Rev. Rul. 65-127

Inquiries have been received relating to the procedure for personal holding companies to follow in making the election under section 545(c)(4) of the Internal Revenue Code of 1954 to treat as nondeductible certain amounts used or irrevocably set aside to pay or retire qualified indebtedness which are otherwise deductible under section 545(c)(1) of the Code in determining undistributed personal holding company income.

The election must be made on or before the 15th day of the third month following the close of the taxable year with respect to which the election applies and shall be irrevocable after such date. The election must be made on or before such date whether or not an extension of time for filing Form 1120, U.S. Corporation Income Tax Return, is granted.

Pending issuance of the regulations the election shall be in the form of a statement attached to the taxpayer corporation's schedule PH (Form 1120), Computation of U.S. Personal Holding Company Tax, for the taxable year to which the election applies. However, if an extension of time is granted for filing Form 1120 for such year, the election statement shall be filed on or before the regular due date for filing such return with the district director for the internal revenue district in which taxpayer's income tax return would be filed.

The statement of election shall include the following:

(1) A statement that the taxpayer wishes to elect in accordance with section 545(c)(4) of the Code;

(2) The amounts paid or set aside which are to be treated as nondeductible under the rule of section 545(c)(4) of the Code;

(3) All information necessary to identify the qualified indebtedness with respect to which such amounts were paid or set aside;

(4) The date on which such payments or set-asides were made; and

(5) All information necessary to identify the indebtedness referred to in section 545(c)(3)(A)(ii) of the Code incurred for the purpose of making the payments or set-asides which the taxpayer elects to treat as nondeductible, including-

(a) The date on which such indebtedness was incurred,

(b) The amount of such indebtedness,

(c) The person or persons to whom such indebtedness is owed, and

(d) A statement that such person or persons do not own more than ten percent in value of the taxpayer's outstanding stock.

¹ Based on Technical Information Release 708, dated Mar. 15, 1965.