Revenue Ruling 2004-100
Rev. Rul. 2004-100
Rev. Rul. 2004-100, 2004-44 I.R.B. 718
                      Internal Revenue Service (I.R.S.)
                                Revenue Ruling
    LOW-INCOME HOUSING CREDIT; SATISFACTORY BOND; “BOND FACTOR” AMOUNTS FOR
                   THE PERIOD JANUARY THROUGH DECEMBER 2004
                          Published: November 1, 2004
 Section 42.–Low-Income Housing Credit
 Low-income housing credit; satisfactory bond; “bond factor” amounts for the period January through December 2004. 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 January through December 2004.
 Low-income housing credit; satisfactory bond; “bond factor” amounts for the period January through December 2004. 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 January through December 2004.
 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-income buildings or interests therein during the period January through December 2004.
————–
 Table 1 Rev.
————–
————–
 Month of
 Disposition
————–
Jan ‘04
Feb ‘04
Mar ‘04
Apr ‘04
May ‘04
Jun ‘04
Jul ‘04
Aug ‘04
Sep ‘04
Oct ‘04
Nov ‘04
Dec ‘04
————–
————————————————————————–
 Rul. 2004-100 Monthly Bond Factor Amounts for Dispositions Expressed As a
————————————————————————–
——————————
 Percentage of Total Credits
——————————
  Calendar Year Building Placed in Service or, if Section 42(f)(1) Election
                                             Calendar Year
—————————————————————————-
 1990  1991  1992  1993  1994  1995  1996  1997  1998  1999  2000
—————————————————————————-
 14.71 27.31 38.15 47.40 55.27 54.52 54.00 53.57 53.27 53.01 52.84
 14.71 27.31 38.15 47.40 55.27 54.40 53.89 53.45 53.16 52.91 52.74
 14.71 27.31 38.15 47.40 55.27 54.28 53.77 53.34 53.05 52.81 52.65
 15.55 28.88 40.34 50.12 58.45 57.84 57.87 57.99 58.25 58.56 58.98
 15.55 28.88 40.34 50.12 58.45 57.71 57.75 57.87 58.13 58.45 58.87
 15.55 28.88 40.34 50.12 58.45 57.59 57.63 57.75 58.02 58.34 58.77
 14.75 27.38 38.24 47.52 55.41 53.96 53.46 53.05 52.78 52.56 52.43
 14.75 27.38 38.24 47.52 55.41 53.85 53.36 52.95 52.68 52.47 52.35
 14.75 27.38 38.24 47.52 55.41 53.75 53.26 52.86 52.59 52.38 52.27
 15.52 28.81 40.24 50.00 58.30 56.99 57.04 57.18 57.46 57.82 58.28
 15.52 28.81 40.24 50.00 58.30 56.88 56.93 57.08 57.37 57.72 58.19
 15.52 28.81 40.24 50.00 58.30 56.77 56.83 56.97 57.27 57.64 58.11
—————————————————————————-
Was Made, the Succeeding
—————————-
 2001  2002  2003  2004
—————————-
 52.99 53.40 54.02 54.15
 52.90 53.30 53.92 54.15
 52.81 53.22 53.83 54.15
 59.74 60.79 62.04 62.68
 59.64 60.69 61.93 62.68
 59.55 60.59 61.84 62.68
 52.61 53.03 53.64 54.15
 52.54 52.97 53.59 54.15
 52.47 52.91 53.54 54.15
 59.08 60.16 61.46 62.68
 59.01 60.10 61.40 62.68
 58.94 60.04 61.36 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; Rev. Rul. 2002-72, 2002-2 C.B. 759; and Rev. Rul. 2003-117, 2003-46 I.R.B. 1051.
DRAFTING INFORMATION
 The principal author of this revenue ruling is David McDonnell of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this revenue ruling, contact Mr. McDonnell at (202) 622- 3040 (not a toll-free call).
 Rev. Rul. 2004-100, 2004-44 I.R.B. 718
Revenue Ruling 2004-113
Rev. Rul. 2004-113
Rev. Rul. 2004-113, 2004-52 I.R.B. 1024
                      Internal Revenue Service (I.R.S.)
                                Revenue Ruling
                    LIFO; PRICE INDEXES; DEPARTMENT STORES
                         Published: December 27, 2004
 Section 472.–Last-in, First-out Inventories, 26 CFR 1.472-1: Last-in, first-out inventories.
  LIFO; price indexes; department stores. The October 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, October 31, 2004.
 The following Department Store Inventory Price Indexes for October 2004 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, October 31, 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                 Oct. 2003    Oct. 2004      Percent
                                                                  Change from
                                                                   Oct. 2003
                                                                    to Oct.
