Part I. Rulings — Internal Revenue Bulletin 2012-51

Section 168.—Accelerated Cost Recovery System

The Internal Revenue Service and the Treasury Department expect to issue final regulations regarding the deduction and capitalization of expenditures related to tangible property in 2013 and anticipate that the final regulations will contain changes from the temporary regulations (T.D. 9564, 76 Fed. Reg. 81060–01 [2012–14 I.R.B. 614]). In addition, the Service and the Treasury Department will publish in the Federal Register a Treasury Decision amending the temporary regulations to apply to taxable years beginning on or after January 1, 2014, while permitting taxpayers to apply the temporary regulations for taxable years beginning on or after January 1, 2012, and before the applicability date of the final regulations. See Notice 2012-73, page 713.

Section 483.—Interest on Certain Deferred Payments

This ruling provides the dollar amounts, increased by the 2013 inflation adjustment, for section 1274A of the Code. Rev. Rul. 2011-27 supplemented and superseded. See Rev. Rul. 2012-33, page 710.

Section 1274.—Determi- nation of Issue Price in the Case of Certain Debt Instru- ments Issued for Property

This ruling provides the dollar amounts, increased by the 2013 inflation adjustment, for section 1274A of the Code. Rev. Rul. 2011-27 supplemented and superseded. See Rev. Rul. 2012-33, page 710.

Section 1274A.—Special Rules for Certain Transactions Where Stated Principal Amount Does Not Exceed $2,800,000

26 CFR 1.1274A–1: Special rules for certain trans- actions where stated principal amount does not ex- ceed $2,800,000. (Also §§ 483, 1274.)

Section 1274A – inflation adjusted numbers for 2013. This ruling provides

the dollar amounts, increased by the 2013 inflation adjustment, for section 1274A of the Code. Rev. Rul. 2011–27 supplemented and superseded.

Rev. Rul. 2012–33

This revenue ruling provides the dollar amounts, increased by the 2013 inflation adjustment, for § 1274A of the Internal Revenue Code.

BACKGROUND

In general, §§ 483 and 1274 determine the principal amount of a debt instrument given in consideration for the sale or exchange of nonpublicly traded property. In addition, any interest on a debt instrument subject to § 1274 is taken into account under the original issue discount provisions of the Code. Section 1274A, however, modifies the rules under §§ 483 and 1274 for certain types of debt instruments.

In the case of a “qualified debt instrument,” the discount rate used for purposes of §§ 483 and 1274 may not exceed nine percent, compounded semiannually. Section 1274A(b) defines a qualified debt instrument as any debt instrument given in consideration for the sale or exchange of property (other than new § 38 property within the meaning of § 48(b), as in effect on the day before the date of enactment of the Revenue Reconciliation Act of 1990) if the stated principal amount of the instrument does not exceed the amount specified in § 1274A(b). For debt instruments arising out of sales or exchanges before January 1, 1990, this amount is $2,800,000.

In the case of a “cash method debt instrument,” as defined in § 1274A(c), the borrower and lender may elect to use the cash receipts and disbursements method of accounting. In particular, for any cash method debt instrument, § 1274 does not apply, and interest on the instrument is accounted for by both the borrower and the

lender under the cash method of accounting. A cash method debt instrument is a qualified debt instrument that meets the following additional requirements: (A) In the case of instruments arising out of sales or exchanges before January 1, 1990, the stated principal amount does not exceed $2,000,000; (B) the lender does not use an accrual method of accounting and is not a dealer with respect to the property sold or exchanged; (C) § 1274 would have applied to the debt instrument but for an election under § 1274A(c); and (D) an election under § 1274A(c) is jointly made with respect to the debt instrument by the borrower and the lender. Section 1.1274A–1(c)(1) of the Income Tax Regulations provides rules concerning the time for, and manner of, making this election.

Section 1274A(d)(2) provides that, for any debt instrument arising out of a sale or exchange during any calendar year after 1989, the dollar amounts stated in § 1274A(b) and § 1274A(c)(2)(A) are increased by the inflation adjustment for the calendar year. Any increase due to the inflation adjustment is rounded to the nearest multiple of $100 (or, if the increase is a multiple of $50 and not of $100, the increase is increased to the nearest multiple of $100). The inflation adjustment for any calendar year is the percentage (if any) by which the CPI for the preceding calendar year exceeds the CPI for calendar year 1988. Section 1274A(d)(2)(B) defines the CPI for any calendar year as the average of the Consumer Price Index as of the close of the 12-month period ending on September 30 of that calendar year.

INFLATION-ADJUSTED AMOUNTS UNDER § 1274A

For debt instruments arising out of sales or exchanges after December 31, 1989, the inflation-adjusted amounts under § 1274A are shown in Table 1.

2012–51 I.R.B. 710 December 17, 2012

1274A(c)(2)(A) Amount (cash method debt

instrument)

Calendar Year

of Sale or Exchange

Rev. Rul. 2012–33 Table 1

Inflation-Adjusted Amounts Under Section 1274A

1274A(b) Amount (qualified debt

instrument)

1990 $2,933,200 $2,095,100 1991 $3,079,600 $2,199,700 1992 $3,234,900 $2,310,600 1993 $3,332,400 $2,380,300 1994 $3,433,500 $2,452,500 1995 $3,523,600 $2,516,900 1996 $3,622,500 $2,587,500 1997 $3,723,800 $2,659,900 1998 $3,823,100 $2,730,800 1999 $3,885,500 $2,775,400 2000 $3,960,100 $2,828,700 2001 $4,085,900 $2,918,500 2002 $4,217,500 $3,012,500 2003 $4,280,800 $3,057,700 2004 $4,381,300 $3,129,500 2005 $4,483,000 $3,202,100 2006 $4,630,300 $3,307,400 2007 $4,800,800 $3,429,100 2008 $4,913,400 $3,509,600 2009 $5,131,700 $3,665,500 2010 $5,115,100 $3,653,600 2011 $5,201,300 $3,715,200 2012 $5,339,300 $3,813,800 2013 $5,468,200 $3,905,900

Note: These inflation adjustments were computed using the All-Urban, Consumer Price Index, 1982–1984 base, published by the Bureau of Labor Statistics.

EFFECT ON OTHER DOCUMENTS

Rev. Rul. 2011–27, 2011–48 I.R.B. 805, is supplemented and superseded.

DRAFTING INFORMATION

The author of this revenue ruling is Steven Harrison of the Office of Associate Chief Counsel (Financial Institutions

& Products). For further information regarding this revenue ruling, contact Mr. Harrison at (202) 622–3930 (not a toll-free call).

December 17, 2012 711 2012–51 I.R.B.