Part I. Rulings — Internal Revenue Bulletin 2003-49

Section 42.—Low-Income Rev. Rul. 2003–124 year of birth of the individual. In deterHousing Credit mining an employee’s covered compensa

Rev. Rul. 2003–124

year of birth of the individual. In determining an employee’s covered compensation for a plan year, the taxable wage base for all calendar years beginning after the first day of the plan year is assumed to be the same as the taxable wage base in effect as of the beginning of the plan year. An employee’s covered compensation for a plan year beginning after the 35-year period applicable under § 1.401( l )–1(c)(7)(i) is the employee’s covered compensation for a plan year during which the 35-year period ends. An employee’s covered compensation for a plan year beginning before the 35-year period applicable under § 1.401( l )–1(c)(7)(i) is the taxable wage base in effect as of the beginning of the plan year.

Section 1.401( l )–1(c)(7)(ii) provides that, for purposes of determining the amount of an employee’s covered compensation under § 1.401( l )–1(c)(7)(i), a plan may use tables, provided by the Commissioner, that are developed by rounding the actual amounts of covered compensation for different years of birth.

For purposes of determining covered compensation for the 2004 year, the taxable wage base is $87,900.

The following tables provide covered compensation for 2004:

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of December 2003. See Rev. Rul. 2003-122, page 1179.

Section 280G.—Golden Parachute Payments

Federal short-term, mid-term, and long-term rates are set forth for the month of December 2003. See Rev. Rul. 2003-122, page 1179.

Section 382.—Limitation on Net Operating Loss Carryforwards and Certain Built-In Losses Following Ownership Change

The adjusted applicable federal long-term rate is set forth for the month of December 2003. See Rev. Rul. 2003-122, page 1179.

Section 401.—Qualified Pension, Profit-Sharing, and Stock Bonus Plans

26 CFR 1.401(l)–1: Permitted disparity in employer- provided contributions or benefits.

Covered compensation tables; 2004. The covered compensation tables under section 401 of the Code for the year 2004 are provided for use in determining contributions to defined benefit plans and permitted disparity.

This revenue ruling provides tables of covered compensation under § 401( l )(5)(E) of the Internal Revenue Code (the “Code”) and the Income Tax Regulations, thereunder, for the 2004 plan year.

Section 401( l )(5)(E)(i) defines covered compensation with respect to an employee, as the average of the contribution and benefit bases in effect under section 230 of the Social Security Act (the “Act”) for each year in the 35-year period ending with the year in which the employee attains social security retirement age.

Section 401( l )(5)(E)(ii) of the Code states that the determination for any year preceding the year in which the employee attains social security retirement age shall be made by assuming that there is no increase in covered compensation after the determination year and before the employee attains social security retirement age.

Section 1.401( l )–1(c)(34) defines the taxable wage base as the contribution and benefit base under section 230 of the Act.

Section 1.401( l )–1(c)(7)(i) defines covered compensation for an employee as the average (without indexing) of the taxable wage bases in effect for each calendar year during the 35-year period ending with the last day of the calendar year in which the employee attains (or will attain) social security retirement age. A 35-year period is used for all individuals regardless of the

2003-49 I.R.B. 1173 December 8, 2003

2004 COVERED COMPENSATION TABLE

CALENDAR YEAR OF BIRTH

2004 COVERED COMPENSATION TABLE

CALENDAR YEAR OF SOCIAL

SECURITY RETIREMENT AGE

1907 1972 $4,488 1908 1973 4,704 1909 1974 5,004 1910 1975 5,316 1911 1976 5,664 1912 1977 6,060 1913 1978 6,480 1914 1979 7,044 1915 1980 7,692 1916 1981 8,460 1917 1982 9,300 1918 1983 10,236 1919 1984 11,232 1920 1985 12,276 1921 1986 13,368 1922 1987 14,520 1923 1988 15,708 1924 1989 16,968 1925 1990 18,312 1926 1991 19,728 1927 1992 21,192 1928 1993 22,716 1929 1994 24,312 1930 1995 25,920 1931 1996 27,576 1932 1997 29,304 1933 1998 31,128 1934 1999 33,060 1935 2000 35,100 1936 2001 37,212 1937 2002 39,444 1938 2004 43,992 1939 2005 46,284 1940 2006 48,576 1941 2007 50,832 1942 2008 53,028 1943 2009 55,164 1944 2010 57,276 1945 2011 59,352 1946 2012 61,392 1947 2013 63,396 1948 2014 65,256 1949 2015 67,020 1950 2016 68,688 1951 2017 70,272 1952 2018 71,760 1953 2019 73,200 1954 2020 74,580 1955 2022 77,148 1956 2023 78,372 1957 2024 79,512 1958 2025 80,556 1959 2026 81,540 1960 2027 82,464 1961 2028 83,340 1962 2029 84,120 1963 2030 84,876 1964 2031 85,596

December 8, 2003 1174 2003-49 I.R.B.