                                                                  2004 [FN1]
——————————————————————————-
1. Piece Goods ……………………….. 487.3Â Â Â Â Â Â Â Â 491.6Â Â Â Â Â Â Â Â Â Â Â 0.9
2. Domestics and Draperies …………….. 556.5Â Â Â Â Â Â Â Â 539.0Â Â Â Â Â Â Â Â Â Â -3.1
3. Women’s and Children’s Shoes ………… 657.4Â Â Â Â Â Â Â Â 665.8Â Â Â Â Â Â Â Â Â Â Â 1.3
4. Men’s Shoes ……………………….. 844.9Â Â Â Â Â Â Â Â 832.1Â Â Â Â Â Â Â Â Â Â -1.5
5. Infants’ Wear ……………………… 609.1Â Â Â Â Â Â Â Â 584.3Â Â Â Â Â Â Â Â Â Â -4.1
6. Women’s Underwear ………………….. 520.2Â Â Â Â Â Â Â Â 513.0Â Â Â Â Â Â Â Â Â Â -1.4
7. Women’s Hosiery ……………………. 352.3 Â Â Â Â Â Â Â Â 337.6Â Â Â Â Â Â Â Â Â Â -4.2
8. Women’s and Girls’ Accessories ………. 578.0Â Â Â Â Â Â Â Â 597.3Â Â Â Â Â Â Â Â Â Â Â 3.3
9. Women’s Outerwear and Girls’ Wear ……. 387.8Â Â Â Â Â Â Â Â 385.5Â Â Â Â Â Â Â Â Â Â -0.6
10. Men’s Clothing ……………………. 552.3Â Â Â Â Â Â Â Â 542.7Â Â Â Â Â Â Â Â Â Â -1.7
11. Men’s Furnishings …………………. 592.1Â Â Â Â Â Â Â Â 578.7Â Â Â Â Â Â Â Â Â Â -2.3
12. Boys’ Clothing and Furnishings ……… 441.9Â Â Â Â Â Â Â Â 430.6Â Â Â Â Â Â Â Â Â Â -2.6
13. Jewelry ………………………….. 883.7Â Â Â Â Â Â Â Â 892.6Â Â Â Â Â Â Â Â Â Â Â 1.0
14. Notions ………………………….. 786.9Â Â Â Â Â Â Â Â 793.7Â Â Â Â Â Â Â Â Â Â Â 0.9
15. Toilet Articles and Drugs ………….. 984.0Â Â Â Â Â Â Â Â 995.6Â Â Â Â Â Â Â Â Â Â Â 1.2
16. Furniture and Bedding ……………… 618.8Â Â Â Â Â Â Â Â 608.5Â Â Â Â Â Â Â Â Â Â -1.7
17. Floor Coverings …………………… 589.4Â Â Â Â Â Â Â Â 581.7Â Â Â Â Â Â Â Â Â Â -1.3
18. Housewares ……………………….. 714.3Â Â Â Â Â Â Â Â 714.6Â Â Â Â Â Â Â Â Â Â Â 0.0
19. Major Appliances ………………….. 210.2Â Â Â Â Â Â Â Â 202.8Â Â Â Â Â Â Â Â Â Â -3.5
20. Radio and Television ……………….. 44.4Â Â Â Â Â Â Â Â Â 41.1Â Â Â Â Â Â Â Â Â Â -7.4
21. Recreation and Education [FN2] ………. 82.1Â Â Â Â Â Â Â Â Â 79.8Â Â Â Â Â Â Â Â Â Â -2.8
22. Home Improvements [FN2] ……………. 125.3Â Â Â Â Â Â Â Â 131.0Â Â Â Â Â Â Â Â Â Â Â 4.5
23. Automotive Accessories [FN2] ……….. 111.8Â Â Â Â Â Â Â Â 113.1Â Â Â Â Â Â Â Â Â Â Â 1.2
Groups 1-15: Soft Goods ……………….. 574.9Â Â Â Â Â Â Â Â 569.9Â Â Â Â Â Â Â Â Â Â -0.9
Groups 16-20: Durable Goods ……………. 390.0Â Â Â Â Â Â Â Â 382.5Â Â Â Â Â Â Â Â Â Â -1.9
Groups 21-23: Misc. Goods [FN2] …………. 93.8Â Â Â Â Â Â Â Â Â 93.1Â Â Â Â Â Â Â Â Â Â -0.7
    Store Total [FN3] ………………… 507.8        502.4          -1.1
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.
 Rev. Rul. 2004-113, 2004-52 I.R.B. 1024
Â
Revenue Ruling 2005-3
Rev. Rul. 2005-3
Rev. Rul. 2005-3, 2005-3 I.R.B. 334
                       Internal Revenue Service (I.R.S.)
                                Revenue Ruling
                 SECTION 901(J)(5) PRESIDENTIAL WAIVER; LIBYA
                          Released: December 29, 2004
                          Published: January 18, 2005
 Section 901.–Taxes of Foreign Countries and of Possessions of United States
 Section 901(j)(5) Presidential waiver; Libya. Pursuant to a section 901(j)(5) Presidential waiver, section 901(j)(1) of the Code ceased to apply to Libya effective December 10, 2004. Section 911(d)(8) is not applicable to Libya after September 20, 2004, and Iraq after July 29, 2004. Rev. Ruls. 92-63 and 95-63 modified and superseded. Rev. Rul. 2004-103 superseded.
 Section 901(j)(5) Presidential waiver; Libya. Pursuant to a section 901(j)(5) Presidential waiver, section 901(j)(1) of the Code ceased to apply to Libya effective December 10, 2004. Section 911(d)(8) is not applicable to Libya after September 20, 2004, and Iraq after July 29, 2004. Rev. Ruls. 92- 63 and 95-63 modified and superseded. Rev. Rul. 2004-103 superseded.
 This ruling sets forth guidance regarding the application of section 901(j) of the Internal Revenue Code (Code) with respect to Libya and the application of section 911(d)(8) of the Code with respect to Iraq and Libya. This ruling modifies and supersedes Rev. Rul. 95-63, 1995-2 C.B. 85, which lists countries subject to special tax rules under sections 901(j) and 952(a)(5) of the Code, and also supersedes Rev. Rul. 2004-103, 2004-45 I.R.B. 783, which modified Rev. Rul. 95-63. This ruling also modifies and supersedes Rev. Rul. 92-63, 1992-2 C.B. 195, which lists countries subject to section 911(d)(8) of the Code.
