Internal Revenue Bulletin 2004-25

Official source: Internal Revenue Bulletin (https://www.irs.gov/pub/irs-irbs/irb04-25.pdf), retrieved 2026-10-03. U.S. Government work (17 U.S.C. § 105).

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These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations.

Rev. Rul. 2004–61, page 1073. LIFO; price indexes; department stores. The April 2004 Bureau of Labor Statistics price indexes are accepted for use by department stores employing the retail inventory and last-in, first-out inventory methods for valuing inventories for tax years ended on, or with reference to, April 30, 2004.

Rev. Rul. 2004–62, page 1072. Business expenses; timber fertilization. The costs incurred by a timber grower for the post-establishment fertilization of an established timber stand are ordinary and necessary business expenses deductible under section 162 of the Code. This ruling also provides procedures for a taxpayer to automatically change its method of accounting for post-establishment fertilization costs to the method provided in this ruling. Rev. Proc. 2002–9 modified and amplified.

Notice 2004–42, page 1075. Weighted average interest rate update; corporate bond indexes; 30-year Treasury securities. The weighted average interest rate for June 2004 and the resulting permissible range of interest rates used to calculate current liability and to determine the required contribution are set forth.

Announcements of Disbarments and Suspensions begin on page 1076. Finding Lists begin on page ii.

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The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly and may be obtained from the Superintendent of Documents on a subscription basis. Bulletin contents are compiled semiannually into Cumulative Bulletins, which are sold on a single-copy basis.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations,

applying the tax law with integrity and fairness to all.

court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secretary (Enforcement).

Part IV.—Items of General Interest. This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

June 21, 2004 2004-25 I.R.B.

Section 162.—Trade or Business Expenses

26 CFR 1.162–1: Business expenses. (Also §§ 263, 263A; 1.263(a)–1.)

Business expenses; timber fertil- ization. The costs incurred by a timber grower for the post-establishment fertilization of an established timber stand are ordinary and necessary business expenses deductible under section 162 of the Code. This ruling also provides procedures for a taxpayer to automatically change its method of accounting for post-establishment fertilization costs to the method provided in this ruling. Rev. Proc. 2002–9 modified and amplified.

Rev. Rul. 2004–62

ISSUE

Whether costs incurred by a timber grower for the post-establishment fertilization of an established timber stand are ordinary and necessary business expenses deductible under § 162 of the Internal Revenue Code or capital expenditures under § 263.

FACTS

X owns and manages timberlands in the United States on which it grows trees for use in its lumber and wood products business. After the target species of timber establishes dominance in an area and becomes an established timber stand, X incurs costs to perform various silvicultural practices for the purposes of managing, maintaining, and protecting the stand. These post-establishment silvicultural costs include labor and materials for fire, disease, insect, and brush control. X performs these silvicultural practices to maintain optimal growing conditions that will promote healthy development and maximize timber volume.

In 2004, X incurs costs to apply fertilizer to a portion of its timberlands underlying an established stand of trees. This application, commonly referred to as “postestablishment fertilization,” is performed after the target species of timber has established dominance in the stand. X gen

erally performs post-establishment fertilization once during the long-term growth cycle of a timber stand. X performs the fertilization to supplement nutrients in the soil to maintain optimal growing conditions that will promote healthy development and maximize timber volume.

LAW AND ANALYSIS

Section 162 and § 1.162–1(a) of the Income Tax Regulations allow a deduction for all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.

Section 263(a)(1) provides that no deduction is allowed for any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property. See also § 1.263(a)–1(a).

Section 1.263(a)–1(b) provides that capital expenditures include amounts paid or incurred to (1) add to the value, or substantially prolong the useful life, of property owned by the taxpayer, or (2) adapt property to a new or different use. However, amounts paid or incurred for incidental repairs and maintenance of property for purposes of § 162 and § 1.162–4 are not capital expenditures under § 1.263(a)–1.

Section 263A generally provides that the direct and indirect costs properly allocable to real or tangible personal property produced by the taxpayer must be capitalized. Section 263A(c)(5)(A) provides that § 263A shall not apply to trees raised, harvested, or grown by the taxpayer other than trees bearing fruit, nuts, or other crops, or ornamental trees (other than evergreen trees more than 6 years old at the time severed from their roots).

Certain costs incurred by timber growers for silvicultural practices performed in established timber stands are ordinary and necessary business expenses deductible under § 162. These costs include amounts incurred for labor and materials for fire, disease, insect, and brush control. See Barham v. United States, 301 F. Supp. 43 (M.D. Ga. 1969), aff’d on other grounds, 429 F.2d 40 (5 ^th Cir. 1970); H.R. Conf. Rep. No. 841, 99 ^th Cong., 2d Sess. II–117

(1986); H.R. Rep. No. 426, 99 ^th Cong., 1 ^st

Sess. 624 (1985). These costs are incurred for the management, maintenance, and protection of the timber stand. These costs are not incurred to materially add value to the timber stand, substantially prolong its useful life, or adapt the timber stand to a new or different use. Accordingly, these costs are not required to be capitalized under § 263.