2004 COVERED COMPENSATION TABLE

CALENDAR YEAR OF BIRTH

2004 COVERED COMPENSATION TABLE

CALENDAR YEAR OF SOCIAL

SECURITY RETIREMENT AGE

1965 2032 86,244 1966 2033 86,796 1967 2034 87,240 1968 2035 87,564 1969 2036 87,780 1970 2037 87,864 1971 and later 2038 87,900

2004 Rounded Covered Compensation Table

Year of Birth Covered Compensation

1937 39,000 1938 - 1939 45,000 1940 48,000 1941 51,000 1942 - 1943 54,000 1944 57,000 1945 - 1946 60,000 1947 63,000 1948 - 1949 66,000 1950 - 1951 69,000 1952 - 1953 72,000 1954 75,000 1955 - 1956 78,000 1957 - 1960 81,000 1961 - 1963 84,000 1964 - 1967 87,000 1968 and later 87,900

DRAFTING INFORMATION

The principal author of this revenue ruling is Lawrence Isaacs of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this revenue ruling, please contact the Employee Plans taxpayer assistance telephone service at 1–877–829–5500, between the hours of 8:00 a.m. and 6:30 p.m. Eastern time, Monday through Friday (a toll-free number). Mr. Isaac’s number is (202) 283–9710 (not a toll-free number).

Section 412.—Minimum Funding Standards

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of December 2003. See Rev. Rul. 2003-122, page 1179.

Section 461.—General Rule for Taxable Year of Deduction

26 CFR 1.461–2T: Contested liabilities (temporary).

T.D. 9095

DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1

Transfers to Provide for Satisfaction of Contested Liabilities

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

SUMMARY: This document contains regulations relating to transfers of money or

other property to provide for the satisfaction of contested liabilities. The regulations affect taxpayers that are contesting an asserted liability and that transfer their own stock or indebtedness, the stock or indebtedness of a related party, or a promise to provide services or property in the future, to provide for the satisfaction of the liability prior to the resolution of the contest. The regulations also affect taxpayers that transfer money or other property to a trust, an escrow account, or a court to provide for the satisfaction of a liability for which payment is economic performance. The text of these temporary regulations also serves as the text of the proposed regulations (REG–136890–02) set forth in the notice of proposed rulemaking on this subject in this issue of the Bulletin.

DATES: Effective Date: These regulations are effective November 19, 2003.

Applicability Dates: For dates of applicability, see §1.461–2T(g).

2003-49 I.R.B. 1175 December 8, 2003

liabilities other liabilities for which other specific rules are not provided.

Section 1.461–4(g)(1)(ii)(A) provides that payment does not include the furnishing of a note or other evidence of indebtedness of the taxpayer.

Section 1.461–4(g)(1)(i) provides that, for liabilities for which payment is economic performance, economic performance does not occur as a taxpayer makes payments in connection with a liability to any other person, including a trust, escrow account, court-administered fund, or any similar arrangement, unless the payments constitute payment to the person to which the liability is owed under paragraph (g)(1)(ii)(B). Section 1.461–4(g)(1)(ii)(B) states that payment is accomplished if a cash basis taxpayer in the position of the person to which the liability is owed would be treated as having actually or constructively received the amount of the payment as gross income under section 451.