SECTION 901(j)
LAW AND ANALYSIS
 Sections 901, 902, and 960 of the Code generally allow U.S. taxpayers to claim a foreign tax credit for income, war profits, and excess profits taxes paid or accrued (or deemed paid or accrued) to any foreign country or to any possession of the United States. The foreign tax credit is subject to various limitations and restrictions under section 901.
 Section 901(j)(1) imposes restrictions in the case of income and taxes attributable to certain countries. Section 901(j)(1)(A) denies the credit for taxes paid or accrued (or deemed paid or accrued under sections 902 or 960) to any country described in section 901(j)(2)(A) if the taxes are with respect to income attributable to a period during which section 901(j) applies. Section 901(j)(1)(B) requires taxpayers to apply subsections (a), (b), and (c) of section 904 and sections 902 and 960 separately with respect to income attributable to such a period from sources within such country. In addition, section 952(a)(5) provides that subpart F income includes income derived by a controlled foreign corporation from any foreign country during any period during which section 901(j) applies to that foreign country.
 Pursuant to section 901(j)(5), the restrictions of section 901(j)(1) will not apply with respect to a country if the President determines that a waiver of the application of that paragraph is in the national interest of the United States and will expand trade and investment opportunities for U.S. companies in such country. This provision provides for the President, not less than 30 days before the date on which a waiver is granted, to report to Congress the intention to grant such a waiver and the reason for the determination under section 901(j)(5)(A)(i).
 The President issued Presidential Determination 2004-48 on September 20, 2004. In that Presidential Determination, the President determined that a waiver of the application of section 901(j)(1) with respect to Libya is in the national interest of the United States and will expand trade and investment opportunities for U.S. companies in Libya. The Presidential Determination directed the Secretary of the Treasury to report to Congress, in accordance with section 901(j)(5)(B), the President’s intention to grant the
waiver and the reasons for the determination. The Secretary of the Treasury submitted such report to Congress on October 7, 2004.
 On December 10, 2004, the President issued Presidential Determination 2005-12 which waives the application of section 901(j)(1) with respect to Libya. Pursuant to Presidential Determination 2005-12, sections 901(j)(1) and 952(a)(5) no longer apply to Libya, effective December 10, 2004. Therefore, United States taxpayers may be entitled to claim a foreign tax credit for income, war profits, and excess profits taxes paid or accrued (or deemed paid or accrued under sections 902 and 960) to Libya, with respect to income attributable to the period beginning after December 9, 2004.
HOLDING AND EFFECTIVE DATES
 Sections 901(j)(1) and 952(a)(5) apply to the following countries for the following periods:
 ————————————————————————–
Country                                         Starting Date     Ending Date
Afghanistan                                  January 1, 1987   August 4, 1994
Albania                                         January 1, 1987   March 15, 1991
Angola                                         January 1, 1987   June 18, 1993
Cambodia                                    January 1, 1987   August 4, 1994
Cuba                                          January 1, 1987   still in effect
Iran                                           January 1, 1987   still in effect
Iraq                                            February 1, 1991  June 27, 2004
Libya                                         January 1, 1987   December 9, 2004
North Korea                                January 1, 1987   still in effect
South Africa                               January 1, 1988   July 10, 1991
Sudan                                       February 12, 1994 still in effect
Syria                                          January 1, 1987   still in effect
Vietnam                                       January 1, 1987   July 21, 1995
People’s Democratic Republic of Yemen January 1, 1987   May 22, 1990
————————————————————————–
  For guidance on issues arising in a taxable year when section 901(j) ceases to apply to a country, see Rev. Rul. 92-62, 1992-2 C.B. 193.
SECTION 911
LAW AND ANALYSIS
 Section 911(a) of the Code allows a “qualified individual” to elect to exclude from gross income his or her “foreign earned income” (as defined in section 911(b)) and “housing cost amount” (as defined in section 911(c)). Section 911(d)(1) generally defines a “qualified individual” as a citizen or resident of the United States whose tax home is in a foreign country and who meets certain requirements of residence or presence in a foreign country.
 Section 911(d)(8)(A) provides generally that if travel with respect to any foreign country (or any transaction in connection with such travel) is proscribed by certain regulations during any period, then: (1) foreign earned income does not include income from sources within that country attributable to services performed during that period; (2) housing expenses do not include any expenses allocable to such period for housing in that country, or for housing of the taxpayer’s spouse or dependents in another country while the taxpayer is present in that country; and (3) an individual is not treated as a bona fide resident of, or as present in, a foreign country for any day during which the individual was present in that country.
 Section 911(d)(8)(B) provides that the regulations described in section 911(d)(8) are those that have been adopted pursuant to the Trading With the Enemy Act, 50 U.S.C. App. 1 et seq., or the International Emergency Economic Powers Act, 50 U.S.C. 1701 et seq., and that include provisions generally prohibiting citizens and residents of the United States from engaging in transactions related to travel to, from, or within a foreign country. Section 911(d)(8)(C), however, provides that the limitations of section 911(d)(8)(A) do not apply to any individual during any period in which that individual’s activities are not in violation of the regulations described in section 911(d)(8)(B).
 Rev. Rul. 92-63, 1992-2 C.B. 195, identifies three countries subject to regulations described in section 911(d)(8)(B): Cuba (31 CFR 515.560) (1989), Libya (31 CFR 550.207) (1989), and Iraq (31 CFR 575.207) (1991).
 On July 29, 2004, the President issued Executive Order 13350 which effectively lifted the sanctions against Iraq effective July 30, 2004. On September 20, 2004, the President issued Executive Order 13357 which effectively lifted the sanctions against Libya, effective September 21, 2004.
