Part I. Rulings — Internal Revenue Bulletin 1999-46

Section 1.—Tax Imposed

The Service provides inflation adjustments to the tax rate tables for individuals, trusts, and estates for taxable years beginning in 2000. In addition, the amounts of certain reductions allowed against the unearned income of minor children in computing the “kiddie tax” are adjusted. Also adjusted are the amounts used to determine whether a parent may elect to report the “kiddie tax” on the parent’s return. See Rev. Proc. 99–42, page 568.

Section 32.—Earned Income

The Service provides inflation adjustments to the limitations on the earned income tax credit for taxable years beginning in 2000. See Rev. Proc. 99–42, page 568.

Section 59.—Other Definitions and Special Rules for the Alternative Minimum Tax

The Service provides an inflation adjustment to the exemption amount used in computing the alternative minimum tax for a minor child subject to the “kiddie tax” for taxable years beginning in 2000. See Rev. Proc. 99–42, page 568.

Section 63.—Taxable Income Defined

The Service provides inflation adjustments to the standard deduction amounts (including the limitation in the case of certain dependents, and the additional standard deduction for the aged or blind) for taxable years beginning in 2000. See Rev. Proc. 99– 42, page 568.

Section 68.—Overall Limitation on Itemized Deductions

The Service provides inflation adjustments to the overall limitation on itemized deductions for taxable years beginning in 2000. See Rev. Proc. 99–42, page 568.

Section 132.—Certain Fringe Benefits

The Service provides inflation adjustments to the limitations on the exclusion of income for a qualified transportation fringe benefit for taxable years beginning in 2000. See Rev. Proc. 99–42, page 568.

Section 135.—Income From United States Savings Bonds Used to Pay Higher Education Tuition and Fees

The Service provides inflation adjustments to the limitation on the exclusion of income from United States savings bonds for taxpayers who pay qualified higher education expenses for taxable years beginning in 2000. See Rev. Proc. 99–42, page 568.

Section 151.—Allowance of Deductions for Personal Exemptions

The Service provides inflation adjustments to the personal exemption and to the threshold amounts of adjusted gross income above which the exemption amount phases out for taxable years beginning in 2000. See Rev. Proc. 99–42, page 568.

Section 170.—Charitable, Etc., Contributions and Gifts

The Service provides inflation adjustments to the “insubstantial benefit” guidelines for calendar year 2000. Under the guidelines, a charitable contribution is fully deductible even though the contributor receives “insubstantial benefits” from the charity. See Rev. Proc. 99–42, page 568.

Section 213.—Medical, Dental, Etc., Expenses

The Service provides inflation adjustments to the limitation on the amount of eligible long-term care premiums includible in the term “medical care,” for taxable years beginning in 2000. See Rev. Proc. 99– 42, page 568.

Section 220.—Medical Savings Accounts

The Service provides inflation adjustments to the amounts used to determine whether a health plan is a “high deductible health plan” for purposes of determining whether an individual is eligible for a deduction for cash paid to a medical savings account for taxable years beginning in 2000. See Rev. Proc. 99– 42, page 568.

Section 512.—Unrelated Business Taxable Income

The Service provides an inflation adjustment to

the maximum amount of annual dues that can be paid to certain agricultural or horticultural organizations without any portion being treated as unrelated trade or business income by reason of any benefits or privileges available to members for taxable years beginning in 2000. See Rev. Proc. 99–42, page 568.

Section 513.—Unrelated Trade Or Business

The Service provides inflation adjustments to the maximum amount of a “low cost article” for taxable years beginning in 2000. Funds raised through a charity’s distribution of “low cost articles” will not be treated as unrelated business income to the charity. See Rev. Proc. 99–42, page 568.

Section 561.—Definition of Deduction for Dividends Paid

26 CFR 1.561–1: Deduction for dividends paid.

If a regulated investment company makes distributions to shareholders that vary as a result of the allocation of certain expenses, as a result of the allocation of the benefit of a waiver or reimbursement of certain expenses, or as a result of the allocation or waiver or reimbursement of a performance fee, may the company include those distributions in the amount of its deduction for dividends paid? See Rev. Proc. 99–40, page 565.

Section 562.—Rules Applicable in Determining Dividends Eligible for Dividends Paid Deduction

26 CFR 1.562–2: Preferential dividends.

Section 685.—Treatment of Funeral Trusts

The Service provides an inflation adjustment to the maximum amount of contributions that may be made to a qualified funeral trust for contracts entered in calendar year 2000. See Rev. Proc. 99–42, page 568.

November 15, 1999 562 1999–46 I.R.B.

Section 852.—Taxation of Regulated Investment Companies and Their Shareholders

26 CFR 1.852–1: Taxation of regulated investment companies.

26 CFR 1.852–3: Investment company taxable income.

Section 877.—Expatriation To Avoid Tax

The Service provides inflation adjustments to amounts used to determine whether an individual’s loss of United States citizenship had the avoidance of United Stated tax as one of its principal purposes for calendar year 2000. See Rev. Proc. 99–42, page 568.

Section 2032A.—Valuation of Certain Farm, Etc., Real Property

The Service provides an inflation adjustment to the maximum amount by which the value of certain farm and other qualified real property included in a decedent’s gross estate may be decreased for purposes of valuing the estate of a decedent dying in calendar year 2000. See Rev. Proc. 99–42, page 568.

