Part I. Rulings — Internal Revenue Bulletin 1997-23

Section 42.—Low-Income Housing Credit

Low-income housing credit; satis- factory bond; “bond factor” amounts for the period April through June 1997. This ruling announces the monthly bond factor amounts to be used by taxpayers who dispose of qualified low-income buildings or interests therein during the period April through June 1997.

Rev. Rul. 97–25

In Rev. Rul. 90–60, 1990–2 C.B. 3, the Internal Revenue Service provided guidance to taxpayers concerning the general methodology used by the Treasury Department in computing the bond factor amounts used in calculating the amount of bond considered satisfactory by the Secretary under § 42(j)(6) of the Internal Revenue Code. It further announced that the Secretary would pub

lish in the Internal Revenue Bulletin a table of ‘‘bond factor’’ amounts for dispositions occurring during each calendar month.

This revenue ruling provides in Table 1 the bond factor amounts for calculating the amount of bond considered satisfactory under § 42(j)(6) for dispositions of qualified low-income buildings or interests therein during the period April through June 1997.

Table 1 Rev. Rul. 97–25 Monthly Bond Factor Amounts for Dispositions Expressed

As a Percentage of Total Credits

Calendar Year Building Placed in Service or, if Section 42(f)(1) Election Was Made,

the Succeeding Calendar Year

Month of Disposition

Apr ’97 May ’97

Jun ’97

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

79.00 78.77 78.55

81.35 81.11 80.88

83.91 83.66 83.42

86.90 86.64 86.40

90.40 90.13 89.87

94.39 94.09 93.81

98.50 98.18 97.88

102.45 102.11 101.79

106.31 105.95 105.61

110.36 109.98 109.64

112.52 112.52 112.52

For a list of bond factor amounts applicable to dispositions occurring during other calendar years, see the following revenue rulings: Rev. Rul. 90–60, 1990–2 C.B. 3, for dispositions occurring during calendar years 1987, 1988, and 1989; Rev. Rul. 90–88, 1990–2 C.B. 7, for dispositions occurring during calendar year 1990; Rev. Rul. 91–67, 1991–2 C.B. 13, for dispositions occurring during calendar year 1991; Rev. Rul. 92–101, 1992–2 C.B. 9, for dispositions occurring during calendar year 1992; Rev. Rul 93–83, 1993–2 C.B. 6, for dispositions occurring during calendar year 1993; Rev. Rul. 94–71, 1994–2 C.B. 4, for dispositions occurring during calendar year 1994; Rev. Rul. 95–83, 1995–2 C.B. 8, for dispositions occurring during calendar year 1995; Rev. Rul. 96–16, 1996–1 C.B. 3, for dispositions occurring during the period January through March 1996; Rev. Rul. 96–33, 1996–27 I.R.B. 4, for dispositions occurring during the period April through June 1996; Rev. Rul. 96–45, 1996–39 I.R.B. 5, for dispositions occurring during the period July through September 1996; Rev. Rul. 96–59, 1996–50 I.R.B. 4, for dispositions occurring during the period October through December 1996; and Rev. Rul. 97–16, 1997–13 I.R.B. 4, for disposi

tions occurring during the period January through March 1997.

DRAFTING INFORMATION

The principal author of this revenue ruling is Jack Malgeri of the Office of Assistant Chief Counsel (Passthroughs and Special Industries). For further information regarding this revenue ruling, contact Mr. Malgeri at (202) 622–3040 (not a toll-free call).

Section 446.—General Rule for Methods of Accounting

26 CFR 1.446–1: General rule for methods of accounting.

T.D. 8719

DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1, 301 and 601

Requirements Respecting the Adoption or Change of Accounting Method; Extensions of Time to Make Elections

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

SUMMARY: This document contains temporary regulations relating to the

procedure for requesting a change in accounting method and to the standards for granting an extension of time to request a change in accounting method. The regulations provide for a longer period of time for filing an application for change in accounting method with the Commissioner. The regulations also provide that an extension of time to file an application for change in accounting method will be granted only in unusual and compelling circumstances. The regulations affect taxpayers requesting a change in method of accounting for federal income tax purposes. The text of these temporary regulations also serves as the text of REG–209837–96 and REG–105299–97, page 8.

