Part III. Administrative, Procedural, and Miscellaneous

DRAFTING INFORMATION

The principal author of this revenue procedure is John W. Rogers III of the Office of the Associate Chief Counsel (International). For further information regarding this revenue procedure, please contact Mr. Rogers at (202) 622-3870 (not a toll-free call), or write to the Internal Revenue Service, Office of the Associate Chief Counsel (International), 1111 Constitution Avenue, NW, Washington, DC 20224, Attention: CC:INTL:Br5, Room 4554.

Losses Claimed on Certain Intangible Assets

Notice 2000–34

This notice informs Blue Cross Blue Shield insurance organizations (“BCBS organizations”) that the Internal Revenue Service will challenge deductions for losses for the termination of individual customer, provider, or employee contracts or relationships associated with customer lists, provider networks, and workforce in place with respect to which the taxpayer claims an adjusted basis derived from § 1012(c)(3)(A)(ii) of the Tax Reform Act of 1986 (the Act).

Section 1012 of the Act revoked the tax-exempt status of BCBS organizations and added § 833 of the Internal Revenue Code (the “Code”), which treats those organizations as taxable stock insurance companies. Under § 1012(c)(3)(A)(ii) of the Act, each organization’s adjusted bases in its assets, for purposes of determining gain or loss, is deemed equal to the assets’ fair market values as of the first day of its first taxable year beginning after December 31, 1986.

The Conference Committee Report accompanying the Act states that this fair market value basis adjustment was provided “solely for purposes of determining gain or loss upon the sale or exchange of the assets, not for purposes of determining amounts of depreciation or for other purposes.” H.R. Conf. Rept. 841, 99 ^th

Cong., 2d Sess. II- 350 (1986). The Conference Report further clarifies that the basis adjustment was provided because

26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement; determination of correct tax liability.

Rev. Proc. 2000–32