Like fire, disease, insect, and brush control, post-establishment fertilization promotes healthy development and maximizes timber volume and is performed for the management, maintenance, and protection of the timber stand. There are no significant differences between post-establishment fertilization and the types of post-establishment silvicultural practices, such as brush control, that have previously been held to be ordinary and necessary business expenses deductible under § 162. Therefore, X ’s costs for post-establishment fertilization are deductible as ordinary and necessary business expenses under § 162. Furthermore, because X is growing trees for timber production, X is not required to capitalize the direct and indirect costs allocable to producing such trees under § 263A. See § 263A(c)(5).

HOLDING

Costs incurred by a timber grower for the post-establishment fertilization of an established timber stand are ordinary and necessary business expenses deductible under § 162.

CHANGE IN METHOD OF ACCOUNTING

Any change in a taxpayer’s treatment of post-establishment fertilization costs to conform to this revenue ruling 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 to comply with this revenue ruling must file a Form 3115 in accordance with the automatic change in method of accounting provisions of Rev. Proc. 2002–9, 2002–1 C.B. 327, as modified and clarified by Announcement 2002–17, 2002–1

2004-25 I.R.B. 1072 June 21, 2004

C.B. 561, modified and amplified by Rev. Proc. 2002–19, 2002–1 C.B. 696, and amplified, clarified, and modified by Rev. Proc. 2002–54, 2002–2 C.B. 432, except that the scope limitations in section 4.02 of Rev. Proc. 2002–9 are not applicable. For purposes of line 1a of Form 3115, the designated number for the automatic accounting method change authorized by this revenue ruling is “86.”

EFFECT ON OTHER DOCUMENTS

Rev. Proc. 2002–9 is modified and amplified to include in the APPENDIX the automatic change provided in this revenue ruling.

DRAFTING INFORMATION

The principal author of this revenue ruling is Amy Pfalzgraf of the Office of Associate Chief Counsel (Income Tax and Accounting). For further information regarding this revenue ruling, contact Ms. Pfalzgraf at (202) 622–4950 (not a toll-free call).

Section 263.—Capital Expenditures

26 CFR 1.263(a)–1: Capital expenditures; in gen- eral.

Whether the costs incurred for the post-establishment fertilization of an established timber stand are deductible business expenses or capital expenditures. See Rev. Rul. 2004-62, page 1072.

Section 472.—Last-in, First-out Inventories

26 CFR 1.472–1: Last-in, first-out inventories.

LIFO; price indexes; department stores. The April 2004 Bureau of Labor Statistics price indexes are accepted for use by department stores employing the retail inventory and last-in, first-out inventory methods for valuing inventories for tax years ended on, or with reference to, April 30, 2004.

Rev. Rul. 2004–61

The following Department Store Inventory Price Indexes for April 2004 were

issued by the Bureau of Labor Statistics. The indexes are accepted by the Internal Revenue Service, under § 1.472–1(k) of the Income Tax Regulations and Rev. Proc. 86–46, 1986–2 C.B. 739, for appropriate application to inventories of department stores employing the retail inventory and last-in, first-out inventory methods for tax years ended on, or with reference to, April 30, 2004.

The Department Store Inventory Price Indexes are prepared on a national basis and include (a) 23 major groups of departments, (b) three special combinations of the major groups - soft goods, durable goods, and miscellaneous goods, and (c) a store total, which covers all departments, including some not listed separately, except for the following: candy, food, liquor, tobacco, and contract departments.

BUREAU OF LABOR STATISTICS, DEPARTMENT STORE INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS

(January 1941 = 100, unless otherwise noted)

Groups April 2003 April 2004

Percent Change from April 2003

to April 2004 ¹

1. Piece Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457.9 491.0 7.2
2. Domestics and Draperies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568.1 539.7 -5.0
3. Women’s and Children’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 646.4 654.5 1.3
4. Men’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 844.7 856.4 1.4
5. Infants’ Wear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 597.8 586.1 -2.0
6. Women’s Underwear. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 517.2 493.2 -4.6
7. Women’s Hosiery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347.1 336.2 -3.1
8. Women’s and Girls’ Accessories . . . . . . . . . . . . . . . . . . . . . . . . . . . 552.1 564.2 2.2
9. Women’s Outerwear and Girls’ Wear . . . . . . . . . . . . . . . . . . . . . . . 385.7 389.2 0.9
10. Men’s Clothing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569.0 545.9 -4.1
11. Men’s Furnishings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589.8 592.7 0.5
12. Boys’ Clothing and Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465.5 459.4 -1.3
13. Jewelry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 876.5 893.0 1.9
14. Notions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 794.1 799.3 0.7
15. Toilet Articles and Drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 982.5 987.5 0.5
16. Furniture and Bedding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 627.7 618.0 -1.5
17. Floor Coverings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584.4 598.8 2.5
18. Housewares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 730.3 715.3 -2.1
19. Major Appliances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215.3 201.8 -6.3
20. Radio and Television. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46.4 42.7 -8.0
21. Recreation and Education ² . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.7 81.2 -3.0
22. Home Improvements ² . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125.1 128.0 2.3
23. Automotive Accessories ² . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111.5 112.1 0.5

June 21, 2004 1073 2004-25 I.R.B.