DATES: These regulations are effective May 15, 1997.

For dates of applicability of these regulations, see §§ 1.446–1T(e)(3)(iii), 301.9100–1T(h) and 601.204T(e) of these regulations.

FOR FURTHER INFORMATION CONTACT: Cheryl L. Oseekey at (202) 622–4970 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains amendments to the Regulations on Income Taxes (26

CFR part 1), the Regulations on Procedure and Administration (26 CFR part 301), and the Statement of Procedural Rules (26 CFR part 601) relating to the requirements for changes in method of accounting and extensions of time to make elections. Proposed and temporary regulations relating to extensions of time to make elections were published in the Federal Register for June 27, 1996 (61 FR 29714 and 61 FR 33365). These regulations extend the time for filing an application for change in accounting method under § 1.446–1(e)(3)(i) and amend §§ 301.9100–1T and 301.9100– 3T to provide that an extension of time to file an application for change in accounting method beyond the year provided in these regulations will be granted only in unusual and compelling circumstances.

Explanation of Provisions

Section 446(e) requires that a taxpayer obtain the Commissioner’s consent before changing a method of accounting. Sections 1.446–1(e)(3)(i) and 601.204(b) require the taxpayer to file a Form 3115, Application for Change in Accounting Method, with the Commissioner within the first 180 days of the taxable year in which the taxpayer desires to make the change. Sections 301.9100–1T and 301.9100–3T provide limited relief for extending the time to file a Form 3115 (not to exceed 90 days from the deadline for filing the Form 3115 except in unusual and compelling circumstances).

Sections 1.446–1(e)(3)(i) and 601.204(b) are amended to provide that a taxpayer must file a Form 3115 with the Commissioner during the taxable year in which the taxpayer desires to make the change in method of accounting. Taxpayers are encouraged to file the Form 3115 as early as possible during the year of change to provide the IRS adequate time to process the application prior to the original due date of the taxpayer’s return.

In addition, §§ 301.9100–1T and 301.9100–3T are amended to provide that an extension of time to file a Form 3115 (i.e., beyond the taxable year) will only be granted in unusual and compelling circumstances.

These amendments are effective for Forms 3115 filed on or after May 15, 1997.

Special Analyses

It has been determined that this Treasury decision is not a significant regulatory action as defined in EO 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. Sections 1.446–1(e)(3)(i) and 601.204(b) require a taxpayer to file a Form 3115, Application for Change in Accounting Method, with the Commissioner within the first 180 days of the taxable year in which the taxpayer desires to make the change. The temporary regulations in this document, §§ 1.446–1T(e)(3)(i) and 601.204T(b), merely extend the time for filing the Form 3115 and, therefore, do not contain a new collection of information. Thus, 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 Internal Revenue Code, these temporary regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

Drafting Information

The principal author of these regulations is Cheryl L. Oseekey of the Office of Assistant Chief Counsel (Income Tax and Accounting). However, other personnel from the IRS and Treasury Department participated in their development.

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Adoption of Amendments to the Regula- tions

Accordingly, 26 CFR parts 1, 301, and 601 are 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. Section 1.446–1, paragraph (e)(3)(i) is amended by adding a sentence at the end of the paragraph to read as follows:

§ 1.446–1 General rule for methods of accounting.

- - - - (e)(3) - - - For any Form 3115 filed

on or after May 15, 1997, see § 1.446– 1T(e)(3)(i)(B).

Par. 3. Section 1.446–1T is added to read as follows:

§ 1.446–1T General rule for methods of accounting (temporary).

(a) through (d) [Reserved] For further guidance, see § 1.446–1(a) through (d).

