SECTION 5. UNDER WHAT — Internal Revenue Bulletin 1998-1

CIRCUMSTANCES DOES THE NATIONAL OFFICE ISSUE LETTER RULINGS?

In income and gift tax .01 In income and gift tax matters, the national office generally issues a letter ruling on a matters proposed transaction and on a completed transaction if the letter ruling request is submitted before the return is filed for the year in which the transaction that is the subject of the request was completed.

(1) Circumstances under which a letter ruling is not ordinarily issued. The national office ordinarily does not issue a letter ruling if, at the time the letter ruling is requested, the identical issue is involved in the taxpayer’s return for an earlier period and that issue—

(a) is being examined by a district director;

(b) is being considered by an appeals office;

(d) has been examined by a district director or considered by an appeals office and the statutory period of limitations has not expired for assessment or for filing a claim for refund or credit of tax; or

(e) has been examined by a district director or considered by an appeals office and a closing agreement covering the issue or liability has not been entered into by a district director or by an appeals office.

If a return dealing with an issue for a particular year is filed while a request for a letter ruling on that issue is pending, the national office will issue the letter ruling unless it is notified by the taxpayer or otherwise learns that an examination of that issue or the identical issue on an earlier year’s return has been started by a district director. See section 8.04 of this revenue procedure. However, even if an examination has begun, the national office ordinarily will issue the letter ruling if the district director agrees, by memorandum, to the issuance of the letter ruling.

Sec. 5.01

1998–1 I.R.B. 17 January 5, 1998

(2) No letter ruling on a property conversion after return filed. The national office does not issue a letter ruling on the replacement of involuntarily converted property, whether or not the property has been replaced, if the taxpayer has already filed a return for the taxable year in which the property was converted. However, the district director may issue a determination letter in this case. See section 6.01 of this revenue procedure.

(3) Certain late S corporation elections. In lieu of requesting a letter ruling under this revenue procedure, a taxpayer may obtain relief under § 1362(b)(5) for certain late S corporation elections by following the procedures in Rev. Proc. 97–40, 1997–33 I.R.B. 50, or Rev. Proc. 97–48, 1997–43 I.R.B. 19. A request made pursuant to Rev. Proc. 97–40 or Rev. Proc. 97–48 does not require payment of any user fee. See section 3 of Rev. Proc. 97–40 or Rev. Proc. 97–48 and section 15.03(2) of this revenue procedure.

A § 301.9100 request .02 The national office will consider a request for an extension of time for making an for extension of time election or other application for relief under § 301.9100–3 of the Procedure and Adminisfor making an tration Regulations. Even if submitted after the return covering the issue presented in the election or for other § 301.9100 request has been filed and even if submitted after an examination of the return relief has begun or after the issues in the return are being considered by an appeals office or a federal court, a § 301.9100 request is a letter ruling request. Therefore, the § 301.9100 request should be submitted pursuant to this revenue procedure.

However, an election made pursuant to § 301.9100–2 is not a letter ruling request and does not require payment of any user fee. See § 301.9100–2(d) and section 15.03(1) of this revenue procedure. Such an election pertains to an automatic extension of time.

(1) Format of request. A § 301.9100 request (other than an election made pursuant to § 301.9100–2) must be in the general form of, and meet the general requirements for, a letter ruling request. These requirements are given in section 8 of this revenue procedure. In addition, the § 301.9100 request must include the information required by § 301.9100–3(e).

(2) Statute of limitations. The running of any applicable period of limitations is not suspended for the period during which a § 301.9100 request has been filed. See § 301.9100–3(d)(2). If the period of limitations on assessment under § 6501(a) for the taxable year in which an election should have been made or any taxable year that would have been affected by the election had it been timely made will expire before receipt of a § 301.9100 letter ruling, the Service ordinarily will not issue a § 301.9100 ruling. See § 301.9100–3(c)(1)(ii). Therefore, the taxpayer must secure a consent under § 6501(c)(4) to extend the period of limitations on assessment. Note that the filing of a claim for refund under § 6511 does not extend the period of limitations on assessment. If § 301.9100 relief is granted, the Service may require the taxpayer to consent to an extension of the period of limitations on assessment. See § 301.9100–3(d)(2).

(3) Taxpayer must notify national office if examination of return begins while re- quest is pending. If the Service starts an examination of the taxpayer’s return for the taxable year in which an election should have been made or any taxable year that would have been affected by the election had it been timely made while a § 301.9100 request is pending, the taxpayer must notify the national office. See § 301.9100–3(e)(4)(i) and section 8.04(1)(b) of this revenue procedure.