HOLDING AND EFFECTIVE DATES
 Section 911(d)(8) applies to the following countries for the following periods:
 ——————————————–
Country Starting Date   Ending Date
 Cuba    January 1, 1987 still in effect
Libya   January 1, 1987 September 20, 2004
Iraq    August 2, 1990  July 29, 2004
——————————————–
  With respect to periods prior to (or ending on) the ending dates listed above for Libya and Iraq, individuals whose activities in Libya and Iraq were not in violation of the regulations described in section 911(d)(8)(B) are not subject to the limitations of section 911(d)(8). See, e.g., Notice 2003- 52, 2003-2 C.B. 296, which states that pursuant to section 911(d)(8)(C), the limitations of section 911(d)(8)(A) do not apply to individuals engaged in activities in Iraq that are permitted by a specific or general license issued by the United States Department of Treasury Office of Foreign Assets Control.
EFFECT ON OTHER ADMINISTRATIVE GUIDANCE
 This ruling modifies and supersedes Rev. Rul. 95-63, 1995-2 C.B. 85, and supersedes Rev. Rul. 2004-103, 2004-45 I.R.B. 783, with respect to the list of countries for which section 901(j) is applicable. This ruling modifies and supersedes Rev. Rul. 92-63, 1992-2 C.B. 195, with respect to the list of countries for which section 911(d)(8) is applicable.
DRAFTING INFORMATION
 The principal author of this revenue ruling is Mark R. Pollard of the Office of Associate Chief Counsel (International). For further information regarding this revenue ruling, contact Mr. Pollard at (202) 622-3850 (not a toll-free call).
 Rev. Rul. 2005-3, 2005-3 I.R.B. 334
Â
Revenue Ruling 2005-2
Rev. Rul. 2005-2
Rev. Rul. 2005-2, 2005-2 I.R.B. 259
                      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: December 20, 2004
                          Published: January 10, 2005
 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 January 2005.
Section 280G.–Golden Parachute Payments
 Federal short-term, mid-term, and long-term rates are set forth for the month of January 2005.
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 January 2005.
Section 412.–Minimum Funding Standards
 The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of January 2005.
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 January 2005.
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 January 2005.
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 January 2005.
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 January 2005.
Section 642.–Special Rules for Credits and Deductions
 Federal short-term, mid-term, and long-term rates are set forth for the month of January 2005.
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 January 2005.
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 January 2005.
Section 1288.–Treatment of Original Issue Discount on Tax-Exempt Obligations
 The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of January 2005.
Section 7520.–Valuation Tables
 The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of January 2005.
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 January 2005.
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, 642, 1274, 1288, and other sections of the Code, tables set forth the rates for January 2005.
 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 January 2005.
 This revenue ruling provides various prescribed rates for federal income tax purposes for January 2005 (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 deemed rate of return for transfers made during calendar year 2005 to pooled income funds described in s642(c)(5) that have been in existence for less than 3 taxable years immediately preceding the taxable year in which the transfer was made.
——————————————————-
              REV. RUL. 2005-2 TABLE 1
   Applicable Federal Rates (AFR) for January 2005
               Period for Compounding
           Annual    Semiannual Quarterly Monthly
Short-term
      AFR 2.78%     2.76%      2.75%     2.74%
 110% AFR 3.06%     3.04%      3.03%     3.02%
 120% AFR 3.34%     3.31%      3.30%     3.29%
 130% AFR 3.62%     3.59%      3.57%     3.56%
 Mid-term
      AFR 3.76%     3.73%      3.71%     3.70%
 110% AFR 4.14%     4.10%      4.08%     4.07%
 120% AFR 4.53%     4.48%      4.46%     4.44%
 130% AFR 4.91%     4.85%      4.82%     4.80%
 150% AFR 5.68%     5.60%      5.56%     5.54%
 175% AFR 6.64%     6.53%      6.48%     6.44%
 Long-term
      AFR 4.76%     4.70%      4.67%     4.65%
 110% AFR 5.24%     5.17%      5.14%     5.12%
 120% AFR 5.72%     5.64%      5.60%     5.57%
 130% AFR 6.20%     6.11%      6.06%     6.03%
——————————————————-
————————————————————-
                 REV. RUL. 2005-2 TABLE 2
               Adjusted AFR for January 2005
                  Period for Compounding
                      Annual Semiannual Quarterly Monthly
Short-term adjusted   2.01%  2.00%      2.00%     1.99%
AFR
Mid-term adjusted AFRÂ 2.97%Â Â 2.95%Â Â Â Â Â Â 2.94%Â Â Â Â Â 2.93%
Long-term adjusted    4.27%  4.23%      4.21%     4.19%
AFR
————————————————————-
——————————————————————————-
                          REV. RUL. 2005-2 TABLE 3
                  Rates Under Section 382 for January 2005
Adjusted federal long-term rate for the current month                    4.27%
Long-term tax-exempt rate for ownership changes during the current month 4.27%
 (the highest of the adjusted federal long-term rates for the current
 month and the prior two months.)
