SECTION 5. SUMMARY OF

EXPECTED GUIDANCE FOR FUTURE YEARS

For years after 2003, Treasury and the IRS intend to issue regulations providing

make a return under section 6042 has determined that a recipient has satisfied the relevant holding period requirements or if it is impractical for such person to determine whether a recipient has satisfied the holding period requirements, the person required to make such return shall treat the recipient as satisfying the holding period test.

.06 Waiver of Penalties for Reporting Based on Simplified Procedures

The IRS will exercise its authority under section 6724(a) of the Code to waive penalties under sections 6721 and 6722 with respect to reporting of calendar year 2003 payments if a person required to make a return under section 6042 makes a good faith effort to report payments consistent with the simplified procedures contained in this notice.

.07 Distributions That Do Not Satisfy the Simplified Procedures In This Notice

This notice describes simplified information reporting procedures for 2003 for a distribution with respect to a security issued by a foreign corporation. A person required to make a return under section 6042 may believe a particular distribution should be reported in Box 1b of Form 1099–DIV as a qualified dividend even though the distribution does not satisfy the simplified information reporting procedures. In that case, the person required to make a return under section 6042 may report the distribution in Box 1b as a qualified dividend, subject to the applicable penalty provisions.

For example, assume that a foreign corporation incorporated in the United Kingdom issues equity securities to U.S. persons in a private placement under SEC Rule 144A. Assume further that the foreign corporation does not have its ordinary or common stock listed on any stock exchange. Finally, assume that the equity, E&P and holding period tests are satisfied. Under these facts, the securities would not satisfy the readily tradable test (because the privately placed securities would not be considered readily tradable) and the foreign corporation would not satisfy the possessions test (because the corporation is not incorporated in a possession). Additionally, the simplified procedure described in this notice regarding the treaty test would not be satisfied (because the foreign corporation’s ordinary or common

stock is not listed on exchange covered by the public trading test in the limitation on benefits provision of the U.S.-U.K. income tax treaty). A person required to make a return under section 6042 may nonetheless believe that the foreign corporation is in fact eligible for benefits under the U.S.-U.K. income tax treaty and thus satisfies the treaty test. Such a person could report a distribution with respect to the security in Box 1b of Form 1099–DIV as a qualified dividend. However, a person doing so could be subject to applicable penalty provisions if the foreign corporation did not in fact satisfy the treaty test and such person did not have reasonable cause for believing the foreign corporation satisfied the treaty test.

.08 Payments Reported on Form 1099–DIV for 2003 For taxable years beginning in 2003, a recipient of Form 1099–DIV may treat amounts reported in Box 1b as qualified dividends, unless and to the extent that the recipient knows or has reason to know that such amounts are not qualified dividends. As provided in § 1.6664–4(b)(1), such reliance may constitute reasonable cause and good faith reliance for purposes of applicable penalties, depending on the facts and circumstances. In addition, a recipient of Form 1099–DIV may treat a dividend excluded from Box 1b as a qualified dividend if such person believes the dividend is a qualified dividend, subject to applicable penalties in the event the amount so reported is not in fact a qualified dividend.