Revenue Procedure 2017-3

26 CFR 601.201: Rulings and determination letters.

Rev. Proc. 2017–3
TABLE OF CONTENTS
SECTION 1. PURPOSE AND NATURE OF CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .130
SECTION 2. BACKGROUND AND SCOPE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .130
SECTION 3. AREAS IN WHICH RULINGS WILL NOT BE ISSUED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .131
SECTION 4. AREAS IN WHICH RULINGS WILL NOT ORDINARILY BE ISSUED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .137
SECTION 5. AREAS UNDER STUDY IN WHICH RULINGS WILL NOT BE ISSUED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .142
SECTION 6. AREAS COVERED BY AUTOMATIC APPROVAL PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .144
SECTION 7. EFFECT ON OTHER REVENUE PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145
SECTION 8. EFFECTIVE DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145
SECTION 9. PAPERWORK REDUCTION ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145
DRAFTING INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145

SECTION 1. PURPOSE AND
NATURE OF CHANGES

Proc. 2017– 4 and Rev. Proc. 2017–5, this
Bulletin.

has been deleted pursuant to Rev. Proc.
2016 – 40, 2016 –32 I.R.B. 228.

.01 The purpose of this revenue procedure is to update Rev. Proc. 2016 –3,
2016 –1 I.R.B. 126, 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 Associate Chief
Counsel (Tax Exempt and Government
Entities) (TEGE) relating to issues on
which the Internal Revenue Service (the
“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. 2017–7, this
Bulletin. For a list of areas under the jurisdiction of the Commissioner, Tax Exempt and Government Entities Division
relating to issues, exempt organizations,
plans, or plan amendments on which the
Service will and will not issue letter rulings or determination letters, see Rev.

.02 Changes.

SECTION 2. BACKGROUND,
SCOPE OF APPLICATION, AND
NO-RULE ISSUES PART OF
INTEGRATED TRANSACTION

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(1) Section 3.01(24), regarding § 118,
has been added.
(2) Section 3.01(51), regarding the definition of “significant issue”, has been
modified.
(3) Section 3.01(54), regarding § 355,
has been modified to delete the provisions
relating to business purpose and device,
pursuant to Rev. Proc. 2016 – 45, 2016 –37
I.R.B. 344.
(4) Section 3.01(62), regarding
§ 419(e), has been added.
(5) Old section 4.01(30), regarding
RICs and REITs in certain § 355 transactions, has been deleted.
(6) Section 4.01(44), regarding § 851,
has been added to incorporate the provisions of Rev. Proc. 2016 –50, 2016 – 43
I.R.B. 522.
(7) Section 4.02(12), regarding Employee Plan Determinations, has been updated to reflect that Rev. Proc. 2007– 44,
2007–28 I.R.B. 54, has been clarified,
modified, and superseded by Rev. Proc.
2016 –37, 2016 –29 I.R.B. 136.
(8) Old section 5.01(1), regarding
§ 148, has been deleted.
(9) Old section 5.01(4), regarding acquisition of control in a § 355 transaction,

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.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 returns or reports that are required by the revenue laws. In employee
plans matters described in section 5.15 of
Rev. Proc. 2017–1, this Bulletin, the Associate Chief Counsel (TEGE) may issue
letter rulings after the filing of 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 or determination letters will not be issued. Section 4
sets forth those areas in which rulings or
determination letters will not ordinarily be
issued. “Not ordinarily” means that

Bulletin No. 2017–1

unique and compelling reasons must be
demonstrated to justify the issuance of a
ruling or determination letter. Section 5
sets forth those areas in which the Service
is temporarily not issuing rulings or determination letters because those matters are
under study. Finally, section 6 of this revenue procedure lists specific areas in
which the Service will not ordinarily issue
rulings because the Service has provided
automatic approval procedures for these
matters.
See Rev. Proc. 2017–1, 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 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 because the Service may decline to issue a
letter ruling or a determination letter when
appropriate in the interest of sound tax
administration (including due to resource
constraints) or on other grounds whenever
warranted by the facts or circumstances of
a particular case. 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.
If the Service determines that it is not
in the interest of sound tax administration
to issue a letter ruling or determination
letter due to resource constraints, it will
adopt a consistent approach with respect
to taxpayers that request a ruling on the
same issue. The Service will also consider
adding the issue to the no rule list at the
first opportunity. See section 6.02 of Rev.
Proc. 2017–1, this Bulletin.

Bulletin No. 2017–1

.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 Integrated
Transaction.
If it is impossible for the Service to
determine the tax consequences of an integrated transaction without knowing the
resolution of an issue on which the Service will not issue rulings or determination letters 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 determination letters on such integrated transactions due to
the relevance of the no-rule issue, despite
the taxpayer’s representation. See also
section 4.02(2) of this revenue procedure.
SECTION 3. AREAS IN WHICH
RULINGS OR DETERMINATION
LETTERS WILL NOT BE ISSUED
.01 Specific Questions and Problems.
(1) Section 42.—Low-Income Housing
Credit.—Whether under § 42(j)(4)(E) a
casualty loss has been restored by reconstruction or replacement within a reasonable period of time. The Service may issue
a determination letter in this case. See
section 12 of Rev. Proc. 2017–1, this Bulletin.
(2) Section 45.—Electricity Produced
from Certain Renewable Resources,
Etc.—The allocation by a partnership of
the § 45 credit, the validity of the partnership, or whether any taxpayer is a valid
partner in the partnership.
(3) Section 45.—Electricity Produced
from Certain Renewable Resources,
Etc.—Whether the taxpayer meets the requirements of § 45 or Notice 2010 –54,
2010 – 40 I.R.B. 403, for refined coal.
(4) Sections 45 and 48.—Electricity
Produced from Certain Renewable Resources, Etc.; Energy Credit.—The appli-

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cation of the beginning of construction
requirement under § 45(d) and § 48(a)(5).
(5) Section 47.—Rehabilitation Credit.—The allocation by a partnership of the
§ 47 rehabilitation credit, the validity of
the partnership, or whether any taxpayer is
a valid partner in the partnership.
(6) Section 48.—See section 3.01(4),
above.
(7) Section 61.—Gross Income Defined.—Whether amounts voluntarily deferred by a taxpayer under a deferredcompensation plan maintained by an
organization described in § 501 (other
than an eligible plan maintained by an
eligible employer pursuant to the provisions of § 457(b)) are currently includible
in the taxpayer’s gross income.
(8) 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.)
(9) Sections 61, 451, and 1001.—Gross
Income Defined; General Rule for Taxable Year of Inclusion; Determination of
Amount of 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.
(10) 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 Income Tax Regulations
had the group consisted of fewer than 10
employees.
(11) 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.

