Source: https://www.irs.gov/irb/2003-49_IRB
Timestamp: 2018-09-21 06:21:50
Document Index: 771552595

Matched Legal Cases: ['§ 401', '§ 1', '§ 1', '§ 1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§ 1', '§ 301', '§ 1', '§ 301', '§ 1', '§ 301', '§ 301', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 935', '§ 351', '§ 754', '§ 584', '§ 409', '§ 419', '§ 461', '§ 1', '§ 301', '§ 461', '§ 1', '§ 461', '§ 468', '§ 1', '§ 461', '§ 461', '§ 1', '§ 1', '§ 461', '§ 461', '§ 461', '§ 461', '§ 1', '§ 267', '§ 461', '§ 6011', '§ 1', '§ 6111', '§ 301', '§ 6112', '§ 301', '§ 6111', '§ 6707', '§ 6112', '§ 6708', '§ 6662', '§ 1', '§ 461', '§ 6011', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 179', '§ 179', '§ 179', '§ 2631', '§ 2642', '§ 1', '§ 1', '§ 1', '§ 1', '§ 23', '§ 23', '§ 23', '§ 24', '§ 24', '§ 25', '§ 25', '§ 25', '§ 32', '§ 32', '§ 42', '§ 1', '§ 55', '§ 55', '§ 63', '§ 1', '§ 1', '§ 1', '§ 1', '§ 63', '§ 63', '§ 68', '§ 68', '§ 132', '§ 132', '§ 135', '§ 137', '§ 137', '§ 137', '§ 146', '§ 151', '§ 1', '§ 1', '§ 1', '§ 1', '§ 179', '§ 179', '§ 179', '§ 179', '§ 213', '§ 220', '§ 221', '§ 221', '§ 512', '§ 513', '§ 170', '§ 685', '§ 877', '§ 2032', '§ 2032', '§ 2503', '§ 2503', '§ 4261', '§ 4261', '§ 4261', '§ 6033', '§ 6039', '§ 6323', '§ 6323', '§ 6334', '§ 6334', '§ 6601', '§ 6166', '§ 7430', '§ 7702', 'art 1', '§1', '§1']

Internal Revenue Bulletin: 2003-49 | Internal Revenue Service
Internal Revenue Bulletin: 2003-49
Rev. Rul. 2003-124
T.D. 9095
Rev. Rul. 2003-122
Notice 2003-76
Notice 2003-77
Rev. Proc. 2003-85
Rev. Rul. 2003-122 Rev. Rul. 2003-122
T.D. 9095 T.D. 9095
Rev. Rul. 2003-124 Rev. Rul. 2003-124
Announcement 2003-77 Announcement 2003-77
Notice 2003-76 Notice 2003-76
This notice sets out transactions that have been identified by the Treasury Department and the IRS as “listed transactions” for purposes of the regulations under sections 6011 and 6111 of the Code. Notice 2001-51 supplemented and superseded.
Notice 2003-77 Notice 2003-77
Rev. Proc. 2003-85 Rev. Proc. 2003-85
Cost-of-living adjustments for 2004. This procedure provides cost-of-living adjustments for the tax rate tables for individuals, estates, and trusts, the standard deduction amounts, the personal exemption, and several other items that use the adjustment method provided for the tax rate tables. The Service also provides the adjustment for eligible long-term care premiums and another item that uses the adjustment method provided for eligible long-term care premiums.
Announcement 2003-75 Announcement 2003-75
This revenue ruling provides tables of covered compensation under § 401(l)(5)(E) of the Internal Revenue Code (the “Code”) and the Income Tax Regulations, thereunder, for the 2004 plan year.
Section 1.401(l)-1(c)(7)(i) defines covered compensation for an employee as the average (without indexing) of the taxable wage bases in effect for each calendar year during the 35-year period ending with the last day of the calendar year in which the employee attains (or will attain) social security retirement age. A 35-year period is used for all individuals regardless of the year of birth of the individual. In determining an employee's covered compensation for a plan year, the taxable wage base for all calendar years beginning after the first day of the plan year is assumed to be the same as the taxable wage base in effect as of the beginning of the plan year. An employee's covered compensation for a plan year beginning after the 35-year period applicable under § 1.401(l)-1(c)(7)(i) is the employee's covered compensation for a plan year during which the 35-year period ends. An employee's covered compensation for a plan year beginning before the 35-year period applicable under § 1.401(l)-1(c)(7)(i) is the taxable wage base in effect as of the beginning of the plan year.
Section 1.401(l)-1(c)(7)(ii) provides that, for purposes of determining the amount of an employee's covered compensation under § 1.401(l)-1(c)(7)(i), a plan may use tables, provided by the Commissioner, that are developed by rounding the actual amounts of covered compensation for different years of birth.
For purposes of determining covered compensation for the 2004 year, the taxable wage base is $87,900.
The following tables provide covered compensation for 2004:
1939 2005 46,284
1940 2006 48,576
1941 2007 50,832
1942 2008 53,028
1943 2009 55,164
1944 2010 57,276
1945 2011 59,352
1946 2012 61,392
1947 2013 63,396
1948 2014 65,256
1949 2015 67,020
1950 2016 68,688
1951 2017 70,272
1952 2018 71,760
1953 2019 73,200
1954 2020 74,580
1955 2022 77,148
1956 2023 78,372
1957 2024 79,512
1958 2025 80,556
1959 2026 81,540
1960 2027 82,464
1961 2028 83,340
1962 2029 84,120
1963 2030 84,876
1964 2031 85,596
1965 2032 86,244
1966 2033 86,796
1967 2034 87,240
1968 2035 87,564
1969 2036 87,780
1970 2037 87,864
1971 and later 2038 87,900
2004 Rounded Covered Compensation Table
1945 - 1946 60,000
1947 63,000
1948 - 1949 66,000
1950 - 1951 69,000
1952 - 1953 72,000
1954 75,000
1955 - 1956 78,000
1957 - 1960 81,000
1961 - 1963 84,000
1964 - 1967 87,000
1968 and later 87,900
The principal author of this revenue ruling is Lawrence Isaacs of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this revenue ruling, please contact the Employee Plans taxpayer assistance telephone service at 1-877-829-5500, between the hours of 8:00 a.m. and 6:30 p.m. Eastern time, Monday through Friday (a toll-free number). Mr. Isaac's number is (202) 283-9710 (not a toll-free number).
This document contains regulations relating to transfers of money or other property to provide for the satisfaction of contested liabilities. The regulations affect taxpayers that are contesting an asserted liability and that transfer their own stock or indebtedness, the stock or indebtedness of a related party, or a promise to provide services or property in the future, to provide for the satisfaction of the liability prior to the resolution of the contest. The regulations also affect taxpayers that transfer money or other property to a trust, an escrow account, or a court to provide for the satisfaction of a liability for which payment is economic performance. The text of these temporary regulations also serves as the text of the proposed regulations (REG-136890-02) set forth in the notice of proposed rulemaking on this subject in this issue of the Bulletin.
