Revenue Procedure 2002-43

Regulations will generally disallow the
deduction claimed by the Taxpayer upon
the termination of the loss leg of the
straddle. See § 1.701–2(d) (Ex. 8) (disallowing duplication of a built-in loss
deduction attributable to the absence of a
§ 754 election). Second, the Service may
challenge the allowance of the loss
deduction based on other statutory provisions, including § 988, and judicial doctrines, including the step transaction doctrine and the doctrines of economic
substance, business purpose, and substance over form. Third, the Service may
assert that, where a loss is disallowed on
the sale of a partnership interest under
§ 267(a)(1) or § 707(b)(1), § 267(d) must
be applied under an aggregate approach
rather than an entity approach. See
§ 1.701–2(e) (requiring aggregate treatment of partnerships for certain purposes). Because the gain realized by Taxpayer on the sale of its interest in LTP
does not correspond to any increase in the
value of the assets within LTP, the disallowed loss realized on the sale of LTP by
UTP cannot be used to offset the gain
under an aggregate approach.
Transactions that are the same as, or
substantially similar to, the transaction
described in this notice are identified as
“listed transactions” for purposes of
§ 1.6011–4T(b)(2) of the temporary
Income Tax Regulations and § 301.6111–
2T(b)(2) of the temporary Procedure and
Administration Regulations. See also
§ 301.6112–1T, A–4. For purposes of
§ 1.6011–4T(b)(2) and § 301.6111–
2T(b)(2), a transaction will be considered
the same as, or substantially similar to,
the transaction described in this notice
even if, at the time relevant for making
such determination, the taxpayer in such
transaction has not engaged in a step having the effect of Step 8.
Persons who are required to satisfy the
registration requirement of § 6111 with
respect to the transaction described in this
notice and who fail to do so may be subject to the penalty under § 6707(a). Persons who are required to satisfy the listkeeping requirement of § 6112 with
respect to the transaction and who fail to
do so may be subject to the penalty under
§ 6708(a). In addition, the Service may
impose penalties on participants in this
transaction or substantially similar transactions or, as applicable, on persons who

2002–28 I.R.B.

participate in the promotion or reporting
of this transaction or substantially similar
transactions, including the accuracyrelated penalty under § 6662, the return
preparer penalty under § 6694, the promoter penalty under § 6700, and the aiding and abetting penalty under § 6701.
The principal author of this notice is
Heather Faught of the Office of Associate
Chief Counsel (Passthroughs and Special
Industries). For further information
regarding this notice, contact Ms. Faught
at (202) 622–3060 (not a toll-free call).

SECTION 10. MEMBER’S REQUEST
FOR THE IRS TO DESIGNATE A SUBSTITUTE AGENT UNDER § 1.1502–
77(d)(3)(i)
SECTION 11. REQUEST THAT IRS
REPLACE A PREVIOUSLY DESIGNATED SUBSTITUTE AGENT
SECTION 12. EFFECTIVE DATE
SECTION 13. PAPERWORK REDUCTION ACT
SECTION 14. INQUIRIES

26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also Part I, §§ 1502; 1.1502–77, 1.1502–77A.)

Rev. Proc. 2002–43
Determination of Substitute
Agent for a Consolidated
Group When the Common
Parent Ceases to Exist
Table of Contents
SECTION 1. PURPOSE
SECTION 2. GENERAL BACKGROUND
SECTION 3. SPECIFIC BACKGROUND INFORMATION REGARDING DIFFERENT MEANS OF DETERMINING A SUBSTITUTE AGENT
SECTION 4. SCOPE
SECTION 5. WHERE TO FILE
SECTION 6. DESIGNATION BY A
TERMINATING COMMON PARENT
OF ITS QUALIFYING SUCCESSOR AS
SUBSTITUTE AGENT
SECTION 7. DESIGNATION BY A
TERMINATING COMMON PARENT
OF A CORPORATION OTHER THAN
ITS QUALIFYING SUCCESSOR AS
SUBSTITUTE AGENT
SECTION 8. DESIGNATION BY
REMAINING MEMBERS OF THE
GROUP UNDER § 1.1502–77A(d)
SECTION 9. NOTIFICATION BY
DEFAULT SUBSTITUTE AGENT
UNDER § 1.1502–77(d)(2)