BUREAU OF LABOR STATISTICS, DEPARTMENT STORE INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS

(January 1941 = 100, unless otherwise noted)

Groups April 2003 April 2004

Percent Change from April 2003

to April 2004 ¹

Groups 1–15: Soft Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573.8 572.0 -0.3 Groups 16–20: Durable Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399.0 385.6 -3.4 Groups 21–23: Misc. Goods ² . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94.8 93.6 -1.3

Store Total ³ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510.0 504.8 -1.0

1Absence of a minus sign before the percentage change in this column signifies a price increase. 2Indexes on a January 1986 = 100 base. 3The store total index covers all departments, including some not listed separately, except for the following: candy, food, liquor, tobacco and contract departments.

DRAFTING INFORMATION

The principal author of this revenue ruling is Michael Burkom of the Office

of Associate Chief Counsel (Income Tax and Accounting). For further information regarding this revenue ruling, contact

Mr. Burkom at (202) 622–7924 (not a toll-free call).

2004-25 I.R.B. 1074 June 21, 2004

Weighted Average Interest Rates Update

Notice 2004–42

This notice provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code. In addition, it provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II), and the weighted average interest rate and permissible ranges of interest rates based on the 30-year Treasury securities rate.

CORPORATE BOND WEIGHTED AVERAGE INTEREST RATE

Sections 412(b)(5)(B)(ii) and 412(l)(7)(C)(i), as amended by the Pension Funding Equity Act of 2004, provide that the interest rates used to calculate current liability and to determine the required contribution under § 412(l) for plan years beginning in 2004 or 2005 must be within a permissible range based on the weighted average of the rates of interest on amounts invested conservatively in long term investment grade corporate bonds during the 4-year period ending on the last day before the beginning of the plan year.

Notice 2004–34, 2004–18 I.R.B. 848, provides guidelines for determining the

Corporate

corporate bond weighted average interest rate and the resulting permissible range of interest rates used to calculate current liability. That notice establishes that the corporate bond weighted average is based on the monthly composite corporate bond rate derived from designated corporate bond indices.

The composite corporate bond rate for May 2004 is 6.19 percent. Pursuant to Notice 2004–34, the Service has determined this rate as the average of the monthly yields for the included corporate bond indices for that month.

The following corporate bond weighted average interest rate was determined for plan years beginning in the month shown below.

For Plan Years Bond 90% to 100%

Beginning in: Weighted Permissible Month Year Average Range

June 2004 6.34 5.70 to 6.34

imum amount of the deduction allowed under § 404(a)(1).

The rate of interest on 30-year Treasury securities for May 2004 is 5.42 percent. Pursuant to Notice 2002–26, 2002–1 C.B. 743, the Service has determined this rate as the monthly average of the daily determination of yield on the 30-year Treasury bond maturing in February 2031.

The following 30-year Treasury rates were determined for the plan years beginning in the month shown below.

30-YEAR TREASURY SECURITIES WEIGHTED AVERAGE INTEREST RATE

Section 417(e)(3)(A)(ii)(II) defines the applicable interest rate, which must be used for purposes of determining the minimum present value of a participant’s benefit under § 417(e)(1) and (2), as the annual rate of interest on 30-year Treasury securities for the month before the date of distribution or such other time as the Secretary may by regulations prescribe. Section 1.417(e)–1(d)(3) of the Income

Tax Regulations provides that the applicable interest rate for a month is the annual interest rate on 30-year Treasury securities as specified by the Commissioner for that month in revenue rulings, notices or other guidance published in the Internal Revenue Bulletin.

Section 404(a)(1) of the Code, as amended by the Pension Funding Equity Act of 2004, permits an employer to elect to disregard subclause (II) of § 412(b)(5)(B)(ii) to determine the max

30-Year

For Plan Years Treasury 90% to 105% 90% to 110%

Beginning in: Weighted Permissible Permissible Month Year Average Range Range

June 2004 5.17 4.65 to 5.43 4.65 to 5.68

Friday. Mr. Stern may be reached at 1–202–283–9703. Mr. Montanaro may be reached at 1–202–283–9714. The telephone numbers in the preceding sentences are not toll-free.

Drafting Information

The principal authors of this notice are Paul Stern and Tony Montanaro of the Employee Plans, Tax Exempt and Government Entities Division. For fur

ther information regarding this notice, please contact the Employee Plans’ taxpayer assistance telephone service at 1–877–829–5500 (a toll-free number), between the hours of 8:00 a.m. and 6:30 p.m. Eastern time, Monday through

June 21, 2004 1075 2004-25 I.R.B.

their names, their city and state, their professional designation, the effective date of disciplinary action, and the period of suspension. This announcement will appear in the weekly Bulletin at the earliest practicable date after such action and will continue to appear in the weekly Bulletins for five successive weeks.

Under Title 31, Code of Federal Regulations, Part 10, attorneys, certified public accountants, enrolled agents, and enrolled actuaries may not accept assistance from, or assist, any person who is under disbarment or suspension from practice before the Internal Revenue Service if the assistance relates to a matter constituting practice before the Internal Revenue Service and may not knowingly aid or abet another

person to practice before the Internal Revenue Service during a period of suspension, disbarment, or ineligibility of such other person.

To enable attorneys, certified public accountants, enrolled agents, and enrolled actuaries to identify persons to whom these restrictions apply, the Director, Office of Professional Responsibility, will announce in the Internal Revenue Bulletin

countant, enrolled agent, or enrolled actuary in accordance with the consent offered.