Section 2503.—Taxable Gifts

The Service provides an inflation adjustment to the amount of gifts that may be made to a person in a calendar year without including the amount in taxable gifts for calendar year 2000. See Rev. Proc. 9942, page 568.

Section 2523.—Gift to Spouse

The Service provides an inflation adjustment to the amount of gifts that may be made in a calendar year to a spouse who is not a citizen of the United States without including the amount in taxable gifts for calendar year 2000. See Rev. Proc. 99–42, page 568.

Section 2631.—GST Exemption

The Service provides an inflation adjustment to the amount of the generation-skipping transfer tax exemption for calendar year 2000. See Rev. Proc. 99–42, page 568.

Section 3221.—Rate of Tax

Determination of Quarterly Rate of Excise Tax for Railroad Retirement Supplemental Annuity Program

In accordance with directions in Section 3221(c) of the Railroad Retirement Tax Act (26 U.S.C., Section 3221(c)), the Railroad Retirement Board has determined that the excise tax imposed by such Section 3221(c) on every employer, with respect to having individuals in his employ, for each work-hour for which compensation is paid by such employer for services rendered to him during the quarter beginning October 1, 1999, shall be at the rate of 27 cents.

In accordance with directions in Section 15(a) of the Railroad Retirement Act of 1974, the Railroad Retirement Board has determined that for the quarter beginning October 1, 1999, 37.1 percent of the taxes collected under Sections 3211(b) and 3221(c) of the Railroad Retirement Tax Act shall be credited to the Railroad Retirement Account and 62.9 percent of the taxes collected under such Sections 3211(b) and 3221(c) plus 100 percent of the taxes collected under Section 3221(d) of the Railroad Retirement Tax Act shall be credited to the Railroad Retirement Supplemental Account.

Dated September 7, 1999.

By Authority of the Board.

Beatrice Ezerski, Secretary to the Board.

(Filed by the Office of the Federal Register on September 15, 1999, 8:45 a.m., and published in the issue of the Federal Register for September 16, 1999, 64 F.R. 50308)

Section 4001.—Passenger Vehicles

The Service provides inflation adjustments to the price above which a passenger vehicle becomes subject to an excise tax for transactions occurring in calendar year 2000. See Rev. Proc. 99–42, page 568.

Section 4003.—Special Rules

The Service provides inflation adjustments to the price above which a passenger vehicle becomes subject to an excise tax for transactions occurring in calendar year 2000. (Price includes the price of installation of parts or accessories on a passenger vehicle within six months of the date after the vehicle was first placed in service.) See Rev. Proc. 99–42, page 568.

Section 4261.—Transportation by Air

The Service provides an inflation adjustment to the amount of the excise tax on passenger air transportation beginning or ending in the United States for calendar year 2000. See Rev. Proc. 99–42, page 568.

Section 6033.—Returns by Exempt Organizations

The Service provides an inflation adjustment to the amount of dues certain exempt organizations with nondeductible lobbying expenditures can charge and still be excepted from reporting requirements for taxable years beginning in 2000. See Rev. Proc. 99–42, page 568.

Section 6039F.—Notice of Large Gifts Received From Foreign Persons

The Service provides an inflation adjustment to the amount of gifts in a taxable year from foreign person(s) that triggers a reporting requirement for a United States person for taxable years beginning in 2000. See Rev. Proc. 99–42, page 568.

Section 6323.—Validity and Priority Against Certain Persons

The Service provides inflation adjustments for calendar year 2000 to (1) the maximum amount of a casual sale of personal property below which a federal tax lien will not be valid against a purchaser of the property, and (2) the maximum amount of a contract for the repair or improvement of certain residential property at or below which a federal tax lien will not be valid against a mechanic’s lienor. See Rev. Proc. 99–42, page 568.

1999–46 I.R.B. 563 November 15, 1999

Section 6334.—Property Exempt From Levy

The Service provides inflation adjustments to the value of certain property exempt from levy (fuel, provisions, furniture, household personal effects, arms for personal use, livestock, poultry, and books and tools of a trade, business, or profession) for calendar year 2000. See Rev. Proc. 99–42, page 568.

Section 6601.—Interest on Underpayment, Nonpayment, or Extension of Time for Payment, of Tax

The Service provides an inflation adjustment to

the amount used to determine the amount of interest charged on a certain portion of the estate tax payable in installments for the estate of a decedent dying in calendar year 2000. See Rev. Proc. 99–42, page 568.

Section 7430.—Awarding of Costs and Certain Fees

The Service provides an inflation adjustment to the hourly limit on attorney fees that may be awarded in a judgment or settlement of an administrative or judicial proceeding concerning the determination, collection, or refund of tax, interest, or penalty for calendar year 2000. See Rev. Proc. 99– 42, page 568.

Section 7702B.—Treatment of Qualified Long-Term Care Insurance

The Service provides an inflation adjustment to the stated dollar amount of the per diem limitation regarding periodic payments received under a qualified long-term care insurance contract or periodic payments received under a life insurance contract that are treated as paid by reason of the death of a chronically ill individual for calendar year 2000. See Rev. Proc. 99–42, page 568.

November 15, 1999 564 1999–46 I.R.B.