Under §1.461-2(c)(1) of the Income Tax Regulations, a transfer for the satisfaction of an asserted liability is a transfer of money or other property beyond the taxpayer's control to: (1) the person asserting the liability, (2) an escrowee or trustee pursuant to a written agreement (among the escrowee or trustee, the taxpayer, and the person who is asserting the liability) providing that the money or other property be delivered in accordance with the settlement of the contest, (3) an escrowee or trustee pursuant to an order of a court or government entity providing that the money or other property be delivered in accordance with the settlement of the contest, or (4) a court with jurisdiction over the contest. The taxpayer must relinquish all authority over the money or other property transferred.
To qualify for a deduction, section 461(f)(4) provides that a deduction is allowed in the taxable year of the transfer only if, but for the fact that the asserted liability is contested, a deduction would be allowed for the taxable year of the transfer (or for an earlier taxable year) “determined after application of subsection (h).” Congress added the quoted language to section 461(f)(4) when Congress enacted section 461(h), which provides, for amounts with respect to which a deduction would be allowable after July 18, 1984, that the all events test is not met any earlier than when economic performance has occurred with respect to the liability. Section 461(h)(2)(C) provides that payment to another person is required to satisfy economic performance for liabilities arising out of any workers compensation act or any tort. The Conference Report accompanying enactment of section 461(h) explains the impact of the economic performance requirement on trusts established under section 461(f):
In the case of workers' compensation or tort liabilities of the taxpayer
requiring payments to another person, economic performance occurs
as payments are made to that person. Since payment to a section
461(f) trust is not a payment to the claimant and does not discharge
the taxpayer's liability to the claimant, such payment does not satisfy
the economic performance test.
For transfers in taxable years beginning after December 31, 1991, §1.461-4(g)(2)-(7) expands the list of liabilities for which payment “to the person to which the liability is owed” constitutes economic performance (payment liabilities). The additional payment liabilities listed in §1.461-4(g)(2)-(6) include liabilities for breach of contract (to the extent of incidental, consequential, and liquidated damages) or violation of law, rebates and refunds, awards, prizes, jackpots, insurance, warranty and service contracts, and taxes. In addition, §1.461-4(g)(7) characterizes as payment liabilities other liabilities for which other specific rules are not provided.
The regulations remove §1.461-2(c)(1) and add §1.461-2T(c)(1). The temporary regulations restructure the provisions of current §1.461-2(c)(1) for greater clarity but retain all of the rules in §1.461-2(c)(1), including the requirement that the taxpayer must transfer money or other property beyond the taxpayer's control and relinquish all authority over the money or other property transferred. The temporary regulations clarify that the transfer of the indebtedness of a taxpayer or of any promise by the taxpayer to provide services or property in the future is not a transfer to provide for the satisfaction of an asserted liability. See Eckert v. Burnet, 283 U.S. 140 (1931); Willamette Industries, Inc., v. Commissioner, 92 T.C. 1116 (1989), aff'd, 149 F.3d 1057 (9th Cir. 1998). In addition, the temporary regulations provide the express rule that a transfer (other than to the person asserting the liability) of a taxpayer's stock, or the indebtedness or stock of a person related to the taxpayer (as defined in section 267(b)), is not a transfer to provide for the satisfaction of an asserted liability. These rules are consistent with section 468B(d)(1)(B), which excludes as a qualified payment to a designated settlement fund the transfer of any stock or indebtedness of the taxpayer (or any related person). See §1.461-4(g)(1)(ii)(A), which provides that payment does not include the furnishing of a note or other evidence of indebtedness of the taxpayer or a promise of the taxpayer to provide services or property in the future.
Section 1.461-4(g) provides that economic performance occurs in the case of a liability requiring payment to another person arising out of a workers compensation act, tort, or other designated liability as payments are made to the person to which the liability is owed. Therefore, the temporary regulations provide in §1.461-2T(e)(2) that, except as provided in section 468B or the regulations thereunder, economic performance does not occur when a taxpayer transfers money or other property to a trust, escrow account, or court to provide for the satisfaction of a contested workers compensation, tort, or other liability designated in §1.461-4(g) unless the trust, escrow account, or court is the claimant or the taxpayer's payment to the trust, escrow account, or court discharges the taxpayer's liability to the claimant. See Maxus Energy Corporation and Subsidiaries v. United States, 31 F.3d 1135 (Fed. Cir. 1994). Rather, economic performance occurs in the taxable year in which the taxpayer transfers money or other property to the person asserting the liability that the taxpayer is contesting, or in the taxable year in which payment from the trust, escrow account, or court registry is made to the person to which the liability is owed.
In general, the temporary regulations apply to transfers made in taxable years beginning after December 31, 1953, and ending after August 16, 1954. However, the temporary regulations apply to transfers of any stock of the taxpayer or any stock or indebtedness of a related person on or after November 19, 2003. Section 1.461-2T(e)(2)(i) applies to transfers of money or other property after July 18, 1984, the effective date of section 461(h). Similarly, §1.461-2T(e)(2)(ii) applies to transfers of money or other property after July 18, 1984, to satisfy workers compensation or tort liabilities, and applies to transfers of money or other property in taxable years beginning after December 31, 1991, the effective date of §1.461-4(g), to satisfy payment liabilities designated under §1.461-4(g) (other than liabilities for workers compensation or tort).
It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. Please refer to the cross-referenced notice of proposed rulemaking (REG-136890-02) published elsewhere in this issue of the Bulletin for applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6). Pursuant to section 7805(f) of the Code, these temporary regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.
§1.461-2 Contested liabilities.
Example 1. A, an individual, makes a gift of certain property to B, an individual. A pays the entire amount of gift tax assessed against him but contests his liability for the tax. Section 275(a)(3) provides that gift taxes are not deductible. A does not satisfy the requirement of paragraph (a)(1)(iv) of this section because a deduction would not be allowed for the taxable year of the transfer even if A did not contest his liability to the tax.
Par. 3. Section 1.461-2T is added to read as follows:
§1.461-2T Contested liabilities (temporary).
(a) and (b) [Reserved]. For further guidance, see §1.461-2(a) and (b).
(2) Application of economic performance rules to transfers under section 461(f). (i) A taxpayer using an accrual method of accounting is not allowed a deduction under section 461(f) in the taxable year of the transfer unless economic performance has occurred.
(ii) Economic performance occurs for liabilities requiring payment to another person arising out of any workers compensation act or any tort, or any other liability designated in §1.461-4(g), as payments are made to the person to which the liability is owed. Except as provided in section 468B or the regulations thereunder, economic performance does not occur when a taxpayer transfers money or other property to a trust, an escrow account, or a court to provide for the satisfaction of an asserted workers compensation, tort, or other liability designated under §1.461-4(g) that the taxpayer is contesting unless the trust, escrow account, or court is the person to which the liability is owed or the taxpayer's payment to the trust, escrow account, or court discharges the taxpayer's liability to the claimant. Rather, economic performance occurs in the taxable year the taxpayer transfers money or other property to the person that is asserting the workers compensation, tort, or other liability designated under §1.461-4(g) that the taxpayer is contesting or in the taxable year that payment is made from a trust, an escrow account, or a court registry funded by the taxpayer to the person to which the liability is owed.
