Revenue Ruling 2003-99

Rev. Rul. 2003-99
Rev. Rul. 2003-99, 2003-34 I.R.B. 388, 2003-2 C.B. 388
                       Internal Revenue Service (I.R.S.)
                                 Revenue Ruling
                            OBSOLETE REVENUE RULINGS
                           Published: August 25, 2003

   Obsolete revenue rulings. This ruling publishes a list of previously published rulings that have been identified as no longer determinative with respect to future transactions.

  Obsolete revenue rulings. This ruling publishes a list of previously published rulings that have been identified as no longer determinative with respect to future transactions.

  The Internal Revenue Service is continuing its program of reviewing rulings  (including revenue rulings, revenue procedures, and notices) published in the Internal Revenue Bulletin to identify and publish lists of those rulings that, although not specifically revoked or superseded, are no longer considered determinative because (1) the applicable statutory provisions or regulations have been changed or repealed; (2) the ruling position is specifically covered by statute, regulations, or subsequent published position; or (3) the facts set forth no longer exist or are not sufficiently described to permit clear application of the current statute and regulations.

  This revenue ruling publishes a list of rulings that have been identified under the Service’s review program as no longer being determinative. The rulings are categorized by the Associate Chief Counsel offices that have primary jurisdiction over the subject matter of the rulings being obsoleted.

  Accordingly, the rulings listed below are hereby declared obsolete.

Associate Chief Counsel (Income Tax and

  Accounting)