Explanation of Provisions

Transfers of Property to Provide for the Satisfaction of an Asserted Liability

The regulations remove §1.461–2(c)(1) and add §1.461–2T(c)(1). The temporary regulations restructure the provisions of current §1.461–2(c)(1) for greater clarity but retain all of the rules in §1.461–2(c)(1), including the requirement that the taxpayer must transfer money or other property beyond the taxpayer’s control and relinquish all authority over the money or other property transferred. The temporary regulations clarify that the transfer of the indebtedness of a taxpayer or of any promise by the taxpayer to provide services or property in the future is not a transfer to provide for the satisfaction of an asserted liability. See Eckert v. Burnet, 283 U.S. 140 (1931); Willamette Industries, Inc., v. Commissioner, 92 T.C. 1116 (1989), aff’d, 149 F.3d 1057 (9 ^th Cir. 1998). In addition, the temporary regulations provide the express rule that a transfer (other than to the person asserting the liability) of a taxpayer’s stock, or the indebtedness or stock of a person related to the taxpayer (as defined in section 267(b)), is not a transfer to provide for the satisfaction of an asserted liability. These rules are consistent with section 468B(d)(1)(B), which excludes as

FOR FURTHER INFORMATION CONTACT: Norma Rotunno, (202) 622–7900 (not a toll free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains amendments to the Income Tax Regulations (26 CFR Part

under section 461(f) of the Internal Revenue Code (Code) relating to the transfer of money or other property to provide for the satisfaction of an asserted liability that a taxpayer is contesting. Section 461(f) provides an exception to the general rules of tax accounting by allowing a taxpayer to deduct a contested liability in a year prior to the resolution of the contest if the following conditions are met: (1) the taxpayer contests an asserted liability, (2) the taxpayer transfers money or other property to provide for the satisfaction of the asserted liability, (3) the contest with respect to the asserted liability exists after the time of transfer, and (4) but for the fact that the asserted liability is contested, a deduction would be allowed for the taxable year of the transfer (or for an earlier taxable year) determined after the application of the economic performance rules. If these requirements are satisfied, a taxpayer may deduct the liability in the taxable year of the transfer.

Section 461(f)(2) requires the taxpayer to transfer money or other property to provide for the satisfaction of the asserted liability. Neither the statute nor the regulations specifically define money or other property. The examples in the regulations and the legislative history involve only transfers of cash.

Under §1.461–2(c)(1) of the Income Tax Regulations, a transfer for the satisfaction of an asserted liability is a transfer of money or other property beyond the taxpayer’s control to: (1) the person asserting the liability, (2) an escrowee or trustee pursuant to a written agreement (among the escrowee or trustee, the taxpayer, and the person who is asserting the liability) providing that the money or other property be delivered in accordance with the settlement of the contest, (3) an escrowee or trustee pursuant to an order of a court or government entity providing that the money or other property be delivered in accordance with the settlement of

the contest, or (4) a court with jurisdiction over the contest. The taxpayer must relinquish all authority over the money or other property transferred.

To qualify for a deduction, section 461(f)(4) provides that a deduction is allowed in the taxable year of the transfer only if, but for the fact that the asserted liability is contested, a deduction would be allowed for the taxable year of the transfer (or for an earlier taxable year) “determined after application of subsection (h).” Congress added the quoted language to section 461(f)(4) when Congress enacted section 461(h), which provides, for amounts with respect to which a deduction would be allowable after July 18, 1984, that the all events test is not met any earlier than when economic performance has occurred with respect to the liability. Section 461(h)(2)(C) provides that payment to another person is required to satisfy economic performance for liabilities arising out of any workers compensation act or any tort. The Conference Report accompanying enactment of section 461(h) explains the impact of the economic performance requirement on trusts established under section 461(f):

In the case of workers’ compensation or tort liabilities of the taxpayer requiring payments to another person, economic performance occurs as payments are made to that person. Since payment to a section 461(f) trust is not a payment to the claimant and does not discharge the taxpayer’s liability to the claimant, such payment does not satisfy the economic performance test. H. R. Rep. No. 861, 98 ^th Cong., 2d Sess. 871, 876 (1984). For transfers in taxable years beginning after December 31, 1991, §1.461–4(g)(2)-(7) expands the list of liabilities for which payment “to the person to which the liability is owed” constitutes economic performance (payment liabilities). The additional payment liabilities listed in §1.461–4(g)(2)-(6) include liabilities for breach of contract (to the extent of incidental, consequential, and liquidated damages) or violation of law, rebates and refunds, awards, prizes, jackpots, insurance, warranty and service contracts, and taxes. In addition, §1.461–4(g)(7) characterizes as payment

December 8, 2003 1176 2003-49 I.R.B.

