Part III. Administrative, Procedural, and Miscellaneous

Year

Elections Into Mark-to-Market Accounting Under Section 1.475(c)–1 of the Regulations

Notice 97–37

On December 24, 1996, final regulations (T.D. 8700, [1997–7 I.R.B. 5] 61 F.R. 67715) were published to furnish guidance under § 475 of the Internal Revenue Code, including the scope of exemptions from the mark-to-market requirements. These regulations contain elections out of certain exemptions, including the intragroup-customer election (§ 1.475(c)–1(a)(3)(iii)(B) of the Income Tax Regulations), the customer paper election (§ 1.475(c)–1(b)(4)(i)), and the negligible sales election (§ 1.475(c)–1(c)(1)(ii)). Section 1.475(c)–1(b)(4)(i)(B) provides a June 23, 1997, deadline to make the customer paper election on an amended return.

The Internal Revenue Service recognizes that taxpayers need further guidance concerning these elections. The Service intends to issue guidance that will address the interplay of the elections under § 1.475(c)–1, the extent to which these elections are available on a retroactive basis, and the application of the § 475(b)(2) identification requirements to taxpayers making these elections. Because taxpayers need additional guidance to evaluate whether to make an election, and because the elections cannot be revoked without the consent of the Commissioner, the additional guidance will extend the filing deadline from June 23, 1997, to at least 45 days after that guidance is released. It should be noted, however, that an amended return making an election must be filed within the statute of limitations on assessment under § 6501(a).

The principal drafter of this notice is Alan B. Munro of the Office of Assistant Chief Counsel (Financial Institutions and Products). For further information regarding this notice contact Mr. Munro on (202) 622–3920 (not a tollfree call).

1997 Marginal Production Rates

Notice 97–38

Section 613A(c)(6)(C) of the Internal Revenue Code defines the term ‘‘applicable percentage’’ for purposes of determining percentage depletion for oil and gas produced from marginal properties. The applicable percentage is the per

centage (not greater than 25 percent) equal to the sum of 15 percent, plus one percentage point for each whole dollar by which $20 exceeds the reference price (determined under § 29(d)(2)(C)) for crude oil for the calendar year preceding the calendar year in which the taxable year begins. The reference price determined under § 29(d)(2)(C) for the 1996 calendar year is $18.46. Table 1 contains the applicable percentages for marginal production for taxable years beginning in calendar years 1991 through 1997.

Notice 97–38 Table 1

APPLICABLE PERCENTAGE FOR

MARGINAL PRODUCTION

1991 15 percent 1992 18 percent 1993 19 percent 1994 20 percent 1995 21 percent 1996 20 percent 1997 16 percent

DRAFTING INFORMATION

The principal author of this notice is Brenda M. Stewart of the Office of Assistant Chief Counsel (Passthroughs and Special Industries). For further information regarding this notice contact Ms. Stewart on (202) 622–3120 (not a toll-free call).

1997 Section 43 Inflation Adjustment

Notice 97–39

Section 43(b)(3)(B) of the Internal Revenue Code requires the Secretary to publish an inflation adjustment factor. The enhanced oil recovery credit under § 43 for any taxable year is reduced if the ‘‘reference price,’’ determined under § 29(d)(2)(C), for the calendar year preceding the calendar year in which the taxable year begins is greater than $28 multiplied by the inflation adjustment factor for that year.

The term ‘‘inflation adjustment factor’’ means, with respect to any calendar year, a fraction the numerator of which is the GNP implicit price deflator for the preceding calendar year and the denominator of which is the GNP implicit price deflator for 1990.

Because the reference price for the 1996 calendar year ($18.46) does not exceed $28 multiplied by the inflation adjustment factor for the 1997 calendar year, the enhanced oil recovery credit for qualified costs paid or incurred in 1997 is determined without regard to the phase-out for crude oil price increases.

Table 1 contains the GNP implicit price deflator used for the 1997 calendar year, as well the previously published GNP implicit price deflators used for the 1991 through 1996 calendar years.

Notice 97–39 TABLE 1 GNP IMPLICIT PRICE DEFLATORS

Calendar

GNP Implicit Price

Calendar Year

Applicable Percentage

DRAFTING INFORMATION

The principal author of this notice is Brenda M. Stewart of the Office of Assistant Chief Counsel (Passthroughs and Special Industries). For further information regarding this notice contact

Year Deflator

1990 112.9 (used for 1991) 1991 117.0 (used for 1992) 1992 120.9 (used for 1993) 1993 124.1 (used for 1994) 1994 126.0 (used for 1995) 1995 107.5 (used for 1996)* 1996 109.7 (used for 1997) *Beginning in 1995, the GNP implicit price deflator was rebased relative to 1992. The 1990 GNP implicit price deflator used to compute the 1996 § 43 inflation adjustment factor is 93.6.

Table 2 contains the inflation adjustment factor and the phase-out amount for taxable years beginning in the 1997 calendar year as well as the previously published inflation adjustment factors and phase-out amounts for the 1991 through 1996 calendar years.

Notice 97–39 TABLE 2 INFLATION ADJUSTMENT FACTORS AND PHASE-OUT

AMOUNTS

Phase-out

Calendar

Inflation Adjustment

Factor

Year Factor Amount

1991 1.0000 0 1992 1.0363 0 1993 1.0708 0 1994 1.0992 0 1995 1.1160 0 1996 1.1485 0 1997 1.1720 0

Year

July 7, 1997 8 1997-27 I.R.B.

Ms. Stewart on (202) 622–3120 (not a toll-free call).

26 CFR 601.602: Forms and instructions.

(Also Part I, Sections 220, 408, 6041, 6041A, 6042, 6043, 6044, 6045, 6047, 6049, 6050A, 6050B, 6050D, 6050E, 6050H, 6050J, 6050N, 6050P, 6050Q, 1.408–5, 1.408–7, 1.6041–1, 7.6041–1, 1.6042–2, 1.6042–4, 1.6044–2, 1.6044–5, 1.6045–1, 5f.6045–1, 1.6045–2, 1.6045–4, 1.6047–1, 1.6049–4, 1.6049–6, 1.6049–7, 1.6050A–1, 1.6050B–1, 1.6050D–1, 1.6050E–1, 1.6050H–1, 1.6050H–2, 1.6050J–1T, 1.6050N–1, 1.6050P–1)

Rev. Proc. 97–32

CONTENTS

EXHIBIT F. Form 1099–G EXHIBIT G. Form 1099–INT EXHIBIT H. Form 1099–LTC EXHIBIT I. Form 1099–MISC EXHIBIT J. Form 1099–MSA EXHIBIT K. Form 1099–OID EXHIBIT L. Form 1099–PATR EXHIBIT M. Form 1099–R EXHIBIT N. Form 1099–S EXHIBIT O. Form W–2G EXHIBIT P. Form 5498 EXHIBIT Q. Form 5498–MSA EXHIBIT R. Form 1096

PART A. GENERAL