Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

Section 163.—Interest

26 CFR 1.163–1: Interest deduction in general.

What procedures apply for estates of decedents dying before January 1, 1998, to make an election under § 503(d)(2) of the Taxpayer Relief Act of 1997 to reduce the rate of interest on estate taxes deferred under § 6166 of the Code and forgo the deduction for interest paid on the deferred estate taxes under §§ 2053 and 163(h). See Rev. Proc. 98–15, page 25.

Section 401.—Qualified Pension, Profit-Sharing and Stock Bonus Plans

26 CFR 1.401(b)–1: Certain retroactive changes in plans.

A remedial amendment period for changes in plan qualification requirements made by the Taxpayer Relief Act of 1997 is provided. See Rev. Proc. 98–14, page 22.

Section 472.—Last-in, First-out Inventories

26 CFR 1.472–1: Last-in, first-out inventories.

LIFO; price indexes; department stores. The November 1997 Bureau of Labor Statistics price indexes are accepted for use by department stores employing the retail inventory and last-in, first-out inventory methods for valuing inventories for tax years ended on, or with reference to, November 30, 1997.

Rev. Rul. 98–6

The following Department Store Inventory Price Indexes for November 1997 were issued by the Bureau of Labor Statistics on December 16, 1997. The indexes are accepted by the Internal Revenue Service, under § 1.472–1(k) of the Income Tax Regulations and Rev. Proc.

86–46, 1986–2 C.B. 739, for appropriate application to inventories of department stores employing the retail inventory and last-in, first-out inventory methods for tax years ended on, or with reference to, November 30, 1997.

The Department Store Inventory Price Indexes are prepared on a national basis and include (a) 23 major groups of departments, (b) three special combinations of the major groups – soft goods, durable goods, and miscellaneous goods, and (c) a store total, which covers all departments, including some not listed separately, except for the following: candy, foods, liquor, tobacco, and contract departments.

BUREAU OF LABOR STATISTICS, DEPARTMENT STORE INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS

(January 1941 = 100, unless otherwise noted)

Percent Change Groups Nov. Nov. from Nov. 1996 1996 1997 to Nov. 1997 ¹

1. Piece Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55.9 524.6 –5.6
2. Domestics and Draperie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634.7 628.2 –1.0
3. Women’s and Children’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656.1 661.7 0.9
4. Men’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 903.7 906.9 0.4
5. Infants’ Wear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614.8 618.2 0.6
6. Women’s Underwear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 535.4 552.9 3.3
7. Women’s Hosiery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287.4 298.8 4.0
8. Women’s and Girls’Accessories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 562.5 543.7 –3.3
9. Women’s Outerwear and Girls’ Wear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415.9 428.4 3.0
10. Men’s Clothing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633.0 621.2 –1.9
11. Men’s Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591.5 604.0 2.1
12. Boys’ Clothing and Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495.1 513.1 3.6
13. Jewelry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1020.6 978.9 –4.1
14. Notions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 740.7 807.7 9.0
15. Toilet Articles and Drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 903.4 917.8 1.6
16. Furniture and Bedding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667.8 665.8 –0.3
17. Floor Coverings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585.6 580.1 –0.9
18. Housewares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804.5 811.7 0.9
19. Major Appliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244.2 241.0 –1.3
20. Radio and Television- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78.1 74.2 –5.0
21. Recreation and Education ² . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111.3 108.3 –2.7
22. Home Improvements ² . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130.6 133.2 2.0
23. Auto Accessories ² . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107.1 107.9 0.7 Groups 1 – 15: Soft Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602.1 606.5 0.7

January 26, 1998 4 1998–4 I.R.B.

BUREAU OF LABOR STATISTICS, DEPARTMENT STORE INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS—Continued

(January 1941 = 100, unless otherwise noted)

Percent Change Groups Nov. Nov. from Nov. 1996 1996 1997 to Nov. 1997 ¹

Groups 16 – 20: Durable Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466.5 462.6 –0.8 Groups 21 – 23: Misc. Goods ² . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113.0 111.4 –1.4 Store Total ³ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555.1 555.9 0.1

1Absence of a minus sign before percentage change in this column signifies price increase. 2Indexes on a January 1986=100 base. 3The store total index covers all departments, including some not listed separately, except for the following: candy, foods, liquor, tobacco, and contract departments.

DRAFTING INFORMATION

The principal author of this revenue ruling is Stan Michaels of the Office of Assistant Chief Counsel (Income Tax and Accounting). For further information regarding this revenue ruling, contact Mr. Michaels on (202) 622-4970 (not a tollfree call).

Section 646.—Election To Treat Certain Revocable Trusts as Part of an Estate

What are the procedures and requirements for making the § 646 election to treat certain revocable trusts as part of an estate? See Rev. Proc. 98–13, page 21.

Section 832.—Insurance Company Taxable Income

26 CFR 1.832–4: Gross income.

The salvage discount factors are set forth for the 1997 accident year. These factors will be used for

computing estimated salvage recoverable for purposes of section 832 of the Code. See Rev. Proc. 98–12, page 18.

Section 846.—Discounted Unpaid Losses Defined

26 CFR 1.846–1: Application of discount factors.

The loss payment patterns and discount factors are set forth for the 1997 accident year, which is a determination year. These factors will be used for computing discounted unpaid losses under section 846 of the Code. See Rev. Proc. 98–11, page 9.

The salvage discount factors are set forth for the 1997 accident year. These factors will be used for computing estimated salvage recoverable for purposes of section 832. See Rev. Proc. 98–12, page 18.

Section 2053.—Expenses, Indebtedness, and Taxes

26 CFR 20.2053–1: Expenses, indebtedness, and taxes in general.

What procedures apply for estates of decedents dying before January 1, 1998, to make an election

under § 503(d)(2) of the Taxpayer Relief Act of 1997 to reduce the rate of interest on estate taxes deferred under § 6166 of the Code and forgo the deduction for interest paid on the deferred estate taxes under §§ 2053 and 163(h). See Rev. Proc. 98–15, page 25.

Section 6166.—Extension of Time for Payment of Estate Tax Where Estate Consists Largely of Interest in Closely Held Business

26 CFR 20.6166–1: Election of alternate extension of time for payment of estate tax where estate consists largely of interest in closely held business.

What procedures apply for estates of decedents dying before January 1, 1998, to make an election under § 503(d)(2) of the Taxpayer Relief Act of 1997 to reduce the rate of interest on estate taxes deferred under § 6166 of the Code and forgo the deduction for interest paid on the deferred estate taxes under §§ 2053 and 163(h). See Rev. Proc. 98–15, page 25.

1998–4 I.R.B 5 January 26, 1998