99

SECTION 1. PURPOSE
This revenue procedure provides
instructions for all communications relating to the determination of a substitute
agent to act on behalf of a consolidated
group pursuant to §1.1502–77(d) or
§ 1.1502–77A(d) of the Income Tax
Regulations. This revenue procedure is
the exclusive procedure under §§ 1.1502–
77(d) and 1.1502–77A(d) for submitting
the communications identified in section
3 of this revenue procedure. This revenue
procedure also provides for the automatic
approval of requests by a terminating
common parent to designate its qualifying
successor as substitute agent.
SECTION 2. GENERAL
BACKGROUND
In general, the corporation that is the
common parent of a consolidated group
for a taxable year is the sole agent for the
group with regard to the group’s income
tax liability for that taxable year. The
original common parent generally
remains the agent for the group for that
taxable year, even if another corporation
is the common parent of the group in a
later year or the group later terminates.
However, the original common parent
cannot act as sole agent if its own existence terminates. In that case, the group
may require a substitute agent to function
with respect to prior open taxable years
for which the original common parent
was the group’s agent. Sections 1.1502–
77(d) and 1.1502–77A(d) provide rules
regarding a substitute agent to replace a
terminating or terminated common parent. This revenue procedure sets forth the
procedures under those rules. These procedures also apply when a substitute

July 15, 2002

agent’s existence terminates. In this revenue procedure, references to a terminating or terminated common parent include
a substitute agent going out of existence.
SECTION 3. SPECIFIC
BACKGROUND INFORMATION
REGARDING DIFFERENT MEANS
OF DETERMINING A SUBSTITUTE
AGENT
.01 Sections 1.1502–77(d)(1) and
1.1502–77A(d) provide for several different means of determining a substitute
agent to act on behalf of a consolidated
group. Each method is described below.
Some can apply only to consolidated
return years beginning on or after June
28, 2002, some can apply only to years
beginning before June 28, 2002, and
some can apply to any or all open years.
If the terminating common parent is agent
for any open years beginning before June
28, 2002, the Internal Revenue Service
(IRS) recommends that the terminating
common parent designate a substitute
agent, because that is the only single procedure applicable to all open years. Designation by the terminating common parent affords the group the greatest choice
as to the selection of its substitute agent
and ensures the least interruption of communication with the IRS.
.02 A terminating common parent may
designate a substitute agent. See
§§ 1.1502–77(d)(1) and 1.1502–77A(d).
Designation by a terminating common
parent is available for any and all taxable
years for which the terminating common
parent is agent for the group. This revenue procedure provides different procedures depending on whether the terminating common parent designates its
qualifying successor (see section 6 of this
revenue procedure) or another corporation (see section 7 of this revenue procedure).
(1) If the terminating common parent
designates its qualifying successor in
accordance with the procedures of this
revenue procedure, that designation is
automatically approved without further
communication from the IRS, and will be
effective on the later of the termination of
the common parent or the filing of the
designation with the IRS. See section
6.02 of this revenue procedure for the
definition of a qualifying successor. Designation by the terminating common par-

July 15, 2002

ent of its qualifying successor as substitute agent is generally available for any
consolidated return year.
(2) The terminating common parent
may also designate certain corporations
other than its qualifying successor as substitute agent (see section 7 of this revenue
procedure). Such a designation is subject
to approval by the IRS. Designation of a
corporation other than the terminating
common parent’s qualifying successor as
substitute agent is generally available for
any consolidated return year.
.03 If the terminating common parent
does not designate a substitute agent, the
remaining members may designate a substitute agent, but only for consolidated
return years beginning before June 28,
2002. See § 1.1502–77A(d). The designation must be filed in the manner specified
in section 8 of this revenue procedure,
and is not effective until the IRS approves
the designation.
.04 If the terminating common parent
does not designate a substitute agent, its
qualifying successor, if any, may notify
the IRS that it is the substitute agent by
default, but only for consolidated return
years beginning on or after June 28, 2002.
See § 1.1502–77(d)(2). IRS approval is
not required, but the IRS is not required
to send communications to, or act on
communications from, the successor until
it provides notification to the IRS of its
status as a default substitute agent under
section 9 of this revenue procedure.
.05 If the terminating common parent
does not designate a substitute agent and
has no qualifying successor, one or more
members of the group may request the
IRS to designate a substitute agent, but
only for consolidated return years beginning on or after June 28, 2002. See
§ 1.1502–77(d)(3)(i). The request is made
pursuant to section 10 of this revenue
procedure. If the group does not request
designation of a substitute agent in this
situation, the IRS may nevertheless (if it
has reason to believe there is no default
substitute agent) designate any group
member or successor of a member as the
substitute agent for the group.
.06 If the IRS designated a substitute
agent for consolidated return years beginning on or after June 28, 2002, one or
more members of the group may request
that the IRS replace the previously designated substitute with another member (or

