SERVICE ANNOUNCES AREAS IN WHICH ADVANCE RULINGS WILL NOT BE ISSUED BY ASSOCIATE CHIEF COUNSEL (TECHNICAL).

Rev. Proc. 89-3

SECTION 1. PURPOSE AND NATURE OF CHANGES

01 The purpose of this revenue procedure is to update Rev. Proc. 88-3, 1988-1 I.R.B. 29, as amplified and modified by subsequent revenue procedures, by providing a revised list of those areas of the Internal Revenue Code under the jurisdiction of the Associate Chief Counsel (Technical) relating to issues in which the Internal Revenue Service will not issue advance rulings or determination letters. For a list of areas under the jurisdiction of the Associate Chief Counsel (International) relating to international issues in which the Service will not issue advance rulings or determination letters, see Rev. Proc. 87-6, 1987-1 C.B. 541, as amplified by Rev. Proc. 87-39, 1987-2 C.B. 514, and Rev. Proc. 87-61, 1987-2 C.B. 765. When applicable, the Tax Reform Act of 1986 will be referred to as "TRA 1986", and the Tax Equity and Fiscal Responsibility Act of 1982 will be referred to as "TEFRA."

02 Changes

1 Old sections 3.019, 3.0136, and 3.0138 have been deleted as a result of Rev. Rul. 88-27, 1988-17 I.R.B. 40.

2 New section 3.0123 modifies old section 3.0124. See Rev. Proc. 88-25, 1988-21 I.R.B. 30.

3. Old sections 3.0127 and 3.0128 have been deleted to reflect changes to the Code in TRA 1986 and the Revenue Act of 1987.

4. Old section 3.023 has been modified. See Rev. Proc. 88-50, 1988-42 I.R.B. 81.

5. New sections 4.014 and 4.017 modify old sections 4.014 and 4.017. See Rev. Proc. 88-26, 1988-22 I.R.B. 53.

6. Old section 4.015 has been deleted. See Rev. Proc. 88-47, 1988-38 I.R.B. 23.

7. New section 4.016 refers to section 141 of the Code, while old section 5.05 has been deleted. See Rev. Proc. 88-57, 1988-52 I.R.B. 29.

8. New section 4.019 refers to sections 162 and 262 of the Code, while old section 5.08 has been deleted. See Rev. Proc. 88-45, 1988- 38 I.R.B. 22.

9. New sections 4.0112, 4.0125, 4.0128, and 4.0129 refer to sections 170, 642, 2055, and 2522 of the Code respectively. See Rev. Proc. 88-54, 1988-48 I.R.B. 16.

New sections 4.0114, 4.0123, and 4.0127 refer to sections 216, 351, and 1502 of the Code respectively, while old sections 5.01, 5.19, and 5.32 have been deleted. See Rev. Proc. 88-46, 1988-38 I.R.B. 22.

11. Old section 5.09 has been deleted. See Rev. Proc. 88-35, 1988-26 I.R.B. 5.

12. Old section 5.14 has been deleted. See Rev. Proc. 88-34, 1988-26 I.R.B. 5.

13 Old section 5.22 has been deleted. See Rev. Proc. 88-38, 1988-32 I.R.B. 9.

14. Old section 5.24 has been deleted. See Rev. Proc. 88-51, 1988-43 I.R.B. 14.

15. Old section 5.37 has been deleted. See Rev. Proc. 88-44, 1988-38 I.R.B. 22.

SEC. 2. BACKGROUND AND SCOPE OF APPLICATION

01 Background

Whenever appropriate in the interest of sound tax administration, it is the policy of the Service to answer inquiries of individuals and organizations regarding their status for tax purposes and the tax effects of their acts or transactions, prior to the filing of 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 advance rulings or determination letters. These areas are set forth in three sections of this revenue procedure. Section 3 reflects those areas in which advance rulings and determinations will not be issued. Section 4 sets forth those areas in which they will not ordinarily be issued. "Not ordinarily" connotes that unique and compelling reasons must be demonstrated to justify the issuance of a ruling or determination letter. Those sections reflect a number of specific questions and problems as well as general areas. Section 5 lists specific areas for which the Service is temporarily not issuing advance rulings and determinations because those matters are under extensive study. See Rev. Proc. 89-1, particularly section 7 captioned "Discretionary Authority to Issue Rulings and Determination Letters" for general instructions and other situations in which the Service will not or ordinarily will not issue 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 restatement of items listed will be made by modification of this revenue procedure. Changes will be published as they occur throughout the year and will be incorporated annually in a new revenue procedure published as the third revenue procedure of the year. These lists should not be considered all-inclusive. Decisions not to rule on individual cases, as contrasted with those that present significant pattern issues, are not reported in this revenue procedure and will not be added to subsequent revisions.

