SECTION 9. EFFECT ON OTHER

DOCUMENTS

Rev. Proc. 92–13, Rev. Proc. 92–13A, 1992–1 C.B. 668, and Rev. Proc. 94–12, 1994–1 C.B. 565, are modified, amplified, and superseded.

DRAFTING INFORMATION

The principal authors of this revenue procedure are Roy A. Hirschhorn and Martin Scully, Jr. of the Office of Assistant Chief Counsel (Income Tax and Accounting). For further information regarding this revenue procedure, contact Roy A. Hirschhorn or Martin Scully, Jr. on (202) 622-4960 (not a toll-free call).

Exchange of MACRS Property for MACRS Property

Notice 2000–4

This notice provides guidance about the depreciation of property subject to § 168 of the Internal Revenue Code (MACRS property) that is acquired in a like-kind exchange under § 1031 or as a result of an involuntary conversion under § 1033. The Internal Revenue Service and the Department of Treasury intend to issue regulations under § 168 that will address these transactions. Taxpayers should follow this notice until these regulations are issued. Public comments to aid in the development of the regulations are requested by March 31, 2000.

BACKGROUND

Section 167 allows as a depreciation deduction a reasonable allowance for the exhaustion, wear and tear of property used a trade or business or held for the production of income. The depreciation allowable for depreciable tangible property placed in service after 1986 generally is determined under § 168 (MACRS).

Section 1031(a)(1) provides that no gain or loss is recognized on the exchange of property held for productive use in a

trade or business or for investment if the property is exchanged solely for property of like kind that is to be held either for productive use in a trade or business or for investment.

Section 1033(a)(1) provides that if property (as a result of its destruction in whole or in part, theft, seizure, or requisition or condemnation or threat or imminence thereof) is compulsorily or involuntarily converted into property similar or related in service or use to the property so converted, no gain is recognized.

The basis of property acquired in a transaction to which § 1031 or § 1033 applies generally is the same as the property surrendered in the transaction less any cash received plus any gain recognized. However, there is no guidance as to how to depreciate the basis of the acquired property under § 168.

APPLICATION

For purposes of determining the depreciation allowable for MACRS property acquired in an exchange of MACRS property for like-kind property to which § 1031 applies, or acquired in replacement of involuntarily converted MACRS property to which § 1033 applies, the acquired MACRS property should be treated in the same manner as the exchanged or involuntarily converted MACRS property with respect to so much of the taxpayer’s basis in the acquired MACRS property as does not exceed the taxpayer’s adjusted basis in the exchanged or involuntarily converted MACRS property. Thus, the acquired MACRS property is depreciated over the remaining recovery period of, and using the same depreciation method and convention as that of, the exchanged or involuntarily converted MACRS property. Any excess of the basis in the acquired MACRS property over the adjusted basis in the exchanged or involuntarily converted MACRS property is treated as newly purchased MACRS property.

For acquired MACRS property placed in service on or after January 3, 2000, in a like-kind exchange of MACRS property under § 1031 or as a result of an involuntary conversion of MACRS property under § 1033, a taxpayer must follow the principles set out in this notice.

For acquired MACRS property placed in service before January 3, 2000, in a

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like-kind exchange of, or as a result of an involuntary conversion of, MACRS property, the Service is aware that taxpayers are depreciating this acquired property either (i) in the manner set out in this notice consistent with §1.168–5(f) of the proposed Income Tax Regulations, published in the Federal Register on February 16, 1984 (49 Fed. Reg. 5940), under former § 168 (ACRS); or (ii) as newly purchased MACRS property. The Service will allow a taxpayer to continue to use its present method of depreciating the acquired property and will treat these methods as allowable methods of depreciation. However, a taxpayer presently treating the acquired property as newly purchased MACRS property may change to treating the property under the principles in this notice, provided the property has been treated by the taxpayer as acquired in a § 1031 likekind exchange or § 1033 involuntary conversion and the change is made for the first or second taxable year ending after January 3, 2000.

CHANGE IN METHOD OF ACCOUNTING

A change from treating MACRS property acquired in a § 1031 like-kind exchange or § 1033 involuntary conversion as newly purchased MACRS property to treating the property under the principles of this notice is a change in method of accounting to which the provisions of § 446 and § 481 and the regulations thereunder apply. A taxpayer changing its method of accounting for the acquired MACRS property must follow the automatic change in accounting method provisions of Rev. Proc. 99–49, 1999–52 I.R.B. 725, provided the taxpayer makes the change in method of accounting for the first or second taxable year ending after January 3, 2000, and takes into account any necessary § 481(a) adjustment in accordance with the provisions of Rev. Proc. 99–49. The scope limitations in section 4.02 of Rev. Proc. 99–49 do not apply to the taxpayer. However, if the taxpayer is under examination, before an appeals office, or before a federal court, the taxpayer must provide a copy of the Form 3115, Application for Change in Accounting Method, to the examining agent(s), appeals officer, or counsel for the government, as appropriate, at the same time that the taxpayer files the copy of the Form 3115 with the

national office. The Form 3115 must contain the name(s) and telephone number(s) of the examining agent(s), appeals officer, or counsel for the government, as appropriate.