100

successor of a member), in accordance
with the procedures of section 11 of this
revenue procedure.
SECTION 4. SCOPE
.01 In general. This revenue procedure
applies to any designation of a substitute
agent under §§ 1.1502–77(d)(1) or
1.1502–77A(d), notification of the existence of a default substitute agent under
§ 1.1502–77(d)(2), request under § 1.
1502–77(d)(3)(i) for the designation of a
substitute agent, and request under
§ 1.1502–77(d)(3)(ii) for replacement of a
previously designated substitute agent.
.02 References to IRS. References in
this revenue procedure to the IRS include
any official to whom the Commissioner’s
authority under §§ 1.1502–77(d) or
1.1502–77A(d) has been duly delegated.
SECTION 5. WHERE TO FILE
Except as provided in section 11 of
this revenue procedure, all documents
described in this revenue procedure are
filed at the following address:
Ogden Submission Processing
Center
P.O. Box 9941
Mail Stop 4912
Ogden, UT 84409
SECTION 6. DESIGNATION BY A
TERMINATING COMMON PARENT
OF ITS QUALIFYING SUCCESSOR
AS SUBSTITUTE AGENT
.01 In general. A terminating common
parent may designate a substitute agent.
See §§ 1.1502–77(d)(1), 1.1502–
77(h)(1)(ii), and 1.1502–77A(d). Designation by a terminating common parent is
available for any and all taxable years for
which the terminating common parent is
agent for the group. If the terminating
common parent designates its qualifying
successor in accordance with the procedures of this section 6, that designation is
automatically approved without further
communication from the IRS, and no
written approval will be provided. Such
designation will be effective on the later
of the termination of the common parent
or the filing of the designation with the
IRS. Designation by a terminating common parent of its qualifying successor as

2002–28 I.R.B.

substitute agent with respect to consolidated return years beginning before June
28, 2002, requires the terminating common parent to elect to apply § 1.1502–
77(d)(1) pursuant to § 1.1502–77(h)(1)(ii)
in accordance with subsection .04(5) of
this section 6. A designation by a common parent, before its existence terminates, of its qualifying successor as substitute agent for the group must be filed in
accordance with the requirements set
forth in this section 6.
.02 Qualifying Successor. For purposes of this revenue procedure, a “qualifying successor” must be (i) the sole
entity that is primarily liable under applicable law (without regard to §§ 1.1502–
1(f)(4) or 1.1502–6(a)) for the common
parent’s Federal income tax liability and
(ii) a domestic corporation for Federal
income tax purposes. Qualifying successors usually result from the merger of a
terminating common parent into another
domestic corporation.
.03 When to file. (1) In general. A terminating common parent’s designation of
its qualifying successor as substitute
agent must be executed by the common
parent before its existence terminates and,
except as provided in paragraph (2) of
this subsection .03, filed promptly.
(2) Special rule. If the qualifying successor does not come into existence
before the common parent’s existence terminates, the common parent must still
execute the designation before its existence terminates, and the qualifying successor must promptly complete the designation after it comes into existence by
executing the statement required in subsection .04(9) of this section 6 and filing
the designation.
.04 Contents. The terminating common
parent’s designation of its qualifying successor as substitute agent must be in writing and contain the following information:
(1) The heading “REV. PROC. 2002–
43: COMMON PARENT’S DESIGNATION OF ITS QUALIFYING SUCCESSOR AS SUBSTITUTE AGENT” must
be typed or legibly printed at the top of
the designation;
(2) Name, address, and employer identification number of the common parent
making the designation;
(3) Name, address, and employer identification number of the common parent’s

2002–28 I.R.B.

qualifying successor and the consolidated
return year(s) for which the designation
applies (or a statement that it applies to
all consolidated return years ending on or
before the date of termination of the common parent);
(4) The name and employer identification number of the common parent under
which the return(s) for which the designation applies was (were) filed, if different
from the common parent named in paragraph (2) of this subsection .04;
(5) If the designation applies to any
consolidated return year(s) beginning
before June 28, 2002, a statement that the
common parent elects pursuant to
§ 1.1502–77(h)(1)(ii) to apply § 1.1502–
77(d)(1) with respect to such year(s);
(6) The Internal Revenue Service Center where the consolidated return(s) was
(were) or will be filed, as the case may
be, for the year(s) for which the designation applies;
(7) The expected date of termination
of the common parent;
(8) The name, address, and phone
number of any Examination Team Manager, Appeals Officer or Counsel Attorney
who currently has jurisdiction of consolidated return year(s) for which the designation applies; and
(9) A statement on behalf of the qualifying successor in which it:
(a) Agrees to serve as the group’s substitute agent pursuant to the common parent’s designation; and
(b) If it was not a member of the group
during the consolidated return year(s) for
which it is designated, acknowledges that
it is or will be primarily liable as a successor of the common parent of the group
for the consolidated tax liability for such
consolidated return year(s).
.05 Signature requirements. (1) The
terminating common parent’s designation
of its qualifying successor as substitute
agent must contain the following declaration, signed by a duly authorized officer
of the common parent: Under penalties
of perjury, I declare that I am authorized to make this designation on
behalf of the common parent and that,
to the best of my knowledge, the information provided is true, correct, and
complete.
(2) The statement required under subsection .04(9) of this section 6 must contain the following declaration, signed by a