(4) National office will notify district director, appeals officer, or government coun- sel of a § 301.9100 request if return is being examined or is being considered by an appeals office or a federal court. If the taxpayer’s return for the taxable year in which an election should have been made or any taxable year that would have been affected by the election had it been timely made is being examined by a district office or considered by an appeals office or a federal court, the national office will notify the appropriate district director, appeals officer, or government counsel that a § 301.9100 request has been submitted to the national office. The examining officer, appeals officer, or government counsel is

Sec. 5.01

January 5, 1998 18 1998–1 I.R.B.

not authorized to deny consideration of a § 301.9100 request. The letter ruling will be mailed to the taxpayer and a copy will be sent to the appropriate district director, appeals officer, or government counsel.

Determinations under .03 Under Rev. Proc. 77–9, 1977–1 C.B. 542, the Office of Associate Chief Counsel § 999(d) of the (International) issues determinations under § 999(d) that may deny certain benefits of the Internal Revenue Code foreign tax credit, deferral of earnings of foreign subsidiaries and domestic international sales corporations (DISCs), and tax exemption for foreign trade income of a foreign sales corporation or a small foreign sales corporation (FSC or small FSC) to a person, if that person, a member of a controlled group (within the meaning of § 993(a)(3)) that includes the person, or a foreign corporation of which a member of the controlled group is a United States shareholder, agrees to participate in, or cooperate with, an international boycott. Requests for determinations under Rev. Proc. 77-9 are letter ruling requests and, therefore, should be submitted to the Associate Chief Counsel (International) pursuant to this revenue procedure.

In matters involving .04 Unless the issue is covered by section 7 of this revenue procedure, the Office of § 367 Associate Chief Counsel (International) may issue a letter ruling under § 367 even if the taxpayer does not request a letter ruling as to the characterization of the transaction under the reorganization provisions of the Code. The Office of Associate Chief Counsel (International) will determine the § 367 consequences of a transaction based on the taxpayer’s characterization of the transaction but will indicate in the letter ruling that it expresses no opinion as to the characterization of the transaction under the reorganization. However, the Office of Associate Chief Counsel (International) may decline to issue a § 367 ruling in situations in which the taxpayer inappropriately characterizes the transaction under the reorganization provisions.

In estate tax matters .05 In general, the national office issues prospective letter rulings on transactions affecting the estate tax on the prospective estate of a living person and affecting the estate tax on the estate of a decedent before the decedent’s estate tax return is filed. The national office will not issue letter rulings for prospective estates on computations of tax, actuarial factors, and factual matters.

If the taxpayer is requesting a letter ruling regarding a decedent’s estate tax and the estate tax return is due to be filed before the letter ruling is expected to be issued, the taxpayer should obtain an extension of time for filing the return and should notify the national office branch considering the letter ruling request that an extension has been obtained.

If the return is filed before the letter ruling is received from the national office, the taxpayer must disclose on the return that a letter ruling has been requested, attach a copy of the pending letter ruling request to the return, and notify the national office that the return has been filed. See section 8.04 of this revenue procedure. The national office will make every effort to issue the letter ruling within 3 months of the date the return was filed.

If the letter ruling cannot be issued within that 3-month period, the national office will notify the district director having jurisdiction over the return, who may, by memorandum to the national office, grant an additional period for the issuance of the letter ruling.

In matters involving .06 In matters involving additional estate tax under § 2032A(c), the national office issues additional estate tax letter rulings on proposed transactions and on completed transactions that occurred before under § 2032A(c) the return is filed.

In matters involving .07 In matters involving qualified domestic trusts under § 2056A, the national office qualified domestic issues letter rulings on proposed transactions and on completed transactions that occurred trusts under § 2056A before the return is filed.

In generation- .08 In general, the national office issues letter rulings on proposed transactions that skipping transfer tax affect the generation-skipping transfer tax and on completed transactions that occurred matters before the return is filed. In the case of a generation-skipping trust or trust equivalent, letter rulings are issued either before or after the trust or trust equivalent has been

Sec. 5.08

1998–1 I.R.B. 19 January 5, 1998

established. The national office will issue letter rulings on the application of the effective date rules for generation-skipping transfer tax (§ 1433 of the Tax Reform Act of 1986, 1986–3 (Vol. 1) C.B. 1, 648) to wills, trusts, and trust equivalents in existence on October 22, 1986, and to generation-skipping transfers taking place on or before October 22, 1986.

In employment and .09 In employment and excise tax matters, the national office issues letter rulings on proexcise tax matters posed transactions and on completed transactions either before or after the return is filed for those transactions.

