SECTION 3. AREAS IN WHICH — Internal Revenue Bulletin 1996-1

RULINGS OR DETERMINATION LETTERS WILL NOT BE ISSUED

.01 Specific questions and problems. (1) Section 79.—Group-Term Life Insurance Purchased for Employees.— Whether a group insurance plan for 10 or more employees qualifies as groupterm insurance, if the amount of insurance is not computed under a formula that would meet the requirements of § 1.79–1(c)(2)(ii) of the Income Tax Regulations if the group consisted of fewer than 10 employees.

(2) Section 83.—Property Transferred in Connection with Performance of Services.—Whether a restriction constitutes a substantial risk of forfeiture, if the employee is a controlling shareholder. Also, whether a transfer has occurred, if the amount paid for the property involves a nonrecourse obligation.

(3) Section 105(h).—Amount Paid to Highly Compensated Individuals Under Discriminatory Self-Insured Medical Expense Reimbursement Plan.— Whether, following a determination that a self-insured medical expense reimbursement plan is discriminatory, that plan had previously made reasonable efforts to comply with tax antidiscrimination rules.

( 4 ) S e c t i o n 1 1 7 . — Q u a l i f i e d Scholarships.—Whether an employerrelated scholarship or fellowship grant is excludible from the employee’s gross income, if there is no intermediary private foundation distributing the grants, as there was in Rev. Proc. 76– 47, 1976–2 C.B. 670. (5) Section 119.—Meals or Lodging Furnished for the Convenience of the Employer.—Whether the value of meals or lodging is excludible from gross income by an employee who is a controlling shareholder of the employer.

(6) Sections 121 and 1034.—OneTime Exclusion of Gain from Sale of Principal Residence by Individual Who Has Attained Age 55; Rollover of Gain on Sale of Principal Residence.— Whether property qualifies as the taxpayer’s principal residence.

(7) Section 125.—Cafeteria Plans.— Whether amounts used to provide group-term life insurance under § 79, accident and health benefits under §§ 105 and 106, and dependent care assistance programs under § 129 are includible in the gross income of

participants and considered ‘‘wages’’ for purposes of §§ 3401, 3121, and 3306 when the benefits are offered through a cafeteria plan.

(8) Section 162.—Trade or Business Expenses.—Whether compensation is reasonable in amount.

(9) Section 163.—Interest.—The income tax consequences of transactions involving ‘‘shared appreciation mortgage’’ (SAM) loans in which a taxpayer, borrowing money to purchase real property, pays a fixed rate of interest on the mortgage loan below the prevailing market rate and will also pay the lender a percentage of the appreciation in value of the real property upon termination of the mortgage. This applies to all SAM arrangements where the loan proceeds are used for commercial or business activities, or where used to finance a personal residence, if the facts are not similar to those described in Rev. Rul. 83-51, 1983–1 C.B. 48. (Also §§ 61, 451, 461, 856, 1001, and 7701.) (10) Section 170.—Charitable, Etc., Contributions and Gifts.—Whether a taxpayer who advances funds to a charitable organization and receives therefor a promissory note may deduct as contributions, in one taxable year or in each of several years, amounts forgiven by the taxpayer in each of several years by endorsement on the note.

(11) Section 213.—Medical, Dental, Etc., Expenses.—Whether a capital expenditure for an item that is ordinarily used for personal, living, or family purposes, such as a swimming pool, has as its primary purpose the medical care of the taxpayer or the taxpayer’s spouse or dependent, or is related directly to such medical care.

(12) Section 264(b).—Certain Amounts Paid in Connection with Insurance Contracts.—Whether ‘‘substantially all’’ the premiums of a contract of insurance are paid within a period of 4 years from the date on which the contract is purchased. Also, whether an amount deposited is in payment of a ‘‘substantial number’’ of future premiums on such a contract.

(13) Section 264(c)(1).—Certain Amounts Paid in Connection with Insurance Contracts.—Whether § 264(c)(1) applies.

(14) Section 269.—Acquisitions Made to Evade or Avoid Income Tax.—Whether an acquisition is within the meaning of § 269.

Bulletin, it will rule where the consequences of qualification are not adequately addressed by these authorities. To obtain a ruling on a collateral issue, the taxpayer or the taxpayer’s representative (as the Service deems appropriate) must state to the best of knowledge and belief that the exchange qualifies under § 351, set forth the authorities most closely related to the collateral issue, and explain why the collateral issue is not resolved by these authorities. If the Service issues a ruling on a collateral issue, the ruling will state that no opinion is expressed as to whether the exchange in question qualifies under § 351.