Example 1. [Reserved]. For further guidance, see §1.461-2(e)(3), Example 1.
Example 2. Corporation X is a defendant in a class action suit for tort liabilities. In 2002, X establishes a trust for the purpose of satisfying the asserted liability and transfers $10,000,000 to the trust. The trust does not satisfy the requirements of section 468B or the regulations thereunder. In 2004, the trustee pays $10,000,000 to the plaintiffs in settlement of the litigation. Under paragraph (e)(2) of this section, economic performance with respect to X's liability to the plaintiffs occurs in 2004. X may deduct the $10,000,000 payment to the plaintiffs in 2004.
(ii) Transfers in taxable years beginning after December 31, 1991, of money or other property to provide for the satisfaction of asserted liabilities designated in §1.461-4(g) (other than liabilities for workers compensation or tort).
Approved November 12, 2003.
(Filed by the Office of the Federal Register on November 19, 2003, 8:45 a.m., and published in the issue of the Federal Register for November 21, 2003, 68 F.R. 65634)
This revenue ruling provides various prescribed rates for federal income tax purposes for December 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. 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. Finally, Table 6 contains the 2004 interest rate for sections 846 and 807.
REV. RUL. 2003-122 TABLE 1
Applicable Federal Rates (AFR) for December 2003
AFR 5.12% 5.06% 5.03% 5.01%
110% AFR 5.65% 5.57% 5.53% 5.51%
120% AFR 6.16% 6.07% 6.02% 5.99%
130% AFR 6.69% 6.58% 6.53% 6.49%
REV. RUL. 2003-122 TABLE 2
Adjusted AFR for December 2003
Short-term adjusted AFR 1.37% 1.37% 1.37% 1.37%
Mid-term adjusted AFR 2.75% 2.73% 2.72% 2.71%
REV. RUL. 2003-122 TABLE 3
Rates Under Section 382 for December 2003
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months.) 4.74%
REV. RUL. 2003-122 TABLE 4
Appropriate Percentages Under Section 42(b)(2) for December 2003
Appropriate percentage for the 70% present value low-income housing credit 8.01%
Appropriate percentage for the 30% present value low-income housing credit 3.43%
REV. RUL. 2003-122 TABLE 5
Rate Under Section 7520 for December 2003
REV. RUL. 2003-122 TABLE 6
Applicable rate of interest for 2004for purposes of section 846 and 807 4.82%
This notice updates the list of transactions that have been determined by the Internal Revenue Service to be “listed transactions” for purposes of § 1.6011-4(b)(2) of the Income Tax Regulations and § 301.6111-2(b)(2) of the Procedure and Administration Regulations. This notice restates the list of “listed transactions” in Notice 2001-51, 2001-2 C.B. 190, and updates the list by adding transactions identified as “listed transactions” in notices and other guidance released subsequent to August 2, 2001.
Transactions that are the same as or substantially similar to transactions described in the list below have been determined by the Service to be tax avoidance transactions and are “listed transactions” for purposes of § 1.6011-4(b)(2) and § 301.6111-2(b)(2). As a result, taxpayers may need to disclose their participation in these listed transactions as prescribed in § 1.6011-4, and promoters (or other persons responsible for registering tax shelter transactions) may need to register these transactions under § 301.6111-2. In addition, material advisors must maintain lists of investors and other information with respect to these listed transactions pursuant to § 301.6112-1.
(3) Transactions described in Part II of Notice 98-5, 1998-1 C.B. 334 (transactions in which the reasonably expected economic profit is insubstantial in comparison to the value of the expected foreign tax credits (identified as “listed transactions” on February 28, 2000));
(4) Transactions substantially similar to those at issue in ASA Investerings Partnership v. Commissioner, 201 F.3d 505 (D.C. Cir. 2000), and ACM Partnership v. Commissioner, 157 F.3d 231 (3d Cir. 1998) (transactions involving contingent installment sales of securities by partnerships in order to accelerate and allocate income to a tax-indifferent partner, such as a tax-exempt entity or foreign person, and to allocate later losses to another partner (identified as “listed transactions” on February 28, 2000));
(5) Treas. Reg. § 1.643(a)-8 (transactions involving distributions described in § 1.643(a)-8 from charitable remainder trusts (identified as “listed transactions” on February 28, 2000));
(6) Notice 99-59, 1999-2 C.B. 761 (transactions involving the distribution of encumbered property in which taxpayers claim tax losses for capital outlays that they have in fact recovered (identified as “listed transactions” on February 28, 2000)). See also Treas. Reg. § 1.301-1(g);
(7) Treas. Reg. § 1.7701(l)-3 (transactions involving fast-pay arrangements as defined in § 1.7701(l)-3(b) (identified as “listed transactions” on February 28, 2000));
(8) Rev. Rul. 2000-12, 2000-1 C.B. 744 (certain transactions involving the acquisition of two debt instruments the values of which are expected to change significantly at about the same time in opposite directions (identified as “listed transactions” on February 28, 2000));
(9) Notice 2000-44, 2000-2 C.B. 255 (transactions generating losses resulting from artificially inflating the basis of partnership interests (identified as “listed transactions” on August 11, 2000)). See also § 1.752-6T of the temporary Income Tax Regulations and §§ 1.752-1(a) and 1.752-7 of the proposed Income Tax Regulations;
(10) Notice 2000-60, 2000-2 C.B. 568 (transactions involving the purchase of a parent corporation's stock by a subsidiary, a subsequent transfer of the purchased parent stock from the subsidiary to the parent's employees, and the eventual liquidation or sale of the subsidiary (identified as “listed transactions” on November 16, 2000));
(11) Notice 2000-61, 2000-2 C.B. 569 (transactions purporting to apply § 935 to Guamanian trusts (identified as “listed transactions” on November 21, 2000));
(12) Notice 2001-16, 2001-1 C.B. 730 (transactions involving the use of an intermediary to sell the assets of a corporation (identified as “listed transactions” on January 18, 2001));
(13) Notice 2001-17, 2001-1 C.B. 730 (transactions involving a loss on the sale of stock acquired in a purported § 351 transfer of a high basis asset to a corporation and the corporation's assumption of a liability that the transferor has not yet taken into account for federal income tax purposes (identified as “listed transactions” on January 18, 2001));
(14) Notice 2001-45, 2001-2 C.B. 129 (certain redemptions of stock in transactions not subject to U.S. tax in which the basis of the redeemed stock is purported to shift to a U.S. taxpayer (identified as “listed transactions” on July 26, 2001));
(15) Notice 2002-21, 2002-1 C.B. 730 (transactions involving the use of a loan assumption agreement to inflate basis in assets acquired from another party to claim losses (identified as “listed transactions” on March 18, 2002));
(16) Notice 2002-35, 2002-1 C.B. 992 (transactions involving the use of a notional principal contract to claim current deductions for periodic payments made by a taxpayer while disregarding the accrual of a right to receive offsetting payments in the future (identified as “listed transactions” on May 6, 2002));
(17) Notice 2002-50, 2002-2 C.B. 98 (transactions involving the use of a straddle, a tiered partnership structure, a transitory partner, and the absence of a § 754 election to claim a permanent non-economic loss (identified as “listed transactions” on June 25, 2002)); Notice 2002-65, 2002-2 C.B. 690 (transactions involving the use of a straddle, an S corporation or a partnership, and one or more transitory shareholders or partners to claim a loss while deferring an offsetting gain are substantially similar to transactions described in Notice 2002-50); and Notice 2003-54, 2003-33 I.R.B. 363 (transactions involving the use of economically offsetting positions, one or more tax indifferent parties, and the common trust fund accounting rules of § 584 to allow a taxpayer to claim a noneconomic loss are substantially similar to transactions described in Notice 2002-50 and Notice 2002-65);