——————————————————————————-
——————————————————————————-
                          REV. RUL. 2005-2 TABLE 4
       Appropriate Percentages Under Section 42(b)(2) for January 2005
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. 2005-2 TABLE 5
                  Rate Under Section 7520 for January 2005
Applicable federal rate for determining the present value of an annuity, 4.60%
 an interest for life or a term of years, or a remainder or
 reversionary interest
——————————————————————————-
——————————————————————————-
                          REV. RUL. 2005-2 TABLE 6
      Deemed Rate for Transfers to New Pooled Income Funds During 2005
Deemed rate of return for transfers during 2005 to pooled income funds    4.0%
 that have been in existence for less than 3 taxable years
——————————————————————————-
 Rev. Rul. 2005-2, 2005-2 I.R.B. 259
Revenue Ruling 2003-123
Rev. Rul. 2003-123
Rev. Rul. 2003-123, 2003-50 I.R.B. 1200, 2003-2 C.B. 1200
                      Internal Revenue Service (I.R.S.)
                                Revenue Ruling
                      QUALIFIED CONSERVATION CONTRIBUTION
                         Published: December 15, 2003
 Section 170.–Charitable, etc., Contributions and Gifts
 Is a trust allowed a charitable deduction under section 642(c) of the Internal Revenue Code or a distribution deduction under section 661(a)(2) with respect to a contribution to charity of trust principal that meets the requirements of a qualified conservation contribution under section 170(h)?
Section 641.–Imposition of Tax, 26 CFR 1.641(a)-2: Gross income of estates and trusts.
 Is a trust allowed a charitable deduction under section 642(c) of the Internal Revenue Code or a distribution deduction under section 661(a)(2) with respect to a contribution to charity of trust principal that meets the requirements of a qualified conservation contribution under section 170(h)?
Section 661.–Deduction for Estates and Trusts Accumulating Income or Distributing Corpus
 Is a trust allowed a distribution deduction under section 661(a)(2) with respect to a contribution to charity of trust principal that meets the requirements of a qualified conservation contribution under section 170(h)?
Section 662.–Inclusion of Amounts in Gross Income of Beneficiaries of Estates and Trusts Accumulating Income or Distributing Corpus
 Is a trust allowed a distribution deduction under section 661(a)(2) with respect to a contribution to charity of trust principal that meets the requirements of a qualified conservation contribution under section 170(h)?
Section 663.–Special Rules Applicable to Sections 661 and 662, 26 CFR 1.663(a)-2: Charitable, etc., distributions.
 Is a trust allowed a distribution deduction under section 661(a)(2) with respect to a contribution to charity of trust principal that meets the requirements of a qualified conservation contribution under section 170(h)?
Section 642.–Special Rules for Credits and Deductions, 26 CFR 1.642(c)- 1: Unlimited deduction for amounts paid for a charitable purpose.
 Qualified conservation contribution. This ruling clarifies the Service’s position that a trust is not allowed either a charitable deduction under section 642(c) or a distribution deduction under section 661(a)(2) of the Code with respect to a contribution to charity of trust principal that meets the requirements of a qualified conservation contribution under section 170(h). Rev. Rul. 68-667 amplified.
 Qualified conservation contribution. This ruling clarifies the Service’s position that a trust is not allowed either a charitable deduction under section 642(c) or a distribution deduction under section 661(a)(2) of the Code with respect to a contribution to charity of trust principal that meets the requirements of a qualified conservation contribution under section 170(h). Rev. Rul. 68-667 amplified.
ISSUE
 Is a trust allowed a charitable deduction under s 642(c) of the Internal Revenue Code or a distribution deduction under s 661(a)(2) with respect to a contribution to charity of trust principal that meets the requirements of a qualified conservation contribution under s 170(h)?
FACTS
 Trust is a complex trust subject to the provisions of ss 661-663. Since its inception, Trust has owned two adjacent parcels of real property located in State A. One parcel is 20 acres of undeveloped land, and the other parcel is 50 acres with improvements. The governing instrument of Trust authorizes the trustee to make contributions to charity, including contributions of Trust’s gross income. The trustee conveys a perpetual conservation easement, valued at $10xx, in the 20-acre parcel to State Agency, an organization described in s 170(c)(1). The contribution meets the requirements of a qualified conservation contribution within the meaning of s 170(h). For the year of the contribution, Trust’s gross income is $20x, and no distributions are made to Trust’s beneficiaries.
LAW AND ANALYSIS
 Section 642(c)(1) provides that a trust (other than a trust subject to ss 651 and 652) is allowed a deduction in computing its taxable income for any amount of gross income, without limitation, that pursuant to the terms of the governing instrument is, during the taxable year, paid for a purpose specified in s 170(c) (determined without regard to s 170(c)(2)(A)). This deduction is in lieu of the charitable deduction allowed by s 170(a).
 Section 1.641(a)-2 of the Income Tax Regulations provides that the gross income of an estate or trust is determined in the same manner as that of an individual.
 Section 661(a) provides that a trust (other than a trust subject to ss 651 and 652) is allowed as a deduction in computing its taxable income the sum of (1) any amount of income for the taxable year required to be distributed currently (including any amount required to be distributed that may be paid out of income or corpus to the extent the amount is paid out of income for the taxable year) and (2) any amount properly paid or credited or required to be distributed for a taxable year. The deduction, however, cannot exceed the distributable net income of the trust.
 Section 662(a) provides that the beneficiary of a trust must include in the beneficiary’s gross income the amount described in s 661(a) that is paid, credited, or required to be distributed by the trust to that beneficiary.
 Section 663(a)(2) provides that any amount paid or permanently set aside or otherwise qualifying for the deduction provided in s 642(c) (computed without regard to ss 508(d), 681, and 4948(c)(4)) shall not be included as an amount falling within ss 661(a) and 662(a).