The Service will also continue to rule on issues that arise in connection with an exchange of stock for stock in the formation of a holding company but do not depend upon or affect qualification under § 351.

(23) Section 355.—Distribution of Stock and Securities of a Controlled Corporation.—The determination of whether the corporate business purpose requirement of § 1.355–2(b) is satisfied in the following situations:

(i) If the reduction of non-federal taxes is substantially coextensive with the reduction of federal taxes.

(ii) If a transaction has the potential of avoiding federal taxes but has another corporate business purpose, whether the non-avoidance purpose is the ‘‘substantial’’ motivation for the transaction.

(iii) If the stated purpose of the transaction is to reduce foreign taxes.

(24) Section 368(a)(1)(A).—Definitions Relating to Corporate Reorganizations.—Whether a transaction constitutes a corporate reorganization within the meaning of § 368(a)(1)(A), including a transaction that qualifies under § 368(a)(1)(A) by reason of § 368(a)(2)(D) or § 368(a)(2)(E), and whether the taxpayer is subject to the consequences of qualification under that section (such as nonrecognition and basis consequences) that are adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin.

For purposes of this provision, if a transaction qualifies under both § 368(a)(1)(A) and another corporate restructuring provision and the other provision is not covered by this reve

(19) Section 302.—Distributions in Redemption of Stock.—Whether the acquisition or disposition of stock described in § 302(c)(2)(B) has, or does not have, as one of its principal purposes the avoidance of federal income taxes within the meaning of that section, unless the facts and circumstances are materially identical to those set forth in Rev. Rul. 85–19, 1985–1 C.B. 94, Rev. Rul. 79–67, 1979–1 C.B. 128, Rev. Rul. 77–293, 1977–2 C.B. 91, Rev. Rul. 57–387, 1957–2 C.B. 225, Rev. Rul. 56–584, 1956–2 C.B. 179, or Rev. Rul. 56–556, 1956–2 C.B. 177.

(20) Section 302(b)(4) and (e).— Redemption from Noncorporate Shareholder in Partial Liquidation; Partial Liquidation Defined.—The amount of working capital attributable to a business or portion of a business terminated that may be distributed in partial liquidation.

(21) Section 312.—Effect on Earnings and Profits.—The determination of the amount of earnings and profits of a corporation.

(22) Section 351.—Transfer to Corporation Controlled by Transferor.— Whether § 351 applies to an exchange of stock for stock in the formation of a holding company, and whether the taxpayer is subject to the consequences of qualification under that section (such as nonrecognition and basis consequences) that are adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin.

For purposes of this provision, if such an exchange qualifies under both § 351 and another corporate restructuring provision and the other provision is not covered by this revenue procedure, the Service will treat any request for a qualification ruling under the other provision as a request for a qualification ruling under § 351. A taxpayer or the taxpayer’s representative (as the Service deems appropriate) seeking a qualification ruling for such an exchange under any such other provision must, accordingly, state to the best of knowledge and belief that the exchange does not qualify under § 351.

The Service will not rule on the qualification of an exchange of stock under § 351, even if it is an integral part of a larger transaction that involves other issues upon which the Service will rule and it is impossible to

determine the tax consequences of the larger transaction without making a determination with regard to the exchange of stock. However, in such event, the Service will rule on the tax consequences of the larger transaction, provided the taxpayer or the taxpayer’s representative (as the Service deems appropriate) states to the best of knowledge and belief that the exchange will (or will not) qualify under § 351. If the Service issues a ruling on the larger transaction, the ruling will state that no opinion is expressed as to whether or not the exchange qualifies under § 351.

SUBISSUES: Additionally, the Service will have the discretion to rule on significant subissues that must be resolved to determine whether a transaction that is in this no-rule area qualifies under § 351. However, the Service will only rule on these subissues if in the view of the Service they are significant and not clearly and adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin.

To obtain a ruling on a subissue, the taxpayer must explain the significance of the subissue, set forth the authorities most closely related to the subissue, and explain why the subissue is not resolved by the authorities. The Service will require the taxpayer or the taxpayer’s representative (as the Service deems appropriate) to state to the best of knowledge and belief that the transaction will (or will not) qualify under § 351 if the Service rules as the taxpayer proposes on the subissue.