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(12) Section 83.—Property Transferred
in Connection with Performance of Services.—Which corporation is entitled to
the deduction under § 83(h) in cases in
which 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.
(13) 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 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.
(14) Sections 101, 761, and 7701.—
Certain Death Benefits; Terms Defined;
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 consist or will consist of life insurance policies on the lives of the members.
(15) Section 102.—Gifts and Inheritances.—Whether a transfer is a gift
within the meaning of § 102(a).
(16) Section 105(h).—Amount Paid to
Highly Compensated Individuals Under a
Discriminatory Self-Insured Medical Expense Reimbursement Plan.—Whether a
self-insured medical reimbursement plan
satisfies the requirements of § 105(h) for a
plan year.
(17) 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.

January 3, 2017

(18) 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).)
(19) 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 issue discount attributable to the
contract is treated for Federal tax purposes. (Also §§ 61, 163, 1275, 2501, and
7701.)
(20) 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.
(21) Section 115.—Income of States,
Municipalities, Etc.—Whether some, but
not all, income of an entity is from the
exercise of an essential government function in order to be excluded from gross
income under § 115.
(22) Section 117.—Qualified Scholarships.—Whether amounts paid to research
fellows and research associates are scholarships or fellowships excluded from
wages for FICA tax purposes.
(23) 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 described in
Rev. Proc. 76 – 47, 1976 –2 C.B. 670.
(24) Section 118.—Contributions to
the Capital of a Corporation.—Whether a
transfer of an intertie as defined in section
III. B. 2. of Notice 2016 –36, 2016 –25
I.R.B. 1029, meets all of the requirements
under the safe harbor provided by Notice
2016 –36.
(25) Section 119.—Meals or Lodging
Furnished for the Convenience of the Em-

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ployer.—Whether the value of meals or
lodging is excludible from gross income
by an employee who is a controlling
shareholder of the employer.
(26) Section 121.—Exclusion of Gain
from Sale of Principal Residence.—
Whether property qualifies as the taxpayer’s principal residence.
(27) Section 125.—Cafeteria Plans.—
Whether amounts used to provide groupterm 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.
(28) Section 162.—Trade or Business
Expenses.—Whether compensation is
reasonable in amount.
(29) 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 in
which the loan proceeds are used for commercial or business activities, or to 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.)
(30) 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).
(31) 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.
(32) Section 170.—Charitable, Etc.,
Contributions and Gifts.—Whether an organization is or continues to be described

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in § 170(b)(1)(A) (other than clause (v))
or § 170(c)(2) – (5), including, for example, whether changes in an organization’s
activities or operations will affect or jeopardize the organization’s status as an organization described in those sections.
The Associate Chief Counsel (TEGE) will
rule, however, on specific legal questions
related to §§ 170(b)(1)(A) or 170(c) that
are not otherwise described in this revenue procedure. See Rev. Proc. 2017–5,
this Bulletin, for the procedures for obtaining determination letters on public
charity status under § 170.
(33) Section 181.—Treatment of Certain Qualified Film and Television Productions.—The determination under
§ 1.181–1(a)(1) and (2) as to who is the
owner of a qualified film or television
production.
(34) 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.
(35) 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.
(36) Section 216.—Deduction of
Taxes, Interest, and Business Depreciation by Cooperative Housing Corporation
Tenant-Stockholder.—Whether a unit
constitutes an “apartment in a building”
under § 216(b)(1)(B).
(37) Section 264.—Certain Amounts
Paid in Connection with Insurance Contracts.—Whether § 264(d)(1) applies.
(38) Section 264(c)(1).—Contracts
Treated as Single Premium 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

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“substantial number” of future premiums
on such a contract.
(39) Sections 267, 304, 331, 332, 351,
and 1502.—Losses, Expenses, and Interest with Respect to Transactions Between
Related Taxpayers; Redemption Through
Use of Related Corporations; Gain or
Loss to Shareholders in Corporate Liquidations; Complete Liquidations of Subsidiaries; Transfer to Corporation Controlled
by Transferor; Regulations.—The treatment of transactions in which stock of a
corporation is transferred with a plan or
intention that the corporation be liquidated in a transaction intended to qualify
under § 331.
(40) Section 269.—Acquisitions Made
to Evade or Avoid Income Tax.—
Whether an acquisition is within the
meaning of § 269.
(41) 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.
(42) 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.
(43) 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.
(44) Section 302.—Distributions in
Redemption of Stock.—Whether § 302(b)
applies to a redemption of stock, if, after
the redemption, the distributing corpora-

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tion 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.
(45) Section 302.—Distributions in
Redemption of Stock.—Whether the acquisition 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.
(46) 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.
(47) Section 304.—See section
3.01(39), above.
(48) Section 312.—Effect on Earnings
and Profits.—The determination of the
amount of earnings and profits of a corporation.
(49) Sections 331, 453, and 1239.—
Gain or Loss to Shareholders in Corporate
Liquidations; Installment Method; Gain
from Sale of Depreciable Property Between Certain Related Taxpayers.—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

January 3, 2017

shareholders includes an installment obligation of the purchasing entity.
(50) Section 331.—See section
3.01(39), above.
(51) Sections 332, 351, 355, 368, and
1036.—Complete Liquidations of Subsidiaries; Transfer to Corporation Controlled
by Transferor; Distribution of Stock and
Securities of a Controlled Corporation;
Definitions Relating to Corporate Reorganizations; Stock for Stock of Same Corporation.—Whether a transaction qualifies under § 332, 351, 355, or 1036 for
nonrecognition treatment or whether it
constitutes a corporate reorganization
within the meaning of § 368, and whether
various tax consequences (such as nonrecognition and basis) result from the application of that section. The Service will
instead rule only on significant issues presented in a transaction described in § 332,
351, 355, 368, or 1036. Additionally, the
Service will rule on one or more significant issues under the Code sections that
address the tax consequences (such as
nonrecognition and basis) that result from
the qualification of a transaction under
§ 332, 351, 355, 368, or 1036. See section
6.03 of Rev. Proc. 2017–1, this Bulletin.
SIGNIFICANT ISSUE: A significant
issue is a germane and specific issue of
law, provided that a ruling on the issue
would not be a comfort ruling, as defined
in section 6.11 of Rev. Proc. 2017–1, or
the conclusion in such a ruling otherwise
would not be essentially free from doubt.
An issue is germane if resolution of the
issue is necessary to determine an element
of the tax treatment of the transaction. An
issue is specific if it is the narrowest articulation of the germane issue. A change
of circumstances arising after a transaction ordinarily does not present a significant issue with respect to the transaction.
OBTAINING A LETTER RULING:
To obtain a letter ruling on a significant
issue presented in a transaction, the taxpayer in its letter ruling request must comply with all the requirements set forth in
section 6.03 of Rev. Proc. 2017–1, as well
as Rev. Proc. 2017–1, in general.
(52) Section 332.—See section
3.01(39), above.
(53) Section 351.—See sections
3.01(39) and (51), above.
(54) Section 355.—Distribution of
Stock and Securities of a Controlled Cor-

