheduled by
Ann. 2011-38, 2011-28 I.R.B. 45
REG-151687-10
Hearing scheduled by
Ann. 2011-48, 2011-36 I.R.B. 227

Revenue Procedures:

2007-35
Amplified and modified by
Rev. Proc. 2011-42, 2011-37 I.R.B. 318
2008-24
Modified and superseded by
Rev. Proc. 2011-38, 2011-30 I.R.B. 66

Revenue Rulings:
58-225
Obsoleted by
Rev. Rul. 2011-15, 2011-30 I.R.B. 57
76-345
Revoked by
Rev. Rul. 2011-29, 2011-49 I.R.B. 824
92-19
Supplemented in part by
Rev. Rul. 2011-23, 2011-43 I.R.B. 585
2007-28
Superseded by
Rev. Rul. 2011-26, 2011-48 I.R.B. 803
2010-30
Supplemented and superseded by
Rev. Rul. 2011-27, 2011-48 I.R.B. 805

2008-32
Superseded by

Treasury Decisions:

Rev. Proc. 2011-39, 2011-30 I.R.B. 68

9527

2009-20

Corrected by

Modified by

Ann. 2011-49, 2011-36 I.R.B. 228

Rev. Proc. 2011-58, 2011-50 I.R.B. 849
2010-33
Superseded by
Rev. Proc. 2011-50, 2011-44 I.R.B. 628
2010-37
Superseded by
Rev. Proc. 2011-51, 2011-44 I.R.B. 669
2010-39
Amplified, modified, and superseded by
Rev. Proc. 2011-47, 2011-42 I.R.B. 520
2011-4
Modified by
Rev. Proc. 2011-44, 2011-39 I.R.B. 446
2011-6
Modified by
Rev. Proc. 2011-49, 2011-44 I.R.B. 608
2011-8
Modified by
Rev. Proc. 2011-49, 2011-44 I.R.B. 608
2011-14
Modified by
Rev. Proc. 2011-43, 2011-37 I.R.B. 326
2011-24
Obsoleted by
Notice 2011-92, 2011-48 I.R.B. 809

72-36

2011-35

Amplified and modified by

Amplified and modified by

Rev. Proc. 2011-42, 2011-37 I.R.B. 318

Rev. Proc. 2011-42, 2011-37 I.R.B. 318

2003-14
Clarified, modified, and superseded by
Rev. Proc. 2011-56, 2011-49 I.R.B. 834
1

A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2011–1 through 2011–26 is in Internal Revenue Bulletin 2011–26, dated June 27, 2011.

2011–50 I.R.B.

iv

December 12, 2011

December 12, 2011

2011–50 I.R.B.

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