A taxpayer may seek a presubmission conference to determine whether a ruling on the subissue can be obtained under this section. See section 10.14 of Rev. Proc. 96–1. If the Service issues a ruling on a subissue, the ruling will state that no opinion is expressed as to whether the transaction in question qualifies under § 351.

COLLATERAL ISSUES: Although the Service will not rule on the consequences of qualification of an exchange of stock for stock in the formation of a holding company under § 351 if the consequences are adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue

nue procedure, the Service will treat any request for a qualification ruling under the other provision as a request for a qualification ruling under § 368(a)(1)(A). A taxpayer or the taxpayer’s representative (as the Service deems appropriate) seeking a qualification ruling under any such other provision must, accordingly, state to the best of knowledge and belief that the transaction does not qualify under § 368(a)(1)(A). The Service will continue to rule on transactions that qualify under § 368(a)(1)(G), even if they are also defined in § 368(a)(1)(A).

The Service will not rule on the qualification of a reorganization under § 368(a)(1)(A), even if it is an integral part of a larger transaction that involves other issues upon which the Service will rule and it is impossible to determine the tax consequences of the larger transaction without determining the tax consequences of the reorganization. However, in such event, the Service will rule on the tax consequences of the larger transaction, provided the taxpayer or the taxpayer’s representative (as the Service deems appropriate) states to the best of knowledge and belief that the reorganization will (or will not) qualify under § 368(a)(1)(A). If the Service issues a ruling on the larger transaction, the ruling will state that no opinion is expressed as to whether or not the reorganization qualifies under § 368(a)(1)(A). For example, the Service will not rule on whether a transaction constitutes a corporate reorganization within the meaning of § 368(a)(1)(A), even if the larger transaction also involves the issue of whether a prior distribution of stock in a subsidiary containing assets unwanted by the acquiring corporation qualifies under § 355. See Rev. Rul. 78–251, 1978–1 C.B. 89. However, in such event, if the taxpayer or the taxpayer’s representative (as the Service deems appropriate) states to the best of knowledge and belief that the merger qualifies under § 368(a)(1)(A), the Service will rule as to whether the prior stock distribution qualifies under § 355. Such ruling will state that no opinion is expressed as to whether or not the reorganization qualifies under § 368(a)(1)(A).

SUBISSUES: Additionally, the Service will have the discretion to rule on significant subissues that must be resolved to determine whether the transaction qualifies under § 368(a)(1)(A) (including transactions qualifying by

reason of § 368(a)(2)(D) or § 368(a)(2)(E)). However, the Service will only rule on such subissues if in the view of the Service they are significant and not clearly and adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin. To obtain a ruling on such a subissue, the taxpayer must explain the significance of the subissue, set forth the authorities most closely related to the subissue, and explain why the subissue is not resolved by these authorities. The taxpayer or the taxpayer’s representative (as the Service deems appropriate) will also be required to state to the best of knowledge and belief that the transaction will (or will not) qualify under § 368(a)(1)(A), if the Service rules as the taxpayer proposes on the subissue.

A taxpayer may seek a presubmission conference to determine whether a ruling on the subissue can be obtained under this section. See section 10.14, Rev. Proc. 96–1. If the Service issues a ruling on a subissue, the ruling will state that no opinion is expressed as to whether the transaction in question qualifies under § 368(a)(1)(A).

COLLATERAL ISSUES: Although the Service will not rule on the consequences of qualification as a reorganization under § 368(a)(1)(A) if the consequences are adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin, it will rule where the consequences of qualification are not adequately addressed by these authorities. For example, the Service will issue a § 381(c)(4) ruling in connection with a § 368(a)(1)(A) reorganization. To obtain a ruling on a collateral issue, the taxpayer or the taxpayer’s representative (as the Service deems appropriate) must state to the best of knowledge and belief that the transaction qualifies under § 368(a)(1)(A), set forth the authorities most closely related to the collateral issue, and explain why the collateral issue is not resolved by these authorities. If the Service issues a ruling on a collateral issue, the ruling will state that no opinion is expressed as to whether the transaction in question qualifies under § 368(a)(1)(A).

The Service will also continue to rule on issues that arise in connection with a transaction under § 368(a)(1)(A)

but do not depend upon or affect qualification under § 368(a)(1)(A).