January 3, 2017

poration.—Whether the distribution of the
stock of a controlled corporation and an
acquisition are part of a plan under
§ 355(e). See Rev. Proc. 2003– 48,
2003–2 C.B. 86. Notwithstanding the preceding sentence, the Service may issue a
ruling regarding the effect of redemptions
under § 355(e) pending the issuance of
temporary or final regulations regarding
redemptions under § 355(e) if an adverse
ruling on such question would result in
there being a direct or indirect acquisition
by one or more persons of stock representing a 50-percent or greater interest in the
distributing corporation or the controlled
corporation that is part of a plan under
§ 355(e).
(55) Section 355.—See section
3.01(51), above.
(56) 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).
(57) Section 368.—See section
3.01(51), above.
(58) Section 403(b).—Taxability of
Beneficiary Under Annuity Purchased by
Section 501(c)(3) Organization or Public
School.—Whether the form of a plan satisfies the requirements of § 403(b) as provided in Rev. Proc. 2017– 4, this Bulletin.
(59) Section 409A.—Inclusion in
Gross Income of Deferred Compensation
Under Nonqualified Deferred Compensation Plans.—The income tax consequences of establishing, operating, or 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).
(60) Section 411(d)(3).—Termination
or Partial Termination; Discontinuance of
Contributions.—Whether there has been a
partial termination of an employee plan.
The Service may issue a determination
letter involving the partial termination of
an employee plan. See Rev. Proc. 2017– 4,
this Bulletin.

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(61) Section 414(d).—Governmental
Plan.—Whether a plan is a governmental
plan under § 414(d).
(62) Section 419(e).—Welfare Benefit
Fund.—Whether a captive insurance arrangement through which an employer
provides health insurance to current or
retired employees is a welfare benefit
fund.
(63) Section 424.—Definitions and
Special Rules.—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).
(64) Section 451.—General Rule for
Taxable Year of Inclusion.—The tax consequences of a nonqualified unfunded
deferred-compensation arrangement with
respect to a controlling shareholderemployee eligible to participate in the arrangement.
(65) Section 451.—General Rule for
Taxable Year of Inclusion.—The tax consequences of nonqualified unfunded
deferred-compensation arrangements in
which 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.
(66) Sections 451 and 457.—General
Rule for Taxable Year of Inclusion; Nonqualified Deferred Compensation Plans of
State and Local Governments and TaxExempt 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.
(67) Section 451.—See section
3.01(9), above.

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(68) Section 453.—See section
3.01(49), above.
(69) Section 457.—See section
3.01(66), above.
(70) Section 457A.—Nonqualified Deferred Compensation from Certain Tax Indifferent Parties.—The income tax consequences of establishing, operating, or
participating in a nonqualified deferred
compensation plan within the meaning of
§ 457A(d)(3).
(71) Section 501.—Exemption from
Tax on Corporations, Certain Trusts,
Etc.—Whether an organization is or continues to be exempt from taxation under
§ 501(a) as an organization described in
§§ 501(c) or 501(d), including, for example, whether changes in an organization’s
activities or operations will affect or jeopardize the organization’s exempt status.
The Associate Chief Counsel (TEGE) will
rule, however, on specific legal questions
related to §§ 501(c) or 501(d) that are not
otherwise described in this revenue procedure. For example, although the Associate
Chief Counsel (TEGE) would not rule on
whether a change in a § 501(c)(3) organization’s activities would jeopardize the
organization’s exempt status, the Associate Chief Counsel (TEGE) would (subject
to the limitations described in this revenue
procedure) rule on whether such new activities would further an exempt purpose
described in § 501(c)(3). See Rev. Proc.
2017–5, this Bulletin, for the procedures
for issuing determination letters on taxexempt status under § 501.
(72) Sections 501, 511, 512, 513, and
514.—Exemption from Tax on Corporations, Certain Trusts, Etc.; Imposition of
Tax on Unrelated Business Income of
Charitable, Etc., Organizations; Unrelated
Business Taxable Income; Unrelated
Trade or Business; Unrelated DebtFinanced Income.—Whether a joint venture between a tax-exempt organization
and a for-profit organization affects an
organization’s exempt status or results in
unrelated business income.
(73) Sections 507, 664, 4941, and
4945.—Termination of Private Foundation Status; Charitable Remainder Trusts;
Taxes on Self-Dealing; Taxes on Taxable
Expenditures.—Issues pertaining to the
tax consequences of the termination of a
charitable remainder trust (as defined in
§ 664) before the end of the trust term as

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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.
(74) Section 509.—Private Foundation
Defined.—Whether an organization is or
continues to be described in § 509(a) including, for example, whether changes in
an organization’s activities or operations
will affect or jeopardize the organization’s
status as a public charity described in
§ 509(a)(1) – (4). The Associate Chief
Counsel (TEGE) will rule, however, on
specific legal questions related to § 509(a)
that are not otherwise described in this
revenue procedure. See Rev. Proc.
2017–5, this Bulletin, for the procedures
for obtaining determination letters on public charity status under § 509.
(75) Sections 511, 512, 513, and
514.—Imposition of Tax on Unrelated
Business Income of Charitable, Etc., Organizations; Unrelated Business Taxable
Income; Unrelated Trade or Business; Unrelated Debt-Financed Income.—Whether
unrelated business income tax issues arise
when charitable lead trust assets are invested with charitable organizations.
(76) Sections 511, 512, 513, and
514.—See section 3.01(72), above.
(77) Section 529.—Qualified Tuition
Programs.—Whether a state-run tuition
program qualifies under § 529.
(78) Sections 542, 543, and 544.—Definition of Personal Holding Company;
Personal Holding Company Income;
Rules for Determining Stock Ownership.—Whether the application of
§ 544(a) causes a corporation to meet the
stock ownership requirements under
§ 542(a)(2), § 543(a)(7), § 543(a)(6), or
§ 543(a)(4).
(79) 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.
(80) 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.
(81) Section 664.—Charitable Remainder Trusts.—Whether the settlement of a

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charitable remainder trust upon the termination of the noncharitable interest is
made within a reasonable period of time.
(82) Section 664.—See section
3.01(73), above.
(83) 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.
(84) Section 704(b).—Determination
of Distributive Share.—Whether the allocation to a partner under the partnership
agreement of income, gain, loss, deduction, or credit (or an item thereof) has
substantial economic effect or is in accordance with the partner’s interest in the
partnership.
(85) Section 761.—Terms Defined.—
Matters relating to the validity of a partnership or whether a person is a partner in
a partnership.
(86) Section 761.—See section
3.01(14), above.
(87) 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.
(88) 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.