(e) Requirement respecting the adop- tion or change of accounting method.

(1) and (2) [Reserved] For further guidance, see § 1.446–1 (e)(1) and (2).

(3)(i)(A) [Reserved] For further guidance, see § 1.446–1(e)(3)(i).

(B) For any Form 3115 filed on or after May 15, 1997, permission to change a taxpayer’s method of accounting will not be granted unless the taxpayer agrees to the Commissioner’s prescribed terms and conditions for effecting the change, including the taxable year or years in which any adjustment necessary to prevent amounts from being duplicated or omitted is to be taken into account.

(ii) and (iii) [Reserved] For further guidance, see § 1.446–1(e)(3) (ii) and (iii).

PART 301—PROCEDURE AND ADMINISTRATION

Par. 4. The authority citation for part 301 continues to read in part as follows: Authority: 26 U.S.C. 7805. - - Par. 5. In § 301.9100–1T, paragraph (h) is amended by adding a sentence at the end of the paragraph to read as follows:

§ 301.9100–1T Extensions of time to make elections (temporary).

- - - - (h) - - - In addition, § 301.9100–

3T(c)(2)(i) is effective for any Form 3115 filed on or after May 15, 1997. Par. 6. In § 301.9100–3T, paragraph (c)(2)(i) is revised to read as follows:

§ 301.9100–3T Other extensions (tem- porary).

- - - - (c) - - (2) - - (i) Subject to the procedure described

in § 1.446–1T(e)(3)(i) of this chapter (requiring the advance written consent of the Commissioner);

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PART 601—STATEMENT OF PROCEDURAL RULES

Par. 7. The authority citation for part 601 continues to read as follows:

Authority: 26 U.S.C. 301 and 552, unless otherwise noted.

Par. 8. Section 601.204, paragraph (b) is amended by adding a sentence at the end of the paragraph to read as follows:

§ 601.204 Changes in accounting peri- ods and in methods of accounting.

- - - - (b) - - - For any Form 3115 filed on

or after May 15, 1997, see § 601.204T(b)(2).

Par. 9. Section 601.204T is added to read as follows:

§ 601.204T Changes in accounting peri- ods and in methods of accounting (tem- porary).

(a) [Reserved] For further guidance, see § 601.204(a).

(b) Methods of accounting. (1) [Reserved] For further guidance, see § 601.204(b).

(2) For any Form 3115 filed on or after May 15, 1997, application for permission to change the method of accounting employed shall be made on Form 3115 and filed with the Commissioner during the taxable year in which the taxpayer desires to make the change in method of accounting. Permission to change the method of accounting will not be granted unless the taxpayer and the Commissioner agree to the terms and conditions under which the change will be effected.

Margaret Milner Richardson, Commissioner of Internal Revenue.

Approved May 2, 1997.

Donald C. Lubick, Assistant Secretary of the Treasury.

(Filed by the Office of the Federal Register on May 14, 1997, 8:45 a.m., and published in the issue of the Federal Register for May 15, 1997, 62 F.R. 26740)

Section 2652.—Other Definitions

26 CFR 26.2652–1: Transferor defined; other definitions.

T.D. 8720

DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 26

Generation-Skipping Transfer Tax

AGENCY: Internal Revenue Service (IRS), Treasury

ACTION: Final Regulations.

SUMMARY: This document contains final regulations relating to the generation-skipping transfer (GST) tax regulations under chapter 13 of the Internal Revenue Code (Code). This document amends the final regulations under section 2652 and is necessary to provide guidance to taxpayers so that they may comply with chapter 13 of the Code.

DATES: This regulation is effective on May 20, 1997.

For dates of applicability of these regulations, see Effective Date under Supplementary Information.