Requests regarding employment status (employer/employee relationship) from federal agencies and instrumentalities should be submitted directly to the national office. Requests regarding employment status from other taxpayers must first be submitted to the appropriate Service office listed on the current Form SS–8 (Rev. June 1997). See section 6.04 of this revenue procedure. Generally, the employer is the taxpayer and requests the letter ruling. However, if the worker asks for the letter ruling, both the worker and the employer are considered to be the taxpayer and both are entitled to the letter ruling.

The national office usually will not issue a letter ruling if, at the time the letter ruling is requested, the identical issue is involved in the taxpayer’s return for an earlier period and that issue—

(1) is being examined by a district director;

(2) is being considered by an appeals office;

(3) is pending in litigation in a case involving the taxpayer or a related taxpayer;

(4) has been examined by a district director or considered by an appeals office and the statutory period of limitations has not expired for assessment or for filing a claim for refund or credit of tax; or

(5) has been examined by a district director or considered by an appeals office and a closing agreement covering the issue or liability has not been entered into by a district director or by an appeals office.

If a return involving an issue for a particular year is filed while a request for a letter ruling on that issue is pending, the national office will issue the letter ruling unless it is notified by the taxpayer or otherwise learns that an examination of that issue or an examination of the identical issue on an earlier year’s return has been started by a district director. See section 8.04 of this revenue procedure. However, even if an examination has begun, the national office ordinarily will issue the letter ruling if the district director agrees, by memorandum, to the issuance of the letter ruling.

In administrative .10 provisions matters

(1) In general. The national office issues letter rulings on matters arising under the Code and related statutes and regulations that involve—

(a) the time, place, manner, and procedures for reporting and paying taxes;

(b) the assessment and collection of taxes (including interest and penalties);

(d) the filing of information returns.

(2) Circumstances under which a letter ruling is not ordinarily issued. The national office ordinarily does not issue a letter ruling if, at the time the letter ruling is requested, the identical issue is involved in the taxpayer’s return for an earlier period and that issue—

(a) is being examined by a district director;

Sec. 5.08

January 5, 1998 20 1998–1 I.R.B.

(b) is being considered by an appeals office;

If a return involving an issue for a particular year is filed while a request for a letter ruling on that issue is pending, the national office will issue the letter ruling unless it is notified by the taxpayer or otherwise learns that an examination of that issue or an examination of the identical issue on an earlier year’s return has been started by a district director. See section 8.04 of this revenue procedure. But, even if an examination has begun, the national office ordinarily will issue the letter ruling if the district director agrees, by memorandum, to the issuance of the letter ruling.

Generally not to .11 The national office does not issue letter rulings to business, trade, or industrial business associations associations or to similar groups concerning the application of the tax laws to members of or groups the group. But groups and associations may submit suggestions of generic issues that would be appropriately addressed in revenue rulings. See Rev. Proc. 89–14, which states the objectives of, and standards for, the publication of revenue rulings and revenue procedures in the Internal Revenue Bulletin.

The national office, however, may issue letter rulings to groups or associations on their own tax status or liability if the request meets the requirements of this revenue procedure.

Generally not to .12 The national office does not issue letter rulings to foreign governments or their politforeign governments ical subdivisions about the U.S. tax effects of their laws. The national office also does not issue letter rulings on the effect of a tax treaty on the tax laws of a treaty country for purposes of determining the tax of the treaty country. See section 13.02 of Rev. Proc. 96–13, 1996–1 C.B. at 626. However, the national office will continue to exchange correspondence with treaty partners pursuant to the consultation provisions in tax treaties. In addition, the national office may issue letter rulings to foreign governments or their political subdivisions on their own tax status or liability under U.S. law if the request meets the requirements of this revenue procedure.

Generally not on .13 The national office does not issue letter rulings on a matter involving the federal tax federal tax consequences of any proposed federal, state, local, municipal, or foreign legislation. The consequences of national office, however, may provide general information in response to an inquiry. proposed legislation

Issuance of a letter .14 Unless the issue is covered by section 7 of this revenue procedure, Rev. Proc. 98–3, ruling before the this Bulletin, or Rev. Proc. 98–7, this Bulletin, a letter ruling may be issued before the issuance of a issuance of a temporary or final regulation or other published guidance that interprets the regulation or other provisions of any act under the following conditions: published guidance

(1) Answer is clear or is reasonably certain. If the letter ruling request presents an issue for which the answer seems clear by applying the statute to the facts or for which the answer seems reasonably certain but not entirely free from doubt, a letter ruling will be issued.