January 3, 2017

(89) Section 1001.—See section
3.01(9), above.
(90) Section 1033.—Involuntary Conversions.—Whether the replacement or
proposed replacement of compulsorily or
involuntarily converted property does or
does not qualify under § 1033(a), if the
taxpayer has already filed a Federal tax
return for the taxable year in which the
property was converted. The Service may
issue a determination letter in this case.
See section 12.01 of Rev. Proc. 2017–1,
this Bulletin.
(91) Section 1036.—See section
3.01(51), above.
(92) 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.
(93) 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.
(94) Section 1239.—See section
3.01(49), above.
(95) Section 1361.—S Corporation Defined.—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).
(96) Section 1502.—Regulations.—If
a member of an affiliated group fails to
file Form 1122 or fails to join in the making of a consolidated return due to a mistake of law or fact, or inadvertence,
whether such member will be treated as if
it had filed a Form 1122. The Service may
issue a determination letter in this case.
See section 12.01 of Rev. Proc. 2017–1,
this Bulletin. But see also section 6.07 of
this revenue procedure.
(97) Section 1502.—See section
3.01(39), above.

January 3, 2017

(98) Section 1551.—Disallowance of
the Benefits of the Graduated Corporate
Rates and Accumulated Earnings Credit.—Whether a transfer is within § 1551.
(99) Section 2031.—Definition of
Gross Estate.—Actuarial factors for valuing interests in the prospective gross estate of a living person.
(100) 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).
(101) Section 2512.—Valuation of
Gifts.—Actuarial factors for valuing prospective or hypothetical gifts of a donor.
(102) 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).
(103) Section 2601.—Tax Imposed.—
Whether a trust exempt from generationskipping 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).
(104) 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
with regard to prior employment status
may be issued.
(105) Sections 3121, 3306, and
3401.—Definitions.—Who is the employer of an “employee-owner” as defined
in § 269A(b)(2).
(106) 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

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bona fide partner and, therefore, not an
employee of the business.
(107) Section 4052(f)(1).—Certain Repairs and Modifications Not Treated as
Manufacture.—Whether a chassis repaired or modified using a “glider kit” is
treated as manufactured or produced if the
cost of the repairs or modifications does
not exceed 75 percent of the retail price of
a comparable new chassis.
(108) Section 4191.—Medical Devices.—Whether a device (as defined in section 201(h) of the Federal Food, Drug, and
Cosmetic Act) intended for humans is not
a “taxable medical device” within the
meaning of § 4191(b)(1) due to the application of the exemption provided in
§ 4191(b)(2) for eyeglasses, contact
lenses, hearing aids, and any other medical device determined by the Secretary to
be of a type which is generally purchased
by the general public at retail for individual use.
(109) Section 4216(b).—Constructive
Sale Price.—Whether a particular methodology for determining the tax base is
allowable under the constructive sale
price rules.
(110) Sections 4375, 4376, and
4377.—Health Insurance; Self-Insured
Health Plans; Definitions and Special
Rules.—Whether an arrangement is a
specified health insurance policy or an
applicable self-insured health plan that is
subject to the fee applicable to such arrangements.
(111) Sections 4940 and 4942.—Excise Tax Based on Investment Income;
Taxes on Failure to Distribute Income.—
Whether an organization is or continues to
be an “operating foundation” described in
§ 4942(j)(3) or an “exempt operating
foundation” described in § 4940(d)(2), including, for example, whether changes in
an organization’s activities or operations
will affect or jeopardize the organization’s
status as an operating foundation or exempt operating foundation. The Associate
Chief Counsel (TEGE) will rule, however,
on specific legal questions related to
§§ 4940(d)(2) or 4942(j)(3) that are not
otherwise described in this revenue procedure. See Rev. Proc. 2017–5, this Bulletin,
for the procedures for obtaining determination letters on foundation status under
§§ 4940 and 4942.

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(112) Section 4941.—Taxes on SelfDealing.—Whether transactions during
the administration of an estate or trust
meet the requirements of the exception to
§ 4941 set forth in § 53.4941(d)–1(b)(3)
of the Private Foundation Excise Tax
Regulations, in cases in which a disqualified person issues a promissory note in
exchange for property of an estate or trust.
(113) Section 4941.—See section
3.01(73), above.
(114) Section 4942.—See section
3.01(111), above.
(115) Section 4945.—See section
3.01(73), above.
(116) Section 4958.—Taxes on Excess
Benefit Transactions.—Whether a compensation or property transaction satisfies
the rebuttable presumption that the transaction is not an excess benefit transaction
as described in § 53.4958 – 6 of the Excess
Benefit Transactions Excise Tax Regulations.
(117) Section 4975(d).—Exemptions.—Whether the renewal, extension,
or refinancing of an exempt loan satisfies
the requirements of § 4975(d)(3). Also,
whether the pre-payment of employee
stock ownership plan (ESOP) loans satisfies the requirements of § 4975(d)(3) other
than with respect to plan termination.
(118) 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.)
(119) Section 4980H.—Shared Responsibility for Employers Regarding
Health Coverage.—Whether an employer
is required to make an assessable payment
under § 4980(H)(a) or (b).
(120) Section 6166.—Extension of
Time for Payment of Estate Tax Where
Estate Consists Largely of Interest in
Closely Held Business.—Requests involving § 6166 if there is no decedent.
(121) Section 6901.—Transferred Assets.—Whether a taxpayer is liable for tax
as a transferee.
(122) Section 7216.—Disclosure or
Use of Information by Preparers of Returns.—Whether a criminal penalty is applicable for any disclosure or use of information by preparers of returns.

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(123) 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.
(124) Section 7701.—Definitions.—
The classification for Federal tax purposes
of a fideicomiso or other land trust created
under local law, applying the principles of
Rev. Rul. 2013–14, 2013–26 I.R.B. 1267,
or Rev. Rul. 92–105, 1992–2 C.B. 204.
(125) Section 7701.—See section
3.01(14), above.
(126) 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) of the Procedure and Administration Regulations)
are readily tradable on a secondary market
or the substantial equivalent thereof under
§ 1.7704 –1(c)(1).
(127) Section 9815.—Additional Market Reforms.—Whether an insured group
health plan satisfies the requirements of
§ 2716 of the Public Health Service Act,
Prohibition on Discrimination in Favor of
Highly Compensated Individuals, as incorporated into the Code by § 9815.
.02 General Areas.
(1) Whether the economic substance
doctrine is relevant to any transaction or
whether any transaction complies with the
requirements of § 7701(o).
(2) The results of transactions that lack
a bona fide business purpose or have as
their principal purpose the reduction of
Federal taxes.
(3) 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.
(4) A matter involving alternate plans
of proposed transactions or involving hypothetical situations.
(5) 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.

