Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

Section 42.—Low-Income Housing Credit

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of December 2007. See Rev. Rul. 2007-70, page 1158.

Section 213.—Medical, Dental, etc., Expenses

26 CFR 1.213–1: Medical, dental, etc., expenses.

Diagnostic medical procedures. This ruling holds that amounts paid by individuals for certain diagnostic and similar procedures and devices are medical care expenses deductible under section 213 of the Code.

Rev. Rul. 2007–72

ISSUE

Are amounts paid by individuals for diagnostic and certain similar procedures and devices, not compensated by insurance or otherwise, medical care expenses deductible under § 213(a) of the Internal Revenue Code?

FACTS

In the situations described below, the costs paid by the taxpayers are not compensated by insurance or otherwise, and the taxpayers are not experiencing any symptoms of illness.

Situation 1

Taxpayer A undergoes an annual physical examination, which is performed by a physician. A pays for the physician’s services and laboratory tests.

Situation 2

Taxpayer B pays for a full-body electronic scan, a relatively high-cost procedure, performed by a technician at a clinic. The scan examines the condition of B ’s internal organs and may identify disease or other abnormalities. B has not consulted a physician before undergoing the

procedure, which can be obtained without a physician’s direction, or determined if less expensive alternatives are available.

Situation 3

Taxpayer C buys a test kit and uses it to determine whether she is pregnant.

LAW

Section 213(a) allows a deduction for expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, spouse, or dependent, to the extent that the expenses exceed 7.5 percent of adjusted gross income. Medical care includes amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. Section 213(d)(1)(A). Medical care includes X-rays and laboratory and other diagnostic services. Amounts paid for obstetrical services are deemed to be for the purpose of affecting a structure or function of the body and therefore are paid for medical care. Section 1.213–1(e)(1)(ii) of the Income Tax Regulations.

“Diagnosis” is the determination of a medical condition, such as a disease, by physical examination or study of symptoms. Black’s Law Dictionary (8 ^th ed., 2004). A diagnosis may encompass a determination that disease is absent. The determination of a medical condition may include testing for changes in the functions of the body, such as those resulting from pregnancy, that are unrelated to disease.

In determining whether an expense is for either medical or personal reasons, the recommendation of a physician is important. Havey v. Commissioner, 12 T.C. 409, 412 (1949). However, this determination is unnecessary in the case of expenses for items that are wholly medical in nature and serve no other function in everyday life. Stringham v. Commissioner, 12 T.C. 580, 584 (court reviewed), aff’d 183 F.2d 579 (6 ^th Cir. 1950).

The amount of the deduction under § 213 is not limited by a ceiling and, although additional costs for personal convenience are not allowable, § 213 does not limit the deduction to amounts paid for the least expensive form of medical care available. Ferris v. Commissioner, 582 F.2d 1112, 1116 (7 ^th Cir. 1978).

ANALYSIS

In Situation 1, the amount A pays for the annual physical examination is for diagnosis and qualifies as an expense for medical care even though A is not experiencing any symptoms of illness.

In Situation 2, the amount B pays for the full-body scan is for diagnosis and qualifies as an expense for medical care even though B is not experiencing symptoms of illness and has not obtained a physician’s recommendation before undergoing the procedure. The procedure serves no non-medical function and the expense is not disallowed because of the high cost or possible existence of less expensive alternatives.

In Situation 3, the amount C pays for the pregnancy test qualifies as an expense for medical care even though its purpose is to test the healthy functioning of the body rather than to detect disease.

Therefore, the amounts paid by Taxpayers A, B, and C for the physical examination, the full-body scan, and the pregnancy test kit are deductible under § 213(a), subject to the 7.5 percent floor.

HOLDING

Amounts paid by individuals for diagnostic and certain similar procedures and devices, not compensated by insurance or otherwise, are medical care expenses deductible under § 213(a), subject to the limitations of that section.

DRAFTING INFORMATION

For further information regarding this revenue ruling, contact Dan Cassano at (202) 622–7900 (not a toll-free call).

2007–50 I.R.B. 1154 December 10, 2007

Section 280G.—Golden Parachute Payments

Federal short-term, mid-term, and long-term rates are set forth for the month of December 2007. See Rev. Rul. 2007-70, page 1158.

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 2007. See Rev. Rul. 2007-70, page 1158.

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

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

2008 covered compensation tables; permitted disparity. The covered compensation tables under section 401 of the Code for the year 2008 are provided for use in determining contributions to defined benefit plans and permitted disparity.

Rev. Rul. 2007–71

This revenue ruling provides tables of covered compensation under

CALENDAR

YEAR OF

BIRTH

§ 401(l)(5)(E) of the Internal Revenue Code (the “Code”) and the Income Tax Regulations, thereunder, for the 2008 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 year of birth of the individual. In deter

ATTACHMENT I

2008 COVERED COMPENSATION TABLE

CALENDAR YEAR OF

SOCIAL SECURITY

RETIREMENT AGE

mining 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 2008 year the taxable wage base is $102,000.

The following tables provide covered compensation for 2008:

2008 COVERED COMPENSATION

TABLE II

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

December 10, 2007 1155 2007–50 I.R.B.