(18) Rev. Rul. 2002-69, 2002-2 C.B. 760, modifying and superseding Rev. Rul. 99-14, 1999-1 C.B. 835 (transactions in which a taxpayer purports to lease property and then purports to immediately sublease it back to the lessor (that is, lease-in/lease-out or LILO transactions) (identified as “listed transactions” on February 28, 2000));
(19) Notice 2002-70, 2002-2 C.B. 765 (transactions involving reinsurance arrangements between a taxpayer and the taxpayer's own reinsurance company that is subject to little or no federal income tax (identified as “listed transactions” on October 15, 2002));
(20) Rev. Rul. 2003-6, 2003-3 I.R.B. 286 (certain arrangements involving the transfer of employee stock ownership plans (ESOPs) that hold stock in an S corporation for the purpose of claiming eligibility for the delayed effective date of § 409(p) (identified as “listed transactions” on December 17, 2002));
(21) Notice 2003-22, 2003-18 I.R.B. 851 (certain arrangements involving leasing companies that have been used to avoid or evade federal income and employment taxes (identified as “listed transactions” on April 4, 2003));
(22) Notice 2003-24, 2003-18 I.R.B. 853 (certain arrangements that purportedly qualify as collectively-bargained welfare benefit funds excepted from the account limits of §§ 419 and 419A (identified as “listed transactions” on April 11, 2003));
(23) Notice 2003-47, 2003-30 I.R.B. 132 (transactions involving compensatory stock options and related persons to avoid or evade federal income and employment taxes (identified as “listed transactions” on July 1, 2003)); and
(24) Notice 2003-55, 2003-34 I.R.B. 395 (transactions in which one participant claims to realize rental or other income from property or service contracts and another participant claims the deductions related to that income (often referred to as “lease strips”), modifying and superseding Notice 95-53, 1995-2 C.B. 334 (identified as “listed transactions” on February 28, 2000)).
Notice 2001-51 is supplemented and superseded. For updates to this list, go to the IRS web page at www.irs.gov/businesses/corporations and click on Abusive Tax Shelters and Transactions. Notices and other published guidance will still be used to identify transactions that have been determined by the Service to be “listed transactions.”
The principal author of this notice is Michael J. Goldman of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, contact Mr. Goldman at (202) 622-3080 (not a toll-free call).
Transfers to Trusts to Provide for the Satisfaction of Contested Liabilities
The Internal Revenue Service and Treasury Department are aware of certain transactions that use contested liability trusts improperly to attempt to accelerate deductions for contested liabilities under § 461(f) of the Internal Revenue Code. This notice alerts taxpayers and their representatives that these transactions are tax avoidance transactions and identifies these transactions, and substantially similar transactions, as listed transactions for purposes of § 1.6011-4(b)(2) of the Income Tax Regulations and §§ 301.6111-2(b)(2) and 301.6112-1(b)(2) of the Procedure and Administration Regulations. This notice also alerts parties involved with these transactions of certain responsibilities that may arise from their involvement with these transactions.
Section 461(f) provides an exception to the general rules of tax accounting by allowing a taxpayer to deduct a contested liability in a year prior to the resolution of the contest if the following conditions are satisfied: (1) the taxpayer contests an asserted liability; (2) the taxpayer transfers money or other property to provide for the satisfaction of the asserted liability; (3) the contest with respect to the asserted liability exists after the time of transfer; and (4) but for the fact that the asserted liability is contested, a deduction would be allowed for the taxable year of the transfer (or for an earlier taxable year) determined after the application of the economic performance rules. If these requirements are satisfied, a taxpayer may deduct the liability in the taxable year of the transfer.
On November 19, 2003, the Service and Treasury Department filed with the Federal Register proposed (REG-136890-02) and temporary (T.D. 9095) regulations under § 461(f). Section 1.461-2T(c)(1) of these temporary regulations, which replaces and restates § 1.461-2(c)(1), provides that a transfer for the satisfaction of an asserted liability is a transfer of money or property beyond the taxpayer's control to: (1) the person asserting the liability; (2) an escrowee or trustee pursuant to a written agreement (among the escrowee or trustee, the taxpayer, and the person who is asserting the liability) providing that the money or other property be delivered in accordance with the settlement of the contest; (3) an escrowee or trustee pursuant to an order of a court or government entity providing that the money or other property be delivered in accordance with the settlement of the contest; or (4) a court with jurisdiction over the contest. An account is in the taxpayer's control unless the taxpayer has relinquished all authority over the money or other property transferred.
Section 1.461-2T(c)(1)(iii) provides that the following actions are not transfers to provide for the satisfaction of an asserted liability: (1) the purchase of a bond to guarantee payment of the asserted liability; (2) an entry on the taxpayer's books of account; and (3) a transfer to an account in the taxpayer's control. The temporary regulations clarify that a transfer in taxable years beginning after December 31, 1953, and ending after August 16, 1954, of any indebtedness of a taxpayer or any promise by the taxpayer to provide services or property in the future is not a transfer to provide for the satisfaction of an asserted liability. In addition, the temporary regulations provide the express rule that a transfer (other than to the person asserting the liability) of a taxpayer's stock, or the indebtedness or stock of a person related to the taxpayer (as defined in section 267(b)), is not a transfer to provide for the satisfaction of an asserted liability.
Section 461(h)(2)(C) provides that, if a workers compensation or tort liability requires a payment to another person, then economic performance occurs as payments to the person are made. The Conference Report accompanying enactment of § 461(h) states:
Section 461(h)(2)(D) provides that in the case of other liabilities, economic performance occurs at the time determined under regulations prescribed by the Secretary. Section 1.461-4(g)(2) through (7) describes other liabilities for which payment is economic performance.
Section 1.461-4(g)(1)(i) provides that, for certain liabilities for which payment is economic performance, economic performance does not occur as a taxpayer makes payments in connection with the liability to any other person, including a trust, escrow account, court-administered fund, or any similar arrangement, unless the payments constitute payment to the person to which the liability is owed. In Maxus Energy Corporation and Subsidiaries v. United States, 31 F.3d 1135, 1144, 1145 (Fed. Cir. 1994), the taxpayer's payment to a settlement fund effectively constituted payment to the person to which the liability was owed because the claimants agreed to look solely to the fund to satisfy their claims and, therefore, the taxpayer's payment to the fund discharged its liability to the claimant.