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(6) A matter involving the regulations
governing practice before the Service under 31 CFR Part 10 (reprinted as Treasury
Department Circular No. 230).
(7) Whether a proposed transaction
would subject the taxpayer to a criminal
penalty.
(8) Whether a completed transaction
can be rescinded for Federal income tax
purposes.
(9) The income tax (including unrelated business income tax) or excise tax
consequences of the contribution of stock
options to, or their subsequent exercise
from, plans described in Part 1 of Subchapter D of Chapter 1 of Subtitle A of the
Code.
(10) Questions that the Service determines, in its discretion, should not be answered in the general interests of sound
tax administration, including due to resource constraints.
(11) Any frivolous issue, as that term is
defined in section 6.10 of Rev. Proc.
2017–1, this Bulletin.
(12) A request that does not comply
with the provisions of Rev. Proc. 2017–1,
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.—Application of
these sections if 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, if 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.
(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 prop-

January 3, 2017

erty, or the liability for the indebtedness,
is in another party.
(4) Section 62(c).—Certain Arrangements Not Treated as 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).
(5) 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.
(6) Sections 101 and 7702.—Certain
Death Benefits; Life Insurance Contract
Defined.—Whether amounts received under an arrangement with an entity 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.
(7) 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.
(8) 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).
(9) Section 141.—Private Activity
Bond; Qualified Bond.—Whether state or

January 3, 2017

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 § 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).
(10) Sections 142 and 144(a).—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 nonqualified costs
equals more than 5 percent of the net
proceeds, as defined in § 150(a)(3).
(11)
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)).
(12) 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.
(13) Section 162(m).—Certain Excessive Employee Remuneration.—Whether
the deduction limit under § 162(m) applies to compensation attributable to services performed for a related partnership.
(14) Section 163.—See section
4.01(3), above.

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(15) Section 165.—Losses. Whether
stock in a corporation has been abandoned.
(16) Section 167.—Depreciation.
(i) Useful lives of assets.
(ii) Depreciation rates.
(iii) Salvage value of assets.
(17) Sections 167 and 168.—Depreciation; Accelerated Cost Recovery System.—Application of those sections in
which the formal ownership of property is
in a party other than the taxpayer except
when title is held merely as security.
(18) Section 170.—Charitable, Etc.,
Contributions and Gifts.—Whether a
transfer to a pooled income fund described in § 642(c)(5) qualifies for a charitable contribution deduction under
§ 170(f)(2)(A).
(19) 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).
(20) Section 170.—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.
(21) 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).

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(22) Section 262.—See section
4.01(12), above.
(23) Section 265(a)(2).—Interest.—
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.
(24) 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.
(25) Section 302(b)(4) and (e).—Redemption from Noncorporate Shareholder
in Partial Liquidation; Partial Liquidation
Defined.—Whether a distribution will
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.)
(26) Section 306.—Dispositions of
Certain Stock.—Whether the distribution,
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).
(27) Sections 331 and 346(a).—Gain
or Loss to Shareholders in Corporate Liquidations; Complete Liquidation.—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.
(28) 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.
(29) Section 355.—Distribution of
Stock and Securities of a Controlled Corporation.—Whether the active business
requirement of § 355(b) is met when,
within the 5-year period described in
§ 355(b)(2)(B), a distributing corporation

Bulletin No. 2017–1

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).
(30) Section 355.—Distribution of
Stock and Securities of a Controlled Corporation.—Any issue relating to the qualification, under § 355 and related provisions, of a distribution, or another
distribution which is part of the same plan
or series of related transactions, if, immediately after any such distribution, the fair
market value of the gross assets of the
trade(s) or business(es) on which the distributing corporation or the controlled corporation relies to satisfy the active trade or
business requirement of § 355(b) is less
than five percent of the fair market value
of the total gross assets of such corporation.
For purposes of determining the fair
market value of the total gross assets of
such corporation and of the gross assets of
such trade(s) or business(es), (i) all members of a separate affiliated group, within
the meaning of § 355(b)(3)(B), are treated
as one corporation; and (ii) if the distributing corporation or the controlled corporation relies on an active trade or business
of a partnership for purposes of § 355(b),
such corporation is treated as owning its
ratable share of the gross assets of the
partnership.
This section 4.01(30) does not apply if
(i) all the stock of the controlled corporation that is distributed in the distribution is
distributed to one or more members of the
affiliated
group,
as
defined
in
§ 243(b)(2)(A), of which the distributing
corporation is a member; and (ii) such
distribution is not part of a plan or series
of related transactions pursuant to which
stock of any corporation will be distributed outside such affiliated group in a
distribution described in this section
4.01(30) or section 5.01(3) of this revenue
procedure.
(31) Section 355.—Distribution of
Stock and Securities of a Controlled Corporation.—Any issue under § 355(e) other
than whether a distribution and an acquisition are part of a plan (i.e., any non-plan
issue). Notwithstanding the preceding

139

sentence, the Service generally will rule
on a non-plan issue or issues (e.g.,
whether a corporation constitutes a predecessor of distributing) if an adverse ruling
on such non-plan issue or issues would
result in there being a direct or indirect
acquisition by one or more persons of
stock representing a 50-percent or greater
interest in the distributing corporation or
the controlled corporation that is part of a
plan under § 355(e).
(32) 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).
(33) 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).
(34) Section 451.—General Rule for
Taxable Year of Inclusion.—The tax consequences of a nonqualified deferred compensation arrangement using a grantor
trust if the trust fails to meet the requirements of Rev. Proc. 92– 64, 1992–2 C.B.
422.
(35) 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 under the Indian Gaming Regulatory Act (25 U.S.C.
§§ 2701 through 2721).
(36) Section 451.—See section
4.01(5), above.
(37) 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.)
(38) Section 642.—Special Rules for
Credits and Deductions.—Whether a
pooled income fund satisfies the requirements described in § 642(c)(5).
(39) Section 664.—Charitable Remainder Trusts.—Whether a charitable remainder trust that provides for annuity or uni-