 Section 1.663(a)-2 provides that any amount that is paid, permanently set aside, or to be used for the charitable purposes specified in s 642(c) and that is allowable as a deduction under that section is not allowed as a deduction to an estate or trust under s 661 or treated as an amount distributed for purposes of determining the amounts includible in gross income of beneficiaries under s 662. Amounts paid, permanently set aside, or to be used for charitable purposes are deductible by estates or trusts only as provided in s 642(c). See also Rev. Rul. 68-667, 1968-2 C.B. 289, holding that an amount paid to charity from a trust’s corpus does not qualify either for the charitable deduction under s 642(c) or for the distribution deduction under s 661(a)(2).
 Under s 642(c), a trust is generally allowed an unlimited charitable deduction for amounts that are paid from gross income for charitable purposes pursuant to the terms of the governing instrument. Because s 642(c) specifically requires that a charitable deduction is available only if the source of the contribution is gross income, tracing of the contribution is required in determining its source. Van Buren v. Commissioner, 89 T.C. 1101, 1109 (1987); Riggs National Bank v. United States, 352 F.2d 812 (Ct. Cl. 1965); Mott v. United States, 462 F.2d 512 (Ct. Cl. 1972), cert. denied, 409 U.S. 1108 (1973); see also Crestar Bank v. Internal Revenue Service, 47 F. Supp. 2d 670 (E.D. Va. 1999).
 In the present situation, Trust’s contribution of the conservation easement in the 20-acre parcel is made pursuant to the terms of Trust’s governing instrument. The contribution meets the requirements of a qualified conservation contribution within the meaning of s 170(h) and thus is for a charitable purpose. The charitable contribution, however, is made with respect to Trust principal, not from the gross income of Trust. Because the contribution of the conservation easement is not paid from Trust’s gross income, Trust is not allowed a charitable deduction under s 642(c) for the contribution.
 Furthermore, no deduction is allowed under s 661(a)(2) because amounts paid, permanently set aside, or to be used for charitable purposes are deductible by trusts only as provided in s 642(c). Section 1.663(a)-2. See also U.S. Trust Company v. Internal Revenue Service, 803 F.2d 1363 (5th Cir. 1986); Mott, supra; Rev. Rul. 68-667.
HOLDING
 A trust is not allowed a charitable deduction under s 642(c) and is not allowed a distribution deduction under s 661(a)(2) with respect to a contribution to charity of trust principal that meets the requirements of a qualified conservation contribution under s 170(h).
EFFECT ON OTHER REVENUE RULING
 Rev. Rul. 68-667 is amplified.
DRAFTING INFORMATION
 The principal author of this revenue ruling is DeAnn K. Malone of the Office of the Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this revenue ruling, contact DeAnn K. Malone at (202) 622-7830 (not a toll-free call).
 Rev. Rul. 2003-123, 2003-50 I.R.B. 1200, 2003-2 C.B. 1200
Revenue Ruling 2004-112
Rev. Rul. 2004-112
Rev. Rul. 2004-112, 2004-51 I.R.B. 985
                      Internal Revenue Service (I.R.S.)
                                Revenue Ruling
                              INTERNET ACTIVITIES
                          Released: December 1, 2004
                         Published: December 20, 2004
 Section 513.–Unrelated Trade or Business, 26 CFR 1.513-3: Qualified convention and trade show activity.
 Internet activities. In one situation, the Internet activities conducted by a trade association described in section 501(c)(6) of the Code on a special supplementary section of its Internet website do not constitute unrelated trade or business under section 513(a), because such activities meet the exception for qualified convention and trade show activity under section 513(d)(3)(B). However, in a second situation, the Internet activities of another trade association do not meet the section 513(d)(3)(B) exception.
 Internet activities. In one situation, the Internet activities conducted by a trade association described in section 501(c)(6) of the Code on a special supplementary section of its Internet website do not constitute unrelated trade or business under section 513(a), because such activities meet the exception for qualified convention and trade show activity under section 513(d)(3)(B). However, in a second situation, the Internet activities of another trade association do not meet the section 513(d)(3)(B) exception.
ISSUE
 Under the circumstances described below, do Internet activities conducted by trade associations described in s 501(c)(6) of the Internal Revenue Code fall within the specific exception for qualified convention and trade show activity under s 513(d)(3)(B)?
FACTS
 Situation 1. A is a trade association that is exempt from federal income tax under s 501(a) as an organization described in s 501(c)(6). A improves business conditions in a certain industry and serves members that are part of this industry. A’s purposes include supporting and enhancing activities within the industry, acting as a spokesperson for the industry, providing members with current information on technical developments, training methods, and economic issues, encouraging and fostering higher safety and technical standards, promoting technological advancements and improvements, and gathering and disseminating information about markets and products.
 A conducts, as one of its substantial exempt purposes, semi-annual trade shows to promote and stimulate interest in and demand for the products of A’s industry. Each trade show typically occurs at an exhibition facility, during a period of ten consecutive days. A undertakes the planning and direction of the show, secures the facility, and charges exhibitors a fee for use of space at the show. At each trade show, A sponsors conferences and seminars, and A’s members and suppliers to A’s industry display their products and services. The conferences, seminars, and exhibits offer a wide variety of information on products and developments in the industry. Sales and order taking are permitted. A’s members, nonmembers, and potential customers attend the shows. Revenues from the shows are used by A to defray the shows’ operating costs, and any excess of revenues over expenditures is used in furtherance of A’s exempt purposes.