Section 1.461-2T(e)(2) provides that, except as provided in § 468B or the regulations thereunder, economic performance does not occur when a taxpayer transfers money or other property to a trust, escrow account, or court to provide for the satisfaction of a contested workers compensation, tort, or other liability designated in § 1.461-4(g) unless the trust, escrow account, or court is the claimant or the taxpayer's payment to the trust, escrow account, or court discharges the taxpayer's liability to the claimant.
The Service and Treasury Department have become aware of transactions in which taxpayers have established trusts purported to qualify under § 461(f), but that fail to comply with the requirements of § 461(f) or the regulations by reason of: (1) retention of powers over the trust assets (such as the power to substitute assets, to pay the contested liabilities out of assets other than those in the trust, or to limit the trustee's ability to sell the taxpayer's assets that the taxpayer transferred to the trust), contrary to the requirement that the taxpayer relinquish control over the property transferred; (2) transfer to the trust of related party notes under circumstances indicating the liability is not genuine or that there is no intent between the parties to enforce the obligation, which is not a valid transfer to provide for the satisfaction of an asserted liability; or (3) establishment of trusts for contested tort, workers compensation, or other liabilities designated in § 1.461-4(g), for which economic performance requires payment to the claimant.
Transactions that are the same as, or substantially similar to, the following transactions are identified as “listed transactions” for purposes of §§ 1.6011-4(b)(2), 301.6111-2(b)(2) and 301.6112-1(b)(2):
(1) transactions in which a taxpayer transfers money or other property in taxable years beginning after December 31, 1953, and ending after August 16, 1954, to a trust purported to be established under § 461(f) to provide for the satisfaction of an asserted liability and retains any one or more of the following powers over the money or other property transferred: to pay any liabilities ultimately due to the claimant out of assets other than those transferred to the trust; to substitute money or other property for property transferred to the trust; to prohibit payment to the claimant by the trustee until instructed by the taxpayer; to prohibit notification to the claimant of the trust's establishment; to limit the trustee's ability to sell the property after it is transferred to the trust; and to limit the trustee's ability to enforce notes or rights relating to other property transferred to the trust;
(2) transactions in which a taxpayer transfers any indebtedness of the taxpayer or any promise by the taxpayer to provide services or property in the future in taxable years beginning after December 31, 1953, and ending after August 16, 1954, to a trust purported to be established under § 461(f) to provide for the satisfaction of an asserted liability;
(3) transactions in which a taxpayer using an accrual method of accounting transfers money or other property after July 18, 1984, to a trust purported to be established under § 461(f) to provide for the satisfaction of a workers compensation or tort liability (unless the trust is the person to which the liability is owed, or payment to the trust discharges the taxpayer's liability to the claimant);
(4) transactions in which a taxpayer using an accrual method of accounting transfers money or other property in taxable years beginning after December 31, 1991, to a trust purported to be established under § 461(f) to provide for the satisfaction of a liability for which payment is economic performance under § 1.461-4(g) (unless the trust is the person to which the liability is owed, or payment to the trust discharges the taxpayer's liability to the claimant), other than a liability for workers compensation or tort; and
(5) transactions in which a taxpayer transfers stock issued by the taxpayer, or indebtedness or stock issued by a party related to the taxpayer (as defined in § 267(b)), on or after November 19, 2003, to a trust purported to be established under § 461(f) to provide for the satisfaction of any asserted liability.
Independent of their classification as “listed transactions,” transactions that are the same as, or substantially similar to, the transactions described in this notice may already be subject to the disclosure requirements of § 6011 (§ 1.6011-4), the tax shelter registration requirements of § 6111 (§§ 301.6111-1T, 301.6111-2), or the list maintenance requirements of § 6112 (§ 301.6112-1). Persons required to register these tax shelters under § 6111 who have failed to do so may be subject to the penalty under § 6707(a). Persons required to maintain lists of investors under § 6112 who have failed to do so (or who fail to provide such lists when requested by the Service) may be subject to the penalty under § 6708(a). In addition, the Service may impose penalties on parties involved in these transactions or substantially similar transactions, including the accuracy-related penalty under § 6662.
Transactions that are the same as, or substantially similar to, the transactions described in this notice are identified as “listed transactions” for purposes of §§ 1.6011-4(b)(2), 301.6111-2(b)(2) and 301.6112-1(b)(2) effective November 19, 2003, the date this notice is released to the public. The references to specific taxable years and dates in the description of transactions covered by this notice are intended to provide consistency with the temporary and proposed regulations under § 461(f) filed with the Federal Register on November 19, 2003. Only those transactions covered by the provisions (including the effective date provisions) of the disclosure, tax shelter registration, and list maintenance requirements under §§ 6011, 6111, and 6112 and the regulations thereunder will be subject to those requirements.
The principal author of this notice is Norma Rotunno of the Office of the Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice, contact Ms. Rotunno at (202) 622-7900 (not a toll-free number).
SECTION 3. 2004 ADJUSTED ITEMS
.16 Personal Exemption 151
.17 Election to Expense Certain Depreciable Assets 179
.18 Eligible Long-Term Care Premiums 213(d)(10)
.19 Medical Savings Accounts 220
.20 Interest on Education Loans 221
.21 Treatment of Dues Paid to Agricultural or Horticultural Organizations 512(d)
.22 Insubstantial Benefit Limitations for Contributions Associated with Charitable Fund-Raising Campaigns 513(h)
.23 Funeral Trusts 685
.24 Expatriation to Avoid Tax 877
.25 Valuation of Qualified Real Property in Decedent's Gross Estate 2032A
.26 Annual Exclusion for Gifts 2503 & 2523
.27 Passenger Air Transportation Excise Tax 4261
.28 Reporting Exception for Certain Exempt Organizations with Nondeductible Lobbying Expenditures 6033(e)(3)
.29 Notice of Large Gifts Received from Foreign Persons 6039F
.30 Persons Against Which a Federal Tax Lien Is Not Valid 6323
.31 Property Exempt from Levy 6334
.32 Interest on a Certain Portion of the Estate Tax Payable in Installments 6601(j)
.33 Attorney Fee Awards 7430
.34 Periodic Payments Received under Qualified Long-Term Care Insurance Contracts or under Certain Life Insurance Contracts 7702B(d)
This revenue procedure sets forth inflation adjusted items for 2004.
.01 The initial bracket amounts for the 10% tax rate for married individuals filing joint returns and surviving spouses under § 1(a) of the Internal Revenue Code, and heads of households under § 1(b) are adjusted for inflation under § 1(i)(1)(C)(ii). Under § 1(i)(1)(B)(iii) the initial bracket amounts for § 1(c) (unmarried individuals (other than surviving spouses and heads of households)) and § 1(d) (married individuals filing separate returns) are equal to the initial bracket amount of § 1(a) (married individuals filing joint returns and surviving spouses) after adjustment for inflation.