02 Scope of Application

This revenue procedure is not to be considered as precluding the submission of requests for technical advice to the National Office from the Office of a District Director of the Internal Revenue or a Chief, Appeals Office.

SEC. 3. AREAS IN WHICH RULINGS OR DETERMINATION LETTERS WILL NOT BE ISSUED.

01 Specific questions and problems.

1. 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 section 1.79-1(c)(2)(ii) if the group consisted of fewer than 10 employees.

2. 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 of the property involves a nonrecourse obligation.

3. Section 105(h). -- Amount Paid to Highly Compensated Individuals under Discriminatory Self-Insurance Medical Expense Reimbursement Plan. -- Whether, following a determination that a self-insured medical expense reimbursement plan is discriminatory, that plan had previously made reasonable efforts to comply with tax discrimination rules.

4. Section 117. -- Scholarships and Fellowship Grants. -- Whether an employer-related scholarship or fellowship grant is excludable from the employee's gross income if there is no intermediary private foundation distributing the grants, as there was in Rev. Proc. 76-47, 1976-2 C.B. 670.

5. Section 119. -- Meals or Lodging Furnished for the Convenience of the Employer. -- Whether the value of meals or lodging is excludable from gross income by an employee who is a controlling shareholder of the employer.

6. Sections 121 and 1034. -- One-Time Exclusion of Gain from Sale of Principal Residence by Individual Who Has Attained Age 55; Rollover of Gain on Sale of Principal Residence. -- Whether property qualifies as the taxpayer's principal residence.

7. Section 162. -- Trade or Business Expenses. -- Whether compensation is reasonable in amount. Also, whether an action is "gross misconduct" within the meaning of section 162(k)(3)(B) (See section 3.05 of Rev. Proc. 87-28, 1987-1 C.B. 770, 771).

8. Section 163. -- Interest. -- The income tax consequences of transactions involving "shared appreciation mortgage" (SAM) loans in which a taxpayer, borrowing money to purchase real property, pays a fixed rate of interest on the mortgage loan below the prevailing market rate and will also pay the lender a percentage of the appreciation in value of the real property upon termination of the mortgage. This applies to all SAM arrangements where the loan proceeds are used for commercial or business activities, or where used to finance a personal residence if the facts are not similar to those described in Rev. Rul. 83-51, 1983-1 C.B. 48. (Also sections 61, 451, 461, 856, 1001, and 7701).

9. Section 170. -- Charitable, Etc., Contributions and Gifts. -- Whether a taxpayer who advances funds to a charitable organization and receives therefore a promissory note may deduct as contributions, on one taxable year or in each of several years, amounts forgiven by the taxpayer in each of several years by endorsement on the note.

10. Section 213(a). -- 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.

11. Section 264(b). -- Certain Amounts Paid in Connection with Insurance Contracts. -- Whether "substantially all" the premiums of a contract of insurance are paid within a period of 4 years from the date on which the contract is purchased. Also, whether an amount deposited is in payment of a "substantial number" of future premiums on such a contract.

12. Section 264(c)(1). -- Certain Amounts Paid in Connection with Insurance Contracts. -- Whether section 264(c)(1) of the Code applies.

13. Section 269. -- Acquisitions Made to Evade or Avoid Income Tax. -- Whether an acquisition is within the meaning of section 269 of the Code.

14. 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 prescribed in Rev. Proc. 83-71, 1983-2 C.B. 590, or any later revenue procedure that modifies Rev. Proc. 83-71.

15. Section 302. -- Distributions in Redemption of Stock. -- Whether section 302(b) of the Code 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 specified defaults by the corporation.

16. Section 302. -- Distributions in Redemption of Stock. -- Whether section 302(b) of the Code 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.

17. Section 302. -- Distributions in Redemption of Stock. -- Whether section 302(b) of the Code applies to a redemption of stock if after the redemption the distributing corporation uses property that is owned by the shareholder from whom the stock is redeemed and the payments by the corporation for the use of the property are dependent upon the corporation's 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.

