SERVICE WILL NOW CONSIDER MUNICIPAL BOND 'SECURITY INTEREST TEST' RULING REQUESTS.

Rev. Proc. 88-47

SECTION 1. PURPOSE

This revenue procedure deletes paragraph 5 of section 4.01 of Rev. Proc. 88-3, 1988-1 I.R.B. 29, relating to an area under section 103 of the Internal Revenue Code for which rulings will not ordinarily be issued by the Internal Revenue Service. Thus, the Service will resume issuance of rulings in this area.

SEC. 2. BACKGROUND

01 Section 4 of Rev. Proc. 88-3 is titled "AREAS IN WHICH RULINGS OR DETERMINATION LETTERS WILL NOT ORDINARILY BE ISSUED."

02 Paragraph 5 of section 4.01 of Rev. Proc. 88-3 reads as follows:

5. Section 103. -- Interest on Certain Governmental Obligations. -- Whether municipal bonds will meet the "security interest test" under section 103(b)(2)(B) of the Code and section 1.103-7(b)(4) of the regulations because an underlying arrangement is inferred, as illustrated in Rev. Rul. 80-251, 1980-2 C.B. 40, and Rev. Rul. 80-339, 1980-2 C.B. 42, when payments are not pledged as security for the bonds are received in respect of the bond-financed property used in the trade or business of nonexempt persons in an amount equal to more than 25 percent of the principal or interest payments on the bonds.

SEC. 3. PROCEDURE

Rev. Proc. 88-3 is modified by deleting paragraph 5 of section 4.01.

SEC. 4 EFFECTIVE DATE

This revenue procedure is effective September 19, 1988, the date of its publication in the Internal Revenue Bulletin.

SEC. 5. EFFECT ON OTHER REVENUE PROCEDURES

Rev. Proc. 88-3 is modified.

DRAFTING INFORMATION

The principal author of this revenue procedure is Gene Overton of the Individual Tax Division. For further information regarding this revenue procedure contact Mr. Overton on (202) 566-3650 (not a toll-free call).