 To serve its members throughout the year, A maintains a website with a variety of information, including dates, locations, and advance ticket information about A’s trade shows. In addition, in conjunction with each semi-annual trade show, A adds a section to its website that augments and enhances the trade show by allowing members and the interested public to access in an alternative medium the same information that is available at the show. The section contains information and visual displays, such as product directories and specific product listings, and links to the websites of exhibitors represented at the trade show, including members of A and those who are suppliers of goods and services to A’s members. The section also contains order forms, and a function that allows on-line purchases from members and suppliers represented at the trade show. The supplementary section of the website typically is available on-line during the ten-day period in which the semi-annual trade show occurs, and during a three-day period prior to the beginning of the show and a three-day period subsequent to the end of the show. At the end of the final three-day period, the supplementary section is removed from the website. A charges a fee to exhibitors who wish to have information listed on the supplementary section of the website. A controls all the website’s content.
 Situation 2. B is a trade association that is exempt from federal income tax under s 501(a) as an organization described in s 501(c)(6), and whose purposes are the same as those of A. B establishes an Internet website that it makes available to the general public 24 hours a day, 7 days a week for a two-week period. At the end of the two-week period, the website is taken down. The two-week period does not over-lap or coincide with any international, national, State, regional, or local convention, annual meeting, or show conducted by B.
 Like the website operated by A, B’s website permits members and the interested public to access information and visual displays, such as product directories and specific product listings. The website contains links to the websites of members of B and those who are suppliers of goods and services to B’s members. The website also contains order forms, and a function that allows on-line purchases from members and suppliers appearing on the website. B charges a fee to those who wish to have information listed on the website. B controls all the website’s content.
LAW
 Section 501(c)(6), in part, provides for the exemption from federal income tax of business leagues, chambers of commerce or boards of trade not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.
 Section 1.501(c)(6)-1 of the Income Tax Regulations, in part, provides that a business league is an association of persons having some common business interest, the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily carried on for profit. The regulation provides that organizations otherwise exempt from tax under s 501(c) are taxable on their unrelated business taxable income.
 Section 511(a) provides for the imposition of tax on the unrelated business taxable income (as defined in s 512) of organizations described in s 501(c)(6).
 Section 512(a)(1) defines “unrelated business taxable income” as the gross income derived by an organization from any unrelated trade or business regularly carried on by it, less certain deductions, but with the modifications provided in s 512(b).
 Section 513(a) defines the term “unrelated trade or business” as any trade or business the conduct of which is not substantially related (aside from the need of such organization for income or funds or the use it makes of the profits derived) to the exercise or performance by such organization of its charitable, educational, or other purpose or function constituting the basis for its exemption under s 501.
 Section 513(c) defines the term “trade or business” broadly to include any activity that is carried on for the production of income from the sale of goods or the performance of services. For purposes of s 513(c), an activity, such as advertising, does not lose identity as a trade or business merely because it is carried on within a larger aggregate of similar activities or within a larger complex of other endeavors that may, or may not, be related to the exempt purposes of the organization.
 Section 513(d)(1) provides, in part, that the term “unrelated trade or business” does not include qualified convention and trade show activities of an organization described in s 513(d)(3)(C). Organizations described in s 513(d)(3)(C) include any organization described in s 501(c)(6) that regularly conducts as one of its substantial exempt purposes a show that stimulates interest in, and demand for, the products of a particular industry or segment of such industry or that educates persons in attendance regarding new developments or products and services related to the exempt activities of the organization.
 Section 513(d)(3)(A) defines the term “convention and trade show activity” as any activity of a kind traditionally conducted at conventions, annual meetings, or trade shows. A convention and trade show activity includes, but is not limited to, any activity one of the purposes of which is to attract persons in an industry generally (without regard to membership in the sponsoring organization) as well as members of the public to the show for the purpose of (1) displaying industry products, (2) stimulating interest in, and demand for, industry products or services, or (3) educating persons engaged in the industry in the development of new products and services or new rules and regulations affecting the industry.
 Section 513(d)(3)(B) defines the term “qualified convention and trade show activity” as a convention and trade show activity carried out by a qualifying organization in conjunction with an international, national, State, regional, or local convention, annual meeting, or show conducted by a qualifying organization, if one of the purposes of such organization in sponsoring the activity is (1) the promotion and stimulation of interest in, and demand for, the products and services of that industry in general, or (2) to educate persons in attendance regarding new developments or products and services related to the exempt activities of the organization, and the show is designed to achieve such purpose through the character of the exhibits and the extent of the industry products displayed.
 Section 1.513-3(b) provides that a convention or trade show activity will not be considered unrelated trade or business if it is conducted by a qualifying organization described in s 513(d)(3)(C), in conjunction with a qualified convention or trade show sponsored by the qualifying organization. Section 1.513-3(c)(1) provides that a qualifying organization includes an organization described in s 501(c)(6) that regularly conducts as one of its substantial exempt purposes a qualified convention or trade show.
 Section 1.513-3(c)(2) provides that a qualified convention or trade show is a show that is (i) conducted by a qualifying organization described in s 513(d)(3)(C), (ii) has as at least one of its purposes the education of the qualifying organization’s members or the promotion of interest in and demand for the products or services of the industry (or segment thereof) of the members of the qualifying organization, and (iii) is designed to achieve that purpose through the character of a significant portion of the exhibits or the character of conferences and seminars held at a convention or meeting.
 Section 1.513-3(d)(1) provides that the rental of display space to exhibitors (including exhibitors who are suppliers) at a qualified trade show or at a qualified convention and trade show will not be considered unrelated trade or business even though the exhibitors who rent the space are permitted to sell or solicit orders.