(25) Section 368(a)(1)(B).—Definitions Relating to Corporate Reorganizations.—Whether the acquisition of stock in the formation of a holding company constitutes a corporate reorganization within the meaning of § 368(a)(1)(B), and whether the taxpayer is subject to the consequence of qualification under that section (such as nonrecognition and basis consequences) that are adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin.

For purposes of this provision, if such an acquisition of stock qualifies under both § 368(a)(1)(B) and another corporate restructuring provision, and the other provision is not covered by this revenue procedure, the Service will treat any request for a qualification ruling under the other provision as a request for a qualification ruling under § 368(a)(1)(B). A taxpayer or the taxpayer’s representative (as the Service deems appropriate) seeking a qualification ruling for such an acquisition under any such other provision must, accordingly, state to the best of knowledge and belief that the acquisition does not qualify under § 368(a)(1)(B).

The Service will not rule on the qualification of an acquisition of stock under § 368(a)(1)(B), even if it is an integral part of a larger transaction that involves other issues upon which the Service will rule and it is impossible to determine the tax consequences of the larger transaction without determining the tax consequences of the acquisition. However, in such event, the Service will rule on the tax consequences of the larger transaction, provided the taxpayer or the taxpayer’s representative (as the Service deems appropriate) states to the best of knowledge and belief that the acquisition will (or will not) qualify under § 368(a)(1)(B). If the Service issues a ruling on the larger transaction, the ruling will state that no opinion is expressed as to whether or not the acquisition qualifies under § 368(a)(1)(B).

basis consequences) that are adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin.

For purposes of this provision, if a transaction qualifies under both § 368(a)(1)(F) and another corporate restructuring provision, and the other provision is not covered by this revenue procedure, the Service will treat any request for a qualification ruling under the other provision as a request for a qualification ruling under § 368(a)(1)(F). A taxpayer or the taxpayer’s representative (as the Service deems appropriate) seeking a qualification ruling under any such other provision must, accordingly, state to the best of knowledge and belief that the transaction does not qualify under § 368(a)(1)(F).

The Service will not rule on the qualification of a reorganization under § 368(a)(1)(F), even if it is an integral part of a larger transaction that involves other issues upon which the Service will rule and it is impossible to determine the tax consequences of the larger transaction without determining the tax consequences of the reorganization. However, in such event, the Service will rule on the tax consequences of the larger transaction, provided the taxpayer or the taxpayer’s representative (as the Service deems appropriate) states to the best of knowledge and belief that the reorganization will (or will not) qualify under § 368(a)(1)(F). If the Service issues a ruling on the larger transaction, the ruling will state that no opinion is expressed as to whether or not the reorganization qualifies under § 368(a)(1)(F).

SUBISSUES: Additionally, the Service will have the discretion to rule on significant subissues that must be resolved to determine whether a transaction that is in this no-rule area qualifies under § 368(a)(1)(F). However, the Service will only rule on such subissues if in the view of the Service they are significant and not clearly and adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin. To obtain a ruling on such a subissue, the taxpayer must explain the significance of the subissue, set forth the authorities most closely related to the

Service will only rule on these subissues if in the view of the Service they are significant and not clearly and adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin. To obtain a ruling on a subissue, the taxpayer must explain the significance of the subissue, set forth the authorities most closely related to the subissue, and explain why the subissue is not resolved by these authorities. The Service will require the taxpayer or the taxpayer’s representative (as the Service deems appropriate) to state to the best of knowledge and belief that the acquisition will (or will not) qualify under § 368(a)(1)(B), if the Service rules as the taxpayer proposes on the subissue.

A taxpayer may seek a presubmission conference to determine whether a ruling on the subissue can be obtained under this section. See section 10.14, Rev. Proc. 96–1. If the Service issues a ruling on a subissue, the ruling will state that no opinion is expressed on whether the acquisition in question qualifies under § 368(a)(1)(B).

COLLATERAL ISSUES: Although the Service will not rule on the consequence of qualification of an acquisition of stock in the formation of a holding company under § 368(a)(1)(B) if the consequences are adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin, it will rule where the consequences of qualification are not adequately addressed by these authorities. To obtain a ruling on a collateral issue, the taxpayer or the taxpayer’s representative (as the Service deems appropriate) must state to the best of knowledge and belief that the acquisition qualifies under § 368(a)(1)(B), set forth the authorities most closely related to the collateral issue, and explain why the collateral issue is not resolved by these authorities. If the Service issues a ruling on a collateral issue, the ruling will state that no opinion is expressed as to whether the acquisition in question qualifies under § 368(a)(1)(B).