(2) Answer is not reasonably certain. The Service will consider all letter ruling requests and use its best efforts to issue a letter ruling even if the answer does not seem reasonably certain where the issuance of a letter ruling is in the best interests of tax administration.

Sec. 5.14

1998–1 I.R.B. 21 January 5, 1998

(3) Issue cannot be readily resolved before a regulation or any other published guidance is issued. A letter ruling will not be issued if the letter ruling request presents an issue that cannot be readily resolved before a regulation or any other published guidance is issued. However, when the Service has closed a regulation project or any other published guidance project that might have answered the issue or decides not to open a regulation project or any other published guidance project, the appropriate branch will consider all letter ruling requests unless the issue is covered by section 7 of this revenue procedure, Rev. Proc. 98–3, or Rev. Proc. 98–7.

SECTION 6. UNDER WHAT District directors issue determination letters only if the question presented is specifically CIRCUMSTANCES DO answered by a statute, tax treaty, or regulation, or by a conclusion stated in a revenue rulDISTRICT DIRECTORS ing, opinion, or court decision published in the Internal Revenue Bulletin. ISSUE DETERMINATION LETTERS?

In income and gift .01 In income and gift tax matters, district directors issue determination letters in response tax matters to taxpayers’ written requests on completed transactions that affect returns over which they have examination jurisdiction. A determination letter usually is not issued for a question concerning a return to be filed by the taxpayer if the same question is involved in a return already filed.

Normally, district directors do not issue determination letters on the tax consequences of proposed transactions. However, a district director may issue a determination letter on the replacement, even though not yet made, of involuntarily converted property under § 1033, if the taxpayer has filed an income tax return for the year in which the property was involuntarily converted.

In estate tax matters .02 In estate tax matters, district directors issue determination letters in response to written requests affecting the estate tax returns over which the district directors have examination jurisdiction. They do not issue determination letters on matters concerning the application of the estate tax to the prospective estate of a living person.

In generation- .03 In generation-skipping transfer tax matters, district directors issue determination skipping transfer tax letters in response to written requests affecting the generation-skipping transfer tax returns matters over which the district directors have examination jurisdiction. They do not issue determination letters on matters concerning the application of the generation-skipping transfer tax before the distribution or termination takes place.

In employment and .04 In employment and excise tax matters, district directors issue determination letters in excise tax matters response to written requests from taxpayers on completed transactions over which they have examination jurisdiction.

Requests for a determination of employment status (Form SS–8) from taxpayers (other than federal agencies and instrumentalities) must be submitted to the appropriate Service office listed on the current Form SS–8 (Rev. June 1997) and not directly to the national office. See also section 5.09 of this revenue procedure.

Circumstances under .05 A district director will not issue a determination letter in response to any request if— which determination letters are not (1) it appears that the taxpayer has directed a similar inquiry to the national office; issued by district director (2) the same issue involving the same taxpayer or a related taxpayer is pending in a case in litigation or before an appeals office;

(3) the determination letter is requested by an industry, trade association, or similar group; or

(4) the request involves an industry-wide problem.

Sec. 5.14

January 5, 1998 22 1998–1 I.R.B.

Under no circumstances will a district director issue a determination letter unless it is clearly shown that the request concerns a return that has been filed or is required to be filed and over which the district director has, or will have, examination jurisdiction.

A district director will not issue a determination letter on an employment tax question if the specific question for the same taxpayer or a related taxpayer has been, or is being, considered by the Central Office of the Social Security Administration or the Railroad Retirement Board.

A district director also will not issue a determination letter on determining constructive sales price under § 4216(b) or § 4218(c), which deal with special provisions applicable to the manufacturer’s excise tax. The national office, however, will issue letter rulings in this area. See section 7.04 of this revenue procedure.

Requests concerning .06 A request received by a district director on a question concerning an income, estate, income, estate, or or gift tax return already filed generally will be considered in connection with the gift tax returns examination of the return. If a response is made to the request before the return is examined, it will be considered a tentative finding in any later examination of that return.

Attach a copy of .07 A taxpayer who, before filing a return, receives a determination letter about any determination letter transaction that has been consummated and that is relevant to the return being filed should to taxpayer’s return attach a copy of the determination letter to the return when it is filed.

Review of .08 Determination letters issued under sections 6.01 through 6.04 of this revenue procedetermination letters dure are not reviewed by the national office before they are issued. If a taxpayer believes that a determination letter of this type is in error, the taxpayer may ask the district director to reconsider the matter or to request technical advice from the national office as explained in Rev. Proc. 98–2, this Bulletin.