18. Section 302. -- Distributions in Redemption of Stock. -- Whether the acquisition or disposition of stock described in section 302(c)(2)(B) of the Code has, or did 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. 56-556, 1956-2 C.B. 177, Rev. Rul. 56-584, 1956-2 C.B. 179, Rev. Rul. 57-387, 1957-2 C.B. 225, Rev. Rul. 77-293, 1977-2 C.B. 91, Rev. Rul. 79-67, 1979-1 C.B. 128, or Rev. Rul. 85-19, 1985-1 C.B. 94.

19. Section 302(b)(4) and (e) (pre-TEFRA sections 346(a)(2) and (b)). -- Partial Liquidation. -- The amount of working capital attributable to a business or portion of a business terminated that may be distributed in partial liquidation.

20. Sections 311 and 336 (pre-TRA 1986). -- Taxability of Corporation on Distribution; General Rule. -- Upon distribution of property in kind by a corporation to its shareholders, in complete liquidation under section 331 of the Code (when under the facts a sale of the property by the corporation would not qualify under pre- TRA 1986 section 337) and section 346(a) (pre-TEFRA section 346(a)(1)), in partial liquidation under section 302(b)(4) and (e) (pre-TEFRA sections 346(a)(2) and (b)) or in redemption of stock under section 302(a), followed by a sale of the property, whether the sale can be deemed to have been made by the corporation under the doctrine of Commissioner v. Court Holding Company, 324 U.S. 331 (1945), 1945 C.B. 58.

21. Section 312. -- Effect on Earnings and Profits. -- The determination of the amount of earnings and profits of a corporation.

22. Section 368(a)(1)(B). -- Definitions Relating to Corporate Reorganizations. -- 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 section 368(a)(1)(B).

23. Section 368(a)(1)(E). -- Definitions Relating to Corporate Reorganizations. -- Whether a transaction constitutes a corporate recapitalization within the meaning of section 368(a)(1)(E) of the Code (or a transaction that also qualified under section 1036) when either (i) the transaction involves a closely-held corporation or (ii) the issues involved are substantially similar to those described in the following revenue rulings:

Rev. Rul. 82-34, 1982-1 C.B. 59 (continuity of business enterprise);

Rev. Rul. 77-479, 1977-2 C.B. 119 (continuity of shareholder interest);

Rev. Rul. 77-238, 1977-2 C.B. 115 (conversion of shares of one class of stock into shares of another class, as permitted by certificate of incorporation);

Rev. Rul. 74-269, 1974-1 C.B. 87 (major shareholder's exchange of common stock for preferred stock);

Rev. Rul. 56-654, 1956-2 C.B. 216 (corporate charter amended to provide preferred stock with increased redemption and liquidation value, where common and preferred stock held pro rata);

Rev. Rul. 55-112, 1955-1 C.B. 344 (common stock exchanged for preferred stock); and

Rev. Rul. 54-482, 1954-2 C.B. 148 (old common stock exchanged for new common stock). The above no-ruling area does not apply, however, to any corporate recapitalization that is an integral part of a larger transaction if it is impossible to determine the tax consequences of the larger transaction without making a determination with regard to the recapitalization.

24. Section 451. -- General Rule for Taxable Year of Inclusion. -- The tax consequences of a nonqualified unfunded deferred compensation arrangement with respect to a controlling shareholder employee eligible to participate in the arrangement.

25. Sections 451 and 457. -- General Rule for Taxable Year of Inclusion; Deferred Compensation Plans with Respect to Service for State and Local Governments. -- The tax consequences to unidentified independent contractors in nonqualified unfunded deferred compensation plans. This applies to plans established under section 451 of the Code by employers in the private sector and to eligible state plans under section 457. However, a ruling with respect to a specific independent contractor's participation in such a plan may be issued.

26. Section 641. -- Imposition of Tax. -- Whether the period of administration or settlement of an estate is reasonable or unduly prolonged.

27. 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.

28. Section 704(e). -- Family Partnerships. -- Matters relating to the validity of a family partnership when capital is not a material income producing factor.

29. Section 856. -- Definition of a 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 section 856 of the Code if the activities of the corporations are integrated.

30. Section 1221. -- Capital Asset Defined. -- Whether speciality stock allocated to an investment account by a registered specialist on a national securities exchange is a capital asset.

31. Section 1551. -- Disallowance of Surtax Exemption and Accumulated Earnings Credit. -- Whether a transfer is within section 1551 of the Code.

32. Section 2031. -- Definition of Gross Estate. -- Actuarial factors for valuing interests in the prospective gross estate of a living person.

33. Section 2512. -- Valuation of Gifts. -- Actuarial factors for valuing prospective or hypothetical gifts of a donor.

34. Section 7701. -- Definitions. -- Whether a foreign arrangement that is a participant in a domestic arrangement classified as a partnership for U.S. tax purposes will itself be classified as a partnership.

35. Section 7701. -- Definitions. -- Whether a foreign limited liability company will be classified as a partnership if the taxpayer requests classification as a partnership and (1) the taxpayer is a corporation and less than 20 percent of the interests in the limited liability company are held by independent parties or (2) the taxpayer is not a corporation and independent parties hold only a nominal interest in the company.

36. Section 7701. -- Definitions. -- Whether an organization, formed in a state that has a statute corresponding to the Uniform Limited Partnership Act or the Revised Uniform Limited Partnership Act, lacks the corporate characteristic of continuity of life where, in the case of the removal of a general partner, the partnership agreement allows less than a majority in interest of limited partners to elect a new one to continue the partnership.

37. Section 7701. -- Definitions. -- Whether a limited partnership will be classified as a partnership if the partnership agreement does not provide that, notwithstanding anything to the contrary that may be expressed or implied in the agreement, the interests of all of the general partners, taken together, in each material item of partnership income, gain, loss, deduction, or credit is equal to at least one percent of each such item at all times during the existence of the partnership. In determining the general partners' interests in such items, limited partnership interests owned by the general partners shall not be taken into account.

38. Section 7701. -- Definitions. -- Whether a limited partnership will be classified as a partnership if the partnership agreement does not expressly provide that, upon the dissolution and termination of the partnership, the general partners will contribute to the partnership an amount equal to: (a) the deficit balances in their capital accounts; or (b) the excess of 1.01 percent of the total capital contributions of the limited partners over the capital previously contributed by the general partners; or (c) the lesser of (a) or (b).

02 General Areas

1. The results of transactions that lack bona fide business purpose or have as their principal purpose the reduction of federal taxes.

2. A matter upon which a court decision adverse to the government has been handed down and the question of following the decision or litigating further has not yet been resolved.

3. A matter involving the prospective application of the estate tax to the property or the estate of a living person, to the extent provided in section 4.04 of Rev. Proc. 88-50, 1988-42 I.R.B. 81. Rev. Proc. 88-50 generally provides for the issuance of advance estate tax rulings on a test basis until December 31, 1989.

4. A matter involving alternate plans of proposed transactions or involving hypothetical situations.

5. A matter involving the federal tax consequences of any proposed federal, state, local or municipal legislation. The Service may provide general information in response to an inquiry.

6. Whether under Subtitle F (Procedure and Administration) of the Code, reasonable cause, due diligence, good faith, clear and convincing evidence or other similar terms that require a factual determination exist.

7. Whether a proposed transaction would subject the taxpayer to a criminal penalty.

8. A request that does not comply with the provisions of Rev. Proc. 89-1.

9. Whether, under the common law rules applicable in determining the employer-employee relationship, a professional staffing corporation (loan-out corporation) or the subscriber is the employer of individuals if:

(a) the loan-out corporation hires employees of the subscriber and assigns the employees back to the subscriber or;

(b) the loan-out corporation assigns individuals to subscribers for more than a temporary period (1 year or longer).

SEC. 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. -- Investment Tax Credit. -- Application of these sections where the formal ownership of property is in a party other than the taxpayer, except when title is held merely as security.

2. Section 61. -- Gross Income Defined. -- Determination as to who is the true owner of property in cases involving the sale of securities, or participation interests therein, where the purchaser has the contractual right to cause the securities, or participation interests therein, to be purchased by either the seller or a third party.

3. Sections 61 and 163. -- Gross Income Defined; Interest. -- Determinations as to who is the true owner of property or the true borrower of money in cases in which the formal ownership of the property or liability for the indebtedness is in another party.

4. Section 103. -- Interest on State and Local Bonds. -- Whether the interest on state and local bonds will be excludable from gross income under section 103(a) of the Code 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 and local bonds prior to their expenditure.

5. Section 103. -- Interest on Certain Governmental Obligations. -- Whether an issue of industrial development bonds is exempt under section 103(b) of the Code when 10 percent or more of the proceeds of the issue (minus "neutral costs," as described in Rev. Rul. 80-171, 1980-2 C.B. 44) are used to finance a facility in which an owner (or a related person) or a lessee (or a related person), who was a user of the facility at any time before the bonds were issued, will be a user of the facilitry after the bonds are issued.