ANALYSIS
 Activities that promote demand for industry products and services, like other advertising activities, generally would constitute a “trade or business” under s 513(c) if carried on for the production of income. Section 513(d) is a narrow exception to what constitutes an “unrelated trade or business” under s 513(a). Section 513(d) was added to the Code by the Tax Reform Act of 1976 (P.L. 94- 455 s 1305), in response to a series of revenue rulings (Rev. Ruls. 75-516 through 75-520, 1975-2 C.B. 220-226) holding that income received by a s 501(c)(6) organization at its convention or trade show from renting display space may constitute unrelated business taxable income, if selling by exhibitors is permitted or tolerated at the show. S. Rep. 94-938, at 601- 603, 1976-3 C.B. 639-641. The activities described in s 513(d)(3) are specifically excepted from the definition of an unrelated trade or business because they are conducted by a qualifying organization in furtherance of its exempt purposes and in connection with a convention, annual meeting, or trade show. The term “convention, annual meeting, or trade show” as used in s 513(d)(3) refers to a specific event at which individuals representing a particular industry and members of the general public gather in person at one location during a certain period of time. Not only must the activities be conducted at a “convention, annual meeting, or trade show,” but the character of the exhibits and the extent of the industry products displayed at the show must be designed to stimulate interest in, and demand for, the products and services of the industry in general or to educate persons in attendance regarding new developments or products and services related to the exempt activities of the organization. It is the nature of the activities and their connection to a specific convention, annual meeting, or trade show that distinguishes “qualified convention and trade show activity” within the meaning of s 513(d)(3) and the regulations from other types of advertising and promotional activities conducted by organizations described in s 501(c)(6).
  In Situation 1, A is a “qualifying organization” within the meaning of s 513(d)(3)(C), because it is an organization described in s 501(c)(6) and regularly conducts as one of its substantial exempt purposes a trade show to promote public interest in A’s industry. A’s semi-annual trade shows include conferences, seminars and a wide variety of exhibits sponsored by members and suppliers with information useful to those in A’s industry and take place during a limited time, at one physical location, where A’s members, suppliers and potential customers meet together in person, and interact face to face. Thus, each of A’s semi-annual trade shows is a “show” within the meaning of s 513(d)(3).
 The activities conducted on the premises of each of A’s semi-annual trade shows and on the special supplementary section of A’s Internet website during the 16-day period that coincides with each semi-annual trade show are of a kind traditionally conducted at trade shows, as required by s 513(d)(3)(A), because the activities are designed to attract to the show persons in A’s industry and members of the public to view industry products, to stimulate interest in, and demand for such products, and to educate persons in the industry about new products and services. Therefore, these activities are “convention and trade show activity.”
 Although not conducted on the premises of A’s semi-annual trade shows, the activities conducted by A on the supplementary section of its Internet website during the 16-day period that coincides with each semi-annual trade show are carried out in conjunction with A’s semi-annual trade shows, as required by s 513(d)(3)(B). The supplementary section is no more than ancillary to the trade show. The content of the supplementary section serves to augment and enhance each semi-annual trade show by making available in an alternative medium the same information available at the show. The supplementary section of A’s Internet website is available to A’s members and the interested public during essentially the same limited time period that each semi-annual trade show is in operation. Although the supplementary section is available for a slightly longer period than the trade show itself, the additional time is reasonably brief and serves to allow for previewing the show before attending, or following up on information gathered at the show. Thus, the supplementary section is merely an extension of each semi-annual trade show.
 Accordingly, both the activities conducted on the premises at A’s semi-annual trade show and the activities conducted on the supplementary section of A’s Internet website during the 16-day period that coincides with A’s semi-annual trade show meet the requirements to be a “qualified convention and trade show activity” under s 513(d)(3)(B). These activities, therefore, are not unrelated trade or business under s 513(a) because they meet the requirements for the limited exception under s 513(d)(3).
 In Situation 2, B’s operation of a website for a two-week period under the circumstances described is not “qualified convention and trade show activity” as defined in s 513(d)(3)(B), because, unlike the activities conducted on the supplementary section of A’s Internet website, B’s Internet activities are not carried out in conjunction with any international, national, regional, State, or local convention, annual meeting, or show conducted by B. B’s website is not itself a “convention, annual meeting, or trade show” within the meaning of s 513(d)(3) because the website is not a specific event at which B’s members, suppliers and potential customers gather in person at one physical location during a certain period of time and interact face to face. Moreover, B’s Internet activities do not coincide with, nor do they augment and enhance, any such specific event conducted by B for one of the purposes described in s 513(d)(3)(B). Therefore, because B’s website is not qualified convention and trade show activity, the operation of the website, even for a relatively short period of time, is not excepted from the definition of an unrelated trade or business under s 513(d)(1).
 As B does not meet the specific exception under s 513(d)(3), whether its Internet activities constitute an unrelated trade or business must be determined under the requirements of s 513.
HOLDINGS
 In Situation 1, under the circumstances described, the Internet activities conducted by a trade association described in s 501(c)(6) on the special supplementary section of its Internet website do not constitute unrelated trade or business under s 513(a) because such activities meet the specific exception for qualified convention and trade show activity under s 513(d)(3)(B).
 In Situation 2, under the circumstances described, the activities conducted by a trade association described in s 501(c)(6) on its Internet website do not meet the specific exception for qualified convention and trade show activity under s 513(d)(3)(B).
DRAFTING INFORMATION
 The principal author of this revenue ruling is Charles Barrett of the Tax Exempt and Government Entities Division, Exempt Organizations. For further information regarding this revenue ruling, contact Mr. Barrett at (202) 283- 8944 (not a toll-free number).
 Rev. Rul. 2004-112, 2004-51 I.R.B. 985
Our Services:
Common IRS Tax Remedies:
Frequently Asked Questions:
Other Tax Questions:
