SEC. 5. PROCEDURES TO BE — Internal Revenue Bulletin 1999-34

FOLLOWED

.01 Cases pending with the Internal Revenue Service.

(1) If a United States taxpayer whose taxable income has been adjusted by the Internal Revenue Service pursuant to section 482 of the Code desires to avail itself of the treatment provided in section 4, it

must file a request in writing with the Service before closing action is taken on the primary adjustment. For purposes of this revenue procedure, the first occurring of the following shall constitute “closing action”:

(a) Execution and acceptance of Form 870-AD, Offer of Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and of Acceptance of Overassessment, or execution of a closing agreement relative to the section 482 allocation;

(b) Stipulation of a section 482 allocation in the Tax Court of the United States;

(d) Final determination of tax liability for the year to which the allocation relates by offer-in-compromise, closing agreement, or court action.

(2) The request shall be signed by a person having the authority to sign the United States taxpayer’s Federal income tax returns, and shall contain the following:

(a) A statement that the taxpayer desires the treatment provided by section 4 of this revenue procedure and the years for which the treatment is requested;

(b) A description of the arrangements or transactions, or the terms thereof, which gave rise to the primary adjustment;

(3) The Service will determine whether the United States taxpayer qualifies for the requested treatment and inform the taxpayer of its decision.

(4) If the Service concludes that section 4 of this revenue procedure properly applies, and if the amount of the primary adjustment has been agreed upon, the United States taxpayer will be requested to enter into a closing agreement under section 7121 of the Code, establishing for each year involved:

(a) The amount of the primary adjustment;

(b) The amount and currency of, and parties to, the account which the taxpayer elects to establish under section 4.01;

(d) The amount of any foreign tax credit that the taxpayer will claim under section 901 of the Code with respect to payment of the principal or interest on an account established pursuant to section 4.01; (e) The manner of payment of the account pursuant to sections 4.01 and 4.02 and the taxpayer’s right to receive or make such payment free of the Federal income tax consequences of the secondary adjustments that would otherwise result from the primary adjustment, provided the payment of the balance of the account, after taking into consideration any prepayment pursuant to section 4.02 is made within 90 days after execution of the closing agreement on behalf of the Commissioner.

.02 Cases of a United States taxpayer reporting an adjustment pursuant to sec- tion 1.482–1(a)(3) of the regulations. If a United States taxpayer that has increased or decreased its taxable income pursuant to section 482 and section 1.482–1(a)(3) of the regulations desires to avail itself of the treatment provided in section 4, it must file a statement with its Federal income tax return reporting the primary adjustment:

(1) A statement that the taxpayer desires the treatment provided by section 4 of this revenue procedure for the years indicated and acknowledges that it is bound by its election of such treatment;

(2) A description of the arrangements or transactions, or the terms thereof, which gave rise to the primary adjustment;

(3) The amount of the primary adjustment;

(4) The amount and nature of any correlative allocation to each related person from, or to, whom the section 482 allocation is made with respect to a controlled transaction, and the corresponding account and treatment thereof by each such related person that is consistent with the treatment applied under this revenue procedure;

(5) The amount and currency of, and parties to, the account which the taxpayer elects to establish under section 4.01;

(6) The amount of interest on the account includible in income, or deductible, pursuant to section 4.01 and the years of such inclusion or deduction;

(7) The amount of any foreign tax credit that the taxpayer will claim under section

August 23, 1999 300 1999–34 I.R.B.

901 of the Code with respect to payment of the principal or interest on an account established pursuant to section 4.01;

(8) The manner of payment of the account pursuant to sections 4.01 and 4.02, which shall be free of the Federal income tax consequences of the secondary adjustments that would otherwise result from the primary adjustment, provided the payment of the balance of the account, after taking into consideration any prepayment pursuant to section 4.02, is made within 90 days of the date on which the taxpayer files the return reporting the primary adjustment, and a statement that any such payment within the 90-day period, and any such prepayment prior to that time, shall be treated as a payment of the account for all Federal income tax purposes, regardless of its characterization under foreign law.

.03 Cases pending before the Tax Court of the United States. If a case reaches trial status in the Tax Court and it is determined that the United States taxpayer is entitled to the treatment provided in section 4, the parties may stipulate or otherwise arrange with the Court so that any adjustment in tax for the years before the Court will reflect the application of section 4, provided the taxpayer executes the required closing agreement.

.04 Cases within the jurisdiction of the Department of Justice. If a United States taxpayer files with the Service a request for treatment under section 4, with respect to a case within the jurisdiction of the Department of Justice, the Service, through its Chief Counsel, will recommend to the Department of Justice the action to be taken with respect to the taxpayer’s request.