The Service will also continue to rule on issues that arise in connection with an acquisition of stock in the formation of a holding company but do

not depend upon or affect qualification under § 368(a)(1)(B).

(26) Section 368(a)(1)(B).—Definitions Relating to Corporate Reorganizations.—The acceptability of an estimation procedure or the acceptability of a specific sampling procedure to determine the basis of stock acquired by an acquiring corporation in a r e o r g a n i z a t i o n d e s c r i b e d i n § 368(a)(1)(B).

(27) Section 368(a)(1)(E).—Definitions Relating to Corporate Reorganizations.—Whether a transaction constitutes a corporate recapitalization within the meaning of § 368(a)(1)(E) (or a transaction that also qualifies under § 1036) when either (i) the transaction involves a closely held corporation or (ii) the issues involved are substantially similar to those described in the following revenue rulings:

Rev. Rul. 82–34, 1982–1 C.B. 59 (continuity of business enterprise);

Rev. Rul. 77–479, 1977–2 C.B. 119 (continuity of shareholder interest);

Rev. Rul. 77–238, 1977–2 C.B. 115 (conversion of shares of one class of stock into shares of another class, as p e r m i t t e d b y c e r t i f i c a t e - f incorporation);

Rev. Rul. 74–269, 1974–1 C.B. 87 (major shareholder’s exchange of common stock for preferred stock);

Rev. Rul. 56–654, 1956–2 C.B. 216 (corporate charter amended to provide preferred stock with increased redemption and liquidation value, where common and preferred stock held pro rata);

Rev. Rul. 55–112, 1955–1 C.B. 344 (common stock exchanged for preferred stock); and

Rev. Rul. 54–482, 1954–2 C.B. 148 (old common stock exchanged for new common stock).

The above no-ruling area does not apply, however, to any corporate recapitalization that is an integral part of a larger transaction, if it is impossible to determine the tax consequences of the larger transaction without making a determination with regard to the recapitalization.

(28) Section 368(a)(1)(F).—Definitions Relating to Corporate Reorganizations.—Whether a transaction constitutes a reorganization within the meaning of § 368(a)(1)(F), and whether the taxpayer is subject to the consequences of qualification under that section (such as nonrecognition and

subissue, and explain why the subissue is not resolved by these authorities. The Service will require the taxpayer or the taxpayer’s representative (as the Service deems appropriate) to state to the best of knowledge and belief that the transaction will (or will not) qualify under § 368(a)(1)(F), if the Service rules as the taxpayer proposes on the subissue.

A taxpayer may seek a presubmission conference to determine whether a ruling on the subissue can be obtained under this section. See section 10.14, Rev. Proc. 96–1. If the Service issues a ruling on a subissue, the ruling will state that no opinion is expressed on whether the transaction in question qualifies under § 368(a)(1)(F).

COLLATERAL ISSUES: Although the Service will not rule on the consequences of qualification as a reorganization under § 368(a)(1)(F) if the consequences are adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin, it will rule where the consequences of qualification are not adequately addressed by these authorities. To obtain a ruling on a collateral issue, the taxpayer or the taxpayer’s representative (as the Service deems appropriate) must state to the best of knowledge and belief that the transaction qualifies under § 368(a)(1)(F), set forth the authorities most closely related to the collateral issue and explain why the collateral issue is not resolved by these authorities. If the Service issues a ruling on a collateral issue, the ruling will state that no opinion is expressed as to whether the transaction in question qualifies under § 368(a)(1)(F).

The Service will also continue to rule on issues that arise in connection with a transaction under § 368(a)(1)(F) but do not depend upon or affect qualification under § 368(a)(1)(F).

(29) Section 425.—Substitution or Assumption of Incentive Stock Options.—Whether the substitution of a new Incentive Stock Option (‘‘ISO’’) for an old ISO, or the assumption of an old ISO, by an employer by reason of a corporate transaction constitutes a modification which results in the issuance of a new option by reason of failing to satisfy the spread test requirement of § 425(a)(1) or the ratio test requirement of § 1.425–1(a)(4). The Service will continue to rule on the issue of whether

the new ISO or the assumption of the old ISO gives the employee additional benefits not present under the old option within the meaning of § 425(a)(2).

(30) Section 451.—General Rule for Taxable Year of Inclusion.—The tax consequences of a non-qualified unfunded deferred-compensation arrangement with respect to a controlling shareholder-employee eligible to participate in the arrangement.