.02 The amounts deemed substantiated when paid by eligible employers in the transportation mainline pipeline construction industry under an accountable plan to employees in accordance with Rev. Proc. 2002-41, 2002-1 C.B. 1098, are adjusted for inflation. (Section 3.09).
.03 The dollar amount in § 179(b)(1) used to determine the dollar limitation of the aggregate cost that may be taken into account under § 179(a) and the dollar amount in § 179(b)(2) used to calculate a reduction in the dollar limitation are adjusted for inflation. (Section 3.17).
.04 The generation-skipping transfer tax exemption under § 2631, which is allowed in determining the “inclusion ratio” defined in § 2642, is no longer adjusted for inflation and has been deleted.
.01 Tax Rate Tables. For taxable years beginning in 2004, the tax rate tables under § 1 are as follows:
Not Over $14,300 10% of the taxable income
Over $14,300 but not over $58,100 $1,430 plus 15% of excess over $14,300
Over $58,100 but not over $117,250 $8,000 plus 25% of excess over $58,100
Over $117,250 but not over $178,650 $22,787.50 plus 28% of excess over $117,250
Over $178,650 but not over $319,100 $39,979.50 plus 33% of excess over $178,650
Over $319,100 $86,328 plus 35% of excess over $319,100
Not Over $10,200 10% of the taxable income
Over $10,200 but not over $38,900 $1,020 plus 15% of excess over $10,200
Over $38,900 but not over $100,500 $5,325 plus 25% of the excess over $38,900
Over $100,500 but not over $162,700 $20,725 plus 28% of the excess over $100,500
Over $162,700 but not over $319,100 $38,141 plus 33% of the excess over $162,700
Over $319,100 $89,753 plus 35% of the excess over $319,100
TABLE 3 — Section 1(c). — Unmarried Individuals (other than Surviving Spouse and Heads of Households)
Not over $7,150 10% of the taxable income
Over $7,150 but not over $29,050 $715 plus 15% of the excess over $7,150
Over $29,050 but not over $70,350 $4,000 plus 25% of the excess over $29,050
Over $70,350 but not over $146,750 $14,325 plus 28% of the excess over $70,350
Over $146,750 but not over $319,100 $35,717 plus 33% of the excess over $146,750
Over $319,100 $92,592.50 plus 35% of the excess over $319,100
Over $29,050 but not over $58,625 $4,000 plus 25% of the excess over $29,050
Over $58,625 but not over $89,325 $11,393.75 plus 28% of the excess over $58,625
Over $89,325 but not over $159,550 $19,989.75 plus 33% of the excess over $89,325
Over $159,550 $43,164 plus 35% of the excess over $159,550
Not Over $1,950 15% of the taxable income
Over $1,950 but not over $4,600 $292.50 plus 25% of the excess over $1,950
Over $4,600 but not over $7,000 $955 plus 28% of the excess over $4,600
Over $7,000 but not over $9,550 $1,627 plus 33% of the excess over $7,000
Over $9,550 $2,468.50 plus 35% of the excess over $9,550
.02 Unearned Income of Minor Children Taxed as if Parent's Income (the “Kiddie Tax”). For taxable years beginning in 2004, the amount in § 1(g)(4)(A)(ii)(I), which is used to reduce the net unearned income reported on the child's return that is subject to the “kiddie tax,” is $800. (This amount is the same as the $800 standard deduction amount provided in section 3.10(2) of this revenue procedure.) The same $800 amount is used for purposes of § 1(g)(7) (that is, in determining whether a parent may elect to include a child's gross income in the parent's gross income and for calculating the “kiddie tax”). For example, one of the requirements for the parental election is that a child's gross income is more than the amount referenced in § 1(g)(4)(A)(ii)(I) but less than 10 times such amount; thus, a child's gross income for 2004 must be more than $800 but less than $8,000 to satisfy that requirement.
.03 Adoption Credit. For taxable years beginning in 2004, under § 23(a)(3) the maximum credit allowed for an adoption of a child with special needs is $10,390. For taxable years beginning in 2004, under § 23(b)(1) the maximum credit allowed with regard to other adoptions is the amount of qualified adoption expenses up to $10,390. The available adoption credit begins to phase out under § 23(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $155,860 and is completely phased out for taxpayers with modified adjusted gross income of $195,860. (See section 3.14 for the adjusted items relating to adoption assistance programs.)
.04 Child Tax Credit. For taxable years beginning in 2004, the value used in § 24(d)(1)(B)(i) in determining the amount of credit under § 24 that may be refundable is $10,750.
(1) For taxable years beginning in 2004, 100 percent of qualified tuition and related expenses not in excess of $1,000 and 50 percent of such expenses in excess of $1,000 are taken into account in determining the amount of the Hope Scholarship Credit under § 25A(b)(1).
(2) For taxable years beginning in 2004, a taxpayer's modified adjusted gross income in excess of $42,000 ($85,000 for a joint return) is taken into account in determining the reduction under § 25A(d)(2)(A)(ii) in the amount of the Hope Scholarship and Lifetime Learning Credits otherwise allowable under § 25A(a).
(1) In general. For taxable years beginning in 2004, the following amounts are used to determine the earned income credit under § 32(b). The “earned income amount” is the amount of earned income at or above which the maximum amount of the earned income credit is allowed. The “threshold phaseout amount” is the amount of adjusted gross income (or, if greater, earned income) above which the maximum amount of the credit begins to phase out. The “completed phaseout amount” is the amount of adjusted gross income (or if greater, earned income) at or above which no credit is allowed.
Earned Income Amount $ 7,660 $10,750 $ 5,100
Maximum Amount of Credit $ 2,604 $ 4,300 $ 390
Threshold Phaseout Amount $14,040 $14,040 $ 6,390
Completed Phaseout Amount $30,338 $34,458 $11,490
Threshold Phaseout Amount (Married Filing Jointly) $15,040 $15,040 $ 7,390
Completed Phaseout Amount (Married Filing Jointly) $31,338 $35,458 $12,490
(2) Excessive investment income. For taxable years beginning in 2004, the earned income tax credit is denied under § 32(i) if the aggregate amount of certain investment income exceeds $2,650.
.07 Low-Income Housing Credit. For calendar years beginning in 2004, the amounts used under § 42(h)(3)(C)(ii) to calculate the State housing credit ceiling for the low-income housing credit is the greater of $1.80 multiplied by the State population or $2,075,000.
.08 Alternative Minimum Tax Exemption for a Child Subject to the “Kiddie Tax.” For taxable years beginning in 2004, for a child to whom the § 1(g) “kiddie tax” applies, the exemption amount under §§ 55 and 59(j) for purposes of the alternative minimum tax under § 55 may not exceed the sum of (A) such child's earned income for the taxable year, plus (B) $5,750.