Ruling No.                                C.B. Citation
Rev. Rul. 70-286                          1970-1 C.B. 113
Rev. Proc. 68-41                          1968-2 C.B. 943
Notice 95-50                              1995-2 C.B. 333
Associate Chief Counsel (Passthroughs
  and Special Industries)
Ruling No.                                C.B. Citation
Rev. Rul. 77-405                          1977-2 C.B. 381
Rev. Rul. 79-29                           1979-1 C.B. 358
Rev. Proc. 89-12                          1989-1 C.B. 798
Rev. Proc. 91-13                          1991-1 C.B. 477
Rev. Proc. 92-33                          1992-1 C.B. 782
Rev. Proc. 92-35                          1992-1 C.B. 790
Rev. Proc. 92-88                          1992-1 C.B. 496
Rev. Proc. 94-46                          1994-2 C.B. 688
Rev. Proc. 95-10                          1995-1 C.B. 501
Associate Chief Counsel (Corporate)
Ruling No.                                C.B. Citation
Rev. Rul. 54-139                          1954-1 C.B. 105
Rev. Rul. 54-396 [FN1]                    1954-2 C.B. 147
Rev. Rul. 56-128                          1956-1 C.B. 442
Rev. Rul. 56-160                          1956-1 C.B. 633
Rev. Rul. 56-212                          1956-1 C.B. 170
Rev. Rul. 56-220                          1956-1 C.B. 191
Rev. Rul. 56-271                          1956-1 C.B. 440
Rev. Rul. 56-344                          1956-2 C.B. 195
Rev. Rul. 56-448                          1956-2 C.B. 130
Rev. Rul. 56-451                          1956-2 C.B. 208
Rev. Rul. 56-586                          1956-2 C.B. 214
Rev. Rul. 56-680                          1956-2 C.B. 597
Rev. Rul. 56-681                          1956-2 C.B. 597
Rev. Rul. 57-296                          1957-2 C.B. 234
Rev. Rul. 58-92                           1958-1 C.B. 174
Rev. Rul. 59-108                          1959-1 C.B. 72
Rev. Rul. 59-120                          1959-1 C.B. 74
Rev. Rul. 59-122                          1959-1 C.B. 230
Rev. Rul. 59-233                          1959-2 C.B. 106
Rev. Rul. 59-326                          1959-2 C.B. 197
Rev. Rul. 59-400                          1959-2 C.B. 114
Rev. Rul. 59-412                          1959-2 C.B. 108
Rev. Rul. 60-49                           1960-1 C.B. 148
Rev. Rul. 60-246                          1960-2 C.B. 462
Rev. Rul. 60-262                          1960-2 C.B. 114
Rev. Rul. 61-96                           1961-1 C.B. 68
Rev. Rul. 64-147                          1964-1 C.B. 136
Rev. Rul. 64-177                          1964-1 C.B. 141
Rev. Rul. 65-110                          1965-1 C.B. 438
Rev. Rul. 66-23 [FN2]                     1966-1 C.B. 67
Rev. Rul. 66-290                          1966-2 C.B. 112
Rev. Rul. 67-186                          1967-1 C.B. 81
Rev. Rul. 67-189                          1967-1 C.B. 255
Rev. Rul. 67-326                          1967-2 C.B. 143
Rev. Rul. 68-388                          1968-2 C.B. 122
Rev. Rul. 68-434                          1968-2 C.B. 137
Rev. Rul. 69-18                           1969-1 C.B. 188
Rev. Rul. 69-20                           1969-1 C.B. 202
Rev. Rul. 69-241                          1969-1 C.B. 200
Rev. Rul. 69-426                          1969-2 C.B. 48
Rev. Rul. 70-6                            1970-1 C.B. 172
Rev. Rul. 70-111                          1970-1 C.B. 184
Rev. Rul. 70-378                          1970-2 C.B. 178
Rev. Rul. 70-409                          1970-2 C.B. 79
Rev. Rul. 70-496                          1970-2 C.B. 74
Rev. Rul. 71-384                          1971-2 C.B. 181
Rev. Rul. 71-440                          1971-2 C.B. 326
Rev. Rul. 72-61                           1972-1 C.B. 281
Rev. Rul. 72-212                          1972-1 C.B. 291
Rev. Rul. 72-472                          1972-2 C.B. 202
Rev. Rul. 72-603                          1972-2 C.B. 517
Rev. Rul. 73-257                          1973-1 C.B. 189
Rev. Rul. 73-277                          1973-1 C.B. 296
Rev. Rul. 73-473                          1973-2 C.B. 115
Rev. Rul. 73-490                          1973-2 C.B. 110
Rev. Rul. 73-498                          1973-2 C.B. 316
Rev. Rul. 74-73                           1974-1 C.B. 254
Rev. Rul. 74-87                           1974-1 C.B. 72
Rev. Rul. 74-211                          1974-1 C.B. 76
Rev. Rul. 74-476                          1974-2 C.B. 104
Rev. Rul. 74-610                          1974-2 C.B. 288
Rev. Rul. 75-54                           1975-1 C.B. 293
Rev. Rul. 75-160                          1975-1 C.B. 112
Rev. Rul. 75-174                          1975-1 C.B. 252
Rev. Rul. 75-179                          1975-1 C.B. 103
Rev. Rul. 75-212                          1975-1 C.B. 107
Rev. Rul. 75-248                          1975-1 C.B. 125
Rev. Rul. 75-468                          1975-2 C.B. 115
Rev. Rul. 75-515                          1975-2 C.B. 117
Rev. Rul. 75-561                          1975-2 C.B. 129
Rev. Rul. 76-90                           1976-1 C.B. 101
Rev. Rul. 76-239                          1976-1 C.B. 90
Rev. Rul. 76-347                          1976-2 C.B. 253
Rev. Rul. 77-81                           1977-1 C.B. 97
Rev. Rul. 77-150                          1977-1 C.B. 88
Rev. Rul. 77-256                          1977-2 C.B. 96
Rev. Rul. 77-284                          1977-2 C.B. 97
Rev. Rul. 77-321                          1977-2 C.B. 98
Rev. Rul. 77-456                          1977-2 C.B. 102
Rev. Rul. 77-483                          1977-2 C.B. 244
Rev. Rul. 78-89                           1978-1 C.B. 272
Rev. Rul. 78-287                          1978-2 C.B. 146
Rev. Rul. 78-441                          1978-2 C.B. 152
Rev. Rul. 79-71                           1979-1 C.B. 151
Rev. Rul. 79-82                           1979-1 C.B. 141
Rev. Rul. 79-104                          1979-1 C.B. 263
Rev. Rul. 79-314                          1979-2 C.B. 132
