Rp 2009-3

26 CFR 601.201: Rulings and determination letters.

Rev. Proc. 2009–3
TABLE OF CONTENTS
SECTION 1. PURPOSE AND NATURE OF CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 2. BACKGROUND AND SCOPE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 3. AREAS RULINGS WILL NOT BE ISSUED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
SECTION 4. AREAS RULINGS WILL NOT ORDINARILY BE ISSUED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
SECTION 5. AREAS UNDER STUDY WHERE RULINGS WILL NOT BE ISSUED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
SECTION 6. AREAS COVERED BY AUTOMATIC APPROVAL PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
SECTION 7. EFFECT ON OTHER REVENUE PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
SECTION 8. EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
SECTION 9. PAPERWORK REDUCTION ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
DRAFTING INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

SECTION 1. PURPOSE AND
NATURE OF CHANGES
.01 The purpose of this revenue procedure is to update Rev. Proc. 2008–3,
2008–1 C.B. 110, by providing a revised
list of those areas of the Internal Revenue Code under the jurisdiction of the
Associate Chief Counsel (Corporate), the
Associate Chief Counsel (Financial Institutions and Products), the Associate Chief
Counsel (Income Tax and Accounting), the
Associate Chief Counsel (Passthroughs
and Special Industries), the Associate
Chief Counsel (Procedure and Administration), and the Division Counsel/Associate
Chief Counsel (Tax Exempt and Government Entities) relating to issues on which
the Internal Revenue Service will not issue letter rulings or determination letters.
For a list of areas under the jurisdiction
of the Associate Chief Counsel (International) relating to international issues
on which the Service will not issue letter
rulings or determination letters, see Rev.
Proc. 2009–7, this Bulletin. For a list of
areas under the jurisdiction of the Commissioner, Tax Exempt and Government
Entities Division relating to issues, plans
or plan amendments on which the Service
will not issue letter rulings and determination letters, see, respectively, section 8
of Rev. Proc. 2009–4 (this Bulletin) and

2009–1 I.R.B.

section 3.02 of Rev. Proc. 2009–6 (this
Bulletin).
.02 Changes.
(1) New section 3.01(42) (Section
409A.—Inclusion in Gross Income of Deferred Compensation Under Nonqualified
Deferred Compensation Plans) has been
added.
(2) New Section 3.01(71) (Section
6166.—Estates consisting largely of an
interest in a closely held business.—Requests involving section 6166 where there
is no decedent) has been added.
(3) New Section 3.01(72) (Section
6901.—Transferee Liability.—Requests
involving section 6901 Transferee Liability) has been added.
(4) Old section 5.08 (Section
409A.—Inclusion in Gross Income of Deferred Compensation Under Nonqualified
Deferred Compensation Plans) has been
deleted.
SECTION 2. BACKGROUND AND
SCOPE OF APPLICATION
.01 Background.
Whenever appropriate in the interest of
sound tax administration, it is the policy of
the Service to answer inquiries of individuals and organizations regarding their status
for tax purposes and the tax effects of their
acts or transactions, prior to the filing of

107

returns or reports that are required by the
revenue laws.
There are, however, certain areas in
which, because of the inherently factual
nature of the problems involved, or for
other reasons, the Service will not issue
rulings or determination letters. These
areas are set forth in four sections of this
revenue procedure. Section 3 reflects
those areas in which rulings and determinations will not be issued. Section 4
sets forth those areas in which they will
not ordinarily be issued. “Not ordinarily” means that unique and compelling
reasons must be demonstrated to justify
the issuance of a ruling or determination
letter. Those sections reflect a number of
specific questions and problems as well
as general areas. Section 5 lists specific
areas for which the Service is temporarily not issuing rulings and determinations
because those matters are under study. Finally, section 6 of this revenue procedure
lists specific areas where the Service will
not ordinarily issue rulings because the
Service has provided automatic approval
procedures for these matters.
See Rev. Proc. 2009–1 (this Bulletin)
particularly section 6 captioned “Under
What Circumstances Does The Service
Not Issue Letter Rulings Or Determination
Letters?” for general instructions and other
situations in which the Service will not or

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ordinarily will not issue letter rulings or
determination letters.
With respect to the items listed, revenue rulings or revenue procedures may be
published in the Internal Revenue Bulletin
from time to time to provide general guidelines regarding the position of the Service.
Additions or deletions to this revenue
procedure as well as restatements of items
listed will be made by modification of
this revenue procedure. Changes will be
published as they occur throughout the
year and will be incorporated annually in
a new revenue procedure published as the
third revenue procedure of the year. These
lists should not be considered all-inclusive. Decisions not to rule on individual
cases (as contrasted with those that present
significant pattern issues) are not reported
in this revenue procedure and will not be
added to subsequent revisions.
.02 Scope of Application.
This revenue procedure does not preclude the submission of requests for technical advice to the National Office from
other offices of the Service.
.03 No-Rule Issues Part of Larger
Transactions.
If it is impossible for the Service to determine the tax consequences of a larger
transaction without knowing the resolution of an issue on which the Service will
not issue rulings and determinations under
this revenue procedure involving a part of
the transaction or a related transaction, the
taxpayer must state in the request to the
best of the taxpayer’s knowledge and belief the tax consequences of the no-rule issue. The Service’s ruling or determination
letter will state that the Service did not consider, and no opinion is expressed upon,
that issue. In appropriate cases the Service
may decline to issue rulings or determinations on such larger transactions due to the
relevance of the no-rule issue, despite the
taxpayer’s representation.
SECTION 3. AREAS IN WHICH
RULINGS OR DETERMINATION
LETTERS WILL NOT BE ISSUED
.01 Specific questions and problems.
(1) Section 61.—Gross Income Defined.—Whether amounts voluntarily deferred by a taxpayer under a deferred-compensation plan maintained by an organization described in § 501 (other than a
plan maintained by an eligible employer

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pursuant to the provisions of § 457) are
currently includible in the taxpayer’s gross
income.
(2) Section 61.—Gross Income Defined.—Whether a split-dollar life insurance arrangement is “materially modified”
within the meaning of § 1.61–22(j)(2) of
the Income Tax Regulations. (Also §§ 83,
301, 1401, 2501, 3121, 3231, 3306, 3401,
and 7872.)
(3) Sections 61, 451, and 1001.—Gross
Income Defined; General Rule for Taxable Year of Inclusion; Determination
of Amount and Recognition of Gain or
Loss.—Whether, under authorization by
an appropriate State agency to recover certain costs pursuant to State specified cost
recovery legislations, any investor-owned
utility company realizes income upon:
(i) the creation of an intangible property
right; (ii) the transfer of that intangible
property right; or (iii) the securitization of
the intangible property right.
(4) Section 79.—Group-Term Life
Insurance Purchased for Employees.—Whether a group insurance plan
for 10 or more employees qualifies as
group-term insurance, if the amount of
insurance is not computed under a formula that would meet the requirements of
§ 1.79–1(c)(2)(ii) of the regulations if the
group consisted of fewer than 10 employees.
(5) Section 83.—Property Transferred
in Connection with Performance of Services.—Whether a restriction constitutes
a substantial risk of forfeiture, if the employee is a controlling shareholder. Also,
whether a transfer has occurred, if the
amount paid for the property involves a
nonrecourse obligation.
(6) Section 83.—Property Transferred
in Connection with Performance of Services.—Which corporation is entitled to
the deduction under § 83(h) in cases where
a corporation undergoes a corporate division, if the facts are not similar to those described in Rev. Rul. 2002–1, 2002–1 C.B.
268.
(7) Section 101.—Certain Death Benefits.—Whether there has been a transfer
for value for purposes of § 101(a) in situations involving a grantor and a trust when
(i) substantially all of the trust corpus consists or will consist of insurance policies
on the life of the grantor or the grantor’s
spouse, (ii) the trustee or any other person has a power to apply the trust’s in-

108

come or corpus to the payment of premiums on policies of insurance on the life of
the grantor or the grantor’s spouse, (iii) the
trustee or any other person has a power to
use the trust’s assets to make loans to the
grantor’s estate or to purchase assets from
the grantor’s estate, and (iv) there is a right
or power in any person that would cause
the grantor to be treated as the owner of
all or a portion of the trust under §§ 673 to
677.
(8) Sections 101, 761, and 7701.—Definitions.—Whether, in connection with the
transfer of a life insurance policy to an unincorporated organization, (i) the organization will be treated as a partnership under §§ 761 and 7701, or (ii) the transfer of
the life insurance policy to the organization
will be exempt from the transfer for value
rules of § 101, when substantially all of the
organization’s assets consists or will consist of life insurance policies on the lives
of the members.
(9) Section 102.—Gifts and Inheritances.—Whether a transfer is a gift within
the meaning of § 102(a).
(10) Section 105(h).—Amount Paid to
Highly Compensated Individuals Under
Discriminatory Self-Insured Medical Expense Reimbursement Plan.—Whether a
self-insured medical reimbursement plan
satisfies the requirements of § 105(h) for
a plan year.
(11) Section 107.—Rental Value of Parsonages.—Whether amounts distributed to
a retired minister from a pension or annuity plan should be excludible from the
minister’s gross income as a parsonage allowance under § 107.
(12) Section 107.—Rental Value of
Parsonages.—Whether an individual is a
“minister of the gospel” for Federal tax
purposes. (Also §§ 1402(a)(8), (c)(4) and
(e), 3121(b)(8)(A), and 3401(a)(9)).
(13) Section 115.—Income of States,
Municipalities, Etc.—The results of transactions pursuant to a plan or arrangement
created by State statute a primary objective of which is to enable participants to
pay for the costs of a post-secondary education for themselves or a designated beneficiary, including: (i) whether the plan or
arrangement, itself, is an entity separate
from a State and, if so, how the plan or
arrangement is treated for Federal tax purposes; and (ii) whether any contract under
the plan or arrangement is a debt instrument and, if so, how interest or original

2009–1 I.R.B.

issue discount attributable to the contract
is treated for Federal tax purposes. (Also
§§ 61, 163, 1275, 2501, and 7701.)
(14) Section 115.—Income of States,
Municipalities, Etc.—Whether the income
of membership organizations established
by States exclusively to reimburse members for losses arising from workmen’s
compensation claims is excluded from
gross income under § 115.
(15) Section 117.—Qualified Scholarships.—Whether amounts paid to research
fellows and research associates are scholarships or fellowships excluded from
wages for FICA tax purposes.
(16) Section 117.—Qualified Scholarships.—Whether an employer-related
scholarship or fellowship grant is excludible from the employee’s gross income, if
there is no intermediary private foundation distributing the grants, as there was in
Rev. Proc. 76–47, 1976–2 C.B. 670.
(17) Section 119.—Meals or Lodging
Furnished for the Convenience of the Employer.—Whether the value of meals or
lodging is excludible from gross income
by an employee who is a controlling shareholder of the employer.
(18) Section 121.—Exclusion of
Gain from Sale of Principal Residence.—Whether property qualifies as the
taxpayer’s principal residence.
(19)
Section
125.—Cafeteria
Plans.—Whether amounts used to provide
group-term life insurance under § 79,
accident and health benefits under §§ 105
and 106, and dependent care assistance
programs under § 129 are includible in
the gross income of participants and considered “wages” for purposes of §§ 3401,
3121, and 3306 when the benefits are
offered through a cafeteria plan.
(20) Section 162.—Trade or Business
Expenses.—Whether compensation is reasonable in amount.
(21) Section 163.—Interest.—The income tax consequences of transactions
involving “shared appreciation mortgage”
(SAM) loans in which a taxpayer, borrowing money to purchase real property, pays
a fixed rate of interest on the mortgage
loan below the prevailing market rate and
will also pay the lender a percentage of the
appreciation in value of the real property
upon termination of the mortgage. This
applies to all SAM arrangements where
the loan proceeds are used for commercial
or business activities, or where used to

2009–1 I.R.B.

finance a personal residence, if the facts
are not similar to those described in Rev.
Rul. 83–51, 1983–1 C.B. 48. (Also §§ 61,
451, 461, 856, 1001, and 7701.)
(22) Section 170.—Charitable, Etc.,
Contributions and Gifts.—Whether a charitable contribution deduction under § 170
is allowed for a transfer of an interest in
a limited partnership or a limited liability
company taxed as a partnership to an organization described in § 170(c).
(23) Section 170.—Charitable, Etc.,
Contributions and Gifts.—Whether a
taxpayer who advances funds to a charitable organization and receives therefor
a promissory note may deduct as contributions, in one taxable year or in each of
several years, amounts forgiven by the
taxpayer in each of several years by endorsement on the note.
(24) Section 181.—Treatment of
Certain Qualified Film and Television
Productions.—The determination under
§ 1.181–1T(a)(1) and (2) as to who is the
owner of a qualified film or television
production.
(25) Section 199.—Income Attributable to Domestic Production Activities.—The
determination
under
§ 1.199–3(f)(1) as to who is the taxpayer
that has the benefits and burdens of ownership under Federal income tax principles
of any qualifying production property (as
defined in § 1.199–3(j)(1)), qualified film
(as defined in § 1.199–3(k)), or utilities (as
defined in § 1.199–3(l)) during the period
in which a qualifying activity under § 199
occurs.
(26) Section 213.—Medical, Dental,
Etc., Expenses.—Whether a capital expenditure for an item that is ordinarily
used for personal, living, or family purposes, such as a swimming pool, has as
its primary purpose the medical care of
the taxpayer or the taxpayer’s spouse or
dependent, or is related directly to such
medical care.
(27)
Section
264(b).—Certain
Amounts Paid in Connection with Insurance Contracts.—Whether “substantially
all” the premiums of a contract of insurance are paid within a period of 4 years
from the date on which the contract is
purchased. Also, whether an amount deposited is in payment of a “substantial
number” of future premiums on such a
contract.

109

(28)
Section
264(c)(1).—Certain
Amounts Paid in Connection with Insurance Contracts.—Whether § 264(c)(1)
applies.
(29) Section 269.—Acquisitions Made
to Evade or Avoid Income Tax.—Whether
an acquisition is within the meaning of
§ 269.
(30) Section 274.—Disallowance
of Certain Entertainment, Etc., Expenses.—Whether a taxpayer who is traveling away from home on business may,
in lieu of substantiating the actual cost of
meals, deduct a fixed per-day amount for
meal expenses that differs from the amount
authorized by the revenue procedure providing optional rules for substantiating the
amount of travel expenses for the period
in which the expense was paid or incurred.
(31) Section 302.—Distributions in
Redemption of Stock.—Whether § 302(b)
applies when the consideration given in
redemption by a corporation consists entirely or partly of its notes payable, and the
shareholder’s stock is held in escrow or as
security for payment of the notes with the
possibility that the stock may or will be
returned to the shareholder in the future,
upon the happening of specific defaults by
the corporation.
(32) Section 302.—Distributions in Redemption of Stock.—Whether § 302(b) applies when the consideration given in redemption by a corporation in exchange for
a shareholder’s stock consists entirely or
partly of the corporation’s promise to pay
an amount based on, or contingent on, future earnings of the corporation, when the
promise to pay is contingent on working
capital being maintained at a certain level,
or any other similar contingency.
(33) Section 302.—Distributions in Redemption of Stock.—Whether § 302(b) applies to a redemption of stock, if after
the redemption the distributing corporation uses property that is owned by the
shareholder from whom the stock is redeemed and the payments by the corporation for the use of the property are dependent upon the corporation’s future earnings or are subordinate to the claims of the
corporation’s general creditors. Payments
for the use of property will not be considered to be dependent upon future earnings
merely because they are based on a fixed
percentage of receipts or sales.
(34) Section 302.—Distributions in Redemption of Stock.—Whether the acqui-

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sition or disposition of stock described in
§ 302(c)(2)(B) has, or does not have, as
one of its principal purposes the avoidance
of Federal income taxes within the meaning of that section, unless the facts and
circumstances are materially identical to
those set forth in Rev. Rul. 85–19, 1985–1
C.B. 94; Rev. Rul. 79–67, 1979–1 C.B.
128; Rev. Rul. 77–293, 1977–2 C.B. 91;
Rev. Rul. 57–387, 1957–2 C.B. 225; Rev.
Rul. 56–584, 1956–2 C.B. 179; or Rev.
Rul. 56–556, 1956–2 C.B. 177.
(35) Section 302(b)(4) and (e).—Redemption from Noncorporate Shareholder
in Partial Liquidation; Partial Liquidation
Defined.—The amount of working capital attributable to a business or portion
of a business terminated that may be distributed in partial liquidation.
(36) Section 312.—Effect on Earnings
and Profits.—The determination of the
amount of earnings and profits of a corporation.
(37) Sections 331, 453, and 1239.—The
Tax Effects of Installment Sales of Property Between Entities with Common Ownership.—The tax effects of a transaction in
which there is a transfer of property by a
corporation to a partnership or other noncorporate entity (or the transfer of stock
to such entity followed by a liquidation of
the corporation) when more than a nominal amount of the stock of such corporation
and the capital or beneficial interests in the
purchasing entity (that is, more than 20
percent in value) is owned by the same persons, and the consideration to be received
by the selling corporation or the selling
shareholders includes an installment obligation of the purchasing entity.
(38) Sections 332, 351, 368(a)(1)(A),
(B), (C), (E) and (F), and 1036.—Complete Liquidations of Subsidiaries; Transfer to Corporation Controlled by Transferor; Definitions Relating to Corporate
Reorganizations; and Stock for Stock of
Same Corporation.—Whether a transaction qualifies under § 332, § 351 or § 1036
for nonrecognition treatment, or whether
it constitutes a corporate reorganization
within the meaning of § 368(a)(1)(A) (including a transaction that qualifies under
§ 368(a)(1)(A) by reason of § 368(a)(2)(D)
or § 368(a)(2)(E)), § 368(a)(1)(B),
§ 368(a)(1)(C), § 368(a)(1)(E) or
§ 368(a)(1)(F), and whether various consequences (such as nonrecognition and
basis) result from the application of that

Sec. 3
January 5, 2009

section, unless the Service determines that
there is a significant issue that must be
resolved in order to decide those matters.
If the Service determines that there is a
significant issue, and to the extent the
transaction is not described in another
no-rule section, the Service will rule on the
entire transaction, and not just the significant issue. Notwithstanding the preceding
paragraph, the Service will rule on the
application of § 351 to a controlled corporation when the transaction is undertaken
prior to the distribution of the stock of
the controlled corporation in a transaction
qualifying under § 355.
SIGNIFICANT ISSUE: A significant
issue is an issue of law that meets the three
following tests: (1) the issue is not clearly
and adequately addressed by a statute, regulation, decision of a court, tax treaty, revenue ruling, revenue procedure, notice, or
other authority published in the Internal
Revenue Bulletin; (2) the resolution of the
issue is not essentially free from doubt; and
(3) the issue is legally significant and germane to determining the major tax consequences of the transaction. An issue of
law will be considered not clearly and adequately addressed by the authorities above,
and its resolution will not be essentially
free from doubt when, because of concern
over a legal issue (as opposed to a factual
issue), taxpayer’s counsel is unable to render an unqualified opinion on what the tax
consequences of the transaction will be.
OBTAINING A RULING: To obtain a
ruling on a transaction involving a significant issue, the taxpayer must in its ruling
request explain the significance of the issue, set forth the authorities most closely
related to the issue, and explain why the
issue is not resolved by these authorities.
(39) Section 351.—See section
3.01(38), above.
(40) Section 358.—Basis to Distributees.—The acceptability of an estimation
procedure or the acceptability of a specific
sampling procedure to determine the basis of stock acquired by an acquiring corporation in a reorganization described in
§ 368(a)(1)(B).
(41) Section 368.—See section
3.01(38), above.
(42) Section 409A.—Inclusion in
Gross Income of Deferred Compensation
Under Nonqualified Deferred Compensation Plans.—The income tax consequences of establishing, operating, or

110

participating in a nonqualified deferred
compensation plan within the meaning of
§ 1.409A–1(a); whether a plan is described
in § 1.409A–1(a)(3)(iv) or (v); whether
a plan is a bona fide vacation leave, sick
leave or compensatory time plan described
in § 1.409A–1(a)(5); and whether a plan
provides for the deferral of compensation
under § 1.409A–1(b).
(43) Section 424.—Substitution or
Assumption of Incentive Stock Options.—Whether the substitution of a new
Incentive Stock Option (“ISO”) for an old
ISO, or the assumption of an old ISO, by
an employer by reason of a corporate transaction constitutes a modification which
results in the issuance of a new option by
reason of failing to satisfy the spread test
requirement of § 424(a)(1) or the ratio test
requirement of § 1.425–1(a)(4). The Service will continue to rule on the issue of
whether the new ISO or the assumption of
the old ISO gives the employee additional
benefits not present under the old option
within the meaning of § 424(a)(2).
(44) Section 451.—See section 3.01(3),
above.
(45) Section 451.—General Rule for
Taxable Year of Inclusion.—The tax consequences of a nonqualified unfunded
deferred-compensation arrangement with
respect to a controlling shareholder-employee eligible to participate in the arrangement.
(46) Section 451.—General Rule for
Taxable Year of Inclusion.—The tax consequences of nonqualified unfunded deferred-compensation arrangements where
the arrangements fail to meet the requirements of Rev. Proc. 92–65, 1992–2 C.B.
428; and Rev. Proc. 71–19, 1971–1 C.B.
698.
(47) Sections 451 and 457.—General Rule for Taxable Year of Inclusion;
Deferred Compensation Plans of State
and Local Governments and Tax-Exempt
Organizations.—The tax consequences
to unidentified independent contractors
in nonqualified unfunded deferred-compensation plans. This applies to plans
established under § 451 by employers in
the private sector and to plans of State and
local governments and tax-exempt organizations under § 457. However, a ruling
with respect to a specific independent contractor’s participation in such a plan may
be issued.

2009–1 I.R.B.

(48) Section 453.—See section
3.01(37), above.
(49) Section 457.—See section
3.01(47), above.
(50) Section 641.—Imposition of
Tax.—Whether the period of administration or settlement of an estate or a trust
(other than a trust described in § 664) is
reasonable or unduly prolonged.
(51) Section 642(c).—Deduction for
Amounts Paid or Permanently Set Aside
for a Charitable Purpose.—Allowance of
an unlimited deduction for amounts set
aside by a trust or estate for charitable
purposes when there is a possibility that
the corpus of the trust or estate may be
invaded.
(52) Section 664.—Charitable Remainder Trusts.—Whether the settlement of a
charitable remainder trust upon the termination of the noncharitable interest is made
within a reasonable period of time.
(53) Section 671.—Trust Income, Deductions, and Credits Attributable to
Grantors and Others as Substantial Owners.—Whether the grantor will be considered the owner of any portion of a trust
when (i) substantially all of the trust corpus consists or will consist of insurance
policies on the life of the grantor or the
grantor’s spouse, (ii) the trustee or any
other person has a power to apply the
trust’s income or corpus to the payment of
premiums on policies of insurance on the
life of the grantor or the grantor’s spouse,
(iii) the trustee or any other person has
a power to use the trust’s assets to make
loans to the grantor’s estate or to purchase
assets from the grantor’s estate, and (iv)
there is a right or power in any person that
would cause the grantor to be treated as
the owner of all or a portion of the trust
under §§ 673 to 677.
(54) Section 704(e).—Family Partnerships.—Matters relating to the validity of
a family partnership when capital is not a
material income producing factor.
(55) Section 761.—See section 3.01(8),
above.
(56) Section 856.—Definition of Real
Estate Investment Trust.—Whether a corporation whose stock is “paired” with or
“stapled” to stock of another corporation
will qualify as a real estate investment trust
under § 856, if the activities of the corporations are integrated.
(57) Section 1001.—See section
3.01(3), above.

2009–1 I.R.B.

(58) Section 1036.—See section
3.01(38), above.
(59) Section 1221.—Capital Asset Defined.—Whether specialty stock allocated
to an investment account by a registered
specialist on a national securities exchange
is a capital asset.
(60) Section 1239.—See section
3.01(37), above.
(61) Section 1551.—Disallowance of
the Benefits of the Graduated Corporate Rates and Accumulated Earnings
Credit.—Whether a transfer is within
§ 1551.
(62) Section 2031.—Definition of
Gross Estate.—Actuarial factors for valuing interests in the prospective gross estate
of a living person.
(63) Section 2055.—Transfers for
Public,
Charitable,
and Religious
Uses.—Whether a charitable contribution
deduction under § 2055 is allowed for the
transfer of an interest in a limited partnership or a limited liability company taxed as
a partnership to an organization described
in § 2055(a).
(64) Section 2512.—Valuation of
Gifts.—Actuarial factors for valuing
prospective or hypothetical gifts of a
donor.
(65) Section 2522.—Charitable and
Similar Gifts.—Whether a charitable contribution deduction under § 2522 is allowable for a transfer of an interest in a limited
partnership or a limited liability company
taxed as a partnership to an organization
described in § 2522(a).
(66) Section 2601.—Tax Imposed.
Exceptions: Retention of Trust’s Generation-Skipping Transfer Tax Exempt
Status in the Case of Modifications,
Etc.—Whether a trust exempt from generation-skipping transfer (GST) tax under
§ 26.2601–1(b)(1), (2), or (3) of the Generation-Skipping Transfer Tax Regulations
will retain its GST exempt status when
there is a modification of a trust, change in
the administration of a trust, or a distribution from a trust in a factual scenario that
is similar to a factual scenario set forth in
one or more of the examples contained in
§ 26.2601–1(b)(4)(i)(E).
(67) Sections 3121, 3306, and
3401.—Definitions.—For purposes of determining prospective employment status,
whether an individual will be an employee
or an independent contractor. A ruling

111

with regard to prior employment status
may be issued.
(68) Sections 3121, 3306, and
3401.—Definitions;
Employment
Taxes.—Who is the employer of an “employee-owner” as defined in § 269A(b)(2).
(69) Sections 3121, 3306, and
3401.—Definitions.—For purposes of
determining employment classification
pursuant to the filing of Form SS–8, Determination of Worker Status for Purposes
of Federal Employment Taxes and Income
Tax Withholding, whether a worker is a
bona fide partner and, therefore, not an
employee of the business is at issue.
(70) Section 4980B.—Failure to Satisfy
Continuation Coverage Requirements of
Group Health Plans.—Whether an action
is “gross misconduct” within the meaning
of § 4980B(f)(3)(B). (See section 3.05 of
Rev. Proc. 87–28, 1987–1 C.B. 770, 771.)
(71) Section 6166.—Estates consisting
largely of an interest in a closely held business.—Requests involving section 6166
where there is no decedent.
(72) Section 6901.—Transferee Liability.—Whether a taxpayer is liable for tax
as a transferee.
(73) Section 7701.—Definitions.—The
classification of an instrument that has
certain voting and liquidation rights in an
issuing corporation but whose dividend
rights are determined by reference to the
earnings of a segregated portion of the
issuing corporation’s assets, including assets held by a subsidiary.
(74) Section 7701.—See section
3.01(8), above.
(75) Section 7704.—Certain Publicly
Traded Partnerships Treated as Corporations.—Whether interests in a partnership
that are not traded on an established securities market (within the meaning of
§ 7704(b) and § 1.7704–1(b)) are readily tradable on a secondary market or
the substantial equivalent thereof under
§ 1.7704–1(c)(1) of the Procedure and
Administration Regulations.
.02 General Areas.
(1) The results of transactions that lack
a bona fide business purpose or have as
their principal purpose the reduction of
Federal taxes.
(2) A matter upon which a court decision adverse to the Government has been
handed down and the question of following the decision or litigating further has not
yet been resolved.

Sec. 3
January 5, 2009

(3) A matter involving alternate plans
of proposed transactions or involving hypothetical situations.
(4) Whether under Subtitle F (Procedure and Administration) reasonable
cause, due diligence, good faith, clear
and convincing evidence, or other similar
terms that require a factual determination
exist.
(5) Whether a proposed transaction
would subject the taxpayer to a criminal
penalty.
(6) A request that does not comply with
the provisions of Rev. Proc. 2009–1 (this
Bulletin).
(7) Whether, under the common law
rules applicable in determining the employer-employee relationship, a professional staffing corporation (loan-out corporation) or the subscriber is the employer
of individuals, if:
(i) the loan-out corporation hires employees of the subscriber and assigns the
employees back to the subscriber, or
(ii) the loan-out corporation assigns individuals to subscribers for more than a
temporary period (1 year or longer).
(8) Questions that the Service determines, in its discretion, should not be answered in the general interests of tax administration.
(9) Any frivolous issue, as that term
is defined in section 6.10 of Rev. Proc.
2009–1 (this Bulletin).
SECTION 4. AREAS IN WHICH
RULINGS OR DETERMINATION
LETTERS WILL NOT ORDINARILY
BE ISSUED
.01 Specific questions and problems.
(1) Sections 38, 39, 46, and 48.—General Business Credit; Carryback and Carryforward of Unused Credits; Amount
of Credit; Energy Credit; Reforestation
Credit.—Application of these sections
where the formal ownership of property is
in a party other than the taxpayer, except
when title is held merely as security.
(2) Section 61.—Gross Income Defined.—Determination as to who is the
true owner of property in cases involving
the sale of securities, or participation interests therein, where the purchaser has
the contractual right to cause the securities, or participation interests therein, to
be purchased by either the seller or a third
party.