The following individuals have been placed under consent disbarment from practice before the Internal Revenue Service:

Under Title 31, Code of Federal Regulations, Part 10, an attorney, certified public accountant, enrolled agent, or enrolled actuary, in order to avoid institution or conclusion of a proceeding for his or her disbarment or suspension from practice be

fore the Internal Revenue Service, may offer his or her consent to disbarment from such practice. The Director, Office of Professional Responsibility, in his discretion, may disbar an attorney, certified public ac

Name Address Designation Date of Disbarment

Ranes III, Wesse C. Annapolis, MD CPA Indefinite from May 1, 2004

tuary in accordance with the consent offered.

The following individuals have been placed under consent suspension from practice before the Internal Revenue Service:

Under Title 31, Code of Federal Regulations, Part 10, an attorney, certified public accountant, enrolled agent, or enrolled actuary, in order to avoid institution or conclusion of a proceeding for his or her disbarment or suspension from practice be

fore the Internal Revenue Service, may offer his or her consent to suspension from such practice. The Director, Office of Professional Responsibility, in his discretion, may suspend an attorney, certified public accountant, enrolled agent, or enrolled ac

2004-25 I.R.B. 1076 June 21, 2004

Name Address Designation Date of Suspension

Montgomery, Goldie L. Lancaster, CA Enrolled Agent Indefinite from February 1, 2004

Frost, Charles L. San Antonio, TX Enrolled Agent Indefinite from February 1, 2004

Briggs, John W. Sayville, NY Enrolled Agent February 10, 2004 from August 8, 2004

Lahman, Gary M. Ft. Collins, CO Enrolled Agent Indefinite from February 12, 2004

Stanny, Gertrude M. South Lyon, MI Enrolled Agent Indefinite from March 1, 2004

Millar, Mark Tall Timbers, MD Enrolled Agent Indefinite from March 1, 2004

Murray, Maureen E. Naugatuck, CT Enrolled Agent Indefinite from March 1, 2004

Keith, James S. Imperial Beach, CA Enrolled Agent March 2, 2004 from June 30, 2004

Zelek, Linda S. Moultonboro, NH CPA Indefinite from March 4, 2004

Gilpin, Charles H. San Leandro, CA Enrolled Agent Indefinite from March 5, 2004

Smith, Sean M. Silver Spring, MD Enrolled Agent Indefinite from March 15, 2004

Morelini, Wayne C. Modesto, CA Enrolled Agent Indefinite from March 15, 2004

Bower, Jay Redmond, OR Enrolled Agent Indefinite from March 16, 2004

Lynn, Celia M. Locust Grove, VA Enrolled Agent Indefinite from April 1, 2004

Swantz Jr., H. E. San Diego, CA Enrolled Agent Indefinite from April 6, 2004

June 21, 2004 1077 2004-25 I.R.B.

Name Address Designation Date of Suspension

Hart, David A. Lake Zurich, IL Enrolled Agent Indefinite from April 8, 2004

Lau, Dennis K.M. Honolulu, HI Enrolled Agent Indefinite from April 20, 2004

Lentz, Carole Mastic, NY Enrolled Agent Indefinite from April 23, 2004

Goble, Dennis R. Valparaiso, IN CPA Indefinite from April 26, 2004

Rivera, Eduardo M. Torrence, CA Attorney May 1, 2004 to October 29, 2006

Grant, Elaine C. Woodway, WA Enrolled Agent May 1, 2004 to October 31, 2004

Bell, Don Grand Junction, CO Enrolled Agent Indefinite from May 1, 2004

Cohick, Jeffrey S. Newville, PA Enrolled Agent May 1, 2004 from October 30, 2004

The following individuals have been placed under suspension from practice before the Internal Revenue Service by virtue of the expedited proceeding provisions:

Under Title 31, Code of Federal Regulations, Part 10, the Director, Office of Professional Responsibility, is authorized to immediately suspend from practice before the Internal Revenue Service any practitioner who, within five years from the date

the expedited proceeding is instituted (1) has had a license to practice as an attorney, certified public accountant, or actuary suspended or revoked for cause or (2) has been convicted of certain crimes.

Name Address Designation Date of Suspension

Candelario, Alexander Cabins, WV CPA Indefinite from February 1, 2004

Riener, Richard St. Paul, MN Attorney Indefinite from March 1, 2004

Dunkle, Clark Carlisle, PA CPA Indefinite from March 15, 2004

2004-25 I.R.B. 1078 June 21, 2004

Name Address Designation Date of Suspension

Bailey, Donald D. Tucson, AZ CPA Indefinite from March 18, 2004

Hill, Donald R. Clinchco, VA CPA Indefinite from April 1, 2004

Bergeson, Nancy Inver Grove Hghts, MN CPA Indefinite from April 14, 2004

Reese, Kenneth J. Nebraska City, NE CPA Indefinite from April 15, 2004

Coates, Marsden S. Baltimore, MD Attorney Indefinite from April 15, 2004

Schaefer, Robert J. Moorhead, MN Attorney Indefinite from April 20, 2004

Mills, Stuart B. Pender, NE Attorney Indefinite from May 1, 2004

Harris-Smith, Bridgette Silver Spring, MD Attorney Indefinite from May 3, 2004

Janousek, Donald R. Omaha, NE Attorney Indefinite from May 3, 2004

Williams, Gary W. Diamond Bar, CA CPA Indefinite from May 3, 2004

Demaio, Louis J. Bel Air, MD Attorney Indefinite from May 3, 2004

Miller, Frederick C. Cedar Hill, TX CPA Indefinite from May 15, 2004

June 21, 2004 1079 2004-25 I.R.B.