Adding new paragraph (e)(2). The addition and revisions read as follows:

§1.461–2 Contested liabilities.

- - - (c) * - (1) [Reserved]. For further guidance, see §1.461–2T(c)(1).
- - - (e) * - (2) [Reserved]. For further guidance, see §1.461–2T(e)(2).

(3) Examples. The provisions of this paragraph are illustrated by the following examples:

Example 1. A, an individual, makes a gift of certain property to B, an individual. A pays the entire amount of gift tax assessed against him but contests his liability for the tax. Section 275(a)(3) provides that gift taxes are not deductible. A does not satisfy the requirement of paragraph (a)(1)(iv) of this section because a deduction would not be allowed for the taxable year of the transfer even if A did not contest his liability to the tax.

Example 2. [Reserved]. For further guidance, see §1.461–2T(e)(3), Example 2.

- - - Par. 3. Section 1.461–2T is added to read as follows:

§1.461–2T Contested liabilities (temporary).

(a) and (b) [Reserved]. For further guidance, see §1.461–2(a) and (b).

(c) Transfer to provide for the satis- faction of an asserted liability —(1) In general. (i) A taxpayer may provide for the satisfaction of an asserted liability by transferring money or other property beyond his control to—

(A) The person who is asserting the liability;

(B) An escrowee or trustee pursuant to a written agreement (among the escrowee or trustee, the taxpayer, and the person who is asserting the liability) that the money or other property be delivered in accordance with the settlement of the contest;

(C) An escrowee or trustee pursuant to an order of the United States or of any State or political subdivision thereof or any agency or instrumentality of the foregoing, or of a court, that the money or other property be delivered in accordance with the settlement of the contest; or

a qualified payment to a designated settlement fund the transfer of any stock or indebtedness of the taxpayer (or any related person). See §1.461–4(g)(1)(ii)(A), which provides that payment does not include the furnishing of a note or other evidence of indebtedness of the taxpayer or a promise of the taxpayer to provide services or property in the future.

Economic Performance Rules for Payment Liabilities

Section 1.461–4(g) provides that economic performance occurs in the case of a liability requiring payment to another person arising out of a workers compensation act, tort, or other designated liability as payments are made to the person to which the liability is owed. Therefore, the temporary regulations provide in §1.461–2T(e)(2) that, except as provided in section 468B or the regulations thereunder, economic performance does not occur when a taxpayer transfers money or other property to a trust, escrow account, or court to provide for the satisfaction of a contested workers compensation, tort, or other liability designated in §1.461–4(g) unless the trust, escrow account, or court is the claimant or the taxpayer’s payment to the trust, escrow account, or court discharges the taxpayer’s liability to the claimant. See Maxus Energy Corporation and Subsidiaries v. United States, 31 F.3d 1135 (Fed. Cir. 1994). Rather, economic performance occurs in the taxable year in which the taxpayer transfers money or other property to the person asserting the liability that the taxpayer is contesting, or in the taxable year in which payment from the trust, escrow account, or court registry is made to the person to which the liability is owed.

Effective Date

In general, the temporary regulations apply to transfers made in taxable years beginning after December 31, 1953, and ending after August 16, 1954. However, the temporary regulations apply to transfers of any stock of the taxpayer or any stock or indebtedness of a related person on or after November 19, 2003. Section 1.461–2T(e)(2)(i) applies to transfers of money or other property after July 18,

1984, the effective date of section 461(h). Similarly, §1.461–2T(e)(2)(ii) applies to transfers of money or other property after July 18, 1984, to satisfy workers compensation or tort liabilities, and applies to transfers of money or other property in taxable years beginning after December 31, 1991, the effective date of §1.461–4(g), to satisfy payment liabilities designated under §1.461–4(g) (other than liabilities for workers compensation or tort).

Special Analyses

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. Please refer to the cross-referenced notice of proposed rulemaking (REG–136890–02) published elsewhere in this issue of the Bulletin for applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6). Pursuant to section 7805(f) of the Code, these temporary regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

Drafting Information

The principal author of these regulations is Norma Rotunno of the Office of the Associate Chief Counsel (Income Tax & Accounting). However, other personnel from the IRS and Treasury participated in their development.