101

duly authorized officer of the terminating
common parent’s qualifying successor:
Under penalties of perjury, I declare
that I am authorized to sign this statement on behalf of the qualifying successor and that, to the best of my knowledge, the information provided is true,
correct, and complete.
SECTION 7. DESIGNATION BY A
TERMINATING COMMON PARENT
OF A CORPORATION OTHER THAN
ITS QUALIFYING SUCCESSOR AS
SUBSTITUTE AGENT
.01 In general. A terminating common
parent may designate a substitute agent.
See §§ 1.1502–77(d)(1), 1.1502–
77(h)(1)(ii), and 1.1502–77A(d). Designation by a terminating common parent is
available for any and all taxable years for
which the terminating common parent is
agent for the group. If the terminating
common parent designates a corporation
other than its qualifying successor as substitute agent, that designation is subject to
approval by the IRS and is not effective
unless and until it is approved. The designation must be made in accordance with
the procedures of this section 7. The terminating common parent may designate:
(1) Any corporation that was a member of the group during any part of the
consolidated return year for which the
designation applies and has not subsequently been disregarded as an entity
separate from its owner or reclassified as
a partnership for Federal tax purposes; or
(2) Any successor of such a corporation, if such successor is a domestic corporation and is not disregarded as an
entity separate from its owner or classified as a partnership for Federal tax purposes, including a corporation that will
become a successor at the time that the
common parent’s existence terminates.
The designation of a successor of a member as substitute agent is available for
consolidated return years beginning
before June 28, 2002, only if the terminating common parent elects to apply
§ 1.1502–77(d)(1) pursuant to § 1.1502–
77(h)(1)(ii) in accordance with subsection
.03(5) of this section 7. (See section 6 of
this revenue procedure regarding the terminating common parent’s designation of
its qualifying successor as substitute
agent.)

July 15, 2002

.02 When to file. (1) In general. A terminating common parent’s designation of
a corporation other than its qualifying
successor as substitute agent under
§§ 1.1502–77(d)(1) or 1.1502–77A(d)
must be executed by the common parent
before its existence terminates and,
except as provided in paragraph (2) of
this subsection .02, filed promptly.
(2) Special rule. If the substitute agent
designated by the terminating common
parent under this section 7 does not come
into existence before the common parent’s existence terminates, the common
parent must still execute the designation
before its existence terminates, and the
designated substitute agent must promptly
complete the designation after it comes
into existence by executing the statement
required in subsection .03(10) of this section 7 and filing the designation.
.03 Contents. The terminating common
parent’s designation of a corporation
other than its qualifying successor as substitute agent must be in writing and contain the following information:
(1) The heading “REV. PROC. 2002–
43: DESIGNATION OF SUBSTITUTE
AGENT BY COMMON PARENT” must
be typed or legibly printed at the top of
the designation;
(2) Name, address, and employer identification number of the common parent
making the designation;
(3) Name, address, and employer identification number of the designated substitute agent and the consolidated return
year(s) for which the designation applies
(or a statement that it applies to all consolidated return years ending on or before
the date of termination of the common
parent);
(4) The name and employer identification number of the common parent under
which the return(s) for which the designation applies was (were) filed, if different
from the common parent named in paragraph (2) of this subsection .03;
(5) If the common parent elects pursuant to § 1.1502–77(h)(1)(ii) to apply
§ 1.1502–77(d)(1) with respect to consolidated return years beginning before
June 28, 2002, a statement making an
election;
(6) The Internal Revenue Service Center where the consolidated return(s) was