.09 Transportation Mainline Pipeline Construction Industry Optional Expense Substantiation Rules for Payments to Employees under Accountable Plans. For calendar years beginning in 2004, an eligible employer may pay certain welders and heavy equipment mechanics an amount of up to $13 per hour for rig-related expenses that is deemed substantiated under an accountable plan when paid in accordance with Rev. Proc. 2002-41. If the employer provides fuel or otherwise reimburses fuel expenses, up to $8 per hour is deemed substantiated when paid under Rev. Proc. 2002-41.
(1) In general. For taxable years beginning in 2004, the standard deduction amounts under § 63(c)(2) are as follows:
Married Individuals Filing Joint Returns and Surviving Spouses (§ 1(a)) $9,700
Heads of Households (§ 1(b)) $7,150
Unmarried Individuals (other than Surviving Spouses and Heads of Households) (§ 1(c)) $4,850
Married Individuals Filing Separate Returns (§ 1(d)) $4,850
(2) Dependent. For taxable years beginning in 2004, the standard deduction amount under § 63(c)(5) for an individual who may be claimed as a dependent by another taxpayer may not exceed the greater of $800 or the sum of $250 and the individual's earned income.
(3) Aged and blind. For taxable years beginning in 2004, the additional standard deduction amounts under § 63(f) for the aged and for the blind are $950 for each. These amounts are increased to $1,200 if the individual is also unmarried and not a surviving spouse.
.11 Overall Limitation on Itemized Deductions. For taxable years beginning in 2004, the “applicable amount” of adjusted gross income under § 68(b), above which the amount of otherwise allowable itemized deductions is reduced under § 68, is $142,700 (or $71,350 for a separate return filed by a married individual).
.12 Qualified Transportation Fringe. For taxable years beginning in 2004, the monthly limitation under § 132(f)(2)(A), regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass, is $100. The monthly limitation under § 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking is $195.
.13 Income from United States Savings Bonds for Taxpayers Who Pay Qualified Higher Education Expenses. For taxable years beginning in 2004, the exclusion under § 135, regarding income from United States savings bonds for taxpayers who pay qualified higher education expenses, begins to phase out for modified adjusted gross income above $89,750 for joint returns and $59,850 for other returns. This exclusion completely phases out for modified adjusted gross income of $119,750 or more for joint returns and $74,850 or more for other returns.
.14 Adoption Assistance Programs. For taxable years beginning in 2004, under § 137(a)(2) the maximum amount that can be excluded from an employee's gross income in connection with the adoption by the employee of a child with special needs is $10,390. For taxable years beginning in 2004, under § 137(b)(1) the maximum amount that can be excluded from an employee's gross income for the amounts paid or expenses incurred by the employer for qualified adoption expenses furnished pursuant to an adoption assistance program in connection with other adoptions by the employee is $10,390. The amount excludable from an employee's gross income begins to phase out under § 137(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $155,860 and is completely phased out for taxpayers with modified adjusted gross income of $195,860. (See section 3.03 for the adjusted items relating to the adoption credit.)
.15 Private Activity Bonds Volume Cap. For calendar years beginning in 2004, the amounts used under § 146(d)(1) to calculate the State ceiling for the volume cap for private activity bonds is the greater of $80 multiplied by the State population or $233,795,000.
.16 Personal Exemption.
(1) Exemption amount. For taxable years beginning in 2004, the personal exemption amount under § 151(d) is $3,100.
(2) Phase out. For taxable years beginning in 2004, the personal exemption amount begins to phase out at, and is completely phased out after, the following adjusted gross income amounts:
Married Individuals Filing Joint Returns and Surviving Spouse (§ 1(a)) $214,050 $336,550
Heads of Households (§ 1(b)) $178,350 $300,850
Unmarried Individuals (other than Surviving Spouses and Heads of Households) (§ 1(c)) $142,700 $265,200
Married Individuals Filing Separate Returns (§ 1(d)) $107,025 $168,275
.17 Election to Expense Certain Depreciable Assets. For taxable years beginning in 2004, under § 179(b)(1), the aggregate cost of any § 179 property a taxpayer may elect to treat as an expense shall not exceed $102,000. Under § 179(b)(2), the $102,000 limitation shall be reduced (but not below zero) by the amount by which the cost of § 179 property placed in service during the 2004 taxable year exceeds $410,000.
.18 Eligible Long-Term Care Premiums. For taxable years beginning in 2004, the limitations under § 213(d)(10), regarding eligible long-term care premiums includible in the term “medical care,” are as follows:
40 or less $ 260
More than 40 but not more than 50 $ 490
More than 50 but not more than 60 $ 980
More than 60 but not more than 70 $2,600
More than 70 $3,250
.19 Medical Savings Accounts.
(1) Self-only coverage. For taxable years beginning in 2004, the term “high deductible health plan” as defined in § 220(c)(2)(A) means, for self-only coverage, a health plan that has an annual deductible that is not less than $1,700 and not more than $2,600, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits does not exceed $3,450.
(2) Family coverage. For taxable years beginning in 2004, the term “high deductible health plan” means, for family coverage, a health plan that has an annual deductible that is not less than $3,450 and not more than $5,150, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits does not exceed $6,300.
.20 Interest on Education Loans. For taxable years beginning in 2004, the $2,500 maximum deduction for interest paid on qualified education loans under § 221 is reduced under § 221(b)(2)(B) when modified adjusted gross income exceeds $50,000 ($100,000 for joint returns), and is completely eliminated when modified adjusted gross income is $65,000 ($130,000 for joint returns).
.21 Treatment of Dues Paid to Agricultural or Horticultural Organizations. For taxable years beginning in 2004, the limitation under § 512(d)(1), regarding the exemption of annual dues required to be paid by a member to an agricultural or horticultural organization, is $124.
.22 Insubstantial Benefit Limitations for Contributions Associated with Charitable Fund-Raising Campaigns.
(1) Low cost article. For taxable years beginning in 2004, the unrelated business income of certain exempt organizations under § 513(h)(2) does not include a “low cost article” of $8.20 or less.
(2) Other insubstantial benefits. For taxable years beginning in 2004, the $5, $25, and $50 guidelines in section 3 of Rev. Proc. 90-12, 1990-1 C.B. 471 (as amplified and modified), for disregarding the value of insubstantial benefits received by a donor in return for a fully deductible charitable contribution under § 170, are $8.20, $41, and $82, respectively.
.23 Funeral Trusts. For a contract entered into during calendar year 2004 for a “qualified funeral trust,” as defined in § 685, the trust may not accept aggregate contributions by or for the benefit of an individual in excess of $8,000.
.24 Expatriation to Avoid Tax. For calendar year 2004, the amounts used under § 877(a)(2), regarding whether an individual's loss of United States citizenship had the avoidance of United States taxes as one of its principal purposes, are more than $124,000 for “average annual net income tax” and $622,000 or more for “net worth.”
.25 Valuation of Qualified Real Property in Decedent's Gross Estate. For an estate of a decedent dying in calendar year 2004, if the executor elects to use the special use valuation method under § 2032A for qualified real property, the aggregate decrease in the value of qualified real property resulting from electing to use § 2032A that is taken into account for purposes of the estate tax may not exceed $850,000.
