Rev. Rul. 59-268

Advice has been requested whether alcohol and neutral spirits may be mingled in the bonded storage facilities of a distilled spirits plant, and, if so, how the resultant product should be designated.

Section 5234(a)(1)(A) of the Internal Revenue Code of 1954, as amended by the Excise Tax Technical Changes Act of 1958, C.B. 1958-3, 92, provides that under such regulations as the Secretary of the Treasury or his delegate shall prescribe, distilled spirits may be mingled on bonded premises if such spirits were distilled at 190 degrees or more of proof.

Section 201.11 of the Distilled Spirits Plants Regulations defines spirits or distilled spirits as that substance known as ethyl alcohol, ethanol, or spirits or wine, including all dilutions and mixtures thereof, from whatever source or by whatever process produced.

Section 201.656 of the regulations provides in part that any spirits distilled at 190 degrees or more of proof, whether or not subsequently reduced, may be mingled in bonded warehouses.

In view of the fact that `spirits' as defined by the regulations includes both alcohol and neutral spirits, it is held that alcohol distilled at or above 190 degrees of proof and neutral spirits, which must be distilled at 190 degrees of proof or more, may be mingled in tanks in the bonded storage facilities of a distilled spirits plant. The mingled spirits may be designated as alcohol, or they may be designated as neutral spirits if all components of the mixture were produced from commodities eligible for use under the Production of Distilled Spirits Regulations.

Where alcohol and neutral spirits are to be mingled, the proprietor of the distilled spirits plant must make application to the internal revenue officer, assigned to his premises, on Form 2323, Mingling of Distilled Spirits, modified as necessary. On the completion of the mingling the warehouse records must be adjusted by debiting and crediting the appropriate accounts.