6. Section 141. -- Private Activity Bond; Qualified Bond. -- With respect to requests made pursuant to Rev. Proc. 88-33, 1988-25 I.R.B. 48, whether state or local bonds will meet the "private business use tests" and the "private security or payment test" under section 141(b)(1) and (2) of the Code in situations where 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 subparagraph (5) output of the facility as defined in section 1.103-7(b)(5)(ii)(b) of the regulations (issued under former section 103(b) of the Code). In similar situations, the Service will not ordinarily issue rulings or determination letters concerning questions arising under paragraphs (3), (4), and (5) of section 141(b).

7. 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 section 1.103-13(g) of the regulations (issued under former section 103(c) of the Code) or replaced proceeds described in section 148(a)(2) of the Code (or former section 103(c)(2)(B)).

8. Section 162. -- Trade or Business Expenses. -- Whether the requisite risk shifting and risk distribution necessary to constitute insurance are present for purposes of determining the deductibility under section 162 of the Code of amounts paid (premiums) by a taxpayer for insurance, unless the facts of the transaction are within the scope of Rev. Rul. 77-316, 1977-2 C.B. 53, or Rev. Rul. 78-338, 1978-2 C.B. 107.

9. Sections 162 and 262. -- Commuting Expenses. -- Whether expenses are nondeductible commuting expenses.

10. Section 167. -- Depreciation.

(a) Useful lives of assets.

(b) Depreciation rates.

(c) Salvage value of assets.

11. Sections 167 and 168. -- Depreciation; Accelerated Cost Recovery System. -- Application of those sections where the formal ownership of property is in a party other than the taxpayer, except when title is held merely as security.

12. Section 170. -- Charitable, Etc., Contributions and Gifts. -- Whether a transfer to a pooled income fund described in section 642(c)(5) of the Code qualifies for a charitable deduction under section 170(f)(2)(A).

13. Section 170(c). -- Charitable, etc., Contributions and Gifts. -- Whether a taxpayer who transfers property to a charitable organization and thereafter leases back all or a portion of the transferred property, may deduct the fair market value of the property transferred and leased back as a charitable contribution.

14. Section 216. -- Deduction of Taxes, Interest, and Business Depreciation by Cooperative Housing Corporation Tenant Stockholder. -- If a cooperative housing corporation (CHC), as defined in section 216(b)(1) of the Code, 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 (1) the income of the transferee corporation derived from the commercial activity, and (2) 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 section 216(b)(1)(D).

15. Section 302. -- Distribution 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.

16. Section 302(b)(4) and (e) (pre-TEFRA section 346(a)(2)). -- Partial Liquidation. -- Whether a distribution will qualify as a distribution in partial liquidation under section 302(b)(4) and (e)(1)(A) (pre-TEFRA section 346(a)(2)) of the Code, unless it results in a 20 percent or greater reduction in (1) gross revenue, (2) net fair market value of assets, and (3) employees.

17. Sections 302(b)(4) and (e) (Pre-TEFRA sections 346(a)(2) and (b)), 331, 332, pre-TRA 1986 section 333 and section 346(a) (pre- TEFRA section 346(a)(1)). -- Effects on Recipients of Distributions in Corporate Liquidations. -- The tax effect of the liquidation of a corporation preceded or followed by the reincorporation of all or a part of the business and assets when more than a nominal amount of the stock (that is, more than 20 percent in value) of both the liquidating corporation and the transferee corporation is owned by the same shareholders; or when a liquidation is followed by the sales of the corporate assets by the shareholders to another corporation in which such shareholders own more than a nominal amount of the stock (that is, more than 20 percent in value).

18. Section 306. -- Disposition of Certain Stock. -- Whether the distribution or disposition or redemption of "section 306 stock" in a closely held corporation is in pursuance of a plan having as one of its principal purposes the avoidance of federal income taxes within the meaning of section 306(b)(4) of the Code.

19. Sections 331 and 346(a). -- Gain or Loss to Shareholders in Corporate Liquidations. -- The tax effect of the liquidation of a corporation by a series of distributions, when the distributions in liquidation are to be made over a period in excess of 3 years from the adoption of the plan of liquidation.

20. Section 336 (pre-TRA 1986 section 337). -- Gain or Loss: Certain Liquidations. -- The application of this section to a corporation upon the sale of property, in connection with its liquidation, to another corporation, when more than a nominal amount of the stock (that is, more than 20 percent in value) of both the selling corporation and the purchasing corporation is owned by the same persons.