Sec. 3
January 5, 2009

(3) Sections 61 and 163.—Gross Income Defined; Interest.—Determinations
as to who is the true owner of property
or the true borrower of money in cases in
which the formal ownership of the property, or the liability for the indebtedness, is
in another party.
(4) Sections 83 and 451.—Property
Transferred in Connection with Performance of Services; General Rule for
Taxable Year of Inclusion.—When compensation is realized by a person who,
in connection with the performance of
services, is granted a nonstatutory option
without a readily ascertainable fair market
value to purchase stock at a price that is
less than the fair market value of the stock
on the date the option is granted.
(5) Section 103.—Interest on State and
Local Bonds.—Whether the interest on
State or local bonds will be excludible
from gross income under § 103(a), if the
proceeds of issues of bonds (other than
advance refunding issues) are placed in
escrow or otherwise not expended for a
governmental purpose for an extended
period of time even though the proceeds
are invested at a yield that will not exceed
the yield on the State or local bonds prior
to their expenditure.
(6) Section 103.—Interest on State
and Local Bonds.—Whether a State or
local governmental obligation that does
not meet the criteria of section 5 of Rev.
Proc. 89–5, 1989–1 C.B. 774, is an “arbitrage bond” within the meaning of former
§ 103(c)(2) solely by reason of the investment of the bond proceeds in acquired nonpurpose obligations at a materially higher
yield more than 3 years after issuance of
the bonds or 5 years after issuance of the
bonds in the case of construction issues described in former § 1.103–13(a)(2)(ii)(E)
or § 1.148–2(e)(2)(ii).
(7) Section 141.—Private Activity
Bond; Qualified Bond.—Whether State or
local bonds will meet the “private business use test” and the “private security
or payment test” under § 141(b)(1) and
(2) in situations in which the proceeds
are used to finance certain output facilities and, pursuant to a contract to take,
or take or pay for, a nongovernmental
person purchases 30 percent or more of
the actual output of the facility but 10
percent or less of the: (i) subparagraph
(5) output of the facility as defined in

112

§ 1.103–7(b)(5)(ii)(b) (issued under former § 103(b)), or (ii) available output of
the facility as defined in § 1.141–7(b)(1).
In similar situations, the Service will not
ordinarily issue rulings or determination
letters concerning questions arising under
paragraphs (3), (4), and (5) of § 141(b).
(8) Sections 142 and 144.—Exempt
Facility Bond; Qualified Small Issue
Bond.—Whether an issue of private activity bonds meets the requirements of § 142
or § 144(a), if the sum of—
(i) the portion of the proceeds used to
finance a facility in which an owner (or
related person) or a lessee (or a related
person) is a user of the facility both after
the bonds are issued and at any time
before the bonds were issued, and
(ii) the portion used to pay issuance
costs and non-qualified costs equals
more than 5 percent of the net proceeds,
as defined in § 150(a)(3).
(9)
Section
148.—Arbitrage.—Whether amounts received as
proceeds from the sale of municipal bond
financed property and pledged to the
payment of debt service or pledged as
collateral for the municipal bond issue are
sinking fund proceeds within the meaning
of former § 1.103–13(g) (issued under
former § 103(c)) or replaced proceeds
described in § 148(a)(2) (or former
§ 103(c)(2)(B)).
(10) Sections 162 and 262.—Trade or
Business Expenses; Personal, Living, and
Family Expenses.—Whether expenses are
nondeductible commuting expenses, except for situations governed by Rev. Rul.
99–7, 1999–1 C.B. 361.
(11) Section 163.—See section 4.01(3),
above.
(12) Section 167.—Depreciation.
(i) Useful lives of assets.
(ii) Depreciation rates.
(iii) Salvage value of assets.
(13) Sections 167 and 168.—Depreciation; Accelerated Cost Recovery System.—Application of those sections where
the formal ownership of property is in a
party other than the taxpayer except when
title is held merely as security.
(14) Section 170.—Charitable, Etc.,
Contributions and Gifts.—Whether a
transfer to a pooled income fund described in § 642(c)(5) qualifies for a

2009–1 I.R.B.

charitable contribution deduction under
§ 170(f)(2)(A).
(15) Section 170(c).—Charitable, Etc.,
Contributions and Gifts.—Whether a taxpayer who transfers property to a charitable organization and thereafter leases back
all or a portion of the transferred property
may deduct the fair market value of the
property transferred and leased back as a
charitable contribution.
(16) Section 170.—Charitable, Etc.,
Contributions and Gifts.—Whether a
transfer to a charitable remainder trust
described in § 664 that provides for annuity or unitrust payments for one or two
measuring lives qualifies for a charitable
deduction under § 170(f)(2)(A).
(17) Section 216.—Deduction of Taxes,
Interest, and Business Depreciation by
Cooperative Housing Corporation Tenant-Stockholder.—If a cooperative housing corporation (CHC), as defined in
§ 216(b)(1), transfers an interest in real
property to a corporation (not a CHC) in
exchange for stock or securities of the
transferee corporation, which engages in
commercial activity with respect to the
real property interest transferred, whether
(i) the income of the transferee corporation derived from the commercial activity,
and (ii) any cash or property (attributable
to the real property interest transferred)
distributed by the transferee corporation
to the CHC will be considered as gross
income of the CHC for the purpose of
determining whether 80 percent or more
of the gross income of the CHC is derived
from tenant-stockholders within the meaning of § 216(b)(1)(D).
(18) Section 262.—See section
4.01(10), above.
(19) Section 265(a)(2).—Expenses
and Interest Relating to Tax-Exempt Income.—Whether indebtedness is incurred
or continued to purchase or carry obligations the interest on which is wholly
exempt from the taxes imposed by subtitle
A.
(20) Section 302.—Distributions in Redemption of Stock.—The tax effect of the
redemption of stock for notes, when the
payments on the notes are to be made over
a period in excess of 15 years from the date
of issuance of such notes.
(21) Section 302(b)(4) and (e).—Redemption from Noncorporate Shareholder
in Partial Liquidation; Partial Liquidation
Defined.—Whether a distribution will

2009–1 I.R.B.

qualify as a distribution in partial liquidation under § 302(b)(4) and (e)(1)(A),
unless it results in a 20 percent or greater
reduction in (i) gross revenue, (ii) net fair
market value of assets, and (iii) employees. (Partial liquidations that qualify as
§ 302(e)(2) business terminations are not
subject to this provision.)
(22) Sections 302(b)(4) and (e), 331,
332, and 346(a).—Effects on Recipients
of Distributions in Corporate Liquidations.—The tax effect of the liquidation
of a corporation preceded or followed by
the transfer of all or a part of the business
assets to another corporation (1) that is
the alter ego of the liquidating corporation, and (2) which, directly or indirectly,
is owned more than 20 percent in value
by persons holding directly or indirectly
more than 20 percent in value of the liquidating corporation’s stock. For purposes
of this section, ownership will be determined by application of the constructive
ownership rules of § 318(a) as modified
by § 304(c)(3).
(23) Section 306.—Dispositions of Certain Stock.—Whether the distribution or
disposition or redemption of “section 306
stock” in a closely held corporation is in
pursuance of a plan having as one of its
principal purposes the avoidance of Federal income taxes within the meaning of
§ 306(b)(4).
(24) Sections 331 and 332.—See section 4.01(22), above.
(25) Sections 331 and 346(a).—Gain or
Loss to Shareholders in Corporate Liquidations.—The tax effect of the liquidation
of a corporation by a series of distributions,
when the distributions in liquidation are to
be made over a period in excess of 3 years
from the adoption of the plan of liquidation.
(26) Section 346(a).—See sections
4.01(22) and (25), above.
(27) Section 351.—Transfer to
Corporation Controlled by Transferor.—Whether § 351 applies to the
transfer of an interest in real property by
a cooperative housing corporation (as described in § 216(b)(1)) to a corporation
in exchange for stock or securities of the
transferee corporation, if the transferee engages in commercial activity with respect
to the real property interest transferred.
(28) Section 355.—Distribution of
Stock and Securities of a Controlled Corporation.—Whether the active business

