SECTION 4. PROCEDURE FOR

MAKING THE ELECTION

.01 Required Statement. To make the election, a statement must be filed with the Service in the manner and time described in this notice. The statement must be entitled “Election to Remain a Domestic Trust under § 1161 of the Taxpayer Relief Act of 1997,” be signed under penalties of perjury by at least one trustee of the trust, and contain the following information:

(1) A statement that the trust is electing to continue to be treated as a domestic trust under § 1161 of the Taxpayer Relief Act of 1997;

(2) A statement that the trustee had a reasonable basis (within the meaning of § 6662) under prior law for treating the trust as a domestic trust on August 19, 1996. (The trustee need not explain the reasonable basis on the election statement);

(3) A statement either that the trust filed a Form 1041 treating the trust as a

domestic trust for the period that includes August 19, 1996, (and that the trust did not file a Form 1040NR for that period), or that the trust was not required to file a Form 1041 or a Form 1040NR for the period that includes August 19, 1996, with an accompanying brief explanation as to why a Form 1041 was not required to be filed; and

(4) The name, address, and employer identification number of the trust.

.02 Filing the Required Statement with the Service Except as provided below, the trust must attach the statement to a Form 1041. The statement may be attached to either the Form 1041 that is filed for the first taxable year of the trust beginning after December 31, 1996 (1997 taxable year), or to the Form 1041 filed for the first taxable year of the trust beginning after December 31, 1997 (1998 taxable year). The statement, however, must be filed no later than the due date for filing a Form 1041 for the 1998 taxable year, plus extensions. The election will be effective for the 1997 taxable year, and thereafter, until revoked or terminated. If the trust has already filed a Form 1041 for the 1997 taxable year without the statement attached, the statement should be attached to the Form 1041 filed for the 1998 taxable year.

If the trust has insufficient gross income and no taxable income for its 1997 or 1998 taxable year, or both, and therefore is not required to file a Form 1041 for either or both years, the trust must make the election by filing a Form 1041 for either the 1997 or 1998 taxable year with the statement attached (even though not otherwise required to file a Form 1041 for that year). The trust should only provide on the Form 1041 the trust’s name, name and title of fiduciary, address, employer identification number, date created, and type of entity. The statement must be attached to a Form 1041 that is filed no later than October 15, 1999.

If the trust files a Form 1040NR for the 1997 taxable year based on application of new § 7701(a)(30)(E) to the trust, and satisfies Section 3.01 of this notice, in order for the trust to make the election the trust must file an amended Form 1040NR return for the 1997 taxable year. The trust must note on the amended Form 1040NR that it is making an election under § 1161

May 4, 1998 12 1998–18 I.R.B.

of the Taxpayer Relief Act of 1997. The trust must attach to the amended Form 1040NR the statement required by this notice and a completed Form 1041 for the 1997 taxable year. The items of income, deduction and credit of the trust must be excluded from the amended Form 1040NR and reported on the Form 1041. The amended Form 1040NR for the 1997 taxable year, with the statement and the Form 1041 attached, must be filed with the Philadelphia Service Center no later than the due date, plus extensions, for filing a Form 1041 for the 1998 taxable year.

Treasury Department request comments on the rules in this notice and, in particular, the change in circumstances that would cause a termination of the election.

Comments should be submitted by June 30, 1998 to: Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044, Attn: CC:DOM:CORP:R (Notice 98–25 CC:DOM:P&SI:2), Room 5226. Submissions may be hand-delivered between the hours of 8 a.m. and 5 p.m. to: Courier’s Desk, Internal Revenue Service, 1111 Constitution Ave., NW, Washington, DC, Attn: CC:DOM:CORP:R (Notice 98–25 CC:DOM:P&SI:2), Room 5226. Alternatively, taxpayers may submit comments electronically at

http://www.irs.ustreas.gov/prod/tax__

regs/comments.html (the Service’s internet site). All comments submitted will be available for public inspection and copying. Please identify the comments as relating to this Notice 98–25.