.26 Annual Exclusion for Gifts.
(1) For calendar year 2004, the first $11,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts under § 2503 made during that year.
(2) For calendar year 2004, the first $114,000 of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) are not included in the total amount of taxable gifts under §§ 2503 and 2523(i)(2) made during that year.
.27 Passenger Air Transportation Excise Tax. For calendar year 2004, the tax under § 4261(b) on the amount paid for each domestic segment of taxable transportation by air is $3.10. For calendar year 2004, the tax under § 4261(c) on any amount paid (whether within or without the United States) for any transportation of any person by air, if such transportation begins or ends in the United States, generally is $13.70. However, for a domestic segment beginning or ending in Alaska or Hawaii as described in § 4261(c)(3), the tax only applies to departures and is at the rate of $6.90.
.28 Reporting Exception for Certain Exempt Organizations with Nondeductible Lobbying Expenditures. For taxable years beginning in 2004, the annual per person, family, or entity dues limitation to qualify for the reporting exception under § 6033(e)(3) (and section 5.05 of Rev. Proc. 98-19, 1998-1 C.B. 547), regarding certain exempt organizations with nondeductible lobbying expenditures, is $86 or less.
.29 Notice of Large Gifts Received from Foreign Persons. For taxable years beginning in 2004, recipients of gifts from certain foreign persons may be required to report these gifts under § 6039F if the aggregate value of gifts received in a taxable year exceeds $12,097.
.30 Persons Against Which a Federal Tax Lien Is Not Valid. For calendar year 2004, a federal tax lien is not valid against (1) certain purchasers under § 6323(b)(4) who purchased personal property in a casual sale for less than $1,180, or (2) a mechanic's lienor under § 6323(b)(7) that repaired or improved certain residential property if the contract price with the owner is not more than $5,890.
.31 Property Exempt from Levy. For calendar year 2004, the value of property exempt from levy under § 6334(a)(2) (fuel, provisions, furniture, and other household personal effects, as well as arms for personal use, livestock, and poultry) may not exceed $7,040. The value of property exempt from levy under § 6334(a)(3) (books and tools necessary for the trade, business, or profession of the taxpayer) may not exceed $3,520.
.32 Interest on a Certain Portion of the Estate Tax Payable in Installments. For an estate of a decedent dying in calendar year 2004, the dollar amount used to determine the “2-percent portion” (for purposes of calculating interest under § 6601(j)) of the estate tax extended as provided in § 6166 is $1,140,000.
.33 Attorney Fee Awards. For fees incurred in calendar year 2004, the attorney fee award limitation under § 7430(c)(1)(B)(iii) is $150 per hour.
.34 Periodic Payments Received under Qualified Long-Term Care Insurance Contracts or under Certain Life Insurance Contracts. For calendar year 2004, the stated dollar amount of the per diem limitation under § 7702B(d)(4), regarding periodic payments received under a qualified long-term care insurance contract or periodic payments received under a life insurance contract that are treated as paid by reason of the death of a chronically ill individual, is $230.
.01 General Rule. Except as provided in section 4.02, this revenue procedure applies to taxable years beginning in 2004.
.02 Calendar Year Rule. This revenue procedure applies to transactions or events occurring in calendar year 2004 for purposes of sections 3.07 (low-income housing credit), 3.09 (pipeline construction industry optional expense substantiation rules), 3.15 (private activity bond volume cap), 3.23 (funeral trusts), 3.24 (expatriation to avoid tax), 3.25 (valuation of qualified real property in decedent's gross estate), 3.26 (annual exclusion for gifts), 3.27 (passenger air transportation excise tax), 3.30 (persons against which a federal tax lien is not valid), 3.31 (property exempt from levy), 3.32 (interest on a certain portion of the estate tax payable in installments), 3.33 (attorney fee awards), and 3.34 (periodic payments received under qualified long-term care insurance contracts or under certain life insurance contracts).
Notice of Proposed Rulemaking by Cross-Reference to Temporary Regulations and Notice of Public Hearing: Transfers to Provide for Satisfaction of Contested Liabilities
In this issue of the Bulletin, the IRS is issuing temporary regulations (T.D. 9095) relating to the transfer of indebtedness or stock of a taxpayer or related persons or of a promise to provide services or property in the future to provide for the satisfaction of an asserted liability that the taxpayer is contesting. The temporary regulations also relate to transfers of money or other property to a trust, an escrow account, or a court to provide for the satisfaction of a liability for which payment is economic performance. The text of those temporary regulations also serves as the text of these proposed regulations. This document also provides notice of a public hearing on these proposed regulations.
Send submissions to: CC:LPD:PR (REG-136890-02), room 5226, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC. 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: CC:LPD:PR (REG-136890-02), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, or sent electronically via the IRS Internet site at www.irs.gov/regs. The public hearing will be held in the 7th floor auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC.
Temporary regulations in this issue of the Bulletin amend the Income Tax Regulations (26 CFR Part 1) relating to section 461(f) of the Internal Revenue Code (Code). The temporary regulations provide the express rule that transfers of the indebtedness of a taxpayer or of any promise to provide services or property in the future, or transfers (other than to the person asserting the liability) of a taxpayer's stock, or the indebtedness or stock of a person related to the taxpayer (as defined in section 267(b)), are not transfers to provide for the satisfaction of an asserted liability. The temporary regulations also provide rules relating to the application of the economic performance rules to transfers of money or other property under section 461(f) to provide for the satisfaction of a contested workers compensation or tort liability, or other liability for which payment is economic performance under §1.461-4(g). The text of the temporary regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the amendments.
A public hearing has been scheduled for March 23, 2004, in the 7th floor auditorium of the Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the “FOR FURTHER INFORMATION CONTACT” section of this preamble.
The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit written comments and an outline of the topics to be discussed and the time to be devoted to each topic (signed original and eight (8) copies) by March 2, 2004. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing.
Par. 2. Section 1.461-2 is amended by revising paragraphs (c)(1), (e)(2), (e)(3), and (g) to read as follows:
[The text of proposed paragraphs (c)(1), (e)(2), (e)(3), and (g) is the same as the text of §1.461-2T(c)(1), (e)(2), (e)(3), and (g) published elsewhere in this issue of the Bulletin
(Filed by the Office of the Federal Register on November 19, 2003, 8:45 a.m., and published in the issue of the Federal Register for November 21, 2003, 68 F.R. 65645)
Bulletins 2003-27 through 2003-49
2003-75 2003-49 I.R.B. 2003-49
2003-77 2003-49 I.R.B. 2003-49
2003-76 2003-49 I.R.B. 2003-49
136890-02 2003-49 I.R.B. 2003-49
2003-85 2003-49 I.R.B. 2003-49
2003-122 2003-49 I.R.B. 2003-49
2003-124 2003-49 I.R.B. 2003-49
9095 2003-49 I.R.B.
2001-51 Supplemented and superseded by Notice 2003-76 2003-49 I.R.B. 2003-49