- - - -

Amendments to the Regulations

Accordingly, 26 CFR part 1 is amended as follows:

PART 1— INCOME TAXES

Paragraph 1. The authority citation for part 1 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * * Par. 2. Section 1.461–2 is amended by:

Removing paragraph (a)(5).
Revising paragraph (c)(1).
Redesignating paragraph (e)(2) as paragraph (e)(3) and revising it.

2003-49 I.R.B. 1177 December 8, 2003

(D) A court with jurisdiction over the contest.

(ii) In order for money or other property to be beyond the control of a taxpayer, the taxpayer must relinquish all authority over the money or other property.

(iii) The following are not transfers to provide for the satisfaction of an asserted liability—

(A) Purchasing a bond to guarantee payment of the asserted liability;

(B) An entry on the taxpayer’s books of account;

(D) A transfer of any indebtedness of the taxpayer or of any promise by the taxpayer to provide services or property in the future; and

(E) A transfer to a person (other than the person asserting the liability) of any stock of the taxpayer or of any stock or indebtedness of a person related to the taxpayer (as defined in section 267(b)).

(c)(2) through (d) [Reserved]. For further guidance, see §1.461–2(c)(2) through (d).

(e) Deduction otherwise allowed —(1)

[Reserved]. For further guidance, see §1.461–2(e)(1).

(2) Application of economic perfor- mance rules to transfers under section 461(f). (i) A taxpayer using an accrual method of accounting is not allowed a deduction under section 461(f) in the taxable year of the transfer unless economic performance has occurred.

(ii) Economic performance occurs for liabilities requiring payment to another person arising out of any workers compensation act or any tort, or any other liability designated in §1.461–4(g), as payments are made to the person to which the liability is owed. Except as provided in section 468B or the regulations thereunder, economic performance does not occur when a taxpayer transfers money or other property to a trust, an escrow account, or a court to provide for the satisfaction of an asserted workers compensation, tort, or other liability designated under §1.461–4(g) that the taxpayer is contesting unless the trust, escrow account, or court is the person to which the liability is owed or the taxpayer’s payment to the trust, escrow account, or court discharges the taxpayer’s liability to the claimant. Rather, economic performance occurs in

the taxable year the taxpayer transfers money or other property to the person that is asserting the workers compensation, tort, or other liability designated under §1.461–4(g) that the taxpayer is contesting or in the taxable year that payment is made from a trust, an escrow account, or a court registry funded by the taxpayer to the person to which the liability is owed.

(3) Examples. The provisions of this paragraph (e) are illustrated by the following examples:

Example 1. [Reserved]. For further guidance, see §1.461–2(e)(3), Example 1.

Example 2. Corporation X is a defendant in a class action suit for tort liabilities. In 2002, X establishes a trust for the purpose of satisfying the asserted liability and transfers $10,000,000 to the trust. The trust does not satisfy the requirements of section 468B or the regulations thereunder. In 2004, the trustee pays $10,000,000 to the plaintiffs in settlement of the litigation. Under paragraph (e)(2) of this section, economic performance with respect to X’s liability to the plaintiffs occurs in 2004. X may deduct the $10,000,000 payment to the plaintiffs in 2004.

(f) [Reserved]. For further guidance, see §1.461–2(f).

(g) Effective date. (1) Except as otherwise provided, this section applies to transfers of money or other property in taxable years beginning after December 31, 1953, and ending after August 16, 1954.

(2) Paragraph (c)(1)(iii)(E) of this section applies to transfers of any stock of the taxpayer or any stock or indebtedness of a person related to the taxpayer on or after November 19, 2003.

(3) Paragraph (e)(2)(i) of this section applies to transfers of money or other property after July 18, 1984.

(4) Paragraphs (e)(2)(ii) and (e)(3) of this section apply to—

(i) Transfers after July 18, 1984, of money or other property to provide for the satisfaction of an asserted workers compensation or tort liability; and

(ii) Transfers in taxable years beginning after December 31, 1991, of money or other property to provide for the satisfaction of asserted liabilities designated in §1.461–4(g) (other than liabilities for workers compensation or tort).

Mark E. Matthews, Deputy Commissioner for Services

and Enforcement.

Approved November 12, 2003.

Pamela F. Olson, Assistant Secretary of the Treasury.