Under Title 31, Code of Federal Regulations, Part 10, in lieu of a proceeding being instituted or continued, an attorney, certified public accountant, enrolled agent,

or enrolled actuary, may offer his or her consent to the issuance of a censure. Censure is a public reprimand.

The following individuals have consented to the issuance of a Censure:

Name Address Designation Date of Censure

Friedman, Milton G. Ft. Lauderdale, FL CPA December 30, 2003

Stevens, William E. Omaha, NE CPA February 13, 2004

Turner, Mark A. Cincinnati, OH CPA February 25, 2004

Rath, Dorris A. Bradenton, FL Enrolled Agent March 9, 2004

Damiano, Lisa South Windsor, CT Enrolled Agent March 9, 2004

Silbiger, Arnold R. Baltimore, MD Attorney March 11, 2004

Farwell, Nancy K. Citrus Heights, CA Enrolled Agent April 5, 2004

Dembrowski, Karen E. Encino, CA CPA April 13, 2004

2004-25 I.R.B. 1080 June 21, 2004

Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the ef- fect:

Amplified describes a situation where no change is being made in a prior published position, but the prior position is being extended to apply to a variation of the fact situation set forth therein. Thus, if an earlier ruling held that a principle applied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare with modi- fied, below).

Clarified is used in those instances where the language in a prior ruling is being made clear because the language has caused, or may cause, some confusion. It is not used where a position in a prior ruling is being changed.

Distinguished describes a situation where a ruling mentions a previously published ruling and points out an essential difference between them.

Modified is used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A

The following abbreviations in current use and formerly used will appear in material published in the Bulletin.

A —Individual. Acq. —Acquiescence. B —Individual. BE —Beneficiary. BK —Bank. B.T.A. —Board of Tax Appeals. C —Individual. C.B. —Cumulative Bulletin. CFR —Code of Federal Regulations. CI —City. COOP —Cooperative. Ct.D. —Court Decision. CY —County. D —Decedent. DC —Dummy Corporation. DE —Donee. Del. Order —Delegation Order. DISC —Domestic International Sales Corporation. DR —Donor. E —Estate. EE —Employee. E.O. —Executive Order.

and B, the prior ruling is modified because it corrects a published position. (Compare with amplified and clarified, above).

Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions. This term is most commonly used in a ruling that lists previously published rulings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted.

Revoked describes situations where the position in the previously published ruling is not correct and the correct position is being stated in a new ruling.

Superseded describes a situation where the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same position published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new ruling does more than restate the substance

ER —Employer. ERISA —Employee Retirement Income Security Act. EX —Executor. F —Fiduciary. FC —Foreign Country. FICA —Federal Insurance Contributions Act. FISC —Foreign International Sales Company. FPH —Foreign Personal Holding Company. F.R. —Federal Register. FUTA —Federal Unemployment Tax Act. FX —Foreign corporation. G.C.M. —Chief Counsel’s Memorandum. GE —Grantee. GP —General Partner. GR —Grantor. IC —Insurance Company. I.R.B. —Internal Revenue Bulletin. LE —Lessee. LP —Limited Partner. LR —Lessor. M —Minor. Nonacq. —Nonacquiescence. O —Organization. P —Parent Corporation. PHC —Personal Holding Company. PO —Possession of the U.S. PR —Partner.

of a prior ruling, a combination of terms is used. For example, modified and su- perseded describes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously published ruling is first modified and then, as modified, is superseded.

Supplemented is used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original ruling has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the additions, and supersedes all prior rulings in the series.

Suspended is used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study.

PRS —Partnership. PTE —Prohibited Transaction Exemption. Pub. L. —Public Law. REIT —Real Estate Investment Trust. Rev. Proc. —Revenue Procedure. Rev. Rul. —Revenue Ruling. S —Subsidiary. S.P.R. —Statement of Procedural Rules. Stat. —Statutes at Large. T —Target Corporation. T.C. —Tax Court. T.D. —Treasury Decision. TFE —Transferee. TFR —Transferor. T.I.R. —Technical Information Release. TP —Taxpayer. TR —Trust. TT —Trustee. U.S.C. —United States Code. X —Corporation. Y —Corporation. Z —Corporation.

June 21, 2004 i 2004-25 I.R.B.