(31) Section 451.—General Rule for Taxable Year of Inclusion.—The tax consequences of unfunded deferredcompensation arrangements where the arrangements fail to meet the requirements of Rev. Proc. 92–65, 1992–2 C.B. 428, and Rev. Proc. 71–19, 1971– 1 C.B. 698. (32) Sections 451 and 457.—General Rule for Taxable Year of Inclusion; Deferred Compensation Plans of State and Local Governments and TaxExempt Organizations.—The tax consequences to unidentified independent contractors in nonqualified unfunded deferred-compensation plans. This applies to plans established under § 451 by employers in the private sector and to plans of state and local governments and tax-exempt organizations under § 457. However, a ruling with respect to a specific independent contractor’s participation in such a plan may be issued.

(33) Section 641.—Imposition of Tax.—Whether the period of administration or settlement of an estate or a trust (other than a trust described in § 664) is reasonable or unduly prolonged.

(34) Section 642(c).—Deduction for Amounts Paid or Permanently Set Aside for a Charitable Purpose.— Allowance of an unlimited deduction for amounts set aside by a trust or estate for charitable purposes when there is a possibility that the corpus of the trust or estate may be invaded.

(35) Section 664.—Charitable Remainder Trusts.—Whether the settlement of a charitable remainder trust upon the termination of the noncharitable interest is made within a reasonable period of time.

(36) Section 704(e).—Family Partnerships.—Matters relating to the validity of a family partnership when capital is not a material income producing factor.

(37) Section 856.—Definition of Real Estate Investment Trust.— Whether a corporation whose stock is

‘‘paired’’ with or ‘‘stapled’’ to stock of another corporation will qualify as a real estate investment trust under § 856, if the activities of the corporations are integrated.

(38) Section 1034.—See section 3.01(6), above. (39) Section 1221.—Capital Asset Defined.—Whether specialty stock allocated to an investment account by a registered specialist on a national securities exchange is a capital asset.

(40) Section 1551.—Disallowance of the Benefits of the Graduated Corporate Rates and Accumulated Earnings Credit.—Whether a transfer is within § 1551.

(41) Section 2031.—Definition of Gross Estate.—Actuarial factors for valuing interests in the prospective gross estate of a living person.

(42) Section 2512.—Valuation of Gifts.—Actuarial factors for valuing prospective or hypothetical gifts of a donor.

(43) Sections 3121, 3306, and 3401.—Definitions.—For purposes of determining prospective employment status, whether an individual will be an employee or an independent contractor. A ruling with regard to prior employment status may be issued.

(44) Section 4980B.—Failure to Satisfy Continuation Coverage Requirements of Group Health Plans.— Whether an action is ‘‘gross misconduct’’ within the meaning of § 4980B(f)(3)(B). ( See section 3.05 of Rev. Proc. 87–28, 1987–1 C.B. 770, 771.) (45) Section 7701.—Definitions.— Whether a foreign arrangement that is a participant in a domestic arrangement classified as a partnership for United States tax purposes will itself be classified as a partnership.

(46) Section 7701.—Definitions.— The classification of an instrument that has certain voting and liquidations rights in an issuing corporation but whose dividend rights are determined by reference to the earnings of a segregated portion of the issuing corporation’s assets, including assets held by a subsidiary.

.02 General Areas. (1) The results of transactions that lack a bona fide business purpose or have as their principal purpose the reduction of federal taxes.

(2) A matter upon which a court decision adverse to the Government has

been handed down and the question of following the decision or litigating further has not yet been resolved.

(3) A matter involving alternate plans of proposed transactions or involving hypothetical situations.

(4) A matter involving the federal tax consequences of any proposed federal, state, local or municipal legislation. The Service may provide general information in response to an inquiry.

(5) Whether under Subtitle F (Procedure and Administration) reasonable cause, due diligence, good faith, clear and convincing evidence, or other similar terms that require a factual determination exist.

(6) Whether a proposed transaction would subject the taxpayer to a criminal penalty.

(7) A request that does not comply with the provisions of Rev. Proc. 96–1.

(8) Whether, under the common law rules applicable in determining the employer-employee relationship, a professional staffing corporation (loan-out corporation) or the subscriber is the employer of individuals, if:

(i) the loan-out corporation hires employees of the subscriber and assigns the employees back to the subscriber, or

(ii) the loan-out corporation assigns individuals to subscribers for more than a temporary period (1 year or longer).