REQUEST FOR COMMENTS

The Service and the Treasury Department intend to issue regulations under § 168 to address the depreciation of MACRS property acquired in a § 1031 like-kind exchange or § 1033 involuntary conversion. Before issuing proposed regulations, the Service and the Treasury Department invite comments from the public to aid in the development of these regulations. Comments should be submitted in writing by March 31, 2000, to:

Internal Revenue Service EXCHANGE OF MACRS PROPERTY FOR MACRS PROPERTY CC:DOM:P&SI:6, Room 5112 P.O. Box 7604 Benjamin Franklin Station Washington, DC 20044 Alternatively, comments may be submitted electronically via: http://www.irs.gov/prod/tax_regs/comments.html (the Service Internet site).

EFFECT ON OTHER DOCUMENTS

Rev. Proc. 99–49 is modified and amplified to include this automatic accounting method change in the Appendix.

DRAFTING INFORMATION

The principal author of this notice is Alan H. Cooper of the Office of Assistant Chief Counsel (Passthroughs and Special Industries). For further information regarding this notice contact Mr. Cooper at (202) 622-3110 (not a toll-free call).

Penalty Relief for Certain Taxpayers Affected by Section 571 of the Tax Relief Extension Act of 1999

Notice 2000–5

PURPOSE

This notice informs taxpayers of penalty relief available for certain corporate taxpayers whose December 15, 1999,

estimated tax installment is affected by § 571 of the Tax Relief Extension Act of 1999, P.L. 106–170 (“the Act”). The notice provides specific procedures for these taxpayers to follow in order to qualify for the penalty relief.

BACKGROUND

Section 571 of the Act amends § 6655 of the Internal Revenue Code by adding new subsection (e)(5). This subsection provides that any dividend that is received from a closely-held real estate investment trust by any person that owns (after application of § 856(d)(5)) 10 percent or more (by vote or value) of the stock or beneficial interests in the trust will be taken into account in computing annualized income tax installments under § 6655(e)(2) in a manner similar to the manner under which partnership income inclusions are taken into account. The statute also references attribution under § 856(l)(3)(B). This reference is erroneous and presumably will be the subject of a technical correction. For the purposes of § 6655(e)(5), the term “closely-held real estate investment trust” means a real estate investment trust with respect to which five or fewer persons own (after application of § 856(d)(5)) 50 percent or more (by vote or value) of the stock or beneficial interests in the trust. The amendment made by § 571 of the Act applies to estimated tax payments due on or after December 15, 1999.

RETROACTIVE EFFECT OF SECTION 571 OF THE ACT

The President signed the Act into law on December 17, 1999. As a result, § 571 of the Act retroactively applies to estimated tax installment payments due on December 15, 1999, by those corporate taxpayers that employ the annualization method to calculate quarterly estimated tax installment payments. Those taxpayers may have used the law in effect on December 15, 1999, to calculate their estimated tax installment due on that date. The retroactive application of § 571 of the Act may result in those taxpayers underpaying their installment due on December 15, 1999. If so, those taxpayers may be subject to an addition to tax under § 6655 of the Code.

PENALTY RELIEF

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engage in millions of transactions daily involving property or services with very low fair market values. In these situations, the barter exchange reporting requirements under § 6045 may impose burdens on the barter exchange that outweigh the benefits of the information collected on Forms 1099–B. Accordingly, the Treasury Department and the Service are studying barter exchange issues with a view to proposing new regulations regarding the information reporting responsibilities of the exchanges.

DE MINIMIS EXCEPTION

A barter exchange is not required to provide an information return with respect to an exchange of property or services if the fair market value of the property or services received in that exchange is less than $1.00.

This exception applies with respect to information returns that would otherwise be due on or after January 5, 2000, and before new regulations are issued addressing the information reporting responsibilities of barter exchanges. With respect to information returns that were due before January 5, 2000, the Service will not impose penalties under §§ 6721 and 6722 on a barter exchange for its failure to file the returns or furnish payee statements with respect to exchanges that meet the criteria of the de minimis exception above.