FOR FURTHER INFORMATION CONTACT: James F. Hogan, (202) 622–3090 (not a toll-free number),

SUPPLEMENTARY INFORMATION:

Background

On December 27, 1995, the IRS published final regulations in the Federal Register (60 FR 66898 [T.D. 8644 C.B. 200]) under sections 2611, 2612, 2613, 2632, 2641, 2642, 2652, 2653, 2654, and 2663. On June 12, 1996, a notice of proposed rulemaking deleting § 26.2652–1(a)(4) and two related examples was published in the Federal Register (61 FR 29714 [PS–22–96, 1996–33 I.R.B. 15]). No comments responding to the notice of proposed rulemaking were received, and no public hearing was requested or held. The final regulations are adopted as proposed.

Explanation of Provision

Section 2652(a)(1) provides generally, that the term transferor means—(A) in the case of any property subject to the tax imposed by chapter 11, the decedent, and (B) in the case of any property subject to the tax imposed by chapter 12, the donor. An individual is treated as transferring any property with respect to which the individual is the transferor. Under § 26.2652–1(a)(2), a transfer is subject to Federal gift tax if a gift tax is imposed under section 2501(a) and is subject to Federal estate tax if the value of the property is includible in the decedent’s gross estate determined under section 2031 or section 2103. Under § 26.2652–1(a)(4), the exercise of a power of appointment that is not a general power of appointment is also treated as a transfer subject to Federal estate or gift tax by the holder of the

power if the power is exercised in a manner that may postpone or suspend the vesting, absolute ownership, or power of alienation of an interest in property for a period, measured from the date of the creation of the trust, extending beyond any specified life in being at the date of creation of the trust plus a period of 21 years plus, if necessary, a reasonable period of gestation.

The purpose of the rule in § 26.2652–1(a)(4) was to impose the GST tax when it may not otherwise have applied. It was never intended to (nor could it) prevent the application of the tax pursuant to the statutory provisions that apply based on the original taxable transfer. To eliminate any uncertainty concerning the proper application of the GST tax, the regulations under section 2652(a) are clarified by eliminating § 26.2652–1(a)(4) and Example 9 and Example 10 in § 26.2652–1(a)(6) from the regulations.

Effective Date

These amendments apply to transfers to trusts on or after June 12, 1996.

Special Analyses

It has been determined that this Treasury Decision is not a significant regulatory action as defined in EO 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 these regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Therefore, a Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking preceding these regulations was submitted to the Small Business Administration for comment on its impact on small business.

Drafting Information

The principal author of this regulation is James F. Hogan, Office of the Chief Counsel, IRS. Other personnel from the IRS and Treasury Department participated in its development.

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Amendments to the Regulations

Accordingly, 26 CFR part 26 is amended as follows:

PART 26—GENERATION-SKIPPING TRANSFER TAX REGULATIONS UNDER THE TAX REFORM ACT OF 1986

Paragraph 1. The authority citation for part 26 continues to read, in part, as follows:

Authority: 26 U.S.C. 7805 - - Par. 2 Section 26.2652–1 is amended as follows:

Paragraph (a)(4) is removed and paragraphs (a)(5) and (a)(6) are redesignated as paragraphs (a)(4) and (a)(5), respectively.
In newly designated paragraph (a)(5), Examples 9 and 10 are removed

and Example 11 is redesignated as Ex- ample 9 .

Margaret Milner Richardson, Commissioner of Internal Revenue.

Approved May 1, 1997.

Donald C. Lubick, Assistant Secretary of the Treasury.

(Filed by the Office of the Federal Register on May 19, 1997, 8:45 a.m., and published in the issue of the Federal Register for May 20, 1997, 62 F.R. 27496)

Section 6012.—Persons Required To Make Returns of Income

26 CFR 1.6012–5: Composite return in lieu of specified form.

General procedures are provided to inform those who participate in the Magnetic Media/Electronic Filing Program for Form 1040NR, of their obligations to the Internal Revenue Service, taxpayers, and other participants. See Rev. Proc. 97–28, page 9.

Section 6061.—Signing of Returns and Other Documents

26 CFR 1.6061–1: Signing of returns and other documents by individuals.