Rev. Rul. 80-79                           1980-1 C.B. 191
Rev. Rul. 80-101                          1980-1 C.B. 70
Rev. Rul. 80-358                          1980-2 C.B. 110
Rev. Rul. 81-190                          1981-2 C.B. 84
Rev. Rul. 81-247                          1981-2 C.B. 87
Rev. Rul. 82-164                          1982-2 C.B. 77
Rev. Rul. 83-119                          1983-2 C.B. 57
Rev. Rul. 84-30                           1984-1 C.B. 114
Rev. Rul. 85-55                           1985-1 C.B. 323
Rev. Rul. 85-136                          1985-2 C.B. 194
Rev. Rul. 86-52                           1986-1 C.B. 204
Rev. Rul. 87-1                            1987-1 C.B. 132
Rev. Proc. 91-11                          1991-1 C.B. 470
Rev. Proc. 91-39                          1991-2 C.B. 694
Rev. Proc. 95-11                          1995-1 C.B. 505
Rev. Proc. 95-39                          1995-2 C.B. 399
Associate Chief Counsel (International)
Ruling No.                                C.B. Citation
Rev. Rul. 56                              1953-1 C.B. 303
Rev. Rul. 55-105                          1955-1 C.B. 94
Rev. Rul. 55-372                          1955-1 C.B. 339
Rev. Rul. 57-116                          1957-1 C.B. 245
Rev. Rul. 57-542                          1957-2 C.B. 462
Rev. Rul. 58-618                          1958-2 C.B. 430
Rev. Rul. 59-356                          1959-2 C.B. 177
Rev. Rul. 60-307                          1960-2 C.B. 214
Rev. Rul. 63-157                          1963-2 C.B. 296
Rev. Rul. 63-224                          1963-2 C.B. 297
Rev. Rul. 63-248                          1963-2 C.B. 623
Rev. Rul. 64-285                          1964-2 C.B. 184
Rev. Rul. 65-260                          1965-2 C.B. 243
Rev. Rul. 65-273                          1965-2 C.B. 240
Rev. Rul. 66-4                            1966-1 C.B. 177
Rev. Rul. 68-309                          1968-1 C.B. 338
Rev. Rul. 68-477                          1968-2 C.B. 317
Rev. Rul. 68-522                          1968-2 C.B. 320
Rev. Rul. 68-608                          1968-2 C.B. 309
Rev. Rul. 68-640                          1968-2 C.B. 321
Rev. Rul. 68-641                          1968-2 C.B. 325
Rev. Rul. 69-361                          1969-1 C.B. 193
Rev. Rul. 69-485                          1969-2 C.B. 158
Rev. Rul. 69-517                          1969-2 C.B. 149
Rev. Rul. 70-229                          1970-1 C.B. 164
Rev. Rul. 70-230                          1970-1 C.B. 166
Rev. Rul. 70-264                          1970-1 C.B. 165
Rev. Rul. 71-13                           1971-1 C.B. 217
Rev. Rul. 71-453                          1971-2 C.B. 292
Rev. Rul. 71-454                          1971-2 C.B. 294
Rev. Rul. 71-495                          1971-2 C.B. 311
Rev. Rul. 71-518                          1971-2 C.B. 293
Rev. Rul. 71-565                          1971-2 C.B. 266
Rev. Rul. 71-582                          1971-2 C.B. 274
Rev. Rul. 72-116                          1972-1 C.B. 220
Rev. Rul. 72-357                          1972-2 C.B. 456
Rev. Rul. 72-526                          1972-2 C.B. 450
Rev. Rul. 72-599                          1972-2 C.B. 458
Rev. Rul. 73-46                           1973-1 C.B. 342
Rev. Rul. 73-119                          1973-1 C.B. 348
Rev. Rul. 73-182                          1973-1 C.B. 350
Rev. Rul. 74-6                            1974-1 C.B. 191
Rev. Rul. 74-59 [FN3]                     1974-1 C.B. 183
Rev. Rul. 74-83                           1974-1 C.B. 184
Rev. Rul. 74-376                          1974-2 C.B. 215
Rev. Rul. 74-521                          1974-2 C.B. 208
Rev. Rul. 75-53                           1975-1 C.B. 234
Rev. Rul. 75-105                          1975-1 C.B. 29
Rev. Rul. 75-106                          1975-1 C.B. 31
Rev. Rul. 75-107                          1975-1 C.B. 32
Rev. Rul. 75-111                          1975-1 C.B. 251
Rev. Rul. 75-134                          1975-1 C.B. 33
Rev. Rul. 75-298                          1975-2 C.B. 290
Rev. Rul. 75-341                          1975-2 C.B. 308
Rev. Rul. 75-426                          1975-2 C.B. 292
Rev. Rul. 76-44                           1976-1 C.B. 127
Rev. Rul. 76-67                           1976-1 C.B. 208
Rev. Rul. 76-329                          1976-2 C.B. 223
Rev. Rul. 76-535                          1976-2 C.B. 219
Rev. Rul. 77-41                           1977-1 C.B. 226
Rev. Rul. 77-343                          1977-2 C.B. 255
Rev. Rul. 77-482                          1977-2 C.B. 242
Rev. Rul. 79-116                          1979-1 C.B. 213
Rev. Rul. 79-424                          1979-2 C.B. 405
Rev. Rul. 80-78                           1980-1 C.B. 171
Rev. Rul. 80-167                          1980-1 C.B. 176
Rev. Rul. 80-170                          1980-1 C.B. 285
Rev. Rul. 82-226                          1982-2 C.B. 156
Rev. Rul. 83-101                          1983-2 C.B. 147
Rev. Rul. 84-28                           1984-1 C.B. 177
Rev. Rul. 88-7                            1988-1 C.B. 269
Rev. Rul. 89-72                           1989-1 C.B. 257
Rev. Proc. 68-23                          1968-1 C.B. 821
Rev. Proc. 90-19                          1990-1 C.B. 495
Notice 87-5                               1987-1 C.B. 416
Notice 87-66                              1987-2 C.B. 376
Notice 94-46                              1994-1 C.B. 356
FN1. Rev. Rul. 54-396 was declared obsolete by T.D. 8885, 2000-1 C.B. 1260,
  1261, and is included in this ruling to allow easier confirmation of its
  obsolete status.
FN2. Rev. Rul. 66-23 was declared obsolete by T.D. 8760, 1998-1 C.B. 803, 805,
  and is included in this ruling to allow easier confirmation of its obsolete
  status.
FN3. Rev. Rul. 74-59 was declared obsolete by T.D. 8708, 1997-1 C.B. 137, 139,
  and is included in this ruling to allow easier confirmation of its obsolete
  status.