July 15, 2002

(were) or will be filed, as the case may
be, for the year(s) for which the designation applies;
(7) The expected date of termination
of the common parent;
(8) The name and address of the corporation(s) (or other person(s)) that have
(or will have) custody of the books and
records with respect to the consolidated
return year(s) for which the designation
applies, if different from the designated
substitute agent named in paragraph (3)
of this subsection .03, and if so, a description of the arrangements available to the
designated substitute agent for access to
the books and records;
(9) The name, address, and phone
number of the Examination Team Manager, Appeals Officer or Counsel Attorney, if any, who currently has jurisdiction
of the consolidated return year(s) for
which the designation applies; and
(10) A statement on behalf of the substitute agent in which it:
(a) Agrees to serve as the group’s substitute agent pursuant to the common parent’s designation; and
(b) If it was not a member of the group
during the consolidated return year(s) for
which it is designated, acknowledges that
it is or will be primarily liable as a successor of a member of the group for the
consolidated tax liability for such consolidated return year(s).
.04 Signature requirements. (1) The
terminating common parent’s designation
of a corporation other than its qualifying
successor as substitute agent must contain
the following declaration, signed by a
duly authorized officer of the common
parent: Under penalties of perjury, I
declare that I am authorized to make
this designation on behalf of the common parent and that, to the best of my
knowledge, the information provided is
true, correct, and complete.
(2) The statement required under subsection .03(10) of this section 7 must contain the following declaration, signed by a
duly authorized officer of the substitute
agent: Under penalties of perjury, I
declare that I am authorized to sign
this statement on behalf of the designated substitute agent and that, to the
best of my knowledge, the information
provided is true, correct, and complete.

102

.05 Designations solely for consolidated return years subject to § 1.1502–
77A(d). If the designation applies only to
one or more consolidated return years
beginning before June 28, 2002, and the
designated substitute agent was a member
(but not a successor of a member) of the
group for the year(s) for which the designation applies, the election in paragraph
(5) of subsection .03 and the statement
signed on behalf of the designated substitute agent in paragraph (10) of subsection
.03 are not applicable and are therefore
not required.
.06 Approval. (1) The IRS may
approve or disapprove for any reason a
designation of a substitute agent under
this section 7. Approval of such designation is in the sole discretion of the IRS.
(2) No designation by a terminating
common parent under this section 7
applies unless and until it is approved by
the IRS. Approval of a terminating common parent’s designation under this section 7 will not be effective before the
existence of the common parent making
the designation terminates.
(3) The IRS will approve or disapprove any designation under this section 7
in writing to the terminating common parent and the substitute agent. Unless written approval is received from the IRS,
taxpayers may not assume that the substitute agent has the authority to act on
behalf of the group.
SECTION 8. DESIGNATION BY
REMAINING MEMBERS OF THE
GROUP UNDER § 1.1502–77A(d).
.01. In general. If a terminating common parent does not designate a substitute agent for any consolidated return
year(s) beginning before June 28, 2002,
the remaining members of the group may
designate a substitute agent pursuant to
§ 1.1502–77A(d) for such year(s). The
remaining members may designate as
substitute agent any corporation that was
a member of the group for any part of a
consolidated return year for which the
designation applies. The designation must
be filed in accordance with the requirements set forth in this section 8.
.02 When to file. The designation of a
substitute agent by the remaining members of the group under § 1.1502–

2002–28 I.R.B.

77A(d)(1) may be filed at any time after
the common parent’s existence terminates.
.03 Contents. The remaining members’
designation of a substitute agent must be
in writing and contain the following
information:
(1) The heading “REV. PROC. 2002–
43: DESIGNATION BY GROUP MEMBERS UNDER § 1.1502–77A(d)” must
be typed or legibly printed at the top of
the designation;
(2) Name, address, and employer identification number of the terminated common parent for which a substitute agent is
being designated;
(3) Name, address, and employer identification number of the designated substitute agent and the consolidated return
year(s) for which the designation applies
(or a statement that it applies to all consolidated return years ending on or before
the date of termination of the common
parent);
(4) The name and employer identification number of the common parent under
which the return(s) for which the designation applies was (were) filed, if different
from the common parent named in paragraph (2) of this subsection .03;
(5) The Internal Revenue Service Center where the consolidated return(s) was
(were) or will be filed, as the case may
be, for the year(s) for which the designation applies;
(6) The date of termination of the common parent;
(7) The name and address of the corporation(s) (or other person(s)) that have
(or will have) custody of the books and
records with respect to the consolidated
return year(s) for which the designation
applies, if different from the designated
substitute agent named in paragraph (3)
of this subsection .03, and if so, a description of the arrangements available to the
designated substitute agent for access to
the books and records;
(8) A representation that the corporations signing the designation constitute all
of the remaining members of the group;
and
(9) The name, address, and phone
number of the Examination Team Manager, Appeals Officer or Counsel Attorney, if any, who currently has jurisdiction
of the consolidated return year(s) for
which the designation applies.