REQUEST FOR COMMENTS

The Treasury Department and the Service invite comments on this notice and on other information reporting issues relating to barter exchanges in connection with the future regulations. In particular, comments are requested concerning other means of reducing the reporting burden on barter exchanges, such as:

(1) Whether the regulations should provide an exception to the reporting requirements for cases in which the fair market value of property or services received by the member or client falls below a de minimis transactional threshold (such as that described in this notice) but only if the total fair market value of property or services received by the member or client during a calendar year does not exceed an aggregate threshold. (2) Whether the regulations should

In a situation in which the amendment made by § 571 of the Act creates or increases an underpayment for the quarterly estimated tax installment due on December 15, 1999, the Service will not assess or will abate any addition to tax resulting from the change in law to the extent that the taxpayer, on or before January 13, 2000, makes a deposit sufficient to satisfy such underpayment using either Form 8109, Federal Tax Deposit Coupon, or the Electronic Federal Tax Payment System (EFTPS) if the taxpayer is required to deposit electronically or chooses to do so voluntarily. The taxpayer must designate that the deposit is for the taxpayer’s estimated tax installment due December 15, 1999. Further, the taxpayer’s 1999 Form 2220, Underpayment of Estimated Tax by Corporations, should clearly state across the top “Penalty Relief Under Notice 2000–5.” If a taxpayer that makes a deposit as described above and receives a notice imposing an addition to tax based on an underpayment of the estimated tax for the installment due on December 15, 1999, and the underpayment relates to the change to the law by § 571 of the Act, the taxpayer should contact the IRS office issuing the notice and request abatement of the addition to tax based on the provisions in this notice.

DRAFTING INFORMATION

The principal author of this notice is Robert A. Desilets, Jr. of the Office of Assistant Chief Counsel (Income Tax and Accounting). For further information regarding this notice contact Robert A. Desilets, Jr. at (202) 622-4910 (not a toll-free call).

Returns of Information of Brokers and Barter Exchanges

Notice 2000–6

PURPOSE

This notice provides that, pending the issuance of new regulations by the Internal Revenue Service (Service) and the Treasury Department, a barter exchange is not required under § 6045 of the Internal Revenue Code to report exchanges in

volving property or services with a fair market value of less than $1.00. This notice also invites comments on information reporting issues under § 6045 relating to barter exchanges in connection with the new regulations.

BACKGROUND

Section 6045 and the regulations thereunder generally require a barter exchange to make a return of information with respect to exchanges of personal property or services through the barter exchange during the calendar year among its members or clients or between such persons and the barter exchange. Section 1.6045-1(a)(4) of the Income Tax Regulations defines a barter exchange generally to include any person with members or clients that contract either with each other or with such person to trade or barter property or services either directly or through such person. However, a barter exchange through which there are fewer than 100 exchanges during the calendar year generally is exempt from reporting for, or making a return of information with respect to, exchanges during such calendar year. Section 1.6045–1(e)(2)(ii).

Section 1.6045–1(f)(2) generally requires a barter exchange to make returns of information on a transactional basis. Under this provision, the barter exchange must show on Form 1099–B, Proceeds From Broker and Barter Exchange Transactions, the name, address, and taxpayer identification number of each member or client providing property or services in the exchange, the property or services provided, the amount received by the member or client for such property or services, the date on which the exchange occurred, and such other information required by Form 1099, in the form, manner, and number of copies required by Form 1099. However, as to each corporate member or client (as defined in the regulations) providing property or services in an exchange for which a return of information is required, the regulations allow the barter exchange to report based on an aggregate basis, rather than on a transactional basis, for the reporting period.

The Treasury Department and the Service have become aware of a growing number of barter exchanges that, through the use of electronic or Internet services,

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allow annual aggregate reporting with respect to amounts received by noncorporate members or clients. (3) Whether the regulations should specifically require annual aggregate reporting, rather than transactional reporting, with respect to transactions involving certain types of property or services. (4) Whether the regulations should apply special rules to certain bartering transactions involving the provision of electronic or Internet services. Further, the Treasury Department and the Service welcome information and comments on additional tax issues associated with electronic commerce transactions.

Written comments should be submitted by April 4, 2000. Written comments should be sent to:

Internal Revenue Service Attn: CC:DOM:CORP:R Room 5228 (IT&A:Br2) P.O. Box 7604 Ben Franklin Station Washington, DC 20044. or hand delivered between the hours of 8 a.m. and 5 p.m. to:

Courier’s Desk Internal Revenue Service Attn: CC:DOM:CORP:R (Notice 2000–6) Room 5228 (IT&A:Br2) 1111 Constitution Avenue, NW

Washington, D.C. Alternatively, taxpayers may submit comments electronically via e-mail to the following address:

Sharon.Y.Horn@M1.IRSCOUNSEL.TR EAS.GOV All comments will be available for public inspection and copying in their entirety.

DRAFTING INFORMATION

The principal author of this notice is Edwin B. Cleverdon of the Office of Assistant Chief Counsel (Income Tax & Accounting). For further information regarding this notice, contact Mr. Cleverdon at (202) 622-4920 (not a toll-free call).

January 18, 2000 316 2000–3 I.R.B.