  The Service will continue to review other rulings to ascertain those that, for the reasons stated above, are inapplicable to future transactions. Therefore, failure to include any particular ruling in the above list should not be construed as an indication that the ruling necessarily is determinative with respect to future transactions.

DRAFTING INFORMATION

  The principal author of this revenue ruling is Marnette Myers of the Office of Associate Chief Counsel (Income Tax and Accounting). For further information regarding the rulings obsoleted in this revenue ruling, contact the following persons from the appropriate Associate Chief Counsel offices (not a toll-free call):

Name               Associate Chief Counsel              Telephone No.
Marnette Myers     Income Tax and Accounting            (202) 622-4920
Louis Solomon      Passthroughs and Special Industries  (202) 622-3010
Wayne Murray       Corporate                            (202) 622-7700
Kelly Myers Kogan  International                        (202) 622-3810

 Rev. Rul. 2003-99, 2003-34 I.R.B. 388, 2003-2 C.B. 388

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Revenue Ruling 2003-100

Rev. Rul. 2003-100
Rev. Rul. 2003-100, 2003-34 I.R.B. 385, 2003-2 C.B. 385
                       Internal Revenue Service (I.R.S.)
                                 Revenue Ruling
                     LIFO; PRICE INDEXES; DEPARTMENT STORES
                           Published: August 25, 2003

 Section 472.–Last-in, First-out Inventories, 26 CFR 1.472-1: Last-in, first-out inventories.

  LIFO; price indexes; department stores. The June 2003 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, June 30, 2003.

  LIFO; price indexes; department stores. The June 2003 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, June 30, 2003.

  The following Department Store Inventory Price Indexes for June 2003 were issued by the Bureau of Labor Statistics. The indexes are accepted by the Internal Revenue Service, under s 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, June 30, 2003.

  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                    June 2002    June 2003     Percent
                                                                      Change
                                                                     from June
                                                                      2002 to
                                                                     June 2003
                                                                       [FN1]
——————————————————————————-
1.         Piece Goods …………………… 494.9        464.3         -6.2
2.         Domestics and Draperies ………… 577.6        557.0         -3.6
3.         Women’s and Children’s Shoes ……. 634.3        629.1         -0.8
4.         Men’s Shoes …………………… 905.7        849.5         -6.2
5.         Infants’ Wear …………………. 603.3        588.9         -2.4
6.         Women’s Underwear ……………… 525.1        516.1         -1.7
7.         Women’s Hosiery ……………….. 346.5        348.9          0.7
8.         Women’s and Girls’
             Accessories …………………. 537.2        547.9          2.0
9.         Women’s Outerwear and Girls’
             Wear ……………………….. 369.7        362.9         -1.8
10.        Men’s Clothing ………………… 580.7        541.8         -6.7
11.        Men’s Furnishings ……………… 581.7        570.2         -2.0
12.        Boys’ Clothing and
             Furnishings …………………. 475.7        449.6         -5.5
13.        Jewelry ………………………. 897.0        877.8         -2.1
14.        Notions ………………………. 805.4        791.4         -1.7
15.        Toilet Articles and Drugs ………. 981.0        990.0          0.9
16.        Furniture and Bedding ………….. 626.2        619.0         -1.0
17.        Floor Coverings ……………….. 616.6        586.6         -4.9
18.        Housewares ……………………. 756.2        726.0         -4.0
19.        Major Appliances ………………. 221.0        214.1         -3.1
20.        Radio and Television ……………. 49.4         45.4         -8.1
21.        Recreation and Education
             [FN2] ……………………….. 86.2         83.1         -3.6
22.        Home Improvements [FN2] ………… 125.5        125.4         -0.1
23.        Auto Accessories [FN2] …………. 110.9        111.5          0.5
Groups 1-15: Soft Goods ………………….. 571.9        559.5         -2.2
Groups 16-20: Durable Goods ………………. 411.5        395.6         -3.9
Groups 21-23: Misc. Goods [FN2] ……………. 96.4         94.4         -2.1
           Store Total [FN3] ……………… 512.9        500.1         -2.5
FN1. Absence of a minus sign before the percentage change in this column
  signifies a price increase.
FN2. Indexes on a January 1986 = 100 base.
FN3. The 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 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).

 Rev. Rul. 2003-100, 2003-34 I.R.B. 385, 2003-2 C.B. 385

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Revenue Ruling 2003-101

Rev. Rul. 2003-101
Rev. Rul. 2003-101, 2003-36 I.R.B. 513, 2003-2 C.B. 513
                       Internal Revenue Service (I.R.S.)
                                 Revenue Ruling
      FEDERAL RATES; ADJUSTED FEDERAL RATES; ADJUSTED FEDERAL LONG-TERM RATE
                          AND THE LONG-TERM EXEMPT RATE
                            Released: August 20, 2003
                          Published: September 8, 2003

 Section 42.–Low-Income Housing Credit

  The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of September 2003.

Section 280G.–Golden Parachute Payments

  Federal short-term, mid-term, and long-term rates are set forth for the month of September 2003.

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 September 2003.

Section 412.–Minimum Funding Standards

  The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of September 2003.

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

  The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of September 2003.

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

  The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of September 2003.

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 September 2003.

Section 483.–Interest on Certain Deferred Payments

  The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of September 2003.

Section 642.–Special Rules for Credits and Deductions

  Federal short-term, mid-term, and long-term rates are set forth for the month of September 2003.

Section 807.–Rules for Certain Reserves

  The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of September 2003.

Section 846.–Discounted Unpaid Losses Defined

  The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of September 2003.

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

  The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of September 2003.

Section 7520.–Valuation Tables

  The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of September 2003.