January 3, 2017

trust payments for one or two measuring
lives or for annuity or unitrust payments
for a term of years satisfies the requirements described in § 664.
(40) 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.
(41) Sections 671 to 679.—Grantors
and Others Treated as Substantial Owners.—In a nonqualified, unfunded deferred compensation arrangement described in Rev. Proc. 92– 64, 1992–2 C.B.
422, the tax consequences of the use of a
trust, other than the model trust described
in that revenue procedure.
(42) 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 under the Indian
Gaming Regulatory Act (25 U.S.C.
§§ 2701–2721) is the grantor and owner
of the trust.
(43) Section 678.—Person Other than
Grantor Treated as Substantial Owner.—
Whether a person will be treated as the
owner of any portion of a trust over which
that person has a power to withdraw the
trust property (or had such power prior to
a release or modification, but retains other
powers which would cause that person to
be the owner of the trust under § 671 if the
person were the grantor), other than a
power which would constitute a general
power of appointment within the meaning
of § 2041, if the trust purchases the property from that person with a note and the
value of the assets with which the trust
was funded by the grantor is nominal
compared to the value of the property
purchased.
(44) Section 851.—Definition of Regulated Investment Company.—Any issue
relating to the treatment of a corporation
as a regulated investment company under

January 3, 2017

§ 851 and related provisions that requires
a determination whether a financial instrument or position is a security as defined in
the Investment Company Act of 1940.
(45) Section 856.—Definition of Real
Estate Investment Trust.—Whether an
outdoor advertising display constitutes
real property for purposes of § 856. However, if the real estate investment trust has
made an election under §1.1033(g)–
1(b), the Service may rule on whether an
asset that is not within the scope of the
election, but is related to the outdoor advertising display, constitutes real property
for purposes of § 856.
(46) Section 1031(f).—Special Rules
for Exchanges Between Related Persons.—Except in the case of (i) a transaction involving an exchange of undivided
interests in different properties that results
in each taxpayer holding either the entire
interest in a single property or a larger
undivided interest in any of the properties
or (ii) a disposition of property in a nonrecognition transaction, whether an exchange described in § 1031(f) involving
related parties, or a subsequent disposition
of property involved in the exchange, has
as one of its principal purposes the avoidance of Federal income tax, or is part of a
transaction (or series of transactions)
structured to avoid the purposes of
§ 1031(f).
(47) 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. 2013–
30, 2013–36 I.R.B. 173. (For instructions
on how to seek this relief, see the preceding revenue procedure.)
(48) 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.
(49) Sections 2035, 2036, 2037, 2038,
and 2042.—Adjustments for Certain Gifts
Made Within Three Years of Decedent’s

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Death; Transfers with Retained Life Estate; Transfers Taking Effect at Death;
Revocable Transfers; Proceeds of Life Insurance.—Whether trust assets are includible in a trust beneficiary’s gross estate
under § 2035, 2036, 2037, 2038, or 2042
if the beneficiary sells property (including
insurance policies) to the trust or dies
within 3 years of selling such property to
the trust, and (i) the beneficiary has a
power to withdraw the trust property (or
had such power prior to a release or modification, but retains other powers which
would cause that person to be the owner if
the person were the grantor), other than a
power which would constitute a general
power of appointment within the meaning
of § 2041, (ii) the trust purchases the
property with a note, and (iii) the value of
the assets with which the trust was funded
by the grantor is nominal compared to the
value of the property purchased.
(50) 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).
(51) 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).
(52) Section 2501.—Imposition of
Tax.—Whether the sale of property (including insurance policies) to a trust by a
trust beneficiary will be treated as a gift
for purposes of § 2501 if (i) the beneficiary has a power to withdraw the trust
property (or had such power prior to a
release or modification, but retains other
powers which would cause that person to
be the owner if the person were the
grantor), other than a power which would
constitute a general power of appointment
within the meaning of § 2041, (ii) the trust
purchases the property with a note, and
(iii) the value of the assets with which the
trust was funded by the grantor is nominal
compared to the value of the property
purchased.
(53) Section 2503.—Taxable Gifts.—
Whether the transfer of property to a trust
will be a gift of a present interest in prop-

Bulletin No. 2017–1

erty 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.
(54) 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.
(55) 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).
(56) 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).
(57) Section 2601.—Tax Imposed.—
Whether a trust that is exempt from the
application of the generation-skipping
transfer tax because it was irrevocable on

Bulletin No. 2017–1

September 25, 1985, will lose its exempt
status if the situs of the trust is changed
from the United States to a situs outside of
the United States.
(58) 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
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.
(59) 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.
(60) Section 2702.—Special Valuation
Rules in Case of Transfers of Interests in
Trusts.—Whether the sale of property (including insurance policies) to a trust by a
trust beneficiary is subject to § 2702 if (i)
the beneficiary has a power to withdraw
the trust property (or had such power prior
to a release or modification, but retains
other powers which would cause that person to be the owner if the person were the
grantor), other than a power which would
constitute a general power of appointment
within the meaning of § 2041, (ii) the trust
purchases the property with a note, and
(iii) the value of the assets with which the
trust was funded by the grantor is nominal
compared to the value of the property
purchased.
(61) 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.
(62) Section 7702.—See section
4.01(6), above.

141

.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. Although it is
generally inappropriate for the Service to
issue a letter ruling on whether an interest
in a corporation is stock or indebtedness,
there may be instances in which the Service may issue a letter ruling. For example, the Service may issue a letter ruling
with respect to an instrument issued by a
domestic corporation if (i) the taxpayer
believes that the facts strongly support the
classification of the instrument as stock
and (ii) the taxpayer can demonstrate that
there are unique and compelling reasons
to justify the issuance of a letter ruling.
Before preparing the letter ruling request,
the taxpayer should call the Office of Associate Chief Counsel having jurisdiction
for the matters on which the taxpayer is
seeking a letter ruling to discuss whether
the Service will consider issuing a letter
ruling for a particular factual situation. To
determine which associate office has jurisdiction over a particular issue see section 3 of Rev. Proc. 2017–1, this Bulletin.
For a list of telephone numbers for the
different associate offices, see section
10.07 of Rev. Proc. 2017–1.
(2) Situations in which 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, the taxpayer should call the
Office of 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 associate office has jurisdiction
over a particular issue, see section 3 of
Rev. Proc. 2017–1, this Bulletin. For a list
of telephone numbers for the different associate offices, see section 10.07 of Rev.
Proc. 2017–1.
Notwithstanding the previous paragraph, in connection with transactions described in § 332, 351, 355, or 1036 and
reorganizations within the meaning of

January 3, 2017

§ 368, the Associate Chief Counsel (Corporate) may issue a letter ruling on part of
an integrated transaction if and to the extent that the transaction presents a significant issue (within the meaning of section
3.01(51)). See section 6.03 of Rev. Proc.
2017–1.
(3) Situations in which two or more
items or sub-methods of accounting are
interrelated. If two or more items or submethods 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
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 in which 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 do 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