(Filed by the Office of the Federal Register on November 19, 2003, 8:45 a.m., and published in the issue of the Federal Register for November 21, 2003, 68 F.R. 65634)

Section 467.—Certain Payments for the Use of Property or Services

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of December 2003. See Rev. Rul. 2003-122, page 1179.

Section 468.—Special Rules for Mining and Solid Waste Reclamation and Closing Costs

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of December 2003. See Rev. Rul. 2003-122, page 1179.

Section 482.—Allocation of Income and Deductions Among Taxpayers

Federal short-term, mid-term, and long-term rates are set forth for the month of December 2003. See Rev. Rul. 2003-122, page 1179.

Section 483.—Interest on Certain Deferred Payments

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of December 2003. See Rev. Rul. 2003-122, page 1179.

Section 642.—Special Rules for Credits and Deductions

Federal short-term, mid-term, and long-term rates are set forth for the month of December 2003. See Rev. Rul. 2003-122, page 1179.

Section 807.—Rules for Certain Reserves

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of December 2003. See Rev. Rul. 2003-122, page 1179.

Section 846.—Discounted Unpaid Losses Defined

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month

December 8, 2003 1178 2003-49 I.R.B.

of December 2003. See Rev. Rul. 2003-122, page 1179.

Section 1274.—Determina- tion of Issue Price in the Case of Certain Debt Instruments Issued for Property

(Also Sections 42, 280G, 382, 412, 467, 468, 482, 483, 642, 807, 846, 1288, 7520, 7872.)

Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate. For purposes of sections 382, 1274, 1288, and other sections of the Code, tables set forth the rates for December 2003.

Rev. Rul. 2003–122

This revenue ruling provides various prescribed rates for federal income tax purposes for December 2003 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(2) for buildings placed in service during the current month. Table 5 contains the federal rate for determining the present value of annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520. Finally, Table 6 contains the 2004 interest rate for sections 846 and 807.

Applicable Federal Rates (AFR) for December 2003

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-Term

AFR 1.68% 1.67% 1.67% 1.66% 110% AFR 1.85% 1.84% 1.84% 1.83% 120% AFR 2.01% 2.00% 2.00% 1.99% 130% AFR 2.18% 2.17% 2.16% 2.16%

Mid-Term

AFR 3.55% 3.52% 3.50% 3.49% 110% AFR 3.91% 3.87% 3.85% 3.84% 120% AFR 4.26% 4.22% 4.20% 4.18% 130% AFR 4.63% 4.58% 4.55% 4.54% 150% AFR 5.35% 5.28% 5.25% 5.22% 175% AFR 6.25% 6.16% 6.11% 6.08%

Long-Term

AFR 5.12% 5.06% 5.03% 5.01% 110% AFR 5.65% 5.57% 5.53% 5.51% 120% AFR 6.16% 6.07% 6.02% 5.99% 130% AFR 6.69% 6.58% 6.53% 6.49%

REV. RUL. 2003–122 TABLE 2

Adjusted AFR for December 2003

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-term adjusted AFR

1.37% 1.37% 1.37% 1.37%

Mid-term adjusted AFR 2.75% 2.73% 2.72% 2.71%

Long-term adjusted AFR

4.58% 4.53% 4.50% 4.49%

2003-49 I.R.B. 1179 December 8, 2003

REV. RUL. 2003–122 TABLE 3

Rates Under Section 382 for December 2003

Adjusted federal long-term rate for the current month 4.58%

Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months.) 4.74%

REV. RUL. 2003–122 TABLE 4

Appropriate Percentages Under Section 42(b)(2) for December 2003

Appropriate percentage for the 70% present value low-income housing credit 8.01%

Appropriate percentage for the 30% present value low-income housing credit 3.43%

REV. RUL. 2003–122 TABLE 5

Rate Under Section 7520 for December 2003

Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest 4.2%

REV. RUL. 2003–122 TABLE 6

Applicable rate of interest for 2004 for purposes of section 846 and 807 4.82%

Section 7872.—Treatment of Loans With Below-Market Interest Rates

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of December 2003. See Rev. Rul. 2003-122, page 1179.

Section 1288.—Treatment of Original Issue Discounts on Tax-Exempt Obligations

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of December 2003. See Rev. Rul. 2003-122, page 1179.

Section 7520.—Valuation Tables

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of December 2003. See Rev. Rul. 2003-122, page 1179.

December 8, 2003 1180 2003-49 I.R.B.