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

  The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of September 2003.

Section 1274.–Determination of Issue Price in the Case of Certain Debt Instruments Issued for Property

  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 September 2003.

  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 September 2003.

  This revenue ruling provides various prescribed rates for federal income tax purposes for September 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. Finally, 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.

———————————————————
               REV. RUL. 2003-101 TABLE 1
    Applicable Federal Rates (AFR) for September 2003
                 Period for Compounding
            Annual      Semiannual  Quarterly   Monthly
Short-Term
       AFR  1.52%       1.51%       1.51%       1.51%
  110% AFR  1.67%       1.66%       1.66%       1.65%
  120% AFR  1.82%       1.81%       1.81%       1.80%
  130% AFR  1.97%       1.96%       1.96%       1.95%
  Mid-Term
       AFR  3.43%       3.40%       3.39%       3.38%
  110% AFR  3.77%       3.74%       3.72%       3.71%
  120% AFR  4.12%       4.08%       4.06%       4.05%
  130% AFR  4.47%       4.42%       4.40%       4.38%
  150% AFR  5.17%       5.10%       5.07%       5.05%
  175% AFR  6.04%       5.95%       5.91%       5.88%
 Long-Term
       AFR  5.08%       5.02%       4.99%       4.97%
  110% AFR  5.60%       5.52%       5.48%       5.46%
  120% AFR  6.11%       6.02%       5.98%       5.95%
  130% AFR  6.64%       6.53%       6.48%       6.44%
———————————————————
—————————————————————
                  REV. RUL. 2003-101 TABLE 2
                Adjusted AFR for September 2003
                    Period for Compounding
                         Annual  Semiannual  Quarterly  Monthly
Short-term adjusted AFR  1.25%   1.25%       1.25%      1.25%
Mid-term adjusted AFR    2.92%   2.90%       2.89%      2.88%
Long-term adjusted AFR   4.65%   4.60%       4.57%      4.56%
—————————————————————
——————————————————————————-
                          REV. RUL. 2003-101 TABLE 3
                  Rates Under Section 382 for September 2003
Adjusted federal long-term rate for the current month                     4.65%
Long-term tax-exempt rate for ownership changes during the current month  4.65%
  (the highest of the adjusted federal long-term rates for the current
  month and the prior two months.)
——————————————————————————-
——————————————————————————-
                          REV. RUL. 2003-101 TABLE 4
       Appropriate Percentages Under Section 42(b)(2) for September 2003
Appropriate percentage for the 70% present value low-income housing       7.99%
  credit
Appropriate percentage for the 30% present value low-income housing       3.42%
  credit
——————————————————————————-
——————————————————————————-
                          REV. RUL. 2003-101 TABLE 5
                  Rate Under Section 7520 for September 2003
Applicable federal rate for determining the present value of an annuity,  4.2%
  an interest for life or a term of years, or a remainder or reversionary
  interest
——————————————————————————-

 Rev. Rul. 2003-101, 2003-36 I.R.B. 513, 2003-2 C.B. 513

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Revenue Ruling 2003-93

Rev. Rul. 2003-93
Rev. Rul. 2003-93, 2003-33 I.R.B. 346, 2003-2 C.B. 346
                       Internal Revenue Service (I.R.S.)
                                 Revenue Ruling
     LOW-INCOME HOUSING CREDIT; SATISFACTORY BOND; “BOND FACTOR” AMOUNTS FOR
                     THE PERIOD JULY THROUGH SEPTEMBER 2003
                           Published: August 18, 2003

   Low-income housing credit; satisfactory bond; “bond factor” amounts for the period July through September 2003. This ruling announces the monthly bond factor amounts to be used by taxpayers who dispose of qualified low-income buildings or interests therein during the period July through September 2003.

  Low-income housing credit; satisfactory bond; “bond factor” amounts for the period July through September 2003. This ruling announces the monthly bond factor amounts to be used by taxpayers who dispose of qualified low-income buildings or interests therein during the period July through September 2003.

  In Rev. Rul. 90-60, 1990-2 C.B. 3, the Internal Revenue Service provided guidance to taxpayers concerning the general methodology used by the Treasury Department in computing the bond factor amounts used in calculating the amount of bond considered satisfactory by the Secretary under s 42(j)(6) of the Internal Revenue Code. It further announced that the Secretary would publish in the Internal Revenue Bulletin a table of bond factor amounts for dispositions occurring during each calendar month.

  Rev. Proc. 99-11, 1999-1 C.B. 275, established a collateral program as an alternative to providing a surety bond for taxpayers to avoid or defer recapture of the low-income housing tax credits under s 42(j)(6). Under this program, taxpayers may establish a Treasury Direct Account and pledge certain United States Treasury securities to the Internal Revenue Service as security.

  This revenue ruling provides in Table 1 the bond factor amounts for calculating the amount of bond considered satisfactory under s 42(j)(6) or the amount of United States Treasury securities to pledge in a Treasury Direct Account under Rev. Proc. 99-11 for dispositions of qualified low-in-come buildings or interests therein during the period July through September 2003.

[Note:  The following TABLE/FORM is too wide to be displayed on one screen.

