SEC. 3. WITHHOLDING

CERTIFICATES—IN GENERAL

.01 Purpose of Withholding Certificate . Withholding under section 1445 of the Code may be reduced or eliminated pursuant to a withholding certificate issued by the Service in accordance with the rules set forth in this revenue procedure. A withholding certificate may be issued by the Service in cases where reduced withholding is appropriate, where the transferor is exempt from U.S. tax, or where an agreement for the payment of tax is entered into with the Service. A withholding certificate that is obtained prior to a transfer notifies the transferee that no withholding is required or that reduced withholding is required. A withholding certificate that is obtained after a transfer has been made may authorize a normal refund or an early refund. See section 1.1445-3(g) of the regulations. A withholding certificate issued pursuant to the provisions of this revenue procedure serves to fulfill the requirements, as applicable, of section 1445(b)(4) concerning qualifying statements, section 1445(c)(1) concerning the transferor’s maximum tax liability, or section 1445(c)(2) concerning the Secretary’s authority to prescribe reduced withholding.

.02 Limited Effect of a Withholding Certificate . A withholding certificate serves only to adjust withholding obligations to correspond as closely as possible to the probable tax liability arising out of a transfer. Therefore, all determinations that are made by the Service in connection with the issuance of a withholding certificate apply solely for the limited purpose of determining withholding obligations under section 1445 of the Code, and do not necessarily represent the

Service’s final view with respect to any substantive issue that may arise in connection with a transfer. Similarly, the Service’s acceptance in connection with the issuance of a withholding certificate of any evidence provided or any representation made by a taxpayer is made only for that purpose, is not binding for any other purpose, and does not constitute a final determination of the truth or accuracy of any such evidence or representation.

.03 Types of Withholding Certificates Available . Pursuant to section 1.1445-3 of the regulations, a withholding certificate may be issued on the basis of any of the following:

1. A determination by the Service that reduced withholding is appropriate because either:

(a) The amount otherwise required

to be withheld would exceed the transferor’s maximum tax liability; or (b) Withholding of a reduced

amount would not jeopardize collection of the tax. 2. The exemption from U.S. tax of all gain realized by the transferor; or

3. An agreement entered into by the transferee or transferor for the payment of tax providing security for the tax liability.