January 3, 2017

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 Associate Chief
Counsel (TEGE) 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.
2017–1, this Bulletin.
(9) A letter ruling will not be issued
with respect to an issue that is clearly and
adequately addressed by statute, regulations, decision of a court, revenue rulings,
revenue procedures, notices, or other authority published in the Internal Revenue
Bulletin (Comfort Ruling). However, except with respect to issues under §§ 332,
351, 355, 368, and 1036 and the tax consequences resulting from the application
of such Code sections (see generally section 6.03 of Rev. Proc. 2017–1, this Bulletin), an Associate office may in its discretion issue a Comfort Ruling if the
Associate office is otherwise 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.
(11) The treatment or effects of hook
equity, including as a result of its issuance, ownership, or redemption. This section 4.02(11) ordinarily will not apply if
(i) an interest’s status as hook equity is
only transitory, such as in a triangular
reorganization, or (ii) the treatment of the
hook equity is not relevant to the treatment of the overall transaction and issue
presented. For this purpose, “hook equity”
means an ownership interest in a business
entity (such as stock in a corporation) that
is held by another business entity in which
at least 50 percent of the interests (by vote
or value) in such latter entity are held

142

directly or indirectly by the former entity.
However, if an entity directly or indirectly
owns all of the equity interests in another
entity, the equity interests in the latter
entity are not hook equity.
(12) Whether a tax-qualified plan satisfies the requirements for qualification
under §§ 401 through 420 and
§ 4975(e)(7). These matters are generally
handled through the Employee Plans Determinations program as provided in Rev.
Proc. 2017– 4, this Bulletin, Rev. Proc.
2016 –37, 2016 –29 I.R.B. 136, and Rev.
Proc. 2015–36, 2015–27 I.R.B. 20. Notwithstanding the preceding sentence, the
Office of Associate Chief Counsel
(TEGE) may issue a ruling if (i) the taxpayer has demonstrated to the Office of
Associate Chief Counsel’s (TEGE) satisfaction that the qualification issue involved is unique and requires immediate
guidance, (ii) as a practical matter, it is not
likely that such issue will be addressed
through the determination letter process,
and (iii) the Office determines that it is in
the interest of good tax administration to
provide guidance to the taxpayer with respect to such qualification issue.
(13) Any issue that is being considered
by the Pension Benefit Guaranty Corporation (PBGC) or the Department of Labor
(DOL), and involves the same taxpayer,
will be issued at the discretion of the
Office of Associate Chief Counsel
(TEGE).
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, A REVENUE
PROCEDURE, REGULATIONS, OR
OTHERWISE
.01 Specific Questions and Problems.
(1) Sections 302 and 304.—Distributions in Redemption of Stock; Redemptions Through Use of Related Corporations.—Treatment of basis in a § 302/304
redemption. See Announcement 2006 –30,
2006 –1 C.B. 879.
(2) Sections 351, 358, and 362.—
Transfer to Corporation Controlled by
Transferor; Basis to Distributees; Basis to
Corporations.—The issues described as

Bulletin No. 2017–1

being under study in Rev. Rul. 2006 –2,
2006 –1 C.B. 261.
(3) Section 355.—Distribution of
Stock and Securities of a Controlled Corporation.—Any issue relating to the qualification, under § 355 and related provisions, of a distribution, or another
distribution which is part of the same plan
or series of related transactions, if, immediately after any such distribution, all of
the following conditions exist: (i) the fair
market value of the gross investment assets of the distributing corporation or the
controlled corporation is two-thirds or
more of the fair market value of its total
gross assets; (ii) the fair market value of
the gross assets of the trade(s) or business(es) on which the distributing corporation or the controlled corporation relies
to satisfy the active trade or business requirement of § 355(b) is less than 10
percent of the fair market value of its
gross investment assets; and (iii) the ratio
of the fair market value of the gross investment assets to the fair market value of
the gross assets other than the gross investment assets of the distributing corporation or the controlled corporation is
three times or more of such ratio for the
other corporation (i.e., the controlled corporation or the distributing corporation,
respectively).
For purposes of determining the fair
market value of the distributing corporation’s and the controlled corporation’s
gross investment assets, gross assets other
than gross investment assets, gross assets
of the trade or business, and total gross
assets, all members of such corporation’s
separate affiliated group, within the meaning of § 355(b)(3)(B), are treated as one
corporation. If the distributing corporation
or the controlled corporation relies on an
active trade or business of a partnership
for purposes of § 355(b), then for purposes of determining the fair market value
of the gross assets of the trade(s) or business(es) on which the distributing corporation or the controlled corporation relies
to satisfy the active trade or business requirement of § 355(b), such corporation is
treated as owning its ratable share of the
gross assets of the partnership.
For purposes of this section 5.01(3),
“investment assets” has the meaning
given such term by § 355(g)(2)(B), except
as follows: (i) in the case of stock or

Bulletin No. 2017–1

securities in a corporation any stock of
which is traded on (or subject to the rules
of) an established financial market within
the meaning of § 1.1092(d)–1(b) (publicly
traded stock), § 355(g)(2)(B)(iv) is applied by substituting “50-percent” for “20percent;” (ii) except as provided in clause
(iv) of this sentence, an interest in a publicly traded partnership (as defined in
§ 7704(b), regardless of whether such
partnership is treated as a corporation pursuant to § 7704(a)) is treated in the same
manner as publicly traded stock; (iii) except as provided in clause (iv) of this
sentence, an interest in a partnership that
is not a publicly traded partnership is
treated in the same manner as stock which
is not publicly traded stock; and (iv) in the
case of an interest in a partnership (other
than a publicly traded partnership treated
as a corporation pursuant to § 7704(a)),
the active trade or business of which is
taken into account by the distributing corporation or the controlled corporation for
purposes of § 355(b), or would be taken
into account without regard to the fiveyear requirement of § 355(b)(2)(B),
clauses (ii) and (iii) of this sentence do not
apply.
The Service also will not rule on any
issue relating to the qualification, under
§ 355 and related provisions, of a distribution if, as part of a plan or series of
related transactions, investment assets are
disposed of, or property, including property qualifying as an active trade or business within the meaning of § 355(b), is
acquired with a principal purpose of
avoiding this section 5.01(3). This section
5.01(3) does not apply if (i) all the stock
of the controlled corporation that is distributed in the distribution is distributed to
one or more members of the affiliated
group, as defined in § 243(b)(2)(A), of
which the distributing corporation is a
member; and (ii) such distribution is not
part of a plan or series of related transactions pursuant to which stock of any corporation will be distributed outside such
affiliated group in a distribution described
in this section 5.01(3) or in section
4.01(30) of this revenue procedure.
(4) Sections 355 and 361.—Distribution of Stock and Securities of a Controlled Corporation; Nonrecognition of
Gain or Loss to Corporations; Treatment
of Distributions.—Whether either § 355