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————————————————————————
  Table 1 Rev. Rul. 2003-93 Monthly Bond Factor Amounts for Dispositions
————————————————————————
———————————————-
 Expressed As a Percentage of Total Credits
———————————————-
                 Calendar Year Building Placed in
————————————————-
Month of       1989   1990   1991   1992   1993
  Disposition
————————————————-
Jul ‘03        16.23  30.04  41.83  51.93  60.50
————————————————-
Aug ‘03        16.23  30.04  41.83  51.93  60.50
————————————————-
Sep ‘03        16.23  30.04  41.83  51.93  60.50
————————————————-
Service or, if Section 42(f)(1) Election Was Made, the Succeeding
           Calendar Year
———————————————————————
 1994   1995   1996   1997   1998   1999   2000   2001   2002   2003
———————————————————————
 59.37  59.27  59.27  59.35  59.58  59.83  60.15  60.83  61.77  62.68
———————————————————————
 59.24  59.14  59.14  59.23  59.45  59.72  60.05  60.74  61.70  62.68
———————————————————————
 59.11  59.01  59.02  59.10  59.34  59.60  59.95  60.65  61.63  62.68
———————————————————————

  For a list of bond factor amounts applicable to dispositions occurring during other calendar years, see: Rev. Rul. 98-3, 1998-1 C.B. 248; Rev. Rul. 2001-2, 2001-1 C.B. 255; Rev. Rul. 2001-53, 2001-2 C.B. 488; and Rev. Rul. 2002-72, 2002-44 I.R.B. 759. For dispositions occurring during the period January through March 2003, see Rev. Rul. 2003-22, 2003-8 I.R.B. 494. For dispositions occurring during the period April through June 2003, see Rev. Rul. 2003-44, 2003-18 I.R.B. 848.

DRAFTING INFORMATION

  The principal author of this revenue ruling is Gregory N. Doran of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this revenue ruling, contact Mr. Doran at (202) 622-3040 (not a toll-free call).

 Rev. Rul. 2003-93, 2003-33 I.R.B. 346, 2003-2 C.B. 346

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Revenue Ruling 2003-95

Rev. Rul. 2003-95
Rev. Rul. 2003-95, 2003-33 I.R.B. 358, 2003-2 C.B. 358
                       Internal Revenue Service (I.R.S.)
                                 Revenue Ruling
    LIFE INSURANCE CONTRACTS; DISTRIBUTIONS MADE IN CONNECTION WITH A CHANGE
                                  IN BENEFITS
                           Published: August 18, 2003

 Section 72.–Annuities; Certain Proceeds of Endowment and Life Insurance Contracts

  A revenue ruling describes the tax treatment of a cash distribution made in connection with a reduction in the benefits of a life insurance contract.

Section 7702.–Life Insurance Contract Defined

  Life insurance contracts; distributions made in connection with a change in benefits. This ruling describes the rules of section 7702(f)(7) of the Code regarding the tax treatment of a cash distribution made in connection with a reduction in the benefits of a life insurance contract.

  Life insurance contracts; distributions made in connection with a change in benefits. This ruling describes the rules of section 7702(f)(7) of the Code regarding the tax treatment of a cash distribution made in connection with a reduction in the benefits of a life insurance contract.

ISSUE

  How is a cash distribution upon a change in the benefits of a life insurance contract taxed under s 7702(f)(7) of the Internal Revenue Code?

FACTS

  Situation 1. In Year 1, A purchased a life insurance contract with a $350,000 death benefit. The contract is a life insurance contract under applicable state law and meets the cash value accumulation test prescribed in s 7702(a)(1) and s 7702(b). The contract is not a “modified endowment contract” as defined in s 7702A.

  Through the end of Year 4, A paid total premiums of $45,000 with regard to the contract. At the end of the Year 4, when the cash surrender value of the contract was $60,000, A surrendered 60% of the contract and received a cash distribution of $36,000. The death benefit under the contract decreased to $140,000 as a result of the partial surrender. Based on A’s age at the time of the partial surrender, the net single premium (determined under s 7702(b)) was $355 per $1000 of insurance coverage.

  Situation 2. Same facts as Situation 1, except that the contract qualifies as a life insurance contract using the guideline premium/cash value corridor test of ss 7702(a)(2), 7702(c), and 7702(d) rather than the cash value accumulation test. When the contract was issued, the guideline premium limitation was $80,500. Immediately after the partial surrender, the guideline premium limitation (determined under s 7702(c)(3)) was $265 per $1000 of insurance coverage and the cash value corridor percentage (determined under s 7702(d)) was 185.

  Situation 3. Same facts as Situation 2, except that the partial surrender occurred 6 years after the issuance of the contract.

