SECTION 2. BACKGROUND AND

SCOPE OF APPLICATION

. 01 Background Whenever appropriate to sound tax administration, the Service answers inquiries from individuals and organizations about their status for tax purposes and the tax effects of their acts or transactions, before the filing of returns or reports that are required by the Internal Revenue Code. There are, however, areas where the Service will not issue advance letter rulings or determination letters, either because the issues are inherently factual or for other reasons. This revenue procedure lists those areas.

Section 3 gives areas in which advance letter rulings and determinations will not be issued under any circumstances. Section 4 gives areas in which they will not ordinarily be issued; in these areas, unique and compelling reasons may justify issuing a letter ruling or determination letter. A taxpayer who plans to request a letter ruling or determination letter in an area described in Section 4 should contact (by telephone or in writing) the Office of Associate Chief Counsel (Inter

January 5, 1998 222 1998–1 I.R.B.

original issue (without regard to the period held by the taxpayer).

(2) Section 894.—Income Affected by Treaty.—Whether a person that is a resident of a foreign country and derives income from the United States is entitled to benefits under the United States income tax treaty with that foreign country pursuant to the limitation on benefits article. However, the Service may rule regarding the legal interpretation of a particular provision within the relevant limitation on benefits article.

(3) Section 954.—Foreign Base Company Income.—The effective rate of tax that a foreign country will impose on income.

(4) Section 1503(d).—Dual Consolidated Loss.—Whether the conditions under the regulations for excepting a net operating loss of a dual resident corporation from the definition of a dual consolidated loss, or for rebutting the presumption that an event constitutes a triggering event for purposes of § 1.1503–2(g)(2)(iii)(B), are satisfied.

.02 General Areas. (1) The prospective application of the estate tax to the property or the estate of a living person, except that letter rulings may be issued on any international issues in a ruling request accepted pursuant to Rev. Proc. 88–50, 1988–2 C.B. 711, and section 5.05 of Rev. Proc. 98–1.

(2) The federal tax consequences of proposed federal, state, local, municipal, or foreign legislation.

(3) Whether reasonable cause exists under Subtitle F (Procedure and Administration) of the Code.

(4) Whether a proposed transaction would subject a taxpayer to criminal penalties.

(5) Any area where the letter ruling request does not comply with the requirements of Rev. Proc. 98–1.

(6) Any area where the same issue is the subject of the taxpayer’s pending request for competent authority assistance under a United States tax treaty.

(7) A “comfort” ruling will not be issued with respect to an issue that is clearly and adequately addressed by statute, regulations, decisions of a court, tax treaties, revenue rulings, or revenue procedures absent extraordinary circumstances (e.g., a request for a letter ruling required by a governmental regulatory authority in order to effectuate the transaction.)

.01 Specific Questions and Problems (1) Section 367(a).—Transfers of Property from the United States.— Whether an oil or gas working interest is transferred from the United States for use in the active conduct of a trade or business for purposes of § 367(a)(3); and whether any other property is so transferred, where the determination requires extensive factual inquiry.

(2) Section 367(b).—Other Transfers. Whether a foreign corporation is considered a corporation for purposes of any nonrecognition provision listed in § 367(b), and related issues, unless the letter ruling presents a significant legal issue or subchapter C rulings are requested in the context of reorganizations or liquidations involving foreign corporations. (These matters are dealt with in detail in § 7.367(b) of the Temporary Income Tax Regulations.)

(3) Section 864.—Definitions and Special Rules.—Whether a taxpayer is engaged in a trade or business within the United States, and whether income is effectively connected with the conduct of a trade or business within the United States; whether an instrument is a security as defined in § 1.864-2(c)(2); whether a taxpayer effects transactions in the United States in stocks or securities under § 1.864-2(c)(2); whether an instrument or item is a commodity as defined in § 1.864-2(d)(3); and for purposes of § 1.864-2(d)(1) and (2), whether a commodity is of a kind customarily dealt in on an organized commodity exchange, and whether a transaction is of a kind customarily consummated at such place.

(4) Section 871.—Tax on Nonresident Alien Individuals.—Whether the income earned on contracts that do not qualify as annuities or life insurance contracts because of the limitations imposed by § 72(s) and § 7702(a) is portfolio interest as defined in § 871(h).

(5) Section 881.—Tax on Income of Foreign Corporations Not Connected with United States Business.—Whether the income earned on contracts that do not qualify as annuities or life insurance contracts because of the limitations imposed by § 72(s) and § 7702(a) is portfolio interest as defined in § 881(c).