2002–28 I.R.B.

.04 Signature requirements. The designation must contain the following declaration, signed by a duly authorized officer
of each remaining member of the group
for the consolidated return year(s) for
which the designation applies: Under
penalties of perjury, I declare that I am
authorized to make this designation on
behalf of the named member of the
group and that, to the best of my
knowledge, the information provided is
true, correct, and complete. For purposes of this subsection .04, the designation may be submitted as a single document containing all required signatures or
as multiple documents each signed by a
duly authorized officer of a remaining
member of the group.
.05 Approval. (1) The IRS may
approve or disapprove for any reason a
designation of a substitute agent under
this section 8. Approval of such designation is in the sole discretion of the IRS.
(2) No designation under this section 8
applies unless and until it is approved by
the IRS.
(3) The IRS will approve or disapprove any designation under this section 8
in writing to the member designated as
substitute agent in subsection .03(3) of
this section 8. Unless written approval is
received from the IRS, taxpayers may not
assume that the substitute agent has the
authority to act on behalf of the group.
SECTION 9. NOTIFICATION BY
DEFAULT SUBSTITUTE AGENT
UNDER § 1.1502–77(d)(2)
.01 In general. If a terminating common parent that does not designate a substitute agent pursuant to § 1.1502–
77(d)(1) has a qualifying successor (as
defined in section 6.02 of this revenue
procedure), such qualifying successor is
the default substitute agent under
§ 1.1502–77(d)(2) for consolidated return
years beginning on or after June 28, 2002.
Such default substitute agent must provide notification to the IRS pursuant to
the filing requirements set forth in this
section 9 to insure that it will receive
communications from the IRS to the
group and to insure that the IRS will act
on its communications to the IRS on
behalf of the group.
.02 When to file. Notification by the
default substitute agent should be filed

103

promptly after the existence of the common parent terminates.
.03 Contents. The notification by the
default substitute agent under § 1.1502–
77(d)(2) must be in writing and contain
the following information:
(1) The heading “REV. PROC. 2002–
43: NOTIFICATION BY DEFAULT
SUBSTITUTE
AGENT
UNDER
§ 1.1502–77(d)(2)” must be typed or legibly printed at the top of the notification;
(2) Name, address, and employer identification number of the terminated common parent;
(3) Name, address, and employer identification number of the default substitute
agent and the consolidated return year(s)
for which it is the substitute agent;
(4) The name and employer identification number of the common parent under
which the return(s) for which the default
substitute agent is the substitute agent
was (were) filed, if different from the
common parent named in paragraph (2)
of this subsection .03;
(5) The Internal Revenue Service Center where the consolidated return(s) was
(were) or will be filed, as the case may
be, for the consolidated return year(s) for
which the default substitute agent is the
substitute agent;
(6) The date of termination of the common parent;
(7) The name, address, and phone
number of the Examination Team Manager, Appeals Officer or Counsel Attorney, if any, who currently has jurisdiction
of the consolidated return year(s) for
which the default substitute agent is the
substitute agent; and
(8) A statement in which the default
substitute agent:
(a) Agrees to serve as the group’s substitute agent; and
(b) If it was not a member of the group
during the consolidated return year(s) for
which it is the default substitute agent,
acknowledges that it is primarily liable as
a successor of the former common parent
of the group for the consolidated tax
liability for such consolidated return
year(s).
.04 Signature requirements. The notification by a default substitute agent must
contain the following declaration, signed
by a duly authorized officer of the default
substitute agent: Under penalties of perjury, I declare that I am authorized to