CALENDAR

YEAR OF

BIRTH

ATTACHMENT I

2008 COVERED COMPENSATION TABLE

CALENDAR YEAR OF

SOCIAL SECURITY

RETIREMENT AGE

2008 COVERED COMPENSATION

TABLE II

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 46,344 1940 2006 48,816 1941 2007 51,348 1942 2008 53,952 1943 2009 56,484 1944 2010 58,992 1945 2011 61,476 1946 2012 63,912 1947 2013 66,324 1948 2014 68,580 1949 2015 70,764 1950 2016 72,828 1951 2017 74,820 1952 2018 76,704 1953 2019 78,540 1954 2020 80,328 1955 2022 83,700 1956 2023 85,332 1957 2024 86,880 1958 2025 88,320 1959 2026 89,712 1960 2027 91,044 1961 2028 92,304 1962 2029 93,492 1963 2030 94,656 1964 2031 95,784 1965 2032 96,828 1966 2033 97,788 1967 2034 98,628 1968 2035 99,360 1969 2036 99,984 1970 2037 100,464 1971 2038 100,896

2007–50 I.R.B. 1156 December 10, 2007

CALENDAR

YEAR OF

BIRTH

ATTACHMENT I

2008 COVERED COMPENSATION TABLE

CALENDAR YEAR OF

SOCIAL SECURITY

RETIREMENT AGE

2008 COVERED COMPENSATION

TABLE II

1972 2039 101,304 1973 2040 101,640 1974 2041 101,868 1975 and Later 2042 102,000

2008 Rounded Covered Compensation Table

Year of Birth Covered Compensation

1937 39,000 1938 - 1939 45,000 1940 48,000 1941 51,000 1942 54,000 1943 57,000 1944 - 1945 60,000 1946 63,000 1947 66,000 1948 69,000 1949 - 1950 72,000 1951 75,000 1952 - 1953 78,000 1954 81,000 1955 - 1956 84,000 1957 - 1958 87,000 1959 - 1960 90,000 1961 - 1962 93,000 1963 - 1965 96,000 1966 - 1970 99,000 1971 and Later 102,000

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 2007. See Rev. Rul. 2007-70, page 1158.

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 2007. See Rev. Rul. 2007-70, page 1158.

DRAFTING INFORMATION

The principal author of this revenue ruling is Wayne Bradley 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 8:30 a.m. and 4:30 p.m. Eastern time, Monday through Friday (a toll-free number). Mr. Bradley may be reached via e-mail at RetirementPlanQuestions@irs.gov .

Section 412.—Minimum Funding Standards

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of December 2007. See Rev. Rul. 2007-70, page 1158.

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 2007. See Rev. Rul. 2007-70, page 1158.

December 10, 2007 1157 2007–50 I.R.B.

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 2007. See Rev. Rul. 2007-70, page 1158.

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 2007. See Rev. Rul. 2007-70, page 1158.

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 2007. See Rev. Rul. 2007-70, page 1158.

Section 846.—Discounted Unpaid Losses Defined

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

of December 2007. See Rev. Rul. 2007-70, page 1158.

Section 1274.—Determi- nation of Issue Price in the Case of Certain Debt Instru- ments 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, 642, 1274, 1288, and other sections of the Code, tables set forth the rates for December 2007.

Rev. Rul. 2007–70

This revenue ruling provides various prescribed rates for federal income tax purposes for December 2007 (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 an 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 2008 interest rate for sections 846 and 807.

Applicable Federal Rates (AFR) for December 2007

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-term

AFR 3.88% 3.84% 3.82% 3.81% 110% AFR 4.26% 4.22% 4.20% 4.18% 120% AFR 4.66% 4.61% 4.58% 4.57% 130% AFR 5.05% 4.99% 4.96% 4.94%

Mid-term

AFR 4.13% 4.09% 4.07% 4.06% 110% AFR 4.55% 4.50% 4.47% 4.46% 120% AFR 4.97% 4.91% 4.88% 4.86% 130% AFR 5.39% 5.32% 5.29% 5.26% 150% AFR 6.23% 6.14% 6.09% 6.06% 175% AFR 7.29% 7.16% 7.10% 7.06%

Long-term

AFR 4.72% 4.67% 4.64% 4.63% 110% AFR 5.21% 5.14% 5.11% 5.09% 120% AFR 5.68% 5.60% 5.56% 5.54% 130% AFR 6.16% 6.07% 6.02% 5.99%

2007–50 I.R.B. 1158 December 10, 2007

REV. RUL. 2007–70 TABLE 2

Adjusted AFR for December 2007

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-term adjusted 3.40% 3.37% 3.36% 3.35% AFR

Mid-term adjusted AFR 3.67% 3.64% 3.62% 3.61%

Long-term adjusted 4.34% 4.29% 4.27% 4.25% AFR

REV. RUL. 2007–70 TABLE 3

Rates Under Section 382 for December 2007

Adjusted federal long-term rate for the current month 4.34%

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.) 4.49%

REV. RUL. 2007–70 TABLE 4

Appropriate Percentages Under Section 42(b)(2) for December 2007 Appropriate percentage for the 70% present value low-income housing credit 8.03%

Appropriate percentage for the 30% present value low-income housing credit 3.44%

REV. RUL. 2007–70 TABLE 5

Rate Under Section 7520 for December 2007

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 5.0%

REV. RUL. 2007–70 TABLE 6

Applicable rate of interest for 2008 for purposes of section 846 and 807 4.06%

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 2007. See Rev. Rul. 2007-70, page 1158.

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

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of December 2007. See Rev. Rul. 2007-70, page 1158.

Section 7520.—Valuation Tables

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of December 2007. See Rev. Rul. 2007-70, page 1158.

December 10, 2007 1159 2007–50 I.R.B.