Numerical Finding List ¹

Bulletins 2004–1 through 2004–25

Announcements:

2004-1, 2004-1 I.R.B. 254

2004-2, 2004-3 I.R.B. 322

2004-3, 2004-2 I.R.B. 294

2004-4, 2004-4 I.R.B. 357

2004-5, 2004-4 I.R.B. 362

2004-6, 2004-3 I.R.B. 322

2004-7, 2004-4 I.R.B. 365

2004-8, 2004-6 I.R.B. 441

2004-9, 2004-6 I.R.B. 441

2004-10, 2004-7 I.R.B. 501

2004-11, 2004-10 I.R.B. 581

2004-12, 2004-9 I.R.B. 541

2004-13, 2004-9 I.R.B. 543

2004-14, 2004-10 I.R.B. 582

2004-15, 2004-11 I.R.B. 612

2004-16, 2004-13 I.R.B. 668

2004-17, 2004-12 I.R.B. 635

2004-18, 2004-12 I.R.B. 639

2004-19, 2004-13 I.R.B. 668

2004-20, 2004-13 I.R.B. 673

2004-21, 2004-13 I.R.B. 673

2004-22, 2004-14 I.R.B. 709

2004-23, 2004-13 I.R.B. 673

2004-24, 2004-14 I.R.B. 714

2004-25, 2004-15 I.R.B. 737

2004-26, 2004-15 I.R.B. 743

2004-27, 2004-14 I.R.B. 714

2004-28, 2004-16 I.R.B. 818

2004-29, 2004-15 I.R.B. 772

2004-30, 2004-17 I.R.B. 833

2004-31, 2004-18 I.R.B. 854

2004-32, 2004-18 I.R.B. 860

2004-33, 2004-18 I.R.B. 862

2004-34, 2004-19 I.R.B. 895

2004-35, 2004-17 I.R.B. 839

2004-36, 2004-20 I.R.B. 932

2004-37, 2004-17 I.R.B. 839

2004-38, 2004-18 I.R.B. 878

2004-39, 2004-17 I.R.B. 840

2004-40, 2004-17 I.R.B. 840

2004-41, 2004-18 I.R.B. 879

2004-42, 2004-17 I.R.B. 840

2004-43, 2004-21 I.R.B. 955

2004-44, 2004-21 I.R.B. 957

2004-45, 2004-21 I.R.B. 958

2004-46, 2004-21 I.R.B. 964

2004-47, 2004-21 I.R.B. 966

2004-48, 2004-22 I.R.B. 998

2004-49, 2004-21 I.R.B. 966

2004-50, 2004-22 I.R.B. 1005

2004-51, 2004-23 I.R.B. 1041

2004-52, 2004-24 I.R.B. 1071

Announcements— Continued:

2004-54, 2004-24 I.R.B. 1061

Court Decisions:

2078, 2004-16 I.R.B. 773

2079, 2004-22 I.R.B. 978

Notices:

2004-1, 2004-2 I.R.B. 268

2004-2, 2004-2 I.R.B. 269

2004-3, 2004-5 I.R.B. 391

2004-4, 2004-2 I.R.B. 273

2004-5, 2004-7 I.R.B. 489

2004-6, 2004-3 I.R.B. 308

2004-7, 2004-3 I.R.B. 310

2004-8, 2004-4 I.R.B. 333

2004-9, 2004-4 I.R.B. 334

2004-10, 2004-6 I.R.B. 433

2004-11, 2004-6 I.R.B. 434

2004-12, 2004-10 I.R.B. 556

2004-13, 2004-12 I.R.B. 631

2004-14, 2004-9 I.R.B. 526

2004-15, 2004-9 I.R.B. 526

2004-16, 2004-9 I.R.B. 527

2004-17, 2004-11 I.R.B. 605

2004-18, 2004-11 I.R.B. 605

2004-19, 2004-11 I.R.B. 606

2004-20, 2004-11 I.R.B. 608

2004-21, 2004-11 I.R.B. 609

2004-22, 2004-12 I.R.B. 632

2004-23, 2004-15 I.R.B. 725

2004-24, 2004-13 I.R.B. 642

2004-25, 2004-15 I.R.B. 727

2004-26, 2004-16 I.R.B. 782

2004-27, 2004-16 I.R.B. 782

2004-28, 2004-16 I.R.B. 783

2004-29, 2004-17 I.R.B. 828

2004-30, 2004-17 I.R.B. 828

2004-31, 2004-17 I.R.B. 830

2004-32, 2004-18 I.R.B. 847

2004-33, 2004-18 I.R.B. 847

2004-34, 2004-18 I.R.B. 848

2004-35, 2004-19 I.R.B. 889

2004-36, 2004-19 I.R.B. 889

2004-37, 2004-21 I.R.B. 947

2004-38, 2004-21 I.R.B. 949

2004-39, 2004-22 I.R.B. 982

2004-40, 2004-23 I.R.B. 1028

2004-42, 2004-25 I.R.B. 1075

Proposed Regulations:

REG-106590-00, 2004-14 I.R.B. 704

REG-116664-01, 2004-3 I.R.B. 319

REG-129447-01, 2004-19 I.R.B. 894

REG-106681-02, 2004-18 I.R.B. 852

REG-122379-02, 2004-5 I.R.B. 392

Proposed Regulations— Continued:

REG-139792-02, 2004-20 I.R.B. 926

REG-139845-02, 2004-5 I.R.B. 397

REG-140492-02, 2004-23 I.R.B. 1031

REG-148399–02, 2004-24 I.R.B. 1066

REG-165579-02, 2004-13 I.R.B. 651

REG-166012-02, 2004-13 I.R.B. 655

REG-115471-03, 2004-14 I.R.B. 706

REG-116564-03, 2004-20 I.R.B. 927

REG-121475-03, 2004-16 I.R.B. 793

REG-126459-03, 2004-6 I.R.B. 437

REG-126967-03, 2004-10 I.R.B. 566

REG-128309-03, 2004-16 I.R.B. 800

REG-128590-03, 2004-21 I.R.B. 952

REG-149752-03, 2004-14 I.R.B. 707

REG-153172-03, 2004-15 I.R.B. 729

REG-156232-03, 2004-5 I.R.B. 399

REG-156421-03, 2004-10 I.R.B. 571

REG-167217-03, 2004-9 I.R.B. 540

REG-167265-03, 2004-15 I.R.B. 730

Revenue Procedures:

2004-1, 2004-1 I.R.B. 1

2004-2, 2004-1 I.R.B. 83

2004-3, 2004-1 I.R.B. 114

2004-4, 2004-1 I.R.B. 125

2004-5, 2004-1 I.R.B. 167

2004-6, 2004-1 I.R.B. 197

2004-7, 2004-1 I.R.B. 237

2004-8, 2004-1 I.R.B. 240

2004-9, 2004-2 I.R.B. 275

2004-10, 2004-2 I.R.B. 288

2004-11, 2004-3 I.R.B. 311

2004-12, 2004-9 I.R.B. 528

2004-13, 2004-4 I.R.B. 335

2004-14, 2004-7 I.R.B. 489

2004-15, 2004-7 I.R.B. 490

2004-16, 2004-10 I.R.B. 559

2004-17, 2004-10 I.R.B. 562

2004-18, 2004-9 I.R.B. 529

2004-19, 2004-10 I.R.B. 563

2004-20, 2004-13 I.R.B. 642

2004-21, 2004-14 I.R.B. 702

2004-22, 2004-15 I.R.B. 727

2004-23, 2004-16 I.R.B. 785

2004-24, 2004-16 I.R.B. 790

2004-25, 2004-16 I.R.B. 791

2004-26, 2004-19 I.R.B. 890

2004-27, 2004-17 I.R.B. 831

2004-28, 2004-22 I.R.B. 984

2004-29, 2004-20 I.R.B. 918

2004-30, 2004-21 I.R.B. 950

2004-31, 2004-22 I.R.B. 986

2004-32, 2004-22 I.R.B. 988

2004-33, 2004-22 I.R.B. 989

2004-34, 2004-22 I.R.B. 991

1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2003–27 through 2003–52 is in Internal Revenue Bulletin 2003–52, dated December 29, 2003.

2004-25 I.R.B. ii June 21, 2004

Revenue Procedures— Continued:

2004-35, 2004-23 I.R.B. 1029

2004-36, 2004-24 I.R.B. 1063

Revenue Rulings:

2004-1, 2004-4 I.R.B. 325

2004-2, 2004-2 I.R.B. 265

2004-3, 2004-7 I.R.B. 486

2004-4, 2004-6 I.R.B. 414

2004-5, 2004-3 I.R.B. 295

2004-6, 2004-4 I.R.B. 328

2004-7, 2004-4 I.R.B. 327

2004-8, 2004-10 I.R.B. 544

2004-9, 2004-6 I.R.B. 428

2004-10, 2004-7 I.R.B. 484

2004-11, 2004-7 I.R.B. 480

2004-12, 2004-7 I.R.B. 478

2004-13, 2004-7 I.R.B. 485

2004-14, 2004-8 I.R.B. 511

2004-15, 2004-8 I.R.B. 515

2004-16, 2004-8 I.R.B. 503

2004-17, 2004-8 I.R.B. 516

2004-18, 2004-8 I.R.B. 509

2004-19, 2004-8 I.R.B. 510

2004-20, 2004-10 I.R.B. 546

2004-21, 2004-10 I.R.B. 544

2004-22, 2004-10 I.R.B. 553

2004-23, 2004-11 I.R.B. 585

2004-24, 2004-10 I.R.B. 550

2004-25, 2004-11 I.R.B. 587

2004-26, 2004-11 I.R.B. 598

2004-27, 2004-12 I.R.B. 625

2004-28, 2004-12 I.R.B. 624

2004-29, 2004-12 I.R.B. 627

2004-30, 2004-12 I.R.B. 622

2004-31, 2004-12 I.R.B. 617

2004-32, 2004-12 I.R.B. 621

2004-33, 2004-12 I.R.B. 628

2004-34, 2004-12 I.R.B. 619

2004-35, 2004-13 I.R.B. 640

2004-36, 2004-12 I.R.B. 620

2004-37, 2004-11 I.R.B. 583

2004-38, 2004-15 I.R.B. 717

2004-39, 2004-14 I.R.B. 700

2004-40, 2004-15 I.R.B. 716

2004-41, 2004-18 I.R.B. 845

2004-42, 2004-17 I.R.B. 824

2004-43, 2004-18 I.R.B. 842

2004-44, 2004-19 I.R.B. 885

2004-45, 2004-22 I.R.B. 971

2004-46, 2004-20 I.R.B. 915

2004-47, 2004-21 I.R.B. 941

2004-48, 2004-21 I.R.B. 945

2004-49, 2004-21 I.R.B. 939

2004-50, 2004-22 I.R.B. 977

2004-51, 2004-22 I.R.B. 974

2004-52, 2004-22 I.R.B. 973

2004-53, 2004-23 I.R.B. 1026

Revenue Rulings— Continued:

2004-54, 2004-23 I.R.B. 1024

2004-56, 2004-24 I.R.B. 1055

2004-57, 2004-24 I.R.B. 1048

2004-58, 2004-24 I.R.B. 1043

2004-59, 2004-24 I.R.B. 1050

2004-60, 2004-24 I.R.B. 1051

2004-61, 2004-25 I.R.B. 1073

2004-62, 2004-25 I.R.B. 1072

Tax Conventions:

2004-3, 2004-7 I.R.B. 486

2004-52, 2004-24 I.R.B. 1071

Treasury Decisions:

9099, 2004-2 I.R.B. 255

9100, 2004-3 I.R.B. 297

9101, 2004-5 I.R.B. 376

9102, 2004-5 I.R.B. 366

9103, 2004-3 I.R.B. 306

9104, 2004-6 I.R.B. 406

9105, 2004-6 I.R.B. 419

9106, 2004-5 I.R.B. 384

9107, 2004-7 I.R.B. 447

9108, 2004-6 I.R.B. 429

9109, 2004-8 I.R.B. 519

9110, 2004-8 I.R.B. 504

9111, 2004-8 I.R.B. 518

9112, 2004-9 I.R.B. 523

9113, 2004-9 I.R.B. 524

9114, 2004-11 I.R.B. 589

9115, 2004-14 I.R.B. 680

9116, 2004-14 I.R.B. 674

9117, 2004-15 I.R.B. 721

9118, 2004-15 I.R.B. 718

9119, 2004-17 I.R.B. 825

9120, 2004-19 I.R.B. 881

9121, 2004-20 I.R.B. 903

9122, 2004-19 I.R.B. 886

9123, 2004-20 I.R.B. 907

9124, 2004-20 I.R.B. 901

9125, 2004-23 I.R.B. 1012

9126, 2004-23 I.R.B. 1023

9127, 2004-24 I.R.B. 1042

9128, 2004-21 I.R.B. 943

9129, 2004-24 I.R.B. 1046

June 21, 2004 iii 2004-25 I.R.B.

Findings List of Current Actions on Previously Published Items ¹

Bulletins 2004–1 through 2004–25

Announcements:

93-60

Obsoleted by

2003-56

Modified by

Ann. 2004-11, 2004-10 I.R.B. 581

2004-38

Modified by

Ann. 2004-43, 2004-21 I.R.B. 955

2004-43

Corrected by

Ann. 2004-51, 2004-23 I.R.B. 1041

Notices:

98-5

Withdrawn by

2000-4

Obsoleted by

T.D. 9115, 2004-14 I.R.B. 680

2002-31

Modified by

2004–2

Modified by

Notice 2004–25, 2004–15 I.R.B. 727

Proposed Regulations:

REG-110896-98

Corrected by

Ann. 2004-14, 2004-10 I.R.B. 582

REG-115037-00

Corrected by

Ann. 2004-7, 2004-4 I.R.B. 365

REG-138499-02

Partially withdrawn by

REG-106590-00, 2004-14 I.R.B. 704

REG-143321-02

Withdrawn by

REG-156232-03, 2004-5 I.R.B. 399

REG-146893-02

Corrected by

Ann. 2004-7, 2004-4 I.R.B. 365

Proposed Regulations— Continued:

REG-163974-02

Corrected by

Ann. 2004-13, 2004-9 I.R.B. 543

REG-166012-02

Corrected by

Ann. 2004-40, 2004-17 I.R.B. 840

Revenue Procedures:

71-21

Modified and superseded by

2001-10

Modified by

Ann. 2004-16, 2004-13 I.R.B. 668

2001-23

Modified by

Ann. 2004-16, 2004-13 I.R.B. 668

2002-9

Modified and amplified by

Rev. Rul. 2004-62, 2004-25 I.R.B. 1072 Rev. Proc. 2004-23, 2004-16 I.R.B. 785 Rev. Proc. 2004-30, 2004-21 I.R.B. 950 Rev. Proc. 2004-32, 2004-22 I.R.B. 988 Rev. Proc. 2004-33, 2004-22 I.R.B. 989 Rev. Proc. 2004-34, 2004-22 I.R.B. 991 Rev. Proc. 2004-36, 2004-24 I.R.B. 1063

Revenue Procedures— Continued:

Modified by

Ann. 2004-16, 2004-13 I.R.B. 668

2002-28

Modified by

Ann. 2004-16, 2004-13 I.R.B. 668

2002-71

Superseded by

2003-3

As amplified by Rev. Proc. 2003-14, and as

modified by Rev. Proc. 2003-48 superseded by

2003-23

Modified and superseded by

2003-29

Obsoleted, except as provided in section 5.02, by

2004-1

Corrected by

Ann. 2004-8, 2004-6 I.R.B. 441

1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2003–27 through 2003–52 is in Internal Revenue Bulletin 2003–52, dated December 29, 2003.

2004-25 I.R.B. iv June 21, 2004

Revenue Procedures— Continued:

2004-4

Modified by

Revenue Rulings:

55-748

Modified and superseded by

Treasury Decisions:

9088

Corrected by

Ann. 2004-39, 2004-17 I.R.B. 840

June 21, 2004 v *U.S. Government Printing Office: 2004—304–778/60140 2004-25 I.R.B.