LAW AND ANALYSIS

  Section 7702(f)(7)(B) provides that if the benefits under a life insurance contract are reduced during the 15-year period beginning on the issue date of the contract and a cash distribution is made to the policyholder as a result of the reduction in benefits, then s 72(e) (other than subsection (e)(5) thereof) applies to the portion of the cash distribution that does not exceed the applicable recapture ceiling. Under s 72(e)(2)(B), a distribution is included in gross income to the extent of the income on the contract. Income on the contract is the amount by which the contract’s cash value (determined without regard to any surrender charge) immediately before the distribution exceeds the policyholder’s investment in the contract (determined under s 72(e)(6)) at such time. See s 72(e)(3)(A). Accordingly, under s 7702(f)(7)(B), the gross income of a policyholder receiving a cash distribution upon a reduction in the benefits during the 15 year period following the issue date of the contract includes an amount equal to the lesser of– (i) the applicable recapture ceiling, (ii) the income on the contract, or (iii) the amount of the distribution. To the extent the distribution exceeds the amount included in gross income, the excess is treated as a tax-free recovery of investment in the contract. See s 72(e)(2)(B).

  The applicable recapture ceiling under s 7702(f)(7) varies depending on when the reduction in benefits occurs and on which of the s 7702 tests is used to qualify the contract as a life insurance contract for federal tax purposes.

  If the reduction in benefits occurs during the 5-year period beginning on the issue date of the contract and the contract qualifies as a life insurance contract by satisfying the cash value accumulation test, then s 7702(f)(7)(C)(i) provides that the applicable recapture ceiling equals the excess of– (1) the cash surrender value of the contract immediately before the reduction in benefits, over (2) the net single premium (determined under s 7702(b)) for the contract immediately after the reduction in benefits. If the contract qualifies as a life insurance contract under the guideline premium/cash value corridor test, then s 7702(f)(7)(C)(ii) provides that the applicable recapture ceiling is the greater of–

  (1) the excess of– (A) the aggregate premiums paid under the contract immediately before the reduction in the contract’s benefits, over (B) the adjusted guideline premium limitation for the contract; or

  (2) the excess of– (A) the cash surrender value of the contract immediately before the reduction in the contract’s benefits, over (B) the maximum cash value permitted under the cash value corridor of s 7702(d) immediately after the reduction of the contract’s benefits.

  The first and third of the four amounts required for this calculation, the aggregate premiums paid under the contract immediately before the reduction in the contract’s benefits and the cash surrender value, are known facts. The second amount, the adjusted guideline premium limitation for the contract, is calculated by subtracting from the original guideline premium limitation a guideline premium limitation (determined under s 7702(c)(2)) for the decrease in the contract’s benefits. The guideline premium limitation is determined as of the date of the reduction in benefits using the attained age of the insured on that date. S. Rep. No. 313, 99th Cong. 2d Sess. 989 (1986); 1986-3 (Vol. 3) C.B. 989. The fourth amount, the maximum cash value permitted under the cash value corridor of s 7702(d) immediately after the reduction of the contract’s benefits, is calculated by dividing the death benefit of the contract immediately after the reduction by the applicable percentage set forth in s 7702(d).

  If the reduction in benefits occurs more than 5 years but less than 16 years after the contract’s issue date, a single recapture ceiling applies to all contracts. The recapture ceiling equals the excess of– (1) the cash surrender value of the contract immediately before the reduction, over (2) the maximum cash value that would be permitted under the cash value corridor of s 7702(d) immediately after the reduction of the contract’s benefits. See s 7702(f)(7)(D).

  In Situation 1, A received a $36,000 cash distribution upon the surrender of 60% of the benefits under the life insurance contract. Immediately before the surrender, the income on the contract was $15,000 [$60,000 - $45,000 = $15,000].

  The partial surrender reduced the death benefit under A’s contract from  $350,000 to $140,000. As the reduction in the benefits occurred within the 5- year period beginning on the issue date of the contract and the contract qualifies as a life insurance contract under the cash value accumulation test, the applicable recapture ceiling is determined under s 7702(f)(7)(C)(i). The recapture ceiling is the excess of the contract’s $60,000 cash surrender value immediately before the reduction in benefits over the net single premium for the contract immediately after the reduction in benefits. On the date of the reduction in benefits, the net single premium was $355 per $1000 of insurance coverage. The net single premium for the contract’s reduced death benefit was $49,700 [$140,000 x $355 / $1,000 = $49,700]. The recapture ceiling, therefore, was $10,300 [$60,000 - $49,700 = $10,300].

  Pursuant to s 7702(f)(7)(B), A’s gross income includes the portion of the distribution equal to the lesser of– (i) the applicable recapture ceiling ($10,300), (ii) the income on the contract ($15,000), or (iii) the amount of the distribution ($36,000). Accordingly, $10,300 is included in A’s gross income. The remaining $25,700 of the distribution is treated, under s 72(e)(5), as a return of a portion of the A’s $45,000 investment in the contract. A’s investment in the contract immediately after the partial surrender is $19,300 [$45,000 - $25,700 = $19,300]. See s 72(e)(6).

  In Situation 2, the reduction in the benefits under A’s life insurance contract also occurred within the 5-year period beginning on the issue date of the contract. However, because the contract qualifies as a life insurance contract using the guideline premium/cash value corridor test, the applicable recapture ceiling under s 7702(f)(7)(C)(ii) is the greater of–

  (1) the excess of– (A) the aggregate premiums paid under the contract immediately before the reduction in the contract’s benefits, over (B) the adjusted guideline premium limitation for the contract; or

  (2) the excess of– (A) the cash surrender value of the contract immediately before the reduction in the contract’s benefits, over (B) the maximum cash value permitted under the cash value corridor of s 7702(d) immediately after the reduction of the contract’s benefits.