21. Section 341. -- Collapsible Corporations. -- Whether a corporation will be considered to be a "collapsible corporation," that is, whether it was "formed or availed of" with the view of certain tax consequences. However, ruling requests will be considered on this matter when the enterprise (1) has been in existence for at least 20 years or has clearly demonstrated that it has realized two- thirds of the taxable income to be derived from the manufacturing, constructing, producing, or purchasing of property as stated in section 341(b)(1)(A) of the Code and as described in Rev. Rul. 72-48, 1972-1 C.B. 102; (2) has had an aggregate change in the shareholders' interests of not more than 10 percent during that period (except for transfers among family members, as defined in section 267(c)(4), or redemptions of stock to pay death taxes pursuant to section 303); and (3) has conducted substantially the same trade or business during that period. The period referred to in (2) and (3) above is the lesser of 20 years of corporate existence or the period in which the enterprise has realized two-thirds of the taxable income from activities specified in section 341(b)(1)(A).

22. Section 351. -- Transfers to a Controlled Corporation. -- The tax effect of the transfer when part of the consideration received by the transferors consists of an instrument that is a bond, debenture, or any other evidence of indebtedness of the transferee and either (1) the terms of the instrument permit, at the option of the issuer or holder, the payment of all or part of the principal on the instrument in less than 10 years from its issuance, or (2) a determination as to whether the "indebtedness" is properly classified as debt or equity is required in order to establish that the requirements of section 351 of the Code are met.

23. Section 351. -- Transfer to Corporation Controlled by Transferor. -- Whether section 351 of the Code applies to the transfer of an interest in real property by a cooperative housing corporation (as described in section 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.

24. Section 355. -- Distribution of Stock and Securities of a Controlled Corporation. -- Whether the active business requirement of section 355(b) of the Code is met when, within the 5-year period described in section 355(b)(2)(B), a distributing corporation acquired control of a controlled corporation as a result of the distributing corporation transferring cash or other liquid or inactive assets to the controlled corporation in a transaction in which gain or loss was not recognized as a result of the transfer meeting the requirements of section 351(a) or 368(a)(1)(D).

25. Section 642. -- Pooled Income Funds. -- Whether a pooled income fund satisfies the requirements described in section 642(c)(5) of the Code.

26. Section 816. -- Definition of Life Insurance Company. -- Whether the requisite risk shifting and risk distribution necessary to constitute insurance are present for purposes of determining if a company is an "insurance company" under section 1.801-3(a) of the regulations, unless the facts of the transaction are within the scope of Rev. Rul. 77-316, 1977-2 C.B. 53, or Rev. Rul. 78-338, 1978-2 C.B. 107.

27. Section 1502. -- Regulations. -- Whether a parent cooperative housing corporation (as defined in section 216(b)(1) of the Code) 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.

28. Section 2055. -- Transfers for Public, Charitable and Religious Uses. -- Whether a transfer to a pooled income fund described in section 642(c)(5) of the Code qualifies for a charitable deduction under section 2055(e)(2)(A).

29. Section 2522. -- Charitable and Similar Gifts. -- Whether a transfer to a pooled income fund described in section 642(c)(5) of the Code qualifies for a charitable deduction under section 2522(c)(2)(A).

30. Section 7701. -- Definitions. -- Whether what is generally known as a foreign corporation will be classified as a partnership for U.S. tax purposes if the taxpayer requests classification as a partnership.

31. Section 7701. -- Definitions. -- Whether a foreign partnership will be classified as an association for U.S. tax purposes if the taxpayer requests classification as an association.

02 General areas.

1. Any matter in which the determination requested is primarily one of fact, e.g., market value of property, or whether an interest in a corporation is to be treated as stock or indebtedness.

2. The tax effect of any transaction to be consummated at some indefinite future time.

3. Any matter dealing with the question of whether property is held primarily for sale to customers in the ordinary course of trade or business.

4. 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.

SEC. 5. AREAS UNDER EXTENSIVE STUDY IN WHICH RULINGS OR DETERMINATION LETTERS WILL NOT BE ISSUED UNTIL THE SERVICE RESOLVES THE ISSUE THROUGH PUBLICATION OF A REVENUE RULING, REVENUE PROCEDURE, REGULATIONS OR OTHERWISE

01 Section 61. -- Gross Income Defined. -- Whether amounts voluntarily deferred by a taxpayer under a deferred compensation plan maintained by an organization described in section 501 of the Code are currently includible in the taxpayer's gross income.

02 Sections 61 and 162. -- Gross Income Defined; Trade or Business Expenses. -- The tax consequences with respect to a salary reduction arrangement under which an employee receives and returns salary amounts to the employer. (Also sections 3121, 3306 and 3401).