113

requirement of § 355(b) is met when,
within the 5-year period described in
§ 355(b)(2)(B), a distributing corporation
acquired control of a controlled corporation as a result of the distributing corporation transferring cash or other liquid or
inactive assets to the controlled corporation in a transaction in which gain or loss
was not recognized as a result of the transfer meeting the requirements of § 351(a)
or § 368(a)(1)(D).
(29) Section 441(i).—Taxable Year of
Personal Service Corporations.—Whether
the principal activity of the taxpayer during the testing period for the taxable year
is the performance of personal services
within the meaning of § 1.441–3(c)(1)(iii).
(30) Section 448(d)(2)(A).—Limitation on Use of Cash Method of Accounting; Qualified Personal Service Corporation.—Whether 95 percent or more of the
time spent by employees of the corporation, serving in their capacity as such, is
devoted to the performance of services
within the meaning of § 1.448–1T(e)(4)(i).
(31) Section 451.—General Rule for
Taxable Year of Inclusion.—The tax consequences of a nonqualified deferred
compensation arrangement using a grantor
trust where the trust fails to meet the requirements of Rev. Proc. 92–64, 1992–2
C.B. 422.
(32) Section 451.—See section 4.01(4),
above.
(33) Section 451.—General Rule for
Taxable Year of Inclusion.—The income
tax consequences as a result of being a beneficiary of a trust that an Indian tribe (as
defined in 25 U.S.C. § 2703(5)) establishes
to receive and invest per capita payments
for its members who are minors or legal incompetents under the Indian Gaming Regulatory Act (25 U.S.C. §§ 2701–2721), if
the trust meets the requirements of section
5.02 of Rev. Proc. 2003–14, 2003–1 C.B.
319.
(34) Section 584.—Common Trust
Funds.—Whether a common trust fund
plan meets the requirements of § 584. (For
§ 584 plan drafting guidance, see Rev.
Proc. 92–51, 1992–1 C.B. 988.)
(35) Section 642.—Special Rules for
Credits and Deductions; Pooled Income
Fund.—Whether a pooled income fund
satisfies the requirements described in
§ 642(c)(5).
(36) Section 664.—Charitable Remainder Trusts.—Whether a charitable remain-

Sec. 4
January 5, 2009

der trust that provides for annuity or unitrust payments for one or two measuring
lives or for annuity or unitrust payments
for a term of years satisfies the requirements described in § 664.
(37) Section 664.—Charitable Remainder Trusts.—Whether a trust that
will calculate the unitrust amount under
§ 664(d)(3) qualifies as a § 664 charitable
remainder trust when a grantor, a trustee, a
beneficiary, or a person related or subordinate to a grantor, a trustee, or a beneficiary
can control the timing of the trust’s receipt
of trust income from a partnership or a deferred annuity contract to take advantage
of the difference between trust income
under § 643(b) and income for Federal
income tax purposes for the benefit of the
unitrust recipient.
(38) Sections 671 to 679.—Grantors
and Others Treated as Substantial Owners.—In a nonqualified, unfunded deferred
compensation arrangement described in
Rev. Proc. 92–64, the tax consequences
of the use of a trust, other than the model
trust described in that revenue procedure.
(39) Sections 671 to 679.—Grantors
and Others Treated as Substantial Owners.—Whether an Indian tribe (as defined
in 25 U.S.C. § 2703(5)) that establishes
a trust to receive and invest per capita
payments for its members who are minors or legal incompetents under the Indian Gaming Regulatory Act (25 U.S.C.
§§ 2701–2721) is the grantor and owner of
the trust, if the trust meets the requirements
of section 5.02 of Rev. Proc. 2003–14,
2003–1 C.B. 319.
(40) Section 1001.—Determination of
Amount of and Recognition of Gain or
Loss.—Whether the termination of a charitable remainder trust before the end of the
trust term as defined in the trust’s governing instrument, in a transaction in which
the trust beneficiaries receive their actuarial shares of the value of the trust assets, is
treated as a sale or other disposition by the
beneficiaries of their interests in the trust.
(41) Section 1221.—Capital Asset Defined.—Whether the termination of a charitable remainder trust before the end of the
trust term as defined in the trust’s governing instrument, in a transaction in which
the trust beneficiaries receive their actuarial shares of the value of the trust assets,
is treated as a sale or exchange of a capital
asset by the beneficiaries.

Sec. 4
January 5, 2009

(42) Section 1362.—Election; Revocation; Termination.—All situations
in which the Service has provided an
automatic approval procedure or administrative procedure for an S corporation
to obtain relief for late S corporation,
qualified subchapter S subsidiary, qualified subchapter S trust, or electing small
business trust elections. See Rev. Proc.
2003–43, 2003–1 C.B. 998; Rev. Proc.
2004–48, 2004–2 C.B. 172; Rev. Proc.
2004–49, 2004–2 C.B. 210; and Rev.
Proc. 2007–62, 2007–41 I.R.B. 786. (For
instructions on how to seek this relief, see
the preceding revenue procedures.)
(43)
Section
1502.—Regulations.—Whether a parent cooperative
housing corporation (as defined in
§ 216(b)(1)) will be permitted to file a
consolidated income tax return with its
transferee subsidiary, if the transferee engages in commercial activity with respect
to the real property interest transferred to
it by the parent.
(44) Section 2055.—Transfers for
Public,
Charitable,
and Religious
Uses.—Whether a transfer to a pooled
income fund described in § 642(c)(5)
qualifies for a charitable deduction under
§ 2055(e)(2)(A).
(45) Section 2055.—Transfers for
Public,
Charitable,
and Religious
Uses.—Whether a transfer to a charitable
remainder trust described in § 664 that
provides for annuity or unitrust payments
for one or two measuring lives or a term of
years qualifies for a charitable deduction
under § 2055(e)(2)(A).
(46)
Section
2503.—Taxable
Gifts.—Whether the transfer of property
to a trust will be a gift of a present interest
in property when (i) the trust corpus
consists or will consist substantially
of insurance policies on the life of the
grantor or the grantor’s spouse, (ii) the
trustee or any other person has a power
to apply the trust’s income or corpus to
the payment of premiums on policies of
insurance on the life of the grantor or the
grantor’s spouse, (iii) the trustee or any
other person has a power to use the trust’s
assets to make loans to the grantor’s estate
or to purchase assets from the grantor’s
estate, (iv) the trust beneficiaries have
the power to withdraw, on demand, any
additional transfers made to the trust, and
(v) there is a right or power in any person
that would cause the grantor to be treated

114

as the owner of all or a portion of the trust
under §§ 673 to 677.
(47) Section 2514.—Powers of Appointment.—If the beneficiaries of a trust
permit a power of withdrawal to lapse,
whether § 2514(e) will be applicable to
each beneficiary in regard to the power
when (i) the trust corpus consists or will
consist substantially of insurance policies
on the life of the grantor or the grantor’s
spouse, (ii) the trustee or any other person
has a power to apply the trust’s income
or corpus to the payment of premiums
on policies of insurance on the life of the
grantor or the grantor’s spouse, (iii) the
trustee or any other person has a power
to use the trust’s assets to make loans to
the grantor’s estate or to purchase assets
from the grantor’s estate, (iv) the trust
beneficiaries have the power to withdraw,
on demand, any additional transfers made
to the trust, and (v) there is a right or
power in any person that would cause the
grantor to be treated as the owner of all or
a portion of the trust under §§ 673 to 677.
(48) Section 2522.—Charitable and
Similar Gifts.—Whether a transfer to
a pooled income fund described in
§ 642(c)(5) qualifies for a charitable deduction under § 2522(c)(2)(A).
(49) Section 2522.—Charitable and
Similar Gifts.—Whether a transfer to a
charitable remainder trust described in
§ 664 that provides for annuity or unitrust
payments for one or two measuring lives
or a term of years qualifies for a charitable
deduction under § 2522(c)(2)(A).
(50)
Section
2601.—Tax
Imposed.—Whether a trust that is excepted
from the application of the generation-skipping transfer tax because it was
irrevocable on September 25, 1985, will
lose its excepted status if the situs of the
trust is changed from the United States to
a situs outside of the United States.
(51) Section 2702.—Special Valuation
Rules in Case of Transfers of Interests
in Trusts.—Whether annuity interests are
qualified annuity interests under § 2702 if
the amount of the annuity payable annually is more than 50 percent of the initial
net fair market value of the property transferred to the trust, or if the value of the
remainder interest is less than 10 percent
of the initial net fair market value of the
property transferred to the trust. For purposes of the 10 percent test, the value of
the remainder interest is the present value