  A paid aggregate premiums of $45,000 under the contract prior to the reduction of the contract’s benefits. The adjusted guideline premium limitation for the contract immediately after the reduction of benefits is calculated by subtracting from the $80,500 original guideline premium limitation a guideline premium limitation for the amount of the decrease in the contract’s death benefit. The partial surrender resulted in a $210,000 decrease in the death benefit under A’s contract. Immediately after the reduction in benefits, the guideline premium limitation was $265 per $1000 of insurance coverage. The guideline premium for the decrease in death benefits was $55,650 [$210,000 x $265 / $1,000 = $55,650]. The adjusted guideline premium limitation for the contract immediately after the reduction in benefits, therefore, was $24,850 [$80,500 - $55,650 = $24,850]. The excess of the aggregate premiums paid under the contract over the adjusted guideline premium limitation was $20,150 [$45,000 - $24,850 = $20,150].

  The cash surrender value of A’s contract immediately before the reduction in benefits was $60,000. Immediately after the reduction of benefits, the cash value corridor of s 7702(d) requires the contract’s death benefit to be at least 185% of the contract’s cash surrender value. The partial surrender reduced the contract’s death benefit to $140,000. The maximum cash value permitted under the cash value corridor requirement, therefore, was $75,675 [$140,000 / 1.85 = $75,675]. The cash surrender value of A’s contract immediately before the reduction in the contract’s benefits was less than the maximum cash value permitted under the cash value corridor of s 7702(d) immediately after the reduction in benefits.

  As the $20,150 excess of the aggregate premiums paid under the contract over the adjusted guideline premium limitation was greater than the $0 excess of the cash surrender value of the contract immediately before the reduction in the contract’s benefits over the maximum cash value permitted under the cash value corridor immediately after the reduction of the contracts benefits, the recapture ceiling was $20,150.

  Pursuant to s 7702(f)(7)(B), A’s gross income includes the portion of the distribution equal to the lesser of– (i) the applicable recapture ceiling ($20,150), (ii) the income on the contract ($15,000), or (iii) the amount of the distribution ($36,000). Accordingly, $15,000 is included in A’s gross income. The remaining $21,000 of the distribution is treated, under s 72(e)(5), as a return of a portion of the A’s $45,000 investment in the contract. A’s investment in the contract immediately after the partial surrender is $24,000 [$45,000 - $21,000 = $24,000].

  In Situation 3, the reduction in the benefits under A’s life insurance contract occurred more than 5 years but less than 16 years after the contract’s issue date. Under s 7702(f)(7)(D), the recapture ceiling equals the excess of– (1) the cash surrender value of the contract immediately before the reduction, over (2) the maximum cash value that would be permitted under the cash value corridor of s 7702(d) immediately after the reduction of the contracts benefits.

  The cash surrender value of A’s contract immediately before the reduction in benefits was $60,000. The maximum permitted cash value under the cash value corridor requirement immediately after the reduction of benefits was $75,675 [$140,000 / 1.85 = $75,675]. As the $60,000 cash surrender value of A’s contract immediately before the reduction in the contract’s benefits was less than the $75,675 maximum cash value permitted under the cash value corridor requirement immediately after the reduction in benefits, the excess was $0. The applicable recapture ceiling, therefore, was $0.

  Pursuant to section 7702(f)(7)(B), A’s gross income includes the portion of the distribution equal to the lesser of– (i) the applicable recapture ceiling ($0), (ii) the income on the contract ($15,000), or (iii) the amount of the distribution ($36,000). Accordingly, none of the $36,000 distribution is included in A’s gross income. The entire distribution is treated, under s 72(e)(5), as a return of a portion of the A’s $45,000 investment in the contract. A’s investment in the contract immediately after the partial surrender is $9,000 [$45,000 - $36,000 = $9,000].

HOLDING

  In Situation 1, $10,300 of the cash distribution is included in A’s gross income. The remaining $25,700 of the distribution is treated as a return of a portion of the A’s $45,000 investment in the contract, which reduces A’s investment in the contract to $19,300.

  In Situation 2, $15,000 of the cash distribution is included in A’s gross income. The remaining $21,000 of the distribution is treated as a return of a portion of the A’s $45,000 investment in the contract, which reduces A’s investment in the contract to $24,000.

  In Situation 3, none of the cash distribution is included in A’s gross income. The entire $36,000 of the distribution is treated as a return of a portion of the A’s $45,000 investment in the contract, which reduces A’s investment in the contract to $9,000.

DRAFTING INFORMATION

  The principal author of this revenue ruling is Stephen Hooe of the Office of Associate Chief Counsel (Financial Institutions and Products). For further information regarding this revenue ruling, contact Kay Hossofsky at (202) 622- 3970 (not a toll-free call).

 Rev. Rul. 2003-95, 2003-33 I.R.B. 358, 2003-2 C.B. 358

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