03 Section 79. -- Group-Term Life Insurance Purchased for Employees. -- Whether life insurance provided for employers under a "retired lives reserve" plan will be considered group-term insurance (also sections 61, 72, 83, 101, 162, 264, and 641).

04 Section 101. -- Certain Death Benefits. -- Whether proceeds of "self-insured" life and survivor benefit plans established through a trust qualified under section 501(c)(9) of the Code are excludable from the beneficiary's gross income as amounts paid by reason of the death of the insured under section 101(a).

05 Section 105. -- Amounts Received Under Accident and Health Plans. -- Whether a medical reimbursement plan, funded by employer contributions, containing a provision allowing unused amounts to be carried over and accumulated in an employee's account qualifies as an accident and health plan under section 105 of the Code.

06 Section 162. -- Trade or Business Expenses. -- Whether payments paid or accrued by a corporation to an exempt organization as described in sections 501(c)(7), (c)(9), (c)(17), or (c)(20) of the Code, are deductible under section 162.

07 Sections 302(b)(4) and (e) (also pre-TEFRA section 346(a)(2) and (b)). -- Partial Liquidation. -- Whether the absence of an actual redemption of stock is a meaningless gesture within the meaning of Rev. Rul. 79-257, 1979-2 C.B. 136, as amplified by Rev. Rul. 81-3, 1981-1 C.B. 125, when:

(i) The corporation has outstanding more than one class of stock and there are priorities as to dividend or liquidating distributions or any other differences in stock rights, or

(ii) Either under the terms of the stock or as established contractually, there are outstanding any rights affecting the corporation's stock, such as, but not limited to, warrants, options, convertible securities, shareholder agreements, or rights of first refusal.

08 Section 306(b)(4). -- Transactions Not in Avoidance. -- Whether section 306(b)(4) of the Code applies to the distribution and disposition or redemption of "section 306 stock" that is subject to mandatory redemption.

09 Section 331, pre-TRA 1986 section 337, and sections 453 and 1239. -- The Tax Effects of Installment Sales of Property Between Entities with Common Ownership. -- The tax effects of a transaction in which there is a transfer of property by a corporation to a partnership or other noncorporation entity (or the transfer of stock to such entity followed by a liquidation of the corporation) when more than a nominal amount of the stock of such corporation and the capital or beneficial interests in the purchasing entity (that is, more than 20 percent in value) is owned by the same persons, and the consideration to be received by the selling corporation or the selling shareholders includes an installment obligation of the purchasing entity.

10 Section 334(b)(2) (pre-TEFRA). -- Liquidation of Subsidiary. -- Whether an acquiring corporation may treat the life insurance reserves received in the liquidation as unsecured liabilities assumed.

11 Section 336 (pre-TEFRA). -- Distribution of Property in Liquidation. -- Whether the liquidation of a life insurance subsidiary is a termination pursuant to section 815(d)(2) as in effect before the enactment of the Tax Reform Act of 1984.

12 Section 338 (pre-TEFRA section 334(b)(2)). -- Certain Stock Purchases Treated as Asset Acquisitions. -- The tax consequences, under subchapter L, from the stock purchase and the deemed purchase of the assets of a life insurance subsidiary.

13 Section 351. -- Transfer to Corporation Controlled by Transferor. -- Whether section 351 of the Code applies to the transfer of widely held developed or undeveloped real property or interests therein; widely held oil and gas properties or interests therein; or any similarly held properties or interests to a corporation in exchange for shares of stock of such corporation when (i) the transfer is the result of solicitation by promoters, brokers, or investment houses, or (ii) the transferee corporation's stock is issued in a form designed to render it readily tradable.

14 Section 368. -- Definitions Relating to Corporate Reorganizations. -- Whether a transaction qualifies under either section 368(a)(1)(B) or section 351(a) of the Code by reason of Rev. Rul. 67-448, 1967-2 C.B. 144, when the same transaction is structured under sections 368(a)(1)(A) and 368(a)(2)(E) (as a reverse triangular merger) and fails to qualify for an advance ruling under those sections merely because the "substantially all" requirement set forth in section 3.01 of Rev. Proc. 77-37, 1977-2 C.B. 568, as amplified by Rev. Proc. 86-42, 1986-2 C.B. 722, is not met.

15 Section 422A. -- Incentive Stock Options. -- Whether Holding (1) of Rev. Rul. 80-244, 1982 C.B. 234, relating to section 1036, applies to incentive stock options.