2009–1 I.R.B.

determined under § 7520 of the right to
receive the trust corpus at the expiration of
the term of the trust. The possibility that
the grantor may die prior to the expiration
of the specified term is not taken into account, nor is the value of any reversion
retained by the grantor or the grantor’s
estate.
(52) Section 2702.—Special Valuation
Rules in Case of Transfers of Interests
in Trusts.—Whether a trust with one
term holder satisfies the requirements of
§ 2702(a)(3)(A) and § 25.2702–5(c) to be
a qualified personal residence trust.
(53) Section 3121.—Definitions.—Determinations as to which of two entities,
under common law rules applicable in
determining the employer-employee relationship, is the employer, when one entity
is treating the worker as an employee.
.02 General areas.
(1) Any matter in which the determination requested is primarily one of fact, e.g.,
market value of property, or whether an interest in a corporation is to be treated as
stock or indebtedness.
(2) Situations where the requested ruling deals with only part of an integrated
transaction. Generally, a letter ruling will
not be issued on only part of an integrated
transaction. If, however, a part of a transaction falls under a no-rule area, a letter
ruling on other parts of the transaction may
be issued. Before preparing the letter ruling request, a taxpayer should call the Office of the Associate Chief Counsel having
jurisdiction for the matters on which the
taxpayer is seeking a letter ruling to discuss whether a letter ruling will be issued
on part of the transaction. To determine
which division has jurisdiction over a particular issue see section 3 of Rev. Proc.
2009–1 (this Bulletin). For a list of telephone numbers for the different divisions,
see section 10.07 of Rev. Proc. 2009–1.
(3) Situations where two or more items
or sub-methods of accounting are interrelated. If two or more items or sub-methods
of accounting are interrelated, ordinarily a
letter ruling will not be issued on a change
in accounting method involving only one
of the items or sub-methods.
(4) The tax effect of any transaction to
be consummated at some indefinite future
time.
(5) Any matter dealing with the question of whether property is held primarily

2009–1 I.R.B.

for sale to customers in the ordinary course
of a trade or business.
(6) The tax effect of a transaction if any
part of the transaction is involved in litigation among the parties affected by the
transaction, except for transactions involving bankruptcy reorganizations.
(7)(a) Situations where the taxpayer or a
related party is domiciled or organized in a
foreign jurisdiction with which the United
States does not have an effective mechanism for obtaining tax information with respect to civil tax examinations and criminal tax investigations, which would preclude the Service from obtaining information located in such jurisdiction that is relevant to the analysis or examination of the
tax issues involved in the ruling request.
(b) The provisions of subsection (a)
above shall not apply if the taxpayer or
affected related party (i) consents to the
disclosure of all relevant information requested by the Service in processing the
ruling request or in the course of an examination in order to verify the accuracy of
the representations made and to otherwise
analyze or examine the tax issues involved
in the ruling request, and (ii) waives all
claims to protection of bank or commercial secrecy laws in the foreign jurisdiction
with respect to the information requested
by the Service. In the event the taxpayer’s
or related party’s consent to disclose relevant information or to waive protection of
bank or commercial secrecy is determined
by the Service to be ineffective or of no
force and effect, then the Service may
retroactively rescind any ruling rendered
in reliance on such consent.
(8) A matter involving the Federal tax
consequences of any proposed Federal,
State, local, municipal, or foreign legislation. The Service may provide general
information in response to an inquiry.
However, the Office of Division Counsel/Associate Chief Counsel (Tax Exempt
and Government Entities) may issue letter
rulings regarding the effect of proposed
State, local, or municipal legislation upon
an eligible deferred compensation plan
under § 457(b) provided that the letter ruling request relating to the plan complies
with the other requirements of Rev. Proc.
2009–1.
(9) Except as otherwise provided in
this revenue procedure (e.g., under section
3.01(38), where the Service already is

115

ruling on a significant issue in the same
transaction), a letter ruling will not ordinarily be issued with respect to an issue
that is clearly and adequately addressed by
statute, regulations, decisions of a court,
revenue rulings, revenue procedures, notices, or other authority published in the
Internal Revenue Bulletin. However, the
Service may in its discretion determine
to issue a ruling on such an issue if the
Service otherwise is issuing a ruling on
another issue arising in the same transaction.
(10) Whether an amount received (in
periodic payments or as a lump sum) in
connection with a legal action or a settlement of a legal action is properly allocated (including an allocation of all payments to one category) to recovery of capital, compensatory damages, punitive damages, dividends, interest, back pay, etc., for
Federal tax purposes.
SECTION 5. AREAS UNDER
STUDY IN WHICH RULINGS OR
DETERMINATION LETTERS WILL
NOT BE ISSUED UNTIL THE
SERVICE RESOLVES THE ISSUE
THROUGH PUBLICATION OF A
REVENUE RULING, REVENUE
PROCEDURE, REGULATIONS OR
OTHERWISE
.01 Section 62(c).—Reimbursement
Arrangements.—Whether amounts related
to a salary reduction and paid under a
purported reimbursement or other expense
allowance arrangement will be treated as
paid under an “accountable plan” in accordance with § 1.62–2(c)(2).
.02 Section 72.—Annuities; Certain
Proceeds of Endowment and Life Insurance Contracts.—The income tax consequences of a transaction (sometimes
referred to as a “partial annuitization”) in
which the holder of an annuity contract
irrevocably elects to apply only a portion
of the contract to purchase a stream of annuity payments under the contract, leaving
the remainder of the contract to accumulate income on a tax-deferred basis.
.03 Sections 101 and 7702.—Certain
Death Benefits; Life Insurance Contract
Defined.—Whether amounts received under an arrangement that is not regulated as
an insurance company may be treated as
received under a “life insurance contract”
within the meaning of §§ 101(a) and 7702.

Sec. 5
January 5, 2009

.04 Section 148.—Arbitrage.—Permission to use a single yield for two or
more issues of qualified mortgage bonds
or qualified student loan bonds under
§ 1.148–4(a).
.05 Sections 162 and 1502.—Trade
or Business Expenses; Consolidated Returns.—Treatment of manufacturer incentive payments under the intercompany
transaction regulations of § 1.1502–13.
See T.D. 9261, 2006–1 C.B. 919.
.06 Sections 302 and 304.—Certain
Redemptions.—Treatment of basis in a
§§ 302/304 redemption. See Announcement 2006–30, 2006–1 C.B. 879.
.07
Sections
351,
358
and
362(a).—Transfers
to
Corporation
Controlled by Transferors; Basis to
Distributees; Basis to Corporations.—The
issues described as being under study in
Rev. Rul. 2006–2, 2006–1 C.B. 261.
.08 Section 451.—General Rule for
Taxable Year of Inclusion.—The income
tax consequences as a result of being a
beneficiary of a trust that an Indian tribe
(as defined in 25 U.S.C. § 2703(5)) establishes to receive and invest per capita
payments for its members (regardless of
whether they are minors or legal incompetents) under the Indian Gaming Regulatory
Act (25 U.S.C. §§ 2701–2721) if the trust
does not meet the requirements of section
5.02 of Rev. Proc. 2003–14, 2003–1 C.B.
319.
.09 Section 664.—Charitable Remainder Trusts.—Whether the termination of a
charitable remainder trust before the end
of the trust term as defined in the trust’s
governing instrument, in a transaction in
which the trust beneficiaries receive their
actuarial shares of the value of the trust assets, causes the trust to have ceased to qualify as a charitable remainder trust within
the meaning of § 664.
.10 Sections 671 to 679.—Grantors
and Others Treated as Substantial Owners.—Whether an Indian tribe (as defined
in 25 U.S.C. § 2703(5)) that establishes
a trust to receive and invest per capita
payments for its members (regardless of
whether they are minors or legal incompetents) under the Indian Gaming Regulatory
Act (25 U.S.C. §§ 2701–2721) is the
grantor and owner of the trust if the trust
does not meet the requirements of section
5.02 of Rev. Proc. 2003–14, 2003–1 C.B.
319.