July 15, 2002

submit this notification on behalf of the
default substitute agent and that, to the
best of my knowledge, the information
provided is true, correct, and complete.
.05 No approval required. IRS
approval is not required for a default substitute agent, but the IRS is not required
to send communications to, or act on
communications from, a default substitute
agent until it provides notification under
this section 9.
SECTION 10. MEMBER’S REQUEST
FOR THE IRS TO DESIGNATE A
SUBSTITUTE AGENT UNDER
§ 1.1502–77(d)(3)(i)
.01 In general. If a terminating common parent does not designate a substitute agent and there is no default substitute agent under § 1.1502–77(d)(2), one
or more members of the group may
request that the IRS designate a substitute
agent pursuant to § 1.1502–77(d)(3)(i) for
consolidated return years beginning on or
after June 28, 2002. Such request may
(but is not required to) propose a member
(or a successor of a member) for the IRS
to designate as substitute agent.
.02 When to file. A request by a member of the group that the IRS designate a
substitute agent may be filed at any time
after the common parent’s existence terminates and before the IRS designates a
substitute agent.
.03 Contents. A request for designation
of a substitute agent must be in writing
and contain the following information:
(1) The heading “REV. PROC. 2002–
43: REQUEST FOR DESIGNATION OF
SUBSTITUTE
AGENT
UNDER
§ 1.1502–77(d)(3)” must be typed or legibly printed at the top of the designation;
(2) Name, address, and employer identification number of the terminated common parent;
(3) Name, address, and employer identification number of the proposed substitute agent, if any, and the consolidated
return year(s) for which the designation is
requested;
(4) The name and employer identification number of the common parent under
which the return(s) for which the designation is requested was (were) filed, if different from the common parent named in
paragraph (2) of this subsection .03;
(5) The Internal Revenue Service Center where the consolidated return(s) was

July 15, 2002

(were) or will be filed, as the case may
be, for the year(s) for which the designation is requested;
(6) The date the common parent’s
existence terminated and the circumstances under which it terminated (e.g.,
dissolution under state law or merger into
a limited liability company);
(7) The name and address of the corporation(s) (or other person(s)) that have
custody of the books and records with
respect to the consolidated return year(s)
for which the designation is requested, if
different from any proposed substitute
agent named in paragraph (3) of this subsection .03, and if so, a description of the
arrangements available to the proposed
substitute agent for access to the books
and records; and
(8) The name, address, and phone
number of the Examination Team Manager, Appeals Officer or Counsel Attorney, if any, who currently has jurisdiction
of the consolidated return year(s) for
which the designation is requested.
.04 Signature requirement. A request
under this section 10 must contain the following declaration, signed by a duly
authorized officer of at least one of the
requesting members which was a member
of the group for the consolidated return
year(s) for which the designation is
requested: Under penalties of perjury, I
declare that I am authorized to make
this request on behalf of the named
member of the group and that, to the
best of my knowledge, the information
provided is true, correct, and complete.
.05 Designation by the IRS. (1) In
response to a request under this section
10, the IRS may, in its sole discretion,
designate as the substitute agent the member (or successor of the member) proposed by the request, if any, or another
member (or successor of another member).
(2) The IRS will notify in writing the
designated substitute agent.
SECTION 11. REQUEST THAT IRS
REPLACE A PREVIOUSLY
DESIGNATED SUBSTITUTE AGENT
.01 In general. If the IRS designates a
substitute agent pursuant to § 1.1502–
77(d)(3)(i), one or more members of the
group may request pursuant to § 1.1502–
77(d)(3)(ii) that the IRS replace the previously designated substitute agent with

104

another member (or successor of another
member). Such request may (but is not
required to) propose a substitute agent to
replace the previously designated substitute agent.
.02 When to file. A request by a member of the group that the IRS replace a
previously designated substitute agent
may be filed at any time after the IRS
designates the substitute agent that the
request seeks to have replaced.
.03 Contents. A request that the IRS
replace a previously designated substitute
agent must be in writing and contain the
following information:
(1) The heading “REV. PROC. 2002–
43: REQUEST FOR IRS TO REPLACE
PREVIOUSLY DESIGNATED SUBSTITUTE AGENT UNDER § 1.1502–
77(d)(3)” must be typed or legibly printed
at the top of the designation;
(2) Name, address, and employer identification number of the previously designated substitute agent;
(3) Name, address, and employer identification number of the proposed substitute agent, if any, to replace the previously designated substitute agent and the
consolidated return year(s) for which the
replacement designation is requested;
(4) The name and employer identification number of the common parent under
which the return(s) for which the replacement designation is requested was (were)
filed;
(5) The Internal Revenue Service Center where the consolidated return(s) was
(were) or will be filed, as the case may
be, for the year(s) for which the replacement designation is requested;
(6) The date the common parent’s
existence terminated and the circumstances under which it terminated (e.g.,
dissolution under state law or merger into
a limited liability company);
(7) The name and address of the corporation(s) (or other person(s)) that have
custody of the books and records with
respect to the consolidated return years
for which the replacement designation is
requested, if different from the proposed
replacement substitute agent named in
paragraph (3) of this subsection .03, and
if so, a description of the arrangements
available to the proposed replacement
substitute agent for access to the books
and records;

2002–28 I.R.B.