143

or § 361 applies to a distributing corporation’s distribution of stock or securities of
a controlled corporation in exchange for,
and in retirement of, any putative debt of
the distributing corporation if such distributing corporation debt is issued in anticipation of the distribution.
(5) Section 358.—See section 5.01(2),
above.
(6) Section 361.—See section 5.01(4),
above.
(7) Section 362.—See section 5.01(2),
above.
(8) Section 613A.—Limitations on
Percentage Depletion in Case of Oil and
Gas Wells.—Whether the sale of oil or
gas, or any product derived from oil or
gas, is a bulk sale for purposes of
§ 613A(d)(2).
(9) Sections 661 and 662.—Deduction
for Estates and Trusts Accumulating Income or Distributing Corpus; Inclusion of
Amounts in Gross Income of Beneficiaries of Estates and Trusts Accumulating
Income or Distributing Corpus.—
Whether the distribution of property by a
trustee from an irrevocable trust to another irrevocable trust (sometimes referred to as a “decanting”) resulting in a
change in beneficial interests is a distribution for which a deduction is allowable
under § 661 or which requires an amount
to be included in the gross income of any
person under § 662.
(10) Section 1014.—Basis of Property
Acquired from a Decedent.—Whether the
assets in a grantor trust receive a § 1014
basis adjustment at the death of the
deemed owner of the trust for income tax
purposes when those assets are not includible in the gross estate of that owner under
chapter 11 of subtitle B of the Internal
Revenue Code.
(11) 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.
(12) 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.

January 3, 2017

(13) 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.
(14) Section 2501.—Imposition of
Tax.—Whether the distribution of property by a trustee from an irrevocable trust
to another irrevocable trust (sometimes
referred to as a “decanting”) resulting in a
change in beneficial interests is a gift under § 2501.
(15) Sections 2601 and 2663.—Tax
Imposed; Regulations.—Whether the distribution of property by a trustee from an
irrevocable generation-skipping transfer
tax (GST) exempt trust to another irrevocable trust (sometimes referred to as a
“decanting”) resulting in a change in beneficial interests is the loss of GST exempt
status or constitutes a taxable termination
or taxable distribution under § 2612.
(16) Sections 4966 and 4967.—Taxes
on Taxable Distributions; Taxes on Prohibited Benefits.—Issues involving interpretation of §§ 4966 and 4967 regarding
distributions from donor advised funds.
(17) 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.
(18) Section 6050P.—Returns Relating
to the Cancellation of Indebtedness by
Certain Entities. Whether amounts discharged in a nonlending transaction are
reportable under § 6050P and the regulations.
(19) Section 6109.—Identifying Numbers. The proper assignment or retention
of an employer identification number
(EIN) in the case of a reorganization
within the meaning of § 368(a)(1)(F) if
the transferor corporation becomes disregarded as an entity separate from its
owner under § 301.7701–3.
.02 General Areas.
Whether transfers of stock, money, or
other property by a person to a corporation and transfers of stock, money, or
property by that corporation to that person
(or a person related to such person) in
what are ostensibly two separate transactions (so-called “north–south” transac-

January 3, 2017

tions), at least one of which is a distribution with respect to the corporation’s
stock, a contribution to the corporation’s
capital, or an acquisition of stock, are respected as separate transactions for Federal income tax purposes.
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 such an extension. See Rev. Proc. 2003–33, 2003–1
C.B. 803 (extension automatically granted
to certain persons required to file Form
8023 to make a valid § 338 election that
have not filed Form 8023 by its due date).
.02 Section 442.—Change of Annual
Accounting Period.—All requests for a
change in annual accounting period where
the Service has provided an automatic
change procedure for obtaining such 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; Rev.
Proc. 2006 – 45, 2006 –2 C.B. 851 (certain
corporations), as clarified and modified by
Rev. Proc. 2007– 64, 2007–2 C.B. 818;
Rev. Proc. 2006 – 46, 2006 –2 C.B. 859
(partnership, S corporation, personal service corporation, or trust); 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 a change in
method of accounting where the Service
has provided an automatic change request
procedure for obtaining such a change in
method of accounting. See the automatic
change request procedures listed in section 9.22 of Rev. Proc. 2017–1, this Bulletin.
.04 Section 461.—General Rule for
Taxable Year of Deduction.—All requests

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for making or revoking an election under
§ 461 where the Service has provided an
administrative procedure for making or
revoking such 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
which an S corporation qualifies for automatic late S corporation relief under Rev.
Proc. 2013–30, 2013–36 I.R.B. 173.
.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 such waivers or
consents on consolidated return issues.
See Rev. Proc. 2014 –24, 2014 –13 I.R.B.
879 (certain subsidiary members treated
as if they filed a Form 1122 even though
they failed to do so); 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 in which
member(s) of the group use a 52–53 week
taxable year).
.08 Section 7701.—Definitions.—All
requests for an extension of time under
§ 301.9100 –3 within which to make an
entity classification election under

Bulletin No. 2017–1

§ 301.7701–3 where the Service has provided an administrative procedure to seek
such an extension. See Rev. Proc. 2009 –
41, 2009 –39 I.R.B. 439 (extension automatically granted to certain persons required to file Form 8832 to make a valid
entity classification election that have not
filed Form 8832 by its due date).
SECTION 7. EFFECT ON OTHER
REVENUE PROCEDURES
Rev. Proc. 2016 –3, 2016 –1 I.R.B.
126; Rev. Proc. 2016 – 45, 2016 –37 I.R.B.
344; and Rev. Proc. 2016 –50, 2016 – 43
I.R.B. 522, are superseded.
SECTION 8. EFFECTIVE DATE
This revenue procedure is effective
January 3, 2017.
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

Bulletin No. 2017–1

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 and
3.01(51).
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
businesses or other for-profit institutions.
The estimated total annual reporting
and/or recordkeeping burden of this revenue procedure, and Rev. Proc. 2017–1,
this Bulletin is 316,020 hours.
The estimated annual burden per respondent/recordkeeper varies from 1 hour
to 200 hours, depending on individual circumstances, with an estimated average
burden of 80 hours. The estimated number

145

of respondents and/or record keepers is
3,956.
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 26 U.S.C. § 6103.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Jean Broderick of the Office
of Associate Chief Counsel (Corporate).
For further information about this revenue
procedure, please contact Ms. Broderick
at (202) 317-6848 (not a toll-free number), or call the associate office contacts
listed in section 10.07 of Rev. Proc.
2017–1, this Bulletin. See section 3 of
Rev. Proc. 2017–1 to determine which
associate office has jurisdiction over a
particular issue.

January 3, 2017