Sec. 5
January 5, 2009

.11 Section 1361.—Definition of a
Small Business Corporation.—Whether
a State law limited partnership electing
under § 301.7701–3 to be classified as an
association taxable as a corporation has
more than one class of stock for purposes
of § 1361(b)(1)(D). The Service will treat
any request for a ruling on whether a State
law limited partnership is eligible to elect
S corporation status as a request for a ruling on whether the partnership complies
with § 1361(b)(1)(D).
.12 Section 1502.—See section 5.05,
above.
.13 Section 2036.—Transfers with Retained Life Estate.—Whether the corpus of
a trust will be included in a grantor’s estate when the trustee of the trust is a private
trust company owned partially or entirely
by members of the grantor’s family.
.14 Section 2038.—Revocable Transfers.—Whether the corpus of a trust will
be included in a grantor’s estate when the
trustee of the trust is a private trust company owned partially or entirely by members of the grantor’s family.
.15 Section 2041.—Powers of Appointment.—Whether the corpus of a trust will
be included in an individual’s estate when
the trustee of the trust is a private trust
company owned partially or entirely by
members of the individual’s family.
.16 Section 6050P.—Returns Relating
to the Cancellation of Indebtedness by Certain Entities.—Whether amounts reduced
pursuant to the terms of a debt instrument
are reportable under § 6050P and the regulations.
.17 Section 7702.—See section 5.03,
above.
SECTION 6. AREAS COVERED
BY AUTOMATIC APPROVAL
PROCEDURES IN WHICH RULINGS
WILL NOT ORDINARILY BE
ISSUED
.01 Section 338.—Certain Stock
Purchases Treated as Asset Acquisitions.—All requests for an extension of
time under § 301.9100–3 within which to
make an election under § 338(g) or (h)(10)
where the Service has provided an administrative procedure to seek an extension.
See Rev. Proc. 2003–33, 2003–1 C.B.
803 (extension automatically granted to
certain persons required to file Form 8023

116

to make a valid section 338 election that
have not filed Form 8023 by its due date).
.02 Section 442.—Change of Annual
Accounting Period.—All requests for
change in annual accounting period where
the Service has provided an automatic
change procedure for obtaining a change
in annual accounting period. See Rev.
Proc. 2002–39, 2002–1 C.B. 1046 (general procedures for prior approval), as
clarified and modified by Notice 2002–72,
2002–2 C.B. 843, and modified by Rev.
Proc. 2003–34, 2003–1 C.B. 856, and
Rev. Proc. 2003–79, 2003–2 C.B. 1036;
Rev. Proc. 2002–37, 2002–1 C.B. 1030
(certain corporations), as clarified and
modified by Notice 2002–72 and modified by Rev. Proc. 2003–34; Rev. Proc.
2002–38, 2002–1 C.B. 1037 (partnership,
S corporation, or personal service corporation seeking a natural business year or an
ownership taxable year), as clarified and
modified by Notice 2002–72 and modified
by Rev. Proc. 2003–79; and Rev. Proc.
2003–62, 2003–2 C.B. 299 (individual
seeking a calendar year).
.03 Section 446.—General Rule for
Methods of Accounting.—Except as otherwise specifically provided in applicable
procedures published in the Internal Revenue Bulletin, all requests for change in
method of accounting where the Service
has provided an automatic change request procedure for obtaining a change in
method of accounting. See the automatic
change request procedures listed in section
9.22 of Rev. Proc. 2009–1 (this Bulletin).
.04 Section 461.—General Rule for
Taxable Year of Deduction.—All requests
for making or revoking an election under
§ 461 where the Service has provided an
administrative procedure for making or
revoking an election under § 461. See Rev.
Proc. 92–29, 1992–1 C.B. 748 (dealing
with the use of an alternative method for
including in basis the estimated cost of
certain common improvements in a real
estate development).
.05 Section 704(c).—Contributed Property.—Requests from Qualified Master
Feeder Structures, as described in section
4.02 of Rev. Proc. 2001–36, 2001–1 C.B.
1326, for permission to aggregate built-in
gains and losses from contributed qualified
financial assets for purposes of making
§ 704(c) and reverse § 704(c) allocations.
.06 Section 1362.—Election; Revocation; Termination.—All situations in

2009–1 I.R.B.

which an S corporation qualifies for automatic late S corporation relief under Rev.
Proc. 97–48, 1997–2 C.B. 521.
.07 Sections 1502, 1504, and
1552.—Regulations; Definitions; Earnings and Profits.—All requests for waivers
or consents on consolidated return issues
where the Service has provided an administrative procedure for obtaining waivers
or consents on consolidated return issues.
See Rev. Proc. 2002–32, 2002–1 C.B.
959, as modified by Rev. Proc. 2006–21,
2006–1 C.B. 1050 (certain corporations
seeking reconsolidation within the 5-year
period specified in § 1504(a)(3)(A)); Rev.
Proc. 90–39, 1990–2 C.B. 365, as modified by Rev. Proc. 2006–21, and as
clarified by Rev. Proc. 90–39A, 1990–2
C.B. 367 (certain affiliated groups of corporations seeking, for earnings and profits
determinations, to make an election or a
change in their method of allocating the
group’s consolidated Federal income tax
liability); and Rev. Proc. 89–56, 1989–2
C.B. 643, as modified by Rev. Proc.
2006–21 (certain affiliated groups of corporations seeking to file a consolidated
return where member(s) of the group use
a 52–53 week taxable year).
SECTION 7. EFFECT ON OTHER
REVENUE PROCEDURES
Rev. Proc. 2008–3, 2008–1 C.B. 110,
and Rev. Proc. 2008–61, 2008–42 I.R.B.
934, are superseded.

2009–1 I.R.B.

SECTION 8. EFFECTIVE DATE
This revenue procedure is effective January 5, 2009.
SECTION 9. PAPERWORK
REDUCTION ACT
The collections of information contained in this revenue procedure have
been reviewed and approved by the Office
of Management and Budget in accordance with the Paperwork Reduction Act
(44 U.S.C. § 3507) under control number
1545–1522.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
control number.
The collections of information in this
revenue procedure are in sections 2.03,
3.01(38), 3.02(1) and (3), and 4.02(7)(b).
This information is required to evaluate
whether the request for a letter ruling or
determination letter is not covered by the
provisions of this revenue procedure. The
collections of information are required to
obtain a letter ruling or determination letter. The likely respondents are business or
other for-profit institutions.
The estimated total annual reporting
and/or recording burden is 90 hours.
The estimated annual burden per respondent/recordkeeper varies from 15
minutes to 3 hours, depending on indi-

117

vidual circumstances, with an estimated
average burden of 2 hours. The estimated
number of respondents and/or recordkeepers is 45.
The estimated annual frequency of responses is on occasion.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by § 6103.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Daniel F. Heins of the Office
of the Associate Chief Counsel (Corporate). For further information about
this revenue procedure, please contact
Mr. Heins at (202) 622–7930 (not a
toll-free call), or call the division contacts
listed in section 10.07 of Rev. Proc.
2009–1 (this Bulletin). To determine
which division has jurisdiction over a
particular issue, see section 3 of Rev. Proc.
2009–1.

January 5, 2009