(8) The name, address, and phone
number of the Examination Team Manager, Appeals Officer or Counsel Attorney, if any, who currently has jurisdiction
of the consolidated return years for which
the replacement designation is requested;
and
(9) The reason(s) for the request to
replace the previously designated substitute agent.
.04 Signature requirement. A request
under this section 11 must contain the following declaration, signed by a duly
authorized officer of at least one of the
requesting members which was a member
of the group for the consolidated return
year(s) for which the replacement designation is requested: Under penalties of
perjury, I declare that I am authorized
to make this request on behalf of the
named member of the group and that,
to the best of my knowledge, the information provided is true, correct, and
complete.
.05 Where to file. Notwithstanding the
instructions in section 4 of this revenue
procedure, a request under this section 11
must be filed with the office that made
the designation of the substitute agent that
the request seeks to replace.
.06 Designation by the IRS. (1) In
response to a request under this section
11, the IRS may, in its sole discretion,
replace the previously designated substitute agent with the member (or successor
of the member) proposed by the request
or another member (or successor of
another member).
(2) If the IRS replaces the previously
designated substitute agent, it will notify
in writing the previously designated substitute agent and the replacement substitute agent of the change in the substitute
agent.
SECTION 12. EFFECTIVE DATE
This revenue procedure applies to designations of substitute agents and notifications of the existence of default substitute agents, and to requests for
designation of a substitute agent or for
replacement of a previously designated
substitute agent made after June 28, 2002.

2002–28 I.R.B.

SECTION 13. PAPERWORK
REDUCTION ACT
The collection of information contained in this revenue procedure has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act (44
U.S.C. 3507) under control numbers
1545–1699 and 1545–1793.
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 OMB control number.
The collections of information in this
revenue procedure are in sections 6
through 11. These collections of information are required (i) for the common parent to notify the IRS of the designation of
a substitute agent for the consolidated
group when the common parent’s existence is about to terminate and for the designated corporation to confirm that it
agrees to serve as the group’s substitute
agent and qualifies to be the group’s substitute agent, (ii) for the common parent’s
successor to notify the IRS that it qualifies as a default substitute agent, or (iii)
for a member of a consolidated group to
request that the IRS designate a substitute
agent or replace a previously designated
substitute agent. This information will be
used (i) to determine whether to approve
the designation of the substitute agent, (ii)
to update IRS records with the name of
the substitute agent, or (iii) to designate
or replace a substitute agent. The collections of information are required to obtain
a benefit in the case of a designation by
the common parent or notification by a
default substitute agent, and voluntary in
the case of requests by members to designate or replace a substitute agent. The
likely respondents are business or other
for-profit institutions.
The estimated total annual reporting
burden is 400 hours.
The estimated annual burden per
respondent varies from one hour to 3
hours, depending on individual circumstances, with an estimated average of two
hours. The estimated number of respondents is 200.
The estimated annual frequency of
responses is on occasion.
Books or records relating to a collection of information must be retained as

105

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.
SECTION 14. INQUIRIES
Inquiries regarding this revenue procedure may be addressed to the Commissioner of Internal Revenue, ATTN:
CC:CORP:BO2, P.O. Box 7604, Ben
Franklin Station, Washington, D.C.
20044.
DRAFTING INFORMATION
The principal authors of this revenue
procedure are George R. Johnson and
Gerald B. Fleming of the Office of Associate Chief Counsel (Corporate). For further information regarding this revenue
procedure, contact Mr. Johnson at (202)
622–7930 or Mr. Fleming at (202) 622–
7770 (not toll-free numbers).

26 CFR 601.204: Changes in accounting periods
and methods of accounting.
(Also Part I, § 832; 1.832–4; 1.832–5.)

Rev. Proc. 2002–46
SECTION 1. PURPOSE
This revenue procedure provides certain insurance companies subject to tax
under § 831 of the Internal Revenue Code
with a safe harbor method of accounting
for premium acquisition expenses. This
revenue procedure also provides a procedure for insurance companies to obtain
automatic consent of the Commissioner
to change to this safe harbor method.
SECTION 2. BACKGROUND
.01 Section 832(b)(1) provides that the
gross income of an insurance company
subject to tax under § 831 includes the
company’s “underwriting income.”
.02 Section 832(b)(3) defines “underwriting income” as “premiums earned on
insurance contracts during the taxable
year, less losses incurred and expenses
incurred.”
.03 Section 832(b)(4) provides that to
compute premiums earned, an insurance
company reduces the amount of gross
premiums written on insurance contracts

July 15, 2002