16 Section 671. -- Trust Income, Deductions, and Credits Attributable to Grantor and Others as Substantial Owners. -- Whether the grantor will be considered the owner of any portion of a trust when (1) the trust corpus consists or will consist substantially of insurance policies on the life of the grantor or the grantor's spouse, (2) 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, (3) 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 (4) 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 sections 673 to 677.

17 Section 721. -- Nonrecognition of Gain or Loss on Contribution. -- Whether section 721 applies to the contribution of widely held developed or undeveloped real property or interests therein; widely held oil and gas properties or interests therein; or any similarly held properties or interests to a partnership in exchange for an interest in the partnership when (i) the contribution is the result of solicitation by promoters, brokers, or investment houses, or (ii) the interest in the transferee partnership is issued in a form designed to render it readily tradable.

18 Section 801(b) -- Life Insurance Company Taxable Income Defined. -- Whether the liquidation of a life insurance subsidiary pursuant to either section 334(b)(2) (pre-TEFRA) or section 338 (added by TEFRA) is a termination under section 815(d)(2) (as in effect before the enactment of the Tax Reform Act of 1984) causing a distribution from the subsidiary's policyholders surplus account.

19 Section 805(a)(8) -- Other Deductions. -- Whether a portion of the purchase price of the stock of the life insurance subsidiary is properly allocable to insurance in force.

20 Section 811(b)(34) -- Amortization of Premium and Accrual of Discount-Exception. -- Whether the difference between the face value of bonds held by a life insurance subsidiary liquidating under section 334(b)(2) (pre-TEFRA) or section 338 (added by TEFRA) and the amount allocable to such bonds pursuant to the liquidation is market discount and need not be accrued.

21 Section 815(d)(2) as in effect before the enactment of the Tax Reform Act of 1984 -- Termination as Life Insurance Company. -- Whether the liquidation of a life insurance subsidiary pursuant to section 334(b)(2) (pre-TEFRA) or section 338 (added by TEFRA) is a termination requiring the application of section 801(c) or section 802(b)(3) as in effect before the enactment of the Tax Reform Act of 1984.

22 Section 816(b). -- Life Insurance Reserves Defined. -- Whether the life insurance reserves acquired in the liquidation of a life insurance subsidiary qualify as unsecured liabilities assumed by the acquiring corporation for purposes of section 334(b)(2) (pre- TEFRA) and section 338 (added by TEFRA).

23 Section 818(b). -- Treatment of Capital Gains and Losses, etc. -- Whether the purchase of the stock of a life insurance subsidiary and its subsequent liquidation under section 334(b)(2) (pre-TEFRA) or section 338 (added by TEFRA) is, in fact, a purchase of the subsidiary's insurance contracts.

24 Section 2503. -- Taxable Gifts. -- Whether the transfer of property to a trust will be a gift of a present interest in property when (1) the trust corpus consists or will consist substantially of insurance policies on the life of the grantor or the grantor's spouse, (2) 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, (3) 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, (4) the trust beneficiaries have the power to withdraw, on demand, any additional transfers made to the trust, and (5) 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 sections 673 to 677.

25 Section 2514. -- Powers of Appointment. -- If the beneficiaries of a trust permit a power of withdrawal to lapse, whether section 2514(e) of the Code will be applicable to each beneficiary in regard to the power when (1) the trust corpus consists or will consist substantially of insurance policies on the life of the grantor or the grantor's spouse, (2) 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, (3) 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, (4) the trust beneficiaries have the power to withdraw, on demand, any additional transfers made to the trust, and (5) 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 sections 673 to 677.

26 Sections 3121, 3306, and 3401. -- Employment Taxes. -- Who is the employer of an "employee-owner" as defined in section 269A of the Code.

27 Section 7701. -- Definitions. -- The classification of arrangements formed as trusts under local law, in which the trust borrows money to purchase equipment or property and leases it to third parties, and in which the grantor or grantors have a beneficial interest in the trust and the power to manage the activities of the trust.

28 Section 7701. -- Definitions. -- The classification of separately tradable instruments that are issued by a corporation as a unit, the components of which collectively contain the attributes of stock.

29 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.

SEC. 6. EFFECT ON OTHER REVENUE PROCEDURES

Rev. Procs. 88-3, 88-25, 88-26, 88-34, 88-35, 88-38, 88-44, 88-45, 88-46, 88-47, 88-51, 88-54, and 88-57 are superseded. Rev. Proc. 88-50 is not superseded.